Delhi High Court Amar Constructions vs Central Public Works Department on 29

September, 2006
Summary of the case:
This is a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 read with
Clause (ii) of the Scheme for Appointment of Arbitrators, notified vide No. 16/Rules dated
02.02.1996.
Under the Indian partnership act, 1932, By agreement No. 48/EE/DAD/2001-02 vide its letter
dated 21.12.2001, the petitioner Amar construction was awarded the contract of construction
of ARC Directorate Complex at Palam, New Delhi by Delhi Aviation Division, CPWD. The
duration for the project was given 10 months. The contract could not finish the project due to
some reasons and he was given the permission of extension by client, finally he completed
the project on 12th June 2003. The contractor raised the final bill on 24th June 2003, the bill
includes some extra work and losses incurred at the site. The client didn’t issue any notice on
liquidated damages. The contractor requested the client to take over the building since he has
deploy his workers. On 16th august 2003, the contractor issued letter to the executive engineer
for the release of outstanding payments.
On 28th October 2003, the client has raised some defects which were done by the contractor
and then contractor refused the client’s allegation on 3rd November 2003 and they mentioned
that there was no notice issued prior to the defects. On 30th April 2004, client has said that the
mandatory maintenance period was not completed with accordance to the work and on 17th
July 2004, the contractor refused there was no such mandatory maintenance period
mentioned in the contract and they requested to issue the outstanding payment. The client
prepared the final bill without considering the extra works, losses and damages of the
contractor on 24th June 2003. The contractor issued the letter regarding the outstanding
payments to the client on 9th august 2004, again on 18th September 2004 process of issuing
letter confirming to handing over of the building to the client.
On 5th January2005, the contractor reminded the payment to the executive engineer for the
outstanding payment, there was no response, so contractor decided to issue the notices in
terms of dispute resolution procedure as per clause 25 of conditions of contract on 21st
January and 7th february 2005 and again there was no response from the client. On 23rd
February 2005 the contractor issued the notice to Superintending Engineer to give his
decision on the outstanding payments within 30 days period. When there was no response
from superintending engineer on 30 days duration, the contractor issued the notice to chief
engineer in terms of clause 25 of GCC on 28th march 2005. Yet again there was no response
from chief engineer
The arbitration clause between the parties being clause 25:
1. if the contractor considers any work demanded of him to be outside the requirement
of the contracts, all disputes any drawings, record or decision given in writing by the
Engineer-in-Charge on any matter in connection with or arising out of the contract
or carrying out of the work, to be unacceptable, he shall promptly within 15 days
request the Superintending Engineer in writing for written instruction or decision.
Thereupon, the Superintending Engineer shall give his written instructions or
decision within a period of one month from the receipt of the contractor's letter.
Superintending Engineer, the contractor may, within 15 days of the receipt of
Superintending Engineer's decision, appeal to the Chief Engineer who shall afford an
opportunity to the contractor to be heard, if the latter so desires, and to offer evidence
in support of his appeal. The Chief Engineer shall give his opinion within 30 days of
receipt of contractor's appeal. If the contractor is dissatisfied with the decision, the
contractor shall within a period of 30 days from receipt of the decision, give notice to
the Chief Engineer for appointment of Arbitrator failing which the said decision shall
be final binding and conclusive and not referable to adjudication by the arbitrator.
2. Except where the decision has become final, binding and conclusive in terms of sub-
para 1 above disputes or difference shall be referred for adjudication through
arbitration by a sole arbitrator appointed by the Chief Engineer, CPWD, in-charge
of the work or if there be no Chief Engineer, the administrative head of the said
CPWD. If the arbitrator so appointed is unable or unwilling to act or resigns his
appointment or vacates his office due to any reason whatsoever another sole
arbitrator shall be appointed in the manner aforesaid. Such person shall be entitled
to proceed with the reference from the stage at which it was left by his predecessor
The contractor submits despite client has received the notice of appointment of an arbitrator
as per the clause, the chief engineer till date didn’t appoint an arbitrator to solve the disputes
arose between the parties thereby It has forced the contractor to present an petition seek
appointment of an independent arbitrator according to Section 11(6) of the Arbitration and
Conciliation Act, 1996. The client had responded the petition that planned date of completion
date was 30th October 2002, but the work was actually completed on 12th June 2003 by the
contractor. They also added that final bill was paid including extra items as per the
measurement book and deviations and penalty of 0.1% was also imposed for the delay. The
appointment of arbitrator is also under process and to be decided as per clause 25.
