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2007 Supreme(Del) 925
IN THE HIGH COURT OF DELHI
Honble Judges: Vipin Sanghi, J.
Appellants: Earnest Builders (Pvt.) Ltd.
Vs.
Respondent: Union of India (UOI) and Ors.
Arb. P. No. 307/2005
Decided On: 02.05.2007
For Appellant/Petitioner/Plaintiff: R.D. Sharma, Adv.
For Respondents/Defendant: Amita Singh, Adv.
The main legal point established is that the appointment of an arbitrator must be in accordance with the arbitration agreement, and the arbitrator should consider the claims and defenses based on the contract terms and conditions.
Headnote:
Arbitration - Dispute Reference - Arbitration and Conciliation Act - Section 11(6)
Fact of the Case:
The petitioner sought reference of its disputes with the respondent to arbitration in terms of an arbitration agreement. Disputes arose regarding works done by the petitioner under the contract, and the respondent only agreed to refer two of the claims to arbitration.
Finding of the Court:
The court found that the present application deserves to be allowed as the appointment made by the respondent was of no avail, and the respondent failed to point out how the decision of the CWE is final and binding for the claims not referred to arbitration.
Issues: The issues revolved around the reference of disputes to arbitration, the respondent's appointment of a substitute arbitrator, and the interpretation of contract conditions regarding the waiver of claims after submission of the final bill.
Ratio Decidendi: The court held that the respondent's appointment was ineffective, and the claims withheld by the respondent and not referred to arbitration did not constitute excepted matters. The court also emphasized that the arbitrator should consider the claims, counter claims, and respective defenses of the parties based on the contract terms and conditions.
Final Decision: The court allowed the application and appointed an independent arbitrator to adjudicate the claims and counter claims of the parties, fixing the arbitrator's fees to be shared equally by the parties.
Vipin Sanghi, J.
1. This petition under Section 11(6) of the Arbitration and Conciliation Act (The Act) has been filed by the petitioner to seek reference of its disputes with the respondent to arbitration in terms of an arbitration agreement contained in the contract agreement number CWE/PM/N.18/98-99.
2. It is the admitted position that the parties had entered into the aforesaid agreement which contains an arbitration agreement in clause 70 of the IAFW-2249. Under this clause disputes between the parties to the contract shall, other than disputes in respect of which the decision of the CWE or any other person is, by the contract expressed to be final and binding, after written notice by either party to the contract to the other, be referred to the sole arbitration of any serving officer having degree in engineering or equivalent on having passed final/direct final examination of subdivision II of Institute of Surveyor (India) recognized by the Government of India, to be appointed by the authority mentioned in the tender document.
3. In relation to the works done by the petitioner under the aforementioned contract, disputes arose and the petitioner sought reference of its seven claims to Arbitration. The chief engineer who is the appointing authority appointed an arbitrator by his communication dated the 9th September, 2003 in relation to two claims of the petitioner deleting five other claims made by it. The petitioner protested against the non-reference of some of its claims by the chief engineer.
4. The arbitrator entered upon the reference on the 16th September, 2003. However, he resigned from the post of arbitrator vide his communication dated 12th April, 2004. The petitioner thereafter once again requested the chief engineer to refer all his claims to a new arbitrator vide his communication dated 24th April, 2004 and reminder dated 25th April, 2005 but to no avail.
5. The petitioner thereafter filed the present application on the 1st September, 2005 in the Court of the District Judge, Delhi which has been transferred to this Court after the decision of the Honble Supreme Court in the case of SBP v. Patel Engineering.
6. The respondent in its reply has stated that it has already appointed a substitute arbitrator on the 21st September 2005. It is further stated that the petitioner had submitted its final bill on 5th March, 2001 without any protest. Under the terms of the agreement, as per condition 65 of the IAFW-2249, no further claim can be made by the contractor after submission of the final bill and all other claims shall be deemed to be waived and extinguished. thereforee the claim of the petitioner for damages could not be referred to arbitration. It is further stated that the other claims, of which reference was sought by the petitioner, and which were not referred to Arbitration, the decision of the CWE is final and binding and thereforee not referable to arbitration under condition 70 of the IAFW-2249. It is claimed that the earlier appointed Arbitrator had already ruled that the other claims raised by the petitioner were excepted matter. Counsel for the respondent also contended in the alternative, that if the court was inclined to appoint an independent arbitrator in exercise of its power under Section 11 of the Act, the appointee should have the requisite qualification as is prescribed under the arbitration clause.
7. Petitioner had sought reference of seven claims to arbitration. They read as follows:
Sl. Brief of description of Claims Approx. Amount No.
1. Reimbursement of Sale Tax on works contract made applicable by Delhi Govt. w.e.f. 01-12-1999. Not known to the contracting parties (Recovered from our final bill vr. No. E/22/526/EM dated 05-03-2001) 42421.00
2. Damage due to Breach of Contract by M.E.S. By non-handling over of
sites, delay in RAR payments, delay in decisions, delay in decision of commission of HT Panels and HT Cables, Illegal cancellation of contract for certain period beyond
the p
