M/S. WEBUILD (P) LTD. & T.K. RAJAN v STATE OF KERALA & MISSION DIRECTOR AMRUT

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE SMT. JUSTICE P.V.ASHA** **THURSDAY ,THE 29TH DAY OF NOVEMBER 2018 / 8TH AGRAHAYANA, 1940** ## **AR.No. 40 of 2018** ## **PETITIONER/S:** **M/S. WEBUILD (P) LTD. AND T.K. RAJAN (JOINT VENTURE HAVING ITS REGISTERED OFFICE AT T.C.16/713, JAGATHY, THIRUVANANTHAPURAM, REPRESENTED BY SRI.C.KAMALASANAN, MANAGING DIRECTOR, WEBUILD (P)LTD., AGED 79 YEARS, S/O.LATE CHELLAPPAN, RESIDING AT SRUTHI, T.C.16/712, JAGATHY, THIRUVANANTHAPURAM-695014.** **BY ADVS. SRI.A.N.RAJAN BABU SRI.A.R.EASWAR LAL SRI.P.GOPALAKRISHNAN (MVA)** ## **RESPONDENT/S:** **1 STATE OF KERALA REPRESENTED BY THE SECRETARY, URBAN AFFAIRS DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM-695001.** **2 THE MISSION DIRECTOR AMRUT, STATE MISSION MANAGEMENT UNIT, T.C.NO.15/166, VEPINCHIKA ANNEX, ALTHARA NAGAR, VELLAYAMBALAM, THIRUVANANTHAPURAM-695010.** ## **OTHER PRESENT:** **SPL.GP.SRI.K.V.MANOJ KUMAR** **THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 29.11.2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **AR.No. 40 of 2018** 2 ## **O R D E R** The applicant entered into a contract with the 2[nd] respondent for executing certain road improvement works. As there arose disputes with respect to the rates of the work, the applicant filed an Arbitration Request No.53 of 2015 relying on Clause 24 of Annexure-B agreement. 2. This Court as per Annexure-F judgment after interpreting Clause 24 and Section 7 of the Arbitration and Conciliation Act, 1996 ('the Act' for short), found that there is no agreement for arbitration. In Paragraph 5 of the order, it was found as follows: > 5. The above provision clearly indicates that there must be an arbitration agreement in either of the form referred therein to resolve the dispute through arbitration. Merely because a clause in the agreement refers to an award that does not mean the parties have agreed for resolution through the arbitration. It is to be noted that a settlement agreement arrived between the parties during the process of conciliation, is also having the status of arbitral award (See Section 74 of the Arbitration and Conciliation Act). **AR.No. 40 of 2018** 3 3. It was found that in the absence of any definite understanding that the dispute should be referred to arbitration, this Court cannot act upon the arbitration request and accordingly, the request was rejected. 4. In this application it is stated that applicant could not point out the provisions contained in Clause-68.1 of Annexure-B agreement-the general conditions of contract, Form No.83 notice under the Kerala Public Works (Building and Local Works Department), inviting tender and Clause 73 of MDSS and could not canvass the position that those Clauses would amount to an agreement as provided under Section 7(5) of the Act. Pointing out these, applicant had filed RP No.993 of 2017 for reviewing Annexure-F order in AR.No.53 of 2015. The Review Petition was rejected as per Annexure-I order, as there is no provision for a review of an order in an arbitration request. While rejecting the same, it was observed that applicant **AR.No. 40 of 2018** 4 would be at liberty to canvas all points raised in the review petition in the appropriate forum. This arbitration request is filed thereafter, after submitting a representation before the 2[nd] respondent. 5. The contention of the applicant is that, Clause 68.1 of the general conditions of contract in Annexure-B, read with Clause 8 of Form 83 read with Clause 73 of MDSS and Section 7 (5) of the Act makes the disputes arbitrable and therefore it can seek appointment of an Arbitrator by filing a fresh Arbitration Request. 6. Clause 8 of the notice inviting tenders in Form No. 83 of the Kerala Public works (Building and L.W) Department), as provided in Annexure-B read as follows: “The tender shall examine closely the Madras Detailed Standard Specifications, and also the Standard Preliminary Specification contained therein and sign the Divisional Office copy of the Madras Detailed Standard Specifications and its addenda volume in token of such study before submitting his tender unit rates which shall be for finished work in site. He shall also carefully study the drawings and additional specifications and all the documents, which form part of the agreement to be entered into **AR.No. 40 of 2018** 5 by the accepted tenderer. The Madras Detailed Standard Specifications and other documents connected with the contract such as specifications plans descriptive specification sheet regarding materials, etc. can be seen at any time during office hours on office days in the office of the Executive Engineer/Assistant Engineer ...... Division/Subdivision. A copy of the set of contract documents can also be had on payment of Rs.