M/S Sagar Enterprises Through Its ... vs M/S Malti Enterprises Having Its ...
2022 Latest Caselaw 3723 Jhar

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          IN THE HIGH COURT OF JHARKHAND AT RANCHI
               Arbitration Application No.07 of 2022
                                 -----

M/s Sagar Enterprises through its Proprietor Sunil Kumar Ojha .... ... Petitioner Versus M/s Malti Enterprises having its office at Bata Gali, Phusro Road, Phusro Bazar, P.O. Bermo, P.S. Bermo, District-

  Bokaro-829144 (Jharkhand)
                                       ...     ... Respondent
                           With

Arbitration Application No.08 of 2022

M/s Sagar Enterprises through its Proprietor Sunil Kumar Ojha .... ... Petitioner Versus M/s Malti Enterprises, through its Proprietor Shri Suresh Dubey, having its office at Bata Gali, Phusro Road, Phusro Bazar, P.O. Phusro Bazar, P.S. Bermo, District-Bokaro- 829144 (Jharkhand).

                                       ...    ... Respondent

                            -------

CORAM: HON'BLE MR. JUSTICE SUJIT NARAYAN PRASAD

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For the Petitioner : Mr. Vikash Pandey, Advocate For the Respondent : Mr. Atanu Banerjee, Advocate

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th Order No. 7/Dated 15 September, 2022

Both the arbitration applications since pertain to

common contract and as such, the learned counsel for

the parties have submitted that both the matters may be

heard together and disposed of by this common order.

2. The instant applications have been filed under

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

by which, the prayer has been made for appointment of

an independent Arbitrator for adjudication of the

disputes between the petitioner and the respondent

arising out of the Agreement dated 01.04.2018

(Arbitration Application No.07 of 2022) and 29.08.2018

(Arbitration Application No.08 of 2022) respectively.

3. The brief facts of the cases, as per the pleading

made on behalf of the petitioner-applicant, read as

under:

It is the case of the petitioner/applicant that an

agreement dated 28th March, 2018 was executed

between M/s. CCL and one M/s Daroga Pradhan,

Adarsh Nagar, Hirapur, Dhanbad for the work of "repair

and maintenance of Qtr" (B. type 80 Nos. and MQ-299

Nos. at Jawahar Nagar Colony and B type 200 Nos, 1-A

type 150 Nos. and MQ-600 Nos. at Subhash Nagar

Colony, for Staff and Workers situated at B&K Area

under Kayakalp Scheme having project cost of

Rs.13,96,04,810.00/- and for the work of "thorough

repairing and Renovation of external drain and water

supply at Jawahar Nagar Colony and Subhash Nagar

Colony in B&K Area under Kayakalp Scheme" having

project cost of Rs.5,46,57,087.73/- respectively.

Subsequently, M/s Daroga Pradhan Offloaded the

work to respondent and the respondent entered into sub

contract agreement dated 01.04.2018 and 29.08.2018

respectively with the petitioner/applicant Sagar

Enterprises for "repair and maintenance of Qtr" (B. type

80 Nos. and MQ-299 Nos. at Jawahar Nagar Colony and

B type 200 Nos, 1-A type 150 Nos. and MQ-600 Nos. at

Subhash Nagar Colony, for Staff and Workers situated

at B&K Area under Kayakalp Scheme and for repairing

and Renovation of external drain and water supply at

Jawahar Nagar Colony and Subhash Nagar Colony in

B&K Area under Kayakalp Scheme and as per the said

sub contract Sagar Enterprises was entitled to 50% and

25% of the share of profit respectively.

It is the further case of the petitioner/applicant

that the petitioner issued letter dated 30.10.2021

invoking the arbitration clause for claiming Rs. One

Crore Six Lakh Approx and Rs.9 Lakh pertaining to R.A.

Bill No.1 to 10 and R.A. Bill No.1 to 4 respectively for the

aforesaid work with interest @ 18% and appointed Shri

Ashutosh Anand, Advocate, High Court of Jharkhand,

as sole Arbitrator to adjudicate the dispute between the

parties arising out of said agreement dated 01.04.2018

and 29.08.2018 respectively. The respondent, in

response to the letter dated 30.10.2021 has stated that

there is no scope left for any adjudication of the alleged

dispute by any method. Further, the stand of the

respondent is that perception of profit is illusion and not

real and substantive and there is no clause of sharing

profit. Apart from the aforesaid, one more bill is also

pending.

The petitioner/applicant had no other alternative

but to invoke the Clause-19 of the aforesaid milling

agreement which is an arbitration clause and in terms

thereof, the petitioner appointed Shri Ashutosh Anand,

Advocate as Arbitrator.

