M/S KAIKARA CONSTRUCTION COMPANYversusSTATE OF KERALA AND ORS.

                         [2014] 6 S.C.R. 278


A          MIS KAIKARA CONSTRUCTION COMPANY
                                  v.
                  STATE OF KERALA AND ORS.
              (Civil Appeal Nos. 5885-5886 of 2014)
                           JULY 01, 2014
B
          [SUDHANSU JYOTI MUKHOPADHAYA AND
                   DIPAK MISRA, JJ.]

        Arbitration and Conciliation Act, 1996: s.11 (6) -
C Appointment of arbitrator - Works contract - Dispute between·
  the parties - Case of the appellant that the Company had
  completed a major portion of the work - According to
  respondents, only 41% of the work was completed - High
  Court dismissed application filed by appellant u/s.11 (6) on the
D ground that no arbitrator agreement existed - On appeal,
  Held: Parties filed joint application showing the name of the
  arbitrator mutually agreed to by the parties - In view of stand
  taken by the parties and in view of mutual agreement for
  arbitration by retired High Court Judge, without going into the
E question of merit, the impugned order set aside and matter
  referred to arbitrator - Parties to negotiate and settle the terms
  and conditions of arbitration.

  .   The appellant entered into a work contract with the
  respondent. Dispute arose between them. The case of
F appellant was that the company had completed a major
  part of the work. This was disputed by the respondents
  who claimed that only 41% of the work was completed
  based on the original contract price. The appellant
  requested for appointment of a 'Dispute Review Expert"
G as stipulated in the General conditions of contract.
  However, no appointment was made. The appellant filed
  application under Section 11 (6) of the Arbitration and
  Conciliation Act, 1996. The High Court dismissed the

H                                 278
MIS KAIKARA CONSTRUCTION COMPANY v. STATE 279
                    OF KERALA
application on the ground that no arbitration agreement     A
existed. The instant appeals were filed challenging the
order of the High Court.

    Disposing of the appeals, the Court

     HELD: In the letter of acceptance dated 21.07 .2005,   B
the Superintendent Engineer intimated the appellant the
acceptance of the offer given by the appellant. It was
specifically mentioned that all terms and conditions of
notice inviting tenders and tender documents shall be
binding on the said contract and the contractor. In the     C
bidding document supplied to the appellant by
respondent no. 3 arbitration clauses were incorporated
at clause 25 and 25.3. [Para 12) [285-B-C]

     2. In the agreement clause (3), it was mentioned that 0
the parties to the contract agreed and undertake the
conditions that arbitration shall not be means of
settlement of disputes or claims or anything on account
of the .said contract. The instant case was heard arid
judgment was reserved. Subsequently, parties filed joint E
application showing the name of the arbitrator mutually
agreed to by the parties. In view of stand taken by the .
parties and as they mutually agreed for arbitration by
retired Hon'ble Judge of the Kerala High Court, without
going into the question of merit, the impugned order is
set aside and the matter is referred to Hon'ble Mr. Justice F
K. John Mathew (retired). The parties will negotiate and
settle the terms and conditions of arbitration. [Paras 13
to 15) [285-F-G; 286-E-F]

    M.K. Abraham and Company v. State of Kera/a and Anr.    G
(2009) 7 SCC636: 2009 (10) SCR 395 - referred to.

                   Case La* Reference:

  2009 (10) SCR 395        Referred to     Para 1
                                                            H
    280       SUPREME COURT REPORTS                [2014) 6-S.C.R.


A       CIVIL APPELLATE JURISDl8TION : CIVIL APPEAL Nos.
    5885-5886 of 2014.

      From the Judgment and order dated 19.07.201 O in AR No.
  39/2009, dated 02/02/2011 in AR No. 39/2009 .. RP No. 816/
B 2010 of the High Court of Kerala at Ernakulam.

        Altaf Ahmad, Babu Thomas K., Wills Mathews, Rabin
    Majumder for the Appellant.

          M.T. George, Kavita K.T. for the Respondent.
c         The Judgment of the Court was delivered by

        SUDHANSU JYOTI MUKHOPADHAYA, J. 1. Leave
    granted.

D        2. These appeals are. directed against order dated
    19.07.2010 passed by the High Court of Kerala at Ernakulam
    in Arbitration Request No.39 of 2009. By the impugned order,
    the appellant's prayer under Section 11 (6) of the Arbitration
    and Conciliation Act, 1996 for appointment of arbitrator has
E   been rejected by the High Court.

          3. The factual matrix of the case is as follows:

       On 27.1.2005, the appellant submitted tender, which was
  accepted by the respondents on 21.7.2005. The possession
F of the work site was handed over to the appellant on 2.9.2005.
  The period for completion of the contract expired on 1.9.2007.
  The case of the appellant is that the Company had completed
  a major part of the work. This was disputed by the respondents.
  According to them, only 41 % of the work was completed as on
G 22.12.2007, based on the original contract price. Based on the
  revised contract price, the progress achieved was only 30% as
  on 22.12.2007; the work carried out from 22.12.2007 to
  1.3.2009 was only 12% as against 70% target.

