A.P. Avarachan v. Kerala State Electricity Board

## IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC MONDAY, THE 1ST DAY OF APRIL 2013/11TH CHAITHRA 1935 ## AR.No. 59 of 2011 () --------------------- PETITIONER(S): ------------------- A.P.AVARACHAN, ANNAIE HOUSE, AYYAMPUZHA.P.O., ANGAMALY. BY ADVS.SRI.NAGARAJ NARAYANAN SRI.SAIJO HASSAN SRI.BENOJ C AUGUSTIN SRI.SEBIN THOMAS SRI.PRATHAP PILLAI SRI.I.J.AUGUSTINE SRI.M.NOOHUKUNJU SAHIB RESPONDENT(S): ------------------- 1. KERALA STATE ELECTRICITY BOARD, VAIDHYUTHI BHAVAN, PATTOM, THIRUVANANTHAPURAM, REP. BY ITS SECRETARY 2. EXECUTIVE ENGINEER, T.C.DIVISION, ALUVA KERALA STATE ELECTRICITY BOARD, NEAR MARINE DRIVE BRIDGE, ERNAKULAM 3. CHIEF ENGINEER (TRANSMISSION), CONSTRUCTION (SOUTH) KERALA STATE ELECTRICITY BOARD, VYDHYUTHI BHAVAN, PATTOM, TRIVANDRUM 695 014. R1 TO R3 BY ADV. SRI.P.SANTHALINGAM (SR.) SC,K.S.E.BOARD R1 TO R3 BY ADV. SRI.S.SHARAN,SC,K.S.E.BOARD THIS ARBITRATION REQUEST HAVING COME UP FOR ADMISSION ON 0104-2013, ALONG WITH AR. 60/2011, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: AR 59/11 ## APPENDIX: ## PETITIONER'S EXHIBITS : ANNEXURE A1: TRUE COPY OF THE AGREEMENT DT.19/1/07 BETWEEN THE PETITIONER AND 1ST RESPONDENT ANNEXURE A2: TRUE COPY OF PART-I(a) OF THE TENDER DOCUMENT ANNEXURE A3: TRUE COPY OF THE NOTICE DT.31/3/11 SENT BY THE PETITIONER TO THE RESPONDENTS ANNEXURE A4: TRUE COPY OF THE NOTICE DATED JULY 2011 SENT BY THE PETITIONER TO 3RD RESPONDENT //True copy// PA TO JUDGE. uj. . ## **ANTONY DOMINIC,J** ## **--------------------------------** ## **A.R.Nos.59 & 60 of 2011** ## **------------------------------------Dated this the 1[st] day of April, 2013** ## **JUDGMENT** Issues raised in these applications filed under Section 11 of the Arbitration and Conciliation Act, 1996 are similar. Therefore, these cases were heard together and are disposed of by this common judgment. 2. The facts pleaded in A.R.No.59 of 2011 are referred to for convenience. The applicant and the respondents entered into Annexure-A1 agreement for the construction of 33 KV line from North Paravur to Alangadu. Annexure-A2 is an extract of the instructions to the tenderers, which forms part of Annexure-A1 agreement. According to the applicant, he completed the work and thereafter, issued Annexure-A3 notice demanding revision of rates and also interest on belated payment of the amount due as per the final bill. There was no response to Annexure-A3. Therefore, he submitted **A.R.Nos.59 & 60 of 2011** : 2 : Annexure-A4 to the Chief Engineer(Transmission), the third respondent herein requesting him to act as the arbitrator in the dispute between himself and respondents 1 and 2. The Chief Engineer did not take any action and it is therefore, this application has been filed with a prayer to appoint an arbitrator to resolve the dispute raised by the applicant. 3. Counter affidavit has been filed on behalf of respondents 1 to 3 and the contention raised is that Annexures-A1 and A2 do not contain an arbitration clause entitling the applicant to seek the appointment of an arbitrator to resolve the alleged dispute between himself and the Board. 4. Thus the only question that arises in these applications is whether there is an arbitration agreement between the parties entitling the applicant to maintain this application under Section 11 of the Act seeking the appointment of an arbitrator. The provision of Annexure- : 3 : **A.R.Nos.59 & 60 of 2011** A2 that is relied on as the arbitration clause is Clause 31, which reads thus: “ _Any dispute or difference that may arise between the Executive Engineer and the contractor on account of the contractor shall at the instances of either party be referred to the Chief Engineer whose decision given in writing shall be final, inclusive and binding. The Executive Engineer may at his discretion delegate in writing to any of his subordinate any of his powers regarding these specifications.”_ 5. Reading of the above provision shows that any dispute or difference between the parties shall at the instance of either of the parties be referred to the Chief Engineer whose decisions shall be final, inclusive and binding on the parties. In support of this contention that the aforesaid provision of the agreement is an Arbitration Clause, the learned counsel for the appellant relied on the Apex Court judgment in **Mallikarjun v.Gulbarga** : 4 : **A.R.Nos.59 & 60 of 2011** **University(2004 (1) SCC 372)** and **Punjab State and others v. Dina Nath (2007 (5) SCC 28)** . On the other hand, on behalf of the respondents, a series of judgments were relied on about which reference shall be made in the course of these judgments. 6. Before, I proceed to examine the rival contentions and I should make reference to a few factual aspects. In all agreements entered into between the Board and its contractors prior to August, 1982, arbitration clauses were incorporated. Subsequently, the Board issued order dated 06.08.1982 directing that there shall not be any provision in the tender documents or agreements enabling the contractors to refer any disputes to arbitration. The order further states that any tender documents already issued should also be modified deleting the arbitration clauses. Admittedly, AnnexureA1 agreement was entered into between the parties only on 19.01.2007, which is long after the Board order dated **A.R.Nos.59 & 60 of 2011** : 5 : 06.08.1982 was issued. Therefore, the Board could not have intended to have a provision for arbitration in its agreement. Another aspect which requires to be noted is that clause 16 of Annexure-A2 provide that the courts at Ernakulam alone shall have jurisdiction to entertain “civil suits pertaining to this contract.” This provision reads thus: “ _The courts situated at the place where the Head Quarters of the Transmission Circle, Kalamassery is situated, viz. Ernakulam alone will have jurisdiction to entertain civil suits pertaining to this contract.”