Telangana High Court
M/S Teja Gew Jv vs The Union Of India on 30 October, 2023
Bench: Surepalli Nanda
1
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IN THE HIGH COURT OF TELANGANA AT HYDERABAD
W.P. No. 20964 of 2023
Between:
M/s TEJA-GEW (JV) Engineering Contractors
... Petitioner
And
The Union of India and others
... Respondents
JUDGMENT PRONOUNCED ON: 30.10.2023
THE HON'BLE MRS JUSTICE SUREPALLI NANDA
1. Whether Reporters of Local newspapers : Yes
may be allowed to see the Judgment?
2. Whether the copies of judgment may be
marked to Law Reporters/Journals? : Yes
3. Whether Their Lordships wish to
see the fair copy of the Judgment? : Yes
_________________
SUREPALLI NANDA, J
2
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THE HON'BLE MRS JUSTICE SUREPALLI NANDA
W.P. No. 20964 of 2023
% 30.10.2023
Between:
# M/s TEJA-GEW (JV) Engineering Contractors
..... Petitioner
And
$ The Union of India and others
... Respondents
< Gist:
> Head Note:
! Counsel for the Petitioner : Mr K.Sai Krishna Mohan Rao
^ counsel for Respondents 1 to 4: Mr G.Praveen Kumar
? Cases Referred:
1. (2022) 4 SCC 463
2. (2011) 14 SCC 337
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THE HON'BLE MRS JUSTICE SUREPALLI NANDA
W.P. NO. 20964 OF 2023
ORDER :
Heard the Learned Counsel appearing on behalf of
the Petitioner Mr. K. Sai Krishna Mohan Rao and
Learned Deputy Solicitor General of India Mr. Gadi
Praveen Kumar appearing on behalf of the Respondents
1 to 4.
2. This writ petition is filed to issue an appropriate writ,
order or direction more particularly one in the nature of Writ
of Mandamus declaring the constitution of Arbitration Tribunal
under Lr.No.W.148/GNT/TEJA-GEW(JV)/Agt.No.03, dated
07.12.2022 as illegal, arbitrary and against the Articles 14
and 21 of the Constitution of India and consequently set aside
the order passed by the impugned Arbitral Tribunal
Lr.No.PAN/ARB/TEJA, dated 22.07.2023.
3. The case of the petitioner, in brief, is as follows:
a) The Arbitral Tribunal was constituted by the 1st
respondent without jurisdiction and in violation of Clause 10
of the conditions of the contract agreement.
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b) The petitioner firm established a very good reputation in
its filed of activities. The petitioner entered into an
agreement vide its lr No.03/Dy.CE/Br.Lines/HQ/SC/2017
dated 27.11.2017 in pursuance of the letter of acceptance
vide its No.W.71/BR/tenders/RUB's/GNT, dated 27.07.2017
for a value of Rs.39,14,20,386.93ps with a completion period
of 12 months from the date of LOA.
c) During execution there were certain disputes arose and
there exists an Arbitration clause in the agreement. The 1st
respondent who is the competent authority to constitute an
Arbitral Tribunal without verifying whether the claims of the
petitioner are arbitrable or non-arbitrable constituted Arbitral
Tribunal consisting of respondents 4 to 6.
d) The petitioner submitted claim statement as per the
terms of the reference , but raised preliminary objection as to
arbitrability of the claims and the jurisdiction of the Arbitral
Tribunal as the claim of the petitioner was Rs.28,73,
15,8340/-, which was beyond 20% of the contract value.
e) Clause 10 of the contract agreement specifically
provides that Clause 63 and 64 of GCC will be applicable only
for settlement of claims, disputes for value less than or equal
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to 20% of the original value of the contract or 20% of the
actual value of the contract or 20% of the actual value of the
work done under the contract whichever is less. The value of
the original agreement is admittedly, Rs.39,14,20,386.93ps.
