Jharkhand High Court
M/S Mecon Limited vs M/S City Construction Corp. Durgapur ... on 28 March, 2025
Author: Sujit Narayan Prasad
Bench: Sujit Narayan Prasad
IN THE HIGH COURT OF JHARKHAND AT RANCHI
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Arbitration Application No. 26 of 2023
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M/s MECON Limited, having its head office at Vivekanand
Path, P.O. & P.S-Doranda, Dist.- Ranchi, Jharkhand
through its General Manager (Contracts & Legal), Shri
Debabrata Acharya, Aged about 57 years, son of Late
Tapan Kumar Acharya, resident of MECON Colony,
Shyamali, P.O. & P.S. -Doranda, District - Ranchi,
Jharkhand-834005. .... Petitioner
Versus
M/s City Construction Corp. Durgapur having its
registered address at R.K. Pally, Main Gate, Durgapur,
P.O. & P.S-Durgapur, District-Burdwan, West Bengal-
713203. ... .... ... Respondent
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CORAM: HON'BLE MR. JUSTICE SUJIT NARAYAN PRASAD
.....
For the Petitioner : Mr. Shresth Gautam, Advocate
For the Respondent : Mr. Saptarshi Bhattacharjee, Adv.
[Through V.C.]
Mr. Vibhor Mayank, Advocate
.....
C.A.V. on 21/03/2025 Pronounced on 28/03/2025
Prayer:
1. The instant application has been filed by the
petitioner invoking the jurisdiction conferred under
Section 11(6) of the Arbitration and Conciliation Act,
1996 [hereinafter referred to as ‗Act, 1996'] for
appointment of arbitrator for resolution of dispute
between the parties.
-1- Arbitration Application No. 26 of 2023
Brief facts of the case:
2. Brief facts of the case, as per the pleadings made in
the application, which is required for adjudication of lis
reads as under:
3. The petitioner-MECON, is a ‗miniratna central public
sector enterprises of Govt. of India under the Ministry of
Steel' and is engaged in the business of consultancy and
execution of construction and industrial projects
throughout the country.
4. Tender bearing Tender Enquiry No. 11.51.027U/Civil
Works/Pkg. No. 001/008R dated 01.09.2021 was floated
by the petitioner inviting bids for execution of works
pertaining to ‗Civil Works for installation of 4th Stove in
Blast Furnace No. 4 of SAIL, Durgapur Steel Plant,
Durgapur'.
5. Pursuant thereto, the respondent applied the
aforesaid tender and after going through the tender
process emerged as L-1, as such was declared the
successful bidder. Accordingly, work order being Work
Order No. 11.51.027U/Civil Works/Pkg. No. 001/9807
dated 04.10.2021 was issued by the petitioner in favour
of respondent.
6. It is stated that in the ‗work order', it is clearly
stipulated that time is the essence of the contract,
therefore, the contractor-respondent was directed to
abide by the time schedule and execute the entire works
within a period of 08 (eight) months from the date of
issuance of ‗work order'.
7. After issuance of work order, the petitioner vide email
dated 06.10.2021 duly furnished the drawings to the
respondent-contractor in order to ensure that work be
executed in a timely and prompt manner.
8. It is stated that in spite of timely issuance of
drawings and other requisites instructions to the
respondent-contractor, the progress of the works was
very slow since inception. In that view of the matter, the
petitioner, vide e-mail dated 06.11.2021, duly intimated
the respondent-contractor to deploy adequate manpower
at the time and made a request to execute the work on
‗high priority jobs'.
9. The petitioner again vide email dated 09.11.2021
intimated the respondent-contractor that there have been
various failures on its end, which include non-
procurement of construction materials, non-procurement
of tools and tackles required to execute the work and
non-submission of labour license by the respondent.
10. Thereafter, the petitioner, vide email dated
15.11.2021 and 16.11.2021, send reminders and
requested to expedite the works but the respondent-
contractor did not meet the targets as agreed upon
between the parties.
11. In such circumstance, on 18.11.2021, the petitioner
issued a ‗Notice of Negligence' communicating that
delayed execution of works by the respondent is severely
jeopardizing the completion schedule but in spite of that
even after passage of 50 days no visible progress was
done in the work assigned to the respondent, which fact
was communicated to the respondent vide email dated
26.11.2021.
12. Consequently, a meeting was held on 26.11.2021 in
MECON Site Office, Durgapur between the parties
wherein revised dates for execution of works were
stipulated and agreed upon by the parties. But again, the
respondent failed to meet the revised timeline, which was
communicated to the respondent vide email dated
30.11.2021.
13. But instead of expediting the work, the respondent
withdrew manpower and machinery from the work site,
which the petitioner communicated to the respondent
vide letter dated 03.12.2021 stating that for such action,
the respondent shall be liable for suitable action as per
the provisions of work order.
14. But in spite of repeated requests and reminders by
the petitioner, the respondent did not execute the works
and virtually abandoned the work, which constrained the
petitioner to issue ‗Negligence & Risk Purchase Notice'
dated 04.12.2021 by which the respondent was
requested to immediately mobilize manpower and
machinery at the work site and initiate execution of civil
works and further if the respondent fails to discharge the
execute the work as per work order, the petitioner shall
left with no option but to complete the left work by a
third entity at the risk and cost of the respondent.
15. Accordingly, the petitioner carried out inspection of
work site and found that no manpower was deployed at
the side and no work was carried out by the respondent,
which was communicated by the MECON, Durgapur side
office to the petitioner vide email dated 06.12.2021.
