Calcutta High Court
Jayashree Electromech Private Limited vs The West Bengal State Electricity ... on 23 September, 2024
Author: Sabyasachi Bhattacharyya
Bench: Sabyasachi Bhattacharyya
In the High Court at Calcutta
Original Civil Jurisdiction
Commercial Division
The Hon'ble Justice Sabyasachi Bhattacharyya
AP-COM No. 751 of 2024
Jayashree Electromech Private Limited
VS
The West Bengal State Electricity Transmission Company Limited
For the petitioner : Mr. Debdut Mukherjee, Adv.
Mr. Debartha Chakraborty, Adv..
Mr. Saptarshi Kar, Adv..
For the respondent : Mr. Pranit Bag, Adv.
Mr. Anuj Kumar Mishra, Adv.
Mr. Balaram Patra, Adv.
Hearing concluded on : 17.09.2024
Judgment on : 23.09.2024
Sabyasachi Bhattacharyya, J:-
1. The present application under Section 11 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act") has
been filed for a composite reference in respect of six letters of award of
contract issued by the respondent in favour of the petitioner pursuant
to a tender floated by the respondent for construction of various
electrical transformers and allied projects. The petitioner turned out
successful in the tender and was awarded the six letters of award on
different dates being May 26, 2016, August 26, 2016 and April 6,
2018.
2. The several letters of award pertained to supply of materials and
equipment and installation, erection and construction of various
transformers bay and feeder bay at different places in West Bengal.
3. Formal contracts were executed by and between the parties in terms
of the letters of award on four different dates. As per the contracts,
the parties were to be governed by the General Conditions of Contract
(GCC) and Special Conditions of Contract (SCC).
4. Subsequently, the petitioner wrote to the respondent requesting
enhancement of the existing contract amount on account of GST
implementation. Several other letters were also written by the
petitioner to the respondent, inter alia for enhancement of the contract
amount and/or requesting waiver of liquidated damages, etc. The
several representations of the petitioner having not been considered by
the respondent, the petitioner filed a writ petition bearing WP
No.5239(W) of 2020, which was decided on January 5, 2021 by
directing the respondent to consider the said representations and pass
a reasoned order.
5. On April 16, 2021, the respondent passed a reasoned order refusing
the claims of the petitioner, upon which the petitioner filed another
writ petition bearing WPA No.16876 of 2021 challenging the said
reasoned order. The said writ petition is still pending and the
petitioner undertakes to withdraw the same if the present application
is allowed.
6. The petitioner, by a letter dated February 20, 2023, purportedly
appointed an Adjudicator under Clause 6 of the GCC. The said
appointment, however, was unilateral. The Adjudicator passed an
award on March 27, 2023, upon which the respondent filed an
application under Section 34 of the 1996 Act, giving rise to AP No.193
of 2023, for setting aside the Adjudicator's award dated March 27,
2023.
7. A co-ordinate Bench of this Court, by an order dated June 26, 2023,
observed that the challenge did not fit into the contours of an
application under Section 34. The premise of the said conclusion was
that the impugned order had not been passed by an Arbitrator but by
an Adjudicator, which was recorded to be an admitted position of the
parties before the Court.
8. Subsequently, the petitioner preferred a writ petition being WPA
No.27644 of 2023, seeking implementation of the award of the
Adjudicator. The said writ petition came up for hearing before another
co-ordinate Bench on May 21, 2024. It was recorded by the learned
Single Judge that at the outset, learned counsel for the petitioners
stated that he was not pressing the writ petition and would take his
remedies in accordance with the GCC Clause 6.2.3. It was also
recorded that learned counsel for the respondents stated that he had
no objection if the present dispute is referred to arbitration in terms of
Clause 6.2.3.
9. The learned Single Judge held that in view of the statement made by
the learned counsel for the petitioners, the writ petition was dismissed
as withdrawn.
10. The petitioner thereafter issued a notice invoking the arbitration
clause on May 22, 2024, requesting the appointment of an Arbitrator
from the options given in the said invocation notice. The respondent
replied to the said notice by an e-mail dated June 26, 2024, raising
objections, inter alia, to one of the names suggested by the petitioner
and insisting upon compliance of the pre-arbitration stages in terms of
Clause 6 of the GCC.
11. A second invocation notice under Section 21 of the 1996 Act was
issued by the petitioner on June 26, 2024, which was followed up by
an e-mail dated June 29, 2024.
12. The respondent having thus refused to accede to the request for
appointment of Arbitrator, the present application under Section 11
has been filed.
