C.R. No. 4391 of 2010 -1- ***** IN THE PUNJAB AND HARYANA HIGH COURT AT CHANDIGARH C.R. No. 4391 of 2010 Date of Decision : 19.07.2010 State of Punjab & others .......... Petitioners Versus Chandi Constractors Pvt. Ltd. ...... Respondent CORAM : HON'BLE MR. JUSTICE VINOD K. SHARMA Present : Mr. N.S. Virk, Addl .A.G., Punjab for the petitioners. **** VINOD K. SHARMA, J. (ORAL) The State of Punjab has invoked the revisional jurisdiction of this Court under Article 227 of the Constitution of India to challenge the order dated 11.11.2009 (Annexure P-1), passed by the learned Addl. District Judge, Muktsar, on an appeal filed by the respondent / Contractor under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter for short “the Act”). The respondent / Contractor filed a suit for recovery of the amount due to him for the work undertaken by him. The State of Punjab filed written statement to the suit filed by the Contractor, in which the amount due to the contractor was admitted. The only stand taken by the State was, that the matter stands referred to the higher authorities for sanction, which would be paid to the Contractor on receipt of sanction from the competent C.R. No. 4391 of 2010 -2- ***** authority. It seems that thereafter an application under Section 8 of the Act, was moved by the State for referring the dispute to the Arbitral Tribunal, in view of the existence of the arbitration clause in the agreement. Prima facie this matter could not be referred for arbitration, firstly, for the reason, that there is no dispute, in view of the written statement filed by the State, and secondly for the reason, that application under Section 8 of the Act was not competent after filing of written statement on merit. It was claimed, that when the matter was taken up by the Arbitral Tribunal the Contractor was required to deposit 10% of the amount claimed, to avoid any frivolous claims. The learned Arbitrator accepted the application ordered the respondent to deposit 10% of the amount claimed in terms of the agreement between the parties. Respondent / Contractor filed an appeal under Section 37 (2)(b)of the Act, to challenge the order passed by the Arbitrator. The learned Addl. District Judge accepted the appeal, for the reason, that on true interpretation of the clause on which the reliance was placed by the Arbitrator, the 10% amount was required to be deposited, only to avoid the frivolous claim being raised by the party. The 10% amount to be deposited, therefore, could not be treated to be mandatory clause, especially in view of the facts and C.R. No. 4391 of 2010 -3- ***** circumstances of the present case, where there was no dispute, as in the civil suit filed by respondent, the State has taken a positive stand that the amount due to the Contractor was to be released after sanction by competent authority. For the reasons stated, it can not remotely be said, that the claims raised were frivolous claims or could be claimed to be so, which could entitle the arbitrator to direct the party to deposit 10% of the amount claimed. The learned Addl. A.G., Punjab challenged the order passed by the learned Appellate Authority by contending, that the learned Court has misread the provisions of the agreement to exempt the Contractor / respondent from depositing 10% of the amount, though it was pre-requisite for revoking the arbitration clause. The learned counsel for the State also contended, that the impugned order passed is in violation of Section 17 of the Act, as it was within the powers of the Arbitrator to direct a party to deposit the appropriate security in connection with the measure which were required under sub-section (1) of the Act. In order to appreciate the arguments, it would be relevant to reproduce Section 17 of the Arbitration and Conciliation Act, 1996, which reads as under :- “Interim measures ordered by arbitral tribunal.-(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the C.R. No. 4391 of 2010 -4- ***** request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute. (2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1).” The reading of clause (1) would show, that the Section 17(1) of the Arbitration and Conciliation Act, 1996, does not cover the provisions in the agreement, as the Section starts with the words “Unless otherwise agreed by the parties”. The interim measures covered under the Section, are also for protection of the subject- matter in the dispute. The imposition of condition to deposit 10% of the claimed amount by the arbitrator before passing of award, by invoking the provisions of Section 17 of the Act, can not be sustained being against the provisions of Section 17 of the Arbitration and Conciliation Act, 1996 itself. For the reasons stated above, I find no force in the contentions raised by the learned Addl. A.G., Punjab. Firstly, there is no dispute, for the reason, that the amount due is admitted by the State, therefore, it can not be said to be a frivolous claim, which could entitle the arbitrator to force the party to deposit 10% of the amount. Further more the provisions of Section 17 of the Act, do not cover the order passed i.e. impugned order. The leaned C.R. No. 4391 of 2010 -5- ***** Appellate Court, therefore, rightly set aside the order passed by the Arbitral Tribunal. No merit. Dismissed. 19.07.2010 (VINOD K. SHARMA) 'sp' JUDGE