Durga Condev Pvt. Ltd. Vs. Executive Engineer, Bhanjanagar and ors. - Court Judgment

Excerpt:
[mr. justice s.n.satyanarayana, j.] this miscellaneous first appeal is filed under order 43, rule l(q) of cpc against the order dated 03.10.2009 passed on ia no.1 in o.s. no.7/2009 on the pile of xx additional city civil & sessions judge, bangalore, dismissing ia no. 1 filed under order 38, rule 4 of cpc for attachment. [mr. justice s.n.satyanarayana, j.] this misc.cvl. in 620/2010 is filed under order 39. rule 1 and 2 read with, section 151 of the cpc. 1908 for temporary injunction.1. the petitioner-contractor has filed this application under section 11 (4) of the arbitration and conciliation act, 1996 (hereinafter referred as 'the act' in short) requesting this court to appoint an arbitrator unconnected with the parties in any manner to settle the dispute between them urging various facts.2. facts in brief are stated as hereunder:the petitioner, a super class contractor, was awarded with a contract work by opposite party no.1 vide agreement no.ncb-1/97-98 (package no.1 a for improvement to rushikulya main canal from rb .002 to 13.69 km). the date of commencement and completion of work were 17.11.1997 and 16.5.2000 respectively for the contractual price of rs.3,65,10,200.00.3. after the contract was awarded in its favour, it mobilized man power and machineries to complete the work within the stipulated time as per the work programme furnished to him along with the agreement. in course of execution of the work, the work operation got frequent suspension by the principal for supply of water to dhakhanipur reservoir for filling the same to cater the drinking water requirement of adjoining areas. such suspension was made on eleven times as a result of which the work was suspended for 220 days, i.e., almost 25% of the total contract period for which the petitioner was forced to incur extra expenditure by way of mobilization, remobilization and demobilization factors of execution, shifting and commissioning of machineries, idle labour and establishment, protection of executed work, removal of silt and debris etc. and in the process the petitioner incurred huge expenditure over and above the bid price agreed upon by it. the said frequent suspension of work having not been spelt out in the contract agreement, the petitioner had not accounted for the said cost aspects arising out of the said suspension in its price bid. as such the expenses arising out of the said suspension indirectly or directly was supposed to be reimbursed by the principal for which series of correspondence were made. finally on 11.7.2000 the petitioner intimated the opposite party no.1 that the extra cost on account of such periodical suspension of work has been assessed at rs.1,80,56,000.00 and the same being legitimate one deserves to be released in its favour as per provisions in paragraph 44.1(f) & (g). the said letter is annexed as annexure-3.4. it is also its case that the "instruction to the bidder" in the tender notification vide clause 36.1 proposed that sri n.c.rout, retired chief engineer, irrigation, be appointed as an adjudicator for settlement of disputes between the parties. it further says that in the event the employer or the contractor disagrees to the same, the adjudicator shall be appointed by chairman, institution of engineers (india) orissa state centre, bhubaneswar vide annexure-4. it is the further case that conditions of the contract vide clauses 24, 25 and 26 specify the mechanism for redressal of disputes by the adjudicator sri n.c.rout, retired chief engineer and on his failure or disagreement, on request by either of the parties, the chairman, institution of engineers, orissa state centre shall appoint the adjudicator as per the agreement at annexure-5. it is the further case that on 19.9.2005 the petitioner expressed its desire to opposite party no.1 that as per the condition of the contract, he having failed to take a decision in relation to the claims arising out of the contract with the petitioner, it desired to refer the matter to the adjudicator for adjudication of the claim. in one hand it has reminded to do so and on the other hand it requested in the letter that since the contract agreement does not bear the consent letter of any adjudicator with details of his address excepting mentioning in the bid document that the named person to be appointed as adjudicator, the address and consent letter be intimated.5. opposite party no.1 vide its letter dated 6.10.2005 intimated the petitioner stating that the claims raised by it were not admissible and acceptable to the department. it was further intimated that for adjudication of dispute the petitioner having accepted sri n.c.rout, retired chief engineer, as the adjudicator in its letter for requisition of advance, all correspondences may be made to him only. thereafter, collecting the address of shri n.c.rout, he was requested to act upon who vide letter dated 19.11.2005 (annexure-8) intimated the petitioner that he is not aware of the provisions of the contract in relation to the adjudication of disputes and the terms and conditions of payment to adjudicator and if both the parties offered their consent to accept him as the adjudicator, he is