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2014 Supreme(Bom) 1825
In the High Court of Bombay at Goa
U.V. BAKRE, J.
M/s. Devdatta P. Shirodkar
Versus
The Chief Engineer, Western Zone II, Central Public Works Department & Another
Application For Appointment of Arbitrator No. 4 of 2014
Decided on: 31-10-2014
Advocate Appeared:
For the Applicant:Premanand Kholkar, Advocate.
For the Respondents:Mahesh Amonkar, Advocate.
Headnote:
Arbitration - Appointment of Arbitrator - Arbitration and Conciliation Act, 1996, Section 11(6) - Clause 25 of the agreement - Dispute Redressal Committee (DRC) - [Section 11(6) of the Arbitration and Conciliation Act, 1996] - [Clause 25 of the agreement] - [Summary of Acts and Sections: The court discussed the provisions of Section 11(6) of the Arbitration and Conciliation Act, 1996 and Clause 25 of the agreement, emphasizing the requirement for exhaustion of the mechanism of settlement of claims/disputes prior to invoking arbitration. The court highlighted the importance of following the prescribed procedure and the binding nature of the corrections made to the agreement, including the constitution of DRC. The interpretation of the modified Clause 25(i) and the obligations of the parties under the contract were central to the court's decision to reject the premature appointment of an arbitrator and direct the applicant to approach the DRC.]
Fact of the Case:
The applicant, a building contractor, terminated a construction agreement due to a fundamental breach by the respondent. Disputes arose, and the applicant sought appointment of an arbitrator under Clause 25 of the agreement. The respondent contended that the application was premature as the applicant had not exhausted all available remedies, including appeal to the Dispute Redressal Committee (DRC).
Finding of the Court:
The court found that the applicant had not exhausted the mechanism of settlement of claims/disputes prior to invoking arbitration, as required by the modified Clause 25(i) of the contract. The court directed the applicant to approach the DRC with an appeal against the decision of the respondent and take further action after the DRC's decision.
Issues: Premature appointment of an arbitrator, Exhaustion of remedies under the contract, Interpretation of Clause 25 and the constitution of DRC
Ratio Decidendi: The court held that the applicant's failure to file an appeal before the DRC, as required by the modified Clause 25(i), rendered the application for appointment of an arbitrator premature. The court emphasized the binding nature of the corrections made to the agreement and the obligation of the parties to follow the prescribed procedure.
Final Decision: The court rejected the premature appointment of an arbitrator and directed the applicant to approach the DRC with an appeal against the decision of the respondent no. 1 within 30 days of the order, and take appropriate steps after the DRC's decision.
1. Heard Mr. Kholkar, learned Counsel appearing on behalf of the applicant and Mr. Amonkar, learned Counsel appearing on behalf of the respondents.
2. By this application, filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (the Act, for short) the applicant has prayed for appointment of an arbitrator and to make an order of reference of disputes listed in Exhibit – B.
3. Facts as stated by the applicant are as under:
The applicant is a proprietary concern and a building contractor. By tender acceptance letter dated 25/05/2012, the respondent no. 2 awarded to the applicant the work of “Construction of two Nos. additional floors over the existing office building for Registrar of Companies at EDC Complex, Patto, Panaji, internal electrical installations and fans, etc.” A formal agreement No. 7/SE/GCD/2012-13 was executed between the applicant and the respondent no. 2. Clause 25 of the said agreement is the arbitration clause. On account of a fundamental breach of contract committed by the respondent no. 2, the applicant terminated the said agreement. By letter dated 14/08/2013, the applicant raised certain claims against the respondent no. 2. By letter dated 17/09/2013, the respondent no. 2 refuted the claim raised by the applicant and stated that nothing was payable to the applicant. Disputes and differences thus arose between the applicant and the respondent no. 2. The applicant, therefore, as per Clause 25 of the agreement, by letter dated 24/09/2013 requested the Superintending Engineer to give his decision in the matter. The Superintending Engineer by his letter dated 23/10/2013 rejected the claims raised by the applicant. The applicant, therefore, as per the said clause 25, by letter dated 06/11/2013 requested the respondent no.1(Chief Engineer) to give his decision in the matter. By letter dated 09/12/2013, the respondent no.1 informed the applicant that the claims raised by the applicant were not in accordance with the provisions of the Contract Agreement and were not tenable. Hence by letter dated 28/12/2013, the applicant requested the respondent no.1 to appoint an arbitrator for adjudication of the disputes between the applicant and the respondent no. 2. The respondent no.1 by letter dated 06/01/2014 informed the applicant to apply in the prescribed format by obtaining it from the Executive Engineer, GCD, CPWD, Goa. Along with the said letter the respondent no.1 also sent to the applicant a copy of the proforma to apply for appointment of an Arbitrator. As requested by the respondent no.1, vide letter dated 28/12/2013, the applicant resubmitted to the respondent no. 1 an application for appointment of the Arbitrator in the prescribed format along with the forwarding letter dated 05/02/2014. The respondent no.1 received the said letter dated 05/02/2014 along with the prescribed format but failed and neglected to appoint an Arbitrator. Hence, the application.
4. The Superintending Engineer, Goa Central Division, CPWD, Bambolim, Goa has filed affidavit-in-reply on behalf of the respondents. He has, inter alia, stated that in terms of contract agreement executed between the applicant and the respondent, this Court has no jurisdiction to entertain the application since the applicant has not exhausted all the remedies available to him under the contract agreement and hence, the application is premature and is liable to be dismissed. He stated that In terms of clause 25 of the agreement no. 7/SE/GCD/2012-13, a Dispute Redressal Committee (DRC, for short) has been incorporated and the applicant has not appealed to the DRC. It is further stated that before receipt of the notice of this Court, the respondent no.1 by letter no. WZ-II-C&A/54 (162) 2014/89 dated 24/04/2014, had duly informed the applicant that the applicant has to exhaust the complete channel for redressal of his grievance including the appeal to DRC. In view of the above, the respondents alleged that this Court has no jurisdiction to ente