13. Learned counsel for the petitioner argues that in view of the specific
concession given before the learned Single Judge on May 21, 2024 by
learned counsel for the respondent, regarding the respondent having
no objection if the dispute is referred to arbitration in terms of Clause
6.2.3, the prior procedure contemplated in Clause 6.1 and its sub-
clauses need not be adhered to afresh. It is submitted that Clause
6.2.3 provides that any dispute submitted by a party to arbitration
shall be heard by an arbitration panel composed of three arbitrators in
accordance with the provisions set forth thereinbelow. Thus, the said
clause refers to compliance of the subsequent provisions and not the
prior provisions relating to pre-arbitration formalities.
14. Hence, it is argued that in view of the concession given by the
respondent before Court, there is no bar to an Arbitrator being
appointed without further ado.
15. Learned counsel cites Demerara Distilleries Private Limited and another
v. Demerara Distillers Limited, reported at (2015) 13 SCC 610 in
support of his contention that in view of the elaborate correspondence
exchanged between the parties, as held by the Supreme Court in the
said judgement, it would be an empty formality to direct the parties to
resolve disputes by resorting to pre-arbitration procedure.
16. Learned counsel also cites a Single Judge decision of the Himachal
Pradesh High Court in the matter of Backend Bangalore Private
Limited, Represented by its Managing Director, Mr. Gautam Hegde v.
Chief Engineer-cum-Project Director, State Roads Project, Himachal
Pradesh Road and Infrastructure Development Corporation Limited
(HPRIDC), reported at 2022 SCC OnLine HP 1044, for the proposition
that an Arbitrator can be appointed even if the disputes were not
referred to an Adjudicator first in terms of the contract executed
between the parties, especially since the respondent had failed to refer
such disputes to the Adjudicator.
17. In controverting the contention of the respondent that the nature of
the dispute was not elaborated in the Section 21 notice, learned
counsel for the petitioner cites the judgment of this Court in AP-COM
No.701 of 2024 [Kakali Khasnobis v. Mrs Reeta Paul and Anr.] where
the court observed that since Section 21 is the commencement of the
arbitral proceedings itself, the rigours applicable to the same are of a
much higher standard than a request under Section 11(5) of the 1996
Act, since the latter is merely a prior step intimating to the respondent
the intention to arbitrate and appoint an Arbitrator, which would be
followed up later by the actual appointment of Arbitrator. Thus, the
tests applicable to Section 11(5) would be on a much liberal anvil in
favour of arbitration than that of Section 21.
18. Learned counsel for the petitioner also cites State of Goa v. Praveen
Enterprises, reported at (2012) 12 SCC 581 to argue that the Chief
Justice or his designate are neither required to identify disputes nor
specifically refer them to the Arbitrator for adjudication but may take
necessary measures by directing the appointing authority to formulate
disputes/claims/counter claims for reference as required by the
arbitration agreement, if he fails to do so.
19. It is argued that in the facts of the present case, since all the contracts
were awarded in terms of the same tender, the disputes emanate from
a single transaction and, as such, ought to be the subject-matter of a
composite reference.
20. Learned counsel appearing for the respondent contends that the so-
called concession given before the learned Single Judge in WPA
No.27644 of 2023 cannot be construed as a waiver given by counsel
on behalf of the respondent regarding the pre-arbitral stages as
contemplated in Clauses 6.2.1 and 6.2.2 of the GCC.
21. It is argued that the concession was merely to the extent of Clause
6.2.3 that is, if the dispute is referred to arbitration, the procedure as
laid down in the said provision is be followed.
22. It is next argued that the unilateral appointment of Adjudicator by the
petitioner was dehors the provisions of the GCC and, as such, was
invalid. Hence, the petitioner is required to comply with the pre-
arbitral formalities as per Clauses 6.2.1 and 6.2.2 prior to seeking
arbitration.
23. It is next argued that the Adjudicator unilaterally appointed by the
petitioner was one of the suggested Arbitrators as well and the very
appointment and thus purported decision of the Adjudicator were non
est in the eye of law.
24. Learned counsel for the respondent cites the following judgments in
support of the contention that pre-arbitral conditions are required to
be followed by the parties prior to initiation of arbitration:
i. Dharamdas Tirathdas Constructions Pvt. Ltd. v. Government of
India in Misc. Civil Case No. 1043 of 2003.
ii. M/s Chabbras Associates v. M/s HSCC India Limited & Anr. in
ARB.P. 782 of 2022.
iii. M/s BCC-Monalisha (JV) v. Container Corporation of India
Limited in ARB.P. 933 of 2022 & I.A. 5219 of 2023
iv. Union Territory of J & K v. M/s S.P. Singla Constructions Pvt. Ltd.
in AA No.06 of 2020.
