Sps Infrabuild PVT LTD vs. Ut Chd And Ors

Facts

The petitioner, SPS Infrabuild Pvt. Ltd., entered into an agreement with Respondent No.4 (likely a department of U.T. Chandigarh) on 27.05.2015 for the construction of 5 Judges Houses. The stipulated completion period was 9 months, ending 26.02.2016. The petitioner alleged significant delays caused by the respondents, including issues with site readiness, removal of obstructions like electrical lines and trees, and delayed supply of drawings. The work was completed on 12.07.2017. The petitioner submitted final bills for Civil Works amounting to Rs.1,13,91,480/-, claims for extra and substituted items totaling Rs.62,35,503/- and Rs.74,54,252/-, and a bill for public health works of Rs.10,00,000/-. The petitioner averred that these payments remained outstanding. The introduction of GST from 01.07.2017 also increased the petitioner's liability. The petitioner invoked Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator as per Clause 25 of the contract.

Held

The Court held that the petitioner had indeed made reasonable attempts to resolve the dispute through the contractual mechanism. It was noted that the petitioner had sent representations within the prescribed time and submitted their request, but no decision was forthcoming from the respondents. The petitioner's claim that they could not appeal to the Dispute Redressal Committee (DRC) because the Chief Engineer had not issued a decision, but merely forwarded the matter to the Superintending Engineer/Executive Engineer, was accepted. The Court found that the respondents did not dispute the execution of the work or the existence of pending payments, but rather detailed the procedural steps being taken for payment. Given that the claims had been pending since 2018 (approximately six years) and the petitioner could not be made to wait indefinitely for the respondents' internal approval processes, the Court deemed it in the larger interest to settle the disputes expeditiously. Consequently, the Court found that a dispute existed and a valid arbitration agreement was in place, warranting the appointment of an arbitrator. Sh. Rajiv Sharma, Judge (Retd.) Punjab and Haryana High Court, was appointed as the Sole Arbitrator. The fee was to be determined as per Schedule 4 of the Arbitration and Conciliation Act, 1996, and the arbitrator was to furnish a declaration as per Section 12. The proceedings were to be completed within the mandate of Section 29-A, with the venue at the Chandigarh Arbitration Centre.

Key Issues

1. Whether the petitioner has exhausted the dispute resolution mechanism stipulated in Clause 25 of the contract before invoking arbitration, specifically concerning the requirement to appeal to the Dispute Redressal Committee (DRC)? (Mixed question of law and fact, turning on Clause 25 of the Contract). Petitioner's arguments: The petitioner contended that they had followed the prescribed procedure by submitting their claims and representations within the stipulated timeframes. They argued that since the Chief Engineer failed to provide a decision within 30 days, and the matter was only referred back to lower authorities without a formal decision, there was no occasion to appeal to the DRC, as such an appeal was contingent upon a decision from the Chief Engineer. Therefore, the notice for arbitration was validly issued. Respondents' arguments: The respondents argued that the petitioner had not exhausted the dispute resolution mechanism, specifically mentioning that the petitioner could have preferred an appeal before the Dispute Redressal Committee. They also stated that the petitioner had approached the court instead of supplying additional documents required for the final bill, which was resubmitted on 23.07.2018 after incorporating extra items, substituted items, and deviations. The respondents indicated that financial approvals were being processed.