Mahesh C. Puri vs State of Himachal Pradesh

Tarlok Singh Chauhan, J.

1.This execution petition has been filed by the decree holder seeking execution of an award made by the Adjudicator on 27.10.2011 ostensibly on the

ground that the said award has attained finality.

2.The judgment debtor has filed the reply/objection to the execution petition wherein preliminary submission regarding the very maintainability of the

execution petition has been raised. It has been averred that the execution petition is not maintainable as the arbitration proceedings have already

commenced in this case as per the provisions of Section 21 of the Arbitration and Conciliation Act, 1996 (for short ‘Act’). The Adjudicator

adjudicated the dispute on 27.10.2011 and further issued corrigendum on 31.10.2011. This was challenged by the judgment debtor vide his

communication dated 29.10.2011 to the Chief Engineer, Mandi Zone, HPPWD, Mandi with a copy thereof to the petitioner. The copy of this letter

was sent to the decree holder on his address which was given at the time of tender as well as on the address which has been given in the judgment

sought to be executed. Therefore, the execution petition is not maintainable as the notice for the appointment of arbitrator was served upon the decree

holder within 28 days. Consequently, the Chief Engineer, Mandi Zone, appointed an arbitrator with copy to the decree holder. The decree holder not

only objected to such appointment, but gave three names which were not acceptable to the judgment debtor. Since the sole arbitrator could not be

appointed with the mutual consent of the parties within 15 days, the matter was referred to the Secretary General Indian Road Congress, New Delhi

for appointment of an arbitrator as per terms and conditions of the agreement which appointment is still awaited.

3.The decree holder has filed rejoinder to the reply wherein it has been denied that arbitration proceedings have commenced under Section 21 of the

Act. It has further been averred that after the decision of the Adjudicator on 27.10.2011, the competent authority to challenge the same was the

Employer i.e. the Chief Engineer and the writing of the letter by the Executive Engineer did not amount to a challenge to the said decision. It has been

averred that in terms of the agreement between the parties, the challenge, if any, had to be laid by the Employer and that also by suggesting a panel of

persons from whom a mutually agreeable arbitrator could be appointed. This was also required to be done within 28 days which was never done by

the respondent. It has been averred that the letter dated 4.11.2011 written by the Executive Engineer was addressed to the Chief Engineer for

appointing an arbitrator, but the Chief Engineer did not have any authority under the contract to unilaterally appoint an arbitrator as he had to be

appointed by mutual consent of the parties. It was further averred that the unilateral appointment of the arbitrator made by the Chief Engineer vide its

letter dated 3.11.2011 was in fact objected to by the decree holder vide his letter dated 9.11.2011 vide which the decree holder had also suggested the

names of a few persons from whom the arbitrator could be mutually selected. The respondent, however, chose not to respond to the same within the

stipulated period of 28 days and thus have lost the right to refer the matter to the arbitrator as per the provisions of Clause 25.2 and 25.4 of the

agreement between the parties. It has further been clarified that the copy of letter dated 17.11.2011 was never received by the decree holder and this

aspect was also pointed out by him to the Chief Engineer vide his letter dated 28.11.2011. Lastly it has been averred that as per the admitted case of

the respondents themselves, the first reference to the Secretary General of the Indian Roads Congress was made by the judgment debtor only on

9.12.2011 and, that too, was not in order since the appointment of the arbitrator had to be made by the Chairman of the Executive Committee of the

Indian Roads Congress as per the requirements of Clause 25.4 of the agreement between the parties. Therefore, the respondents have lost their right

to refer the matter to the arbitrator and the decision of the Adjudicator has attained finality under the provisions of Clause 25.2 of the Contract.

4.I have heard Mr. J.S. Bhogal, learned Senior Counsel assisted by Mr. Parmod Negi, Advocate, learned counsel for the decree holder and the

learned Advocate General assisted by Mr.J.S. Guleria, learned Deputy Advocate General, for the judgment debtor and have gone through the material

placed on record.

5.Evidently, the only dispute in this case is whether the award passed by Adjudicator on 27.10.2011 has attained finality and is thus required to be

executed?

6.Clause 24 of the agreement deals with the Disputes and reads thus:

“24.1. If the Contractor believes that a decision taken by the Engineer was either outside the authority given to the Engineer by the Contractor or

that the decision was wrongly taken, the decision, shall be referred to the Adjudicator within 14 days of notification of the Engineer’s decision.

Performance under the contract shall continue notwithstanding the reference to the Adjudicator, and payments by the Employer to the Contractor will

not be withheld unless they are the subject matter of dispute.â€​

7.Clause 25 sets-out the procedure for Resolution of Disputes and as regards the instant case, it is only Clauses 25.1, 25.2 and 25.4 that are relevant

for our purpose and reproduced as under:

“25.1. The Adjudicator shall give a decision in writing within 28 days of receipt of a notification of a dispute.

25.2. The Adjudicator shall be paid daily at the rate specified in the Contract Data together with reimbursable expenses to the types specified in the

Contract Data and the cost shall be divided equally between the Employer and the Contractor, whatever decision is reached by the Adjudicator. Either

party may refer a decision of the Adjudicator to Arbitration within 28 days of the Adjudicator’s written decision. Arbitration shall be under the

Arbitration and Conciliation Act, 1996. If neither party refers the dispute to Arbitration within the above 28 days, the Adjudicator’s decision will be

final and binding.

