Jharkhand High Court

Modi Projects Limited vs East Central Railway Through Its ... on 23 June, 2022

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                 IN THE HIGH COURT OF JHARKHAND AT RANCHI
                         Arbitration Application No.08 of 2020

            Modi Projects Limited, a Company registered under the provisions of
            the Indian Companies Act, 1956, having its registered office at 3rd
            Floor, Shivani Apartment, 23-Lansdown Terrace, Koltata, P.O. and
            P.s.-Kolkata, District-Kolkata 700026 and having its Corporate office at
            Kanke Road, Ranchi-834008, Jharkhand through one of its Directors
            Pradip Modi, Aged about-63 years, son of Late Sita Ram Modi,
            Resident of -9/1, Basant Vihar, Kanke Road, P.O. & P.S. Gonda,
            District-Ranchi.                      .........                 Petitioner


            1. East Central Railway through its General Manager, having its office
               at Diggikalam Hajipur P.O. P.S. & Dist Hajipur Bihar 844101
            2. The Chief Administrative Officer (con), East Central Railway,
               Mahendru Ghat P.O. P.S. Mahendru Ghat Dist Patna Bihar-800004
            3. The Chief Engineer (con)/(South), East Central Railway, Mahendru
               Ghat P.O. P.S. Mahendru Ghat Dist Patna Bihar-800004
            4. Dy. Chief Engineer (con), East Central Railway, Barkakana P.O. P.S.
               Barkakana Dist Ramgarh-829102       .........             Respondents

            CORAM         : HON'BLE MR. JUSTICE SUJIT NARAYAN PRASAD
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For the Petitioner : Mr. Shresth Gautam, Advocate : Mr. Rajarshi Singh, Advocate : Mr. Abhijeet Tushar, Advocate For the Resp.-Railway : Mr. Prashant Pallav, A.S.G.I.

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13/23.06.2022 The instant application has been filed invoking the

jurisdiction conferred under Section 11(6) of the Arbitration and

Conciliation Act, 1996, (hereinafter referred to as the 'Act'), 1996

for appointment of Arbitrator, in view of the Arbitration Clause

as contained under Clause 64 (1) (i) of the Contract.

2. The brief facts of the case, as per the pleading made in the

application, required to be enumerated, are as hereunder:-

It is the case of the petitioner/applicant that in terms of the

notice inviting tender bearing Tender Notice No.05 of 2013-14

(Open)/South and Tender No.22 of 2013-14 (Open)/South, which

has been issued for the Construction of Syphon Bridges at Km

195.715 and Km 196.610, provision of catch water drain from Km

179.500 to Km 199.47 and other associated drainage/water

crossing works in Barkakana-Ranchi section in connection with

Koderma-Ranchi new BG Rail line Project.

The petitioner/applicant being an eligible tenderer applied

for the same and after due process of law, the work order for the

aforesaid construction work was awarded to the petitioner, vide

letter dated 27.09.2013. An agreement was executed between the

petitioner and the respondents for the aforesaid Construction of

Syphon Bridges at Km 195.715 and Km 196.610, provision of

catch water drain from Km 179.500 to Km 199.47 and other

associated drainage/water crossing works in Barkakana-Ranchi

section in connection with Koderma-Ranchi new BG Rail line

Project, which is having Arbitration Clause as under Clause 64 (1)

(i), in view of the applicability of the General Conditions of

Contract, 2008.

The further fact of the case is that as per the contract, the

time of completion of work was 6 months, i.e., 26.03.2014 and

value of work was Rs.5,77,39,523/30. The petitioner/applicant

immediately upon issuance of work order and execution of the

agreement, invested and mobilized men and machines at the

worksite for commencement of the work.

The petitioner/applicant has submitted a bank guarantee,

as per the condition stipulated in the agreement within the

stipulated period.

The further fact of the case is that in terms of the agreement,

the respondents were required to provide approved drawings of

two Syphon bridges immediately after the issuance of LoA which

was to be used for undertaking the construction of work but

according to the petitioner/applicant, even after lapse of time

given for completion of work, the approved drawings were not

provided even after repeated requests.

It is the grievance of the petitioner/applicant that it is due

to the non-performance of the condition of the agreement by not

providing encumbrance free site, details of drainage/water

crossing works, within the time schedule and as such, the work

could not have been commenced. However, extension was

granted to the petitioner and by that time, only 10-12 per cent of

the total contract value of the work could have been completed.

But no payments were being made for execution of work which

caused financial hindrance to the petitioner/applicant in

completion of the work, which fact has been brought to the notice

of the concerned authority and it was agreed to fore-close the

contract and to that effect, a request was made by the petitioner

vide letter dated 07.09.2017 also requesting therein to arrange

release of performance bank guarantee as also for making

payments of the final bill at an early date. The respondents have

not given any heed to such request in spite of the repeated

request made in this regard and as such, a notice under Clause 63

of the General Condition of Contract, 2008 of the agreement, has

been given for justified action on the part of the respondent.

