OM CONSTRUCTION CO.versusAHMEDABAD MUNICIPAL CORP. & ANR.

                         [2009] 1 S.C.R. 232


A                    OM CONSTRUCTION CO.
                                  II.
            AHMEDABAD MUNICIPAL CORP. & ANR.
                (Civil Appeal No. 107 of 2009)
                        JANUARY 13, 2009
B
       [ALTAMAS KABIR AND MARKANDEY KATJU, JJ.)

         Gujarat Public Works Contracts Disputes Arbitration
    Tribunal Act, 1992:
c
        s.2(1)(k)and (i) - 'Works Contract' - 'Public Undertaking'
    - Held: The local authority could assume the garb of 'Public
    Undertaking' only pursuant to a notification published in that
    regard in official gazette.
D       Arbitration and Conciliation Act, 1996:

       ss. 11 (2), (5) and (6) - Appointment of arbitrator -
  Arbitration clause in agreement not providing for any
  procedure for appointment of arbitrator - Held: Since parties
E have agreed to resolve their dispute by arbitration, provisions
  of sub-section (5) can be pressed into service to enable the
  parties to invoke powers of Chief Justice to appoint an
  arbitrator- In the circumstances of the case, in order to avoid
  delay, instead of remitting the matter to High Court, arbitrator
F appointed.
      The appellant, a construction company, carried out
  the work entrusted to It by the respondent Corporation.
  Clause 30 of Form B-1, which was made applicable In the
  contract entered Into between the parties when
G appellant's tender was accepted, provided for
  appointment of an arbitrator. Dispute arose with regard
  to payment. The applicant filed an application u/s.11 of the
  Arbitration and Conciliation Act, 1996 for appointment of
  an arbitrator to resolve the dispute. The High Court
H                                232
 OM CONSTRUCTION CO. v. AHMEDABAD MUNICIPAL             233
               CORP. & ANR.

noticing the pr,ovisions of s.2(1 )(i) of the Gujarat Public A
Works Contracts Disputes Arbitration Tribunal Act, 1992
held that since no notification was issued under _the Act
with respect to the respondent Corporation it wasnot a
"Public Undertaking" and, therefore, the work entrusted
to the appellant could not be termed as a "Work . B
Contract" as defined u/s.2(1 )(k) of the Gujarat Tribunal
Act and, as such, the Arbitration Tribunal of the State
would have no jurisdiction. The High Court further held
that since the arbitration agreement between the parties
did not lay down any procedure for appointing an c
arbitrator, the Designated Judge could not invoke the
jurisdiction u/s.11(6) of the Act.
     In the appeal filed by the Construction company, the
questions for consideration before the Court were:
whether in the absence of a Notification in the Official       D
Gazette, the respondent Municipal Corporation could at
all be considered as a Public Authority for the purpose
of Section 2(1)(k) of the Gujarat Tribunal Act, 1992 and
whether the absence of a procedure for appointment of
an arbitrator in the arbitration agreement, would              i::
constitute a bar for appointment of an arbitrator u/s 11 (6)
or any other provision of the 1996 Act, when not only the
parties to the proceedings, but the High Court also, had
arrived at a conclusion that the provisions of the Gujarat
Tribunal Act, 1992, would not be applicable in the case.       F
    Allowing the appeal, the Court
     HELD: 1. There is no dispute that the Ahmedabad
Municipal Corporation is a local authority and it could
assume the garb of a "Public Undertaking" as defined in        G
s.2(1)(i) of the Gujarat Public Works Contracts Disputes
Arbitration Tribunal, 1992, only pursuant to a Notification
published in that regard in the Official Gazette. [Para 14)
[240-8-C]

    2.1. Even if Form 8-1 loses its relevance as far as the    H
    234        SUPREME COURT REPORTS             [2009] 1 S.C.R.


