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Riico Ltd. Jaipur & Ors. v. Manoj Ajmera & Anr.
Factual and Procedural Background
The petitioners challenged the District Judge's order dated 6-11-2000 under Section 9 and 11 of the Arbitration and Conciliation Act, 1996 by which Shri G.L. Goyal, retired Chief Engineer, PWD was appointed as sole Arbitrator to decide a dispute between the petitioner (contractor) and respondent no.1 (RIICO) concerning execution of a contract for commissioning a Water Supply Scheme at Matsya Industrial Area, Alwar. The contract contemplated commencement on 15-12-1997 and completion by 25-6-1998; the parties accepted the actual date of completion as 11-1-1999. The contractor claimed delay was due to RIICO's failure to fulfill requirements; RIICO contended the contractor lacked adequate infrastructure and workforce. The District Judge allowed the contractor's application and directed the arbitrator to deliver the award within four months. The petition sought to set aside that appointment; the matter was heard by the court and resulted in dismissal of the writ petition.
Legal Issues Presented
- Whether the contractor's notice constituted a timely expression of intention to refer the dispute to arbitration within the periods prescribed by Clause 23 and Clause 37 of the contract (including the proviso concerning appointment within thirty days after expiry of the defect liability period).
- Whether the District Judge erred in appointing a sole Arbitrator contrary to the procedural stipulations of the parties' agreement.
- Whether, in light of the Constitutional Bench judgment in S.B.P. & Co. v. Patel Engineering Ltd., the nominee of the Chief Justice must decide if a claim is dead or time-barred before appointing an arbitrator, and the effect of that judgment on the maintainability of the writ petition (including availability of remedy under Article 136).
Arguments of the Parties
Petitioner's Arguments
- Clause 23 required the Additional Chief Engineer to send a list of three eligible officers within 30 days of receipt of the contractor's notice and the contractor to select one within 15 days; the proviso barred claims if an arbitrator was not appointed before 30 days after expiry of the defect liability period.
- Clause 37 fixed defect liability at 12 months from actual completion (accepted as 11-1-1999); the contractor first gave notice of intention to refer to arbitration on 21-6-2000, well beyond the 30-day post-defect-liability period, so RIICO was not obliged to refer the matter to arbitration.
- Reliance on the Constitutional Bench judgment (S.B.P. & Co. v. Patel Engineering Ltd.) that the nominee of the Chief Justice must follow the agreement's stipulations and decide whether a claim is dead or time-barred before appointing an arbitrator.
Respondent's Arguments
- The contractor served a notice dated 14-1-2000 on RIICO which, in its concluding paragraph, demanded payment and stated that if the claim was not discharged within 30 days, the contractor would seek arbitration under Clause 23 — thus constituting a timely expression of intention to refer to arbitration within the contractual period.
- Given the 14-1-2000 notice, there was no basis to contend the notice was outside the 12-month period required by Clause 37(d).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| S.B.P & Co. v. Patel Engineering Ltd. | That the nominee of the Chief Justice must give due regard to contractual stipulations when appointing an arbitrator; the nominee may decide whether a claim is dead or time-barred; the power to appoint is judicial and such order is assailable only before the Supreme Court under Article 136. | The court observed the principles of that judgment apply but held that on the facts the contractor's claim was not a dead or long time-barred claim; further, relying on the authority, the court noted the writ petition was non-maintainable as the appropriate remedy to challenge the appointment is under Article 136. |
Court's Reasoning and Analysis
The court noted common facts: actual completion date accepted as 11-1-1999 and that a legal notice demanding payment was served on 14-1-2000. The narrow contested issue was whether the language of that notice sufficed as an expression of intention to refer the dispute to arbitration under Clause 23 and the proviso tied to the defect liability period in Clause 37. The court examined the concluding paragraph of the 14-1-2000 notice which demanded payment and stated that failing discharge within 30 days the contractor would be "compelled to knock the doors of justice" and that the first available legal remedy would be to seek arbitration under Clause 23. The court held this language conveyed the contractor's intention to seek arbitration and satisfied the proviso to Clause 23; it therefore rejected the petitioner's contention that the notice was untimely. Applying S.B.P. & Co., the court further held that the present claim was not dead or time-barred, nor had the parties manifested final satisfaction of mutual rights by conduct such as accepting final payment without objection. Finally, the court observed that the Constitutional Bench decision establishes that appointments by the Chief Justice or his designate are judicial acts and challenges to such appointments lie to the Supreme Court under Article 136; hence the writ petition was non-maintainable on that authority.
