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: 19th April, 2016
+ Arb. P. No.89/2016
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 10th May, 2014 to the
petitioner inter-alia for the complete design, manufacturing, supply,
transport to site, unloading, storage, erection, testing, 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 Over Rs.5,40,52,473/-
Energo Comm.No.18/ Section 9 of on 19th Rs.2
Engineering 2016 the Arbitration September, crores
Projects Ltd and 2011 which
Conciliation was followed
Act, 1996 by Purchase
Order 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,
Energo Comm.No.19/ Section 9 of was issued Rs.2 71,92,000/-
Engineering 2016 the Arbitration Letter of Intent crores
Projects Ltd and dated
Conciliation 21st November,
Act, 1996 2013, which
was 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 Rs.2 /-
Engineering 2016 the Arbitration of Intent dated crores
Projects Ltd and 1st January,
Conciliation 2014 for the
Act, 1996 work of 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 Over Rs. Rs.
Energo Comm.No.21/ Section 9 of Respondent had 2 crores 6,95,99,122/-
Engineering 2016 the Arbitration issued Letter of
Projects Ltd and Intent
Conciliation dated 16th
Act, 1996 April, 2014, for
supply, 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 Over Rs. Restrain the
vs. Energo (Comm) Section 9 of No.1 issued 2 crore respondent from
Engineerin 65/2015 the Arbitration purchase order encashing the Bank
g Projects and to the petitioner Guarantee
Ltd., Conciliation dated 6th May, Nos.
Act, for 2014 for supply 1403831BGA0000
interim orders. of Wagon 7 for
Tippler and Side Rs.4,62,92,400/-
Arm Charger. and
The petitioner 1403831BGP00026
was issued for
another work Rs.5,01,09,200/-
order for executed by the
erection and petitioner in favour
commissioning of the respondent in
of Wagon pursuance to the
Tippler and Side agreement entered
Arm Charger between the parties.
dated 26th May,
2014.
2. TRF Ltd. O.M.P(I) Petition under Respondent Over Rs. Restrain the
vs. Energo (Comm) Section 9 of No.1 issued 2 crore respondent from
Engineerin 66/2015 the Arbitration purchase orders encashing the Bank
g Projects and to the petitioner Guarantee
Ltd., Conciliation dated 10th May, Nos.
Act, for 2014 for supply 1403831BGP00028
interim orders. of Wagon for
Tippler and Side Rs.1,21,76,700/-
Arm Charger and
and for erection 1403831BGA0001
and 0 for
commissioning Rs.1,12,26,700/-
of Wagon executed by the
Tippler and Side petitioner in favour
Arm Charger of the respondent in
dated. pursuance to the
agreement entered
between the parties.
3. TRF Ltd. O.M.P(I) Petition under Respondent Over Rs. Restrain the
vs. Energo (Comm) Section 9 of No.1 issued to 2 crore respondent from
Engineerin 68/2015 the Arbitration the petitioner encashing the
g Projects and purchase order Bank Guarantee
Ltd., Conciliation dated 22nd Nos.
Act, for October, 2011 Nos.
interim orders. for supply of 00191GPER00451
Reversible 1 for
Bucket Wheel Rs.3,51,50,000/-
Type and
Stacker- cum- 00191GPER00441
Reclaimer. 1 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 encashing the
g Projects and to the petitioner Bank Guarantee
Ltd., Conciliation dated 10th May, 1403831BGA0000
Act, for 2014 for supply 9 for
interim orders. of Wagon Rs.1,12,26,700/-
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 encashing the
g Projects and to the petitioner Bank Guarantee
Ltd., Conciliation dated 9th 140383IBGA00006
Act, for December, 2013 for Rs.31,26,000/-
interim orders. for supply, and
erection and 140383IBGP00025
commissioning for Rs.31,26,000/-
of executed by the
Plough Feeder. 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 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 Deepak
Verma (Retd.) as the sole Arbitrator in terms of clause 33.d of the Purchase
Order.
12. 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.
13. 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.
14. Clause 33.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.
15. Clause 33.d 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".
16. 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.
17. 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.d 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.
18. 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.
19. 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.
20. 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.
21. 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 mention 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.d 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.
22. 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.
23. 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.
24. 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 Verma (Retd.) has been appointed
as an Arbitrator in relation to similar disputes between the same parties
under three Purchase Orders pertaining to the projects at Khorba, Sipat and
Kudgi. 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.
25. 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.
26. Before consenting to act as the learned sole Arbitrator, Justice Verma
(Retd.) by letter dated 28th 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
27. 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.
28. Even, besides the stipulation of the agreement/purchase order
governing the parties, this Court inclines to appoint Hon'ble Mr.Justice
Deepak Verma (Retd.) as sole Arbitrator to decide the dispute between the
parties.
29. For the reasons stated above, there is no merit in the petition and the
same is accordingly dismissed.
(MANMOHAN SINGH)
JUDGE
APRIL 19, 2016