25. It is next argued that the notice invoking arbitration is silent on the
exact disputes sought to be referred and as such, is defective. Thus,
the same cannot be a valid precursor for filing the present application
under Section 11. It is argued that the petitioner was issued separate
letters of award, followed up by different contractual agreements
which were signed by separate individuals on different dates and
contemplate separate areas and scope of work. Hence, a composite
reference is out of question.
26. Learned counsel also relies on Bharat Sanchar Nigam Limited and Anr.
v. Nortel Networks India Private Limited, reported at (2021) 5 SCC 738
for the proposition that Section 11 is maintainable only after a notice
is issued under Section 21 of the 1996 Act.
27. It is, thus, argued that the present application under Section 11 is
premature and ought to be dismissed.
28. The cardinal question on which the present matter hinges is whether
the instant application under Section 11 of the 1996 Act is premature
in view of the petitioner having not complied with pre-arbitral
formalities. The purport of the concession given by the respondent
through its counsel in WPA No.27644 of 2023 is crucial in that regard.
The order dated May 21, 2024 passed in the said writ petition is set
out below:
" At the outset itself, learned counsel for the petitioners
states that he is not pressing that present writ petition and will
take his remedies in accordance with the G.C.C. Clause 6.2.3.
Learned counsel for respondents states that he has no
objection if the present dispute is referred to arbitration in
terms of Clause 6.2.3.
In view of the statement made by the learned counsel for
the petitioners, the present writ petition is dismissed as
withdrawn."
29. The "no objection" given by the respondent's counsel has to be
construed in the light of the previous submission of the petitioners as
per the above order, learned counsel for the petitioners therein stated
that he will take his remedies in accordance with the GCC Clause
6.2.3, to which the learned counsel for the respondent responded that
he has no objection if the present dispute is referred to arbitration in
terms of Clause 6.2.3. Clause 6.2.3 states that any dispute submitted
by the party to arbitration shall be heard by an arbitration panel
composed of three Arbitrators in accordance with the provision set
forth thereinbelow. The respondent contends that a reference under
Section 6.2.3 includes implicitly the compliance of the prior formalities
as indicated in the previous clauses that is Clause 6.2.1 and Clause
6.2.2. However, the concession given before the co-ordinate bench in
WPA No. 27644 of 2023 leaves no scope of such interpretation. The
unambiguous concession was in respect of the dispute being referred
to arbitration in terms of Clause 6.2.3. Once it is submitted before the
court that the respondent agrees to a reference to arbitration, it
cannot resile from that position and subsequently argue that the
parties are required to be relegated back to the formalities preceding
such arbitration as contemplated in the original agreement.
30. The law does not mandate the compliance of prior formalities as a pre-
condition of reference to arbitration. Such prior conditions emanate
entirely from agreement between the parties. Thus, by necessary
implication, what is agreed on consensus can also be waived by
consensus. Before the co-ordinate Bench, as recorded in the order
dated May 21, 2024, the parties were consensus ad idem to an
immediate reference to arbitration, without any insinuation of the
requirement of prior proceedings being complied with. Thus, in view of
such concession, the parties agreed clearly to waive the prior
formalities and go ahead with arbitration.
31. At best, the respondent could insist upon the procedure contemplated
in Clause 6.2.3 and subsequent clauses to be complied with. There
would be sufficient compliance with the subsequent clauses if a three-
member Arbitral Tribunal is constituted, two of them being deemed
nominees of the parties and the third to be chosen by the two
nominees.
32. However, by opposing the present application under Section 11 and
insisting that the petitioner be relegated to pre-arbitral formalities,
there is obvious and implied refusal to agree to appointment of
Arbitrator, which provides sufficient ground to appoint an Arbitral
Tribunal under Section 11 of the 1996 Act.
33. In any event, the petitioner in its first notice under Section 21 of the
1996 Act, dated May 22, 2024, referred to a "relatively small amount"
being involved in the current dispute. In the subsequent notice dated
June 26, 2024, the claimant referred to previous letters seeking to
know the name of the Project Manager and also to request letters to
the Managing Director and Chief Engineer of the respondent informing
them of the dispute. As per the allegation in the second Section 21
notice, despite such efforts, no decision was taken at the end of the
respondent.
34. Thus, the petitioner, in its invocation of the arbitration clause, clearly
referred to previous correspondence between the parties where the
dispute had been enumerated.
35. Since such multiple correspondences yielded no result, it would be an
"empty formality'', as envisaged in Demerara Distilleries Private Limited
(supra), to relegate the parties back to the rigmarole of pre-arbitration
formalities. The learned Single Judge of the Himachal Pradesh High
Court, in Backend Bangalore Private Limited (supra) had also held that
since the respondent had failed to refer the dispute to an Adjudicator,
an Arbitrator could be appointed even if there was no prior reference
to the Adjudicator.
