IN THE HIGH COURT OF KERALA AT ERNAKULAM
AR.No. 35 of 2009()
1. T.J.AUGUSTHY, S/O.JOSEPH,
... Petitioner
Vs
1. THE CHAIRMAN, COCHIN PORT TRUST,
... Respondent
2. CHIEF ENGINEER,
For Petitioner :SRI.SAJI MATHEW
For Respondent :SRI.B.S.KRISHNAN (SR.)
The Hon'ble MR. Justice K.T.SANKARAN
Dated :20/05/2010
O R D E R
K.T.SANKARAN, J.
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ARB. REQUEST NO. 35 OF 2009
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Dated this the 20th day of May, 2010
O R D E R
When the Arbitration Request came up for admission, the
learned Judge who heard the matter passed the following order on
10.12.2009:
“Learned counsel for parties, having regard to the
issues and the amount involved, would make an
endeavour to have this matter settled even without
request for arbitration.
Post in the 3rd week of January, 2010.”
The matter was not settled.
2. The applicant was appointed as a contractor for the work of
“raising VTMS Project site at Puthuvypeen” as per Annexure A1
agreement dated 21.4.2008, for an amount of Rs.18,84,146/-. The
estimated cost of the work was Rs.24.02 lakhs. The work was not
completed within time. Extension of time was requested for. Time
was extended. The work was completed on 20.8.2008. As per
ARB. REQUEST NO.35 OF 2009
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Annexure A4 dated 6.10.2008, extension of time for completion of
the work was granted up to 20.8.2008 and the contract period was
extended up to 19.12.2008. However, this was done with a rider of
reserving the right of Cochin Port Trust to claim compensation for the
delayed performance of the contract. It would appear that the Chief
Engineer took a decision as per the order dated 27.6.2008 to deduct
Rs.1,88,415/-, the amount being 10% of the contract amount, from
the amount payable to the contractor, as compensation to the Cochin
Port Trust on account of the delayed execution of the work. (The
order passed by the Chief Engineer is not produced. The applicant
stated in the Arbitration Request that on receiving Annexure A2
dated 23.5.2008, he submitted Annexure A3 reply dated 2.7.2008.
This does not appear to be correct. The reference in Annexure A3 is
T-10/R-C/2007-C dated 27.6.2008. That is not Annexure A2. In
Annexure A3, the prayer is to set aside the order dated 27.6.2008.)
The applicant filed Annexure A6 appeal dated 27.5.2009 against the
decision of the Chief Engineer. The appeal was to be disposed of
within thirty days by the Chairman. The Chairman did not do so.
Therefore, the applicant sent Annexure A7 notice dated 8.7.2009 to
the Chairman requesting to appoint an independent Arbitrator to
adjudicate the dispute listed in Annexure A7 within fifteen days from
ARB. REQUEST NO.35 OF 2009
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the date of receipt of the notice. It is stated that no reply was sent
by the Chairman to Annexure A7. The applicant, therefore, filed the
Arbitration Request. The prayer in the Arbitration Request is to
appoint an independent Arbitrator for resolution of the disputes and
differences as specified in Annexures A6 and A7.
3. The applicant has produced a copy of clause 25 of the
general conditions of contract for civil works in Cochin Port Trust
(Annexure A9). It is submitted that going by Annexure A9, the
dispute has to be referred to arbitration.
4. A counter affidavit is filed by the second respondent, the
Chief Engineer. In paragraph 5 of the counter affidavit, it is stated as
follows:
“5. It is submitted that applicant did not submit
the final bill and it is not paid. Since this respondent
suffered loss due to the fact that the work was not
completed in time, Annexure 5 was issued levying an
amount of Rs.1,80,415/- as compensation. It is
submitted that against Annexure V the applicant filed an
appeal. Even though the petitioner was requested to
appear before the Chairman for personal hearing, the
ARB. REQUEST NO.35 OF 2009
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petitioner appeared and informed that he had already
moved Hon’ble High Court and therefore the conditions
stipulated in Cl.25 of the general conditions of the
contract will not be of any help to the applicant. Copy of
the letter dated 12.1.2010 issued to the petitioner
requesting him to appear before the Chairman for
personal hearing. A reading of Cl.25 of the general
conditions of the contract will clearly show that the
above claim of the applicant will not fall within the
conditions contained in Cl.25 of the general conditions
of the contract. It is respectfully submitted that Cl.25(2)
clearly states that the party invoking arbitration shall
gave list of disputes with amounts claimed in respect of
each such dispute along with notice for appointment of
arbitrator and giving reference to the rejection by the
Chairman of the appeal. Annexure 6 is the appeal filed
by the applicant. A reading of Annexure 6 will clearly
show that the applicant has not complied with Cl.25(2)
of the general conditions of contract. Cl.25(2) further
states that “it is also term of this contract that no person
other than a person appointed by the Board as aforesaid
should act as arbitrator and if for any reasons is not
possible, the matter shall not be referred to arbitration at
all.”
5. Annexure A9 provides for referring the dispute for
adjudication through Arbitration by a sole arbitrator appointed by the
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Board. The following clauses in Annexure A9 are also relevant.
They are:
“It is a term of this contract that the party invoking
arbitration shall give a list of disputes with amounts
claimed in respect of each such dispute along with the
notice for appointment of arbitrator and giving reference
to the rejection by the Chairman of the appeal.
It is also a term of this contract that no person
other than a person appointed by the board as aforesaid
should act as arbitrator and if for any reason that is not
possible, the matter shall not be referred to arbitration at
all.
