Reserved Judgment IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Arbitration Application No. 19 of 2006. Karam Chand Thapar & Bros Limited, 25, Brabourne Road, Thapar House Kolkata-700 001 and Also at, Karam Chand Thapar & Bros. (C.S.) Ltd TICIL Division, P.B. No. -5, V.K. Puram – 249 130 Tehri, Tehri Garhwal. …Applicant. Vs. M/s Tehri Hydro Development Corporation Limited, Kribhco Bhavan, A-Wing, 4th Floor, A-10, Sector 1, NOIDA- 201 301 Uttar Pradesh, and also at, Bhagirathpuram Tehri, District Tehri Uttaranchal. …Opposite Party. Sri V.B.S. Negi, learned counsel for the applicant. Sr. U.K. Uniyal Senior Advocate, assisted by Sri Shobhit Saharia, learned counsel for the respondent. With Arbitration Application No. 20 of 2006. Karam Chand Thapar & Bros. (C.S) Ltd. TICIL Division, post Box No. -5, Tehri through its General Manager (Projects), Shri A.K. Aggarawal. …Petitioner. Vs. 1. Tehri Hydro Development Corporation Limited, having its registered office at Bhagirath Bhawan, Bhagirathpuram, Tehri Garhwal, Uttaranchal – 249 001 through its General Manager (Project). 2. Secretary (Power), Ministry of Energy, Government of India. ….Respondents. Sri V.K. Kohli, Senior Advocate, assisted by Sri T.C. Pande, learned counsel for the applicant/petitioner. Sr. U.K. Uniyal Senior Advocate, assisted by Sri Shobhit Saharia, learned counsel for the respondents. Learned Assistant Solicitor General of UOI for respondent no.2. And Arbitration Application No. 21 of 2006. Karam Chand Thapar & Bros. (C.S) Ltd. TICIL Division, post Box No. -5, Tehri through its General Manager (Projects), Shri A.K. Aggarawal. …Petitioner. Vs. 3. Tehri Hydro Development Corporation Limited, having its registered office at Bhagirath Bhawan, Bhagirathpuram, Tehri Garhwal, Uttaranchal – 249 001 through its General Manager (Project). 4. Secretary (Power), Ministry of Energy, Government of India. ….Respondents. Sri V.K. Kohli, Senior Advocate, assisted by Sri T.C. Pande, learned counsel for the applicant/petitioner. Sr. U.K. Uniyal Senior Advocate, assisted by Sri Shobhit Saharia, learned counsel for the respondents. Learned Assistant Solicitor General of UOI for respondent no.2. Date March 11, 2008 Hon’ble B.S. Verma, J. Since the controversy involved in all these three arbitration applications moved under Section 11 of the Arbitration and Conciliations Act, 1996 (for short the Act) for appointment of an Arbitrator is similar and the dispute is between the same parties, therefore, for the sake of convenient, all the three applications are being decided by this common order. In Arbitration Application No. 19 of 2006, the applicant-company has alleged that the respondent invited tenders for constructing Tehri Hydro Power Plant Civil Works, Package-I vide Letter No. THDC/RKSH/CD/150/Package-I dated 1-6-1993 in respect of the works comprising intake works, balance work of Head Race Tunnels, Control Gate Shafts, Bifurcation of Head Race Tunnels, Butterfly Valve Chamber, Penstock Assembly Chamber, Pressure Shafts and approach adits etc. As per contract documents of the respondent, the petitioner submitted its tender, which was accepted by the respondent vide its letter of Intent No. THDC/RKSH/CD/150/package-I/1786 dated 8/9th November 1995. According to the applicant, both the parties were under obligation to discharge their respective obligations property in accordance with the contract documents/bond. The applicant carried out the work in conformity with the drawings supplied by the respondent and as per instructions of the Engineer Incharge or his authorized representatives at site from time to time during the progress of project work. The company had executed the work of the contract bond as well as beyond the data given in the contract bond and the said work was carried out in excess of what has been mentioned in the agreement between the parties because on the instructions of the Engineers of the respondent the petitioner had to revise the methodology from that given in the tender document and contract bond, which gave rise to the dispute regarding the claim of extra expenditure incurred due to change in methodology in control gate shaft HRT for Package-I Agreement No. THDC/RKSH/CK/150/Pakage-I/A.G. The applicant filed a claim showing extra expenditure of Rs. 35,00,000/- due to changed methodology by the respondent by letter dated 7-10-2007, 10-10- 2007 and 24-11-2007. The grievance of the applicant is that despite repeated requests made by the applicant for payment of extra expenditure incurred by the applicant, no payment was made by the respondent rather the respondent has rejected the claim vide its letter dated 17- 10-2007. Subsequently, the applicant preferred appeal before the Chairman and Managing Director of the respondent in accordance with Clause 60.0 of the General Conditions of Contract, a copy of which has been annexed as Annexure No.1. The Chairman and Managing