Bangladesh Bank Vs. A. Latif & Company Limited and another, V ADC (2008) 753

Case No: Civil Petition for Leave to Appeal No. 1595 of 2007

Judge: Md. Abdul Matin,

Court: Appellate Division ,,

Advocate: Mr. Rafique-ul-Huq,Fida M. Kamal,,

Citation: V ADC (2008) 753

Case Year: 2008

Appellant: Bangladesh Bank

Respondent: A. Latif & Company Limited and another

Subject: Arbitration/Mediation,

Delivery Date: 2008-03-27

Supreme Court of Bangladesh
Appellate Division
(Civil)
 
Present:
Md. Ruhul Amin, CJ.
M. M. Ruhul Amin, J.
Md. Abdul Matin, J.
 
Bangladesh Bank
..........Petitioner
Vs.
A. Latif & Company Limited and another
.........Respondents
 
Judgment
March 27, 2008.
 
The Arbitration Act, 1940
This is a technical objection which the petitioner could have raised before the learned Subordinate Judge. This objection would have enabled the respondent to amend their petition and invoke some other section of the Arbitration act. We find that the Arbitrator has already entered on the reference and has started issuing notices to the parties. In that view of the matter we are not inclined to entertain this technical objection at this stage. ……. (16)
 
Case Referred to-
Coal Controller Vs. Ventura Industries, 45 DLR (AD) 184.
 
Lawyers Involved:
Fida M. Kamal, Senior Advocate instructed by Abu Sams Khalequzzaman, Advocate-on-Record-For the Petitioner
Rafique-ul Huq, Senior Advocate instruct­ed by A. K. M. Shahidul Huq, Advocate-on- Record-For Respondent No. 1
Not represented-Respondent No. 2.
 
Civil Petition for Leave to Appeal No. 1595 of 2007
(From the judgment and order dated 03.05.2007 passed by the High Court Division in First Appeal No. 02 of 2003 and First Miscellaneous Appeal No. 01 of 2003.)
 
JUDGMENT
Md. Abdul Matin J.
 
1.         This petition for leave to appeal is directed against the judgment and order dated 03.05.2007 passed by the High Court Division in First Appeal No. 02 of 2003 and First Miscellaneous Appeal No. 01 of 2003 heard analogously dismissing both the appeals and affirming the judgment and decree dated 06.07.2002 passed by the learned Joint District Judge, 3rd Court, Dhaka in Title Suit No. 01 of 2000 making an award dated 11.11.1999 passed by the sole arbitrator-defendant-respondent No. 2 rule of the court and decreeing the suit in favour of the first party plaintiff.
 
2.         The facts, in short, are that the 1st party entered into a contract with the 2nd party on 24.08.1994 and work order was fol­lowed thereafter 27.08.1994 for Construction of Bangladesh Bank, Rangpur Centre, Rangpur. According to the terms and conditions of the tender the 1st party deposited due earnest money and furnished performance bond in the form of bank guarantee. The contract contained conditions that the 1st party will execute the work within 4 months time as stipulated in the work order issued in favour of the 1st party for completion of the work, In the event of failure of the 1st party to commence and complete the work with in the stipulated time the 1st party would be subjected to diverse punishment viz imposition of liquidated damage, cancellation of contract forfeiture of security money and performance bond and sale of plants and machineries if the 2nd party deemed fit and necessary to recover their claim, The 2nd party however failed to supply the approved site plan and working drawing for the whole contracted work either on the day of issuing the work order on 27.08.1994 or within the commencement period of 15 days to execute and complete the work within target period of 4 months. On receipt of the work order on 27.08.1994 the 1st party at site on 31.08.1994 deposited samples of bricks and sands for laboratory test under intimation to the 2nd party. But unfortunately the 2nd party defaulted in their performance and contractual obligation by not supplying the site plan and working drawing and without these two material documents execution of the work was impossible. The 1st party requested the General Manager (Engg) to arrange supply of the drawings by their letter dated 04.09.1994 and 28.09.1994. After 26 days of the work order the draft site plan was approved by the 2nd party and it was supplied to the 1st party on 22.09.1994. The 2nd party again defaulted in not supplying the working drawing along with the site plan.
 
