M/S Jai Prakash Associates Ltd. vs M/S National Hydroelectric Power ...
2009 Latest Caselaw 3850 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                 Arb.P.118 of 2007

%                                 Date of decision:-18.09.2009


M/S JAI PRAKASH ASSOCIATES LTD. ....Petitioner
                        Through: Mr. S.B. Upadhyay, Sr. Advocate with
                                 Mr.   Ashish   Bansal,  Mr.   Pawan
                                 Upadhyay, Mr. A.K. Singh & Mr. S.K.
                                 Singh, Advocates

                                Versus

M/S NATIONAL HYDROELECTRIC POWER
CORPORATON LTD.               ... Respondent
                        Through: Mr. Kailash Vasudeva, Sr. Advocate
                                 with Mr. Ajit Pudussery, Advocate


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?                 YES

2.    To be referred to the reporter or not?          YES

3.    Whether the judgment should be reported         YES
      in the Digest?


RAJIV SAHAI ENDLAW, J.

1. The petition under Section 11 of the Arbitration Act, 1996 is

for consideration. Notice of the petition was issued to the respondent

first on 20th April, 2007 for 24th July, 2007. The respondent did not

file any reply to the petition and on 24th July, 2007 sought time for

filing the reply. The request of the respondent for filing the reply was

declined and the counsels heard. The opposition orally made to the

petition was not successful and this court allowed the petition and

appointed a retired judge of this court as the arbitrator. The

respondent preferred SLP Civil No.17785/2007 to the Supreme

Court and vide order dated 11th November, 2008 the same was

allowed and the order of this court appointing the arbitrator was set

aside and the matter remitted to this court for passing a fresh order

on the petition under Section 11(6) of the Act after giving an

opportunity to the respondent herein to file its counter affidavit and

after hearing the parties. The respondent has since filed its counter

affidavit. The senior counsels for the parties were heard at length on

11th September, 2009 and by order of that date the petition was

dismissed with reasons to follow and which are recorded herein

below.

2. In the petition as preferred, there is a reference only to the

agreement dated 18th July, 1999 between the parties and along with

the petition, a copy of the said agreement only along with General

Conditions of contract containing an arbitration clause was annexed.

In the said agreement between the petitioner and the respondent, it

is inter-alia mentioned that the petitioner along with three other

parties described in the agreement as "other contracting parties"

had submitted a coordinated bid for execution of the Chamera

Hydroelectric Project Stage-II in District Chamba, Himachal Pradesh

of the respondent on turnkey basis; that pursuant to post bid

discussions, clarifications, negotiations, the respondent had agreed

to award the contract for execution of the project to the petitioner

and the other contracting parties and at the request of the petitioner

and the other contracting parties, the respondent had further agreed

that the project shall be executed on a coordinated basis, inter-alia

through three separate contracts to be signed by each contracting

party which shall be directly responsible for the supplies and/or the

portion of the works covered by each contract. The contract dated

18th July, 1999 between the petitioner and the respondent was for

the civil and certain other works. During the course of hearing, it

was informed that on the same date separate contracts were entered

by the respondent with the other three contracting parties for other

works in relation to the said project.

3. Clause 38.2 of the General Conditions of contract appended to

the aforesaid agreement is as under:-

"Any dispute or difference which may arise between the parties out of or in connection with this Contract which the parties are unable to settle amicably, shall be settled by reference to arbitration by three arbitrators. Each party shall appoint one arbitrator and the third shall be appointed by the Court of Arbitration of the International Chamber of Commerce, Paris (ICC) in accordance with the provisions of the Rules of Arbitration of the International Chamber of Commerce, Paris (ICC). The rules governing the proceedings before the arbitrators shall be those of the ICC. Save as above, the Indian Arbitration and Conciliation Act, 1996 shall govern the arbitration. The venue of arbitration proceedings shall be New Delhi, India."

