MARYMATHA CONSTRUCTION COMPANY v. ADDITIONAL PROJECT MANAGER (WS & SS) & OTHERS

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **MONDAY, THE 19TH DAY OF OCTOBER 2020 / 27TH ASWINA, 1942** ## **AR.No.71 OF 2018** ## **PETITIONER:** **M/S.MARYMATHA CONSTRUCTION COMPANY MARYMATHA SQUARE, ARAKKUZHA ROAD MUVATTUPUZHA, ERNAKULAM-686 661 REP. BY ITS PARTNER SABU CHERIAN** **BY ADV. P. SHANES METHAR** ## **RESPONDENTS:** |**1**|**THE ADDITIONAL PROJECT MANAGER (WS & SS)**| |---|---| ||**SUPERINTENDING ENGINEER, JNNURM PROJECT AUTHORITY**| ||**KERALA WATER AUTHORITY, KOCHI.682011**| |**2**|**THE PROJECT DIRECTOR,**| ||**PROJECT MANAGEMENT UNIT,KERALA SUSTAINABLE URBAN**| ||**DEVELOPMENT PROJECT,5TH FLOOR,TRANS**| ||**TOWERS,VAZHUTHAVAUD,**| ||**THIRUVANANTHAPURAM-695014.**| |**3**|**KOCHI MUNICIPAL CORPORATION**| ||**PROJECT IMPLEMENTATION UNIT,COCHIN,ERNAKUAM-682 011**| ||**REP. BY ITS SECRETARY.**| **R1 BY SRI.P.BENJAMIN PAUL, SC, KERALA WATER AUTHORITY BY SRI.SAJI VARGHESE,SC R2 BY SHRI.K.V.MANOJ KUMAR, SENIOR GOVERNMENT PLEADER R3 BY SRI.E.D.GEORGE,SC,COCHIN CORPORATION** **THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 19.10.2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** 2 **AR.No.71 OF 2018** ## **JUDGMENT** The applicant had emerged as a successful bidder for the work of “Sewerage Sub Component of Kochi Corporation Construction of wet wells 3, 7, and 8 and laying of pumping mains – package No.KCH – SS – 03 A” pursuant to a notice inviting tender issued by the respondents. The project in question was funded by the Asian Development Bank and, pursuant to it emerging as the lowest bidder, the applicant entered into an agreement with the 1st respondent as the employer, the 2nd respondent as the nodal agency and the 3rd respondent as the owner of the project. The bidding documents, that formed part of the agreement, were in three parts, namely, Part -1 that enumerated the bidding procedure, Part -2 that enumerated the works requirement and Part -3 that enumerated the conditions of contract and contract forms. 2. In the General Conditions of Contract (GCC), Clause 2.3 that deals with interpretation indicates that the documents forming the contract have to be interpreted in the following order of priority: ## “ **2. Interpretation** 2.1 xxxxx ## 2.2 xxxxx 2.3: The documents forming the Contract shall be interpreted in 3 **AR.No.71 OF 2018** the following order of priority: (a) Agreement, (b) Letter of Acceptance, (c) Contractor's Bid, (d) Particular Conditions of Contract, (e) General Conditions of Contract, (f) Specifications, (g) Bill of Quantities (or Schedules of Prices for lump sum contracts), and (h) Drawings; (i) any other document listed in the **PCC** as forming part of the Contract.” 3. Clause 24 of the GCC deals with procedure for disputes and reads as follows: ## “ **24. Procedure for Disputes** 24.1 The rationale of amicable settlement should be followed to settle the disputes at the lowest possible level of responsibility by bringing the individuals concerned face to face. The project manager of the Employer and the Project Manager of the Contractor's representative in the Project may try to settle the dispute amicably. 24.2 If the dispute is not settled at this level as indicated in 24.1, than the matter shall tried to be solved by Chief of the Contractor's firm and Project Director, Kerala Sustainable Urban Development Authority on the same rationale of amicable 4 **AR.No.71 OF 2018** settlement. 24.3 Any dispute or difference arising out of this Contract or in connection therewith and which cannot be amicably settled according to Clause 24.1 and 24.2 shall be finally settled through the local court of Law. The resulting award shall be final and binding on the Parties and shall be in lieu of any other remedy. 