willing to offer his consent to work as the adjudicator. the petitioner vide its letter dated 12.1.2006 (annexure-9) forwarded to shri rout, the nominated adjudicator, with reference to his letter dated 19.11.2005 the relevant portion of the contract relating to the dispute adjudication system along with the letter of the executive engineer, bhanjanagar irrigation division dated 6.10.2005 giving his consent in favour of shri n.c.rout as adjudicator of the project but he has not responded to the said letter. the same was accordingly intimated to opposite party no.1 stating that the nominated adjudicator has not been positive which may be recorded as non-fulfilling his function in accordance with clause 26.1 of the agreement and a new adjudicator may be appointed to whom the petitioner will also accept as the adjudicator. as there was no response from opposite party no.1, the petitioner once again approached him vide letter dated 6.2.2006 requesting him to suggest the name of any other adjudicator after obtaining a letter of consent from him to act as such. opposite party no.1 failed to respond to the said letter of the petitioner. therefore, the petitioner through its letter dated 12.5.2006 requested the chairman of institution of engineers (india) orissa state centre wherein the sequences of event pertaining to appointment of adjudicator were brought to their knowledge and they were requested to appoint adjudicator/arbitrator as per the provisions of clause 36.1 of itb and clauses 24, 25 and 26 of the general conditions of contract. as on the date of filing of this petition, the chairman of the institution of engineers had not taken any action in relation to appointment of adjudicator, the petitioner has approached this court. finally by letter dated 26.10.2006 (annexure-12), the petitioner intimated the opposite parties the sequence of events pertaining to the correspondences in regard to appointment of adjudicator and requested opposite party no.1 to find out the way out for effective adjudication of the dispute arising out of the contract between the parties. since the opposite parties failed to make appointment of an arbitrator more than one and half years from the date of its reminder, the petitioner has approached this court seeking for the aforesaid relief.6. opposite party no.1 has filed a detailed counter affidavit and also produced certain documents as annexures-a to annexure-d in support of its counter claim opposing the claim of the petitioner. the principal contention urged in this case is that the final bill has been paid vide final bill dated 31.3.2001 and the contract has also been closed. all the security dues such as bid security and performance security relating to the work have also been refunded to the contractor. it is opposite party's case that before passing the final bill, the contractor had not alleged that any dispute regarding the work or its payment and he has accepted the final bill without any protest. five years after completion of the work in all respect, the petitioner in his application dated 19.9.2005, 12.1.2006, 6.2.2006 and 26.10.2006 respectively intimated to the opposite party no.1 regarding the extra payment of rs.1,80,56,000.00 illegally and requested to appoint an adjudicator viz sri n.c.rout, retired chief engineer. it is further stated that there is no live contract. as the contract had come to an end on acceptance of final bill without any protest, the claim is not maintainable. the said fact was intimated to the chief engineer and basin manager, berhampur vide letter no.5036/we dated 9.12.2005 of the executive engineer, bhanjanagar irrigation division. the chief engineer and basin manager, berhampur in his letter no.7183 dated 31.12.2005 has intimated the executive engineer, bhanjanagar irrigation division that the contract has already been closed and all the dues and the final bill have been paid and security deposit refunded which has been accepted by the petitioner. therefore, appointment of arbitrator is not permissible.7. shri mohapatra, learned government advocate, in support of the justification of the aforesaid stand of opposite party no.1 has placed reliance upon the constitution bench decision of the supreme court as reported in air 2005 sc 450 para 25 and clauses 25(1) and 25(2) of the agreement and submits that the claim having not been raised within the period stipulated therein, the same is barred by limitation. therefore, the question of this court appointing an arbitrator does not arise.8. in reply submission, learned counsel for the petitioner placed reliance upon the decision of the supreme court reported in air 1974 sc 158 :damodar valley corporation v. k.k.kar in support of his contention wherein the payment including return of the security deposits by finally settling the claim of the contractor was made. after receiving those payments, claim made by the contractor for damages for repudiation of the contract is held to be maintainable. therefore, there is no merit in the stand taken by opposite party no.1 in its counter statement.9. with reference to the above said fact, this court is required to examine as to whether there is live claim between the parties in respect of the civil work awarded under the contract, whether