4. It is further the case of the petitioner in the petition that

subsequent to the aforesaid contract, a letter dated 9thApril, 2003

was written by the respondent to the petitioner whereunder the

respondent agreed to, in the event of commissioning of the project

earlier to the agreed date, to pay incentive of the total sum of Rs.30

crores. Disputes and differences were alleged to have arisen with

respect to the payment of the said incentive. In this regard, it may

also be mentioned that out of the agreed incentive of Rs.30 crores, a

sum of Rs.10 crores was released to the petitioner as advance, to be

refunded in the event of the incentive ultimately not being due.

During the hearing, it was informed that it is the case of the

respondent that the petitioner did not become entitled to the

incentive and the respondent claimed refund of the said sum of Rs.10

cores from the petitioner. In fact, it is the contention of the senior

counsel for the respondent that this petition was filed as an

afterthought and with a malafide intention only to ward off/delay the

refund of the said sum of Rs.10 crores, when the same was

demanded by the respondent from the petitioner and the petitioner

had prior thereto neither claimed to be entitled to the incentive nor

raised any other dispute.

5. Having noticed the facts leading to the filing of the petition,

and before considering the defense/opposition of the respondent, the

scope of enquiry in a proceeding under Section 11 may be noticed.

The Supreme Court in National Insurance Co. Ltd. Vs. Boghara

Polyfab Pvt. Ltd. AIR 2009 SC 170 has held that the Chief

Justice/his designate in exercise of powers under Section 11 will

have to necessarily decide; (a) whether the party making the

application has approached the appropriate High Court; (b) whether

there is a arbitration agreement and whether the party who has

applied under Section 11 of the Act is a party to such an agreement.

It was further held that the Chief Justice/his designate may choose to

decide or leave the same for the decision of the Arbitral Tribunal; (a)

whether the claim is a dead (long barred) claim or a live claim; (b)

whether the parties have concluded the contract/transactions by

recording satisfaction of their mutual rights and obligations or by

receiving the final payment without objection. It was further held

that the Chief Justice or his designate should exclusively leave for

the decision of the Tribunal; (1) whether the claim may fall within

the arbitration clause; (2) merits of any claim involved in the

arbitration. The scope of enquiry being limited as aforesaid, it is

deemed appropriate to notice the defense raised in this context.

6. The senior counsel for the respondent has contested the

petition on three grounds. Firstly, this court being not the

appropriate court i.e. not having territorial jurisdiction to entertain

the petition. Secondly, on the ground of there being no agreement

for arbitration of the disputes as to the incentive aforesaid. Thirdly, it

is contended that the petitioner is not competent to alone invoke the

arbitration clause or to approach this court.

Re. Territorial Jurisdiction.

7. The senior counsel for the petitioner has referred to Clause 5

of the General Conditions of contract, a complete copy whereof was

handed over in the court during the hearing. Sub Clause 5.2 provides

that in respect of all matters or actions arising out of the contract

the courts at Delhi/Chandigarh shall have exclusive jurisdiction.

Attention was invited to Rajasthan State Electricity Board Vs.

Universal Petrol Chemicals Ltd. (2009) 3 SCC 107 in support of

the proposition that where two or more courts have jurisdiction, the

parties can agree to vest the jurisdiction in one such court only. It

was contended that in the present case the parties had vested the

said jurisdiction in the courts either at Delhi or Chandigarh and thus

the petitioner could in its discretion invoke the jurisdiction of either

of the said two courts. It being admitted that the works to be

executed under the contract were outside the territorial jurisdiction

of this court, it was enquired as to where the contract was executed.

It was informed that the contract was executed at Faridabad. It was

put to the senior counsel for the petitioner that the parties could not

by consent vest jurisdiction in this court if it otherwise had none

under the law. The senior counsel while agreeing with the

proposition contended that the contract for payment of incentive was

"an independent contract" contained in the letter dated 9th April,

2003 (Supra) of the respondent and the same was addressed to the

petitioner at New Delhi. It was stated that certain other

correspondence also from the respondent to the petitioner was at

New Delhi and thus the cause of action had partly accrued to the

petitioner at Delhi. Reliance was also placed on Telephone Cables

Ltd. Vs. Chief General Manager, Haryana Telecom Circle

(2005) 10 SCC 294. However, in that case it was not disputed that

formal acceptance of the contract was at Chandigarh and the

payment under the contract was paid and was payable at Chandigarh

and it was in that context that it was held that the courts at

Chandigarh had jurisdiction.

