IN THE HIGH COURT OF JUDICATURE AT PATNA REQ. CASE No.20 of 2009 HINDUSTAN CONSTRUCTION CO.LTD. Versus UNION OF INDIA with REQ. CASE No.19 of 2009 HINDUSTAN CONSTRUCTION CO.LTD. Versus UNION OF INDIA ---------- For the Petitioner: Mr Jayanta Mitre, Senior Advocate Mr P.K.Dutte, Senior Advocate Mr. Subhro Sanyal, Advocate For the Respondent: Mr Mahesh Prasad Standing Counsel Railways ---------- 02/ 13.11.2009 Both the matters arise out of the same agreement between the same parties who are also parties in these two cases. 2. Heard learned counsel for the petitioner and the respondent. 3. Request case no. 20 of 2009 has been filed on behalf of the petitioner, which is a construction company, under section 11(6) of the Arbitration and Conciliation Act,1996 (hereinafter referred to as „the Act‟ for the sake of brevity) for appointment of Arbitrator for determining the disputes and differences which have arisen between the parties and were covered under the Arbitration Clause contained in the contract between the parties and which are as follows: “(i) What is the correct and proper interpretation of the Price Variation Clause, being Clause 20 of the Special Conditions of the Contract (General)? (ii) Whether it was the intention of the parties, which intention can be inferred from the different clauses of the contract, that in respect of abnormal and unusual rise in the prices of the said materials, which could not be covered by the Price Variation Clause, was to be absorbed by the petitioner? (iii) In a true and proper interpretation of the contractual provisions, it could be contended that whether to supply or not to supply the said materials was - 2 - within the absolute discretion of the Respondent- Railways? (iv) Is the petitioner right in its contention that on a correct interpretation of the relevant clauses of the contract an obligation was cast upon the Respondent- Railway to supply the said materials, when the same were available with the Railways? (v) Whether the petitioner is entitled to claim a sum of Rs 3.78 crores from the respondent on account of the escalation of steel as demanded in its letter dated 8th September, 2005 and further sums till the completion of the contract? (vi) To that relief, if any, is the petitioner entitled against the respondent?” 4. Learned counsel for the petitioner submits that clause 64 of the agreement which is detailed at page 228 of the brief is the clause with regard to arbitration. Hence when there was abnormal rise in the steel prices, not forseen at the time of bidding by any means which has resulted in enormous additional cost to the petitioner, the petitioner sent a letter dated 08.09.2005 (Annexure 13) notifying its intention to commence arbitration on the matter of dispute and requested the respondent to initiate necessary procedures for constitution of arbitral tribunal. 5. The respondent vide their letter dated 28.02.2007 (annexure 15) sending a panel of four names, out of whom two were to be selected by the petitioner. It transpires that the petitioner did not make his choice and instead sent letter dated 30.04.2007 (annexure 14 ) to the respondent stating that since they had given notice to the railway in that regard, they requested to amicably resolve the matter under dispute. 6. The Respondent replied vide letter dated 25.09.2007 (annexure 16) stating that since the petitioner had not chosen any - 3 - person from the panel sent by the respondent they had appointed a tribunal of three persons and the petitioner was directed to abide by the said arbitral tribunal. The petitioner was not satisfied by the said appointment of tribunal and the said tribunal remained absolutely non- functional and hence the petitioner was constrained to file Request case no. 20 of 2009 before this Court for appointment of an arbitrator to determine the disputes and differences between the parties. 7. Request Case no. 19 of 2009 has been filed by the same petitioner against the same respondent for appointment of Arbitrator for determining the disputes and differences between the petitioner and the respondent under the provision of section 11(6) of the Act as the disputes and differences which have arisen between the parties were covered under the Arbitration Clause contained in the contract between the parties and which are as follows: “ (i) Whether the petitioner is entitled to be reimbursed by the respondent for the additional cost incurred by it in procuring the cement from the open market which was, however, not supplied and/or failed to supply by the respondent? (ii) Whether the petitioner in absence of supply of the materials by the respondent was responsible to procure such materials from the open market at an abnormal high price for the benefit of the project and at the sufferance of the petitioner? (iii) Whether on the basis of the Price Variation Clause, being Clause 20 of the Special Conditions of Contract (General) the petitioner was entitled to be reimbursed for the additional cost suffered by it in procurement of cement from the open market on behalf of the respondent? (iv) Whether in the alternative, the price variation clause 20 of the contract stands in the way in getting the additional cost by the petitioner on account of cement procured by it to the knowledge and notice of the respondent from the open market at an abnormal high price - 4 - which however was not in contemplation of either of the parties? (v) Whether it was not the absolute responsibility of the respondent to supply cement for the completion of the project or if not, was it the responsibility of the petitioner to procure such cement at any price or at an abnormal high price for the benefit of the project at its own cost and expenses? (vi) Whether it was the intention of the parties under the contract that the respondent will pay the actual fluctuated price of the material in case of non-supply of such materials by the respondent for completion of the project? (vii) Whether the petitioner was entitled to get the sum of Rs 1.484 Crores and Rs 1.316 Crores respectively by reason of increase of quantity of wire crates and wire nets for the project than the contractual quantities? (viii) Whether the respondent can deny its liability to reimburse the actual premium amount paid by the petitioner in respect of the project in question by reason of non-availability of the particular amount of coverage with the Insurance Company to the extent of Rs 1.65 crores? (ix) Whether the respondent is liable to pay the amount paid by the petitioner on account of imposition of service taxes and was also liable to pay the additional work executed by the petitioner as per the suggestion and advice and/or instruction of the respondent as mentioned in the letter of demand dated 13th October,2008 as referred to above? (x) Similarly whether the respondent can deny its liability to pay the actual price of Port Land Pozzolana Cement (PPC) in place and stead of Ordinary Port Land Cement (OPC) which was not available in the market although use of the said PPC was made to the notice and knowledge and as per the approval of the respondent and/or its authorized representative?. (xi) Whether the respondent can deny and /or dispute its liability to pay damages and/or loss of profit suffered by the petitioner for the reasons of reduction of contract value and also to pay interest for delayed payment under the contract? (xii) Whether the petitioner is entitled to claim a total sum of Rs 20.12 Crores as demanded in its final letter of invocation of arbitration dated January, 27, 2009? (xiii) Whether issuance of “No Claim Certificate” by the petitioner under undue influence and coercion and/or under threat of economic pressure at the instance of the respondent, disentitle the petitioner to claim its remaining and/or unsettled dues from the respondent?” 8. Learned counsel for the petitioner submits that there - 5 - were disputes between the parties with regard to some unsettled claims with respect to their contract but no action having been taken by the respondent, the petitioner sent a letter dated 07.07.2009 (annexure 17) to the respondent demanding arbitration as per Arbitration Clause 64 of the Contract, but there was no response from the respondent to the said request of the petitioner and hence the petitioner had no remedy but to file Request Case no. 19 of 2009 before this court for appointment of an arbitrator to determine the disputes and differences between the parties. 9. After considering both the matters in detail, this Court feels that there is necessity for appointment of an Arbitrator for arbitration with regard to the disputes in both the cases which arise out of the same agreement between the parties to these cases. As suggested by learned counsel for the petitioner, let Justice R.C. Lahoti, former Chief Justice of India be appointed as Arbitrator to resolve the said disputes between the parties in accordance with the provisions of the Act . Both the parties will approach the said Arbitrator within one month from today and the Arbitrator will be at liberty to fix his remuneration and expenses which will be borne by the parties equally. 10. With the aforesaid directions, both the aforesaid cases are disposed of. shahid (S.N.Hussain, J)