The petitioner filed this petition praying to appoint Mr. (Retd.) Justice Shivaraj V. Patil, Former Judge of Supreme Court of India as the sole Arbitrator to adjudicate the dispute between the petitioner and respondents in terms of Clause No.48.1.1 of the GCC which is the integral part of agreement dated 19.02.2007 vide Annexures-A and A1 or in the alternate appoint independent and neutral Arbitrator of the same repute to adjudicate the dispute between the petitioner and respondents.
2. The factual background of the dispute arises from the agreement dated 19.02.2007 vide Annexure-A and A1 entered into between the petitioner and respondents under which the petitioner was entrusted the execution of RGGVY scheme to the respective electricity supply companies in the state of Karnataka in their respective jurisdiction. The respondents have not paid several amounts due and payable to the petitioner in terms of the agreement. The petitioner approached the respondents calling upon them to make payment of the amount due and payable to the petitioner and settle the matter by mutual agreement. The respondent did not call for negotiation. The petitioner approached the designated Engineer under Clause 47.2 of GCC by submitting a statement of claim to give a decision. The designated Engineer did not give a decision within 30 days from the date of receipt of the statement of claim.
3. The petitioner invoking arbitration clause 48.1.1 of GCC, requested to nominate Mr.(Retd.)Justice Shivaraj V.Patil, as the Arbitrator on the side of the petitioner and requested to nominate their Arbitrator within 60 days from the date of letter dated 11.02.2019. The letter was served on the respondents. However, there was no response. The respondents did not appoint their Arbitrator within 60 days as provided under Clause 48.1.1 of GCC. The petitioner has sent further letter dated 03.05.2019 requesting the respondents to confirm the appointment of Mr.(Retd.)Justice Shivaraj V Patil as a sole Arbitrator so as to enable the petitioner to request Mr.(Retd.)Justice Shivaraj V Patil to enter upon the response to adjudicate the dispute between the petitioner and respondents.
4. Fourth respondent replied to the letter dated 03.05.2019 stating that the respondents have not received the said letter invoking the arbitration clause. Therefore, instructed to send a copy of the letter invoking the arbitration clause. On 25.05.2014, the petitioner wrote a letter informing the Chief Engineer (Electricity) O & M Zone, Belagavi for invocation of arbitration clause was received. The respondents in spite of service of letter, there was no response from the respondents side. Therefore, the petitioner filed an application under Section
11 of the Arbitration and Conciliation Act, 1996 ('1996 Act, for short) to appoint Mr.(Retd.)Justice Shivaraj V Patil as the sole Arbitrator.
5. The respondents filed statement of objections opposing the said application on the ground that the claim raised by the petitioner with respect to the project work are barred by law of limitation and are non-arbitrable. It is also stated that the project work of rural electricity infrastructure and Households electrification work in Belagavi District in Karnataka was executed and declared closed by the respondent No.1 in the year 2013. The petitioner after passage of 7 years, called upon the first respondent in terms of Clause 47 of GCC to enter into mutual consultation for the summary of claims raised by it. It is further submitted that the claim raised by the petitioner is barred by the provisions of the Limitation Act, 1963 read with Section 43 of 1996 Act and therefore non- arbitrable. It is also stated that the present petition has been initiated by the Official Liquidator who was appointed by the National Company Law Tribunal its order dated 04.07.2019. It is also stated that the present claims are arising out of the project work that was executed before the Liquidator appointed to represent/act on behalf of the petitioner. Hence, the Liquidator has no locus standi to file this petition. It is also stated that the petitioner failed to complete the work within the stipulated time due to his negligence and made unreasonable claims for delay which is caused by itself. It is also submitted that the petitioner had not reserved any right to raise claims against the respondents after completion of project nor did it make any claims during the execution of the project. The said conduct of the petitioner makes it clear that it had waived its right to make any claim against the respondents. The petitioner is precluded from raising claim against the respondents as it is barred by limitation. Hence, prayed to reject the petition filed by the petitioner.
