M/S.Agni Constructions Pvt. Ltd. vs M/S.Gnb Brothers Pvt. Ltd.
2009 Latest Caselaw 541 Del

*                    IN THE HIGH COURT OF DELHI AT NEW DELHI

+                                A.A. No.273/2008

%                           Date of Decision: 16.02.2009

M/s.Agni Constructions Pvt. Ltd.                              .... Petitioner

                           Through Mr.Shiv Khorana, Advocate.

                                    Versus

M/s.GNB Brothers Pvt. Ltd.                                  .... Respondent

                           Through Mr.Subodh Kumar, Advocate

CORAM:
HON'BLE MR. JUSTICE ANIL KUMAR

1.       Whether reporters of Local papers may be               YES
         allowed to see the judgment?
2.       To be referred to the reporter or not?                 NO
3.       Whether the judgment should be reported in             NO
         the Digest?


ANIL KUMAR, J.

*

1. This is petition under Section 11 of Arbitration and Conciliation

Act, 1996 by the petitioner seeking appointment any of the three

suggested persons named in the notice dated 12th June, 2008 as an

arbitrator in place of the Arbitrator appointed by the respondent.

2. The petitioner contended that an inquiry was issued by Corozo

Fashion Clothing through their architect, M/s. Sachdeva Consultants,

for the civil and plumbing works involved in the construction of an

industrial building at Manesar. The work was sub divided into two

phases. The petitioner contended that after discussions and

negotiations, the petitioner was awarded work by Corozo Fashion

Clothing on 14th August, 2006. The work letter contained an arbitration

clause in terms of clause 5.9.5. The petitioner under the terms of the

work letter was entitled for two percent bonus on completion of the

work within the scheduled time.

3. It is asserted by the petitioner that though the work was awarded

to them by Corozo Fashion Clothing, due to paucity of funds, Corozo

Fashion Clothing had entered into some arrangements with M/s. GNB

Brothers Pvt. Ltd., the respondents herein.

4. The plaintiff has contended that though the terms of payment in

the work letter dated 14th August, 2006 were in accordance with

clauses 5.7 and 5.7.3 of the tender enquiry, later on an agreement,

dated 17th November, 2006, for item rate contract within the rate for

recovery of material to be supplied by the respondent was entered into

with the respondent. It is contended that though the petitioner had

already executed work worth 62 lacs by the time the agreement dated

17th November, 2006 was entered into, the petitioner was only paid 25

lacs and the balance was retained by the respondent.

5. The petitioner has contended that even though the various

hindrances and delays on the part of the respondent, which had

brought about a delay in the completion of phase I of the work, were

brought to the notice of the respondent, they failed to rectify the same.

It was also contended that on account of the delay the petitioner had to

execute additional work and submitted bills for the same, however, the

same has not been paid by the respondent. The allegation has also

been made by the petitioner that the respondent committed breach of

contract by non certifying bills, the details of which are given by the

petitioner in the petition.

6. The petitioner has contended that despite the breaches

committed by the respondent, he further failed to release the payment

for the work already executed and made the petitioner to sign an

agreement dated 25th October, 2007 which contained an arbitration

clause which is reproduced below.

"Arbitration Clauses:-

In the event of any dispute arising out of any way connected with M/s. Agni Constructions Pvt. Ltd., its terms and conditions or its interpretation or validity, such disputes shall firstly be attempted to be sorted out amicably, falling which they shall be referred to the sole arbitration of M/s. G.N.B. Bros Pvt. Ltd. The arbitration shall be conducted at Delhi under the terms of the arbitration and conciliation Act, 1996 and the award of the arbitration shall be final and binding on both the parties. The arbitrator shall be appointed by G.N.B. Bros. Pvt. Ltd. who shall have the sole discretion to appoint the arbitrator in the event of any of the above said party raising disputes under this contract.

The court of contempt jurisdiction shall be exclusively that of our registered head office (Delhi at present) even when there are several defendants or in the case of an appeal.

However we can also take our suppliers/service providers to the court corresponding to their own registered offices. Neither our notes nor our acceptance of payment shall represent either a novation or derogation to the clause allocating the jurisdiction"

7. The petitioner contended that the contract with him was

terminated by the respondent by a letter dated 21st April, 2008 and

after termination petitioner submitted a bill for Rs.44,958,325/- dated

6th May, 2008, however, the amounts were not paid and the disputes

arose between the parties.

