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AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • M/s. Bansal construction co.…through Mr. B.K Dewan, Advocate
  • Indian Oil Corporation Ltd…through Mr. V.N Koura, Advocate & Another
Judges
  • P.K Bahri J.
Acts
  • provisions of Section 69 of the Indian partnership Act
  • Sections 8 & 20 of the Arbitration Act
  • provisions of Clauses 6.7.1.0
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • M/s. Bansal construction co.…through Mr. B.K Dewan, Advocate
  • Indian Oil Corporation Ltd…through Mr. V.N Koura, Advocate & Another
Judges
  • P.K Bahri J.
Acts
  • provisions of Section 69 of the Indian partnership Act
  • Sections 8 & 20 of the Arbitration Act
  • provisions of Clauses 6.7.1.0
See more information ...
Smart Summary

Structured Summary of the Opinion (P.K. Bahri J., August 2, 1991)

Judge: P.K. Bahri, J.

Date of judgment: August 2, 1991

Statutory basis of petition: Sections 8 and 20 of the Arbitration Act (as stated in the opinion)

Factual and Procedural Background

The petitioner entered into a contract with the respondents for construction work described as "construction of effluent disposal channel out fall structure and WBM roads at MRP" for the Mathura Refinery Project. The contract was awarded by letter dated October 20, 1977, with completion to be within 20 months from handing over of the site. On December 7, 1977 it was agreed that the site would be handed over progressively and the entire stretch would be handed over within six months of the letter of acceptance (i.e., by April 19, 1978), with at least one-third available by January 15, 1978.

The petitioner alleges that respondents made available only 600 meters out of a total 5,100 meters until May 10, 1978, causing delay and losses. The petitioner completed the work on September 15, 1980 and furnished a security deposit of Rs. 3,27,000/-, which was due for refund on March 14, 1981 (subject to the six-month maintenance period). The petitioner claimed Rs. 7,72,410/- overall; after pressure from respondents he received payment for work done and Rs. 1,00,000/- against his claim. He then gave notice claiming the balance (Rs. 6,72,410/-) and invoked the arbitration clause to refer disputes to arbitration. The claimed items included idle labour charges (Rs. 22,035/- for May 30–June 15, 1978) and escalation/increase in costs (Rs. 7,50,375/-).

Respondents contested maintainability, initially pleading that the petition was hit by Section 69 of the Indian Partnership Act. On merits they relied on contractual clauses (referencing clauses such as 6.6.1.0 and the arbitration clause 9.1.0.0) to contend that the petitioner failed to give the required notice of claim to the Engineer-in-Charge and Site Engineer within ten days, and thus the claim was not arbitrable. They also pleaded that acceptance of Rs. 1,00,000/- was in full and final satisfaction of claims.

The court framed four issues: (1) status of the petitioner as a registered partnership and whether Shri Mahavir Prasad Bansal is entered as partner; (2) whether petitioner's claims are notified claims within the arbitration agreement; (3) if issue 2 is proved, whether the arbitration agreement stands discharged as alleged; and (4) relief.

Legal Issues Presented

  1. Is the petitioner a registered partnership firm and is the name of Shri Mahavir Prasad Bansal entered in the register of Registrar of firms as a partner thereof?
  2. Whether the claims of the petitioner or any of them are notified claims within the scope of the arbitration agreement?
  3. If issue No. 2 is proved, does the arbitration agreement stand discharged and extinguished as alleged by respondent No. 1?
  4. What relief (if any) should be granted?

Arguments of the Parties

Petitioner's Arguments

  • The petitioner contended that the claim for damages (arising from respondents not making available the site within the stipulated period) is covered by the arbitration clause and, therefore, the matter should be referred to an arbitrator for determination of merit.
  • The petitioner asserted that it was not incumbent upon him to notify the claim to the Engineer-in-Charge or Site Engineer as required by Clause 6.6.1.0 (i.e., the petitioner contended failure to give such notice did not preclude arbitration).