16. In the meantime, the respondent vide letter dated
01.12.2021 communicated to the petitioner that work
fronts were purportedly not being made available to the
respondent and further claimed of escalation of item
rates, to which the petitioner replied vide email dated
10.12.2021 that the work order was fixed unit rate
contract having no provision for escalation and allegation
of the respondent with regard to the unavailability of
work site was also negated by the petitioner.
17. It is stated that seeing no improvement in the rate of
progress/execution of works by the respondent, the
petitioner terminated the work order vide letter dated
17.12.2021.
18. Upon issuance of the termination order, the
respondent was requested to return the reinforcement
bars taken from the stores along with all gate passes
issued to the workers of the respondents vide emails
dated 18.12.2021 and 29.12.2021.
19. Thereafter, the petitioner got the balance work under
the work order executed by a third entity at a total basic
price of Rs. 3,89,68,536/- as against the ‗Initial Total
Contract Price' of Rs. 3,07,80,708/- plus overhead.
20. Consequently, the petitioner vide letter dated
07.04.2022 raised its claim upon the respondent to the
tune of Rs.81,87,828/- but the respondent did not pay it
till date.
21. It has been stated that as per Clause 36.2 of the
work order since the dispute arose between the parties,
the petitioner vide letter dated 13.09.2022 requested the
respondent for conciliation of disputes that had accrued
between the parties, but the respondent failed to take any
action.
22. The petitioner herein, upon receiving no response
from the respondent side, issued a notice invoking
arbitration under clause 36.2.1 vide letter dated
16.06.2023 proposing panel of three names from which
the respondent was requested to nominate for
appointment of sole arbitrator for resolution of disputes
between the parties but the respondent did not take any
steps.
23. In the backdrop of aforesaid facts, the petitioner has
invoked the jurisdiction conferred under Section 11(6)
‗Act, 1996' for appointment of arbitrator for resolution of
dispute between the parties.
Submission advanced on behalf of petitioner:
24. Learned counsel for the petitioner has submitted that
in pursuance to ‗Notice Inviting Tender' [NIT], inviting
bids for execution of works pertaining to ‗Civil Works for
installation of 4th Stove in Blast Furnace No. 4 of SAIL,
Durgapur Steel Plant, Durgapur'. The respondent after
going through the tender process emerged as L-1, as
such was declared successful and accordingly work order
being Work Order No. 11.51.027U/Civil Works/Pkg. No.
001/9807 dated 04.10.2021 was issued by the petitioner
in favour of respondent.
25. Submission has been made that immediately after
issuance of work order, the petitioner vide email dated
06.10.2021 duly furnished the drawings to the
respondent-contractor in order to ensure that work be
executed in a timely and prompt manner.
26. Learned counsel for the petitioner has submitted that
the work order contains certain conditions particularly
the time period in which the entire work was to be
completed i.e., within a period of eight months from the
date of issuance of work order, as per clause 4.0
―Completion period‖ wherein it has specifically been
stated that ‗Entire works as detailed in the Technical
Specification shall be completed within 08 (eight) months
from the date of work order.' Further, as per Clause No.
36.0 in case of any dispute or difference in between the
parties on any provisions of the contract, there is
provision of invocation of arbitration clause.
27. It is case of the petitioner that since inception the
progress of the works was very slow, therefore, the
petitioner vide e-mail dated 06.11.2021 duly intimated
the respondent-contractor to deploy adequate manpower
at the time and made a request to execute the work on
‗high priority jobs'.
28. Further submission has been made that the
petitioner time and again, repeatedly sent several
reminder requesting the respondent-contractor to
expedite the works but the respondent-contractor did not
meet the targets as agreed upon between the parties.
Therefore, vide letter dated 18.11.2021, the petitioner
issued a ‗Notice of Negligence' communicating that
delayed execution of works by the respondent is severely
jeopardizing the completion schedule but in spite of that
even after passage of 50 days no visible progress was
done in the work assigned to the respondent. Thereafter,
a meeting was convened on 26.11.2021 in MECON Site
Office, Durgapur between the parties wherein revised
dates for execution of works were stipulated and agreed
by the parties. But again, the respondent failed to meet
the revised timeline, and instead of expediting the work,
the respondent withdrew manpower and machinery from
the work site.
29. It has further been submitted that in such
circumstance, the petitioner issued ‗Negligence & Risk
Purchase Notice' dated 04.12.2021 by which the
respondent was requested to immediately mobilize
manpower and machinery at the work site and initiate
execution of civil works and further if the respondent fails
to discharge the execute the work as per work order, the
petitioner shall left with no option but to complete the left
work by a third entity at the risk and cost of the
respondent.
30. Submission has been made the considering that fact
no improvement in the rate of progress/execution of
works by the respondent, the petitioner terminated the
work order vide letter dated 17.12.2021.
31. Thereafter, the petitioner got the balance work under
the work order executed by a third entity at a total basic
price of Rs. 3,89,68,536 as against the ‗Initial Total
Contract Price' of Rs. 3,07,80,708/- plus overhead.
Consequently, the petitioner vide letter dated 07.04.2022
raised its claim upon the respondent to the tune of
Rs.81,87,828/- but the respondent did not pay it till
date.
32. Submission has been made that in accordance with
the provisions of Clause 36.2.1, the petitioner vide letter
dated 13.09.2022 requested the respondent for
conciliation of the disputes but the respondent failed to
take any action, therefore, the petitioner issued notice
invoking arbitration clause 36.2.1 vide letter dated
16.06.2023 proposing panel of three names from which
the respondent was requested to nominate for
appointment of sole arbitrator for resolution of disputes
between the parties but the respondent did not take any
steps, therefore, the petitioner is before this Court under
the provisions of Section 11(6) ‗Act, 1996' for
appointment of arbitrator for resolution of dispute
between the parties.
