Madras High Court
M/S.P.S.T.Engineering ... vs Water Resources Department on 26 October, 2022
Arb.O.P.(Comm.Div.) No.93 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 26.10.2022
CORAM
THE HONOURABLE MR.JUSTICE SENTHILKUMAR
RAMAMOORTHY
Arb.O.P.(Comm.Div.) No.93 of 2021
M/s.P.S.T.Engineering Construction
Represented by its Managing Partner,
V.S.Thennarasu
2/352, Vavipalayam, Kolaram (Po)
Paramathi Velur Tk,
Namakkal District 637 201. .. Petitioner
vs.
1. Water Resources Department
Government of Tamil Nadu,
Pennayar Basin Circle
Represented by its Superintending Engineer/
Special Chief Engineer
Thiruvannamalai 606 603.
2. The Executive Engineer
Water Resources Department,
Public Works Department,
Lower Pennayar Division,
Villupuram 605 602. ... Respondents
PRAYER: Arbitration Original Petition filed under Section 11(6) of the
Arbitration and Conciliation Act, 1996, prayed to appoint a Sole Arbitrator
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Arb.O.P.(Comm.Div.) No.93 of 2021
to adjudicate upon the disputes arising between the petitioner and the
respondent under the Articles of Agreement (LumpSum) dated 4.01.2019
and General Conditions of Contract of Tamil Nadu Building Practice.
For Petitioner : Mr.M.S.Krishnan, Senior Counsel
for Mr.S.Senthil
For Respondents : Mr.Edwin Prabhakar, Spl. G.P.
ORDER
Pursuant to a tender floated by the respondents for the construction of
an Anicut across Pennaiyur River at Enderimangalam Village, Panruti
Taluk, Cuddalore District, the petitioner was the successful bidder.
Consequently, a contract was executed between the petitioner and the
respondent.
2. By citing clause 3 of the Articles of Agreement dated 24.01.2019
and clause 69 of the General Conditions of Contract, learned senior counsel
for the petitioner contends that the intention of parties to resolve disputes
through arbitration is beyond dispute. In view of the unequivocal intention
to submit disputes for arbitration, he submits that an arbitral tribunal should
be constituted especially keeping in mind the fact that this is a dispute
arising out of a complex construction contract.
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Arb.O.P.(Comm.Div.) No.93 of 2021
3. By drawing reference to the judgment of this Court in the
Chairman, Tamilnadu Urban Habitat Development Board and Others v.
M/s.P.S.T. Engineering Construction, order dated 28.01.2022 in A.No.4793
of 2021 in C.S.C.D.No.108 of 2021, he submitted that the arbitration clause
in the said matter was unambiguous. By contrast, with specific reference to
the fourth paragraph of clause 69, he submitted that the said clause indicates
that the jurisdiction of the arbitral tribunal extends to matters of monetary
value in excess of Rs.1,00,000/-.
4. These contentions were refuted by learned Special Government
Pleader for the respondents. He submitted that the work carried out by the
petitioner was defective and that the respondents intend to raise a monetary
claim of about Rs.5.43 crore in respect thereof. As regards the arbitration
clause, he contended that the express intention of the respondents is to
resolve disputes by arbitration only if the claim is up to Rs.50,000/-. In
relation to disputes wherein the monetary claim is higher than the
prescribed threshold, he submitted that the policy decision of the
respondents is to resolve such disputes through the public court system.
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Arb.O.P.(Comm.Div.) No.93 of 2021
5. In order to decide this dispute, it is necessary to extract the relevant
arbitration clause. Accordingly, clause 3 of the Articles of Agreement and
clause 69 of the General Conditions of Contract are set out below:
“3. The arbitrator for fulfilling the duties
set forth in the arbitration clause of the General
Condition of the Contract shall be as follows:-
a. Up to Rs.50,000/- - Superintending
Engineer of PWD.,
WRO., Vellar Basin
Circle, Cuddalore.
b. Rs.50,000/- and - Competent Civil
above Court
J.SETTLEMENT OF DISPUTES
69. Arbitrations
69.1 In case of any dispute or difference between
the parties to the contract either during the
progress or after – the completion of the works or
after the determination, abandonment or breach
of the contract, or as to any matter or thing
arising thereunder except as to the matters left to
the sole discretion of the Executive Engineer
under clauses 18,20,25-3,27,34,35 and 37 of
“General conditions of contract” or as to the with
holding by the Executive Engineer of payment of
any bill to which the contractor may claim to be
entitled, then either party shall up to Rs.50000/-.
