Back
SUPREME COURT OF INDIA
A.M. Khanwilkar, Ajay Rastogi, JJ.
UNION OF INDIA – Appellant(s)
Vs.
PARMAR CONSTRUCTION COMPANY – Respondent(s)
Civil Appeal No. 3303 of 2019 (Arising Out of SLP(C) No. 6312 of 2018) with Civil Appeal No(s). 3306 of 2019 (Arising Out of SLP(C) No(s). 6034 of 2018); Civil Appeal No(s). 3304 of 2019 (Arising Out of SLP(C) No(s). 2166 of 2018); Civil Appeal No(s). 3307 of 2019 (Arising Out of SLP(C) No(s). 6316 of 2018); Civil Appeal No(s). 3312 of 2019 (Arising Out of SLP(C) No(s). 7720 of 2018); Civil Appeal No(s). 3310 of 2019 (Arising Out of SLP(C) No(s). 8019 of 2018); Civil Appeal No(s). 3311 of 2019 (Arising Out of SLP(C) No(s). 8021 of 2018); Civil Appeal No(s). 3305 of 2019 (Arising Out of SLP(C) No(s). 7937 of 2018); Civil Appeal No(s). 3308 of 2019 (Arising Out of SLP(C) No(s). 8597 of 2018); Civil Appeal No(s). 3319 of 2019 (Arising Out of SLP(C) No(S).8256 of 2019) (Arising Out of Diary No. 8885/2018); Civil Appeal No(s). 3309 of 2019 (Arising Out of SLP(C) No(s). 8596 of 2018); Civil Appeal No(s). 3314 of 2019 (Arising Out of SLP(C) No(s). 9514 of 2018); Civil Appeal No(s). 3313 of 2019 (Arising Out of SLP(C) No(s). 8598 of 2018); Civil Appeal No(s). 3315 of 2019 (Arising Out of SLP(C) No(s). 9559 of 2018); Civil Appeal No(s). 3317 of 2019 (Arising Out of SLP(C) No(s). 11417 of 2018); Civil Appeal No(s). 3318 of 2019 (Arising Out of SLP(C) No(s). 11862 of 2018); Civil Appeal No(s). 3316 of 2019 (Arising Out of SLP(C) No(s). 22263 of 2018)
Decided on : 29-03-2019
(B) Arbitration and Conciliation Act, 1996 – Section 11(6) – Appointment of independent Arbitrator – There cannot be a rule of absolute kind and each case has to be looked into on its own facts and circumstances – Where a petty/small contractor has made investments from his available resources in executing works contract and bills have been raised for escalation cost incurred by him and railway establishments/appellants without any justification reduces claim unilaterally and take defence of no claim certificate being furnished which is to be furnished at the time of furnishing final bills in the prescribed format, rebuttable presumption could be drawn that when a no claim has been furnished in prescribed format at the time of final bills being raised with unilateral deductions made even that acceptable amount will not be released, unless no claim certificate is being attached to the final bills – Present contractors with whom no option has been left and being in financial duress to accept amount tendered in reference to final bills furnished and from discharge voucher which has been taken to be a defence by appellants prima facie cannot be said to be voluntary and has resulted in discharge of contract by accord and satisfaction as claimed by appellants – Arbitral dispute subsists and contract has not been discharged as being claimed by appellants employer(s) and all contentions in this regard are open to be examined in arbitral proceedings. (Paras 33, 35 and 36)
(C) Arbitration and Conciliation Act, 1996 – Section 11(8) – Appointment of independent Arbitrator – Before any other alternative is resorted to, agreed procedure has to be given its precedence and terms of agreement has to be given its due effect as agreed by parties to the extent Possible – Corrective measures have to be taken first and Court is last resort – By appointing Arbitrator in terms of sub-section (8) of Section 11 of Act, 1996, due regard has to be given to qualification required for Arbitrator by agreement of parties and also other considerations such as to secure an independent and impartial Arbitrator – To fulfil the object with terms and conditions which are cumulative in nature, it is advisable for Court to ensure that remedy provided as agreed between parties in terms of contract is first exhausted – Emphasis should always be on terms of arbitration agreement to be adhered to or given effect as closely as possible. (Paras 38 and 39)
(D) Arbitration and Conciliation Act, 1996 – Section 11(6) – Appointment of independent Arbitrator – Work contract – Dispute has arisen in context of payment of escalated cost as demanded by respondent contractors – Where impartiality of Arbitrator in terms of arbitration agreement is in doubt or where Arbitral Tribunal appointed in terms of arbitration agreement has not functioned or has failed to conclude proceedings or to pass award without assigning any reason and it became necessary to make a fresh appointment, Chief Justice or his designate in given circumstances after assigning cogent reasons in appropriate cases may resort to an alternative arrangement to give effect to appointment of independent Arbitrator under Section 11(6) of Act – High Court was not justified in appointing an independent Arbitrator without resorting to procedure for appointment of an Arbitrator which has been prescribed under clause 64(3) of contract under inbuilt mechanism as agreed by parties – Orders passed by High Court quashed and set aside – Appellants directed to appoint Arbitrator in terms of clause 64(3) of agreement. (Paras 43, 44 and 45)
Facts of Case:
Question that arises for consideration in batch of appeals by special leave is as to whether (1) High Court was justified in invoking amended provision which has been introduced by Arbitration and Conciliation (Amendment Act), 2015 with effect from 23rd October, 2015 ; (2) whether arbitration agreement stands discharged on acceptance of amount and signing no claim/discharge certificate and (3) whether it was permissible for High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 to appoint third party or an independent Arbitrator when parties have mutually agreed for procedure vis-à-vis authority to appoint designated arbitrator. High Court has passed separate orders in exercise of its powers under Section 11(6) of Act, 1996 in appointing an independent arbitrator without adhering to mutually agreed procedure under agreement executed between parties.