Having failed to appoint an arbitrator by the chief engineer, the contractor issued an notice
again on 29th April 2005 referring the disputes of arbitration, this time chief engineer didn’t
respond so the contractor finally decided to take this dispute to the court. The question arises
whether the court can able to appoint an independent arbitrator? The clause 6 of Section 11 of
the Arbitration and Conciliation Act, 1996 answers this a person, including an institution,
fails to perform any function entrusted to him or it under that procedure, a party may
request the Chief Justice or any person or institution designated by him to take the
necessary measure, unless the agreement on the appointment procedure provides other
means for securing the appointment.
Ms. Maneesha Dhir, learned Counsel of client knows the fact that the disputes to be
adjudicated and however cannot able to point any clauses appointment of engineer as an
arbitrator. The counsel also pointed out the appointment of a technical person has been
mentioned in sub-section8 of section11, where the Chief Justice or the person or
institution designated by him, in appointing an arbitrator, shall have due regard to (a)
any qualifications required of the arbitrator by the agreement of the parties and (b)
other considerations as are likely to secure the appointment of an independent and
impartial arbitrator. In the agreement there was no provisions in the qualifications of
appointing an arbitrator, so the chief engineer should appoint the arbitrator. But having failed
and neglected by the chief engineer for the appointment of arbitrator
Final judgement:
By taking the example of Datar Switchgear (supra) was affirmed by the Apex Court in Punj
Lloyd Ltd. v. Petronet MHB Ltd. (2006) 2 SCC 638 and Shin Satellite Public Co. Ltd. v. Jain
Studios Ltd. Where to solve an dispute they have failed to appoint an arbitrator. The
aggrieved party has approached the court for the appointment of arbitrator. ratio of the
judgment in Shin Satellite (supra), wherein it was held that the respondent had lost its right to
make appointment of an arbitrator once the petitioner had approached the Chief Justice under
Section 11(6) for appointment of arbitrator. They have mentioned this example because this
case is similar to that dispute of appointment of arbitration
Finally in the court, the conclusion were made to appoint an retired additional district &
session Judge to adjudicate the dispute between the parties. Shri S.S. Bal, Retired Additional
District & Sessions Judge is appointed as sole arbitrator to adjudicate upon the
disputes/claims raised by the contractor as detailed in petition, where the arbitrator can fix his
own fees. Both the parties should appear on the 16th October 2006 or any other time said by
the arbitrator. The arbitrator will dispose of the disputes enumerated in the petition,
preferably within a period of 4 months from the date of entering upon the reference. The
petition is disposed of accordingly, leaving the parties to bear their own costs. . A copy of this
judgment be sent to the learned Arbitrator forthwith for necessary information and
compliance.

3. In FIDIC silver book under the clause 20 claims, disputes and arbitration clause 20.1
contractors claims it is clearly stated clearly that with the all kinds of claims with respect
to contractor.
If there is issue with the client and the disputes arises under the clause 20.2 Appointment
of the Dispute Adjudication Board according to this clause since this issue not a big
problem dispute may be resolved this clause itself if client do not agree it may lead to
clause 20.4 Obtaining Dispute Adjudication Board’s Decision dispute will be resolved.
So there is no need to go for arbitration under 20.5 and 20.6.

