Tatva Global Environment ... vs The Municipal Corporation Of ...
2017 Latest Caselaw 6010 Bom

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                    IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                        ORDINARY ORIGINAL CIVIL JURISDICTION
                                          
                   COMM. ARBITRATION APPLICATION NO.44 OF 2016


      Tatva Global Environment (Deonar)                       ....    Applicant
      Limited

                Vs.

      Municipal Corporation of Greater                         ....   Respondent
      Mumbai.


      Mr. Shardul Singh i/by HVS Legal for the Applicant. 
      Ms. Vaishali Chaudhary a/w Mr. P.Y. Sirsikar for the Respondent.


                                         Coram  : G.S. KULKARNI, J.

                                         Date     :  16 August, 2017
      P.C. :


      1                 Leave   to   amend   to   correct   the   date   of   the   agreement   is 

      granted.  Reverification is dispensed with.  



      2                 This is an application under Section 11(6) of the Arbitration 

and Conciliation Act, 1996 (for short the 'Act') praying for appointment

of an arbitrator for adjudication of the disputes and differences that

have arisen between the parties under the Concession Agreement dated

31st October, 2011.

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      3                 The facts can be summarised thus :

The Respondent-Municipal Corporation had floated a

tender inviting bids for works titled as "the partial closure and

maintenance of the Existing Dump Site and Design, Engineering, Operation

and Maintenance of Integrated Waste Management Facilities on Design,

Build, Own, Operate and Transfer (DBOOT) basis at Deonar, Mumbai".

The successful bidder would enter into a 'concession agreement' with the

respondent-Corporation. The applicant was the successful bidder. On

30th October, 2009, the respondent issued a Letter of Award in favour of

the applicant. Consequent to this, a concession agreement dated 31 st

October, 2011 came to be executed between the applicant and the

respondent. The duration of the contract was to be 25 years. The nature

of the project is defined in Clause 1.40 of the said agreement. The

agreement created obligations between the parties.

4 Under the above agreement in regard to the applicant's

monetary claims, disputes had arisen between the parties. The

applicant had invoked Section 11(6) of the Arbitration Act as the

respondent had failed to appoint an arbitrator by approaching this court

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in Arbitration Application No. 15 of 2014. The Court considering the

rival pleas and considering the nature of the arbitration clause, by it's

order dated 19 March, 2015 allowed the applicant's application and

appointed a sole arbitrator to decide the disputes between the parties.

The applicants contend that it is the same arbitration clause which has

been invoked in the present application, however, on a different dispute.

5 The case of the applicant in the present application, is that

apart from the monetary disputes, in regard to other matters under the

agreement as raised by the applicant by its several letters, there was no

response from the respondent-Corporation. The applicant by it's letter

dated 28 February, 2014 made concrete efforts to bring the notice of the

respondent various breaches and issues, which were required to be

resolved. The grievance of the applicant was particularly as regards the

non-execution of lease deed or its alternative, for change in the effective

date of contract, technology options, assignment and protection of the

secured lender's rights etc. The applicant issued further

letters/representations dated 5 May, 2014 and 30 May, 2014 and 14

August 2015, setting out the breaches on the part of the respondent.

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      6                 The   respondent,   however,   instead   of   resolving   the   issues, 

issued a pre-termination notice dated 8 September, 2015 to the

applicant, stated to be a notice as per Clause 17 of the said agreement.

The applicant was called upon to cure, the breaches to the satisfaction of

the respondent, within 60 days. On receipt of this notice, the applicant

filed Writ Petition (L) No. 2906 of 2015 in this court, seeking directions

against the State Government for issuance of land lease agreement. By

an order dated 27 October, 2015 passed by the Division Bench, the

applicant was permitted to make a representation to the State

Government as also submit a reply to the pre-termination notice. The

applicant, accordingly submitted a representation as also submitted a

detailed reply dated 5 November, 2015 to the pre-termination notice

pointing out that various breaches that have been committed by the

respondent and pointed out that the applicant was not in breach of any

of the provisions of the concession agreement. The applicant thus

contended that the pre-termination notice was bad in law. The

respondent however did not consider the applicant's reply to the pre-

termination notice and issued a termination notice dated 22 January

2016.

