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Judgment
Ramesh Ranganathan, CJ
Restoration Application No. 623 of 2019 :
The application for restoration is not opposed by Mr. B.S.Negi, learned counsel for the respondents and is, therefore, ordered.
Arbitration Application No. 27 of 2018 :
This application is filed, under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short the "1996 Act"), seeking appointment of an Arbitrator.
The applicant herein is a contractor carrying on business as a sole proprietary concern. He is a Class "A" contractor registered with the Public Works Department (B & R), Uttarakhand Government. A notice inviting tender was floated in the month of May, 2015 to which the applicant submitted his bid. As he was the lowest tenderer, he was informed by the second respondent, by letter dated 22.06.2015, that his quotation was approved. The applicant was directed to furnish Security Deposit within seven days. Various other directions were also issued to him. By letter dated 29.06.2015, the applicant was informed that his tender, for execution of road and drainage system, has been accepted, and he was directed to commence execution of the works.
The agreement entered into between the parties dated 29.06.2015 does not specifically contain an arbitration clause. However, Clause 15 thereof provides that works which are carried out under the State's monetary assistance would be governed by the applicable Government Orders.
Mr. Aditya Singh, learned counsel for the applicant, would submit that, in the light of Clause 15 of the agreement, the Government Order, whereby the Uttarakhand Procurement Rules, 2008 were made and notified, would apply; and, consequently, the Arbitration Clause must be understood to have been incorporated by reference in the agreement entered into between the parties. Reliance is placed by Mr. Aditya Singh, learned counsel for the applicant, on the judgment of the Supreme Court in Giriraj Garg v. Coal India Limited and others : (2019) 5 SCC 192 in this regard.
On the other hand Mr. B.S. Negi, learned counsel for the respondents, would submit that reliance placed on behalf of the applicant, on the Uttarakhand Procurement Rules, 2008, is wholly misplaced; a bare reading of the agreement, entered into between the parties, shows that it does not contain an arbitration clause; it is evident therefrom that the parties have not agreed mutually to refer their disputes to the arbitrator; Clause 15 of the agreement cannot be read out of context or be understood as making the Uttarakhand Procurement Rules, 2008 applicable; and, in the absence of an arbitration agreement between the parties, the application as filed, seeking appointment of an Arbitrator, is not maintainable.
Clause 15 of the agreement dated 29.06.2015 reads as under :
"That the works which are to be done through State grant, in that respect, the orders of the State Government will be complied. The department will proceed for return the security amount of the contractor after 12 months after finding work satisfactory."
It is not in dispute that the subject works are being executed through State's grant. Clause 15 of the agreement requires, in such circumstances, for orders of the State Government to be complied with.
In the exercise of the powers conferred by Article 166(1) of the Constitution of India, the Government of Uttarakhand framed the Uttarakhand Procurement Rules, 2008, which were notified on 01.05.2008. Clause 1(3) of the said Rules makes it applicable, among others, to Municipalities and the Urban Local Bodies also. The respondent herein is an Urban Local Body i.e. a Nagar Panchayat.
Rule 44 of the Uttarakhand Procurement Rules, 2008 provides for a dispute resolution mechanism and Rule 44(ii) thereof relates to Arbitration. Rule 44(ii)(a) of the said Rules reads thus:
"All questions and disputes relating to the meaning of the specifications, design, drawings and instructions herein and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing, whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works or the execution or failure to execute the same, whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof, shall be referred to a sole arbitrator for adjudication through arbitration. The arbitration shall be conducted in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modifications or re-enactment thereof and the rules made there under and for the time being in force, shall apply to the arbitration proceedings."
Rule 44(ii)(a) of the Uttarakhand Procurement Rules, 2008 requires disputes between the parties to be resolved through arbitration in accordance with the provisions of the 1996 Act. Since the 2008 Rules, which were notified by Government Order dated 01.05.2008, contains an arbitration clause, the question which necessitates examination is whether by a reference to the Government Order in Clause 15 of the agreement dated 29.06.2015, it can be held that there is an arbitration agreement by reference.
Since reliance is placed on behalf of the applicant on the judgment of the Supreme Court in Giriraj Garg v. Coal India Limited and others : (2019) 5 SCC 192, it is useful to take note of the relevant clause which arose for consideration therein. Clause 7 reads thus:
"The sale order will be governed by guidelines, circulars, office orders, notices, instructions, relevant law etc. issued from time to time by Coal India Ltd., Bharat Coking Coal Ltd., State Govts., Central Govt. and other statutory bodies. This is also subject to any future escalation in prices and or levies/or duties, taxes etc. which may be imposed from time to time."
The question which arose for consideration before the Supreme Court, in the aforesaid case, was whether, in the light of clause 7 of the agreement between the parties, the provisions of Clause 11.2 of the 2007 Scheme, which provides for arbitration, would apply. The Supreme Court held, after referring to several judgments on this aspect, that a general reference to a consensual standard form was sufficient for incorporation of an arbitration clause; and a general reference, to a standard form contract of one party, would be sufficient for incorporation of the arbitration clause. Reference was made therein to Russell on Arbitration (24th Edn., 2015) wherein the expression "disputes "in connection with", "in relation to", or "regarding" a contract" were interpreted as sufficient to catch disputes arising under another contract relating to the contract containing the arbitration clause.
The Supreme Court concluded that the words "in relation thereto" used in Clause 11.2 of the 2007 Scheme indicated that the clause would apply to all transactions which took place under the 2007 Scheme, which included the sale transactions of the case before the Supreme Court.
On a conjoint reading of Rule 1(3), Rule 44(ii) of the 2008 Rules, with Clause 15 of the agreement between the parties dated 29.06.2015, it is evident that there exists an arbitration agreement albeit by reference. The mere fact that an arbitration clause has not been specifically incorporated in the agreement itself is of no consequence. I am satisfied, therefore, that the parties intended to resolve their disputes through Arbitration.
Since existence or otherwise of an arbitration agreement is the only question which necessitates examination, in view of Section 11(6)(A) of the 1996 Act, and I am satisfied that there exists an arbitration agreement by reference, I consider it appropriate to appoint Mr. Irshad Hussain, Retired Judge, R/o Irshad Manzil, 13/36, Azad Nagar, Banbhoolpura, Haldwani, Nainital as an Arbitrator to resolve the disputes, between the parties, in this case.
The learned Arbitrator shall, in terms of Section 11(8) of the 1996 Act, furnish his disclosure in writing to this Court within 15 days from the date of receipt of a certified copy of this order. He shall, thereafter, fix his remuneration, and charges towards other expenses, in consultation with the parties to the dispute. He shall endeavour to complete the arbitral proceedings, and to pass an award with utmost expedition, preferably within six months from the date on which he enters upon a reference.
The Arbitration Application is, accordingly, disposed of.