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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.J. Kathawalla, J.
M/s F A Enterprise - Appellant
Versus
Vidarbha Irrigation Development Corporation - Respondent
Arbitration Petition No. 62 of 2017
Decided On : 13-08-2021
Arbitration Petition - Appointment of Arbitrator - Arbitration and Conciliation Act, 1996 - Clauses 30.1, 30.2, 30.3 - The court held that the clauses empowering the Superintending Engineer to take certain decisions and providing for an appeal did not constitute a valid arbitration agreement. The judgments of the Supreme Court in Vishnu (Dead) by LRs and M/s. P. Dasarathorama Reddy Complex were relied upon to support the decision.
Fact of the Case:
The Petitioner, a registered Partnership Firm, filed an Arbitration Petition seeking appointment of an Arbitrator to decide disputes arising from a Work Contract with the Respondents. The disputes arose when the work was cancelled due to non-availability of funds, and the Petitioner invoked clauses 30.1, 30.2, and 30.3 of the General Conditions of the Contract to request payment.
Finding of the Court:
The court found that the clauses in question did not constitute a valid arbitration agreement, as they were meant for expeditious sorting out of problems and did not involve adjudication of any dispute or lis between the parties. The court also relied on the judgments of the Supreme Court in similar cases to support its decision.
Issues: The main issue was whether the clauses in the General Conditions of the Contract constituted a valid arbitration agreement.
Ratio Decidendi: The court held that the clauses empowering the Superintending Engineer and providing for an appeal did not constitute a valid arbitration agreement, as they were meant for expeditious sorting out of problems and did not involve adjudication of any dispute or lis between the parties.
Final Decision: The Arbitration Petition seeking appointment of an Arbitrator was dismissed, as the court found that there existed no arbitration agreement between the parties.
JUDGMENT
S J Kathawalla, J. - The above Arbitration Petition is filed by the Petitioner under Section 11 of the Arbitration and Conciliation Act, 1996 ('the Act') seeking appointment of an Arbitrator to decide the disputes between the Petitioner and the Respondents arising out of the Work Contract dated 17th August, 2009.
2. The facts which have led to the filing of the above Arbitration Application, are in brief set out hereunder :
2.1 The Petitioner is a registered Partnership Firm, undertaking engineering and irrigation contracts of various organizations.
2.2 Respondent No.1 is a Statutory Corporation formed by the Government of Maharashtra in the year 1997, for timely completion of irrigation projects in the Vidarbha Region. Respondent No.2 is the Executive Director of Respondent No.1.
2.3 Pursuant to a Tender Notice No.1/2009-2010, a Work Order dated 17th August, 2009 was issued by the Respondents to the Petitioner for "Construction of left bank, main canal of Lower Penganga Project @ RD 36000 mt to 55000 mt., of District Yavatmal", at Tender Cost of Rs.699,76,22,994/-, to be completed within 72 months from the date of issue of the said Work Order. The work was to be carried out as per the General and Special Conditions mentioned in the Tender.
2.4 Relying on Clauses 30.1, 30.2 and 30.3 of the General Conditions of the Contract, the Petitioner has submitted that there exist an Arbitration Agreement between the Petitioner and the Respondent No.1. The said Clauses 30.1, 30.2 and 30.3 read thus :
"Clause 30.1 - Except where otherwise specified in the contract and subjected to the powers delegated to him by Corporation under the code, rules then in force, the decision of Superintending Engineer of the Circle for the time being shall be final, conclusive and binding on all parties to the contract upon all questions relating to the meaning of the specifications, design, drawing and instructions herein before mentioned and as to the quality of workmanship or material used on the work or as to any other questions claims, right matter or thing whatsoever if any way arising out of or relating to the contract designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works, or the execution or failure to execute same, whether arising during the progress of work or after the completion or abandonment thereof.
Clause 30.2 The contractor may within 30 days of receipt by him of any order passed by the Superintending Engineer of the circle as aforesaid appeal against it to the Chief Engineer concerned with the contract work or project provided that ....
a) The accepted value of the contract exceeds Rs. 100 Lakhs (Rs. One Hundred Lakhs)
b) Amount of claims is not less than Rs.1.00 Lakh (Rupees one Lakhs )
Clause 30.3 - If the contractor is not satisfied with the order passed by the Chief Engineer as aforesaid the contractor may within 30 days of receipt by him of any such order appeal against it to the Executive Director, Vidarbha lrrigation Development Corporation, Nagpur. Who, if convinced that prima facie the contractor's claim rejected by Superintendent Engineer / Chief Engineer is not frivolous and that there is some substance in the claim of the contractor as would merit a detailed examination and decision by the Executive Committee / Claim Committee at Corporation level for suitable decision."
2.5 By a Letter dated 12th May, 2011, the Respondent No.2 on behalf of the Respondent No.1, informed the Petitioner that the Chief Engineer, Water Resources Department, Amaravti, has ordered the said work to be cancelled due to non availability of funds and therefore the said Notice of Cancellation was being issued to the Petitioner under Clause 15 of the Tender Document.
2.6 Since disputes arose between the parties in this regard, the Petitioner vide its Letter dated 11th April, 2014 invoked Clause 30.1 of the General Conditions of the Contract and requested for payment as set out in the said Lette
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