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CASE NO.: Appeal (civil)  1896 of 2008

PETITIONER: State of Rajasthan

RESPONDENT: M/s. Chiesel & Hammer Const. Company

DATE OF JUDGMENT: 10/03/2008

BENCH: ASHOK BHAN & DALVEER BHANDARI

JUDGMENT: JUDGMENT O R D E R

CIVIL APPEAL NO.1896 OF 2008 [Arising out of S.L.P.(C)No.20906 of 2006] W I T H C.A.NO.1897 OF 2008 [Arising out of S.L.P.(C)No.3081 of 2007]

       Delay condoned.         Leave granted.         State of Rajasthan has filed the present appeals.  A notice inviting tender was issu ed  for construction of Ghar Ganga Aquaduct of RMC of Chhapi Project from RP 7225 to  7915 M.  Certain time frame was given for completion of the work.  Respondent  submitted its tender which was accepted and an agreement was entered into between the  State Government and the respondent.  Since the progress of the work was very slow, the  State Govt. issued several notices requesting the contractor to execute the contract in  terms of the Agreement.  In the year 2001, the contractor is alleged to have abandoned the  work.  It is also alleged that in spite of a number of notices the respondent-contractor did   not re-start the work and instead filed Writ  Petition No.482  of 2002 before  the High  Court for  

C.A.No.1896/08 etc. .... (contd.) - 2 - appointment of an arbitrator.  A learned Single Judge of the High Court dismissed the  writ petition by holding that the High  Court is not empowered to issue any direction  regarding appointment of arbitrator in view of Section 11(6) of the Arbitration &  Conciliation Act, 1996 (’the Act’).  However, it was clarified that the petitioner was free  to  move an application before the Standing Committee constituted under Clause 23 of the  Agreement for redressal of his grievances.  It was also made clear that if he did not want  to approach the said Committee, he can move an application under Section 11(6) of the  Act before the Chief Justice of the High Court for appointment of an arbitrator.         Respondent filed an application under Section 9 of the Act before the District Judge ,  Jhalawar.  It also filed an application under Section 11(6) of the Act before the High  Court for appointment of an arbitrator.  Objections were filed by the appellant-State  before the High Court which were rejected by order dated 20th November 2003 and the  learned Single Judge directed the parties to furnish the names of the persons who could  be appointed as arbitrators.  The appellant filed an application for modification of the  order dated 20th November 2003 which was dismissed by an order dated 09th February  2005.  Both these orders are under challenge and are subject-matter of Civil Appeal  No.1897 of 2008.   

C.A.No.1896/08 etc. .... (contd.)

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- 3 -         Learned Single Judge, by order dated 13th July 2006, appointed Shri Bhagwan Das  Gupta, retired Chief Engineer, Irrigation Department, Kota, Rajasthan as the sole  arbitrator to decide the dispute.   This order is also under challenge and is subject-matter   of Civil Appeal No.1896 of 2008.         Counsel appearing for State of Rajasthan has relied on Clause 23 of the  aforementioned Agreement to contend that the dispute between the parties could have  been resolved by referring the dispute to the Empowered Standing Committee under the  said clause.  Clause 23 of the Agreement is in the following terms : "Clause 23 : If any question, difference or objection whatsoever shall, arise in  any way in connection with or arising out of this instrument or the meaning of  operation of any part thereof or the rights, duties or liabilities of either party,  then save in so far as the decision of any such matter as herein before provided  for and been so decided, every such matter constituting a total claim of  Rs.50,000/- or above, whether its decision has been otherwise provided for  and whether it has been finally decided accordingly, or whether the contract  should be terminated or has been rightly terminated and as regards the rights  or obligations of the parties as the result of such termination shall be referred  for decision to the empowered standing committee which would consist of the  following :-

(i)     Administrative Secretary concerned; (ii)    Finance Secretary or his nominee not below the rank of Deputy  Secretary; (iii)   Law Secretary or his nominee and not below the rank of Joint L.R. (iv)    Chief Engineer-cum-Addl. Secretary of the concerned Department; (v)      Chief Engineer concerned (Member-Secretary)

The Engineer-in-Charge on receipt of application along with prescribed fee  (the fee would be two percent of the  amount in  dispute not  exceeding  Rupees One Lakh)

C.A.No.1896/08 etc. .... (contd.) - 4 - from the contractor shall refer the disputes to the committee within a period  of one month from the date of receipt of application."

       Counsel also contends that the High Court has erred in appointing an arbitrator when   the dispute could have been resolved under the said clause.  Further contends that the  High Court has not even recorded any reasons therefor.         Counsel for the respondent, without entering into the controversy, states that the  matter be now referred to the Empowered Standing Committee for resolution of the  simmering dispute between the parties.           Accordingly, we set aside the order of the High Court appointing Shri B.D. Sharma as   the sole arbitrator and instead refer the matter to the Empowered Standing Committee  constituted by the State of Rajasthan as per Clause 23 of the Agreement for resolving the  dispute between the parties.  Since the dispute between the parties is pending since 1998,  we direct the Empowered Standing Committee to resolve the dispute within a period of  six months of the production of a certified copy of this order at its end.  Consequently,  orders dated 20th November 2003 and 09th February 2005 are also set aside.         The appeals are allowed accordingly.  No costs.