Dismissed

M/S.Cherian Varkey Construction Co.(P)Ltd. v. Cochin Shipyard Limited

Kerala HC27 Sept 2012AR/38/2012

Case brief

AI extract

What is this about?

Petitioner sought appointment of a Sole Arbitrator to determine a retained sum pending finalization of contract issues. Court held the agreement lacked a specific enabling arbitration clause. Request dismissed; parties directed to pursue mutual settlement or approach competent Court.

What did the court decide?

Arbitration Request dismissed; interference declined.

M/S.Cherian Varkey Construction Co.(P)Ltd. Vs Cochin Shipyard… — Arbitration | Kerala HC (2012)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON

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THURSDAY, THE 27TH DAY OF SEPTEMBER 2012/5TH ASWINA 1934

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AR.No. 38 of 2012 () --------------------

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PETITIONER(S):

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M/S.CHERIAN VARKEY CONSTRUCTION CO.(P)LTD. 5TH FLOOR, ALPHA PLAZA, K.P.VALLON ROAD KADAVANTHARA, KOCHI-682 020 REPRESENTED BY ITS DIRECTOR, SRI.GEORGE VARKEY.

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BY ADVS.SRI.SANTHOSH MATHEW SRI.SATHISH NINAN SRI.ARUN THOMAS SRI.JENNIS STEPHEN SRI.I.B.SUSEEL

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RESPONDENT(S):

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THE COCHIN SHIPYARD LIMITED, KOCHI-682 015. REPRESENTED BY ITS CHAIRMAN & MANAGING DIRECTOR.

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BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.GOPINATH SRI.P.BENNY THOMAS SRI.K.JOHN MATHAI

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THIS ARBITRATION REQUEST HAVING COME UP FOR ADMISSION ON 27-09-2012, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

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AR.No. 38 of 2012 ()

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APPENDIX

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PETITIONER'S EXHIBITS:

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ANNEXURE A1: COPY OF THE AGREEMENT FOR CONSTRUCTION ENTERED INTO BETWEEN THE APPLICANT AND THE RESPONDENT.
ANNEXURE A2: COPY OF THE JUDGMENT DATED 28.03.2012 IN WP(C) NO.6019/2011.
ANNEXURE A3: COPY OF THE OBJECTION DATED 11.05.2012 SUBMITTED BY THE APPLICANT COMPANY TO THE RESPONDENT.
ANNEXURE A4: COPY OF THE ORDER DATED 20.07.2012 ISSUED BY THE RESPONDENT.
ANNEXURE A5: COPY OF THE LETTER NO.CVCC/12/1039 DATED 6TH AUGUST, 2012 SUBMITTED BY THE PETITIONER.
ANNEXURE A6: COPY OF THE REPLY DATED 22.08.2012 ISSUED BY THE RESPONDENT TO THE PETITIONER.

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RESPONDENT'S EXHIBITSNIL

//TRUE COPY//

P.A TO JUDGE

P.R. RAMACHANDRA MENON, J.

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A.R. No. 38 of 2012

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Dated this the 27^th day of September, 2012

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JUDGMENT

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The applicant who was awarded a contract by the

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respondent, has approached this Court seeking for release of the amount retained by the respondent in respect of delay in completion of the works without causing the same to be adjudicated by the Arbitrator to be appointed in terms of Annexure A1 agreement. The applicant seeks for appointing a Sole Arbitrator to adjudicate the disputes between the parties, based on Annexure A1 agreement as set out in paragraph '6' of the arbitration request.

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The factual position as narrated in the arbitration request reveals that a total sum of Rs.96,39,503/-(Rupees ninety six lakhs thirty nine thousand five hundred and three) has been retained at the hands of the respondent, as the penalty/compensation for the delay. According to the applicant, there is absolutely no rhyme or reason for retaining the said amount and even otherwise, by virtue of the specific terms as

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A.R. No. 38 of 2012 -2-

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contained in Clause 44 and 45 of Annexure A1 agreement, the amount so withheld can be retained by the Awarder of the contract only till the claim arising out of or under the contract is determined by the Arbitrator or competent Court or settled otherwise by mutual agreement. The request made by the applicant Company for appointment of an Arbitrator, so as to finalize the issue, turned to be rejected by the respondent vide Annexure A6 dated 22.8.2012, which in turn is under challenge.

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Heard the learned counsel for the petitioner as well as the learned Standing Counsel for the respondent at length.

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The clauses 44 and 45 of Annexure A1 agreement relied on by the applicant read as follows:

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“CLAUSE 44: (1) Whenever

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any claim or claims for payment of a sum money arises out of or under the contract against the contractor, Cochin Shipyard Limited shall be entitled to withhold and also have a lien to retain such sum or sums firstly from the security deposited with the Cochin Shipyard Limited, secondly if insufficient or if no security taken, to withhold and have a lien to retain to the extent of the claimed amount from any sum found payable or becoming payable to the

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A.R. No. 38 of 2012

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-3-

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contractor whether under the same contract any other contract with Cochin Shipyard Limited. Should this sum be not sufficient to cover the full amount recoverable, the contractor shall deposit with Cochin Shipyard Limited, on demand the balance remaining due.

