IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 11TH DAY OF JULY 2019 BEFORE THE HON'BLE Mr. JUSTICE B.VEERAPPA CIVIL MISCELLANEOUS PETITION NO.324/2018 Between:
Sri.C.Subba Reddy, No.606, 4th Cross, HRBR Layout, 2nd Block, Kalyan Nagar, Bengaluru-560 043. ... Petitioner (By Sri.Vasu Deva Naidu.S, Advocate) And:
Union of India Rep. by 1. The General Manager, South Western Railway, Gadag Road, Hubli.
2. The Divisional Railway Manager (Work), Bangalore Division, South Western Railway, Bengaluru-560 023.
3. The Senior Divisional Engineer (Co-Ord), Bangalore Division, South Western Railway, Bengaluru-23. ... Respondents (By Sri.C.Babu, Advocate for R1 to R3) This Civil Miscellaneous Petition is filed under Section 11(6) of the Arbitration and Conciliation Act 1996, praying to appoint a sole arbitrator to resolve the disputes and outstanding issues between the parties in accordance with the provisions of agreement bearing No.208/SBC/09 dated:24.09.2009 under Annexure-B and in consonance with Arbitration and Conciliation (Amendment) Act, 1996 in the interest of justice.
This petition coming on for Admission, this day, the Court made the following:-
O R D E R The petitioner has filed the present CMP under the provisions of Section 11(6) of the Arbitration and Conciliation Act, 1996 to appoint the sole arbitrator to resolve the dispute and outstanding dues between the parties in accordance with the agreement of works dated 24.09.2009, entered into between the parties.
2. It is the case of the petitioner that respondent No.2 had called for tender vide Tender notification dated 26.06.2008 Item No.4 for SBC Division – Construction of new station building on second entry of Bengaluru City Railway Station. In response to the said notice, the petitioner had submitted his tender on 19.09.2008. Respondent No.2 – the Divisional Railway Manager has accepted the petitioner’s offer through a letter of acceptance dated 19.09.2008. In terms of the said acceptance letter, approximate value of the work was Rs.1,39,87,877/- and the work should be completed within eight months reckoned from the date of acceptance letter i.e., the work should be completed on or before 18.05.2009.
3. On 24.09.2009, both the parties have entered into an agreement. The Indian Railways Standard General Conditions of Contract and the Special Conditions and Specifications of Contract appended to the agreement to govern the contract, clauses 63 and 64 of General Conditions of Contract contemplate resolution of disputes through arbitration.
4. The respondents did not provide encumbrance free site, scope of work and work areas, due to which, the petitioner could not proceed with the work during original currency. The respondents granted extensions on their account and work was completed on 31.03.2015. Since the respondents failed to comply the terms and conditions of the agreement dated 24.09.2009, the petitioner was forced to issue letter dated 14.02.2018 to invoke clause 63 of General Conditions of Contract requesting a decision on the disputes raised by the petitioner. The respondents did not respond. Therefore, the petitioner was forced to issue legal notice on 29.06.2018 invoking the arbitration clause 64 of the General Conditions of Contract to initiate the process of appointing Arbitral Tribunal. The respondents have not responded to the said legal notice also. Therefore, the petitioner is before this Court for the relief sought for.
5. The respondents have filed the objections and have not disputed the agreement entered between the parties and contended that there was variation in agreement quantities beyond 25% and up to 50% negotiation was conducted with the agency/petitioner on 08.07.2011 and the agency agreed to execute the work at the original accepted rates only. The work was completed at a final value of Rs.1,94,69,888/-. The petitioner has given no claims certificate. At no point of time during the contract period, the petitioner has raised any objection of measurement and works in respect of the said agreement. It is further contended that the petitioner has submitted its Final Bill along with ‘No Claim Certificate’ and the said ‘No Claim Certificate’ was ‘unconditional’. Thereafter, the petitioner made demand for arbitration on 14.02.2018 and 29.06.2018 whereby, six claims were raised. It is further contended that in terms of the general condition of contract, which was in force at the time of execution of agreement is applicable in this case. In terms of clause 43(1) of General Conditions of Contract (GCC), the contractor shall prepare and furnish to the engineer once in every month an account giving full and detailed particulars of all claims for any additional expenses to which the contractor may consider himself entitled to and of all extra or additional works ordered by the engineer, which he has executed during the preceding month and no claim for payment for any such work will be considered, which has not been included in such particulars. The petitioner after completion of work, raised the objection. Therefore, sought for dismissal of the application.
6. When the matter came before this Court, on 04.07.2019, Sri. C. Babu, learned counsel for respondent Nos.1 to 3 submitted that he has already secured the deposit made by the petitioner and has been refunded and final bill has also been cleared and produced the documents along with memo. The documents and memo does not depict that the dispute is resolved and refunded the Security Deposit made.
