R IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 18TH DAY OF FEBRUARY 2019 BEFORE THE HON’BLE MR. JUSTICE ALOK ARADHE C.M.P.No.134 OF 2018 C/W C.M.P.No.135 OF 2018 C.M.P.No.134 OF 2018 BETWEEN:
M/S. SHYAMRAJU & COMPANY (INDIA) PVT. LTD. DIVYASREE CHAMBERS, A WING No.11, O’SHAUGHNESSY ROAD BANGALORE-560 025 REP. BY ITS GENERAL MANAGER JAYANTHI D.N.
… PETITIONER (By Mr. DHYAN CHINAPPA, SR. COUNSEL A/W Mr. ADITYA VENUGOPALAN, ADV.) AND:
CITY MUNICIPAL COUNCIL HOSAPETE POST-583102.
REP. BY THE MUNICIPAL COMMISSIONER.
… RESPONDENT (By Mr. K. RAGHAVENDRA RAO, ADV., FOR Mr. M.R. PATIL, ADV.,) - - -
THIS CIVIL MISC. PETITION IS FILED UNDER SECTION 11(5) OF THE ARBITRATION AND CONCILIATION ACT, 1996 PRAYING TO APPOINT A SOLE ARBITRATOR AS THIS HON’BLE COURT MAY DEEM FIT AND REFER THE DISPUTES RAISED BY THE PETITIONER TO ARBITRATION IN TERMS OF THE LETTERS AS RECORDED VIDE ANNEXURE-C DATED 19-01-2018 AND ANNEXURE-D DATED 12-03-2018 AND REFER THE PARTIES TO ARBITRATION & ETC.
C.M.P.No.135 OF 2018 BETWEEN:
M/S. SHYAMRAJU & COMPANY (INDIA) PVT. LTD. DIVYASREE CHAMBERS, A WING No.11, O’SHAUGHNESSY ROAD BANGALORE-560 025 REP. BY ITS GENERAL MANAGER JAYANTHI D.N.
… PETITIONER (By Mr. DHYAN CHINAPPA, SR. COUNSEL A/W Mr. ADITYA VENUGOPALAN, ADV.) AND:
CITY MUNICIPAL COUNCIL HOSAPETE POST-583102.
REP. BY THE MUNICIPAL COMMISSIONER.
… RESPONDENT (By Mr. K. RAGHAVENDRA RAO, ADV., FOR Mr. M.R. PATIL, ADV.,) - - -
-
THIS CIVIL MISC. PETITION IS FILED UNDER SECTION 11(5) OF THE ARBITRATION AND CONCILIATION ACT, 1996 PRAYING TO APPOINT A SOLE ARBITRATOR AS THIS HON’BLE COURT MAY DEEM FIT AND REFER THE DISPUTES RAISED BY THE PETITIONER TO ARBITRATION IN TERMS OF THE LETTERS AS RECORDED VIDE ANNEXURE-C DATED 19-01-2018 AND ANNEXURE-D DATED 12-03-2018 AND REFER THE PARTIES TO ARBITRATION & ETC.
THESE CIVIL MISC. PETITIONS COMING ON FOR ADMISSION THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER Mr. Dhyan Chinappa, learned Senior counsel along with Mr.Aditya Venugopalan, learned counsel for the petitioner.
Mr.K.Raghavendra Rao for Mr.M.R.Patil, learned counsel for the respondent.
2. The petition is admitted for hearing. With consent of the parties, the same is heard finally.
3. By means of this application under Section 11(6) of Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’ for short) the petitioner seeks reference of dispute between the parties in term of letters dated 19.01.2018 and 12.03.2018.
4. Facts giving rise to filing of the petition in CMP 134/2018 and CMP 135/2018 respectively briefly stated are that petitioner in CMP 134/2018 was awarded the contract for improvement to sewerage system in Hospet city provided and laying 176 kms sewer network, construction of manholes and construction of secondary drains and the in CMP 135/2018 petitioner was awarded the tender for improvement to the sewerage system in Hospet City construction of 27 Million Liters per Day activated sludge Process type Sewage Treatment Plant, including 2 Nos. wet wells, pumping machines and pumping main. The parties entered into a contract on 29.09.2010. It is the case of the petitioner that since the respondent did not fulfill its obligation under the contract which led to delay in execution of the contract, the petitioner thereupon by a communication dated 19.01.2018 sent a statement of claim and asserted existence of arbitration agreement and sought reference of the dispute through arbitration. The respondent on 12.03.2018 sent a statement of defence and did not deny the existence of the arbitration agreement or reference to arbitration. In the aforesaid factual background, this petition has been filed.
5. Learned Senior Counsel for the petitioner submitted that even though the agreement dated 29.09.2010 does not expressly contain the arbitration clause but if a party asserts the existence of an arbitration agreement and the other party does not deny the same the same would tantamount to an implied agreement. In support of aforesaid submissions, reference has been made to Section 7(4) of the Act as well as a decision of this Court in ‘TATA ELXSI LIMITED, BANGALORE VS. ANAND JOSHI’, 2000 SCC ONLINE KAR 120.