24.4 The Location of the Court will be as specified in the Particular Conditions of the Contract **(PCC)** ” 4. Clause 68 of the GCC provides for application of the conditions prevailing in the Public Works Department of the State and reads as follows: ## “ **68 Conditions of PWD** 68.1 Apart from the General Conditions of Contract mentioned in this document, conditions in force in Kerala PWD would also apply. For similar conditions which are mentioned in both PWD and this document, conditions given in this document will prevail. The Form 83 Kerala Public Works (Building and Local Works) Department is attached as Annexure–1 to Section VII (General Conditions of Contract).” 5. As seen from a reading of Clause 68, the Form 83 Kerala Public Work (Building and Local Works) Department that contains the relevant conditions in force in the PWD, is attached as Annexure-1 to the 5 **AR.No.71 OF 2018** GCC. Clause 24 of the said Annexure reads as follows: “24. Arbitration in claims of the contract regarding cost escalation and risk and cost will be considered by the Government Arbitration Committee constituted as per G.O. (Rt) 2252/86/P.W & 7 dt. 29.12.1986.24. Arbitration in claims of the contract regarding cost escalation and risk and cost will be considered by the Government Arbitration Committee constituted as per G.O. (Rt) 2252/86/P.W & 7 dt. 29.12.1986.” 6. For the sake of completion of facts it is also necessary to refer to the particular conditions of contract, and in particular, the Clause, which refers to a modification of Clause 24.4 of the GCC, which reads as follows: “GCC 24.4 All disputes arising out of the Contracts that may be executed, in presence of the contract shall be settled only by the Civil Court at Kochi under whose jurisdiction the work place covered by the contract is situated and for in whose jurisdiction the contract was entered into, in case the work extends to the jurisdiction of more than one court.” 7. In the Arbitration Request, it is the case of the applicant that, while it had completed the work entrusted to it by the respondents, disputes have arisen between the parties as a consequence of which substantial amounts remain due and unpaid to the applicant towards the work done under the contract. It is the case of the applicant that, by 6 **AR.No.71 OF 2018** virtue of Clause 24 in Annexure 1 to the GCC, the claims regarding cost escalation and risk and costs have to be considered by the Government Arbitration Committee. It is pointed out that the said Clause in Annexure 1 to the GCC qualifies Clause 24 of the GCC itself, in that while Clause 24 of the GCC deals generally with resolution of disputes that have arisen between the parties under the contract, and provides for a resolution of those disputes through the civil court, Clause 24 of Annexure 1 to the GCC carves out an exception in respect of two particular claims, namely, those relating to cost escalation and risk and costs, which claims have to be referred to arbitration for their resolution. Going further, the learned Senior counsel for the claimant would contend that, after the amendment of the Arbitration and Conciliation Act in 2015, the reference to the Government Arbitration Committee cannot be seen as a procedure that is permitted under the Act, and hence, the said Arbitration Clause must be seen as requiring a reference to be made to a Sole Arbitrator in terms of Section 11 of the Arbitration and Conciliation Act, 1996. 8. The learned counsel for the respondents Sri.Saji Varghese and the learned Government Pleader Sri.Manoj Kumar, would rely on the counter affidavits filed by them to contend that Clause 24 of Annexure 1 to the GCC cannot be seen as an arbitration agreement that binds the parties. They would contend that since Clause 24 of the GCC clearly 7 **AR.No.71 OF 2018** stipulates that all disputes arising between the parties must be referred to the civil court for a resolution of the same, Clause 24 of Annexure 1 to the GCC should necessarily yield to the former Clause in the GCC, which must ultimately determine the Forum for resolution of disputes. 9. I have heard the learned Senior counsel Sri.Ramesh Babu duly assisted by Sri.Shanes Methar for the applicant, Sri.Manoj Kumar, the learned Government Pleader for the State Government and Sri.Benjamin Paul, the learned Standing counsel for the respondent Water Authority. 