3.         The 2nd party caused serious hindrance in the work progress consequent upon which the 1st party suffered tremendous financial hazards. The 2nd party instead of doing some thing that can enable the 1st party to start execution of the work they very surprisingly stopped the work for indefinite period except barbed wire fenc­ing work by their letter dated 20.10.1994. While the contracted work was directed to be stopped the 2nd party failed to instruct the 1st party to release the workers except the workers engaged for barbed wire fencing work. The 2nd party on 19.03.1995 supplied part drawing of note verification hall and cash department upto the plinth level without supplying drawing for door, window, grills and false ceiling and truss. The 1st party asked the 2nd party by their letter for supply of complete drawing so as to enable the 1st party to complete the work without further delay, besides requesting the 2nd party to pay compensation to them for loss they incurred for con- ducting the work for an unreasonable period. Due to such delay extension of time was indispensable. Therefore the 1st party asked the 2nd party to accord time extension considering 2nd party's failure to provide working drawing in due course of time. The 1st party complained that they sustained heavy financial and business loss for continuing the work beyond the stipulated 4 months time. The 1st party in their letter requested the 2nd party to compensate the loss. The 1st party's loss could have been mitigated if the bill for excess additional work done as per direction of the 2nd party had been given as per direction of the 2nd party. The excess work was done in 1995 and despite repeated written and verbal request the bill in question was not paid even in 1997. Thus being aggrieved the 1st party applied to the General Manager (Engineer) department of the 2nd party to negotiate and arrange payment of compensation to them. But the General Manager utterly failed to negotiate the matter. The 1st party contended t there was no alternative than to refer the matter to arbitration. Accordingly the 1st party under Clause 28 of the contract (Green form) applied to the General Manager (Accounts) to appoint a sole arbitrator on 14.10.1997 within 15 days and settle the dispute by an award for payment of compensation to the 1st party.
 
4.         The General Manager neither replied to the letter nor appointed any sole arbitrator as per the notification and ultimately they filed Arbitration Miscellaneous Case in the Court of 3rd Subordinate Judge, Dhaka being Arbitration Miscellaneous Case No. 39 of 1997 praying for appointment of a sole arbitrator and for award of compensation to the 1st party. The 1st party requested the 2nd party in writing to accept the work and make payment of bills but they did not pay up the bill. The work was finally completed on 26.02.1998 two days ahead of the last extended date being 28.02.1998. After completion the 1st party requested the 2nd party to take over the work but the 2nd party imposed liquidated damage i.e. delay penalty. They then began to adopt dilatory tactics to take over the project. The 2nd party without any consideration of the above letter imposed delay fine for Tk. 10,78,371.00 during the pendency of the Arbitration Miscellaneous Case. The 2nd party also enchased performance bond for Tk.5, 39,186.00. The contract provides for deduction of the security money from running bills only, after adjustment of the full earnest money from each running bill before the earnest money was exhausted. As a result all the time the 1st party received running bill amount less than the amount they were entitled to. The 2nd party by their negligent act and omission prevented the 1st party from completing the work within 4 months time specification ending on 26.12.1994. The 1stparty was entitled to get bill for the whole contracted price being Tk.1,07,83,710.91 by January and February, 1995. But no work could be done and no bill could be prepared and submitted for want of approved site plan and working drawings.
 
