IN THE HIGH COURT OF KERALA AT ERNAKULAM
RP.No. 960 of 2009()
1. THE STATE OF KERALA,
... Petitioner
2. THE SUPERINTENDENT OF ENGINEER,
Vs
1. K.V.JOSEPH & SONS,
... Respondent
For Petitioner :GOVERNMENT PLEADER
For Respondent :SRI.RAJIV ABRAHAM GEORGE
The Hon'ble MR. Justice PIUS C.KURIAKOSE
Dated :27/07/2010
O R D E R
PIUS C. KURIAKOSE, J.
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RP. No. 960 of 2009 in A.R. No. 1 of 2007
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Dated this the 27th day of July, 2010
O R D E R
The respondents in Arbitration Request No. 1 of 2007,
viz., the State and the Superintending Engineer seek review
of the order of this Court dated 25-6-2007 in the arbitration
request on various grounds. The arbitration request was
submitted by the applicant therein (hereinafter referred to
as the contractor) under sub-sections (6) and (8) of Section
11 of Arbitration and Conciliation Act, 1996. The prayer in
the request was that Justice B.M.Thulasidas, a former
Judge of this Court nominated by the applicant as their
nominee, be appointed as the sole arbitrator for
adjudicating upon the disputes and differences which have
arisen between the contractor and the respondents in the
arbitration request (hereafter referred to as the
Government). It was averred that the work of “CRF Works –
Improvements to Kadambanad – Mannady – Enathu-
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Ezhamkulam Road in Pathanamthitta District” was awarded
to the contractor and a formal contract agreement was
executed between the contractor and the Government on
25-5-2004. Disputes arose between the parties during the
course of the execution of work and by Annexure-I notice
produced along with the A.R. the contractor treated the
contract as ended and called upon the Government to pay a
sum of Rs.34,75,89,178.40 together with interest within 30
days. As the above claim was rejected by Annexure-II,
letter invoking the arbitration clause contained in the
agreement, the contractor sent Annexure – III containing
the names of five retired Judges of this Court, one of them
a former Chief Justice of the High Court of Madhya Pradesh,
to be considered by the Government for appointing one
among them as the sole arbitrator for adjudicating the
disputes and differences between the parties. It is on the
allegation that in spite of elapse of more than two months
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after Annexure – III was received by the Government there
was no response from the side of the Government and it
was under such circumstances that the contractor appointed
Justice B.M.Thulasidas as their nominee arbitrator and
issued Annexure- IV calling upon the Government to appoint
their nominee arbitrator under clause 25.3 of the conditions
of contract. The applicant referred to clause 25.3(c) of the
general conditions of contract as well as the special
conditions of contract and stated that if one of the parties
failed to appoint its arbitrator in pursuance of sub-clause (a)
and (b) within 30 days, then the Council, I.R.C. should
appoint arbitrator on behalf of the defaulting party. There
was no response from the Council, I.R.C. to Annexure – V
notice which was sent to them. It is under such
circumstances that the A.R. was submitted to this court and
Annexure – VI produced along with the A.R. is the copy of
the arbitration clause contained in condition No.3 of the
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special conditions of contract forming part of the contract
agreement. A detailed counter affidavit was filed on behalf
of the Government refuting the various claims of the
applicant. However, towards the end of the counter
affidavit it was stated that in case this Court is inclined to
appoint Arbitral Tribunal, either Justice T.V.Ramakrishnan,
former Judge of this Court or Sri.E. Kurian Mathew, Chief
Engineer (Retired) be appointed as the sole arbitrator.
Despite the above stand taken in the counter affidavit, at
the Bar both sides submitted that it is ideal to have both
Justice T.V.Ramakrishnan and Sri.E.Kurian Mathew as the
Arbitral Tribunal. This Court however, on considering the
submissions addressed on behalf of the parties became
inclined to allow the arbitration request and appointed
Sri.B.M.Thulasidas, retired Judge of this Court and
Sri.Kurian Mathew, retired Chief Engineer, Kerala PWD as
joint arbitrators for constituting the Arbitral Tribunal to
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adjudicate on the disputes. It is the above order that is
sought to be reviewed by the Government by filing the
instant review petition.
