Uttarakhand High Court

Maa Bhagwati Construction ... vs Chief Engineer on 4 September, 2023

    IN THE HIGH COURT OF UTTARAKHAND
                AT NAINITAL


         THE HON'BLE THE CHIEF JUSTICE SRI VIPIN SANGHI
                                AND
             THE HON'BLE SRI JUSTICE ALOK KUMAR VERMA




             WRIT PETITION (M/B) NO. 225 OF 2023


                       04TH SEPTEMBER, 2023


Maa Bhagwati Construction Company ......                     Petitioner


Versus


Chief Engineer, Level I, N.H.,
P.W.D. and another                           ......          Respondents

Counsel for the petitioner : Mr. Sagar Kothari, learned counsel

Counsel for the respondents : Mr. Amarendra Pratap Singh, learned Additional Advocate General for the State

The Court made the following:

JUDGMENT: (per Hon'ble The Chief Justice Sri Vipin Sanghi)

The petitioner has preferred the present writ

petition to seek the following substantive reliefs :

"i) Issue a writ, order or direction in the nature of certiorari, quashing the impugned office memorandum dated 20.06.2023 issued by respondent No. 2 (Annexure No. 4 to this writ petition).

ii) Issue a writ, order or direction in the nature of certiorari, quashing the impugned notice inviting

(Annexure No. 6 to this writ petition).

iii) Issue a writ, order or direction in the nature of mandamus, commanding / directing the respondents to strictly follow the dispute resolution clause provided under clause 26.2 of the contract bond and decide the dispute between the parties in accordance with the provisions contemplated under the said clause."

2) The petitioner was awarded the contract by

the respondent, namely, 'Strengthening work from Km.

10.000 to Km. 25.000 and Km. 48.000 to Km. 77.100 on

National Highway 309-B under Annual Plan 2020-21 in

the State of Uttarakhand on EPC mode', vide agreement

dated 21.06.2021. By the impugned Office Memorandum

dated 20.06.2023, the respondents have terminated the

said contract, on the ground of alleged defaults

committed by the petitioner-contractor. Thereafter, the

respondents have initiated the fresh tender process for

execution of the balance work, vide notice inviting bid

dated 22.07.2023.

3) The case of the petitioner is that the

petitioner has offered to complete the remaining work

within four months, whereas the respondents are

granting nine months under the new NIT dated

22.07.2023. The petitioner submits that the

respondents should accept his offer. The further case of

the petitioner is that the petitioner has invoked clause

26 of the agreement, which provides for conciliation, but

there has been no response from the respondents. The

further case of the petitioner is that, since conciliation

has not taken place, the petitioner would not be able to

invoke the arbitration agreement, contained in clause

26.3 of the agreement.

4) We have heard learned counsel for the

petitioner, and perused the record, and we do not find

any merit in the aforesaid submissions of the petitioner.

5) Firstly, the respondents have terminated the

petitioner's contract by giving reasons therefor in their

impugned Office Memorandum dated 20.06.2023. It is

not for this Court, in these proceedings, to adjudicate

the legality, or correctness, of the said termination. The

dispute - as to whether, the petitioner committed

default, or not, is a matter arising from the contract

between the parties. It involves determination of

disputed questions of fact, and the petitioner has

efficacious and alternate remedy for determination of the

said dispute. Therefore, challenge to the Office

Memorandum dated 20.06.2023, is rejected while

leaving it open to the petitioner to agitate the same in

appropriate proceedings.

6) The next submission of learned counsel for the

petitioner that, since the respondents have not resorted

to conciliation, as provided in clause 26.2, the

respondents should be directed to conciliate the dispute,

also has no merit.

7) Clauses 26.2 and 26.3, which deal with

Conciliation and Arbitration respectively, read as follows:

"26.2 Conciliation

In the event of any Dispute between the Parties, either Party may call upon the Authority's Engineer, or such other person as the Parties may mutually agree upon (the "Conciliator") to mediate and assist the Parties in arriving at an amicable settlement thereof. Failing mediation by the Conciliator or without the intervention of the Conciliator, either Party may require such Dispute to be referred to the Chairman of the Authority and the Chairman of the Board of Directors of the Contractor for amicable settlement, and upon such reference, the said persons shall meet no later than 7 (seven) business days from the date of reference to discuss and attempt to amicably resolve the Dispute. If such meeting does not take place within the 30 (thirty) business day period or the Dispute is not amicably settled within 30 (thirty) days of the meeting

or the Dispute is not resolved as evidenced by the signing of written terms of settlement within 30 (thirty) days of the notice in writing referred to in Clause 26.1.1 or such longer period as may be mutually agreed by the Parties, either Party may refer the Dispute to arbitration in accordance with the provisions of Clause 26.3 but before resorting to such arbitration, the parties agree to explore conciliation by the Conciliation Committees of independent Experts set up by the Authority in accordance with the procedure decided by the panel of such experts and notified by the Authority on its website including its subsequent amendments. In the event of the conciliation proceedings being successful, the parties to the dispute would sign the written settlement agreement and the conciliators would authenticate the same. Such settlement agreement would then be binding on the parties in terms of Section 73 of the Arbitration Act. In case of failure of the conciliation process even at the level of the Conciliation Committee, either party may refer the Dispute to arbitration in accordance with the provisions of Clause 26.3.

26.3         Arbitration

(i)     Any dispute which remains unresolved between

the parties through the mechanisms available / prescribed in the Agreement, irrespective of any claim value, which has not been agreed upon / reached settlement by the parties, will be referred to the Arbitral Tribunal as per the Arbitration and Conciliation Act.

(ii) Deleted

(iii) The Arbitral Tribunal shall make a reasoned award (the "Award"). Any Award made in any

arbitration held pursuant to this Article 26 shall be final and binding on the Parties as from the date it is made, and the Contractor and the Authority agree and undertake to carry out such Award without delay.

(iv) The Contractor and the Authority agree that an Award may be enforced against the Contractor and/or the Authority, as the case may be, and their respective assets wherever situated.

(v) This Agreement and the rights and obligations of the Parties shall remain in full force and effective, pending the Award in any arbitration proceedings hereunder. Further, the parties unconditionally acknowledge and agree that notwithstanding any dispute between them, each Party shall proceed with the performance of its respective obligations, pending resolution of Dispute in accordance with this Article.

(vi) In the event the Party against whom the Award has been granted challenges the Award for any reason in a court of law, it shall make an interim payment to the other Party for an amount equal to 75% (seventy five per cent) of the Award, pending final settlement of the Dispute. The aforesaid amount shall be paid forthwith upon furnishing an irrevocable Bank Guarantee for a sum equal to 120% (one hundred and twenty per cent) of the aforesaid amount. Upon final settlement of the Dispute, the aforesaid interim payment shall be adjusted and any balance amount due to be paid or returned, as the case may be, shall be paid or returned with interest calculated at the rate of

10% (ten per cent) per annum from the date of interim payment to the date of final settlement of such balance."

8) A perusal of clause 26.2 shows that upon

either party invoking the mechanism for conciliation,

conciliation may actually take place, or it may not take

place.

9) Clause 26.2, inter alia, reads - "if such

meeting does not take place within the 30 (thirty)

business day period, or...... either party may refer the

dispute to arbitration in accordance with the provisions

of clause 26.3 but before resorting to such arbitration,

the parties agree to explore conciliation by the

Conciliation Committees of independent experts set up