Respondents' Arguments

  • The respondents argued the petition was not maintainable and was hit by Section 69 of the Indian Partnership Act (this contention was not pressed after the petitioner filed an uncontroverted affidavit showing registration).
  • On the merits, the respondents relied on contract provisions (noting clauses including 66.1.0 and 6.2.1.0 and specifically clause 6.6.1.0) to contend that the contractor was bound to notify any claim to the Engineer-in-Charge and Site Engineer within ten days; failure to comply meant the claim was not arbitrable under Clause 9.1.0.0.
  • They also pleaded that the petitioner, having accepted Rs. 1,00,000/-, had accepted full and final satisfaction and was not entitled to further claims referable to arbitration.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Uttam Singh Duggal & Co. (P) Ltd. v. Indian Oil Corporation Limited & Another, Suit No. 697-A/83 (decided Jan 8, 1985 by D.P. Wadhwa, J.) That where contract clauses require notification of claims (clause 6.6.1.0 or similar), failure to give such notice prevents the claim from being referred to arbitration under clause 9.1.0.0. The court relied on this authority to support the proposition that an unnotified claim cannot be referred to arbitration; it treated this decision as persuasive and followed its conclusion for the present facts.
Associated Hybilds (P) Ltd. v. Indian Oil Corporation Limited, Suit No. 2399-A/85 (decided Oct 15, 1987 by B.N. Kirpal, J.) Similar holding: claims not notified in terms of clause 6.6.1.0 cannot be referred to arbitration under clause 9.1.0.0. The court relied on this decision (which reached the same legal conclusion) and applied the same principle to hold that the petitioner's unnotified claim was not arbitrable.

Court's Reasoning and Analysis

The court addressed the issues in sequence.

  1. Issue No. 1 (partnership status): The court directed determination by affidavit. Shri M.P. Bansal filed an affidavit stating the petitioner is a registered partnership firm and that he is a registered partner. This affidavit was not controverted; accordingly the respondent did not pursue the Section 69 objection. The court decided Issue No. 1 in favour of the petitioner.
  2. Issues Nos. 2 and 3 (notified claim and effect on arbitration clause): The court reproduced the operative contractual provisions: Clause 6.6.1.0 (which requires the Contractor to give notice in writing to the Engineer-in-Charge and Site Engineer within ten days of the event giving rise to any claim, and which states that the Contractor shall be deemed to have waived claims not notified in the manner and within the time specified) and Clause 9.1.0.0 (the arbitration clause, which makes arbitration subject to certain provisions and refers disputes arising out of any notified claim of the Contractor included in his Final Bill to arbitration).
  3. The court considered opposing contentions: respondents' counsel argued that failure to notify a claim in conformity with Clause 6.6.1.0 rendered the claim non-arbitrable; petitioner's counsel argued notice was not incumbent and that the arbitrator should decide the merits.
  4. The court observed that similar contract clauses had been considered in two prior judgments of this Court (Uttam Singh Duggal and Associated Hybilds). In those judgments, after extensive consideration, the respective courts concluded that unless a claim is notified in terms of clause 6.6.1.0, the claim cannot be referred to arbitration under clause 9.1.0.0 and petitions under Section 20 were dismissed.
  5. Applying that precedent and the plain wording of the contractual clauses reproduced in the opinion, the court found that the petitioner had admittedly not given the notice required by Clause 6.6.1.0. Consequently, the court held that the claim could not be referred to arbitration under Clause 9.1.0.0. Issues 2 and 3 were decided against the petitioner.

Holding and Implications

Holding: The petition is DISMISSED.

Direct consequences and immediate implications:

  • The court dismissed the petition under Sections 8 and 20 of the Arbitration Act because the petitioner had not given the contractual notice required by Clause 6.6.1.0, and therefore the claim could not be referred to arbitration under Clause 9.1.0.0.
  • The court left the parties to bear their own costs in view of the peculiar facts of the case.
  • The opinion expressly followed earlier decisions (Uttam Singh Duggal and Associated Hybilds) applying the same contractual interpretation; the judgment does not purport to create a new legal principle beyond applying those precedents and the contract wording to the facts at hand.

Judge: P.K. BAHARI, J. — Date: August 2, 1991.

Show full summary ...

    Bansal Construction Co. v. Indian Oil Corporation Ltd. And Another

    P.K Bahri:— This petition has been filed under sections 8 & 20 of the arbitration act for seeking direction for filing of the arbitration agreement and for reference of the disputes mentioned in the petition to the arbitrator to be appointed in accordance with the arbitration clause.

