Disposed

M/S Sai Sun Outsourcing Services Pvt. Ltd. v. Chief Engineer

Madhya Pradesh HC5 Oct 2020WP/9269/2020

Case brief

AI extract

What is this about?

The Division Bench disposed of six writ petitions filed by M/S Sai Sun Outsourcing Services Pvt. Ltd. regarding the termination of a contract. The Court held that since the contract contained a valid arbitration clause providing an alternative remedy, the Court refused to exercise writ jurisdiction and directed the petitioner to approach the arbitration tribunal under the Madhya Pradesh Madhyastha

What did the court decide?

Writ petitions dismissed; petitioner directed to avail remedy under arbitration clause (Clause 40 of LOA).

M/S Sai Sun Outsourcing Services Pvt. Ltd. Vs Chief… — Arbitration | Madhya Pradesh HC (2020)

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THE HIGH COURT OF MADHYA PRADESH

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(Division Bench)

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Writ Petition No.9241/2020	Writ Petition No.9267/2020
M/S Sai Sun Outsourcing Services Pvt. Ltd. vs	M/S Sai Sun Outsourcing Services Pvt. Ltd. vs
Chief Engineer and others	Chief Engineer and others
Writ Petition No.9269/2020	Writ Petition No.9272/2020
M/S Sai Sun Outsourcing	M/S Sai Sun Outsourcing
Services Pvt. Ltd. vs	Services Pvt. Ltd. vs
Chief Engineer and others	Chief Engineer and others
Writ Petition No.9277/2020	Writ Petition No.9279/2020
M/S Sai Sun Outsourcing	M/S Sai Sun Outsourcing
Services Pvt. Ltd. vs	Services Pvt. Ltd. vs
Chief Engineer and others	Chief Engineer and others

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Appearance:

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Shri Atul Kumar Jain, learned counsel for the petitioners. Shri Purushaindra Kaurav, learned Senior Counsel with Shri Ankit Agrawal, learned counsel for the respondents No.1 and 2. Shri Siddharth Seth, learned counsel for respondent No.3.

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CORAM :

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Hon’ble Mr. Justice Sanjay Yadav, Acting Chief Justice Hon’ble Mr. Justice Rajeev Kumar Dubey, Judge

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O R D E R

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(Jabalpur, Dated : 05.10.2020)

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Per Sanjay Yadav, ACJ :-

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This common order shall govern final disposal of Writ Petitions No.9241/2020, 9267/2020, 9269/2020, 9272/2020, 9277/2020 and 9279/2020.

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2 . Petitioner takes exception to order dated 21.11.2019; whereby, the contract for providing unskilled, semi-skilled and skilled manpower to carry out 33/11 KV sub-station operation, line maintenance work and data entry work etc. under Shahdol circle Jabalpur city circle, Tikamgarh circle, Satna circle, Anuppur circle and Umaria circle, has been terminated in accordance to Clause 19.2 of LOA dated 31.03.2018 for violating the terms of Clauses 13.8, 13.10, 18.1(iii), 18.1(iv) and 21.2 of LOA.

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3 . Evidently, Clause 40 of the General Conditions of Contract mandates “Settlement of Disputes and Arbitration”. It stipulates :

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“40. Settlement of Disputes and Arbitration

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40.1 If any dispute or difference of any kind whatsoever arises between the Purchaser and the Agency in connection with or arising out of the Contract, the parties will make every effort to resolve amicably such dispute or difference by mutual consultation. For this purpose, a committee may be constituted comprising representatives from both the parties. The committee shall be formed and convened

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by ED/CE Regional Office. After sixty (60) days from the date the dispute is first brought to the notice of either party, if the parties have failed to resolve their dispute or difference by such mutual consultation, then the dispute shall be referred in writing by either party to initiate the Arbitration process.

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40.1.1 The arbitration proceedings shall be conducted in accordance with the following acts as amended :

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Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 as amended.

