The Delhi High Court recently comprising of a bench of Justice Suresh Kumar Kait while dismissing a petition seeking appointment of the respondent’s Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 observed that proceedings before the second arbitral tribunal are in progress, however, not yet complete and if the disputes raised in the present petition are referred to the second arbitral tribunal, it may result in delay of proceedings before the second arbitral tribunal. (Panipat Jalandhar NH 1 Tollway Private Limited vs National Highways Authority of India)
Facts of the case
Panipat Jalandhar NH-1 Tollway Private Limited had entered into a Concession Agreement with National Highway Authority of India for Six-Laning of Panipat-Jalandhar Section of NH-1 in the State of Haryana and Punjab to be executed on Built-Operate-Transfer basis on Design- Build-Finance- Operate pattern under NHDP Phase-V. The duration of the Concession Agreement was 15 years commencing from 11th May, 2009.
Subsequent to entering into the Concession Agreement, petitioner started the work, however, certain disputes arose between the parties and those disputes pertaining to the year 2013 are pending before an independent arbitral tribunal.
Petitioner has claimed that out of the 291.1 km, the work on 269 km was completed when Respondent took a decision to delink 22.1 km out of the total length, for the delay and failure on the part of respondent to hand over the stretch and consequently, due to this delinking, petitioner suffered severe loss.
Accordingly, petitioner sent a Notice of Dispute to the respondent. Since the parties failed to resolve the disputes, petitioner invoked arbitration under clause 44.3 of the Concession Agreement and issued a notice calling upon the respondent to confer a set of Arbitrators.
However, on 4th December, 2020 respondent suspended the Concession Agreement, against which petitioner filed a petition under Section 9 of Arbitration and Conciliation Act, 1996.
Arguments before HC’s Coordinate Bench
During the course of hearing, the learned senior counsel appearing for the petitioner, submitted that after the respondent failed to appoint its nominee Arbitrator, the petitioner filed a petition under Section 11(6) of the Act; however, the Court appointed Justice Mathur as nominated arbitrator on behalf of the respondent proposed by the respondent itself. It was also stated that the said appointment was contingent on Justice Mathur's consent and the required disclosure under Section 12(5) of the Act. As a result, on May 25, 2021, Justice Mathur declared that he had been appointed arbitrator in three other matters by respondent-NHAI in the previous three years.
Furthermore, because the parties failed to resolve their differences as stated in the Dispute Notice, the petitioner issued a notice to the respondent on June 4, 2021 invoking arbitration and appointing Mr. V.K. Tyagi as its nominee arbitrator, and asked the respondent to appoint its nominee arbitrator within 30 days.
On behalf of the petitioner, it was argued that the invocation of arbitration via notice dated 4th June, 2021 relates to disputes that are distinct, separate, and independent of disputes arbitrated by the first and second arbitral tribunals. However, in its communication dated June 17, 2021, respondent requested that the second and third arbitrations be consolidated, and in a letter dated July 2, 2021, respondent requested that Justice Mathur consent to act as respondent's nominee in the proposed third arbitration.
The petitioner objected to the aforementioned in a letter dated July 6, 2021, explaining how three arbitrations are distinct from one another and thus cannot be consolidated, and also that Justice (Retd.) G.P. Mathur has already been appointed as respondent's Arbitrator in four matters, including the second arbitration between the parties, and all arbitrators must comply with the requirements of the Fifth and Seventh Schedules of the Arbitration Act.
The present petition was filed by the petitioner under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking appointment of the respondent’s Arbitrator upon its failure to appoint the same, for adjudication of disputes with regard to Concession Agreement. In addition, they also prayed to declare that the purported appointment of Justice Mathur, former Judge, Supreme Court by the respondent is non est and bad in the eyes of law.
