IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH JUDGMENT RSB Projects Ltd. Vs. RUIDP (S.B. Arbitration Application No.11/2008) S. B. Arbitration Application under Section 11 (6) read with 43(3) of the Arbitration and Conciliation Act,1996. Date of Judgment: August 22, 2008. PRESENT HON'BLE MR. SHIV KUMAR SHARMA, J. Mr. Alok Sharma, for the applicant. Dr. P.C.Jain, for the respondent. BY THE COURT: In this application under section 11(6) read with 43(3) of Arbitration and Conciliation Act,1996 (for short `1996 Act') the applicant company seeks to appoint independent arbitrator. 2. The facts are these: The applicant company entered into a contract for construction of raw water reservoir with earthen embankment and allied works at Sobhasar Headworks Bikaner under package No.BIK/WS/06 with the Rajasthan Urban Infrastructure Development Project (herein after `RUIDP') in pursuance of the invitation of bid dated November 16, 2002. According to tender the work was to be started on March 31, 2003 and to be completed opn September 30, 2004. Owing to reasons of delay attributable to RUIDP the work could be completed on January 31, 2005. The Superintending Engineer issued completion certificate of the work on February 25, 2006. The applicant company submitted final bill on July 21, 2005 for an amount of Rs.8,26,29,992.07, out of which RUIDP paid only Rs.6,47,54,778/- inspite of passing the bill of Rs.6,60,41,787/-. Under clause 21 of Section IV of the contract the disputes were to be adjudicated by the Arbitrator. Vide letter dated September 12, 2005 the applicant company invoked clause 21.2 by applying to the Engineer-in- charge for his decision on various unpaid items under the final Bill, as 7 items were excluded without any justification. Vide letter dated February 23, 2006 RUIDP pointed out that 6 claims were not being accepted. Vide letter dated November 24, 2006 the applicant company requested RUIDP for an amicable settlement. No response was received of the letter dated November 24, 2006. Hence vide letter dated February 27, 2007 the applicant company invoked clause 21.3 of the contract seeking commencement of arbitration within a period of two months from the date of letter. Vide another letter dated May 15, 2007 the applicant company again sought for appointment of arbitrator. The Project Director vide letter dated June 8, 2007 responded the notice of applicant company informing the company that the dispute raised on November 12, 2005 had been rejected vide Enigneer's letter dated February 23, 2006. Since the applicant company was required to seek arbitration within a period of 28 days of purported decision dated February 23, 2006, the request made vide letter dated November 24, 2006 and February 27, 2007 for amicable settlement was time barred as per clause 21.3. Consequently the appointment of arbitrator could not be made. 3. According to applicant company the letter dated June 8, 2007 of the respondent invoked by misapplying the contract conditions and overlooking the provisions of 1996 Act. Therefore the applicant company preferred the instant application for appointment of independent arbitrator. 4. The respondent RUIDP submitted detailed reply to the application. In addition to parawise reply following preleminary objections have been raised:- (i) Since the applicant company failed to comply with the provisions of Section 11 (2), 11(4) and 11(5) of 1996 Act, instant application is not maintainable. (ii) No case is made out to invoke the provisions of Section 43(3) of 1996 Act. 5. In parawise reply to the application the respondent RUIDP stated that the delay cannot be attributed to RUIDP. The bill submitted by applicant on July 21, 2005 was was passed for Rs.6,60,41,787/- but certain amount was withheld as the applicant had to submit No Objection Certificate from Excise Department. The applicant company was not entitled to invoke clause 21 as it had been guilty of laches and delay. 6. Before dealing with the submissions of learned counsel for the parties, it will be appropriate to consider Condition 21 of the contract, which reads as under:- "21.1 Engineer's Decision: If any dispute of any kind whatsoever arises between the Employer and the Contractor in connection with, or arising out of, the contract of the execution of the works, whether during the execution of works or after their completion, and before or after repudiation or other termination of the contract, including dispute as to: a) the meaning of the specifications, designs, drawings and instructions herein before mentioned, b) the quality of the workman ship or materials, c) any opinion, instruction, determination, certificate or valuation of the Engineer, or d) any other question, claim, right matter or anything whatsoever in any way arising out of or relating to the contract, design, drawings, specifications, estimates, instructions, conditions, orders or the failure to execute the same. The dispute shall, in the first place, be referred in writing to the Engineer who has jurisdiction over the works specified in the Contract, with a copy to the other party. Such reference shall state that it is made pursuant to this clause. Not later than 28 (twenty eight) day after the day on which he received such reference the Engineer shall give written notice of his decision to the Employer and the Contractor. Such decision shall state that it is made pursuant to this clause. Subject to the other forms of settlement hereinafter provided, the Engineer's decision in respect of every dispute or difference so referred shall be final and binding upon the Contractor and the Employer. Unless the Contract has already been repudiated or terminated, the Contractor shall, in every case, continue to proceed with the Works with all due diligence and the Contractor and the Employer shall give effect forthwith to every such decision of the Engineer untill or unless the same shall be revished in an amicable settlement or as hereinafter provided. 