20.1 Contractor’s Claims

If the Contractor considers himself to be entitled to any extension of the Time for
Completion and/or any additional payment, under any Clause of these Conditions or
otherwise in connection with the Contract, the Contractor shall give notice to the
Employer, describing the event or circumstance giving rise to the claim. The notice shall
be given as soon as practicable, and not later than 28 days after the Contractor became
aware, or should have become aware, of the event or circumstance. If the Contractor fails
to give notice of a claim within such period of 28 days, the Time for Completion shall not
be extended, the Contractor shall not be entitled to additional payment, and the Employer
shall be discharged from all liability in connection with the claim. Otherwise, the
following provisions of this Sub-Clause shall apply. The Contractor shall also submit any
other notices which are required by the Contract, and supporting particulars for the claim,
all as relevant to such event or circumstance. The Contractor shall keep such
contemporary records as may be necessary to substantiate any claim, either on the Site or
at another location acceptable to the Employer. Without admitting liability, the Employer
may, after receiving any notice under this Sub-Clause, monitor the record-keeping and/or
instruct the Contractor to keep further contemporary records. The Contractor shall permit
the Employer to inspect all these records, and shall (if instructed) submit copies to the
Employer. Within 42 days after the Contractor became aware (or should have become
aware) of the event or circumstance giving rise to the claim, or within such other period
as may be proposed by the Contractor and approved by the Employer, the Contractor
shall send to the Employer a fully detailed claim which includes full supporting
particulars of the basis of the claim and of the extension of time and/or additional
payment claimed. If the event or circumstance giving rise to the claim has a continuing
effect:
(a) this fully detailed claim shall be considered as interim;
(b) the Contractor shall send further interim claims at monthly intervals, giving the
accumulated delay and/or amount claimed, and such further particulars as the Employer
may reasonably require; and
(c) the Contractor shall send a final claim within 28 days after the end of the effects
resulting from the event or circumstance, or within such other period as may be proposed
by the Contractor and approved by the Employer.
Within 42 days after receiving a claim or any further particulars supporting a previous
claim, or within such other period as may be proposed by the Employer and approved by
the Contractor, the Employer shall respond with approval, or with disapproval and
detailed comments. He may also request any necessary further particulars, but shall
nevertheless give his response on the principles of the claim within such time. Each
interim payment shall include such amounts for any claim as have been reasonably
substantiated as due under the relevant provision of the Contract. Unless and until the
particulars supplied are sufficient to substantiate the whole of the claim, the Contractor
shall only be entitled to payment for such part of the claim as he has been able to
substantiate. The Employer shall proceed in accordance with Sub-Clause 3.5
[Determinations] to agree or determine (i) the extension (if any) of the Time for
Completion (before or after its expiry) in accordance with Sub-Clause 8.4 [Extension of
Time for Completion], and/or (ii) the additional payment (if any) to which the Contractor
is entitled under the Contract. The requirements of this Sub-Clause are in addition to
those of any other Sub-Clause which may apply to a claim. If the Contractor fails to
comply with this or another Sub-Clause in relation to any claim, any extension of time
and/or additional payment shall take account of the extent (if any) to which the failure has
prevented or prejudiced proper investigation of the claim, unless the claim is excluded
under the second paragraph of this Sub-Clause.
20.2 Appointment of the Dispute Adjudication Board
Disputes shall be adjudicated by a DAB in accordance with Sub-Clause 20.4 [Obtaining
Dispute Adjudication Board’s Decision]. The Parties shall jointly appoint a DAB by the
date 28 days after a Party gives notice to the other Party of its intention to refer a dispute
to a DAB in accordance with Sub-Clause 20.4. The DAB shall comprise, as stated in the
Particular Conditions, either one or three suitably qualified persons (“the members”). If
the number is not so stated and the Parties do not agree otherwise, the DAB shall
comprise three persons. If the DAB is to comprise three persons, each Party shall
nominate one member for the approval of the other Party. The Parties shall consult both
these members and shall agree upon the third member, who shall be appointed to act as
chairman. However, if a list of potential members is included in the Contract, the
members shall be selected from those on the list, other than anyone who is unable or
unwilling to accept appointment to the DAB. The agreement between the Parties and
either the sole member (“adjudicator”) or each of the three members shall incorporate by
reference the General Conditions of Dispute Adjudication Agreement contained in the
Appendix to these General Conditions, with such amendments as are agreed between
them.