the claim is barred by limitation, as pleaded by the state government and whether the case in hand warrants appointment of arbitrator. as the aforesaid points are related to each other, the same are taken up and answered together.10. it is an undisputed fact that there is a claim with regard to suspension of work as claimed by the petitioner on 11 number of times. work for nearly about 25% of the total contract period was suspended for operation of the work. in this regard the petitioner has already preferred a claim as per document annexure-3 dated 11.7.2000. we have carefully perused the arbitration clause 34.7. opposite party no.1 neither accepted the claim nor referred the same to the nominated adjudicator under clause 34.7. therefore, the claim was pending with the opposite party no.1. reliance placed upon clauses 24.1 and 25.2 in support of their case that it is barred by limitation is absolutely not tenable in law as the same is contrary to the factual position, namely, the claim in respect of the suspension of work on 11 times on account of which unnecessary extra expenditure was incurred by the petitioner by way of mobilization, demobilization and remobilization factors of execution, shifting and commissioning of machineries, idle labour and establishment, protection to executed work, removal of silt and debris. the same is over and above the agreed bid amount under the contract. therefore, it was the duty of the opposite party no.1 to refer the same to the nominated adjudicator under clause 26.1. when opposite party no.1 did not take any step, petitioner requested the nominated adjudicator to act upon who by letter dated 19.11.2005 intimated the petitioner that he is not aware of the provisions of the contract relating to adjudication of dispute and thereafter the petitioner through letter dated 6.2.2006 intimated opposite party no.1 that since the proposed adjudicator had not been positive it may be recorded as non-fulfilling the function in accordance with the provision of clause 26.1 of gcc and requested for suggesting name of any other adjudicator. when opposite party no.1 did not respond, the petitioner vide letter dated 12.5.2006 requested the chairman, institution of engineers (india) orissa state centre to appoint an arbitrator as per clause 36.1 of itb and clauses 24, 25 and 26 of the general condition of the contract. the same was also not materialized. therefore, he has approached this court.11. not settling the claim by appointing the nominated arbitrator and non-appointment of adjudicator as per clause 36.1 of itb certainly gives the petitioner cause of action to approach this court for appointment of the arbitrator to resolve the dispute between the parties in respect of the claim vide document annexure-3. inaction on the part of the opposite party no.1 despite the fact that the claim was preferred as back as 11.7.2000 to the commissioner-cum-secretary, government of orissa, water resources department-opposite party no.3 the same has not been accepted, is a dispute between the parties. preferring claims with the secretary of the water resources is not in dispute and the nominated arbitrator has not agreed to be adjudicator and the chairman, institution of engineers (india) orissa state centre not appointed the arbitrator in spite of request made by the petitioner, it cannot be said that there is no live claim merely because the final bill is received by the petitioner. the bill amount is in relation to the work that was executed by him. the same has nothing to do with the pending claims regarding extra expenditure not covered under the agreement for execution of civil work agreed upon by the contractor. therefore, factually receipt of the amount under the final bill is not in relation to the claims made. therefore, it cannot be said that there is no live claim between the parties referred to supra. the decision relied upon by the learned government advocate has absolutely no application and reliance placed on said decision is misplaced. on the other hand learned counsel for the petitioner has placed reliance upon the decision in damodar valley corporation (supra) which supports its case. further the contention urged that the claim is barred by limitation placing reliance on clause 24.1, 25.1 and 25.2 is not tenable in law. in view of the failure on the part of the opposite party in not persuading the nominated arbitrator or not appointing another arbitrator or not appointing any arbitrator under clause 36.1 of itb by the chairman, institution of engineers (india) orissa state, the said contention that claims is barred by limitation must fail. therefore, the prayer of the petitioner for appointment of arbitrator must succeed. i, therefore, appoint justice shri a.k.parichha, a former judge of this court, as the arbitrator to decide the dispute between the parties. the arbitrator so appointed shall enter upon the reference within a period of four weeks from the date of communication of the order. the fee and other charges of the arbitrator will be fixed by the arbitrator himself. after entering upon the reference, the arbitrator shall decide the dispute between the parties within a period of six months. the petition is accordingly allowed. application allowed.