          According to the appellant, a sum of Rs.1, 18,87,265/- was
H
 M/S KAIKARA CONSTRUCTION COMPANY v. STATE OF 281
    KERALA [SUDHANSU JYOTI MUKHOPADHAYA, J.]

payable to it but the said amount was withheld by the             A
respondents. As a condition for releasing the amount, the
appellant was compelled to execute a supplemental agreement.
The appellant sought extension of the period for completion of
the work which was granted up to 1.3.2009. On 7.3.2009, the
appellant requested for appointment of a 'Dispute Review          B
Expert' as stipulated in the General Conditions of Contract. On
9.5.2009, the appellant again made a request for appointment
of 'Dispute Review Expert' and also for extension of the
"intended completion period". Another letter dated 10.6.2009
was written by the appellant to the Chairman of the Council of    c
Indian Roads Congress with similar prayer to appoint a
'Dispute Review Expert' as stipulated in Clause 36.1 of ITB
forming part of the agreement without any delay, with due
intimation to the appellant in writing.

     On 7.08.2009, the Indian Roads Congress addressed a          D
letter to the Chief Engineer, PWD Nationcil Highways,
Thiruvananthapuram to inform about the appointment of Dispute
Review Expert. On 6.10.2009, the Indian Roads Congress
wrote another letter to the Chief Engineer, Ministry of Road
Transport & Highways, New Delhi requesting him to inform          E
about the appointment of Dispute Review Expert. However, no
reply was given to the appellant.

     4. In this background, the appellant moved before the High
Court under Section 11 (6) of the Arbitration and Conciliation    F
Act, 1996 for appointment of an arbitrator. The learned Single
Judge of the High Court by impugned order dated 19.07.2010
dismissed the request holding that no arbitration agreement
exists.

    5. Review Petition filed by the appellant was also rejected   G
by order dated 2.02.2011.

      6. The appellant relied upon Clauses 24 and 25 of the
.-standard Bidding Document which forms part of the contract
 and read as follows:                                             H
    282        SUPREME COURT REPORTS                 [2014) 6 S.C.R.


A         "24. Disputes

       ·24.1 If the Contractor believes that a decision taken by the
        Engineer was either outside the authority given to the
        Engineer by the Contract or that the decision was wrongly
B       taken the decision shall be referred to the Dispute Review
        Expert within 14 days of the notification of the Engineer's
        decision.

          25. Procedure for Disputes.

c         25.1. The Dispute Review Expert (Board) shall give a
          decision in writing within 28 days of receipt of notification
          of a dispute.

          25.2 The Dispute Review Expert (Board) shall be paid
          daily at the rate specified in the Contract Data together
D         with reimbursable expenses of the types specified in the
          Contract Data and the cost shall be divided equally
          between the Employer and the Contractor, whatever
          decision is reached by the Dispute Review Expert. Either
          party may give notice to the other to refer a decision of
E         the Dispute Review Expert to an Arbitrator within 28 days
          of the Dispute Review Expert's written decision. If neither
          party refers the dispute to arbitration within the next 28
          days, the Dispute Review Expert's decision will be final
          and binding.
F
          25.3 The arbitration shall be conducted in accordance with
          the arbitration procedure stated in the Special Conditions
          of Contract."

        7. Detailed procedure has been stipulated in Sub clause
G (a) to (f) of Clause 25.3 of the Standard Bidding document.

        8. It appears that appellant by letter dated 11.8.200~
    requested the Superintending Engineer, National Highway,'
    Central Circle, Kochi, to agree to the appointment of a sole
H
M/S KAIKARA CONSTRUCTION COMPANY v. STATE OF 283
   KERALA [SUDHANSU JYOTI MUKHOPADHAYA, J.]
arbitrator mentioned in the letter. But no reply was given.          A

     9. The respondents in their counter affidavit opposed the
prayer and contended that if arbitration is the mode of
settlement of disputes, the names of Dispute Review Experts
are to be specifically mentioned in the contract data, which was
                                                                     8
not done in the present case. In the contract entered into
between the parties on 25.08.~005, there was a specific clause
which reads as follows:

    "The parties to this contract agree and undertake the
    condition that arbitration shall not be a means of settlement    C
    of dispute or claims or anything on account of this contract."

