Reserved Judgment IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Arbitration Petition No. 10 of 2006. SHRING Construction Company Pvt. Ltd. (a company duly registered under the Companies Act, 1956) having its Registered Office at D-245, Nehru Colony, Haridwar Road, Dehradun, through its Director. … Applicant. Vs. M/s National Projects Construction Corporation Limited (a Govt. of India Enterprise), a Company within the meaning of the Companies Act, 1956 having its Zonal Office at Plot No. 67-68, Sector-25 Faridabad-121004 (Haryana) through its Zonal Manager (North Zone). …Respondent. Sri V.K.Kohli, Senior Advocate, assisted by Sri T.C.Pande, learned counsel for the applicant. Sri Alok Singh Senior Advocate, assisted by Sri T.P.Singh, learned counsel for the respondent. With Arbitration Petition No. 22 of 2006. SHRING Construction Company Pvt. Ltd. (a company duly registered under the Companies Act, 1956) having its Registered Office at D-245, Nehru Colony, Haridwar Road, Dehradun, through its Managing Director. … Applicant. Vs. 1. M/s National Projects Construction Corporation Limited (a Govt. of India Enterprise), A Company within the meaning of the Companies Act, 1956 having its Zonal Office at Plot No. 67-68, Sector-25 Faridabad-121004 (Haryana) through its Zonal Manager (North Zone). 2. The Executive Engineer (Civil), M/s National Projects Construction Corporation Ltd. Maneri Bhali Unit, P.O. Dharasu, District Uttarkashi-249 134 (Uttaranchal). 3. The Additional General Manager, Northern Sector, M/s National Projects Construction Corporation Ltd. Plot No. 67- 68 Sector-25, Faridabad-121 004 (Haryana). …Respondents. Sri S.K.Jain, learned counsel for the applicant. Sri Alok Singh Senior Advocate, assisted by Sri T.P.Singh, learned counsel for the respondent. 2 Date March 28, 2008 Hon’ble B.S.Verma, J. Since the controversy involved in both the arbitration petitions moved under Section 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of an Arbitrator (for short the Act) is similar and the dispute is between the same parties, therefore, for the sake of convenience, both the petitions are being decided by this common order. In Arbitration Petition No. 10 of 2006, the applicant- company has alleged that the applicant is a private limited company and Shri Samir Jain is its Director. The respondent had invited tenders for the work of clearance/removal of loose Much, Slush and Mud doing Back-fill concrete/invert Mudmat concrete in horizontal Penstocks and adits at Maneri Bhali Hydro Electric Project, Stage- II Dharasu and the tender submitted by the applicant was accepted by the respondent and consequently, an agreement was duly executed between the parties on 22-10-2002. The contract work was completed in March 2004 but in spite of repeated demands, the respondent did not make payment of Rs. 2,86,67,530-00 to the applicant, rather the claim has been denied. According to the applicant, as per Clause S1.3.01(c) of the agreement, every dispute, difference or question which may be at any time arise between the parties or any person claiming under them was to be resolved through arbitration. The dispute is first to be submitted to Conciliation as per Clause S1.3.01(A) and the party initiating conciliation is required to send to the other party a written invitation to conciliate upon the disputed matter and in case the other party rejects the invitation or does not reply within thirty days from the date of invitation, there will be no conciliation proceedings. The applicant issued a notice on 8-5-2006 to the respondent and invited the respondent for settlement of the matter by conciliation vide Annexure NO. 2. The notice was served upon 3 the respondent vide copy of postal receipt Annexure No.3. In spite of service of said invitation, the applicant has not received any reply from the respondent. Hence the applicant invoked the provision of Clause S1.3.01(C) of the agreement and has sent a notice on 14.6.2006 to the respondent proposing the names of three retired High Court Judges of the Allahabad High Court for appointing any one of them to arbitrate the matter. The respondent was called upon to propose name of any one of them to act as arbitrator, but even after expiry of period of thirty days from the date of service of notice, no response was received from respondent. Hence the applicant has filed the present petition. On behalf of the respondent, counter affidavit has been filed. It has been admitted that a contract agreement was executed between the parties. The respondent has denied the claim of Rs. 2,86,67,530-00 set up by the applicant and it has been stated that the applicant-petitioner is not entitled to claim any amount beyond Rs. 59.15 lacs. It was also stated that the petitioner company received advance payment of Rs. 567.66 lacs, which is not permissible under the agreement beyond the said amount of Rs. 59.15 lacs, hence the respondent company is entitled to recover extra payment made to the applicant company against Rs. 567.66 lacs. As per Clause S.1.2.08 of the agreement, for recovery of advance payment made, the matter shall be placed before Dispute Resolution Board (DRB). The respondent has issued notice to the applicant company on 25-8-2006 both for the purposes of seeking recovery of extra payment as well as for settlement of dispute. It has been stated that the respondent company agrees and undertakes to place the matter before Dispute Resolution Board, therefore, the petition is not maintainable and the matter cannot be referred for arbitration. It has further been submitted that the applicant has not given complete details of the alleged dues hence the petition is not maintainable. 