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The cost of the arbitration shall be equally shared by the Purchaser and the Service Provider. The arbitration shall be conducted at the Headquarters of Arbitrator (Adhikaran) or Headquarters of Purchaser as may be applicable.

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40.2 Notwithstanding any disputes with reference to the Contract pending for arbitration, the Agency shall continue to perform his obligations in accordance with the Purchaser's decision or instruction, and Purchaser shall also continue to perform his obligations under the Contract including payment of any undisputed monies due to the Agency.”

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4 . A Full Bench of our High Court in Shri Gouri Ganesh Shri Balaji Constructions “C” Class Contractor vs Executive

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Engineer, PWD, (2018) 3 MP LJ 163 , while answering the

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following issues; viz,

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(1) Whether the dispute relating to termination of a contract without claiming any consequential relief is maintainable before the Arbitral Tribunal under the M.P. Madhyastham Adhikaran Adhiniyam, 1983?

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(2) Whether, under the guise of challenge to an action of termination of contract, the remedy under the M.P. Act can be said to be not available, when the real challenge is to the Revenue Recovery Certificate issued by the State for recovery of the loss/damages?

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(3) Any other question that may arise for adjudication or decision in the dispute involved in the present petition and which the Larger Bench thinks appropriate to decide?

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held :

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“29. The arbitration is a procedure to determine legal rights and obligations of the parties judicially with binding effect, which is enforceable in law. The arbitrators are appointed by the parties to do justice in the sense of arriving at a “fair decision” and not in the sense of “judicial justice”. The arbitrator is not bound by a strict Law of Evidence as contained in the Indian Evidence Act, 1872. Section 1 of the Evidence Act contemplates that such Act is not applicable to proceedings before an arbitrator. In fact, a resolution of

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dispute by an Arbitrator is one of the four alternative dispute resolution mechanism contemplated by section 89 of the Code of Civil Procedure, 1908. Such adjudication process is outside the adjudicatory functions of the Court. As per the Halsbury's Law of England, 4th Edition (1973), Vol. 2 p. 255, para 502, the “arbitration” is a substitution, by consent of parties, of another tribunal for the tribunals provided by the ordinary processes of law; a domestic tribunal - as contra-distinguished from a regularly organized Court proceeding according to the course of law. The relevant extract, reads as under:—

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“An arbitration is a reference to the decision of one or more persons of a particular matter in difference between the parties” (Collins v. Collins, 28 LJ Ch 186, per ROMILY M.R. The process of arbitration means the determination of a matter in dispute by the judgment of one or more persons called arbitrators). It is the submitting of a disputed matter to the judgment of one or more persons called arbitrators. “In its broadest sense, arbitration is a substitution, by consent of parties, of another tribunal for the tribunals provided by the ordinary processes of law; a domestic tribunal - as contradistinguished from a regularly organised Court proceeding according to the course of law - depending upon the voluntary act of the parties disputant in the selection of judges of their own choice. Its object is the final disposition, in a speedy and inexpensive way, of the matters involved, so that they may not become the subject of future litigation between the parties”.

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The Supreme Court in its judgment reported as (1987) 4 SCC 497, Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar examined the purport and scope of arbitration. The Court held as under:—

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“5. It is familiar learning but requires emphasis that section 1 of the Evidence Act, 1872 in its rigour is not intended to apply to proceedings before an arbitrator. P.B. Mukhaiji, J. as the learned Chief Justice then was, expressed the above view in Haji Ebrahim Kassam Cochinwall v. Nothem Indian Oil Industries Ltd., AIR 1951 Calcutta 230 and we are of the opinion that this represents the correct statement of law on this aspect. Lord Goddard, C.J. in Mediterranean and Eastern Export Co. Ltd. v. Fortress Fabrics Ltd., [1948] 2 All E.R. 186 observed at pages 188/189 of the report as follows:

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“A man in the trade who is selected for his experience would be likely to know and indeed to be expected to know the fluctuations of the market and would have plenty of means of informing himself or refreshing his memory on any point on which he might find it necessary so to do. In this case according to the affidavit of sellers they did take the point before the Arbitrator that the Southern African market has slumped. Whether the buyers contested that statement does not appear but an experienced Arbitrator would know or have the means of knowing whether that was so or not and to what extent and I see no reason why in principle he should be required to have evidence on this point any more than on any other question relating to a particular trade. It must be taken I think that in fixing the amount that he has, he has acted on his own knowledge and experience. The day has long gone by when the Courts looked with jealousy on the jurisdiction of the Arbitrators. The modem tendency is in my opinion more especially in commercial arbitrations, to endeavour to uphold Awards of the skilled persons that the parties themselves have selected to decide the questions at issue between them. If an Arbitrator has acted within the terms of his submission and has not violated any rules of what is so often called natural justice the Courts should be slow indeed to set aside his award.

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This in our opinion is an appropriate attitude.”

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The Supreme Court in a judgment reported as

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(2006) 13 SCC 322, Paramjeet Singh Patheja v. ICDS

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Ltd. examined the difference between the Courts and arbitral tribunals and held that the litigation is a legal action in a Court of law whereas arbitration is the resolution of a dispute between the two contracting parties by the persons chosen by them to be arbitrators. The Supreme Court held as under:—

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“35. That litigation is therefore very different from arbitration is clear. The former is a legal action in a Court of law where judges are appointed by the State; the latter is the resolution of a dispute between two contracting parties by persons chosen by them to be arbitrators. These persons need not even necessarily be qualified trained judges or lawyers. This distinction is very old and was picturesquely expressed by Edmund Davies, J. in these words:

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“Many years ago, a top-hatted gentleman used to parade outside these law Courts carrying a placard which bore a stirring injunction ‘Arbitrate don’t Litigate”

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Moreover, the position that arbitrators are not Courts is quite obvious and this Court noted the position as under in two decisions:

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“16. But the fact that the arbitrator under section 10A is not exactly in the same position as a private arbitrator does not mean he is a tribunal under Article 136. Even if some of the trappings of the Court are present in his case, he lacks the basic, the essential and the fundamental requisite in that behalf because he is not invested with the State's inherent judicial power He is not a Tribunal because the State has not invested him with its inherent judicial power and the power of adjudication which he exercises is derived by him from the agreement of the parties.” (Engineering Mazdoor Sabha v. Hind Cycles Ltd., AIR 1963 SC 874.)” (emphasis supplied)

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“4. There was no dispute that the arbitrator appointed under section 19(1)(b) [of the Defence of India Act, 1939] was not

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a Court. (Collector v. Gauri Shankar Misra, AIR 1968 SC 384)”

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Thus the thrust of submissions made by both the learned senior counsel can be summarized as under:

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Courts are institutions invested with the judicial power of the State to finally adjudicate upon disputes between litigants and to make formal and binding orders and decrees. Civil Courts pass decrees and orders for payment of money and the terms ‘decree and order’ are defined in the CPC. Arbitrators are persons chosen by parties to adjudge their disputes. They are not Courts and they do not pass orders or decrees for the payment of money; they make awards.”

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A Constitution Bench in a judgment reported as (1992) 1 SCC 508, Secretary, Irrigation Department, Government of Orissa v. G.C. Roy, while examining the right of an Arbitrator to award pendente lite, held that arbitration is substitution of the forum of Civil Court. The relevant conclusion reads as under:—

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“43 (i) *** *** ***

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(ii) An arbitrator is an alternative form (sic forum) for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the Court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.

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(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to section 41 and section 3 of Arbitration Act illustrate this point). All the

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same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement.

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In view of the above, we find that the arbitration is resolution of disputes between two contracting parties by the persons chosen by them to be arbitrators and in the case of arbitration under the State Act, by statutory constituted Tribunal. An Arbitrator is to do justice in the sense of arriving at a fair decision and is not bound by strict law of evidence as contained in Indian Evidence Act. However, the Arbitrator while arriving at a fair decision has to keep in mind the law applicable to the contract and to the facts of the matter before it.”

