Delhi High Court
Parsvnath Developers Limited & ... vs Rail Land Development Authority on 19 May, 2020
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on : 19.02.2020
Pronounced on: 19.05.2020
+ ARB P. 710/2019
PARSVNATH DEVELOPERS LIMITED
& ANR. ......Petitioners
Through: Mr. Vijay Nair, Mr. Shubham
Paliwal & Ms. Sakshi Kapoor,
Advocates
versus
RAIL LAND DEVELOPMENT
AUTHORITY .....Respondent
Through: Mr. Amit Kumar, Mr. Shaurya
Sahay & Mr. Chetan Joshi,
Advocates
CORAM:
HON'BLE MS. JUSTICE JYOTI SINGH
JUDGEMENT
1. Present petition has been filed under Section 11 (6) of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as the
„Act‟) for appointment of a Sole Arbitrator to adjudicate the disputes
between the parties.
2. The brief facts as averred in the petition are that Respondent
invited tenders from private parties for development (including re-
development of an existing Railway Colony) of a plot measuring
approximately 15.27 hectares situated at Sarai Rohilla, Kishan Ganj, New
Delhi (hereinafter referred to as „Project Land‟) on 18.01.2010 through IL
& FS Infrastructure Development Corporation Ltd.
3. Respondent represented that Project Land belonged to Indian
Railways and the tender was issued to put the land to effective
commercial utilization. Project was to be executed through a Special
Purpose Vehicle (hereinafter referred to as „SPV‟) i.e. Petitioner no.2.
Project included re-development of existing Railway Colony over 4.37
hectares and development of balance 10.9 hectares.
4. Tender process was in two phases wherein those bidders who
qualified the requirements under Request for Qualification document
were allowed to place their financial bids. Petitioner no.1 was declared
successful with its bid of Rs.1651.51 Crores on 12.11.2010 and
Respondent issued a Letter of Demand dated 12.11.2010 demanding
payment of Rs.33,03,02,000/- as Commitment Security to commence and
complete the Project. Petitioner no.1 paid the said amount from the
account of SPV vide letter dated 25.11.2010.
5. Respondent thereafter issued Letter of Acceptance dated
26.11.2010 awarding the work to Petitioner no.1. Respondent was aware
that SPV was to implement the Project and finally by letter dated
07.02.2011, approved the work to be executed by the SPV.
6. On 29.03.2011 and 31.03.2011, Petitioner no.1 paid to the
Respondent, amounts towards first instalment in terms of the RFP
(Request For Proposal). As requested by the Respondent, Petitioner no.1
paid interest at the rate of 18% for delayed payment of first instalment,
under protest. Petitioner no.1 requested the Respondent vide letter dated
12.02.2011 to waive and alter the condition precedent in relation to
Performance Bank Guarantee (hereinafter referred to as „PBG‟) to the
extent that it shall be allowed to submit the PBG before execution of first
Lease Deed or from eighteen months of the effective date, whichever is
earlier. However, as a measure of comfort, Petitioner no.1 authorised the
Respondent to forfeit an amount equal to the amount of the proposed
PBG from the amount of first instalment in addition to the element of
15% of the paid lease premium, which was forfeitable by Respondent.
This request was accepted by the Respondent and it allowed Petitioner
no.1 to submit PBG within six months after signing the Development
Agreement (hereinafter referred to as the „DA‟).
7. However, within days of granting the approval, Respondent
withdrew its consent vide letter dated 16.03.2011 pursuant to instruction
from the Railway Board to ensure that open and transparent tendering
process is followed for selecting bidders for commercial development of
land.
8. Contemporaneously, Government informed the Railway Board that
a Policy was under way with respect to alienation of land held by the
Government and a specific approval of the Cabinet was required in case
of long term Lease or sale. In this background, Respondent was perhaps
incapacitated from entering into the DA. Instead of notifying the
incapacity, Respondent vide letter dated 22.03.2011 insisted on
submission of PBG for execution of DA and directed Petitioner no.1 to
pay the first instalment within seven days with interest. Finally, on
13.07.2011, Respondent unilaterally withdrew its consent accorded to the
SPV disbalancing the entire plan of Petitioner no.1.