4 Rejoinder affidavit has been filed on behalf of the applicant and it has been reiterated that the deponent Samir Jain has been duly authorized to move the present petition. In the rejoinder affidavit the facts already stated in the petition has been reiterated. In Arbitration Petition No. 22 of 2006, it has been alleged that the tender of the applicant company was accepted and an agreement was duly executed between the parties on 16-4-2004. The applicant got the contract work completed in March 2004 as per terms and conditions of the contract and to the satisfaction of the respondents. After completion of the work, the applicant submitted its claim but instead of making payment of the claim, the respondents started to create the disputes. The respondents have given false assurance for settlement of disputes to the applicant. The applicant has stated that amounts of Rs. 26,56,462-00 have not been paid to the applicant by the respondents. Subsequently, the applicant requested the respondents to settle the dispute by arbitration through its letter dated 8-5-2006 and the applicant even requested the respondents personally for settlement of disputes by Arbitrator, but they did not pay any heed to the repeated requests of the applicant. Ultimately, the applicant served a notice under Section 11 of the Act on 19-6-2006 upon the respondents, but the respondents did not give any reply of the letter and the notice. Counter affidavit has been filed on behalf of the respondents. The respondents have raised preliminary objection regarding maintainability of the petition. It has been stated that Clause 5 of the Special Terms and conditions prescribes that no escalation of price variation shall be paid. Applicant was required to complete the work within two months and in case of failure, the applicant himself was to be blamed for the delay. It has been stated that no delay was caused by the respondents and the contractor cannot claim escalation of prices for the delay caused by him in 5 execution of the work. The applicant was also not stopped in carrying out the contract work within stipulated time by the respondents. According to the respondents, it is for the applicant to establish that the dispute between the parties is bona fide before requesting for arbitration. It has further been stated that the contractor-applicant cannot claim any escalation of price, who himself has failed to complete the work within the stipulated time. It was also stated that there was no change of site condition after execution of the contract bond. The respondent-corporation created no hindrances for stopping the contract work. According to the respondents, the arbitration clause of the agreement can only be invoked if there existed bona fide dispute and not on account of own default on the part of the contractor-applicant. It was also stated that no cause of action has arisen to the contractor for invoking arbitration clause. The applicant-contractor filed rejoinder affidavit and on the point of delay, it has been stated that there was no delay on the part of the contract and that the entire contract work was done as per satisfaction and requirement of the respondent and if any delay is found, the same is attributed to the respondent-Corporation as they have committed breach of the contract and this aspect can also be adjudicated by the Arbitrator. The respondents have also filed supplementary counter affidavit and has stated that the representative of the applicant had a negotiation with the respondent and he was satisfied with the measurement and bills prepared by the respondents. On 16-06- 2006, the representative of the applicant also signed the final bill prepared by the Department. As per Clause 5 of the Special Terms and Conditions of the contract, no escalation of price variation shall be paid. The applicant itself is responsible for the delay if any and escalation. The terms and conditions of the contract are fully binding upon the parties. It was also contended that there has been 6 no arbitral issue between the parties, hence there is no question of the dispute to be referred to the arbitrator. I have heard learned counsel for both the parties and have given my anxious thoughts to the averments made in the application, counter affidavit, rejoinder affidavit, supplementary counter affidavit and the annexures filed along with them as also the arbitration clause of the agreement between the parties. I have perused the provision of the agreement bond (S1.3.01) which provides for Protest and Claims, which reads as under:- “Protest and Claims: The sub-clauses (a), (b) & (c) of principal agreement, for future cases, if any, is substituted as below: Every dispute, difference or question which may be at any time arise between the parties hereto or any person claiming under them, touching or arising out or in respect of this agreement or the subject matter thereof shall be resolved as per procedure given hereunder: A) CONCILIATION: a) Disputes between the Employer and the Contractor shall first be submitted to Conciliation. The procedure outlined in the Arbitration and Conciliation Act, 1996, shall be followed. b) The party initiating conciliation shall send to the other party a written invitation to conciliate. Conciliation proceedings shall commence when the other party accepts in writing the invitation to conciliate. If the other party rejects the invitation, or does not reply within thirty days from the date of invitation, there will be no Conciliation Proceedings. 