M/S Geo Miller & Co Pvt Ltd vs Bihar Urban Infrastructure ...
2017 Latest Caselaw 978 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                   Judgment Reserved on: 03.01.2017
                                    Judgment delivered on: 20.02.2017

+       FAO(OS) 382/2016

M/S GEO MILLER & CO PVT LTD                                 ..... Appellant

                           versus

BIHAR URBAN INFRASTRUCTURE DEVELOPMENT
CORPORATION PVT LTD & ANR       ..... Respondents
Advocates who appeared in this case:
For the Appellant         : Mr S.D. Singh with Mr Rahul Kr. Singh & Mr
                            Jitender Singh.
For the Respondents       : Mr Shivam Singh with Mr Vikram Singh
                            Chauhan.

CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE ASHUTOSH KUMAR

                               JUDGMENT

ASHUTOSH KUMAR, J

CM 47779/2016 (Exemption) Allowed, subject to all just exceptions.

FAO(OS) 382/2016

1. This appeal is directed against the order dated 06.12.2016 passed

by a learned single Judge of this Court in the appellant‟s petition under

Section 9 of the Arbitration and Conciliation Act, 1996 being OMP (I)

No. 290/2015 whereby it was held by the learned single Judge that such

petition was not maintainable by the appellant in its individual capacity.

2. The appellant had sought setting aside of orders dated 26.10.2013

and 27.05.2015 debarring the appellant from participating in future

tenders by the respondent no.1 and blacklisting the appellant for a period

of 5 years respectively.

3. The respondent no.1 had invited bids for a project for design,

construction, installation, commissioning, management, operation and

maintenance of Intake, RWPH, 220 MLD water treatment plant and water

distribution network in Patna.

4. The appellant (Geo Miller) and another company, Gammon India,

intending to bid jointly, formed a consortium by way of a „Joint Bidding

Agreement‟ dated 12.01.2012. Under this agreement the parties intended

to constitute a proposed SPV i.e. Patna Water Supply Distribution

Networks Pvt. Ltd. for the purpose of conducting the works under the

agreement. The lead member of the consortium was Gammon India

having an equity participation of 74% and Geo Miller held 26% equity.

5. The bid of the consortium/JV was accepted vide Letter of

Acceptance dated 27.02.2014 at a bid price of Rs. 5,48,83,14,670/-. A

tripartite agreement (TPA) was entered between the JV/consortium,

Respondent no.1 (BUIDCO) and Patna Nagar Nigam in terms of which

bank guarantees were furnished by the appellant and Gammon India up to

the value of 10% of the contract value.

6. A supplementary agreement (SA) was also entered into between

aforesaid three parties, containing the dispute resolution clause, the

arbitration clause and a clause regarding applicability of law and

jurisdiction. In terms of Clause 20.4 of the agreement, it was agreed that

arbitration would be held in accordance with the rules of arbitration of the

International Centre for Alternative Dispute Resolution, New Delhi. The

venue of arbitration was to be Patna. Clause 24.1 provided for "governing

law and jurisdiction." viz. that the Courts at Delhi would have jurisdiction

over matters arising out of or relating to the contract.

7. Because of the disputes between the respondents and the

JV/consortium as also because of delay in execution of contract, the

respondents, by order dated 26.10.2013 debarred the appellant and

Gammon India from participating in future tenders to be floated by

BUIDCO. On 27.05.2015, the appellant as well as Gammon India were

blacklisted for 5 years.

8. The learned single Judge, by noticing the Clause 20.4 of the

agreement dealing with arbitration, held that arbitration clause could be

invoked only in case of dispute between the parties. The "party", the

learned single Judge further observed, was defined under section 2(1)(h)

of the Arbitration and Conciliation Act, 1996 which means party to an

arbitration agreement. Since the "party" to the arbitration agreement in

the present case was the consortium and not Geo Miller in its individual

capacity, it was held that such invocation of the arbitration clause by only

the appellant was not maintainable.