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Arb.O.P.(Comm.Div.) No.93 of 2021
The Arbitrator shall give detailed reasons in their
awards for their findings and conclusion.
Subject as aforesaid to the provisions of the
arbitration Act, 1940 or any statutory
modification or re-enactment thereof and the rules
made there under and for the time being in force
shall apply to the Arbitration proceeding under
this clause.
Upon every and any such reference, the costs of
and incidental to the reference and award
respectively shall be discretion of the arbitrator,
subject to the condition that the amount of such
costs to be awarded to either party shall not, in
respect of a monetary claim exceed the percentage
set out below of any such award irrespective of
the actual fees, cost and expenses incurred by
either party provided that where a monetary claim
is disallowed in full the said percentage shall be
calculated on the amount of the claim. The
arbitrator may determine the amount of the costs
to be awarded or director the same to be fixed as
between solicitor and client or as party and shall
direct by whom and to whom and in what manner
the same shall be borne and paid.
The percentage above referred to in this clause
are 5% on any such monetary award which does
not exceed Rs.10,000.3% on the next Rs.40,000 or
any part thereof 2% on the next Rs.50,000 or any
part thereof and 1% on any excess over
Rs.1,00,000/- provided that the government shall
not be liable to any claim in respect of any such
dispute or difference until the liability and the
amount thereof shall have been referred to and
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Arb.O.P.(Comm.Div.) No.93 of 2021
decided by the Arbitrator.
69.2 The fees for Arbitrators shall be levied
based on the value of claims referred to for
arbitration. The fees shall be calculated at 5% of
the first Rs.10000/- at 3% of the next Rs.40000/-”
6. Clause 3 of the Articles of Agreement clearly provides for the
resolution of disputes through the Superintending Engineer of PWD, WRO.,
Vellar Basin Circle, Cuddalore, if the claim is up to Rs.50,000/-. If the claim
is above Rs.50,000/-, it provides for resolution through the competent civil
court. The said clause however draws reference to the arbitration clause in
the General Conditions of Contract.
7. The first paragraph of clause 69 indicates that reference to
arbitration is limited to disputes of monetary claim up to Rs.50,000/-. The
fifth paragraph, which deals with the fees of the arbitral tribunal, reinforces
the conclusion that arbitration is restricted to claims up to Rs.50,000/-. By
relying on the fourth paragraph, learned senior counsel contended that the
said paragraph indicates that the jurisdiction extends to claims that exceed
Rs.1,00,000/-. On examining the fourth paragraph in the context of the other
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Arb.O.P.(Comm.Div.) No.93 of 2021
paragraphs, it appears that the fourth paragraph deals with monetary awards
in excess of Rs.1,00,000/-, whereas the other paragraphs deal with claims
up to Rs.50,000/-.
8. More importantly, near identical clauses were interpreted by the
Hon'ble Supreme Court in State of A.P. and another v. Obulu Reddy
(2001) 10 SCC 30, and by a Division Bench of this Court in Rajam
Engineering Contractors v. The State of Tamil Nadu, 2006 (1) CTC 796. In
the said judgments, the Court concluded that the dispute cannot be referred
to arbitration and that the party should approach the jurisdictional civil
court.
9. Although I concur with the contention of learned senior counsel
for the petitioner that the contract does disclose the intention of parties to
resolve disputes through arbitration, the language of such clause, which
restricts reference to arbitration to disputes where the monetary claim does
not exceed Rs.50,000/-, cannot be disregarded. It should also be noticed that
in response to a specific question, learned Special Government Pleader
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Arb.O.P.(Comm.Div.) No.93 of 2021
stated that the respondents are not agreeable to the resolution of this dispute
through arbitration.
10. In the above circumstances, Arb.O.P.(Com. Div.) No.93 of 2021
is dismissed without any order as to costs by leaving it open to the petitioner
to institute appropriate civil proceedings. The respondents will do well to
revisit the arbitration clause at least for the limited purpose of re-fixing the
threshold for reference of disputes to arbitration since such threshold is set
at a such a low level as to render the said arbitration clause otiose.
26.10.2022
Index : Yes / No
Internet : Yes / No
kal
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Arb.O.P.(Comm.Div.) No.93 of 2021
SENTHILKUMAR RAMAMOORTHY,J
kal
Arb.O.P.(Comm.Div.) No.93 of 2021
26.10.2022
https://www.mhc.tn.gov.in/judis
