Allowed

M/S. Sophisticated Industrial Materials v. M/S. U.P. State Industrial Development Authority and Another

Allahabad HC23 Aug 2023ARCO/55/2022

Case brief

AI extract

What is this about?

Application under Section 11 of the Arbitration and Conciliation Act, 1996 was filed by a company for appointment of an arbitrator to resolve a dispute regarding an unclaimed security retention amount. The court held the application maintainable, rejecting limitation objections based on the Supreme Court's COVID-19 extension order, and appointed an arbitrator.

What did the court decide?

Appointment of Hon'ble Mr. Justice Rajiv Joshi as Arbitrator subject to his consent in terms of Section 11(8) of the Act.

M/S. Sophisticated Industrial Materials Vs M/S. U.P… — Company and Corporate | Allahabad HC (2023)

¶1

¶2

Reserved on :- 13.04.2023

¶3

Delievered on :- 23.08.2023

¶4

Court No. - 65

¶5

Case :- ARBITRATION AND CONCILI. APPL.U/S11(4) No. - 55 of 2022

¶6

Applicant :- M/S Sophisticated Industrial Materials Analytic Labs (P) Ltd. (Sima Labs. Pvt. Ltd. A-37, Mayapuri Industrial Area, Phase-II, New Delhi-110064 through its Authorised representative Shri Shashi Verma

¶7

Opposite Party :- M/S U.P. State Industrial Development Authority formerly known as U.P. State Industrial Development Corporation Ltd UPSIDC COMPLED, A/1/4, Lakhanpur, Kanpur 208024, U.P Counsel for Applicant :- Nitin Chopra

¶8

Hon'ble Rajeev Misra,J.

¶9

Heard Mr. P. R. Sikka, Advocate along with Mr. Nitin Chopra, the learned counsel for applicant and Mr. Ashish Agrawal, the learned counsel for respondents

¶10

Perused the record.

¶11

This arbitration application under Section 11 of the Arbitration and Conciliation Act, 1996 has been filed by applicant for appointment of an arbitrator to resolve the dispute between the parties.

¶12

Record shows that applicant M/S Sophisticated Industrial Materials Analytic Labs (P) Ltd. (Sima Labs. Pvt. Ltd. A-37, Mayapuri Industrial Area, Phase-II, New Delhi is a Company duly incorporated under the

¶13

¶14

Companies Act. The Company was initially known as Sima Labs Pvt. Ltd, The company has its registered office at A-37, Mayapuri Industrial Area, Phase-II, New Delhi.

¶15

M/S U.P. State Industrial Development Authority was previously known as U.P. State Industrial Development Corporation Ltd . (hereinafter referred to as the UPSIDC)

¶16

Tenders were invited by UPSIDC for construction of waste water treatment plant of 6 MLD capacity at Surajpur (Housing), District Gautam Buddh Nagar, U.P. In response to the said invitation/tender notice, the applicant submitted his tender, which was accepted by UPSIDC. Accordingly, contract bond No. 07/CE/2009/2010 dated 04.05.2009 and Job No. CD-II (334) dated 26.02.2009 was awarded to the petitioner for amounting to Rs. 13,90,30,000/- (Rs. Thirteen Crore Ninety Lac Thirty Thousand Only).

¶17

It is the case of the applicant that work was completed within time and thereafter the plant was handed over to the Corporation. In view of above, the amount payable under the contract was paid except the security retention amount.

¶18

Subsequently, applicant prayed for the release of the security retention amount i.e. Rs. 9,00,000/-(Nine Lac Only), which was deducted by the respondent till handing over of the plant. Admittedly the plant has been handed over by the applicant to the respondent UPSIDC as is evident from the letter dated 03.03.2015 (Annexure-8 to the petition). However, despite repeated request, the security retention amount was not released. The applicant claims that a letter dated 25.09.2018 was written by Executive Engineer recommending therein that the security retention amount of the applicant be released. According to the applicant, this was followed by the final letter dated 31.10.2018 sent by Executive Engineer, UPSIDC recommending therein that the security retention amount and another be immediately released. According to the applicant, inspite of

¶19

¶20

aforesaid, the security retention amount has not been paid.

