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Saturday, July 12, 2014

Arbitration and conciliation Act - Request for appointment of Arbitrator under sec.11 was rejected by High court - Apex court held that as both parties mutually agreed for arbitration by retired Hon’ble Judge of the Kerala High Court, without going into the question of merit, we set aside the impugned order dated 19th July, 2010 and refer the matter to Hon’ble Mr. Justice K. John Mathew (retired). The parties will negotiate and settle the terms and conditions of arbitration. It is expected that the arbitration proceeding will be concluded at an early date. The appeals stand disposed of with aforesaid observations. = M/s Kaikara Construction Company … Appellant VERSUS State of Kerala and Ors. … Respondents = 2014 – July. Part -http://judis.nic.in/supremecourt/filename=41711

Arbitration and conciliation Act - Request for appointment of Arbitrator under sec.11 was rejected by High court - Apex court held that  as both parties mutually agreed  for arbitration by retired Hon’ble Judge  of  the  Kerala  High  Court,  without going into the question of merit, we set  aside  the  impugned  order  dated 19th July, 2010 and refer the matter to Hon’ble Mr. Justice K.  John  Mathew (retired). The parties will negotiate and settle the  terms  and  conditions of arbitration. It is expected  that  the  arbitration  proceeding  will  be concluded at an early date.  The appeals stand disposed of with aforesaid observations. =

 the appellant’s prayer under Section 11  (6)  of  the
Arbitration and Conciliation Act, 1996 for  appointment  of  arbitrator  has
been rejected by the High Court.=

In view of stand taken by the parties and as they mutually agreed  for
arbitration by retired Hon’ble Judge  of  the  Kerala  High  Court,  without
going into the question of merit, we set  aside  the  impugned  order  dated
19th July, 2010 and refer the matter to Hon’ble Mr. Justice K.  John  Mathew
(retired). The parties will negotiate and settle the  terms  and  conditions
of arbitration. It is expected  that  the  arbitration  proceeding  will  be
concluded at an early date.
16.   The appeals stand disposed of with aforesaid observations. No costs.

2014 – July. Part -http://judis.nic.in/supremecourt/filename=41711

                                                                REPORTABLE
                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                   CIVIL APPEAL NOs.               OF 2014
               (arising out of SLP(C) Nos.14947-14948 of 2011)

M/s Kaikara Construction Company              … Appellant

                                   VERSUS

State of Kerala and Ors.                           … Respondents


                               J U D G M E N T


Sudhansu Jyoti Mukhopadhaya, J.

      Leave granted.
2.    These appeals are directed against order dated  19.07.2010  passed  by
the High Court of Kerala at Ernakulam in Arbitration Request No.39 of  2009.
By the impugned order, the appellant’s prayer under Section 11  (6)  of  the
Arbitration and Conciliation Act, 1996 for  appointment  of  arbitrator  has
been rejected by the High Court.
3.    The factual matrix of the case is as follows:
      On 27.1.2005, the appellant submitted tender, which  was  accepted  by
the respondents on 21.7.2005. The possession of the  work  site  was  handed
over to the  appellant  on  2.9.2005.  The  period  for  completion  of  the
contract expired on 1.9.2007. The case of the appellant is that the  Company
had  completed  a  major  part  of  the  work.  This  was  disputed  by  the
respondents. According to them, only 41% of the work  was  completed  as  on
22.12.2007, based on the original  contract  price.  Based  on  the  revised
contract price, the progress achieved was only 30%  as  on  22.12.2007;  the
work carried out from 22.12.2007 to 1.3.2009 was only  12%  as  against  70%
target.
      According to the appellant, a sum of Rs.1,18,87,265/- was  payable  to
it but the said amount was withheld by the respondents. As a  condition  for
releasing the amount, the appellant was compelled to execute a  supplemental
agreement. The appellant sought extension of the period  for  completion  of
the work which was granted  up  to  1.3.2009.  On  7.3.2009,  the  appellant
requested for appointment of a ‘Dispute Review Expert’ as stipulated in  the
General Conditions of Contract. On 9.5.2009,  the  appellant  again  made  a
request for appointment of ‘Dispute Review Expert’ and  also  for  extension
of the "intended completion period".  Another  letter  dated  10.6.2009  was
written by the appellant to the Chairman of  the  Council  of  Indian  Roads
Congress with similar  prayer  to  appoint  a  ‘Dispute  Review  Expert’  as
stipulated in Clause 36.1 of ITB forming part of the agreement  without  any
delay, with due intimation to the appellant in writing.
      On 7.08.2009, the Indian Roads Congress  addressed  a  letter  to  the
Chief Engineer, PWD National Highways, Thiruvananthapuram  to  inform  about
the appointment of Dispute Review Expert. On  6.10.2009,  the  Indian  Roads
Congress wrote another letter  to  the  Chief  Engineer,  Ministry  of  Road
Transport  &  Highways,  New  Delhi  requesting  him  to  inform  about  the
appointment of Dispute Review Expert. However, no reply  was  given  to  the
appellant.
4.    In this background, the appellant moved before the  High  Court  under
Section  11  (6)  of  the  Arbitration  and  Conciliation  Act,   1996   for
appointment of an arbitrator. The learned Single Judge of the High Court  by
impugned order dated  19.07.2010  dismissed  the  request  holding  that  no
arbitration agreement exists.
5.    Review Petition filed by the appellant  was  also  rejected  by  order
dated 2.02.2011.
6.    The appellant relied upon Clauses 24 and 25 of  the  Standard  Bidding
Document which forms part of the contract and read as follows:
     "24. Disputes
       24.1 If  the  Contractor  believes  that  a  decision  taken  by  the
Engineer was either outside the authority  given  to  the  Engineer  by  the
Contract or that the decision  was  wrongly  taken  the  decision  shall  be
referred to the Dispute Review Expert within 14 days of the notification  of
the Engineer's decision.