8. Per contra, the senior counsel for the respondent has drawn

attention to the letter dated 23rd April, 2003 of the petitioner to the

respondent in response to the letter dated 9th April, 2003 (Supra). It

was urged that the petitioner had concealed the said letter from this

court and in fact was not entitled to any relief on this ground alone.

The said letter dated 23rd April, 2003 is addressed from the

petitioner at Chamba to the respondent at Chamba. It is contended

that the agreement with respect to the payment of incentive came

into being only on acceptance by the petitioner on 23rd April, 2003 of

the proposal of the respondent contained in the letter dated 9th April,

2003. The said acceptance was outside the jurisdiction of this court.

Reliance in this regard was placed on Bhagwandas Goverdhandas

Kedia Vs. M/s Girdharilal Parshottamdas & Co. (1966) 1 SCR

656 laying down that it was the place of the acceptance of the offer

and not of the place of making of the offer which formed part of the

cause of action. A.B.C. Laminart Pvt. Ltd. Vs. A.P. Agencies

(1989) 2 SCC 163 was also cited to contend that the parties could

not by consent vest jurisdiction in a court which under the law had

none. Reference was also made to Shree Ram Mills Ltd. Vs.

Utility Premises (P) Ltd. (2007) 4 SCC 599 to contend that the

question of territorial jurisdiction has to be gone into at this stage.

9. A reading of the letters dated 9th April, 2003 & 23rd April, 2003

would show that though the proposal for payment of incentive had

emanated from the petitioner but the terms & conditions on which

the respondent had agreed to pay commission were listed out in the

letter dated 9th April, 2003. One of the conditions stipulated therein

for advancing incentive of Rs.10 crores as demanded by the

petitioner was submission of a bank guarantee for the said amount in

favour of the respondent. The respondent by the said letter also

called upon the petitioner to contact the Engineer Incharge "for

further needful in this regard". Thus the letter dated 9th April, 2003

was a proposal only and which was accepted by the petitioner vide

letter dated 23rd April, 2003. The fact that such acceptance of the

petitioner was necessary is evident from the language of the letter

conveying the irrevocable unconditional acceptance of the petitioner

to the terms for payment of incentive. The said acceptance had

become necessary because the petitioner had first, after receipt of

letter dated 9th April, 2003 sought variation of its terms and which

was not acceptable to the respondent. The said acceptance having

been issued from and delivered outside the jurisdiction of this court,

the contention of the senior counsel for the petitioner that the

"independent contract contained in the letter dated 9th April, 2003"

fructified within the territorial jurisdiction of this court giving this

court jurisdiction to entertain this petition is meritless.

10. As far as the argument of certain correspondence having been

exchanged at Delhi, in my view the same cannot constitute the cause

of action. Each and every dealing between the parties is not part of

or constitutes cause of action. It is only such bundle of facts which it

is necessary for petitioner to prove to be entitled to relief, which

constitute a cause of action. The senior counsel for the petitioner has

not shown anything of the nature having happened in Delhi or being

required to happen in Delhi, within the territorial jurisdiction of this

court, from which it can be said that cause of action had accrued to

the petitioner against the respondent at Delhi. Reference may also

be made to the letter dated 9th May, 2006 of the respondent to the

petitioner denying the arbitrability of the petitioner's claim for

incentive. The said letter undoubtedly has been issued by the

respondent from Faridabad to the petitioner at Delhi. The contention

of the senior counsel for the petitioner was that on this account this

court would have territorial jurisdiction. However, merely because

such a letter has been issued at Delhi, perhaps owing to the same

being in response to the letter issued by the petitioner from Delhi

would again in my opinion remain a triviality not forming part of the

cause of action. I may also notice that the only averment in the

petition for invoking the territorial jurisdiction of this court is, the

venue of arbitration clause being Delhi. It is settled law that the

venue of arbitration does not govern the "court" within the meaning

of Section 2 (e) of the Act.