¶21

Faced with aforesaid situation, applicant invoked the Arbitration Clause contained in Clause 31 of Section 2 of the General Conditions of Contract. For Ready reference, the same is reproduced herein-under:

¶22

"If any question,difference or objection whatsoever shall arise in any way connected with or arise in any way connected with or arising out of his instrument or the meaning or operation of any part thereof or the rights, duties or liabilities or either party that save in so far as the decision of any such matter including whether its decision has been otherwise provided for and/or whether it has been finally decided accordingly, or whether the contract should be terminated or has been rightly terminated and as regards the right and obligations or the parties as th result of such termination shall be referred for arbitration to Managing Director UPSIDC, acting as such of the time of reference within 180 days or 6 months from the payment of final bill or written notice issued to the contractor that his bill is ready for payment and his decision shall be final and binding and where the matter involves a claim for or the payment or recovery of deduction of money, only the amount, if any awarded in such arbitration shall be recoverable in respect of the matter so referred if the matter is not referred to arbitration within the specified period, all the rights and claims under the contract shall be deemed to have been forfeited and absolutely barred. "

¶23

In spite of above, no heed was paid by the respondents to either release the amount claimed by the applicant i.e. Rs. 9,00,000/- (Nine Lacs Only) nor an Arbitrator was appointed. In the circumstances noted above, applicant approached Delhi High Court by filing an Application Under Section 11 of the Arbitration and Conciliation Act, 1996 which was registered as ARB.P. 1184 of 2021 (Sophisticated Industrial Materials Analytic Labs (P) Ltd. Vs. (U.P. State Industrial Development Authority and Another). The Delhi High Court passed an order dated 08.02.2022, whereby aforesaid application was dismissed as withdrawn (Primarily on account of lack of jurisdiction). Same reads as under:

¶24

“The hearing has been conducted through video conferencing

¶25

Learned counsel for the petitioner seeks permission to withdraw these petitions with liberty to file before the appropriate forum, having jurisdiction

¶26

Permission is granted with liberty as prayed for.

¶27

Accordingly, these petitions are dismissed as withdrawn”

¶28

¶29

It is subsequent to above order that applicant has approached this court by means of present application under Section 11 of Arbitration and Conciliation Act 1996 seeking appointment of an Arbitrator to resolve the dispute between the parties.

¶30

Mr. P. R. Sikka, the learned counsel for applicant submits that there is no dispute between the parties that a tender was floated by UPSIDC for construction of waste water treatment plant of 6 MLD capacity at Surajpur (Housing), District Gautam Buddh Nagar, U.P. Pursuant to the said tender notice, the applicant previously known as Sima Labs. Pvt. Ltd. duly submitted its tender which was accepted and thereafter acted upon. All the payments due under the contract except the security retention amount have already been paid to the applicant. The liability regarding payment of above-mentioned amount is also admitted by the respondents as per letter dated 25.09.2018 and 31.10.2018 (Annexures 10 and 11 to the petition) written by Executive Engineer, UPSIDC directing the release of the said amount in favour of applicant.

¶31

On the above premise, it is urged by the learned counsel for applicant that since the last letter of acceptance is dated 31.10.2018, therefore, the limitation shall be counted from 31.10.2018. The limitation would thus be till 30.10.2021. However, since in the interregnum, the pandemic Covid-19 came in, therefore, the Apex Court considered the hardship faced by the litigants and extended the period of limitation vide order dated 08.03.2021 passed in Suo Motu Writ Petition (Civil) No. 3 of 2020. The said order reads as under:-

¶32

"1. Due to the onset of COVID-19 pandemic, this Court took suo motu cognizance of the situation arising from difficulties that might be faced by the litigants across the country in filing petitions/ applications/ suits/appeals/all other proceedings within the period of limitation prescribed under the general law of limitation or under any special laws (both Central or State). By an order dated 23.03.2020 this Court extended the period of limitation prescribed under the general law or special laws whether compoundable or not with effect from 15.03.2020

¶33

¶34

till further orders. The order dated 23.03.2020 was extended from time to time. Though, we have not seen the end of the pandemic, there is considerable improvement. The lockdown has been lifted and the country is returning to normalcy. Almost all the Courts and Tribunals are functioning either physically or by virtual mode. We are of the opinion that the order dated 23.03.2020 has served its purpose and in view of the changing scenario relating to the pandemic, the extension of limitation should come to an end.