9. After delay of several months, approval for the SPV was granted
on 02.08.2012 but the DA was not executed as the Respondent did not
have Schedule „L‟ of the land, ready. DA was finally executed on
31.05.2013 and Article 31 of the DA provided for a Dispute Resolution
Mechanism / Arbitration.
10. Disputes having arisen between the parties, the Arbitral Tribunal
was constituted (hereinafter referred to as „First AT‟). The reliefs claimed
before the First AT were as follows :-
(i) Hold that the Respondent was estopped from issuing the
letter dated 13.07.2011 or withdrawing the approval of
PPDPL as the SPV granted vide letter dated 07.02.2011
and that the letter dated 13.07.2011 was issued by the
Respondent without any basis whatsoever; and
(ii) Hold that the delay of 18 months, between 07.02.2011
and 03.08.2012, i.e., between the approval of PPDPL as
the SPV and later PRLPPL as the SPV, is solely
attributable to the Respondent; and
(iii) Hold that the delay of approximately 1 0 months from
03.08.2012 to 31.05.2013 in signing the DA after approval
of the SPV was also attributable to the Respondent as the
Claimants could not have signed the DA without the
Respondent acknowledging that the disputes raised by the
Claimants shall be considered by the Respondent and it
was only on 03.04.2013 that the aforementioned assurance
was provided by the Respondent and prior to the
aforementioned date, the Respondent had flatly refused to
even consider the requests of the Claimants.
(iv) Consequently, hold that the aforesaid period of 28
months, between 07.02.2011 and 31.05.2013 ought to have
been considered as ZERO PERIOD, for the purposes of
the time-lines for payment of installments of Lease
Premium and the due dates of payments of each of the
installments of Lease Premium were liable to be postponed
by 28 months; and
(v) Consequently, hold that the payments received by the
Respondent, both towards instalments of Lease Premium
as well as interest claimed thereon as detailed in Annexure
C-89 above have been received by the Respondent much
prior to and much in excess of the entitlement of the
Respondent.
(vi) Direct the Respondent to pay to the Claimants an
amount of Rs. 134,10,82,192/- (Rupees One Hundred
Thirty Four Crores, Ten Lakhs Eighty Two Thousand One
Hundred Ninety Two only) towards interest on the amount
received by the Respondent towards the 1st instalment of
Lease Premium prior to the entitlement of the Respondent.
(vii) Withdrawn.
(viii) Direct the Respondent to pay to the Claimants an
amount of Rs. 118,09,42,767/- (Rupees One Hundred
Eighteen Crores, Nine Lakhs Forty Two Thousand Seven
Hundred Sixty Seven only) towards interest on the amount
received by the Respondent towards the 2nd instalment of
Lease Premium prior to the entitlement of the Respondent.
(ix) Withdrawn.
(x) Direct the Respondent to pay to the Claimants an
amount of Rs. 156,35,68,224/- (Rupees One Hundred Fifty
Six Crores, Thirty Five Lakhs Sixty Eight Thousand Two
Hundred Twenty Four only) towards interest on the
amount received by the Respondent towards the 3rd
instalment of Lease Premium prior to the entitlement of the
Respondent, calculated from 22.08.2013 till 15.06.2015.
(xi) Award the costs of the arbitration proceedings to the
Claimants.
11. By a majority Award passed on 01.06.2018, claims of Petitioner
No. 1 were rejected. Cumulative payments received by the Respondent
till the termination under the DA were Rs.11,66,65,85,913/-. Apart from
the above, Respondent also received an amount of Rs.4,25,10,536/-
towards damages, for non-achievement of financial close. In the scheme
of DA, Petitioners were to achieve financial close under Article 4, failing
which DA was to be automatically terminated, until extended. On
15.06.2015, last extension expired and Lease stood terminated.
Petitioners became entitled to refund of Rs.10,34,53,77,913/-. In order to
retain the entire money paid by the Petitioners, Respondent terminated
the DA on 06.08.2015 with effect from 23.02.2015 and Petitioners
refuted the retrospective termination of DA and retention of money by the
Respondent.
12. This gave rise to another Arbitration (hereinafter referred to as
„Second Arbitration‟) in which Petitioner sought to recover part of the
amount due, reserving its right to claim the balance money as damages
under Clause 7.2.2 of the DA. Therefore, the issue in the Second
Arbitration was whether the Termination was deemed or on account of
alleged breach by the Petitioners under Article 29.8.2. The Second AT
allowed the claim of the Petitioners and found that the action of the
Respondent to insist on forfeiture of the entire amount was
unsubstantiated and impermissible. The Second AT declared the PBG to
be non-est and directed payment to the Petitioners with interest.