11. Thus it is found that this court is not appropriate court or the

court within the meaning of Section 2 (e) of the Act or the

appropriate court to entertain this petition.

12. Though the petition can be disposed of on this aspect alone but

it is deemed appropriate to deal with the other oppositions raised as

well.

Re. Arbitrability of the claim for incentive.

13. The contention of the senior counsel for the respondent is that

payment of incentive was not a part of the agreement containing an

arbitration clause; thus the dispute with respect thereto could not be

covered by the arbitration clause in the agreement. It was further

argued with reference to the clauses of the contract that the same

provided for the time for completion of the project and the letter

dated 9th April, 2003 does not vary/alter any of the terms or

conditions of the agreement containing an arbitration clause for the

letter dated 9th April, 2003 to form part/subject matter of the said

agreement.

14. Per contra, the senior counsel for the petitioner has urged that

the arbitration clause as set out herein above is very wide containing

the expressions "out of", "in connection with" and the claim for

incentive was in connection with the contract and thus was

arbitrable. Reliance was placed on Olympus Superstructures Pvt.

Ltd. Vs. Meena Vijay Khetan (1999) 5 SCC 651 (para 30) where

the Supreme Court held the matters connected with the subject

matter of the main agreement to be also arbitrable in terms of the

arbitration clause contained in the main agreement. Attention was

also invited to Clause 2.5 of the General Conditions of contract

whereunder the Engineer Incharge is entitled to issue instructions

directing the manner in which the works are to be carried out. It was

urged that it cannot be argued that the disputes arising out of such

directions of the Engineer Incharge would not be arbitrable.

15. The senior counsel for the respondent contended that the

reliance by the petitioner on Olympus Superstructures Pvt. Ltd.

(Supra) is misconceived. Attention was invited to the arbitration

clause and the facts in that case to contend that therein arbitration

was agreed not only of disputes by virtue of the agreement but even

otherwise as to any other matter in any way connected with or in

relation to the subject matter of the agreement. It was further urged

that the court had in that case found the disputes and payments to

be integrally connected and overlapping with the main agreement.

It was urged that it is not so in the present case.

16. The expression "out of" or "in connection with this contract"

used in Clause 38.2 (supra) of the General Conditions of Contract

can only refer to a dispute of difference arising out of or in

connection with the contract executed between the parties. The said

contract admittedly did not provide for any incentive for

commissioning of the project before the agreed date. Thus it cannot

be urged that the aforesaid expression in the arbitration clause

would apply to all disputes which may arise between the parties with

respect to the project. The same can have reference/relevance only

to the disputes arising out of the terms and conditions of that

contract. That contract did not at all provide for any incentive for

commissioning before the scheduled date and thus it cannot be said

that the dispute between the parties as to the entitlement, if any, of

the petitioner to incentive could have been agreed by the parties to

be referred to arbitration. The principles of interpretation of an

arbitration agreement are the same as of any other contract. What

has to be determined is whether the parties can be said to have been

ad idem. In the absence of anything in the contract as signed on 18 th

July, 1999, qua incentive, it cannot possibly be said that the parties

could have intended to arbitrate on the claims qua incentive.

17. The agreement for incentive came into being between the

parties only pursuant to letters dated 9th April, 2003 & 23rd April,

2003 (supra). The Agreement for incentive is thus an independent

agreement, as also repeatedly urged by the counsel for the

petitioner, i.e. independent from the contract signed in 1999. What

has to be thus determined is whether the parties intended to

incorporate the arbitration clause contained in their agreement of

1999 in their agreement of 2003 qua incentive, relating to the same

project.

18. The first thing to be noticed is that the terms and conditions

contained in the letters dated 19th April, 2003 and 23rd April, 2003

are self contained agreement qua incentive and are not dependent

upon the agreement of 1999. In fact in the letter dated 9 th April,

2003 of the respondent it is expressly stated that the proposal for

incentive was "without altering the terms of the contract" of 1999.