20% of the original agreement value shall be
Rs.7,82,84,077/-. The claims referred to arbitration is
admittedly more than Rs.33,99,00,101/-, which is more than
20% of the agreement value. Or executed value whichever
was less.
f) The claims of the petitioner are not arbitrable and the
arbitration is not the remedy for resolution of the disputes.
Therefore, the petitioner or the respondent is to file civil suit
for recovery of damages and losses before the competent civil
court. Hence, this writ petition.
PERUSED THE RECORD
4. The impugned proceedings No.PAN/ARB/TEJA
dated 22.07.2023 of the presiding Arbitrator for
Arbitral Tribunal, reads as under :
"Respondent was asked to submit remarks
against Claimant application dated 17.06.2023
and reminded further to submit on or before
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20.07.2023, but nothing is received. Arbitral
Tribunal has examined the content of the
Memorandum dated 17.6.2023 cited vide
reference ii) above, submitted by the claimant and
is discussed item wise as follows:
1. Regarding the objection raised by the claimant
that Tribunal has no jurisdiction as the claims are
beyond 20% of agreement value, it is noted -
i) that Claimant, having full knowledge of this
provision, sought Arbitration vide letter dated
15.06.2022 addressed to GM/SC Railway with
copy to DRM,ADRM/GNT and have not raised this
issue therein. Further Tribunal also observes that
this issue has not been challenged by Claimant
before any appropriate court /the Hon. High Court
of Telangana.
ii) that Respondent Railway have accepted the
request for Arbitration and appointed this Tribunal
which Claimant had also accepted and submitted
the Statement of Claims (SOC). Respondents have
also submitted their Statement of Defense (SOD).
iii)Thereafter three hearings were held and during
4th hearing while presenting oral submission
Claimant raised this objection (orally) for the first
time.
Hence raising the objection regarding jurisdiction
of Arbitral Tribunal at this stage of the
proceedings cannot be admitted under the
relevant provisions of the Arbitration &
Conciliation Act, 1996, and therefore objection
raised by Claimant is rejected.
2. It is to be noted that arguments of Claimant on
the objection during hearing on 17.06.2023 was
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heard by the Tribunal and Respondent was
directed to furnish remarks by 18.06.2023 which
was also accepted by the respondents. Tribunal
directed Claimant to proceed with the oral
arguments. But Claimant insisted on immediate
orders of the Tribunal on the objection. Further
tone and conduct of the Claimant during the
proceedings were not conducive for further
conduct of the proceedings. Hence the Tribunal
was forced to adjourn the proceedings and
decided to cancel the hearing fixed on 18.06.2023
and not to hold any hearings further ( kindly
connect letter dated 18.06.2023 cited vide
reference iii) above)
It may be noted that the tribunal has already
given the necessary declarations required under
the Arbitration and Conciliation Act to prove their
independence. The allegation of unlawful actions,
unilateral biased attitude of Tribunal and decision
to terminate the mandate of Tribunal, asking
refund of amount by Claimant is emotional,
baseless, without any substantiation and is purely
due to the reason that Tribunal has not given
immediate orders on objections for which
Claimant was insistent with unconducive tone and
conduct. Therefore Tribunal rejects all allegations.
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3. Due to non-conducive behaviour and conduct
of Claimant, it is decided by the Tribunal not to
hold any further hearings and to go ahead with
the Proceedings based on the statement of Claims
and Statement of Defense and other materials
furnished by both the claimant and respondent.
Kind attention is invited to the Tribunal directives
vide reference iii) cited above for furnishing their
further Defense/ documents additional
submissions in support of their respective claims
by 05.7.2023 for which no additional documents
have been received till date.
Tribunal will proceed further as envisaged in
section 25(C) of the Arbitration and Conciliation
Act 1996.
