Wadia Techno-Engineering Services Limited v. Director General of Married Accommodation Project & Anr.

3. Petitioner was awarded work in relation to "Detailed Engineering and Project Management Consultancy Services for Married Accommodation Projects" (DEPMC) for construction of residential accommodation at Ahmednagar, Deolali, Nasik (AF), at various sites under separate letters, details whereof are as under:

(i) Letter of Acceptance No.81932/MAP/PH-II/DEPMC/PKG-24/40/E-8

(ii) Letter of Acceptance No.81931/MAP/PH-II/DEPMC/PKG-23/60/E-8 dated 22"*^ May, 2009 along with Contract Agreement of the same ARB.P.794-796/2020 Page2of[8] date[which is the subject matter ofArb.P.795/2021];and

(iii) Letter ofAcceptance No.81944/MAP/PH-II/DEPMC/PKG-36/43/E-8

4. Briefly stated, the case of the Petitioner is that, as per the identical Contract Agreements,the project completion date was of April 2012.Due to poor progress of work by the contractors, the project extended beyond the stipulated date. In fact, the project is still continuing, with no end in sight. Petitioner continuously rendered uninterrupted services beyond the contractual time schedule and- incurred high cost due to idling of engineer-professionals deployed for the project. As a result of such time overrun. Petitioner suffered substantial losses and requested the Respondent for enhancement of contract price due to increase in project cost and additional fee for the extended period,taking into consideration the surge in remuneration package of all categories of professionals as well as rise in Consumer Price Index (CPI). Since the Respondents did not agree, Petitioner invoked Article 17 of the Contract Agreement which deals with settlement of disputes, and requested the Respondent to appoint an Arbitrator. This request was also not acceded to, constraining the Petitioner to approach this Court under Section 11(6) of the Arbitration and Conciliation Act,1996(hereinafter the'Act')by way ofthe instant petitions.

5. Respondents,in their reply, do not dispute the existence of the Contract Agreements.They however raise objections as to maintainability by arguing that the petitions are premature. Mr. Satya Ranjan Swain, Mr. Vijay Joshi ARB.P. 794-796/2020 Page3of[8] and Mr. Neeraj, counsels for the Respondents, rely upon Article 17 of the Agreement,which reads as under: "Article 17 SettlementofDisputes All disputes, between the parlies to the contract(other than thosefor which the decision ofthe DGMAP or any otherperson is by the contract expressed to befinaland binding) shall, after written notice by eitherparty to the Contract to the other ofitem, be referred to the sole arbitration ofserving officer having degree in Engineering or equivalent or having passed Final I Direct Final Examination of Sub Division II of Institution of Surveyors (India) recognized by the Govt of India to be appointed by the Engineer-in-Chief E-in-C's Branch, Kashmir House, New Delhi-II or Director General of Works ifspecifically delegated in writing by Engineer-in-Chief, Army Headquarters, New Delhi whose decision shall befinal, conclusive and bin<;ling. The Arbitration shall be governed by Arbitration and Conciliation Act, 1996. Unless both the parties asree in writins. such reference shall not take place until after the completion of the Works or termination or determination of the Contract under conditions ofthe contract. Provided that in the event ofabandonment ofthe works or cancellation ofthe Contract under conditions of this contract, such reference shall not take place until alternative arrangements have been finalized by the OWNER to get the works completed by or through any otherconsultantorconsultantsorAgency oragencies. Provided always that commencement or continuance of any arbitration proceeding hereunder or otherwise shall not in any manner militate against the Owner's right of recoveryfrom the consultant asprovided in conditions ofthis contract. Ifthe arbitratorso appointed resigns his appointmentor vacates his office or is unable or unwilling to act due to any reason whatsoever, the authority him may appoint a new Arbitrator to act in hisplace. The Arbitrator mayproceed with the arbitration, exparte, ifeitherparty, inspite ofnotice from the Arbitrator,fails to take partin the proceedings The Arbitrator shall give his reasoned award in writing on all matters referred to h.im and shall indicate hisfindings, along with sums awarded, separately on each individual item ofdispute. The venue ofarbitration shall be such place orplacesas may befixed by the Arbitrator in his discretion. The language of the arbitration proceedings and that of all documents any communications between the parties.shall be "English". The award ofthe Arbitratorshall befinaland binding on both theparties to the contract. Notwithstanding thefact that the stations ofwork are anywhere in India, only the courts at Delhi/New Delhi shall have the jurisdiction to adjudicate and settle any disputes between OWNER and the consultant. No other court outside Delhi/New Delhi shall have anyjurisdiction on any matter requiring reference to Civil Court." [emphasis supplied]

6. They submit that in terms of the underlined proviso, unless both the parties agree in writing, no reference to arbitration can be made until after the alleged completion of work, for determination of the contract under conditions ofthe contract. They urge thatin view ofthe aforesaid provision, the Petitioner cannot request for Arbitration at this stage. Further, they also ARB.P.794-796/2020 Page4of[8] argue that the Petitioner is supposed to render all assistance in arbitrable disputes between the Respondents and the contractor,and therefore,it would be inconceivable that there would be further parallel arbitration(s) between the parties.

