TaxTMI 
TaxTMI 
2021 (11) TMI 1174
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....) was also relied upon that no other person than the one appointed by MD/Chief Engineer shall act as an arbitrator and the matter shall not be liable to be referred to arbitration, if for any reason it was not possible to appoint such an arbitrator and the parties are free to avail the civil remedy. 4. In CWP-13539-2021 challenge has been raised to the Clause 25A(7) on the ground that it arbitrary and against the object of the 1996 Act and liable to be quashed, since it provided a clause for furnishing pre-deposit security fee @ 3% of the total amount claimed. The same was to be adjusted against the cost or any amount awarded against the contractor and remaining amount was to be refunded to the contractor within one month from the date of the award. 5. Counsel for the contractor/petitioner, Mr. Gupta has relied upon the judgment passed in 'M/s. ICOMM Tele Ltd. Vs. Punjab State Water Supply & Sewerage Board and another', 2019 (4) SCC 401, to submit that in similar circumstances Clause 25(vii) had been struck down by the Apex Court while setting aside the judgment of this Court, which had dismissed the writ petition by holding that the tender condition cannot be said to be ....
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.... be reckoned after 15 days of issuing the letter of allotment. The arbitration clause had been invoked on 05.09.2018 (Annexure P-3) by filing it before the Executive Engineer and then before the Chief Engineer of the Corporation on 12.11.2018 (Annexure P-4). The said claim was rejected on 17.01.2019 (Annexure P-5) on the ground that the scheduled date of completion was 16.02.2017, but work was completed on 17.03.2017 and, therefore, penalty of 2% of Rs. 3,31,987/- was deducted from the final bill. It was further mentioned that the claim was made after a gap of 1½ years and no representation had been made to the SE (Civil) and fall back had been made on Clause 25A (10) on the ground that the same had to be made within six months. Another request was made on 18.02.2019 (Annexure P-6), wherein the plea taken was that the final bill was still unpaid and the prayer for appointment of an arbitrator was made, which was rejected vide letter dated 08.04.2019 (Annexure P-7) leading to the filing of the arbitration petition on 24.04.2019. 8. The plea taken in the written statement was that the petitioner was required to complete the work by 16.02.2017 but he had completed the same on ....
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....r reference or such a claim or dispute to arbitration within a period of 60 days of his receipt of decision of the Engineer-in-charge or of the competent authority in writing. In case the contractor fails to make such a written request with in the stipulated period, the decision so conveyed to him by the Engineer-in-charge will be final and will not be a subject matter of arbitration at all. In case the Engineer-in-charge fails to convey his decision or that of the competent authority in writing with in a period of ninety days as referred to above, the contractor may make a request to the MD/Chief Engineer of HVPNL with in 60 days of expiry of the said 90 days to refer the matter to arbitration and the same shall be referred to arbitration in the manner provided herein after. The work under the contract shall not be stopped and shall continue during the arbitration proceedings. 2. The reference of dispute or difference referred to above for arbitration to an officer not below the rank of a Superintending Engineer of HVPNL shall be by designation. It will not be a valid objection to any such reference to the arbitration that the arbitrator so appointed is a servant of HVPNL, or he....
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....ll be recoverable from any sum due to such party under this contract or other contract. 9. The venue of the arbitration shall be such place or places as may be fixed by the Arbitrator from time to time at his sole discretion. 10. Neither party shall be entitled to bring a claim for arbitration if no move in writing has been made for that purpose to the MD/Chief Engineer of HVPNL with-in 6 months:- a) Of the date of completion of work as certified by the Engineer in charge or b) Of the date of abandonment of work or c) Of its non-commencement with in 6 months from the date of abandonment, or written order by the Engineer in charge or his representative to commence the works as applicable or d) Of the completion of work through any alternative agency or means after withdrawal of work from the contractor as a whole or in part and or its recession, or e) Of receiving any intimation from the Engineer-in-charge that final payment due to or recovery form the contractor has been determined. Whichever of (a) to (e) above is the latest in the matter of time. And if the matter is not referred to arbitration with in period prescribed above, all the rights and claims of the part....
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....he parties would be at liberty to avail the civil remedy. Sub-clause (7) provides the furnishing of the security fee @ 3% of the total amount claimed by contractor and the sum so deposited by the contractor was to be adjusted against the costs and any amount awarded against the contractor on the termination of the arbitration proceedings. The remaining amount was to be refunded to the contractor. Sub-clause (10) provided the limitation period to the extent that neither party shall be entitled to make a claim for arbitration if no move in writing has been made within six months, on the completion of work, date of abandonment of work or non-commencement of work or the completion of work through the alternative agency or receiving any intimation from the Engineer-In-Charge or recovery from the contractor is determined. Strangely sub-clause (13) refers to Arbitration Act, 1940, even though the allotment is of the year 2016. 11. The authority as such of the Managing Director to act an arbitrator or his nominee has been diluted in totality by the Apex Court in a string of judgments. Reliance can be placed upon the judgment passed in 'M/s. Voestalpine Schienen Gmbh Vs. Delhi Metro Ra....
