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M/s. SAN Engineers, a proprietary concern, Rep. by its Proprietor S. Adiniarayana Reddy v/s M/s. Siddartha Constructions, A partnership firm, rep, by its Managing Partner

    Arbitration Application No. 123 of 2015

    Decided On, 30 April 2021

    At, High Court of Andhra Pradesh

    By, THE HONOURABLE CHIEF JUSTICE MR. ARUP KUMAR GOSWAMI

    For the Applicant: K. Sarvabhouma Rao, Advocate. For the Respondent: M. Sudheer Kumar, Advocate.



Judgment Text

1. This application is filed under Section 11 of the Arbitration and Conciliation Act, 1996, read with Para 3(i)(c) of Scheme for Appointment of Arbitrators, 1996, as framed by the High Court at Hyderabad, seeking appointment of a sole arbitrator.

2. The case of the applicant, in short, is that the applicant proprietary concern is engaged in engineering works, particularly, pile foundation works of various technical specifications for various engineering installations. The respondent is a contractor for Indian Oil Corporation Limited, engaging in works for the said Corporation at its various places of operations. The applicant had undertaken, amongst others, two works at Paradeep and Angul in Orissa as a sub-contractor of the respondent. In that connection, the respondent had placed a work order dated 10.02.2011 for the work of “BORE cast-in-situ piles of 600mm dia” at Paradeep and another work order dated 20.08.2011 for construction of JSPL, Angul, for mobilizing, erection and dismantling of rig installation of 600 mm dia bore cast-in-situ piles. It is pleaded that both the works were completed and handed over to the respondent by 30.09.2011.

3. It is the case of the applicant that there is an arbitration clause being Condition No.19 in the work order dated 20.08.2011 and that in respect of the work order dated 10.02.2011, terms and conditions were not fully supplied by the respondent and some pages were missing. While the second work order contains all pages, including the page containing arbitration clause, in the first work order dated 10.02.2011, pages relating to arbitration clauses were not appended and, therefore, it has to be taken that there is an arbitration clause in both the work orders.

4. It is stated that for the works at Angul site, an amount of Rs.9,41,285/- and for Paradeep site, an amount of Rs.21,04,461/- were required to be reimbursed on account of service tax. However, the respondent did not pay the entire amount due under the service tax component and kept an amount of Rs.21,45,362/- pending. Accordingly, a registered legal notice dated 20.04.2015 was issued and in response, the respondent, by reply notice dated 26.04.2015, denied the liability to make payment and accordingly, a registered rejoinder notice dated 22.05.2015 was issued by the applicant and in the said rejoinder notice, the applicant invoked arbitration clause and demanded appointment of arbitrator.

5. An affidavit was filed by the respondent raising preliminary objections about the maintainability of the application contending that in relation to work order dated 10.02.2011, there was no arbitration clause and that the claim for the amount of Rs.20,45,362/- is raised jointly for both the work orders. It is also pleaded that this Court does not have jurisdiction to entertain the application as no part of cause of action had arisen at Visakhapatnam within the jurisdiction of this Court as in terms of clause 18 of the work order dated 20.08.2011, all disputes shall be deemed to have arisen in project site, i.e., in the State of Orissa. It is also pleaded that the claim is barred by limitation as recourse to law was not taken within a period of three years from 30.09.2011 and that the application was filed only on 09.11.2015. It is also stated that the applicant never invoked arbitration clause as the demand for arbitration is to be made with the competent authority, i.e., the Chairman-cum- Manging Director of the respondent and, therefore, there was no question of failure to appoint arbitrator on the part of the respondent.

6. With regard to the factual aspects, amongst others, it is denied that the applicant had executed both the works completely within the stipulated time. It is also denied that amount of Rs.21,04,462/- and Rs.9,41,286/- under the subject work orders remained due from the respondent towards service tax component or that there remained an amount of Rs.21,45,262/- to be paid to the applicant. It is categorically denied that some pages of the first work order were not supplied to the applicant as stated and that both the work orders are independent of each other with respective terms and conditions. Accordingly, the respondent prayed for dismissal of the application.

