Allowed

M/S.Va Tech Wabag Limited, v. Kerala Water Authority

Kerala HC17 Dec 2019AR/74/2019

Case brief

AI extract

What is this about?

In an arbitration request under Section 11(6) of the Arbitration and Conciliation Act, 1966, the Kerala High Court held that the Court's jurisdiction is limited to determining the existence of an arbitration agreement. Relying on Duro Felguera, the Court allowed the reference despite the respondent's objection regarding prior adherence to the dispute resolution clause referring disputes to an Engi

What did the court decide?

The arbitration request was allowed and Justice A. V. Ramakrishna Pillai was appointed provisionally as the Arbitrator.

M/S.Va Tech Wabag Limited, Vs Kerala Water Authority — Arbitration | Kerala HC (2019)

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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.B.SURESH KUMAR

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TUESDAY, THE 17TH DAY OF DECEMBER 2019 / 26TH AGRAHAYANA, 1941

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AR.No.74 OF 2019

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PETITIONER:

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M/S.VA TECH WABAG LIMITED, REPRESENTED BY ITS DIRECTOR AND CGO, WABAG HOUSE, NO.17, 200 FEET THORAIPAKKAMPALLAVARAM, MAIN ROAD, SUNNAMBU KOLATHUR, CHENNAI (TAMIL NADU)-600117, INDIA.

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BY ADVS. SRI.GEORGE POONTHOTTAM (SR.) SRI.RIJI RAJENDRAN SMT.NISHA GEORGE

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RESPONDENT:

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KERALA WATER AUTHORITY, REPRESENTED BY ITS CHIEF ENGINEER, WATER SUPPLY PROJECT, WATER WORKS CAMPUS, JALA BHAVAN, VELLAYAMBALAM, THIRUVANANTHAPURAM (KERALA)- 695033, INDIA.

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R1 BY SRI.P.BENJAMIN PAUL, SC, KERALA WATER AUTHORITY

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THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 17.12.2019, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

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A.R. No. 74 of 2019

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P.B.SURESH KUMAR, J.

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------------------------------------A.R. No.74 of 2019

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Dated this the 17^th day of December, 2019

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O R D E R

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This is an arbitration request filed under Section 11(6) of the Arbitration and Conciliation Act, 1966. The applicant is a Company engaged in the business of water treatment plants. The applicant was awarded by the opposite party, a work relating to a water treatment plant. Annexure A2 is the agreement entered into between the applicant and the opposite party in connection with the award. It is alleged by the applicant that though they have executed the work awarded to them satisfactorily, large amounts payable to them are withheld by the opposite party without any justifiable reason. It is the case of the applicant that, in terms of the agreement, disputes of this nature are required to be resolved by recourse to arbitration. It is alleged by the applicant that they have though required the opposite party to take necessary steps to resolve the dispute raised by them by recourse to arbitration, the same is not being considered by

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the opposite party.

A counter affidavit has been filed by the opposite party contending, mainly, that the bills raised by the applicant have not been honoured in full as various defects were noticed in the work. It was also contended in the counter affidavit that the request for initiation of arbitration proceedings was belated and the same was not in accordance with the arbitration agreement. The fact that Annexure A2 agreement contains an arbitration clause is not, however, denied or disputed by the opposite party in the counter affidavit filed by them.

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Heard the learned senior counsel for the applicant as also the learned Standing Counsel for the Water Authority.

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The learned senior counsel for the applicant, placing reliance on the decision of the Apex Court in Duro Felguera S.S. v. Gangavaram Port Limited ((2017) 9 SCC 729) contended that the jurisdiction of this Court in a proceedings under Section 11(6) of the Act is only to see as to whether there exists an arbitration agreement. It was pointed out that if it is found that there is an arbitration agreement

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A.R. No. 74 of 2019

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executed between the parties, the court has to make a reference, and all other issues are to be considered by the Arbitrator. The contention of the learned senior counsel for the applicant was, therefore, that in so far as the opposite party has not disputed the existence of the arbitration agreement, there has to be a reference and the contentions raised in the counter affidavit are matters for the Arbitrator to decide.

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Per contra , the learned Standing Counsel for

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the opposite party submitted that going by the arbitration clause, the applicant has to raise the dispute in the first place in writing to the Engineer referred to in the agreement and it is only after a decision is taken and communicated by the Engineer, or if the Engineer is not taking decision within the particular time limit prescribed, that the applicant is entitled to approach this Court for reference of the dispute to the Arbitrator. According to the learned Standing Counsel, the arbitration request, therefore, is not maintainable.