Director of the respondent rejected the claim of the petitioner vide letter dated 10-4-1998. Ultimately the petitioner wrote a letter on 30-10-2002 to refer the matter to the Dispute Review Board (for short DRB), which was constituted and the proceedings took place before it. The applicant presented a claim of Rs. 78,78,000/- on account of claim for extra expenditure incurred due to change in methodology in control gate shaft HRT for Package-I and Interest @ 24% per annum. The D.R.B. by its majority decision given on 20-1-2006 had awarded a lump sum payment of 4,10,000/- to the petitioner, while in minority decision, the petitioner was allowed to a sum of Rs. 43,39,761/- as per minority report (Annexure No. 2.). According to the petitioner, the total claim including the interest @ 24% comes to more than Rs. 200.00 lacs as detailed in paragraph no. 29, hence the present application has been filed for appointment of Arbitrator under the Act for settlement of dispute between the parties. In Arbitration Petition No. 20 of 2006, filed by the petitioner, prayer has been made for appointment of two arbitrators in addition to the arbitrator already appointed by the petitioner as envisaged by Clause No. 60(ii) of the General Conditions of Contract with the allegation that a contract was given to the applicant for construction of Tehri H .P.P. Civil Works Pakage-II vide agreement dated 3-1-1996. It has been contended by the petitioner that a sum of Rs. 28,59,329.17 with interest is due to the petitioner against the respondent in respect of the work executed by the petitioner. The claim for the above amount was made by the petitioner, which was rejected by the respondent vide letter contained as Annexure No. 5. The petitioner preferred an appeal before the Chairman and Managing Director of the respondent no.1 as provided under Clause 60 of the General Conditions of Contract, which too was rejected vide letter dated 7-4-2003, copy of which has been annexed as Annexure No. 7 to the arbitration petition. The matter was referred to D.R.B. which rejected the claim of the petitioner vide Annexure No. 8. Thereafter, the petitioner filed a review before DRB as there were allegedly material irregularities in the decision, which too was rejected vide decision dated 11-2-2004, copy of which has been annexed as Annexure No. 9 to the petition. The grievance of the petitioner is that the respondent has failed to make the payment of the work done by the applicant therefore, the applicant is left with no other option to invoke the Arbitration Clause contained in Clause 60 of the General Conditions of the Contract. According to the petitioner, it has already appointed Sri Yashpal Singh as its Arbitrator as per terms of the contract. In Arbitration Petition No. 21 of 2006, the petitioner has inter alia alleged that the applicant and the respondent no. 1 entered into a contact vide Agreement No. THDC/RKSH/CD/150/PACKAG-II/AG dated 3-1-1996 and the applicant was given contract for construction of Tehri H.P.. Civil Works (Package-II) comprising of Machine Hall, Transformer Hall, Draft Tube, upper and lower expansion chambers, cable tunnel, ventilation tunnel, control room, drainage galleries, approach adits, ect. and other appurtenant works and it was agreed between the parties that the contract shall be performed as per terms and conditions of the contract bond stipulated in the contract documents and in conformity with the drawings and instructions of the Engineer-in-Charge or his representatives. The grievance of the petitioner is that for the first time, the petitioner was asked for construction of compressors and receivers room at the end face (near Unit-1) machine hall for the first time in December 1998 and the drawings issued by respondent no. 1 earlier were cancelled vide letter dated 26-2-1999 and by that time, a major part of the work under contract had been executed by the applicant and the work of compressors and receivers room were additional work. The petitioner has claimed a sum of Rs. 12,12,256/-, but the respondent no. 1 did not care for making payment thereof. The petitioner had carried out excavation work of the compressor house as per procedure prescribed in Clause No. 35 of the agreement at the rate of Rs. 1,115/- per cubic metre, whereas the respondent has provisionally made payment @ Rs. 535/- per cubic metre, hence the petitioner raised a claim for the aforesaid amount of Rs. 12,15,256/- being the short payment, but the respondent did not care for the same, therefore, the matter was referred to DRB as per Clause No. 60 of the General Conditions of Contract, but the DRB did not find favour with the petitioner- company and the claim had been rejected. Vide order dated 8-10- 2003. The petitioner-company filed review before the DRB but the same too was rejected vide order dated 11-2-2004, a copy whereof has been annexed as Annexure No. 2 to the petition. In