Welspun Enterprises Limited vs Greater Mohali Area Development ...
2024 Latest Caselaw 18576 P&H

Punjab-Haryana High Court

Welspun Enterprises Limited vs Greater Mohali Area Development ... on 21 October, 2024

Author: Suvir Sehgal

Bench: Suvir Sehgal

                    ARB-65-2022 (O&M)                             -1-

                                      IN THE HIGH COURT OF PUNJAB AND HARYANA
                                                   AT CHANDIGARH

                    (113)
                                                                           ARB-65-2022 (O&M)
                                                                 DATE OF DECISION:- 21.10.2024

                    WELSPUN ENTERPRISES LIMITED                                    ...PETITIONER

                                                            VERSUS

                    GREATER MOHALI AREA DEVELOPMENT AUTHORITY

                                                                                   ...RESPONDENT


                    CORAM: HON'BLE MR. JUSTICE SUVIR SEHGAL


                    Present:-           Mr. Aashish Chopra, Senior Advocate with
                                        Ms. Rupa Pathania, Advocate,
                                        Ms. Nitika Sharma, Advocate and
                                        Ms. Gurpreet Randhawa, Advocate for the petitioner.

                                        Mr. D.V.Sharma, Senior Advocate with
                                        Ms. Sunder Kumari, Advocate for the respondent.
                                        ****
                    SUVIR SEHGAL, J. (Oral)

1. This petition has been filed under Section 11 (5) of the

Arbitration and Conciliation Act, 1996 (for short "the Arbitration Act") for

appointment of an Arbitrator to adjudicate the dispute between the parties.

2. Mr. Aashish Chopra, learned senior counsel for the petitioner,

submits that after the acceptance of the bid given by the petitioner, an

agreement dated 05.03.2012, Annexure P-1, was entered into between the

parties, whereby petitioner was awarded a contract for laying of pipeline

from Kajauli headwords to waterworks at S.A.S. Nagar along with ancillary

work. He submits that the value of the contract was revised to

Rs.193,57,03,849/- and the work was to be completed within a period of 30

months. Counsel submits that immediately on the award of the contract,

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ARB-65-2022 (O&M) -2-

petitioner mobilized the required resources, man power etc., but work could

not be completed within the stipulated period due to breaches by the

respondent. Though, the petitioner sought an extension of time for the

completion of the contract, but liquidated damage of Rs.30 lacs was imposed

and the petitioner approached this Court by filing a writ petition, which was

withdrawn on 30.11.2017, Annexure P-2, with liberty to avail alternative

remedy. He asserts that in terms of Clause 25 of the agreement, petitioner

raised claims before the Engineer of the work vide letter dated 25.05.2018,

Annexure P-3, but the claims were rejected vide communication dated

24.07.2018, Annexure P-4. Counsel submits that the Arbitration Clause was

invoked vide notice dated 19.09.2018, Annexure P-5, which was followed

by reminders, Annexure P-6 and P-7, respectively, but the respondent did

not accept the request. He asserts that in the meantime, petitioner completed

the project and a completion certificate was issued on 31.10.2019 and final

bill was submitted on 27.12.2019. He submits that the Arbitration Clause 25

provides for appointment of a Superintending Engineer of the respondent as

the sole Arbitrator, but in view of Section 12 (5) of the Arbitration Act, he is

ineligible to be appointed, therefore, an independent Arbitrator be appointed

to adjudicate the dispute between the parties.

3. Upon notice by this Court, petition has been contested by the

respondent by filing a response, wherein it has been submitted that as

reference of claim to an Arbitrator has not been sought within the period

stipulated in the Arbitration Clause, the petition is barred by time. Mr.

D.V.Sharma, learned senior counsel for the respondent, has placed reliance

upon the judgment of the Supreme Court in P.Manohar Reddy and Bros.