2. It is urged that the Superintending Engineer
entered into the subject contract with the contractor only in
his official capacity and by order of the Governor. It is
apparent from G.O. (MS) No. 53/78/PW&E dated 8-5-1978
that the Government had ordered that the system of
arbitration in Public Works Engineering Contracts will be
restricted to contracts with estimated PAC of Rs.2 lakhs and
below. Later by Annexure-I GO (MS)45/85/PW dated 16-5-
1985 the Government dispensed with the system of
arbitration in engineering contracts in the contract works in
Public Works Department completely, irrespective of the
PAC and further the Government directed the Chief Engineer
(General) that necessary instructions be given to all officers
of the PWD to implement Annexure – I G.O. by deleting the
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arbitration clause from all tender forms and agreements.
It is urged that pursuant to Annexure – I G.O. the
Government issued Annexure – II G.O. (GO (MS) 10/85/PW
& E dated 27-1-1986 introducing amendments to be
incorporated in the notice inviting tender for works, the
tender form, the form of agreement and the special
conditions to the agreement in respect of PWD works. It is
urged that by virtue of Annexures I and II, the Government
expressly and unequivocally declared that arbitration shall
not be a means of settlement of all or any of the disputes or
claims or anything on account of any contract entered into
between the PWD Contractor and the Government of Kerala.
It is pointed out that it was obligatory on the part of the
Superintending Engineer who is the second review petitioner
to have deleted the arbitration clause in the special
conditions of contract which is part of the printed format of
the agreement in question. It is also pointed out that in
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the works contract agreement, admittedly executed
between the parties there is a clause that arbitration shall
not be a means of settlement of disputes or claims. It is
submitted that the existence of the arbitration clause in the
special conditions which is due to non deletion of that clause
by the Superintending Engineer can be treated only as an
inadvertent omission. It is urged in the memorandum of
review petition that under the cover of arbitration the
contractor is claiming unconscionable compensation amount
of Rs.34,75,89,178/- as against the agreed contract amount
of Rs.9,98,44,495/-. The review petition reiterates that in
the teeth of Annexures I and II Government Orders
providing that no contract with the executive Government
as comprehended by Article 299 of the Constitution shall
contain a provision for arbitration, the existence of any
arbitration clause in PWD contracts contrary to the express
intention of the executive Government will be inoperative.
RP. No. 960/09
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It is urged that provision of a contract which is contrary to
the stipulations contained in any directives issued by the
Governor under Article 299 will be void and unenforceable
against the Government. It is contended on that basis that
the arbitration clause can only be considered as nugatory
and non est. It is conceded that the non-applicability of the
arbitration clause in a PWD contract was not brought to the
notice of this Court either by filing the statement of
objections or while addressing arguments before this Court
in the arbitration request. But it is contended that
participation in the arbitration request will not amount to
acquiescence,waiver or ratification on the part of the
Government. The doctrine of promissory estoppel would
not stand in the way of Government in assailing the
provisions of arbitration clause at any stage. It is submitted
that the Superintending Engineer who is an officer of the
Government acted beyond the scope of his authority. It is
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pointed out that the constitutional provisions and Section
175(3) of the Government of India Act, 1935 contemplate
that Government contracts made in exercise of the
executive power of the State shall be made by the Governor
through such persons as the Governor may direct or
authorise. These provisions are enacted as a mater of
public policy as the Government should not be saddled with
any loss for unauthorised contracts. These provisions have
been enacted in public interest and hence the omission on
the part of the Government to bring to the notice of this
Court Annexures I and II by filing counter affidavit in the
A.R. cannot be considered as waiver by the Government of
its objection. In the review petition the review petitioner
relies on the judgment of the Supreme Court in State of
Punjab v. Om Prakash, 1988(2) KLT SN 71, M/s. Jith Ram
Shivkumar v. State of Haryana, AIR 1980 SCC 1285, M/s.