The parties in the agreement of incentive contained in the aforesaid

letters did not even depend upon the agreement of 1999 for defining

the scheduled date of completion. The said letters contain the dates

also, on achieving completion whereon the incentive would be

payable. The manner of payment of incentive is also contained in the

said letters and an independent bank guarantee was sought to be

furnished for the advance against the incentive. The agreement

borne out of the said letters is a supplementary or additional, or

subsidiary or subsequent or later contract to the contract of 1999

providing for arbitration. There is no statement in any of the said

letters that "other terms and conditions shall be as per the

agreement of 1999". I thus do not find any intention of the parties to

incorporate the arbitration clause in the main contract in such

supplementary contract.

19. A similar question had arisen in Seth Thawardas Pherumal

Vs. Union of India AIR 1955 SC 468. There also the claim was

grounded not on any clauses of the contract nor implied in the

contract but on a collateral promise evidenced not by the contract

but by two letters written by the department. The Supreme Court

held that the claim on such a subsidiary contract could not be said to

be arising out of a contract to which the arbitration clause applied.

Lord Macmillan in Heyman Vs. Darwins Ltd. 1942 AC 356 was

referred to in support of the proposition that if the parties chose to

add a fresh contract in addition to the old then the arbitration clause

cannot cover the new contract.

20. In Umraosingh & Co. Vs. State of Madhya Pradesh AIR

1976 MP 126 the facts also were identical. In that case also after the

execution of the agreement, a bonus was agreed to be paid for

completing the works within the stipulated time. The Division Bench

held that since in the original contract there was no provision for

bonus and since in the supplementary agreement relating to bonus

there was no provision for arbitration, the arbitration clause in the

original contract was not applicable for resolving the disputes

relating to bonus. It was held that the agreement pertaining to bonus

was an entirely independent agreement and there was nothing to

show that the arbitration clause in the original agreement got

incorporated in the agreement for bonus.

21. Even though the aforesaid two judgments are of prior to the

1996 Act, in my view the position remains the same. Section 7(5) of

the 1996 Act lays down the same test. The reference in a contract to

a document containing an arbitration clause constitutes an

arbitration agreement only if reference is such as to make that

arbitration clause part of the contract. In the present case, neither

do I find any reference in the supplementary contract qua incentive,

to the main contract nor any intent to make the arbitration clause in

the main contract part of the contract qua incentive.

22.     The   Supreme   court      recently   in    M.R.     Engineers       &

Contractors       Pvt   Ltd     Vs     Som         Datt     Builders       Ltd.

MANU/SC/1150/2009 has held that even though the contract

between the parties does not contain a provision for arbitration, an

arbitration clause contained in an independent document will be

imported and engrafted in the contract between the parties, by

reference to such independent document in the contract, if the

reference is such as to make the arbitration clause in such document

a part of the contract i.e., it must be evident that the parties

intended to incorporate the arbitration clause contained in the

document into the contract. Russell on Arbitration was quoted to

the effect that general words of incorporation are not sufficient,

rather particular reference to the arbitration clause needs to be

made to comply with the provisions unless special circumstances

exist. It was held that an arbitration clause in other document, would

get incorporated into a contract by reference only when the contract

contains a clear reference to the documents containing the

arbitration clause; the reference to the other document should

clearly indicate an intention to incorporate the arbitration clause

into the contract and the arbitration clause should be appropriate,

i.e. capable of application in respect of the disputes under the

contract and should not be repugnant to any term of the contract. It

was further held that when a contract between the parties provides

that the execution or performance of that contract shall be in terms

of another contract (which contains the terms and conditions

relating to performance and a provision for settlement of disputes by

arbitration), then the terms of the referred contract in regard to the

execution/performance alone will apply and not the arbitration

agreement in the referred contract unless there is special reference

to the arbitration clause also. Though certain other parameters were

also laid down by the Supreme Court in that case but the same are

not found relevant for the present case.

