IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.T.SANKARAN THURSDAY, THE 29TH JULY 2010 / 7TH SRAVANA 1932 AR.No. 14 of 2010 PETITIONER ---------------------- T.S.SANIL, AGED 44 YEARS, S/O.T.A.SURENDRAN, PROPRIETOR, M/S.SILPA CONSTRUCTIONS, NORTH SQUARE, 4TH FLOOR, PARAMARA ROAD, KOCHI-18, RESIDING AT THANDASSERY HOUSE, VADUTHALA, CHERANELLUR VILLAGE, KANAYANNUR TALUK. BY ADV. SRI.P.K.RAVISANKAR RESPONDENT: --------------- M/S.LULU INTERNATIONAL CONVENTION CENTER(P) LTD., PUZHAKKAL, AYYANTHOLE, THRISSUR-3, REP. BY ITS MANAGING DIRECTOR, YUSUF ALI M.A. BY ADV. SRI.S.ANIL KUMAR (TRIVANDRUM) SRI.K.S.HARIHARAN NAIR THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 29/07/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: K.T.SANKARAN, J. ------------------------------------------------------ A.R. NO. 14 OF 2010 ------------------------------------------------------ Dated this the 29th day of July, 2010 O R D E R The petitioner, the proprietor of M/s.Silpa Constructions, entered into a contract with the respondent for construction of a convention center and allied buildings at Thrissur for the respondent. There is no dispute that the work was completed as on 28.7.2006. It is stated that 7% of the amount covered by the running bills was retained by the respondent as retention money. It was agreed by the parties that the retention money would be returned to the petitioner after the defect liability period of twelve months was over. It is stated that the total retention amount, including the earnest money deposit, was Rs.49,42,488/-. The petitioner stated that the respondent paid an amount of Rs.42 lakhs on various dates. According to the petitioner, the balance due to him from the respondent is Rs.7,42,488/-. 2. Two agreements were executed by the parties in respect of the construction of the buildings. They are, Annexure-A agreement dated 29.10.2004 and Annexure-B agreement dated 4.2.2005. ARB. REQUEST NO.14 OF 2010 :: 2 :: Clause V (10) of Annexure-A agreement and Clause V(9) of Annexure-B agreement contain the arbitration clause. The arbitration clause reads as follows: “10. With regard to settlement of disputes the architect will give final decision and if not satisfied with the above decision the particular issues are to be referred to the Arbitrator mutually agreeable by both parties in accordance with the provisions of Arbitration and Conciliation Act, 1996 or any statutory modifications in force. If parties are not satisfied with the decision of arbitrator the issues are to be referred to court at Thrissur.” 3. It is stated in the Arbitration Request that though the petitioner approached Sri.N.M.Salim, the Architect, no settlement was arrived at. This is not disputed by the respondent. Annexure-C notice was issued by the petitioner to the respondent demanding the amount. The respondent replied as per Annexure-D reply dated 18.12.2009, in which, the liability was disputed. It was contended that the respondent would be entitled to get a sum of Rs.46,50,000/- from the petitioner on account of the delay occasioned in the completion of the work. Another sum of Rs.25 lakhs is claimed on ARB. REQUEST NO.14 OF 2010 :: 3 :: account of the Value Added Tax. The petitioner issued Annexure-E notice dated 17.12.2009 requesting the respondent to communicate its consent to appoint Sri.N.Sukumaran as the arbitrator. In Annexure-F reply dated 27.1.2010, the respondent made it clear that the arbitrator suggested in Annexure-E is not acceptable to the respondent. 4. A counter affidavit is filed by the respondent reiterating the contentions put forward in the reply notice. In the counter affidavit filed by the respondent, it is stated as follows: “3. Section 10 of the Kerala Value Added Tax Act, 2003 imposes responsibility on the awarder of the work to deduct the tax payable by the contractor in relation to the goods transferred in the execution of the works contract from the payments made to the contractor, including advance payment, and to remit it to Government. But the respondent herein had not deducted any amount from the applicant since the applicant had made the respondent to believe that he was paying tax under the said Act to the assessing authority. But the Assistant Commissioner (Audit Assessment), Commercial Taxes, Thrissur issued notice dated 15.10.2007 to the respondent proposing to ARB. REQUEST NO.14 OF 2010 :: 4 :: assess the petitioner for the years 2005-2006 and 2006- 2007 taking into account the contract amount of Rs.1,61,99,208/- in respect of which the applicant had not paid tax. A copy each of the said notices dated 15.10.2007 is produced herewith and is marked as Exhibit R1 and Exhibit R2 respectively. 4. The respondent has filed reply to Ext.R1 and Ext.R2 notices. A copy of the reply dated 30.11.2007 is produced herewith and is marked as Exhibit R3 respectively. But orders on Ext.P3 are yet to be passed by the Commercial Taxes Department. 5. If the proposals in Ext.R1 and Ext.R2 are implemented, an amount of Rs.15,18,676/- (approximately) will be payable in relation to the contract amount already received by the applicant, which is the actual liability of the applicant under the Kerala Value Added Tax Act. The amount of Rs.6,73,395/- retained by the respondent will be too insufficient to meet the tax liability of the applicant.” 5. It is admitted that the dispute between the parties is arbitrable. The arbitrator, as suggested by the applicant, is not acceptable to the respondent. In the facts and circumstances of the case, all the disputes which arose between the parties in relation to ARB. REQUEST NO.14 OF 2010 :: 5 :: the contracts are required to be settled by the arbitrator. According to the petitioner, the dispute relates to repayment of the retention amount. The respondent contended that since the liability under the Value Added Tax is not finalized, the amount is liable to be retained. This also amounts to a dispute. In the facts and circumstances of the case, I am of the view that the matter requires to be referred to arbitration under Section 11(6) of the Arbitration and Conciliation Act. As regards the appointment of arbitrator, various names came up for consideration. It is agreed by the petitioner as well as the respondent that Sri.O.Ramachandran Nambiar (Retired District Judge), Advocate, Ernakulam can be appointed as the arbitrator. Accordingly, the Arbitration Request is allowed. Sri.O.Ramachandran Nambiar, Advocate is appointed as the arbitrator to resolve the disputes between the petitioner and the respondent in respect of the matters mentioned in the Arbitration Request as well as in the counter affidavit. (K.T.SANKARAN) Judge ahz/