PNP 1 ARBAP228-08=26.8 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O. O. C. J. ARBITRATION APPLICATION NO.228 OF 2008 Arnico Builders ..Applicant. Vs. Maharashtra State Employees’ Cultural Society ..Respondent. ..... Mr.Sandeep Parikh with Ms. Punita Soni i/b M/s.Bilawala & Co. for the Applicant. Mr. Avinash B. Avhad with Mr. M.V. Pawar for the Respondent. .... CORAM : DR.D.Y.CHANDRACHUD, J. 26 August 2010. P.C. : 1. This is an application under Section 11(6) of the Arbitration and Conciliation Act 1996. 2. In pursuance of a tender floated by the Respondent, the Applicant was awarded a contract for carrying out the work of additions, alterations and renovations to the Alpabachat Bhavan, Pune which belongs to the Respondent. An agreement was entered into between the parties on 20 May 2004. The estimated cost of work PNP 2 ARBAP228-08=26.8 was Rs.2.35 Crores subject to final certificates/ bills to be issued by the Project Management Consultants. Shrikhande Consultants Private Limited, Pune were appointed as the Project Management Consultants and Engineers for the work. Clause 4 of the agreement was to the following effect : “4. Tender documents comprising Instructions to Tenderers, Form of Tender together with Appendix, General and Special Conditions of Contract, Mode of payment, Drawing, Specifications with all working drawings/details and other documents constituting a tender and acceptance thereof etc. shall be read and studied as forming part of this Agreement and the parties hereto shall respectively abide by and submit themselves to the conditions and stipulations and perform the agreements on their part respectively in such conditions contained.” 3. The Applicants claim to have commenced work on 16 April 2004 and to have completed the work of Phase I on 13 March 2005. According to the Applicant, the work of Phase II relating to the swimming pool area was taken up by them on the instructions of the Respondent. However, the work of Phase II is alleged to have ceased on the instructions of the Respondent in or about September 2005. According to the Applicant the project consultant issued a final PNP 3 ARBAP228-08=26.8 certificate in August 2005 in respect of the work completed of Phase I. In January 2006 the Applicant submitted its final bill for the partial work completed of Phase II. The Project Management Consultant is stated to have furnished a final certificate for a part of the work completed, of Phase II, in August 2006. According to the Applicant a final certificate / bill aggregating to Rs.2,94,52,211/- payable by the Respondent was certified by the Project Management Consultants who were also nominated as engineers under the contract. By a letter dated 1 September 2007 the Project Management Consultants informed the Respondent that there had been an inordinate delay of almost twenty four months in the payment for Phase I and of about twelve months for Phase II inspite of the Applicant having completed the work and rectified the defects. Correspondence ensued between the parties and on 23 April 2008 the Applicant invoked the arbitration agreement. 4. The Respondent has been served with the Arbitration Application under Section 11(6). No reply has been filed. PNP 4 ARBAP228-08=26.8 5. Counsel appearing on behalf of the Respondent submitted that in the present case there is no valid arbitration agreement. The submission is that the agreement dated 20 May 2004 does not itself incorporate an arbitration agreement. Moreover, it was submitted that Clause 28.2 of the general conditions of contract provide that a party may require that a dispute be arbitrated upon and there was therefore no mandatory requirement of submitting disputes to arbitration. 6. There is no merit in the submission. As already noted earlier, Clause 4 of the agreement specifically incorporates the general conditions of contract. It has not been disputed on behalf of the Respondent that the general conditions of contract contain a provision for arbitration in Clause 28. Clause 4 of the agreement is express and clear, in that the General Conditions of Contract are to be read as forming a part of the agreement and parties agreed to abide by and submit themselves to the conditions and stipulations contained PNP 5 ARBAP228-08=26.8 therein. The reliance which is placed on the judgment of the Supreme Court in K. Sasidharan v. Kerala State Film Development Corporation1 will not carry the case of the Respondent any further. In that case, the judgment of the Supreme Court notes that while entering into the contract, the arbitration clause was admittedly excluded. Once parties had specifically excluded the arbitration clause in the agreement, it was held that it could not be incorporated by necessary implication. 7. The next judgment on which reliance has been placed is in Jagdish Chander v. Ramesh Chander2. The Supreme Court has held that while there is no specific form of an agreement, the words should disclose a determination and obligation to go to arbitration and not merely the possibility of going for arbitration. In the present case, the test which has been laid down by the Supreme Court is patently satisfied. Clause 28 of the General Conditions of Contract which is incorporated into the agreement between the parties contains a 1 1994(4) SCC 135. 2 2007(5) SCC 719. PNP 6 ARBAP228-08=26.8 determination and obligation to go to arbitration and not merely a contemplated possibility of parties agreeing to do so in future. The use of the word ‘may’, in the circumstances, does not indicate that the agreement to arbitrate was in the realm of a future possibility which is dependent upon an agreement being arrived at subsequently between the parties. There was in praesenti an agreement between the parties to the effect that disputes and differences would be referred to arbitration. Clause 4 of the agreement dated 20 May 2004 inter alia provides that the tender documents including the General and Special conditions of contract shall be read as forming part of the agreement and that the parties shall respectively abide by and submit themselves to the conditions and stipulations contained therein. In paragraph 10 of the Arbitration Application, it has been stated that Clause 28 of the General Conditions of Contract, a copy of which is annexed to the application at Exhibit K, contains an arbitration agreement. Clause 28.1 provides that all differences and disputes arising out of or in connection with the contract or carrying out of the work shall be referred to and settled by the engineer who shall state PNP 7 ARBAP228-08=26.8 his decision in writing. Under Clause 28.2 if either the employer or the contractor is dis-satisfied with the decision of the engineer on any other matter, question or dispute of any kind or as to the withholding by the engineer of any certificate, then in such a case either party may within fifteen days after receiving notice of the decision give a written notice to the other party through the engineer requiring that such a matter in dispute be arbitrated upon. 8. On behalf of the Respondent it has next been urged that parties contemplated a recourse to the civil courts and not to arbitration because Clause 8 of the contract provides that all disputes arising out of the agreement shall be deemed to have arisen in Pune, and only the Court in Pune shall have the jurisdiction to determine the same. Clause 8 of the agreement cannot possibly be read to override the provisions of Clause 4 under which the General Conditions of Contract were specifically incorporated as part of the agreement. Clause 28 of the General Conditions of Contract to which a reference has been made in paragraph 10 of the Application and PNP 8 ARBAP228-08=26.8 which has been annexed at Exhibit K to the Application provides an agreement on arbitration. The general provisions of Clause 8 to the effect that disputes would be deemed to have arisen in Pune and would be subject to the jurisdiction of the Court only in Pune therefore cannot be read to imply that there was no arbitration agreement. 9. The Engineers appointed for the purposes of the contract have on 1 September 2007 recorded that the bill of the Applicant in respect of Phase I and Phase II had been certified and that payment had been inordinately delayed. The Applicant proceeded to invoke the arbitration agreement by its letter dated 23 April 2008. Neither was there any reply to the letter nor is there any reply to the Arbitration Application. In these circumstances, from the material on the record, it is evident that there is an arbitration agreement between the parties. Disputes and differences have arisen. In terms of the provisions of Section 11(6) of the Arbitration and Conciliation Act, 1996, an arbitrator would have to be appointed to adjudicate PNP 9 ARBAP228-08=26.8 upon the disputes and differences. 10. In the circumstances, in exercise of the powers under Section 11(6) of the Arbitration and Conciliation Act 1996, Mr. Justice M.S. Jamdar, Former Judge of this Court is appointed as sole arbitrator to arbitrate upon the disputes and differences between the parties. The Arbitration Application is accordingly disposed of. The Prothonotary and Senior Master shall forthwith transmit a copy of this order together with a memorandum of Address of the parties to the Learned Arbitrator. There shall be no order as to costs. (Dr. D.Y.Chandrachud, J.)