Jammu & Kashmir High Court

M/S Walia Construction Co. Near Tangri ... vs Ut Of Jammu And Kashmir on 23 August, 2024

                                                                 Sr. No.13
                                                                 Regular
       HIGH COURT OF JAMMU & KASHMIR AND LADAKH
                       AT JAMMU
                             Arb P No. 40/2023
M/s Walia Construction Co. Near Tangri Palace, ...Petitioner(s)/appellant(s)
College Road, Kathua through its Partner
Simaranjit Singh Walia, Aged 40 years
S/O Narinder Singh Alhu Walia
R/O House NO.1-R, Abrol Nagar,
P.O. Pathankot, Tehsil Pathankot
Gurdaspur, Punjab 145001

Through:      Mr. Ankur Sharma, Advocate.

                                     Vs.

 1.    UT of Jammu and Kashmir                              ...Respondent(s)
 Through Commissioner/Secretary to Government
 PWD(R&B) Department, Civil Secretariat,
 Jammu.
 2.    J&K Projects Construction Corporation Ltd.
 (JKPCC) through the General Manager,
 Ambedkar Chowk, Rail Head, Jammu.
 3.    The J&K Projects Construction Corporation
 Ltd. (JKPCC)
 Through Deputy Manager
 Opposite Police Petrol Pump
 Jawahar Nagar, Jammu
Through:      Mr. Ravinder Gupta, AAG with
              Mr. Raja Mohit Bucha, Advocate.
CORAM:

HON'BLE THE CHIEF JUSTICE (ACTING)
                                ORDER

23.08.2024

1. Heard Mr. Ankur Sharma, learned counsel for the petitioner and

Mr. Ravinder Gupta, learned AAG for the respondents at length and perused

the record.

2. The present petition has been filed by the petitioner seeking

appointment of an independent Arbitrator under Section 11(6) of the J&K

Arbitration and Conciliation Act, 1996, to resolve the dispute that has arisen

between the parties.

3. According to the petitioner, the petitioner is a reputed Construction

Company registered under the name and style of M/s Walia Construction

Co. which is carrying out the business of raising construction of various

projects of huge strategic importance all across the country.

4. It is averred in the petition that the respondent authorities vide e-NIT

No.02 of 2015-16/JKPCC-V/618-25 dated 12.12.2015 has floated the

Tender from 'A' Class/ Special Class Contractor/Firms for the improvement/

widening of Hatli Link Road Km 7 to 18 th. That the petitioner submitted his

bid against the said E-NIT and subsequently vide Allotment Order dated

16.01.2017, he was allotted the contract for the said work.

5. It is further averred in the petition that neither the payment has been

released nor the petitioner was in a position to carry out with the work

without the release of funds in his favour, in fact no attention was given to

the genuine requests of the petitioner which constrained the petitioner to

issue notice of foreclosure of agreement vide communication dated

12.12.2020. Thereafter, it is alleged by the petitioner that the respondents

vide termination order dated 25.02.2022 terminated the contract allotted to

the petitioner and has further debarred the petitioner for three years from

participating in the tender process.

6. Aggrieved of cancelling the contract, the petitioner approached this

court by way of WP(C) No. 182 of 2022 titled 'Walia Construction Co.

versus UT of J&K and others'. However, the said writ petition was

dismissed as withdrawn for availing the appropriate remedy.

7. It is further averred in the petition that since the disputes have been

cropped between the parties and in terms of Clause 24 of the e-NIT (supra)

as well as Clause 15 of the Allotment Order dated 16.01.2017, the same is

referable to the Arbitrator, as such the Legal Notice for the appointment of

the same has already been issued to the respondents on 07.07.2023.

8. Clause 24 of the e-NIT talks of reference of dispute to the arbitrator ,

which is Managing Director, JKPCC Ltd. Jammu at the first instance. Clause

24 reads as:

"24.1. If any dispute or difference of any kind what-so-ever shall arise in connection with or arising out of this contract or the execution of works or maintenance of the works there under whether before its commencement or during the progress of works or after the termination/abandonment or breach of the contract, it shall in the first instance be referred for settlement to the competent authority i.e. Managing Director, JKPCC Ltd., Jammu described along with their powers in the Contract data, above the rank of the Engineer-in-Charge, the competent authority shall within a period of forty-five days after being requested in writing by the Contractor to do so convey his decision to the contractor such decision in respect of every matter so referred, shall, subject to review as hereinafter provided, be final and binding upon the contractor. In case the work is already in progress, the Contractor shall proceed with the execution of the work, including maintenance thereof, pending receipt of the decision of the competent authority as aforesaid, with all due diligence. "

9. However, Sub section 5 of Section 12 of the Arbitration and

conciliation Act, 1996 provides as:

"Notwithstanding any prior agreement to the contrary, any

person whose relationship with the parties or counsel or the

subject matter of the dispute falls under any of the categories

specified in the Seventh Schedule, he shall be ineligible to be

appointed as an arbitrator."

