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A2Z Waste Management (Jaipur) Limited v/s Jaipur Municipal Corporation, Jaipur Lal Kothi, Tonk Road, Jaipur & Others

    Arbitration Application No. 69 of 2013
    Decided On, 20 May 2016
    At, High Court of Rajasthan Jaipur Bench
    For the Applicant: Sandeep Taneja, Advocate. For the Respondents: Dharmendra Jain, Advocate.

Judgment Text
1. This application has been filed by applicant A2Z Waste Management (Jaipur) Ltd. praying for appointment of an independent, impartial and qualified Arbitrator for resolving its dispute with non-applicants.

2. Applicant is a company incorporated under the Indian Companies Act, 1956 having its registered office at Gurgaon (Haryana). It is engaged in business of collection, segregation, transportation and disposal of municipal solid waste on designing, renovating, operating, maintaining and transferring (DPROMT) or on commercial basis for municipal corporations/local authorities/government authorities and semi government agencies.

3. Non-applicant-Jaipur Municipal Corporation is an instrumentality of the State having been established under the Rajasthan Municipality Act, 1959. In response to the tender invited by non-applicant Jaipur Municipal Corporation, applicant has given his bid for award of contract for development of Integrated Solid Waste Management System for Jaipur Nagar Nigam on Public Private Partnership (PPP) Model. Applicant, being successful bidder, entered into an agreement dated 24.09.2012, referred to as Concession Agreement, with non-applicant Jaipur Nagar Nigam through its Commissioner (Health) pursuant to aforesaid contract. Said contract was entered into for improving existing standard of public health and environmental quality by establishing efficient mechanism for collection and transportation of Municipal Solid Waste, to promote economic operations of service creating an efficient and effective garbage transportation system in Jaipur in accordance with Municipal Solid Waste (Management & Handling Rules), 2000. Applicant claims to have commenced the work and also raised various bills against tippling fees, but it is alleged that payment of the bills has not been cleared by non-applicants as yet, in utter disregard to the terms of contract resulting in grave financial hardship to it.

4. Mr. Sandeep Taneja, learned counsel for applicant submits that applicant raised bills for the month of September, 2012 to February, 2013 for a sum of Rs.1,82,35,050.77. Non-applicant acknowledged receipt of all the bills, but failed to make payment despite various representations including representation dated 7.2.2013. Action of non-applicant in not making payment is arbitrary inasmuch as when applicant pressed for payment of the bills, non-applicant threatened to encash applicant's bank guarantee, without any fault on its part. When non-applicant threatened to encash applicant's bank guarantee, applicant was left with no alternative but to file an application under Section 9 of the Arbitration and Conciliation Act, 1996 for seeking an injunction/restraint order.

5. Learned counsel submitted that as per terms of agreement, non-applicant was required to provide 75 acres of land for setting up MSW plant, but it did not do so. The letter of request sent by applicant to this effect dated 18.4.2013 and 20.5.2013 are enclosed with application, which remained unresponded. Non-applicant itself is guilty of breach of contract and not applicant, in discharging obligation on its part as non-applicant did not provide bare minimum land required for parking. Pursuant to above referred to concession agreement, applicant sought permission to park vehicles used for collection and transportation of solid waste vide letter dated 21.11.2012. Instead of, however, providing appropriate land, non-applicant after repeated representations, provided a temporary site at Dawab Khana, Sanjay Bazar for parking, which was not a suitable place for the purpose. Non-applicant was under an obligation to provide suitable place for parking to applicant, but instead of providing suitable parking site, non-applicant confiscated vehicle of applicant bearing registration no.RJ14-3G-3319 in the garb of claiming rent of aforementioned temporary site. Applicant sent a letter dated 21.3.2013 to release the vehicle, but non-applicant turned hostile and did not care to reply the same.

6. Mr. Sandeep Taneja, learned counsel for applicant, submits that applicant also filed a suit with an application under Section 9 of the Arbitration and Conciliation Act, 1996, in the court of Additional Sessions Judge No.18, Jaipur City, Jaipur, for interim measures which issued an interim injunction on 25.2.2013 restraining non-applicants from encashing bank guarantee till further orders. During pendency of the said application, non-applicant issued notice inviting fresh tenders, which was challenged by applicant by filing a writ petition. Applicant employed 600 labours and purchased more than 100 vehicles. He has made a huge investment on infrastructure, vehicles, bins, rickshaws, machinery, manpower amounting to Rs.5,74,00,000. It is therefore prayed that this Court may appoint an independent Arbitrator to resolve the dispute.

