Arb.P. No.03/202 vs The State Of Tripura And Others
2021 Latest Caselaw 36 Tri

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                      HIGH COURT OF TRIPURA
                            AGARTALA

                           1. Arb.P. No.03/2020
Sri Gathan Datta
                                                    ----Petitioner(s)
                                       Versus

The State of Tripura and others
                                                  -----Respondent(s)

Along with

2. Arb.P. No.04/2020

Sri Gathan Datta

----Petitioner(s) Versus

The State of Tripura and others

-----Respondent(s)

3. Arb.P. No.05/2020

Sri Gathan Datta

----Petitioner(s) Versus

The State of Tripura and others

-----Respondent(s)

4. Arb.P. No.06/2020 Sri Gathan Datta

----Petitioner(s) Versus

The State of Tripura and others

-----Respondent(s)

5. Arb.P. No.07/2020

Sri Gathan Datta

----Petitioner(s) Versus

The State of Tripura and others

-----Respondent(s)

For Petitioner(s) : Mr. Somik Deb, Advocate.

For Respondent(s)                 : Mr. P.K. Dhar, Sr. G.A.,
                                    Mr. K. De, Addl. G.A.

       HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHI

Date of hearing and judgment : 7th January, 2021.

      Whether fit for reporting         : YES.

                    JUDGMENT & ORDER (ORAL)

All these petitions arise in common background. They have

been heard together and disposed of by this common judgment. For

convenience facts may be noted from Arb.P. No.03 of 2020. Petitioner, an

individual (hereinafter to be referred to as the bidder or contractor), was

awarded a work order dated 07.03.2019 by Executive Engineer, Water

Resource Division No.IV for execution of the work namely, "Muhuri

irrigation project at Kalshi, South Tripura District/Barrage Apartment work,

main canal and branches (Unit-I & II) Phase-II". Pursuant to the said work

order the petitioner and the Executive Engineer executed a formal

agreement. Despite awarding of the work contract the Executive Engineer

concerned did not handover the site to enable the petitioner to commence the

construction. The petitioner, therefore, wrote letters to the Executive

Engineer, Water Resource Division No.IV urging him to handover the site.

Since despite several letters from the petitioner the site was not handed over,

the petitioner once again wrote on 02.01.2020 to the said authority pointing

out that despite request site was not handed over to him on the ground that

land was not yet acquired. He had to start the construction within 15 days of

the date of the work order and complete it within six months. Due to delay

the cost of materials is escalating. It would be difficult for him to execute the

work if the site is not handed over shortly. He pointed out that the monsoon

may start from middle of March, 2020 making his task of carrying out

construction very difficult. He, therefore, requested that the site be handed

over immediately. Since the site was still not handed over the petitioner

wrote to the Superintending Engineer on 05.02.2020 and reiterated all the

averments made by him in the earlier letter to the Executive Engineer and

repeated his request for handing over the site immediately.

2. Finally on 29.05.2020 the petitioner wrote to the Chief

Engineer, Water Resource Department. He referred to the past

correspondences on record and contended that for over 12 months after

issuance of the work order, the site has not been handed over. In the

meantime, he has kept the manpower and machinery on standby which has

resulted into loss and injury to him. He had quoted the lowest price and,

therefore, awarded the contract. The construction had to begin within 15

days of the issuance of work order but the site has not been handed over

nearly a year later. He, therefore, raised the following monetary claims and

urged the Executive Engineer to act as a sole arbitrator or to appoint the

disputes to a sole arbitrator who may be appointed in terms of Clause 22 of

the agreement:

"In the instant case, the Executive Engineer, WR Division-IV, Belonia South Tripura could not handover the site after elapses of stipulated period of time for completion, extended period and even thereafter also. Applicant therefore, is entitled to the following claims as damages of loss of profit and longer retention of establishment for an indefinite period for the breach of contract by the concerned Executive Engineer.