9. For the sake of completeness, Clause 20.4 of the agreement is

being reproduced below:

"20.4 Arbitration

1. Any Dispute which is not resolved amicably by conciliation of the Expert Committee, as provided in Clause 20.3 shall be finally decided by reference to arbitration by a Board of Arbitrators appointed in accordance with the Rules of Arbitration of the International Centre for Alternative Dispute Resolution. New Delhi (the "Rules") or such other rules as may be mutually agreed by the Parties. And shall be subject to the provisions of the arbitration Act. The venue of such arbitration shall be Patna Bihar (India) and the language of arbitration proceedings shall be English.

2. There shall be a board of three arbitration of whom each Party shall select one and the third arbitrator shall be appointed by the two arbitrators so selected and in the

even of disagreement between the two arbitrators, the appointment shall be made inaccordance with the Rules.

3. The arbitrators shall make a reasoned award (the "Award").Any Award made in any arbitration held pursuant to this Article 20.4 shall be final and binding on the Parties as from the date it is made and the Contractor and the Employer, agree and undertake to carry out such Award without delay.

4. The Contractor and the Employer agree that an Award may be enforced against the Contractor and/or the Employer as the case may and their respective assets wherever situated.

5. This Contract and the rights and obligations of the Parties shall remain in full force and effect pending the Award in any arbitration proceedings hereunder."

10. The agreement dated 12.01.2012 between the members of the

consortium clearly indicates that Gammon India shall be the lead member

of the consortium and shall be authorised to receive instructions and incur

liabilities for the project. The lead member i.e. Gammon India, according

to the agreement, had equity participation and total shareholding of 74%

whereas the appellant being the other consortium member had a

shareholding of 26%. Only the consortium, according to the agreement,

could invoke the arbitration agreement.

11. The contention of the appellant that the agreement had been signed

not only by the lead member but also by the appellant who could invoke

the arbitration clause in its own capacity was rightly rejected by the

learned single Judge as the wordings of the agreement unambiguously

indicate that the consortium would be represented through the lead

member of the consortium.

12. Mr S. D. Singh, the learned counsel for the appellant submitted that

the appellant could not have been blacklisted for the non-performance of

the contractual obligations of the JV/Consortium unless the same was

determined by a competent court and that holding of the appellant as not

a "party" to the agreement in terms of section 2(1)(h) of the Arbitration

Act was unnecessary and unreasonable. In fact, it was argued that the

blacklisting of the appellant individually for alleged non-performance of

the consortium could not be justified and therefore, by a reverse logic, the

appellant ought not to have been precluded from invoking the arbitration

clause individually. It was further contended that the blacklisting of the

appellant under Rule 8 of Bihar Contractors Registration Rules was

illegal as the appellant was not registered under the said rules, which in

fact is a precondition for attracting the provision of the rules. The

blacklisting and debarring, it was asserted, was an individual and separate

action on the appellant and the appellant being a member of the

consortium could invoke the arbitration clause individually and was not

dependant on the action of the consortium.

13. We are afraid we cannot accept the submission of the appellant as

the intention reflected in the agreement clearly belies the contention of

the appellant that the arbitration clause could be invoked by any member

of the consortium/JV independently or individually. The learned single

Judge was absolutely justified in holding that the remedy of the appellant

does not lie under the Tripartite Agreement between the respondent,

consortium and Patna Nagar Nigam.

14. In Automation Technologies (I) Pvt. Ltd. v. Unitech Ltd.:, 2009

(1) RAJ 444 (Del), the court had permitted the invocation of the

arbitration clause in the Memorandum of Understanding at the instance of

one of the members of the agreement because of the special wordings of

the arbitration clause which permitted invocation in case of any dispute or

difference arising out of or in connection with the agreement or with the

interpretation thereof. In the arbitration clause of that agreement, it was

not covenanted that only a party to the agreement could invoke the

arbitration clause. A broad meaning was, in that context given to the word

"party" as defined under section 2(1)(h) of the Arbitration and

Conciliation Act, 1996.

15. In the present case, the arbitration clause (Clause 20.4), clearly

refers to a dispute between the "parties". It was the consortium which

was one of the 'parties' and not the appellant.

16. Thus we do not find any reason to differ with the view taken by the

learned single Judge.

17. The appeal is dismissed but without any order as to costs.

CM 47778/2016

1. In view of the appeal having been dismissed, the application has

become infructuous.

2. The application is disposed of accordingly.

ASHUTOSH KUMAR, J

BADAR DURREZ AHMED, J FEBRUARY 20, 2017/ab