6. On the other hand, learned counsel for the respondent has invited the attention of this court to clause 24.1. and 24.2 of general conditions of contract and has submitted that the procedure for amicable settlement of the dispute has been provided therein and in case the dispute is not settled between the parties, the matter has to be referred to civil court. Thus, the agreement between the parties specifically excludes the arbitration clause. It is also argued that in the statement of claim, it was no where asserted that there is an arbitration clause in the agreement between the parties. It is submitted that the clause contained in the agreement cannot be termed as an arbitration agreement. In support of aforesaid submissions, reliance has been placed on decisions of Supreme Court in ‘P.DASARATHARAMA REDDY COMPLEX VS. GOVERNMENT OF KARNATAKA’, 2014 2 SCC 201 and ‘ORIENTAL INSURANCE COMPANY LIMITED VS. M/S NARBHERAM POWER AND STEEL PVT. LTD.’, AIR 2018 SC 2295.
7. By way of rejoinder reply, Learned Senior Counsel for the petitioner submitted that decision in the case of P.DASARATHARAMA REDDY COMPLEX supra has no application as in the aforesaid case, the Supreme Court interpreted Clause 21 of the agreement executed between the parties. Similarly, the decision relied by the respondent in the case of ORIENTAL INSURANCE COMPANY LIMITED supra is of no assistance in the fact situation of the case as in the aforesaid case, the Supreme Court dealt with interpretation of the Clause contained in insurance contract.
8. I have considered the submissions on both the sides and have perused the record. An agreement to refer existing disputes to arbitration can in an appropriate case be implied by the conduct of the parties. Where a party denies that it has entered into an agreement to arbitrate, the court will consider whether a reasonable person, knowing the relevant background and observing matters from the perspective of the party asserting the existence of the arbitration agreement, would have concluded from the other party’s conduct that it was agreeing to participate in the proposed arbitration [See: ATHLETIC UNION OF CONSTANTINOPLE VS. NATIONAL BASKETBALL ASSOCIATION (2002) 1 ALL E.R. (COMM) 70], Before proceeding further it is apposite to take note of Section 7(4)(c) of the Act, which reads as under:
7. Arbitration agreement. - 1. In this Part, 'arbitration agreement' means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
Xxxx xxxx 4. An arbitration agreement is in writing if it is contained in-
a. a document signed by the parties;
b. an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or c. an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
9. The Supreme Court in ‘S.N.PRASAD, HITEK INDUSTRIES (BIHAR)LIMITED VS. MONNET FINANCE LIMITED AND OTHERS’, (2011) 1 SCC 320 while interpreting Section 7(4)(c) of the Act has held that the words ‘. But the words, “statements of claim and defence” occurring in Section 7(4)(c) of the Act, are not restricted to the statements of claim and defence filed before the arbitrator. If there is an assertion of existence of an arbitration agreement in any suit, petition or application filed before any court, and if there is no denial thereof in the defence/counter/written statement thereto filed by the other party to such suit, petition or application, then it can be said that there is an “exchange of statements of claim and defence” for the purposes of Section 7(4)(c) of the Act.
10. In the backdrop of aforesaid legal principles facts of the case on hand may be seen. In the instant case, in the notice dated 19.01.2018, the petitioner has made the following averments:
We have already forwarded our list of claims vide letter under reference and we would request you to kindly make payment of the same. A copy of the letter under reference with all the claims are appended hereto and may be read as part and parcel of this letter.
12. We hereby submit that the claims be referred to arbitration and wish to place on record our agreement and understanding to refer disputes to arbitration. The arbitration can be conducted under the auspices of the Arbitration and Conciliation Centre Rules 2012 framed by the Hon’ble High Court of Karnataka at Bangalore. In any event, we hereby nominate Mr.L.V.Srirangak Raju as the Sole Arbitrator to adjudicate on all disputes that have arisen between the parties and call upon you to concur to the same within a period of thirty days from the date of receipt of notice.
11. Admittedly, the respondent has not denied the aforesaid averments. Therefore, in view of Section 7(4) as interpreted by Supreme Court in ‘S.N.Prasad’ supra, ‘Hitek Industries (Bihar)’ supra, there is an implied agreement to refer the existing dispute between the parties to the arbitration.
14. So far as reliance placed by learned counsel for the respondent in the case of ‘P.Dasaratharama Reddy’ Complex supra is concerned, in the aforesaid decision, the Supreme Court has interpreted clause 29 of the agreement executed between the parties and has held that the same is not an arbitration agreement. The aforesaid decision does not deal with Section 7(4) of the Act and therefore has no application to the fact situation of the case. Similarly, in ‘Oriental Insurance Company Limited’ supra the Supreme Court was dealing with a Clause which provided that no dispute or difference shall be referable to arbitration if company has disputed or not accepted liability under or in respect of this policy. The aforesaid decision also does not deal with Section 7(4) of the Act. Therefore, the same also does not apply to the obtaining factual matrix of the case.
15. In view of preceding analysis the petition filed by the petitioner under Section 11(6) of the Act succeeds and is hereby allowed. In view of the aforesaid submissions and as prayed by learned counsel for the parties, Mr.G.Raghvendra Rao, Retired District and Sessions Judge is appointed as sole Arbitrator to adjudicate the dispute between the parties.
16. A copy of this order be dispatched to the Arbitration Centre, Khanija Bhavan, Bengaluru for necessary action in that regard. Learned counsel for the petitioner to also approach the Arbitration Centre with the relevant papers to be filed therein. The learned Arbitrator appointed herein shall thereupon enter reference and proceed with the matter in accordance with law and the Rules governing the Arbitration Centre.
Accordingly, petitions are disposed of.
Sd/- JUDGE ss