JANSATTA SHAKARI AWAS SAMITI LTD Vs. ORGANIC INDIA

JUDGEMENT

(1.) Jansatta Sahkari Awas Samiti Ltd. (hereinafter referred to as the Society) on 20th December, 2003 filed a petition in the Registry of this Court under Section 11 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the Act) praying for appointment of an arbitrator as the respondent had failed to appoint the same despite service of notice and had failed to concur with the suggested arbitrator and prayed for an appointment of arbitrator, as per procedure laid down.

(2.) The Society is duly registered under the registration No.2271 in Distt.Ghaziabad (U.P.) on 30th March, 1998. The agreement was signed between the Society and M/s.Organic India, Architect and Consultant, respondent in the petition in terms of clause Part-B(ii) making its covenants binding on both the parties. On 23rd July, 1998 another agreement was signed between the Society M/s.Govind Ram Chaprana & Sons, contractors for execution of Housing Project having estimated costs of Rs.7,53,44,346/-. It was stated in the agreement in unambiguous terms that the project has to be completed within 24 months from the date of commencement of the work by the Contractor. The work was carried on. There were certain difficulties and the Society was not happy with the progress of the work and its quality by the Contractor. However, on 29th August, 2000 M/s.Anil Ashok & Associates, Chartered Accountants, rechecked the costing of the project given by the Architect and their apportionment flatwise. The Chartered Accountant was appointed to recheck the accounts to complete the internal audit of the project. On 7th April, 2001 work on complete internal audit began. The external electrification work was awarded by the Society to M/s.Power Line Cables India Pvt.Ltd. on 10th April, 2001 and the said work was to be completed within 45 days at the costs of Rs.40,75,000/-. Certain disputes arose between the said Company and the Society. An internal audit report was made which was replied by the by the then Secretary of the Society Shri Amrish Kumar. Noticing the discrepancies pointed out in the audit report, the Managing Committee prepared an action plan on 26th April, 2002 and also lodged an FIR against the Accountant of the Society for siphoning Rs.13,21,000/- of the Society on 9th February, 2002. On 17th January, 2003, the new Management of the Society issued a letter to the Contractor alleging to extort excess payment from the Society without even completing the project and in connivance with the members. Vide letter dated 31st January, 2003, the Society called upon the contractor to submit the account of the material received and their consumption. No reply was received to the said letter. On 11th July, 2003, a legal notice was sent to the architect and consultant by the Society for professional misconduct, breach of agreement and cheating the Society of the huge amount. Again a notice was sent on 15.9.2003 through Advocate to the said party demanding Rs.2 crore as compensation and also to accepting the arbitration of Shri Alok Kumar, Advocate. No reply was received by the Society from the architect even to this notice, resulting in filing of the present petition under section 11(6) of the Arbitration Act. Reply to this petition was filed on behalf of architect and the consultant stating that the application was not maintainable as there was no agreement of arbitration between the parties in respect of the alleged dispute. The arbitration agreement exists only in respect of professional charges to be paid by the petitioner to the respondent. As the disputes do not relate to the professional fee, there cannot be any reference to the arbitrator. The name of Mr.Alok Kumar, Advocate was not acceptable to the respondent as arbitrator, as there is a provision of panel of the arbitrators to be appointed and not a single arbitrator. According to the respondent, each party is entitled to appoint one arbitrator and the application is stated to be malafide and intended to pressurise the architect and in any case there is no clause of the agreement under which the respondent could be made liable for deficiency of services. It is generally averred in the reply that correspondence stated in the para has not been received by the respondent, as claimed by the petitioner. There is no dispute between the parties which can be referred to arbitration in respect of the points raised by the petitioner and prayed for dismissal of the petition. Rejoinder to this was filed by the petitioner reiterating the averments made in the petition and further clarifying that the arbitration clause is for appointment of a sole arbitrator and that the disputes raised in the petition are referable to the arbitration and the petitioners were ready to accept any arbitrator which may be appointed by the Court.

(3.) During the pendency of this petition before the Court, the Contractor filed another petition on 2nd August, 2004 in the Registry of this Court under Section 11 of the Act praying that the Architects (respondent in petition No.250/93) be appointed as sole arbitrator to go into the disputes and claims of the contractor. It is stated by the contractor that as per clause 2.12 of the agreement between the Society and the Contractor, the disputes arising between the parties were required to be referred to the Architect, owner of M/s.Organic India. It is further the case of the petitioner that with ulterior motive, the respondent-Society is avoiding the payment of Rs.74,40,000/- plus interest which is due from the respondent and are levelling false allegations against the contractor. It is stated that the President of the Society had agreed to sort out the differences with the help of the Architect. Petitioner had approached the respondent for payment of their dues and had written various letters. A notice dated 14th January, 2004 was received on behalf of the respondent, whose reply was sent on 12th February, 2004 and the petitioner had made a request that as per terms of the agreement dated 23rd July, 1998, the Architect should be appointed as the arbitrator, but no reply thereof has been received by the petitioner, even after a reminder dated 9th March, 2004. As the respondents are sitting over the matter, the petitioners have filed the present petition praying for appointment of the arbitrator as the sole arbitrator in terms of the agreement. This petition is also contested by the Society on the ground that Architect cannot be appointed as an arbitrator, as civil and criminal proceedings have already been initiated against the said Architect for siphoning the funds of the Society as well as deficiency in services resulting in huge loss to the Society. It is stated that an FIR has also been lodged against Som Sharma, the Architect of the Firm. It is further averred that the measurement of civil work and quality check was done and a report was made on 1st September, 2002 making it crystal clear that the Contractor has fraudulently over drawn a sum of Rs.81,69,444/- from the Society. In the event the Architect is appointed as arbitrator, it will violate the basic rule of law. The receipt of the notice issued by the petitioner to the respondent-Society is not disputed and it is stated that the Society had declined to concur to the appointment of Architect as the sole arbitrator for the reasons aforenoticed. In view of the above facts, it will be appropriate to dispose of both these petitions by a common order. Before examining the contents of the merits and contentions raised, reference to the arbitration clause existing in the two agreements, which otherwise is not in dispute, can be carefully referred at this stage itself.