.IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR ORDER
ARBITRATION APPLICATION NO.21/2013 M/S.Trimurti Constructions, Ajmer Versus Vice Chancellor, Maharana Pratap University of Agriculture & Technology, Udaipur & Anr.
Date of Order : 01.07.2014 PRESENT HON'BLE Mr.JUSTICE GOVIND MATHUR Ms.Rekha Borana for the applicant Mr.G.R.Punia, Senior Advocate, assisted by Mr.Yashpal Khileree, for the respondents BY THE COURT : This application is preferred for appointment of an independent Arbitrator to settle the dispute/claims said to be arising out of the work order dated 13.06.2011.
Suffice to mention here that the applicant, a contractor with the Public Works Department in “AA”.
class, entered into a contract with the respondent Maharana Pratap University of Agriculture and Technology for “Construction of University Girls Hostel MPUAT, Udaipur”.The work in pursuant to the work order concerned was to be commenced on 24.06.2011 and to be completed till 23.05.2012.
As per the applicant, some delay occurred in .commencing the work due to the reasons assigned to the respondent University.
The applicant ultimately suffered certain losses due to unilateral action of the University, thus, a notice for demand of justice dated 29.09.2012 was served upon the University through counsel for the applicant.
The applicant claimed for payment of a sum of Rs.47,20,206/-.
On receiving no adequate response, the applicant by the notice dated 31.10.2012 called upon the respondent University for getting the dispute settled as per clause 23 of the agreement by treating the clause aforesaid as arbitration clause in the agreement.
Despite expiry of period of one month from the date of service of the notice, the dispute was not referred to the standing committee as per clause 23 of the agreement; hence, this application is preferred with a claim for appointment of an independent arbitrator.
While contesting the application, the stand of the University is that clause 23 of the agreement is not an arbitration clause; hence, the application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short, 'the Act of 1996') is not maintainable.
Per contra, it is submitted by learned counsel for the applicant that under clause 23 of the agreement, the dispute between the parties is required to be referred to a .competent standing committee, therefore, the same is nothing but an arbitration clause and on being failed to refer the dispute for its adjudication to the standing committee, an independent and impartial Arbitrator is required to be appointed in accordance with the provisions of Section 11 of the Act of 1996.
Heard learned counsel for the applicant and learned counsel for the respondent University.
As per the Act of 1996, “Arbitration”.
means any arbitration whether or not administered by permanent arbitral institution.
The expression “Arbitration Agreement”.
manes : “An agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in - (a) a document signed by the parties; (b) an exchange of letteRs.telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
(5) There reference in a contract to a document containing an arbitration clause constitutes an .arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.”
Chapter V of the Act of 1996 pertains to conduct of arbitral proceedings.
Section 18 of the Act of 1996 provides that parties shall be treated with equality and each party shall be given full opportunity to present its case.
Section 19 empowers the arbitral tribunal to determine the rules of procedure including power to determine the admissibility, relevance, materiality and weight of any evidence.
A look at the provisions of Section 18 and 19 of the Act of 1996 indicates that the arbitral proceedings are of quasi judicial nature and the principles of natural justice are required to be adhered during the couRs.of adjudication.
This position is further strengthened by the provisions of Section 23 and 24 of the Act of 1996.
As per Section 23 of the Act of 1996, the claimant is required to state the facts supporting his claim, the points at issue and the relief or remedy sought.
The other party is having all rights to make defence in respect of the claims made.
As per Section 24 of the Act of 1996, the arbitral tribunal is also required to provide opportunity of hearing, may that be in the form of oral arguments or by submitting .arguments in writing.
A sufficient notice is also required to be given by the arbitrator for hearing and other proceedings in relation to the arbitration.
The provisions aforesaid in quite unambiguous terms indicates that the arbitration is a mutual process of adjudication by adhering the principles of natural justice.
The arbitration proceedings and the expression “arbitration agreement”.
have been been explained by Hon'ble Supreme Court in the case of Jagdish Chander versus Ramesh Chander & ORS.reported in (2007) 5 SCC719by laying down the principles as under :- (i) The intention of the parties to enter into an arbitration agreement shall have to be gathered from the terms of the agreement.
If the terms of the agreement clearly indicate an intention on the part of the parties to the agreement to refer their disputes to a private tribunal for adjudication and an willingness to be bound by the decision of such tribunal on such disputes, it is arbitration agreement.
While there is no specific form of an arbitration agreement, the words used should disclose a determination and obligation to go to arbitration and not merely contemplate the possibility of going for arbitration.
Where there is merely a possibility of the parties agreeing to arbitration in future, as contrasted from an obligation to refer disputes to arbitration, there is .no valid and binding arbitration agreement.
(ii) Even if the words 'arbitration' and 'arbitral tribunal (or arbitrator).are not used with reference to the process of settlement or with reference to the private tribunal which has to adjudicate upon the disputes, in a clause relating to settlement of disputes, it does not detract from the clause being an arbitration agreement if it has the attributes or elements of an arbitration agreement.
They are : (a) The agreement should be in writing.
(b) The parties should have agreed to refer any disputes (present or future) between them to the decision of a private tribunal.
(c) The private tribunal should be empowered to adjudicate upon the disputes in an impartial manner, giving due opportunity to the parties to put forth their case before it.
(d) The parties should have agreed that the decision of the Private Tribunal in respect of the disputes will be binding on them.
