M/S. NAV NIRMAN CONSTRUCTION COMPANY v. EXECUTIVE ENGINEER CD – IX, IRRIGATION AND FLOOD CONTROL DEPARTMENT, GNCT OF DELHI

1. Whether the Reporters of local papers may be allowed to see the judgment? NO

2. To be referred to Reporter or not? NO

3. Whether the judgment should be NO reported in the Digest? 2011:DHC:4796-DB SANJAY KISHAN KAUL, J. (ORAL)

1. The appellant was awarded a contract for construction of inlet/outflow structure of DDA Storm Water drain at a bid price of `20,23,116.00. This bid was accepted by the respondent on 11.5.1992. The stipulated date for commencement of the work was 18.5.1992 and the date for completion of work was 17.10.1992, i.e. a period of five (5) months. The work, however, got completed only on 30.10.1997 after almost five (5) years of the stipulated date of completion. The petitioner raised the final bill after completion of work and claimed additional payments on account of delay in completion of the work. Since there were disputes which arose on this account, the appellant invoked the arbitration clause, being clause No.25, of the agreement on 14.8.2000. The respondent, however, did not appoint any arbitrator and the appellant moved an application on the original side of this Court under Section 11(6) of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the „said Act‟).

2. The aforesaid application filed by the appellant, being AA No.45/2003, was disposed of vide order dated 21.4.2003. A perusal of the said order shows that a request was made by the appellant that the respondent has a panel of arbitrators consisting of retired Chief Engineers and requested that any one of them may be appointed as the arbitrator. This request was acceded to by the counsel for the respondent. It is on such joint request of the parties that Mr. A.S. Gahlawat, retired Chief Engineer of the Haryana Irrigation Department, who was on the panel of the respondent, was appointed as the sole arbitrator to adjudicate the disputes which had arisen between the parties.

3. The arbitrator made and published his award dated 19.4.2006 awarding various claims to the appellant totaling to `13,98,726.75 along with interest @ 12 per cent per annum from 14.8.2000 up to the date of publication of the award. The total, thus, comes to `23,49,858.95. There is no reference to future interest.

4. The respondent, thereafter filed objections to the award vide OMP No.451/2006 which has given rise to the impugned Order dated 23.12.2009 setting aside the award.

5. We may notice that the learned single Judge has discussed the various claims awarded by the arbitrator but has really given no findings in respect of the same. This appears to be so on account of the fact that the learned single Judge found that the reference itself was bad in law in view of peculiar wordings of the arbitration clause. It appears that the same learned single Judge had given various pronouncements on the same clause as referred to in paragraphs 12 & 13 of the impugned judgement to come to this conclusion. The appointment of the arbitrator was, thus, held contrary to the contract.

6. In order to appreciate the aforesaid plea, we would like to reproduce the arbitration clause, once again, as it is the common case of the parties that the clause has not been correctly reproduced, which reads as under: “CLAUSE 25. Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions herein before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right matter of thing whatsoever, in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions orders or 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 completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the D.G. of works/Chief Engineer, CPWD/(DA), Zone II in charge of the work at the time of dispute or if there be no D.G. of works/Chief Engineer, the administrative head of the said F.C.W. (DA), Zone ))))) at the time of such appointment. It will be no objection to any such appointment that the arbitrator so appointed is a Government servant, that he had to deal with the matters to which the contract relates and that in the course of his duties as Government servant he had expressed views on all or any of the matters in dispute or difference. The arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, such D.G. of works/Chief Engineer or administrative head as aforesaid at the time of such transfer, vacation of office or inability to act, shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by such D.G. of works/Chief Engineer or administrative head of CPWD/(DA), Zone II as aforesaid should act as arbitrator and if for any reason, that is not possible, the matter is not to be referred to arbitration at all. In all, cases where the amount of claim in dispute is `75,000.00 (Rupees Seventy five thousand only) and above, the arbitrator shall give reasons for the award.”

7. It is the opinion of the learned single Judge that since the arbitration clause specifically stipulated that no person other than the person appointed by the authority should act as an arbitrator and that if for any reason that is not possible, the matter need not be referred to arbitration at all, the court could not have exercised the powers under Section 11 (8) of the said Act.

8. Learned counsels for the parties have in this context discussed the effect of the judgement pronounced by the Supreme Court in Nandyal Coop. Spinning Mills Ltd. Vs. K.V. Mohan Rao (1993) 2 SCC 654. As pointed out by learned counsel for the appellant, the nature of clause is similar. This is apparent from paragraph 4 of the judgement where clause 65.[1] has been reproduced being the arbitration clause and contains the sentence “and if for any reason it is not possible the matter is not referred to the arbitration at all….”. The contention in context of the aforesaid clause is contained in paragraph 11 of the judgement, which reads as under:

The Supreme Court held that the appointment of the arbitrator by the trial court as upheld by the High Court was perfectly legal and valid warranting no interference as the failure to appoint an arbitrator by the designated authority would invite the provisions of Section 11 (6) of the said Act. We note that Nandyal Coop. Spinning Mills Ltd.‟s case (supra) was decided under the provisions of the Arbitration Act, 1940.

9. Both the learned counsels for the parties seek to rely upon the case of Indian Oil Corporation Ltd. & Ors. Vs. Raja Transport (P) Ltd. (2009) 8 SCC 520.

10. Learned counsel for the appellant has drawn our attention to paragraphs 46 and 47 of the judgement, which reads as under: