Reserved Judgment IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Arbitration Application No. 16 of 2007 Sri Lokendra Verma, R/O 500, Railway Road, Shamli (Muzaffarnagar) U.P. …… Applicant. Versus State of U.P. through Superintending Engineer, UP Irrigation Department, Upper Ganga Canal, Modernization Circle- 1st, Haridwar Road, Roorkee, District Haridwar, Uttarakhand and two others. …Respondents. Sri S.K. Jain, learned counsel for the applicant. Sri S.P.S. Panwar, learned Additional Chief Standing Counsel (U.P. Govt.), for the respondents. Date May 23, 2008. Hon’ble B.S.Verma, J. This application has been filed with a prayer to appoint sole arbitrator for settlement of disputes between the parties or designate any person or institution for such appointment as per Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 (for short the Act). Relevant facts giving rise to the present application, according to the applicant, are that the applicant is a contractor engaged exclusively in the business of construction and maintenance works on contract basis. He is carrying his contract business under the name and style M/s Lokendra Verma, which is a sole proprietorship Firm and the applicant is the sole owner and sole proprietor of the said firm. In the year 1993-94, tenders were invited for construction of Stop Log structure at Km. 29.250 of Parallel Upper Ganga Canal at Roorkee (Haridwar). The applicant also submitted his tender, which was ultimately accepted by respondent no.2. A written agreement was executed bearing 2 contract agreement No. R1-02-076 dated 07-02-1994 between the parties. According to the agreement, the cost of the work was Rs. 55,96,565-00. The date of commencement of work was 08-02- 1994. The completion period was 18 months. As per contract agreement, the applicant started execution work thereof. According to applicant, the respondents without assigning reasons failed to discharge their obligations under the contract, due to the applicant had to suffer severe financial loss and that proved to be fatal to the progress of the contract work. The applicant, however, completed the contract work in all respect to the full satisfaction of the respondents on 25- 3-1998, i.e. within the extended time period of completion. The applicant in paragraph no. 8 of the application has mentioned the hindrances caused by the respondents. In paragraph no. 9, it has been stated that as per terms and conditions and Schedule ‘C’ of the contract, certain items/material such as cement, steel and sheet piles etc. were required to be issued by the department, but the same were not supplied to the applicant in time. It has also been averred that the progress of work was badly retarded due to the strike of junior engineers, which was continued from 13-12-1994 to 24-01- 1995. As such the construction work was completely paralyzed and no payment could be made to the applicant. The Junior Engineers again went on strike for indefinite period w.e.f. 9-9-1997 with the result that the applicant suffered heavy financial loss and the period of contract was prolonged on that count. In paragraph no. 11 it was stated that certain items of work which were beyond the scope of work were got executed by the respondents on the assurance that the payment thereof shall be made as ‘Extra Item’ within very short period. The payment of extra items was never made to the applicant. It was further stated that the work on raft of Stop Log Structure was stopped by the respondents due to non-availability of drawings on 22-03-1995, which were made available to the applicant on 20-5-1995 only. As such the work remained closed during the said period of two months, which had resulted in heavy 3 financial loss to the applicant. In paragraph no. 14 it was stated that the respondents were harassing the applicant by not passing the shuttering and reinforcement and changing the reinforcement and this fact was brought to the knowledge of the respondents but to no avail. Similar allegations were made in para nos. 15 to 17 of the application and it was stated that the contract work was completed by 25-03-1998. The grievance of the applicant is that even after completion of work, neither the final bill was prepared by the respondents nor the completion report was issued in favour of the applicant. Ultimately the applicant sent notice to the Chief Engineer concerned invoking the arbitration clause no. 52 of the General Conditions of Contract by his letter dated 9-12-2003. Along with the letter list of claims was attached as Appendix A, thereby the respondent no. 3 was requested to forward the names of three officers of the rank of Superintending Engineer or higher within 30 days of the receipt of letter. The Chief Engineer, Madhya Ganga Canal Project, Dodhpur, Aligarh, who is the appointing authority of Sole Arbitrator did not pay any need to the matter and the period of 30 days was allowed to be elapsed. The applicant then sent a panel of three persons as per procedure laid down in the arbitration clause 52 by his letter dated 15-10-2004 requesting the respondent no. 3 to select one of the three names and appoint him as sole arbitrator for adjudication of the applicant’s claim under intimation to the applicant vide Annexure No. 4. The respondent no.3 failed to comply with the arbitration clause 52, hence this application was filed under Section 11(6) of the Act for appointing sole arbitrator to settle the dispute/claims of the applicant. The applicant has appended list of claims in the latter part of the application. The respondents contested the applicant by filing counter affidavit, which was duly sworn by Assistant Engineer, 4 Upper Ganga Canal. In the counter affidavit execution of contract No. R 1-02-076 dated 7-2-1994 was admitted between the parties for construction of stop Log Structure at Km. 29.250 of Parallel Upper Ganga Canal at Roorkee. According to respondents, the work was to commence on 8-2-1994 and the same was to be completed by 7-8-1995, but the work was completed on 25.8.1998. In para no. 3 the respondents have inter alia stated as under:- “According to contract the construction work was to be started from 8-2-1994 and it was to be completed by 7.8.1995, but actually the work was completed on 25.8.1998 and the period of defective liability was up to 24.9.1998 and according to provisions of Clause G.C.