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IN THE HIGH COURT OF JUDICATURE AT PATNA
VIKASH JAIN, J.
Kumar & Kumar Associates - Petitioner
Versus
The Union of India Respondents
Civil Writ Jurisdiction Case No. 2308 of 2014
Decided On : 27-07-2016
Termination - Railway Contract - Code of Civil Procedure, 1908, Arbitration and Conciliation Act, 1996 - Section 89, Section 12(5) - Seventh Schedule
Fact of the Case:
The petitioner, a partnership firm, participated in a tender issued by the respondent railway for various construction works. The work was delayed, and the petitioner requested for closing the agreement and payment of its dues. The respondent terminated the agreement, leading to the present writ petition.
Finding of the Court:
The court found that an arbitrable dispute existed between the parties and directed the petitioner to raise its grievances through arbitration. The court also ruled that a serving railway officer could not be appointed as an arbitrator due to the newly inserted Section 12(5) and Seventh Schedule of the Arbitration and Conciliation Act, 1996.
Issues: Delay in completion of work, Termination of agreement, Appointment of arbitrator
Ratio Decidendi: The court's decision was influenced by the newly inserted Section 12(5) and Seventh Schedule of the Arbitration and Conciliation Act, 1996, which rendered serving railway officers ineligible for appointment as arbitrators, overriding any prior agreement between the parties.
Final Decision: The court appointed a retired judge as the sole arbitrator for settling the dispute between the parties in accordance with the provisions of the Arbitration Act.
The present writ petition has been filed for quashing the termination notice bearing no. W.7/17/Misc/PNBE/L/Open/08-09 dated 29.01.2013 issued by the Respondent No. 6 whereby the Agreement No. W-17/Misc/PNBE/L/Open/08-09 executed between East Central Railway and the petitioner on 05.12.2008 has been terminated; as well as for a number of connected reliefs.
2. I.A. No. 2802 of 2016 has been filed for amendment in the relief portion by adding the following prayers –
“1(ix) To issue an appropriate writ/order/direction referring the parties to settle their dispute through the alternative mechanism of arbitration by invoking Section 89 of the Code of Civil Procedure, 1908;
1(x) To issue an appropriate writ/order/direction directing for appointment of an independent arbitrator for adjudication of the dispute between the parties in view of Section 12(5) read with Seventh Schedule of the Arbitration and Conciliation Act, 1996”
Having regard to the nature of the prayers, I.A. No. 2802 of 2016 is allowed and the petitioner is permitted to make appropriate amendments in the writ petition.
3. The short facts of the case are that the petitioner, a registered partnership firm, participated in a Tender bearing No. W-7/Tender/16/Open/DNR/07-08 dated 28.09.2007 issued by the respondent railway for earth work in filling in formation, blanketing, extension/construction of low/high level platform, construction of sand hump, linking of track, linking of point and crossing, construction of retaining wall and other ancillary work with respect to loop and crossover at Bankaghat and Khusrupur Railway Station on Main Line under AEN (Line), Patna. The work was awarded to the petitioner vide letter of acceptance dated 30.05.2008 at a total cost of Rs. 2,11,75,420.03. Subsequently, an agreement was entered into between the parties on 05.12.2008. The petitioner duly deposited the requisite amounts towards security deposit and earnest money as well as towards personal guarantee. It appears that progress of the work was delayed, which delay was, according to the petitioner, attributable to the respondent-Railway and for which several letters were written by the petitioner. Applications were also filed for extension of date of completion (“DOC” for short), which was granted successively upto 30.12.2009, 30.06.2010, 31.03.2011, 31.12.2011, 31.01.2012 and lastly upto 16.04.2012. Three supplementary agreements were also executed on 13.03.2009, 25.01.2010 and 26.12.2011 respectively, and the value of the contract was enhanced first to Rs. 2,90,31,896.06 and finally to Rs. 3,14,60,586.15. In view of considerable problems and hindrances being faced by the petitioner in completing the work, the petitioner requested the respondents by letter dated 08.03.2011 to close the agreement and make payment of its legitimate dues to the extent of work already completed. On the request of the respondents to complete the remaining work, however, the petitioner continued in the project upon the DOC being extended upto 16.04.2012 as aforesaid. Thereafter, however, on being required by the respondents through letter dated 19.12.2012 to execute and complete the entire work, the petitioner expressed by letter dated 24.12.2012 that in view of the continuing obstructions on the work site, the work could not be completed and it was not possible to seek further extension of the DOC, and therefore a request was again made for closing the agreement and for making payment of the petitioner’s dues. Further correspondence ensued, leading the petitioner to dispatch a legal notice dated 14.01.2013, seeking closure of the agreement and payment of its dues. The respondents on their part terminated the agreement with effect from 16.04.2012 being the date upto which the DOC had been finally granted.
4. Learned counsel for the petitioner submits that the impugned order of termination dated 29.01.2013 is wholly arbitrary and illegal, considering that the enormous delay in completing the work was
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