13. It is stated in the petition that this Award was challenged by the
Respondent before this Court but the Objection Petition as well as the
Appeal before the Division Bench was dismissed. Respondent
challenged the order of the Division Bench in the Supreme Court but did
not succeed. Execution Petition filed by the Petitioners was disposed of
on 17.07.2019 recording the stand of the Respondent that it had made
payment of Rs.11,99,39,52,552/-. However, PBG was never returned by
the Respondent until 16.08.2019.
14. At the stage of dismissal of the Appeal under Section 37 of the Act,
Petitioners vide letter dated 30.05.2018 called upon the Respondent to
invoke Dispute Resolution Process in respect of Claims pertaining to
retention of a total of Rs.132,12,08,000/-. Respondent refuted the claims
and refused to appoint the Conciliation Committee in terms of Article 31
of the DA, vide its letter dated 25.06.2018, on the ground that the
Petitioners had admitted in the second Arbitration that the Respondent
was entitled to the said amount under Article 7.2.2 and also that the claim
was barred by Limitation and under Order II Rule 2 CPC.
15. Petitioners thereafter called upon the Respondent to proceed to
Arbitration and appointed their Nominee Arbitrator. Respondent refused
to appoint its Nominee Arbitrator. Petitioners filed an Arbitration Petition
being Arb. Pet. No.724/2018 and this Court appointed Respondent‟s
Nominee Arbitrator.
16. Before the Third Arbitral Tribunal, Petitioners have raised claims
in respect of the Retention money as well as losses due to various mis-
representations made by the Respondent. It is averred in the petition that
the Third Arbitration is underway and was at the stage of evidence as on
15.12.2019.
17. Petitioners state that in the Second Arbitration, Arbitral Tribunal
declared the PBG dated 30.05.2013 non-est and thus, illegal withholding
of the PBG by the Respondent was affirmed. Respondent became liable
for damages on account of delay in returning the PBG and also to
compensate the Petitioners for costs, expenses and damages incurred by
the Petitioners due to illegal retention. For issuance of the PBG, Punjab
National Bank had required a 100% margin to secure the amount
guaranteed, which the Petitioner had provided by tendering an FDR and a
charge of the Bank on its immovable assets for the balance amount. For
sourcing the funds to provide the FDR, Petitioner No. 1 had utilized funds
received from IL & FS Financial Services at an interest rate of 16% p.a.
Thus, the total claim on account of PBG charges due to the Petitioners
was Rs.18,85,19,827/-.
18. Petitioners invoked Arbitration vide Notice dated 17.09.2019
demanding the said amount along with losses incurred between
02.11.2015 to 20.08.2019 due to non-availability of immovable assets
charged to the Bank. Respondent again refused to appoint an Arbitrator
on the ground of absence of subsisting Arbitration Agreement, bar of
limitation and estoppel.
19. Petitioner has thus filed the present petition on the strength of the
Arbitration Clause 31.4 which reads as under :
"31.4 Arbitration
31.4.1 Any Dispute, which is not resolved amicably by
conciliation, as provided in Clause 31.3, shall be finally
decided by reference to arbitration by an Arbitral Tribunal
appointed in accordance with Clause 31.4.2 (herein the
"Arbitral Tribunal"). Such arbitration shall be held in
accordance with the Rules of Arbitration of the
International Centre for Alternative Dispute Resolution,
New Delhi (herein the "Rules"), or such other rules as may
be mutually agreed by the Parties, and shall be subject to
the provisions of the Arbitration and Conciliation Act,
1996. The governing law of the arbitration shall be the
laws of India. The venue of such arbitration shall be Delhi,
and the language of arbitration proceedings shall be
English.
31.4.2. A notice of the intent (herein the "Notice of Intent")
to refer the dispute to arbitration may be given by one
Party [herein the "Claimant(s)"] to the other Party [herein
the "Respondent(s)"]. There shall be an Arbitral Tribunal
consisting of three (3) arbitrators. The Claimant(s) and
Respondent(s) shall be entitled to appoint one arbitrator
each and the third arbitrator shall be appointed by the two
arbitrators so appointed, and in the event of disagreement
between the two arbitrators, the appointment shall be
made in accordance with the Rules.