all the three arbitration petitions, counter affidavit has been filed on behalf of the respondent-T.H.D.C. The affidavit has been sworn in Sri R.C. Bahuguna the Manager Power House Tehri Garhwal. The main contention inter alia raised in the counter affidavit is that the arbitration petition is not maintainable because in Clause 60.0 of the contract/agreement, the decision- recommendations of the Dispute Review Board shall be binding on the T.H.D.C. and the Contractor involving the disputes upto Rs. 200.00 lacs and if inspite of the recommendations/decision of the DRB, in the case of disputed amount being more that Rs. 200.00 lacs, the dispute remains unresolved, either party, within 15 days of the receipt of the recommendations/decision of the DRB may seek review of the decision/recommendation and if even then the parties fail to resolve the dispute, either party may resort to arbitration. It has been further contended that the petitioner-company in order to mislead this Court has mala fidely and illegally enhanced the claim amount to more than Rs. 200.00 lacs by including the interest @ 24% on its own free will. In each case, the amount claimed is less that Rs. 200. 00 lacs. The respondent no. 1 has also raised a preliminary objection regarding maintainability of the arbitration petition by making reference to Clause 60.0 of the agreement and has contended that it is specifically provided in the agreement that only those disputes shall be referred for arbitration wherein the individual claim in beyond Rs. 200.00 lacs. It has also been contended that the conditions specified in Section 11(6) (a), (b) or (c) of the Act have not been satisfied by the petitioner-company, therefore, the petitions are not maintainable. Even on merits, the allegations made in the arbitration applications have been denied, which shall be referred to if required in the later part of the judgment. Rejoinder affidavit has been filed by the petitioner company and it has been stated that the decision given by the DRB involving the claims less that Rs. 200 lacs is not subject to any appeal for getting the matter reviewed by the same Board, but so far the claims beyond Rs. 200 lacs is concerned, there is a provision for reconsideration of the same by DRB by filing appeal by the aggrieved party as provided in sub-clause (ii) of Clause 60 as well as sub-clause (iii) of Clause 60 which are independent to each other. The petitioner-company has reiterated the same contentions as raised in the memo of arbitration petitions. It has been contended that in the original claim petition interest @ 24% has been claimed, therefore, there is no inflation of claim. It has been contended that under Clause 60(ii), there is no restriction of claim amount upto Rs. 200 lacs, rather this clause covers the claims of less than and more than Rs. 200 lacs. There is no provision under Clause 60 of the General Conditions of Contract which makes the claim of less than 200 lacs non arbitral. I have heard learned counsel for the parties and perused the record including the Clause 60 of the General Conditions of Contract executed between the parties. Before entering into the merits, it is expedient to deal the maintainability of petitions in view of Clause 60 of the General Conditions of contract. Clause 60 reads as under:- “Clause 60.0 SETTLEMENT OF DISPUTES (i) If the Contractor considers any work demanded of him to be outside the requirements of the contract or considers any decision of the Engineer-in-Charge on any matter in connection with or arising out of the contract or carrying out of work to be unacceptable, he shall promptly ask the Engineer-in-Charge in writing for written instructions or decision. Thereupon the Engineer-in-Charge shall give his written instructions or decision within a period of thirty days of such request. Upon receipt of the written instructions or decision, the contractor shall promptly proceed without delay to comply with such instructions or decision. If the Engineer-in-Charge fails to give his instructions or decision in writing within a period of thirty days after being requested for or if the contractor is dissatisfied with the instructions or decision of the Engineer-in-Charge, the contractor may within thirty days after receiving the instructions or decision, file a written appeal with the CMD, THDC stating clearly and in detail, the basis for the objection. The CMD will consider the written appeal and make his decision on the basis of the relevant contract provisions, together with the facts and circumstance involved in the dispute. The decision will be furnished in writing to the contractor within thirty days after the receipt of the contractor’s written appeal. If the counter is still dis-satisfied with the decision, the contractor, within a period of fifteen days from the receipt of the decision, shall indicate to the CMD, THDC his intention to refer the matter