Judgment:
1. The petitioner-contractor has filed this application under section 11 (4) of the Arbitration and Conciliation Act, 1996 (hereinafter referred as 'the Act' in short) requesting this Court to appoint an arbitrator unconnected with the parties in any manner to settle the dispute between them urging various facts.

2. Facts in brief are stated as hereunder:

The petitioner, a Super Class contractor, was awarded with a contract work by opposite party no.1 vide agreement No.NCB-1/97-98 (Package No.1 A for improvement to Rushikulya Main Canal from RB .002 to 13.69 KM). The date of commencement and completion of work were 17.11.1997 and 16.5.2000 respectively for the contractual price of Rs.3,65,10,200.00.

3. After the contract was awarded in its favour, it mobilized man power and machineries to complete the work within the stipulated time as per the work programme furnished to him along with the agreement. In course of execution of the work, the work operation got frequent suspension by the principal for supply of water to Dhakhanipur reservoir for filling the same to cater the drinking water requirement of adjoining areas. Such suspension was made on eleven times as a result of which the work was suspended for 220 days, i.e., almost 25% of the total contract period for which the petitioner was forced to incur extra expenditure by way of mobilization, remobilization and demobilization factors of execution, shifting and commissioning of machineries, idle labour and establishment, protection of executed work, removal of silt and debris etc. and in the process the petitioner incurred huge expenditure over and above the bid price agreed upon by it. The said frequent suspension of work having not been spelt out in the contract agreement, the petitioner had not accounted for the said cost aspects arising out of the said suspension in its price bid. As such the expenses arising out of the said suspension indirectly or directly was supposed to be reimbursed by the principal for which series of correspondence were made. Finally on 11.7.2000 the petitioner intimated the opposite party no.1 that the extra cost on account of such periodical suspension of work has been assessed at Rs.1,80,56,000.00 and the same being legitimate one deserves to be released in its favour as per provisions in paragraph 44.1(f) & (g). The said letter is annexed as Annexure-3.

4. It is also its case that the "Instruction to the bidder" in the tender notification vide Clause 36.1 proposed that Sri N.C.Rout, Retired Chief Engineer, Irrigation, be appointed as an adjudicator for settlement of disputes between the parties. It further says that in the event the employer or the contractor disagrees to the same, the adjudicator shall be appointed by Chairman, Institution of Engineers (India) Orissa State Centre, Bhubaneswar vide Annexure-4. It is the further case that conditions of the contract vide Clauses 24, 25 and 26 specify the mechanism for redressal of disputes by the adjudicator Sri N.C.Rout, Retired Chief Engineer and on his failure or disagreement, on request by either of the parties, the Chairman, Institution of Engineers, Orissa State Centre shall appoint the adjudicator as per the agreement at Annexure-5. It is the further case that on 19.9.2005 the petitioner expressed its desire to opposite party no.1 that as per the condition of the contract, he having failed to take a decision in relation to the claims arising out of the contract with the petitioner, it desired to refer the matter to the adjudicator for adjudication of the claim. In one hand it has reminded to do so and on the other hand it requested in the letter that since the contract agreement does not bear the consent letter of any adjudicator with details of his address excepting mentioning in the bid document that the named person to be appointed as adjudicator, the address and consent letter be intimated.

