Madras High Court
M/S.Baka Construction vs Union Of India on 21 December, 2021
Arb.O.P.(Comm.Div).No.176 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 21.12.2021
Coram:
THE HONOURABLE MR. JUSTICE SENTHILKUMAR RAMAMOORTHY
Arbitration Original Petition (Comm.Div).No.176 of 2021
M/s.Baka Construction,
Rep. by its Partner/Authorised Signatory,
Mr.KM Anil Kumar, Partner,
C/o. 3rd Stage, 4th Block, No.25/A, 2nd Floor,
1st Main Road, West of Chord Road,
Basaveshwara Nagar, Bangalore – 560 079. ... Petitioner
/versus/
1. Union of India,
Represented by its Secretary,
Ministry of Defense,
South Block, New Delhi – 110 011.
2. Engineer in Chief,
Kashmir House,
Rajaji Marg,
New Delhi – 110 011.
3. Military Engineer Services,
Head Quarters, Chief Engineer,
Chennai Zone, Island Grounds,
Chennai – 600 009.
4. Chief Engineer,
Souther Command,
MM Road, Camp, Pune – 411 001.
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Arb.O.P.(Comm.Div).No.176 of 2021
5. Commander Works Engineer,
No.7, Pallavan Salai, Anna Road,
Egmore, Chennai – 600 002.
6. Garrison Engineer,
(Aloy Nag, IDSE, EE),
Fort Saint George,
Chennai – 600 009. ... Respondents
Prayer: This Arbitration Original Petition is filed under Section 11(5) and 11(6)
of the Arbitration and Conciliation Act, 1996 as amended by Act 3 of 2016,
praying to appoint any one sole arbitrator from amongst the empanelled arbitrators
of Department.
Shri Arvind K Arora, Retd DG(Pers), New Delhi,
Shri Satish Chander, ADG (Contracts) (Retd), Pune,
Shri Vinay Kulkarni, Retd DG (Pers), Bhopal,
Shri RP Tripathi, ADG (Retd), Bhopal,
Maj General (Retd) S.Kaushik, Pune.
To adjudicate on the disputes which have arisen between the petitioner and
the respondent as per the conditions of I.A.F.W-2249 of Military Engineer Services
General Conditions of Contract herein and pass such further order.
For Petitioner : Mr.M.Sunil Kumar
For Respondents : Ms.Saisudha Kuberan for
Mr.D.Saravanan
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Arb.O.P.(Comm.Div).No.176 of 2021
ORDER
The petitioner seeks appointment of an arbitrator.
2.The petitioner was awarded a contract in relation to the provision of a
450KW Solar Power Generator at Island Grounds, Chennai. The said contract
consisted of both General Conditions of Contract and Special Conditions of
Contract. Clause 70 of the General Conditions of Contract contains an arbitration
clause, which is set out below:
“70. Arbitration - All disputes, between the parties to
the Contract (other than those for which the decision of the
CWE or any person is by the contract expressed to be final
and binding) shall, after written notice by either party to the
Contract to the other of them, be referred to the sole
arbitration of a Serving Officer having degree in
Engineering or equivalent or having passed final/ direct
final Examination of sub-Division H of Institution of
Surveyor (India) recognised by the Govt. of India) to be
appointed by the authority mentioned in the tender
documents.
Unless both parties agree in writing such reference
shall not take place until after the completion or alleged
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Arb.O.P.(Comm.Div).No.176 of 2021
completion of the Works or termination or determination of
the Contract under Condition Nos. 55, 56 and 57 hereof.
Provided that in the event of abandonment of the
Works or cancellation of the Contract under Condition Nos.
52, 53 or 54 hereof, such reference shall not take place
until alternative arrangements have been finalised by the
Government to get the Works completed by or through any
other Contractor or Contractors or Agency or Agencies.
Provided always that commencement or continuance
of any arbitration proceeding hereunder or otherwise shall
not in any manner militate against the Government's right
of recovery from the Contractor as provided in Condition
67 hereof.
If the Arbitrator so appointed resigns his
appointment or vacates his office or is unable or unwilling
to act due to any reason whatsoever, the authority
appointing him may appoint a new Arbitrator to act in his
place.
The Arbitrator shall be deemed to have entered on
the reference on the date he issues notice to both the
parties, asking them to submit to him their statement of the
case and pleadings in defence.