Submission on behalf of respondent
33. Counter affidavit has been file on behalf of
respondent wherein the issue of maintainability of the
arbitration application has been raised besides raising
the issue on merit.
34. Mr. Saptarshi Bhattacherjee, learned counsel for the
respondent, who appeared through Virtual Mode, being
assisted by Mr. Vibhor Mayank, learned counsel for the
respondent, raising the issue of the maintainability of the
arbitration application, has submitted that the instant
application has been filed without following the due
procedure of law as the petitioner at no point of time has
followed the mechanism as prescribed under reference.
35. Further submission has been made that the work
order under reference, was never signed and accepted by
the respondent, as such there exists no agreement by the
parties to submit any dispute to arbitration which may
arise between them.
36. On the merit of the issue, submission has been made
that this Court has no jurisdiction to decide on any
purported issuance of drawings, deployment of man
power, mobilization thereof and/or any execution of
works, which emanated out of a purported work order
dated 04.10.2021 and further this Court has no
jurisdiction to hear any purported issue pertaining to
procurement of construction materials, non-procurement
of tools and tackles required to execute any purported
work or works with regard to test pile boring etc., as
alleged by the petitioner.
37. Therefore, submission has been made that purported
notice of negligence dated 18.11.2021 is bad in law and
is outside the purview of Arbitration.
38. Further submission has been made that failure to
adhere to timelines, progress of work, withdrawal of man
power, abandonment of work site is not amenable under
the provisions of Arbitration and Conciliation Act, 1996,
therefore, the purported ‗negligence and risk purchase
notice' dated 04.12.2021 is bad in law and outside the
purview of Act, 1996.
39. Learned counsel has submitted that absence of any
arbitration clause is evident from email communication
dated 04.10.2021 and 09.11.2021 issued by the
petitioner.
40. Further submission has been made that the alleged
‗termination order' dated 17.12.2021 is bad in law and
the consequential demand of additional cost of
Rs.81,87,828/- plus overhead is also not tenable in law.
41. At paragraph 8 of the counter affidavit, it has been
denied that the petitioner has approached the respondent
for any form of conciliation and it has been denied at
paragraph 9 that there exists any valid arbitration clause
between the parties.
42. Therefore, submission has been made that the
instant application is fit to be dismissed in limine.
Analysis
43. We have heard learned counsel for the parties, gone
through the material available on record and rival
submissions advanced on behalf of parties.
44. The fact, which is not in dispute is that a ‗Notice
Inviting Tender' [NIT], inviting bids for execution of works
pertaining to ‗Civil Works for installation of 4th Stove in
Blast Furnace No. 4 of SAIL, Durgapur Steel Plant,
Durgapur', was floated, upon which the respondent
participated in the tender process and after going
through the tender process emerged as L-1 tenderer, as
such was declared successful. Accordingly work order
being Work Order No. 11.51.027U/Civil Works/Pkg. No.
001/9807 dated 04.10.2021 was issued by the petitioner
in favour of respondent.
45. The work order contains certain conditions. Clause
1.0 under the caption ‗Scope of Work', it is specifically
stated that ‗Your scope of work shall be strictly as per
Technical Specification (enclosed as Annexure-I).'
46. Further 2.0 speaks about the contract price which
says that the contract price for the total scope of work
enumerated in this Work Order is indicated in the Price
Schedule (Annexure -II) and the contract price shall be
firm and not subject to any increase/decrease
whatsoever for impositions of any fresh taxes and cesses,
if any, or statutory variation/removal of any existing
taxes and cess etc. within the contractual period.
47. Clause 4.0 is under the caption ‗Completion period'.
Clause 4.1 emphatically says that Completion Schedule/
Time is one of the most important aspects of the work
order and Contractor shall complete the entire work as
per the scope of work detailed in the technical
specification. Further laying emphasis, it has been
stipulated therein that the ‗Entire works as detailed in
the Technical Specification shall be completed within 08
(eight) months. For ready reference, Clause 4 of the work
order is quoted as under:
4.0 COMPLETION PERIOD
4.1 Completion Schedule/ Time is one of the most important
aspects of the work order and is firm & binding Contractor
shall complete the entire work as per the scope of work detailed
in the technical specification and clause 1.0 above in all
respects as the following schedule: Entire works as detailed
in the Technical Specification shall be completed within
08 (eight) months from the date of work order.
4.2 In order to achieve completion schedule as stated above,
contractor shall submit to MECON within 2 (two) weeks from
work order, a detailed work programme time schedule in the
form of a Bar Chart/ PERT Network to complete the entire scope
of work, for approval by MECON. The Contractor shall have to
comply with PERT/Bar Chart, as approved by MECON, for
completion of the entire work.
4.3 The delivery period as mentioned above shall be suitably
extended if the Contractor is delayed or impeded in the
performance of any of its obligations under this order by
reasons of any of the following:
i) Delay in issue of drawings/documents by MECON/SAIL-
DSP/CET (Consultant) Delay in issue drawings/ documents to
the contractor from the schedule as stipulated in the Technical
Specification.
ii) Any occurrence of Force Majeure as provided in clause no.
35.0.
iⅲ) Any suspension order given by MECON under clause no.
22.0.
iv) Delay in handing over of front to carry out civil works as
certified by site engineer.
The delivery period under the above condition shall be
extended by such period as shall be fair and reasonable in all
the circumstances and as shall fairly reflect the delay or
impediment sustained by the contractor for the reasons
attributable to MECON. Except where otherwise specifically
provided in the order, the Contractor shall submit to MECON
their claim for an extension of the delivery period together with
particulars of the event or circumstances justifying such
extension as soon as reasonably practicable after the
commencement of such an event or circumstances. The
Contractor shall at all times use its reasonable efforts to
minimize any delay in the performance of its obligation under
the order."
48. Clause 11.0 of the work order deals with ‗submission
of progress report, which says that the contractor shall
furnish progress report as 1st and 15th of every month
showing the progress of each activity. For ready
reference, clause 11 of the work order is quoted as under:
"11.0 SUBMISSION OF PROGRESS REPORT
The CONTRACTOR shall furnish progress report as 1" & 15 of
every month showing the progress of each activity as per the
bar chart agreed between MECON and CONTRACTOR. If
requested by MECON, CONTRACTOR shall also furnish three
(3) prints each to the MECON of progress photographs of the
work done at Site.‖
49. Clause 15.1 of the work order speaks about
Inspection of the work, wherein it has been stated that
Construction/Contract work shall be inspected by
petitioner-MECON to ensure that the plans and
specification are being properly executed. The petitioner-
MECON shall have access and right to inspect the work
or any part thereof at any stage. If by the above
inspection, the petitioner rejects any work, the
Contractor shall make good such rejections either by
modifications or repairs as may be necessary, to the
entire satisfaction of petitioner-MECON. For ready
reference, the Clause 15.1 is quoted as under:
15.0 ACCEPTANCE
15.1 INSPECTION
The Construction/ Contract work shall be inspected by
MECON/SAIL-DSP/CET to ensure that the plans and
specification are being properly executed. MECON/SAIL-
DSP/CET shall have access and right to inspect the work or
any part thereof at any stage. If by the above inspection,
MECON/ SAIL-DSP/CET reject any work, the Contractor shall
make good such rejections either by modifications or repairs as
may be necessary, to the entire satisfaction of MECON. Such
repair modifications include re-execution of such of those works
of other Contractor's and/ or agencies, which might have got
damaged or affected by re-work done to the contractor's work.
All supply items shall be inspected by MECON/SAIL-DSP CET,
if required, before despatch to site. Contractor shall send
inspection call after readiness of materials along with copies of
Internal Test report/ Test Certificates etc.
50. Clause 16 speaks about completion certificate, which
says that within 10 days of the completion of the entire
scope of work, the contractor shall give notice of such
completion to MECON and MECON shall inspect the
work and after satisfying itself with tests as required,
shall issue completion certificate to the contractor.
51. Clause 18 speaks about the responsibility for
performance of contract, which says that the Contractor
shall be responsible for the due and faithful performance
of the Work Order in all respects according to the intent
and meaning of the drawings, specifications and all other
documents referred to in this Work Order. For ready
reference clause 18.1 is quoted as under:
18.0 RESPONSIBILITY FOR PERFORMANCE OF CONTRACT
18.1The Contractor shall be responsible for the due and faithful
performance of the Work Order in all respects according to the
intent and meaning of the drawings, specifications and all
other documents referred to in this Work Order. Any approval
which MECON/SAIL-DSP/ CET may have given in respect of
the order shall not bind MECON/SAIL DSP/ CET and
notwithstanding any approval or acceptance given by
MECON/SAIL DSP/CET. It shall be lawful for MECON to reject
the work at site, if it is found that the materials used by the
Contractor are not in conformity with the terms and conditions
of the Work Order in all respects.
52. Further, the work order also contains an arbitration
clause under Clause 36. Clause 36.1.1 says that in the
event of any dispute or difference relating to
interpretation and application of the provisions of
Contract between the Contractor& MECON, such dispute
or difference shall be taken by either party for resolution
through Administrative Mechanism for Resolution of
CPSEs Disputes (AMRCD) as mentioned in DPE OM
no:4(1)/2013-DPE(GM)/FTS-1835 dated 22.05.2018.
Clause 36.2.1 says that any disputes, differences,
whatsoever, arising between the parties out of or relating
to the contraction meaning, scope, operation or effect of
this Order shall be settled between MECON and the
Contractor amicably. If, however, the MECON and the
Contractor are not able to resolve their disputes /
differences amicably as aforesaid, the said disputes /
differences shall be settled by Arbitration in accordance
with the Rules of Arbitration and the award made in
pursuance thereof shall be binding on the parties.
Conciliation shall be resorted to prior to invoking
Arbitration. For ready reference, Clause 36, the
Arbitration clause is quoted as under:
"36.0 ARBITRATION
36.1 For PSUs
36.1.1 In the event of any dispute or difference relating to
interpretation and application of the provisions of Contract
between the Contractor & MECON, such dispute or difference
shall be taken by either party for resolution through
Administrative Mechanism for Resolution of CPSEs Disputes
(AMRCD) as mentioned in DPE OM no:4(1)/2013-DPE(GM)/FTS-
1835 dated 22.05.2018. The place of arbitration shall be New
Delhi and the language to be used in Arbitration proceeding
shall be English.
36.1.2 During the pendency of the Arbitration proceedings both
the parties shall continue to perform their contractual
obligations,
36.2 For other than PSUs
36.2.1 Any disputes, differences, whatsoever, arising between
the parties out of or relating to the contraction meaning, scope,
operation or effect of this Order shall be settled between
MECON and the Contractor amicably. If, however, the MECON
and the Contractor are not able to resolve their disputes /
differences amicably as aforesaid, the said disputes /
differences shall be settled by Arbitration in accordance with
the Rules of Arbitration and the award made in pursuance
thereof shall be binding on the parties. Conciliation shall be
resorted to prior to invoking Arbitration. Work under this Order
shall be continued by the Contractor during the Arbitration
proceedings unless otherwise directed in writing by MECON or
unless matter is such that the work cannot possibly be
continued until the decision of the arbitrator is obtained.
