Arbitration Case No. 261 of 2006 :1: In the High Court of Punjab and Haryana, Chandigarh. Arbitration Case No. 261 of 2006 Date of Decision: 27.03.2009 M/s. Precto Engineer ....petitioner. Versus P.S.E.B., Patiala. ....respondent. Coram:- Hon'ble Mr.Justice J.S. Khehar. Present: Mr. P.S. Rana, Advocate for the petitioner. Mr. Manish Kapila, Advocate for the respondent. ... J.S. Khehar, J. (Oral). It is not a matter of dispute that the parties before this Court entered into a contract dated 25.2.2004. A copy of the aforesaid contract is available on the record of this case as Annexure A-2. The contract under reference related to the manufacture, testing and supply of 9 metre long PCC poles against PSEB Tender Enquiry No.QQ2115. The aforesaid contractual agreement Annexure A-2 contained an arbitration clause. The aforesaid arbitration clause was recorded at Sr. No.21 in the aforesaid contract. The arbitration clause referred to hereinabove, is being extracted hereunder: -- “ARBITRATION. a) if at any time any question, dispute or difference whatsoever shall arise between the purchaser/Board and the Arbitration Case No. 261 of 2006 :2: contractor/supplier, upon or in relation to all in connection with the purchase order/contract either party may forth with give to the other notice in writing of the existence of such question/dispute or difference and the same shall be referred for sole arbitration of nominee of the purchaser/Board who shall give a reasoned/speaking award. The award of the Sole Arbitrator shall be final and binding on the parties under the provisions of the Indian arbitration Act, 1996 and of the rules thereunder. Any statutory amendment, modification or re- enactment thereof for the time being in force, shall be deemed to apply and be incorporated in the contract/purchase order it will not be objectionable if the Sole Arbitrator is an officer of the Board and he has expressed his views on all or any of the matter in question of dispute or difference. b) Upon every or any such reference, the cost of an incidental to the reference and award respectively shall be at the discretion of the Sole Arbitrator so appointed who may determine the amount thereof or direct the same to be fixed as between solicitor and client or as between party and party shall direct by whom and to whom and in what manner the same is to be borne and paid. c) The work under the contract shall if reasonably possible, continue during the arbitration proceedings and no payment due or payable by the purchaser/Board shall be withheld on account of such proceedings.” Consequent upon an increase in prices of steel and cement, the Arbitration Case No. 261 of 2006 :3: petitioner commenced to address representations to the respondent asserting change in the terms and conditions of the contract dated 25.2.2004. On the denial of its claim, the petitioner addressed a legal notice dated 2.8.2005 to the Chief engineer/MM Central Purchase Organization, PSEB, Patiala. The basis of the differences between the parties were depicted in paragraphs 1 to 4 of the aforesaid legal notice, and the basis of the claim for the appointment of an arbitrator was depicted at the conclusion thereof. Since no arbitrator was appointed in terms of the mandate of the provisions of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 1996 Act), the petitioner preferred a civil suit. Eventually, the aforestated civil suit was transferred to this Court and is now subject matter of the present consideration. During the course of hearing, it was the vehement contention of the learned counsel for the petitioner, that it was imperative for the respondent in view of the dispute referred to in the legal notice dated 2.8.2005, to appoint an arbitrator, and since the respondent had failed to appoint an arbitrator, either on the issuance of the aforesaid legal notice or during the pendency of the present petition before the Civil Court, and thereafter before this Court, it is imperative for this Court, in terms of Section 11 of the 1996 Act, to appoint an arbitrator. Learned counsel for the respondent has disputed the prayer made at the hands of the learned counsel for the petitioner. It is the vehement contention of the learned counsel for the respondent, that no dispute, whatsoever, can be stated to have arisen between the parties in terms of the contract dated 25.2.2004. It is also the contention of the learned counsel for the respondent based on some clauses referred to in the Arbitration Case No. 261 of 2006 :4: contract dated 25.2.2004, that the claim of the petitioner for appointment of an arbitrator is wholly misconceived as there is no dispute, whatsoever, between the parties. The submissions advanced by the learned counsel for the respondent must necessarily be evaluated in terms of the factual position disclosed in the legal notice dated 2.8.2005. Since the aforesaid factual position has been recorded in paragraphs 1 to 4 of the legal notice, the same are being extracted hereunder: -- “1. That the above mentioned P.O. was placed upon my client for the supply of 9 metre long PCC poles @ Rs.930/- per pole. FOR destination in Punjab inclusive of all taxes and excise duty @ 9.6% and prices being firm. The delivery period was to commence after 45 days of the P.O. and completion in 4 equally quarterly instalments. It is further stated that in the NIT rates of Steel Wire and Cement were mentioned as Rs.31272/- per M.T. and