10. Learned counsel for the petitioner has vehemently argued that in

view of the amendment of Section 12(5) of the Act, an independent

arbitrator is required to be appointed in this case. In support of his

contention he has relied upon the judgments passed by the Supreme Court

reported as AIR 2017 (Supreme Court) 939, AIR 2017 (Supreme Court)

3889 and 2021 AIR (Supreme Court) 653 and AIR 2020 SC 59, Perkins

Eastman Architects Dpc vs. Hscc (India) Limited]

11. Therefore, the petitioner contends that a sole independent arbitrator

is required to be appointed to settle the dispute between the parties.

12. On the other hand, the respondents have filed their objections in

response to this petition, in which they admitted that there is a dispute

between the petitioner and the respondents. It is further stated in the

objections that in view of fact that petitioner did not complete the remaining

work in spite of repeated reminders in this behalf, the contract was finally

cancelled on 25.02.2022.

13. It is submitted by the respondents that in view of clauses 24 and 25

of the General Conditions of Contract, any dispute has to be initially referred

to the Managing Director, JKPCC Ltd and the Managing Director is required

to decide the claim within a period of 45 days. It is further submitted that the

decision of the Managing Director can be subject matter of arbitration under

Clause 25 of the GCC. Therefore, the present petition seeking appointment

of independent arbitrator is not maintainable and is liable to be dismissed.

14. The fact that the petitioner has raised certain claims which,

according to the petitioner, have not been addressed by the respondents, this

Court is of the view that a dispute exists between the parties, which would

require resolution in accordance with the aforementioned Clause 24 and this

court is of the view that the dispute has to be ultimately decided by an

independent Arbitrator.

15. The parties admitted that the dispute is there. The only objection

raised by the respondents is that whether this Court can adjudicate the

present petition under Section 11(6) of the J&K Arbitration and

Conciliation Act, 1997.

16. The Supreme Court in the case titled "Haryana Space

Application Centre (HARSAC) & Anr. Vs. M/s Pan India Consultants

Pvt. Ltd." reported as 2021 AIR (Supreme Court) 653 has observed in para

17, as under:-

"17. We are of the view that the appointment of the Principal Secretary, Government of Haryana as the nominee arbitrator of HARSAC which is a Nodal Agency of the Government of Haryana, would be invalid under Section 12(5) of the Arbitration and Conciliation Act, 1996 read with the Seventh Schedule. Section 12(5) of the Arbitration Act, 1996 (as amended by the 2015 Amendment Act) provides that notwithstanding any prior agreement to the contrary, any person whose relationship with the parties, or counsel, falls within any of the

categories specified in the Seventh Schedule, shall be ineligible to be appointed as an arbitrator.

Item 5 of the Seventh Schedule of the Act reads as under :

Arbitrator's relationship with the parties or counsel

5. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration."

Section 12(5) read with the Seventh Schedule is a mandatory and nonderogable provision of the Act. In the facts of the present case, the Principal Secretary to the Government of Haryana would be ineligible to be appointed as an arbitrator, since he would have a controlling influence on the Appellant Company being a nodal agency of the State."

17. In view of well settled legal position as contained in Section 12(5) of

the Arbitration and Conciliation Act and in view of aforesaid judgments of

the Supreme Court on the issue involved in this petition, any dispute raised

between the parties cannot be referred to the departmental arbitrator i.e.

Managing Director, JKPCC Ltd in this case..

18. Accordingly, the present petition is disposed of and

Col. Jasbir Singh (Retd.), F-254, Sainik Colony, Jammu (J&K)-180011,

Mob:8968544669 is appointed to act as the sole Arbitrator who shall

proceed in the matter to decide the dispute between the parties and make an

award in accordance with law after hearing the parties and charging the

prescribed fee along with incidental expenses to be shared by the parties.

19. Parties may raise their claims and counter claims before the