9911796707
TMI Blog2024 (8) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... ith Section 11(9) of the Arbitration and Conciliation Act, 1996 for appointment of arbitrator to adjudicate the disputes that have arisen between the parties therein in connection with the contracts in question, has held, ' It is also a well-settled law that while deciding the question of appointment of arbitrator, the court has not to touch the merits of the case as it may cause prejudice to the case of the parties. The scope under Section 11(6) read with Section 11(9) is very limited to the extent of appointment of arbitrator. This Court has to see whether there exists an arbitration agreement between the parties and if the answer is in the affirmative then whether the applicant has made out a case for the appointment of arbitrator.' It is settled law that in a commercial dispute, mere failure to pay may not give rise to a cause of action. Once the applicant has asserted his claim and the respondent fails to respond to such claim, such failure will be treated as a denial of the applicant's claim giving rise to a dispute, and thus it is the cause of action for reference to arbitration. In the case on hand, it is the case of applicant that having found in internal finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2006 and it is engaged in the business of construction and also undertakes Government work contracts. It is further case of the applicant that Respondent No. 1 invited tenders for replacement of existing AC sheets with Galvalume sheets in stores Buildings (05 Nos, BLDG Nos. 19/01, 19/2, 19/3, 19/4 19/5) including Gas House Bldg No. 17 inside factory area at Medak, vide tender published on 22.11.2019. The respondent No. 1 accepted the applicant's bid for the subject tender work for a sum of Rs. 2,16,91,366/-and declared the applicant as successful bidder vide proceedings dt.06.02.2020. It is further case of applicant that bid amounts quoted were only for completion of work by the applicant and the said bid amount was excluding the GST @ 12% and labour welfare cess @ 1% and it was expressly agreed between the applicant and the Respondents that the GST and labour welfare cess are to be charged over and above the bid amounts. However, during internal financial audit it came to light that the Respondent Nos. 1 and 2 have been deducting the GST @ 12% and labour welfare cess @ 1% from the principal bid amount instead of paying additional amounts to the tune of 13% which includes G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent No. 2 further stated that the Applicant accepted the final bill process on 08.07.2022 without protest and therefore, taking recourse to arbitration in view of condition No. 70 of IAFW-2249 would be at the own risk of the applicant and refused to settle the dispute amicably. Therefore, the applicant is constrained to file the present Arbitration Application for appointment of a Sole Arbitrator as per the provisions of Section 11 and other relevant provisions of the Arbitration and Conciliation Act, 1996. 3. A counter affidavit has been filed by the respondent No. 1, wherein inter alia it is stated that the applicant-firm was awarded a contract bearing No. CE (Fy)/HYD/MDK/02 of 2019-20 for Replacement of existing AC sheets with Galvalume sheets in Store Buildings (05 Nos. Bldg No. 19/01, 19/02, 19/03, 19/04 19/05) including Gas House Building No. 17 inside Factory at Ordinance Factory Medak for an amount of Rs. 2,16,91,366/-. As per the work order, the work was commenced on 01.03.2020 and the work was physically completed by the contractor on 29.05.2021 subject to completion of rectification of defects as pointed out while issuing completion certificate by AGE (Indep) Fy Eddum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the tune of 13% and soon after noticing the same, the applicant submitted a letter dated 22.01.2022 to the respondent No. 3 and informed the disparity in the internal financial audit and requested the Respondents to immediately release the amounts of the taxes and repay tax amounts deducted along with interest @ 24% per annum including penalties, if any, till the date of payment. It is submitted that there are serious disputes with regard to deduction of the amounts contrary to the terms of the agreement and those are required to be determined by the Arbitrator. Since the respondents have not turned up to settle the disputes before the Arbitrator as per the notice dated 18.06.2022, the applicant was constrained to approach this Court invoking the jurisdiction under Section 11(6) of the Act. 6. Per contra, Smt. L.Pranathi Reddy, learned Standing Counsel for Government appearing for the respondents has vehemently contended that as per Condition No. 65 of IAFW-2249, no further claims shall be made by the contractor after submission of final bill and the claims shall be deemed to have been waived and extinguished and therefore, even though the agreement provides arbitration clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the G.E. No charges shall be allowed to the Contractor on account of the preparation of the final Bill. 10. Condition No. 70 of General Conditions of IAFW-2249 which relates to Arbitration Clause, reads as under: 70. Arbitration. All disputes, between the parties to the Contract(other than those for which the decision of the C.W.E. or any other person is by the Contract expressed to be final and binding) shall, after written notice by either party to the Contract to the other of them, be referred to the sole arbitration of an Engineer officer to be appointed by the authority mentioned in the tender documents. Unless both parties agree in writing such reference shall not take place until after the completion or alleged completion of the Work or termination or determination of the Contract under Condition Nos. 55, 56 and 57 hereof. Provided that in the event of abandonment of the Works or cancellation of the Contract under Condition Nos. 52, 53 or 54 hereof, such reference shall not take place until alternative arrangements have been finalized by the Government to get the Works completed by or through any other Contractor or Contractors or Agency or Agencies. Provided always that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he scope under Section 11(6) read with Section 11(9) is very limited to the extent of appointment of arbitrator. This Court has to see whether there exists an arbitration agreement between the parties and if the answer is in the affirmative then whether the applicant has made out a case for the appointment of arbitrator. 12. In Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729 the Hon'ble Supreme Court, at para 59, has held as under: The scope of the power under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. [SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] and Boghara Polyfab [National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117]. This position continued till the amendment brought about in 2015. After the amendment, all that the courts need to see is whether an arbitration agreement exists nothing more, nothing less. The legislative policy and purpose is essentially to minimise the Court's intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected. 13. It is settled law that in a commercial dispute, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Act, 1963. Section 43 of the Arbitration and Conciliation Act, 1996 provides that the Limitation Act shall apply to arbitrators, as it applies to proceedings in Court. Since none of the Articles in Schedule to the Limitation Act, 1963 provide a time period for filing an application for appointment of arbitrator under Section 11, it would be covered by the residual provision under Article 137 of the Limitation Act which provides that the period of limitation is three years for any other application for which no period of limitation is provided elsewhere in the division. The time limit starts from the period when the right to apply accrues. Admittedly, in the instant case, the Final Bill of the applicant has been settled on 06.09.2022 and even before the expiry of the three years limitation period prescribed under Article 137 of the Limitation Act, 1963, the applicant has raised a dispute and sought reference to the Arbitrator. Therefore, viewing the case from any angle, the dispute sought for reference to the arbitrator is not barred by limitation. Adding further, whether the claim is barred by lapse of time is a matter which requires to be decided by the Arbitrator at the tim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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