Learned senior counsel for the petitioner took the court through the order dated 4th May, 2021 passed by a Coordinate Bench of this Court to controvert the claim of respondent in its communication dated 5th August,2021 that petitioner consented to the nomination of Justice Mathur. He further referred to the twin pre-conditions to the appointment of Justice Mathur. He emphasized that by filing petition under Section 11 of the Act, respondent had in fact forfeited its right to appoint an Arbitrator in view of Hon’ble Supreme Court’s decision in Datar Switch gears Ltd. Vs. Tata Finance Ltd., (2000) 8 SCC 151.
The counsel submitted that declaration by Justice Mathur shows that his appointment was in contravention of Entry No. 22 of the Fifth Schedule of the Arbitration Act. Even the subsequent declaration dated 5th August, 2021 was not in accordance with Sixth Schedule and the provisions of the Arbitration Act.
Learned counsel submitted that arbitrator's disclosure under the Sixth Schedule has to be crystal clear in all aspects to which Section 12 and the Schedules of the Arbitration Act entails and the declaration by Justice Mathur vide subsequent declaration dated 5th August, 2021 was bereft of all material particulars as required under the Arbitration Act, as the same does not provide information of the total ongoing arbitrations and as to whether other three arbitrations wherein he was appointed as Arbitrator by respondent-NHAI were pending or not.
Moreover, Justice Mathur considered his appointment in the present matter as an appointment by the Court and not by the respondent and such an interpretation is in contravention of Entry No. 22 of the Fifth Schedule.
Contention of the Respondent
On the other hand, the counsel for the respondent-NHAI submitted that the present petition is not only ill-conceived and motivated but also filed with mala fide intention to create confusion.
He submitted that the present petition under the provisions of Section 11(6) deserves to be rejected as it has been filed on the false pretext that respondent had failed to appoint its nominee arbitrator within 30 days.
The counsel submitted that the respondent has been in regular touch with the petitioner over appointment of its nominee arbitrator and thereby, petitioner cannot claim that respondent has failed to take steps to nominate its arbitrator within 30 days of notice invoking arbitration. Further submitted that where an arbitrator has been appointed by a party and intimation thereof has been conveyed to the other, an application for appointment of an arbitrator under Section 11 of the Act is not maintainable. He relied on the SC decision in Antrix Corporation Ltd. v. Devas Multimedia Private Limited (2014) 11 SCC 560.
Learned senior counsel next submitted that by filing this petition, petitioner is seeking appointment of third Arbitral Tribunal for adjudication of disputes relating to a project for which second arbitral tribunal has already been constituted and this would lead to multiplicity of proceedings which is wholly unwarranted and unsustainable. He relied on the decision of this Court in M/s Gammon India Ltd &Anr. Vs. NHAI 2020 SCC Online Del 659.
Courts Observation and Judgment
The bench at the very outset noted, "In the opinion of this Court multiple arbitrations can exist if the cause of action continues or arises after constitution of a tribunal. This Court is informed that disputes pertaining to the year 2013 are pending before first arbitral tribunal. The suspension and termination of Concession Agreement in question are subject matter of consideration before the second arbitral tribunal. The petitioner has not been able to establish that the disputes, resolution of which is sought under the proposed third arbitral tribunal, cause of action thereof arose post suspension and termination of Concession Agreement. This fact is further substantiated by the language of Notice dated 4th June, 2021 invoking arbitration, which clearly stipulates that for resolution of differences which were subject matter of Notice of Dispute dated 25th October, 2019, the constitution of third arbitral tribunal is sought, which is already under consideration before the second arbitral tribunal and so, in the considered opinion of this court, it would lead to multiple observations and findings by two different tribunals, which cannot be permitted."
The Hon’ble Court held that objections raised by the petitioner with regard to nomination and appointment of Justice (Retd.) G.P. Mathur as respondent’s Arbitrator are baseless and liable to be rejected. The Court observed that proceedings before the second arbitral tribunal are in progress, however, not yet complete and if the disputes raised in the present petition are referred to the second arbitral tribunal, it may result in delay of proceedings before the second arbitral tribunal. However, the members of the second arbitral tribunal are familiar with the facts and disputes raised between parties and this would enable to speedy resolution of disputes rather than delaying it, there will be no confusion as well.
The Court thus dismissed the petition.
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