The final account including claims in the matter of

Construction of Syphon Bridges at Km 195.715 and Km 196.610,

provision of catch water drain from Km 179.500 to Km 199.47 and

other associated drainage/water crossing works in Barkakana-

Ranchi section in connection with Koderma-Ranchi new BG Rail

line Project was submitted by the petitioner but the same has also

not been considered.

3. Finally, the petitioner/applicant when after the dispute

having not been settled, has made a request vide letter dated

16.11.2019 by invoking the condition stipulated under Clause 64

of the General Condition of Contract, for appointment of

Arbitrator, so that, the dispute may be resolved. But, no action

has been taken on behalf of the respondents, therefore, the instant

application has been filed praying therein for appointment of sole

Arbitrator. Thereafter, a notice was issued to the concerned

respondent, in pursuant thereto, appearance has been made on

behalf of the Railway, who on earlier occasion, was represented

by Mr. Jalisur Rahman, who has taken the plea of applicability of

the General Condition of Contract, 2016, which contains a

provision of appointment of Arbitrator who has been named in

the GCC, 2016.

4. Mr. Rahman, learned counsel appearing for the Railway

has relied upon the judgment rendered by the Hon'ble Apex

Court in the case of Central Organization for Railway

Electrification Vrs. ECI-SPIC-SMO-MCML (JV) a Joint Venture

Company, reported in (2020) 14 SCC 712, wherein, the Hon'ble

Apex Court has considered the applicability of the General

Condition of Contract which contains a Clause as under Clause

64 (3) (b) and has laid down that after issuance of notification

dated 16.11.2016 by the Railway Board modifying the Clause 64

of the General Condition of Contract, by which, the Arbitral

Tribunal shall consist of sole Arbitrator who shall be a Gazetted

Officer of the Railway not below the JA Grade nominated by the

General Manager and as such, submission has been made that

after modification of the General Condition of Contract by way of

the notification dated 16.11.2016, there is no question of

application of General Condition of Contract which contains a

provision of Arbitration Clause as under Clause 64 (2) (a),

wherein, it has been stipulated for appointment of independent

sole Arbitrator and hence, it was submitted that the instant

application is fit to be dismissed on the aforesaid ground alone.

5. In response to the same, Mr. Shresth Gautam, learned

counsel appearing for the petitioner/applicant has submitted that

even accepting the General Condition of Contract was modified

by virtue of notification dated 16.11.2016, the same cannot be a

ground for rejection of the instant application, reason being that

the contract or the work in question was executed at the time of

existence of the General Condition of Contract, 2008.

It has further been submitted that the General Condition of

Contract which was notified on 16.11.2016 cannot have its

retrospective application for deciding the issue of appointment of

Arbitrator giving go-by to the condition stipulated in the General

Condition of Contract, 2008, the period under which the

agreement has been executed.

6. It requires to refer herein that due to change in the panel of

the Railway, Mr. Prashant Pallav, learned Assistant Solicitor

General of India, has taken over the case and has argued the case

at length.

7. Mr. Pallav, learned A.S.G.I., in response to the submission

made on behalf of the learned counsel for the

petitioner/applicant about retrospective application of the

modified General Condition of Contract, notified on 16.11.2016

and what will be its effect in the contract executed during the

period of existence of the General Condition of Contract, 2008

and has submitted at bar that there is no question of retrospective

application of the modified General Condition of Contract which

has been notified on 16.11.2016, subsequent to the date of

execution of agreement in question, which admittedly has been

issued in course of subsistence period of the General Condition of

Contract, 2008.

8. This Court has heard the learned counsel for the parties.

9. The bone of contention on the objection which earlier was

made about the applicability of the General Condition of

Contract modified on 16.11.2016, which contains a Clause for

appointment of Arbitrator, who will be a Gazetted Officer of the

Railway not below the rank of JA grade nominated by the

General Manager.

10. The issue was raised that once the General Condition of

Contract, notified on 16.11.2016, has came into existence, the

effect of the General Condition of Contract, 2008, the period

under which, the contract has been entered into, will lose its

force.

11. The position of law is well settled that if the parties have

entered into a contract, in pursuant to the condition of contract,

the condition stipulated under the said contract will only be

applicable having not been affected by the subsequent

modification in the condition of contract, otherwise, the

imposition of the modified condition in the already existing

contract will prejudice the interest of the party and it will be said

to be unilateral insertion of an agreement due to the substitution

of the condition of the earlier contract.