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....Relevant portion of the said judgment reads as under:- "57. In such a context, the fulcrum of the controversy would be, can an ineligible arbitrator, like the Managing Director, nominate an arbitrator, who may be otherwise eligible and a respectable person. As stated earlier, we are neither concerned with the objectivity nor the individual respectability. We are only concerned with the authority or the power of the Managing Director. By our analysis, we are obligated to arrive at the conclusion that once the arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. The arbitrator becomes ineligible as per prescription contained in Section 12(5) of the Act. It is inconceivable in law that person who is statutorily ineligible can nominate a person. Needless to say, once the infrastructure collapses, the superstructure is bound to collapse. One cannot have a building without the plinth. Or to put it differently, once the identity of the Managing Director as the sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated. Therefore, the view expressed by the High Court is not sustainable and we say so." 13. In ....
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....an appointing authority. We thus have two categories of cases. The first, similar to the one dealt with in TRF Limited where the Managing Director himself is named as an arbitrator with an additional power to appoint any other person as an arbitrator. In the second category, the Managing Director is not to act as an arbitrator himself but is empowered or authorised to appoint any other person of his choice or discretion as an arbitrator. If, in the first category of cases, the Managing Director was found incompetent, it was because of the interest that he would be said to be having in the outcome or result of the dispute. The element of invalidity would thus be directly relatable to and arise from the interest that he would be having in such outcome or decision. If that be the test, similar invalidity would always arise and spring even in the second category of cases. If the interest that he has in the outcome of the dispute, is taken to be the basis for the possibility of bias, it will always be present irrespective of whether the matter stands under the first or second category of cases. We are conscious that if such deduction is drawn from the decision of this Court in TRF Lim....
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....e sustained or not. 17. The argument raised by Mr. Mahajan that limitation would stand in the way of this Court to appoint an arbitrator as the claim is belated, is without any basis. It is not disputed that the work was completed on 17.03.2017 though beyond the scheduled date of completion i.e. 16.02.2017. Resultantly, penalty of 2% was put and deduction was made of Rs. 3,31,987/- from the final bill. The petitioner had filed the application on 05.09.2018 to the Executive Engineer and on account of non-decision of the claim of the petitioner, an application had then been moved to the Chief Engineer on 12.11.2018 (Annexure P-4). 18. A perusal of the same would go on to show that the matter was not settled by the said officers and the same was liable to be referred for arbitration for redressal of the grievances. In the subsequent communication the petitioner had also in para No. 4 agreed that security amount of 3% which was to be deposited as per terms and conditions of the agreement would be deposited prior to the Learned Arbitrator entering into reference. Thus, it cannot be said that there was any inordinate delay on the part of the contractor as the claim was made after a gap....
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....v. Board of Trustees for Port of Calcutta, (1993) 4 SCC 338, that the period of limitation for an application for appointment of arbitrator under Sections 8 and 20 of the 1940 Act commences on the date on which the "cause of arbitration" accrued, i.e. from the date when the claimant first acquired either a right of action or a right to require that an arbitration take place upon the dispute concerned. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Having perused through the relevant precedents, we agree that on a certain set of facts and circumstances, the period during which the parties were bona fide negotiating towards an amicable settlement may be excluded for the purpose of computing the period of limitation for reference to arbitration under the 1996 Act. However, in such cases the entire negotiation history between the parties must be specifically pleaded and placed on the record. The Court upon careful consideration of such history must find out what was the 'breaking point' at which any reasonable party would have abandoned efforts at arriving at a settlement and contemplated referral of the dispute for arbitration. This 'breaking point' would then be treated a....
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....the arbitral tribunal will conclude the proceedings within a period of 18 months. In view of the legislative intent, the period of 3 years for filing an application under Section 11 would run contrary to the scheme of the Act. It would be necessary for Parliament to effect an amendment to Section 11, prescribing a specific period of limitation within which a party may move the court for making an application for appointment of the arbitration under Section 11 of the 1996 Act." 22. It is to be noticed that in the present case the rejection to appoint an arbitrator was only on 08.04.2019 (Annexure P-7) on the ground of limitation and the present petition was filed on 24.04.2019 and therefore, there is no such inordinate delay and the objection raised by the respondent is without any basis, keeping in view the above discussion. 23. Resultantly, the issue of pre-deposit now arises. Counsel for the petitioner has heavily relied upon the judgment passed in M/s. ICOMM Tele Ltd. (supra), which has been rightly distinguished by the learned counsel for the respondent. The issue of pre-deposit was subject matter of consideration before two Division Benches. Firstly in the case of 'Nat....
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....ainst it. Thus, the clause was held to be wholly arbitrary. Relevant portion of the said judgment reads as under:- "23. The important principle established by this case is that unless it is first found that the litigation that has been embarked upon is frivolous, exemplary costs or punitive damages do not follow. Clearly, therefore, a "deposit-at-call" of 10% of the amount claimed, which can amount to large sums of money, is obviously without any direct nexus to the filing of frivolous claims, as it applies to all claims (frivolous or otherwise) made at the very threshold. A 10% deposit has to be made before any determination that a claim made by the party invoking arbitration is frivolous. This is also one important aspect of the matter to be kept in mind in deciding that such a clause would be arbitrary in the sense of being something which would be unfair and unjust and which no reasonable man would agree to. Indeed, a claim may be dismissed but need not be frivolous, as is obvious from the fact that where three arbitrators are appointed, there have been known to be majority and minority awards, making it clear that there may be two possible or even plausible views which would....