----- for each set.” 7. Relying on Clause 73 of MDDS (Madras Detailed Standard Specifications), which is produced as Annexure-J, along with IA No.20 of 2018, applicant claims that any dispute raised in respect of the contract is to be resolved by arbitration. 8. It is also pointed out that, as per Clause 47 of Annexure-B agreement, the notice in Form No.83 inviting tenders shall form part of the agreement. Therefore, it is argued that in view of the order Anneure-I in the review petition, allowing the applicant to raise all the points, this arbitration request is liable to be allowed. 9. The respondents have filed a counter affidavit stating that, once this Court had already considered the request of the applicant and rejected **AR.No. 40 of 2018** 6 the same, applicant cannot be permitted to re-agitate the same. 10. In the RP.No.993 of 2017 filed by applicant respondents had filed Annexure-R2(a) counter affidavit in which it was stated in paragraphs 4, 5 and 6 as follows: 4. Clause 24.3 specifically provides “dispute or difference arising out of this contract or in connection there with and which cannot be amicably settled according to Clause 24.1 and 24.2 shall be finally settled **through local court of law.”** Resulting award shall be final and binding on the party and shall be in lieu of any other remedy. The location of the Court is notified in Clause 24.4. Therefore, the parties to the contract consciously excluded the arbitration agreement, and it was decided that only local Civil Court will have jurisdiction to resolve the dispute between the parties. 5. Clause 2.3 of the General Conditions of Contract provides the documents forming the contract shall be interpreted in the following **order of priority;** (a) Agreement - (b) Letter of acceptance (c) Contractor's Bid - (d) Particular Conditions of Contractor (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. 6. GCC 2.3 provides The following documents, also form part of the contract. i) any other written agreement reached between the **AR.No. 40 of 2018** 7 employer and the contractor further to the award to contract. ii) variation orders issued during the course of execution of the contract. Therefore neither Form 83 nor MDSS form part of the Contract. Further the parties had incorporated special conditions as per G.O(MS) 53/88/PW&T dated 30.09.1988, which provides: “All disputes and difference arising out of the contract that may be executed in pursuance of the contract shall be settled **only by Civil Court** in whose jurisdiction the work covered by the contract situated for any hours the jurisdiction contract was entered into/in case the work extends to the jurisdiction of more than one Court”. True copy of the same is produced herewith and marked as **Annexure R2(a).** Therefore arbitration has been specifically excluded specifically and the parties have specifically agreed that only Civil Court is having jurisdiction to adjudicate all disputes and differences arising out of the Contract. ## 11. Respondents have produced Ann.R2(d), which contains special conditions as per ## G.O.MS.No.53/88/PW&T dated 30.09.1998, which reads as ## follows: All disputes and differences arising out of the contracts that may be executed, in issuance of the contract shall be settled only by the Civil Court in whose jurisdiction the work covered by the contract is situated for in whose jurisdiction the contract was entered in case the work extends to the jurisdiction of more than one Court. Therefore, it is stated that the contentions raised by the petitioner for appointment of Arbitrator relying **AR.No. 40 of 2018** **==> picture [6 x 8] intentionally omitted <==** on Clause 68 and Clause 73 of the MDSS are unsustainable. It is also stated that Form 83 does not form part of the contract as provided in Clause 2.3 of GCC and it is only a notice inviting tender; it does not have any binding force after execution of the contract. It is further stated that MDSS is not at all relevant and parties are not bound by it. As long as MDSS does not form part of the contract, Clause 73 cannot be relied on. It is also stated that even assuming that Form 83 is part of the contract, in view of Clause 24, the provisions contained in GCC including Clause 68 or Form 83 would be irrelevant. It is stated that Form 83 is a standard form applicable to building and local work, for the purpose of building only and it is not signed by the parties. 