At, High Court of Karnataka
By, THE HONOURABLE MR. JUSTICE S.G. PANDIT
For the Appearing Parties: Ajay J. Nandalike, Dhyan Chinnappa, M.V. Sundar Raman, Advocates.
1. This petition is filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, praying to appoint the second arbitrator on behalf of the respondent to enable constitution of the Arbitratal Tribunal based on the contract dated 05.01.2011 which is produced at Annexure-B.2. The petitioner is a Construction and Infrastructure Company, which is a private limited company.3. The respondent Mangalore Special Economic Zone Limited a Government Entity invited tender dated 04.09.2010 for construction of Pipeline Corridor and Road for MSEZL Reach-1 Project. The petitioner submitted its tender. The respondent upon finding the offer of the petitioner reasonable accepted the tender of the petitioner. The petitioner was given a letter of intent on 03.12.2010 and the petitioner accepted the letter of intent by letter dated 04.12.2010. In pursuance of the acceptance of petitioner s tender, the petitioner and the respondent entered into a contract dated 05.01.2011 which is at Annexure-B. The agreed contract period was of six months commencing from 03.12.2010 and ending on 02.06.2011. The petitioner had also submitted performance Bank Guarantee dated 24.12.2020 for a sum of Rs.3,25,77,300/-. Due to delay in handing over the site, issuing the GFC Drawings, change in GFC Drawings, hindrances at the site of work and due to delay in payments by the Respondent, the contract could not be completed within six months period as prescribed in the original agreement. Therefore, there was delay in completion of work and finally work was completed on 30.08.2014. Subsequently the petitioner submitted RA Bill and the final bill on 23.09.2014 upon completion of the work. Thereafter the respondent called upon the petitioner to sign and issue No Claim Certificate and Site Clearance Certificate. As the petitioner was facing critical financial conditions, the petitioner was coerced to sign the No Claim Certificate. It is stated that on 03.07.2017 the petitioner issued a letter claiming under various heads, the losses suffered on account of the delay attributed to the respondent and also stating that No Claim Certificate was given under financial duress. Thereafter through its letter dated 28.07.2017 the petitioner communicated its intention to settle the dispute amicably. The respondent rejected the request of the petitioner. Thereafter the petitioner states that notice dated 09.04.2018 was issued to the respondent invoking the arbitration clause and seeking appointment of arbitrator. Learned counsel for the petitioner invites attention to clause 21(3) of Section 3 of the Contract Data which reads as follows :-ARBITRATION: Where both the parties fail to settle the disputes amicably Arbitration shall be conducted in accordance with the arbitration procedure stated below.a) In case of dispute relating to any matter arising out of or connected with this agreement, such disputes shall be settled in accordance with the Arbitration and Conciliation Act, 1996. The tribunal shall consist of three arbitrators one each to be appointed by the MSEZL and the Contractor. The third Arbitrator shall be chosen by the two Arbitrators so appointed by the parties and shall act as a presiding Arbitrator.b) If one of the parties fails to appoint its arbitrator in pursuance of the above within 30 days after the receipt of notice of appointment of its arbitrator by the other party, then the Indian Council of Arbitration/President of Institution of Engineers (India) shall be appointed as the arbitrator.c) Arbitration proceedings shall be at the premises of Mangalore SEZ Limited.d) The decision of the majority of the arbitrators shall be final and binding upon both the parties. The cost and expenses of the Arbitration Proceedings will be paid as determined by the arbitration tribunal. However, the expenses incurred by each party in connection with the preparation, presentation etc of its proceedings as also the fees of the arbitrator appointed by such party or on its behalf shall be borne by each party itself.e) Performance under the contract shall continue during the arbitration proceedings and payments due to the contractor by the owners shall not be withheld, unless they are the subject matter of the arbitration proceedings.4. It is submitted that in compliance of the above clause the petitioner has appointed Sri. A. Jagannathan as the nominee Arbitrator. The efforts of the petitioner to resolve the dispute amicably failed and by letter dated 13.04.2018 the respondent rejected the appointment of the arbitrator stating that the contract is discharged by the petitioner. As the respondent failed to nominate the arbitrator in accordance with the agreed procedure, the petitioner is before this Court under Section 11(6) of the Act seeking appointment of arbitrator to adjudicate the dispute that has arisen between the parties.5. The respondent has filed its objection contending that that claim made by the petitioner is barred by time. Further it also contended that the contract is discharged, as the petitioner issued a No Claim Certificate , which is a voluntary act of the petitioner. Since the petitioner has issued the No Claim Certificate , now it is not open to contend that he was coerced to issue the No Claim Certificate . Once the contract stands discharged arbitration clause would not survive for consideration.6. There is no dispute with regard to arbitration clause under agreement dated 05.01.2011. Arbitration Clause 21.3 of Section 3 is extracted above. There exists dispute between the petitioner and the respondent with regard to the work entrusted to the petitioner by respondent and loss said to have been suffered by the petitioner. The efforts made by the petitioner to amicably settle the dispute has failed. Thereafter the petitioner invoked arbitration clause and nominated one Sri A. Jagannathan as the nominee arbitrator under notice dated 09.04.2018 vide Annexure-J. The respondent rejected the same under letter dated 13.04.2018. The contentions or objections raised by the respondent in its objections cannot be looked into or cannot be gone into by this Court in this petition.7. At this stage, it is for this Court to see as to whether there exists arbitration clause in the agreement and also to see as to whether there exists any dispute. It is satisfied that there exists arbitration clause in the agreement at Annexure-B and also there exists several disputes between the petitioner and the respondent. The objections or contentions raised will have to be submitted before the Arbitrator and it is for the arbitrator to decide upon those objections. It is to be noted that even if contract is discharge or contract stands terminated the arbitration clause in the agreement would continue to exist and could be invoked for redressal of disputes arising of the said contract by Arbitration. All contentions of the parties are left open.8. For the reasons stated above the petition is allowed. Hon ble Mr. Justice K.N. PHANEENDRA Retired Judge of this Court is appointed as Arbitrator on behalf of the res
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pondent Mangalore Special Economic Zone Limited. The petitioner has already nominated Sri. A. Jagannathan as the arbitrator. Both the arbitrators shall choose the Third Arbitrator as provided under the contract. Thereafter the Arbitral Tribunal to enter upon the reference and adjudicate the matter at the Arbitration and Conciliation Centre, Bengaluru, as per the Arbitration and Conciliation Centre Rules, 2012. Even though the contract specifies the place of arbitration at Mangalore SEZ Limited, Sri. Dhyan Chinnappa, learned Senior Counsel appearing for the respondent submits on instructions that respondent has no objection for taking up the arbitration proceedings at Arbitration Centre, Bengaluru.Registry is directed to send copy of this order to Arbitration Centre, Bengaluru.