to the Disputes Review Board (DRB) and within period of another fifteen days shall formally appeal to the Disputes Review Board. The constitution of the Disputes Review Board and the procedure to be adopted by it for resolving the disputes is elaborated in the TABLE-A provided, however, all such disputes which may arise prior to the constitution of the Board, shall be taken up for consideration as its first meeting convened not later than thirty days upon its constitution. As specified under para 1 of Annex-A, the decisions/recommendations of Dispute Review Board in respect of disputes involving the individual claims upto Rs. 200.00 lacs shall be binding on the THDC and the contractor. In the case of the dispute involving individual claim beyond Rs. 200.00 lacs, if in spite of the recommendations/decision of the Disputes Review Board, the Dispute remains unresolved, either party, within 15 days of the receipt of the aforesaid recommendations/decision of the board, may appeal the decision back to the Board for review. However, if even after this review of its recommendations/decision by the Disputes Review Board, the two parties still fail to resolve the dispute, either party may resort to arbitration. In that case, within a period of 30 days of the receipt of the Disputes Review Board’s final recommendations/decision, the party desiring to resort to arbitration shall indicate its intention to refer the dispute to Arbitration, failing which, the said final recommendations/decision of the Disputes Review Board shall be conclusive and binding. (ii) The disputes arising between the contractor and the THDC shall be resolved by arbitration in accordance with the provisions of Indian Arbitration Act 1940, or any statutory amendments thereof. The Board of arbitrators shall comprise of three arbitrators, on to be nominated by the Contractor, the second by the THDC and the third by the Secretary (Power), Ministry of Energy, Govt. of India. (iii) The said arbitrators shall have power to open up, revise and review any decision, opinion, directing, certificate of valuation etc. relating to the matter of dispute. (iv) If either of the parties fail to appoint its arbitrators in pursuance of sub clause (ii) above, within sixty days after receipt of the notice of the appointment of its arbitrators, then the Secretary (Power), Ministry of Energy, Govt. of India shall have the power, at the request of either party to appoint arbitrator. A certified copy of the Secretary (Power)’s order making such appointment shall be furnished to both the parties. (v) Neither party shall limited in the proceedings before such arbitrators to the evidence or arguments already before any authority herein-above provided for the purpose of obtaining its said recommendations/decisions. No recommendations/decisions given by the DRB shall disqualify any of its members from being called as a witness and giving evidence before the arbitrators on any matter whatsoever relevant to the dispute or difference referred to the arbitrators as aforesaid. (vi) The reference to arbitration may proceed notwithstanding the works shall not then be or be alleged to be complete, provide always that the obligations of the THDC, the Engineer-in-Charge and the contractor shall not be altered by reason of the arbitration being conducted during the progress of the works. Neither party shall be entitled to suspend such work to which the dispute relates and payment to the contractor shall be conducted to be made in terms of the contract. (vii) (a) All arbitration shall be held at New Delhi, India. (b) The language of the arbitration proceedings and that of all documents and communications between the parties shall be English. (viii) The decision of the majority of arbitrations shall be final and binding upon both the parties. The expenses of the arbitrators as determined by the arbitrators shall be shared equally be the THDC and the contractor. However, the expenses incurred by each party in connection with the preparation, presentation etc. of its case prior to, during and after the arbitration proceedings shall be borne each party itself. (ix) All awards of arbitration shall be in writing and shall state reasons for the amounts awarded.” It has been vehemently contended by the learned counsel for the applicant that the objection raised by the learned counsel for the T.H.D.C. that the dispute involving individual claim of less than Rs. 200 Crores is not referable to arbitration and the findings of the DRB shall be final and binding upon the T.H.D.C. and the contractor is not tenable and no such condition is permissible under the law and if any such provision is allowed to stand, the same shall take away the legal right of the contractor to avail appropriate remedy for redressal of his grievance. Learned counsel for the applicant has further argued that any clause in the agreement making the decision of the