12. It is not in dispute that when the party entered into a

contract, the same binds both the parties if the contract is bilateral

and there cannot be any change in the condition of contract

unilaterally.

Herein, the proposition which has been put-forth on earlier

occasion on behalf of the counsel appearing for the respondent

Railway that the moment the General Condition of Contract

which has been notified on 16.11.2016 has came into being, the

condition contained in the earlier General Condition of Contract,

2008 will ipso-facto lose its force, but, this Court is not in

agreement with such proposition, for the reason that, if such

proposition will be accepted then the Clause which was already

existed on the date of contract entered in between the parties, will

be allowed to be substituted without any knowledge on the part

of the said party who is going to be adversely affected.

13. However, Mr. Pallav, learned A.S.G.I., has submitted that

there cannot be a retrospective applicability of the General

Condition of Contract by deeming the condition already existing

in the earlier contract to be redundant.

14. This Court, on appreciation of the aforesaid submission is

of the view that sole dispute about the applicability of the

subsequent General Condition of Contract notified on 16.11.2016

will not be applicable in the facts of the given case, rather the

General Condition of Contract, 2008 will have its implication and

as such, the Arbitration Clause is to be considered on the basis of

the Arbitration Clause existing in the General Condition of

Contract, 2008.

For ready reference, Clause 64(1) of the General Condition

of Contract, 2008 reads as under:-

"64 (1) (i)-Demand for Arbitration In the event of any dispute or difference between the parties hereto as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account or

as to the withholding by the Railway of any certificate to which the contractor may claim to be entitled to, or if the Railway fails to make a decision within 120 days, then and in any such case, but except in any of the "excepted matters" referred to in Clause 63 of these conditions, the contractor, after 120 days but within 180 days of his presenting his final claim on disputed matters shall demand in writing that the dispute or difference be referred to arbitration.

64 (1) (ii)-The demand for arbitration shall specify the matters which are in question, or subject of the dispute or difference as also the amount of claim item wise. Only such dispute(s) or difference(s) in respect of which the demand has been made, together with counter claims or set off, given by the Railway, shall be referred to arbitration and other matters shall not be included in the reference. 64 (1) (ii)-(a) The Arbitration proceedings shall be assumed to have commenced from the day, a written and valid demand for arbitration is received by the Railway.

(b) The claimant shall submit his claim stating the facts supporting the claims along with all the relevant documents and the relief or remedy sought against each claim within a period of 30 days from the date of appointment of the Arbitral Tribunal.

(c) The Railway shall submit its defence statement and counter claim(s), if any, within a period of 60 days of receipt of copy of claims from Tribunal thereafter, unless otherwise extension has been granted by Tribunal.

(d) The place of arbitration would be within the geographical limits of the Division of the Railway where the cause of action arose or the Headquarters of the concerned Railway or any other place with the written consent of both the parties.

64 (1) (iii)- No new claim shall be added during proceedings by either party. However, a party may amend or supplement the original claim or defence thereof during the course of arbitration proceedings subject to acceptance by Tribunal having due regard to the delay in making it. 64 (1) (iv)-If the contractor(s) does/do not prefer his/their specific and final claims in writing within a period of 90 days of receiving the intimation from the Railways that the final bill is ready for payment, he/they will be deemed to have waived his/their claim(s) and the Railway shall be discharged and released of all liabilities under the contract in respect of these claims."

For ready reference, Clause-64(3) of the General Condition

of Contract, 2014 as notified vide notification dated 16.11.2016

reads as under:-

"64. (3) Appointment of arbitrator:

* * * * *

64. (3)(a)(ii) In case not covered by Clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a panel of three gazette railway officers not below JA Grade or two railway gazette officers not below JA Grade and a retired railway officer, retired not below the rank of SAG officer, as the arbitrators. For this purpose, the Railways will send a panel of at least four (4) names of gazette railway officers of one or more departments of the Railways which may also include the name(s) of retired railway officer(s) empanelled to work as railway arbitrator to the contractor within 60 days from the day when a written and valid demand for arbitration is received by the GM........"

15. Learned counsel for the respondents has not raised any

other point in opposition.

16. This Court, in consequence of the aforesaid finding is of the

view that the instant application is fit to be allowed, accordingly,

the instant application stands allowed.

17. Learned counsel for the parties have suggested the name of

Hon'ble Mr. Justice (Retd.) Pramath Patnaik, Former Judge of this

Court, to act as Sole Arbitrator and as such, the same is being

accepted.

18. Considering the aforesaid suggestion, this Court, therefore,

appoints Hon'ble Mr. Justice (Retd.) Pramath Patnaik, Former

Judge of this Court, presently residing at Plot No.11-2D/780/52,