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M/S Des Raj Nagpal Engineers & ...

vs Union Of India And Ors on 5 April, 2010

Jammu High Court Jammu High Court M/S Des Raj Nagpal Engineers & ... vs Union Of India And Ors on 5 April, 2010 HIGH COURT OF JAMMU AND KASHMIR AT JAMMU. AA No.23 OF 2005 M/S Des Raj Nagpal Engineers & Contractors Petitioners Union of India and ors. Respondent !Mr. Anil Mahajan, Advocate. ^Mr. R.P.Jamwal, Advocate Hon'ble Mr. JUSTICE J. P. SINGH, JUDGE. Date: 05.04.2010 :J U D G M E N T : Disputes arising out of the Contract Agreement No.CWE/JP-37/2000-2001: Provn of Security Wall Around TK TPTR Plant at Ratnuchak between the parties were referred for adjudication to the Sole arbitration of Sh. R.K.Garg, SO-I (Plg) C.E. Udhampur Zone by the Chief Engineer, Udhampur Zone in terms of Clause 70 of the General Conditions of Contract. The petitioner approached this Court questioning the appointment of the Arbitrator by its Arbitration Application No.51/2003 which was disposed of on 06.12.2004 with the following observations:"==Based on the aforesaid consensus arrived at between the parties, Mr. Magoo, Sr. CGSC undertakes to refer the claim in respect of which the petitioner is stated to have signed and accepted the bill under protest and has not been paid shall be referred alongwith other claims to the Arbitrator for adjudication within four weeks. Mr. Anil Mahajan undertakes that in the event of his claim covered by final bill which remain still un-paid shall also refer to the Arbitrator, he shall participate in the arbitration proceedings without any loss of time. In view of the consensus reached, the petition stands disposed of in the terms indicated above." 2 The petitioner's claim regarding the final bill, as assured by their counsel in the Court, does not, however, appear to have been referred to the Arbitrator by the respondents. The petitioner did not appear before the Arbitrator, who accordingly made an ex-parte Award on May 17, 2005, in terms whereof, claims of the petitioner were rejected and those of Union of India allowed. Petitioner has filed this A.A. No.23/2005 for setting aside the Award. I have heard learned counsel for the parties and gone through the records. Before dealing with the issues canvassed at the Bar for and against the Award, reference needs to be made to the Chief Engineer's Communication of June 30, 2003 and the Arbitrator's Award. The Chief Engineer's Communication reads thus:- "Chief Engineer, Udhampur zone P O: Garhi
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M/S Des Raj Nagpal Engineers & ... vs Union Of India And Ors on 5 April, 2010

Udhampur-182121 8 436/1774E8 30 June 2003 Shri R K Garg, SO-I (Plg) CE Udhampur Zone CA No CWE/JP-37/00-01: PROVN OF SECURITY WALL AROUND TK TPTR PLANT AT RATNUCHAK Dear Sir, WHEREAS certain disputes and differences have arisen in connection with the contract mentioned above between M/S Des Raj Nagpal and the Union of India represented by HQ 138 Wks Engrs and Union of India represented by HQ 138 Wks Engrs has requested me in his letter No. 82000/37/114/E8 dt. 29 May 2003 for appointment of Sole Arbitrator to adjudicate the said dispute and differences. AND WHEREAS the said contract includes an arbitration agreement vide Condition 70 of IAFW-2249 forming part of the contract which interalia, provides that all disputes between the parties to the contract (other than those for which the decision of the CWE 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 3 them, be referred to the sole arbitration of an Engineer Officer to be appointed by the Chief Engineer Udhampur Zone, Udhampur. AND WHEREAS the Govt have concurred in the reference except as to the matter in respect of which decision of the CWE or any other person is by the contract expressed to be final and binding and without prejudice to its right to raise all legal objections against the claims of the above said contractor and prefer its counter claims. NOW THEREFORE, by virtue of the aforesaid, and provisions contained in Condition-70 of IAFW-2249, I hereby appoint you as Sole arbitrator to adjudicate upon the disputes pertaining to the above contract and request you to enter upon the reference and publish your findings and award in respect of disputes as listed in Appendix 'A' to this letter. I request you first decide on the jurisdiction and arbitrability of these claims as per terms and conditions of the contract and Section-16 of Arbitration and Conciliation Act, 1996 and only thereafter take up for adjudication on merit. Please acknowledge. Yours faithfully Sd/( D J Thosre ) Brig Chief Engineer Encl:Appendix'A' Copy to:1. PCDA NC Jammu 2. HQ 138 Wks Engrs
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M/S Des Raj Nagpal Engineers & ... vs Union Of India And Ors on 5 April, 2010

