Delhi High Court
M/S United Telecoms Ltd. vs M/S. Bharat Broadband Network Ltd on 25 April, 2019
$~24
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 25.4.2019
+ O.M.P.(I) (COMM.) 125/2019
M/S UNITED TELECOMS LTD. ..... Petitioner
Through: Mr. Pawan Upadhyay with Mr.
Rajesh Chhetri, Mr. Ratik Sharma,
Ms. Meenakshi Rawat and Mr.
Rajeev Chhetri, Advs.
versus
M/S. BHARAT BROADBAND NETWORK LTD...... Respondent
Through: Mr. Chandan Kumar, Adv.
CORAM:
HON'BLE MR. JUSTICE RAJIV SHAKDHER
RAJIV SHAKDHER, J. (ORAL)
I.A. 5920/2019
1. Allowed, subject to just exceptions.
O.M.P.(I) (COMM.) 125/2019
2. This is a petition filed under Section 9 of the Arbitration and
Conciliation Act, 1996 (hereafter referred to as "1996 Act") wherein certain
interim reliefs are sought.
3. Before I proceed further, the background in which the petition has
been filed requires to be noticed.
3.1 Upon disputes erupting between the parties, the respondent i.e. M/s
Bharat Broadband Network Ltd (in short "BBNL") appointed an Arbitrator.
While the arbitration proceedings were in progress, BBNL, on its own,
proceeded to challenge the appointment of the Arbitrator, since it was not in
consonance with the mandate of the law declared by the Supreme Court in
O.M.P.(I) (COMM.) 125/2019 Pg. 1 of 6
TRF Ltd. vs. Energo Engineering Projects Ltd., (2017) 8 SCC 377.
3.2 This aspect was carried by BBNL right uptil the Supreme Court. The
Supreme Court, vide judgment dated 16.4.2019, sustained the appeal filed
by BBNL herein. Via the judgment dated 16.4.2019, which is rendered in
Civil Appeal No.3972/2019 with 3973/2019, the Supreme Court passed the
following operative directions:
"22. We thus allow the appeals and set aside the impugned
judgment. The mandate of Shri Khan having terminated, as he
has become de jure unable to perform his function as an
arbitrator, the High Court may appoint a substitute arbitrator
with the consent of both the parties.
23. Vide order dated 25.01.2018, we had issued notice in the
Special Leave Petition as well as notice on the interim relief
prayed for by the appellant. Since there was no order of stay,
the arbitral proceedings continued even after the date of the
impugned judgment, i.e., 22.11.2017, and culminated in two
awards dated 11.07.2018 and 12.07.2018. We have been
informed that the aforesaid awards have been challenged by the
appellant by applications under Section 34 of the Act, in which
certain interim orders have been passed by the Single Judge of
the High Court of Delhi. These awards, being subject to the
result of this petition, are set aside. Consequently, the
appellant's Section 34 proceedings have been rendered
infructuous. It will be open to the appellant to approach the
High Court of Delhi to reclaim the deposit amounts that have
been made in pursuance of the interim orders passed in the
Section 34 petition filed in the High Court of Delhi."
3.3 It may be relevant to note that while the appeal was pending in the
Supreme Court, two awards were passed dated 11.7.2018 and 12.7.2018.
3.4 These awards were assailed by BBNL by preferring the petitions
under Section 34 of the 1996 Act. These petitions are numbered as
OMP(COMM.) No.411/2018 and 418/2018.
O.M.P.(I) (COMM.) 125/2019 Pg. 2 of 6
3.5 It may be relevant to note that petitions bearing No. OMP(COMM.)
No.411/2018 and OMP(COMM.) No.418/2018 have been disposed of today
formally by me in view of the aforementioned judgment passed by the
Supreme Court.
3.6 I may also note that prior to the commencement of the arbitration
proceedings, a Section 9 petition [i.e. OMP (I) (Comm.) 503/2016] was filed
by the petitioner herein in which an interim order dated 28.02.2017 was
passed. The operative directions passed in the order read as follows:
"8. In the aforesaid circumstances, the present petition is allowed and
the respondents are restrained from invoking the bank guarantee No.
PBG No.2014 BG 255 dated 28.10.2014 & PBG No. 172 BG
01143100001 dated 05.11.2014. However, this is subject to the
petitioner keeping the bank guarantees alive till the conclusion of the
arbitral proceedings. Needless to mention that since the bank
guarantees are being kept alive at the instance of the respondent, the
petitioner would be at liberty to make an appropriate claim for costs
and charges incurred for keeping the bank guarantees alive, before the
arbitral tribunal. The respondent is also at liberty to apply to the
arbitral tribunal for such orders and for such relief as may be advised.
9. It is clarified that the arbitral tribunal shall consider any such
application uninfluenced by the observations made by this court in the
present order."
4. Given this backdrop, Mr. Upadhayay, who, appears for the petitioner,
says that on 8.2.2019, this Court passed an order in OMP(COMM.)