23. Russell on Arbitration, 21st Edition (i.e. of prior to the English

Arbitration Act, 1996) while dealing with a situation where a

contract is varied and disputes have arisen about whether the

contract as varied includes or excludes the original arbitration

agreement cites; i) EB Aaby's Rederi A/S Vs Union of India

(1974) 2 Lloyd's Rep 57 where the arbitration clause was held to be

not incorporated in the variation to the agreement for the reason of

the claims under the original arbitration agreement being required

to be made within 12 months and the variation requiring many years;

and ii) Faghirzadeh Vs Rudolf Woolf SA (PTI) Limited (1977) 1

Lloyd's Rep 630 where the arbitration clause was held to apply to

variations also for the reason of the variation being unintelligible

without reference back to the original agreement.

24. Mustill and Boyd in their work on Commercial Arbitration, 2nd

Edition opine that where one contract operates by variation or

replacement of another and only one of them contains an arbitration

clause, it is a question of construction whether disputes under both

contracts or only under one fall within the clause.

25. Applying the aforesaid tests, neither can it be said that the

subsequent agreement qua incentive is unintelligible without

reference back to the main contract, nor is the arbitration clause in

the main contract consistent with the subsequent agreement qua

incentive. The main agreement on the basis whereof the petition

under Section 11 of the Arbitration Act is filed, is between the

petitioner (in its individual capacity) and the respondent only and

relating only to the works which the petitioner alone, as one of the

members of the consortium aforesaid, was to carry out for the

project. However, the agreement qua incentive is between the

petitioner, as leader of the consortium and for and on behalf of itself

as well as other members of the consortium on the one hand and the

respondent on the other hand. Also, while the main agreement is

concerned only with the works which the petitioner was to carry out

in the entire project (and not the works which other consortium

members were required to do with respect to same project but under

different agreements with the respondent), the subsequent

agreement qua incentive is concerned with commissioning of the

project, which could only be on completion of works by other

consortium members also under their respective contracts with the

respondent. Yet also, while payments under the main agreement on

basis whereof petition is filed, were to be made by respondent to

petitioner only and were to be received by petitioner on its own

behalf only, the payment of incentive under the subsequent

agreement was to be made by respondent to all the consortium

members and advance incentive was received by the petitioner on

behalf of itself as well as other consortium members and under

authority from them.

26. For the aforesaid differences, there cannot be said to be any

intent to make the arbitration clause in the main agreement on basis

whereof petition is filed, a part of the agreement qua incentive

described by senior counsel for petitioner also during arguments as

"independent".

27. I do not thus find the dispute arising from agreement qua

incentive to be arbitrable.

Re. Locus of the petitioner.

28. The senior counsel for the petitioner in his opening

submissions had in response to a query from the court categorically

stated that the agreement for payment of incentive (disputes with

respect whereto had arisen) was between the petitioner and the

respondent only and the other contracting parties referred to in the

agreement (Supra) between the petitioner and the respondent (on

basis whereof petition is filed) were not concerned with the same.

This query was raised since the arbitration provided in the General

Conditions of contract is of International Chamber of Commerce. It

was felt strange as to why the petitioner and the respondent with no

foreign party involved would for their said dispute of incentive

provide for arbitration of International Chamber of Commerce, Paris

(ICC). In fact this query was made in the context of finding out

whether it could have been the intention of the parties that the

disputes qua payment of incentive with which the other consortium

members being foreigners were not stated to be concerned, could be

intended to be covered by arbitration of ICC.