31.4.3. The Arbitral Tribunal shall make a reasoned award
(herein the "Award"). Any Award made in any arbitration
held pursuant to this Article XXXI shall be final and
binding on the Claimant(s) and Respondent(s) as from the
date it is made, and the Developer and RLDA agree and
undertake to obey and implement such Award without
delay."
20. Reply was filed by the Respondent raising certain preliminary
objections. The first objection against the maintainability of the petition
is that the claims now sought to be referred are directly overlapping with
the claims referred in the earlier Arbitrations and neither is there any
subsisting Arbitral Clause nor any dispute for adjudication. Disputes
raised in the instant petition by the Petitioners were subject matter of
Second Arbitration, in which an Arbitral Award has already been passed
on 25.11.2017. Petitioners have already invoked the Arbitral Clause on
three occasions with respect to the disputes arising out of a single DA
between the parties.
21. Learned counsel for the Respondent contends that present petition
is not maintainable. The issue of PBG which is being raised in the
present petition was a subject matter of the Award dated 25.11.2017,
wherein the Petitioner had specifically sought the relief of restraining the
Respondent from encashing the PBG. Therefore, the entitlement of the
Respondent to encash the PBG was directly an issue in second
Arbitration and the dispute is no longer alive.
22. It is argued that the Petitioners in the opening submissions filed in
second Arbitration specifically in para 8.3 sought a direction for release
of the PBG. It is further contended that in the Award dated 25.11.2017,
in paras 30 and 31, the Tribunal held that RLDA was entitled to the
amount equivalent to PBG of Rs.82,57,55,000/- and in para 31 declared
the PBG non-est. Core issues thus concerning the retention and
invocation of PBG were subject matter of Second Arbitration. The
Award was stamped only in April 2019 and became enforceable on the
said date. Decree in terms of the Award including the relief of return of
PBG stood satisfied when the Execution Petition was disposed of
17.07.2019. Thereafter, no claim can survive for any fresh reference by
the Petitioners.
23. It is further submitted that the claim relating to expenses for
maintaining the PBG was specifically raised in Third Arbitration where
Petitioners have sought refund of the PBG amount along with interest at
the rate of 18% p.a. with effect from 15.06.2015. Therefore, all charges
allegedly incurred on maintenance of PBG are included in the claim
before the Third Arbitral Tribunal. Section 7 of the Act does not permit
the Petitioner to raise the dispute again in the present petition.
24. Learned counsel thus submits that there is no Arbitration
Agreement in existence for adjudication of the disputes sought to be
raised, in terms of Section 7 of the Act. Reliance is placed on the
judgment in the case of Garware Wall Ropes Ltd. vs. Coastal Marine
Constructions & Engineering Ltd. (2019 SCCOnLine SC 515), more
particularly para 29. It is further argued that the dispute is for a period,
after the termination of the Agreement, and is neither relatable nor arising
out of or in relation to the Agreement and is not covered by the
Arbitration Clause.
25. Counsel for the Respondent places reliance on the judgment in the
case of M/s. Brightstar Telecommunications India Ltd. vs. M/s IWorld
Digital Solutions Pvt. Ltd. [2018 SCC OnLine Del 13071], NCC Ltd. vs.
Indian Oil Corporation [Arb P. 115 of 2018] and Western Constructions
vs. Eden Buildcon Pvt. Ltd. [Arb. P. 447 of 2019] to argue that scope of
inquiry under Section 11 of the Act involves (a) identification of binding
Arbitration Agreement between the parties and (b) whether the dispute is
at all relatable to such Agreement. In the present case, the claims raised
do not fall within the definition of "dispute" in Article 1.1.29 of the DA
and also pertain to periods after the termination of the DA and cannot be
referred.
26. Lastly, counsel for the Respondent contends that the conduct of the
Petitioners also merits dismissal of the present petition. Till date, there
have been three references out of the same Agreement and even the
Tribunal has noticed that bifurcation of claims is resulting in confusion.