8. The plea of the petitioner is that in order to sort out the disputes,

a meeting was called on 11th March, 2008. It is pleaded that the

respondent prepared an incorrect minutes of the said meeting and,

therefore, petitioner did not sign the same and wrote to the respondent

a letter dated 12th March, 2008 to have further meeting at a neutral

venue. The petitioner, without disclosing the details of the letters

written to him by the respondent, has alleged that the respondent

threatened the petitioner. It is also alleged that by a letter dated 22nd

April, 2008 the respondent had asked the petitioner to agree with the

choice of arbitrator of the respondent or else the petition would be filed

for the appointment of arbitrator under the provisions of Arbitration

and Conciliation Act, 1996. According to the petitioner, he did not

accept the appointment of arbitrator by respondent and issued a letter

to the respondent, dated 5th May, 2008, indicating the same. The

petitioner contends that the claims of the petitioner are absolutely

technical in nature and the disputes relate to construction work of an

industrial unit and the nature of the claims are engineering and

technical, therefore, it is essentially necessary to have an arbitrator who

is a civil engineer and well experienced. According to the petitioner by

notice dated 12th June, 2008, petitioner suggested three names, i.e.,

Mr.C.B. Lal, Retired Director General, CPWD; Mr.M.K. Goyal, Retired

Chief Engineer, CPWD and Shri Ganu Lal, Superintendent Engineer,

and asked the respondent to choose any of the names within seven

days of the receipt of the notice. The petitioner has also raised the

disputes which are detailed in para 7 (B) of the petition and the present

petition under Section 11 of the Arbitration and Conciliation Act, 1996

was filed on 29th July, 2008.

9. The petition for appointment of arbitrator is contested by the

respondent contending inter alia that according to the terms of the

agreement between the parties, the arbitrator is to be appointed by the

respondent. The respondent has contended that it had appointed

Hon‟ble Mr. Justice K. Ramamoorthy (retired Judge of the Delhi High

Court) as the sole arbitrator in terms of clause of 5.9.5 of the tender

document read with amended arbitration clause in agreement dated

25th October, 2007 forming part of the contract for civil and plumbing

work of industrial building at Plot No.14, IMT Maneshar, Gurgaon, to

resolve the disputes arising under the said contract. Despite the letter

dated 22nd April, 2008 appointing the said arbitrator, the petitioner

wrote a letter dated 12th June, 2008 and sought appointment of any one

of the three names indicated by him in his communication as the

arbitrator. The respondent contended that the appointment of arbitrator

by it is in consonance with the arbitration agreement and the petitioner

cannot insist for appointment of any other person as an arbitrator, in

the facts and circumstances.

10. Relying on National Highways Authority of India v. Bumihiway

DDB Ltd, (2006) 10 SCC 763 and Rite Approach Group Ltd. v.

Rosoboronexport, (2006) 1 SCC 206, it was contended that unless the

arbitrator appointed according to the terms of the arbitration agreement

fails to exercise its jurisdiction, the Court cannot assume jurisdiction

under Section 11(6) of the Arbitration & Conciliation Act, 1996.

11. The respondent contended that the petitioner has no cause to file

the present arbitration petition as the petitioner is accepting the

appointment of arbitrator in terms of the arbitration clause in

agreement dated 25th October, 2007 and is also trying to have his

appointment superseded by filing petition under Section 14 of

Arbitration and Conciliation Act, 1996 which is also pending

adjudication in this court. In the circumstances it has been

contended that attitude of the petitioner is malafide and his conduct is

illegal. The respondent also contended that facts in issue in the present

petition are substantially similar to the facts of the claim filed by the

respondent before the arbitrator and there cannot be two different

arbitration proceedings going on simultaneously. The respondent also

contended that the petitioner had filed an application under Section 16

of the Arbitration and Conciliation Act, 1996 raising objection to the

jurisdiction of the sole arbitrator. The application of the petitioner

under Section 16 was heard by the learned Arbitrator and the objection

was dismissed on 27th August, 2008.

12. The respondent also contended that the arbitrator had been

appointed pursuant to communication dated 22nd April, 2008, however,

this fact has been concealed by the petitioner who had deliberately

made a wrong averment in para 4 of the petition alleging that no

arbitrator is appointed to adjudicate the claims of the petitioner.

13. In the circumstances, it is prayed that the petition be dismissed.

14. Learned counsel for the petitioner had contended vehemently that

fees demanded by the Arbitrator appointed pursuant to letter dated

22nd April, 2008 is exorbitant and, therefore, the arbitration by such an

Arbitrator be superseded and has relied on Bharat Sanchar Nigam Ltd.

and another v. Motorola India Pvt. Ltd., 2008 (3) Arb.L.R. 531 (SC);

Union of India v. Bharat Battery Manufacturing Co. (P) Ltd., 2007 (3)

Arb.L.R. 282 (SC); Datar Switchgears Ltd. v. Tata Financial Ltd. and

another, (2000) 8 SCC 151; Harcharan Das Gupta v. Govt. of NCT of

Delhi and another, AA No.349/2006, decided on 19th December, 2007;

Shri Satya Pal Gupta v. Municipal Corporation of Delhi, AA

No.437/2006, decided on 14th December, 2007.