5. Opposite party no.1 vide its letter dated 6.10.2005 intimated the petitioner stating that the claims raised by it were not admissible and acceptable to the department. It was further intimated that for adjudication of dispute the petitioner having accepted Sri N.C.Rout, retired Chief Engineer, as the adjudicator in its letter for requisition of advance, all correspondences may be made to him only. Thereafter, collecting the address of Shri N.C.Rout, he was requested to act upon who vide letter dated 19.11.2005 (Annexure-8) intimated the petitioner that he is not aware of the provisions of the contract in relation to the adjudication of disputes and the terms and conditions of payment to adjudicator and if both the parties offered their consent to accept him as the adjudicator, he is willing to offer his consent to work as the adjudicator. The petitioner vide its letter dated 12.1.2006 (Annexure-9) forwarded to Shri Rout, the nominated adjudicator, with reference to his letter dated 19.11.2005 the relevant portion of the contract relating to the dispute adjudication system along with the letter of the Executive Engineer, Bhanjanagar Irrigation Division dated 6.10.2005 giving his consent in favour of Shri N.C.Rout as adjudicator of the project but he has not responded to the said letter. The same was accordingly intimated to opposite party no.1 stating that the nominated adjudicator has not been positive which may be recorded as non-fulfilling his function in accordance with Clause 26.1 of the agreement and a new adjudicator may be appointed to whom the petitioner will also accept as the adjudicator. As there was no response from opposite party no.1, the petitioner once again approached him vide letter dated 6.2.2006 requesting him to suggest the name of any other adjudicator after obtaining a letter of consent from him to act as such. Opposite party no.1 failed to respond to the said letter of the petitioner. Therefore, the petitioner through its letter dated 12.5.2006 requested the Chairman of Institution of Engineers (India) Orissa State Centre wherein the sequences of event pertaining to appointment of adjudicator were brought to their knowledge and they were requested to appoint adjudicator/arbitrator as per the provisions of Clause 36.1 of ITB and Clauses 24, 25 and 26 of the General Conditions of Contract. As on the date of filing of this petition, the Chairman of the Institution of Engineers had not taken any action in relation to appointment of adjudicator, the petitioner has approached this Court. Finally by letter dated 26.10.2006 (Annexure-12), the petitioner intimated the opposite parties the sequence of events pertaining to the correspondences in regard to appointment of adjudicator and requested opposite party no.1 to find out the way out for effective adjudication of the dispute arising out of the contract between the parties. Since the opposite parties failed to make appointment of an arbitrator more than one and half years from the date of its reminder, the petitioner has approached this Court seeking for the aforesaid relief.

6. Opposite party no.1 has filed a detailed counter affidavit and also produced certain documents as Annexures-A to Annexure-D in support of its counter claim opposing the claim of the petitioner. The principal contention urged in this case is that the final bill has been paid vide final bill dated 31.3.2001 and the contract has also been closed. All the security dues such as bid security and performance security relating to the work have also been refunded to the contractor. It is opposite party's case that before passing the final bill, the contractor had not alleged that any dispute regarding the work or its payment and he has accepted the final bill without any protest. Five years after completion of the work in all respect, the petitioner in his application dated 19.9.2005, 12.1.2006, 6.2.2006 and 26.10.2006 respectively intimated to the opposite party no.1 regarding the extra payment of Rs.1,80,56,000.00 illegally and requested to appoint an adjudicator viz Sri N.C.Rout, retired Chief Engineer. It is further stated that there is no live contract. As the contract had come to an end on acceptance of final bill without any protest, the claim is not maintainable. The said fact was intimated to the Chief Engineer and Basin Manager, Berhampur vide letter no.5036/WE dated 9.12.2005 of the Executive Engineer, Bhanjanagar Irrigation Division. The Chief Engineer and Basin Manager, Berhampur in his letter No.7183 dated 31.12.2005 has intimated the Executive Engineer, Bhanjanagar Irrigation Division that the contract has already been closed and all the dues and the final bill have been paid and security deposit refunded which has been accepted by the petitioner. Therefore, appointment of arbitrator is not permissible.

7. Shri Mohapatra, learned Government Advocate, in support of the justification of the aforesaid stand of opposite party no.1 has placed reliance upon the Constitution Bench decision of the Supreme Court as reported in AIR 2005 SC 450 para 25 and clauses 25(1) and 25(2) of the agreement and submits that the claim having not been raised within the period stipulated therein, the same is barred by limitation. Therefore, the question of this Court appointing an arbitrator does not arise.

8. In reply submission, learned counsel for the petitioner placed reliance upon the decision of the Supreme Court reported in AIR 1974 SC 158 :Damodar Valley Corporation v. K.K.Kar in support of his contention wherein the payment including return of the security deposits by finally settling the claim of the contractor was made. After receiving those payments, claim made by the contractor for damages for repudiation of the contract is held to be maintainable. Therefore, there is no merit in the stand taken by opposite party no.1 in its counter statement.

9. With reference to the above said fact, this Court is required to examine as to whether there is live claim between the parties in respect of the civil work awarded under the contract, whether the claim is barred by limitation, as pleaded by the State Government and whether the case in hand warrants appointment of arbitrator. As the aforesaid points are related to each other, the same are taken up and answered together.

