Kerala High Court
M/S. Nm-Sem (Jv) vs Union Of India on 20 December, 2024
AR NO.160/2024 1
2024:KER:97585
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE SYAM KUMAR V.M.
FRIDAY, THE 20TH DAY OF DECEMBER 2024 / 29TH AGRAHAYANA, 1946
AR NO. 160 OF 2024
PETITIONER:
M/S.NM-SEM (JV)
AGED 57 YEARS
HIGH SCHOOL ROAD, KOOTHATTUKULAM,
REPRESENTED BY ITS LEAD PARTNER, NAJEEB MANNEL,
MANNEL HOUSE, THODIYOOR VILLAGE EDAKULANGARA P.O.,
PIN - 690 523, KARUNAGAPPALLY TALUK,
KOLLAM DISTRICT, PIN - 686662
BY ADVS.
K.BABU THOMAS
MARYKUTTY BABU
DRISYA DILEEP
RESPONDENTS:
1 UNION OF INDIA
REPRESENTED BY THE GENERAL MANAGER,
SOUTHERN RAILWAY HEADQUARTERS,
PARK TOWN, CHENNAI, PIN - 600003
2 THE CHIEF ENGINEER
(CONSTRUCTION), SOUTHERN RAILWAY,
ERNAKULAM, KOCHI, PIN - 682016
3 THE DEPUTY CHIEF ENGINEER
CONSTRUCTION-1, SOUTHERN RAILWAY,
ERNAKULAM JUNCTION, KOCHI, PIN - 682016
BY ADV SRI.RAJAGOPALAN.A., CGC
THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON
20.12.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
AR NO.160/2024 2
2024:KER:97585
ORDER
Dated this the 20th day of December, 2024
Petitioner has filed this Arbitration Request, invoking Section 11 of the
Arbitration and Conciliation Act, 1996 (Hereinafter referred to as ‘the Act of
1996’) seeking to appoint a sole Arbitrator to adjudicate the disputes and
differences between the petitioner and the respondents/opposite parties
arising out of a works contract.
2. The petitioner participated in a tender for the work relating to the
doubling of the track between Kuruppanthara and Chingavanam. Being the
lowest bidder, the petitioner was awarded the said work, and accordingly,
they entered into Annexure A1 works contract with the 1 st respondent
through the 3rd respondent. The general conditions of contract that form
part of Annexure A1 stipulates in clause 64 that arbitration is the dispute
settlement mechanism agreed upon by the parties and lays down in detail
the mandates and methods for the invocation and conduct of the same.
3. Disputes arose between the parties, inter alia, regarding the
alleged delays/defaults, rider agreements, non-payment of market rates,
and withholding of payments. A Writ Petition was filed before this Court by
the petitioner concerning the recovery of Rs.16,57,950/- by the
respondents from the bill submitted by the petitioner. Annexure A2
AR NO.160/2024 3
2024:KER:97585
judgment was rendered therein subsequent to which the respondents vide
Annexure A3 inter alia intimated to the petitioner that the amount of
Rs.16,57,950/- recovered from the final bill purportedly towards vitiation
cannot be refunded. Faced with Annexure A3 refusal, the petitioner issued
Annexure A4 letter inter alia invoking the arbitration clause and seeking the
appointment of an Arbitrator. Annexure A8 letter was issued to the
petitioner on behalf of the 1st respondent calling upon them to select at
least two out of the panelists comprising of retired Railway Senior
Administrative Grade Officers as suggested by the respondents. Petitioner
was not amenable to such a process of appointment and since the
invocation and request were not favourably acted upon, the petitioner has
filed the above Arbitration Request seeking to appoint an Arbitrator.
4. The respondents entered appearance and filed a detailed counter
affidavit responding to the factual contentions put forth in the petition.
Execution of Annexure A1 agreement/works contract is admitted in the
counter affidavit. The existence of an arbitration clause therein is also
admitted. It is, however, averred that the Arbitration Request is not
maintainable since all payments due to the petitioner had been paid as and
when demanded after taking due note of the escalation factors which are
already built-in within the contract conditions. The contention that
liquidated damages should be paid including for the purported delay
AR NO.160/2024 4
2024:KER:97585
caused in the work is unsustainable. Such a demand is not as per the
agreement conditions and cannot be accepted and the petitioner has no
entitlement to claim the same. It is further submitted that the final bill had
been signed by the petitioner with no claim against the Railway in respect
of the relevant work. Hence the request now put forth to refer the claim to
arbitration is unsustainable. As regards the vitiation amount, it is submitted
in the counter affidavit that the same has been calculated as per the
relevant clause in the agreement and there is no illegality on the said
count. Referring to clauses 63 and 64 of the general conditions of contract,
it is contended that the General Manager is the competent authority
empowered to appoint Arbitrators and hence the petitioner has no right to
request a particular person to be appointed as Arbitrator. Reliance is
placed on Exts.R1 (a) to R 1 (o) which includes the no-claim certificate
issued by the petitioner to buttress the contentions put forth in the counter
affidavit.