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      7                 On the above background, the case of the applicant is that 

the disputes have arisen between the applicant and the respondent on

account of illegal termination of the contract and that the applicant is

entitled to seek damages on the termination of the contract by the

respondent. The applicant therefore issued a notice dated 13 June,

2016 invoking the arbitration agreement being Clause 21 under the said

agreement dated 31 October, 2011, recording that disputes have arisen

between the parties. The applicant also suggested the names of two

independent arbitrators. Despite a lapse of 30 days, the respondent did

not respond to the said notice. However belatedly on 21 July 2016, the

applicant received a reply from the respondent whereby it refused to

accept one of the arbitrators nominated by the applicant or to nominate

its Arbitrator. The respondent however decided to constitute it's own

committee of three members to look into the dispute. This according to

the applicant was not appropriate, as the notice of the applicant was for

appointment of an Arbitrator as the contention of the applicant was that

Clause 21 of the concession agreement constituted an arbitration

agreement and it was obligatory on the part of the respondent to

appoint an independent arbitrator to resolve the dispute, that had arisen

between the parties. On this conspectus, the applicant is before this

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court in the present proceedings.

8 Before adverting to the submission as made on behalf of the

learned counsel for the parties, it would be appropriate to note Clause

21 of the agreement, which speaks of 'dispute resolution' and Clause 23,

which provides for jurisdiction. These clauses read thus :

"21 DISPUTE RESOLUTION :

If any dispute, difference or claim arises by either party to any matter arising out of this Agreement, the aggrieved party may refer such dispute within a period of 7 days to the concerned Additional Municipal Commissioner, who shall constitute a committee comprising of three officers i.e. concerned D.M.C. Or Dir. (E.S. & P.), Chief Engineer other than the engineer of contract and concerned Chief Accountant. The committee shall give its decision within 60 days.

Appeal from the order of the committee may be referred to Municipal Commissioner within 7 days. Thereafter the Municipal Commissioner shall constitute the committee comprising of three Additional Municipal Commissioners including Additional Municipal Commissioner in-charge of finance department. The decision given by this committee shall be final and binding upon the parties.

23 JURISDICTION:

Subject to Clause 21, only the courts in Mumbai shall have jurisdiction to try all disputes and matters arising out of or under this Agreement, after reference to arbitration.

9 Mr. Singh, learned counsel for the applicant would submit

that Clause 21 constitutes an arbitration agreement between the parties.

Mr. Singh submits that Clauses 23 reinforces the intention of the parties

of reference of the disputes to arbitration under Clause 21. It is

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submitted that Clauses 21 and 23 were subject matter of consideration

of this Court in Arbitration Application No. 15 of 2014 as decided by this

court by it's order dated 19 March, 2015, which pertained to the

monetary dispute between the parties under the same agreement. Mr.

Singh submits that considering the nature of Clause 21 (supra), the

court has come to a conclusion that said clause, would constitute a valid

and subsisting arbitration agreement between the parties and invoking

Clause 21 for reference of the disputes to an arbitral tribunal, would be

a legal and valid, for appointment of an arbitral tribunal. Mr. Singh

would submit that the said order passed by this Court was challenged by

the respondent by approaching the Supreme Court in S.L.P. (C) No.

20400 of 2016. The Supreme Court, by an order dated 28 October,

2016 rejected the S.L.P. of the respondent-Corporation not only on the

ground of delay but also on merits. Mr. Singh thus submits that in view

of said orders passed by this Court and having confirmed by the

Supreme Court, the respondent cannot oppose appointment of an

arbitrator to arbitrate the dispute in the present proceedings, which

arises under the same agreement.

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      10              On   the   other   hand,   learned   counsel   for   the   respondent-

Corporation would vehemently contest this petition. Learned counsel

for the respondent would not agree with the submission as made on

behalf of the applicant that Clause 21 having fell for consideration of

this court in the earlier round litigation, between the parties and the

orders by this being confirmed by the Supreme Court would conclude

the issue. The contention on behalf of the respondent is that the orders

passed by the learned Single Judge in Arbitration Application No. 15 of

2014 cannot be relied as the said order passed by the learned Single

Judge is not a decision of a judicial authority or a Court as defined

under Section 2(1)( C) of the Arbitration Act but by the Chief Justice or

his delegate. Learned counsel for the respondent would support this

contention relying on the decision of the Supreme Court in State of

West Bengal and others vs. Associated Contractors 1. The next

submission as made on behalf of the respondent is that Clause 21 is not

an arbitration clause, as Clause 21 provides for a mechanism by which

the departmentally dispute should be resolved between the parties. In

support of this proposition, learned counsel for the respondent has

placed reliance on the decisions in "Ved Prakash Gupta Vs. Municipal

1 (2015) 1 Supreme Court Cases 32

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Corporation of Gr.Bombay, through the Municipal Commissioner &

Ors."2, "Vishnu(Dead) By LRS. Vs. State of Maharashtra & Ors. 3",

"State of Orissa & Ors. Vs. Bhagyadhar Dash" 4, and "P.

