IBI CONSULTANCY INDIA PRIVATE LIMITED versus DSC LIMITED on 16 April 2018

IBI CONSULTANCY INDIA PRIVATE LIMITED

v.

DSC LIMITED

(Arbitration Case (C) No. 53 of 2016)

APRIL 16, 2018

[R. K. AGRAWAL AND S. ABDUL NAZEER, JJ.]

Arbitration and Conciliation Act, 1996 – s.11(6) r/w s.11(9)– Appointment of arbitrator – The scope under s.11(6) read withs.11(9) is very limited to the extent of appointment of Arbitrator –The Court has to see whether there exists an Arbitration Agreementbetween the parties – While deciding the question of appointmentof Arbitrator, court has not to touch the merits of the case as it maycause prejudice to the case of the parties – In the instant case,arbitration clause existed in the contract – Accordingly, solearbitrator appointed to adjudicate the disputes.

Disposing of interlocutory application and petitions, theCourt HELD: 1. The first and the foremost thing is the existenceof an arbitration agreement between the parties to the petitionunder Section 11 of the Act and the existence of dispute(s) to bereferred to Arbitrator is condition precedent for appointing anArbitrator under Section 11 of the Act. While deciding thequestion of appointment of Arbitrator, court has not to touch themerits of the case as it may cause prejudice to the case of theparties. The scope under Section 11(6) read with Section 11(9) isvery limited to the extent of appointment of Arbitrator. Perusalof contract showed that arbitration clause did exist in the Contract.[Paras 7, 9][1030-D-E; 1031-F, G]

2. It is a cardinal principle of the Arbitration and ConciliationAct that the parties are free to decide the number of arbitrators,provided, it is an odd number, as well as the procedure forappointing them. However, if the parties are not able to agree onthe said procedure, or constitute the Arbitral Tribunal to theirmutual satisfaction, either of the party has an option to route toan appropriate remedy under Section 11 of the Act, which provides

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Adetailed machinery for appointment of Arbitrator through judicialintervention. Accordingly, Justice Amitava Roy, a former Judgeof this Court, is appointed as the sole Arbitrator to adjudicatethe disputes between the parties on such fees he may fix. Thesaid appointment is subject to the necessary disclosure beingmade under Section 12 of the Act and the Arbitrator not beingBineligible under Section 12(5) of the Act. [Paras 10-11][1031-G-H; 1032-A-B]

CIVIL ORIGINAL JURISDICTION: Arbitration Case (C) No.53 of 2016.

Under Section 11(5), 11(6) (a) read with Sections 11(9) & 11(12)C(a) of the Arbitration and Conciliation Act, 1996.

WITH

Arbitration Case (C) Nos. 63, 54 and 57 of 2016

Rakesh Kumar, Ms. Preeti Kashyap, P. K. Sachdeva (ForDShibashish Misra), Merusagar Samantaray, Advs. for the Petitioner.Ms. Manali Singhal, Santosh Sachin, Ms. Vinita Sashidharan, JatinMongia, Abhijat P. Medh, Advs. for the Respondent.

The Judgment of the Court was delivered by

R. K.AGRAWAL J. 1. The IBI Consultancy India PrivateELimited-the petitioner-Company is the Indian subsidiary of the IBI Groupbased in Canada. The above petitions, under Section 11(6) read withSection 11(9) of the Arbitration and Conciliation Act, 1996 (hereinafterreferred to as ‘the Act’), have been filed by the petitioner-Company aswell as by the IBI Group for appointment of an Arbitrator to adjudicatethe disputes that have arisen between the parties in connection with theFcontracts in question.

2. The petitioner-Company has filed two petitions for theappointment of Arbitrator and its parent company viz., IBI Group hasalso filed two petitions of the same nature. Since the point of considerationis same in all these four petitions, purpose would be served if we mootGthe case of either of the petition and would be disposed off by this commonjudgment.

Arbitration Case No. 53 of 2016

3. The petitioner-Company is a multi-disciplinary company engagedin the business of providing system integration and maintenance service H

for Toll and Traffic Management Systems whereas the DSC Limited,the respondent-Company is a Company registered under the CompaniesAct, 1956 having two subsidiary companies. First subsidiary Companyof the respondent-Company is the Lucknow Sitapur Expressway Limited(LSEL) which is a special purpose vehicle (SPV) of the respondent-Company and has signed a Concession Agreement with the NationalHighways Authority of India (NHAI) for developing Lucknow-SitapurHighway Project (LSEL Project) for widening the existing 2-Lane Roadto 4-Lane dual carriageway between Km 413.200 to Km 488.270 onNH-24 in the State of Uttar Pradesh. Second subsidiary Company ofthe respondent-Company is Raipur Expressway Limited (REL), whichis also a special purpose vehicle (SPV) of the respondent-Company andhas signed a Concession Agreement with the NHAI for developing theRaipur-Aurang Highway Project (REL Project) for widening the existing2-lane Road to 4-Lane dual carriageway between Km 239 to Km 281on NH-6 in the State of Chhattisgarh.

4. Vide e-mail dated 16.02.2010, the respondent-Company sent aRequest for Proposal (RFP) to the petitioner-Company, inviting technicaland commercial proposal for their LSEL and REL Projects. Vide letterdated 07.06.2010, the petitioner-Company had given a proposal to executethe contract for installation, erection and commissioning of the TollCollection and Traffic Control Equipments at NH-24. The respondent-Company, vide letter dated 14.06.2010, accepted the said proposal.Pursuant thereto, a Contract Agreement dated 30.08.2010 was executedbetween the parties. The value of the Contract was mutually finalizedat Rs. 1,55,20,700.00 in pursuance of the Contract Agreement. Intotal, the IBI group and the petitioner-Company had entered into 6 (six)separate contracts for the respective LSEL and REL Projects with therespondent-Company.