Versus Maharashtra Krishna Valley Development Corporation and others,

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ARB-65-2022 (O&M) -3-

(2009) 2 SCC 494 delivered by a bench of two judges, to contend that the

time period laid down in the Arbitration Clause for reference of dispute to

Arbitrator has to be adhered to. It has been submitted that vide letter dated

27.08.2021, Annexure R-2, petitioner was informed that he has to approach

the Punjab Infrastructure Regulatory Authority (PIRA) for resolution of

dispute in terms of Section 6 of the Punjab Infrastructure (Development and

Regulation) Act, 2002. Another objection taken by the respondent is that

Sub-Clause (viiii) of Clause 25 of the Arbitration Clause provides for a pre-

deposit of 10% of the amount claimed, which is mandatory. Yet another

objection has been raised that the petitioner is solely responsible for the

delay in the completion of the work resulting in the imposition of the

liquidated damages.

4. I have heard counsel for the parties and considered their

respective submission.

5. This Court will deal with the objections raised by the

respondent one by one. In so far as the first objection raised by the

respondent is concerned, it may be noticed that the judgment of the Supreme

Court in P. Manohar Reddy's case (supra) came up for consideration before

a Division Bench of the Delhi High Court in M/s Chander Kant and Co.

Versus The Vice Chairman, DDA and others, Law Finder Doc ID

#1422192, decided on 26.05.2009. The Division Bench discussed the effect

of the amendment brought about in Section 28 of the Indian Contract Act,

1872 w.e.f. 08.01.1997. The Division Bench held that the amendment to the

provision prohibits clauses, which seek to extinguish the rights of any party

thereto, or discharge any party from any liability under or in respect of any

contract on the expiry of a specified period so as to restrict any party from

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ARB-65-2022 (O&M) -4-

enforcing his rights. The Court came to the conclusion that any Clause

extinguishing the right of a party or discharging any party from the liability

in respect of any contract on expiry of specific period so as to restrict the

time period would be void. The Division Bench was of the opinion that in

view of the amended Section coming into force, the distinction sought to be

carved out earlier by legal pronouncements would not hold good. In

particular, reference needs to be made to the observations of the Division

Bench in para 11 of the judgment, which are reproduced hereunder:-

"11. In P.Manohar Reddy's case the Supreme Court had no occasion to consider the effect of the insertion of Clause (b) in Section 28 by Amending Act 1 of 1997. The Court did refer to the judgments in The Vulcan Insurance Co. Ltd. v. Maharaj Singh and another, 1976 AIR SC 287 and Wild Life Institute of India, Dehradun v. Vijay Kumar Garg, (1997) 10 SCC 528 but it was obvious that the observations were made in the context of unamended section 28 of the Contract Act. It is also seen from the judgment that the cause of action had arisen in that case on 29.10.1991 on which date the appellant's claim was rejected. It is thus clear that the Court considered the case in the light of the unamended provisions of section 28 of the Contract Act."

6. Three judges bench of the Supreme Court in Grasim Industries

Limited Versus State of Kerala, (2018) 14 SCC 265 and in Geo Miller &

Co. Pvt. Ltd. Versus Chairman, Rajasthan Vidyut Utpadan Nigam

Limited, (2020) 14 SCC 643 held that even if restricted period for raising an

arbitral dispute had actually been provided for in the Arbitration Clause, the

same would have to be treated as void and the limitation with reference to

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ARB-65-2022 (O&M) -5-

the claim raised by the petitioner would have to be determined only under

Article 137 of the Limitation Act, 1963. Supreme Court clarified that the

period of limitation would be three years prior to the date of invocation of

the arbitration. When examined in the light of the settled position, it is

apparent that the petitioner had invoked the Arbitration Clause within a

period of three years of the rejection of the claim by the Engineer In-charge

of the work. The claim, therefore, cannot be held to be barred by time.

Moreover, the present petition was instituted in the month of May, 2021,

which is also within the prescribed period. The first argument raised by

counsel for the respondent is, therefore, rejected.

