J. Kodanda Rami Reddy vs State Of A.P. & Ors

2. By GOM No. 430 dated 24.10.1983, the first respondent issued the following revised procedure in regard to arbitration introduced by GOM dated 31.7.1975. The relevant portions of the revised procedure (paras 2, 3 & 4) are extracted below:

2. It has come to the notice of the Govt., that some of the contractors are approaching Courts to decide the claims above Rs. 50,000/- under the pro- visions of the Arbitration Act taking advantage of para 2(3) of the G.O. read above. The intention of the Govt. incorporating the above provision is to dispense with the Arbitration proceedings in respect of claims above Rs. 50,000/- and leave the parties to have their remedy in Civil Court. As some of the contractors have misconstrued that the claims above Rs. 50,000/- have to be decided under the Arbitration Act and not under ordi- nary Law in a regular civil Court, the Govt., direct that the following amendments to G.O.MS. No. 430, I(Irr.V) Deptt., dated 24-10-1983 be is- sued by way of clarification :-

3. By letter dated 15.2.1990 the appellant lodged fourteen claims (of which claims 12, 13 and 14 related to pre-reference, pendente lite and future interest respectively) in regard to the said work, with the first respondent and demanded payment. As the first respondent did not settle the claims, the ap- pellant filed a petition before the Sub-ordinate Judge, Nellore, under Clause 73 of the A.P. Standard Specifications, requesting the said court to act as the arbitrator and settle the claims, in terms of the provision for arbitration, con- tained in the contract dated 22.6.1987. This was on the assumption that Item (3) of para 2 of GOM dated 24.10.1983 required all claims above Rs.50,000/- to be decided by arbitration, the named Arbitrator being `the court of competent jurisdiction'. The Sub-ordinate Judge, by order dated 17.4.1990, held that he could not act as an arbitrator. Thereafter, the appel- 4 lant issued a notice dated 6.6.1990, under section 8 of the Arbitration Act, 1940 (`Act' for short) seeking reference of the disputes to arbitration and furnished a panel of three names with a request to the State Government to concur in the appointment of any one from that Panel as sole arbitrator for adjudicating the disputes raised in his claim letter dated 15.2.1990. As there was no response, appellant filed OP No. 62/1990 under Section 8 of the Act in the Court of Sub-ordinate Judge, Nellore, seeking appointment of a sole arbitrator from out of the panel of three names suggested by him, to decide the disputes arising out of agreement dated 22.6.1987.

4. The first respondent filed a counter to the said application disputing the claims and contending that as per the terms of GOM dated 24.10.1983 as clarified by the GOM dated 1.6.1987, all claims over and above Rs.50,000/- shall have to be decided by civil court of competent jurisdiction by way of regular suit and not by way of arbitration. We extract below para 11 of the counter statement filed by the first respondent in the proceedings under section 8 of the Act :

The Sub-ordinate Judge, Nellore by his order dated 25.3.1991 allowed the said application and appointed Sh. HS Bhat, retired Chief Engineer as the sole arbitrator under Section 8(2) of the Act. The civil court accepted the contentions of the appellant that the contract was concluded by acceptance of his tender on 31.3.1987 and the subsequent execution of the agreement on 22.6.1987 was merely a formality; that the clarificatory GOM dated 1.6.1987 was prospective in operation and therefore, did not apply to the contract between appellant and respondent; and that GOM dated 24.10.1983 alone applied, which was capable of being interpreted as providing for arbi- tration in regard to claims exceeding Rs.50,000/-. The learned Sub-ordinate Judge then proceeded to nominate the Arbitrator, on the ground that under GOM dated 24.10.1983, in regard to claims above Rs.50,000/-, there was no named Arbitrator and the court of competent jurisdiction had to appoint the arbitrator.

5. The first respondent did not challenge the said order dated 25.3.1991 appointing an arbitrator under Section 8(2) of the Act. The arbitrator ap- pointed by the court entered upon the reference on 11.4.1991 and after due 6 hearing made an award dated 8.6.1992. The arbitrator allowed claims 2, 3, 4 and 9 and rejected claims 1, 5, 6, 7, 8, and 10 of the appellant. The arbitrator also allowed claim 11 by directing release of the final bill amount and secu- rity deposit with interest @18% per annum on the final bill amount from 15.2.1990 and on the security deposit amount from 1.10.1991 upto date of payment or decree, whichever was earlier. The arbitrator also granted a sim- ple interest at 18% per annum on the amounts awarded under claim Nos. 2, 3, 4 and 9 for the pre-reference period (15.2.1990 to 10.4.1991), pendente lite (11.4.1991 to 8.6.1992) and also as future interest (9.6.1992 to date of decree).

6. The Arbitrator filed the award before the Sub-ordinate Judge, Nellore under Section 14(2) of the Act which was registered as OP No. 56/1992. The first respondent filed OP No. 81/1992 under Sections 30 and 33 of the Act for setting aside the award. The Sub-ordinate Judge, Nellore by common or- der dated 8.4.1993 dismissed OP No. 81/1992 filed by the first respondent for setting aside the award, and allowed OP No.56/1992 filed under Section 14(2) of the Act and made the award, a rule of the court, and awarded further interest at 18% per annum from the date of decree till the date of realization. 7

7. Feeling aggrieved, on 17.4.1993, the first respondent filed an appeal and a revision against the order dated 8.4.1993. CMA No. 1251/1993 was filed challenging the dismissal of its application under Sections 30 and 33 of the Act. CRP No. 4055/1993 was filed challenging the direction that a de- cree be made in terms of the award under Section 14(2) of the Act. Along with the said appeal and revision, it filed another revision petition (CRP No. 134/1995) on 14.7.1993 challenging belatedly the order dated 25.3.1991 made in OP No. 62/1990 under Section 8(2) of the Act appointing the arbi- trator.

8. The said appeal and two revision petitions were disposed of by the High Court by a brief common order dated 5.10.1999, which is the subject matter of challenge in these appeals. The High Court held that having regard to decision of this Court in State of Andhra Pradesh vs. Obulu Reddy (Civil Appeal No. 7246/1993 decided on 21.9.1999) holding that disputes relating claims of more than Rs.50000/- shall not be adjudicated by appointment of an Arbitrator under section 8 of the Act, but should be resolved by a compe- tent civil court, the revision petition challenging the order dated 25.3.1991 appointing the arbitrator (CRP No. 134/1995), had to be allowed. Conse- quently, the High Court allowed CMA No. 1251 of 1993 filed against the 8 dismissal of the application under Sections 30 and 33 of the Act and CRP No. 4055/1993 filed against the order making the award a rule of the court and permitted the appellant to convert OP No.62/1990 filed under Section 8 of the Act into a regular civil suit by carrying out necessary amendments and by payment of necessary court fee. The appellant filed two petitions for re- viewing the order allowing CMA 1251/1993 and CRP 4055/1993 and the said review petitions were dismissed by an order dated 28.4.2000. Feeling aggrieved, the appellant has filed these five appeals challenging the common order dated 5.10.1999 of the High Court made in CMA No.1251/1993, CRP No.4055/1993 and CRP No.134/1995 and the common order dated 28.4.2000 dismissing the review petitions in CMP Nos. 5446/1993 and 5447/2000.

Conclusion :

rection in the order dated 5.10.1999 of the High Court allowing CMA No.12590 and CRP No.4055 of 1990, becomes unsupportable and requires to be set aside. The High Court has to now consider on merits the challenge to the order rejecting the application under sections 30 and 33 of the Act.

21. Therefore these appeals are allowed as follows :