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Arb.O.P.(Comm.Div).No.176 of 2021
The Arbitrator may proceed with the arbitration, ex
parte, if either party, in spite of a notice from the Arbitrator
fails to take part in the proceedings.
The Arbitrator may, from time to time with the
consent of the parties, enlarge, the time for making and
publishing the award.
The Arbitrator shall give his award within a period
of six months from the date of his entering on the reference
or within the extended time as the case may be on all
matters referred to him and shall indicate his findings,
along with sums awarded, separately on each individual,
item of dispute. [The arbitrator shall give reason for the
award in each and every case irrespective of the value of
claims or counter claims].
The venue of Arbitration shall be such place or
places as may by fixed by the Arbitrator in his sole
discretion.
The Award of the Arbitrator shall be final and
binding on both parties to the Contract.”
3.Clause 28 of the Special Conditions of Contract, which deals with
conciliation is also of relevance, and is set out below:
28. CONCILLIATION:
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Arb.O.P.(Comm.Div).No.176 of 2021
28.1. Appointment of conciliator:
All disputes brought out here-in-after/before shall
be referred to the sole conciliator viz serving officer not
below the rank of Superintending Engineer/Superintending
Engineer (QS&C) having degree in Engineering or
equivalent or having passed final/direct final examination
of Sub division II of Institution of Surveyors (India) to be
appointed by the Engineer-in-Chief, Army Headquarters,
New Delhi or in his absence the Officer officiating as
Engineer-in-Chief or Director General of
works specifically delegated by the Engineer-in-Chief in
writing.
28.2. Scope of conciliation
The scope of conciliation shall be restricted to
the following types of disputes with financial limits as
indicated therein:-
a) Disputes relating to levy of compensation for delay in
completion actual amount of compensation.
b) Disputes relating to technical examination of works.
c) Disputes relating to interpretation of the provisions of
the contract with reference to their application to parties.
d) Disputes relating to non return of Schedule 'B' stores
over-issued to contractor.
e) Any other dispute having fair chances of being
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Arb.O.P.(Comm.Div).No.176 of 2021
resolved by conciliation and considered fit to be referred to
conciliation by the parties.
For item (b), (c), (d) and (e.) each as stated above the
financial limit shall be Rupees two lakhs or one percent of
the contract amount whichever is less.
28.2.1. Commencement of Conciliation Proceedings:
28.2.2: The party initiating conciliation shall send to the
other party a written invitation to conciliate, briefly
identifying the subject of the dispute.
28.2.3. Conciliation proceedings shall commence when the
other party accepts in writing the invitation to conciliate.
28.2.4. If the other party rejects the invitation, there
will be no conciliation proceedings. If the party initiating
conciliation does not receive a reply within 30 days from
the date on which he sends or within such other periods of
time as specified in the invitation, he may elect to treat this
as a rejection of the invitation to conciliate and if he so
elects, he shall inform in writing the other party
accordingly.
28.3. Number of Conciliators: There shall be a sole
conciliator
28.4. Status of Effect of settlement agreement:
The settlement agreement signed by the parties as a result
of conciliation proceedings shall have the same stalls and
effect as it is an arbitral award on agreed terms.
28.5. On finalisation of conciliation proceedings, the
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Arb.O.P.(Comm.Div).No.176 of 2021
settlement agreement shall be signed by Accepting Officer
on behalf of Union of India after ascertaining the
availability of funds.
28.6. In case the net total amount of payment involved in
the settlement agreement exceeds Rs. 2.00 lakhs,
Accepting Officer will consult next higher authority and
obtain clearance before conclusion of conciliation
proceedings.
4.The petitioner issued a communication dated 26.12.2020 to the 3rd
respondent with a copy to the 2nd, 5th & 6th respondents. By such communication,
the petitioner set out the dispute and the claims relating thereto and requested that
the dispute be referred for conciliation. In addition, the petitioner stated that the
letter may be taken as a notice for appointment of arbitrator as per note 7(b) of
Tender page 71 of the CA in case the respondents are of the view it is outside the
scope of the conciliation clause. The present petition is filed in view of the failure
of the respondents to respond to this communication.
5.The respondents have filed a counter statement in response to the petition.