7. There is no weight in the second argument of the respondent

due to the intervening circumstances. By a memorandum dated 05.02.2024,

Department of Finance, Government of Punjab has issued a memorandum to

various officials, including the Registrar General of this Court, intimating

that the appointment of Arbitrators in cases pending before this Court, has

been left to the discretion of this Court. The memorandum reads as under:-

"File No: 1/21/2011-5FE4/39 Government of Punjab Department of Finance (Finance Expenditure-IV Branch) Dated, Chandigarh the 05th Feb, 2024 To,

1) All the Special Chief Secretaries/Additional Chief Secretaries/Financial Commissioners/ Principal Secretaries & Administrative Secretaries to govt. of Punjab.

2) The Registrar, Punjab and Haryana High Court.

3) Managing Director, Punjab Infrastructure Development Board.

4) Secretary, Punjab Infrastructure Regulatory Authority.

Subject: Regarding taking decision to appoint the Arbitrators in absence of Chairperson and Members at PIRA.

Madam/Sir,

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I am directed to inform you that the following decisions have been taken for appointment of Arbitrators:-

a) The appointment of Arbitrator in cases pending before the Hon'ble High Court, should be left to the discretion of the Hon'ble High Court.

b) The existing list of Arbitrators as mentioned in the Punjab and Haryana High Court and updated time to time will be used for appointment of arbitrators in future cases with the approval of competent authority in consultation with Ld. Advocate General, Punjab.

However the Arbitration Fee should not be more than that has been prescribed in Schedule-B of the "Punjab and Haryana High Court (Arbitrator's Panel and Fee) Rules, 2011."

Sd/-

Under Secretary, Finance

ID. No-1/21/20211-5FE4/40 Dated, Chandigarh: 5/2/2024

A copy of the above is forwarded to the following for kind information, please:-

1) OSD to worthy Chief Secretary to Govt. of Punjab.

2) OSD to Ld. Advocate General, Punjab.

Sd/-

Under Secretary, Finance"

8. As the discretion to appoint the Arbitrators has been left by the

Government to this Court, counsel for the respondent cannot insist that the

dispute has to be referred to PIRA, more so, as its constitution is incomplete.

The second argument is, therefore, rejected.

9. The insistence of the respondent upon pre-deposit is also of no

avail. Supreme Court in Lombardi Engineering Limited Versus

Uttarakhand Jal Vidyut Nigam Limited, (2024) 4 SCC 341 has held that

such a condition is arbitrary and hit by Article 14 of the Constitution.

Supreme Court is of the view that the same can be ignored by the referral

Court while appointing an Arbitrator. As to whether the petitioner is

responsible for the delay in the completion of the work or the reason for the

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ARB-65-2022 (O&M) -7-

delay is on account of the lackadaisical attitude of the respondent is an issue,

which is arbitrable. Therefore, the third and fourth argument raised by

counsel for the respondent are also rejected.

10. For the afore-going reasons, this Court is of the view that a

dispute persists between the parties, which deserves to be referred for

determination to an Arbitrator.

11. Accordingly, the petition is allowed. Mr. Justice (Retd.)

Krishna Murari, a former judge of the Supreme Court, resident of House

No.27, First Floor, Nizamuddin East, Next to India Post, New Delhi -

110013, is requested to take over the role of an Arbitrator to adjudicate the

dispute between the parties, subject to compliance with statutory provisions.

12. Parties are directed to appear before the learned Arbitrator on

date, time, and place to be fixed by him at his convenience.

13. Liberty is granted to the parties to raise all claims, counter

claims, defences, pleas, etc. before the learned Arbitrator.

14. Needless to mention that all the questions arising between the

parties in this matter shall remain open for determination in the arbitral

proceedings and any observation made hereinabove will not be binding on

the learned Arbitrator.

15. A request letter along with a copy of the order be sent to Mr.

Justice (Retd.) Krishna Murari.

16. Pending application(s), if any, stand disposed of.

                                                                        (SUVIR SEHGAL)
                    21.10.2024                                              JUDGE
                    kamal
                                         Whether Speaking/Reasoned            Yes/No
                                         Whether Reportable                   Yes/No



authenticity of this order/judgment