7. Mr. Sandeep Taneja, learned counsel for the appellant, submitted that since admitted outstanding payment/dues have not been cleared so far even after repeated requests of applicant, a dispute has arisen between the parties. Reference is made to Article 14.1 (b) of the Concession Agreement, which envisages that upon a reference, either party may require any such dispute to be referred to the Authority for amicable settlement. Upon such reference, the Authority shall meet concessionaires/authorised representative of the Concessionaire at the earliest mutual convenience and in any event within 15 days of such reference to discuss and attempt to amicably resolve the dispute. If the dispute is not amicably settled within 15 days of such meeting, either party may then refer the dispute to the Arbitrator. Learned counsel for applicant submits that aforesaid clause provides that Principal Secretary UDII and LSG shall be sole Arbitrator to adjudicate the matter relating and arising out of the scope of work under the Concession Agreement. Now in view of provisions contained in Section 12(5) of the Arbitration and Conciliation (Amendment) Ordinance, 2015 read with Schedule 5 and 7 appended thereto, said authority cannot act as an Arbitrator. Since the very process of inviting tenders and award of original contract and thereafter re-tendering, has been made by decision and with the permission of the Principal Secretary, UDH & LSG, he cannot be considered as an independent and impartial arbitrator.

8. In support of the arguments, learned counsel for applicant, has cited judgment of the division bench of this court in Special Appeal (Writ) No.355/2015 - Union of India and Others v. Rajasthan Micro & Small Enterprises Facilitation Council and Another, decided on 20.11.2015, and that of single bench in S.B. Civil Misc. Application (Arbitration) No.31/2015 - M/s. Ganesh Containers Movers Syndicate v. Rajasthan Small Industries Corporation Limited, decided on 22.04.2016 and in S.B. Arbitration Application No.92/2012 - Giriraj Civil Developers Private Limited v. The Union of India and Others decided on 11.09.2015.

9. Mr. Dharmendra Jain, learned counsel appearing for non-applicants opposed application and submitted that applicant initially did not submit the plan for execution of work within a period of 15 days after issuance of Letter of Intent. Thereafter, it sought time by letter dated 19.6.2012 requesting extension of time for 45 days. Applicant was a defaulter since beginning and did not submit bank guarantee in time. Applicant also filed application under Section 9 of the Act of 1996 praying for interim measure against invocation of bank guarantee but the non-applicants have already encashed the bank guarantee as per order of the Additional District and Sessions Judge No.18, Jaipur. Thereafter, applicant did not complete the work as per contract and on its own sent a letter dated 18.2.2013 to stop the work and eventually stopped the work with effect from 19.10.2013. Due to irresponsible behaviour of applicant, entire city of Jaipur had to suffer acute problem of hygiene. In order to overcome this situation, State Government was compelled to invite fresh tenders.

10. Learned counsel for non-applicant submits that applicant was supposed to complete the work within stipulated time. It failed to do so despite repeated letters/notices served by non-applicant dated 8.10.2012, 15.10.2012, 30.10.2012, 19.11.2012, 27.11.2012, 30.11.2012, 24.01.2013, 11.2.2013, 18.2.2013 & 20.2.2013 collectively filed with reply to application as Annexure-R/1.

11. Learned counsel for non-applicants further submits that applicant firm was wholly incapable of executing the work of this magnitude and therefore it failed to do so. Applicant firm, as per its own showing, has already filed S.B. Civil Writ Petition No.12515/2013, which is still pending, therefore present application would not be maintainable. The contract stands terminated as per Clause 12.8 of the agreement and thereafter applicant has no right to invoke Clause 14.1(b) of the agreement. Even otherwise, applicant was also called for meeting on several occasions for amicable settlement but he failed to turn up and rather preferred to unilaterally stop work with effect from 19.02.2013, which caused great amount of inconvenience to the entire city of Jaipur. It is therefore prayed that arbitration application be dismissed.

12. Learned counsel for applicant rejoined and submitted that writ petition was filed by applicant assailing fresh notice-inviting-tender dated 19.06.2013, which was earlier awarded to non-applicants and that is entirely a different dispute. Learned counsel has invited attention of the court towards copy of writ petition. The application filed under Section 9 of the Act of 1996 for interim measures was the right of the applicant. After dismissal of that application, applicant filed appeal before this court, which was also dismissed by order dated 09.01.2014 and thereafter applicant filed Special Leave Petition against said order. The Supreme Court, while dismissing the Special Leave Petition vide order dated 24.01.2014, requested this court to decide present application under Section 11 of the Act of 1996 as expeditiously as possible and preferably within three months.

