Delhi High Court
Trf Ltd. vs Energo Engineering Projects Ltd on 19 April, 2016
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 8th March, 2016
Judgment pronounced on: 19 April, 2016
+ Arb. P. No.86/2016
TRF LTD. ..... Petitioner
Through Mr.Ciccu Mukhopadhaya, Sr. Adv.
with Mr.Kaushik Poddar and
Ms.Rashmi Gogoi, Advs.
versus
ENERGO ENGINEERING PROJECTS LTD ..... Respondent
Through Mr.Rajiv Nayar, Sr. Adv. with
Ms.Anannya Ghose, Ms.Reena
Choudhary and Mr.Saurabh Seth,
Advs.
CORAM:
HON'BLE MR.JUSTICE MANMOHAN SINGH
MANMOHAN SINGH, J.
1. The present petition has been filed by the petitioner under Section
11(5) read with Section 11(6) of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as the 'Act') seeking appointment of a retired Judge
of the Supreme Court as an Arbitrator for adjudication of the disputes
between the parties by declaring the Arbitrator already appointed by the
respondent ineligible and further declaring such appointment void ab initio.
2. The petitioner is a Company duly incorporated under the Companies
Act, 1956.
3. The respondent is engaged in the business of procuring Bulk Material
Handling Equipment for installation in Thermal Power Plants on behalf of
its clients like National Thermal Power Corporation ('NTPC' in short) and/or
Moser Baer, Lanco Projects Ltd. etc.
4. The respondent issued a Purchase Order dated 22nd October, 2011 to
the petitioner for the supply of Reversible Bucket Wheel Type Stacker-cum-
Reclaimer, including for the complete design, manufacturing, supply,
erection, commissioning and performance guarantee testing of various
Articles including wagon tippler, side arm charger, apron feeder etc. To
secure the performance under the Purchase Order, the petitioner had
submitted an Advance Bank Guarantee and a Performance Bank Guarantee.
5. The petitioner approached this Court by way of petition under Section
9 of the Act praying for an injunction against the respondent from exercising
its contractual rights to encash the Advance Bank Guarantee and the
Performance Bank Guarantee, both of which are admittedly unconditional.
Thereafter, the petitioner filed set of petitions under Section 9 of the Act
seeking an order for the respondent to furnish security for the purportedly
outstanding amounts.
6. The details of the said 1st set of petitions filed by the petitioners under
Section 9 of the Act are given as under:-
S. No. Case Title Case Number Section Details Amount/ Amount
claim outstanding
1. TRF Ltd. v. OMP(I) Petition under Letter of Intent on Over Rs.5,40,52,473/-
Energo Comm.No.18/ Section 9 of 19th September, Rs.2
Engineering 2016 the Arbitration 2011 which was crores
Projects Ltd and followed by
Conciliation Purchase Order
Act, 1996 dated 22nd
October, 2011 by
the respondent for
supply of
Reversible Bucket
Wheel Type
Stacker-cum-
Reclaimer by
the respondent.
2. TRF Ltd. v. OMP(I) Petition under The petitioner Over Rs. 1, 71,92,000/-
Energo Comm.No.19/ Section 9 of was issued Letter Rs.2
Engineering 2016 the Arbitration of Intent dated crores
Projects Ltd and 21st November,
Conciliation 2013, which was
Act, 1996 issued to the
petitioner by sole
respondent for
supply of 'Plough
Feeder' for the
end use project
of Moser Baer
and/or LANCO
Projects Ltd. The
said LOI was
subsequently
culminated into
Purchase Order
dated 9th
December, 2013.
3. TRF Ltd. v. OMP(I) Petition under Respondent had Over Rs.11,13,95,500/-
Energo Comm.No.20/ Section 9 of issued a Letter of Rs.2
Engineering 2016 the Arbitration Intent dated 1st crores
Projects Ltd and January, 2014 for
Conciliation the work of
Act, 1996 supply, erection
and
commissioning of
'Wagon Tippler
and Side Arm
Charger' in
favour of the
petitioner. After a
lapse of almost
five months from
the issuance of
LOI, a Purchase
Order with
respect to supply
of Wagon Tippler
and Side Arm
Charger dated 6th
May, 2014 was
issued by the sole
respondent.
