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M/s. URC Constructions Private Limited, Rep. by its Direction, V. Ganesan v/s M/s. Hindustan Aeronautics Limited, Rep. by its Additional General Manager (Works), Bangalore

    Civil Miscellaneous Petition No. 339 of 2019

    Decided On, 23 January 2020

    At, High Court of Karnataka

    By, THE HONOURABLE MR. JUSTICE B. VEERAPPA

    For the Petitioner: Abhilash Raju, Advocate. For the Respondent: Rhea Mathew, Advocate.



Judgment Text

(Prayer: The Civil Miscellaneous petition is filed under Section 11(6) of the Arbitration and Conciliation Act 1996, praying to appoint sole arbitrator, in terms of the letter of acceptance dated 12.11.2015 (Annexure B) and clause 33 of conditions of contract dated nil (Annexure C) entered into between the petitioner and respondent to resolve the disputes that have order as this Hon’ble Court may deem it fit and necessary in the circumstances of the case and in the interest of justice.)

1. The petitioner has filed the present Civil Miscellaneous Petition under the provisions of Section 11(6) of the Arbitration and Conciliation Act, 1996(‘the Act’ for short) for appointment of the sole Arbitrator to adjudicate the dispute, in terms of Letter of Acceptance dated 12.11.2015 (Annexure-B) r/w Clause 33 of the Conditions of Contract dated nil (Annexure-C) entered into between the parties.

2. It is the case of the petitioner that petitioner is a company incorporated under the Companies Act, 1956 and exists under the provisions of the Companies Act, 2013 and is engaged in the business of construction and property development. Respondent is a premier Public Sector Undertaking under the administrative control of the Department of Defence Production, Ministry of Defence, and Government of India and is engaged in the design, development and manufacture of aircrafts, Defence systems and accessories used essentially by the Defence Forces of the country. The respondent floated e-tender inviting bids from contractors for the Construction of Integrated Cryogenic Manufacturing Facility (ICMF) and Ailied Buildings (including Civil Works, E & M Services & Other Allied Works) at Aerospace Division in HAL, Bangalore. Petitioner was desirous of taking up the works and had submitted its bid which was opened on 23.05.2015. The respondent communicated Acceptance of the tender offer submitted by the petitioner, on 12.11.2015. The accepted contract amount for execution of the works was Rs.37,65,00,000/-.

3. It is further case of the petitioner that on 8.1.2019, the respondent issued a letter to the petitioner stating that the work was completed as on 30.11.2018 and that the snag list was already communicated to the petitioner and further the request for extension of time was being examined and under process and likely to take some time. Accordingly, the petitioners was called upon to submit a pre-final bill as per Clause 26(b) of the Special Conditions of Contract. In response to the above, petitioner requested for grant of full EoT without the levy of liquidated damages.

4. It is further case of the petitioner that on 1.2.2019, respondent issued a letter rejecting the pre-final bill on the ground that certain unsubstantiated claims were included in the pre-final bill. In response to the same petitioner issued letter dated 2.2.2019 stating that the rejection was unreasonable and any further delay in approval of EoT and NTIs will further hamper the financial flow of the Company and requested to forthwith approve full EoT without any penality. However, petitioner was surprised to receive letter dated 11.2.2019 issued by respondent stating that competent authority has approved extension of time upto 20.12.2017 without imposition of penalty and imposed liquidated damages at the rate of 7.5% of the contract value of the delayed period between 21.12.2017 to 30.11.2018 as per Clause 18(b) of the Special Conditions of Contract.

5. It is further case of the petitioner that on 14.03.2019 petitioner issued a letter requesting for consideration of its claims in a fair and reasonable manner and release the pending payment or arrange a meeting in this regard or intimate petitioner accordingly to enable reference of the dispute of Arbitration as per Clause 33 of the Special Conditions of Contract. On 20.3.2019 respondent sent a letter clarifying the issues raised by petitioner in its letter and stating that there is no dispute for the same to be resolved through Arbitration. Thereafter, the petitioner issued legal notice on 31.07.2019. The respondent has not given any reply within time. Therefore, the petitioner filed the present Civil Miscellaneous Petition for the relief sought for.

6. The respondent filed statements of objections denying the averments made in the Civil Miscellaneous Petition relating to the allegations against the respondent, but has not denied the existence of the Letter of acceptance dated 12.11.2105 as per Annexure-B and the ‘Special Conditions of Contract’ dated nil as per Annexure-C. It is further contended that under the Clauses 33 of the ‘Special Conditions of the Contract’, the petitioner has not right to nominate an arbitrator and the right to appoint an arbitrator lies solely with the respondent and the respondent is willing to appoint an arbitrator if the petitioner waives the applicability of Section 12(5) of the Act. It is further contended that it is the petitioner who violated the terms and conditions of the agreement and question of appointing or nominating the arbitrator at the instance of the petitioner would not arise. Accordingly sought for dismissal of the Civil Miscellaneous Petition.