A contract in question is concerned, since the parties have
  agreed to resolution of their disputes by arbitration, the
  provisions of Sub-section (5) of s.11 of the Arbitration and
  Conciliation Act, 1996 can be pressed into service to
  enable the parties to invoke the powers of the Chief
B Justice to appoint an Arbitrator. [Para 14] [240-D]

        2.2. Order of the High Court is set aside. In the
  · circumstances of the case, remitting the matter to the
    High Court would only mean another round of litigation,
C whereas if the appointment is made by this Court, the
    matter will achieve finality, which would ultimately be
    beneficial for all concerned. Accordingly, arbitrator is
    appointed. [Para 16] (241-D]

       CIVIL AP PELLATE JURISDICTION : Civil Appeal No. 107
D of 2009.

         From the Judgment and Order dated 30.11.2007 of the
    High Court of Gujarat at Ahmedabad in Petition under
    Arbitration Act No. 35 of 2007.
E         S.K. Gambhir, Sanjay Kapur, Rajiv Kapur and Arti Singh
    for the Appellant.

        Shyam Divan, Rustam Marshall, Hemantika Wahi and K.
    Enatoli Serna for the Respondents.
F
          The Judgement of the Court was delivered by

          AL TAMAS KABIR, J. 1. Leave granted.

       2. The appellant herein is a "C" class approved contractor,
G whose tender was accepted by the Ahmedabad Municipal
  Corporation for providing and fixing Nibhada Stone for paving
  and Footpath in Kalupur and Dariapur wards in Central Zone
  within the City of Ahmedabad The Work Order was issued on
  6th June, 2006, and as per the appellant's version the work was
H completed by the end of October, 2006. According to the
           OM CONSTRUCTION CO. v. AHMEDABAD MUNICIPAL                  235
                 CORP. & ANR. [AL TAMAS KABIR, J.]
          appellant, after giving·credit for payments which had been made     A
     "    by the Corporation, a sum of Rs.68,46,872/ - was still due
          towards the work performed in the Dariapur ward, while a sum
          of Rs.8,61,760/ - was also due for the work carried out in
          Kalupur ward. It is the case of the appellant that despite notice
          having been served on the Corporation on 24th May, 2007, the        B
          said amounts remained unpaid. Ultimately, on 6th June, 2007,
          the appellant issued a notice to the Corporation setting out the
     +    facts relating to the work performed and the claim made in
          detail and claimed a sum of Rs.77,08,632/-, together with
          interest at the rate of 18% per annum, from the due date till the   c
          date of realization, which the appellant claimed, was the total
          outstanding amount. In the notice it was also indicated that the
          claim made by the appellant should be accepted and payment
          should be made within a period of 30 days from the date of
          receipt of the notice or that an Arbitrator should be appointed
                                                                              D
    ~     by the Corporation within a period of 30 days from the date of
          receipt of the notice.

               3. As there was no resp0nse to the said notice from the
           Municipal Corporation nor was any payment made or Arbitrator
          appointed, the appellant invoked clause 30 of Form B-1, which E
          provided for the appointment of an Arbitrator and was made
          applicable in the contract entered into between the parties when
          the appellant's tender was accepted. It appears that under
     "    General Conditions of Contract of the Engineering Department
          of the Ahmedabad Municipal Corporation, under its General F
          Specifications it is provided that certain conditions are required
          to be followed which includes the condition that Form B-1 would
          be applicable to the contract and clause 30 of Form B-1 is
          relevant for this case. The relevant portions of clause 30 of Form
          8-1 reads as follows:-                                             G

    --v       "Clause 30(1) Disputes to be referred to Tribunal: The
              disputes relating to this contract, so far as they relate to
              any of the following matters, whether such disputes arise
              during the progress of the work or after the completion or
•                                                                             H
    236           SUPREME COURT REPORTS              [2009] 1 S.C.R.