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As rightly pointed out by the learned senior counsel for the applicant, the scope of the power under Section 11(6) of the Act is only to see as to whether an arbitration agreement exists between the parties, and nothing more,

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nothing less. Even otherwise, it is settled that arbitrability of a dispute is also a matter for the Arbitrator to decide.

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Clauses 20.2 to 20.5 of the Annexure A2

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agreement reads thus:

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Sub-clause 20.2

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Settlement of Disputes

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Engineer's decision If a dispute of any kind whatsoever arises between the Engineer and the Contractor in connection with, or arising out of, the Contract or the execution of the Works, whether during the execution of the Works or after their completion and whether before or after repudiation or other termination of the Contract, including any dispute as to any opinion, instruction, determination, certificate or valuation of the Engineer, the matter in dispute shall, in the first place, be referred in writing to the Engineer, with a copy to the Employer. Such reference shall state that it is made pursuant to this Clause. No later than the eighty-fourth day after the day on which he receives such reference the Engineer shall give notice of his decision to the Employer and the Contractor. Such decision shall state that it is made pursuant to this Clause.

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Unless the Contractor has already been repudiated or terminated, the Contractor shall, in every case, continue to proceed with the Works with all due diligence and the Contractor and Employer shall give effect forthwith to every such decision of the Engineer unless and until the same shall be revised, as hereinafter provided, in an amicable settlement or an arbitral award.

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If either the Employer or the Contractor be dissatisfied with any decision of the Engineer, or if the Engineer fails to give notice of his decision on or before the Eighty-fourth day after the day on which he received the reference, then either the Employer or the Contractor may, on or before the seventieth day after the day on which he received notice of such decision, or on or before the seventieth day after the day on which the said period of 84 days expired, as the case may be, give notice to the other party, with a copy for

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information to the Engineer, of his intention to commence arbitration, as hereinafter provided, as to the matter in dispute. Such notice shall establish the entitlement of the party giving the same to commence arbitration, as hereinafter provided, as to such dispute and, subject to Sub-Clause 20.5, no arbitration in respect thereof may be commenced unless such notice is given.

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If the Engineer has given notice of his decision as to a matter in dispute to the Employer and the Contractor and no notice of intention to commence Arbitration as to such dispute has been given by either the Employer or the Contractor on or before the seventieth day after the day on which the parties received notice as to such decision from the Engineer, the said decision shall become final and binding upon the Employer and the Contractor.

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Sub-Clause 20.3

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Amicable Settlement

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Where notice of intention to commence arbitration as to a dispute has been given in accordance with Sub-Clause 20.2, the parties shall attempt to settle such dispute amicable before the commencement of arbitration. Provided that, unless the parties otherwise agree, arbitration may be commenced on or after the fifty-sixth day after the day on which notice of intention to commence arbitration of such dispute was given, even if no attempt at amicable settlement thereof has been made.

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Sub-Clause 20.4 Any dispute in respect of which:

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Arbitration

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(a) the decision, if any, of the Engineer has not become final and binding pursuant to Subclause 20.2, and

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(b) amicable settlement has not been reached within the period stated in Sub-Clause 20.3,

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shall be finally settled under the Rules of the Indian Arbitration and Conciliation Act 1996 by one or more arbitrators appointed under such Rules. The said Arbitrator/s shall give full power to open up, review and revise any decision, opinion, instruction, determination, certificate or valuation of the Engineer related to the dispute.

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Neither party shall be limited in the proceedings before such arbitrator/s to the evidence or arguments put before the Engineer for the purpose of obtaining his said decision pursuant to SubClause 20.2. No such decision shall disqualify the Engineer from being called as a witness and giving evidence before the arbitrator/s on any matter whatsoever relevant to the dispute.

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Arbitration may be commenced prior to or after completion of the Works, provided that the obligations of the Employer, the Engineer and the Contractor shall not be altered by reason of the arbitration being conducted during the progress of the Works.

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Sub-Clause 20.5 Failure to comply with Engineer's Decision

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Where neither the Employer nor the Contractor has given notice of intention to commence arbitration of a dispute within the period stated in sub-Clause 20.2 and the related decision has become final binding, either party may, if the other party fails to comply with such decision, and without prejudice to any other rights it may have, refer the failure to arbitration in accordance with Sub-Clause 20.4. The provisions of Sub- Clauses 20.2 and 20.3 shall not apply to any such reference.”

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The fact that the applicant has not preferred a claim before the Engineer is not seen seriously disputed. In paragraph 10 of the arbitration request, the explanation offered for the same is that when the dispute arose between the applicant and the opposite party, the Engineer appointed for the work as referred to in the extracted clause of the agreement was not available, as his services were terminate d by the opposite party. As noted, the question whether the arbitration clause contained in the agreement can be invoked by the applicant for

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adjudication of the dispute raised is a question to be considered by the arbitrator. Insofar as the existence of an arbitration agreement is admitted and found, I am of the view that the dispute raised by the applicant is to be resolved by recourse to arbitration.