7. I have heard the learned counsel for the parties to the lis.

8. Sri Abhilasah Raju, learned counsel for the petitioner reiterating the averments made in the Civil Miscellaneous Petition contended that in response to the tender floated by the respondent inviting bids from the contractors, the petitioner has submitted his bid and the same was accepted by the respondent and the accepted contract amount for execution of the works was Rs.37,65,00,000/-. The petitioner commenced the work as per Letter of Acceptance. Thereafter, the petitioner has submitted pre-final bill as per Clause 26(b) of the ‘Special Conditions of Contract’. The same was rejected on the ground that certain unsubstantiated claims were included in the pre-final bill, thereby the dispute arose between the parties. Therefore, the petitioner issued legal notice and the same was not replied. Therefore, he sought to allow the writ petition.

9. Per contra, Ms. Rhea Mahtew, learned counsel for the respondent while reiterating the averment made in the statements of objections contended that under the provisions of Clause 33 of the ‘Special Conditions of Contract’, the petitioner has no right to nominate an arbitrator and the right to appoint an arbitrator lies solely with the respondent. She further contended that the respondent is willing to appoint an arbitrator if the petitioner waives the applicability of Section 12(5) of the Act. She further contended that it is the petitioner who has violated the terms of the contract and hence, question of appointment of the Arbitrator at the instance of the petitioner would not arise. Therefore, she sought to dismiss the writ petition.

10. Having heard the learned counsel for the parties, it is an undisputed fact that the respondent floated e-tender inviting bids from contractors for the construction of Integrated Cryogenic Manufacturing Facility (ICMF) and Allied Buildings (including Civil Works, E & M Services & other allied works) at Aerospace Division in HAL, Bangalore. It is also not in dispute that in response to the e.tender, the petitioner has submitted his bid and the same was accepted by the respondent by their communication dated 12.11.2015 and the accepted contract amount for execution of the works was Rs.37,65,00,000/-. There is no dispute with regard to the Letter of Acceptance dated 12.11.2015 as per Annexure-B and Contract dated nil as per Annexure-C entered into between the parties. According to the petitioner though he has submitted pre-final bill as per the provisions of Clause 26(b) of the ‘Special Conditions of Contract’, the respondent rejected the same on the ground that certain unsubstantiated claims were included in the pre-final, bill thereby dispute arose between the parties.

11. Clause 33 of the ‘Special Conditions of Contract’ stipulates settlement of the dispute through arbitration, which reads as under:

33. Arbitration:

Except where, otherwise provided for in the contract, all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions herein before mentioned and as to the quality of workmanship, or material used on the work, or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relation to the contract, designs drawing to the specifications, estimates, instruction, orders or these conditions, or otherwise concerning the works, or the execution, or failure to execute, the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of the Managing Director/General Manager and if the Managing Director/General Manager is unable or willing to act, to the sole arbitration of some other persons appointed by the Managing Director/General Manager willing to act as such Arbitrator. The Arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, such managing Direction/General Manager as aforesaid at the time of such transfer, vacation of office or inability to act, shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor.

a) Subject as aforesaid the Provision of the Arbitration and Conciliation Act, 1996, or any statutory modification or re-enactment thereof and the rules made there under and for the time being in force small apply to the arbitration proceeding under this clause.

b) It is a term of the contract that the party involving arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such dispute.

c) The arbitrator(s) may from time to time with consent of the parties enlarge the time, for making and publishing the award.

d) The work under the contract shall, if reasonably possible, continue during the arbitration proceedings and no payment due or payable to the contractor shall be withheld on account of such proceedings.

e) The arbitrator shall be deemed to have entered on the reference on the date he issues notices to both the parties fixing the date of the first hearing. The arbitrator shall give a separate award in respect of each dispute or difference referred to him.

f) The venue of arbitration shall be such place as may be fixed by the Arbitrator in his sole discretion.

g) The award of the arbitrator shall be final, conclusi

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ve and binding on both the parties to the contract. 12. The petitioner has complied the provision of Section 11(5) of the Act by issuing the legal notice. The respondent did not give any reply to the legal notice before filing the present Civil Miscellaneous Petition. However, Sri Abhilash Raju, learned counsel for the petitioner submits that the reply to the legal notice was issued after filing the present Civil Miscellaneous Petition. 13. In view of the above admitted facts, there is no impediments for this Court to appoint the sole Arbitrator to adjudicate the dispute between the parties. 14. For the reasons stated above, the Civil Miscellaneous Petition is allowed. Hon’ble Sri Justice Shivaraj V Patil, Former Judge, Hon’ble Supreme Court of India is appointed as the sole Arbitrator to adjudicate the dispute, in terms of the Letter of Acceptance dated 12.11.2015 (Annexure-B) r/w Clause 33 of the Special Conditions of Contract dated nil (Annexure-C) entered into between the parties. The Registry is directed to send copy of this order to Hon’ble Sri Justice Shivaraj V Patil, Former Judge, Hon’ble Supreme Court of India as well as to the Arbitration Centre.
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