Leo Construction Contractors v. Government of Kerala, 1989
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(1) KLT 215. It is also pointed out that the Superintending
Engineer who had entered into the contract with the
contractor in this case on behalf of the Governor was acting
unauthorisedly while executing the contract in question and
in this context it is pointed out that the very same
Superintending Engineer executed another contract relating
to execution of work “CRF- Construction of Erumeli –
Chalakkayam – Phase – 3” in the same district in tune with
the Government orders by excluding the arbitration
clauses.
3. To the review petition the contractor has filed a
detailed counter affidavit repudiating the averments made
and grounds raised in the RP. It is submitted that the
review petition is not maintainable. It is pointed out that
the Arbitration and Conciliation Act 1996 is a complete and
comprehensive Act by itself both as regards substantive
and procedural law relating to arbitration, conciliation and
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mediation and the said statute does not provide for a review
of orders passed by the Honourable Chief Justice or the
designated Judge under Section 11. It is also pointed out
that section 16 of the act empowering the Arbitral Tribunal
to rule on its own jurisdiction including any objections with
respect to the existence or validity of the arbitration
agreement was introduced with the view of reducing the role
of courts during the course of the arbitral proceedings. It is
pointed out that the review petition is hopelessly delayed.
Till the date of the R.P. in September 2009 more than 30
sittings of the Tribunal had taken place as provided under
Section 4 of the Arbitration Conciliation Act 1996 and in all
these sittings there was full and complete participation by
the review petitioners. The review petitioners are deemed to
have waived their right to object to the alleged
noncompliance of any requirement of deleting the
arbitration clause.
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4. As regards Annexure I G.O. relied on by the review
petitioners it is contended that a proper reading of the G.O.
would clearly indicate only that the decision is to dispense
with existing system of referring to arbitration of disputes in
Public Works Engineering Contracts, the value of which was
Rs.2 lakhs and below and it is contended that directions
were issued to the Chief Engineer (General) to take
necessary action for implementing G.O. dispensing with
arbitration relating to small contracts of Rs.2 lakhs and
below. As regards Annexure II G.O. it is contended that by
this G.O. amendments to notice inviting inviting tenders for
works (Form No.83), form of tender (Form No.84) and form
of agreement (Form No.GW 132) were indicated and it was
directed that the amended forms should be used for all
types of PWD works irrespective of the PAC. The contention
of the Government that by virtue of the two G.Os. the
Government has expressly and unequivocally declared that
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arbitration shall not be a means of settlement of all or any
of the disputes or claims entered into between a PWD
Contractor and the Government of Kerala is repudiated. It
is submitted that in the present contract none of the forms
referred to in Annexure II G.O. find a place and in fact the
contract in question being a centrally funded project
national competitive bidding was resorted to and the PWD,
Government of Kerala is only the executing agency and
therefore the conditions applicable to national competitive
bidding were made applicable to the contract. The counter
affidavit refers to paragraph 16 of the counter affidavit
which had been filed in a arbitration request No. 1 of 2007
and contends that the review petitioners cannot now be
heard to say that the Superintending Engineer did not delete
the arbitration clause in the special conditions of contract.
It is submitted in the counter affidavit that the parties
having acted upon the contract based upon the terms
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entered into and the contractor having substantially
completed the work under the contract, the review
petitioners should not be permitted to go back on the terms
entered into and agreed upon in writing, dealing at arms
length and seek to change the terms of the agreement to
deny settlement by arbitration. The counter affidavit
denies the averments in the review petition that the
agreement contains a clause signed by both parties that
arbitration shall not be a means of settlement of disputes.
5. It is contended that the contract being a centrally
funded scheme, Annexures I and II G.Os. promulgated by
the Kerala Government did not apply. The provision in the
special conditions for arbitration is binding on parties
especially as there is no provision in the contract providing
that all or any of the G.Os. promulgated by the Government
will be applicable to the contract in question. It is pointed
out that when the contractor’s bid was accepted by the
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Superintending Engineer vide selection notice dated 25-5-
2004 it was specifically provided that G.Os. dated 19-8-
1997 and 21-11-1992 will be applicable to the contract at
hand and not Annexures I and II G.Os.