10. It is an undisputed fact that there is a claim with regard to suspension of work as claimed by the petitioner on 11 number of times. Work for nearly about 25% of the total contract period was suspended for operation of the work. In this regard the petitioner has already preferred a claim as per document Annexure-3 dated 11.7.2000. We have carefully perused the arbitration clause 34.7. Opposite party no.1 neither accepted the claim nor referred the same to the nominated adjudicator under clause 34.7. Therefore, the claim was pending with the opposite party no.1. Reliance placed upon Clauses 24.1 and 25.2 in support of their case that it is barred by limitation is absolutely not tenable in law as the same is contrary to the factual position, namely, the claim in respect of the suspension of work on 11 times on account of which unnecessary extra expenditure was incurred by the petitioner by way of mobilization, demobilization and remobilization factors of execution, shifting and commissioning of machineries, idle labour and establishment, protection to executed work, removal of silt and debris. The same is over and above the agreed bid amount under the contract. Therefore, it was the duty of the opposite party no.1 to refer the same to the nominated adjudicator under clause 26.1. When opposite party no.1 did not take any step, petitioner requested the nominated adjudicator to act upon who by letter dated 19.11.2005 intimated the petitioner that he is not aware of the provisions of the contract relating to adjudication of dispute and thereafter the petitioner through letter dated 6.2.2006 intimated opposite party no.1 that since the proposed adjudicator had not been positive it may be recorded as non-fulfilling the function in accordance with the provision of Clause 26.1 of GCC and requested for suggesting name of any other adjudicator. When opposite party no.1 did not respond, the petitioner vide letter dated 12.5.2006 requested the Chairman, Institution of Engineers (India) Orissa State Centre to appoint an arbitrator as per Clause 36.1 of ITB and Clauses 24, 25 and 26 of the General Condition of the Contract. The same was also not materialized. Therefore, he has approached this Court.

11. Not settling the claim by appointing the nominated arbitrator and non-appointment of adjudicator as per Clause 36.1 of ITB certainly gives the petitioner cause of action to approach this Court for appointment of the arbitrator to resolve the dispute between the parties in respect of the claim vide document Annexure-3. Inaction on the part of the opposite party no.1 despite the fact that the claim was preferred as back as 11.7.2000 to the Commissioner-cum-Secretary, Government of Orissa, Water Resources Department-opposite party no.3 the same has not been accepted, is a dispute between the parties. Preferring claims with the Secretary of the Water Resources is not in dispute and the nominated arbitrator has not agreed to be adjudicator and the Chairman, Institution of Engineers (India) Orissa State Centre not appointed the arbitrator in spite of request made by the petitioner, it cannot be said that there is no live claim merely because the final bill is received by the petitioner. The bill amount is in relation to the work that was executed by him. The same has nothing to do with the pending claims regarding extra expenditure not covered under the agreement for execution of civil work agreed upon by the contractor. Therefore, factually receipt of the amount under the final bill is not in relation to the claims made. Therefore, it cannot be said that there is no live claim between the parties referred to supra. The decision relied upon by the learned Government Advocate has absolutely no application and reliance placed on said decision is misplaced. On the other hand learned counsel for the petitioner has placed reliance upon the decision in Damodar Valley Corporation (supra) which supports its case. Further the contention urged that the claim is barred by limitation placing reliance on Clause 24.1, 25.1 and 25.2 is not tenable in law. In view of the failure on the part of the opposite party in not persuading the nominated arbitrator or not appointing another arbitrator or not appointing any arbitrator under Clause 36.1 of ITB by the Chairman, Institution of Engineers (India) Orissa State, the said contention that claims is barred by limitation must fail. Therefore, the prayer of the petitioner for appointment of arbitrator must succeed. I, therefore, appoint Justice Shri A.K.Parichha, a former Judge of this Court, as the Arbitrator to decide the dispute between the parties. The arbitrator so appointed shall enter upon the reference within a period of four weeks from the date of communication of the order. The fee and other charges of the arbitrator will be fixed by the arbitrator himself. After entering upon the reference, the arbitrator shall decide the dispute between the parties within a period of six months. The petition is accordingly allowed. Application allowed.