13. I have given anxious consideration to rival submissions and perused the material on record.

14. This court, while considering application under Section 11 of the Act of 1996 seeking appointment of Arbitrator, cannot go into the merits of the case to decide whether applicant was responsible for violating conditions/terms of the contract or non-applicants failed to perform their obligation as per the contract. Facts clearly show that applicant, vide letter dated 14.03.2013, requested non-applicants to resolve the dispute invoking Clause 14.1 aforesaid, to which no reply appears to have been given by non-applicants. Applicant again on 18.04.2013 sent a letter to non-applicants making similar request, which also does not appear to have been replied specifically. It was thereafter applicant served a notice on non-applicants dated 20.05.2013. Non-applicants claimed that they served on applicant notice dated 8.10.2012 followed by another notices dated 15.10.2012, 30.10.2012, 19.11.2012, 27.11.2012, 30.11.2012, 24.01.2013, 11.02.2013, 18.02.2013 and 20.02.2013, and in the last of the notices, applicant was called upon to immediately resume the work or else it will be deemed that he has revoked the contract unilaterally and the contract shall be treated as terminated. There can be no gainsaying of the fact that there exists a dispute between the parties.

15. Filing of writ petition by applicant against fresh notice-inviting-tenders cannot be an impediment for appointment of Arbitrator. Applicant has served notice on non-applicants. Non-applicants have failed to resolve the dispute in terms of Clause 14.1. Thus, despite invocation of arbitration clause by applicant, they have failed to appoint Arbitrator. Since the dispute has not been referred to the Arbitrator within thirty days from invocation of arbitration clause by applicant in terms of agreement till filing of present application, their right to do so now stood forfeited.

16. Mandate of law contained in sub-section (6) of Section 11 of the Act has to be followed in all such cases, which provides that, "a party may request the Chief Justice or any person or institution designated by him to take the necessary measures." The expression "necessary" as a general rule can be broadly stated to be those things which are reasonably required to be done or legally ancillary to the accomplishment of the intended act. This expression has to be read with the requirement in Section 11(8) of the Act that the Chief Justice or the person or an institution designated by him in appointing an arbitrator shall have "due regard" to the two cumulative conditions contained in Sections 11(8)(a) and (b) relating to qualifications and other considerations as are likely to secure the appointment of an independent and impartial arbitrator. As held by the Supreme Court in Northern Railway Administration, Ministry of Railway, New Delhi v. Patel Engineering Company Ltd., (2008) 10 SCC 240, the Court must first ensure that the remedies provided for are exhausted. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations. The expression "due regard" means that proper attention to several circumstances have been focused. The expression "necessary" as a general rule can be broadly stated to be those things which are reasonably required to be done or legally ancillary to the accomplishment of the intended act. Necessary measures are the steps which are reasonably required to be taken, one of which is to secure appointment of an independent and impartial arbitrator, which aspect has been emphasised by the Parliament even in the newly introduced the Arbitration and Conciliation (Amendment) Act, 2015, especially in Clauses 1 and 5 of the Fifth Schedule with reference to explanation to Section 12(1) (b) and Clauses 1 and 5 of Seventh Schedule with reference to Section 12(5) of the Act.

17. Section 12(5) of the Act of 1996 provides that notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject matter of the dispute, falls under any of the categories specified in the Seventh Schedule, shall be ineligible to be appointed as an arbitrator. Seventh schedule referred to in Section 12 (5) provides that if the arbitrator is an em

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ployee, consultant, adviser or has other past or present business relationship with a party, it would give rise to justifiable doubts as to his independence or impartiality. Clauses 5 of Seventh Schedule also provides that for a similar consequence, if any arbitrator happens to be manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration. Sub-section (5) of Section 12 of the Act of 1996 has thus been given overriding effect over any prior agreement to the contrary. Therefore, independence and impartiality of arbitrator as mandated by Amending Act of 2015 has now been made paramount consideration for appointment of arbitrator. In the facts of the case, therefore, the Principal Secretary, UDH & LSG, cannot act as an Arbitrator. 18. In the result, application is allowed. Hon'ble Mr. Justice N.M. Kasliwal (former Judge of the Supreme Court), R/o 20, Kasliwal Path, Mangal Vihar, Gopalpura Bypass, Tonk Road, Jaipur (9414078755) is hereby appointed as an independent sole arbitrator to resolve the disputes between the parties. The cost of arbitration proceedings and the arbitration fees shall be paid as per Fourth Schedule inserted in the Act of 1996 vide Arbitration and Conciliation(Amendment) Act, 2015. 19. A copy of this order be sent to Hon'ble Mr. Justice N.M. Kasliwal (former Judge of the Supreme Court), R/o 20, Kasliwal Path, Mangal Vihar, Gopalpura Bypass, Tonk Road, Jaipur (cell no.9414078755). Application Allowed.