6. The petitioner filed rejoinder stating that the respondents have taken untenable pleas in the statement of objections. It is stated that the petitioner has completed work in the year 2013 and the petitioner maintained the project thereafter. In order to start limitation, the final bill is required to be approved by the respondents. Till day, the final bill is not approved by the respondents. Therefore, the ground of limitation raised has no legs to stand in the eye of law. It is also stated that Liquidator is entitled to continue the legal proceedings on behalf of the petitioner company and it is the statutory duty on the part of the Liquidator to continue proceedings which are also initiated prior to the Liquidation proceedings. Hence, he prays to allow the petition.
7. Heard the learned counsel for the petitioner and learned counsel for respondents.
8. Learned counsel for the petitioner submits that final bill has not been finalized. He further submits that there is an arbitration clause and the petitioner has invoked the same. further notice was issued to the respondents and the said notice was served on the respondents but the respondents have not replied to the same. Further, the petitioner requested the respondents to nominate their Arbitrator within 60 days from the date of letter dated 11.12.2019. The said letter was served on the respondents. In spite of service of letter, the respondents did not reply and did not appoint their Arbitrator within 60 days. Further the petitioner has sent another letter dated 03.05.2019 requesting to confirm the appointment of Mr.(Retd.)Justice Shivaraj V. Patil as the sole Arbitrator. He further submits that as far as limitation is concerned, the issue of limitation is concerned, that has to be decided by the Arbitrator and the Court while considering a petition under Section 11, the Court should look into only one aspect i.e., existence of an Arbitration Agreement. He relies upon the judgment of the Honble Apex Court in the case of M/s. Uttarakhand Purv Sainik Kalyan Nigam Limited Vs. Northern Coal Field Limited disposed of on 27.11.2019 and submits that the Liquidator is authorized to represent on behalf of the Corporation under Section 35 of the Insolvency and Bankruptcy Code, 2016. Hence, he prays to allow the petition.
9. Per contra, learned counsel for respondents opposing the petition submits that the claim made by the petitioner is barred by limitation and the official Liquidator - 10 - has no right to represent the petitioner. He relies upon the judgment of the Honble Apex Court in the case of Vidya Drolia & others Vs. Durga Trading Corporation reported in 2020 SCC online SC1018 and prays to dismiss the petition.
10. Perused the records and considered the submissions of the learned counsel for the parties.
11. It is not in dispute that the Agreement at Annexures-A and A1 was executed between the petitioner and respondents. In order to consider the submission of parties, it is necessary to extract some clauses from the agreements at Annexure-A and A1. Clause 4.0 reads as under: 4.0 Settlement of disputes 4.1 It is specifically agreed by and between the parties that all the differences of disputes arising out of the Agreement or touching the subject matter of the Agreement shall be decided by the process of Settlement & Arbitration as specified - 11 - in Clause 47 of the General Terms & Conditions of the Contract and the provisions of the Indian Arbitration Act, 1940 shall apply and Jurisdictional Courts alone shall have exclusive jurisdiction over the same. Clause 4.1 deals with the disputes arising out of the agreement that shall be decided by the process of Settlement & Arbitration.
