Kartar Singh and Co. Vs. Punjab State Electricity Board and ors. - Court Judgment

Excerpt:
- administrative law - government contract: [vijender jain, c.j., rajive bhalla & sury kant, jj] government contract rejection of highest bid challenge as to held, state has no dominus status to dictate unilateral terms and conditions when it enters into contract. its actions must be reasonable, fair and just in consonance with rule of law. as a necessary corollary thereto, state cannot refuse to confirm highest bid without assigning any valid reason and/or by giving erratic, irrational or irrelevant reasons. the state is free to enter into a contract just like any other individual and the contract shall not change its legal character merely because other party to contract is state. though no citizen possesses a legal right to compel state to enter into a contract, yet latter can neither pick and choose any person arbitrarily for entering into such agreement nor can it discriminate between persons similarly circumstanced. similarly, where breach of contract at hands of state violates fundamental rights of a citizen or its refusal to enter into a contract is contrary to statutory provisions or public duty, judicial review of such state action is inevitable. likewise, if state enters into a contract in consonance with article 299 rights of the parties shall be determined by terms of such contract irrespective of fact that one of the parties to it is a state or a statutory authority. for these precise reasons the equitable doctrine of promissory estoppel has been made applicable against the government, as against any other private individual, even in cases where no valid contract in terms of article 299 was entered into between the parties. hence, if government makes a representation or a promise and an individual alters his position by acting upon such promise, the government may be required to make good that promise and shall not be allowed to fall back upon the formal defect in the contract, though subject to well known limitations like larger public interest. the state, thus, has no dominus status to dictate unilateral terms and conditions when it enters into contract and its actions must be reasonable, fair and just and in consonance with rule of law. as a necessary corollary thereto state cannot refuse to confirm highest bid without assigning any valid reason and/or by giving erratic, irrational or irrelevant reasons. -- consumer protection act, 1986 [c.a. no. 68/1986]. articles 14 & 300a: government contract noon-acceptance of highest bid held, it does not result in taking away right to property of highest bidder highest bid, per se, unless it is accepted by competent authority, and consequential sale certificate is issued, does not grant the highest bidder right to property of type which is protected under article 300a right to property is limited to confer highest bidder the right to challenge action of appropriate authority in refusing to accept highest or other bids. [air 1984 p&h 282 (fb) explained] articles 14 & 226: government contract rejection of highest bid held, highest bidder has locus standi to maintain writ petition and assail action of state government or its authorities by contending that his bid has been turned down for arbitrary, illegal or perverse reasons however in such matters, heavy onus would like on petitioner bidder to establish his allegations as state action shall always be presumed to be in accordance with law - therefore, the arguments raised by the learned counsel for the respondents that the petition filed by the petitioner under section 11 of the arbitration and conciliation act suffers from delay is not well founded. the respondents have failed to refer the petitioner's claim for adjudication pursuant to the arbitration clause and thus, held themselves liable not to supply a vacancy of arbitrator in the stipulated time.vijender jain, c.j.1. this petition has been filed under section 11 of the arbitration and conciliation act, 1966, inter alia praying for appointment of sole arbitrator to adjudicate the disputes and differences between the petitioner and the respondents, arisen out of the contract agreement dated 26.3.1993. the arbitration clause is admitted between the parties.2. learned counsel appearing for the petitioner has contended that following was the arbitration clause 2.39 in the agreement:if at any time any question, dispute or difference whatsoever shall arise, between the purchaser/board and the contractor/supplier, upon or in relation to or in connection with the purchase order/contract either party may forthwith give to the other, notice in writing of the existence of such question, dispute or difference and the same shall be referred for sole arbitration of nominee of the purchaser board, who shall give a reasoned/speaking awards. the award of the sole arbitrator shall be final and binding on the parties under the provisions of the indian arbitration act, 1948 and of the rules thereunder. any statutory amendment, modification or re-enactment thereof for the time being enforce, shall be deemed to apply to and be incorporated in the contract/purchase order, it will not be objectionable if the sole arbitrator is an officer of the board and he has expressed his views on all or any of the matters in question of dispute or difference.(b) upon every or any such reference, the cost of and incidental to the reference and award respectively shall be in the discretion of the sole arbitrator so appointed who may determine the amount thereof or direct the same to be taxed as between solicitor and client or as between party and party and shall direct by whom and to whom and in what manner the same is to be done and paid.