No.418/2018 permitting substitution of bank guarantee bearing PBG
No.2014BG255 dated 28.10.2014. I am informed that this bank guarantee
has been substituted with PBG No.2018BG238, dated 16.2.2019, in the sum
of Rs.5 crores, drawn on Canara Bank.
4.1 Insofar as the other bank guarantee is concerned, which is referred to
in the order dated 28.2.2017, I am told it is valid till 04.05.2019. As would
O.M.P.(I) (COMM.) 125/2019 Pg. 3 of 6
be evident upon reading the extract of the order dated 28.02.2017, this bank
guarantee is numbered as PBG 172BG01143100001, dated 5.11.2014 and is
good for a sum of Rs.24.22 crores.
5. Given the foregoing circumstances, which includes the observations
made in paragraph 22 of the Supreme Court judgment dated 16.4.2019,
which allows for substitution of the Arbitrator, the petitioner seeks the
following interim prayers:
"(a) restraining the Respondent from invoking and/or
encashing the Bank Guarantees bearing (i) PBG No.
2018BG238 dated 16.2.19 for an amount of Rs.5 Crores issued
by Canara Bank, Prime Corporate Branch, Shankaranarayana
Building, 25, MG Road, Bangalore-560 001 and (ii) PBG
No.172 BG 01143100001 dated 05.11.2014 for an amount of
Rs. 24.22 Crores issued by Dhanalaxmi Bank, Kasturba Road,
Bangalore-560 001 till further Orders from this Hon'ble Court;
(b) restrain Respondent No.2 & 3 from remitting the proceeds
of the Bank Guarantee No. 2018BG238 dated 16.2.19 and PBG
No.172 BG 01143100001 dated 05.11.2014 to the account of
Respondent during the pendency of the instant proceedings
and/or adjudication of the disputes between the Petitioner and
Respondent by the Arbitral Tribunal whichever is later;"
6. Counsel for the petitioner says that the petitioner will, shortly, be
moving an application for substitution of the Arbitrator.
7. Issue notice to the respondent
8. Mr. Chandan Kumar accepts notice for BBNL.
9. Mr. Chanan Kumar says that a formal reply is not required to be filed
though BBNL has an objection in the matter which concerns jurisdiction of
the Arbitrator. Learned counsel says that since it is the petitioner's own
stand that there was no concluded contract obtaining between the parties, the
O.M.P.(I) (COMM.) 125/2019 Pg. 4 of 6
Arbitrator cannot adjudicate upon the matter. Mr. Kumar, however, does
not concede that, since it may, perhaps, be a mixed question of fact and law,
BBNL could take recourse to Section 16 petition of the 1996 Act by filing
an appropriate application in that behalf, once a substitute Arbitrator is
appointed.
10. Accordingly, in consonance with order dated 28.02.2017, the
invocation and/or encashment of bank guarantees referred to in prayer
clause (a) and (b) of the captioned petition is stayed during the pendency of
the arbitration proceedings subject to the bank guarantees being kept alive
till further orders.
11. At this stage, counsel for parties submit that since the Supreme Court
has permitted substitution of the earlier Arbitrator, this Court could appoint
a common independent Arbitrator to hasten adjudication on merits in respect
of contracts dated 3.9.2014 and 15.3.2016
12. It is ordered accordingly. Hon'ble Mr. Justice M. Jagannadha Rao,
former Judge, Supreme Court of India (Cell No.040-23224533) is appointed
as an Arbitrator in the matter.
12.1 Learned Arbitrator will be paid his fee in terms of the Fourth
Schedule appended to the 1996 Act.
12.2 The burden qua boarding, lodging and travel expenses of the learned
Arbitrator will be borne in equal measure by both the parties.
12.3 Needless to say, before entering upon the reference, the learned
Arbitrator will file a declaration under Section 12 read with attendant
provisions of the 1996 Act.
12.4 The learned Arbitrator will have liberty to affirm or vacate or even
modify interim directions issued vis-a-vis the subject bank guarantees as
O.M.P.(I) (COMM.) 125/2019 Pg. 5 of 6
adverted to in paragraph 10 above.
13. The Registry, in these circumstances, will return the arbitration record
to the counsel for the petitioner.
14. Since this is a case of substitution of the Arbitrator, learned counsel
for the parties agree that the substitute Arbitrator can continue the
proceedings from the stage it is presently positioned.
15. However, it is made clear that if the parties seek to amend their
pleadings, the learned Arbitrator will take a decision in the matter upon an
application being moved in that behalf.
16. For the convenience of the learned Arbitrator, the mobile number of
the counsel for parties are setforth hereafter:
(a) Mr. Pawan Upadhayay (Cell No.9811136356) and Mr. Rajesh
Chhetri (Cell No.9891675255) - counsel for the petitioner.
(b) Mr. Chandan Kumar (Cell No.9810312011) - counsel for the
respondent.
17. The Registry will dispatch a copy of the order to the learned
Arbitrator.
18. The captioned petition is disposed of in the aforementioned terms.
19. Dasti.
RAJIV SHAKDHER, J
APRIL 25, 2019/pmc
O.M.P.(I) (COMM.) 125/2019 Pg. 6 of 6