    The petitioner had entered into a contract with the respondents for the work of “construction of effluent disposal channel out fall structure and WBM roads at MRP” operating through Mathura Refinery Project. This work was awarded to the petitioner vide letter dated October 20, 1977, with the stipulation that period of completion would be 20 months reckoned from the date of handing over of the site. It is averred that later on certain discussions took place and it was agreed on December 7, 1977, that the site shall, however, be handed over to the contractor progressively and the entire stretch of land within a maximum period of six months from the date of letter of acceptance. So, it is averred that the entire site was to be handed over latest by April 19, 1978 and it was assured that at least one-third of the land would be made available for execution of the work upto January 15, 1978. The petitioner has pleaded that, in fact, the respondents could make available only 600 meters of stretch of land against total land of 5,100 meters upto May 10, 1978. So, due to this breach of the term of the contract by the respondents, the petitioner is stated to have suffered losses for which the petitioner claims damages. It is pleaded that the entire work was completed by the petitioner on September 15, 1980, to the entire satisfaction of the respondents in terms of the contract. The petitioner had furnished security deposit of Rs. 3,27,000/- which was liable to be refunded on March 14, 1981, i.e excluding the six months period of liability of the petitioner for maintenance of the work from the date of the completion. The petitioner is also stated to have put up a claim for the payment of Rs. 7,72,410/-. The petitioner has pleaded that instead of releasing the security of Rs. 3,27,000/-, the respondents required the petitioner on April 3, 1981, to extend the validity period of the bank guarantee for a period of three months and the respondents were bent upon not to release the security deposit unless the petitioner agreed to reduce his claim. It is pleaded that the petitioner out of coercion agreed to receive any payment whatsoever offered by the respondents and the petitioner was then refunded his amount due to the petitioner on the basis of the work already done and Rs. 1,00,000/- out of the claim of Rs. 7,72,410/-. The petitioner then served a notice on the respondent for claiming Rs. 6,72,410/- and on failure of the respondent to pay the said claim, the petitioner has invoked the arbitration clause for reference of the disputes to the arbitrator. The details of the claim are mentioned in para 26 of the petition. It is mentioned that the petitioner is entitled to payment on account of idle labour charges with effect from May 30, 1978 to June 15, 1978 which come to Rs. 22,035/- and the claim against the increase in the cost and material, transportation etc. the amount claimed was Rs. 7,50,375/- and after deducting Rs. 1,00,000/- already received, the petitioner has now set up his claim for Rs. 6,72,410/-. It is evident from the perusal of the petition that this claim is for damage incurred by the petitioner on account of respondent not making available the site to the petitioner within the stipulated period.

    The respondents has contested the petition pleading that the petition is not maintainable as is hit by the provisions of Section 69 of the Indian partnership Act and on merits, it is pleaded that in view of the terms of the contract, articularly clauses 66.1.0 and clause 6.2.1.0 the petitioner was bound to notify the claim to the Engineer-in-Charge within ten days and the petitioner having not notified the claim in accordance with the main clause 6.6.1.0, the claim for damages is not covered by the arbitration clause 9.1.0.0

    Another plea taken is that the petitioner has accepted Rs. 1,00,000/- on full and final satisfaction of his claims and thus, is not entitled to raise any other claim which could be referred to arbitration.

    Following issues were framed:

    1. Is the petitioner a registered partnership firm and is the name of Shri Mahavir Prasad Bansal entered in the register of Registrar of firms as a partner thereof?

    2. Whether the claims of the petitioner or any of them are notified claims within the scope of the arbitration agreement?

    3. If issue No. 2 is proved, does the arbitration agreement stand discharged and extinguished as alleged by respondent No. 1?

    4. Relief.

    ISSUE No. 1

    The matter was directed to be decided by affidavits. Shri M.P Bansal has filed the affidavit in which he has mentioned that the petitioner is a registered partnership firm and he is one of the registered partners. In view of this affidavit which is not controverted, counsel for the respondent has not raised any contentions based on provisions of Section 69 of the Indian partnership Act. So, this issue is decided in favour of the petitioner.