_ 7. Clause 31 of Annexure-A2 which is relied on by the applicant as an arbitration clause should be understood in the light of the Board order dated 06.08.1992 and also in the light of Clause 16 extracted above. 8. I shall now refer that the judgments that are relied on by the counsel for the applicant. **Mallikarjun** : 6 : **A.R.Nos.59 & 60 of 2011** **v.Gulbarga University(2004 (1) SCC 372)** was a case where Clause 30 of the agreement provided that in case of dispute arising between the contractor and the university, the decision of the Superintending Engineer shall be final, conclusive and binding on all parties to the contract. This provision of the contract was interpreted in the light of the Apex Court judgments which lay down the principle that parties parties must have intended to settle the dispute in arbitration and that the parties must agree in writing to be bound by the decision of the Tribunal. On that basis, the Apex Court held that the aforesaid provision of the agreement, disclosed an arbitration agreement. The second judgment relied on is the judgment in **Punjab State and others v. Dina Nath (2007 (5) SCC 28)** . In that case, the provision of the agreement was to the effect that any dispute arising between the department and the contractor shall be referred to the Superintending Engineer for orders and : 7 : **A.R.Nos.59 & 60 of 2011** that his decision will be final and binding on both parties. This agreement was also understood in the light of the above principles and the Apex Court held that when the provision of the agreement speaks for a dispute between the parties and a decision by the Superintending Engineer on a reference made by either of the parties and when it is agreed that the decision taken shall be final and binding on the parties, the provision of the agreement disclosed an agreement to settle the suits in an arbitration proceedings. 9. On behalf of the respondents, reliance was placed on **K.K.Modi v. K.N.Modi and others (1998(3) SCC 573** ), where the Apex Court considered the question whether Clause 9 of an agreement between the parties which provided that implementation will be done in consultation with the financial institutions and that for all disputes, clarifications etc., the same shall be referred to the Chairman, IFCI or his nominees whose decisions will : 8 : **A.R.Nos.59 & 60 of 2011** be final and binding on both the groups, is an arbitration agreement. In this case, the attributes which must be present for an agreement to be considered as an arbitration agreement have been indicated thus: _17. Among the attributes which must be present for an agreement to be considered as an arbitration agreement are:_ - _(1). The arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement,_ - _(2) that the jurisdiction of the tribunal to decide the rights of parties must derive either from the consent of the parties or from an order of the court or from a statute, the terms of which make it clear that the process is to be an arbitration,_ - _(3) the agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal,_ - _(4) that the tribunal will determine the rights of the parties in an impartial and judicial_ : 9 : **A.R.Nos.59 & 60 of 2011** _manner with the tribunal owing an equal obligation of fairness towards both sides,_ - _(5) that the agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law and lastly,_ - _(6) the agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal._ 10. Thereafter, the Apex Court held that Clause 9 referred to above was intended not to operate as an arbitration clause. Similarly, in **Bhushan Bansal v. U.P.Small Industries Corporation Ltd(1999(2) SCC** **166)** , these principles have been followed and the Clause considered therein was held to be not arbitration agreement. 11. Suffice it to say that among the important attributes that are to be ascertained by a court, one of the main attribute is whether the parties intended to operate : 10 : **A.R.Nos.59 & 60 of 2011** the particular provision as an arbitration agreement. It is while examining this question that one has to take note of the order issued by the Board on 06.08.1982 deleting arbitration clause and Clause 16 of Annexure-A2, which confers jurisdiction on the courts at Ernakulam in respect of civil suits pertaining to the agreement. Secondly, if the Clause 31 was to operate as an agreement for arbitration, there would not have been a provision like Clause 16 in Annexure-A2, conferring jurisdiction on court for entertaining civil suits arising out of the agreement. From these two provisions itself, it can be concluded that the parties did not intend to read Clause 31 of Annexure-A2 as an arbitration clause. Necessarily therefore, the Chief Engineer before whom Annexure-A4 was filed could not have acted thereupon and the applicant also could not have invoked the jurisdiction of this Court under Section 11 of the Arbitration and Conciliation Act. Therefore, this application has to be rejected and I do so. **A.R.Nos.59 & 60 of 2011** : 11 : The issue raised in A.R.No.60 of 2011 being similar in all respects, that application also cannot be entertained and is only to be rejected and I do so. Sd/- **ANTONY DOMINIC, JUDGE** ln