6. It is highlighted that in the light of the sworn
statement of the Joint Secretary to Government who is the
deponent in the counter affidavit dated 16-6-2007 it is futile
for the review petitioners now to contend that the omission
to place on record the existence of the Annexures I and II
G.Os. before this Court at the time of hearing was due to
inadvertence. It is contended that the filing of the review
petition amounts to gross abuse of process of this Court. It
is pointed out further that after completion of the pleadings
12 issues were settled by the Arbitral Tribunal and that
recording of evidence is over and the claimant’s counsel has
completed his arguments and the counsel for respondents
who are the review petitioners has commenced his
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arguments. A total of 45 sittings have been held so far by
the Arbitral Tribunal spread over nearly two years and
interim award published directing the petitioners to pay an
amount of Rs.2.43 crores towards admitted amount for work
done and the said amount was actually paid to the
respondents. It is submitted that considerable amounts
have been already expended by the parties towards cost of
arbitration. It is then pointed out that numerous
correspondence exchanged between the parties to the
contract during the pendency of the work and thereafter
various officials of the review petitioners including the 2nd
review petitioner had adverted to or referred to the the
arbitration clause in the contract all of these items of
correspondence are before the Arbitral Tribunal. The
present attempt of the review petitioner is only to protract
the arbitral proceedings by attempting to mislead this
Court. It is also pointed out that for numerous works in
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Kerala carried out by the Kerala PWD, Kerala Water
Authority, Kerala State Transport Project etc. arbitration has
been and is the means of settlement of disputes between
the parties and by having the issues adjudicated by learned
arbitrators of proven integrity, no prejudice is being caused
to anybody. Lastly it is submitted that in this case no
prejudice will be caused to the applicants as the issues are
being considered by an Arbitral Tribunal consisting of two
retired Judges of this Court and a retired Chief Engineer of
PWD regarding whose integrity and learning the
Government cannot have any legitimate ground.
7. It was Sri.K.R.Ganesh, Senior Govt. Pleader who
addressed arguments before me on behalf of the review
petitioner. Raising very spirited and persuasive arguments
on the basis of various grounds raised in the RP
Sri.K.R.Ganesh submitted that there is every warrant for
recalling the order of this court constituting Arbitral Tribunal
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for adjudicating the disputes between the parties. Referring
to the judgment of the Supreme Court in Inderchand Jain
v.Motilal, 2009(3) KLT SN 65 Mr.Ganesh submitted that
power of review under Order 47 Rule 1 of the Code of Civil
Procedure can be invoked for any other sufficient reason
than the reasons mentioned under the above provision of
the Code of Civil Procedure. In support of his argument that
there is no scope for reporting the doctrine of equitable
estoppel against the Government in a case where orders are
passed on behalf of the Governor of Kerala by virtue of the
powers under Article 229(1) of the Constitution ignoring
public interest the learned Government Pleader relied
strongly on the judgment of the Supreme Court in M/s. Jit
Ram Shiv Kumar v. State of Haryana, AIR 1980 SC 1285.
For the same proposition the learned Govt. Pleader relied on
the judgment of the Supreme Court in State of Punjab v.
Om Prakash, 1988(2) KLT SN 71. The learned counsel
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submitted that where there is contravention of the
provisions of Article 299(1) of the Constitution, i.e., when
contract is entered into in gross violation of existing
Government Orders, the plea of estoppel cannot be raised
against the Government, when the Government requests
that a patent illegality done by the representative of the
Government should be undone. Mr.Ganesh submitted that
it cannot be as though the Government Orders taking away
the provision for arbitration from PWD contracts was not
known to the contractor or the Superintending Engineer. In
order to show that this court has noticed the Government
Orders taking away the provision for arbitration for PWD
contracts and approving the Government Orders Mr.
Ganesh relied on the judgment of this Court in M/s. Leo
Construction Contractors v. Government of Kerala, 1989 (1)
KLT 215. To argue that an application for review of the order
passed by the designated Judge under Section 11(6) of the
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Arbitration and Conciliation Act Sri.Ganesh relied on the
judgment of the Supreme Court in M/s. Jain Studios Ltd. v.
Shin Satellite Public Co. Ltd. AIR 2006 SC 2686.