3. GE Kaluchak 4. M/S Des Raj Nagpal 401, Shastri Nagar Jammu-180004." The Award made by the Arbitrator is reproduced hereunder:"CWE/JP-37/00-01 ORIGNAL ON STAMP PAPER OF RS 100/IN THE MATTER OF THE ARBITRATION AND CONCILIATION ACT,1996 BETWEEN M/S Des Raj Nagpal Hereinafter called as 'Contractor" Engineer & Contractor 401 Shastri Nagar Jammu-180004 AND HQ 138 Wks Engineers Hereinafter called as 'Union of India' On behalf of Union of India (UOI) PERTAINING TO CONTRACT AGREEMENT NO.CWE/JP-37/00-01: PROVN OF SECURITY WALL AROUND TK TPTR PLANT AT RATNUCHAK. 1. WHEREAS a contract in writing was concluded between the President of India represented by HQ 138 Wks Engrs & M/S Des Raj Nagpal Engineer & Contractor, 401 Shastri Nagar, Jammu and was given contract agreement (CA) No.CWE/JP-37/00-01: Provn of Security Wall around TK TPTR at Ratnuchak. 2. AND WHEREAS the said contract includes an Arbitration Clause vide condition 70 of IAFW 2224 forming part of the contract. 3. AND WHEREAS certain difference arose between the parties out of a contract in writing for Provn of Security Wall around TK TP TR at Ratnuchak, bearing CA No.CWE/JP-37/00-01. 4. AND WHEREAS request was made to me to act as Sole Arbitrator in the matter by Chief Engineer Udhampur Zone in terms of condition 70 of IAFW-2249 forming part of the said contract between parties, vide his letter No.86436/1774/E8 dated 30 Jun 2003. 4 5. AND WHEREAS in the said reference to me, the following claims of the parties were referred to me for adjudication:- a) For Union of India: Four claims listed as serial B-1,2,3,4 in Appx "A" to Chief Engineer Udhampur Zone letter No.86436/1774/E8 dated 30 Jun 2003. b) M/S Des Raj Nagpal: Twelve claims listed as serial No. '1' to '12' in Appx "A" to Chief Engineer Udhampur Zone letter No.86436/1774/E8 dated 30 Jun 2003. 6. AND WHEREAS I entered on reference vide my letter No.300212/RKG/2/Pers dated 10 Jul 2003 and called upon both the parties to submit to me with a copy to other party, their statement of case and pleading in
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M/S Des Raj Nagpal Engineers & ... vs Union Of India And Ors on 5 April, 2010

defence (on the statement of case of opposite party) by 25 Jul 2003 and 09 Aug 2003 respectively. 7. AND WHEREAS Contract failed to submit statement of case alongwith other document by 09 Aug 2003. 8. AND WHEREAS Union of India submitted their Statement of Case along with claims vide letter no. 8257/165/E8 dt 04/09 Aug 2003 with copy to M/S Des Raj Nagpal, Contractor. 9. AND WHEREAS the Contractor had intimated vide his letter No.DRN/CWE/JP-37/00-01/ARB/11/03 dt. 13 Aug 2003 that GE had not handed over photocopies of certain documents. 10. AND WHEREAS GE Kaluchak had intimated vide his letter No.8257/172/E8 dated 16 Aug 2003 that contractor's rep attended his office on Aug 14 and noted required information from relevant documents. 11. AND WHREREAS I again requested contractor to submit his claim vide my letter No 300212/RKG/3/Pers dt. 26 Jul 03, otherwise exparte decision will be taken by the undersigned. 12. AND WHEREAS a hearing for the case was fixed on 18 Aug 2003 at 1100 hrs in the office of Chief Engineer Udhampur Zone, Udhampur. 13. AND WHEREAS hearing as scheduled was conducted and attended as under:c) For Contractor: Sikander Lal Nagpal - Prop Ashwani Nagpal - Attorney Holder Gurdial Singh - Site Engineer d) For Union of India MES-602029 Sh. NK Purhohit,EE - GE Kaluchak MES-405424 Sh. Pankaj Kumar Pathak, AEE (QS&C),HQ 138WE MES-508871 Sh. R K.Meena, Offg AE(QS&C) GE Kaluchak. 14. AND WHEREAS during the hearing contractor has confirmed that all documents and statement of claims have been received by him and no further documents are required by the contractor from UOI. Contractor agreed to submit statement of claims by 25 Aug 2003 and both the parties agreed to submit the pleading-in-defence by 30 Aug 2003. 15. AND WHEREAS next date of hearing was fixed on 08 Sep 2003 at 1130 hrs in HQ CE Udhampur Zone. 16. AND WHEREAS Contractor had leveled certain allegations against the Sole Arbitrator vide his letter No DRB/CWE-JP/37/2000- 2001/ARB/15/03 dt 25 Aug 2003 addressed to CE Udhampur Zone with a request to change the Arbitrator. 17. AND WHEREAS GE Kaluchak vide his letter No.8257/185/E8 dt 07/08 Sep 2003 denial the allegations leveled by contractor. 18. AND WHEREAS Chief Engineer did not agree with the request of Contractor as intimated vide his letter No 86436/1806/E8 dt 08 Sep 03.