                             SCHEDULE OF CLAIMS

Sl.   Particular of claims                                          Amt. in Rs.

i.    Refund of security deposit lying with the Department at Rs.63,393/-
      my credit,

ii. Entitlement of longer retention of machineries Namely:-

i. Hiring of JCB Machine for 12 months @ 50,000/pm Rs.6,00,000/- ii. Salary of JCB Operator Rs.10,000 x 12 months. Rs.1,20,000/-

iii. Hiring charge of Tripper with driver for 12 months @ Rs.3,60,000/- Rs.30,000/-

iv. Mixer Machine for 12 months @ Rs.6000 Per month Rs.72,000/-

for 12 months iii(a) Entitlement of damages suffered for longer retention of site establishment staff in the work.

a) Site Engineer...1 [email protected] Rs.10,000/- Per month for 12 Rs.1,20,000/- months

b) Site Manager...1 [email protected] Rs.6000/- Per month for 12 Rs.72,000/-

months iv. Loss of expected profit @15% for the unexecuted works Rs.10,24,589/-

for an amount of Rs.68,30,596/-

v.     Also claim interest @ 18% P.A. from the date of issue of    As would be
       work order till payment.                                    decided by the
                                                                   Ld. Arbitrator
vi.   Claim cost of the Arbitration proceedings.                   As would be
                                                                   decided by the
                                                                   Ld. Arbitrator

vii. Cost of materials lying at the site work which could not be Rs.7,00,000/-

utilized for not handing over clear site due to pending acquisition process, Steel bars, stone chips, bricks, brick bats, sand and other construction materials.

Total Rs.31,31,982/-

I therefore, request you to kindly adjudicate my aforesaid claim as Sole Arbitrator or in the alternative be pleased to refer this dispute to a Sole Arbitrator as may be appointed by you under Clause 22 of the aforesaid agreement for adjudication of the disputes in respect claim for Rs.31,31,982/- as mentioned above along with further interest @12% p.a till payment and the cost of Arbitration proceeding."

3. Since there was no response from the respondents even after

this notice, the petitioner filed the arbitration petition seeking appointment

of an arbitrator for resolving the said disputes.

4. The respondents have taken an objection to the appointment of

an arbitrator which can be gathered from the affidavit-in-reply, relevant

portion of which reads as under:

"8. That, the petitioner by a letter dated 29/05/2020 to the Chief Engineer has for the first time raised his claim and sought for appointment of sole Arbitrator.

It is pertinent to mention here that the petitioner had never raised any claim before the Executive Engineer or Superintendent Engineer concerned. The petitioner directly raised his claim before the Chief Engineer. The arbitral disputes have to be resolved through an arbitrator as per mechanism provided under Clause 22.2 of the agreement. Thus as per Clause 22 of the Agreement the Petitioner has not followed in-house-mechanism raising his claim or for appointment of Sole Arbitrator. Hence, this petition is liable to be dismissed in limini.

9. That, the petition of the petitioner for appointment of Arbitrator is premature in as much as he did neither raised any dispute and did not also raised claims as required under clause 22 of the Agreement and in absence of compliance/exhaustion of in house mechanism within time as provided in Clause 22. The petition is liable to be summarily dismissed."

5. In short, thus the respondents' sole objection to appointment of

an arbitrator is that the contractor has not followed the dispute resolution

mechanism before raising the arbitration dispute and demand for

appointment of an arbitrator.

6. Appearing for the petitioner learned counsel Mr. Somik Deb

drew my attention to Clause 22 of the agreement which reads as under:

"22. Settlement of disputes:

22.1 If any dispute or difference of any kind whatsoever arises between the department and the Bidder in connection with, or arising out of the Contract at stage, whether during the progress of the works or after their completion and whether before or after the termination, abandonment or breach of the contract, it shall in the first place, be referred to and settled by the Engineer-in-charge who shall, within a period of twenty days after being requested by the Bidder to do so, give written notice of his decision to the Bidder. Upon receipt of the written notice of the decision of the Engineer-in-charge the Bidder shall promptly proceed without delay to comply with such notice of decision.

22.2 If the Engineer-in-charge fails to give notice of his decision in writing within a period of twenty days after being requested or if the Bidder is dissatisfied with the notice of the decision of the Engineer-in-charge, the Bidder may within fifteen days after receiving the notice of decision appeal to the concerned Superintending Engineer of Department who shall after affording opportunity of being heard shall give notice of his decision within a period of thirty

days. After Superintending Engineer has given written notice of his decision to the Bidder and no claim to arbitration, has been communicated to him by the Bidder within a period of fifteen days from receipt of such notice the said decision shall remain final and binding on both side. If the superintending engineer fails to give notice of his decision, as aforesaid within a period of thirty days after being requested as aforesaid, or if the Bidder be dissatisfied with any such decision, then and in any such case the Bidder within thirty days after the expiration of the first named period of thirty days as the case may be, require that the matter or matters in dispute be referred to arbitration as detailed below:-

SETTLEMENT OF CLAIMS:

All disputes or difference arising of or relating to the Contract shall be referred for the adjudication as follows:

a) Claims up to a value of Rupees 50,000/-

-Superintending Engineer of another circle in the same department.

b) Claims above Rs.50,000/-

-Another Chief Engineer or Arbitrator appointed by the Chief Engineer of the same department.