14. Learned counsel for the petitioner has also referred to arbitration

clause 5.9.5 which has been referred to by the learned Arbitrator while

dealing with the application under Section 16 of the Arbitration and

Conciliation Act, 1996 which was dismissed by order dated 27th August,

2008.

15. Learned counsel for the petitioner cannot deny the appointment

of Arbitrator in terms of arbitration clause in agreement dated 25th

October, 2007, as by letter dated 5th May, 2008. The petitioner had

sought appointment of arbitrator by mutual consent or by the court.

16. If the arbitrator was not appointed by the respondent in terms of

the arbitration clause, only then would the petitioner have had a lis to

approach this court for appointment of an arbitrator in terms of the

arbitration agreement. Arbitration agreement contemplates sole

arbitration by M/s. G.N.B. Bros. Pvt. Ltd. who had to appoint an

arbitrator at their sole discretion which had been done by them. The

arbitration clause in the award of work dated 14th August, 2006 and

subsequent agreement dated 17th November, 2006 shall stand modified

by the arbitration clause in the agreement dated 25th October, 2007.

17. Learned counsel for the petitioner has also vehemently contended

that the disputes of the petitioner are not being adjudicated by the

Arbitrator. The contention of the petitioner is misleading and contrary

to the petitioner‟s stand. The petitioner has not filed his claims before

the Arbitrator nor has the Arbitrator refused to adjudicate the disputes

raised by the petitioner. Rather, the petitioner has filed an application

under Section 16 of Arbitration and Conciliation Act, 1996 seeking

dropping of the arbitration proceedings on the ground that the

Arbitrator has no jurisdiction till this Court passes an order in the

application filed by the respondent under Section 11 of the Act.

18. Since the respondent had invoked the arbitration agreement in

terms of arbitration clause and appointed the sole arbitrator as

contemplated under the agreement, there was no necessity for the

respondent to approach this court for appointment of the arbitrator. If

the appointment of the Arbitrator was not in consonance with the

arbitration clause in the agreement dated 25th October, 2007, only then

the petitioner could have approached this Court for appointment of an

arbitrator in terms of the arbitration clause between the parties. The

petitioner is taking contradictory stands as the petitioner has also filed

a petition to terminate the mandate of the Arbitrator under Section 14

of the Arbitration and Conciliation Act, 1996 on the ground that the

fees demanded by the Arbitrator is prohibitory and consequently the

arbitration be superseded as Arbitrator has become de jure or de facto

unable to perform his functions. The plea for the terminating the

mandate of the arbitrator is pending separately before this Court,

however, that does not entitle the petitioner to get an arbitrator

appointed under Section 11 of the Arbitration and Conciliation Act,

1996 so long as the appointment of the Arbitrator is in accordance with

the arbitration clause.

19. The petitioner has also made incorrect averments in the petition.

By a letter dated 22nd April, 2007, the Arbitrator was appointed,

however, in para 4 of the petition which is also verified by the petitioner

it is stated that no Arbitrator had been appointed to adjudicate the

claims of the petitioner. The precedents relied on by the petitioner also

do not support the claim of the petitioner.

20. In Bharat Sanchar Nigam Ltd. (supra), it was held that the

disputes raised by the petitioners were not „excepted matters‟ and that

the respondents were not to decided whether they were excepted

matters and whether they were excepted matters was also to be

adjudicated before the Arbitrator. Apparently, the ratio of the case relied

on by the petitioner is not relevant to the present facts and

circumstances. In Union of India v. Bharat Battery Manufacturing Co.

P. Ltd. (supra), Union of India had failed to appoint an Arbitrator within

30 days of invocation of the arbitration agreement and the petition

under Section 11(6) of the Arbitration and Conciliation Act, 1996 was

filed on 30th March, 2006. The Union of India, however, appointed an

Arbitrator after the petition under Section 11(6) of Arbitration and

Conciliation Act, 1996 was filed. It was held that the Union of India had

lost its right to appoint an Arbitrator and that the appointment of the

Arbitrator by the court was justified. The other decisions relied on by

the petitioner, Harcharan Das Gupta (supra) and Shri Satya Pal Gupta

(supra) are also distinguishable and on the basis of the ratio of the said

judgments, the petitioner is not entitled to have another Arbitrator

appointed under Section 11 of Arbitration and Conciliation Act, 1996

after challenging his jurisdiction under Section 16 of the Arbitration

and Conciliation Act, 1996 before the Arbitrator and on account of

pendency of another petition under Section 14 of the Arbitration and

Conciliation Act, 1996 seeking termination of his mandate.

21. In the totality of facts and circumstances, the petition under

Section 11 of the Arbitration and Conciliation Act, 1996 by the

petitioner is an abuse of process of law and is without any merit and it

is, therefore, dismissed with a cost of Rs.10,000/- payable by the

petitioner to the respondent. The cost be paid to the respondent within

four weeks.

February 16, 2009                                    ANIL KUMAR, J.
'Dev'