    ISSUES NOS. 2& 3

    Issues Nos. 2 & 3 would be dealt with together. In order to appreciate the contention being ra sed before me on these issues, it is appropriate to refer to relevant clauses of the contract. Clause 6.6.1.0 reads as follows:

    “Should the Contractor consider that he is entitled to any extra payment or compensation in respect of the works over and above the amounts due in terms of the contract as specified in clause 6.3.1.0 hereof or should the Contractor dispute the validity of any deductions made or threatened by the Owner from any renning account bills or any payments due to him in terms of the contract, the contractor shall forthwith give notice in writing of his claim in this behalf to the Engineer-in-Charge and the Site Engineer within 10 (ten) days from the date of the issue of orders or instructions relative to any works for which the Contractor claims such additional payment or compensation, or on the happening of other event upon which the contractor bases such claim, and such notice shall give full particulars of the nature of such claim, grounds on which it is based, and the amount claimed. The Contractor shall not be entitled to raise any claim, nor shall the Owner anywise be liable in respect of any claim by the Contractor unless notice of such claim shall have been given by the Contractor to the Engineer-in-Charge and the Site Engineer in the manner and within the time aforesaid, and the Contractor shall be deemed to have waived any or all claims and all his rights in respect of any claim not notified to the Engineer-in-Charge and the Site Engineer in writing in the manner and within the time aforesaid”.

    The arbitration clause contained in Clause 9.1.0.0 reads as follows:

    “Subject to the provisions of Clauses 6.7.1.0 and 6.7.2.0 hereof, any dispute or difference between the parties hereto arising out of any notified claim of the Contractor included in his Final Bill in accordance with the provisions of clause 6.6.3.0 hereof and/or arising out of any amount claimed by the Owner (whether or not the amount claimed by the Owner or any part thereof shall have been deducted from the Final Bill of the Contractor or any amount paid by the Owner to the Contractor in respect of the work) shall be referred to arbitration by a Sole Arbitrator selected by the Contractor from a panel of three persons nominated by the General Manager.”

    The learned counsel for the respondents has contended that unless and until the Contractor had notified his claim in consonance with the provision of clause 6.6.1.0, the claim of the petitioner is not arbitrable in view of the clear wording of the arbitration clause.

    The learned counsel for the petitioner, on the other hand, has contended that it was not incumbent on the part of the petitioner to have notified any such claim to the Engineer-in-Charge or the Site Engineer as required by Clause 6.6.1.0 and the claim in question is covered by the arbitration clause and it is for the arbitrator it decide the merited of the claim. The matter is not res integra as these two clauses appearing in the usual contracts of Indian Oil Corporation Limited came up for consideration in two judgements of this Court, one given in Suit No. 697-A/83, Uttam Singh Duggal & Co. (P) Ltd. v. Indian Oil Corporation Limited & Another, decided on January 8, 1985, by D.P Wadhwa, J. and the other given in Suit No. 2399-A/85, Associated Hybilds (P) Ltd. v. Indian Oil Corporation Limited, decided on October 15, 1987, by B.N Kirpal, J.. In the case of Uttam Singh Duggal (supra) the Contractor has put up the claim alleging that there had occurred a breach of contract by the Indian Oil Corporation in furnishing the drawings. The Contractor in that case is alleged to have suffered damages for idle labour and due to escalation of prices of material and labour as the Corporation had committed breach of contract in not furnishing the drawings within the stipulated periods which delayed the execution of the work by the contractor. In the said case also, the plea was taken by the Corporation that the Contractor had failed to notify the claims in accordance with clause 6.6.10 and thus, the dispute was not arbitrable in accordance with the arbitration clause 9.1.0.0

    After dealing with all the contentions which could possible be raised in a very extensive judgement, the learned Judge came to the conclusion that unless and until the claim is notified in terms of clause 6.6.1.0 of the arbitration clause mentioned above. In the case of Associated Hybilds (P) Ltd. (supra), again the Contractor had set up the claim for damages on account of the Corporation not making available the site for the work within the stipulated period. The learned Judge after referring to the similar clauses clearly held that unless the claim is notified in terms of clause 6.6.1.0 the claim cannot be referred to arbitration under clause 9.1.0.0 In both the cases the petition under Section 20 was dismissed.

    In the present case also, admittedly the petitioner had not notified his claim in terms of clause 6.6.1.0 and thus, the same cannot be refered to for arbitration in view of the very wording of arbitration clause 9.1.0.0 So, I hold that the claim of the petitioner cannot be refered for arbitration. Issues are decided against the petitioner.

    Relief

    In view of the decision in issues 2 & 3 the petition is liable to be dismissed.

    I dismiss the petition, but in view of the peculiar facts of the case I leave the parties to bear their own costs.

    August 2, 1991,

    P.K BAHARI J.

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    Comments

    Bansal Construction Co. v. Indian Oil Corporation Ltd. And Another
    (Aug 2, 1991)