Allowed

Cg State Power Generation Co. Ltd. v. M/S Jessop and Co. Ltd.

Chhattisgarh HC3 Feb 2012ARBA/1/2010

Case brief

AI extract

What is this about?

The court treated an arbitration clause in tender documents as part of the contract between a power company and a supplier. Despite the respondent proposing no arbitrator, the court held a dispute existed and, invoking Section 11(8), appointed a retired High Court Judge as sole arbitrator.

What did the court decide?

Appointment of Hon'ble Shri Justice V.K. Shrivastava, former Judge of High Court of Chhattisgarh at Bilaspur, as sole arbitrator.

Cg State Power Generation Co. Ltd. Vs M/S Jessop and Co. Ltd. — Arbitration | Chhattisgarh HC (2012)

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LN^HEHIGH^OURT^F CHHATTISGARH AT BILASPUR

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ARBITRATION APPLICATION N0 .^ OF 2010 'SSilS^ ||©

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APPLICANT Chhattisgarh State Power Generation Company Limited, through its Chief Engineer (S & P ^fe : Generation), 5th Floor, Vidyut V-'o^ ^^ Sewa Bhawan, Danganiya, ^^.^.'."..^yt' ^0-<< ..-••::'' ^" •i'L\r^»"'G-" Raipur (CG). ^:'<...."""

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Versus

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NON-APPLICANT M/s Jesscp & Company Limited, 8, Mangal Pandey Road, Dumdum, Kolkata (West

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Bengal).

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APPLICATIOH UNDER SECTIGN 11 ARBITRATSON AND CONCILIATION ACT, !L.i-

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^ >-

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HIGH COURT OF CHHATTISGARH AT BILASPUR

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Arbitration Application No.1 of 2010

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Applicant Chhattisgarh State Power General Company Limited.

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Versus

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Non-apDlicanta

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M/S Jessop & Company Limited

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Order

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Post for pronouncement of Order

3 -02.2012

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N.K. Agrawal Judge

^ -02.2012

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HIGH COURT OF CHHATTISGARH AT BILASPUR

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Arbitration ApDlicationNo. 1 of 2010

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APPLICANT

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Chhattisgarh State Power General Company Limited.

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Versus

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NON-APPLIANT

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M/S Jessop & Company Limited.

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APPLICATION UNDER SECTION 11 (6) OF THE ARBITRATION AND CONCILIATION ACT. 1996

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-k.

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(SB: Hon'ble Mr. N.K. Aaarwal. J.)

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Present : Mr. Adhiraj Surana, counsel for the applicant. Smt. Fouzia Mirza, counsel for the non-applicant.

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ORDER

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(PassedonS .02.2012)

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The petitioner has preferred application under Section 1 1 (6) of the Arbitration and Conciliatjon Act, 1996 (henceforth 'the Act') for appointment of Arbitrator.

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The Chhattisgarh State Power General Company Limited floated a tender No. 20-03/KEB/P&W/T-145/2003 for procurement of 30 numbers of B.G. Hopper Wagon with side discharge system for broad gauge railway track for Korba Thermal Power Station, Korba East. General terms and conditions of purchase (part of the tender document) contains arbitration clause, which reads as under:

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(30) Arbitration:

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"If, at any time question, dispute or difference, whatsoever, shall arise between the purchaser and the supplier upon, or in relation to or in connection with the contract, either party may forth with give to the othernotice in writing of the existence of such question, dispute or difference and the same shall be referred to the adjudication of two arbitrators, one to be nominated by the purchaser and the other to be nominated by the Contractor, or in the case of said arbitrators not agreeing, then to the adjudication ofthe

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Umpire to be appointment by the arbitrator, whose decision shall be final and binding on the parties and the provisions ofthe Indian Arbitration Act, 1940, and the rules thereunder and any statutory modification thereof shall be deemed to apply. The arbitrators or the Umpire, as the case may be are bound to give a detailed speaking award assigning reasons for the findings. Supplies under the contract shall be continued by the Contractor during the arbitration proceedings unless, otherwise, directed in writing by the Purchaser or unless the matter is such that the work cannot possibly be continued until the decision of the arbitrators the Umpire as the case may be issued."