A         abandonment thereof, shall be referred to the Arbitration
          Tribunal, Gujarat State;

          (2) ···············
          (3) The provision of Arbitration Act, shall in so far as they
B         are inconsistent with the provision of this Act, cease to
          apply to any dispute arising from a works contract and all
          arbitration proceedings in relation to such dispute before
          an Arbitrator, Court or authority shall stand transferred to
          the Tribunal."
c
         4. The appellant filed a petition before the Gujarat High
    Court on 9th July, 2007, being Arbitration Petition No. 35 of
    2007, under Section 11 of the Arbitration and Conciliation Act,
    1996, hereinafter referred to as "the 1996 Act", inter alia,
0   praying for the appointment of an Arbitrator to resolve the
    disputes between the parties. The High Court by its order dated
    20th November, 2007, rejected the said petition. While doing
    so, the High Court took note of Section 2(1 )(k) of the Gujarat
    Public Works Contracts Disputes Arbitration Tribunal Act,
E   1992, hereinafter referred to as the "Gujarat Tribunal Act",
    which defines "works contract" to mean a contract made by the
    State Government or Public Undertaking which is notified in the
    Official Gazette by the State Government. The High Court also
    noticed Section 2(1) (I) of the aforesaid Act, which defines
    "Public Undertaking" to, inter alia, mean such class of local
F   authorities as the State Government specifies by Notification
    in the Official Gazette. It was further noticed that in the absence
    of such Notification, the Ahmedabad Municipal Corporation
    was not a "Public Undertaking" and the contract entered into
    by it with the appellant could not, therefore, be termed as a
G   "Works Contract" as defined in Section 2(1 )(k} of the aforesaid
    Act. The High Court, therefore, held that the Arbitration Tribunal,
    Gujarat State, would have no jurisdiction to entertain the
    disputes between the parties emanating from the Work Order
    in.question.
H
  OM CONSTRUCTION CO. v. AHMEDABAD MUNICIPAL                     237
        CORP. & ANR. [AL TAMAS KABIR, J.]

      5. The High Court then went on to consider the                    A
 applicability of the Arbitration and Conciliation Act, 1996, to the
 facts of the case. The High Court took note of the fact that the
 Agreement between the parties, and more particularly the
 Arbitration Agreement, did not lay down any procedure for
 appointing an Arbitrator or Arbitrators. Accordingly, in the           B
 absence of such procedure, the Designated Court could not
 invoke its jurisdiction under Sub-section (6) of Section 11 of the
 1996 Act, which contemplates a situation, where the
 appointment procedure as agreed to by the parties under Sub-
 section (2) of Section 11 is not followed. The High Court,             c
 therefore, while rejecting the applicability of the Gujarat Tribunal
 Act, also closed the doors for relief under the provisions of the
 1996 Act.

       6. The said order of the High Court, which has been
  challenged in this appeal, therefore, gives rise to the question      D
· as to whether in the absence of any procedure in the Arbitration
  clause for the appointment of an Arbitrator, can the Chief
  Justice of the High Court or the Designated Court appoint an
  Arbitrator under Section 11 (6) of the 1996 Act in terms of the
  Agreement between the parties to have their disputes settled          E
  by arbitration.

      7. Mr. S.K. Gambhir, learned Senior Advocate appearing
for the appellant company, submitted that having regard to the
specific condition contained in the General Conditions of F
Contract regarding the application of Form 8-1, the parties to
the Arbitration Agreement could not be forced to file a suit
simply because the procedure for arbitration, as required under
Section 11 (6) of the 1996 Act, had not been agreed upon by
the parties or specified therein. Mr. Gambhir urged that when G
there was a specific Arbitration Agreement between the
parties, the remedy in respect thereof under the 1996 Act could
not be denied on a mere technicality and if no procedure had
been mentioned in the Arbitration Agreement, it could not be
contended that on such ground alone the provisions of Sub- H
    238        SUPREME COURT REPORTS              [2009] 1 S.C.R.