7. I have heard the learned counsel for the parties to the lis.
8. Sri. Vasudeva Naidu. S., learned counsel for the petitioner reiterating the grounds urged in the memorandum of Civil Miscellaneous Petition (CMP) has contended that there is no dispute with regard to the works agreement dated 24.09.2009 and existence of arbitration clause 64 to resolve the dispute between the parties. He further contended that after the work was started and was in progress, the account bills have been submitted for the works done. Due to non-availability of funds in the Railways, the payments have been arranged in parts (Piece meal basis). Therefore, it was put to such a situation that the petitioner could not maintain consistency in progress as required. Therefore, there was unusual delay in progressing the work and the same cannot be attributed to the petitioner. Further it is contended that the said work was finally completed in the year 2013 with a delay of four years with the variations of 50% over and above the contract value, which has put the petitioner to the further additional losses, because the rates quoted by the contractor are five years old and no price variations have been paid in any manner nor the losses have been compensated to the petitioner on account of the delays, which cannot be attributable to the petitioner.
9. It is further contended that during the course of execution of the work, certain new item of works have been executed at the request of the railway administration from time to time, which are incidental to the main work and the same have not been processed and paid. At last, the final bill has been witnessed with a view to get the PBG and Security deposit released. The Railway Administration totally forgotten the petitioner after the work is completed and despondently failed to release his legitimate payment due and the assets created by the petitioner have been put to use immediately after completion and the same is under the utilization of the railways from the date of completion of work. For non clearance of work, the petitioner has personally demanded on 14.02.2018, the same was not replied by the respondents. Therefore, he was compelled to issue legal notice under Section 11(5) of the Act on 29.06.2018. No reply was received from the respondents. Therefore, he submits that there is no impediment to appoint the sole arbitrator.
10. Per contra, Sri. C. Babu, learned counsel for the respondents reiterating the averments made in the objections contended that the delay is on the part of the petitioner and that cannot be attributed to the respondents. The entire amount due to the petitioner has been paid. Therefore, he sought for dismissal of the petition.
11. Having heard the learned counsel for the parties, it is undisputed fact that the parties have entered into an agreement for works on 24.09.2009. The respondents have not disputed the same. It is also not in dispute that the petitioner has issued legal notice and personally demanded to take a decision in respect of dispute raised by the petitioner in terms of clause 63 of General Conditions of Contract on 14.02.2018, for which no reply was issued by the respondent. Subsequently, it is also not in dispute that on 29.06.2018, the petitioner issued legal notice as contemplated under Section 7(5) of the Act. Admittedly, no reply was issued by the respondents. The agreement for works entered between the parties on clause 64 for arbitration to resolve the dispute between the parties, reads as under:
“64.(1) Demand for Arbitration:
64.(1) (i) In the event of any dispute or difference between the parties hereto as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account or as to the withholding by the Railway of any certificate to which the contractor may claim to be entitled to, or if the Railway fails to make a decision within 120 days, then and in any such case, but except in any of the “expected matters” referred to in Clause 63 of these Conditions, the contractor, after 120 days but within 180 days of his presenting his final claim on disputed matters shall demand in writing that the dispute or difference be referred to arbitration.
64.(1) (ii) The demand for arbitration shall specify the matters which are in question, or subject of the dispute or difference as also the amount of claim item- wise. Only such dispute(s) or difference(s) in respect of which the demand has been made, together with counter claims or set off, given by the Railway, shall be referred to arbitration and other matters shall not be included in the reference.
64.(1) (iii) (a) The Arbitration proceedings shall be assumed to have commenced from the day, a written and valid demand for arbitration is received by the Railway.
(b) The claimant shall submit his claim stating the facts supporting the claims along with all the relevant documents and the relief or remedy sought against each claim within a period of 30 days from the date of appointment of the Arbitral Tribunal.
(c) The Railway shall submit its defence statement and counter claim(s), if any, within a period of 60 days of receipt of copy of claims from Tribunal thereafter, unless otherwise extension has been granted by Tribunal.
(d) Place of Arbitration: The place of arbitration would be within the geographical limits of the Division of the Railway where the cause of action arose or the Headquarters of the concerned Railway or any other place with the written consent of both the parties.
64.(1) (iv) No new claim shall be added during proceedings by either party. However, a party may amend or supplement the original claim or defence thereof during the course of arbitration proceedings subject to acceptance by Tribunal having due regard to the delay in making it.
64.(1) (v) If the contractor(s) does/do not prefer his/their specific and final claims in writing, within a period of 90 days of receiving the intimation from the Railways that the final bill is ready for payment, he/they will be deemed to have waived his/their claim(s) and the Railway shall be discharged and released of all liabilities under the contract in respect of these claims.
64.(2) Obligation during pendency of Arbitration: Work under the contract shall, unless otherwise directed by the Engineer, continue during the arbitration proceedings, and no payment due or payable by the Railway shall be withheld on account of such proceedings, provided, however, it shall be open for Tribunal to consider and decide whether or not such work should continue during arbitration proceedings.
64.(3) Appointment of Arbitrator:
64.(3) (a) (i) In cases where the total value of all claims in question added together does not exceed Rs.25,00,000 (Rupees twenty five lakh only), the Arbitral Tribunal shall consist of a Sole Arbitrator who shall be a Gazetted Officer of Railway not below JA Grade, nominated by the General Manager. The sole arbitrator shall be appointed within 60 days from the day when a written and valid demand for arbitration is received by GM.