Holding and Implications
Writ petition dismissed.
Direct consequences: the court found the contractor's 14-1-2000 notice fulfilled the contractual requirement to express intention to refer the dispute to arbitration and rejected the petitioners' challenge; the writ petition was dismissed with no order as to costs. The court also noted, following S.B.P. & Co., that challenges to an appointment by the Chief Justice's nominee are judicial in nature and are to be pursued before the Supreme Court under Article 136; no broader precedent beyond applying those authorities to the facts was announced.
Mohammad Rafiq, J.:— The petitioners have challenged the order passed by learned District Judge dated 6-11-2000 under Section 9 and 11 of the Arbitration and Conciliation Act, 1996 as nominee of the Chief Justice appointing Shri G.L Goyal, retired Chief Engineer, PWD as the sole Arbitrator to decide the dispute between the petitioner and the respondent no. 1 in regard to execution of contract for commissioning of Water Supply Scheme at Matsya Industrial Area (South Extension), Alwar.
2. Bone of contention between the parties is that as per the agreement between the parties the work was to be commenced from 15-12-1997 and to be completed upto 25-6-1998. While according to the Contractor he could not complete the work because the RIICO did not fulfill many of the requirements in time. The RIICO has however contested the matter by asserting that the Contractor did not have adequate infrastructure and workforce of experts and thus failed to complete the work on time. The learned District Judge by its order dated 6-11-2000 allowed the application of the Contractor and appointed Shri G.L Goyal, retired Chief Engineer, PWD as the sole Arbitrator with the direction to deliver the award within four months.
3. I have heard Shri Vishnu Kant Sharma, the learned counsel for the petitioners and Shri Rahul Tiwari, the learned counsel for the respondent.
4. Shri Vishnu Kant Sharma, the learned counsel for the petitioners argued that according to Clause 23 of the agreement between the parties, the disputes was required to be referred for Arbitration to a sole Arbitrator appointed as per the procedure prescribed therein. The Additional Chief Engineer, RIICO had to refer the dispute to the Arbitration within 30 days of receipt of notice from the Contractor of his such intention by sending a list to the Contractor of three officers of the rank of Senior Regional Manager who have not been connected with the work under the contract. The Contractor was then required within 15 days of the receipt of this list to select and communicate to Additional Chief Engineer, RIICO name of one officer from such list and he was then required to be appointed as the sole Arbitrator. The learned counsel further submitted that the said clause was subject to a proviso which inter alia provided that “neither party is entitled to bring a claim to arbitration if the Arbitrator has not been appointed before the expiration of thirty days after defect liability period.” He submitted that clause 37 of the agreement further provided that the amount of security deposit and performance security shall be refunded by RIICO when the defect liability period is over and defect liability period in respect of original works/special repairs/renewal works has been prescribed to be 12 months in sub-clause (2) of Clause 37 (supra). Note No. 2 given below in clause 37 provides that defect liability period shall commence from the date of actual date of completion of work. Learned counsel submits that this is agreed case between the parties that the date of completion of work is 11-1-1999 and the petitioner for the first time gave the notice expressing his intention to refer the matter for adjudication by the Arbitration on 21-6-2000 which period obviously is much beyond the period of 30 days after expiry of the defect liability period. He therefore submitted that the learned District Judge has erred in law in omitting this important aspect of the matter. In spite of having received the notice, the RIICO was not obliged to refer the issue to the Arbitrator because such intention was expressed by the Contractor after more than one year and five months of the completion of the work. Learned counsel for the petitioner referred to Constitutional Bench judgment of Hon'ble Supreme Court in and argued that in para 38-39 of the judgment, the Hon'ble Supreme Court has held that existence of an arbitration agreement is the basic requirement for the nominee of the Chief Justice to exercise his powers under Section 11 of the Arbitration Act, 1940 and such appointment can be made strictly in accordance with the stipulations made in the agreement. It was argued that according to said judgment, the nominee of the Chief Justice has to also decide the question whether the claim, that is being raised, is dead one or has become time barred which was sought to be resurrected after long time even when the authorities have by their conduct allowed the matters to conclude. The nominee has to therefore decide that conditions for appointing an Arbitrator as contained in Section 11(6) of the Act have been fulfilled.
