IN THE PUNJAB & HARYANA HIGH COURT AT CHANDIGARH Date of Decision: 15.09.2011 Arb. Case No.120 of 2009 M/s Mehta Construction Company …Petitioner Versus State of Haryana and others …Respondents CORAM: HON’BLE MR. JUSTICE HEMANT GUPTA Present: Mr. Raman Sharma, Advocate, for the petitioner. Mr. Pradeep Singh Poonia, Addl. AG, Haryana, for the respondents. HEMANT GUPTA, J. (ORAL) The petitioner has invoked the jurisdiction of this Court under Section 11 of the Arbitration & Conciliation Act, 1996 (for short ‘the Act’) for appointment of an Arbitrator in respect of the disputes arising out of an Agreement executed between the parties. The petitioner was granted contract for “Widening to four laning & stg. of old GT road (Section NDRI Chowk to Liberty Chowk Km. 2.50 to 5.38 in Karnal Distt.)” vide memo No.511 dated 28.02.2005. On the basis of such memo, a written agreement was executed between the parties, containing arbitration clause. The relevant extract from the Agreement has been appended as Annexure P-1 with the petition. As per the averments made in the petition, the petitioner completed the work on 31.03.2006, whereas as per the respondents, the work was completed on 20.06.2007. The petitioner raised certain disputes Arb. Case No.120 of 2009 and sought appointment of an Arbitrator. In reply to the said communication, the Executive Engineer, Provincial Division No.1, PWD B&R, Karnal vide communication dated 03.10.2008 conveyed to the petitioner that an amount of Rs.4,38,170/- is lying as balance security deposit, which is payable after the defect liabilities period i.e. 24 months from the date of completion (20.06.2007). It is further communicated that if the petitioner still has any claim for arbitration, therefore, as per clause 25A (7), security deposit amounting to 7.5% of amount claimed may be deposited. In pursuance of such communication, on 18.10.2008, the petitioner communicated that deposit of security at the rate of 7.5% in terms of contract agreement is not relevant at this stage and that in terms of sub clause 25A(11), the reference for arbitration is to reckon from the day on which the notice is issued to the parties fixing first date of hearing by the Arbitrator. Subsequently, on 10.11.2008, the petitioner was informed that final payment has been made to the petitioner and that there is no need to appoint an Arbitrator in this case. The present petition was filed on 19.11.2009 seeking appointment of an Arbitrator. In response to the notice, the respondents have pointed out that the respondents were ready and willing to appoint an Arbitrator, but the petitioner has not deposited the security amount in terms of sub-clause (7), therefore, the Arbitrator cannot be appointed. The relevant sub Clause 25A(7) and 25A(11) read as under: “7. It is also a term of this arbitration agreement that where the party invoking arbitration is the contractor, no reference for arbitration shall be maintainable unless the contractor furnishes to the satisfaction of the Executive Engineer-in-charge of the work a security deposit of a sum determined according to details given below and the sum so deposited shall on the termination of the arbitration proceedings be adjusted against the cost if any awarded by the arbitrator against the claimant party and the balance remaining after such adjustment in the absence of any such cost 2 Arb. Case No.120 of 2009 being awarded the whole of the sum will be refunded to him within one month from the case of the award: Amount of Claims Rate of Security Deposit (i) for claims below Rs.10,000/- 2% of amount claimed (ii) for claims of Rs.10,000/- 5% of amount claimed and above and below Rs.1,00,000/- and above (iii) For claims of Rs.1,00,000/- 7% of amount claimed and above The stamp fee due on the award shall be payable by the party as desired by the arbitrator and in the event of such party’s default stamp fee shall be recoverable from any other sum due to such party under this or any other contract. xxx xxx xxx 11. The arbitrator shall be deemed to have entered on the reference on the day be issued notices to the parties fixing the first date of hearing. The arbitrator may from time to time with the consent of the parties, enlarge the initial time for making and publishing the award.” As per the petitioner, the amount of security is to be payable after Arbitrator is appointed, whereas as per the respondents the security amount has to be paid before seeking reference to an Arbitrator. After hearing learned counsel for the parties, I find that the arguments raised by the learned counsel for the petitioner are not meritorious. Clause 25A (7) contemplates that the Contractor has to furnish to the satisfaction of the Executive Engineer-in-charge of the work, a security deposit of a sum determined. It is not dependent upon reference to an Arbitrator, which is mentioned in sub Clause 25A(11) of the Agreement. Learned counsel for the petitioner now states that the petitioner shall deposit the amount of security within a period of two months to enable the respondents to appoint an Arbitrator in terms of Clause 25A. In view of the said fact, the present petition is disposed of with liberty to the petitioner to deposit the security amount, as mention in sub clause (7) within two months and on deposit of such security, the 3 Arb. Case No.120 of 2009 respondents shall appoint an Arbitrator within a period of one month thereafter. Disposed of. (HEMANT GUPTA) JUDGE 15.09.2011 Vimal 4