M/S West Coast Dredging Company v. Dredging Corporation of India Limited and The Project Manager, Dredging Corporation of India

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR. JUSTICE SHAJI P.CHALY** **FRIDAY, THE 23RD DAY OF JUNE 2017/2ND ASHADHA, 1939** **AR.No. 71 of 2016 () ---------------------** **APPLICANT: ---------** **M/S WEST COAST DREDGING COMPANY, 27/3202B, KUNNELAKAT BUILDINGS, M.G.ROAD, ATLANTIS, KOCHI-682 015, KERALA, REPRESENTED BY THE MANAGING PARTNER, K.V.THOMAS.** **BY ADVS.SRI.K.L.VARGHESE (SR.) SMT.SANTHA VARGHESE SRI.RAHUL VARGHESE SRI.RANJITH VARGHESE** **OPPOSITE PARTIES/RESPONDENTS:** **-----------------------------** **1.DREDGING CORPORATION OF INDIA LIMITED, "DREDGE HOUSE", PORT AREA, VISAKHAPATINAM-530 035, REPRESENTED BY GENERAL MANAGER (OPS).** **2.THE PROJECT MANAGER, DREDGING CORPORATION OF INDIA, PROJECT OFFICE, COCHIN-18.** ## **BY ADVS. SRI.B.RAMACHANDRAN, CGC SRI.S.KRISHNAMOORTHY** **THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 23-06-2017, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **EL** ## **AR.No. 71 of 2016 ()** ## **---------------------** ## **APPENDIX** ## **PETITIONER(S)' ANNEXURES** **-----------------------** |**ANNEXURE A1**|**TRUE COPY OF THE LETTER OF AWARD OF WORK**| |---|---| ||**DT.28.10.2014 ISSUED BY THE 1ST**| ||**RESPONDENT TO THE APPLICANT.**| |**ANNEXURE A2**|**TRUE COPY OF THE CONTRACT AGREEMENT**| ||**ENTERED INTO BETWEEN THE APPLICANT AND**| ||**THE 1ST RESPONDENT ON 19.11.2014.**| |**ANNEXURE A3**|**TRUE COPIES OF THREE LETTERS**| ||**DT.26.1.2015, 9.2.2015 AND 13.2.2015**| ||**ISSUED BY THE APPLICANT TO THE**| ||**RESPONDENTS.**| |**ANNEXURE A4**|**TRUE COPIES OF FEW OF THE CORRESPONDENCE**| ||**BETWEEN THE APPLICANT AND THE**| ||**RESPONDENTS.**| |**ANNEXURE A5**|**TRUE COPY OF THE STATEMENT SHOWING THE**| ||**BILL PASSED AND DEDUCTIONS ON THE**| ||**APPLICANT.**| |**ANNEXURE A6**|**TRUE COPY OF THE LETTER DT.30.7.2015**| ||**ISSUED BY THE 1ST RESPONDENT TO THE**| ||**APPLICANT.**| |**ANNEXURE A7**|**TRUE COPY OF THE LETTER DT.10.8.2015**| ||**ISSUED BY THE APPLICANT TO THE 1ST**| ||**RESPONDENT.**| |**ANNEXURE A8**|**TRUE COPIES OF THE FEW OF THE**| ||**CORRESPONDENCE BETWEEN THE APPLICANT AND**| ||**THE RESPONDENTS.**| |**ANNEXURE A9**|**TRUE COPY OF LETTER DT.10.10.2015 ISSUED**| ||**BY THE 1ST RESPONDENT TO THE APPLICANT.**| |**ANNEXURE A10**|**TRUE COPY OF THE LETTER DT.27.12.2015**| ||**ISSUED BY THE APPLICANT TO THE 2ND**| ||**RESPONDENT.**| |**ANNEXURE A11**|**TRUE COPY OF THE LETTERS DT.28.12.2015**| ||**ISSUED BY THE APPLICANT TO THE 2ND**| ||**RESPONDENT.**| |**ANNEXURE A12**|**TRUE COPY OF THE LETTER DT.25.1.2016**| ||**ISSUED BY THE 2ND RESPONDENT TO THE**| ||**APPLICANT.**| |**ANNEXURE A13**|**TRUE COPY OF LETTER DT.28.1.2016 ISSUED**| ||**BY THE APPLICANT TO THE 1ST RESPONDENT.**| |**ANNEXURE A14**|**TRUE COPY OF THE LETTER DT.5.2.2016**| ||**ISSUED BY THE 2ND RESPONDENT TO THE**| ||**COMMAND PLANS OFFICER.**| **AR.No. 71 of 2016 ()** **--------------------** - **ANNEXURE A15 TRUE COPY OF THE LETTER DT.23.4.2016 ISSUED BY THE APPLICANT TO THE 1ST RESPONDENT.** - **ANNEXURE A16 TRUE COPY OF LETTER DT.25.4.2016 ISSUED BY THE 2ND RESPONDENT TO THE APPLICANT.** - **ANNEXURE A17 TRUE COPY OF LETTER DT.2.5.2016 ISSUED BY THE APPLICANT TO THE 2ND RESPONDENT.** - **ANNEXURE A18 TRUE COPY OF THE LETTER DT.21.5.2016 ISSUED BY THE APPLICANT TO THE 1ST RESPONDENT.** - **ANNEXURE A19 TRUE COPY OF LETTER DT.26.5.2016 ISSUED BY THE APPLICANT TO THE 1ST RESPONDENT.** - **ANNEXURE A20(A) TRUE COPY OF ACKNOWLEDGEMENT RECEIPT EVIDENCING RECEIPT OF ANNEXURE A19 LETTER BY THE CHAIRMAN & MANAGING DIRECTOR OF THE RESPONDENTS.** - **ANNEXURE A20(A) TRUE COPY OF ACKNOWLEDGEMENT RECEIPT EVIDENCING RECEIPT OF ANNEXURE A19 LETTER BY THE RESPONDENT.** - **ANNEXURE A21 ATTESTED TRUE COPY OF THE ARBITRATION CLAUSE NO. 20 OF THE GENERAL CONDITIONS OF CONTRACT AND CLAUSE 5 OF THE SPECIAL CONDITIONS OF CONTRACT IN THE AGREEMENT BETWEEN THE PARTIES.** - **ADDL. ANNEXURE A22 TRUE COPY OF LETTER DATED 25.4.2016 ISSUED BY THE APPLICANT TOT HE 2ND RESPONDENT** - **ADDL. ANNEXURE A23 TRUE COPY OF LETTER DT.27.4.2016 ISSUED BY THE 2ND RESPONDENT TO THE APPLICANT** - **ADDL. ANNEXURE A24 TRUE COPY OF COVERING LETTER DATED 2.5.2016 AND 'NO DUES/NO CLAIM CERTIFICATE' DT.2.5.2016 ISSUED BY THE APPLICANT TO THE 2ND RESPONDENT** - **ADDL. ANNEXURE A25 TRUE COPY OF LETTER DT.26.05.2016 ISSUED BY THE APPLICANT TO THE 1ST RESPONDENT** - **RESPONDENT(S)' ANNEXURES -----------------------ANNEXURE R1(A) TRUE COPY OF THE LETTER NO.WCDC/DCI/CSD/2016/60 DATED 2.5.2016** **TRUE COPY** **P.S. TO JUDGE** **EL** ## **SHAJI P. CHALY, J.