      25. Procedure for Disputes.
      25.1. The  Dispute  Review  Expert  (Board)             shall  give  a
decision in writing within 28 days             of  receipt  of  notification
of a dispute.

      25.2 The Dispute Review Expert (Board) shall  be  paid  daily  at  the
rate specified in the Contract Data together with reimbursable  expenses  of
the types specified in the Contract Data  and  the  cost  shall  be  divided
equally between the  Employer  and  the  Contractor,  whatever  decision  is
reached by the Dispute Review Expert. Either party may give  notice  to  the
other to refer a decision of the Dispute  Review  Expert  to  an  Arbitrator
within 28 days of the Dispute Review Expert's written decision.  If  neither
party refers the dispute  to  arbitration  within  the  next  28  days,  the
Dispute Review Expert's decision will be final and            binding.

      25.3 The arbitration shall be conducted in            accordance  with
the arbitration procedure stated in the Special Conditions of Contract."

7.    Detailed procedure has been stipulated in Sub clause  (a)  to  (f)  of
Clause 25.3 of the Standard Bidding document.
8.    It appears that appellant by  letter  dated  11.8.2009  requested  the
Superintending Engineer, National Highway, Central Circle, Kochi,  to  agree
to the appointment of a sole arbitrator mentioned  in  the  letter.  But  no
reply was given.
9.    The respondents in their counter  affidavit  opposed  the  prayer  and
contended that if arbitration is the mode of  settlement  of  disputes,  the
names of Dispute Review Experts are to  be  specifically  mentioned  in  the
contract data, which was not done in  the  present  case.  In  the  contract
entered into between the parties on 25.08.2005, there was a specific  clause
which reads as follows:

"The parties to  this  contract  agree  and  undertake  the  condition  that
arbitration shall not be a means of  settlement  of  dispute  or  claims  or
anything on account of this contract."

10.   It was contended on behalf of  the  respondents  that  in  absence  of
nomination  of  Dispute  Review  Expert,  there  is  no  valid   arbitration
agreement.
11.   Learned counsel for the appellant relied upon decision of  this  Court
in M.K. Abraham and Company v. State of Kerala and  another,  (2009)  7  SCC
636. In the said case, the Court noticed that a letter dated  28.9.1994  was
issued by the Ministry of Surface Transport, Government of  India  informing
all the State Public Works Departments and all Chief Engineers  in  all  the
States dealing with National  Highways,  that  a  standard  contract  clause
prescribing the procedure to be followed for appointment of arbitrators  was
to be incorporated in the bidding conditions for the National Highway  works
and that the arbitration clause should be  compulsorily  made  part  of  the
bidding conditions in the  respective  states.  In  said  case,  this  Court
noticed the aforesaid letter dated 28.08.1994 and Clauses 24  and  24(a)  of
the notice inviting tenders for works as printed in  the  standard  form  of
agreement executed between the parties and observed as follows:
“24. In the present case, as noticed  above,  the  contract  consists  of  a
typewritten  contract  agreement  between  the  appellant  and  the   second
respondent [which does not contain  any  terms  and  conditions,  but  which
merely states that the contract is for execution of the  described  work  as
per  the  accompanying  articles  of  agreement,  plan,  specification   and
conditions of contract approved  by  the  Project  Director  (SE),  National
Highway (ADB), Circle Adappally, Cochin] with  several  printed  forms  with
cyclostyled additions as annexures and handwritten corrections. The  printed
form of articles of agreement has an attachment slip.
25. The contract in the present case does not contain any handwritten  terms
in  regard  to  arbitration.  The  contract  has  printed  clauses   barring
arbitration [Clauses 24 and 24(a) of the notice inviting tenders  for  works
and a preamble clause  and  Clause  3  in  the  articles  of  agreement].  A
cyclostyled slip signed by both parties containing  the  words  “arbitration
clause as  per  the  Ministry  of  Surface  Transport’s  Letter  No.  RW/NH-
34041/3/94-DO-III dated 28-9-1994 will be applicable”  is  attached  to  the
printed articles of agreement.
26. By applying the well-settled  principles  relating  to  construction  of
contract the following position will emerge:

(i) the terms of the articles of agreement will prevail over  the  terms  of
notice inviting tenders for works, and

(ii) the term contained in the cyclostyled attachment to  the  printed  form
of articles of  agreement  will  prevail  over  the  terms  of  the  printed
articles of agreement.
Consequently, the contents of the attachment slip to  the  printed  form  of
articles of agreement providing for arbitration will prevail  over  the  bar
on arbitration contained in the notice inviting tenders for  works  and  the
articles of agreement. As a result, it has  to  be  held  that  there  is  a
provision for arbitration in regard to the disputes between  the  respective
appellant and the respondents.”

            However, the High Court distinguished the case  relied  upon  by
the appellant.
12.   In the letter  of  acceptance  dated  21.07.2005,  the  Superintendant
Engineer intimated the appellant the acceptance of the offer  given  by  the
appellant at paragraph 9 therein, it was  specifically  mentioned  that  all
terms and conditions of notice inviting tenders and tender  documents  shall
be binding on the said contract and the contractor. In the bidding  document
supplied to the  appellant  by  respondent  no.3  arbitration  clauses  were
incorporated at clause 25 and 25.3  as  noticed  above.  At  Clause  36  the
provisions of Dispute Review Expert was mentioned as follows:
      “36. Dispute Review Expert
      36.1 The Employer proposes  that  [name  of  proposed  Dispute  Review
Expert as indicated in Appendix]  be  appointed  as  Dispute  Review  Expert
under  the  Contract,  at  a  daily  fee  as  indicated  in  Appendix   plus
reimbursable expenses.  If the Bidder  disagrees  with  this  proposal,  the
Bidder should so state in the Bid. If  in  the  Letter  of  Acceptance,  the
Employer has not agreed on the appointment of  the  Dispute  Review  Expert,
the Dispute Review Expert shall be appointed by the Council of Indian  Roads
Congress      at       the       request       of       either       party.”




13.   In the agreement clause (3) it was mentioned that the parties  to  the
contract agreed and undertake the conditions that arbitration shall  not  be
means of settlement of disputes or claims or  anything  on  account  of  the
said contract.
14.   The case was heard and judgment was  reserved.  Subsequently,  parties
have filed joint application showing the name  of  the  arbitrator  mutually
agreed to by the parties as under:
      “Hon. Justice Mr. K. John Mathew
            Former Judge of the Hon. High Court of Kerala,
      Veekshanam Road, Kochi, 682018
      Kerala State

      Sd/-
      Advocate for the Petitioner
      Babu Thomas K
      For Rabin Maujumdar
                                                   Sd/-
                                                   Adv. M T George
                                        Advocate for the respondents”
15.   In view of stand taken by the parties and as they mutually agreed  for
arbitration by retired Hon’ble Judge  of  the  Kerala  High  Court,  without
going into the question of merit, we set  aside  the  impugned  order  dated
19th July, 2010 and refer the matter to Hon’ble Mr. Justice K.  John  Mathew
(retired). The parties will negotiate and settle the  terms  and  conditions
of arbitration. It is expected  that  the  arbitration  proceeding  will  be
concluded at an early date.
16.   The appeals stand disposed of with aforesaid observations. No costs.

                                               …………………………………………………………………….J.
                                       (SUDHANSU JYOTI MUKHOPADHAYA)



                                               …………………………………………………………………….J.
                                             (DIPAK MISRA)

NEW DELHI,
JULY 01, 2014.
ITEM NO.1A               COURT NO.6                 SECTION XIA

(For Judgment)



               S U P R E M E  C O U R T  O F  I N D I A

                          RECORD OF PROCEEDINGS



                     Civil Appeal No(s). …......../2014

                      (@ SLP (C) Nos. 14947-14948/2011)



M/S. KAIKARA CONSTRUCTION CO.                      Appellant(s)



                                VERSUS



STATE OF KERALA AND ORS.                           Respondent(s)





Date : 01/07/2014      These appeals were called on for pronouncement
            of Judgment today.



For Appellant(s)       Mr. Rabin Majumder ,Adv.



For Respondent(s)            Mr. M. T. George ,Adv.





       Hon'ble  Mr.  Justice  Sudhansu  Jyoti  Mukhopadhaya  pronounced  the
reportable judgment of the Bench comprising His  Lordship  and  Hon'ble  Mr.
Justice Dipak Misra.



      The appeals are allowed in terms of the signed reportable judgment.











(MEENAKSHI KOHLI)                               (USHA SHARMA)

  COURT MASTER                                   COURT MASTER



             [Signed reportable judgment is placed on the file]


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