(Interestingly paragraph 11 of this judgment was relied on
by the counsel for the respondent also). Mr.Ganesh relied on
the judgment of the Supreme Court in M.M.Thomas v. State
of Kerala and another, (2000) 1 SCC 666 to argue that as a
court of record, power and duty to review its own judgment
for correcting its own mistake is inherent in every High
Court. The counsel submitted that High Court is a court of
record and unquestionably a superior court of plenary
jurisdiction and is competent to determine the scope of its
jurisdiction. Mr. Ganash relied on the judgment of the
Supreme Court in H.Lathakumari v.Vamanapuram Block
Panchayat and others, 2009 KHC 4439 to submit that even
the Supreme Court has recognised the Government Orders
excluding arbitration clauses from PWD contracts. Sri.
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Ganesh lastly relied on the judgment of this Court in
Southern Structurals Ltd. v. K.S.E. Board, 2008(1) KLT 105
after referring to Section 7 of the Arbitration and
Conciliation Act and Sections 10, 14, 20, 21 and 22 to argue
that any contract in which an arbitration clause is
introduced by playing fraud on the Government will be a
void contract and that the High Court cannot compel an
unwilling party to go for arbitration on the basis of such a
void contract.
8. The submissions of Mr.Ganash were met by
Mr.Rajiv A. George, learned counsel for the respondent
contractor. Mr. Rajiv referred to Sections 114 and rule 1 of
Order 47 CPC and submitted that review can be allowed
only on the grounds specifically mentioned in those
provisions of the Code of Civil Procedure. Other sufficient
reason envisaged by Rule 1 of Order 47 is a reason which is
ejusdem generis with the reasons enumerated therein
RP. No. 960/09
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before. Counsel submitted that in the present case the Joint
Secretary to the Public Works Department who had filed
counter affidavit on behalf of the Government in Arbitration
Request No. 1 of 2007 had not only not denied the existence
of the arbitration clause but had reiterated its existence.
Mr. Rajiv would distinguish all the decisions cited on behalf
of the Government by Mr.Ganesh on facts which according
to the learned counsel are peculiar in this case. Referring to
the judgment of the Constitution Bench of the Supreme
Court in SBP & Co. v. Patel Engineering Ltd. and another,
(2005) 8 SCC 618 Mr.Rajiv submitted that under that
judgment the Supreme Court had overruled the earlier
Constitution Bench decision in Konkan Railway Corporation
Ltd. v. Rani Constructions (P) Ltd. (2002) 2 SCC 388 and
held that the Chief Justice or his designate while dealing
with an application under Section 11 was bound to decide
whether he had jurisdiction, whether there was a valid
RP. No. 960/09
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arbitration agreement, whether the person making the
request was a party to the arbitration agreement and
whether there subsisted a dispute/live claim capable of
being arbitrated upon and that the decision of the
designated Judge was a judicial one and not an
administrative one. The counsel submitted that this is a
case where there was a concluded contract and argued that
once a concluded contract comes into existence, then terms
of tender cannot override the terms and conditions of the
completed contract. He relied on the judgment of the
Supreme Court in Security Printing and Minting Corporation
of India Ltd. and another v. Gandhi Industrial Corporation,
(2007) 13 SCC 236.
9. I have anxiously considered the rival submissions
addressed at the Bar. I have to remind myself at the very
outset of the contours of the jurisdiction which is being
invoked by the Government. It is trite by various decisions
RP. No. 960/09
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including the judgment of the Supreme Court in
Inderchand Jain v. Motilal, 2009(3) KLT SN 65 which was
relied on by the review petitioners themselves and the
judgment in Jain Studios Ltd. v. Shin Satellite Public Co.
Ltd., 2006(5)SCC 501 that power of review is distinct in
nature from appellate power. Discovery of new and
important matter or evidence which after the exercise of
due diligence by the petitioner was not within his
knowledge or could not be produced by him at the time
when the original order was passed or existence of any
mistake or error which is apparent on the face of the
record or existence of “any other sufficient reason” are the
only grounds on which applications for review can be
entertained and allowed. The expression “any other
sufficient reason” appearing in clause ) of sub-rule (1) of
Rule 1 of Order 47 has to be a reason homologous or atleast
analogous to the other reasons mentioned earlier in the
RP. No. 960/09
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said clause. In other words, unless sufficient reason
highlighted by the Government is ejusdem generis with the
other two reasons mentioned in clause(c) the same cannot
be a sufficient reasons for the purpose of clause ) at all.