** -------------------------------------------------- ## **A.R. No.71 of 2016 ----------------------------------------------Dated this the 23[rd] day of June, 2017** ## **O R D E R** The applicant herein and the respondents have entered into a dredging contract for two years as borne out from Annexure-A1 work order, and Annexure-A2 agreement. According to the applicant, though the work was completed in spite of want of facilities and breach of contract committed by the respondents, unconscionable amounts have been sought for recovery on the pretext of Liquidated Damages, notwithstanding the fact that the delay in completion has been caused only on account of the reasons which are borne out by contemporaneous correspondences produced as Annexures A3 series, A4 series, A7, A8 series, A-13, A-15 etc. etc. To put it short, disputes arose by and between the parties, consequent to which, applicant has issued Annexure-A7 notice, in which the disputes existing by and between the parties are narrated and requested that in view of the arbitration clause in the agreement, catering for resolution of the disputes by arbitration and as a prelude to comply with the requirement of resolution of the disputes or differences by mutual discussion, 2 **A.R. No.71 of 2016** as contemplated in Clauses 20.1 and 20.2 of the General Conditions of Contract, to resolve the disputes mutually. It is also stated therein that, if for any reason, the settlement process does not work out, the applicant will be at liberty to pursue for arbitration without further notice. However, no reply was issued by the respondents. 2. Applicant has a specific contention that the delay in completion of the work has occurred due to the default on the part of the respondents, especially certain directives were issued in restricting the dredging in certain zones, as borne out by Annexure-A9. However, in spite of these facts and on account of no fault on the part of the applicant, liquidated damages has been levied, is the thrust of the contention advanced. The applicant challenged the propriety in the levying of liquidated damages, evident from repeated correspondences like, Annexures-A7, A13 and A15. The work was done for the Navy, and there was considerable delay to take post dredging surveys and in the meanwhile, there was slippage of materials from the zones where respondent failed to deploy its dredgers, as per its commitment, evident from Annexure-A14. Thus, disputes have arisen, which, as per 3 **A.R. No.71 of 2016** Annexure-A21 agreement, have to be settled by resorting to arbitration. Thereafter, applicant has issued Annexure-A19 notice also to the respondents, which was accepted evident from Annexures-A20(a) and A20(b), postal acknowledgment receipts, requesting to resolve the dispute by resorting to arbitration as agreed upon by and between the parties. However, there was no response. Thereafter, on expiry of 30 days, applicant has approached this Court with this arbitration request. 3. A counter affidavit is filed on behalf of the respondents, and among other contentions, it is stated that there is no such claim to be settled, and as per Annexure-R1 (a), the claimant himself has given a No Dues Certificate. However, the settlement of disputes by resorting to the alternative disputes resolution mechanism provided under Annexure-A21 is not disputed by the respondents. 4. Reply affidavit is filed by the applicant, reiterating the stand adopted in the arbitration request. It is disputed therein that, consequent to issuance of No Dues Certificate, the disputes by and between the parties are settled. Various other documents are produced in order to establish that 4 **A.R. No.71 of 2016** disputes are still subsisting with respect to the liquidated damages claimed by the respondents and non-release of the Bank Guarantee furnished, Performance Security and the amount of Rs.32,29,392/- recovered towards Retention amount from the running bills of the applicant. 