5.         In addition the 2nd party also stopped the contracted work from 20.10.1994 to 26.01.1995. They suffered business loss and damage for Tk.1,54,58,607.12 at the rate of 16% calculated for different period of delay in payment of bills. The 1st party had to pay salary and wages to the staff/workers for 38 months upto 28.02.1998 after expiry of the work order period on 26.12.1994. Due to negligent act the 2nd party compelled the 1st party to continue the work upto 28.02.1998 and the 1st party is accordingly entitled to get back the excess money they paid for their skilled works for 38 months being Tk.45,80,064.00 and also paid salary for 35 nos. of skilled labour for 38 months and paid them Tk. 26,60,000.00. The 1st party paid Tk. 17,29,000.00 for 13 nos. Site office staff. The 1st party paid Tk. 9,12,000.00 for 3 nos. engineers, Tk. 1,12,000.00 for 2 nos. Staff Tk. 84,000.00 for 4. Guard and menials and Tk.1,78,500.00 for salary of 3 nos. Engineer. Therefore the 1st party sustained business loss for Tk.16, 38,017.33; for with holding payment of bill for addi­tional work for 22 months. The 2nd party illegally deducted as VAT Tk.4, 15,418.80 from the bill of the 1st party and as such the amount is refundable to the 1st party. The 2nd party again retained the earnest amount of Tk.2,32,000.00 upto 18.02.1996 and the 1st party is entitled to get a business loss for Tk. 1,97,97 3.3 3 for illegal with holding money of 1st party. The performance bond for Tk.5,39,186.00 was liable to be refunded to the 1st party after one month from completion of the work by 26.12.1994 but the performance bond was not released by January, February, 1995. As such the 1st party sus­tained loss for Tk. 15, 58,074.50 for renew­ing the performance bond along with busi­ness loss caused due to illegal detention of performance bond amount.
 
6.         The 1st party spent Tk. 3,17,520.00 for the purpose which was a non schedule work and as such the 1st party is entitled to get the money. The 1st party under compulsion had to continue the work to avoid different punishment that could have been imposed by the 2nd party. The 1st party made repeated request to increase the tendered price and arrange payment of compensation for working for an unreasonable period upto 28.02.1998. The price of construction materials and wages in 1998 are much higher than the tender price of 1994. Therefore they are entitled to get 15% price escalation from 1995. But due to refusal of the 2nd party to increase rate the 1st party sustained loss for Tk. 54,42,812.95 on this account. In addition the final bill kept unpaid for Tk. 8, 85,282.94 and performance bond amount for Tk.5, 39, 186.00 and Security deposit amount for Tk.9, 23,152.86 are the personal money of the 1st party. The 2nd party is liable to pay those amounts to the 1st party. In fact the 1st party is entitled to get an award for Tk. 3, 66, 89,641.83 along With award of interest at the rate of Tk. 20% on the awarded amount till recovery.
 
7.         The 2nd party also filed an application Lawyers under Section 30 of the Arbitration Act, 1940 for setting aside the award before the learned Subordinate Judge, 2nd Court Dhaka being Title Suit No. 01 of 2000 on the ground that the Arbitrator acted arbi­trarily and is guilty of legal misconduct in awarding damage to the extent of Tk. 2,84,90,849.24 without any evidence submitted by the claimant and prayed for rejection of award dated 11.11.1999 passed by the Arbitrator Justice Abdul Wadud Chowdhury.
 