-52 of Contract, the appointment of an Arbitrator was to be made within a period of 30 days under Defect Liability Period, which was up to 23.10.1998. For kind perusal of this Hon’ble Court Clause 52 is quoted as hereunder:- “Neither party is entitled to bring a claim to arbitration if the arbitrator has not been appointed before the expiry of thirty days after defect liability period.” It is pertinent to mention here that an application for appointment of an Arbitrator was received by the office of the deponent on 9.12.2003, which was time barred and was not within a period of 30 days as prescribed Under Defect Liability Period, hence the department cannot be held responsible for the same. In this connection a copy of clause 51 and 52 of the Contract is being annexed herewith and marked as Annexure No.C.A.1 to this counter affidavit.” Rejoinder Affidavit was filed by the applicant wherein the averments made by the respondents on the material issue were denied and the averments made in the application were reiterated. I have heard learned counsel for the parties and perused the averments made in the application, the counter affidavit 5 and the rejoinder affidavit along with the annexures enclosed therewith. At the very outset, it may be mentioned that the execution of the contract agreement No. R1-02-076 dated 7-2-1994 between Superintending Engineer of the respondent-department and the applicant in respect of construction of stop log structure at Km. 29.250 of Parallel Upper Ganga Canal at Roorke (Haridwar) is admitted to the respondents. This fact is not disputed that the contract work was completed on 25-03-1998. In paragraph no. 17 of the application it has been stated that the respondents was not prepared the final bill of the applicant and that the respondents are utilizing the completed work for the last so many years. In the counter affidavit, in paragraph no. 16 which is in reply of contents of paragraph no. 17 of the arbitration application, the following averments were made by the respondents:- “16. That the contents of paragraph no. 17 of the arbitration application are not admitted. Infact the work of the aforesaid contract was being completed on 25-03-1998, but no Executive Engineer has not issued any certificate with regard to the completion of work, because no application in this behalf was received by the department from the level of applicant. Hence department cannot be held responsible in this connection, according to Section G.C. of Contract. A copy of G.C. is being annexed herewith and marked as Annexure No. C.A.-6 to this counter affidavit.” It is thus clear that this fact has not been denied that the final bill in respect of the contract had not been prepared by the respondent-department. It has also not been denied that the respondents are utilizing the completed work for the last many years. This fact is also admitted to both the parties that Clause 52 6 of the General Conditions of the contract agreement provides for arbitration in respect of all disputes or differences in respect of which decision is not final and conclusive and the matter has to be referred for Arbitration to a Sole Arbitrator. The facts narrated hereinabove clearly show that there exists a dispute between the parties in respect of Contract Agreement No. R1-02-076, dated 7-2-1994 for construction of stop log structure at Km.29.250 of Parallel Upper Ganga Canal at Roorkee (Haridwar). Now, it has to be seen as to what is the agreed procedure between the parties for settlement of disputes by arbitration. Relevant extract of clause 52 of the General Conditions of the Contract, executed between the parties, reads as under:- “52. ARBITRATION All disputes or differences in respect of which decision is not final and conclusive, shall be referred for Arbitration to a Sole Arbitrator appointed as follows: Within thirty days of receipt of notice from the contractor of his intention to refer the dispute to arbitration the Chief Engineer shall send to the Contractor a list of three officers of the rank of Superintending Engineer or higher, who have not been connected with the work under this contract. The Contractor shall within 15 days of receipt of this list select and communicate to the Chief Engineer the name of one officer from the list who shall then be appointed as the sole arbitrator. If the contractor fails to communicate his selection of name, within the stipulated period, the Chief Engineer shall without delay select one officer from thelist and appoint him as the sole arbitrator. If the Chief Engineer fails to send such a list within thirty days, as stipulated the Contractor shall send a similar list to the Chief Engineer within 15 days. The Chief Engineer shall then select one officer from the list and appoint him as the sole arbitrator within 15 days.” 7 It may be mentioned that procedure for appointment of arbitrators has been laid down in Section 11 of the Act. Relevant extract of Section 11 of the Act is reproduced as under:- “11. Appointment of arbitrators.