Full Judgment
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 28TH DAY OF FEBRUARY, 2025 BEFORE THE HON'BLE MR JUSTICE SACHIN SHANKAR MAGADUM CIVIL MISC. PETITION NO. 422 OF 2024 BETWEEN: M/S. M V CONSTRUCTIONS, NO. 16, 4TH CROSS, LAKSHMIPURA LAYOUT, DEVASANDRA, K R PURAM, BENGALURU - 560 036. A REGD. PARTNERSHIP FIRM, REPRESENTED BY ITS AUTHORIZED SIGNATORY, SRI. CHERUKERU RAMBABU. …PETITIONER (BY SRI. SAMPAT BAPAT, ADVOCATE) AND:
1. UNION OF INDIA
Digitally REPRESENTED BY THE GENERAL MANAGER, signed by SOUTH WESTERN RAILWAY, CHAITHRA P RAIL SADAN, GADAG ROAD, Location: HUBBALLI - 20.High Court of Karnataka 2. THE CHIEF ADMINISTRATIVE OFFICER (CONST.) SOUTH WESTERN RAILWAY,
3. THE CHIEF ENGINEER (CONST-II) SOUTH WESTERN RAILWAY, (CONST). SOUTH WESTERN RAILWAY,
4. THE DEPUTY CHIEF ENGINEER (CONST/IV) SOUTH WESTERN RAILWAY, -2- (CONST). SOUTH WESTERN RAILWAY, …RESPONDENTS (BY SRI. RESHMA K.T, ADVOCATE) THIS CIVIL MISCELLANEOUS PETITION IS FILED UNDER SECTION 11(6) OF ARBITRATION AND CONCILIATION ACT, 1996, PRAYING TO APPOINT A SOLE ARBITRATOR TO RESOLVE THE DISPUTES AND OUTSTANDING ISSUES BETWEEN THE PARTIES IN RESPECT OF AGREEMENT BEARING NO.SWR.WRC/CIVIL/2023/0029 DATED 28.03.2023, VIDE ANNEXURE-G, IN THE INTEREST OF JUSTICE. THIS PETITION, COMING ON FOR ADMISSION, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE SACHIN SHANKAR MAGADUM
ORAL ORDER
This Civil Miscellaneous Petition is filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking appointment of a sole arbitrator to resolve the dispute and difference between the parties herein in terms of agreement dated 28.03.2023 vide Annexure-G.
2. The respondents, on receipt of summons, engaged a counsel and there is a contest to this petition.
3. The petitioner asserts that the contract awarded by the respondents includes an incentive/penalty clause, -3-
under which he is entitled to receive an incentive bonus for completing the project within the stipulated timeframe. The petitioner emphasizes that he was fully committed to adhering to the agreed timeline. However, he alleges that delays caused by the respondent department disrupted the work schedule, leading to its suspension. Furthermore, in the early stages of the project, the petitioner submitted a request to respondent No.4 seeking relaxation of the penalty clause. The respondents, however, declined the request and instead imposed penalties for an extension of time.
4. The petitioner maintains that he did not seek an extension of time but rather opted for the closure of the contract. Despite this, respondent No.4 unilaterally proceeded to terminate the contract, imposing penalties in the form of forfeiture of the security deposit and encashment of the bank guarantee. In response, the petitioner issued a notice under Section 21 of the -4- Arbitration and Conciliation Act, invoking the arbitration clause.
5. The learned counsel for the respondents, while
acknowledging the existence of an arbitration clause, argues that the petitioner is not entitled to the claims raised in the notice, contending that the breach of contract lies with the petitioner rather than the respondents.
6. The Hon’ble Supreme Court has consistently
held that a referral court's role is limited to determining
the existence of an arbitration clause and whether the dispute is arbitrable. Since the respondents do not dispute the existence of the arbitration clause, and upon reviewing the petition, annexures, and supporting documents, this Court finds that the petitioner has fulfilled the procedural requirements prescribed under Section 11(4) of the Arbitration and Conciliation Act.
7. This Court also considers the legal principles established by the Hon’ble Supreme Court in Central -5-
Organisation for Railway Electrification vs. ECI-SPIC-SMO- MCML(JV), reported in (2020) 14 SCC 712. In that case, the Supreme Court held that arbitration clauses mandating tribunals composed of railway officials contravene the 2015 amendment, particularly Section 12(5) of the 1996 Act. Since the contract in the present case contains a similar provision, the precedent laid down by the Hon’ble Supreme Court is directly applicable.
8. In the light of the aforesaid clause of arbitration and the contentions advanced by the petitioner and applying the principles laid down by the Hon'ble Apex Court cited supra, this Court passes the following:
ORDER
(a) The petition is allowed appointing
Hon'ble Shri. Justice Ajit J. Gunjal, Former Judge, High Court of Karnataka, as the sole arbitrator to enter reference of the disputes between the petitioner and the respondents and conduct -6- proceeding at the Arbitration and Conciliation Centre (Domestic and International), Bengaluru according to the Rules governing the said Arbitration Centre.
(b) All contentions inter se parties are left open for adjudication in the arbitration proceedings.
(c) The office is directed to communicate this
order to the Arbitration and Conciliation
Centre and to Hon'ble Shri. Justice Ajit J. Gunjal, Former Judge, High Court of Karnataka, as required under the Arbitration and Conciliation Centre Rules, 2012. Sd/- (SACHIN SHANKAR MAGADUM) JUDGE HDK List No.: 3 Sl No.: 14 CT: BHK