7. Mr. Swain acknowledges that this Court has taken a view against the Respondents in other similar petitions, but points out that the said decisions have been assailed by the Respondents in Special Leave to Appeal before the Supreme Court.In the said challenge,leave has indeed been granted and the hearings have been deferred to await the outcome ofthe said appeals.He also submits that the view taken by this Court allowing the other petition is not con'ect. The observations made in the judgment regarding Article 17 being in conflict with Section 28 of the Indian Contract Act, 1872, is erroneous. He relies upon the the exception to Section 28 of the Indian Contract Act, 1872, to emphasize that the proviso to Article 17 of the Contract Agreementis valid and enforceable.

8. Mr. Shambo Nandy, counsel for the Petitioner, controverts the contentions ofthe Respondents and submits that the objections raised by the Respondents have already been rejected by this court. The proviso to Article 17 is visibly void in light of Section 28 of the Indian Contract Act, 1872. This view taken by this Court,has not been stayed or interfered with by the Supreme Court. Further, the exceptions to Section 28 do not validate the proviso to Article 17 either. These exceptions only allow the parties to enter into an Agreement to arbitrate, whereas the proviso to Article 17 puts a complete embargo upon the Petitioner to agitate its claims. He urges that the ARB.P. 794-796/2020 Page5of[8] Petitioner cannot be left high and dry. Even though the Petitioner is continuing to fulfil its obligation under the Agreement, it does preclude them from agitating its claims in accordance with the dispute resolution mechanism.

9. The counsels have been heard. The objections raised by the Respondents have already been considered and rejected by a coordinate bench of this Court. Six similar petitions have been allowed by this Court against the Respondents.' Challenge was laid by the Respondents before the Supreme Court in respect of all the petitions. Initially, stay was granted in respect of four orders, however subsequently,the said petitions were dismissed on the ground on non-prosecution. In respect of the two remaining petitions,there is no interim stay granted by the Supreme Court. As a result, the arbitration proceedings have advanced to the stage of rejoinder arguments by the Claimant.

10. The objection of the Respondents regarding the maintainability of the petitions on the ground ofbeing premature is devoid ofmerit.Since disputes have arisen between the parties, the Petitioner cannot be deprived of the remedy for Arbitration in terms of Article 17 contained in the Contract. The court finds no reason to take a view different from one taken by the coordinate bench ofthis court.Primafacie. Court also finds that the restrain in the proviso to Article 17 would be in the teeth ofSection 28 ofthe Indian Contract Act, 1872 as it curtails the right of the Petitioner to seek legal 'In Alb.P616/2014,Arb.P619/2014,Arb.P615/2014,Arb.P500/2014,Arb.P618/2014and Arb.P 617/2014. ARB.P.794-796/2020 Page6of[8] redressal by having the disputes referred to arbitration. The exceptions to Section 28, on a primafacie view, have no application to the facts of the present case. Those exceptions protect the right of the parties to agree for arbitration. That however does not mean that the an agreement can restrain the invocation of arbitration, till such time the Contract is not terminated or is notcompleted,thereby curtailing the rightofa party to legal redressal.

11. Further,it is also to be noted that the Arbitration Clause as worded is not enforceable to the extent that it contemplates reference of disputes to arbitration before a serving employee, to be unilaterally appointed by the Engineer-in-Chief of the Respondent. This clause is clearly in conflict with Section 12(5)ofthe Act.The only remedy now available for the parties is to approach the Court under Section 11 ofthe Act.

12. In view ofthe above,the Court sees no hesitation in allowing the present petitions.

13. Accordingly, Hon'ble Mr.Justice A.K.Pathak,(Retd.)former Judge of this Court[Contact No.: +91 9910384602] is appointed as a common Sole Arbitrator to adjudicate the disputes arising between the parties in respect of thefollowing agreements,all dated 22"^^ May,2009:

(i) Letter of Acceptance No. 81932/MAP/PH-II/DEPMC/PKG-24/40/E-8