7 c) There shall be one Conciliator, preferably an eminent engineer, unless the parties agree that there shall be one or three Conciliators, i.e. in odd numbers. Where there is more than one Conciliator, they ought, as a general rule, to act jointly. d) When it appears to the Conciliator that there exists elements of a settlement, which may be acceptable to the parties, he shall submit them to parties for their observation. He may reformulate the terms of a possible settlement in the light of their observations. e) If the parties reach agreement of the dispute, they may draw up and sign a written settlement agreement. They may request the Conciliator to draw up or assist them in drawing up to the settlement agreement. f) Settlement agreement shall have the same status and effect as if it is an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal under section 30 of the Act. g) If the settlement does not appear possible, the Conciliator, after conciliation with the parties, will give a written declaration that further efforts at conciliation are no longer justified and the Conciliation Proceedings are terminated. B) When conciliation proceedings have become infructuous or have been terminated, the party, which invited Conciliation, shall refer the dispute for Arbitration. The reference to arbitration should be made preferably within 28 days of the termination of Conciliation Proceedings. C) The Arbitration shall be conducted in accordance with the Arbitration and Conciliation Act; 1996. For contracts costing upto Rs. 10 Crores, A Sole Arbitrator should be appointed. For contracts costing over Rs. 10 Crores, a committee of arbitrators should be appointed composed of one arbitrator to be nominated by the contractor, one to be nominated by the employer and the third arbitrator, who 8 will act as a chairman, but not as umpire, to be chosen jointly by the two nominees. The decision of the majority of arbitrators shall be final and binding on both parties.” It is pertinent to mention that in paragraph no. 10 of the former case and in paragraph no. 7 of the latter case, it has been specifically mentioned by the applicant that the applicant issued a notice on 8-5-2006 to the respondents invoking the Clause S1.3.01(A) of the agreement and had invited the respondents for settlement of the matter by conciliation and has annexed the photocopy of the letter/notice dated 8-5-2006 as Annexure Nos. 3 and 2 respectively. It is also not disputed that the notice was duly served upon the respondents. It has been stated by the applicant that the respondents have not sent reply of the notice inviting conciliation. It has been specifically stated by the applicant that despite service of the notice upon the respondent, the respondent has not agreed upon for the appointment of an arbitrator for the settlement of the disputes between the parties. Moreover, in the latter case, it has been stated by the applicant in paragraph no. 12 as under:- “12. That thereafter under the compelling circumstances the applicant served a notice under Sec. 11 of Arbitration and Conciliation Act 1996, on 19-06-2006 by registered A/D. The said notice was served on the respondents on 22-06- 2006. A true photocopy of the Notice dated 19-06-2006 along with the A/D are being filed herewith and marked as Annexure No. 4 to the application.” In the counter affidavit, there is no specific denial of all these allegations made by the applicant pertaining to the notice sent by him for conciliation of the dispute and for appointment of arbitrator. 9 Even in paragraph no. 8 of its counter affidavit filed in Arbitration Petition No. 10 of 2006, the respondent has conceded inter alia that the disputes between the parties shall be first submitted for conciliation and further as per terms and conditions of the agreement to the arbitrator. So far as referring the matter to Disputes Resolution Board (DRB) is concerned, the dispute, which has now been raised by the applicant, cannot be referred to the DRB according to the agreement itself. Certain class of disputes may, in mutually agreed time bound manner, be referred to the DRB and the present dispute does not belong to that category of cases. The escalation matter may also be decided by the Arbitrator. In view of the discussion made in the foregoing paragraphs, I am of the view that a bona fide dispute exists between the parties and the dispute is referable to the arbitrator. The questions whether the applicant is entitled to escalation price including the claims as alleged in paragraph no. 4 of the former case and that of paragraph no. 6 of the latter case all such disputes are to be decided by the Arbitrator and the same is not within the scope of Section 11(6) of the Act. Accordingly, the application for appointment of arbitrator in each is allowed. Sri Justice P.P. Gupta (Retired High Court Judge, Allahabad) Sector-4, Rajnagar, House No.106, Ghaziabad is appointed as Sole Arbitrator to initiate the arbitral proceedings and to submit his Award in accordance with law. The sole arbitrator shall conclude the arbitral proceedings expeditiously as far as possible. Both the arbitration petitions are allowed. (B.S.Verma,J.) RCP