Delhi High Court
National Buildings Construction ... vs Reunion Engineering Co. Ltd. on 14 February, 2012
Author: Sanjay Kishan Kaul
R-5 & 7
* THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 14.02.2012
+ FAO(OS) 235/2005 and FAO(OS) 377/2005
NATIONAL BUILDINGS CONSTRUCTION
CORPORATION LTD.. ...APPELLANT
Through: Mr. Arvind Minocha and
Mr. Randhir Singh, Advocates
VERSUS
REUNION ENGINEERING CO. LTD. ...RESPONDENT
Through: Mr. C.V. Francis and Mr. Arun
Francis, Advocates
CORAM :-
HON'BLE MR JUSTICE SANJAY KISHAN KAUL
HON'BLE MR JUSTICE RAJIV SHAKDHER
SANJAY KISHAN KAUL, J. (ORAL)
1. The dispute interse the parties arises from the agreement of 1980 with
State Organisation for Tourism, Iraq for construction of two hotels. NBCC
entered into a back to back contract with Reunion Engineering Company
Limited for electrification work in these two hotels. The work was completed
in 1987 but the claim interse the parties before us could not be resolved and
thus arbitration was invoked.
2. In terms of arbitration clause 36, the dispute had to be referred to the
sole arbitration of the Project Director, NBCC or any person appointed by
him. In the relevant time, the post of the Project Director had not been filled.
NBCC appointed one Mr. V.A. Kelkar, one of its Chief Engineers as an
Arbitrator, which was objected to by the contractor, resulting in filing of OMP
49/1989 under sections 5, 11, 12 and 33 of the Arbitration Act, 1940
(hereinafter referred to as the said Act). This dispute was amicably resolved as
the parties jointly filed an application before the court for appointment of Mr.
S.R. Nair, as Sole Arbitrator in substitution of the earlier arbitrator , which was
accepted by the learned Single Judge and the OMP was disposed of on
06.08.1991. Mr. S.R. Nair thereafter entered upon reference and the award
finally came to be made on 22.10.1994. Needless to note that during this
period, the time for making the award was extended at joint request of the
parties. The award was filed in court and registered as CS(OS) 83A/1995.
NBCC filed objections under sections 30 and 33 of the said Act, which was
registered as IA No.2515/1995. These objections have been partly allowed by
the impugned order dated 05.04.2005, which has given rise to appeal and
cross appeal.
3. It is the submission of learned counsel for NBCC (as was the plea before
the learned Single Judge) that in view of the arbitration clause a specified
designated authority had to appoint an Arbitrator, no other mode of
appointment of arbitrator was permissible and thus the arbitration was coram
non judice. This plea, which is based on the arbitration clause is made on the
ground that parties have taken care to incorporate in the said arbitration clause
that, no person other than the person appointed by the Project Director should
act as an Arbitrator, and if, for any reason that is not possible, the matter will
not be referred to arbitration at all.
4. The learned Single Judge in the impugned order has discussed various
judgments cited at the bar by learned counsel for the NBCC.
4.1 The plea taken has been negated by the learned Single Judge in paras 17
and 18 of the impugned order, while coming to the conclusion that the factual
contours of the present case would be governed by the judgment of the learned
Single Judge of this court (as he then was) in M/s. W.S. Constructions
Company Vs. Hindustan Steel Works Construction Ltd. AIR 1990 Delhi 134.
Learned Single Judge thus concluded that the appointment of Mr. S.R. Nair as
an Arbitrator was in substitution of the existing arbitrator , made by consent of
parties.
5. On examination of the pleas of the learned counsel for parties, we find
that nothing prevents the parties from novating the terms of contract inter se
the parties, with the consent, of its own free will. It is nobody's case that the
consent has been procured without free will or under any duress. In fact it
could hardly have been pleaded so by the NBCC. Undoubtedly, the original
terms of the contract envisaged only the designated authority to appoint an
Arbitrator, failing which arbitration process was not to be resorted to for
settlement of disputes. However, the joint application filed by the parties
sought appointment of Mr. S.R. Nair as an Arbitrator. The relevant portion of
the application reproduced in the orders of the learned Single Judge for
convenience is once again reproduced by us as under :-
"Both the petitioner and respondent no.1 agree to the appointment of
Shri S.R. Nair, Retired Chief Engineer, Survey of Works, MES &
Ex. General Manager, E.P.I., resident of H.No.TC-9/260, Palace
Road, Kawdiar, Trivandrum-695003, as an Arbitrator in place of Shri
V.A. Kelkar, Chief Engineer (E&M), N.B.C.C., Respondent No.2"
5.1 The orders passed by the court on 06.08.1991 was thus on the basis of
the said joint application.
5.2 It is not as if the court itself exercised the power of appointment of the
Arbitrator, but that, it gave its imprimatur to the joint request of the parties to
appoint Mr. S.R. Nair as an Arbitrator. We thus find no merit in this plea of
NBCC.
6. We may notice that the learned counsel for the NBCC also sought to
question some factual findings in the award relating to excepted matters but
given the limited scope of interference of the court vis-à-vis an arbitral award,
the learned Single Judge refrained from doing so, in view of the legal position
enunciated in para 19 of the impugned order. We find no fault in this approach
of the learned Single Judge. Nothing was shown to us to have us disagree with
the view taken by the learned Single Judge.
7. NBCC, however, succeeded before the learned Single Judge qua the
issue of interest, as the Arbitrator has awarded interest at 15% p.a., which was
reduced to 6% p.a., specially taking note of the fact that the award was in US
Dollars. NBCC also succeeded qua certain period of interest and the issue of
rebate.
7.1 The cross appeal filed by the contractor is qua the issue of rate of
interest, but learned counsel for contractor could not seriously dispute the
position as it would be "LIBOR" rates which would apply once the award is
made in terms of US Dollars. Learned counsel thus does not seriously press
the cross appeal.
8. For the aforesaid reasons, we dismiss both the appeal and the cross
appeal leaving the parties to bear their own costs.
9. The full decretal amount stands deposited in this court be released to the
respondent with accrued interest thereon, if any.
SANJAY KISHAN KAUL,J
RAJIV SHAKDHER, J
FEBRUARY 14, 2012/yg