25.4. Where the Initial Contract Price as mentioned in the Acceptance Letter is Rs.5 Crore and below, disputes or differences in which an

Adjudicator has given a decision shall be referred to a sole Arbitrator. The Sole Arbitrator would be appointed by the agreement between the parties;

failing such agreement within 15 days of the reference to arbitration, by the appointing authority, namely the Chairman of the Executive Committee of

the Indian Roads Congress.â€​

8.It is more than settled that a business like interpretation of contractual provisions must be adopted in construing contracts entered into by persons of

business to govern business dealings. The Court is required to ensure that interpretation of law in commercial cases must not be disjointed from the

intent and object which those having business dealings seek to subserve. Therefore, unless interpretation of contracts effectuates a business meaning

for persons of business, the law will not fulfill its purpose and object of being a facilitator for business and providing a structure of ordered certainty to

those who carry on business here.

9.Now adverting to the different Clauses of the agreement, it would be noticed that the procedure for resolution of disputes has been provided in

Clause 25 (supra) wherein as per Clause 25.1 the Adjudicator to whom the Engineer’s decision has been referred is required to give his decision

in writing within 28 days of receipt of a notification of a dispute. The Adjudicator in the instant case has announced his award on 27.10.2011 and copy

thereof admittedly delivered to both the parties on the same day. The decision of the Adjudicator could be referred to the arbitration by either of the

parties within 28 days of the Adjudicator’s written decision and if neither party refers the dispute to arbitration within the above 28 days, then the

Adjudicator’s decision was deemed to be final and binding.

10.In the instant case, the respondent vide its letter dated 3.11.2011 had appointed the Superintending Engineer Arbitration Circle, HPPWD, Solan to

decide and make his award regarding the claims/disputes given by the decree holder. However, the decree holder vide his letter dated 9.11.2011 had

reservation to the arbitrator suggested by the respondent/judgment debtor and he, in turn, suggested three names with a further request to appoint

anyone of the three persons as an arbitrator. The respondent/ judgment debtor did not accede to this request and in turn requested the decree holder to

consider the name of the five persons to be appointed as arbitrator as communicated vide letter dated 17.11.2011. Even though the receipt of this

letter has been denied by the decree holder, but then this letter was followed by another letter dated 24.11.2011 whereby the decree holder was again

requested to intimate the name of the persons to be appointed as arbitrator as was earlier intimated to him on 17.11.2011. The receipt of this letter has

been duly acknowledged and admitted in the letter written by the decree holder on 28.11.2011, meaning thereby, that the decree holder very well

knew that it was required to suggest the name of the arbitrator as is borne out from the letter dated 24.11.2011, which is reproduced in its entirety as

under:

“HIMACHAL PRADESH

PUBLIC WORKS DEPARTMENT

No. PW-CE(MZ)-CTR-II-HP-08-05/11-16916-18 Dated 24.11.2011

From   Chief Engineer (MZ).

To

M/S S.R.M. Constructions,

Sukhdham Dhingra Estate,

Boileauganj, Shimla.

C/O Hanogi to Bandhi road Km 0/0 to 15/0 (SH:- F/C 5/7 mtr. Wide including R/Wall, Essential soling, CD work and C/O Parapets, Logo Boards km

stone and setting out etc. under World Bank Funding Phase-II Package No. HP-08-05).

Please refer to the Executive Engineer Padhar Division, Â HPPWD, Padhar letter No. PW-PD-AB-HP-08 -05/11-13440-42 dated 17.11.2011Â

addressed to this office and copy endorsed to the Superintending Engineer, Joginder Nagar Circle, HPPWD, Joginder Nagar as

well as to your office on the above cited subject.

You are requested to intimate the name of person to be appointed as Arbitrator as shown by the Executive Engineer, Padhar Division vide his letter

referred above to this office immediately so that further action in the matter shall be taken accordingly.

Chief Engineer (MZ),

HPPWD, Mandi.

Copy to the Superintending Engineer, Joginder Nagar Circle, HPPWD, Joginder Nagar for information w.r.to above. Copy to the ExecutiveÂ

Engineer, Padhar Division, HPPWD, Padhar for information w.r.to above.

Sd/-

Chief Engineer (MZ)

HPPWD, Mandi.â€​

11.That being the factual position, the contention of the decree holder that the award has attained finality under the provisions of Clause 25.2 of the

contract for want of appointment of arbitrator in terms of Clause 25.4 within the stipulated period of 15 days of the reference to arbitration, by the

appointing authority to the Chairman of the Executive Committee of the Indian Roads Congress made by the respondent, holds no water. As per

Clause 25.4, the sole arbitrator was to be appointed by the agreement between the parties; failing such appointment within 15 days of the reference to

arbitration by the appointing authority, namely the Chairman of the Executive Committee of the Indian Roads Congress.

12.This Clause clearly suggests that the sole arbitrator was to be appointed by the agreement between the parties and it was only failing such

agreement that a reference to arbitration by the appointing authority namely the Chairman of the Executive Committee of the Indian Roads Congress,

was required to be made within 15 days of the reference.

13.The decree holder having deliberately chosen not to respond to the letter of the judgment debtor dated 24.11.2011 whereby he was requested to

intimate the name of the persons to be appointed as arbitrator, cannot claim that the award has attained finality for want of appointment of arbitrator

or else that would be permitting the decree holder to take advantage of his own wrong. What in fact was required is that the parties should have been

ad idem on the appointment of the arbitrator which obviously had to be a “conscious act†and not an act of “default†and it was only failing

which the sole arbitrator was to be appointed within 15 days of the reference to the arbitration by the appointing authority, namely the Chairman of the

Executive Committee.

14.Evidently, none of the conditions as stipulated in Clause 25 is attracted and, therefore, the award of the Adjudicator cannot be said to have attained

finality as alleged by the decree holder. Consequently, this execution petition is totally misconceived and is dismissed as such, leaving the parties to

bear their own costs.