4. TRF Ltd. v. OMP(I) Petition under The Respondent Over Rs. Rs. 6,95,99,122/-
Energo Comm.No.21/ Section 9 of had issued Letter 2 crores
Engineering 2016 the Arbitration of Intent
Projects Ltd and dated 16th April,
Conciliation 2014, for supply,
Act, 1996 erection and
commissioning of
Wagon Tippler
and Side Arm
Charger. The
same was
followed
by Purchase
Order dated 10th
May, 2014 for
supply of Wagon
Tippler and Side
Arm Charger.
7. The details of the 2nd set of the petitions are given as under:-
S.No. Case Case Section Details Amount Prayer
Name Number /Claim
1. TRF Ltd. O.M.P(I) Petition under Respondent No.1 Over Rs. Restrain the
vs. Energo (Comm) Section 9 of issued purchase 2 crore respondent from
Engineerin 65/2015 the Arbitration order to the encashing the Bank
g Projects and petitioner dated 6th Guarantee
Ltd., Conciliation May, 2014 for Nos.
Act, for supply of Wagon 1403831BGA00007
interim orders. Tippler and Side for Rs.4,62,92,400/-
Arm Charger. and
The petitioner was 1403831BGP00026
issued another for Rs.5,01,09,200/-
work order for executed by the
erection and petitioner in favour
commissioning of of the respondent in
Wagon Tippler and pursuance to the
Side Arm Charger agreement entered
dated 26th May, between the parties.
2014.
2. TRF Ltd. O.M.P(I) Petition under Respondent No.1 Over Rs. Restrain the
vs. Energo (Comm) Section 9 of issued purchase 2 crore respondent from
Engineerin 66/2015 the Arbitration orders to the encashing the Bank
g Projects and petitioner dated Guarantee
Ltd., Conciliation 10th May, 2014 for Nos.
Act, for supply of Wagon 1403831BGP00028
interim orders. Tippler and Side for Rs.1,21,76,700/-
Arm Charger and and
for erection and 1403831BGA00010
commissioning of for Rs.1,12,26,700/-
Wagon Tippler and executed by the
Side Arm Charger petitioner in favour
dated. of the respondent in
pursuance to the
agreement entered
between the parties.
3. TRF Ltd. O.M.P(I) Petition under Respondent No.1 Over Rs. Restrain the
vs. Energo (Comm) Section 9 of issued to the 2 crore respondent from
Engineerin 68/2015 the Arbitration petitioner purchase encashing the Bank
g Projects and order dated 22nd Guarantee Nos.
Ltd., Conciliation October, 2011 Nos.
Act, for for supply of 00191GPER004511
interim orders. Reversible Bucket for Rs.3,51,50,000/-
Wheel Type and
Stacker- cum- 00191GPER004411
Reclaimer. for Rs.3,51,50,000/-
executed by the
petitioner in favour
of the respondent in
pursuance to the
agreement entered
between the parties.
4. TRF Ltd. O.M.P(I) Petition under The respondent Over Rs. Restrain the
vs. Energo (Comm) Section 9 of No.1 issued a 2 crore respondent from
Engineerin 69/2015 the Arbitration purchase order to encashing the Bank
g Projects and the petitioner dated Guarantee
Ltd., Conciliation 10th May, 2014 for 1403831BGA00009
Act, for supply of Wagon for Rs.1,12,26,700/-
interim orders. Tippler and Side and
Arm Charger. 1403831BGP00027
for Rs.1,21,76,700/-
executed by the
petitioner in favour
of the respondent in
pursuance to the
agreement entered
between the parties.