The respondent has neither settled the claims

nor has referred the claims/disputes under the

agreement to arbitration, as such, the petitioner has got

no other efficacious remedy than to approach before this

Court under the provisions of Arbitration and

Conciliation Act, 1996 for appointment of an

independent Arbitrator for settlement of the disputes.

4. It is the case of the applicant/petitioner that the

request has been made through legal notice for

appointment of Arbitrator since the dispute has not

amicably been settled but the Arbitrator having not been

appointed, therefore, the instant applications have been

filed.

5. The respondent has appeared and an filed

affidavit inter-alia objecting and stating that the instant

application is not maintainable, reason being that the

applicant/petitioner has not invoked Clause-8 in the

manner as agreed upon by the parties because Clause 8

of the agreement specifically says that all disputes and

difference arising out of all in connection with this

agreement which is not resolved amicably within 15

days of the dispute and difference coming to the notice

of both the parties shall be resolved by arbitration. No

such 15 days' notice has ever been issued or given by

the applicant, therefore, since, the pre-mechanism

exercise has not been taken before filing the instant

applications, hence, the applications are not

maintainable.

Further, the criminal case also been instituted

against the proprietor of the respondent/opposite party.

It has also been stated that a letter has also been

communicated i.e., letter dated 30.10.2021 seeking

consent of the opposite party to accept Mr. Ashutosh

Anand, Advocate as sole Arbitrator to adjudicate the

dispute in terms of Clause 8 of the agreement dated

01.04.2018, which has been replied as under

paragraph-11 thereof, and sum and substance, such

claim has been rejected, said to be not maintainable as

the same will cause the prejudice in the pending

criminal case. Further, the dispute of claim has also

been objected.

6. In order to buttress his argument, learned

counsel for the respondent has relied upon the

judgment rendered by the Hon'ble Apex Court in the

case of Union of India Vrs. Parmar Construction

Company, (2019) 15 SCC 682.

7. In response to the same, learned counsel for the

petitioner/applicant has submitted that the ground

which has been taken for giving no notice for amicable

settlement within 15 days as provided in the agreement,

even if, it will be accepted to be correct then also, at this

stage, on that ground, this application is held to be

maintainable, since, the legal notice making request for

appointment of Arbitrator has been responded by

rejecting the claim on merit as also the objecting the

application for appointment of Arbitrator, as would

appear from paragraph-11, so far as it relates to

Arbitration Application No.07 of 2022 and paragraph-14

so far as it relates to Arbitration Application No.08 of

2022.

Therefore, once the claim has been rejected as

raised vide legal notice by making request for

appointment of Arbitrator and as such, at this stage,

taking the ground of not giving notice for amicable

settlement within 15 days is not worth to be considered.

Since, when the claim itself has been rejected,

where is the question of amicable settlement as on the

date.

It has further been stated by referring to the

various paragraphs of the objection affidavits filed on

30.08.2022 in both the applications, wherein, the claim

on merit has also been disputed, which suggest that the

dispute is there and hence, the same is required to be

adjudicated by appointment of Arbitrator and in that

view of the matter also, the instant applications are well

maintainable.

8. This Court has heard the learned counsel for the

parties and perused the pleading of both the parties as

also the Agreement, basis upon which, the jurisdiction

of this Court as conferred under Section 11(6) of the

Arbitration and Conciliation Act, 1996 has been

invoked.

9. Admittedly, the agreement dated 01.04.2018

(A.A. No.07.2022) and 29.08.2018 (A.A. No.08.2022) are

having the same Arbitration Clause as under Clause-8

which reads hereunder as:-

"8. Any dispute or differences arising

out of or in connection with this

agreement which is not resolved

amicably within 15 days of the dispute

or difference coming to the notice of both

the parties shall be resolved by

arbitration of a single arbitrator. Both the

parties shall appoint the arbitrator

mutually in case of disagreement on the

choice of the arbitrator, the arbitration

shall be conducted in accordance with

and the government by the rules of

Indian Council of arbitration the

language of arbitrators shall be English

and the venue of arbitration shall be

Bokaro or Dhanbad."

The aforesaid Arbitration Clause provides the

following mechanism:-

In case of all disputes and

differences arising out of or in connection

with this agreement which is not resolved

amicably within 15 days of the dispute and

differences coming to the notice of both the

parties shall be resolved by arbitration by a

single Arbitrator.

The aforesaid condition of contract stipulates that

the resolution through the Arbitrator is to be made only

if the dispute has not been resolved amicably within 15

days.

The further admitted position herein is that no

notices have been given by the claimant for its

amicable resolution of the dispute within 15 days. A

legal notice has been given for making request in view

of the provision of Section 21 of the Arbitration and

Conciliation Act, 1996 for appointment of Arbitrator.