(iii) Where the clause provides that in the event of disputes arising between the parties, the disputes shall be referred to Arbitration, it is an arbitration agreement.
Where there is a specific and direct expression of intent to have the disputes settled by arbitration, it is not necessary to set out the attributes of an arbitration agreement to make it an arbitration agreement.
But where the clause relating to settlement of disputes, contains words which specifically excludes any of the attributes of .an arbitration agreement or contains anything that detracts from an arbitration agreement, it will not be an arbitration agreement.
For example, where an agreement requires or permits an authority to decide a claim or dispute without hearing, or requires the authority to act in the interests of only one of the parties, or provides that the decision of the Authority will not be final and binding on the parties, or that if either party is not satisfied with the decision of the Authority, he may file a civil suit seeking relief, it cannot be termed as an arbitration agreement.
(iv) But mere use of the word 'arbitration' or 'arbitrator' in a clause will not make it an arbitration agreement, if it requires or contemplates a further or fresh consent of the parties for reference to arbitration.
For example, use of words such as "parties can, if they so desire, refer their disputes to arbitration" or "in the event of any dispute, the parties may also agree to refer the same to arbitration" or "if any disputes arise between the parties, they should consider settlement by arbitration" in a clause relating to settlement of disputes, indicate that the clause is not intended to be an arbitration agreement.
Similarly, a clause which states that "if the parties so decide, the disputes shall be referred to arbitration" or "any disputes between parties, if they so agree, shall be referred to arbitration" is not an arbitration agreement.
Such clauses merely .indicate a desire or hope to have the disputes settled by arbitration, or a tentative arrangement to explore arbitration as a mode of settlement if and when a dispute arises.
Such clauses require the parties to arrive at a further agreement to go to arbitration, as and when the disputes arise.
Any agreement or clause in an agreement requiring or contemplating a further consent or consensus before a reference to arbitration, is not an arbitration agreement, but an agreement to enter into an arbitration agreement in future.”
Hon'ble Apex Court again considered the meaning of the expression “arbitration agreement”.
as defined under Section 7 of the Act of 1996 in Karnataka Power Transmission Corporation LTD.and another v.; M/S.Deepak Cables (India) LTD.(2014 AIR SCW2134 and by examining its scope on the scale of several judgments arrived at the conclusion that for constituting an arbitration agreement, there should be a dispute between the parties required to be referred for arbitration and the arbitrator, may that be a single person or a body of several persons, is required to act judiciously and by following the principles of natural justice.
The finding given by the arbitrator should be having binding effect to the parties.
Clause 23 of the agreement, said to be arbitration .clause in the instant matter, is required to be examined in the light of the law discussed above.
Clause 23 of the agreement reads as under :- “23 : Standing Committee for Settlement of Disputes - If any question, difference or objection, whatsoever shall arise in any way, in connection with or arising out of this instrument, or the meaning of operation of any part thereof, or the rights, duties or liabilities or either party then, save in so far, as the decision of any such matter, as herein before provided for, and been so decided, every such matter constituting a total claim of Rs.50,000/- or above, whether its decision has been otherwise provided for and whether it has been finally decided accordingly, or whether the contract should be terminated, or has been rightly terminated, and as regards the rights or obligation of the parties, as the result of such termination, shall be referred for decision then empowered Standing Committee, which would consist of the followings:- (i) Chairman Tech.
Committee .(ii) Legal Advisor University (iii) Estate Officer Concerned (Member-Secretary) The Engineer-in-charge, on receipt of application alongwith non-refundable prescribed fee, (the fee would be two percent of the amount in dispute, not exceeding Rs.One lac) from the Contractor, shall refer the disputes to the committee, within a period of one month from the date of receipt of application.
Procedure and Application for referring case for settlement by the Standing Committee shall be, as given in Form RPWA90”.
As per the clause aforesaid, any question, difference or objection whatsoever arising in connection with or arising out of the agreement, or the meaning of operation of any part thereof, or the rights, duties or liabilities of either party, then the same is required to be referred for decision to the empowered standing committee.
The empowered standing committee is consisting of 3 officers of the University.
The clause nowhere prescribes procedure that is to be adhered during the aribitral proceedings.
It simply mentions that the dispute is required to be referred for its .decision to the standing committee.
Clause 23 also does not provide any binding effect of the decision given by the standing committee.
As per clause 23, the committee shall decide the dispute but it is not supposed to call the parties necessarily, thus, the mandatory need of acting judiciously by the committee is conspicuously absent.
Pertinent to notice here that clause 51 of the contract provides that in the event of any dispute arising between the parties in respect of any of the matters comprised in the agreement shall be settled by competent court having jurisdiction over the place, where the agreement is executed and by no other court, after completion of the proceedings under clause 23 of the contract.
This fact clearly indicates that the decision of the standing committee can be challenged by way of availing appropriate remedy before a civil court.
Clause 23 in conjunction with the provision of clause 51 of the agreement clearly indicates that a decision given by the standing committee is not having that binding effect, that must be needed for an arbitral award.
Clause 23 of the conditions of contract also not mentions any procedure as required for arbitral proceedings in consonance with the provisions of Chapter V of the Act of 1996.
In such circumstances, I am of the view that clause 23 of the conditions of contract is not an arbitration clause, .but a provision for unilateral decision about the dispute by the University itself through its officeRs.In view of this position, no order for appointment of an arbitrator in accordance with the provisions of Section 11 of the Act of 1996 can be passed in the instant matter.
The application is dismissed, accordingly.