36.2.2 The arbitration shall be governed and regulated in all
respect according to Laws of India.
36.2.3 The Arbitration proceedings shall be regulated and
governed by Indian Arbitration and Conciliation Act 1996, or
such modification thereof. The seat & venue of Arbitration
proceeding shall be Ranchi.
36.2.4 This order including the Arbitration proceeding shall be
governed by and interpreted in accordance with the laws of
India and shall be subject to the exclusive jurisdiction of the
courts of Ranchi."
53. It is evident from Clause 36 of the work order that it
provides for dispute redressal mechanism stating
specifically therein that the disputes / differences shall
be settled by Arbitration in accordance with the Rules of
Arbitration and the award made in pursuance thereof
shall be binding on the parties. Conciliation shall be
resorted to prior to invoking Arbitration.
54. As per pleading available on record, it is evident that
the respondent-contractor has accepted the work order
and started the contractual work but the work having not
been concluded as per the time schedule, and there was
no improvement in the rate of progress/execution of
works by the respondent, the petitioner-MECON
terminated the work order vide letter dated 17.12.2021.
Thereafter, the petitioner got the balance work under the
work order executed by a third entity at a total basic
price of Rs. 3,89,68,536/- as against the ‗Initial Total
Contract Price' of Rs. 3,07,80,708/- plus overhead.
Consequently, the petitioner vide letter dated 07.04.2022
raised its claim upon the respondent to the tune of
Rs.81,87,828/- but the respondent did not pay it till
date.
55. It is submitted that thereafter as per provisions of
Clause 36.2.1, the petitioner vide letter dated 13.09.2022
requested the respondent for conciliation of the disputes
but the respondent failed to take any action, therefore,
the respondent issued notice invoking arbitration clause
36.2.1 vide letter dated 16.06.2023 proposing panel of
three names from which the respondent was requested to
nominate for appointment of sole arbitrator for resolution
of disputes between the parties but the respondent did
not take any steps.
56. Hence, the present petition invoking the jurisdiction
of this Court conferred under Section 11(6) of the Act,
1996, for appointment of arbitrator for resolution of
dispute between the parties.
57. The respondent has raised the issue that the
condition stipulated in the work order cannot be
construed to be concluded contract, as such the
arbitration clause even if it is available therein as Clause
No. 36.0, cannot maintain the present application under
Section 11 (6) of the Arbitration and Conciliation Act,
1996 in absence of any formal contract between the
parties.
58. Argument on merit of the issue has also been made.
59. This Court needs to refer herein so far merit of the
case is concerned the same is not required to be taken
into consideration at this stage by this Court reason
being that this Court is exercising the power conferred
under Section 11(6) of the Act, 1996 wherein the
jurisdiction lies to the Court to appoint arbitrator only
and any other issues on merit is to be considered in
course of adjudication by the arbitrator, if appointed.
60. Herein, the issue has been raised that the work order
cannot be said to be concluded contract and as such the
instant application is not maintainable.
61. This Court, therefore, first is to consider the issue as
to:
"Whether the work order containing certain conditions
including arbitration clause can be said to be
concluded contract in a case where the work order
has been issued by the petitioner in terms of the
decision taken by the tender committee in pursuance
to the „Notice Inviting Tender‟ and the said work order
has been accepted by the respondent-contractor by
commencement of the work, as referred in the said
work order?"
62. This Court, in order to answer the issue, needs to
again go the factual aspect of the instant case.
63. The petitioner-MECON, for executing the work,
invited bids for execution of works pertaining to ‗Civil
Works for installation of 4th Stove in Blast Furnace No. 4
of SAIL, Durgapur Steel Plant, Durgapur', whereupon the
respondent-contractor offered his candidature and
participated in the tender process. The respondent-
contractor, after going through the tender process
emerged as L-1 tenderer, and as such was declared
successful. Accordingly work order being Work Order No.
11.51.027U/Civil Works/Pkg. No. 001/9807 dated
04.10.2021 was issued by the petitioner in favour of
respondent.
64. The said work order has been accepted by the
respondent since the respondent has commenced the
work in pursuance to the said work order. The said work
order contains certain conditions including the
arbitration clause at Clause No. 36 i.e., the dispute
redressal mechanism. Clause 36.2 of the work order
contains specific provision that in case of any dispute
between the parties, the same shall be referred to for
arbitration.
65. Further, Clause 36.2.1 of the work order speaks that
any disputes, differences, whatsoever, arising between
the parties shall be settled between parties amicably. If,
however, the parties are not able to resolve their
disputes/differences amicably as aforesaid, the said
disputes/differences shall be settled by Arbitration in
accordance with the Rules of Arbitration and the award
made in pursuance thereof shall be binding on the
parties. However, conciliation shall be resorted to prior to
invoking Arbitration.
66. Fact about commencement of work has not been
disputed by the respondent, since there is no averment to
that effect that work has not been commenced by the
respondent-contractor.
67. The question, therefore, would be that in such
circumstances where the work order issued by the
petitioner has not been disputed rather it is being
admitted as would appear from the conduct of the
respondent-contractor that the work has commenced in
pursuance to the said work order.
68. The moment the respondent has accepted the work
order by commencement of the work in pursuance to the
said work order dated 04.10.2021, according to the
considered view of this Court it is not available for the
respondent to take the ground that the same cannot be
treated in the nature of concluded contract reason being
that the document if being accepted it is to be accepted
by the party in entirety and not in piecemeal.