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M/S Des Raj Nagpal Engineers & ... vs Union Of India And Ors on 5 April, 2010

19. AND WHEREAS the hearing was held on 08 Sep 2003 at 1000 hrs and was attended by representative of Union of India. No one attended the hearing from the Contractor side. 20. AND WHEREAS Contractor has requested to postpone the hearing due to self illness vide his telegram dt 06-09-03. 21. AND WHEREAS hearing was again fixed on 29 Sep 2003 and both the parties has been intimated through Regd letter No 300212/A/RKG/18/Pers dt 10 Sep 03. 5 22. AND WHEREAS Contractor intimated vide his letter No DRN/CWE/JP-37/2000-2001/ARB/20/3/dt 30 Sep 2003 that Hon'ble High Court has stayed the proceeding on 29-9-03. 23. AND WHEREAS UOI vide his letter No 8257/192/E8 dt 29 Sep 03 requested to proceed with Arbitration proceedings Ex-Parte as Respondent has nothing to submit in support of false and base less claims. 24. AND WHEREAS Hon'ble High Court J&K Jammu disposed off the petition vide their Judgment dt 06-12-2004. 25. AND WHEREAS I once again requested the contractor to submit their claims vide my letter No 300212/A/RKG/25/Pers dated 19 Mar 2005 by 11 Apr 2005 and next date of hearing was fixed on 25 Apr 05 at 1130 hrs in the office of HQ CE Jalandhar Zone, Jalandhar. 26. AND WHEREAS the hearing was held on 25 Apr 05 at 1130 hrs and was attended by representative of Union of India. Following reps have attended the hearing:c) Union of India:MES-508385 Sh. Romesh Chander ACWE(C)-HQ 138 Wks Engr MES-310315 Sh. SC Joshi, AGE B/R GE Kaluchak MES-411153 Sh. Pradeep Kumar, AE (QS&C), GE Kaluchak d) Contractor:- No one attended the hearing. 27. AND WHEREAS it was agreed by Union of India that they had full and fair opportunity to present their case, make submissions and arguments in respect of their claims before the Arbitrator. During hearing UOI revised their claim No.1 from Rs.50,000/- to Rs.1,50,340/- and added claim of Rs.50,000/- for cost of mental torture and harassment of department by unnecessary dragging the department into Court The hearing was accordingly taken to have been completed on 25 Apr 05. 28. AND WHEREAS Union of India has amended his claim No.1 at para 2 of their letter No 8271/114/E8 dated 04/09 Aug 03 from Rs.50,000/- to Rs.1,59,340/- and added claim No.5 for cost of defending court case for Rs.58095/- and Claim No.6 for Mental torture and harassment of Govt servants engaged in Defence during arbitration and court case Rs.50,000/-. 29. AND WHEREAS contractor has not submitted any documents as asked for repeatedly but dragged the matter unnecessarily into court. 30. AND WHEREAS sufficient opportunity had already been given to the contractor to make his submission and the Union of India was insisting on proceeding with the case. Hence the case was proceeded EX-PARTE.
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M/S Des Raj Nagpal Engineers & ... vs Union Of India And Ors on 5 April, 2010