The Arbitrator having not been appointed,

therefore, the instant applications.

10. The objection has been raised on behalf of the

respondent that before making request for appointment

of Arbitrator for resolution of dispute, a notice for

amicable settlement of the dispute within 15 days has

not been resorted to and as such, on this ground the

instant applications are fit to be dismissed.

11. This Court for the purpose of consideration of

the said objection has considered the objection filed on

behalf of the concerned respondent and found from

paragraph-11, so far as it relates to Arbitration

Application No.07 of 2022 and paragraph-14, so far as it

relates to Arbitration Application No.08 of 2022 that the

legal notice which has been given by the applicant in

pursuance to the provision of Section 21 of the

Arbitration and Conciliation Act, 1996 has been

discussed and the claim has been rejected on the

ground that the applicant has not given any notice for

resolution of dispute amicably within 15 days. It further

appears that the claim has also been disputed.

12. This Court, on the basis of the pleading made in

the objection affidavits (in both the applications) filed on

behalf of the respondent on 30.08.2022, is of the view

that the fact about dispute of the claim is not being

disputed by the respondent. The only dispute is that no

notice for amicable settlement within 15 days for

resolution of dispute has been taken by the

petitioner/applicant and the applications under Section

11(6) have been filed by inserting the said condition

contained in the contract.

13. This Court is to consider as to whether at this

stage, will it be proper to reject the application for

appointment for Arbitrator in view of the fact that the

request made as per the provision of Section 21 of the

Arbitration and Conciliation Act, 1996, has been dealt

with by rejecting the claim of appointment of Arbitrator

on various grounds including the ground of institution

of criminal case by the applicant/petitioner upon the

respondent and the claim on merit has also been

disputed.

14. The question of consideration of the objection

about not taking steps for resolution of amicable

settlement of the dispute, can be said to be a good

ground to reject these applications, if the respondent

would not have taken any adverse decision on the

request made by the applicant/petitioner for

appointment of Arbitrator.

15. This Court is further of the view that if at this

stage, the applicant/petitioner will be relegated to take

recourse of the amicable settlement of the dispute

within 15 days, then what would be its result, is

required to be considered.

The contract suggests that first, steps to be

taken for amicable settlement of the dispute. The

respondent when rejected the claim on the basis of the

request made for appointment of Arbitrator, as would

appear from paragraph-11 of the affidavit dated

30.08.2022, so far as it relates to Arbitration Application

No.07 of 2022 and paragraph-14 of the affidavit dated

30.08.2022, so far as it relates to Arbitration Application

No.08.2022, now where is the question of amicable

settlement.

          Therefore,        at         this       stage       if      the

petitioner/applicant        will       be     relegated    before     the

concerned respondent, there will be no result and it will

be rejected and as such, in that circumstances,

relegating the petitioner/applicant before the respondent

for raising the dispute for amicable settlement will be

nothing but a futile exercise.

16. This Court thought it proper to consider the

judgment, upon which, the learned counsel for the

respondent has relied upon, i.e., the judgment rendered

by the Hon'ble Apex in the case of Union of India Vrs.

Parmar Construction Company (supra).

The observation laid down as under paragraph-

39 thereof, has been relied upon, in which, it has been

held that it is advisable for the Court to ensure that the

remedy provided as agreed between the parties in terms

of the contract is first exhausted.

There is no dispute about the settled position of

law but it is equally settled that the judgment is to be

considered on the basis of the facts and circumstances

governing the case.

The fact of the case of Union of India Vrs.

Parmar Construction Company (supra), as would

appear from the judgment, wherein, the agreement

contains a Clause as under Clause 64 of the Condition

of Contract which provides that in the event of any

dispute or difference between the parties hitherto 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 Railways of any

certificate to which the contractor may claim to be

entitled to, or if the Railways fail 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.

The fact of the case is that the respondent when

raised the final bills in the predetermined format on the

newly agreed prices, dispute has arisen in the context of

payment of escalated prices or withholding of security

deposits, taking note of the existence of arbitration

clause in the agreement the respondents sent a notice to

appoint an Arbitrator as per Clause 64(3) of the GCC to

resolve the dispute of payment of outstanding dues

which was declined by the appellants by sending the

reply that "no due certificate" was signed and that

entails no dispute to be sent to arbitration. Since the

appellants failed to appoint the arbitrator in accordance

with arbitration clause in the agreement, each of the

respondent filed application under Section 11(6) of the

Act before the High Court for appointment of an

independent Arbitrator and the primary objection of the

appellants before the High Court was that on furnishing

the no claim certificate by the contractor, no dispute

subsists which is to be sent to the arbitrator and further

the claims which have been submitted were beyond time

as prescribed in the agreement and thus fall under the

"excepted matter" in the agreement.