12. From the perusal of Annexure-A1, it is seen that Clause 47 deals with the settlement of dispute which reads as under: 47.0 SETTLEMENT OF DISPUTES 47.1 Any dispute(s) or difference(s) arising out of or in connection with the Contract shall, to the extent possible, be settled amicably between the parties. 47.2 If any dispute or difference of any kind, whatsoever, shall arise between the Owner and the Contractor, arising out of the contract for the performance of the Works whether during the progress of the Works or after its completion - 12 - or whether before or after the termination, abandonment or breach of the Contract, it shall, in the first place, be referred to and settled by the Engineer, who, within a period of thirty (30) days after being requested by either party to do so, shall give written notice of his decision to the Owner and the Contractor. 47.3 Save as hereinafter provided, such decision in respect of every matters so referred shall be final and binding upon the parties until the completion of the Works and shall forthwith be given effect to by the Contractor who shall proceed with the Works with all due diligence, whether he or the Owner requires arbitration as hereinafter provided or not. 47.4 If after the Engineer has given written notice of his decision to the parties, no claim to arbitration has been communicated to him by either party within thirty (30) days from the receipt of such notice, the said decision shall become final and binding on the parties. 47.5 In the event of the Engineer failing to notify his decision as aforesaid within thirty (30) days after being requested as aforesaid, or in the event of either the Owner or the Contractor - 13 - being dissatisfied with any such decision, or within thirty (30) days after the expiry of the first mentioned period of thirty days, as the case may be, either party may require that the matters in dispute be referred to arbitration as hereinafter provided.
13. Clause 47.2 deals with if any dispute or differences raised between the owner and contractor out of contract, it shall be referred to and settled by the Engineer within a period of 30 days after being requested by either party to do so, shall give written notice of his decision to the owner and the contractor. The petitioner in pursuance to Clause 47.2, submitted a claim petition before Chief Engineer (Electricity) O & M Zone, HESCOM, Belagavi, on 29.12.2018 as per the Annexure-K. The designated Engineer was required to give a decision as per the Clause 47.4. in the present case, the designated Engineer has failed to give a decision within 30 days from the date of claim petition field by the petitioner. The petitioner being dissatisfied with the inaction of the designated Engineer in not notifying his decision, has invoked Arbitration Clause - 14 - as per Clause 48 of the Agreement i.e., Clause 48.1.1 by issuing notice on 11.02.2019 vide Annexure-L. Clause 48.1 and 48.1.1 reads as under: 48.0 ARBITRATION 48.1 All disputes or differences in respect of which the decision, if any, or the Engineer has not become final or binding as aforesaid shall be settled by arbitration in the manner hereinafter provided. 48.1.1 The arbitration shall be conducted by three arbitrators, one each to be nominated by the Contractor and the Owner and the third to be appointed as an umpire by both the arbitrators in accordance with the Indian Arbitration Act. If either of the parties fails to appoint its arbitrator within sixty (60) days after receipt of a notice from the other party invoking the Arbitration clause, the arbitrator appointed by the party invoking the arbitration clause shall become the sole arbitrator to conduct the arbitration. (emphasis supplied) - 15 - Clause 48.1 deals with all the disputes or differences that shall be settled by arbitration. Clause 48.1.1 deals with nominating arbitrators, one each by the contractor and the owner and the third to be nominated as an umpire by both the arbitrators.
14. In the present case, letter was issued by the petitioner to the respondents nominating the name of Mr.(Retd.)Justice Shivaraj V. Patil as the Arbitrator from the side of the petitioner and further called upon the respondents to suggest the name of Arbitrator from their side. The letter was served on the respondents, the respondents did not reply to the letter issued by the petitioner calling upon the respondents to nominate the Arbitrator from their side within 60 days from the date of receipt of the said letter. When the respondents failed to reply the letter dated 11.02.2019 as per Clause 48.1.1, the Arbitrator appointed by the petitioner invoking Arbitration clause shall become the sole Arbitrator to conduct the Arbitration. Accordingly, considering Clause 48.1.1, - 16 - Mr. (Retd.) Justice Shivaraj V. Patil, Former Judge of Supreme Court of India shall be appointed as sole Arbitrator.
15. Learned counsel appearing for the respondent submits that the claim made by the petitioner is dead one and time barred. In order to appreciate the contentions of the parties in respect of limitation, it is necessary to consider the pleadings.