Findings of Court:
Independence and impartiality of the arbitrator has never been doubted but where impartiality of Arbitrator in terms of arbitration agreement is in doubt or where Arbitral Tribunal appointed in terms of arbitration agreement has not functioned, or has failed to conclude proceedings or to pass an award without assigning any reason and it became necessary to make a fresh appointment, Chief Justice or his designate in given circumstances after assigning cogent reasons in appropriate cases may resort to an alternative arrangement to give effect to appointment of independent arbitrator under Section 11(6) of Act.
Result : Appeals disposed of in terms.
Key Points: - (!) - (!) - (!) - (!) - (!) - (!)
JUDGMENT
Rastogi, J.
Leave granted.
2. The question that arises for consideration in the batch of appeals by special leave is as to whether (1) the High Court was justified in invoking amended provision which has been introduced by Arbitration and Conciliation(Amendment Act), 2015 with effect from 23rd October, 2015(hereinafter being referred to as "Amendment Act, 2015"); (2) whether the arbitration agreement stands discharged on acceptance of the amount and signing no claim/discharge certificate and (3) whether it was permissible for the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996(prior to the Amendment Act, 2015) to appoint third party or an independent Arbitrator when the parties have mutually agreed for the procedure vis-à-vis the authority to appoint the designated arbitrator. The High Court has passed separate orders in exercise of its powers under Section 11(6) of the Act, 1996 in appointing an independent arbitrator without adhering to the mutually agreed procedure under the agreement executed between the parties. Since the batch of appeals involve common questions of law and facts with the consent of parties, are disposed off by the present judgment.
3. The facts have been noticed from civil appeal arising out of SLP(Civil) no. 2166 of 2018.
4. The work for construction of office accommodation for officer and rest house was allotted to the respondent contractor, at Dungarpur in the State of Rajasthan on 21stDecember, 2011. As alleged, the extension was granted by the appellants to complete the work by 31st March, 2013. The measurement was accepted by the respondent under protest and when appellants officials failed to clear 7th final bill until the respondent put a line over "under protest" and signed no claim certificate. The total value of the work executed was of Rs. 58.60 lakhs against which Rs. 55.54 lakhs was paid and escalation cost was not added with interest @ 18% over delay payment. Demand notice was sent to the appellants to appoint an arbitrator invoking Clause 64(3) of the GCC to resolve the disputes/differences on 23rd December, 2013. When the appellants failed to appoint the arbitrator in terms of Clause 64(3), application came to be filed under Section 11(6) of the Act, 1996 before the Chief Justice/his Designate for appointment of an independent arbitrator who after hearing the parties under the impugned judgment allowed the application of the respondent and appointed a retired judge of the High Court as an independent arbitrator to arbitrate the proceedings.
5. In the instant batch of appeals, one fact is common that the orders were placed for various nature of construction works for its execution and the agreement executed between the parties includes a separate chapter for settlement of disputes leaving any dispute or difference between the parties to be resolved through the process of arbitration by appointing an arbitrator invoking clause 64(3) of the contract. As per terms of the agreement, date of completion of the project was delayed as alleged due to breach of obligations by the appellants and the scheduled date of completion had to be extended. Meanwhile, due to rise in the prices of raw material, the project was impossible to be completed by the respondent contractors and hence correspondence was made to either pay the escalated price or in the absence, the respondents would not be in a position to conclude the contract. It was alleged that the appellants accepted the terms and conditions for escalated prices and asked the respondents to complete the work and handover the project.
6. But when the respondents raised the final bills in the predetermined format (which also included the no dues certificate) on the newly agreed prices, dispute has arisen in context of payment of escalated prices or withholding of security deposits, taking note of the existence of ar
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