The application filed under Section 11(6) of the

Act, 1996 came to be decided by the High Court and

appointed a retired Judge of the High Court as an

independent sole arbitrator. The said order has been

questioned by the respondent therein on the ground

that there is final settlement of bill, no arbitral dispute

subsists and the contract stands discharged and as

such, they cannot be permitted to urge that they gave no

claim certificate under any kind of financial

duress/undue influence and even in support thereof, no

prima facie evidence has been placed on record. In such

circumstances, the appointment of an independent

arbitrator by the High Court under Section 11(6) of the

Act, 1996 is not sustainable.

        The     Hon'ble     Apex     Court   has    taken     into

consideration         the        pre-appointment        arbitrator

mechanism as provided under Clause 64.1, wherein, it

has been stipulated that if there is any dispute or

difference between the parties hitherto as to the

construction or operation of the contract, or the

respective rights and liabilities of the parties on any

matter in question, or any other ancillary dispute arising

from the terms of the contract or if the Railway

establishment fails to take a decision within the

stipulated period and the dispute could not be amicably

settled, such dispute or difference is to be referred to the

arbitration.

The Hon'ble Apex Court in the pretext of the

objection raised by the respondent that the claim of the

parties was turned down because of furnishing no claim

certificate and taking into consideration the specific

clause made as under Clause 64(3) that in cases, where

the total value of all claims in question added together

does not exceed Rs.25 lakhs, the Arbitral Tribunal shall

consist of a sole arbitrator who shall be a gazetted officer

of the Railways not below JA Grade, nominated by the

General Manager.

17. But, herein, in the facts of the given case, no

such clause is available under the contract designating

the name of the Arbitrator to be nominated by the

concerned respondent, rather, only stipulation made

that the notice is to be given to both the parties for

amicable settlement within 15 days. Once the decision

has been taken by the respondent negating the claim,

then in that circumstances, it has to be resolved and

since there is no condition in contract for appointment

of named Arbitrator, therefore, only remedy available to

the applicant/petitioner is to make an application under

Section 11(6) of the Act, 1996 and as such, the instant

applications have been filed and in view thereof, the

judgment relied upon by the learned counsel for the

respondent is not applicable in the facts of the given

cases.

18. The issue herein since pertains to the

commercial dispute and the intent of the Commercial

Courts Act read with the Arbitration and Conciliation

Act, 1996 is to dispose of dispute of such nature

expeditiously.

19. This Court, after taking into consideration the

aforesaid statute and taking into consideration the fact

that the claim of appointment of Arbitrator vis-à-vis the

claim on merit has also been disputed by the

respondent, therefore, at this stage, it will not be just

and proper to relegate the petitioner/applicant to take

recourse of amicable settlement.

20. This Court, on the basis of the discussion made

hereinabove, is of the view that the objection which has

been raised by the respondent is not worth to be

considered, accordingly, rejected.

21. The respondent, since, has admitted that the

dispute is there, but, the applicant/petitioner is not

entitled for the same which suggests that the dispute

requires to be resolved.

22. Therefore, in such circumstances, this Court is

of the view that the instant applications deserve to be

allowed.

23. Accordingly, the instant applications stand

allowed.

24. The order after having been passed, Mr. Atanu

Banerjee, learned counsel appearing for the respondent,

at this juncture, has suggested the name of Hon'ble Mr.

Justice (Retd.) Tapen Sen, Former Judge of this Court,

to act as an Arbitrator. The aforesaid suggestion has

been accepted by the learned counsel appearing for the

petitioner/applicant.

25. Considering the aforesaid suggestion, this Court,

therefore, appoints Hon'ble Mr. Justice (Retd.) Tapen

Sen, Former Judge of this Court, presently residing at

H/o-Raju Hirani, Dam Side Road, Kanke, Ranchi, e-

[email protected], to act as an Arbitrator

for resolution of dispute between the parties.

26. The proposed Arbitrator is required to submit a

declaration in terms of Section 12 of Arbitration and

Conciliation Act, 1996.

27. Learned Arbitrator would be free to lay down fees

and other expenses towards conduct of the arbitration

proceedings, however, keeping into account the ceiling

prescribed under Schedule IV of the Act, 1996 as

amended.

28. Let the photocopy of the entire pleadings along

with copy of the entire order sheets be sent to the

learned Arbitrator by the Registry.

29. Pending Interlocutory Application(s), if any,

stands disposed of.

(Sujit Narayan Prasad, J.)

N.A.F.R.

Rohit/-