Gail India Ltd. vs M/S Samtel Glass Limited
2014 Latest Caselaw 5328 Del

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*       IN THE HIGH COURT OF DELHI AT NEW DELHI
%                                      Judgement delivered on: 29.10.2014

+                   ARB.P. 539/2013
GAIL INDIA LTD                                            ..... Petitioner


                    versus

M/S SAMTEL GLASS LIMITED                                  ..... Respondent

Advocates who appeared in this case:

For the petitioner: Mr Arjun Garg, Advocate For the respondent: Nemo

CORAM:

HON'BLE MR. JUSTICE RAJIV SHAKDHER

RAJIV SHAKDHER, J

1. This is a petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (in short the Act).

1.1 A prayer has been made for appointment of an arbitrator to adjudicate upon the disputes adverted to in the main petition, which have arisen out of the Gas Sale Agreement (GSA) dated 29.12.2008, executed between the parties herein.

2. Notice in the petition was issued on 10.12.2013. As per the report of the Registry, notice has been served on the respondent as far back as on 19.09.2014. Despite service, there is no representation on behalf of the respondent.

2.1 Having regard to the fact that this is a petition for appointment of an arbitrator, any further adjournment of the matter would only delay the prosecution of the main petition, and therefore, I intend to proceed with the adjudication of the present petition.

3. Briefly, what is necessary to be noticed for the purposes of adjudication of the present petition are, the following facts :- 3.1 As indicted hereinabove, a GSA was executed between the parties on 29.12.2008. As per the said GSA, the petitioner was to supply 0.0489 MMSCMD of Regasified Liquified Natural Gas (RLNG) to the respondent's plant at Kota. The supply was secured by a letter of credit (LC) dated 19.03.2004. The value of the LC was a sum of Rs.2,31,52,000/-. This LC was valid till 02.04.2012. It is the case of the petitioner that the respondent was required to renew the LC at least 15 days before the expiry of the validity of the LC.

3.2 It appears that the disputes between the parties is pertaining to two outstanding bills dated 01.10.2011 and 15.10.2011. The total amount due and payable against the said bills at the relevant point in time was a sum of Rs.2,23,75,549/-. A communication in that behalf was made by the petitioner on 14.11.2011. It may be relevant to note that prior to the issuance of the said communication, on 21.10.2011, the aforementioned LC was invoked to realize the outstanding amount of Rs.2.23 Crores approximately. The LC was, however, not honoured by the concerned bank, as there was, evidently, no balance left in the account. 3.3 Curiously enough, the petitioner took out no action qua the bank. However, in this particular petition, I am not called upon to decide this aspect of the matter. As indicated above, it seems strange why the petitioner

did not institute an appropriate action qua the bank in consonance with remedies available in law.

3.4 Be that as it may, on this aspect of outstanding payments, correspondence was exchanged with the respondent and, in one such communication, which is dated 14.08.2012, the respondent appears to have communicated that it would make a payment of Rs.2.18 Crores, with respect to the contract in issue, to the petitioner by 18.08.2012. 3.5 This stand, in a sense, was reiterated by the respondent in its letter dated 29.10.2012. The said letter also is demonstrative of the fact that the respondent at the relevant point in time was making the right noises, which was, that it would defray what was due and payable to the petitioner. However, the record seems to indicate that these payments were not made. 3.6 Accordingly, on 24.04.2013, the petitioner issued a notice of invocation of disputes under the GSA to the respondent. This step was taken in compliance with Article 15.1 of the GSA. The total demand made by virtue of this notice was a sum of Rs.7,86,25,567/-. This sum was inclusive of a sum of Rs.1,94,67,151/- towards outstanding invoices qua supplies of gas made; Rs.5,89,15,394/- towards ATOPQ dues; and Rs.2,43,022/- on account of withholding tax deducted by the respondent. The petitioner, as required, gave 60 days to the respondent for settlement of the said dues.

3.7 The petitioner having not received the amount due, followed the aforementioned notice, with a notice invoking arbitration. The said notice was issued on 05.07.2013, in terms of Rs.15.6 of the GSA. The demand made by the petitioner for the payment of moneys remains the same. The only difference was that this time around the petitioner submitted a panel of

names comprising of three independent persons, for appointment of an arbitrator, to the respondent.