Dasaratharama Reddy Complex Vs. Government of Karnataka &

Anr.5. It is next submitted that the order passed by this court in

Arbitration Application No.15 of 2014 (Supra) though confirmed by the

Supreme Court does not take into consideration the clear position in law

as laid down in the above decisions as referred by the learned counsel

for the respondent. Thus the submission on behalf of the respondent is

that this application is required to be rejected by permitting the

respondent-Corporation to follow the mechanism as set out in Clause 21

of the agreement in question.

11 Having heard the learned Counsel for the parties and

having examined Clause 21 read with clause 23 of the Contract in

question, I am of the clear opinion that Clause 21 is an arbitration

agreement between the parties. As to what would constitute an

arbitration agreement and what would be the necessary constituents of

2 1999 (1) Bom. C.R. 112 3 (2014) 1 Supreme Court Cases 516 4 (2011) 7 Supreme Court Cases 406 5 (2014) 2 Supreme Court Cases 201

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an arbitration agreement is now well settled (See."K.K.Modi Vs.

K.N.Modi"6 and "Jagdish Chander Vs. Ramesh Chander & Ors)."7 A

bare reading of Clause 21 clearly indicates that essential requirements as

necessary for the clause to be construed as an arbitration agreement are

very much present. The essentials being the parties agreeing to refer

present or future differences in connection with the agreement to a

private tribunal and the parties agreeing that the decision of such

dispute resolution shall be final and binding between the parties. There

is no dispute that the applicant and the respondent have executed such

an agreement as contained in clause 21. The intention of clause 21

being an arbitration agreement is further fortified by reading of clause

23, which specifically refers to arbitration between the parties. On

conjoint reading of clause 21 and 23 of the contract in question, it can

sufficiently be concluded that clause 21 is an arbitration clause. I am,

therefore, in complete agreement with the decision of the learned Single

Judge in Arbitration Application No.15 of 2014 in which the learned

Single Judge considering the position in law laid down in catena of

decisions of the Supreme Court has held Clause 21 to be an arbitration

agreement between the parties. It is further significant that the decision

6 1998(1) SCC 407 7 (2007)5 SCC 719

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of the learned Single Judge has attained finality in view of dismissal of

Special Leave Petition by the Supreme Court on merits as noted above.

12 In view of the above discussion, the submission on behalf of

the respondent that the judgment of the learned Single Judge has no

precedential value, is of no consequence. The learned Counsel for the

respondent in making such submission has completely overlooked the

consequence of the judicial order passed by the Supreme Court

dismissing a Special Leave Petition filed under Article 136 of the

Constitution. In any event having concurred with the reasoning of the

learned Single Judge in the decision in Arbitration Application No. 15 of

2014, the reliance of the respondent on the decision in "State of West

Bengal & Ors. Vs. Associated Contractors" (supra) is of no avail.

13 As regards the reliance of the respondent on the decision in

"Ved Prakash Gupta Vs. Municipal Corporation of Gr.Bombay,

through the Municipal Commissioner & Ors."(supra), "Vishnu(Dead)

By LRS. Vs. State of Maharashtra & Ors."(supra), "State of Orissa &

Ors. Vs. Bhagyadhar Dash"(supra), "P.Dasaratharama Reddy

Complex Vs. Government of Karnataka & Anr."(supra), in my opinion,

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it is clearly unfounded. These decisions as cited refer to specific clauses,

which deal with specific issues of designs etc. which pertain to issues in

the working and the progress of the contract, in which certain technical

decisions are required to be taken by the departmental officers.

Considering the nature of the clauses as considered in each of the said

decisions, the Court has come to a conclusion that these are not

arbitration clauses. However, the arbitration agreement in the present

case is in no manner comparable to the specific clauses considered in the

said decision.

14 In the light of the above discussion, this application is

required to be allowed by appointing a sole Arbitrator to adjudicate the

disputes that have arisen between the parties under the Concession

Agreement dated 31 October 2011. I propose to appoint Shri Justice

Mohit S. Shah, Former Chief Justice of this court to arbitrate the

disputes between the parties.

15 To enable the learned proposed Arbitrator to submit a

disclosure as per the requirement of Section 11 (8) read with 12(1) of

the Arbitration Act, stand over for four weeks.

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      16              Office   to   forward   a   copy   of   this   order   to   Shri.   Mohit   S. 

      Shah, Former Chief Justice of this Court.  



      17              Stand  over  to 13  September  2017  to be  listed under  the 

      caption "for Directions".   



                                                              (G.S. KULKARNI, J.)