31. AND WHEREAS certain particulars of the contract agreement in which dispute has arisen are as under:a) Contract Agreement No : CEW/JP-37/00-01 b) Name of Work : Provn of Security Wall around TK TP TR at Ratnuchak c) Amount of Contract : Rs.20,43,752.00 d) Date of commencement : 18 Dec 2000 e) Date of completion : 16 Sep 2001 f) Extended date of completion: 31 Dec 2001 g) Certified date of completion: 31 Dec 2001 32. Now I Er. RK Garg, IDSE, SE, Sole Arbitrator having taken upon the burden of the reference, and heard and examined and considered the statements, documentary and oral evidence, submission and arguments made during the hearing by them. I DO HEREBY MAKE AND PUBLISH THIS MY FINAL AWARD, IN WRITING AND CONCERNING THE MATTERS REFERRED TO ME CLAIMS OF UNION OF INDIA M/S Des Raj Nagpal shall pay to Union of India represented by HQ 138 Wks Engrs and GE Kaluchak amount set out as AWARD against various claims. 6 33. Claim No.1 Cost of Arbitration amounting ot Rs.50,000/- revised to Rs.1,59,340/-. 33.1 AND WHEREAS UOI claims for two trips for attending hearing at Jalandhar instead of one hearing hence claim works out to be Rs.1,28,805/-. 33.2 Since the contractor has unnecessary dragged UOI into Arbitration, the UOI deserves to get the cost of reference. 33.3 Hence the claim of UOI is partially sustained. I award that M/S Des Raj Nagpal Contractor, shall pay Rs.1,28,805/- to Union of India, represented by Garrison Engineer, Kaluchak against this claim. 34. Claim No.2 Non return of Sch 'B' Stores 34.1 'Withdrawn' by UOI. 35. Claim No.3: Cost of Rectification of Defects-13581.00: 35.1 Since the contractor has carried out defective work and not rectified the defects despite notices, the claim of UOI is sustained. 35.2 I award that M/S Des Raj Nagpal, Contractor, shall pay Rs.13581.00 to Union of India, represented by Garrison Engineer, Kaluchak against this claim. 36. Claim No.4 Interest @ 18% 36.1 Interest is admissible as law of the land and has been upheld by numerous Supreme Court Judgement. The rate of interest, is however has to be reasonable. 36.2 I award that M/S Des Raj Nagpal, contractor shall pay simple interest at the rate of 12% per annum from the date of dragging into Arbitration to the actual date of payment on claim No 1 & 3 and simple interest @ 12% per annum from the date of dragging into Court to the actual date of payment to Union of India. 37. Claim No.5: Cost of defending court case Rs.58095.00: 37.1. Since the contractor has unnecessary dragged the dept into court of law, just for delaying the arbitration proceedings in his own interest, the claim of UOI is sustained.

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M/S Des Raj Nagpal Engineers & ... vs Union Of India And Ors on 5 April, 2010

37.2 I award that M/S Des Raj Nagpal, Contractor, shall pay Rs.58095/- to Union of India, represented by Garrison Engineer, Kaluchak against this claim. 38. Claim No.6 Mental Torture and Harassment of Govt Servants engaged in defending Arbitration and Court Case Rs.50,000.00 38.1 Since the contractor has unnecessary dragged the dept into arbitration/court, the Govt servant and official dealing with case had gone through the necessary/unwanted mental torture and harassment while preparing various details for defence of the case on behalf of UOI at various stage and at various venues, due to which the Govt routine work was totally held up and delayed, thus claim of UOI is sustained. 38.2 I award that M/S Des Raj Nagapl, Contractor, shall pay Rs.50,000/- to Union of India, represented by garrison Engineer, Kaluchak against this claim. CLAIMS OF CONTRACTOR 39. The contractor has made no submission inspite of all possible opportunity meaning thereby that he has no submission to make and hence no claims. His claims therefore are not sustained and stands extinguished. 40. I award that Union of India represented by HQ 138 Wks Engrs shall pay 'NIL' to M/S Des Raj Nagpal, Engineer & Contractor, 401 Shastri Nagar, Jammu against claim No. '1' to '12'. 42. Cost of stamp papers. 41.1. The cost of stamp paper for the award to the extent of Rs.100/- will be born by Union of India and any additional cost of stamp papers, if required, for filling the award in the court shall be born by the party filling the award in the Court. 42. AS WITNESS my hand this 17 day of May 2005. Sd/(Er R K Garg) SE Dir (Pers & Legal) Sole Arbitrator 7 Witness Sd/MES-439088 Smt Karamjit Kaur, Stenographer" Clause-70 of the General Conditions of the Contract, needs to be noticed at this stage. It reads thus:- "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.

