SCA/7450/1990 1/13 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 7450 of 1990 For Approval and Signature: HONOURABLE MR.JUSTICE AKIL KURESHI ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= MUNICIPAL CORPN. OF AHMEDABAD - Petitioner(s) Versus ARVIND JAYANTILAL TALATI 3RD SPECIAL LAND ACQUISITION & 1 - Respondent(s) ========================================================= Appearance : MR PRASHANT G DESAI Sr. Advocate with Mr. Kasushal Patel for Petitioner MR KM PATEL for Respondent(s) : 1, RULE SERVED for Respondent(s) : 2, ========================================================= CORAM : HONOURABLE MR.JUSTICE AKIL KURESHI Date : 24/10/2008 ORAL JUDGMENT 1. Ahmedabad Municipal Corporation - petitioner herein has challenged an order dated 18.6.1990 SCA/7450/1990 2/13 JUDGMENT passed by learned City Civil Judge, Ahmedabad in Civil Misc. Application No.448 of 1989. 2. Between respondent No.1 and Ahmedabad Municipal Corporation an agreement to execute certain work was entered into in the year 1979. Respondent No.1 is an Architect by profession. Through the said agreement, a copy of which is produced at Annexure A to the petition, it was agreed between the parties that respondent No.1 is appointed as Architect for a complex which Ahmedabad Municipal Corporation wants to construct on its land. Terms of payment to the work to be executed by respondent No.1 were also mentioned. Clause (c) of Para 1 of the agreement reads as follows: (C) In addition to the one and eight tenth per cent (1.8%) on the total cost of executed works, the Architect is entitled to charge in respect of all works included in the tender but SCA/7450/1990 3/13 JUDGMENT subsequently omitted, and not replaced, two third of the charges which would have been payable, had they been executed. This shall only apply if the omission exceeds Rs.25,000/- after the acceptance of working drawings.” 3. The agreement also provided for arbitration of disputes between the parties in paragraph 8 which reads as follows: “8. That if any dispute, differences or question shall at any time arise between the parties in respect of the construction of this agreement, or concerning anything herein contained or arising out of this agreement or as to the rights, liabilities or duties of the said parties, hereunder, the same shall be referred to the Arbitration of two persons, one each appointed by the two parties. The Arbitrators so appointed SCA/7450/1990 4/13 JUDGMENT shall be fellow member of the Indian Institute of Architects and may in turn appoint an empire, also a fellow member of the Indian Institute of Architects.” 4. It appears that after respondent No.1 executed part of the work by preparation of drawings, designs, etc., AMC for their internal reasons did not find it possible to execute the actual construction work. In the year 1981 respondent No.1 was also paid the bills which he had raised. From communication dated 25.8.1981 Annexure B from respondent No.1 to AMC it can be seen that he had agreed to accept the fees only on building work and not on electrical works, structural fees, etc. He, therefore, requested that net bill of Rs.13,821/- towards his professional fees be paid. It is not in dispute that same was duly paid shortly thereafter. 5. After 25.8.1981 there is no further correspondence between the parties at least on SCA/7450/1990 5/13 JUDGMENT record. First time thereafter on 18.12.1986 respondent No.1 wrote a letter to the petitioner and raised bill of Rs.3,39,120/- of which he was previously paid Rs.23,842/- and thus demanded AMC to release a sum of Rs.3,15,278/- in his favour. The said demand was primarily based on its contention that he was engaged as Architect for the entire execution of the work and even though the construction project had been abandoned he was entitled to his professional fees as per terms and conditions, particularly condition 1 (c) reproduced above. 6. Ahmedabad Municipal Corporation replied to the demand vide communication Annexure C and contended that the bills of respondent No.1 were settled way back in the year 1981 and he had accepted the payment as such and there was no further outstanding dues to him. 7. Respondent No.1 issued a legal notice to AMC on 15.4.1987 and demanded that the dispute SCA/7450/1990 6/13 JUDGMENT between the parties be referred to arbitration as per the terms of the agreement between the parties. On his side he appointed Shri L.D. Asarpote as arbitrator and and he called upon AMC to appoint second arbitrator in terms of para 8 of agreement Annexure A between the parties. 8. AMC replied to the notice by communication dated 14.8.1987 and contended, inter alia, that respondent No.1 is not entitled to recover any charges from AMC and further that he has no authority to unilaterally appoint arbitrator. 9. Since the Corporation did not appoint second arbitrator, sole arbitrator appointed by respondent No.1 started arbitration proceedings at which stage the Corporation approached the City Civil Court, Ahmedabad by filing Civil Misc. Application No.448 of 1989 and prayed for a declaration that there is no agreement in existence between the parties and that respondent No.2 herein i.e., arbitrator appointed SCA/7450/1990 7/13 JUDGMENT by respondent No.1, has no authority to conduct arbitration proceedings. It was this application which came to be turned down by the learned Judge of the City Civil Court, Ahmedabad by the impugned order dated 18.6.1990. 