Bkb Transport Pvt.Ltd. Vs. Central Coalfields Ltd. and Ors - Court Judgment

SooperKanoon Citationsooperkanoon.com/110628
CourtJharkhand High Court
Decided OnJul-28-2017
AppellantBkb Transport Pvt.Ltd.
RespondentCentral Coalfields Ltd. and Ors
Excerpt:
in the high court of jharkhand at ranchi arbitration application no. 34 of 2007 with arbitration application no. 35 of 2007 bkb transport pvt. ltd., bokaro through its director ….... petitioner(both cases) vrs. 1.central coal fields limited, ranchi through its chairman cum managing director, ranchi 2.the director technical(operation), central coal fields ltd. ranchi 3.the general manager, central coal fields ltd. kathara area, bokaro .... respondents(both cases) ….... coram: hon’ble mr. justice aparesh kumar singh for the applicant : m/s rajiv ranjan, shresth gautam for the respondent : m/s a.k.srivastava, badal vishal 06/28.07.2017 heard learned counsel for the parties.2. both these applications are preferred by the same petitioner against the same respondent seeking appointment of an arbitrator in terms of clause 95 of the respective agreements. clause 95 is in the same language in both the agreements in the two arbitration applications, first dated 17.12.2003 (in arbitration application no.34 of 2007) relating to award of the work of loading of coal into railway wagons at jarangdih railway siding and the second dated 9.11.2001(in arbitration application no.35 of 2007) relating to work of transportation of crushed coal from jarangdih f.b. to jarangdih railway siding pf no.-ii.3. petitioner raised the dispute and sought appointment of an arbitrator in terms of clause 95 of both the agreements through notices dated 12.2.2007. having failed to elicit any response, they have sought for appointment of an arbitrator separately under both the agreements under section 11(6) of the arbitration and conciliation act,1996. learned counsel for the petitioner submits that in terms of the arbitration clause 95 the dispute arising out of a contract shall be referred to director and the decision of the director would be final and binding on the contractor. he submits that instant clause should be read as arbitration clause.4. reliance is placed on a judgment rendered by the apex court in the case of bihar state mineral development corporation and another vrs. encon builders(i)(p)ltd. reported in (2003) 7 scc418 para 13 thereof, which incorporates the essential elements of an arbitration agreement i.e. (i) there must be a present or a future difference in connection with some contemplated affair;(ii) there must be the intention of the parties to settle such -2- difference by a private tribunal; (iii) the parties must agree in writing to be bound by the decision of such tribunal and; (iv) the parties must be ad idem. he has also relied upon a judgment rendered by the apex court in the case of k.k.modi vrs. k.n.modi and others reported in (1998) 3 scc573 para 17 thereof, which also refers to the attributes which must be present in the agreement to be considered as an arbitration agreement. para 17 of the instant judgment is extracted hereunder:- “17.among the attributes which must be present for an agreement to be considered as an arbitration agreement are : (1) the arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement, (2) that the jurisdiction of the tribunal to decide the rights of parties must derive either from the consent of the parties or from an order of the court or from a statute, the terms of which make it clear that the process is to be an arbitration, (3) the agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal, (4) that the tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness towards both sides, (5) that the agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law and lastly, (6) the agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal”.5. learned counsel for the respondents have appeared and filed their counter affidavit resisting the plea of the petitioner for appointment of an arbitrator. it is also their contention that clause refers to reference of a dispute to the director of the respondent company and director has been defined in the agreement itself. apart from that the respondents have also raised their contention in respect of the merits of the claim. learned counsel for the respondents have placed reliance upon a judgment rendered by the hon'ble supreme court of india in the case of utkal galvanizers ltd. vrs. orissa hydro power corporation ltd. & others reported in 2007(6) supreme 587. respondents have also relied upon judgment rendered by the apex court in the case of indian oil corporation limited & others vrs. raja transport private limited reported in (2009) 8 scc520and in the case of denel (proprietary) limited vrs. ministry of defence reported in (2012) 2 scc759in support of their submission that when parties have agreed to submit to a nominated arbitrator under the agreement, they are supposed to abide by the decision of the named arbitrator alone.6. i have considered the submission of learned counsel for the parties and -3- also the relevant materials on record relied upon by them including the judgments cited on their behalf. clause 95 of both the agreements in question, which are in identical terms, is quoted hereunder:- “all disputes arising out of this contract, for which no specific provision has been made in the agreement, shall be referred to director and the decision of the director shall be final and binding on the contractor. such reference, however, shall in no way affect the execution of the work”.7. one of the first question, which is to be answered in exercise of powers under section 11 of the act of 1996 is whether the clause relied upon by the petitioner for appointment of an arbitrator is an arbitration clause or not. in the instant case the parties have agreed to refer all disputes to the director of the respondent company whose decision shall be final and binding on the contractor. it also stipulates that such reference in no way affect the execution of the work. the question which falls for consideration is whether the instant clause is in substance an arbitration clause or an expert determination mechanism provided under the agreement between the parties. this issue has been considered in the case of vishnu (dead) by lrs. vrs. state of maharashtra & others reported in (2014) 1 scc516before the hon'ble supreme court of india. clause 29 and 30 of the b-1 agreement was in question therein. clause 29 and 30 of b-1 agreement referred to at para 11 of the report is quoted hereunder:- “para 11.we have considered the respective arguments. clauses 29 and 30 of the b-1 agreements entered into between the parties read as under:“29. all works to be executed under the contract shall be executed under the direction and subject to the approval in all respects of the superintending engineer of the circle for the time being, who shall be entitled to direct at what point or points and in what manner they are to be commenced, and from time to time carried on.30. except where otherwise specified in the contract and subject to the powers delegated to him by the government under the code rules then in force the decision of the superintending engineer of the circle for the time being shall be final, conclusive, and binding on all parties to the contract upon all questions, relating to the meaning of the specifications, designs, drawing, and instructions hereinbefore mentioned and as to the quality of workmanship, or materials used on the work, or as to any other question, claim, right, matter, or thing whatsoever, if any way arising, out of, or relating to the contract designs, drawings, specifications, estimates, instructions, orders, or these conditions or otherwise concerning the works, or the execution, or failure to execute the same, whether arising, during the progress of the work, or after the completion or abandonment thereof”.8. the hon'ble supreme court examined the provisions of clause 29 and 30 of the b-1 agreement and the precedents on the subject which include -4- those relied upon by the petitioner and came to the finding that the said clause 30 was not an arbitration agreement. powers conferred upon the superintending engineer to take decision on matters enumerated in clause 30 did not involve adjudication of any dispute or lis between government and contractor. hence, the said clause is not an arbitration clause in the opinion of the apex court.9. the ratio rendered by the apex court on this issue applies with all rigors to the facts of the present case as well. in the present case clause 95 relied upon by the petitioner also contemplates reference of dispute arising out of a contract to the director whose decision shall be final and binding on the contract. this would also not affect the execution of the work. essential attributes of an arbitration clause as referred in the case of k.k.modi vrs. k.n.modi (supra) also do not stand fulfilled in the present case to treat clause 95 of agreements as arbitration clause. therefore prayer for appointment of an arbitrator in terms of section 11(6) of the act of 1996 cannot be entertained.10. these applications are accordingly dismissed. (aparesh kumar singh, j.) a.mohanty
Judgment:

IN THE HIGH COURT OF JHARKHAND AT RANCHI Arbitration Application No. 34 of 2007 with Arbitration Application No. 35 of 2007 BKB Transport Pvt. Ltd., Bokaro through its Director ….... Petitioner(both cases) Vrs. 1.Central Coal Fields Limited, Ranchi through its Chairman cum Managing Director, Ranchi 2.The Director Technical(Operation), Central Coal Fields Ltd. Ranchi 3.The General Manager, Central Coal Fields Ltd. Kathara Area, Bokaro .... Respondents(both cases) ….... CORAM: HON’BLE MR. JUSTICE APARESH KUMAR SINGH For the Applicant : M/s Rajiv Ranjan, Shresth Gautam For the Respondent : M/s A.K.Srivastava, Badal Vishal 06/28.07.2017 Heard learned counsel for the parties.

2. Both these applications are preferred by the same petitioner against the same respondent seeking appointment of an Arbitrator in terms of Clause 95 of the respective agreements. Clause 95 is in the same language in both the agreements in the two Arbitration Applications, first dated 17.12.2003 (in Arbitration Application No.34 of 2007) relating to award of the work of loading of coal into Railway wagons at Jarangdih Railway Siding and the second dated 9.11.2001(in Arbitration Application No.35 of 2007) relating to work of transportation of crushed coal from Jarangdih F.B. to Jarangdih Railway Siding PF No.-II.

3. Petitioner raised the dispute and sought appointment of an Arbitrator in terms of Clause 95 of both the agreements through notices dated 12.2.2007. Having failed to elicit any response, they have sought for appointment of an Arbitrator separately under both the agreements under Section 11(6) of the Arbitration and Conciliation Act,1996. Learned counsel for the petitioner submits that in terms of the arbitration clause 95 the dispute arising out of a contract shall be referred to Director and the decision of the Director would be final and binding on the contractor. He submits that instant clause should be read as arbitration clause.

4. Reliance is placed on a judgment rendered by the Apex Court in the case of Bihar State Mineral Development Corporation and another Vrs. Encon Builders(I)(P)Ltd. reported in (2003) 7 SCC418 para 13 thereof, which incorporates the essential elements of an arbitration agreement i.e. (i) there must be a present or a future difference in connection with some contemplated affair;(ii) there must be the intention of the parties to settle such -2- difference by a private tribunal; (iii) the parties must agree in writing to be bound by the decision of such tribunal and; (iv) the parties must be ad idem. He has also relied upon a judgment rendered by the Apex Court in the case of K.K.Modi Vrs. K.N.Modi and others reported in (1998) 3 SCC573 para 17 thereof, which also refers to the attributes which must be present in the agreement to be considered as an arbitration agreement. Para 17 of the instant judgment is extracted hereunder:- “17.Among the attributes which must be present for an agreement to be considered as an arbitration agreement are : (1) The arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement, (2) that the jurisdiction of the tribunal to decide the rights of parties must derive either from the consent of the parties or from an order of the court or from a statute, the terms of which make it clear that the process is to be an arbitration, (3) the agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal, (4) that the tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness towards both sides, (5) that the agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law and lastly, (6) the agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal”.