5. In the present case when the agreement clearly indicates that after the notice for getting the dispute referred to the arbitration has not been served within 30 days from the date of completion of the work, the learned District Judge could not have referred the dispute to the sole Arbitrator contrary to the intention of the agreement.
6. On the other hand Shri Rahul Tiwari, the learned counsel for the respondent no. 1 argued that notice was very much served within the period as prescribed in the agreement. He in this connection has invited my attention to the notice dated 14-1-2000 which was for the first time served upon by the Contractor to Senior Regional Manager, RIICO Ltd. Alwar, in concluding para of which it was stated as under:—
“Hence, under this notice, we demand total justice from your goodself and request in totally reviewing our this contract in its final determination, by paying us all our claimed amount so as to end up without any contractual disputes and differences in it. In the event of your non discharge of our legitimate claimed amount to us in 30 days of receipt of this notice, we shall be compelled to knock the doors of justice in obtaining it, for which the First available legal remedy to us would be to seek Arbitration for which we are contractually entitled under clause No. 23 of the agreement.”
7. According to learned counsel for the respondents, when the notice aforesaid was served by the Contractor on the RIICO on 14-1-2000, there was absolutely no basis for the petitioner to contend that the notice was not served within 12 months as required by clause 37(d), supra.
8. I have given my earnest consideration to the rival arguments and perused the material on record.
9. There is no dispute between the parties as to the date of completion of the work which both have accepted to be 11-1-1999 and there is also no dispute that legal notice for demand of justice was indeed served by the Contractor on the RIICO on 14-1-2000 which falls well within the period of 12 months. The dispute between the parties lies in the narrow compass and it is that whether on the language used in the notice, such notice can be taken as a notice of expression of the intention by the Contractor to get the dispute referred to the Arbitration. In the concluding part of the notice as extracted above, it was clearly stated that the Contractor demand justice from RIICO and request for totally reviewing the contract in its final determination, by paying them all their claim amount so as to end up without any contractual disputes and differences in it. It was further stated that in the event of their non discharge of the contractor's legitimate claim in 30 days of receipt of the notice, they shall be compelled to knock the doors of justice in obtaining it, for which the first available legal remedy to the Contractor would be to seek Arbitration to which contractor was contractually entitled under clause 23 of the agreement. Even if the notice did not directly ask for making a reference to the Arbitration, none-the-less it did make the intention of the Contractor full well known that he specifically demanded the payment of the claimed amount and failing which, he expressed his intention to seek Arbitration for which, it was stated, that he was contractually entitled for in terms of clause 23 of the agreement. In my considered opinion, the intention expressed therein fulfilled the requirement of proviso to clause 23. Arguments of the learned counsel for the petitioner is accordingly rejected.
10. So far as the judgment of Constitutional Bench of Hon'ble Supreme Court in S.B.P & Co. v. Patel Engineering Ltd. (supra) relied on by learned counsel for the petitioner is concerned, that judgment also requires the nominee of the Chief Justice while considering the request for appointment of Arbitrator to give due regard to the various clauses of agreement depending upon the fact situation of a given case. In the facts of the present case, it cannot be said that the claim made by the Contractor had become dead one or a long time barred claim, that was sought to be reagitated after enormous delay or that it was a case where the parties had concluded the contract by recording satisfaction of their mutual rights or obligation expressly or impliedly or by receiving final payment without objection. On the contrary, the Constitutional Bench of the Hon'ble Supreme Court in that case held the power of the Chief Justice or his designate in making appointment of Arbitrator is not administrative action but judicial in nature and that such order could be assailed only before the Hon'ble Supreme Court by recourse to Article 136 of the Constitution and therefore the writ petition would not be maintainable there against. Apart from merits of the case, the writ petition in the present case is therefore on the authority of that judgment also liable to be dismissed as non maintainable.
11. In view of what has been discussed above, I do not find any merit in the writ petition. The writ petition is accordingly dismissed with no order as to costs.
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