10. Learned Senior advocate Shri P.G. Desai appearing with Kasuhal Patel for AMC has vehemently contended that the learned Judge committed error in rejecting the application of the petitioner. Section 5 of the Arbitration Act, 1940 vests power in the Court for recalling the authority or arbitrator. He contended that there was no agreement surviving between the parties under which an arbitrator could have been appointed. 11. On the other hand, learned Senior advocate Shri K.M. Patel for respondent No.1 opposed the petition and contended that respondent No.1 was entitled to professional charges at the agreed rate even if execution of the work was abandoned SCA/7450/1990 8/13 JUDGMENT by AMC. In any case the dispute between the parties can be resolved in terms of para 8 of the agreement. He, therefore, contended that the trial court committed no error in turning down the application of the petitioner. He relied upon the following decisions of the Apex Court and various High Courts: (i) Fertilizer Corporation of India Limited. v. Ravi Kumar Ohri, AIR 1979 Orissa 19; (ii) M/s. Bharat Heavy Electricals Limited, Ranipur v. M/s. Amar Nath Bhan Prakash, (1982) 1 SCC 625, (iii) M/s. Navbharat Dal Mils v. Food Corporation of India and another, AIR 1993 Delhi 87; (iv)Chief Engineer, Betwa River Board, Nandanpura SCA/7450/1990 9/13 JUDGMENT and another v. L.N. Garg, AIR 1995 Allahabad 44, (v) Ramesh B. Desai and others v. Bipin Vadilal Mehta and others, (2006) 5 SCC 638; and (vi)Balasaria Construction (P) Ltd. V,. Hanuman Seva Trust and others, (2006) 5 SCC 658. He also contended that this Court in exercise of writ jurisdiction under Article 227 of the Constitution should not interfere with the impugned order passed by the Court below since it is not shown that same is without jurisdiction. 12. Having heard learned advocates appearing for the parties, I find that though there is a clause for referring the disputes between the parties under the agreement by one of the parties to an arbitrator, the question of arbitrability of the issues needs to be judged in the facts of the case. If respondent No.1 had raised dispute at the relevant time and sought reference to the SCA/7450/1990 10/13 JUDGMENT arbitrator, the matter would have, perhaps, been different. In the present case however, it clearly emerges that after initially undertaking the project and after engaging respondent No. 1 as Architect, AMC for their internal reasons could not sustain the project and terminated the activities. As noted, an agreement was entered into between the parties in the year 1979. By the year 1981 the parties were conscious that the project is stillborn and for the work already down by respondent No.1 he had raised bills. After some disputes between the parties, the bills were partially cleared and at least on record to the satisfaction of respondent No.1 payment was made as it clearly emerges from his own letter dated 25.8.1981. After 25.8.1981 there is absolutely no material on record to suggest that there was any correspondence, communication or any other form of dialogue between respondent No.1 and the petitioner. Suddenly, after more than five years, in November 1986 respondent No.1 raised his bills demanding full payment in terms SCA/7450/1990 11/13 JUDGMENT of the agreement even though at least from 1981 no further work was executed either by respondent No.1 or by the petitioner Corporation. He demanded total charged of Rs.3,39,120 on the basis that even if the project was abandoned, he was entitled to the charges committed by the Corporation. As already stated, the dispute between the parties whether respondent No.1 was entitled to such payment or not cannot be judged in this petition. One thing however, is clear that at least from the record after August 1981 till November 1986 the issue was closed, forgotten and abandoned. 13. To enable respondent No.1 to produce any correspondence which may have been entered into between the parties during the said period, I had after some hearing kept the matter today. It was conveyed to me that at least respondent No.1 does not possess any such correspondence and may have to inquire with AMC if any such correspondence exists. In a petition which is instituted in the SCA/7450/1990 12/13 JUDGMENT year 1990 it was not possible to grant any further opportunity and I have, therefore, proceeded from the available material on record to hold that between said two dates there was absolutely no communication between the parties. 14. The net result of the said conclusion would be that even respondent No.1 abandoned not only the project but his claim or any dispute which he may have under the agreement between parties. After more than five years, therefore, it was not open for me to reopen the closed cause in the guise of seeking a reference for adjudication of the disputes to arbitrators. It was a fit case where the Civil Court should have intervened in exercise of powers under Section 5 of the Arbitration Act, 1940. No useful purpose would be served in permitting examination of time barred and abandoned claims. 15. Under the circumstances, I find that the petitioner has made out a case for interference SCA/7450/1990 13/13 JUDGMENT with the impugned order. Impugned order dated 18.6.1990 is quashed and the petition is allowed. Prayers in Civil Misc. Application No.448 of 1989 stand granted. The petition stands disposed of accordingly. (Akil Kureshi, J.) ... (karan)