The Chief Engineer I.D. vs K. Sudhakar Reddy

N. Ananda, J.—The question in this appeal is whether Clause 29 of the agreement entered into between the parties would provide for arbitration. The appellant had raised this question before the arbitrator as also before the learned designated Judge. The learned designated Judge while answering point No. 1 has held:

The applicant having preferred the application U/S. 34 of the Act on 16-02-2006 in the very first grounds of objections in para 15 of the application has taken up contention that vide clause 29 of the agreement bearing No. 18/1995-96 dated 16.01.1996 there was no agreement for settling the dispute through arbitration, whereas, the learned Arbitrator erroneously held that the said clause amounted to such an agreement. Whereas in para 13 of the application as to be found on page 8 it has been pleaded that the learned respondent No. 2 being the sole Arbitrator did pas an order dated 05-02-2003 holding that he had every jurisdiction to entertain the arbitral dispute under Clause 29 of the agreement. It is worth to note at this juncture itself that even much earlier to submission of the present application rather even much earlier to 10-11-2005 on which day the learned Arbitrator passed the impugned award, the very applicant among others did challenge the said order dated 05-02-2003 before the Hon''ble High Court of Karnataka vide WP No. 20586/2003 clubbed with 28982/2003 (GM-RES). The Hon''ble High Court vide order dated 12-01-2004 has upheld said order dated 05-02-2003 passed by the learned Arbitrator. For the sake of ready reference the court reproduces the entire text of the final order passed by the Hon''ble High Court in the said WPs. It reads

"I. Following the observations made by a Division Bench of Bombay High Court in the case of Konkan Railway Corporation Ltd. Vs. Isco Track Sleepers Pvt. Ltd., The Chief Justice of Bombay High Court, Mr. Justice S.C. Pratap (Retd.), Learned Arbitrator, Union of India (UOI), Rayalseema Concrete Sleepers Pvt. Ltd., Patel Engineering Company Ltd. and Arbitral Tribunal consisting of Chief Justice Shri M.N. Chandurkar (Retd.), Shri Dilip Seth, Chartered Accountant and Shri S.L. Jain, Retired Executive Director, Madhya Pradesh Electricity Board, , the first prayer sought for by the petitioners in these writ petitions is rejected.

II. Since I have come to the conclusion that provisions of Sec. 15(5) of the Arbitration and Conciliation Act, 1966, are constitutionally valid, the order made by the learned-. Arbitrator dated 5-2-2003 also does not require any interference by this Court. Accordingly, it is also rejected.

III. With the above observations, writ petitions are rejected.

Ordered accordingly."

a) As the learned Arbitrator had taken up the said point as a preliminary point for consideration and decided by holding that clause 29 of the agreement amounted to the Arbitration Agreement by virtue of order dated 5-2-2003 and as it has attained the finality at the very instance of the applicant by preferring Writ Petition as noted above; the applicant is legally prevented from urging the said grounds again. In other words this court is of the definite opinion that the applicant cannot raise the grounds again to the effect that the said agreement vide clause 29 of it did not disclose scope for settling the dispute through arbitration. Hence the said finding on point No. 1.

We have heard learned counsel for parties.

In Civil Appeal No. 1586/2004 and connected matters wherein Clause 29 of the agreement entered between the appellant herein and other contractors similarly placed as that of respondent was under consideration before the Supreme Court. The Supreme Court has held that Clause 29 cannot be construed as clause providing for arbitration. The Supreme Court has reserved liberty to the contractors to avail appropriate legal remedy for recovery of amount, if any, due from the appellant in terms of respective agreements.

In Special Leave to Appeal (Civil) Nos. 7492-7493/2010 dated 12.04.2010, the Supreme Court while considering the appeal filed by one of the contractors against appellant-KBJNL has declined to interfere with the matter and dismissed the Special Leave Petition. The Supreme Court has held that it is open to the petitioner (contractor) to seek remedy in accordance with law including institution of suit. It has further held that it is open for the petitioner to seek condonation of delay/exclusion of time taken in the proceedings and in case such a petition is filed, the court shall consider the petitioner''s prayer in accordance with law.

In view of the above, the findings of arbitrator as also the learned designated Judge that Clause 29 of agreement entered into between the parties provides for arbitration cannot be sustained.

In the result, the appeal is accepted. The impugned award as also the order made in Arbitration Case No. 1/2006 are set aside. The first respondent herein is at liberty to initiate suit to recover the amount, if any, due from the appellant.

It is open for the first respondent to seek for condonation of delay/exclusion of time taken in these proceedings in the suit, if any, filed by him before the Civil Court. In such an event, the Civil Court shall consider the said prayer having regard to the time spent for prosecuting the instant proceedings and in accordance with law.