This is issued with the approval of the members of
Arbitral Tribunal
5. I.R.S. General Conditions of Contract entered into
between the Petitioner and South Central Railways,
Secunderabad. Condition No.10 reads as under :
10. Modification to Clause 63 & 64 of GCC :
a) The provision of clause 63 and 64 of the General
Conditions of Contract will be applicable only
for settlement of claims, disputes, for valuses
less than or equal to 20% of the original value
(excluding the cost of materials supplied free
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by Railway) of the contract or 20% of the
actual value of the work done (excluding the
value of the work rejected) under the
contract, whichever is less.
b) When claims/disputes are of value more than
20% of the value of the original contract or
20% of the value of the actual work done
under the contract, whichever is less, the
contractor will not be entitled to seek such
disputes/claims for reference to arbitration
and the provisions of clause No.63 & 64 of the
General Conditions of Contract will not be
applicable for referring the disputes to be
settled through arbitration.
c) The contractor shall furnish his monthly
statement of claims as per clause 43(1) of
General Conditions of Contract.
d) The contractor can seek reference to
arbitration to settle the disputes only once.
6. Referring to Clause 10(a) (b) of the Contract
Agreement entered into between the Petitioner and
South Central Railway, Secunderabad, the
Claimant/Petitioner herein raised a preliminary
objection as to jurisdiction of the Tribunal in the
Memorandum of Application dated 17.06.2023 raising
specific objection as to jurisdiction of the Tribunal in
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the matter of Arbitration arising out of Agreement
bearing No.03/DY.CE/BR.Lines/HQ/SC/2017, dated
27.11.2017 and the relevant portion reads as under :
"II. It is further submitted that, though the
claimant filed claim statement with all relevant
documents appended in support of the claims
before the this Hon'ble Tribunal, the claimant
raised preliminary objection as to jurisdiction of
this present Hon'ble tribunal In view of above said
clause of the agreement which is fundamental and
go to the root of the Issue of constitution of the
present Hon'ble Tribunal and its jurisdiction.
Therefore the counsel for the claimant prayed
before the Hon'ble Tribunal to pass orders on such
preliminary objections raised by the claimant
during the proceedings as to the jurisdiction of
the Hon'ble tribunal to adjudicate the disputes
under the subject matter which was under
question. The said contention and view of the
claimant was agreed to by one of the member of
the Hon'ble Tribunal by name Dr B. Srinivasan,
Retd. FA&CAO/Sothern Railway. However the
Hon'ble tribunal (Majority members by name Sri
N. Pancham and Sri G.Venugopal Reddy) without
cognizance to the clause in the agreement
mentioned above and also the objection raised by
the claimant before the Hon'ble Tribunal, the
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Hon'ble tribunal forced and compelled the
claimant to proceed with the matter pending
objections raised with the claimant, otherwise the
tribunal threatened the claimant that in the event
ciaimant do not proceed with the matter, the
tribuna! will pass ex-parte orders. Therefore the
claimant aggrieved with unlawful actions,
decisions and unilateral biased attitude of the
Hon'ble tribunal decided to terminate the mandate
of the tribunal as it lacksjurisdiction to adjudicate
the matter under dispute in view of the said
agreement clause above mentioned and decided
to file civil suit for damages before the competent
civil Court, which was the remedy available to the
claimant under the provision of law.
DISCUSSION AND CONCLUSION :
DISCUSSION :
7. It is the specific case of the Petitioner that as per
Clause 10 of the Contract Agreement entered into
between the Petitioner and South Central Railway,
Secunderabad, Arbitration cannot be the remedy if the
value of the disputes and claims is more than 20% of
the original contract value or executed value whichever
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is less. It is further the case of the Petitioner that the
claims of the Petitioner are admittedly more than 20%
of the original contract value or executed value
whichever is less and therefore Arbitration is not the
remedy available to the parties and the constitution of
the Tribunal by the Respondent No.1 vide its order
dated 07.12.2022 is in violation of the Clause 10 of the
Contract Agreement and hence it is illegal. It is further
the case of the Petitioner that in view of the fact that
the Constitution of Arbitration Tribunal vide order dated
07.12.2022 is itself without jurisdiction, being illegal,
the Petitioner seeks setting aside of the said order and
also the consequential order passed by the Tribunal
vide Letter No.PAN/ARB/TEJA dated 22.07.2023.