69. It is settled principle of law that there cannot be
‗approbate and reprobate' meaning thereby the part of
the document cannot be allowed to be accepted and part
thereof cannot be allowed to be refused. Reference in this
regard be made to the judgment rendered in the case of
R.N. Gosain vs. Yashpal Dhir reported in (1992) 4 SCC
683 wherein at paragraph 10 which reads hereunder:
"10. Law does not permit a person to both approbate and
reprobate. This principle is based on the doctrine of
election which postulates that no party can accept and
reject the same instrument and that "a person cannot
say at one time that a transaction is valid and thereby
obtain some advantage, to which he could only be
entitled on the footing that it is valid, and then turn round
and say it is void for the purpose of securing some other
advantage". [See : Verschures Creameries Ltd. v. Hull
and Netherlands Steamship Co. Ltd, Scrutton, L.J.]
According to Halsbury‟s order (for example for the
payment of costs) a party may be precluded from saying
that it is invalid and asking to set it aside". (para 1508)"
70. In State of Punjab and Ors. vs. Krishan Niwas,
AIR 1997 Supreme Court 2349 the Hon'ble Apex Court
at paragraph-4 has laid down that once the employee has
accepted the correctness of the order and then acted
upon it, the same cannot be questioned by the concerned
71. It needs to refer herein that the Arbitration and
Conciliation Act, 1996 defines arbitration agreement. As
per Section 2(b) of the Act, 1996, the arbitration
agreement will be said to be agreement as referred in
Section 7 of the Act, 1996. Reference of Section 2(b) along
with Section 7 of the Act, 1996 needs to refer herein
which reads as under:
Section 2(b) "arbitration agreement" means an agreement
referred to in section 7;
Section 7. Arbitration agreement.--(1) In this Part,
"arbitration agreement" means an agreement by the parties to
submit to arbitration all or certain disputes which have arisen
or which may arise between them in respect of a defined legal
relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an
arbitration clause in a contract or in the form of a separate
agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in--
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of
telecommunication [including communication through electronic
means] which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the
existence of the agreement is alleged by one party and not
denied by the other.
(5) The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement if the
contract is in writing and the reference is such as to make that
arbitration clause part of the contract.
72. It is evident from Section 7 of the Act, 1996 wherein
certain criteria have been given considering the same to
be an agreement within the meaning of Section 2(b) of the
Act, 1996. The ‗Arbitration Agreement' has been defined
under Chapter II of Section 7, which means an agreement
by the parties to submit to arbitration all or certain
disputes which have arisen or which may arise between
them in respect of a defined legal relationship, whether
contractual or not; meaning the agreement will be said to
be an agreement which if is in respect of legal
relationship, whether contractual or not.
73. Sub-section (2) of Section 7 thereof stipulated that
an arbitration agreement may be in the form of an
arbitration clause in a contract or in the form of a
separate agreement. Sub-Section (3) thereof provides that
an arbitration agreement shall be in writing. Sub-section
(4) thereof provides that an arbitration agreement is in
writing if it is contained in-- (a) a document signed by the
parties; (b) an exchange of letters, telex, telegrams or
other means of telecommunication [including
communication through electronic means] which provide
a record of the agreement; or (c) an exchange of
statements of claim and defence in which the existence of
the agreement is alleged by one party and not denied by
the other.
74. Sub-Section (5) of Section 7 stipulates that the
reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement if
the contract is in writing and the reference is such as to
make that arbitration clause part of the contract.
75. It is evident from perusal of Section 7 sub-section
4(b) along with the word ―legal relationship‖ as provided
under Section 7(1) that the legal relationship also
establishes by way of exchange of letters, telex, telegrams
or other means of telecommunication [including
communication through electronic means] which provide
a record of the agreement.
76. This Court, therefore, requires to consider what is
the meaning of word ‗legal relationship'
77. For that, this Court is again delving into the factual
aspect of the present case, from which it would be
evident that the work order is issued on the basis of the
decision taken by the tender committee which was
constituted in pursuance to the ‗Notice Inviting Tender',
in which the respondent was declared successful.
78. It is the respondent who has offered its candidature
for consideration so that the work order be allotted to
him, if he is found to be eligible in terms of the condition
of NIT. The respondent after going through the tender
process has emerged L-1 and has been declared
successful and thereafter the decision has been taken by
issuing the work order in favour of respondent. The
issuance of the work order, after being successful in the
tender process, will be said to have creation of legal
relationship between the petitioner-MECON and
respondent-contractor.
79. This Court is coming to such conclusion, that is of
relationship between the petitioner-MECON and
respondent-contractor is relationship, for the reason that
process of entering into the relationship will be legal one
when the work order has been issued in favour of the
respondent after conclusion of process of tender and
thereafter the respondent while accepting the terms and
conditions of the work order has commenced the
proposed work also.
80. The matter would have been different, if the
respondent would not have commenced the work in
pursuance to the work order and at the outright work
order was not accepted by the respondent but that is not
the fact herein and if that would have been the situation
then it could have been understood that no legal
relationship has ever existed between the parties.
81. But herein the fact is otherwise since the
respondents have accepted the work order meaning
thereby the work order has been accepted by the
respondent in entirety including the terms and conditions
stipulated therein, in particular clause 36.0 which is the
Arbitration Clause mentioned in the work order.