64.(3) (a) (ii) In cases not covered by the Clause 64.(3) (a) (i), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers not below JA Grade or 2 Railway Gazetted Officers not below JA Grade and a retired Railway Officer, retired not below the rank of SAG Officer, as the arbitrators. For this purpose, the Railway will send a panel of more than 3 names of Gazetted Railway Officers of one or more departments of the Railway which may also include the name(s) of retired Railway Officer(s) empanelled to work as Railway Arbitrator to the contractor within 60 days from the day when a written and valid demand for arbitration is received by the GM.
Contractor will be asked to suggest to General Manager at least 2 names out of the panel for appointment as contractor’s nominee within 30 days from the date of dispatch of the request by Railway. The General Manager shall appoint at least one out of them as the contractor’s nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the ‘presiding arbitrator’ from amongst the 3 arbitrators so appointed. GM shall complete this exercise of appointing the Arbitral Tribunal within 30 days from the receipt of the names of contractor’s nominees. While nominating the arbitrators, it will be necessary to ensure that one of them is from the Accounts Department. An officer of Selection Grade of the Accounts Department shall be considered of equal status to the officers in SA grade of other departments of the Railway for the purpose of appointment of arbitrator.
64.(3) (a)(iii) If one or more of the arbitrators appointed as above refuses to act as arbitrator, withdraws from his office as arbitrator, or vacates his/their office/offices or is/are unable or unwilling to perform his functions as arbitrator for any reason whatsoever or dies or in the opinion of the General Manager fails to act without undue delay, the General Manager shall appoint new arbitrator/arbitrators to act in his/their place in the same manner in which the earlier arbitrator/arbitrators had been appointed. Such re-constituted Tribunal may, at its discretion, proceed with the reference from the stage at which it was left by the previous arbitrator(s).
64.(3) (a) (iv) The Arbitral Tribunal shall have power to call for such evidence by way of affidavits or otherwise as the Arbitral Tribunal shall think proper, and it shall be the duty of the parties hereto to do or cause to be done all such things as may be necessary to enable the Arbitral Tribunal to make the award without any delay. The Arbitral Tribunal should record day-to-day proceedings. The proceedings shall normally be conducted on the basis of documents and written statements.
64.(3) (a) (v) While appointing arbitrator(s) under Sub-clause (i), (ii) & (iii) above, due care shall be taken that he/they is/are not the one/those who had an opportunity to deal with the matters to which the contract relates or who in the course of his/their duties as Railway servant(s) expressed views on all or any of the matters under dispute or differences. The proceedings of the Arbitral Tribunal or the award made by such Tribunal will, however, not be invalid merely for the reason that one or more arbitrator had, in the course of his service, opportunity to deal with the matters to which the contract relates or who in the course of his/their duties expressed views on all or any of the matters under dispute.
64.(3) (b) (i) The arbitral award shall state item wise, the sum and reasons upon which it is based. The analysis and reasons shall be detailed enough so that the award could be inferred therefrom.
64.(3) (b) (ii) A party may apply for corrections of any computational errors, any typographical or clerical errors or any other error of similar nature occurring in the award of a Tribunal and interpretation of a specific point of award to Tribunal within 60 days of receipt of the award.
64.(3) (b) (iii) A party may apply to Tribunal within 60 days of receipt of award to make an additional award as to claims presented in the arbitral proceedings but omitted from the arbitral award.
64.(4) In case of the Tribunal, comprising of three Members, any ruling on award shall be made by a majority of Members of Tribunal. In the absence of such a majority, the views of the Presiding Arbitrator shall prevail.
64.(5) Where the arbitral award is for the payment of money, no interest shall be payable on whole or any part of the money for any period till the date on which the award is made.
64.(6) The cost of arbitration shall be borne by the respective parties. The cost shall inter-alia include fee of the arbitrator(s), as per the rates fixed by Railway Board from time to time and the fee shall be borne equally by both the parties. Further, the fee payable to the arbitrator(s) would be governed by the instructions issued on the subject by Railway Board from time to time irrespective of the fact whether the arbitrator(s) is/are appointed by the Railway Administration or by the court of law unless specifically directed by Hon’ble Court otherwise on the matter.
64.(7) Subject to the provisions of the aforesaid Arbitration and Conciliation Act 1996 and the rules thereunder and any statutory modifications thereof shall apply to the arbitration proceedings under this Clause.”
12. In view of the aforesaid admitted facts, there is no impediment to appoint the sole arbitrator. Accordingly, the Civil Miscellaneous Petition is allowed. Hon’ble Mr. Justice Ashok B. Hinchigeri, former Judge of this Court is appointed as a sole arbitrator to resolve the dispute between the parties in terms of the agreement for works dated 24.09.2009 under Arbitration Clause 64 entered into between the parties.
13. All the contentions raised by learned counsel for both the parties, are left open to be urged with regard to the claim and payment made by both the parties before the learned arbitrator.
14. Registry is directed to send a copy of this order to Hon’ble Mr. Justice Ashok B. Hinchigeri, former Judge of this Court as well as to the Arbitration Centre, Bengaluru, forthwith, for reference.
Sd/- JUDGE VBS