¶35

We have considered the suggestions of the learned Attorney General for India regarding the future course of action. We deem it appropriate to issue the following directions: -

¶36

In computing the period of limitation for any suit, appeal, application or proceeding, the period from 15.03.2020 till 14.03.2021 shall stand excluded. Consequently, the balance period of limitation remaining as on 15.03.2020, if any, shall become available with effect from 15.03.2021.

¶37

In cases where the limitation would have expired during the period between 15.03.2020 till 14.03.2021, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 15.03.2021. In the event the actual balance period of limitation remaining, with effect from 15.03.2021, is greater than 90 days, that longer period shall apply.

¶38

The period from 15.03.2020 till 14.03.2021 shall also stand excluded in computing the periods prescribed under Sections 23 (4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings.

¶39

The Government of India shall amend the guidelines for containment zones, to state.

¶40

“Regulated movement will be allowed for medical emergencies, provision of essential goods and services, and other necessary functions, such as, time bound applications,

¶41

¶42

including for legal purposes, and educational and job-related requirements.”

¶43

3. The Suo Motu Writ Petition is disposed of accordingly."

¶44

On the above premise and with reference to paragraphs 16 and 19 of the petition, the learned counsel for applicant contends that the claim of applicant is not barred by limitation and therefore, an Arbitrator is liable to be appointed by this Court to resolve the dispute between the parties.

¶45

Mr. Ashish Agrawal, the learned counsel representing respondents has, however, opposed the present application. He submits that applicant has no locus to maintain the present application as no contract was entered into by UPSIDC with applicant M/S Sophisticated Industrial Materials Analytic Labs (P) Ltd. However, as the contractor i.e. applicant himself failed to comply with the conditions of contract. The work was not completed within time. Amount due to the applicant under the contract has already been paid. In the submission of the learned counsel for respondents, the claims of applicant is barred by limitation as the final payment of the applicant was made much before.

¶46

Having heard the learned counsel for applicant, the learned counsel representing respondents and upon perusal of material brought on record, this Court finds that the contract was entered into by UPSIDC with M/S Sima Labs. Pvt. Ltd. the predecessor Company of the applicant. The said fact is also established from the document occurring at page 21 of the paper book. As such, it cannot be said that the applicant has no locus to maintain the present application under Section 11 of the Arbitration and Conciliation Act 1996.

¶47

The second issue as to whether the claim is barred by limitation or not, the Court finds that the contract entered into by the parties was valued at Rs. 13,90,30,000/- (Rs. Thirteen Crore Ninety Lac Thirty Thousand Only). The entire amount payable under the contract appears to have been paid except the security/ retention amount i.e. Rs. 9,00,000/(Nine Lac Only). The liability to pay the said amount has been admitted in

¶48

¶49

the letter dated 25.09.2018 and 31.10.2018 written by Executive Engineer of the Corporation (Annexures 10 and 11 to the petition). A categorical averment to that effect has been made in paragraphs 12 and 13 of the petition, which reads as under:-

¶50

"(12). That after great persuasions the Executive Engineer of the Respondent had written a letter No. 546(1)/SIDA/CE/Payment-File dated 25.09.18 where in the Executive Engineer of the respondent had mentioned that their officials had inspected the plant on 16.04.2018 and 17.04.2018 and letter No.623(1)/SIDC/EE/CD-II dated 31.10.2018 thereby intimating their Accounts Department to release the funds in respect of the release of the said amount. For kind perusal of this Hon'ble Court the copy of letter dated 25.09.2018 is being filed herewith and marked as Annexure 10 to this petition.

¶51

(13). That even final letter dated 31.10.2018 written by the Executive Engineer to their Financial Controller to release the said amount for Rs.9,00,000/- (Rupees Nine Lakhs) only in favour of the petitioner but same has not been released so far. For kind perusal of this Hon'ble Court the copy of letter dated 31.10.2018 is being filed herewith and marked as Annexure 11 to this petition."

