Om Construction Co. Vs.
Ahmadabad Municipal Corp.& ANR. [2009] INSC 55 (13 January 2009)
Judgment
CIVIL APPELLATE
JURISDICTION CIVIL APPEAL NO. 107_______OF 2009 (Arising out of Special Leave
Petition (Civil) NO.1363 of 2008) Om Construction Co. ... Appellant Ahmedabad
Municipal Corp. & Anr. ... Respondents
ALTAMAS KABIR, J.
1.
Leave
granted.
2.
The
appellant herein is a "C" class approved contractor, whose tender was
accepted by the Ahmedabad Municipal Corporation for providing and fixing
Nibhada Stone for paving and Footpath in 2 Kalupur and Dariapur wards in
Central Zone within the City of Ahmedabad. The Work Order was issued on 6th
June, 2006, and as per the appellant's version the work was completed by the
end of October, 2006.
According to the
appellant, after giving credit for payments which had been made by the
Corporation, a sum of Rs.68,46,872/- was still due towards the work performed
in the Dariapur ward, while a sum of Rs.8,61,760/- was also due for the work
carried out in Kalupur ward. It is the case of the appellant that despite
notice having been served on the Corporation on 24th May, 2007, the said
amounts remained unpaid. Ultimately, on 6th June, 2007, the appellant issued a
notice to the Corporation setting out the facts relating to the work performed
and the claim made in detail and claimed a sum of Rs.77,08,632/-, together with
interest at the rate of 18% per annum, from the due date till the date of
realization, which the appellant claimed, was the total outstanding amount. In
the notice it was also indicated that the claim made by the appellant should be
accepted and payment should be made within a 3 period of 30 days from the date
of receipt of the notice or that an Arbitrator should be appointed by the
Corporation within a period of 30 days from the date of receipt of the notice.
3.
As
there was no response to the said notice from the Municipal Corporation nor was
any payment made or Arbitrator appointed, the appellant invoked clause 30 of
Form B-I, which provided for the appointment of an Arbitrator and was made
applicable in the contract entered into between the parties when the
appellant's tender was accepted. It appears that under General Conditions of
Contract of the Engineering Department of the Ahmedabad Municipal Corporation,
under its General Specifications it is provided that certain conditions are
required to be followed which includes the condition that Form B-I would be
applicable to the contract and clause 30 of Form B-I is relevant for this case.
The relevant portions of clause 30 of Form B-I reads as follows :- "Clause
30(1) Disputes to be referred to Tribunal: The disputes relating to this 4
contract, so far as they relate to any of the following matters, whether such
disputes arise during the progress of the work or after the completion or
abandonment thereof, shall be referred to the Arbitration Tribunal, Gujarat
State;
(2) ...............
(3) The provision of
Arbitration Act, shall in so far as they are inconsistent with the provision of
this Act, cease to apply to any dispute arising from a works contract and all
arbitration proceedings in relation to such dispute before an Arbitrator, Court
or authority shall stand transferred to the Tribunal."
4.
The
appellant filed a petition before the Gujarat High Court on 9th July, 2007,
being Arbitration Petition No. 35 of 2007, under Section 11 of the Arbitration
and Conciliation Act, 1996, hereinafter referred to as "the 1996
Act", inter alia, praying for the appointment of an Arbitrator to resolve
the disputes between the parties. The High Court by its order dated 20th
November, 2007, rejected the said petition. While doing so, the High Court took
note of Section 2(1)(k) of the Gujarat Public Works Contracts Disputes
Arbitration Tribunal Act, 1992, hereinafter 5 referred to as the "Gujarat
Tribunal Act", which defines "works contract" to mean a contract
made by the State Government or Public Undertaking which is notified in the
Official Gazette by the State Government. The High Court also noticed Section
2(1) (l) of the aforesaid Act, which defines "Public Undertaking" to,
inter alia, mean such class of local authorities as the State Government
specifies by Notification in the Official Gazette. It was further noticed that
in the absence of such Notification, the Ahmedabad Municipal Corporation was not
a "Public Undertaking" and the contract entered into by it with the
appellant could not, therefore, be termed as a "Works Contract" as
defined in Section 2(1)(k) of the aforesaid Act. The High Court, therefore,
held that the Arbitration Tribunal, Gujarat State, would have no jurisdiction
to entertain the disputes between the parties emanating from the Work Order in
question.
5.