The persuasive submissions of Mr. K.R.Ganesh
notwithstanding, it is clear to my mind that any reason
constituting ground for review under Order 47 rule 1 has not
been made out by the Government in the present case. As
rightly contended by the respondent contractor, the
Government through the counter affidavit submitted in A.R.
No. 1 of 2007 not only did not deny the existence of the
arbitration clause which was being consistently relied on by
the contractor but also admitted the same in paragraph 16
of the counter. While meeting the merits of the claims
raised by the contractor it was contended by the
Government that the claims had been raised with the
malafide intention of extracting undue and unwarranted
RP. No. 960/09
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benefits from the arbitration clause. As stated by me in the
order in A.R. 1 of 2007 the Government after refuting the
claims of the applicant contractor had suggested that if this
court becomes inclined to appoint an Arbitral Tribunal either
Justice T.V.Ramakrishnan, former Judge of this Court or
Sri.E.Kurian Mathew, retired Chief Engineer be appointed as
arbitrator. In fact, at the Bar, the counsel for the applicant
contractor and the Government Pleader (then Sri.Shyson
P.Manguzha) submitted that it will be ideal if this court
appoints Justice T.V.Ramakrishnan and Sri.Kurian Mathew
jointly as the Arbitral Tribunal. The judgment of the
Supreme Court in Prasun Roy v. Calcutta Metropolitan
Development Authority and another, (1987) 4 SCC 217
and State of Rajasthan v. Nav Bharat Construction Co.,
(2005) 11 SCC 197 give strong support to the contention
that once existence of an enforceable and valid arbitration
clause between the parties is admitted, it is not open to the
RP. No. 960/09
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parties to raise a contention later that there was no valid
enforceable arbitration agreement. It is not in dispute that
the contract did contain the arbitration clause. But the
contention is that the tender conditions did not contain the
arbitration clause. But then the contract substitutes or
supersedes the tender conditions as laid down by the
Honourable Supreme Court in Security Printing and Minting
Corporation of India Ltd. and another v. Gandhi Industrial
Corporation, (2007) 13 SCC 236.
10. The fact situation in the present case also
dissuades me notwithstanding Annexures I and II from
thinking in terms of recalling my order which was passed
virtually on consent. Pursuant to the order passed by me in
arbitration request No. 1 of 2007 (presently sought to be
reviewed) constituting Arbitral Tribunal consisting of a
retired Judge of this Court and a retired Chief Engineer of
PWD whose name was suggested by the Government itself
RP. No. 960/09
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in their counter affidavit, those two arbitrators together
would appoint again with consent of both sides another
Judge of this Court as the presiding arbitrator and the
above Arbitral Tribunal consisting of two Judges and a
retired Chief Engineer had entered on arbitration. Several
sittings, I am told by now about 60, were conducted spread
over a period of two years. Entire evidence was taken,
arguments of both sides is also completed. What remains is
only the passage of the final award. An interim award was
passed and published by the Arbitral Tribunal directing the
review petitioners to pay to the respondent an amount of
Rs.2.43 crores towards the work admittedly done and it is
not disputed before me that the above interim award has
been honoured. The passage and publication of the final
award by the Tribunal is being postponed only because of
the pendency of this review petition. I have not been
convinced of any legal prejudice that may be caused to the
RP. No. 960/09
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Government by allowing the Tribunal to complete its
proceedings and publish its final award. The learning and
integrity of the persons constituting the Tribunal was not
questioned before me even for a moment. There is no
reason for me to assume that the Tribunal will unmindful of
the public interest involved in the matter and uphold any
invalid or inconsistent claim raised by the contractor. I am
satisfied that the present case is not one where the power of
review can be invoked.
The RP will stand dismissed. No costs.
(PIUS C.KURIAKOSE, JUDGE)
ksv/-