-(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. (2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. (3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. (4) If the appointment procedure in sub-section (3) applies and- (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (5) Failing any agreement referred to in sub-section(2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (6) Where, under an appointment procedure agreed upon by the parties- (a) a party fails to act as required under that procedure; or (b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or 8 (c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.” In the light of the provisions of Section 11 of the Act vis-à-vis the agreed procedure as contained in Clause 52 of the General Conditions of contract agreement it has to be examined whether in the case at hand, the arbitrator can be appointed to settle the dispute between the parties. The only main contention of the respondents is that the claim of the applicant had become time barred, therefore, the arbitrator cannot be appointed by this Court in respect of a claim, which had been barred by time. In support of this contention, learned Additional Chief Standing Counsel of the U.P. Government, appearing for the respondents, has relied upon the case of Shree Ram Mills Ltd. Vs. Utility Premises (P) Ltd. [(2007) 4 Supreme Court Cases, 599], wherein the Hon’ble Apex Court while dealing with the provisions of Section 11(6) of the Act has observed that preliminary matters are to be determined by the Chief Justice or his designate before appointing arbitrator under the Act. It was held that it is for the purpose of putting the arbitration proceedings in motion by appointing an arbitrator that the finding is given in respect of the existence of the arbitration clause, territorial jurisdiction, live issue and limitation and unless there is a finding on these issues, there would be no question of proceeding with the arbitration. The Apex Court in paragraph no. 27 has inter alia observed as under:- “The Chief Justice only has to record his satisfaction that prima facie the issue has not become dead by the lapse of time or that any party to the agreement has not slept over its rights 9 beyond the time permitted by law to agitate those issues covered by the agreement. It is for this reason that it was pointed out in the above para that it would be appropriate sometimes to leave the question regarding the live claim to be decided by the Arbitral Tribunal. All that he has to do is to record his satisfaction that the parties have not closed their rights and the matter has not been barred by limitation. Thus, where the Chief Justice comes to a finding that there exists a live issue, then naturally this finding would include a finding that the respective claims of the parties have not become barred by limitation.” Learned counsel for the respondents has further placed reliance upon the case of V.M. Salgaocar V. Board of Trustees of Port of Mormugao and another [(2005) 4 S.C.C. 613]. In that case, the Hon’ble Apex Court has dealt with the provision of Section 210 of the Major Port Trusts Act, 1963, wherein provision of limitation for filing suit within the prescribed period of six months of the accrual of the cause of action and it has to be preceded by one month notice. The ratio of the case of V.M.Salgaocar (supra) cannot be disputed, but this case law does not apply to the facts of the case at hand. As mentioned earlier, the contract work was completed on 25-3-1998. The applicant had issued notice through his counsel for non-finalization of agreement on 18-3-1999 (Annexure No.2) to the Superintending Engineer concerned and it has been written in clause (22) “that non-finalization of the agreement over one year, has no justification and has given rise to dispute, for reference to arbitration.” Thereafter on 9-12-2003, the applicant sent letter to the Chief Engineer, Madhya Ganga Canal Project, Irrigation Department, Canal Colony, Dodhpur, Aligarh and in this letter (Annexure No.3) it was written that the disputes still persist the application had been left with no alternative except to seek arbitration as per clause no. 52 of General Condition of the contract. Again by letter dated 15-10-2004, the applicant had 10 written a letter (Annexure No. 4) to the Chief Engineer concerned to select one person from the panel of three persons and to appoint him as Sole Arbitrator to settle the dispute. Thus, the applicant had been making all efforts to invoke the arbitration clause as provided in the Arbitration Clause referred to above. In the case at hand, the applicant contractor by his letter dated 9-12-2003 addressed to the Chief Engineer informed him of his intention to settle the dispute by arbitration as contained in Clause 52 of General Conditions of the Contract Agreement and requested him to send a list of names of three officer of the rank of Superintending Engineer or higher to enable him to select the name of one Officer to be appointed as Sole Arbitrator. No list was sent by the Chief Engineer to the applicant till 15.10.2004. On 15.10.2004, again letter was sent by the applicant contractor to the Chief Engineer with reference to letter dated 9.12.2003 and a panel of three such officers was enclosed therewith. It was requested that the Chief Engineer should select one person and appoint him as Sole Arbitrator in the matter as is clear from Annexure No. 4 to the writ petition. It is obvious that the Chief Engineer had failed to appoint Sole Arbitrator from the list of three officers sent by the applicant contractor. It is thus evident that the respondents failed to adopt the agreed procedure to appoint Sole Arbitrator. In the above circumstances, it is clear that the dispute between the parties is clearly a live issue and prima facie it cannot be said that the claim of the applicant is barred by limitation particularly in view of the fact that the fact that final bill was not prepared by the department has not been controverted by the respondents in their counter affidavit. I am of the considered view that the dispute/claim raised by the applicant is a live issue and the same is referable to the Arbitrator. As such the provision of sub- section (6)(a) of the Act is clearly attracted in the case at hand and it is a fit case in which Sole Arbitrator can be appointed by this 11 Court. The application moved by the applicant deserves to be allowed. Accordingly, the application for appointment of Arbitrator is allowed. Justice O.P.Garg (Retired Judge of the Allahabad High Court), R/O E-48, Sector 39, Noida (U.P.) is appointed as Sole Arbitrator to settle the dispute between the parties. The learned sole arbitrator shall initiate the arbitral proceedings at an early date after presentation of the certified copy of this order and shall submit his Award in accordance with law as early as possible. ( B.S.Verma, J. ) RCP 12 13