Case: M/S. P. Manohar Reddy &amp; Bros Vs. Maharashtra Krishna Valley Dev.Corp.&amp;Ors

2. Respondent herein invited tenders for the work of excavation in canal K.M. No. 126, Kukadi Left Bank Canal, Shrigonda in the District of Ahmednagar at an estimated costs of Rs.23,26,424/- pursuant whereto appellant herein submitted its offer for a sum of Rs.21,10,233/-. The said offer being the lowest was accepted.3. The parties hereto thereafter entered into a contact on 9.2.1988; clauses 37, 54 and 55 whereof read asAfter completion of work and prior to that payment, the contractor shall furnish to the Executive Engineer, a release of claims against the Government arising out of the contract, other than claims specifically identified, evaluated and expected from the operation of the release by the contractor."54. Settlement of Dispute (For works costing less than Rs. 50 lakhs). If the contractor considers any work demanded of him to be outside the requirements of the contract, or considers any drawings, record or ruling of the Executive Engineer, KIP Dn. No. VII, Shrigonda on any matter in connection with or arising out of the contract or the carrying out of work to be outside the terms of contract and hence unacceptable he shall promptly ask the Executive Engineer, in writing, for written instructions or decision. Thereupon the Executive Engineer, shall give his written instructions or decision within a period of 30 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 Executive Engineer fails to give his decision in writing within a period of 30 days after being requested, or if the contractor is dissatisfied with the instructions or decision of the Executive Engineer, the contractor may within 30 days after receiving the instructions or decision appeal to upward authority who shall afford an opportunity to the contractor to be heard and to offer evidence in support of his appeal.If the contractor is dissatisfied with this decision, the contractor within a period of thirty days fromreceipt of the decision shall indicate his intention to refer the dispute to Arbitration as per clause 55failing which the said decision shall be final and conclusive.55. Arbitration (For works costing less than Rs.50 lakhs)All the disputes or differences in respect of which the decision has not been final and conclusive as per clause 54 above shall be referred for arbitration to a sole arbitrator appointed as follows.Within 30 days of receipt of notice from the contractor or his intention to refer the dispute to arbitration the Chief Engineer (SP Irrigation Department), Pune shall send to the contractor a list of three officers of the rank of Superintending Engineers or higher, who have not been connected with the work under this contract. The contractor shall within 15 days of receipt of this list select and communicate to the Chief Engineer, the name of one officer from the list who shall then be appointed as the Sole Arbitrator. In case contractor fails to communicate this selection of name within the stipulated period, the Chief Engineer shall without delay select one officer from the list and appoint him as the sole arbitrator. If the Chief Engineer fails to send such a list within 30 days as stipulated the contract shall send a similar list to the Chief Engineer within 15 days. The Chief Engineer shall then select one officer from the list and appoint him as the Sole Arbitrator within 15 days. If the Chief Engineers fails to do so, the contractor shall communicate to the Chief Engineer the name of one officer from the list who shall then be the sole Arbitrator.The Arbitrator shall be conducted in accordance with the provision of the Indian Arbitration Act, 1940 or any statutory modification thereof. The Arbitration shall determine the amount of costs to be awarded to either parties.Performance under the contract shall continue during the arbitration proceedings and payments due to the contractor shall not be withheld unless they are subject matter of the arbitration proceedings.All awards shall be in writing and in case of award amounting to Rs. One lakh and above, such awards shall state the reasons for the amount awarded. Neither party is entitled to bring a claim to arbitrator if the arbitrator has not been appointed before the expiration of 30 days after defects liability period.A work order was issued on the same day. The said contract was to be completed by 8.1.1989, i.e. within a period of about 11 months. Appellant failed to complete the work within the stipulated time. He applied for extension which was granted first upto 09.07.1989 and thereafter upto 30.09.1990. Within the said period the work was completed. The measurements of the work undertaken by the appellant were recorded on 26.11.1990. Final bill prepared and paid by the respondent was accepted by the appellant without any demur.5. Inter alia, on the premise that appellant was asked to do extra items of work, it raised its claims by a letter dated 27.2.1991, which was rejected. Details of the purported extra work done by appellant, however, were not mentioned in the said letter dated 27.2.1991. It submitted another claim giving details thereof by a letter dated 10.6.1991.6. Appellant by a letter dated 26.9.1991 purporting to invoke clause 54 of the General Conditions of Contract, issued notice to the Executive Engineer of respondent,a number of claims were referred to you from time to time and in respect of many of them you have failed to give the decision. And whereas the work under contract was kept in progress by us in good faith and with a belief that on completion of the work you will reconsider our total case and settle our accounts with all the claims. And whereas the work has been duly completed by us, we are now in a petition (sic) of finally work out in full the sum of money due and payable to us by the department including all the claims.Now therefore, we hereby call upon you and give you notice finally under clause 54 of the General conditions of contract with a request to settle our accounts and give your decisions in respect of our following claims and disputes within a period of thirty days from the date of receipt of this notice by reconsidering your earlier decision in respect of claim on which you had indicated your decisionspecified 16 claims thereunder.7. Respondent rejected the said claim by its letter dated 5.10.1991 alleging that the stipulated period therefore expired in May, 1991. The Executive Engineer of the respondent by his letter dated 29.10.1991 opined that the matter cannot be considered for arbitration,refer your letter under reference which was received by this office in the 1st week of October 1991. The claims raised were already denied by this Office vide letter No. 448 dtd. 29.4.91. As