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IN THE HIGH COURT OF JUDICATURE AT CALCUTTA
Ashis Kumar Chakraborty, J.
Kolkata Metropolitan Development Authority – Petitioner
Vs.
Hindustan Construction Co. Ltd. – Respondent
G.A. No. 3448, 3449 of 2017 With A.P.O. No. 501, 502 of 2017 Arising out of A.P. No. 956, 957 of 2016
Decided On : 01-12-2017
Arbitration and Conciliation Act, 1996 - Arbitral Agreement - Clause 41.1 and 41.2 - The court discussed the mandatory requirement of referring disputes to the Engineer-in-Charge before initiating arbitration, the jurisdiction of the arbitrator to entertain counter-claims, and the right of the respondent to raise counter-claims under Section 23(2A) of the Act. The court held that the counter-claims of the appellant were maintainable and set aside the impugned orders.
Fact of the Case:
The respondent invoked the arbitral agreement for appointment of an Arbitrator due to disputes arising from a construction contract. The appellant raised counter-claims, but the respondent contended that the counter-claims were not maintainable as they were not referred to the Engineer-in-Charge as per the contract.
Finding of the Court:
The court found that the appellant's counter-claims were maintainable as the right to raise counter-claims is conferred under Section 23(2A) of the Act, and the requirement of referring disputes to the Engineer-in-Charge does not apply to the respondent's counter-claims.
Issues: The main issue was whether the appellant was required to refer its counter-claims to the Engineer-in-Charge before initiating arbitration, and whether the respondent had the right to raise counter-claims under Section 23(2A) of the Act.
Ratio Decidendi: The court held that the appellant's counter-claims were maintainable as the right to raise counter-claims is conferred under Section 23(2A) of the Act, and the requirement of referring disputes to the Engineer-in-Charge does not apply to the respondent's counter-claims.
Final Decision: The impugned orders were set aside, and the learned Arbitrator was directed to proceed with the arbitral proceedings and consider the counter-claims raised by the appellant against the respondent in accordance with the law. The learned Arbitrator was also directed to fix his remuneration after considering the counter-claims.
Ashis Kumar Chakraborty, J.
1. These appeals under Section 37 of the Arbitration and Conciliation Act, 1996, as amended by the Amendment Act 3 of 2016 (in short “the Act of 1996”), at the instance of the same respondent in the arbitral proceedings, have been filed against the orders both dated July 18, 2017 passed by the same learned Arbitrator, in the arbitral proceedings arising out of A.P. 956 of 2016 and A.P. No. 957 of 2016. By the impugned orders, the learned Arbitrator allowed the applications filed by the respondent in these appeals, the claimant, under Section 16 of the Act of 1996 and refused to consider the counter-claims of the present appellant, the respondent in the arbitral proceedings. In both the appeals, the appellant has also filed separate applications for stay of operation of the respective impugned orders passed by the learned Arbitrator, as well as stay of the respective arbitral proceeding.
2. The facts giving rise to both the arbitral proceeding, between the same parties in these appeals are identical and the question that falls for consideration in both the appeals is common. Accordingly, both the appeals are disposed of by this common judgment.
3. Since the facts relevant for deciding these appeals are identical, arising out of the same contract, it would be suffice to discuss the facts relating to the appeal A.P.O. No. 501 of 2017.
4. The brief facts necessary for present purposes are that by an agreement dated February 12, 2010 entered into between the parties (hereinafter referred to as “the contract”), the appellant awarded a contract in favour of the respondent for construction of the elevated road corridor from Park Circus to E.M. Bypass near Parama Island. Clause 41.1 of the Special Terms and Conditions of the said contract contained an arbitral agreement for adjudication of the disputes, if any between the parties which might arise in connection with, or arising out of the execution of the contract. Since clauses 41.1 and 41.2 of the Special Terms and Conditions of the said contract has a bearing on the issue involved in this appeal the said clause is extracted here-in-below.
“Clause 41.1 :
Employer”s decision : If a dispute of any kind whatsoever arises between the Employer and the Contractor in connection with, or out of the Project or the execution of the Construction Works, whether during the execution of the works or after their completion and whether before or after repudiation or other termination of the Contract Agreement, including any dispute as to any opinion, instruction, determination, certificate or valuation of the Engineer In Charge, the matter in dispute shall, in the first place, being referred in writing to the Engineer In Charge, with a copy to the other party. All the disputes will be settled by the Employer with the help of Engineer In Charge and Employer’s decision will be final and binding to all.”
“Clause 41.2 :
Amicable Settlement : Where Notice of Intension to commence arbitration as to a dispute has been given in accordance with above Sub-Clause the parties shall attempt to settle such dispute amicably before the commencement of arbitration provided that, unless the parties otherwise agree, arbitration may be commenced on or after the fifty-sixth day after the day on which the notice of intention to commence the arbitration of such dispute was given, even if no attempt for amicable settlement thereof has been made”.
5. The respondent started construction of the said elevated road corridor and the time for completion of the said work was extended from time to time. The respondent alleged that the extension of time for completion of the contract from time to time gave rise to its various claims against the appellant, but the latter refused to entertain such claims. Thus, the disputes and differences arose between the parties with regard to the claims of the respondent against the appellant and by a notice dated August 3, 2016 the respondent invoked the arbitral agre
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