     10. It was contended on behalf of the respondents that in
absence of nomination of Dispute Review Expert, there is no
valid arbitration agreement.                  ·                      D
      11. Learned counsel for the appellant relied upon decision
of this Court in M.K Abraham and Company v. State of Kera/a
and another, (2009) 7   sec    636. In the said case, the Court
noticed that a letter dated 28.9.1994 was issued by the Ministry
of Surface Transport, Government of India informing all the          E
State Public Works Departments and all Chief Engineers in all
the States dealing with. National Highways, that a standard
contract clause prescribing the procedure to be followed for
appointment of arbitrators was to be incorporated in the bidding
conditions for the National Highway works and that the               F
arbitration clause should be compulsorily made part of the
bidding conditions in the respective states. In said case, this
Court JlOticed the aforesaid letter dated 28.08.1994 and
Clauses 24 and 24(a) of the notice inviting tenders for works
as printed in the standard form of agreement executed between        G
the parties and observed as follows:

    "24. In the present case, as noticed above, the contract
    consists of a typewritten contract agreement between the
    appellant and the second respondent [which does not
                                                                     H
    284       SUPREME COURT REPORTS                  [2014] 6 S.C.R.


A         contain any terms and conditions, but which merely states
          that the contract is for execution of the described work as
          per the accompanying articles of agreement, plan,
          specification and conditions of contract approved by the
          Project Director (SE), National Highway (ADB), Circle
B         Adappally, Cochin] with several printed forms with
          cyclostyled additions as annexures and handwritten
          corrections. The printed form of articles of agreement has
          an attachment slip.

          25. The contract in the present case does not contain any
c         handwritten terms in regard to arbitration. The contract has
          printed clauses barring arbitration [Clauses 24 and 24(a)
          of the notice inviting tenders for works and a preamble
          clause and Clause 3 in the articles of agreement]. A
          cyclostyled slip signed by both parties containing the words
D         "arbitration clause as per the Ministry of Surface
          Transport's Letter No. RW/NH-34041/3/94-00-111 dated 28-
          9-1994 will be applicable" is attached to the printed articles
          of agreement.

E         26. By applying the well-settled principles relating to
          construction of contract the following position will emerge:

          (1) the terms of the articles of agreement will prevail over
          the terms of notice inviting tenders for works, and

F         (i1) the term contained in the cyclostyled attachment to the
          printed form of articles of agreement will prevail over the
          terms of the printed articles of agreement.

          Consequently, the contents of the attachment slip to the
G         printed form of articles of agreement providing for
          arbitration will prevail over the bar on arbitration contained 1

          in the notice inviting tenders for works and the articles of
          agreement. As a result, it has to be held that there is ~
          provision for arbitration in regard to the disputes betweerl
          the respective appellant and the respondents."
H
                                   "-
M/5_ KAIKARA CONSTRUCTION COMPANY v. STATE OF 285
    KERALA [SUDHANSU JYOTI MUKHOPADHAYA, J.]

    Howe·ver, the High Court distinguished the case relied         A
upon by the appellant.

   _. 12. In the ietter of ac~eptance dated 21.07.2005, ·the
Superintendant Engineer intimated the appellant the
acceptance of the offer given by the appellant at paragraph 9      B
therein, it was specifically .mentioned that all terms and
conditions of notice inviting teRders and tender documents shall
be binding on ·the said contract and the contractor. In the
bidding document supplied to the appellant by respondent no.3
arbitration c1a·use$ were incorporated at clause 25 and 25.3       C
as noticed above. At Clause 36 the provisions of Dispute
Review Expert was mentioned as follows:

    "36. Dispute Review Expert

     36.1 The Employer proposes that [name of proposed             D
     Dispute Review Expert as indicated in Appendix] be
   . appointed as Dispute Review Expert under the Contract,
     at a daily fee as indicated in Appendix plus reimbursable
     expenses. If the Bidder disagrees with thi~ proposal, the
     Bidder should so state in the Bid. If in the Letter of        E
     Acceptance, the Employer has not agreed on the
     appointment of the Dispute Review Expert, the Dispute
     Review Expert shall be appointed by the Council olindian
     Roads Congress at the request of either party."

     13. In the agreement clause (3) it was mentioned that the     F
parties to the contract agreed and undertake the conditions that
arbitration shall not be means of settlement of disputes or
claims or anything on account of the said contract.

    14. The case was heard and judgment was reserved.              G
Subsequently, parties have filed joint application showing the
name of the arbitrator mutually agreed to by the parties as
under:

    "Hon. Justice Mr. K. John Mathew
                                                                   H
    286          SUPREME COURT REPORTS             [2014] 6 S.C.R.


A         Former Judge of the Hon. High Court of Kerala,

          Veekshanam Road, Kochi, 682018

          Kerala State

B         Sd/-

          Advocate for the Petitioner

          Babu Thomas K

C         For Rabin Maujumdar

                                                             Sd/-
                                                Adv. M T George
                                    Advocate for the respondents"
D
        15. In view of stand taken by the parties and as they
  mutually agreed for arbitration by retired Hon'ble Judge of the
  Kerala High Court, without going into the question of merit, we
  set aside the impugned order dated 19th July, 2010 and refer
  the matter to Hon'ble Mr. Justice K. John Mathew (retired). The
E parties will negotiate and settle the terms and conditions of
  arbitration. It is expected that the arbitration proceeding will be
  concluded at an early date.

      16. The appeals stacd disposed of with aforesaid
F observations. No costs.
    Devika Gujral                                 Appeals disposed of.