The
High Court then went on to consider the applicability of the Arbitration and
Conciliation Act, 1996, to the facts of the case. The High Court 6 took note
of the fact that the Agreement between the parties, and more particularly the
Arbitration Agreement, did not lay down any procedure for appointing an
Arbitrator or Arbitrators.
Accordingly, in the
absence of such procedure, the Designated Court could not invoke its
jurisdiction under Sub-section (6) of Section 11 of the 1996 Act, which
contemplates a situation, where the appointment procedure as agreed to by the
parties under Sub- section (2) of Section 11 is not followed. The High Court,
therefore, while rejecting the applicability of the Gujarat Tribunal Act, also
closed the doors for relief under the provisions of the 1996 Act.
6.
The
said order of the High Court, which has been challenged in this appeal,
therefore, gives rise to the question as to whether in the absence of any
procedure in the Arbitration clause for the appointment of an Arbitrator, can
the Chief Justice of the High Court or the Designated Court appoint an
Arbitrator under Section 11(6) of the 1996 Act in 7 terms of the Agreement
between the parties to have their disputes settled by arbitration.
7.
Mr.
S.K. Gambhir, learned Senior Advocate appearing for the appellant company,
submitted that having regard to the specific condition contained in the General
Conditions of Contract regarding the application of Form B-I, the parties to
the Arbitration Agreement could not be forced to file a suit simply because the
procedure for arbitration, as required under Section 11(6) of the 1996 Act, had
not been agreed upon by the parties or specified therein.
Mr. Gambhir urged
that when there was a specific Arbitration Agreement between the parties, the
remedy in respect thereof under the 1996 Act could not be denied on a mere
technicality and if no procedure had been mentioned in the Arbitration
Agreement, it could not be contended that on such ground alone the provisions
of Sub-section (6) of Section 11 could not be invoked in view of the provisions
of Sub-section (2) thereof. Mr. Gambhir submitted that, in any event, Sub-section
(2) of Section 11 would have to be 8 read with Sub-clauses (3) to (5) as well
and the powers of the Chief Justice or the Designated Court could not be
fettered by Sub-section (6). It was submitted that the Chief Justice or the
Designated Court could in given circumstances appoint an Arbitrator by applying
the provisions of Sub-section (6) of Section 11 of the said Act. It was
submitted that while the High Court had correctly held that the provisions of
the Gujarat Tribunal Act would have no application in the present case, it had
gone wrong in holding that no relief could be provided to the appellant under
the provisions of the 1996 Act also.
8.
Mr.
Gambhir also contended that the requirements of Sub-section (6) of Section 11
of the 1996 Act have all been fulfilled, although, the appointment procedure
had not been indicated by the parties. He submitted that what was most
important is that the parties had failed to reach an agreement regarding the
appointment of an Arbitrator to resolve their disputes, which was the basic
requirement to request the Chief Justice or the Designated Court to secure the
appointment of an Arbitrator. Mr. Gambhir drew 9 our attention to the opinion
provided by the Legal Department of the Ahmedabad Municipal Corporation itself
indicating that in the event of a dispute between a contractor and the
Corporation in the work of the Engineering Department, proceedings will have to
be initiated under the Arbitration and Conciliation Act, 1996. Mr. Gambhir also
drew our attention to an earlier order passed by the Designated Court of the
Gujarat High Court in Arbitration Petition Nos.46-55 of 2003 in respect of a
similar contract, where a retired Judge of the said High Court was appointed as
Sole Arbitrator to resolve the disputes between the parties after the parties
had arrived at a consensus regarding the passing of such an order.
9.
Mr.
Gambhir submitted that the Ahmedabad Municipal Corporation had themselves
agreed to the appointment of an Arbitrator under the 1996 Act and could not,
therefore, resile from such position in the instant case.
10.
The
stand taken by Mr. Gambhir was opposed by Mr. Shyam Divan, learned Senior
Advocate, who supported the view taken by the High Court and submitted that the
appellant's remedy lay in the filing of a suit.
In the alternative,
it was also submitted that the decision in the matter could be deferred and a
notice could be issued to the State of Gujarat to indicate as to whether it had
any intention of publishing a Notification as contemplated in Section 2(k) of
the Gujarat Tribunal Act.
11.
Mr.
Divan further submitted that in the absence of such Notification, clause 30 of
Form B-I would remain inoperative and consequently the provisions relating to
the settlement of disputes by arbitration would also not be available to the
parties.
12.
Mr.
Divan urged that other than Clause 30 of Form B-I, there was no other provision
for arbitration in the contract between the parties and the question of
invoking jurisdiction under the 1996 Act was, therefore, misconceived. Mr.