8. A bare perusal of the contents of the letter dated
22.07.2023 of the Presiding Arbitrator for Arbitral
Tribunal (referred to and extracted above) indicates
that it is at the instance of the Petitioner herein who
vide his letter dated 15.06.2022 addressed to G.M./SC
Railway sought Arbitration, having full knowledge of
the fact that the Tribunal has no jurisdiction in respect
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of claims beyond 20% of agreement value and in the
present case admittedly the claims are beyond 20% of
agreement value, and that the Arbitration Tribunal had
been constituted vide Lr.No.W.148/GNT/ TEJA-
GEW(JV)/Agt. No.03, dated 07.12.2022. Further the
said letter dated 22.07.2023 of the Presiding Arbitrator
for Arbitral Tribunal indicates that the Petitioner
participated in 3 hearings held by the Arbitral Tribunal
and during the 4th hearing while presenting oral
submissions the Petitioner raised this objection orally
for the first time and further the Arbitral Tribunal
rejected the objection raised by the Petitioner
observing that raising the objection regarding
jurisdiction of Arbitral Tribunal at this stage of the
proceedings cannot be admitted under the relevant
provisions of the Arbitration and Conciliation Act, 1996.
It is further indicated in the said proceedings dated
22.07.2023 that due to non-conducive behaviour and
conduct of the Petitioner herein it is decided by the
Tribunal not to hold any further hearings and to go
ahead with the proceedings based on the statement of
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claims and statement of defence and other materials
furnished by both the claimant and the respondent
thereunder and further it is declared by the Arbitral
Tribunal that the said Tribunal will proceed further as
envisaged in Sec.25(c) of the Arbitration & Conciliation
Act, 1996.
9. Section 16 of Arbitration & Conciliation Act, 1996
reads as under :
CHAPTER IV - Jurisdiction of Arbitral Tribunals :
16. Competence of arbitral tribunal to rule on its
jurisdiction.--(1) The arbitral tribunal may rule on
its own jurisdiction, including ruling on any
objections with respect to the existence or validity
of the arbitration agreement, and for that
purpose,--
(a) an arbitration clause which forms part of a
contract shall be treated as an agreement independent
of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the
contract is null and void shall not entail ipso jure the
invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not
have jurisdiction shall be raised not later than the
submission of the statement of defence; however,
a party shall not be precluded from raising such a
plea merely because that he has appointed, or
participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding
the scope of its authority shall be raised as soon
as the matter alleged to be beyond the scope of its
authority is raised during the arbitral proceedings.
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(4) The arbitral tribunal may, in either of the
cases referred to in sub-section (2) or sub-section
(3), admit a later plea if it considers the delay
justified.
(5) The arbitral tribunal shall decide on a plea
referred to in sub-section (2) or sub-section (3) and,
where the arbitral tribunal takes a decision rejecting the
plea, continue with the arbitral proceedings and make
an arbitral award.
(6) A party aggrieved by such an arbitral award may
make an application for setting aside such an arbitral
award in accordance with section 34.
CONCLUSION :
10. A bare perusal of Section 16(2) clearly indicates
that a plea that the Arbitral Tribunal does not have
jurisdiction shall be raised not later than the
submission of the statement of defence, however, a
party shall not be precluded from raising such a plea
merely because that he has appointed, or participated
in the appointment of, an Arbitrator. A bare perusal of
the Memorandum of Application dated 17.06.2023
raising specific objection as to jurisdiction of the
Tribunal in the matter of Arbitration arising out of
Agreement bearing No.03/DY.CE/BR.Lines/
HQ/SC/2017, dated 27.11.2017 filed by the
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Petitioner/Claimant before the Arbitral Tribunal
(referred to and extracted above) clearly indicates that
a specific pleading in writing as borne on record has
been raised with regard to jurisdiction of the Arbitral
Tribunal on 17.06.2023 itself and therefore this Court
opines that the observation of the Arbitral Tribunal in
its letter dated 22.07.2023 that the Petitioner raised
this objection orally for the first time and further
holding that at this stage of the proceedings, the said
plea regarding jurisdiction of Arbitral Tribunal cannot
be admitted under the relevant provisions of the
Arbitration and Conciliation Act, 1996 and further
rejecting the objection raised by the Petitioner
mechanically without assigning any reasons on the
ground that Petitioner sought for Arbitration vide its
letter dated 15.06.2022 having full knowledge that the
Tribunal has no jurisdiction as the claims are beyond
20% of the Agreement value and further observing that
the Petitioner participated in 3 hearings earlier is
contrary to Section 16(1)(2)(3) and (4) of the
Arbitration and Conciliation Act, 1996, which clearly
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provides that the Arbitral Tribunal may rule on its own
jurisdiction. Admittedly this Court opines that the
proceedings dated 22.07.2023 rejecting Petitioner's
objections mechanically without assigning any reasons
is totally contrary to Sec.16 (1) (2) (3) and (4) of the
Arbitration & Conciliation Act, 1996.
