DIAMOND AGENCIS Vs. UNION OF INDIA

JUDGEMENT

(1.) By means of this application filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act"), the petitioner seeks appointment of an Arbitrator. Facts giving rise to filing of this application, briefly stated, are that the respondent No. 1 issued Notice Inviting Tender, dated 4-10-2010 for construction of civil works. The tender submitted by the petitioner was accepted. It is the case of the petitioner that despite several requests, the respondent No. 1 neither co-operated nor fulfilled his obligations in respect of furtherance of execution of the work, due to which the petitioner could not execute the work within the prescribed time limit. The respondent No. 1, thereafter, vide order dated 21-3-2012 rescinded the contract of the petitioner and called upon it to deposit a sum of Rs. 3,66,876 towards balance sum of performance guarantee within three days and a sum of Rs. 2,53,740 furnished vide Term Deposit Receipt was also forfeited. The petitioner by letter dated 16-8-2012 invoked the arbitration clause and requested the General manager, Western Central Railway to appoint an Arbitrator within 120 days from the receipt of letter as provided under Clauses 63 and 64 of the General Conditions of Contract. However, the request made by the petitioner for referring the dispute for arbitration was turned down by the respondents vide communication dated 3-1-2013 on the ground that claim of the petitioner is for an amount of more than 20% of the contract value, therefore, it cannot be referred to arbitration, under Clauses 63 and 64 of the General Conditions of the Contract.

(2.) Learned Senior Counsel for the petitioner was unable to dispute the fact that the claim of the petitioner is more than the 20% of the value of the contract. However, it was submitted by him that under Section 16 of the Act, the Arbitral Tribunal has authority to rule on its own jurisdiction and, therefore, the action of the respondents in not referring the dispute to the Arbitrator cannot be sustained. On the other hand, learned Counsel for the respondents submitted that the claim of the petitioner does not fall within the purview of arbitration clause as it is more than the 20% of the value of the contract and, therefore, respondents have rightly declined to accede to the prayer of the petitioner for referring the dispute to the arbitration.

(3.) I have considered the respective submissions made by learned Counsel for the parties. In SBP & Co. Vs. Patel Engineering Ltd. and another, 2005 8 SCC 618it has been held that in order to set into motion the arbitral procedure the following issues, if raised, have to be decided, namely, territorial jurisdiction, existence of arbitration agreement between the parties and whether the claim made by the applicant was a dead one in the sense that the parties have already concluded the transaction by recording satisfaction of their mutual rights and obligations or have recorded satisfaction regarding their financial claims. However, it was held that at that stage of consideration of the application under Section 11(6) of the Act, it may not be possible to decide whether a live claim made is one which comes within the purview of the arbitration clause and this question should be left to be decided by the Arbitral Tribunal on taking evidence. Similar view has been taken by the Supreme Court in the case of Anil Kumar Vs. B.S. Neelkanta, 2010 5 SCC 407.