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It is an agreed term of the contract that the sum of money or moneys so withheld or retained under the lien referred of above, by Cochin Shipyard Limited will be kept withhold or retained as such by Cochin Shipyard Limited till the claim arising out or under the contract is determined by the arbitrator or by the competent Court or otherwise settled by mutual agreement and that the contractor will have no claim for interest and damage whatsoever on any account in respect of such withholding under the lien referred to supra and duly notified in respect of such to the contractor. For the purpose of this clause, where the contractor is partnership firm or a limited company Cochin Shipyard Ltd., shall be entitled to withhold and also have a lien to retain towards such claimed amounts in whole or in part from any sum found payable to any partner/limited company as the

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A.R. No. 38 of 2012

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case may be, whether in his individual capacity or otherwise.

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(2) Cochin Shipyard Limited shall have the right to cause an audit and technical examination to the works and the final bills of the contractor including all supporting vouchers, abstract etc. to be made after payment of the final bill and if as a result of such audit and technical examination any sum found to have been overpaid in respect of any work done by the contractor under the contract or any work done by the contractor claimed by him to have been done by him under the contract and found not have been executed, the contractor shall be liable to refund the around of overpayment and it shall be law full for Cochin Shipyard Limited to recover the same from him in the manner prescribed in the sub-clause (1) of this clause or in any other manner legally permissible and if it is found that the contractor was paid less than what was due to him under the contract in respect of any work executed by him under it, the amount of such underpayment shall be duly paid by Cochin Shipyard Limited to the contractor.

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Provided that Cochin Shipyard Limited shall not be entitled to

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A.R. No. 38 of 2012

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recover any sum overpaid, nor the contractor shall be entitled to payment of any sum paid short where such payment has been agreed upon between the Engineerin-charge on the one hand and the contractor on the other under any term of contract permitting payment for work after assessment by the Engineer-in-charge.

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CLAUSE 45: Any sum of money due and payable to the contractor (including Security Deposit returnable to him) under this contract may be withheld or retained by way of lien by Cochin Shipyard Limited and set off against any claim of the Cochin Shipyard Ltd., for the payment of a sum of money arising out of under any other contractor made by the contractor with the Cochin Shipyard Ltd.

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It is an agreed term of the contract that the sum of money or money so withheld or retained under the lien referred to above, by Cochin Shipyard Limited will be kept withheld or retained as by Cochin Shipyard till the claim arising out of or under the contract is determined by the arbitrator or by the competent Court or otherwise settled by mutual agreement and that the contractor

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A.R. No. 38 of 2012 -6-

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will have no claim for interest and damages whatsoever on this account or on any other ground in respect of any sum of money withheld or retained under this clause and duly notified as such to the Contractor.”

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With reference to the contents of the said clause, the learned counsel for the petitioner submits that the respondent is bound by the same, and that the matter requires to be adjudicated by an Arbitrator. As such, the Arbitration Request made by the applicant vide Annexure A5 had to be dealt with positively by the respondent, instead of which, the same is rejected as per Annexure A6.

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The learned counsel however concedes that, but for the above clauses, there is no other clause which refers to the instance of 'Arbitration'. The stand taken by the respondent as revealed from Annexure A6 is that, there is no clause to have an Arbitration and as such, the request of the applicant to refer the matter for Arbitration and appointment of a Sole Arbitrator is not liable to be entertained.

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The contents of above clauses sought to be pressed into service by the applicant only stipulate that the amount detained by the awarder of the contract has necessarily to be released,

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subject to the finalization of the issue as per the Award passed by the Arbitrator or pursuant to the verdict passed by a competent Court or if otherwise settled by mutual agreement. There is no dispute that, there is no Court verdict or mutual agreement to release the amount. The petitioner has of course expressed desire to have the same adjudicated by an Arbitrator; for which

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the arbitration request has been made. Question is, whether the respondent is bound to nominate a Sole Arbitrator, to have such a course.

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It is settled law, that an Arbitrator can be appointed only if the agreement enables to have such a course by way Arbitration. But for the clauses 44 and 45, it is conceded that there is no other clause in the agreement, which refers to the course of Arbitration. In view of the nature of the different courses provided under the general terms of the contract, the course by way of Arbitration can be pressed into service, only if such a course is mutually agreed and has been clearly provided in the agreement; which is conspicuously absent in the instant case. This Court finds that the applicant cannot seek for a direction to be given to the respondent to appoint a Sole Arbitrator in the absence of any specific enabling clause in the agreement. It is

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always open for the petitioner to pursue the other two courses as provided in the General Conditions; i.e., either by approaching competent Court of law or by causing the matter to be settled otherwise, if the same is agreeable to the respondent.

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In the said circumstance, this Court finds that, the idea and understanding of the applicant to have the issue referred for

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Arbitration is quite wrong and misconceived. Leaving open the rights and liberties of the applicant to approach the competent Court of law or pursue steps for settlement in terms of clauses 44 and 45, interference is declined and the Arbitration Request is dismissed.

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P.R. RAMACHANDRA MENON, JUDGE.

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Kp/-

M/S.Cherian Varkey Construction Co.(P)Ltd. v. Cochin Shipyard Limited

Case brief

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M/S.Cherian Varkey Construction Co.(P)Ltd. v. Cochin Shipyard Limited

Case brief

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