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2015 Supreme(Ker) 284
IN THE HIGH COURT OF KERALA AT ERNAKULAM
P. BHAVADASAN, J.
M/S. IVRCL LIMITED(FORMRLY IVRCL, INFRASTRUCTURES & PROJECTS LTD.) - APPLICANT
Vs.
UNION OF INDIA - RESPONDENT
Arbitration Request Nos. 67, 68 & 69 of 2014
Decided On : 10.4.2015
Advocate Appeared:
For the Appellant :SRI. K.L. VARGHESE (SENIOR ADVOCATE), SMT. SANTHA VARGHESE SRI. RAHUL VARGHESE, SRI. RANJITH VARGHESE.
For the Respondent: SRI. N. NAGARESH, ASSISTANT SOLICITOR GENERAL, SRI. S. KRISHNAMOORTHY, CGC, SENIOR PANEL COUNSEL.
Headnote:
ARBITRATION - APPOINTMENT OF ARBITRATOR - SECTION 11 OF THE ARBITRATION AND CONCILIATION ACT, 1996 - PROCEDURE AND METHOD FOR APPOINTMENT OF ARBITRATOR - COURT'S POWER TO APPOINT AN INDEPENDENT ARBITRATOR - CONDITIONS PRECEDENT.
Fact of the Case:
The petitioner, a contractor, entered into three agreements with the respondent, a government department, for construction work. Disputes arose between the parties, and the petitioner approached the court under Section 11 of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator to resolve the disputes.
Finding of the Court:
The court held that the petitioner had a right to seek arbitration, and that the respondent's contention that the arbitration request was premature was not tenable. The court also held that the procedure and method for appointment of an arbitrator as prescribed in the contract between the parties was not binding on the court, and that the court had the power to appoint an independent arbitrator if it felt that such an appointment was necessary to ensure an impartial and fair resolution of the disputes.
Issues: 1. Whether the petitioner had a right to seek arbitration under Section 11 of the Arbitration and Conciliation Act, 1996, despite the respondent's contention that the arbitration request was premature. 2. Whether the court was bound to follow the procedure and method for appointment of an arbitrator as prescribed in the contract between the parties.
Ratio Decidendi: 1. The court held that the petitioner had a right to seek arbitration under Section 11 of the Arbitration and Conciliation Act, 1996, despite the respondent's contention that the arbitration request was premature. The court reasoned that the period of limitation for seeking arbitration begins to run from the date of breach of contract, and that the respondent's contention would effectively postpone the petitioner's right to seek arbitration indefinitely. 2. The court held that the procedure and method for appointment of an arbitrator as prescribed in the contract between the parties was not binding on the court. The court reasoned that Section 11(6) of the Arbitration and Conciliation Act, 1996, empowers the court to take necessary measures to secure the appointment of an arbitrator, and that this provision gives the court the discretion to appoint an independent arbitrator if it feels that such an appointment is necessary to ensure an impartial and fair resolution of the disputes.
Final Decision: The court allowed the petitioner's arbitration requests and appointed Justice K. Padmanabhan Nair as the arbitrator to resolve the disputes between the parties.
The applicant has approached this Court under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') for appointment of an Arbitrator to resolve the dispute between the petitioner and the respondent.
2. The petitioner had contracted for three works relating to Ezhimala Naval Academy and they are, Agreement No.7/2005-06 which gives rise to A.R. No. 69 of 2014, Agreement No. 8/2007-08 which gives rise to A.R. No. 67 of 2014 and Agreement No. 9/2005-06 which gives rise to A.R. No. 68 of 2014. Agreement No. 7/2005-06 relates to the work of the main building, Agreement No. 8/2007-08 relates to large scale construction and Agreement No.9/2005-06 relates to residential quarters, each valued at Rs.125 Crores, Rs.32.65 Crores and Rs.62.76 Crores respectively. The time for completion of the work was 24 months with respect to Agreement Nos. 7/2005-06 and 8/2007-08 and 18 months with respect to Agreement No. 9/2005-06.
3. The petitioner would aver that during the work, several deviations and changes were incorporated by the respondent and large number of revisions of drawings had to be made in all these cases. This has caused the work to go beyond the stipulated period and several extensions had to be given. Several other factors intervened and delayed the progress of the work which has been specified in each of the petitions. It is not necessary for the purpose of these applications to narrate them in detail in this order.
4. The petitioner would contend that the economic viability of the agreement would depend upon the completion of the work. The inordinate delay in completing the work, mainly due to the conduct on the part of the respondent, resulted in considerable increase of cost of construction. According to the petitioner, usually in these types of contracts, an escalation clause will be provided. But for reasons best known to the respondent, it was conspicuously absent in the agreements on hand. The petitioner would assert that as per the various decisions of the various High Courts and Apex Court in such cases, the contractor is entitled to enhanced rate especially when the period for completion of work has been extended by the other party. The various communications sent to the respondent are produced in these applications. It is pointed out by the petitioner that as far as Agreement No.7/2005-06 is concerned, there were 1250 revised drawings and Agreement No.8/2007-08 is concerned, there were 75 revised drawings. In Agreement No.9/2005-06, there were 70 revised drawings. With respect to Agreement No.7/2005-06, 92% of the work had been completed and with respect to Agreement No.8/2007-08, the entire work has been completed and with respect to Agreement No.9/2005-06, 84% of the work had been completed. With respect to Agreement No.7/2005-06, Bank Guarantee worth Rs.6.20 Crores was furnished, while in Agreement No.8/2007-08, Bank Guarantee worth Rs.40 Lakhs was furnished and with respect to Agreement No.9/2005-06, Bank Guarantee worth Rs.1.08 Crores was furnished.
5. The complaint of the petitioner is that without justification, Agreement No.7/2005-06 was terminated on 29.11.2014 and on 19.7.2014 Agreement No.9/2005-06 was terminated.
6. Since disputes and differences arose between the parties with regard to each of the work, it had to be resolved through arbitration going by Clause 70 of the General Conditions. The relevant document is produced as Annexure A10 in A.R. No.68 of 2014. But that clause contains several restrictions and qualifications and also provided that the right for arbitration arises only on alternative arrangement being made by the respondent under condition No.54 relating to cancellation of contract.
7. The respondent resorted to take coercive steps against the petitioner arbitrarily. Petitioner is given to understand that the respondent is taking steps to have t
