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2012 Supreme(Cal) 26
High Court Of Calcutta
Sanjib Banerjee, J.
Shristi Infrastructure Development Corporation Ltd – Appellant
Versus
Mfar Construction Pvt. Ltd – Respondent
AP No. 897 of 2011
Decided on : Jan 11, 2012
S.N.Mookerjee, Ranjan Bachawat, Ravi Kapur, Debnath Ghosh, Monoj Kr.Tewari, Jishnu Chowdhury, P.K.Srivastava, J.Pandit, P.Goswami
An arbitration agreement of restricted operation covers only disputes between the engineer and the contractor.
Headnote:
ARBITRATION - SCOPE OF ARBITRATION AGREEMENT - RESTRICTED OPERATION - DISPUTES BETWEEN ENGINEER AND CONTRACTOR - NO DISPUTES BETWEEN CONTRACTOR AND ENGINEER - OWNER'S PETITION UNDER SECTION 9 OF THE ARBITRATION AND CONCILIATION ACT, 1996 - DISMISSED - CONTRACTOR'S PETITION UNDER SECTION 9 OF THE ACT - WITHDRAWN.
Fact of the Case:
The owner and the contractor entered into an agreement for the construction of a building intended to be a five-star hotel. The agreement contained an arbitration clause in clause 67. The owner filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, alleging that the contractor had not taken up the work with due diligence and had failed to adhere to the agreed schedule. The contractor filed a subsequent petition under Section 9 of the Act, alleging that the owner failed to make timely payments or mobilize the other resources necessary for the construction work to be carried out or completed.
Finding of the Court:
The court held that the arbitration agreement between the parties was of restricted operation and covered only disputes between the engineer and the contractor. The court found that there were no real disputes between the contractor and the engineer and that the owner's petition was not maintainable. The court also held that the matters covered by the contractor's petition would not be covered by the arbitration agreement and that the contractor did not wish to proceed with its petition.
Issues: Whether the arbitration agreement between the parties covered all disputes and differences that could arise between the parties in respect of the agreement.
Ratio Decidendi: The court held that the arbitration agreement between the parties was of restricted operation and covered only disputes between the engineer and the contractor. The court found that there were no real disputes between the contractor and the engineer and that the owner's petition was not maintainable. The court also held that the matters covered by the contractor's petition would not be covered by the arbitration agreement and that the contractor did not wish to proceed with its petition.
Final Decision: The court dismissed the owner's petition and the contractor's petition was withdrawn.
1. A.P. No. 897 of 2011 is the earlier petition under Section 9 of the Arbitration and Conciliation Act, 1996 filed by the owner and A.P. No. 903 of 2011 is the subsequent petition under Section 9 of the Act filed by the contractor.
2. UNDER an agreement in writing dated March 13, 2009, the contractor was engaged by the owner for the construction of a building intended to be a five- star hotel in Rajarhat. The detailed agreement contains the mechanism for resolution of disputes in clause 67 thereof. The owner carried the Section 9 petition on the owner's understanding that the arbitration agreement contained in clause 67 covered all disputes and differences that could arise between the parties in respect of the agreement. It appears that the contractor also harboured the same perception till it was submitted on behalf of the contractor in course of the present proceedings that the arbitration agreement may be of restricted operation and there may be no arbitration agreement between the parties to cover the disputes that have been carried by way of the rival petitions under Section 9 of the Act. It is necesssary, in such context, to see clause 67 of the agreement between the parties.
"Clause 67.0 SETTLEMENT OF DISPUTES All disputes or differences of any kind whatsoever that may arise between the Engineer and the Contractor in connection with or arising out of the contract or subject matter thereof or the execution of their completion, whether during the progress of works or after their completion whether before or after the determination of contract shall be settled as under: 67.1 Mutual Settlement All such disputes or differences shall in the first place be referred by the Contractor to the Owner's Representative in writing for resolving the same through mutual 3 discussions, negotiations, deliberation etc. associating representatives from both the sides and concerted efforts shall be made for reaching amicable settlement of disputes or differences. 67.2 Conciliation/Arbitration a) It is a term of this contract that Conciliation/Arbitration of disputes shall not be commenced unless an attempt has first been made by the parties to settle such disputes through mutual settlement. b) If the Contractor is not satisfied with the settlement by the Owner's Representative on any matter in question, disputes or differences, the Contractor may refer to the Managing Director of the Owner in writing to settle such disputes or differences through Conciliation or Arbitration provided that the demand for Conciliation or Arbitration shall specify the matters, which are in question or subject of the disputes or differences as also the amount of claim, item wise. Only such dispute(s) or difference(s) in respect of which the demand has been made, together with counter claims of the Owner shall be referred to Conciliator or Arbitrator as the case may be and other matters shall not be included in the reference. c) ... d) ... e) ... f) ... g) ... h) ... 67.3 ... 67.4 ... 67.6 ..."
It is undeniable that only disputes or differences that arise between the engineer and the contractor in connection with or arising out of the agreement would be matters which could ultimately be carried to arbitration. The opening paragraph in clause 67.0 leads to clause 67.1. The word 'such' in the opening limb of clause 67.1 links it to the disputes and differences which are mentioned in clause 67.0. Though sub-clause (a) of clause 67.2 appears to be a stand-alone clause, there is no substantive agreement reflected therein between the owner and the contractor to carry their disputes and differences under the construction agreement to an arbitral reference. Indeed, the second sub-clause of clause 67.2 refers to "settlement" and the "owner's representative." That a settlement may be brought about by the owner's representative is envisaged in clause 67.1 and covers only the disputes and differences between the contractor and the engineer. It is such settlement that