Dispute Review Board to be final and binding between the parties shall have to be treated to be objectionable part and the same is clearly severable and this Court can enforce the legal part of the agreement. Learned counsel has further contended that sub-clause (ii) of Clause 60.0 of the agreement is an independent clause and it does not refer to sub- clause (i) of Clause 60.0, which provides that the disputes arising between the contractor and the THDC shall be resolved by arbitration in accordance with the provisions of Indian Arbitration Act 1940 or any statutory amendments thereof. In support of his contention, he relied upon the Apex Court verdict in the case of “Shin Satellite Public Co. Ltd. Vs. M/s Jain Studios Ltd. [AIR 2006, Supreme Court, Page 963]. I have perused the judgment in the case of Shin Satellite Public Co. Ltd. (supra). In that case the controversy involved was almost similar and there was a condition in the arbitration clause of agreement that “ the arbitrator’s determination shall be final and binding between the parties and the parties waive all rights of appeal or objection in any jurisdiction.” The Apex Court in para no. 12 of the judgment has observed as under:- “12. The main contention of the learned counsel for the respondent is that clause 23 made the arbitrator’s determination “final and bindings between the parties” and the parties have waived all rights of appeal or objection “in any jurisdiction”. According to the counsel, the said provision is inconsistent with Section 28 of the Contract Act, 1872 as also against public policy.” In paragraph 18, it is has been held as under:- “18. It is no doubt true that a court of law will read the agreement as it is and cannot re-write nor create a new on. It is also true that the contract must be read as a whole and it is not open to dissect it by taking out a part treating it to be contrary to law and by ordering enforcement of the rest if otherwise it is not permissible. But it is well settled that if the contract is in several parts, some of which are legal and enforceable and some are unenforceable, lawful parts can be enforced provided they are severable.” Para no. 20 reads that “in several cases, courts have held that partial invalidity in contract will not ipso facto make the whole contract void or unenforceable. Wherever a contract contains legal as well as illegal parts and objectionable parts can be served, effect has been given to legal and valid parts striking out the offending parts.” In the case at hand, Clause 60.0 deals with Settlement of Disputes for which certain stages have been given to be taken recourse of. It has been inter alias mentioned therein that “as specified under para 1 of Annex-A, the decisions/recommendations of Dispute Review Board in respect of the disputes involving the individual claims upto Rs. 200.00 lacs shall be binding on the THDC and the contractor. It is further provided that “in case of the dispute involving individual claim beyond Rs. 200.00 lac, if inspite of the recommendations/decision of the Disputes Review Board, the Disputes remains unresolved, either party, within 15 days of the receipt of the aforesaid recommendations/decision of the board, may appeal the decision back to the Board for review.” I have given my anxious thought to Clause 60.0 which deals with Settlement of Disputes in the light of the law laid down by the Apex Court in the case of Shin Satellite Public Co. Ltd. (supra) and I am of the considered view that the offending part of condition as existing in sub-clause (i) of Clause 60.0 to the effect that “the decisions/recommendations of Dispute Review Board in respect of disputes involving the individual claims upto Rs. 200.00 lacs shall be binding on the THDC and the contractor is severable. To my mind the ratio of the case of Shin Satellite Public Co. Ltd. (supra) is fully applicable to the case at hand, because the contract agreement in this case contains both legal as well as illegal/objections parts. The part of the clause 60.0 (i) “the decisions/recommendations of Dispute Review Board in respect of disputes involving the individual claims upto Rs. 200.00 lacs shall be binding on the THDC and the contractor” is inconsistent with Section 288 of the Contract Act 1872 as also against the public policy, because it gives finality and conclusiveness to the decision of the DRB. This part is clearly separable from the main clause as also against the public policy. To my mind, the disputes arising between the contractor and the THDC are to be resolved by arbitration as provided under sub-clause (ii) of Clause 60.0 and the condition that decision/recommendations of DRB in respect of disputes involving the individual claims upto Rs. 200.00 lacs shall be binding on the THDC and the contractor cannot be allowed to come in the way of arbitration. The disputes between the parties are referable for arbitration. For the