21.2 Remedy when the Engineer's Decision is not Accepted: If either the Employer or the Contractor be dissatisfied with any decision of the Engineer, or if the Engineer fails to give notice of his decision on or before 28 (twenty eight) days after the day on which he received the reference, then either the Employer or the Contractor may, on or before the twenty eight day after the day on which he received the notice of such decision, or on or before the twenty eight day after the day on which the said period of 28 days expired, as the case may be, give notice to the other party, with a copy to the Engineer, of his intention to commence arbitration for settlement of the dispute. If the Engineer has given notice of his decision as to a matter in dispute to the Employer and the Contractor and no writen notice to commence arbitration has been given by either the Employer or the Contractor on or before the twenty eight day after the day on which the parties received notice as to such decision from the Engineer, the said decision shall become final and binding upon the Employer and the Contractor. 21.3 Amicable Settlement: Where notice of intention to commence arbitration has been given in accordance with sub-clause 21.2, arbitration shall not be commenced unless an attempt has first been made by the parties to settle the dispute amicably. Provided that, unless the parties otherwise agree, arbitration may be commenced on or after the fifty-sicth day after the daya on which the notice of intention to commence arbitration was given whether or not any attempt at amicable settlement thereof has been made. 21.4 Arbitration: Any dispute in respect of which: a) the decision, if any, of the Engineer has not become final and binding pursuant to sub-clause 21.1 and b) amicable settlement has not been reached within the period stated in sub- clause 21.3 shall be finally resolved by arbitration. The arbitration will take place in accordance with Indian Arbitration and Conciliation Act,1940 and the Arbitration will take place at Jaipur. Arbitration may be commenced prior to or after completion of the Works, provided that the obligations of the Employer, the Engineer and the Contractor shall not be altered by reason of the arbitration being concluded during the progress of the Works. 21.5 Contractor to Execute Work pending settlement: Whether the dispute is referred to the Engineer, to amicable settlement, or to the law courts, as the case may be, the Contractor shall, unless the contract has been repudiated or terminated, proceed to execute and complete the Works with all due diligence pending settlement of the said dispute or differences." (Emphasis Supplied) 7. Reference of Section 43 of 1996 Act also appears necessary, which reads as follows:- "43. Limitations. (1) The limitation Act, 1963 (36 of 1963) shall apply to arbitrations as it applies to proceedings in Court. (2) For the purpose of this section and the Limitation Act, 1963 (36 of 1963), an arbitration shall be deemed to have commenced on the date referred in Section 21. (3) Where an arbitration agreement to submit future disputes to arbitration provides that any claim to which the agreement applies shall be barred unless some step to commence arbitral proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may on such terms, if any, as the justice of the case may require, extend the time for such period as it thinks proper. (4) Where the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act,1963 (36 of 1963), for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted." (Emphasis Supplied) 8. Learned counsel for the applicant company canvassed that even if the dispute was not raised within the time prescribed, the Court under Sub- section (3) of Section 43 may extend time in view of undue hardship caused to the applicant company. Reliance is placed on Sterling General Insurance Co. Vs. Planters Airways (1975)1 SCC 603. I am afraid this argument does not help the applicant company. The respondent RUIDP already paid a sum of Rs.6,47,54,778/- to the applicant company and the applicant company no where stated in the application as to what were the reasons for delay. In Sterling General Insurance Co. Vs. Planters Airways (supra) the Apex Court indicated that the amount at stake and the reasons for delay, both, are matters to be examined to resolve the question of undue hardship. Considering the amount involved and the reasons for the delay I think it would not be undue hardship to the applicant company if time is not extended. 9. Having taken into consideration all relevant circumstances of the case i.e.: (i) the degree of blameworthiness of the applicant company in failure to appoint an arbitrator within the time; (ii) the amount at stake; (iii) the length of delay, and (iv) the possibility of the respondent having been prejudiced by the delay. I am of the opinion that the applicant company is not entitled to any relief. 10. For these reasons, I find no merit in the instant application and the same accordingly stands dismissed without any order as to costs. (Shiv Kumar Sharma)J. arn/