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~t^<.

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Respondent placed its offer No.AB/SM/CGS&WMKTG/CSEB/WAGAON/0304, dated 11.03.2004, pursuant to tender notice floated by the petitioner. General conditions of purchase including arbitration clause is a part of offer made by the respondent.

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Vide letter of intent for manufacturing and supply of 30 numbers of new B.G.Hopper Wagons with side discharge system for Broad Gauge Railway track of CSEB, Korba East, dated 31 .01.2005 (Annexure AD/2), the petitioner accepted respondent's offer dated 11.03.2004 (Annexure AD/1)and thus a concluded contract came in existence between the parties.

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As per the letter of intent Part X, all the terms and conditions shall be as per tender specifications and subsequent offer of the firm.

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On 7.2.2005 (Annexure A/2), the work order was issued to the respondent by the petitioner. Clause-1 of important terms and conditions for supply annexed with the work order reads thus:

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Basis of the order

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It is explicitly implied and clearly understood that the basis of this order is our tender specification, your tender documents and written correspondence exchanged from either end and as listed above shatl be

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required to be referred to for any conclusive inferences. The intention is that any inference drawn from the structure of words and sentences in this order shall always mean to have a basis of past records for this contract and you shall not have any right to produce any inferences independent of past records associated with this contract. CSEB will always have a right to amend the order at any stage within the frame work of all documentation."

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On 10.02.2005 Corporate Guarantee Agreement was executed between the parties, which is supplemental to the contract No. 20-03/KEB/P&W/T-145/2003 entered into between the parties and a sum of Rs.1,55,77,980/- is paid by the petitioner to the respondent in advance as per Clause 10 (a) ofthework order.

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The dispute and differences arose between the parties with regard to supply of wagons, return of advance money with interest etc. vide notice dated 9.10.2009 (Annexure A/38), the petitioner requested respondent to nominate one Arbitrator of his choice within a period of 15 days from the date of receipt of notice, in terms of arbitration clause contained in the contract. Respondent neither proposed name of arbitrator nor sent any reply. Hence, this petition under section 11 (6) of the Arbitration and Conciliation Act for appointment of Arbitrator.

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Shri Adhiraj Surana, learned counsel for the petitioner, by referring clause 30 of General Terms and Conditions of purchase, respondent's offer dated 11.3.2004, petitioner's acceptance of respondent's offer vide letter of intent dated 31.1.2005 and a portion of its clause 1 of important terms and conditions for supply annexed with the work order dated 7.2.2005 (Annexure A/2), would contend: arbitration clause 30 is integral part of the contract entered into between the parties within the meaning of Section 7 of the Act and

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matter is required to be referred to the Arbitrator which may be appointed by this Court.

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The prayer is opposed by the respondent, inter alia, on the grounds, the Corporate Guarantee Agreement dated 10.02.2005 (Annexure A/3) does not specifically have any arbitration clause for deciding the dispute which arose between the parties. The arbitration clause 30, which has been set out in the General Terms and Conditions of purchase, annexed as Annexure A/1 with the application, is not operative on the dispute raised as there is no written acceptance of this term and condition of the purchase by both the parties, hence the basic requirements that there should be a written acceptance of an arbitration agreement and that the agreement applies to the differences arising between the parties are not applicable. It was further contended, the arbitration agreement contained in General Terms and Conditions of purchase has been expressly and by necessary implication excluded by incorporating clause 20 of Important Terms and Conditions for supply annexed with the work order dated 7.2.2005 and clause 7 of Corporate Guarantee Agreement. Reliance has been placed upon the judgment of Supreme Court in the case of K. Sas'idharan \i. Kerala State Film Development Corporation, (1994) 4 SCC 135.

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I have heard learned counsel for the parties, perused the documents annexed with the petition.

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As per Section 7 (1) of the Act,

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"arbitration agreement" means 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.

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Sub-section (2) envisages, an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

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Sub-section (3) makes out necessary that an arbitration agreement shall be in writing.