8.         The 2nd party also filed written reply denying material allegations made in the plaint and stated that the claim of the 1st party is baseless, unfounded malafide and not supported by the terms and conditions of the contract. The 1st party and the 2nd party concluded formal contract on 24.08.1994 followed by work order dated 27.08.1994 and the entire work was fixed at Tk.1,07,83,710.91. The 1st party furnished 5% of the tender value being for Tk.5, 39, 186.00. The contract contained Clause No. 20 which empowers Bangladesh Bank for extension of time without prove escalation. Since the state­ment of claim is for price escalation the arbitration proceeding can not proceed. The site plan was supplied with the work order and the amended site plan was sup­plied on 22.09.1994 before mobilization of the work by the contractor and before samples of materials were supplied on 10.09.1994. The contractor did not mobi­lize proper manpower and even after sup­ply of the site plan and drawing for tempo­rary shed with the work order, the contrac­tor executed only 2.46% work upto 19.10.1994 and 5.39% upto 31.03.1995. The contractor instead of giving priority on carrying on the work they have given all attention in making unnecessary corre­spondences for price escalation and for illegal benefit in different untenable plea. The 1st party deposited samples of materi­als on 10.09.1994 and they laboratory test report was received, the finally approved site plan was supplied to them on 22.09.1994. Drawing and design are required to be supplied before the com­mencement of actual work on full satisfac­tion of the materials test report and the approved site plan been given on 22.02.1994 before the test report was obtained on 26.09.1994. The allegation that site plan was not supplied with work order does not stand. The 1st party tried to shift his failure upon the bank and there is no provision for price escalation. There was no worker of the contractor to work site sitting ideal and they did not mobilize workers even on 26.09.1994. Vat money was legally deducted and the earnest money has been kept as security and the performance bond will be refunded after deducting penalty and other risk factors. The claim of dewatering is not permissi­ble. The claim of the Bangladesh Bank for Tk.10, 78,371.09 be accepted by making on award in favour of Bangladesh Bank to pay 16% interest on the awarded sum till its recovery.
 
9.         The arbitrator after hearing the parties, framed issues with regard to maintainabil­ity and came to a conclusion that proceed­ings is maintainable since dispute and dif­ferences existed between the parties and awarded Tk.2,84,90,849.24. The 2nd party will pay the awarded amount to the 1st party by 30th November, 1999 failing which the 1st party would be entitled to get 16% interest over the awarded amount from the date of making signing and pass­ing the award till realization of the award­ed amount and thereupon the plaintiff filed Title Suit No. 01 of 2000 before the learned Joint District Judge to make the Award Rule of the Court. The defendant contested the proceeding by filing written statement. The Court after hearing the parties made the Award Rule of the Court.
 
10.       The defendant petitioners preferred first appeal and first miscellaneous appeal before the High Court Division and both have been dismissed.
 
11.       The defendant petitioners have filed this petition for leave to appeal.
 
12.       We have heard Mr. Fida M. Kamal, learned Counsel and perused the petition and the impugned judgment and order of the High Court Division and other papers on record.
 
13.       Mr. Fida M. Kamal, learned Counsel submits that the High Court Division failed to appreciate that the proceeding of Arbitration Miscellaneous Case No. 39 of 1997 under Section 8 of the Arbitration  Act, 1940 was illegal and without jurisdiction and thus erred in law in dismissing the appeal and not setting aside the award in question inasmuch as Section 8 of the Arbitration Act, 1940 is applicable in an arbitration agreement where the arbitration clause contemplated the arbitrator to be appointed by consent of the parties and the said section has no manner of application with regard to an arbitration agreement where the arbitrator is contemplated to be appointed by a named appointing authority as opposed to the consent of the parties. The very appointment of the arbitrator is void being without jurisdiction and an arbitrator so appointed lacks jurisdiction inherently and hence any award passed by such arbitrator is none-est.
 
14.       It appears that at no point of the proceeding before the trial court the petitioner raised any objection with regard to jurisdiction rather participated in the pro­ceeding and when the award has gone against them raised objection with regard to jurisdiction before the High Court Division in the first appeal and in the mis­cellaneous appeal which the High Court Division has rightly rejected.
 
15.       On a similar situation appointment of arbitrator under Section 8 was challenged pleading lack of jurisdiction and this court held the objection to be a technical objection in the case of Coal Controller Vs. Ventura Industries reported in 45 DLR (AD) 184 .
 
16.       In that case it was observed as under:

"5. This is a technical objection which the petitioner could have raised before the learned Subordinate Judge. This objection would have enabled the respondent to amend their petition and invoke some other section of the Arbitration Act. We find that the Arbitrator has already entered on the reference and has started issuing notices to the parties. In that view of the matter we are not inclined to entertain this technical objection at this stage."
 
17.       In the present case the court has already given the award and the award has been made Rule of the court and thereafter this objection is coming which cannot be entertained at this stage.
 
18.       We find no merit in this petition which is accordingly dismissed.
 
Ed.