1 HIGH COURT OF MADHYA PRADESH BENCH AT INDORE (SB: HON. SHRI JUSTICE PRAKASH SHRIVASTAVA) A.C. No.10/2009 M/s Karan Development Services Pvt. Ltd. C-21, Inder Nagar, Tansen Road, Gwalior. .... Applicant Vs. Union of India and one Another. .... Respondents ------------------------------------------------------------------------------------ Shri D.M. Kulkarni, learned counsel for the applicant. Shri H.Y. Mehta, learned counsel for the respondents. ------------------------------------------------------------------------------------ Whether approved for reporting : ORDER (Passed on 19.9.2011) 1/ This arbitration case has been filed under Section 11(6) of the Arbitration & Conciliation Act, 1996 for appointment of independent arbitrator. 2/ The case of the applicant is that it was awarded contract by the respondents under agreement No.C&S/810 dated 1.10.1997 for construction and other works. It is alleged that due to the reasons attributable to the respondents, the work could not be completed within the stipulated time. The respondents rescinded the contract under risk and cost clause, vide communication dated 27.12.1999. As per the applicant since the contract had become voidable, therefore, the applicant determined the contract, vide telegram dated 2 28.11.1999 followed by the letter even dated. The respondents, vide communication dated 30.11.1999, extended the time to complete the work up to 28.2.2000 with some penalty. The copy of the final bill was received by the applicant on 18.9.2000, which was subsequently passed by the respondents on 4.12.2000. The applicant had submitted application on 12.10.2000 to the CAO, Church Gate Mumbai for the settlement of the dispute under Clause 63 of the General Conditions of the Contract. The reminder was submitted on 27.11.2000 and on 20.2.2001 the Chief Engineer (Construction) had sent the reply to the applicant. Further case of the applicant is that he had submitted the application to the General Manager, Western Railway, Church Gate on 12.2.2001, which was after expiry of 90 days but before expiry of 180 days, but the General Manager did not appoint the arbitrator. Since the dispute was not referred and the arbitrator was not appointed under Clause 63 & 64 of the General Conditions of Contract, therefore, the applicant filed application under Section 8 red with S. 11 of the Arbitration and Conciliation Act, 1996 before the District Judge, Shajapur. The application was rejected by the District Judge by order dated 21.1.2002. The said order was challenged before this Court in W.P. No.1768/2002 and it was set aside by the Division Bench of this Court by order dated 7.5.2009 on the ground that after the judgment of the Supreme Court in the matter of S.B.P. & Co. Vs. Patel Engineering Ltd. reported in 2005(8) SCC 618, the District Judge had no jurisdiction to entertain and decide the application under Section 11(6). The Division Bench while setting aside 3 the order of the learned District Judge granted liberty to the petitioner to apply afresh before the nominee judge. The applicant, therefore, filed the present application on 6.7.2009. 3/ The application has been opposed by the respondents on the ground that in terms of Clause 41.2 of the special conditions of the contract the claim including with interest being more than 20% of the contract amount, the arbitration clause is not attracted. Further objection has been taken that the application is barred in view of Clause 63 and 64 of the general conditions since the applicant did not take steps in time. 4/ I have heard the learned counsel for the parties and perused the record. 5/ So far as the first objection in respect of the claim being in excess of the value mentioned in Clause 41.2 of the Contract is concerned, it is noticed that the value of the claim, which was submitted by the applicant to the respondents, vide Annexure P/5 excluding the claim of interest, is less than 20% of the value of the contract. The interest on the said claim is to be ascertained in the arbitration proceedings. Even otherwise, the Supreme Court in the matter of S.B.P. & Co. (supra) has held that :- “39. It is necessary to define what exactly the Chief Justice, approached with an application under Section 11 of the Act, is to decide at that stage. Obviously, he has to decide his own jurisdiction in the sense whether the party making the motion has approached the right High Court. He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before 4 him, is a party to such an agreement. It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long-barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. It may not be possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. It will be appropriate to leave that question to be decided by the Arbitral Tribunal on taking evidence, along with the merits of the claims involved in the arbitration. The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary. We think that adoption of this procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of expediting the process of arbitration, without too many approaches to the court at various stages of the proceedings before the Arbitral Tribunal. 6/ Therefore, in terms of the aforesaid, it is found just and proper to leave the question of falling of the claim of the applicant within the purview of the arbitration clause, for decision by the arbitrator. 7/ In this regard learned counsel for the respondents has relied upon the order of this Court in the matter of O.P. Sharma Vs. Union of India and others dated 13.10.2005 passed in Civil Revision No.431/2004 but the said order is of no help to him since in that case the dispute involved was found to 5 be of a value of more than 20% of the contracted sum, and even otherwise the said order was passed prior to the judgment of the Supreme Court in the matter of S.B.P. & Co. (supra). 8/ The next objection of the counsel for the respondents is that the arbitrator can not be appointed in view of the fact that the applicant did not take steps within time in terms of Clause 63 & 64 of the General Conditions of Contract. The applicant in this regard has taken the stand that the contract was illegally terminated on 27.12.1999. The applicant had submitted application for making the reference under Clause 63 of General Conditions of the Contract before the Chief Administrative Officer, Mumbai on 12.10.2000 but the C.A.O. did not give any decision within the prescribed time, therefore, the applicant had submitted the application for appointment of arbitrator under Section 64 of the General Conditions of the Contract on 12.2.2001 to the General Manager, Western Railway, Mumbai, as per the provisions of agreement which should have been disposed of by General Manager up to 12.4.2001, but no action was taken, therefore, the cause of action arose on 13.4.2001 and is continuing thereafter. The applicant's case is that these applications were submitted to the C.A.O. and the General Manager within limitation as per provisions contained in the Limitation Act, 1963 read with Section 21 and 43 of the Arbitration and Conciliation Act, 1996. 9/ On the perusal of the Annexure R/3 dated 16.5.2000 filed by the respondents along with their reply, it is noticed that the applicant's request for grant of arbitration was 6 not rejected on the ground that the applicant did not take steps within time but it was rejected on the sole ground that the value of claim is more than 20% of the contracted value. It is also worth noting that the issue of limitation raised by the respondents requires leading of evidence by both the parties, therefore, it is found just and proper to leave the said issue open for decision by the arbitrator, if raised by the respondents. At this stage the applicant's prayer for appointment of the arbitrator can not be rejected since the claim is not found to be a dead claim and it has been found that the agreement contains the arbitration clause and the parties before this Court are parties to the agreement. 10/ Keeping in view the fact that the appellant had earlier approached the Chief Administrative Officer and General Manager of the respondent for settling the dispute but the same has been proved to be futile and also the fact that the appellant is trying since the year 2000 for settling the dispute through arbitration and also keeping in view the judgment of the Supreme Court in the matter of Northern Railway Administration Vs. Patel Engineering Co reported in (2008)10 SCC 240 and Union of India Vs. Singh Builders Syndicate reported in (2009)4 SCC 523, I deem it proper to appoint an independent arbitrator in the matter. 11/ The conditions for appointment of arbitrator in the present case are fulfilled, therefore, by allowing this application, Hon.Mr.Justice S.P.Khare (Retired), R/o.A-1, 202, Shehnai Residency, A.B.Road, Indore is appointed as 7 arbitrator. The parties are directed to appear before the arbitrator on 30/09/2011. (PRAKASH SHRIVASTAVA) J u d g e Trilok.