3.8 Evidently, by a return communication dated 18.07.2013, the respondent accepted the fact that disputes had arisen between the parties on account of "...over billing and over charging in the rates agreed between the parties...." The stand taken by the respondent in the said reply was that, this discrepancy, had been pointed out to the petitioner, which was apparently, not rectified. According to the respondent, reconciliation of accounts was pending, and that, the amounts demanded were "exorbitant". 3.9 In the very same communication, it was also claimed by the respondent that the petitioner had failed to give the basis for levying ATOPQ charges. The respondent concluded the said letter by indicating that the disputes which had arisen between the parties were technical in nature and, therefore, an expert, who is conversant with the measurement of gas quantity and accounting / billing procedure should be appointed to adjudicate upon the disputes in issue.

4. It is pertinent to note that the petitioner having received a response dated 18.07.2013, evidently mulled over the matter and came to the conclusion that ATOPQ charges, could not be sustained for the period 2007- 2008. Accordingly, the petitioner withdrew its claim with regard to the same.

5. It is in the background of the aforesaid facts that the present petition was filed in this court, on 26.11.2013.

6. Mr. Garg , who appears for the petitioner says that, in view of the aforesaid facts, this court should appoint an arbitrator. It is his submission that while, the respondent has accepted the fact that disputes have arisen

with regard to over-billing and other charges, it has incorrectly taken the stand that a technical expert be appointed. The learned counsel for the petitioner says that the appointment of a technical expert is provided in Article 15.2 of the GSA which, gets triggered only if, the disputes relate to matters which are provided for, in Article 10 or Article 13 of the GSA. 6.1 The learned counsel for the petitioner submits that Article 10 pertains to quality specifications, while Article 13 pertains to measurements. It is his contention that the disputes simplicitor pertain to non-payment of the bills raised qua gas supplied to the respondent. The learned counsel for the petitioner submits that, the only article, which would be applicable in the present case would be Article 15.6.

7. I have heard the learned counsel for the petitioner. In view of the fact that the respondent has not entered appearance, in a sense, the matter has gone uncontested. However, having regard to the correspondence exchanged between the parties, I am clearly of the view that a dispute has arisen between the parties. This aspect comes through upon a perusal of letter dated 18.07.2013, issued by the respondent. Pertinently, in the said letter, no dispute has been raised as to the existence of the arbitration agreement between the parties. The only stand that the respondent has taken, is that, an expert, conversant with the measurements of gas quantity and its accounting / billing procedure, should be appointed. By virtue of this fact, clearly, the qualitative aspects of the matter are clearly excluded and, therefore, Article 10 would have no applicability. 7.1 In so far as Article 13 is concerned, which relates to the measurement of gas supply, in my view, as is presently apparent, the said article also does not appear to get attracted. This is for the reason that, during the course of

the argument, when queried, the learned counsel for the petitioner stated that the respondent at no stage raised any issue with regard to the measurement of gas. At this stage, I have no reason to disbelieve, what the learned counsel for the petitioner, has put forth.

7.2. Moreover, the other reason which has propelled me to come to this conclusion is the fact that the respondent itself, in paragraph 2 of the letter dated 18.07.2013 (as indicated hereinabove by me), has taken the stand that its dispute with the petitioner is, with regard to the overbilling and over charging of rates. This perhaps could be ascertained even by a lay arbitrator, as against one, who is an expert in quantitative analysis of gas supplied by evaluating the documentary evidence generated during the course of transaction between the parties. Therefore, the stand of the respondent taken in the letter dated 18.07.2013, with regard to the appointment of an expert, can be ignored.

7.3 As noticed above, the respondent has failed to select an arbitrator in terms of Article 15.6 of the GSA out of the panel supplied by the petitioner. In view of the above, the respondent has lost its right to select an arbitrator out of the panel supplied in that behalf.

8. Having regard to the above, I am inclined to allow the petition. Accordingly, Hon'ble Ms. Justice Rekha Sharma, a former Judge of this court (whose name also finds mention in the panel supplied to the respondent) (Contact Nos.9871300025 and 25841455), is appointed as an arbitrator in the matter.

8.1 Needless to say, the arbitrator will issue notice to the respondent, before proceeding further in the matter. I am told that the petitioner has a fee schedule for the arbitrators appointed in such like matters. The learned

arbitrator will, therefore, decide her own fee, in consultation with the parties herein.

8.2 The parties will appear before the learned arbitrator on 17.11.2014 at 3.30 p.m. In case the date given by the court is not convenient to the learned arbitrator, the learned arbitrator will fix any date in close proximity by giving notice to the parties in that behalf.

9. With the aforesaid observations in place, the captioned petition is disposed of.

RAJIV SHAKDHER, J OCTOBER 29, 2014 Yg