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In the result, the arbitration request is allowed and Justice A. V. Ramakrishna Pillai, Former Judge, [Ampazhavelil (House No. 49/697 A), Rajeev Nagar, Elamakkara, Kochi- 682 026] is appointed provisionally as the Arbitrator to resolve the dispute between the parties. The Registry is directed to obtain disclosure statement under Section 11(8) of the Arbitration and Conciliation Act, 1996 from the Arbitrator and place the matter before the court for confirmation of the appointment of the Arbitrator. The Registry shall retain the original of the disclosure statement and append a copy of the same to the order.

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Sd/P.B.SURESH KUMAR JUDGE

ds 10.12.2019

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APPENDIX

PETITIONER'S/S EXHIBITS:

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ANNEXURE A1 COPY OF THE LETTER OF ACCEPTANCE ISSUED ON 19.09.2006. ANNEXURE A2 COPY OF THE AGREEMENT DATED 13.10.2003.

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ANNEXURE A3 COPY OF THE TAKING OVER CERTIFICATE DATED 20.06.2012. ANNEXURE A4 COPY OF THE INAUGURATION INVITATION. ANNEXURE A5 COPY OF THE REPORT ON TECHNICAL SUPPORT FOR JICA ASSISTED WATER SUPPLY SCHEME-CHERTHALA TO KWA TRIVANDRUM. ANNEXURE A6 COPY OF THE FINAL BILL DATED 11.05.2013 ALONG WITH COVERING LETTER DATED 18TH NOVEMBER, 2014. ANNEXURE A7 COPY OF THE ORIGINAL AND EXTENDED BANK GUARANTEE.

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ANNEXURE A8 COPY OF THE LETTER DATED 20.04.2019 ISSUED BY THE APPLICANT TO THE MINISTER FOR WATER RESOURCES.

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ANNEXURE A8(A) COPY OF THE LETTER DATED 05.12.2017 ISSUED BY THE APPLICANT TO THE MANAGING DIRECTOR, KERALA WATER AUTHORITY. ANNEXURE A8(B) COPY OF THE LETTER DATED 05.12.2017 ISSUED BY THE APPLICANT TO THE MANAGING DIRECTOR, KERALA WATER AUTHORITY.

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ANNEXURE A8(C) COPY OF THE LETTER DATED 17.03.2017 ISSUED BY THE APPLICANT TO THE MANAGING DIRECTOR, KERALA WATER AUTHORITY.

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ANNEXURE A8(D) COPY OF THE LETTER DATED 24.10.2014 ISSUED BY THE KERALA WATER AUTHORITY. ANNEXURE A8(E) COPY OF THE LETTER DATED 03.07.2015 ISSUED BY THE APPLICANT TO THE MANAGING DIRECTOR, KERALA WATER AUTHORITY. ANNEXURE A8(F) COPY OF THE LETTER DATED 12.08.2014 ISSUED BY THE APPLICANT TO THE HON'BLE MINISTER FOR WATER RESOURCES. ANNEXURE A9 COPY OF THE INTERIM ORDER DATED 05.01.2017 ISSUED BY THIS HON'BLE COURT IN W.P.(C)NO.227/2017. ANNEXURE A9(A) COPY OF THE INTERIM ORDER DATED 04.08.2017 ISSUED BY THIS HON'BLE COURT IN W.P.(C)NO.227/2017. ANNEXURE A9(B) COPY OF THE INTERIM ORDER DATED 18.08.2017 ISSUED BY THIS HON'BLE COURT IN W.P.(C)NO.227/2017. ANNEXURE A10 COPY OF THE COUNTER AFFIDAVIT FILED BY THE RESPONDENT BEFORE THIS HON'BLE COURT IN W.P.(C)NO.227/2017. ANNEXURE A11 COPY OF THE INVOCATION LETTER DATED 19.11.2018 ALONG WITH THE PROOF OF DELIVERY. ANNEXURE A12 COPY OF THE ATTESTED COPY OF THE ARBITRATION CLAUSE IN THE AGREEMENT. ANNEXURE A13 COPY OF THE REPLY/COMMUNICATION DATED 24.12.2018 ISSUED BY THE KERALA WATER AUTHORITY TO THE APPLICANT.

M/S.Va Tech Wabag Limited, v. Kerala Water Authority

Case brief

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M/S.Va Tech Wabag Limited, v. Kerala Water Authority

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