IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision : 16.03.2011 Arb. Case No.27 of 2010 Uppal Engineering Company Pvt. Ltd. ...Petitioner Versus H.S.I.D.C. and another ...Respondents CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA Present : Mr. P.S.Rana, Advocate, for the petitioner. Mr. Dhiraj Chawla, Advocate, for the respondents. HEMANT GUPTA, J. (ORAL) The petitioner was granted contract for construction of Roads at Investate Bawal, District Rewari, Haryana as per Agreement executed between the parties on 02.12.1998. As per the said Agreement, the petitioner was to complete the work within 27 months from the date of issue of instructions for the commencement of work i.e. w.e.f. 02.12.1998. The petitioner could not complete the work within the stipulated period. The respondents extended the time to complete the work up to 29.09.2003 without levy of any compensation. The petitioner completed the work on or before 25.03.2004. The petitioner submitted a statement of completion on 07.06.2004 vide Annexure R-3. On 14.03.2005 vide Annexure R-5, a Taking Over Certificate was issued by the respondents but advising the petitioner to complete the work in respect of ‘rectification of earthern shoulders by Arb. Case No.27 of 2010 making grade and camber’ and ‘repair of RCC culverts’. On 26.04.2005, 50% of the security was released to the petitioner and the balance 50% on 12.08.2005. It was on 25.05.2007, the payment of final bill was released to the petitioner. Thereafter, the petitioner raised a demand claiming a sum of Rs.99,89,810/- inclusive of claim of non-release of payment against the work amounting to Rs.1,99,950/-, balance payment of escalation amounting to Rs.41,40,804/- and claim for price rise due to increase in market rates of bitumen and fuels amounting to Rs.43,91,209/-. It was the said demand, which was declined vide communication dated 29.04.2008 (Annexure A-3). It was communicated that payment of Rs.1,99,950/- cannot be released to the petitioner on account of less consumption of cement to the extent of 5% as per the report of the Vigilance Department. It is, thereafter, the petitioner invoked the jurisdiction of this Court under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (for short ‘the Act’) through the present petition filed on 25.02.2010. In reply, it is inter alia pleaded that the petitioner has accepted the full and final payment vide communication dated 03.06.2008 and, therefore, there is no dispute between the parties, which could be referred to an Arbitrator. It was pointed out that the escalation amount was paid to the petitioner on the value of the work which was done up to 29.09.2003, based upon the indices of 04.03.2001 much before the extension of time to the petitioner in terms of undertaking by way of an affidavit dated 25.06.2004. Thus there is no dispute which requires adjudication. It is admitted by the parties that in terms of Clause 15.10, the defect liability certificate was not issued, but the contractual obligations came to an end when the security amount furnished by the petitioner was released. A perusal of the contract agreement shows that in terms of Clause 2 Arb. Case No.27 of 2010 15.4 of the Agreement, the Contractor has to submit a statement on completion with supporting documents showing the final value of the work done in accordance with the contract and any further sum which the Contractor considers to be due. The “Taking Over Certificate” was issued on 14.03.2005 by the respondent, but before the said certificate, the work was completed on 25.03.2004 and the petitioner has submitted statement of completion on 07.06.2004. In fact, such statement of completion is in terms of Clause 15.4 of the Agreement, which reads as under: “15.4 Statement at Completion Not later than 84 days after the issue of the Taking-Over Certificate in respect of the whole of the Works, the Contractor shall submit to the Construction Manager, 3 copies of a statement at completion with supporting documents showing in details, in the form approved by the Construction Manager: (a) the final value of all work done in accordance with the Contract up to the date stated in such Taking-Over Certificate. (b) any further sums which the Contractor considers to be due.” Clause 15.5 of the Agreement provides for submission of final statement, which is required to be submitted by the Contractor not later than 56 days after the issue of defect liability certificate pursuant to sub-Clause 15.10. In the said statement, the Contractor has to communicate the value of all work done in accordance with the Contract and any further sums which the Contractor considers to be due to him under the Contract or otherwise. Clause 15.5 of the Agreement reads as under: “15.5. Final