Engineering Development ... vs Municipal Corporation Of Delhi & ...
2009 Latest Caselaw 3886 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI


                                                Date of Reserve: September 10, 2009
                                                Date of Order: September 22, 2009

+ Arb.P.451/2008
%                                                                             22.09.2009
     Engineering Development Corporation                               ...Petitioner
     Through: Ms. Anusuya Salwan, Advocate

        Versus

        Municipal Corporation of Delhi & Anr.             ...Respondent
        Through: Ms. Divya Kapur and Ms. Shifel Trehan, Advocates


        JUSTICE SHIV NARAYAN DHINGRA

1.      Whether reporters of local papers may be allowed to see the judgment?

2.      To be referred to the reporter or not?

3.      Whether judgment should be reported in Digest?


        JUDGMENT

1. By this petition under Section 11 of the Arbitration & Conciliation Act,

1996 ("the Act", for short), the petitioner has prayed for appointment of an

arbitrator alleging that disputes arose between the parties to the contract and

by a letter dated 12th August, 2008, the petitioner invoked the arbitration

clause. This letter was duly served upon respondent but respondent did not

take any action in pursuance of this letter. It is submitted that the original

agreement containing arbitration clause was in power and possession of

respondent, however, a copy of the arbitration clause has been produced.

2. Respondent has taken the stand that the petition was not maintainable

since there was no arbitration agreement between the parties. The

relationship between the parties was governed by the work order

No.WOEE(PR)SZ/TC/2005-0/132 dated 30th September 2005 and this work

Arb.P.451 of 2008 Engineering Development Corp. v. MCD & Anr. Page 1 Of 5 order does not contain any arbitration clause. It is stated that petitioner was

directed to attend the office of respondent and complete execution of formal

agreement within seven days of receipt of work order. The petitioner did not

comply with the conditions and the present petition was not maintainable.

3. Brief facts relevant for the purpose of deciding this petition are that the

petitioner was the successful bidder in respect of work regarding construction

of outfall drain for disposal of storm water/ waste in Devli Village in South

Zone. After petitioner became successful bidder, the work order dated 30th

September 2005 was placed on the petitioner and the petitioner was asked to

execute a formal agreement within seven days of receipt of letter awarding

the work. It is not disputed that no formal agreement was executed between

the parties. It seems that there was some stay granted by the Court in

respect of the site and the work did not proceed at all. The time period for

execution of work was extended by respondent in view of the stay from this

Court. However, petitioner did not execute formal agreement either at the

initial stage or later on. On 30th March, 2006, respondent wrote a letter to the

petitioner informing that this Court while disposing of a PIL being WP(C)

12408 of 2004 titled as Jeet Ram JNCT v JNCTD & Ors. has directed MCD to

start the work of construction of the said drain via Raju Park Sainik Farm

route. The petitioner was asked to make necessary arrangements like

mobilization of T&P, procurement of materials, etc. so that the work may be

started at site at the earliest possible as per the direction of the High Court,

Delhi. In response to this letter, petitioner wrote back to respondent that the

time stipulated for the work was over and during the course of the contract

period the petitioner suffered losses on various counts. The petitioner

informed respondent that respondent has lost right under clause 2 of the

Arb.P.451 of 2008 Engineering Development Corp. v. MCD & Anr. Page 2 Of 5 agreement for extension of time or for renewal of the contract since the

stipulated date of completion of work was over. The petitioner however stated

in its letter that it was ready to start the work only if the rates were increased

by 25%. Thus, this contract did not take off. Respondent did not agree for

enhancement of the rates and the petitioner did not start the work.

4. It is submitted by counsel for petitioner that it was not necessary that a

formal agreement should have been executed. The tender document which

was filled up by the petitioner contained an arbitration clause. Since the work

order was executed in favour of petitioner, respondent was bound by

arbitration clause as contained in the tender document. The petitioner placed

reliance on UNISSI (India) Pvt. Ltd. v Post Graduate Institute of Medical

Education & Research (2009 ) 1 SCC 107. In this case, the Supreme Court

observed that where a tender document contained an arbitration clause, by

reasons of acceptance of tender, a valid arbitration agreement is said to be

executed between the parties.

5. The arbitration clause as relied upon by petitioner has been annexed

by the petitioner along with this petition as Annexure-A. This arbitration

clause provides that it was the terms of the contract that a party invoking the

arbitration clause shall give a list of disputes with amount claimed in respect

of each disputes with the notice for appointment of arbitrator giving a

reference to the rejection by the Chief Engineer. The arbitration clause further

provides that it was a term of the contract that no person other than the

person appointed by Commissioner MCD should act as an Arbitrator. If for any

reason that is not possible the matter should not be referred for arbitration at

all.

Arb.P.451 of 2008 Engineering Development Corp. v. MCD & Anr. Page 3 Of 5

6. A perusal of letter dated 23rd April 2006 written by petitioner to

respondent shows that the petitioner told respondent to close the contract

and refund the earnest money and release the bank guarantee given for

performance of the contract. The petitioner had not raised a dispute in

respect of losses suffered by the petitioner. It is apparent that the petitioner

did not comply with the terms of the arbitration clause relied upon by the

petitioner which specifically provides that every notice of arbitration shall

specify the quantum of amount claimed and specify the list of disputes that

the amount claimed in respect of each dispute. Moreover, the arbitration

clause provides that if for any reason appointment of an arbitrator was not

done by MCD, the matter shall not be referred to arbitration at all. This clause

had come for consideration of this Court in Arbitration Petition 219 of 2008

M/s Arvind Construction Company Pvt. Ltd. Versus Union of India & Ors and

this Court observed that the parties are bound by the contract entered into

between them, including the arbitration clause and if the clause provides that

the arbitration proceedings shall be conducted only by a particular arbitrator

failing which there shall not be no arbitration, the dispute can be taken up

before ordinary civil Court and the petitioner does not have a right to get the

an arbitrator appointed through the Court under Section 11 of the Act. The

Supreme Court in Indian Oil Corporation Limited and others v Raja Transport

Private Limited (2009) 11 Scale 672 held as under:

"It is quite common for governments, statutory corporation and PSUs' while entering into contracts, to provide for settlement of disputes by arbitration and further provide that the Arbitrator will be one of its senior officers. If a party, with open eyes and full knowledge and comprehension of the said provision enters into a contract

Arb.P.451 of 2008 Engineering Development Corp. v. MCD & Anr. Page 4 Of 5 with a Govt./statutory corporation/PSU containing an arbitration agreement providing that one of its Secretaries/ Directors shall be arbitrator, he cannot subsequently turn around and contend that he is agreeable for settlement of disputes by arbitration, but not by the named arbitrator who is an employee of the other party. No party can say he will be bound by only one part of the agreement and not the other part, unless such other part is impossible of performance or is void being contrary to the provisions of the Act.

A party to the contract cannot claim the benefit of arbitration under the arbitration clause, but ignore the appointment produces relating to the named arbitrator contained in the Arbitration clause."

7. I, therefore, consider that in view of peculiar arbitration clause in case

of non appointment of arbitrator by respondent, the petitioner can approach

the civil court and this Court cannot appoint an arbitrator under Section 11 of

the Act. The arbitration clause exhausted itself the moment respondent failed

to or refused to appoint the arbitrator. The petition is hereby dismissed. No

orders as to costs.

September 22, 2009                                   SHIV NARAYAN DHINGRA J.
rd




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