5. TRF Ltd. O.M.P(I) Petition under The respondent Over Rs. Restrain the
vs. Energo (Comm) Section 9 of No.1 issued a 2 crore respondent from
Engineerin 70/2015 the Arbitration purchase order to encashing the Bank
g Projects and the petitioner dated Guarantee
Ltd., Conciliation 9th December, 2013 140383IBGA00006
Act, for for supply, erection for Rs.31,26,000/-
interim orders. and commissioning and
of 140383IBGP00025
Plough Feeder. for Rs.31,26,000/-
executed by the
petitioner in favour
of the respondent in
pursuance to the
agreement entered
between the parties.
8. The said petitions under Section 9 of the Act are presently pending
consideration before this Court.
9. The petitioner by letter dated 28th December, 2015 invoked the
arbitration in terms of Clause 33 of the General Terms and Conditions of the
Purchase Order ("GTCPO") for reference of disputes between the parties to
arbitration.
10. However, the petitioner objected to the procedure for appointment of
Arbitrator provided under the Purchase Order, who communicated to the
respondent its consent for appointment of an Arbitrator de hors the specific
terms of the Purchase Order.
11. The contention of the respondent is that the submission of the
petitioner is contrary to the binding contractual terms between the parties.
The respondent denied such suggestion and by letter dated 27th January,
2016 informed the petitioner about the appointment of Justice A.P.Shah
(Retd.) as the sole Arbitrator in terms of clause 33.c of the Purchase Order.
12. Later on, admittedly, Justice A.P.Shah (Retd.) ("Arbitral Tribunal")
by letter dated 29th January, 2016 addressed to both the parties directed them
to appear before the Arbitral Tribunal for a preliminary meeting to be held
on 9th February, 2016.
13. It is alleged by the respondent that with the sole purpose of defeating
the arbitration proceedings, the petitioner has sought to invoke the
jurisdiction of this Court under Section 11(5) read with Section 11(6) of the
Act by way of the present petition.
14. The present petition has been filed under both Sections 11(5) and
11(6) of the Act. The fundamental procedure for invocation of this Court's
jurisdiction under Section 11(5) of the Act, i.e. failure on part of the parties
to agree on a procedure for appointment of Arbitrator under Section 11(2) of
the Act is not made out.
15. Clause 32.b of the GTCPO states that if the parties fail to amicably
resolve the disputes, then either party may require that the dispute be
referred to arbitration.
16. Clause 33.c of the GTCPO provides that any dispute between the
parties in connection with the Purchase Order "shall be referred to sole
arbitration of the Managing Director of the Buyer or his nominee".
17. The said terms of the Purchase Order makes it clear that the petitioner
and the respondent have agreed on a procedure for appointing an Arbitrator
as contemplated by Section 11(2) of the Act. In these circumstances, the
disputes between the parties have to be decided in accordance with such
procedure and recourse to Section 11(5) of the Act cannot be taken by the
petitioner.
18. The petitioner has also contended that since the respondent's
Managing Director has himself become "ineligible" to be appointed as an
Arbitrator, he cannot also nominate any other person as an Arbitrator and
any such appointment is contrary to the rule of law and that is the intent and
purpose of the recent amendments to the Act. The petitioner has also alleged
that the arbitration agreement under clause 33.c of the GTCPO is rendered
void. The petitioner's arguments in this regard are without any merit, as the
right of the Managing Director to nominate a sole Arbitrator under the
Purchase Order is independent of his right to himself act as the sole
Arbitrator.
19. The mere reason that the Managing Director of the respondent cannot
act as a sole Arbitrator in the disputes between the parties does not take
away his right to nominate an independent and neutral Arbitrator.
20. Appointment of an independent and impartial Arbitral Tribunal does
not append the recent changes brought about in the Act, including Section
12(5) and the Seventh Schedule to the Act or in any manner contrary to the
rule of law. Although, I must mention here and appreciate the fairness of the
learned Senior counsel for the petitioner who has made his submission that
he is merely arguing the matter on legal issue otherwise he and his client
have full faith and respect for the learned sole Arbitrator appointed. He
submits that since it is an important legal issue therefore, he is making his
submissions on legal issue only.
