D.C. Engineers v. Irrigation and Flood Control Department and Another

1. The present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred as ‘the A&C Act’) seeks appointment of a Sole Arbitrator to adjudicate the disputes between the parties. These disputes stem from an Letter of Acceptance (LOA) bearing no. EE/CD-IX/Acs/Agmt.08/2014-15/4037 dated 10.02.2015 and Award letter 24.02.2015. The petitioner was awarded a construction work of double lane bridge D/S of existing Mughal Bridge across old course of Najafgarh drain for a tendered amount of ₹2,38,99,500/-. SACHIN DATTA, J. (ORAL)

2. The relevant conditions of contract contained an arbitration clause as under: - “Clause 25 Except where otherwise provided in the contract, all questions and disputes relating t the meaning of the specifications, design, drawings and instructions here-in before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of relating to the contract, designs, drawings, specifications, estimates, instructions, orders of these conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof shall be dealt with as mentioned hereinafter:

(i) If the contractor considers any work demanded of him to be outside the requirements of the contract, or disputes any drawings, record or decision given in writing by the Engineer-in-Charge on any matter in connection with or arising out of the contract or carrying out of the work, to be unacceptable he shall promptly within 15 days request the Superintending Engineer in writing for written instruction or decision. Thereupon the Superintending Engineer shall give his written instructions or decision within a period of one month from the receipt of the contractor’s letter. If the Superintending Engineer fails to give his instructions or decision in writing within the aforesaid period or if the contractor is dissatisfied with the instructions or decision of the Superintending Engineer, the contractor may within 15 days of the receipt of the Superintending Engineer’s decision, appeal to the Chief Engineer who shall afford an opportunity to the contractor to be heard, if the latter so desires, and to offer evidence in support of his appeal. The Chief Engineer shall give his decision within 30 days of receipt of contractor’s appeal. If the contractor is dissatisfied with the decision of the Chief Engineer, the contractor may within 30 days from the receipt of the Chief Engineer decision, appeal before the Dispute Redressal Committee (DRC) along with a list of disputes with amounts claimed in respect of each such dispute and giving reference to the rejection of his disputes by the Chief Engineer. The Dispute Redressal Committee (DRC) shall give his decision within a period of 90 days from the receipt of Contractor’s appeal. The constitution of Dispute Redressal Committee (DRC) shall be as indicated in Schedule ‘F’. If the Dispute Redressal Committee (DRC) fails to give his decision within the aforesaid period or any party is dissatisfied with the decision of Dispute Redressal Committee (DRC), then either party is dissatisfied with the decision of Dispute Redressal Committee (DRC), then either party may within a period of 30 days from the receipt of the decision of Dispute Redressal Committee (DRC), give notice to the Chief Engineer for appointment of arbitrator on prescribed proforma as per Appendix XV, failing which the said decision shall be final binding and conclusive and not referable to adjudication by the arbitrator. It is a term of contract that each party invoking arbitration must exhaust the aforesaid mechanism of settlement of claims/disputes prior to invoking arbitration.

(ii) Except where the decision has become final, binding and conclusive in terms of Sub Para (i) above, disputes or difference shall be referred for adjudication through arbitration by a sole arbitrator appointed by the Chief Engineer, CPWD, in charge of the work or if there be no Chief Engineer, the Additional Director General of the concerned region of CPWD or if there be no Additional Director General, tile Special Director General or the Director General, CPWD. If the arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever, another sole arbitrator shall be appointed in the manner aforesaid. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is a term of this contract that the party invoking arbitration shall give a list of disputes with amounts claimed in respect of each such dispute alongwith the notice for appointment of arbitrator and giving reference to the rejection by the Chief Engineer of the appeal. It is also a term of this contract that no person, other than a person appointed by such Chief Engineer CPWD or Additional Director General or Special Director General or Director General, CPWD, as aforesaid, should act as arbitrator and if for any reason that is not possible, the matter shall not be referred to arbitration at all. It is also a term of this contract that if the contractor does not make any demand for appointment of arbitrator in respect of any claims in writing as aforesaid within 120 days of receiving the intimation from the Engineer-in-Charge that tile final bill is ready for payment, the claim of the contractor shall be deemed to have been waived and absolutely barred and the Government shall be discharged and released of all liabilities under the contract in respect of these claims. The arbitration shall be conducted in accordance with the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) or any statutory modifications or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause. It is also a term of this contract that the arbitrator shall adjudicate on only such disputes as are referred to him by the appointing authority and give separate award against each dispute and claim referred to him and in all cases where the total amount of the claims by any party exceeds Rs.1,00,000/-, the arbitrator shall give reasons for the award. It is also a term of the contract that if any fees are payable to the arbitrator, these shall be paid equally by both the parties. It is also a term of the contract that the arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties calling them to submit their statement of claims and counter statement of claims. The venue of the arbitration shall be such place as may be fixed by the arbitrator in his sole discretion. The fees, if any, if the arbitrator shall, if required to be paid before the award is made and published, be paid half and half by each of the parties. The cost of the reference and of the award including the fees, if any, of the arbitrator shall be in the discretion of the arbitrator who may direct to any by whom and in what manner, such costs or any part thereof shall be paid and fix or settle the amount of costs to be so paid.”

3. The disputes between the parties arose when the petitioner raised claims for outstanding dues, escalation in costs, head office expenses, diversion of water etc. However, the respondents failed to address or satisfy the claims raised by the petitioner.

4. The petitioner made several attempts to resolve the payment dispute by sending letters dated 03.04.2018, 08.05.2018, and 29.05.2018. The petitioner also made personal visits to the respondents’ offices, but these efforts did not yield any result.

5. In light of the respondents’ failure to address the grievances, the petitioner formally invoked the arbitration clause provided under Clause 25. Letters dated 22.08.2022, 07.11.2022, and 23.12.2022 were sent to the respondents, requesting the appointment of a Sole Arbitrator. However, the respondents failed to respond.

6. The petitioner has now approached this Court, through the present petition, seeking the appointment of a Sole Arbitrator to adjudicate the dispute.

7. Since the existence of the arbitration clause is evident from relevant conditions of contract, there is no impediment in appointing an independent Sole Arbitrator for adjudicating the disputes between the parties as prayed for and as mandated in terms of the judgments of the Supreme Court in Perkins Eastman Architects DPC v. HSCC (INDIA) Limited, (2020) 20 SCC 760, TRF Limited v. Energo Engineering Projects Limited, (2017) 8 SCC 377 and Bharat Broadband Network Limited v. United Telecoms Limited, (2019) 5 SCC 755.

8. Accordingly, Mr. Bhuvan Gugnani, Advocate (Mob.: +91 9810126664), is appointed as the Sole Arbitrator to adjudicate the disputes between the parties.

9. The respondents shall be entitled to raise preliminary objections as regards jurisdiction/arbitrability, if any, which shall be decided by the learned arbitrator, in accordance with law.

10. The learned Sole Arbitrator may proceed with the arbitration proceedings subject to furnishing to the parties requisite disclosures as required under Section 12 of the A&C Act.

11. The learned Sole Arbitrator shall be entitled to fee in accordance with Fourth Schedule to the A&C Act; or as may otherwise be agreed to between the parties and the learned Sole Arbitrator.

12. All rights and contentions of the parties in relation to the claims/counter-claims are kept open, to be decided by the learned Arbitrator on their merits, in accordance with law.

13. Needless to say, nothing in this order shall be construed as an expression of this court on the merits of the case.