10. On a consideration of the facts and circumstances of the case and the submissions made across the bar, I am of the view that the limited question that this Court is called upon to decide in the present Arbitration Request is whether there is an arbitration agreement between the applicant and the respondents that would require me to exercise my jurisdiction under Section 11 to refer the parties to Arbitration for resolution of the disputes that have arisen between them. If I do find the existence of an arbitration agreement between the parties, then by virtue of the amendments to the Arbitration and Conciliation Act, 1966, introduced in 2015, and the decisions of the Supreme Court in **TRF Limited v. Energo Engineering Projects Ltd. [(2017) 8 SCC 377]** and **Perkins Eastman Architects DPC & Others** 8 **AR.No.71 OF 2018** **v. HSCC (India) Ltd. [(2019) 9 SCC Online SC1517]** , I would have to refer the parties to arbitration by a Sole Arbitrator in terms of Section 11(6) of the Act. The principal question, however, is whether there is an arbitration agreement between the parties? 11. When I go through the contract documents, and in particular, the GCC and the PCC, which are in Parts 7 and 8 of the contract documents, I find that Clause 24 of the GCC clearly mandates that in the event of any disputes arising between the parties, the resolution of that dispute is to be attempted through amicable settlement, and on its failure, by recourse to the local court of law. Clause 24.4 clarifies that the location of the court will be specified in the particular conditions of contract. As already noted through the provisions extracted above, the PCC has provided that the disputes shall be settled by the civil court at Kochi under whose jurisdiction the workplace covered by the contract is situated, and within whose jurisdiction the contract was entered into, in case the work extends to the jurisdiction of more than one court. The clear provisions in the GCC would, therefore, in the absence of anything to the contrary, clearly suggest that there was no arbitration agreement between the parties and that they had chosen the civil court as the forum for resolution of the disputes that arose between them while working the contract. The learned Senior counsel would, however, place reliance on Clause 24 of Annexure 1 to the GCC to contend that in 9 **AR.No.71 OF 2018** respect of two claims, namely, costs escalation and risk and costs, the terms of the GCC clearly envisage a resolution of such dispute through arbitration. It is his contention that Clause 24 of Annexure 1 to the GCC carves out the two claims aforementioned for differential treatment in the matter of resolution of disputes. 12. The contention of learned Senior counsel as above requires me to understand the true purport behind appending an Annexure to Section 7 of the bid document, which incorporates the GCC. Clause 68 of the GCC indicates that, apart from the general conditions mentioned in the main document, the conditions in force in the Kerala PWD would also apply. The said clause goes on to clarify that, where there are similar conditions, mentioned both in the PWD and the Bid documents, the conditions given in the bid document will prevail. The said Clause, in my opinion, only envisages that when the conditions in force in Kerala PWD are made applicable to the contract in question, those conditions would supplement the conditions already specified in the GCC. Further, although the additional conditions mentioned in the Annexure to Section 7 are made applicable to the contract, such conditions, when inconsistent with the other clauses already forming the GCC (without the annexure), would have to yield to the clauses in the GCC. The question that then arises is as regards the effect of the last sentence in Clause 68, which refers to the appending of the Annexure to the GCC. In my view, 10 **AR.No.71 OF 2018** the said Annexure only serves the purpose of appending to the GCC, the conditions in