(c) the work under the contract shall if reasonably possible, continued during the arbitration proceedings and no payment due or payable by the purchaser/board shall be with-held on account of such proceedings.3. it has been contended before me that the afore said arbitration clause was invoked by the petitioner on 7.11.1997 and thereafter the petitioner sent reminders to the respondents for appointment of the arbitrator in terms of the arbitration clause. the petitioner served a legal notice dated 17.8.2004 ( annexure p-15) on the respondents and, thereafter, yet another reminder was sent by the petitioner to the respondents. having received neither any reply nor any acknowledgement, nor any vacancy having been supplied by the respondent, the petitioner did not have any other alternative, but to file a petition under section 11 of the arbitration and conciliation act, 1996 in this regard on 27.4.2005.4. learned counsel appearing for the respondents mr. govind has contended that the petition is not maintainable as the same is time barred. it is contended by learned counsel for the respondents that as per section 11 sub-section (5). of the act, petitioner ought to have approached the chief justice to appoint an arbitrator within thirty days i.e. on or before 6.12.1997. having not done so, the petitioner cannot maintain its petition as the period of more than three years has elapsed from the time cause of action accrued in favour of the petitioner. in support of this contention, learned counsel for the respondents has placed reliance on the judgment major (retd.) inder singh rekhi v. delhi development authority : [1988]3scr351 and steel authority of india limited v. j.c. budharaja, government and mining contractor : air1999sc3275 . it has also been contended by shri goel that in terms of article 137 of the limitation act, the right to apply had accrued to the petitioner after expiry of 30 days from the invocation of the arbitration clause on 7.11.1997, the petitioner ought to have filed a petition under section 11 of the arbitration and conciliation act, within three years from 7.12.1997. having not done so, the petition is not maintainable and no arbitrator can be appointed by this court.5. i have heard the arguments advanced by the counsel for the parties. there is no force in the arguments raised by learned counsel for the respondents. the arbitration and conciliation act is a special act. section 43 of the said act provide for limitation. section 43(2) reads as follows:43. limitations:- xxxxxxxx(2) for the purpose of this section and the limitation act, 1963, an arbitration shall be deemed to have commenced on the date referred to in section 21.section 21 of the act is as follows:21. commencement of arbitral proceedings:unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.from the aforesaid provisions of law, the intention of the legislature is manifestly clear that the embargo for attracting the provisions of limitation is on a date when the arbitral proceedings in a dispute shall commence, on a request for that dispute to be referred to arbitration is received by the respondent. the legislature in its wisdom has not taken any other steps/applications/proceedings or other cause of action into consideration except when a request is made by a party to an agreement to refer any dispute is received by the respondent for the purpose of calculating the period of limitation. the request for invocation of the arbitration was made by the petitioner on 7.11.1997. when the request for invoking the arbitration agreement for constituting a tribunal under the agreement was made by the petitioner to the respondents that invocation was within the period of limitation as contemplated under section 43 read with section 21 of the arbitration act. therefore, the arguments raised by the learned counsel for the respondents that the petition filed by the petitioner under section 11 of the arbitration and conciliation act suffers from delay is not well founded.6. coming to the arguments advanced by the learned counsel for the respondents that section 11(5) of the arbitration act provides a period of limitation of 30 days in which the party has to file a petition after receipt of a request by one party from the other party is based on misunderstanding of the provision of section 43 of the act. as a matter of fact, 30 days period as envisaged in sub-section (5) of section 11 is a period prescribed after invoking the arbitration clause by the other party to supply the vacancy as per the arbitration clause and no party can approach the chief justice or any person or institution designated by him before the expiry of period of 30 days that means a party has to necessarily wait for the expiry of 30 days period after invocation of arbitration clause, so as to approach the chief justice or his designate to supply the vacancy, in terms of arbitration clause,. sub-section (5) does not prescribe any embargo for filing the petition under section 11 of the arbitration and conciliation act. the limitation for filing of a petition under section 11 is only prescribed under section 43 of the arbitration and conciliation act.7. let it be judged from a different angle. arbitration clause is admitted in agreement. the party invokes the said arbitration clause within the period of limitation, as has been done in the present case on 7.11.1997. another party after having received the letter of invocation sits over the same and neither rejects the request for appointment of an arbitrator nor appoints any arbitrator. if after a lapse of considerable time the party approaches the court by a petition under section 11 of the act and the opposite party opposes the prayer by alleging that limitation has expired, acceptance of the objection of limitation would nullify the scheme of the arbitration and conciliation act itself.8. therefore, there is no merit in the submission of the respondents. the respondents have failed to refer the petitioner's claim for adjudication pursuant to the arbitration clause and thus, held themselves liable not to supply a vacancy of arbitrator in the stipulated time.9. therefore, i appoint justice a.l. bahri (retired judge of punjab and haryana high court) as sota arbitrator to adjudicate upon the dispute between the parties.the arbitrator shall fix his own fee.registry is directed to send a copy of this order of the arbitrator.parties to appear before the arbitrator on 4.5.2007 at 4.00 p.m. at the residence of the arbitrator.petition stands disposed of.