Kalpataru Projects International Ltd. Vs Municipal Corporation of Greater Mumbai (Bombay High Court)
Bombay High Court held that just because modified Clause 96 of the General Conditions of Contract states that the decision given by the Committee shall be final and binding upon the parties, the modified clause 96 constitutes the Arbitration Agreement between the parties
Facts- The present Application has been filed under the provisions of Section 11 of the Arbitration and Conciliation Act, 1996. Respondent No.1 issued an E-Tender Notice dated 25th January, 2016, inviting bids for the construction of the Ghatkopar- Mankhurd Link Road Flyover (“GMLR flyover”) for the tender amount of Rs.313,85,05,635.80/-.
Notably, during the course of the works, and post the completion of the project, the Applicant raised various claims in accordance with the Contract. Disputes pertaining to the Contract arose and the Applicant initiated the pre-arbitral steps as provided in Clause 96 of the General Conditions of Contract (“GCC”) to ensure strict compliance with the provisions of the Contract.
It is the case of the Applicant that the pre-arbitral procedure, wherein both the parties participated, did not result in a favourable outcome for the Applicant as conveyed by the Committee by its letter dated 26th April, 2022.
Being aggrieved by the failure of the pre-arbitral steps to amicably settle the disputes, the Applicant was constrained to issue a Notice dated 7th May, 2022, under Clause 96 of the GCC invoking Arbitration. Since the Applicant did not receive any response from the Respondents to the said Notice, the Applicant was constrained to file the present Arbitration Application.
Conclusion- Held that a clause in a contract does not show that the parties intended to have their disputes resolved through Arbitration merely because a particular decision is made final and binding by that clause. For these reasons also, in my view, the modified Clause 96 of the GCC does not constitute an Arbitration Agreement between the parties.
It is also not possible to accept the submissions of the Applicant that, just because modified Clause 96 of the GCC states that the decision given by the Committee shall be final and binding upon the parties, the modified clause 96 constitutes the Arbitration Agreement between the parties.
Held that the modified Clause 96 of the GCC does not constitute an Arbitration Agreement between the parties. In these circumstances, the parties have not agreed to have their disputes resolved by arbitration and, therefore, the present Application, seeking the appointment of an Arbitrator, is liable to be dismissed.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
This Application has been filed under the provisions of Section 11 of the Arbitration and Conciliation Act, 1996 (“the said Act”).
2 Respondent No.1 issued an E-Tender Notice dated 25th January, 2016, inviting bids for the construction of the Ghatkopar- Mankhurd Link Road Flyover (“GMLR flyover”) for the tender amount of Rs.313,85,05,635.80/-. The scope of work as described in the Tender Documents included the construction of (a) the GMLR flyover (b) three foot over bridges at Indian Oil Nagar, Rising City and Baiganwadi junction respectively and (c) a vehicular underpass at Mohite Patil Nagar Junction.
3 The Applicant submitted its bid in response to the said Tender, which was accepted by Respondent No.1 vide Resolution No. 1275 dated 21st December, 2016 passed by Respondent No.1’s Standing Committee. Respondent No.1 awarded the contract to the Applicant by a Letter of Acceptance dated 26th December, 2016.
4 Respondent No.1, thereafter, issued a Work Order No.7803 dated 28th December, 2016. Since the Tender Documents prescribed a time period of 30 months for the completion of the works, the project was slated to be completed by 3rd July, 2019.
5 Although the Applicant commenced work immediately post the issuance of the work order, the parties formally signed the Contract only on 14th May, 2018.
6 It is the case of the Applicant that the planned progress of work was disrupted by various delay events caused by the Respondents or unforeseen circumstances, and additional works instructed by the Respondents which constituted a change in the scope of work envisaged under the Tender Documents. The Applicant was, therefore, constrained to seek extensions of time of the contract period, which were granted on various occasions.
7 The project was substantially completed on 25th July, 2021 and inaugurated on 1st August, 2021. It is, however, the case of the Applicant that Respondent No.1, thereafter, instructed the Applicant to carry out additional variation works and extended the contract period to 30th September, 2021 to complete the said additional variation works. The understanding between the parties with respect to the additional variation works carried out post inauguration of the project and the consequent extension of time granted is recorded in Respondent No.1’s letter dated 8th April, 2022.
8 It is the case of the Applicant that it duly completed all the balance work and variation works by 30th September, 2021 and a Certificate of Completion was issued by the Respondents.
9 During the course of the works, and post the completion of the project, the Applicant raised various claims in accordance with the Contract.
10 In this regard, in September 2021, the Applicant addressed various letters to the Respondents. The Chief Engineer of Respondent No.1 rejected / declined to award certain claims of the Applicant. It is the case of the Applicant that the Chief Engineer’s decisions were unsubstantiated by the Contract and in law. It is the case of the Applicant that, therefore, disputes pertaining to the Contract arose and the Applicant initiated the pre-arbitral steps as provided in Clause 96 of the General Conditions of Contract (“GCC”) to ensure strict compliance with the provisions of the Contract.
11 The Applicant addressed a letter dated 24th September, 2021 to the Additional Municipal Commissioner, placing on record all its objections to the Chief Engineer’s decisions in respect of the claims and reiterating its entitlement thereto. The Applicant, further, notified the Additional Municipal Commissioner to proceed with the constitution of a committee comprising of three officers of Respondent No.1 as envisaged in the first paragraph of Clause 96 of the GCC to settle the disputes.
12 The Committee was appointed on 12th October, 2021 and the appointment was communicated to the Applicant by way of an Office Order of even date. The first meeting was held before the Committee on 10th December, 2021. Subsequent to the first meeting, the Applicant submitted additional clarifications with respect to its claims before the Committee by its letter dated 13th December, 2021.
13 The second meeting before the Committee was held on 17th December, 2021 with the Applicant submitting additional clarifications post the meeting by way of its letter dated 23rd December, 2021. It is the case of the Applicant that it reiterated its desire to have the matter amicably settled before the Committee.
14 Further, the Applicant submitted some more claims before the Committee by its letter dated 25th January, 2022.
15 It is the case of the Applicant that the pre-arbitral procedure, wherein both the parties participated, did not result in a favourable outcome for the Applicant as conveyed by the Committee by its letter dated 26th April, 2022.
16 It is the case of the Applicant that, aggrieved by the failure of the pre-arbitral steps to amicably settle the disputes, the Applicant was constrained to issue a Notice dated 7th May, 2022, under Clause 96 of the GCC invoking Arbitration. Since the Applicant did not receive any response from the Respondents to the said Notice, the Applicant was constrained to file the present Arbitration Application.
17 Mr. Thacker, the learned Counsel appearing on behalf of the Applicant in support of the Application, referred to clause 96 of the GCC, which was modified by a Circular dated 29th May, 2002, and which reads as under:-