12. The contention of the applicant is that under Section 7(5) of the Act any provision for arbitration which is referred to in a contract can also be considered as an arbitration Clause. **AR.No. 40 of 2018** 9 ## 13. I have heard the contentions on either side and considered the contentions. Petitioner relies on Section 7(5) of the Act, which reads as follows: “The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.” 14. In Ann.B agreement, the procedure for disputes is specifically provided in Clause 24, which ## read as follows: - “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 settlement. - 24.3 Any dispute or difference arising out of this contract or in connection therewith and which cannot be amicable 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). 15. Clause 24 is already interpreted in Annexure- **AR.No. 40 of 2018** 10 F order and it is found that there is no agreement for arbitration. Thus under Clause 24.3 of Annexure B all the disputes and differences arising out of the contract and those which could not be amicably settled shall be finally settled through local court of law. Annexure A is the agreement signed by both the parties, which provides for the documents which would form part of the agreement and that the said agreement would prevail over all other contract documents. Clause 73 of MDSS cannot be said to be an agreement for arbitration as defined under Section 7(5), as alleged by the petitioner referring to Clause 68 of the general conditions or Clause 8 of Form 83 or Clause 73 of MDSS. 16. In this context the judgment relied on by the learned Government Pleader **in M. K. Abraham & Co V State of Kerala:** [(2009)9 SCC 636] and **Kaikkara Construction Company v. State of Kerala** [2010 (4) KLT 373] are relevant. In Abraham's case the Apex Court **AR.No. 40 of 2018** 11 discussed the issue relating to the agreements of similar nature and concluded that in Kerala, if it is a PWD contract, even though MDSS which is made a part of the contract, specifically provided for arbitration in Clause 73, the same is held to be inapplicable, having regard to the subsequent additions incorporated by the Government of Kerala in 1986 and 1988 barring arbitration. In paragraph 21 it was held as follows: **21.** If a contract consists of a printed form with cyclostyled amendments, typed additions and deletions and handwritten corrections, an endeavour shall be made to give effect to all the provisions. However, in the event of apparent or irreconcilable inconsistency, the following rules of construction will normally apply: - ( _i_ ) The cyclostyled amendments will prevail over the printed terms; ( _ii_ ) The typewritten additions will prevail over the printed terms and cyclostyled amendments; ( _iii_ ) Handwritten corrections will prevail over the printed terms, cyclostyled amendments and typewritten additions. xxxxxx xxxxxxxx When such a standard form is used with reference to a specific contract, it becomes necessary to modify the standard/general terms by making additions/alterations/deletions, to provide for the special features of that contract. This is done either by way of an attachment of an annexure to the standard printed form, incorporating the changes, or by carrying out the required additions/alterations/deletions in the standard form itself. Such additions/alterations/deletions are done **AR.No. 40 of 2018** 12 by typing/stamping/hand. 17. However in that case the contract was with National Highway Authority and it was found that there was a cyclostyled slip signed by both parties providing for arbitration. is attached to the printed articles of agreement. Therefore the cyclostyled slip prevailed. In the present case Ext.R2(d) specifically excludes arbitration. 