5. During completion of the projects, the respondent-Companydefaulted in releasing the agreed payment to the petitioner-Companyand the IBI Group. Though several verbal and written communicationwere exchanged between the parties to this effect, the respondent-Company could not release the outstanding payment. On 06.09.2012, alegal notice was sent to the respondent-Company by the IBI Group aswell as by the petitioner-Company for the recovery of outstandingpayment for all the contracts. Further, on 12.06.2013, a reminder foroutstanding payment was sent to the respondent-Company.

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1030SUPREME COURT REPORTS

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A6. On 24.04.2014, a legal notice for invoking Arbitration Clauseand appointment of Arbitrators was sent to the respondent-Companyand the name of Mr. Debashish Moitra, Advocate was suggested as aSole Arbitrator, however, there was no reply from the other side. TheIBI Group and the petitioner-herein filed petitions under Section 11 ofthe Act before the High Court being Arbitration Petition Nos. 443, 448,B444 and 449 of 2014 before the High Court of Delhi at New Delhi.Learned single Judge of the High Court, vide order dated 24.02.2015,disposed of the petitions while holding that since one of the parties to thepetition is an entity incorporated outside India, therefore, the arbitrationof the dispute involving such an entity would be an ‘internationalCcommercial arbitration’ within the meaning of Section 2(1)(f) of the Actand for seeking appointment of an Arbitrator in a dispute involving suchan entity, an application will have to be filed before the Supreme Courtunder Section 11(9) of the Act. The petitioners herein have thereforeinvoked the jurisdiction of this Court by filing the above petitions.

D7. The first and the foremost thing is the existence of an arbitrationagreement between the parties to the petition under Section 11 of theAct and the existence of dispute(s) to be referred to Arbitrator is conditionprecedent for appointing an Arbitrator under Section 11 of the Act. It isalso a well settled law that while deciding the question of appointment ofArbitrator, court has not to touch the merits of the case as it may causeEprejudice to the case of the parties. The scope under Section 11(6) readwith Section 11(9) is very limited to the extent of appointment of Arbitrator.This Court has to see whether there exists an Arbitration Agreementbetween the parties and if the answer is affirmative then whether thepetitioner has made out a case for the appointment of Arbitrator.F

8. It is worth mentioning that the position after the insertion ofsub-Section 6(A) of Section 11 of the Act dated 23.10.2015 has beenchanged. The extent of examination is now confined only to the existenceof the Arbitration Agreement. At this juncture, it is pertinent to set outArticle-1 as well as Clause 3.14 of the Contract Agreement datedG30.08.2010 which are as under:- “Article-1

Contract Documents

The following document shall constitute the Contract betweenthe client and the contractor, and each shall be read and construed as an integral part of the Contract;

(i) This Contract Agreement and Appendices hereto

(ii) Letter or indent ref no. No LSEL/Tolling/IBI/HO-2 dated 14[th]June 2010…..”

“Clause 3.14

Arbitration (as mentioned in ref. No LSEL/Tolling/IBI/HO-1dated 14[th] June 2010)

1. In the event of any dispute or difference arising out or touchingupon any of the terms and conditions of this contract and /or inrelation to the implementation or interpretation hereof, the sameshall be resolved initially by mutual discussion and conciliation butin the event of failure thereof, the same shall be referred to anindependent arbitrator mutually agreed by the two parties.Thedecision of the arbitrator shall be final and binding upon the parties.The arbitration shall be in Delhi and the arbitrator shall give hisaward in accordance with “The Arbitration and conciliation Act,1996”.

2. In the event of arbitrator dying, neglected or refusing to act orresigning or being unable to act for any reason or his award beingset aside by the court for any reason the parties will mutuallyagree another to act as Arbitrator.

(Emphasis supplied by us)”

9. On a careful perusal of Article-1 as well as Clause 3.14 of theContract dated 30.08.2010 along with the Letter of Indent dated14.06.2010, it is evident that the letter dated 14.06.2010 is a part of theContract and it shall be read and construed as an integral part of theContract. Therefore, the contention of the respondent-Company thatthere does not exist any arbitration agreement between the parties is notsustainable in the eyes of law. We are of the considered view thatArbitration clause exists in the Contract and we hold this point in favourof the petitioner-Company.

10. It is a cardinal principle of the Arbitration and Conciliation Actthat the parties are free to decide the number of arbitrators, provided, itis an odd number, as well as the procedure for appointing them. However,if the parties are not able to agree on the said procedure, or constitute A

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Athe Arbitral Tribunal to their mutual satisfaction, either of the party hasan option to route to an appropriate remedy under Section 11 of the Act,which provides detailed machinery for appointment of Arbitrator throughjudicial intervention.

11. Accordingly, Justice Amitava Roy, a former Judge of this Court,Bis appointed as the sole Arbitrator to adjudicate the disputes between theparties on such fees he may fix. Nevertheless to say, the said appointmentis subject to the necessary disclosure being made under Section 12 ofthe Act and the Arbitrator not being ineligible under Section 12(5) of theAct.

C12. The petitions as well as interlocutory application, if any, aredisposed of accordingly.

Devika Gujral

Petitions disposed of.

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