The principal ground on which the respondents resist the petition is that the
petitioner did not invoke the arbitration clause. Instead, it is contended that the
petitioner only invoked the conciliation clause. Learned counsel for the respondents
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Arb.O.P.(Comm.Div).No.176 of 2021
relies upon the Special Conditions of Contract and contends that in case of conflict
between the Special Conditions and General Conditions, the Special Conditions
would prevail. On the specific issue of dispute resolution, learned counsel for the
respondents contends that the Special Conditions provide for dispute resolution by
conciliation and not arbitration. Besides, it is contended that there is a financial
limit of Rs.2,00,000/- as per the conciliation clause. In support of these
contentions, learned counsel for the respondents refers to and relies upon the
judgment of the Hon'ble Supreme Court in Konkan Railway Corporation Limited
and another v. Rani Construction Private Limited, 2002 2SCC 388, to the effect
that the procedure prescribed in the agreement as regards dispute resolution should
be adhered to strictly.
6. In the light of the rival contentions, the first issue that should be decided
is whether the petitioner has invoked the arbitration clause. In the communication
dated 26.12.2020, the petitioner set out the dispute between the parties and
requested that such dispute be referred to conciliation. However, it should be
noticed that the petitioner also indicated in the said communication that it should
be treated as a notice for appointment of arbitrator in case the respondents are of
the view that the dispute is not within the scope of the conciliation clause. A notice
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Arb.O.P.(Comm.Div).No.176 of 2021
invoking the arbitration clause is not required to be in any particular format, and
the law does not prescribe the content of such notice. Without doubt, in substance,
such notice should disclose the intention of the party to seek to resolve disputes
through arbitration. In the case in hand, the petitioner has stated that if the
respondents are of the view that the claims are not within the scope of the
conciliation clause, the communication should be treated as the notice for
appointment of an arbitrator. Therefore, in substance, the said notice satisfies the
requirements of Section 21 of the Arbitration and Conciliation Act 1996.
7. The 2nd contention of the respondents was that the Special Conditions of
Contract override the General Conditions to the extent of conflict. There can be no
quarrel with the proposition that the Special Conditions would prevail in case of
conflict. However, it should be examined whether there is conflict. In this case, the
Special Conditions of Contract contain a conciliation clause, but the respondents
are unable to point out any clause for dispute resolution either by arbitration or
through a court of law. Conciliation and mediation, in contrast to arbitration or
litigation, are not methods of dispute resolution through adjudication. Instead, they
are modes of enabling the parties to arrive at a settlement. In fact, clause 28.2.4 of
the Special Conditions indicates beyond doubt that the request for conciliation may
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Arb.O.P.(Comm.Div).No.176 of 2021
be rejected by the recipient of a notice for conciliation. This sub-clause underscores
the completely consensual nature of the conciliation process. Consequently, there
is no conflict between the Special Conditions of Contract and the General
Conditions of Contract. As a corollary, the arbitration clause in the General
Conditions of Contract continues to apply. Hence, the petitioner is entitled to
succeed. Clause 70 of the General Conditions of Contract provides for the
appointment of a serving officer as the sole arbitrator. After the entry into force of
Act 3 of 2016, a serving officer would be ineligible. Therefore, a neutral person
should be appointed as the arbitrator.
8. For the reasons set out above, Arbitration Original Petition No.176 of
2021 is allowed by appointing Dr.N.Ravi, retired Additional Director General,
CPWD, 3A, Madhunams Skandha Apartments, No.7, V.K.Iyer Road, Mandaveli
Chennai – 600 028 (Mobile No.9445566227), as the Sole Arbitrator. The Sole
Arbitrator is directed to enter upon reference and adjudicate the dispute in
accordance with law. It is open to the Sole Arbitrator to fix the fees and expenses
in relation to the arbitral proceedings.
21.12.2021
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Arb.O.P.(Comm.Div).No.176 of 2021
Index : Yes/No.
Internet : Yes/No.
bsm
https://www.mhc.tn.gov.in/judis
Arb.O.P.(Comm.Div).No.176 of 2021
SENTHILKUMAR RAMAMOORTHY J,
bsm
Arb.O.P.(Comm.Div).No.176 of 2021
21.12.2021
https://www.mhc.tn.gov.in/judis