82. Section 7 sub-section 4(b) stipulates that an
arbitration agreement is in writing if it is contained in
exchange of letters, telex, telegrams or other means of
telecommunication [including communication through
electronic means] which provide a record of the
agreement if the same will be read along with the
definition of ‗legal relationship, the ground which has
been taken on behalf of respondent that the condition
stipulated having not been signed by the respondent will
not be said to be concluded contract, is having no force,
reason being that in case of exchange of letters the
bilateral relationship might be there but in a case of
telex, telegrams or other means of telecommunication,
which provide the record of agreement, there is no
requirement of signature of the other side, exactly the
case herein.
83. The moment the work order has been accepted by
commencement of work by the respondent it is not
available for the respondent to take the ground there is
no signature on the work order, hence, the agreement
cannot be said to be concluded agreement.
84. The moment the respondent has offered its
candidature for allotment of work order in pursuance to
Notice Inviting Tender and in furtherance thereto
decision has been taken on his application on
consideration by the petitioner after declaring the
respondent to be successful bidder and work order has
been issued thereafter then the same will in the same
transaction and it will be the contract in between the
petitioner and the respondent by virtue of issuance of
work order incorporating certain condition including
Clause No. 36 of arbitration.
85. The issue fell for consideration before the Hon'ble
Apex Court in the case of Govind Rubber Limited Vs.
Louis Drefus Commodities Asia Private Limited
[(2015) 13 SCC 477], wherein it has been held that a
commercial agreement has to be construed according to
sense and meaning as collected in a first place from the
terms used and understood in the plain, ordinary and
popular sense in order to effectuate the immediate
intention of the parties. An agreement even if not signed
by the parties can be spelt out from correspondence
exchanged between the parties. However, it is the duty of
the Court to construe correspondence with a view to
arrive at the conclusion whether there was any meeting
of mind between the parties which could create a binding
contract between them and further it has been held that
in order to constitute an agreement, it need not be signed
by all the parties. For ready reference, the relevant
paragraphs of the judgment are quoted as under:
"12. There may not be any dispute with regard to the settled
proposition of law that an agreement even if not signed by
the parties can be spelt out from correspondence
exchanged between the parties. However, it is the duty of
the court to construe correspondence with a view to
arrive at the conclusion whether there was any meeting
of mind between the parties which could create a binding
contract between them. It is necessary for the court to find
out from the correspondence as to whether the parties were ad
idem to the terms of contract.
13. It is equally well settled that while construing an arbitration
agreement or arbitration clause, the courts have to adopt a
pragmatic and not a technical approach. In Rukmanibai
Gupta v. Collector [(1980) 4 SCC 556] , this Court held that:
(SCC p. 560, para 6)
"6. Arbitration agreement is not required to be in any
particular form. What is required to be ascertained is
whether the parties have agreed that if disputes arise
between them in respect of the subject-matter of contract
such dispute shall be referred to arbitration, then such
an arrangement would spell out an arbitration
agreement."
14. So far as the first contention made by the learned
counsel for the appellant that since the appellant did not
sign the agreement, it cannot be said to be a party to the
agreement, we would like to refer Section 7 of the Arbitration
and Conciliation Act, which reads as under:
7.Arbitration agreement.--(1) In this Part,
„arbitration agreement‟ means an agreement by the
parties to submit to arbitration all or certain disputes
which have arisen or which may arise between them in
respect of a defined legal relationship, whether
contractual or not.
(2) An arbitration agreement may be in the form of an
arbitration clause in a contract or in the form of a
separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained
in--
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means
of telecommunication which provide a record of the
agreement; or
(c) an exchange of statements of claim and defence in
which the existence of the agreement is alleged by one
party and not denied by the other.
(5) The reference in a contract to a document containing
an arbitration clause constitutes an arbitration
agreement if the contract is in writing and the reference
is such as to make that arbitration clause part of the
contract."
15. A perusal of the aforesaid provisions would show that in
order to constitute an arbitration agreement, it need not be
signed by all the parties. Section 7(3) of the Act provides that
the arbitration agreement shall be in writing, which is a
mandatory requirement. Section 7(4) states that the arbitration
agreement shall be in writing, if it is a document signed by all
the parties. But a perusal of clauses (b) and (c) of Section 7(4)
would show that a written document which may not be signed
by the parties even then it can be arbitration agreement. Section
7(4)(b) provides that an arbitration agreement can be culled out
from an exchange of letters, telex, telegrams or other means of
telecommunication which provide a record of the agreement.
16. On reading the provisions it can safely be concluded
that an arbitration agreement even though in writing
need not be signed by the parties if the record of
agreement is provided by exchange of letters, telex,
telegrams or other means of telecommunication. Section
7(4)(c) provides that there can be an arbitration
agreement in the exchange of statements of claims and
defence in which the existence of the agreement is
alleged by one party and not denied by the other. If it can
be prima facie shown that the parties are at ad idem, then the
mere fact of one party not signing the agreement cannot absolve
him from the liability under the agreement. In the present day
of e-commerce, in cases of internet purchases, tele purchases,
ticket booking on internet and in standard forms of contract,
terms and conditions are agreed upon. In such agreements, if
the identity of the parties is established, and there is a record
of agreement it becomes an arbitration agreement if there is an
arbitration clause showing ad idem between the parties.
Therefore, signature is not a formal requirement under Section
7(4)(b) or 7(4)(c) or under Section 7(5) of the Act.
86. Therefore, this Court, taking into consideration the
discussion made hereinabove and law laid down by
Hon'ble Apex Court in the case of Govind Rubber
Limited Vs. Louis Drefus Commodities Asia Private
Limited (supra), is of the view that what has been
argued on behalf of respondent by taking the ground that
arbitration clause as contained in the work order cannot
be construed to be an agreement since it is not a
concluded one, is not sustainable for the reasons
aforesaid, accordingly the same is rejected.
