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2019 Supreme(UK) 327
IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL
RAMESH RANGANATHAN, J.
M/s Kuldip Singh Sethi & Gagan Goyal - Appellant
Versus
Ecole Globale International Girls School - Respondent
Arbitration Application No. 19 of 2016, 20 of 2016
Decided On : 30-07-2019
Advocate Appeared:
Arvind Vashisth, Adv., Rajat Mittal, Adv., Learned, Adv., T.S. Bindra, Adv.
Headnote:
The clause after Clause 31 of the agreement is not an arbitration agreement but a provision for expert determination. The Architect was involved at different stages of the execution of the work and was entrusted with the task of supervision of the work. He is not a person unconnected with the work and, in such circumstances, it is difficult to hold that the subject clause is an arbitration agreement, and not of expert determination.
Fact of the Case:
The applicant, a partnership firm engaged in the business of civil construction, is empanelled with the Uttarakhand State Infrastructure Development Corporation Limited as a Class-II contractor. It is the applicant's case that M/s Tarunjot Singh and others had approached them for developing and constructing a residential school in the name of Ecole Global International Girls School at Horawalla village, Dehradun; an agreement was executed between them on 22.01.2011; the school management had, thereafter, awarded them the work of lay-out, basic infrastructure and landscaping, etc for which an agreement was executed on 10.08.2011; and the said agreement dated 10.08.2011 required the work to be completed before 09.08.2012.
Finding of the Court:
The clause below Clause 31 of the agreement, evidently, requires the architect to make on his own inquiry, and apply his own expertise in deciding the question on his expert opinion. The said clause does not also obligate the architect to afford both the parties a full hearing and receive evidence from them. The Architect, who was made overall incharge of all works to be executed under the contract, was, evidently, considered by the parties to be the best person to provide immediate resolution of any controversy relating to specifications, designs, drawings, quality of workmanship or material used, etc. This is the primary reason why the Architect was entrusted with the task of taking decision on various matters. However, there is nothing in the language of the clause from which it can be inferred that the parties had agreed to confer the role of arbitrator upon the Architect.
Issues: 1. Whether the clause, after Clause 31 of the agreement, is an arbitration clause? 2. Whether the claim of the applicant, of the agreement containing an arbitration clause, is an after-thought?
Ratio Decidendi: 1. The clause below Clause 31 of the agreement does not reflect the consensus ad-idem between the applicant and the respondent to refer the dispute to arbitration. It does not also require the architect to determine the rights of the parties in an impartial and judicial manner owing an equal fairness to both sides. Nor does it provide for the decision of the architect to be enforceable in law. There is no specific provision in the said clause for the architect to receive evidence from both sides, hear their contention or to give the parties an opportunity to put them forward. None of the attributes of a valid arbitration agreement are to be found in the clause below Clause 31 of the agreement. 2. The applicant raised a final bill thereafter, and had subsequently sought reference to arbitration, lends credence to the submission, urged on behalf of the respondent by Mr. T.S. Bindra, learned counsel, that it is only after the amendment, by Act No. 3 of 2016, that this ruse was adopted by the applicant to somehow have the disputes between the parties referred to Arbitration, (even in the absence of an Arbitration agreement between the parties), while at the same time avoid arbitration by the Architect.
Final Decision: The applications, seeking appointment of an arbitrator, are dismissed.
JUDGMENT :
RAMESH RANGANATHAN, J.
1. This application is filed, under Section 11(4) & (6) of the Arbitration and Conciliation Act, 1996 (for short "the 1996 Act") seeking appointment of an arbitrator for settlement of the disputes between the parties, or to designate any person or institution for appointment, as per Section 11(6) of the 1996 Act.
2. The applicant, a partnership firm engaged in the business of civil construction, is empanelled with the Uttarakhand State Infrastructure Development Corporation Limited as a Class-II contractor. It is the applicant's case that M/s Tarunjot Singh and others had approached them for developing and constructing a residential school in the name of Ecole Global International Girls School at Horawalla village, Dehradun; an agreement was executed between them on 22.01.2011; the school management had, thereafter, awarded them the work of lay-out, basic infrastructure and landscaping, etc for which an agreement was executed on 10.08.2011; and the said agreement dated 10.08.2011 required the work to be completed before 09.08.2012.
3. There is a dispute between the parties regarding the change in the drawings and specifications. The respondent is said to have started running the school at the site from April, 2012, and to have commenced the admission process. In terms of Clause 14 of the Agreement, the applicant was required, on completion of the work, to raise a final bill on the respondent. It is the applicant's case that they completed the construction work in late 2014; despite raising running bills regularly, the respondent did not clear their bills on time, and failed to make payment as per the agreed terms between the parties; they raised their final bill on 02.02.2016 for Rs. 2,61,67,423/-; as the respondent failed to make payment, they issued two reminders on 1st March, 2016 and 26th March, 2016 requesting the respondent to clear the final bill raised by them; a legal notice was sent calling upon the respondent to make payment of Rs. 1,05,88,163/- after adjusting the part payment made by the respondent and, on failure to make payment, to agree to the appointment of an arbitrator in terms of the dispute resolution mechanism in accordance with the arbitration clause of the agreement dated 22.01.2011, and under Section 21 of the 1996 Act; the Architect, appointed by the respondent, was required to act as an arbitrator, and his decision was final and binding between the parties; in terms of the 2015 amendment to the 1996 Act, appointment of the Architect as an arbitrator is restricted; the applicant was not willing to give their consent for appointment of the architect as an arbitrator; they had, therefore, requested the respondent to give their consent for the appointment of Sri O.P.Bhatia, a retired Assistant Director General, CPWD as an arbitrator to resolve the disputes between the parties; they had strong objections to the appointment of the Architect as an arbitrator; he was regularly working with the respondent on various projects, and was also under the direct control of the respondent; while the 30 days' notice period expired on 08.06.2016, the respondent had sent a reply, to the legal notice dated 31.05.2016, contending that the claim of the applicant was an afterthought; they claimed compensation for the delay in construction; and, since the respondent did not agree to the appointment of an arbitrator, the applicant was constrained to invoke the jurisdiction of this Court by way of the present application.
4. In the counter affidavit, filed by the respondent, it is stated that the arbitration application, for appointment of an arbitrator, was misconceived and was not maintainable; there was no arbitration clause in the agreement executed between the parties; the architect was connected with the execution of the work, and the drawings for the execution of the work was to be supplied by him; Clause 31 of the Contract specifically provided that, in case any variation from the contract