18. In the judgment in **Kaikkara Construction Company** 's case (supra), the designated Judge while considering an Arbitration Request, found that a printed form was attached to the the contract executed between the parties on typed stamp paper in which it was provided that parties to the contract agree that arbitration shall not be a means of settlement. Relying on the judgment in **M.K.Abraham** 's case it was held that when a printed form was attached to the contract executed between the parties, which contained a Clause excluding arbitration, it would prevail over **AR.No. 40 of 2018** 13 the general and special condition attached to the contract containing arbitration request. 19. In the present case the parties have consciously entered into Annexure-A agreement. Annexure-B is the general conditions of contract. Clause 2.3 of Annexure-B which provides for the order of priority under which the documents forming the contract shall be interpreted. The priority (a) is agreement. The particular conditions of contract is priority no. (d); general conditions of contract is priority (e) and specifications is priority (f). Clause 24 is contained in the general conditions of contract which comes under priority No.(e). The provision for arbitration relied on by the petitioner is Clause 73 in the specifications Annexure-J. It comes under priority No.(f) with priority below the particular condition in Annexure-R2(d) which specifically provides for settlement of disputes arising out of the contract through civil court only **AR.No. 40 of 2018** 14 and the general conditions which contains Clause 24, which also does not provide for arbitration. In view of Annexure-R2(d) arbitration is specifically excluded. There is no other Clause in any of the documents having higher priority which provides for arbitration. Going by the judgment in **Abraham** 's case (supra), Ext.R2(d) prevails over all other agreements and excludes arbitration. 20. In the above circumstances, the contentions raised by the learned counsel for the petitioner relying on the judgment in **Groupe Chimique Tunisien SA v. Southern Petrochemicals Industries Corpn. Ltd.** [AIR 2006 SC 2422], that a subsequent arbitration request can be filed when the party was on mistaken understanding does not in any way help the petitioner. The judgment of the Patna High Court in **State of Bihar v Shiv Shankar Constructions Co.(P) Ltd** also does not in any manner help the applicant, for the purpose of this request. **AR.No. 40 of 2018** 15 21. Even assuming that the petitioner can approach this Court with a subsequent Arbitration Request, in the light of the provisions in AnnexureR2(d) the Special Conditions which provides that disputes shall be settled only through the civil court and even Clause 24 of general conditions specifically bars arbitration, there is no basis for this request. In the above circumstances, as there is no agreement based on which arbitrator can be appointed, the Arbitration Request is rejected. Sd/- **P.V.ASHA, JUDGE.** AS **AR.No. 40 of 2018** 16 ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** - **ANNEXURE-A A TRUE COPY OF AGREEMENT NO.10/PIU/KSUDP/URT DATED 7/11/2008** - **ANNEXURE-B TRUE COPY OF THE CLAUSE 46 OF THE GENERAL CONDITIONS OF CONTRACT (GCC).** - **ANNEXURE-C TRUE COPY OF THE RELEVANT PAGES OF THE PARTICULAR CONDITIONS OF CONTRACT (PCC)** - **ANNEXURE-C1 TRUE COPY OF THE KSUDP CIRCULAR DATED 15/6/2011** - **ANNEXURE-D TRUE COPY OF THE JUDGMENT DATED 20/7/2015 IN WP(C) NO. 24453/2012 OF THIS HONOURABLE COURT.** - **ANNEXURE-E TRUE COPY OF THE LETTER DATED 24/9/2015.** - **ANNEXURE-F TRUE COPY OF THE JUDGMENT DATED 31/3/2016 IN A.R. 53/2015 OF THIS HONOURABLE COURT.** - **ANNEXURE-G TRUE COPY OF THE LETTER DATED 27/7/2016 ADDRESSED TO PROJECT MANAGER** - **ANNEXURE-H TRUE COPY OF THE LETTER NO. 261/2017 DATED 7/10/2017 SENT BY THE 2ND RESPONDENT.** **ANNEXURE-I TRUE COPY OF ORDER DATED 30/1/2018 IN R.P.NO.993/2017 IN AP NO.53/2015. ANNEXURE-J TRUE COPY OF THE LETTER DATED 27/7/2016 ADDRESSED TO PROJECT MANAGER. ANNEXURE-K TRUE COPY OF THE RELEVANT PORTION OF M.D.S.S. CONTAINING CLAUSE 73.** **AR.No. 40 of 2018** 17 ## **RESPONDENT'S/S EXHIBITS:** **ANNEXURE-R2(a)** TRUE COPY OF THE COUNTER AFFIDAVIT FIELD IN RP NO. 993/2017 IN AR NO. 53/2015. **AR.No. 40 of 2018** 18 **ANNEXURE-R2(b)** TRUE COPY OF THE JUDGMENT DATED 28/2/2017 **ANNEXURE-R2(c)** TRUE COPY OF THE ORDER NO. LO-261/2017/KSUDP DATED 25/10/2017 **ANNEXURE-R2(d)** TRUE COPY OF THE G.O.(MS) 53/88/PW AND T DATED 30/9/1988. ANNEXURE K COPY OF THE DELAY ANALYSIS REPORT BY THE PROJECT MANAGER