Delhi High Court
International Panaacea Ltd. vs National Seeds Corporation Ltd. on 23 August, 2016
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Order delivered on: 23rd August, 2016
+ Arb. P. No.270/2016
INTERNATIONAL PANAACEA LTD. ..... Petitioner
Through Mr.Sumesh Dhawan, Adv. with
Ms.Vatsala Kak, Adv.
versus
NATIONAL SEEDS CORPORATION LTD. ..... Respondent
Through Mr.Sameer Kulshreshtha, Adv.
CORAM:
HON'BLE MR.JUSTICE MANMOHAN SINGH
MANMOHAN SINGH, J. (Oral)
1. The petitioner has filed the present petition under Section 11(5)
of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as
the "Act") for appointment of a sole Arbitrator to adjudicate the
disputes arisen between the parties.
2. The respondent entered into an Agreement dated 24th May, 2012
with the petitioner for Registered Co-supplier/Co-producer of quality
agri-inputs, i.e. Bio-manure, Bio-fertilizers, Bio-pesticides and micro-
nutrients for Bihar and Jharkhand Regions. The arrangement was
continued up to 31st December, 2012. The respondent failed to make
the payment due. On 26th December, 2015, the petitioner served a
legal notice upon the respondent for appointment of a sole Arbitrator.
On 7th March, 2016, the respondent replied to the said legal notice,
stating that the respondent had no objection for appointment of a sole
Arbitrator, however, as no disputes had arisen between the parties,
there was no reason for appointment of sole Arbitrator. The similar
plea is also taken by the respondent in its reply in para 2-B thereof.
3. The contention of the learned counsel for the petitioner is that
despite of notice, as per the arbitration clause, the respondent failed
to appoint an Arbitrator before filing of the present petition.
4. As far as the disputes between the parties are concerned, the
respondent is not disputing the same so as the arbitration clause. The
only submission of the respondent is that since it is a back-to-back
contract, therefore, the prayer should not be allowed.
5. Learned counsel for the petitioner has referred a decision of the
Supreme Court rendered in the case of Zonal General Manager,
IRCON International Limited v. Vinay Heavy Equipments (2015)
13 SCC 680 (para 9) which reads as under:-
"9. Insofar as the question of primary liability therein is
concerned, the law on subcontracts and employer liability
is amply clear. In the absence of covenant in the main
contract to the contrary, the rules in relation to privity of
contract will mean that the jural relationship between the
employer and the main contractor on the one hand and
between the sub-contractor and the main contractor on the
other will be quite distinct and separate. No such clause to
the contrary, existent in the main contract between
Appellants and SIPCOT, has been highlighted before us by
the Appellants, which would persuade us towards a
deviation from the presumption of distinct and sole liability
of the Appellant-Contractor as employer viz. a. viz. the
Respondent-Sub Contractor. On the contrary, much of the
exercise in determining the existence of a "back to back
clause" in the contracts C1 and C2 appears to be
misplaced. Such an accommodation or transference of
liability needs to be pinpointed in the main contract, for it
is SIPCOT's acceptance of liability of subcontractor claims
which is of the essence; even a clause indicating "back to
back" liability in agreements C1 and C2 would not serve to
novate the main contract and fasten payment liability on
SIPCOT, prevented as it would be by privity, for it would be
a matter of SIPCOT's acceptance of subcontractor liability
in the main contract, and not a matter of novation by
imposition upon SIPCOT by two parties in a separate
bilateral contract. Nothing presented before us suggests
that SIPCOT's contract with the Appellant provided for
"back to back" subcontracts whereby SIPCOT would be
directly answerable for the payment claims raised by
contractors. That subletting was provided for by the main
contract, and indeed occurred, has been found by the
Arbitrator (in both Arbitrations) and affirmed by the Courts
below. This however, is quite distinct from concluding that
SIPCOT contractually (in the main agreement) assumed
primary liability for the Subcontractor-Respondent's
payment claims in respect of agreements made with the
Appellant. The fact that the Respondent was represented
and present in parleys and meetings between SIPCOT and
the Appellant or that it was referred to in the
correspondence exchanged between them does not lead to
the conclusion that a Tripartite contract had come into
effect by evolution."
6. Learned counsel for the petitioner also submits that since third
party is not a party to the Agreement, therefore, in the present case,
the dispute is only between the petitioner and the respondent. He
further submits that a sole Arbitrator be appointed by this Court and
liberty may also be granted to the respondent to raise all the pleas
before the Arbitrator.
7. There is a force in the submission of the learned counsel for the
petitioner. Accordingly, the prayer made in the petition is allowed.
Justice Mukul Mudgal, retired Chief Justice of Punjab & Haryana High
Court (Mobile No.9818000250) is appointed as sole Arbitrator to
adjudicate the disputes arising out of the agreement between the
parties as mentioned in the present petition. The parties are also
allowed to file their respective claims and counter-claims before the
Arbitrator. Liberty is granted to the respondent to raise all the
grounds as mentioned in the reply to the petition.
8. The Arbitrator shall ensure the compliance of the provisions of
Arbitration and Conciliation (Amendment) Act, 2015 before
commencing the arbitration. The fees of the learned Arbitrator shall be
in terms of the schedule of the amended Act. The parties to appear
before the Arbitrator on 8th September, 2016 at 4.00 p.m. for
directions.
9. The petition is accordingly disposed of.
10. Copies of this order be given dasti to the learned counsel for the
parties and a copy thereof be delivered to the learned Arbitrator
forthwith.
(MANMOHAN SINGH)
JUDGE
AUGUST 23, 2016