36. In the present case as well, it is clearly seen that several
correspondence between the parties were exchanged and all efforts of
the petitioner to have the dispute resolve by the mutual discussion
failed. The petitioner's attempt to appoint an Adjudicator also met
with resistance by the respondent and the respondent never took any
step of its own, despite being aware of the dispute raised by the
petitioner, to appoint an Adjudicator to resolve such dispute.
37. Thus, it would be a useless formality to force the petitioner to return
to the paraphernalia of red-tapism by re-starting the dispute
resolution exercise from any prior stage than arbitration.
38. Moreover, the two notices under Section 21, particularly the
subsequent one, amply indicate the parameters of the disputes by
referring to the previous correspondence between the parties. Hence,
it cannot be said that the parties themselves did not understand the
nature and scope of the disputes. It is well-settled that a notice should
not be read with a fault-finding approach but it has to be read in a
manner so as to give meaning to it, since the parties themselves
understood the contours of the dispute. In the present case, there is
no reason why the parties would be construed not to understand the
scope of the disputes, in view of the reference in the invocation notice
to prior communications between them.
39. Hence, it cannot be said that the notice did not sufficiently disclose
the nature of the disputes. Moreover, the nature of a request for
appointment of an Arbitrator in Section 11 is contradistinct from a
notice initiating the arbitral process under Section 21. The two
Sections are couched in different language. A request for appointment
of an Arbitrator as contemplated in Section 11 is a pre-arbitral
formality and has to be taken in much more lenient context than a
notice under Section 21, which is itself the commencement of the
arbitral process.
40. I find from the subsequent Section 21 notice dated June 26, 2024 that
the same is clear enough on the dispute falling under the agreement
between the parties and refers to previous correspondence which,
according to the notice itself, sets forth the parameters of the
disputes. Hence, such prior notice was sufficient for the court to
assume jurisdiction under Section 11 of the 1996 Act.
41. Insofar as the alleged composite nature of the dispute is concerned,
the same is, to say the least, is debatable. There is valid rationale
behind both sides' arguments. Whereas the different work orders
pertained to the same work, contemplated under a single tender
between the same parties and the underlying scope of work was
substantially the same, although for different areas, which arguably is
an indicator of the disputes being inter-connected, on the other hand,
it is an equally valid argument that the disputes having arisen out of
different contracts of different dates in respect of separate areas, the
reference should also be separate.
42. It is well-settled that the Section 11 court can only ascertain whether
there is a valid arbitration clause and cannot enter into the merits of
the disputes or determine the contours of the dispute or decide
whether they should be taken up compositely by the Arbitrator.
43. In the present case, there has been a valid invocation of the
arbitration clause and such request of appointment of arbitrator has
failed to elicit a positive response from the respondent. There being a
valid arbitration clause in the form of Clause 6.2.3, there is no reason
why the matter should not be referred to arbitration. Although
Clause 6.2.3 provides for the appointment of an arbitral panel
composed of three Arbitrators, the request of the petitioner to appoint
an Arbitrator has failed. However, keeping in view the consensus
between the parties to appoint a three-member Arbitral Tribunal, this
Court deems it prudent to honour such agreement.
44. Accordingly, AP-COM No.751 of 2024 is allowed, thereby appointing
Sri Siddhartha Banerjee (Mobile No. 9830298922), a member of the
Bar Association, as nominee-Arbitrator on behalf of the petitioner and
Sri Krishnaraj Thaker (Mobile No. 9830116355), a member of the Bar
Library Club, as the nominee-Arbitrator on behalf of the respondent,
subject to disclosures being obtained from the said proposed
Arbitrators under Section 12 of the Arbitration and Conciliation Act,
1996. The two nominee-Arbitrators shall, preferably within a fortnight
from tendering their disclosures under Section 12, agree upon the
appointment of a third Arbitrator and communicate the particulars of
the said learned Arbitrator to the learned Registrar, Original Side of
this Court in writing. Thereafter, a disclosure under Section12 of the
1996 Act shall similarly be obtained from the said third Arbitrator,
upon which the said three Arbitrators shall form the three-member
Arbitral Tribunal which will decide the disputes between the parties.
45. The three-member Tribunal shall fix its own remuneration in
consultation with the parties and in consonance with the provisions of
the 1996 Act and its Fourth Schedule.
46. All questions are kept open to be decided by the Tribunal, including
the question as to whether the disputes arising out of the several
agreements and/or power of attorney shall be clubbed together or
decided separately by the Tribunal.
47. The petitioner shall, as per the undertaking given by it, withdraw WPA
No.16876 of 2021 with liberty to canvass the points urged therein
before the Arbitral Tribunal.
48. Urgent certified server copies, if applied for, be issued to the parties
upon compliance of due formalities.
( Sabyasachi Bhattacharyya, J. )
