Case: Om Construction Co Vs. Ahmedabad Municipal Corp. &amp; Another

The appellant herein is a C class approved contractor, whose tender was accepted by the Ahmedabad Municipal Corporation for providing and fixing Nibhada Stone for paving and Footpath in Kalupur and Dariapur wards in Central Zone within the City of Ahmedabad. The Work Order was issued on 6th June, 2006, and as per the appellants version the work was completed by the end of October, 2006. According to the appellant, after giving credit for payments which had been made by the Corporation, a sum of Rs.68,46,872/- was still due towards the work performed in the Dariapur ward, while a sum of Rs.8,61,760/- was also due for the work carried out in Kalupur ward. It is the case of the appellant that despite notice having been served on the Corporation on 24th May, 2007, the said amounts remained unpaid. Ultimately, on 6th June, 2007, the appellant issued a notice to the Corporation setting out the facts relating to the work performed and the claim made in detail and claimed a sum of Rs.77,08,632/-, together with interest at the rate of 18% per annum, from the due date till the date of realization, which the appellant claimed, was the total outstanding amount. In the notice it was also indicated that the claim made by the appellant should be accepted and payment should be made within a period of 30 days from the date of receipt of the notice or that an Arbitrator should be appointed by the Corporation within a period of 30 days from the date of receipt of the notice3. As there was no response to the said notice from the Municipal Corporation nor was any payment made or Arbitrator appointed, the appellant invoked clause 30 of Form B-I, which provided for the appointment of an Arbitrator and was made applicable in the contract entered into between the parties when the appellants tender was accepted. It appears that under General Conditions of Contract of the Engineering Department of the Ahmedabad Municipal Corporation, under its General Specifications it is provided that certain conditions are required to be followed which includes the condition that Form B-I would be applicable to the contract and clause 30 of Form B-I is relevant for this case. The relevant portions of clause 30 of Form B-I reads as follows: -Clause 30(1) Disputes to be referred to Tribunal: The disputes relating to this contract, so far as they relate to any of the following matters, whether such disputes arise during the progress of the work or after the completion or abandonment thereof, shall be referred to the Arbitration Tribunal, Gujarat State;(3) The provision of Arbitration Act, shall in so far as they are inconsistent with the provision of this Act, cease to apply to any dispute arising from a works contract and all arbitration proceedings in relation to such dispute before an Arbitrator, Court or authority shall stand transferred to the Tribunal4. The appellant filed a petition before the Gujarat High Court on 9th July, 2007, being Arbitration Petition No. 35 of 2007, under Section 11 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as the 1996 Act, inter alia, praying for the appointment of an Arbitrator to resolve the disputes between the parties. The High Court by its order dated 20th November, 2007, rejected the said petition. While doing so, the High Court took note of Section 2(1)(k) of the Gujarat Public Works Contracts Disputes Arbitration Tribunal Act, 1992, hereinafter referred to as the Gujarat Tribunal Act, which defines works contract to mean a contract made by the State Government or Public Undertaking which is notified in the Official Gazette by the State Government. The High Court also noticed Section 2(1) (l) of the aforesaid Act, which defines Public Undertaking to, inter alia, mean such class of local authorities as the State Government specifies by Notification in the Official Gazette. It was further noticed that in the absence of such Notification, the Ahmedabad Municipal Corporation was not a Public Undertaking and the contract entered into by it with the appellant could not, therefore, be termed as a Works Contract as defined in Section 2(1)(k) of the aforesaid Act. The High Court, therefore, held that the Arbitration Tribunal, Gujarat State, would have no jurisdiction to entertain the disputes between the parties emanating from the Work Order in question5. The High Court then went on to consider the applicability of the Arbitration and Conciliation Act, 1996, to the facts of the case. The High Court took note of the fact that the Agreement between the parties, and more particularly the Arbitration Agreement, did not lay down any procedure for appointing an Arbitrator or Arbitrators. Accordingly, in the absence of such procedure, the Designated Court could not invoke its jurisdiction under Sub-section (6) of Section 11 of the 1996 Act, which contemplates a situation, where the appointment procedure as agreed to by the parties under Sub-section (2) of Section 11 is not followed. The High Court, therefore, while rejecting the applicability of the Gujarat Tribunal Act, also closed the doors for relief under the provisions of the 1996 Act

Court's reasoning:
Having arrived at the aforesaid conclusion, the only question that remains to be decided is whether this matter should be remitted to the High Court for appointment of an Arbitrator or whether we should ourselves appoint an Arbitrator in terms of the Arbitration Agreement. Remitting the matter to the High Court would only mean another round of litigation, whereas if the appointment is made by us, the matter will achieve finality, which would ultimately be beneficial for all concernedWe, accordingly, allow the appeal and appoint Honble Mr. Justice C.K. Thakker, a former Judge of the Supreme Court, presently settled at D-64, Akash Towers, Judges Bungalow Road, Vastrapur, Ahmedabad to be the Arbitrator for settlement of the disputes which have arisen between the parties. The learned Arbitrator shall fix his own fees and shall also formulate the procedure to be adopted by him during the arbitration proceedings. The Arbitrator shall try and publish his Award as expeditiously as possible, but positively within six months from the date of entering upon the Reference. The Arbitrator will also decide the venue and sittings of the Arbitral Tribunal in consultation with the parties