The arbitration shall be conducted in accordance with the provisions of Indian Arbitration and Conciliation Act 1996 or any statutory modification thereof.

The arbitrator shall state his reasons in passing the award.

A reference for adjudication under this clauses shall be made by the Bidder within 180 (one hundred eighty) days from the date of intimating the Bidder of the preparation of

final bill or his having accepted payment whichever is earlier. Only contracts executed in Tripura shall have jurisdiction for any suit arising out of this contract. More particularly no suit shall be instituted or entertained in any court outside the state arising out of contract."

7. Counsel contended that Clauses 22.1 and 22.2 of the agreement

refer to settlement of disputes and do not constitute an arbitration agreement.

In his opinion, the later portion of Clause 22 under the headings "Settlement

of Claims" is a standalone arbitration agreement and which does not require

any attempt at resolving the disputes before seeking appointment of an

arbitrator. He divided the two parts of Clause 22 into one pertaining to

resolution of onsite disputes amicably to keep the flow of the work going as

against the later portion which refers to settlement of claims which would

constitute in his opinion the arbitration clause. In support of his contentions,

he has referred to several decisions to which reference would be made at a

later stage.

8. On the other hand, learned Sr. Government Advocate Mr. P.K.

Dhar appearing for the Government would contend that Clause 22 of the

agreement is a composite contract taking within its sweep entire dispute

resolution mechanism and envisages resolution of disputes at the level of the

Government engineers and if such disputes at that level cannot be resolved,

only then the arbitration of the surviving disputes is envisaged.

9. With this background if one reverts back to Clause 22 of the

agreement, the same carries the title "Settlement of Disputes". Clause 22.1

thereof provides that if any dispute or difference of any kind whatsoever

arises, the same shall at first place be referred to and settled by the Engineer-

in-charge. Such a dispute which arises out of the contract, could be at any

stage whether during the progress of the work, after its completion and it

may be before or after the termination, abandonment or breach of the

contract. Thus, sub-clause (1) of Clause-22 encompasses all kinds of

disputes and is not confined to the disputes which arise during the actual

execution of the work. The expression arising out of the contract at the stage

whether during the progress of the work or after its completion and whether

before or after the termination, abandonment or breach of the contract, is

significant. Any such dispute must first be addressed by the Engineer-in-

charge who shall respond to the grievances of the bidder within specified

time.

10. Sub-clause (2) of Clause-22 would operate when the

mechanism provided in sub-clause (1) of Clause-22 fails to address the

dispute amicably to the satisfaction of both sides. The said sub-clause

provides that if the Engineer-in-charge fails to give notice of his decision

within the stipulated time or the bidder is dissatisfied with the decision of

the Engineer-in-charge, he may within 15 days of receiving the notice of the

decision appeal to the Superintending Engineer of the department who shall

render his decision, again within stipulated time. This part of sub-clause (2)

of Clause 22 again is aimed at resolving the dispute at the level of the

department so that the issue does not escalate further and become a cause for

arbitration. However, this sub-clause does not stop here and it proceeds to

state that after the Superintending Engineer has given the notice of his

decision to the bidder and no claim to arbitration has been communicated to

him by the bidder within stipulated time from the receipt of the notice of the

decision, the decision shall become final and binding on both sides. Thus,

the finality of the decision of the Superintending Engineer would result only

if the bidder does not demand arbitration. This is thus not a simpliciter

clause where the decision of the Government authority is final and binding

to the parties. It becomes binding and achieves finality only if the bidder

does not request for arbitration. For greater clarity this very clause further

provides that if the Superintending Engineer fails to give notice of his

decision within the specified time or if the bidder is dissatisfied with such

decision that he has given then the bidder may within specified period

require that the matter or matters in dispute be referred to arbitration as

mentioned below. As mentioned below refers to second part of Clause-22

and is titled as "Settlement of Claims". This part provides that all disputes or

differences arising or relating to the contract shall be referred to the

adjudication in the manner provided therein. As per this provision the

arbitration would be conducted by different authorities depending on the

valuation of the claim.