29. However, subsequently during hearing, when letters dated 9th

April, 2003 & 23rd April, 2003 containing agreement qua incentive

were read and it was found that the same was of all the consortium

members with the respondent, it was again enquired as to how the

disputes therefrom could be covered by arbitration agreement

between petitioner & respondent only, on the contract on basis

whereof petition was filed. The senior counsel for petitioner then

drew attention to an "overall agreement" dated 18th July, 1999, i.e. of

the same day as the agreement between petitioner and respondent

and on basis whereof petition is filed and to which not only the

petitioner and the respondent but the other consortium members are

also a party. A copy of the said agreement was filed not with the

petition but along with the rejoinder to reply of respondent. The

same also provides for settlement of disputes in Clause 11 thereof as

under:-

"11.0 SETTLEMENT OF DISPUTES Any dispute or difference which may arise between the parties out of or in connection with the Agreement which the parties are unable to settle amicably, shall be settled in accordance with the provisions of Article 38 (Settlement of Disputes) of the GENERAL CONDITIONS provided that for the purposes of this Agreement in the said Article 38 of the GENERAL CONDTIONS the Owner shall be one party and all the Contracting Parties collectively acting through the leader, shall be other party. "

This agreement is signed by other consortium members also.

However the same also does not cover incentive.

30. The scheme for appointment of an arbitrator framed by this

court in 1996 requires a request under Section 11(4) or (5) or (6) to

be accompanied by the original arbitration agreement or true copy

thereof. The only agreement copy whereof was filed along with the

request in this petition was the agreement between the petitioner

and respondent only. Thus the plea/request of the petitioner is for

arbitration under that agreement only and not under the overall

agreement which surfaced for the first time in rejoinder.

31. The agreement qua incentive is found to be between parties

other than the petitioner & respondent also and who are not parties

to the arbitration agreement on basis whereof petition is filed. The

said parties are also not parties to this petition. The senior counsel

for the petitioner at this stage admitted that other consortium

members are also parties to agreement qua incentive and the overall

agreement was relied upon in this regard only. Even then the other

consortium members, even if admitted to be parties to agreement

qua incentive and contended to be arbitrable, ought to have been

impleaded as parties to this petition. They have not been so

impleaded. Neither were their particulars given in the petition as

required to be given under the scheme aforesaid. After the judgment

in SBP & Co. Vs. Patel Engineering Ltd. AIR 2006 SC 450 notice

is required to be given to all parties to arbitration and they are to be

heard.

32. Moreover, the claim for incentive if any is under an agreement

made jointly by petitioner and other consortium members, with the

respondent. The petitioner alone cannot claim under the said

agreement. The petitioner thus does not have the locus to alone

make a request under Section 11 of the Act, under such agreement.

33. I have also considered the effect of the petition, under the

arbitration clause aforesaid in the overall agreement (on basis

whereof though petition is not filed) being entitled to act as a leader

of the consortium to appoint the arbitrator. However, in my view the

same would not obviate all parties to the dispute being before this

court. The respondent can be considered to be at best an agent of

the other consortium members. An agent of a disclosed principal,

under Section 230 of the Contract Act, cannot be sued. Thus for the

petition to be covered by the arbitration clause in the overall

agreement also, the other contracting parties were required to be a

party hereto.

34. Faced with this situation, the senior counsel for the petitioner

stated that an opportunity be given to him to implead the other

contracting parties as parties hereto. No ground was found for

giving such opportunity. This court cannot guide the petitioner,

especially when the petitioner is found to have taken inconsistent

stand i.e. in the opening submissions urged that the petitioner alone

and not the other consortium members was party to the agreement

qua incentive and upon failing in the said submission wanting to

implead the other parties. It is the contention of the senior counsel

for the respondent that the petitioner had suppressed the "overall

agreement" also from this court and by such suppression in the first

round had managed to obtain an order for appointment of arbitrator.

35. There is yet another aspect of the matter. The correspondence

required under Section 11 of the Act to precede a request to Chief

Justice/his designate, is also by petitioner for itself only and not on

behalf of other consortium members. There is nothing to show that

they were in any way concerned with the dispute.

35. I, therefore, do not find any merit in the petition. Though the

order of dismissal of petition was announced in court itself on

conclusion of hearing, the senior counsel for the respondent had

pressed for costs and order with respect thereto also was reserved.

In the facts and circumstances aforesaid, costs of these proceedings

of Rs.1 lac are also awarded to the respondent against the petitioner.

RAJIV SAHAI ENDLAW (JUDGE)

September 18th, 2009 M/PP