Divan urged that as the 11 basic requirement of Sub-section (6) of Section 11
regarding an agreed procedure had not been fulfilled, neither the Chief Justice
nor the Designated Court could assume jurisdiction thereunder for appointing an
Arbitrator.
13.
We
have carefully considered the submissions made on behalf of the respective
parties and it appears that we are called upon to decide two questions in order
to decide this appeal. The first and possibly basic question is whether in the
absence of a Notification in the Official Gazette, the Municipal Corporation
can at all be considered as a Public Authority for the purpose of Section
2(1)(k) of the Gujarat Tribunal Act, 1992. The other question is whether the
absence of a procedure for appointment of an Arbitrator in the Arbitration
Agreement itself, would constitute a bar for the appointment of an Arbitrator
under Section 11(6) or any other provision of the 1996 Act, when not only the
parties to these proceedings, but the High Court as well, had arrived at a
conclusion that the provisions of the Gujarat 12 Tribunal Act, 1992, would not
be applicable in the instant case.
14.
In
this regard, we are inclined to accept the submissions of Mr. Gambhir
notwithstanding the fact that the Ahmedabad Municipal Corporation had not been
notified to be a "Public Undertaking" as defined in Section 2(1)(iii)
of the Gujarat Tribunal Act, 1992.
There is no dispute
that the Ahmedabad Municipal Corporation is a local authority and it could
assume the garb of a "Public Undertaking" only pursuant to a
Notification published in that regard in the Official Gazette. On the other
hand, even if Form B-I loses its relevance as far as the present contract is
concerned, since the parties have agreed to resolution of their disputes by
arbitration, the provisions of Sub-section (5) of the 1996 Act can be pressed
into service to enable the parties to invoke the powers of the Chief Justice to
appoint an Arbitrator. The stand taken by Mr. Divan is highly technical and is
not in aid of resolution of the disputes between the parties by an Arbitral
Tribunal.
13 While recognizing
the right of the appellant to approach the Chief Justice or the Designated
Court under Section 11(6) of the 1996 Act, the stand of the respondent
Corporation has been that the party should be relegated to suit, which is quite
contrary to the stand taken by it in the case of other employees.
15.
Section
11 of the 1996 Act deals exclusively with the appointment of Arbitrators.
Sub-section (2) provides that the parties are free to agree on a procedure for
appointing the Arbitrator or Arbitrators but subject to Sub-section (6) which
provides that if an agreed procedure had not been acted upon, the parties could
approach the Chief Justice or his Designate for appointment of an Arbitrator.
Sub-sections (3), (4) and (5) contemplate different situations in which the
Chief Justice or his Designate could be requested to appoint an Arbitrator. In
our view, in the facts of this case, the answer to the question thrown up in
this appeal lies in Sub-clause (5) of Section 11 of the 1996 Act, which reads
as follows :- 14 "(5) Failing any agreement referred to in sub-section
(2), in an arbitration with a sole arbitrator, if the parties fail to agree on
the arbitrator within thirty days from receipt of a request by one party from
the other party to so agree the appointment shall be made, upon request of a
party, by the Chief Justice or any person or institution designated by
him."
16.
Having
arrived at the aforesaid conclusion, the only question that remains to be
decided is whether this matter should be remitted to the High Court for
appointment of an Arbitrator or whether we should ourselves appoint an
Arbitrator in terms of the Arbitration Agreement. Remitting the matter to the
High Court would only mean another round of litigation, whereas if the
appointment is made by us, the matter will achieve finality, which would
ultimately be beneficial for all concerned.
17.
We,
accordingly, allow the appeal and appoint Hon'ble Mr. Justice C.K. Thakker, a
former Judge of the Supreme Court, presently settled at D-64, Akash Towers,
Judges' Bungalow Road, Vastrapur, Ahmedabad 15 to be the Arbitrator for
settlement of the disputes which have arisen between the parties. The learned
Arbitrator shall fix his own fees and shall also formulate the procedure to be
adopted by him during the arbitration proceedings. The Arbitrator shall try and
publish his Award as expeditiously as possible, but positively within six
months from the date of entering upon the Reference. The Arbitrator will also
decide the venue and sittings of the Arbitral Tribunal in consultation with the
parties. The judgment and order of the High Court impugned in this appeal is,
accordingly, set aside. The costs of this appeal shall be the costs in the
arbitration proceedings.
_______________J.
(ALTAMAS KABIR)
_______________J.
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