The terms of the remuneration of either the sole member or each of the three members,
shall be mutually agreed upon by the Parties when agreeing the terms of appointment.
Each Party shall be responsible for paying one-half of this remuneration. If at any time
the Parties so agree, they may appoint a suitably qualified person or persons to replace
any one or more members of the DAB. Unless the Parties agree otherwise, the
appointment will come into effect if a member declines to act or is unable to act as a
result of death, disability, resignation or termination of appointment. The replacement
shall be appointed in the same manner as the replaced person was required to have been
nominated or agreed upon, as described in this Sub-Clause. The appointment of any
member may be terminated by mutual agreement of both Parties, but not by the Employer
or the Contractor acting alone. Unless otherwise agreed by both Parties, the appointment
of the DAB (including each member) shall expire when the DAB has given its decision
on the dispute referred to it under Sub-Clause 20.4, [Obtaining Dispute Adjudication
Board Decision], unless other disputes have been referred to the DAB by that time under
Sub-Clause 20.4, in which event the relevant date shall be when the DAB has also given
decisions on those disputes.

20.4 Obtaining Dispute Adjudication Board’s Decision

If a dispute (of any kind whatsoever) arises between the Parties in connection with, or
arising out of, the Contract or the execution of the Works, including any dispute as to any
certificate, determination, instruction, opinion or valuation of the Employer, then after a
DAB has been appointed pursuant to Sub-Clauses 20.2 [Appointment of the Dispute
Adjudication Board] and 20.3 [Failure to Agree Dispute Adjudication Board], either Party
may refer the dispute in writing to the DAB for its decision, with a copy to the other
Party. Such reference shall state that it is given under this Sub-Clause. For a DAB of three
persons, the DAB shall be deemed to have received such reference on the date when it is
received by the chairman of the DAB. Both Parties shall promptly make available to the
DAB all information, access to the Site, and appropriate facilities, as the DAB may
require for the purposes of making a decision on such dispute. The DAB shall be deemed
to be not acting as arbitrator(s).
Within 84 days after receiving such reference, or the advance payment referred to in
Clause 6 of the Appendix - General Conditions of Dispute Adjudication Agreement,
whichever date is later, or within such other period as may be proposed by the DAB and
approved by both Parties, the DAB shall give its decision, which shall be reasoned and
shall state that it is given under this Sub-Clause. However, if neither of the Parties has
paid in full the invoices submitted by each member pursuant to Clause 6 of the Appendix,
the DAB shall not be obliged to give its decision until such invoices have been paid in
full. The decision shall be binding on both Parties, who shall promptly give effect to it
unless and until it shall be revised in an amicable settlement or an arbitral award as
described below. Unless the Contract has already been abandoned, repudiated or
terminated, the Contractor shall continue to proceed with the Works in accordance with
the Contract. If either Party is dissatisfied with the DAB’s decision, then either Party
may, within 28 days after receiving the decision, give notice to the other Party of its
dissatisfaction. If the DAB fails to give its decision within the period of 84 days (or as
otherwise approved) after receiving such reference or such payment, then either Party
may, within 28 days after this period has expired, give notice to the other Party of its
dissatisfaction. In either event, this notice of dissatisfaction shall state that it is given
under this SubClause, and shall set out the matter in dispute and the reason(s) for
dissatisfaction. Except as stated in Sub-Clause 20.7 [Failure to Comply with Dispute
Adjudication Board’s Decision] and Sub-Clause 20.8 [Expiry of Dispute Adjudication
Board’s Appointment], neither Party shall be entitled to commence arbitration of a
dispute unless a notice of dissatisfaction has been given in accordance with this Sub-
Clause. If the DAB has given its decision as to a matter in dispute to both Parties, and no
notice of dissatisfaction has been given by either Party within 28 days after it received the
DAB’s decision, then the decision shall become final and binding upon both Parties.