Telangana High Court
M/S. Cemcon Track Industries vs Union Of India, on 19 February, 2025
Author: T.Vinod Kumar
Bench: T. Vinod Kumar
THE HON'BLE SRI JUSTICE T. VINOD KUMAR
AND
THE HON'BLE SRI JUSTICE PULLA KARTHIK
Civil Miscellaneous Appeal No.632 of 2024
JUDGMENT:
(per Hon'ble Sri Justice T.Vinod Kumar)
This Civil Miscellaneous Appeal is directed against the order
dt.29.10.2024 in I.A.No.827 of 2022 in O.S.No.78 of 2021 on the file of
the XII Additional Chief Judge, City Civil Court, Secunderabad, whereby
the underlying interlocutory application filed by the appellant herein as
the defendant in the suit filed by the respondents herein under Section 8
of the Arbitration and Conciliation Act, 1996 (for short, 'the Act') has been
dismissed.
2. Heard learned counsel for the appellant and Sri M.Rama Krishna,
learned counsel representing Sri Gadi Praveen Kumar, learned Deputy
Solicitor General of India appearing for the respondents, and perused the
record.
3. The appellant herein is the petitioner in the underlying
interlocutory application and defendant in the suit filed by the
respondents herein as plaintiffs for recovery of a sum of Rs.88,55,711/-
being the increase in cost and the consequential loss on account of the
failure of the appellant herein in making supplies, pursuant to e-tender
issued by the respondents herein.
4. Appellant further contends that as the respondents have failed to
place purchase order within 120 days from the date of validity of the offer
made by it, the offer made by the appellant pursuant to the e-tender
issued by the respondents stood cancelled and as such, the respondents
cannot seek to enforce the covenants of contract or standard terms of
contract forming part of e-tender.
5. It is the further case of the appellant that notwithstanding the
termination/cancellation of the purchase order issued by the respondents,
the respondents have now sought to recover the suit amount from the
appellant herein on the ground that the appellant failed to make supplies
in pursuance of the purchase order placed on it.
6. It is also the contention of the appellant that since the relationship
between the parties is governed by the Indian Railway Standard
Conditions of Contract, forming part of the e-tender issued by the
respondents, the respondents cannot maintain the suit before the Civil
Court for recovery of the aforesaid sum and ought to have referred the
dispute for its resolution by arbitration as provided in Clause 2900 of the
Indian Railway Standard Conditions of Contract, providing for resolution
of disputes by arbitration.
7. Appellant further contends that on the respondents filing the
aforesaid suit, it had filed the underlying interlocutory application before
the Court below praying for dismissal of the suit and to refer the parties
to arbitration in the light of the arbitration agreement contained in Clause
2900 of the Indian Railway Standard Conditions of Contract; and that the
Court below had erroneously dismissed the same, by observing that
already the matter was referred to Arbitrator and the learned Arbitrator
had passed award on 02.12.2019 and thus, the appellant herein availed
the remedy under Section 8 of the Act.
8. It is the contention of the appellant that the suit filed by the
respondents herein is in relation to recovery of increased cost and
consequential loss suffered by it, on account of the purchases made by it,
by invoking risk purchase clause of agreement and reference to
arbitration at an earlier point of time was in relation to the penalty
imposed and thus, both disputes are independent of one another and the
Court below had erred in dismissing the underlying interlocutory
application filed under Section 8 of the Act.
9. In support of his contentions, appellant placed reliance on various
decisions of the Hon'ble Supreme Court in Hindustan P etroleum
Corporation Lim ited v/ s. P inkcity M idw ay P etroleum s 1 ; Branch
M anager, M agm a Leasing and Finance Lim ited v/ s. P otluri
M adhavilata 2 ; Am eet Lalchand Shah v/ s. R ishabh Enterprises 3 ;
(2003) 6 SCC 503
(2009) 10 SCC 103
(2018) 15 SCC 678
Vidya Drolia v/ s. Durga Trading Corporation 4 ; M cDerm ott
I nternational I nc. v/ s. Burn Standard Corporation Lim ited 5 ;
S.N.P rasad Hitek I ndustries (Bihar) Lim ited v/ s. M onnet Finance
Lim ited 6 ; Gam m on I ndia Lim ited v/ s. National Highw ays
Authority of I ndia 7 and Dolphin Drilling Lim ited v/ s. Oil and
Natural Gas Corporation Lim ited 8
10. Per contra, learned counsel appearing on behalf of the respondents
would submit that it had filed the suit for recovery of the amount due to
the failure of the appellant herein to make supplies under the purchase
order placed on it, by invoking risk purchase clause forming part of the
tender conditions.
11. It is also contended on behalf of the respondents that since the
appellant had already invoked the remedy of arbitration against the
termination of contract, and imposition of penalty of Rs.50,00,000/-, it
cannot seek for referring the dispute once again for arbitration.
12. We have taken note of the respective contentions urged.
13. A perusal of the counter-affidavit filed by the respondents in the
underlying interlocutory application would clearly show that the
(2021) 2 SCC 1
(2006) 11 SCC 181
(2011) 1 SCC 320
2020 SCC OnLine Del 659
(2010) 3 SCC 267
respondents herein are seeking to recover the suit amount by placing
reliance on the contract terms, which provides for recovery of
loss/damage under risk purchase. Thus, the suit filed by the respondents
herein is only by exercise of powers conferred under the
contract/standard conditions of the contract and not outside the contract.
Once, the respondents are seeking to recover the loss or damage caused
to it, in terms of the contract, it is not open for the respondents to plead
that the subject suit would fall outside the scope of the contract and thus,
the arbitration clause contained in the agreement would not be
applicable.
14. Further, it is also to be noted that even in respect of the
terminated contract also, arbitration would be available to the affected
party to claim remedies thereunder.
15. Further, it is also to be noted that in a recent decision, the Apex
Court had held that even if a contract is terminated, the arbitration clause
would survive. (see SBI General I nsurance Com pany Lim ited v/ s.
K rish Spinning 9 ).
16. Applying the aforesaid decision of the Apex Court to the facts of
the case, since the respondents are seeking recovery of suit amount as
2024 SCC OnLine SC 1754
loss/damage caused to them, which had arisen only on account of the
purchase order placed by it, this Court is of the view that the said dispute
would also be arbitral dispute to be resolved only by reference to
arbitration and the respondents cannot proceed by filing a civil suit.
17. Thus, this Court is of the opinion that the Court below erred in
dismissing the underlying interlocutory application filed by the appellant
under Section 8 of the Act in refusing to refer the dispute to arbitration
and proceeding with the suit filed by the respondents.
18. Accordingly, the impugned order dt.29.10.2024 in I.A.No.827 of
2022 in O.S.No.78 of 2021 on the file of the XII Additional Chief Judge,
City Civil Court, Secunderabad, is set aside and the appeal is allowed and
the matter is remitted back to the Court below to refer the parties to
resolve the dispute through arbitration in terms of Clause 2900 of the
Indian Railway Standard Conditions of Contract.
19. Miscellaneous petitions, if any, pending shall stand closed. No
order as to costs.
__________________
T. VINOD KUMAR, J
Date:19.02.2025
_________________
PULLA KARTHIK, J
GJ
THE HON'BLE SRI JUSTICE T. VINOD KUMAR
AND
THE HON'BLE SRI JUSTICE PULLA KARTHIK
Civil Miscellaneous Appeal No.632 of 2024
(per Hon'ble Sri Justice T.Vinod Kumar)
19.02.2025
GJ
