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IN THE HIGH COURT OF ALLAHABAD
RAJEEV MISRA, J.
M/S. Chandra Hi Tech - Applicant
Versus
M/S. U.P. State Industrial Development Authority and Another - Opposite Parties
Arbitration and Concili. Appl.U/S 11(4) No. 43 of 2022
Decided On : 23-08-2023
Advocate Appeared:
For the Applicant : Nitin Chopra.
The main legal point established in the judgment is that any amount due under a contract cannot be withheld indefinitely without legal sanction, and disputes regarding unpaid amounts are capable of being referred to arbitration.
Headnote:
Arbitration - Appointment of Arbitrator - Arbitration and Conciliation Act
Fact of the Case:
The applicant, a partnership firm, entered into a contract for construction of a Sewage Treatment Plant with the U.P. State Industrial Development Authority. The applicant completed the work, but a balance amount of Rs.46,84,252 remained unpaid. The applicant invoked the Arbitration Clause, but the respondents did not appoint an arbitrator. The applicant filed a petition under Section 11 of the Arbitration and Conciliation Act before the Delhi High Court, which was dismissed as withdrawn. The applicant then approached the present court for appointment of an arbitrator.
Finding of the Court:
The court found that a dispute existed between the parties regarding the unpaid amount, and it was capable of being referred to arbitration. The court referred to the law laid down in Vidya Drolia Vs. Durga Trading Corporation (2021) 2 SCC 1 and held that the dispute was liable to be referred to arbitration. The court allowed the application and appointed an arbitrator to resolve the dispute.
Issues: The main issues were the unpaid balance amount under the contract, the invocation of the Arbitration Clause, and the appointment of an arbitrator to resolve the dispute.
Ratio Decidendi: The court held that any amount due under the contract cannot be withheld indefinitely unless there is a legal sanction behind it. It referred to the law laid down in Vidya Drolia Vs. Durga Trading Corporation (2021) 2 SCC 1 and concluded that the dispute between the parties was capable of being referred to arbitration.
Final Decision: The court allowed the application and appointed an arbitrator to resolve the dispute between the parties.
JUDGMENT :
1. This application under section 11 of the Arbitration and Conciliation Act, has been filed by applicant seeking appointment of an Arbitrator to resolve the dispute between the parties.
2. I have heard Mr. P.K. Sikka along with Mr. Nitin Chopra, the learned counsel for applicant and Mr. Ashish Agarwal, the learned counsel for respondent.
3. The applicant M/S Chandra Hi Tech is a partnership firm which is duly registered with the Registrar of firms under the Partnership Act. Mr. Siddharth Gupta and Mr. Sachin Agarwal are said to be partners of aforesaid partnership firm.
4. That U.P. Industrial Development Authority is presently known as Government Company who is now known as U.P. State Industrial Development Authority.
5. That erstwhile U.P. State Industrial Development Corporation Limited invited tenders for construction of Sewage Treatment Plant 1A, Kursi Road, Barabanki, U.P. In response to the said tender notice, applicant also submitted his tender. Ultimately, tender submitted by applicant was accepted. Accordingly, Contract Bond No. 14/CE/2010-11 dated 9.7.2010 was executed. Same was followed by Job No. CD-VI (104) dated 30.4.2010. Value of the contract was assessed as Rs.6,46,00,000/-.
6. It is the case of applicant that pursuant to the above contract, the work started on 9.7.2010 and was completed in the month of October, 2014. Therefore, the final bill was raised on 3.3.2016. According to applicant, the Sewage Treatment Plant was handed over to the respondents on 5.2.2016, which has been confirmed on 5.2.2016 itself. The entire amount payable under the contract has been substantially paid except for the meagre amount of Rs.46,84,252/-.
7. Record shows that a letter dated 11.9.2018 was issued by the Executive Engineer of Corporation (U.P.S.I.D.C) asking the applicant to remove certain deficiencies which were noticed in the inspection conducted on 14.6.2018.
8. According to applicant, the deficiencies pointed out, vide letter dated 11.9.2018, have been rectified by undertaking the works specified therein. However, in spite of above, the balance amount due to the applicant under the contract i.e. Rs.46,84,252/- has not yet been paid.
9. In the circumstances as noted above, the applicant invoked Arbitration Clause contained in Clause-31 of Section-2 of the General Conditions of Contract. For ready reference, the same is reproduced herein under :
“If any question, difference or objection whatsoever shall arise in any way connected with or arise in any way connected with or arising out of his instrument or the meaning or operation of any part thereof or the right duties or liabilities of either party than save insofar as the decision of any such matter is herein before provided for an has been so decided every such matter including whether its decision has been otherwise provided for and/or whether it has been finally decided accordingly, or whether the contract should be terminated or has been rightly terminated and as regards the right and obligations of the parties as the result of such termination shall be referred for arbitration to Managing Director UPSIDC, acting as such of the time of reference within 180 days or 6 months from the payment of final bill or written notice issued to the contractor that his bill is ready for payment and his decision shall be final and binding and where the matter involves a claim for or the payment or recovery of deduction of money, only the amount, if any awarded in such arbitration shall be recoverable in respect of the matter so referred if the matter is not referred to arbitration within the specified period, all the rights and claims under the contract shall be deemed to have been forfeited and absolutely barred.”
10. However, no action was taken by respondents to appoint an Arbitrator for resolving the aforementioned dispute between the parties. Accordingly, applicant filed a petition under Section 11 of the Arbitration and Conciliation Act 1996 before the Delhi High Court, the s