A section (6) of Section 11 could not be invoked in view of the
  provisions of Sub-section (2) thereof. Mr. Gambhir submitted
  that, in any event, Sub-section (2) of Section 11 would have to
  be read with Sub-clauses (3) to (5) as well and the powers of
  the Chief Justice or the Designated Court could not be fettered
B by Sub-section (6). It was submitted that the Chief Justice or
  the Designated Court could in given circumstances appoint an
  Arbitrator by applying the provisions of Sub-section (6) of
                                                                     ~
  Section 11 of the said Act. It was submitted that while the High
  Court had correctly held that the provisions of the Gujarat
c Tribunal  Act would have no application in the present case, it
  had gone wrong in holding that no relief could be provided to
  the appellant under the provisions of the 1996 Act also.

         8. Mr. Gambhir also contended that the requirements of
  Sub-section (6) of Section 11 of the 1996 Act have all been
D fulfilled, although, the appointment procedure had not been        ...
  indicated by the parties. He submitted that what was most
  important is that the parties had failed to reach an agreement
  regarding the appointment of an Arbitrator to resolve their
  disputes, which was the basic requirement to request the Chief
E Justice or the Designated Court to secure the appointment of
  an Arbitrator. Mr. Ganibhir drew .our attention to the opinion
  provided by the Legal Department of the Ahmedabad Municipal
  Corporation itself indicating that in the event of a dispute
                                                                     ;.
  between a contractor and the Corporation in the work of the
F Engineering Department, proceedings will have to be initiated
  under the Arbitration and Conciliation Act, 1996. Mr. Gambhir
  also drew our attention to an earlier order passed by the
   Designated Court of the Gujarat High Court in Arbitration
   Petition Nos.46-55 of 2003 in respect of a similar contract,
G where a retired Judge of the said High Court was appointed
  as Sole Arbitrator to resolve the disputes between the parties
  after the parties had arrived at a consensus regarding the         -r
   passing of such an order.
          9. Mr. Gambhir submitted that the Ahmedabad Municipal
H
      OM CONSTRUCTION CO. v. AHMEDABAD MUNICIPAL                    239
            CORP. & ANR. [AlTAMAS KABIR, J.]

     Corporation had themselves agreed to the appointment of an           A
     Arbitrator under the 1996 Act and could not, therefore, resile
     from such position in the instant case.

         10. The stand taken by Mr. Gambhir was opposed by Mr.
    Shyam Divan, learned Senior Advocate, who supported the               8
    view taken by the High Court and sub.mitted that the appellant's
    remedy lay in the filing of a suit. In the alternative, it was also
    submitted that the decision in the matter could be deferred and
    a notice could be issued to the State of Gujarat to indicate as
    to whether it had any intention of publishing a Notification as       C
    contemplated in Section 2(k) of the Gujarat Tribunal Act.

         11. Mr. Divan further submitted that in the absence of such
    Notification, clause 30 of Form B-1 would remain inoperative
    and consequently the provisions relating to the settlement of
    disputes by arbitration would also not be available to the parties. D

            12. Mr. Divan urged that other than Clause 30 of Form B-
     l, there was no other provision for arbitration in the contract
    between the parties and the question of invoking jurisdiction
    under the 1996 Act was, therefore, misconceived. Mr. Divan            E
    urged that as the basic requirement of Sub-section (6) of
    Section 11 regarding an agreed procedure had not been
    fulfilled, neither the Chief Justice nor the Designated Court could
    assume jurisdiction thereunder for appointing an Arbitrator.

         13. We have carefully considered the submissions made            F
    on be halt of the respective parties and it appears that we are
    called upon to decide two questions in order to decide this
    appeal. The first and possibly basic question is whether in the
    absence of a Notification in the Official Gazette, the Municipal
    Corporation can at all be considered as a Public Authority for        G
    the purpose of Section 2(1 )(k) of the Gujarat Tribunal Act, 1992.
    The other question is whether the absence of a procedure for
    appointment of an Arbitrator in the Arbitration Agreement itself,
    would constitute a bar for the appointment of an Arbitrator under
    Section 11 (6) or any other provision of the 1996 Act, when not       H
j
    240       SUPREME COURT REPORTS                (2009) 1 S.C.R.


