M/S Salcon Engineers and Fabricators Vs the Chief Engineer

For the petitioner : Mr. Terence Dcruz, .... Advocate For the Respondents : Mr. Shatadru Chakraborty, Mr. Ramendu Agarwal. .... Advocate Heard on : 28.09.2022 & 21.04.2023 21^st August, 2024. Judgment on :

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Arindam Mukherjee, J.:

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I. Nature of application:-

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This is an application by the contractor seeking Court’s intervention to terminate the mandate of the Arbitrator under the provisions of Section 14 (1) of the Arbitration and Conciliation Act, 1996 (hereinafter referred

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to as the 1996 Act) in an arbitration proceedings where an officer of the CPWD, the Principal is the appointing authority and has appointed an Arbitrator exercising such authority on the ground of ineligibility of the

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A.P No.7 of 2022

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arbitrator to enter into reference and adjudicate in view of the provisions of section 12 (5) read with the seventh schedule of the said Act incorporated by the 2015 Amendment Act and to appoint a substitute arbitrator in its stead.

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II. Facts of the Case: -

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The petitioner, M/S. Salcon Engineers and Fabricators Pvt. Ltd., is a government contractor enlisted as Class I (Civil) contractor with the Andaman Public Works Department (in short APWD). The petitioner entered into an agreement with the respondent for the work of “Construction of New Medical College at Port Blair; Sub Work: Development of site for Administrative Block, Science Block, Type –IV, Type V, Type VI and Professor Hostel at the new Medical Campus” to be completed within six months for the amount of Rs.7,99,91,956/(hereinafter referred to as the said agreement). Incorporated in the said agreement is Clause 25 of General Conditions of Contract, 2014 which is an arbitration agreement for adjudication of any dispute through arbitration. The said arbitration clause is set out hereunder for

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convenience:-

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“Except where otherwise provided in the contract, all questions and disputes relating to 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 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 cancellation, termination, completion or abandonment thereof shall be dealt with as mentioned hereinafter:

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(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

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written instructions or decision within a period of one month from the receipt of the contractor’s letter.

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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 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 this decision, the contractor shall within a period of 30 days from receipt of the decision, 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.

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(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, the Director General of Works, 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.

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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 along with the notice for appointment of arbitrator and giving reference to the rejection by the Chief Engineer of the appeal.

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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 Director General of works, 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.

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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 the 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.

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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.

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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.

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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.

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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, of 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

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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”.

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1. The date of commencement of instant work as per the said agreement was 27^th July, 2017 and the date of completion was scheduled on 26^th November, 2018 but due to various reasons the work was ultimately completed on 2^nd January, 2019. The extension of time was accorded upto 2^nd January, 2019 without levy of compensation. In course of executing the work 8 (eight) Running Account Bills (RA Bills) and the 9^th RA being the final bill was raised by the petitioner (contractor). It is the case of the petitioner that huge payments are in arrears.

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1. Being aggrieved by such non-payment of bills despite completion of the work, the petitioner invoked the arbitration agreement and submitted a notice for appointment of arbitrator to the Chief Engineer, being the respondent no.1 herein vide a notice dated 23^rd June, 2020. This letter according to the petitioner is a notice in terms of Section 21 of the 1996 Act.

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1. The respondent no.1 without suggesting any name unilaterally appointed Shri H.S. Dogra, retired D.G (works), C.P.W.D the sole arbitrator by an Office Order No.7 dated 3^rd September, 2021 by invoking the arbitration agreement contained in Clause 25 of General Condition of Contract (GCC), 2010 as set out hereinabove being part of the main agreement.

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1. The sole arbitrator so appointed immediately thereafter entered into reference after making a cryptic disclosure which is not in the form as required under the amended provisions of the 1996 Act.

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1. The learned Arbitrator held two sittings respectively on 8^th November, 2021 and 8^th January, 2022 and the third sitting scheduled on 17^th February, 2022 stood cancelled at the instance of the learned Arbitrator.

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1. The petitioner, therefor, by a letter dated 24^th May, 2022 challenged the eligibility of the personnel appointed as the arbitrator to act as an arbitrator as also the jurisdiction and authority of the appointing authority under the arbitration agreement by invoking the provisions of Section 12 (5) read with seventh schedule of the 1996 Act as amended by the Arbitration amendment Act, 2015 (hereinafter referred to as 2015 Amendment Act)

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1. The challenge to the jurisdiction and authority of the learned Arbitrator being the same personnel having been appointed in another arbitration proceedings between M/s. Ravi Realcons Pvt. Ltd and the respondents herein on identical footing. M/s. Ravi Realcons Pvt. Ltd. had filed an application for termination of mandate of the learned Arbitrator and for appointment of a substitute arbitrator being AP 6 of 2022 on more or less identical grounds. The said application being AP 6 of 2022 was taken up for consideration immediately before this application.

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1. In view of the judgment delivered in AP 6 of 2022 (M/s. Ravi Realcons Pvt. Ltd. vs. The Chief Engineer & Anr) on 21^st August, 2024 this application is also allowed.

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1. The mandate of learned Arbitrator H.S. Dogra stands terminated. In exercise of power under Section 11(6) of the said Act as delegated to

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this bench read with powers under Section 15 thereof a substitute arbitrator is hereby appointed.

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1. In the facts and circumstances as aforesaid Mr. Sahidullah Munshi, a former Judge of this Court is appointed as a Sole Arbitrator. The Learned Arbitrator shall be free to fix his fees in the light of paragraph 128 of the judgment reported in 2024 (4) SCC 481 [ONGC Ltd. vs. Afcons Gunanusa JV] . The arbitration proceedings shall be held in accordance with the provisions of Arbitration and Conciliation Act, 1996.

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The application is accordingly disposed of as a consequence whereof all connected applications also stand disposed of.

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Urgent photostat certified copy of this judgment and order, if applied for, be supplied to the parties on priority basis after compliance with all necessary formalities.

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(ARINDAM MUKHERJEE, J.)

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M/S Salcon Engineers and Fabricators v. the Chief Engineer

Case brief

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M/S Salcon Engineers and Fabricators v. the Chief Engineer

Case brief

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