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2018 Supreme(Raj) 1031
IN THE HIGH COURT OF RAJASTHAN
ARUN BHANSALI, J.
Shakti Builders - Appellant
Versus
Divisional Railway Engineer (West), North Western Railway, Jodhpur - Respondent
Arbitration Application No. 11 of 2018
Decided On : 23-10-2018
K.K. Shah, Adv., Kamal Dave, Adv.
Failure to comply with the pre-requisite conditions for invoking provisions of Section 11(6) of the Act renders the application not maintainable.
Headnote:
ARBITRATION - SETTLEMENT OF DISPUTES - CLAUSE 63 AND 64 OF THE STANDARD GENERAL CONDITIONS OF CONTRACT (GCC) - REFERENCE OF DISPUTE TO GENERAL MANAGER (GM) - FAILURE TO COMPLY WITH PRE-REQUISITE CONDITIONS - APPLICATION UNDER SECTION 11(6) OF THE ARBITRATION AND CONCILIATION ACT, 1996 DISMISSED.
Fact of the Case:
Applicant sought reference of dispute to sole Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 (the Act). The dispute arose from a contract for protection and restoration of Bank boulder pitching. The respondent issued a 24-hour notice forfeiting security deposit and performance guarantee due to delay in execution of the work. The contract was subsequently rescinded, and the applicant raised a dispute seeking payment within 120 days as per Clause 63 of the GCC. After 120 days, the applicant sought appointment of sole Arbitrator, but the respondent did not appoint one.
Finding of the Court:
The court found that the applicant failed to comply with the pre-requisite conditions for invoking provisions of Section 11(6) of the Act. The applicant did not refer the dispute to the GM as required by Clause 63 of the GCC and did not make a demand for arbitration to the GM as required by Clause 64(1) of the GCC.
Issues: Whether the applicant complied with the pre-requisite conditions for invoking provisions of Section 11(6) of the Act.
Ratio Decidendi: The court held that the provisions of Clause 63 and 64 of the GCC are mandatory and that the applicant failed to comply with the same. The court noted that the GM has the power to decide disputes and that the applicant was required to refer the dispute to the GM. The court also noted that the applicant failed to make a demand for arbitration to the GM as required by Clause 64(1) of the GCC.
Final Decision: The court dismissed the application under Section 11(6) of the Act, leaving it open for the applicant to act in accordance with law.
ARUN BHANSALI, J.
1. This application under Section 11(6) of the Arbitration and Conciliation Act, 1996 ('the Act') has been filed by the applicant seeking reference of dispute indicated in notice dated 15.03.2018 (Annex.-22) to the sole Arbitrator to be appointed by this Court.
2. It is, inter alia, indicated in the application that on 10.05.2016, the applicant was awarded work of protection and restoration of Bank boulder pitching etc., the agreement in this regard was executed on 10.07.2016. During the course of execution of contract, on 25.09.2017, the respondent issued a 24 hours' notice in terms of Clause 62 of the Standard General Conditions of Contract ('the GCC') indicating that the security deposit and performance guarantee amount has to be forfeited. The applicant responded to the same indicating the reasons for delay in execution of the work. On 28.09.2017 (Annex.-20), the contract was rescinded in terms of Clause 62 of the GCC and it was indicated that the security deposit shall be forfeited and performance guarantee shall also be en-cashed.
3. By representation dated 31.10.2017, the applicant, raised dispute and sought payment of Rs. 36,25,511/- within a period of 120 days as specified in Clause 63 of the GCC. Where after, after lapse of 120 days, on 15.03.2018, the applicant sought appointment of sole Arbitrator in terms of Clause 64 of the GCC. However, the respondent did not appoint the sole Arbitrator leading to filing of the present application.
4. On notices being issued, a reply has been filed by the sole-respondent, inter alia, raising several objections. It is, inter alia, indicated that in terms of Clause 63 and 64 of the GCC, the applicant did not refer the dispute to the requisite authority i.e. the General Manager ('the GM') and as such the reference made invoking provisions of Clause 63 and 64 of the GCC is not inconformity with mandatory requirement of Clause 63 and 64 of the GCC and, therefore, for absence of pre-requisite condition for invoking provisions of Section 11(6) of the Act, the application deserves to be rejected.
5. It was emphasized that the notice seeking appointment also could only be issued to the GM and, therefore, the application filed by the applicant deserves to be rejected on this count alone.
6. Further submissions have been made that the timeline as required by provisions of Clause 63 and 64 of the GCC have not been adhered to by the applicant and, therefore, on that count also, the application deserves to be dismissed.
7. Learned counsel for the applicant, made submissions that the facts are not in dispute wherein the contract was terminated on 28.09.2017, the applicant raised dispute on 31.10.2017 and, thereafter on 15.03.2018, sought appointment of Arbitrator, which is in consonance with the timeline provided under Clause 63 and 64 of the GCC and, therefore, the objection raised in this regard is baseless.
8. Further submission has been made that the agreement between the parties as reflected from the agreement (Annex.-2) was entered into between the President of India acting through the Divisional Engineer (West), NWR, Jodhpur and the applicant and the order of termination of contract also has been passed by the same authority and, therefore, the argument sought to be raised by the respondents that as the notice was not sent/given to the GM, the application is not maintainable has not basis. It was prayed that in view of the provisions of Section 11(6-A) of the Act, the application be allowed and an appropriate sole Arbitrator be appointed for resolving the dispute between the parties.
9. Learned counsel appearing for the respondent reiterated the objections and placed reliance on United India Insurance Co. Ltd. v. Hyundai Engineering & Construction Co. Ltd. and Others.: Civil Appeal No. 8146 of 2018 arising out of SLP(C) No.4260/2018, decided on 21.08.2018.
10. I have considered the submissions made by learned counsel for the parties and have perused the material availabl