A only the parties to these proceedings, but the High Court as
  well, had arrived at a conclusion that the provisions of the
  Gujarat Tribunal Act.• 1992, would not be applicable in the
  instant case.

        14. In this regard, we are inclined to accept the
8
  submissions of Mr. Gambhir notwithstanding the fact that the
  Ahmedabad Municipal Corporation had not been notified to be
  a "Public Undertaking" as defined in Section 2(1 )(iii) of the
  Gujarat Tribunal Act, 1992. There is no dispute that the
  Ahmedabad Municipal Corporation is a local authority and it
C could assume the garb of a "Public Undertaking" only pursuant
  to a Notification published in that regard in the Official Gazette.
  On the other hand, even if Form B-1 loses its relevance as far_
  as the present contract is concerned, since the parties have
  agreed to resolution of their disputes by arbitration, the
D provisions of Sub-section (5) of the 1996 Act can be pressed
  into service to enable the parties to invoke the powers of the
  Chief Justice to appoint an Arbitrator. The stand taken by Mr.
  Divan is highly technical and is not in aid of resolution of the
  disputes between the parties by an Arbitral Tribunal. While
E recognizing the right of the appellant to approach the Chief
  Justice or the Designated Court under Section 11 (6) of the
   1996 Act, the stand of the respondent Corporation has been
  that the party should be relegated to suit, which is quite contrary
  to the stand taken by it in the case of other employees.
F
        15. Section 11 of the 1996 Act deals exclusively with the
   appointment of Arbitrators. Sub-section (2) provides that the
  parties are free to agree on a procedure for appointing the
  Arbitrator or Arbitrators but subject to Sub-section (6) which
   provides that if an agreed procedure had not been acted upon,
G the parties could approach the Chief Justice or his Designate
   for appointment of an Arbitrator. Sub-sections (3), (4) and (5)
   contemplate different situations in which the Chief Justice or
   his Designate could be requested to appoint an Arbitrator. In
   our view, in the facts of this case, the answer to the question
H
   OM CONSTRUCTION CO. v. AHMEDABAD MUNICIPAL                        241
         CORP. & ANR. [AL TAMAS KABIR, J.]

 thrown up in this appeal lies in Sub-clause (5) of Section 11 of           A
 the 1996 Act, which reads as follows:-

          "(5) Failing any agreement referred to in sub-section (2),
         in an arbitration with a sole arbitrator, if the parties fail to
         agree on the arbitrator within thirty days from receipt of a       8
         request by one party from the other party to so agree the
         appointment shall be made, upon request of a party, by the
        ,Chief Justice or any person or institution designated by
         him."

        16. Having arrived at the aforesaid conclusion, the only            C
  question that remains to be decided is whether this matter
  should be remitted to the High Court for appointment of an
. Arbitrator or whether we should ourselves appoint an Arbitrator
  in terms of the Arbitration Agreement. Remitting the matter to
  the High Court would only mean another round of litigation,               D
  whereas if the appointment is made by us, the matter will
  achieve finality, which would ultimately be beneficial for all
  concerned.

      17. We, accordingly, allow the appeal and appoint Hon'ble             E
 Mr. Justice C.K. Thakker, a former Judge of the Supreme Court,
 presently settled at D-64, Akash Towers, Judges' Bungalow
 Road, Vastrapur, Ahmedabad to be the Arbitrator for settlement
 of the disputes which have arisen between the parties. The
 learned Arbitrator shall fix his own fees and shall also formulate
                                                                            F
 the procedure to be adopted by him during the arbitration
 proceedings. The Arbitrator shall try and publish his Award as
 expeditiously as possible, but positively within six months from
 the date of entering upon the Reference. The Arbitrator will also
 decide the venue and sittings of the Arbitral Tribunal in
 consultation with the parties. The judgment and order of the               G
 High Court impugned in this appeal is, accordingly, set aside.
 The costs of this appeal shall be the costs in the arbitration
 proceedings.

 R.P.                                                 Appeal allowed.       H