5. A reply affidavit has been filed by the petitioner controverting the
factual averments in the counter affidavit and relying on Annexures A10 to
A12. The reply affidavit inter alia states that the petitioner has not
requested any particular person to be appointed as the Arbitrator and that
in view of Section 12 (5) of the Act of 1996, the panel suggested by the
respondents cannot be sustained.
AR NO.160/2024 5
2024:KER:97585
6. Heard Sri.Babu Thomas K., learned counsel appearing for the
petitioner and Sri.Rajagopalan A, Central Government Counsel on behalf
of the respondents.
7. The respondents have admitted in their counter affidavit the
existence of Annexure A1 agreement which contains the relevant
arbitration clause as part of the general conditions of contract. The factual
disputes concerning arbitrability and maintainability of the claims as
elaborated by the respondents in their counter affidavit are beyond the
purview of the referral jurisdiction as exercised in this petition under
Section 11 of the Act of 1996. The law on the point has been pithily laid
down by the Supreme Court in SBI General Insurance Co. Ltd V. Krish
Spinning [2024 SCC OnLine SC 1754]. It has been held therein that while
at the stage of deciding an application for appointment of Arbitrator, the
court must not conduct an intricate evidentiary enquiry into whether the
claims raised by the applicant are time-barred and should leave that
question for the Arbitrator to determine. Further it has been held that the
referral court should limit its enquiry to examining whether a Section 11(6)
application has been filed within the three-year period of limitation. Thus
the contours of the exercise of the referral powers under Section 11(6)
have been clearly circumscribed and laid down by the Supreme Court.
8. It is noted that the respondents have vide Annexure 8 letter called
AR NO.160/2024 6
2024:KER:97585
upon the petitioner to select from a panel of Arbitrators suggested by them.
Thus the arbitrability has in effect been admitted by the respondents and
the only question that remains is the choice of Arbitrators. The panel
mentioned in Annexure A8 letter comprises only of retired Railway Senior
Administrative Grade Officers. In view of Section 12 (5) of the Act of 1996,
the contention that the General Manager of the respondents is the
competent authority empowered to appoint Arbitrators is not sustainable.
Further, the dictum laid down by the Supreme Court in TRF Ltd. v. Energo
Engineering Projects Ltd. [(2017) 8 SCC 377] is unequivocal that by
virtue of Section 12(5) of the Act, if any person who falls under any of the
categories specified in the Seventh Schedule shall be ineligible to be
appointed as the Arbitrator.
9. In view of the above discussion, I conclude that the parties are at
ad idem regarding the existence of the arbitration agreement and the need
to appoint an Arbitrator. The disputes concern only the factual aspects of
the subject matter in issue and the same falls within the purview of the
Arbitrator to decide. Hence I find it fit and appropriate to allow the
Arbitration Request and to appoint a retired District Judge from the panel
of Arbitrators maintained by this Court as the Arbitrator.
Accordingly, this Arbitration Request stands allowed and it is
ordered as follows :
AR NO.160/2024 7
2024:KER:97585
(i) Sri.K.Sathyan, Retired District Judge, residing at 22/37, Saranga
Republic Road, Near Samooham High School, North Parur,
Ernakulam – 683 513, is nominated as the sole Arbitrator to resolve
the disputes that have arisen between the petitioner and the
respondents under Annexure-A1 agreement.
(ii) The learned Arbitrator may entertain all disputes/issues between
the parties in connection with the said agreement, including
questions of jurisdiction and limitation, if any, raised by the parties.
(iii) The Registry shall communicate a copy of this order to the
learned Arbitrator within ten days from today and obtain a Statement
of Disclosure from the learned Arbitrator as stipulated under Section
11(8) read with Section 12(1) of the Act of 1996.