87. The issue formulated by this Court on the basis of
pleading made by the parties is answered against the
respondent and it is hereby held that the work order
issued by the petitioner in favour of the respondent, who
had already commenced the proposed work based upon
the said work order, is concluded contract.
88. This Court, after having discussed the issue is in
detail, as hereinabove, is of the view that it is a case
where the application filed under Section 11 (6) of the
Act, 1996 is held to be maintainable.
89. Now, the second question which arises for
consideration is as to:
Whether the mechanism, as provided under Clause 36
of the work order has properly been followed before
taking recourse of provision of Section 11(6) of the Act,
1996 or not?
90. It is evident from clause 36.2.1 of the work order that
any disputes, differences, whatsoever, arising between
the parties out of or relating to the contraction meaning,
scope, operation or effect of this Order shall be settled
between MECON and the Contractor amicably. If,
however, the MECON and the Contractor are not able to
resolve their disputes / differences amicably as aforesaid,
the said disputes / differences shall be settled by
Arbitration in accordance with the Rules of Arbitration
and the award made in pursuance thereof shall be
binding on the parties. Conciliation shall be resorted to
prior to invoking Arbitration.
91. Clause 36.2 of the work order is specific that in case
of any dispute between the parties, the same shall be
referred to for arbitration.
92. This Court in the backdrop of aforesaid clause has
again delve into the factual aspect and found therefrom
that at clause 4.0, which speaks about completion
schedule/time, wherein it has specifically been
mentioned that Completion Schedule/ Time is one of the
most important aspects of the work order and further the
entire works as detailed in the Technical Specification
shall be completed within 08 (eight) months from the date
of work order.
93. But, as per pleading made in the writ petition, when
the respondent-contractor failed to expedite the progress
of the work in question and did not meet the targets, as
agreed upon between the parties, sent several reminder
letters and vide letter dated 18.11.2021 as also ‗Notice of
Negligence', as would be evident from Annexure 8 to the
instant application. Consequently, a joint meeting was
also convened on 26.11.2021 whereby revised dates for
execution of works were agreed upon by the parties, as
would be evident from minutes of meeting dated
26.11.2021, annexed a Annexure 10 to the instant
application.
94. It is the case of the petitioner that even thereafter,
the respondent did not adhere to the time schedule and
honor the commitment given by the respondent, as such
several request/warning letters were given for completion
of work, annexed as Annexure 12 to the application.
Thereafter, it is stated that inspection was done by the
petitioner of the site and it was found that no work is
being carried out by the respondent, as such the
petitioner terminated the work order, which was
communicated to the respondent vide letter of
termination order dated 17.12.2021 [Annexure 17 to the
instant application] and got the balance work executed by
a third entity third entity at a total basic price of Rs.
3,89,68,536 as against the ‗Initial Total Contract Price' of
Rs. 3,07,80,708/- plus overhead.
95. Consequently, the petitioner vide letter dated
07.04.2022 raised its claim upon the respondent to the
tune of Rs.81,87,828/- and a claim letter dated
07.04.2022 has been sent by the petitioner to the
respondent, as would be evident from Annexure 19 to the
instant application.
96. It appears that the petitioner vide letter dated
13.09.2022 requested the respondent contractor for
conciliation of the disputes that has accrued between the
parties as per Clause 36.2.1 of the work order but the
respondent did not act in furtherance of the notice for
conciliation issued under Clause 36.2.1 of the work order
and no communication has been received by the
respondent in this regard also.
97. The fact about making communication for the
purpose of resolution of dispute through conciliation has
not been disputed by the respondent in the counter
affidavit rather the issue of work order being not treated
as concluded agreement has mainly been raised, which
this Court has answered hereinabove.
98. It is settled position of law that the condition
stipulated in the work order/agreement is to be followed
by both the parties and in case of non-observance of the
conditions stipulated therein, which contains the
arbitration clause, the party aggrieved shall have the
right to take recourse of Arbitration and Conciliation Act,
1996.
99. This Court, therefore, is of the view the recourse as
available under Section 11(6) of the Arbitration and
Conciliation Act, 1996 has been taken after exhausting
the alternative dispute redressal mechanism i.e., the
process of conciliation, as available under Clause 362.1.
100. Accordingly, the question, as formulated by the
Court is answered.
101. This Court, from the discussions made
hereinabove, deems it fit and proper to exercise the power
conferred under Section 11(6) of the Act, 1996 and
requires to pass order accordingly.
102. Accordingly, the instant Arbitration Application
stands allowed.
103. However, for making suggestion of the name of
the arbitrator by the parties, the matter is posted on
28.03.2025.
104. List this case on 28.03.2025 under appropriate
heading.
(Sujit Narayan Prasad, J.)
Later on
28.03.2025
1. This Court in course of argument has sought
for name of the arbitrator by way of suggestion from the
parties, upon which both the parties have suggested the
name of Hon'ble Mr. Justice Amitav Kumar Gupta
(Retd.), High Court of Jharkhand to act as an Arbitrator.
2. Accordingly, this Arbitration Application stands
disposed of by appointing Hon'ble Mr. Justice Amitav
Kumar Gupta, Former Judge, High Court of Jharkhand,
Ranchi, as Arbitrator for resolution of dispute.
3. Needless to say that the parties will be at liberty to
raise all the legal issues for its consideration by the
learned Arbitrator, in accordance with law.
4. Learned Registrar General of this Court is directed to
send a copy of the entire records of this case along with
entire order sheet with this order to the learned
Arbitrator forthwith.
5. The instant arbitration application is allowed and
accordingly, disposed of.
(Sujit Narayan Prasad, J.)
Alankar /
A.F.R.