you have referred the matter under the provisions of clause 54 of the L.C.B. No. 18 for 87, 88, The decisions of this office are again sent herewith. It is further clarified that the matter is brought for arbitration process after expiry of 30 days from end of defect liability period. The work was completed in November-90 and the defect liability period of six months is over in May 1991, hence the matter cannot be considered forits earlier decision of rejecting the claim was repeated.8. Treating the same to be an order rejecting his claim, appellant herein preferred an appeal thereagainst before the Superintending Engineer in terms of its letter dated 26.11.1991; pursuant whereto a meeting was held between the representatives of the parties; the minutes whereof read asthe contractors have not submitted their claims under clause 54 of the General conditions of the contract along with documentary evidences within the stipulated period i.e. before the expiry of 30 days after defect liability period and as per clause 55 which states `Neither party is entitled to bring a claim to arbitrator if the arbitrator has not been appointed before the expiration of 30 days after defect liability period.Defect liability period of this contract expired on 31st May 1991 and the stipulated period of 30 days expired on 30th June 1991. Hence the contractors appeal for arbitration is herebyA copy of the said minutes of the meeting was sent by the Superintending Engineer along with his letter dated 30.12.1991. A notice, on the premise that disputes and differences arose between the parties within the meaning of clause 55 of the General Conditions of Contract, was served upon the Chief Engineer asking him to furnish the names of its three officers for appointment of sole arbitrator within 30 days from the receipt thereof. The said request was rejected by the Chief Engineer in terms of his letter dated 26.2.1992,You have given notice under clause 54 on 26/11/91 to refer the dispute to arbitration. Thus the notice under clause 54 is given after the expiry of 30 days of defect liability period. Thus you have not submitted the claims within the stipulated time and followed the procedure as per the clause 54 of general condition for settlement of dispute. This has already been informed to you by the Superintending Engineer Kukadi canal circle, Pune-6 under his letter no. KCC/PB-1/KM 126/Claims/4129 dt. 30/12/91. Hence the question of appointing arbitrator by this office does not arise.Appellant thereafter sent a list of arbitrators on 9.3.1992 followed by a notice through a lawyer.Indisputably, the said request for referring the disputes to an arbitrator was rejected by respondent.11. Appellant filed an application under Section 8 of the Arbitration Act, 1940 (for short, "the Act") in the Court of Civil Judge (Senior Division), Ahmednagar at Ahmednagar for appointment of Arbitrator. By reason of a judgment and order dated 9.12.1997, the Civil Judge Senior Division, Ahmednagar opining that the said application having been filed within the period as specified in Article 137 of the Limitation Act, 1963 and the cause of action therefore having arisen on 29.10.1991 on which date the appellants claim was rejected, appointed one Shri V.M. Bedse, a retired Chief Engineer as Arbitrator with regard to the additional and extra works allegedly carried out by appellant.The learned judgepetitioner along with Exh. 19 has produced various documents and correspondence ensued with the respondents. It is crystal clear from this correspondence that the petitioner had demanded release of claim on 27/2/91 under clause No. 37 of the contract agreement. This claim letter was received by the respondents and further query in respect of proof of claim was called for by the respondents by their letter dated 29/4/91. Accordingly, the proof was submitted by letter dated 10/6/91 and details of claim were given on 26/9/91. The petitioner also apprised about `settlement of dispute as contemplated in clause No. 54 of the contract agreement. Therefore practically there is compliance by the petitioner as contemplated under clause No. 54 of the contract agreement. The record also reveals that the respondents on 5/10/91 i.e. after lapse of three months replied the notice of petitioner dated 10/6/91 and first time it was agitated that the petitioner has not taken steps under clause No. 55 under defect liability and before expiration of 30 days. The clause No. 19(a) of the contract agreement is in respect of material and workmanship and it defines the defect liability in respect of workmanship and materials and so also the defect liability period is to be counted from the certified date of completion certificate. Under clause No. 26 of the contract agreement, it is the respondents who are required to issue such certificate to the petitioner. The notices were issued by the petitioner under clause Nos. 54 and 55 of the contract but it appears from the record that the respondents did not take any steps to choose their arbitrator. On the contrary, on 9/3/92 the list of three officers was demanded and out of them sole arbitrator was chosen but the respondents have not replied the same. In this manner, the petitioner and respondents could not concur for appointment of arbitrator and the petitioner had therefore no alternative but to resort to provisions of Section 8 of the Arbitration Act. The correspondence produced on record in support of claim under Section 8 of the Arbitration Act by the petitioner is sufficient to come to the conclusion that there was dispute between petitioner and the respondents in respect of additional work and no such steps have been taken by the respondents as provided under the Contract.A Civil Revision Application No. 201 of 1998 was preferred thereagainst by the respondent before the High Court, which by reason of the impugned judgment and order dated 13.4.2004 has been allowed. A Review Petition filed by appellant thereagainst has been dismissed.

Court's reasoning:
Court, however, will only be concerned with the question whether trial issues have been raised which are required to be determined by thehowever, as noticed hereinbefore, are concerned with a different fact situation. As arbitration clause could not be invoked having regard to the limited application of clauses 37, 54 and 55 of the General Conditions of the Contract, we are of the opinion that the trial court was not correct in directing appointment of anis also not a case where sub-section (4) of Section 37 of the Act could be invoked. Appellant did not invoke Section 37(4) of the Act. No reason has been assigned as to why the said discretion of the court should be invoked particularly when the claim has been raised only after completion of the work.