Rs.2930/- per M.T. respectively. Immediately after the placement of the purchase order and even before the commencement of the P.O. the prices of steel, wire and cement increased many times as such my client intimated about the sudden increase in the steel, wire and cement and requested the Board to extend the commencement/delivery period accordingly. My client’s request was considered but rejected by the Board without assigning any reason on 23.4.2004. Since the abnormal and sudden price increase of steel, wire and cement did not come down as such my client again sent letter dated 21.5.2004 and thereby again requested Arbitration Case No. 261 of 2006 :5: the Board to extend the commencement/delivery period under force majeure clause of the P.O. as the sudden and abnormal increase in the prices of the steel, wire and cement were beyond the control of my client. 2. That my client also intimated about further increase of steel price by Rs.2000/- per M.T. vide letter dated 19.7.2004. Since the Board issued final notice dated 13.8.2004 my client accordingly sent letter dated 18.8.2004 and again requested for extension of the delivery period till the prices come down to the level of prices of the raw material rates prevailing when NIT was issued and in the alternative variable prices were requested to be allowed with the new delivery period. 3. That since the Board neither allowed variable prices not extended the delivery period nor deferred the commencement even under force majeure clause as such in order to maintain good relations with the Board thought my client was to still suffered heavy losses, it offered 750 No. Ex-stock poles 9 metre long for inspection from its business associates M/s. Precto Pipes for commencing the supplies and again requested to extend the delivery period for one quarter and made commitment to supply the poles within the delivery period to be extended. The Board did not respond to the offer of inspection of poles from the business associates immediately rather but after one and half months passed my client to complete certain legal formalities which were unjustified and unwarranted thus could not be fulfilled by my client. In fact Arbitration Case No. 261 of 2006 :6: the Board was not interested to have the poles from my client as such it did not inspect the Ex-stock of poles offered for inspection by my client rather on the other hand lingered on the matter for months together due to which heavy losses were caused on account of blocked inventory. Due to the act and conduct of the Board my client suffered loss of profit on the one hand and also suffered losses on account of idle permanent staff and establishment etc. 4. That due to sudden and abnormal increase in prices of the material i.e. steel, wire and cement the contract agreement stands frustrated more particularly when the Board has not come forward to allow variable prices or deferred the commencement of supply and extend the delivery period till the prices of steel, wire and cement come down to normal which was prevailing at the time of issuing the NIT.” Having considered the factual position disclosed in the legal notice, in conjunction with Clause 27 of the contract dated 25.2.2004, which has been extracted hereinabove, I am satisfied that the factual assertions made in the legal notice dated 2.8.2005 definitely lead to the conclusion, that a dispute has arisen between the parties, namely, the petitioner – contractor and the respondent – Board in connection with the Purchase Order dated 25.2.2004. Thus viewed, I am satisfied that it was imperative for the respondent to have appointed an arbitrator in terms of the mandate of the provisions of the 1996 Act. Having failed to do so, in exercise of the authority vested in this Court under Section 11 of the 1996 Act, I hereby appoint Shri H.L. Randev, District and Sessions Judge (Retd.) from the Arbitration Case No. 261 of 2006 :7: Superior Judicial Services from the State of Punjab, as arbitrator. Liberty is granted to the arbitrator to fix his own fee and determine the terms and conditions of arbitration. A copy of this order shall be forwarded by the Registry of this Court to Shri H.L. Randev, District and Sessions Judge (Retd.), who shall then issue notice to the parties in terms of the instant order. It would be improper for me not to make a reference to CM Nos.1867-68-CII of 2008, which came to be allowed on 30.1.2008, wherein the petitioner sought liberty to place on the record of the case a memorandum dated 19.2.2007 (Annexure A-17) and a notice issued by the petitioner dated 26.3.2007 (Annexure A-18). Based on Annexures A-17 and A-18, it is the vehement contention of the learned counsel for the petitioner, that the dispute depicted in the legal notice dated 26.3.2007 (Annexure P-18) having also not been redressed, the terms of reference for the arbitrator appointed by this Court should be extended, so as to include the dispute raised in the legal notice dated 26.3.2007. It is not possible for this Court to accept the instant prayer made by the learned counsel for the petitioner as the same is not subject matter of consideration in Arbitration Case No.261 of 2006, being disposed of by the present order. It will, however, be open to the petitioner to move an appropriate application/petition for such a claim, if the petitioner is so advised, in accordance with law. Disposed of in the aforesaid terms. ( J.S. Khehar ) Judge 27.03.2009 sk.