7. Abiding by the stand taken in the application, Mr. K. Sarvabhouma Rao, learned counsel for the applicant, submits that the respondent raised a dispute with regard to payment of service tax and, therefore, in the rejoinder notice dated 22.05.2015 issued by the counsel, the applicant had demanded appointment of sole arbitrator. It is submitted by him that for all intents and purposes, the terms and conditions of the second work order were applied by the respondent to both the works. It is submitted that clause 18 of the work order dated 20.08.2011 provides that Visakhapatnam Court shall have jurisdiction in respect of disputes and, therefore, in the context of appointment of arbitrator, this Court will have jurisdiction to entertain this application. It is submitted that even if request for appointment of arbitrator was made by way of reply legal notice to the counsel of the respondent, the fact remains that the applicant had raised demand for appointment of arbitrator. It is submitted that plea taken that the claim is barred by limitation is not correct and that the question of limitation can be gone into by the arbitrator.

8. Mr. M. Sudheer Kumar, learned counsel appearing for the respondent, reiterates the contentions raised in the counter-affidavit.

9. Though the learned counsel for the respondent had raised an issue with regard to the maintainability of the application on the ground that this Court does not have jurisdiction, it is manifestly clear from a reading of Clause 18 of the work order dated 20.08.2011 that the Court at Visakhapatnam shall have jurisdiction to determine the disputes. Therefore, this application for appointment of an arbitrator, in the considered opinion of this Court, would be maintainable before this Court, Visakhapatnam being within the territorial jurisdiction of this Court.

10. A perusal of the work order dated 10.02.2011 goes to show that there is no arbitration clause in the terms and conditions of the said work order. The terms and conditions of the work order dated 20.08.2011 do not indicate that the dispute between the parties will be referred to arbitrator in respect of the work order dated 10.02.2011 also. It also does not appear that the applicant had raised any plea before the respondent that some pages in respect of terms and conditions of the work order dated 10.02.2011 were missing. In that view of the matter, it is apparent that disputes, if any, are not to be referred to arbitrator so far as work order dated 10.02.2011 is concerned.

11. Clause 19 of the work order dated 20.08.2011 reads as follows:

“All dispute of any kind whatsoever arises between SSC & SAN in connection with or arising out of the contract or the execution of the works, whether during the execution of the works or after the completion and whether before or after repudiation or other termination of the contract; shall be referred to Arbitrator under the Arbitration and Reconciliation Act 1996 with a sole Arbitrator to be appointed by the CMD of SSC.”

12. Perusal of the notice dated 20.04.2015 as well as the rejoinder legal notice dated 22.05.2015 goes to show that the applicant had made a statement that there is an outstanding amount of Rs.21,45,362/- without segregating how much amount is due in respect of which work order. In the context of the case, when there is no arbitration clause with regard to the work order dated 10.02.2011, this aspect assumes significance, as disputes arising out of this work order cannot be referred to arbitration.

13. In the absence of any demand with specific reference to the work order dated 20.08.2011, it is not possible to determine what is the disputed amount with regard to the work order

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dated 20.08.2011. It is to be noted that in the rejoinder legal notice, it was also indicated by the applicant that on failure to appoint an arbitrator, the applicant would file a civil suit for recovery of an amount of Rs.21,45,362/-. When the applicant had clubbed together purported outstanding amounts for two work orders dated 10.02.2011 and 20.08.2011 and there being no arbitration clause with regard to the work order dated 10.02.2011, I am of the considered opinion that this application in the present form cannot be considered for appointment of an arbitrator, as requested by the applicant. 14. In view of the above conclusion, it is not necessary for this Court to go into other aspects raised by the respondent. 15. In view of what has been stated above, this application stands dismissed. No costs. Pending miscellaneous applications, if any, shall stand closed.
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