It is also a term of this contract that if the
contractor does not make any demand for appointment
of arbitrator in respect of any claims in writing as
aforesaid within 120 days of receiving the intimation
from the Engineer-in-charge that the final bill is ready for
payment, the claim of the contractor, shall be deemed to
have been waived and absolutely barred and the board
shall be discharged and released of all liabilities under
the contract in respect of these claims.
The Arbitration shall be conducted in accordance
with the provisions of the arbitration and conciliation Act,
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1996 (26 of 1996) or any statutory modifications or re-
enactment thereof and the rules made thereunder and
for the time being in force shall apply to the arbitration
proceeding under this clause.”
6. The learned counsel for the respondents submitted that
Annexure A9 provides for the procedure for appointment of the
arbitrator and the manner of appointing the arbitrator. Only after the
appeal is disposed of by the Chairman, the contractor could invoke
the arbitration clause. An independent arbitrator cannot be
appointed and the arbitrator should be appointed in terms of clause
25. It is also contended that since the Chairman has not taken any
decision in the matter, the Arbitration Request is premature.
7. I am not inclined to accept the contention raised by the
respondents that the Arbitration Request cannot be entertained for
appointing an arbitrator or taking such measures as provided in
Section 11 of the Arbitration and Conciliation Act. In 2005 (1) KLT
763 (National Thermal Power Corporation Ltd. v. Raghul
Constructions (P) Ltd.) a Division Bench of this Court held as
follows:
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“7. S.11(6) deals with cases where there is an
appointment procedure agreed to between the parties.
If a party fails to act as required under that procedure,
party may request the Chief Justice or any person or
institution designated by him to take necessary measure
for securing the appointment. So also, under sub-s.(4)
of S.11, if two appointed arbitrators fail to agree on the
third arbitrator within thirty days from the date of their
appointment, then also the Chief Justice upon the
request of a party or any person designated by him can
make appointment. In sub-s.(5) of S.11, the wording
used is appointment by the Chief Justice. However, by
sub-s.(6) of S.11, the Chief Justice has to take
necessary measure for securing the appointment. If the
party fails to act as required under that procedure and if
any party requests the Chief Justice or any person or
institution designated by him to take the necessary
measure, the Chief Justice or any person or institution
has to take necessary measures for securing
appointment. So also the parties or the two appointed
arbitrators fail to reach an agreement expected of them
under that procedure, a party may request the Chief
Justice to take necessary measures for securing
appointment. The expression “necessary measures”
and the expression “securing appointment” are absent in
a case where there is no agreed procedure. In a case
where there is no agreed procedure the Chief Justice
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can make an appointment. In a case where there is
agreed procedure the Chief Justice or the person or
institution designated by him has to take necessary
measures so as to secure appointment as per the
agreed procedure. In our view, endeavour must be to
give effect to that procedure and not to annihilate it.
Only in cases where that endeavour to secure the
appointment does not succeed, the Chief Justice or the
person designated would go for an independent
arbitrator.
8. Arbitration agreement itself is a contract and
parties enter into solemn agreement agreeing on a
procedure for appointing an arbitrator. The mere fact
that a party has failed to follow that agreed procedure
does not mean that the Chief Justice or the designated
person shall not take any measure to give effect to the
agreed procedure…”
In view of the decision of the Division Bench, I am of the view that
the Court is not powerless in dealing with the matter, if no arbitrator
is appointed by the Board.
8. The next question to be considered is whether the
Arbitration Request is to be allowed at this stage when the Chairman
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has issued notice to the applicant for a hearing of the appeal. In
2005 (1) KLT 763 (National Thermal Power Corporation Ltd. v.
Raghul Constructions (P) Ltd.) referred to above, such a situation
arose and the Division Bench took the view that even if an arbitrator
is appointed subsequent to the filing of the Arbitration Request, such
a procedure cannot be faulted. In the present case, the arbitration
clause can be invoked only after the decision of the Chairman. The
Chairman has not decided the appeal. There is also a clause in
Annexure A9 that if the contractor fails to make any demand for
appointment of an arbitrator within 120 days of receiving the
intimation from the Engineer that the final bill is ready for payment,
the claim of the contractor shall be deemed to have been waived and
barred and the Board shall be discharged and released of all the
liabilities under the contract in respect of the claims. The learned
counsel for the applicant pointed out that if the Arbitration Request is
now closed awaiting the decision of the Chairman, the clause
referred to above would preclude him from raising his claim. But, I
do not think that the respondents would be able to raise such a
contention since the applicant had already raised his claim within
120 days. The respondents would be estopped from raising such a
contention. I hold that the applicant would not be precluded from
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raising his claim and from contending that an Arbitrator should be
appointed, in case the decision of the Chairman goes against him,
since the applicant had already invoked the clause and made a
request for appointing an Arbitrator.
9. Going by the peculiar terms of Annexure A9, I think it would
be ideal to relegate the question of appointment or an arbitrator or
the question of taking such measures, until the Chairman takes a
decision in the matter. The Chairman shall take a decision in the
appeal filed by the applicant within thirty days from today, after giving
an effective and meaningful opportunity of being heard to the
applicant. If, for any reason, the applicant is dissatisfied with the
decision of the Chairman, invoking the clause in Annexure A9, he
would be entitled to invoke the arbitration clause by issuing
appropriate notice.
The rights of both the parties are left open and the Arbitration
Request is closed with the above direction.
(K.T.SANKARAN)
Judge
ahz/