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M/S Des Raj Nagpal Engineers & ... vs Union Of India And Ors on 5 April, 2010

Unless both parties agree in writing such reference shall not take place until after the completion or alleged completion of the Works 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 commencement or continuance of any arbitration proceeding hereunder or otherwise shall not in any manner militate against the Government's right of recovery from the contractor as provided in Condition 67 hereof. If the Arbitrator so appointed resigns his appointment or vacates his office or is unable or unwilling to act due to any reason whatsoever, the authority appointing him may appoint a new Arbitrator to act in his place. The Arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties, asking them to submit to him their statement of the case and pleadings in defence. The Arbitrator may proceed with the arbitration, exparte, if either party, inspite of a notice from the Arbitrator fails to take part in the proceedings. The Arbitrator may, from time to time with the consent of the parties, enlarge, the time upto but not exceeding one year from the date of his entering on the reference, for making and publishing the award. The Arbitrator shall give his award within a period of six months from the date of his entering on the reference or within the extended time as the case may be on all matters referred to him and shall indicate his findings, along with sums awarded, separately on each individual item of dispute. The venue of Arbitration shall be such place or places as may be fixed by the Arbitrator in his sole discretion. The Award of the Arbitrator shall be final and binding on both the parties to the Contract." Perusal of the Award indicates that the Competent Authority's command to the Arbitrator to first rule on the jurisdiction and arbitrability of the claims as per the terms and conditions of the Contract, has not been adhered to by the learned Arbitrator, in that, there is not even a whisper in the Award as to whether or not the Claims referred to him by the Competent Authority were arbitrable and the Arbitrator had the jurisdiction to make the Award. 8 The Arbitrator's jurisdiction to arbitrate on the claims referred to him for his Award depends primarily on his jurisdiction so to do. He was, therefore, required to dwell on the issue of his jurisdiction to deal with the matter. Omission of the Arbitrator to rule on his jurisdiction is thus fatal to the Award, in that, unless he had opined on the issue and found him jurisdictionally competent to deal with the claims, his Award cannot but be said to be without jurisdiction. I, therefore, find sufficient force in petitioner's learned counsel's submission that the Arbitrator's Award was in violation of Section 34 (2)(a)(iv) of the Jammu and Kashmir Arbitration and Conciliation Act, 1997, hereinafter referred to as the " Act" for short, in that, it deals with a dispute on which, no finding, as required by the referral Authority, had been given by the Arbitrator, as to its arbitrability or otherwise and it was a decision on matters by the Arbitrator beyond the scope of submission to the arbitration. Perusal of the Award further reveals that while allowing the Union of India's Claims and rejecting those of the Contractor, the Arbitrator has omitted to record his findings before awarding/rejecting the Claims. This act of the Arbitrator in omitting to record his findings is in violation of the provisions of Clause 70 of the General Conditions of the Contract, in terms whereof, he was required by the parties to record his findings before making 9
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M/S Des Raj Nagpal Engineers & ... vs Union Of India And Ors on 5 April, 2010

the Award. The Award of the Arbitrator is, thus, in violation of Section 34(2)(b)(ii) of the Act. Union of India's learned counsel's submission that having intentionally avoided to appear before the Arbitrator, the Contractor was not entitled to question the Award for lack of jurisdiction and that omission of the Arbitrator to rule on his jurisdiction was only an irregularity not vitiating the Award, is found untenable, in that, jurisdiction of an Authority to deal with the matter goes to the very root of his authority so to do and unless the Arbitrator had ruled on the issue holding him jurisdictionally competent to arbitrate he would have no jurisdiction to make the Award. Learned Arbitrator having failed to comply with the command of the referral Authority to rule on his jurisdiction before deciding the disputes additionally offends Section 16 of the Jammu and Kashmir Arbitration and Conciliation Act 1997. For all what has been said above, the Arbitrator's Award dated May 17, 2005 made in respect of the Contract Agreement No.CWE/JP-37/2000-2001, found to be in violation of Section 34 of the Act is, accordingly, set aside. Arbitration Application No.23/2005 is, accordingly, disposed of. (J. P. Singh) Judge Jammu: 05.04.2010 Vinod 10

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