11. The Apex Court in the judgment reported in
(2022) 4 SCC 463 in Indian Oil Corporation Limited
through its Senior Manager, Vs. Shree Ganesh
Petroleum Rajgurunagar through its Proprietor Laxman
Dagdu Thite at paras 43 and 44 observed as under :
Para 43 : An Arbitral Tribunal being a
creature of contract, is bound to act in terms of
the contract under which it is constituted. An
award can be said to be patently illegal where the
Arbitral Tribunal has failed to act in terms of the
contract or has ignored the specific terms of a
contract.
Para 44 : However, a distinction has to be
drawn between failure to act in terms of a
contract and an erroneous interpretation of the
terms of a contract. An Arbitral Tribunal is entitled
to interpret the terms and conditions of a
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contract, while adjudicating a dispute. An error in
interpretation of a contract in a case where there
is valid and lawful submission of arbitral disputes
to an Arbitral Tribunal is an error within
jurisdiction.
12. The learned counsel appearing on behalf of the
Respondents placed reliance on para 17 of the
judgment of the Apex Court in Civil Appeal No.14665 of
2015 in Bhaven Construction Through Authorized
Signatory Premjibhai K. Shah Vs. Executive Engineer
Sardar Sarovar Narmada Nigam Ltd., & Another, dated
06.01.2021, it is observed in para 17 of the judgment
as under :
Para 17 : In any case, the hierarchy in our legal
framework, mandates that a legislative enactment
cannot curtail a Constitutional right. In Nivedita
Sharma v. Cellular Operators Association of India,
reported in (2011) 14 SCC 337, this Court referred
to several judgments and held:
"11. We have considered the respective
arguments/submissions. There cannot be
any dispute that the power of the High
Courts to issue directions, orders or writs
including writs in the nature of habeas
corpus, certiorari, mandamus, quo
warranto and prohibition under Article
226 of the Constitution is a basic feature
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of the Constitution and cannot be
curtailed by parliamentary legislation - L.
Chandra Kumar v. Union of India, (1997)
3 SCC 261. However, it is one thing to
say that in exercise of the power vested
in it under Article 226 of the Constitution,
the High Court can entertain a writ
petition against any order passed by or
action taken by the State and/or its
agency/ instrumentality or any public
authority or order passed by a
quasijudicial body/authority, and it is an
altogether different thing to say that
each and every petition filed under
Article 226 of the Constitution must be
entertained by the High Court as a
matter of course ignoring the fact that
the aggrieved person has an effective
alternative remedy. Rather, it is settled
law that when a statutory forum is
created by law for redressal of
grievances, a writ petition should not be
entertained ignoring the statutory
dispensation.
It is therefore, prudent for a Judge to not exercise
discretion to allow judicial interference beyond
the procedure established under the enactment.
This power needs to be exercised in exceptional
rarity, wherein one party is left remediless under
the statute or a clear 'bad faith' shown by one of
the parties. This high standard set by this Court is
in terms of the legislative intention to make the
arbitration fair and efficient.
