GR GREEN LIFE ENERGY PVT. LTD. versus LEITWIND SHRIRAM MANUFACTURING PVT. LTD. on 22 February 2021

1. The present Civil Appeal has been filed by the Appellant-BContractor to challenge the Order dated 16.09.2020 passed on anApplication filed under Section 11 of the Arbitration and ConciliationAct, 1996 by the Madras High Court in Original Petition No. 300 of2019.

2. The Appellant and the Respondent had entered into aCDevelopment Agreement dated 10.02.2014 to set up a Wind Farm Projectin Sangli District in Maharashtra, which contained an arbitration clause.

Clause 20 of the Agreement reads as :

“20. Governing Law and Jurisdiction and Service of Process D….

c) All disputes, differences and claims or any non-paymentconcerning the project work hereby created and / or touching thispresents, arising out of or in relation to anything contained hereinshall be referred to arbitration to be held at Chennai, under theprovisions of Arbitration and Conciliation Act, 1996 (inforce fromEtime to time). The arbitration panel shall consist of three arbitrators,one arbitrator shall be appointed by each party and the arbitratorsso appointed shall appoint the presiding arbitrator. The parties hereto shall duly observe any interim award/s or direction/s of thearbitration tribunal and the award in pursuance to arbitration shallFbe final and binding on the parties hereto. The arbitrationproceedings shall be in English language.”

3. Disputes arose between the parties with respect to claims raisedby the Appellant-Contractor, which led to issuance of a legal notice dated21.04.2018 seeking payment of outstanding dues of Rs. 3,26,08,545/-.

G

4. The Respondent vide letter dated 21.01.2019 rejected theallegations in the notice, and contended that the Contractor had failed toprovide services as agreed under the Development Agreement. It wasfurther contended that the Appellant-Contractor was liable to refund anamount of Rs.10,26,00,000/- with Interest @ 15% p.a., and pay liquidatedHdamages of Rs. 1,54,00,000/- to the Respondent-Company.

The Respondent invoked arbitration under Clause 20 of theAgreement, and nominated its arbitrator, with a request to the Appellantherein to make nomination of its arbitrator.

5. On 18.03.2019, the Respondent herein filed a Petition underSection 11(6) of the 1996 Act before the High Court of Madras, whereinit was prayed that the Court may appoint an arbitrator on behalf of theAppellant in terms of Clause 20 of the Development Agreement, sincethe Contractor had failed to do so.

6. Subsequently, the Appellant-Contractor, registered itself underthe Micro, Small and Medium Enterprises Development Act, 2006(“MSMED Act”), and filed an application for resolution of disputes beforethe Facilitation Council, Pune established under the MSMED Act.

7. In the meanwhile, the Petition under Section 11 was taken upfor hearing before the High Court, wherein it was observed that there isno provision under the MSMED Act for reference of counter-claims tothe Facilitation Council, and adjudication thereof. Sections 15 to 18 ofthe MSMED Act provide for reference of disputes with respect to claimsmade by a supplier / contractor registered under the MSMED Act. Eventhough Section 24 of the MSMED Act gives overriding effect to theMSMED Act, it would not be applicable in this case, since there is noprovision under this Act to deal with counter-claims filed against thesupplier-contractor.

The High Court took the view that since there is no provision forraising counter-claims under the MSMED Act, and the parties had inthe Development Agreement dated 10.02.2014 agreed to refer all theirdisputes under the 1996 Act, it was a fit case for appointment of thearbitrator. The arbitration agreement provided for a three-membertribunal. The Applicant (Respondent herein) had already nominated itsarbitrator, the Contractor was directed to appoint an arbitrator. On suchnomination, the two arbitrators would appoint the presiding arbitrator.

8. The Appellant-Contractor challenged the aforesaid Order dated16.09.2020 before this Court vide Special Leave Petition (C) No. 16027of 2020.

During the course of the proceedings, the parties have agreed tohave their disputes adjudicated under the Arbitration & Conciliation Act,1996 by a Court-appointed Sole Arbitrator.

ABC

DE

F

G

H

586SUPREME COURT REPORTS

AIn view of the statement made by the Counsel for both parties oninstructions, Clause 20 of the Development Agreement dated 10.02.2014stands superseded to the extent that the arbitration will be conducted bya three-member tribunal.

We appoint Justice K. Kannan, former Judge of the Madras HighBCourt, as the Sole Arbitrator to adjudicate on all the claims and counterclaims made by the parties arising out of the Development Agreementdated 10.02.2014. The arbitration will be conducted in accordance withthe Arbitration and Conciliation Act, 1996. The arbitral proceedings shallbe conducted by the Madras High Court Arbitration Centre in accordancewith its Rules.C

The appointment of the Sole Arbitrator is subject to theDeclarations to be made under Section 12 of the Arbitration andConciliation Act, 1996 with respect to independence and impartiality,and the ability to devote sufficient time to complete the arbitration. TheSole Arbitrator will be paid fees as per the Schedule of the Madras HighDCourt Arbitration Centre (Administrative Cost and Arbitrators’ Fees)Rules, 2017.

A copy of this Order be despatched to the Madras High CourtArbitration Centre, and Justice K. Kannan (Retd.) at the followingaddress:E

“Justice K. Kannan

3/11, Lakshmi Colony,

North Crescent, T. Nagar

Chennai - 600017F

Mob: [REDACTED]"

9. In view of the aforesaid directions, the Application filed by theAppellant-Contractor under the MSMED Act, registered as MSFECCase No. MH/26/M/PNE/02000 on 22.10.2020, will stand closed by theGFacilitation Council, Pune.

10. The Appeal is disposed of in the aforesaid terms. Pendingapplications, if any, stand disposed.

HBibhuti Bhushan Bose