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5 . Furthermore, in M/s Prestressed Concrete Industries through its partners Naresh Agarwal & Ors vs M.P.M.K.V.V.C.L & Ors : Writ Petition No.3189/2019 decided on 26.06.2019 by Gwalior Bench of this Court, it is held :

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“It is borne out from the agreement that Clause 32 contains the Arbitration Clause which provides:

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“32. ARBITRATION:

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If, at any time, any 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 forthwith give to the other, notice in writing of the existence of such question, dispute or difference, and the same shall be referred to the adjudication

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of two Arbitrators, one to be nominated by the purchaser and the other to be nominated by the supplier. In the case of said Arbitrators not agreeing, the matter shall be referred to the adjudication of an Umpire, to be appointed by the Arbitrators, whose, decision shall be final and binding on the parties.

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The arbitration shall be conducted as per provision of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam 1983, as amended from time to time, and of the rules made there under. The Arbitrators or the Umpire as the case may be, are bound to give a detailed speaking award assigning reasons for the findings.

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Supplies under the contract shall be continued by the Supplier 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 Arbitrator or of the Umpire, as the case may be, is issued.”

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In “Bisra Lime Stone Co. Ltd. Vs. Orissa SEB [(1976) 2 SCC 167]”, it is held by their Lordships:

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“24. It is then submitted that this Court should not use its discretion in favour of arbitration in a matter where it is a pure question of law as to the power of the Board to levy a surcharge. This submission would have great force if the sole question involved were the scope and ambit of the power of the Board under Sections 49 and 50 of the Act to levy a surcharge, as it was sought to be initially argued. The question in that event may not have been within the content of Clause 23 of the agreement. But all questions of law, one of which may be interpretation of the agreement, need not necessarily be withdrawn from the domestic forum because the court has discretion under Section 34 of the Arbitration Act or under Article 226 of the Constitution and that the court is better posted to decide such questions. The arbitration Clause 23 is a clause of wide amplitude taking in its sweep even interpretation of the agreement and

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necessarily, therefore, of Clause 13 therein. We are therefore, unable to accede to the submission that we should exercise our discretion to withhold the matter from arbitration and deal with it ourselves.”

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In “Sanjana M. Wig Vs. Hindustan Petroleum Corpn. Ltd [(2005) 8 SCC 242]”, it is held by their Lordships:

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“12. The principal question which arises for consideration is as to whether a discretionary jurisdiction would be refused to be exercised solely on the ground of existence of an alternative remedy which is more efficacious. Ordinarily, when a dispute between the parties requires adjudication of disputed question of facts wherefor the parties are required to lead evidence both oral and documentary which can be determined by a domestic forum chosen by the parties, the Court may not entertain a writ application [See Titagarh Paper Mills Ltd. v. Orissa SEB (1975) 2 SCC 436 and Bisra Stone Lime Co. Ltd. v. Orissa SEB) (1976) 2 SCC 167].”

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In “Empire Jute Company Limited And others vs Jute Corporation of India Limited and another [(2007) 14 SCC 680]”, their Lordships were pleased to observe:

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“18. The power of judicial review vested in the superior courts undoubtedly has wide amplitude but the same should not be exercised when there exists an arbitration clause. The Division Bench of the High Court took recourse to the arbitration agreement in regard to one part of the dispute but proceeded to determine the other part itself. It could have refused to exercise its jurisdiction leaving the parties to avail their own remedies under the agreement but if it was of the opinion that the dispute between the parties being covered by the arbitration clause should be referred to arbitration, it

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should not have proceeded to determine a part of the dispute itself.”

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Since the petitioner has an efficacious, alternative remedy for resolving the dispute by taking recourse to arbitration, we are not inclined to cause an indulgence.”

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6 . Since there exist an efficacious, alternative statutory remedy

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for resolving the dispute which arises due to termination of contract, we are not inclined to cause any indulgence in a writ petition under Article 226 of the Constitution. The petitioner is relegated to avail the remedy as per Clause 40 of the General Conditions of Contract.

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