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13. The learned counsel appearing on behalf of the
Respondents placing reliance on the above said
judgment contends that the present writ petition
should not be entertained and submits that the
Petitioner has to await the passing of final award and
avail the remedy U/s.34.
14. This Court opines that the Petitioner duly followed
the procedure as stipulated U/s.16 (1) & (2) of the
Arbitration and Conciliation Act, 1996 and filed
Memorandum of Application dated 17.06.2023 raising
objection as to jurisdiction of the Tribunal in the matter
of Arbitration arising out of Agreement bearing
No.03/DY.CE/BR.Lines/HQ/SC/2017, dated 27.11.2017
(referred to and extracted above) and in particular 2nd
last paragraph of the said memorandum explained the
said plea in detail, but the Arbitral Tribunal however did
not consider the same in accordance to law and
rejected the same mechanically without assigning any
reasons and further passed the impugned order against
the Petitioner dated 22.07.2023 contrary to Section 16
of Arbitration & Conciliation Act, 1996, observing that
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the Tribunal decided not to hold any further hearings
and decided to go ahead with the proceedings on the
statement of claims, statement of defence and other
materials furnished by both the Claimant and the
Respondent thereunder and to proceed further in the
matter as envisaged in Sec.25(c) of the Arbitration &
Conciliation Act, 1996. This Court opines that the
Arbitral Tribunal cannot act arbitrarily, irrationally, and
independently of the contract ignoring the law which
would tantamount to malafide action.
15. This Court opines that Arbitrator is the creature of
the contract between the parties and therefore if the
Arbitral Tribunal ignores the specific terms of the
contract entered into between the parties it would be a
question of jurisdictional error and it is important that
the points of contract must be examined in detail for
arriving at a conclusion in deciding the jurisdiction
issue.
16. Taking into consideration of the above said facts
and circumstances of the case and the law laid down by
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the Apex Court in (1) Nivedita Sharma v Cellular
Operators Association of India reported in (2011) 14
SCC 337, (2) the judgment reported in (2022) 4 SCC
463 in Indian Oil Corporation Limited through its Senior
Manager, v Shree Ganesh Petroleum Rajgurunagar
through its Proprietor Laxman Dagdu Thite, and also
(3) the judgment of the Apex Court in Civil Appeal
No.14665 of 2015 in Bhaven Construction through
Authorized Signatory Premjibhai K.Shah v Executive
Engineer Sardar Sarovar Narmada Nigam Ltd. And
another, the Writ Petition is allowed setting aside the
proceedings No.PAN/ARB/TEJA, dated 22.07.2023 of
the Arbitral Tribunal in relation to Arbitration in the
matter of disputes arising out of Agreement
No.CA.03/DYCE/BR Lines/HQ/SC/2017, dated
27.11.2017 and the Arbitral Tribunal constituted vide
Lr.No. W.148/GNT/TEJA-GEW (JV)/Agt. No.03, dated
07.12.2022 is directed to reconsider the whole issue
i.e. the objection filed by the Petitioner vide
Memorandum of Application dated 17.06.2023 raising
specific objection as to jurisdiction of the Tribunal in
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the matter of Arbitration arising of Agreement
No.CA.03/DYCE/BR Lines/HQ/SC/2017, dated
27.11.2017 as mandated U/s.16(1) (2) (3) (4) of the
Arbitration & Conciliation Act, 1996 and pass
appropriate reasoned orders deciding on the
competence of Arbitral Tribunal to rule on its own
jurisdiction in the present case in accordance to law,
duly considering the terms of contract entered into
between the Petitioner and South Central Railway,
Secunderabad, in conformity with principles of natural
justice by giving reasonable opportunity to the
Petitioner and also the South Central Railway,
Secunderabad and duly communicate the decision to
the Petitioner, within a period of four weeks from the
date of receipt of the copy of the order. However, there
shall be no order as to costs.
Miscellaneous petitions, if any, pending shall stand
closed.
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SUREPALLI NANDA, J
Date: 30.10.2023
Note: L.R.Copy to be marked.
b/o kvrm
