Dismissed

Johnson Lifts Pvt.Ltd v. the Chief Engineer,Central Public Works Dept.

Orissa HC5 Jul 2021ARBP/25/2020

Case brief

AI extract

What is this about?

The High Court of Orissa disposed of an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking an arbitrator. Relying on M/s. Mitra Guha Builders, the Court held that claims regarding compensation for delay in works under the specific agreement clause are excepted matters and non-arbitrable, dismissing the petition.

What did the court decide?

Arbitration petition dismissed; no order as to costs; dismissal does not preclude other legal remedies.

Johnson Lifts Pvt.Ltd Vs the Chief Engineer,Central Public Works… — Arbitration | Orissa HC (2021)

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IN THE HIGH COURT OF ORISSA AT CUTTACK

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ARBP No.25 of 2020

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Johnson Lifts Pvt. Ltd

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…. Petitioner

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Mr. P. Dash, Advocate

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-versus-

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…. The Chief Engineer, Central Public Opposite Parties Works Department and others

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Mr. P. K. Parhi, ASGI

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CORAM: THE CHIEF JUSTICE

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ORDER 05.07.2021

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Order No.

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Dr. S. Muralidhar, CJ.

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This matter is taken up by video conferencing mode.

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This is an application under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (‘Act’) seeking the appointment of an Arbitrator to adjudicate the disputes between the Petitioner and the Opposite Parties, arising out of an Agreement dated 18^th May, 2013.

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The background facts are that the Petitioner is a Company incorporated under the Companies Act, 1956. It had entered into an agreement with the Central Public Works Department (CPWD)

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at Bhubaneswar on 18^th May, 2013 for installation of lifts in hostels, faculty quarters and a guest house being constructed by the I.I.T. Bhubaneswar.

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According to the Petitioner, a completion certificate came to be issued on 21^st December 2016, following which the Petitioner requested the Opposite Parties to release the pending payments that had been withheld. According to the Petitioner, it wrote a letter dated 4^th January, 2019 to the Opposite Parties seeking release of the balance payment of Rs.47 lakhs together with the security deposit of Rs.7,37,290/-.

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The Petitioner states that the CPWD issued it a show cause notice (SCN) dated 18^th September, 2019 alleging that the work entrusted to the Petitioner could not be completed within the stipulated time for reasons within its control and, therefore, it is liable to pay compensation. It was called upon to explain why compensation should not be imposed under Clause 2 of the Agreement for delayed completion of the work. After the Petitioner replied to the SCN on 26^th September 2019, the CPWD passed an order dated 27^th November, 2019 computing the compensation payable by the Petitioner as Rs.29,70,000/- together with interest @ 1.5% per each month of delay.

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The Petitioner disputed the above demand and by a letter dated 14^th July, 2020 invoked the arbitration clause in Clause 25 (ii) of

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the agreement for adjudication of the disputes that had arisen. Questioning the mode of appointment of the Arbitrator under Clause 25 (ii), which gives the discretion in that regard to the Chief Engineer, or Additional Director General or Director General of the CPWD, the Petitioner has filed the present petition seeking the appointment of an independent Arbitrator.

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In response to the notice issued in the present petition, a reply has been filed by the CPWD where inter alia it is pointed out that the levy of compensation under Clause 2 of the Contract is an “excepted matter” and is not arbitrable. Reliance is placed on a three judge Bench judgment of the Supreme Court in M/s. Mitra Guha Builders (India) Company v. Oil and Natural Gas Corporation Ltd (2020) 3 SCC 222 . The remainder of the reply is a denial of the merits of the Petitioner’s claims.

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The Court has heard the submissions of Mr. P. Dash, learned counsel for the Petitioner and Mr. P. K. Parhi, learned Assistant Solicitor General of India appearing for the Opposite Parties.

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Mr. Das, relies on the decisions of the Supreme Court in State of Karnataka v. Shree Rameshwara Rice Mills Thirthahalli (1987) 2 SCC 160 and Bharat Sanchar Nigam Ltd v. Motorola India Ltd, 2009 (2) SCC 337 to contend that whether a certain claim falls within the category of “excepted matter” should also be

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left to the decision of the Arbitrator and the right to seek appointment of an Arbitrator cannot be defeated on that ground.

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On the other hand, Mr. Parhi places reliance on the decisions in Vishwanath Sood v. Union of India (1989) 1 SCC 657 , Food Corporation of India v. Sreekanth Transport (1999) 4 SCC 491 and M/s. Mitra Guha Builders ( supra ) to urge that the claim of the Petitioner as regards the computation of compensation is an “excepted matter” and is not arbitrable.

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The Court has considered the above submissions. The relevant clause in M/s. Mitra Guha Builders ( supra ) was Clause 2. Its relevant portion reads as under:

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“xxx In the event of the contractor failing to comply with this condition, he shall be liable to pay as compensation an amount equal to ½ % per week as the Superintending Engineer (whose decision in writing shall be final) may decide on the said contract value if the whole work for every week that the due quantity of works remains incomplete provided always that the entire amount of compensation to be paid under the provisions of the clause shall not exceed ten per cent (10%) of the tendered cost of the work as shown in the tender.”

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The Supreme Court also referred to the relevant portion in Clause 25 of the Agreement, which is the arbitration clause, and which again emphasized that “the decision of the Superintending Engineer regarding the quantum of reduction as well as his justification in respect of reduced rates for sub-standard work,

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which may be decided to be accepted, will be final and would not be open to arbitration.”

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The Supreme Court then compared the above clauses with similar clauses in Vishwanath Sood (supra) and Food Corporation of India (supra) to conclude that the decision of the Superintending Engineering in levying compensation is final and the same is an “excepted matter”. The correctness of his decision cannot be called in question in the arbitration proceedings and the remedy if any, will arise in the ordinary course of law.

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In the present case, the clause in question is more or less similar to the Clause 2 in M/s. Mitra Guha Builders and the ONGC case. The inevitable conclusion is that the decision of the Opposite Party as regards compensation payable by the Petitioner is not arbitrable. The Court is therefore unable to agree with the learned counsel for the Petitioner that the decision whether the claim concerning the compensation amount is arbitrable or not should be left to the Arbitrator.

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Further, the Court notes that the decisions in Shree Rameshwara Rice Mills Thirthahalli (supra) as well as Bharat Sanchar Nigam Ltd (supra) were by smaller benches of the Supreme Court whereas the decision in M/s. Mitra Guha Builders (supra) is a later one and by a three judge Bench and which is, therefore, binding.

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In that view of the matter, the Court is unable to accept the plea of the Petitioner for the appointment of an Arbitrator to adjudicate the disputes that have arisen between the parties in the manner prescribed hereinbefore.

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The arbitration petition is accordingly dismissed, but in the circumstances, with no order as to costs.

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It is clarified that the dismissal of the present petition would not preclude the Petitioner from availing other remedies that may be available to it for redressal of the disputes it has with the Opposite Parties in accordance with law.

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As the restrictions due to resurgence of COVID-19 situation are continuing, learned counsel for the parties may utilize a printout of the order available in the High Court’s website, at par with certified copy, subject to attestation by the concerned advocate, in the manner prescribed vide Court’s Notice No.4587, dated 25^th March, 2020 as modified by Court’s Notice No.4798, dated 15^th April, 2021.

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(Dr. S. Muralidhar) Chief Justice

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M. Panda

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Johnson Lifts Pvt.Ltd v. the Chief Engineer,Central Public Works Dept.

Case brief

What is this about?

What did the court decide?

Johnson Lifts Pvt.Ltd v. the Chief Engineer,Central Public Works Dept.

Case brief

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What did the court decide?

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