Supreme Court of India
HYDROELECTRIC PROJECT AUTHORITY, BHUTAN versus LARSEN & TOUBRO LTD. on 22 February 2021
PUNATSANGCHHU – 1 HYDROELECTRIC PROJECTAUTHORITY, BHUTAN
v.
LARSEN & TOUBRO LTD.(Civil Appeal No. 693 of 2021)
FEBRUARY 22, 2021
[INDU MALHOTRA AND AJAY RASTOGI, JJ.]
Arbitration and Conciliation Act, 1996 – s.11 – Contractbetween appellant-authority and respondent-contractor in relationto a Hydro-electric Project in Bhutan – Disputes between the parties– Respondent sent notice of arbitration to appellant under Clause67 (ii) of the contract, and nominated its own nominee arbitrator –Appellant stated it was agreeable for arbitration; however,arbitration would be governed by Alternative Dispute ResolutionAct, 2013 of Bhutan and the place of arbitration shall be at Thimphu,Bhutan – Thereafter, respondent filed application u/s.11(6) of theAct, 1996 before High Court for appointment of arbitrator on behalfof appellant – High Court held that Clause 67 (ii) of the contractdid not indicate that applicability of the 1996 Act would cease onenactment of the Bhutan Act of 2013 – Since appellant had failedto appoint its arbitrator, High Court exercised its jurisdiction u/s.11, and made the appointment and further directed that the twoarbitrators would proceed to appoint the presiding arbitrator, andthe arbitral proceedings would be governed by the provisions ofthe 1996 Act – Hence the instant appeal – Meanwhile, the arbitraltribunal was constituted, as the two arbitrators had appointed apresiding arbitrator – However, thereafter, consensus arrived atbetween appellant and respondent with respect to the applicablestatute and the seat of arbitration – Accordingly, order of HighCourt modified to the extent that all disputes arising out of thecontract in question shall be conducted in accordance with theBhutan Act of 2013 with the seat of arbitration at Thimphu – Thetribunal will, however, be at liberty to conduct some of the hearings,in consultation with the parties, at such venues as may be convenient– Alternative Dispute Resolution Act, 2013 (enacted by Kingdom ofBhutan).
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[2021] 1 S.C.R.
ACIVIL APPELLATE JURISDICTION : Civil Appeal No. 693of 2021.
From the Judgment and Order dated 11.12.2020 of the High Courtof Delhi at New Delhi in Arbitration Petition No. 461 of 2020.
Tushar Mehta, SGI Ranjeet Kumar, Gourab Banerjee, Sr. Advs.BBharat Singh, Dhruv Gupta, Amit Pawan, Ananya Kumar, Rajat Joneja,Ms. Neeharika Aggarwal, Divyam Agarwal, Advs. for the appearingparties.
The following Order of the Court was passed:
ORDERC
Leave granted.
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1. On 14.04.2009, a Contract Agreement was executed betweenthe Appellant and the Respondent-Contractor for the Construction ofDiversion Tunnel, Dam, Intake and Desilting Arrangement includingDHydro-mechanical Works of the Punatsangchhu-I Hydro-electric Projectlocated in Wangdue Phodrang District in Bhutan. The contract providedfor resolution of disputes through arbitration. The relevant terms of theContract are as under :
Clause 5 (i) (b)E
The law to which the Contract is to be subject and according towhich the Contract is to be construed shall be the law for the timebeing in force in Bhutan and within the jurisdiction of Thimphucourts.
Clause 67F
(ii) Except where the decision has become final, binding andconclusive in terms of Sub Para (i) above disputes or differencesshall be referred for arbitration through to an Arbitral Tribunal ofthree arbitrators appointed jointly by the PHPA and the Contractor.Where the mandate of an arbitrator terminates a substituteGarbitrator shall be appointed according to the rules that wereapplicable to the appointment of the arbitrator being replaced.
In the absence of an Arbitration Act in Bhutan, the Arbitral Tribunalshall follow / be guided by the basic principles and procedures ascontained in the Indian Arbitration and Conciliation Act 1996. The H
parties shall be free to agree on a procedure for appointing theArbitrators. Failing any agreement for appointment of Arbitrators,each party shall appoint one Arbitrator and the two appointedArbitrators shall appoint the third Arbitrator, who shall act as thepresiding Arbitrator.
