Kmb-Era(Jv) vs Airport Authority Of India
2016 Latest Caselaw 7381 Del

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*       IN THE HIGH COURT OF DELHI AT NEW DELHI
+       ARB.P. 620/2016
        KMB-ERA(JV)                                         ..... Petitioner
                          Through :     Mr Manoj K. Singh and Mr Rahul
                                        Pandey, Advocates.

                          versus

        AIRPORT AUTHORITY OF INDIA               ..... Respondent
                     Through : Mr Pradeep Desodaya and Mr Rahul
                               Singhal, Advocates for Ms Anjana
                               Gosain, Advocate.

        CORAM:
        HON'BLE MR. JUSTICE VIBHU BAKHRU
                     ORDER

        %            14.12.2016
VIBHU BAKHRU, J

1. The matter is taken up today since 12.12.2016 was declared a holiday.

2. The petitioner has filed the present petition under Section 11 of the Arbitration and Conciliation Act, 1996 (hereafter 'the Act') praying that an arbitrator be appointed to adjudicate the disputes that have arisen between the parties in relation to a contract entered into on 03.11.2008.

3. The General Conditions of Contract (GCC) includes an arbitration clause - Clause 57(c) - which is set out below:-

"Arbitration:

c) Except where otherwise provided for in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions herein

before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works, or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitrator as may be appointed by the authority mentioned at Serial No. (32) in Schedule E. There will be no objection if the arbitrator so appointed is an employee of AAI and that he had to deal with the matters to which the contract relates and that in the course of his duties as such he had expressed views on all or any of the matters in dispute or difference. The arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, the appointing authority for arbitrator, as aforesaid at the time of such transfer, vacation of office or inability to act, shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by the authority mentioned in schedule E, should act as arbitrator and if for any reason, that is not possible, the matter is not to be referred to arbitration at all.

Cases where the amount of the claim in dispute is Rs.75,000 (Rupees Seventy five thousand) and above, the arbitrator shall give reasons for the award.

Subject as aforesaid the provision of the Arbitration Act 1996, or any statutory modification or re-enactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceeding under this clause. In case of disputes arising between two Government of India Undertaking, provisions as contained in Bureau of Public Enterprises letter No. BPF/GL-001/16/MAN-2 (100-

75-BPE) (GM-I) dated 1.1.1976 and as may be amended from time to time shall apply.

It is a term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to Arbitration under this clause together with the amount or amounts claimed in respect of each such dispute.

If the contractor do/does not make any demand for arbitration in respect of any claim in writing within 90 days of receiving the intimation from the AAI that the bill is ready for payment, the claim of the contractor(s) will be deemed to have been waived and absolutely barred and the AAI shall be discharged and released of liabilities under the contract in respect of these claims.

The decision of the Engineer-in-Charge regarding the quantum of reduction as well as justification there of in respect of rates for sub standard work which may be decided to be accepted will be final and would not be open to arbitration.

The arbitrator(s) may from time to time with consent of the parties enlarge the time, for making and publishing the award.

The work under the Contract shall, if reasonably possible, continue during the arbitration proceedings and no payment due or payable to the Contractor shall be withheld on account of such proceedings.

The arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties fixing the date of the first hearing.

The Arbitrator shall give a separate award in respect of each dispute or difference referred to him.

The venue of arbitration shall be such place as may be fixed by the Arbitrator in his sole discretion. The award of

the arbitrator shall be final, conclusive and binding all parties to this contract."

4. Notice in this petition was issued on 06.10.2016 and the learned counsel appearing for the respondent had sought time to file a reply. Again on 17.11.2016, the learned counsel sought further time to file the reply. Although it is stated that a reply was filed, it was returned under objections. The respondent has not taken any steps to cure the same. However, the learned counsel for the petitioner has today handed over a copy of the said reply which was served on him. The same indicates that the respondent does not dispute the existence of the arbitration clause. The only objection taken in the reply is that the disputes cannot be referred to Dispute Resolution Board (DRB) or for arbitration as such reference would be time barred.

5. In the present case, the contract in question was entered into on 03.11.2008 and the works were completed on 29.07.2011. The petitioner submitted the final bill on 22.05.2012. The respondent granted the final extension of time on 07.02.2014. Thereafter, the petitioner sent a notice under clause 57(a)(i) of the GCC requesting that the disputes be referred to DRB. This request was not accepted in view of clause 57 (a) (ii) of GCC since it was beyond a period of 90 days from the date on which the petitioner was intimated the respondent's acceptance of the final bill, which according to the respondent was 22.05.2012. Clause 57(a) of GCC is set out below:

"Dispute Resolution Mechanism

57 (a)(i) If a dispute of any kind, whatsoever, arises, between the procuring entity and contractor in connection with or arising out

of the contract or the execution of the works, whether during the execution of the works or after their completion and whether before or after the repudiation or termination of the contract, including any disagreement by either party with any action, in action, opinion, instruction, determination, certificate or valuation of the Engineer, the matter in dispute shall, in the first place, be referred to the Dispute Resolution Board as may be appointed by accepting authority as mentioned S.No.-4 in schedule F/Chairman AAI.

ii) If the contractor do/does not make any demand for dispute resolution board in respect of any claim in writing within 90 days of receiving the intimation from the AAI that the bill is ready for payment the claim of the contractor(s) will be deemed to have been waived and absolutely barred and the AAI shall be discharged and released of liabilities under the contract in respect of these claims."

6. The question whether the period of limitation can be curtailed by a contract between the parties is no longer res integra. In Explore Computers Pvt. ltd. v. Cals Limited and Another : 131 (2006) DLT 477, this Court had considered the effect of the amendment to Section 28 of the Contract Act, 1872 and held that any clause which extinguishes the right of a party on expiry of a specific period so as to restrict the period provided would fly in the face of the amended Section 28 of the Contract Act and would be void. The aforesaid view was also accepted by a Division Bench of this Court in Chander Kant & Co. v The Vice Chairman, DDA and Ors:

MANU/DE/2221/2009. In that case, the works were completed on 11.10.1990; the final bill was released on 07.11.2002; and the petitioner therein invoked the arbitration clause by a notice dated 17.06.2004. It was urged by the respondent (DDA) that since petitioner's demand for appointment of an arbitrator was beyond the specified period of 90 days, the

petitioner had forfeited and waived his right to invoke the arbitration clause. The Division bench rejected the aforesaid contention and held that the relevant clause which restricted the time for making demand for arbitration to 90 days was violative of Section 28 of the Indian Contract Act, 1872. A similar view has also been taken by this Court in Hindustan Construction Corporation v DDA: 77 (1999 ) DLT 165; and Pandit Construction Company v Delhi Development Authority and Anr.: 2007 (3 )ArbLR 205(Delhi).

7. In view of the above, the respondent's claim that the petitioner has lost its right to invoke arbitration clause since it had not issued relevant notice within a period of 90 days from the date of the intimation of the final bill cannot be accepted.

8. Since there is no dispute as to the existence of the arbitration clause, an Arbitrator is required to be appointed. Accordingly, Justice Mr Deepak Verma (Retired), former Judge of the Supreme Court of India (Mobile No: 9717393521), is proposed to be appointed as a Sole Arbitrator to adjudicate the disputes between the parties.

9. The Registry is directed to communicate a copy of this order to the proposed Arbitrator for eliciting a disclosure under Section 12 of the Act. The parties are at liberty to approach the proposed Arbitrator for obtaining necessary disclosure.

10. List on 16.01.2017.

VIBHU BAKHRU, J DECEMBER 14, 2016/pkv