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As per sub-section (4), an arbitration agreementis in writing if it is contained in-

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^ (a) a document signed by the parties;

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^ b) an exchange of letters, telex, telegraphs or other means of telecommunication which provide a record of the agreement; or

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^ 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.

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The wording of Section 7 (5) of the Act makes it clear that a mere reference to a document would not have the effect of making an arbitration clause from that document, a part of the contract. Reference to the document should be such that shows the intention to incorporate arbitration clause contained in the document, into the contract.

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Reverting to the facts of the case, General Terms and Conditions of the purchase (part of the tender document) and respondent's offer dated 11.3.2004, which was signed by the respondent, contains arbitration clause. Acceptance of respondent's offer by the petitioner specifically provides that "all the terms and conditions shall be as per tender specifications and subsequent offer of the firm". Arbitration agreement, thus, is an integral part of the contract entered into between the parties. The Corporate Guarantee Agreement is a supplemental agreement to the contract already entered into between the parties.

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The wording "if, at any time question, dispute or difference, whatsoever, shall arise between the purchaser and the supplier upon, or in relation to or in connection with the contracf in the

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arbitration clause makes arbitration clause exhaustive which includes in its ambit all kinds of disputes or differences between the parties. 16. In view of above, it is not correct to say that clause 30 of General Terms and Conditions of purchase is not operative on the dispute raised as there is no written acceptance of these terms and conditions of purchase by both the parties, inasmuch as, the arbitration agreement is integral part of the contract entered into between the parties.

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The second question raised by Mrs. Fouzia Mirza that incorporation of jurisdiction clause in the work order and Corporate Guarantee Agreement, the arbitration agreemenVclause stands excluded by necessary implication is also devoid merit, As per the arbitration clause, provisions of the Indian Arbitration Act, 1940 and the Rules thereunder and any statutory modification there of shall be deemed to apply. Under Section 20 of the Indian Arbitration Act, 1940, an application for appointment of arbitrator can only be made before a Court having territorial jurisdiction over the subject matter. Where there are two competent courts which can deal with the subject matter of the litigation, it is open to the parties to the contract to agree that any dispute in respect any subject or class should be adjudicated upon by one of the two competent courts and such agreement is perfectly legal and not contrary to Section 28 of the Contract Act.

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As per Section 85 of the Act of 1996, the Arbitration Act, 1940 has been repealed. Even prior to the judgment of Supreme Court in the case of SBP & Co. v. Patel Engineering Ltd. and another, (2005) 8 SCC 618, the petitions under Section 11 (6) of the Act of 1996 are being filed before the District Judge having territorial jurisdiction over the subject matter. It is in this backdrop, vide clause 20 of Important Terms and Conditions for supply annexed with the work order dated 7.2.2005 and clause 7 of Corporate Guarantee

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Agreement, the parties have agreed to confer jurisdiction to the Court at Raipur. It does not mean that by incorporating the same in the agreement, the arbitration clause contained in the main contract stands excluded by necessary implication. The ratio of law laid down in the case of K. Sasidharan (supra), therefore, is of no help to the respondent.

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Therefore, in my considered opinion, the contract entered into between the parties contains arbitration agreement. Considering that the respondent has failed to act on the request of the petitioner for appointment of arbitrator and also considering that the dispute had arisen out of contract agreement, this Court is of the opinion that a case for appointment of arbitrator is made out.

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Considering the fact that there is no provision in the arbitration agreement for appointment of arbitrator if a party to the agreement does not propose arbitrator of his choice in the light of Section 11 (6) read with Section 11 (8) of the Act, l deem it fit to appoint a retired former Judge of High Court as sole arbitrator to adjudicate upon the dispute between the parties.

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Therefore, l hereby appoint Hon'ble Shri Justice V.K.Shrivastava, former Judge of High Court of Chhattisgarh at Bilaspur, as sole arbitrator, subject to his consent.

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The Hon'ble Arbitrator may settle his terms and conditions and remuneration.

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Registry to intimate Hon'ble Shri Justice V.K-Shrivastava, former Judge of High Court of C.G. Bilaspur, about his appointment as Arbitrator and to send all the papers along with address of the parties.

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