5. Heard learned Senior Counsel for the applicant, Sri. K.L. Varghese and the learned counsel appearing for the respondents, Sri. S. Krishnamoorthy. Perused the documents on record and the pleadings put forth by the respective parties. 6. Taking into account the rival contentions put forth by the respective counsel, the sole question to be decided is, whether consequent to Annexure-R1(a) 'No Dues Certificate' issued by the applicant, the disputes by and between the parties are subsisting. It is stated in Annexure-R1(a) that there is no dues outstanding from the 1st respondent, and therefore, requested to release the Bank Guarantees, Performance Security and the Retention amount. As I have pointed out earlier, the resolution of disputes by resorting to the provisions of the Arbitration and Conciliation Act, 1996 is not under dispute. Merely because a No Dues Certificate is issued by the applicant, that will not in any manner resolve the 5 **A.R. No.71 of 2016** disputes existing by and between the parties. Even if the recitals contained in Annexure-R1(a) are taken into account, what is stated therein is that there are no amounts due from the 1st respondent. However, the amounts detained by the 1st respondent is not admitted by the applicant. From the correspondences produced by the applicant, it is evident that the respondents have a case that respondents are entitled to retain the Retention amount, Performance Security and Bank Guarantees on account of liquidated damages. The applicant has in its communications refuted the authority of the respondents to recover any such amounts by adjudicating the issue by the respondents themselves. 7. Apparently, when there is an arbitration clause contained in the agreement entered into by and between the parties, evident from Annexure-A21, and when disputes arose by and between the parties, definitely as per the agreement entered into by and between the parties, the subject matter of the disputes are to be settled by resorting to the Dispute Resolution Mechanism, which thus means, even if the respondents detain the amount specified above, and it is disputed, the No Dues Certificate issued by the applicant will 6 ## **A.R. No.71 of 2016** not in any way manner stand in the way of adjudicating the claim raised by the applicant. Moreover, from Annexure-A16 letter issued by the 1st respondent dated 25.04.2016, it is evident that there are clear disputes existing by and between the parties with respect to the disputes remaining in respect of the delay caused in completing the work, charging of liquidated damages etc. etc. Therefore, I have no hesitation to hold that there are serious disputes existing by and between the parties on account of the contract entered into. 8. That apart, learned Senior Counsel has invited my attention to the judgment of the apex court in ' _**R.L. Kalathia and Company v. State of Gujarat**_ ' [(2011) 2 SCC 400], wherein the question with respect to issuance of “no-claim certificate/no-dues certificate” by the contractor was considered, where it is held that, issuance of any such certificate does not absolutely bar the contractor from raising genuine claims after submission of “no-claim certificate” or acceptance of final bill by mentioning “without prejudice”. 9. The communication issued by the applicant shows that, at no point of time, the applicant admitted the claims raised by the respondents in Annexure-A16 referred to above. **A.R. No.71 of 2016** 7 On the other hand, continuously, correspondences were issued by the applicant and disputed the claims raised by the respondents. 10. In that view of the matter, I am of the considered opinion that the disputes are to be resolved by appointing an arbitrator. Therefore, as mutually agreed, I appoint Justice S. Siri Jagan, former Judge of this Court as the arbitrator to resolve the disputes by and between the parties. The arbitrator shall enter on reference and resolve the disputes in accordance with law. The applicant is directed to produce a disclosure statement from the arbitrator, as is contemplated under Sec.11(8) of the Arbitration and Conciliation Act, 1996 before the Registry of this Court, and the certified copy of the order shall be issued only after securing the disclosure statement, and attaching copy along with the order. The original of the statement shall be retained with the Registry. The arbitration request is allowed accordingly. Sd/- **SHAJI P. CHALY JUDGE** St/24.06.2017