¶52

The averments made in paragraphs 12 and 13 of the petition have been replied in paragraphs 20 and 21 of the counter affidavit filed by respondents. The same is extracted herein-under

¶53

"20. That the contends of paragraph nos. 12 of the affidavit need no specific reply.

¶54

That the contents of paragraph nos. 13 of the affidavitwrong and denied. It is wrong to say that by the letter dated 31.10.2018; there was any direction for the release of the funds in favourof the contractor. The same is a wrong interpretation. More so, the said letter will not extend to the limitation nor will bring the claim of the contractor within limitation. There is no acknowledgement of amount payable by the answering respondent. Further it is hereby stated that the final payment was made to the contractor and any averment to contrary is wrong and denied."

¶55

The applicant has rejoined the averments made in paragraphs 12

¶56

¶57

and 13 of the petition in paragraph 20 and 21 of the rejoinder affidavit, which are as under:-

¶58

"20. That the contents of paragraph no. 20 need no reply.

¶59

That the contents of paragraph no. 21 of the counter affidavit are incorrect, wrong and hence denied. It is pertinent to submit here that the contention of the respondent is incorrect in so far as they have submitted that letter dated 31-10-2018 does not extend limitation while it is further relevant to mention here that as per the said letter respondent has extended his liability and accordingly limitation is extended. The corresponding para of the petition is reiterated and reaffirmed."

¶60

There is nothing on record to show that amount of Rs. 9,00,000/(Rs. Nine Lac Only) has either been paid to the applicant or the same has been forfeited by the respondents on account of breach of contract in exercise of any conditions of the contract. Moreover, there is nothing on record to show that any communication has been sent to the applicant indicating the grounds for retaining the disputed amount.

¶61

The objection raised on behalf of the respondents in filing the present application on the ground that since the claim itself is barred by limitation, therefore, the application is not maintainable, is misconceived. It is an undisputed fact that the last letter issued by Executive Engineer, UPSIDC accepting the liability regarding payment of security retention amount was issued on 31.10.2018. As such, the limitation shall exipire on 30.10.2021. However, in the interregnum, the pandemic COVID-19 came in and therefore, the Supreme Court Suo Motu extended the period of limitation as noted above. Consequently, the applicant approached the Delhi High Court but the arbitration application was dismissed with liberty to approach the appropriate forum vide order dated 08.02.2022. In view of above, it cannot be said that the claim is barred by limitation.

¶62

In the light of above, the inescapable conclusion is that there exists a dispute between the parties, which is capable of being referred to for

¶63

¶64

adjudication to the Arbitrator. As such, the case in hand is squarely covered by the judgement of supreme Court in Vidya Drolia Vs. Durga Trading Corporation (2021) 2 SCC 1.

¶65

In view of above, the application succeed and is liable to be allowed.

¶66

It is accordingly allowed .

¶67

Let Hon'ble Mr. Justice Rajiv Joshi, R/o 202, Vinayak Enclave, Ashok Nagar, Allahabad, Mob. No.- 9415218815, be appointed as an Arbitrator to resolve the dispute between the parties subject to his consent in terms of Section 11(8) of the Arbitration and Conciliation Act, 1996.

¶68

Registry is directed to obtain consent of proposed arbitrator in terms of Section 11(8) of the Act within three weeks.

¶69

List thereafter.

¶70

Order Date :- 23.08.2023

¶71

¶72

Digitally signed by :- YASHWANT KUMAR High Court of Judicature at Allahabad

M/S. Sophisticated Industrial Materials v. M/S. U.P. State Industrial Development Authority and Another

Case brief

What is this about?

What did the court decide?

M/S. Sophisticated Industrial Materials v. M/S. U.P. State Industrial Development Authority and Another

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Mohan @ Makarand Vs State of U.P.

Vikas Sahani @ Vikesh Vs State of U.P.

Rajveer @ Raju Vs State of U.P.

Aman Singh Vs State of U.P.

Saurabh Yadav @ Kandu Yadav Vs State of U.P.

Pawan Vs State of U.P.