UNIT CONSTRUCTION COMPANY Vs. NATIONAL ALUMINIUM COMPANY LTD

JUDGEMENT

(1.) THE decision of the Subordinate Judge, Bbubaneswar, dated 3 -12 -1990 passed on an application being filed under Sec 38 of the Arbitration Act by opp. party No. 1 is under challenge in this revision.

(2.) THE brief facts leading to the impugned order of the Sub -ordinate Judge are stated hereundar. Opp. party No. 1, the National Aluminium Company Limited, is an Undertaking of the Government of India dealing with manufacture of aluminium. The said opp. party No. 1 invited tenders in February, 1983, for the work 'Construction of Residential Quarters at Angul in the district of Dhenkanal' and the petitioner was one of the tenderers. The tender of the petitioner was ultimately accepted by opposite party No 1 after negotiation and the petitioner was communicated the order accepting his tender and allotting the work to him. A formal agreement between the parties was also entered into and pursuant to the agreement, the petitioner commenced work. The work was completed some time in July, 1986. During the continuance of the work, petitioner was submitting running bills and was receiving on account payments. After the completion of the work, the petitioner submitted the final bill and along with the final bill he also submitted a 'no -claim certificate' which is required to be submitted under the terms of the agreement immediately after submitting the aforesaid final bill together with no -claim certificate, the petitioner also submitted another bill on account of escalation on 12th of September, 1988, The claim of the petitioner as given in the final bill was accepted and the petitioner was paid a sum of Rs. 4,92,372/ -. But so far as the bill submitted by the petitioner on account of escalation, the same was not accepted. The petitioner then requested opp. party No. 1 for re -consideration of the order. But since he did not receive any communication, the petitioner wrote a letter on 27th of April, 1983, calling upon the opp. party No. 1 to refer the dispute for arbitration in terms of Clause 87 of the General Conditions of Contract. Clause 87 of the General Conditions of Contract provides: 87. ARBITRATION : AH disputes of differences whatsoever which shall at any time arise between the parties hereto touching or concerning the works or the execution or maintenance thereof of this Contract or the rights touching or concerning the works or the execution or maintenance thereof of this Contract or the construction meaning, operation or effect thereof or to the rights and/or liabilities of the parties or arising out of or in relation thereto whether during or after completion of the contract or whether before or after determination, for closure or breach of the Contract (other than those in respect of which the decision of any 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 and to the Appointing Authority hereinafter mentioned/referred for adjudication to a sola arbitrator to be appointed as hereinafter provided. For the purpose of appointing the sole Arbitrator referred to above, the Appointing Authority will send within thirty days of receipt of the notice, to the Contractor a panel of three names of persons who shall all be presently unconnected with the organisation for which the work is executed. The Contractor shall on receipt of the names as aforesaid select any one of the persons named to be appointed as a sole Arbitrator and communicate his name to the Appointing Authority within thirty days of receipt of the names. The Appointing Authority shall thereupon without any delay appoint the said person as the sole Arbitrator. If the Contractor fails to communicate such selection as provided above within the period specified, the Appointing Authority shall make the selection and appoint the selected person as the sole Arbitrator. If the Appointing Authority fails to send to the Contractor the panel of three names as aforesaid within the period specified, the Contractor shall send to the Appointing Authority a panel of three names of persons who shall all be unconnected with either party, The Appointing Authority shall on receipt of the names as aforesaid select any one of the person* named and appoint him as the sole Arbitrator. If the appointing authority fails to select the person and appoint him as the sole arbitrator within 30days of receipt of the panel and inform the Contractor accordingly, the Contractor shall be entitled to appoint one of the persons from the panel as the sole Arbitrator and communicate his name to the Appointing Authority. If the Arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever sole Arbitrator shall be appointed as afore - said. The work under the Contract shall, however continue during the arbitration proceedings and no payment due or payable to the Contractor shall be withheld on account of such proceedings. The Arbitrator shall be deemed to have entered on the reference on the date he issues notices to both the parties fixing the date of the first hearing. The Arbitrator may, from time to time, with the consent of the parties, enlarge the time for making and publishing the award. The Arbitrator shall give a separate award in respect of each dispute or difference referred to him. The venue of arbitration shall be such place as may be fixed by the Arbitrator in his sole discretion. The fees, if any, of the Arbitrator