21. The Fifth and the Seventh Schedule reveal that the grounds provided
thereunder are in relation to the appointed Arbitrator himself and thus, the
petitioner's argument that the nominee Arbitrator being ineligible to act as
an Arbitrator is without any force and against the scheme of the Act. The
Purchase Order does not stipulate that the Managing Director of the
respondent will have a right to nominate a sole Arbitrator only so long as he
is also qualified to act as such.
22. The right of one party to a dispute to appoint a sole Arbitrator prior to
the amended Act has been well-recognized and the amended Act does not
take away such a right. Had the intent of the amended Act been to take
away a party's right to nominate a sole Arbitrator as suggested by the
petitioner, the same would have found mentioned in the detailed list of
ineligibility criteria enumerated under the Seventh Schedule to the Act.
Therefore, the petitioner's submission that the arbitration clause under clause
33.c of the GTCPO has been rendered void, is without any merit. Thus, the
petitioner has been able to make out a case for exercise of powers by this
Court under Section 11(5) of the Act.
23. The recourse to Section 11(6) of the Act can be had only if there are
any of the contingencies provided under Section 11(6) (a), (b) or (c). The
petitioner is not able to indicate as to how any of the contingencies
contemplated by Section 11(6) of the Act arise in the present case.
24. The petitioner has contended that the appointment of the Arbitral
Tribunal is contrary to Item Nos.22 and 24 of the Fifth Schedule to the Act.
The Fifth Schedule to the Act does not per se provide for grounds for
disqualification of an Arbitrator. The said Schedule merely provides an
indicative list of the grounds which give rise to justifiable doubts as to the
independence or impartiality of arbitrators. Under Section 12(1) of the Act, a
person who is approached in connection with his possible appointment as an
Arbitrator is to be guided by the Fifth Schedule while determining whether
the circumstances exist which give rise to justifiable doubts and if so, he
shall disclose the same in the form specified in the Sixth Schedule.
25. The petitioner's argument that the appointment of the Arbitral
Tribunal is bad in view of Item 22 of the Fifth Schedule to the Act is entirely
frivolous and without any basis whatsoever. Insofar as the petitioner's
challenge in terms of Item 24 of the Fifth Schedule is concerned, the said
argument has no consequence as Justice Shah (Retd.) has been appointed as
an Arbitrator in relation to similar disputes between the same parties under
two Purchase Orders pertaining to the same project at Annupur. With regard
to Item 29 of the Fifth Schedule to the Act, it stipulates that if the Arbitrator
has within the past three years received more than three appointments by the
same counsel or the same law firm, the Item would show that the same is in
relation to the counsel or the law firm who makes the appointment and does
not pertain to the counsel or the law firm of the opposite side to an
arbitration proceeding.
26. Even otherwise, I agree with the suggestion of learned counsel for the
respondent that the objections, if any, against the constitution of the Arbitral
Tribunal on any ground whatsoever including under the Fifth and the
Seventh Schedule of the Act can only be raised before the Arbitral Tribunal
27. Before consenting to act as the learned sole Arbitrator, Justice Shah
(Retd.) by letter dated 27th January, 2016 had given the requisite disclosures
under the Sixth Schedule wherein he had indicated that as per him, there are
no circumstances which are likely to give rise to justifiable doubts as to his
independence and impartiality.
28. The Arbitral Tribunal has already been constituted and has entered
into reference who has already ensured the compliance of the provision
under the amended Act about no conflict. Now, the petitioner cannot be
allowed to change the Arbitral Tribunal.
29. Even, besides the stipulation of the agreement/purchase order
governing the parties, this Court inclines to appoint Hon'ble Mr.Justice
A.P.Shah (Retd. Chief Justice) as sole Arbitrator to decide the dispute
between the parties.
30. For the reasons stated above, there is no merit in the petition and the
same is accordingly dismissed.
(MANMOHAN SINGH)
JUDGE
APRIL 19, 2016