Statement Not later than 56 days after the issue of the Defects Liability Certificate pursuant to Sub-Clause 15.10, the 3 Arb. Case No.27 of 2010 Contractor shall submit to the Construction Manager for consideration 3 copies of a draft Final statement with supporting documents showing in detail, in the form approved by the Construction Manager: (a) the value of all work done in accordance with the Contract, and (b) any further sums which the Contractor considers to be due to him under the Contract or otherwise.” Since, the respondent has not issued defect liability certificate and has released security furnished by the petitioner, therefore, the time limit contemplated under Clause 15.5 of the agreement cannot be adhered to for submission of final claim. Clause 19 of the Agreement is in respect of settlement of disputes. In terms of such clause, Firstly, the disputes are to be considered by the Construction Manager and being unsatisfied with the decision of the Construction Manager, the Employer or the Contractor has the right to seek resolution of disputes through arbitration after serving notice. The relevant extracts of Clause 19 read as under: “19.0 SETTLEMENT OF DISPUTES 19.1 Construction Manager’s Decision …..If either the Employer or the Contractor be dissatisfied with any decision of the Construction Manager, or if the Construction Manager fails to give notice of his decision on or before the eighty-fourth (84th) day after the day on which he received the reference, then either the Employer or the Contractor may, on or before the seventieth day (70th) after the day on which he received notice of decision, or on or before the seventieth (70th) day after the day on which the said period of 84 days expired, as the case may be, give notice to the other party, with a copy for information to the Construction Manager, or his intention to commence arbitration, as hereinafter provided, as to the matter in 4 Arb. Case No.27 of 2010 dispute. Such notice shall establish the entitlement of the party giving the same to commence arbitration, as hereinafter provided, as to such dispute and, subject to Sub- Clause 19.4, no arbitration in respect thereof may be commenced unless such notice is given. …. 19.3 Arbitration Any dispute in respect of which: (a) the decision, if any, of the Construction Manager has not become final and binding pursuant to Sub-Clause 19.1, and (b) amicable settlement has not been reached within the period stated in Sub-Clause 19.2, shall be finally settled, unless otherwise specified in the Contract, under the Rules of Indian Arbitration Act, 1996 by one or more arbitrators appointed under such Rules. The said Arbitrator/s shall have full power to open up, review and revise any decision, opinion, instruction, determination, certificate or valuation of the Construction Manager related to the dispute.” As discussed above, the respondents had not issued defect liability certificate in terms of Clause 15.10 of the Agreement. The petitioner has submitted statement of completion of works in terms of Clause 15.4 on 07.06.2004 i.e. within 84 days of the actual date of completion i.e. 25.03.2004. The certificate of Taking Over was issued on 14.03.2005, but before the said date, the petitioner has submitted statement of completion of works. 50% of the security has been released on 26.04.2005 and the remaining on 12.08.2005. The defect liability certificate was not issued and the payment of final bill amounting to Rs.15,30,679/- was released on 25.05.2007. It is also not disputed that there is no Construction Manager from whom the petitioner could seek settlement of disputes in terms of 5 Arb. Case No.27 of 2010 Clause 19.1 of the Agreement. In the absence of issuance of the defect liability certificate and the Construction Manager, the rights of the petitioner are to be determined not in terms of the period prescribed under the Agreement, but under the statutory period of limitation prescribed under the Limitation Act, 1963. Therefore, the demand of the petitioner on 07.03.2008 for adjudication of disputes is within 3 years from the date cause of action arises i.e. the date of final payment. Thus, the claim of the petitioner cannot be said to be barred by limitation and not referable to an Arbitrator. In view of the said fact, the disputes between the parties are required to be adjudicated upon by an Arbitrator. Consequently, Hon’ble Mr. Justice N.K.Aggarwal, former Judge of this court and resident of 305, Public Society No.34, Sector-5, MDC, Panchkula is appointed as an Arbitrator to adjudicate upon all the disputes arising between the parties. The Arbitrator shall fix his fee in consultation with the parties on the first date of hearing. 16.03.2011 (HEMANT GUPTA) Vimal JUDGE 6