(iv) Upon receipt of the Disclosure Statement, the Registry shall
issue to the learned Arbitrator a certified copy of this order with a
copy of the Disclosure Statement appended. The original of the
Disclosure Statement shall be retained in Court.
(v) The fees of the learned Arbitrator shall be governed by the
Fourth Schedule of the Act of 1996.
Sd/-
SYAM KUMAR V.M.
JUDGE
csl
AR NO.160/2024 8
2024:KER:97585
APPENDIX OF AR 160/2024
PETITIONER’S ANNEXURES
Annexure A1 TRUE COPY OF RELEVANT PORTION OF AGREEMENT
NO.04/DCE/ERS/2017 INCLUDING ARBITRATION
CLAUSE 64 IN THE GENERAL CONDITIONS OF
CONTRACT DATED 20-2-2017
Annexure A2 TRUE COPY OF JUDGMENT IN W.P.(C) NO.25263 OF
2022 DATED 16-11-2022
Annexure A3 TRUE COPY OF LETTER OF THE 2ND PARTY
INTIMATING REFUSAL TO PAY EVEN THE ADMITTED
AMOUNT DATED 9-2-2023
Annexure A4 TRUE COPY OF NOTICE OF THE APPLICANT
DEMANDING PAYMENT OF RS.3,21,65,829/- DATED
5-2-2024
Annexure A5 TRUE COPY OF REPLY OF THE 3RD OPPOSITE PARTY
TO ANNEXURE A4 NOTICE DATED 3-5-2024
Annexure A6 TRUE COPY OF LETTER ISSUED FOR THE FIRST
OPPOSITE PARTY DATED 27-6-2024
Annexure A7 TRUE COPY OF LETTER OF APPLICANT INTIMATING
OBJECTION IN THE PANEL IN ANNEXURE A6 DATED
12-7-2024
Annexure A8 TRUE COPY OF LETTER OF THE 1ST OPPOSITE PARTY
DATED 23-7-2024
Annexure A9 TRUE COPY OF REPLY OF THE APPLICANT TO
ANNEXURE A8 DATED 8-8-2024
RESPONDENTS’ EXHIBITS :
Exhibit R1(a) True Copy of the request made by the
petitioner on 27/10/2017 seeking extension of
the currency period for 6 months for
completing the work.
Exhibit R1(b) True copy of reply dated 08/11/2017 issued by
AR NO.160/2024 92024:KER:97585
the respondents granting extension of time
upto 28/04/2018.
Exhibit R1(c) True copy of the request made by the
petitioner on 27/04/2018 for extension of the
currency period upto 28/10/2018.
Exhibit R1(d) True Copy of reply dated 04/05/2018 issued by
the respondents granting extension of time
upto 31/07/2018.
Exhibit R1(e) True Copy of the rider agreement entered into
between the petitioner and the respondents on
12/05/2018.
Exhibit R1(f) True copy of the request made by the
petitioner on 30/07/2018 for extension of the
currency period upto 31/03/2019Exhibit R1(g) True Copy of the reply dated 14/08/2018
issued by the respondents granting extension
of time upto 31/10/2018 and 31/01/2019
respectively.
Exhibit R1(h) True Copy of the rider agreement entered in
to between the petitioner and the respondents
on 20/12/2018.
Exhibit R1(i) True Copy of the request made by the
petitioner on 29/01/2019 for the extension of
the currency period upto 30/03/2019Exhibit R1(j) True Copy of the rider agreement entered into
between the petitioner and the respondents on
30/01/2019Exhibit R1(k) True Copy of the request made by the
petitioner on 27/05/2019 for extension of the
currency period upto 30/06/2019Exhibit R1(l) True Copy of the rider agreement entered into
between the petitioner and the respondents on
29/05/2019Exhibit R1(m) True Copy of the rider agreement entered into
AR NO.160/2024 102024:KER:97585
between the petitioner and the respondents on
09/03/2021Exhibit R1(n) True Copy of the final bill dated 19/03/2021
issued by the 2nd respondentExhibit R1(o) True Copy of the no claim certificate issued
by the petitioner on 09/10/2020PETITIONER’S ADDITIONAL DOCUMENTS:
Annexure A10 True copy of protest letter sent to the
respondents dated 5-3-2021Annexure A11 True copy of clauses 17 A(ii), 17 B and 17(C)
of the GCC dated nilAnnexure A12 True copy of the Railway Board Circular
No.2017/Trans/01/POLICY dated 8-2-2018