16. Admittedly, both the parties are party to the Arbitration Agreement. As far as the claim of the petitioner is concerned, whether the claim was dead one or time barred claim sought to be resurrected or by the parties had concluded the transaction by recording subsequent mutual rights and the obligations and received the final payment without objection. The scope of judicial intervention under Section 11 of 1996 Act are restricted to the situation that the judicial authorities to find that Arbitration Agreement does exist or is null and void. The scope of examination is now confined only to the existence - 17 - of Arbitration Agreement as per the law laid down by the Honble Apex Court in Uttarakhands case supra. The Honble Apex Court held that the scope of examination is confined only to the existence of the Arbitration Agreement at the Section 11 stage and nothing more. The Honble Apex Court further examined about the issue of limitation and held that limitation is mixed question of law and fact and the same involves a question of jurisdiction. The said issue to be determined having regard to the facts and grounds. The issue of limitation to be decided by the arbitral Tribunal. The said decision is aptly applicable to the present case on hand as the respondents have taken the contention that the claim made by the petitioner is barred by limitation. The said issue cannot be considered at the stage of considering an application under Section of the 11 of 1996 Act and the contention of the learned counsel for the respondent in regard to issue of limitation cannot be accepted for the reasons stated above. - 18 -
17. In order to consider the contention of respondents regarding Liquidator has no right to represent the petitioner, it is necessary to examine Section 35 of the Insolvency and Bankruptcy Code, 2016 and Section 35(k) specifically authorizes the Liquidator to represent on behalf of corporate debtor. Section 35(k) reads as follows:
35. Powers and duties of liquidator.(1) Subject to the directions of the Adjudicating Authority, the liquidator shall have the following powers and duties, namely: (a) xxx (b) xxx (c) xxx (d) xxx (e) xxx (f) xxx (g) xxx (h) xxx
(i) xxx (j) xxx - 19 - (k) to institute or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name of on behalf of the corporate debtor. Section 35 deals with the powers and duties of the liquidator. As per Section 35(k), the liquidator is authorized to institute or defend any legal proceeding on behalf of the corporate debtor. The liquidator has right to represent the corporate debtor ie., the petitioner. Hence, the petition filed by the liquidator is maintainable.
18. Learned counsel for respondents submits that if the Court comes to a conclusion that there exists an Arbitration Clause and if the Court comes to conclusion for nominating an Arbitrator, he suggested the name of Mr.(Retd.)Justice A.V Chandrashekhar, Farmer Judge, High Court of Karnataka.
19. From the perusal of the agreement, i.e., clause 48.1.1 that Arbitration shall be conducted by the three Arbitrators to be nominated by the contractor and the owner and another to be appointed by the employer in - 20 - accordance with the Indian Arbitration Act, if failed to appoint the Arbitrator within 60 days after the receipt of notice from the party invoking Arbitration Clause. The Arbitrator appointed by the party invoking arbitration clause shall become the sole arbitrator to conduct the arbitration.
20. Accordingly, the petition is allowed. This Court appoints Mr. (Retd.) justice Shivaraj V. Patil, Former Judge of Supreme Court of India as the sole arbitrator subject to declarations being made under Section 12 of the 1996 Act (as amended) with respect to the independence and impartiality of the arbitrator and the ability to devote sufficient time to complete the arbitration within the period specified by Section 29A of the 1996 Act.
21. The agreement states that the venue of the Arbitration shall be Mysore subject to any modification that may be made by the parties. The Arbitrator is, however, at liberty to conduct the proceedings at a convenient - 21 - venue as per the convenience of the Arbitrator and the parties if so required.
22. The Arbitrator will be paid fees in accordance with the Fourth Schedule of the 1996 Act. Both the parties shall share the cost of arbitration equally.
23. The registry is directed to dispatch the copy of this order to Mr. (Retd.) Justice Shivaraj V. Patil, Former Judge, Supreme Court of India at the following address: Mr. (Retd.) Justice Shivaraj V. Patil, Former Judge, Supreme Court of India, Sparsh, No.254, 18th Cross, Sadashivnagar, Bangalore-560080
24. Parties are directed to appear before the Arbitrator on 1st March 2021. Sd/- JUDGE
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