5. Learned counsel for the Respondents have appeared and filed their counter affidavit resisting the plea of the petitioner for appointment of an arbitrator. It is also their contention that clause refers to reference of a dispute to the Director of the Respondent Company and Director has been defined in the agreement itself. Apart from that the Respondents have also raised their contention in respect of the merits of the claim. Learned counsel for the Respondents have placed reliance upon a judgment rendered by the Hon'ble Supreme Court of India in the case of Utkal Galvanizers Ltd. Vrs. Orissa Hydro Power Corporation Ltd. & others reported in 2007(6) Supreme 587. Respondents have also relied upon judgment rendered by the Apex Court in the case of Indian Oil Corporation Limited & others Vrs. Raja Transport Private Limited reported in (2009) 8 SCC520and in the case of Denel (Proprietary) Limited Vrs. Ministry of Defence reported in (2012) 2 SCC759in support of their submission that when parties have agreed to submit to a nominated Arbitrator under the agreement, they are supposed to abide by the decision of the named Arbitrator alone.

6. I have considered the submission of learned counsel for the parties and -3- also the relevant materials on record relied upon by them including the judgments cited on their behalf. Clause 95 of both the agreements in question, which are in identical terms, is quoted hereunder:- “All disputes arising out of this contract, for which no specific provision has been made in the agreement, shall be referred to Director and the decision of the Director shall be final and binding on the contractor. Such reference, however, shall in no way affect the execution of the work”.

7. One of the first question, which is to be answered in exercise of powers under Section 11 of the Act of 1996 is whether the clause relied upon by the petitioner for appointment of an arbitrator is an arbitration clause or not. In the instant case the parties have agreed to refer all disputes to the Director of the Respondent Company whose decision shall be final and binding on the contractor. It also stipulates that such reference in no way affect the execution of the work. The question which falls for consideration is whether the instant clause is in substance an arbitration clause or an expert determination mechanism provided under the agreement between the parties. This issue has been considered in the case of Vishnu (DEAD) By LRS. Vrs. State of Maharashtra & others reported in (2014) 1 SCC516before the Hon'ble Supreme Court of India. Clause 29 and 30 of the B-1 agreement was in question therein. Clause 29 and 30 of B-1 agreement referred to at para 11 of the report is quoted hereunder:- “Para 11.We have considered the respective arguments. Clauses 29 and 30 of the B-1 Agreements entered into between the parties read as under:

“29. All works to be executed under the contract shall be executed under the direction and subject to the approval in all respects of the Superintending Engineer of the Circle for the time being, who shall be entitled to direct at what point or points and in what manner they are to be commenced, and from time to time carried on.

30. Except where otherwise specified in the contract and subject to the powers delegated to him by the Government under the Code Rules then in force the decision of the Superintending Engineer of the Circle for the time being shall be final, conclusive, and binding on all parties to the contract upon all questions, relating to the meaning of the specifications, designs, drawing, and instructions hereinbefore mentioned and as to the quality of workmanship, or materials used on the work, or as to any other question, claim, right, matter, or thing whatsoever, if any way arising, out of, or relating to the contract designs, drawings, specifications, estimates, instructions, orders, or these conditions or otherwise concerning the works, or the execution, or failure to execute the same, whether arising, during the progress of the work, or after the completion or abandonment thereof”.

8. The Hon'ble Supreme Court examined the provisions of Clause 29 and 30 of the B-1 agreement and the precedents on the subject which include -4- those relied upon by the petitioner and came to the finding that the said clause 30 was not an arbitration agreement. Powers conferred upon the Superintending Engineer to take decision on matters enumerated in clause 30 did not involve adjudication of any dispute or lis between Government and contractor. Hence, the said clause is not an arbitration clause in the opinion of the Apex Court.

9. The ratio rendered by the Apex Court on this issue applies with all rigors to the facts of the present case as well. In the present case clause 95 relied upon by the petitioner also contemplates reference of dispute arising out of a contract to the Director whose decision shall be final and binding on the contract. This would also not affect the execution of the work. Essential attributes of an arbitration clause as referred in the case of K.K.Modi Vrs. K.N.Modi (supra) also do not stand fulfilled in the present case to treat clause 95 of agreements as arbitration clause. Therefore prayer for appointment of an arbitrator in terms of section 11(6) of the Act of 1996 cannot be entertained.

10. These applications are accordingly dismissed. (Aparesh Kumar Singh, J.) A.Mohanty