shall, if required to be paid before the award is made and published, be paid half and half by each of the parties. The costs of the inference and of the award including the fees, if any of the Arbitrator shall be in the discretion of the Arbitrator who may direct to and by whom and in what manner, such costs or any part thereof shall be paid and may fix or settle the amount of costs to be so paid. The award of the arbitrator shall be final and binding on bath the parties. Subject to aforesaid, the provisions of the Arbitration Act 1940, or any statutory modification or re -enactment thereof and the rules made thereunder, and for the time being in force, shall apply to the arbitration proceeding under this clause.' On receipt of the aforesaid letter of the petitioner, opp party No. 1 appointed Shri A. C. Padhi, former Secretary to Government of Orissa. Works Department, as the sole Arbitrator for adjudicating upon the dispute between the petitioner and opp, party No. 1, but it was mentioned in the letter of . appointment that the appointment of the arbitrator is without prejudices to the arbitrability and the maintainability of the claim of the petitioner. The arbitrator then entered into reference and directed the parties to file their respective statements of claim and counter statement. Opp. party No. 1 on 26th of April, 1989, filed an application before the Arbitrator for deciding the arbitrability and maintainability of the claim, as a preliminary issue. The petitioner also filed an objection to the said application. The learned Arbitrator heard the matter on 26th of August, 1989, and the matter was adjourned to 30th of September, 1989. On 30th of September, 1989, opp. party No. 1 filed an application before the arbitrator requiring the arbitrator to make a reference Under Section 13 of the Arbitration Act for the opinion of the Court on the question of law involved as to whether in the facts and circumstances of the case, the agreement between the parties has come to an end and, therefore, the arbitration clause parishes with the conclusion of the agreement and consequently, the reference to the arbitrator is not maintainable. The learned Arbitrator accordingly further heard on the question of maintainability as well as on the question of making a reference to the Court of the question of law raised and passed an order on 11th of October, 1989. holding that the contract as well as the arbitration clause in the Contract has not perished and the arbitration clause is very much alive to settle the dispute between the parties. He accordingly directed opp. party No. 1 to file his written statement on merits within three weeks from the date of receipt of the notice. The said opp. party No. 1 thereupon filed an application in the Court of the Subordinate Judge, Bhubaneswar, Under Section 33 of the Arbitration Act challenging the existence of the arbitration agreement and praying to have the same determined, which was registered as Misc. Case No. 316 of 1989. In the said miscellaneous case, the petitioner appeared and filed his objection and under the orders of the Subordinate Judge, the Arbitrator also submitted the original records of the arbitration proceedings along with the order -sheet maintained by the arbitrator. After hearing the parties at length, the learned Subordinate Judge by the impugned order dated 3rd of December, 1990, came to the conclusion that the contract between the parties had come to an end and consequently, the arbitration clause in the contract does not survive and, therefore, the reference of the so -called dispute to the arbitrator was incompetent and the arbitrator had no jurisdiction to decide the dispute on merits. It is this order of the learned Subordinate Judge which is being assailed in the present revision application by the petitioner.

(3.) MR . R. K. Rath, appearing for opp. party No. 1, on the other hand, contends that in the absence of any allegation of fraud or coercion in the matter of submission of final bill or in the matter of giving the certificate of no -claim and the amount under the final bill having been received by the petitioner without any protest, the conclusion is irresistible that the contract itself had come to an end and with it the arbitration clause, which is a part and parcel of the contract and, therefore, the learned Subordinate Judge rightly came to the conclusion that the arbitration clause could not have been invoked and the arbitrator was incompetent to entertain the claim. Mr. Rath further urges that in view of the contention raised by opp. party No. 1 with regard to the fact that the agreement between the parties has come to an end and consequently the arbitration clause has perished, it is only Under Section 33 of the Arbitration Act, the Subordinate Judge has the power to determine the effect of the agreement and, therefore, there is no illegality committed by the Subordinate Judge in entertaining the application and deciding the same. Mr. Rath lastly urges that in view of the submission of no -claim certificate by the petitioner and receipt of the amount covered under the final bill without protest, the contract must be held to have come to an end by mutual agreement between the parties and since the arbitration clause was a part of the contract itself, it could not be invoked with the extinction of the contract and consequently, the impugned order is unassailable.