11. What thus emerges is that Clause-22 of the agreement is a

comprehensive dispute resolution mechanism and envisages resolution of

the disputes at any stage of the contract and even after its termination or

abandonment of the work at two levels. First at the Government level where

at the first instance, the Engineer-in-charge would apply his mind. If the

dispute still survives, the Superintending Engineer would be roped in and if

after his intervention the bidder is still dissatisfied he would ask for

arbitration. I am unable to accept the contention of Sri Deb for the petitioner

that sub-clauses (1) and (2) of Clause-22 are totally severable from the later

part of Clause-22 referring to settlement of claims which is a standalone

arbitration clause. The entire Clause-22 is a composite arbitration agreement

and resort to arbitration can be had only if this mechanism has been

followed.

12. In the present case, concededly the petitioner did not follow the

procedure contained in sub-clauses (1) and (2) of Clause-22 of the

agreement. I have referred to the three letters that the petitioner wrote to the

Executive Engineer, Superintending Engineer and the Chief Engineer

respectively which would demonstrate that in the first two letters to the

Executive Engineer and the Superintending Engineer the petitioner

clamoured for handing over the site for construction immediately. He

pointed out that the delay in handing over the site is causing irreparable

damage to him since material cost is escalating and approaching monsoon

would make his task of completion of the work within stipulated time

extremely difficult. Significantly, in both the letters his demand was for

handing over the site immediately. It was only in the last letter dated

29.05.2020 to the Chief Engineer that he raised his monetary demands and

requested for appointment of an arbitrator. Once again in this letter after

giving the background of the past events, he raised a claim of Rs.31,31,982/-

and requested the Chief Engineer to act as a sole arbitrator or to appoint an

arbitrator to adjudicate all such claims. In my opinion, these actions taken by

the petitioner do not satisfy the mechanism chosen by the parties for dispute

resolution. It may seem technical, nevertheless the law is well settled and in

issues of appointment of arbitrators the parties must follow the contractual

terms and obligations as mutually agreed.

13. Counsel for the petitioner relied on following decisions:

(i) State of Orissa and another vrs. Damodar Das reported in (1996) 2 SCC 216;

(ii) Bharat Bhushan Bansal vrs. U.P. Small Industries Corporation Ltd., Kanpur reported in (1999) 2 SCC 166;

(iii) Vishnu (Dead) by LRs vrs. State of Maharashtra and others reported in (2014) 1 SCC 516;

(iv) P. Dasaratharama Reddy Complex vrs. Government of Karnataka and another reported in (2014) 2 SCC 201; &

(v) International Amusement Limited vrs. India Trade Promotion Organisation and another reported in (2015) 12 SCC 677.

However, minute perusal of these judgments would show that

in none of these cases the Court was considering the dispute resolution

clause as is existing in the present case.

14. In case of Damodar Das (supra), the agreement provided that

the decision of the Public Health Engineer shall be final, conclusive and

binding on all parties to the contract.

15. In case of Bharat Bhushan Bansal (supra) the agreement

provided that except or otherwise specified in the contract the decision of the

Executive Engineer shall be final, conclusive and binding on both parties on

all questions relating to the contract.

16. In case of Vishnu (Dead) by LRs vrs. State of Maharashtra

(supra) similarly the agreement provided that all works would be executed

under direction and subject to approval of the Superintending Engineer and

further provided that except otherwise specified in the contract the decision

of the Superintending Engineer shall be final, conclusive and binding on all

parties on all questions relating to the contract.

17. In case of P. Dasaratharama Reddy Complex (supra) the

agreement contained a clause providing for settlement of disputes which

provided that if any dispute or difference of any kind arises between the

engineer and the contractor regarding specified items, the same would be

resolved by the Chief Engineer whose decision shall be final. If the decision

of the Chief Engineer is not accepted by the contractor, he could approach

the Court of law. It was on this background the Court held that this cannot

be termed as an arbitration agreement. The significant difference in the

terms of the contract and the said case and our case is that in the former the

decision of the Chief Engineer had ad-hoc finality subject to being

questioned in a Court of law. In our case, on the other hand, the decision of

the Superintending Engineer becomes final and binding only if no

arbitration against the same by the aggrieved bidder is demanded. For good

measure, the Supreme Court in the said case held that the dispute resolution

mechanism did not constitute an arbitration agreement.

18. In case of International Amusement Limited (supra), the

agreement once again provided that the dispute arising out of and in

connection with the agreement shall be referred to the sole arbitration of the

Chairman of the contract giver organization whose decision would be final

and conclusive on the parties.

19. In the result, these arbitration petitions must fail. However, if

the petitioner still follows the settlement dispute mechanism as provided in

said Clause-22 of the agreement, it would be open for the petitioner to seek

arbitration if eventually any of the disputes still survive.

20. With these observations, all the petitions are disposed of.

(AKIL KURESHI), CJ

Pulak