force in the Kerala PWD, which have a bearing on the contract entered into between the parties in the instant case. It is in the nature of additional conditions incorporated in the GCC so as to take care of situations that might have been omitted in the GCC and with a view to supplement the conditions in the GCC. In the event of a conflict between the conditions enumerated in the Annexure and the conditions enumerated in the GCC without the annexure, the latter must prevail in view of the express words used in Clause 68 of the GCC. Accordingly, in the event of a conflict between Clause 24 of Annexure 1 to the GCC, that deals with arbitration of specific claims, and Clause 24 of the GCC that deals with resolution of all disputes arising between the parties by the civil court, it is the latter clause of the GCC that has to prevail. I am also not persuaded to accept the contention of the learned Senior counsel that there is no conflict between the two Clauses and Clause 24 of Annexure 1 only carves out two categories of claims for differential treatment in the matter of resolution of disputes. In my view, the main clause in the GCC (Clause 24) does not exclude any class/category of disputes from a resolution through the procedure mandated therein. Clause 24 of Annexure 1, therefore, cannot in any manner control or restrict the ambit of Clause 24 of the GCC. 13. There is yet another aspect of the matter. Admittedly, Clause 11 **AR.No.71 OF 2018** 24 of the GCC is the earlier clause in the agreement between the parties, appearing as it does, before Clause 24 of Annexure 1 to the GCC. It is trite that when there are two clauses in an agreement that conflict with each other, the court must take the earlier clause as expressing the true intention of the parties ( **See** : **Radha Sundar Dutta v. Mohd. Jahadur Rahim and Others - AIR 1959 SCC 24** and **His Highness Yeshwant Rao Ghorpade v. Commissioner of Wealth Tax, Bangalore - AIR 1967 SCC 135** ). The upshot of the above discussion is that, I find the agreement between the parties to be one for resolution of disputes through amicable settlement, at first instance, and on its failure, through the local Court, which on the facts of the instant case is the civil court in Kochi. There being no arbitration agreement between the parties, as discernible from the contractual documents made available before me, I am constrained to hold that the request for arbitration cannot be entertained. The Arbitration request therefore fails and is accordingly dismissed. Sd/- ## **A.K.JAYASANKARAN NAMBIAR JUDGE** mns 12 **AR.No.71 OF 2018** ## **APPENDIX** ## **PETITIONERS ANNEXURES** **ANNEXURE -I TRUE COPY OF THE LETTER OF ACCEPTANCE (NO.KSUDP/1253/08/COC DATED 06.11.2013** **ANNEXURE -1I TRUE COPY OF THE CONTRACT AGREEMENT NO.07/201314/ADDL.PM/KOCHI DATED 26.11.2013 ALONG WITH RELEVANT PORTION OF ARBITRATION CLAUSE** **ANNEXURE -III TRUE COPY OF THE MINUTES OF MEETING OF THE 55TH EMPOWERED COMMITTEE DATED 18.02.2016** **ANNEXURE -IV TRUE COPY OF THE ORDER NO.ADDL.PM/KSUDP/1279/B DATED 11.05.2016 OF THE 1ST RESPONDENT** **ANNEXURE -V TRUE COPY OF THE LETTER NO.MMC-C/SL/18/2279 DATED 23.07.2018 ADDRESSED TO THE 1ST RESPONDENT** **ANNEXURE -VI TRUE COPY OF THE LETTER NO.MMC-C/SL/18/2280 DATED 23.07.2018 ADDRESSED TO THE 1ST RESPONDENT** **ANNEXURE VII TRUE COPY OF THE RELEVANT PAGES OF THE CONTRACT AGREEMENT NO.07/2013-14/ADDL.PM/KOCHI** **ANNEXURE VIII TRUE COPY OF THE LETTER NO.MMC-C/SL/18/2279 DATED 27.07.2018 RESPONDENTS EXHIBITS:** **ANNEXURE R1(A): TRUE COPY OF THE AGREEMENT DATED 26.11.2013 EXECUTED BY THE PETITIONER** **ANNEXURE R1(B): TRUE COPY OF THE STANDARD BIDDING DOCUMENTS** **ANNEXURE R1(C) A TRUE COPY OF THE NOTICE SENT TO THE PETITIONER** **ANNEXURE R1(D) TRUE COPY OF THE REPLY OF THE PETITIONER DATED 07.04.2016** **ANNEXURE R2(A) TRUE COPIES OF THE RELEVANT PAGES OF THE CLAUSE 24.4 INCORPORATED IN PARTICULAR CONDITIONS OF CONTRACT** **ANNEXURE R2(B) TRUE COPIES OF THE RELEVANT PAGES OF THE PARTICULAR CONDITIONS OF CONTRACT** **//TRUE COPY//** **P.A TO JUDGE**