Case: M/s. Shetty's Construction Company Pvt. Ltd Vs. M/s. Konkan Railway Corpn. Ltd

BACKGROUND FACTS :3. The common appellant is a contractor and common respondents are Konkan Railway Corporation and its officers. The contractor entered into four contracts for executing the work of the respondent No. 1 corporation, which had issued an advertisement inviting tenders for the construction of theNew Board Gauge Railway Line Earthwork" and for other ancillary works. Four different contract were entered into by theion in connection with the laying of the aforesaid broad gauge railway line. It is not in dispute between the parties that the contractor did proceed with the work for some time, but ultimately all the four contracts giving rise to these appeals were terminated by theWe are not concerned with the merits or demerits of the said exercise undertaken by thein the present proceedings at this stage. All these contracts were terminated in the first half of the year 1992. It has to be noted at this stage that these contracts were entered into by theies in the closing months of the year 1990. After the said termination of contracts and handing over the incomplete work of the contracts by theto other contractors, theraised certain disputes arising out of the working in the said contracts in the closing months of the year 1994. It has also to be noted that, by that time, no final bills were prepared by thein connection with the work actually done by theunder these four contracts. It is the case of thethat despite the raising of these disputes which were not favourably responded to by thetor demanded reference to arbitration pursuant to the terms of the contractual agreement, thedid not comply with the said demand and, on the contrary, wrongly rejected the claims put forward by theand did not refer the disputes for adjudication by the arbitrators as laid down by the terms of the contracts. As thedid not comply with the procedure for appointment of arbitrators for resolving these disputes, themoved the High Court of Bombay on its original side under Section 8 read with Section 20 of the Indian Arbitration Act, 1940 (hereinafter referred to as `the Act). After hearing the parties, the learned Single Judge of the High Court directed theto comply with the procedure of appointment of arbitrators as per the contracts agreed to between the parties. However, the learned Judge did not accept the further prayer of thethat arbitration should be entrusted to independent arbitrators as thehad failed to carry out their contractual obligations under the contracts by appointing arbitrators as per the said provisions. Identical directions issued in all the four suits by the learned Single Judge to theto refer the disputes for appointment of arbitrators as per the terms of the contract after following the machinery provided therein, were accepted by theby not challenging the said Orders partially granting the prayers of the appellant. However, thein search of appointment of independent arbitrators filed original side appeals before the Division Bench of the High Court. The Division Bench of the High Court, mainly relying on additional affidavit filed by thein appeals, took the view that thehad not followed the gamut of the procedure regarding raising of demand for reference to arbitration as per Clause 63.1.1 of the contract and, therefore, it could not be said that thehave forfeited their right to refer the disputes to the arbitrators as laid down by the relevant clauses of the said contracts and, hence, the directions issued by the learned Single Judge for referring the disputes and differences which are arbitrable under the arbitration agreement for adjudication and consequently directing theDirector of theto nominate arbitrators within Â? six weeks as per the relevant clause of the contracts, were confirmed by the Division Bench of the High Court and the appeals of thewere dismissed. That is how theis before this Court in these appeals.

Court's reasoning:
POINT NO. 1Now, it becomes at once clear that excepting general denial there is no specific denial on the part of thein the written statements that the plaintiff had not complied with the time schedule and the gamut laid down by Clause 63.1.1 and hence there was no occasion for theto appoint arbitrators under the relevant clauses of the contracts. However, that is not the end of the matter. The learned Trial Judge, without expressly referring to this aspect of the matter, ultimately held in favour of theto the limited extent by granting partial relief to thenamely, that thewere called upon to appoint arbitrators as per the terms of the contracts. Implicit in the said direction was the finding that thewere not guilty of any breach of the procedural provisions of Clause 63.1.1. It was also implicit in the said direction that thehad not made out a case for subjecting theto the procedure of independent arbitration de hors Clause 63.1.1 and the rest of the relevant clauses. It was also implicit in the said direction that the plaintiff has not followed the time schedule and not raised proper demand for arbitration as per Clause 63.1.1. But, what was implicit in the finding resulting in the ultimate direction by the Trial Judge was made explicit by the Division Bench in appeal. It is true that detailed affidavit raising this contention was filed by thebefore the Appellate Court. It is also true that the Appellate Court was required to give sufficient time to theto file his response by filing his affidavit in reply. That no such time was given to theBut this grievance becomes academic as the appellants learned senior counsel did not claim any remand on this ground and wanted us to decide the main controversies between the parties on the basis of evidence on record. It has also to be kept in view that the learned Judges of the Division Bench heard the parties on merits of this controversy regarding compliance with the procedure of Clause 63.1.1 and thereafter agreeing with thedismissed the appeals. It must, therefore, be held that the question regarding compliance orof the time schedule laid down by Clause 63.1.1 by either side is a live controversy which has to be resolved on merits in the light of evidence on record. Under these circumstances, the objection regarding waiver of this contention by theon the peculiar facts of these cases, does not survive.14. Having cleared these preliminary objections and points in controversy, now the stage is reached for addressing ourselves to the main question as to whether theis justified in demanding reference to arbitration by independent arbitrators or not.15. For deciding this controversy and finding out as to whether thehas complied with the time frame laid down by Clause 63.1.1, it becomes necessary to look at the relevant facts which are well established on record as emerging from the documentary evidence exchanged between the parties in connection with all these four contracts. It would, therefore, be convenient to deal with the factual data in connection with the appeals arising out of each of these four SLPs dealing with all the four different contracts between theNO. 2:24. The discussion on point No. 1 and the conclusion reached thereon would automatically result in answering this point in the negative in favour of theand against thetor is shown to have failed to carry out his contractual obligations under Clause 63.1.1, there would remain no occasion for theto be dubbed as having failed to comply with their corresponding obligations under the very same clause.POINT NO. 3 :25. In view of our finding on point Nos. 1 and 2, there would remain no occasion for the Court to permit either party to get out of the contractual obligations regarding resolution of disputes by arbitration de hors the scheme of arbitration envisaged by the contractual terms. In other words, it could not be said that thehave failed to carry out their contractual obligations of appointing arbitrators under the agreement even though validly called upon by theto do so and, therefore, had missed the bus and consequently the Court could appoint independent arbitrators, if it though fit. That occasion never arose for consideration by the Court in the light of the aforesaid findings of act on the relevant points as discussed by us. Consequently, it must be held that in the present four cases, the High Court was perfectly justified in relegating both the parties to the procedure of arbitration as laid down under the contracts binding on them. The final Orders passed by the learned Single Judge in all the four suits and as confirmed by the Division Bench remain well sustained on record.26. However, before parting with these appeals, we must note that rightly or wrongly thehas a simmering grievance since 1992 when his four contracts were terminated giving rise to diverse claims which, though rejected by thewere required to be adjudicated upon by the arbitrators as envisaged by the parties under the contracts. As years have rolled by, it would be appropriate to direct theto comply with the Orders passed the learned Single Judge as confirmed by the Division Bench and also by us at the earliest.