Clause 67 (iv)
If either of the parties fail to appoint its arbitrators in pursuance ofsub-clause (ii) above, within 30 days after the receipt of the noticeof the appointment of its arbitrators or the two appointed Arbitratorsfail to agree on third Arbitrator within thirty days from the date oftheir appointment then the appointment shall be made, upon requestof a party, by the Chief Justice, Delhi High Court, India/ThimphuHigh Court, Bhutan or any person or institutions designated byhim.
Clause 67 (vii)(a)
All arbitration shall be held at New Delhi, India/ Thimphu, Bhutan.
2. On 25.02.2013, the Kingdom of Bhutan enacted the AlternativeDispute Resolution Act, 2013 (“the Bhutan Act”) to provide for settlementof disputes through arbitration. The Act came into force w.e.f. 14.03.2013.
3. Disputes arose between the parties with respect to certainclaims made by the Respondent-Contractor.
On 28.07.2020, the Respondent-Contractor sent a notice ofarbitration to the Appellant-Authority under Clause 67 (ii) of the Contract,and nominated a retired Judge of this Court as its nominee arbitrator.
4. In response to the Notice dated 28.07.2020, the Appellant repliedvide Letter dated 04.08.2020, stating that it was agreeable for settlementof disputes through arbitration. However, as per Clause 67 (ii) of theContract, the arbitration would be governed by the Bhutan Act, 2013and the place of arbitration shall be at Thimphu, Bhutan as provided byClause 67 (vii) (a).
5. In October, 2020, the Respondent-Contractor filed an applicationu/S. 11 (6) of the Arbitration & Conciliation Act, 1996 before the DelhiHigh Court for appointment of an arbitrator on behalf of the Appellant-Authority.
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A6. The Delhi High Court vide Order dated 11.12.2020 held thatClause 67 (ii) of the Agreement did not indicate that the applicability ofthe 1996 Act would cease on the enactment of the Bhutan Act. Theenactment of the Bhutan Act, 2013 would not result in the 1996 Actbecoming inapplicable. The arbitration would be governed by the 1996Act. Since the Hydro-electric Authority had failed to appoint its arbitrator,Bthe Court exercised its jurisdiction u/S.11, and made the appointment. Itwas further directed that the two arbitrators would proceed to appointthe presiding arbitrator, and the arbitral proceedings would be governedby the provisions of the 1996 Act.
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7. Aggrieved by the Order dated 11.12.2020, the Hydro-electricCAuthority filed the present special leave petition.
We have heard Mr. Tushar Mehta, learned Solicitor General ofIndia and Mr. Ranjeet Kumar, Senior Advocate on behalf of the Appellant-Authority, and Mr. Gourab Banerji, Senior Advocate on behalf of theRespondent-Contractor.D
On 16.02.2021, the matter was taken up for admission hearing.We were informed by the Senior Counsel for the parties that in themeanwhile, the arbitral tribunal had been constituted, as the two arbitratorshad appointed Justice (Retd.) R.C. Lahoti, former Chief Justice of India,as the presiding arbitrator.E
The learned Solicitor General appearing on behalf of the Authorityfairly submitted that the Appellant herein did not have an issue withrespect to the panel of arbitrators appointed for adjudication of thedisputes. Their grievance was limited to the applicability of the IndianArbitration & Conciliation Act, 1996 and the seat of arbitration at NewFDelhi.
8. The matter was then taken up on 22.02.2021 for further hearing.Mr. Gourab Banerji, learned Senior Advocate for the Respondent-Contractor submitted that his clients were agreeable to the arbitrationbeing conducted in accordance with the Alternative Dispute ResolutionGAct, 2013 of Bhutan, with the seat of arbitration at Thimphu.
9. In view of the consensus arrived between the parties, the Orderof the High Court stands modified to the extent that all disputes arisingout of the Agreement dated 14.04.2009 shall be conducted in accordancewith the Alternative Dispute Resolution Act of Bhutan, 2013 with the H
seat of arbitration at Thimphu. The tribunal will, however, be at liberty toconduct some of the hearings, in consultation with the parties, at suchvenues as may be convenient.
The Civil Appeal is disposed of, with no order as to costs.
Pending applications, if any, shall stand disposed of.
Devika Gujral
Appeal disposed of.
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