Petitioner in Third Arbitration claimed Rs.132 Crores at the stage of
filing Section 11 Petition, however, after the constitution of the Tribunal,
the claim has gone up to Rs.4000/- Crores. Such a conduct is akin to
playing fraud on the Court and the Tribunal.
27. Learned counsel for the Petitioners in rejoinder argues that there is
no overlap of the reliefs sought in the present petition with any claims in
the earlier Arbitrations. In Second Arbitration only restraint on
encashment of PBG was sought as Respondent had retained amounts in
excess of its entitlement. In Execution Petition, the relief sought was for
return of the PBG which is distinct from the claim herein and in any
event, the Executing Court had not passed any directions. In Third
Arbitration, Mr. Pankaj Aggarwal, Claimant Witness 2, had categorically
stated that only Bank charges till 02.11.2015 had been claimed. Issues of
estoppel, waiver, res judicata and bar under Order II Rule 2 CPC cannot
be raised by the Respondent, as the same objection was overruled by a
Co-ordinate Bench in Arb. Petition no.724/2018 titled Parsvnath
Developers Limited & Anr. v. Rail Land Development Authority
between the same parties and with respect to the same DA. Court held
that these issues are determinable by the Arbitral Tribunal and not by the
Court under Section 11 of the Act.
28. Learned counsel further argues that a plea of overlap is essentially
a plea of jurisdiction of the Court and accord and satisfaction and cannot
be determined under Section 11 of the Act, after the insertion of Sub-
Section (6A) in Section 11, by Amendment Act 3 of 2016, as has been
clearly held by the Supreme Court in M/s Mayavati Trading Pvt. Ltd. v.
Pradyuat Deb Burman [2019 8 SCC 714]. The pleas raised by the
Respondent to oppose the petition are clearly beyond the scope of
examination under Section 11 of the Act. The Court can only examine
the existence of the Arbitration Agreement and all other preliminary
issues have to be left to be decided by the Tribunal under Section 16 of
the Act.
29. Learned counsel sums up his arguments by submitting that vide
Invocation Notice dated 17.09.2019, the claims sought to be referred by
the Petitioners are costs, expenses and damages incurred by the Petitioner
due to (a) illegal retention of PBG, post 02.11.2015 and (b) inability to
have the charge of PNB release against immovable assets of the
Petitioner.
30. I have heard the learned counsels for the parties and examined their
rival contentions.
31. The narrow controversy that has arisen in the present case on
account of the preliminary objections raised by the Respondent is whether
the disputes / claims sought to be referred to Arbitration in the present
petition are overlapping and are/were the subject matter of Third
Arbitration and the Second Arbitration respectively, where the latter has
culminated into an Arbitral Award. However, the larger issue that arises
before this Court is whether in a petition under Section 11 of the Act, this
Court can even delve into this controversy.
32. The Supreme Court in the case of SBP and Co. v. Patel Engg. Ltd.
[(2005) 8 SCC 618], had carved out three categories with respect to the
preliminary issues that may arise for consideration in an Application
under Section 11 of the Act viz : (i) issues which the Court is bound to
decide (ii) issues that the Court may choose to decide; (iii) issues which
should be left to the Arbitral Tribunal to decide. The Law Commission
examined the matter and made recommendations in the 246 th Report for
insertion of sub-section (6A) in Section 11 of the Act. The Act was
amended by an Amendment Act 3 of 2016 and sub-Section (6A) was
inserted in Section 11. Section 11 (6A) reads as under :-
"(6A) The Supreme Court or, as the case may be, the High
Court, while considering any application under sub-
section (4) or sub-section (5) or sub-section (6), shall,
notwithstanding any judgment, decree or order of any
Court, confine to the examination of the existence of an
arbitration agreement."
33. Post the amendment, scope of examination under Section 11 of the
Act by a Court again came up before the Supreme Court in the case of
Duro Felguera, S.A. v. Gangavaram Port Ltd., [(2017) 9 SCC 729].
The Supreme Court in as many words held that while examining a
petition under Section 11 of the Act, the Court would confine itself only
to examining the existence of an Arbitration Agreement between the
parties and no more. The Court also laid down a single test for such
examination and observed that the only requirement was to see if the
contract between the parties contained an Arbitration Clause. Relevant
part of the judgment is as under :-
"48. ...... From a reading of Section 11(6-A), the intention
of the legislature is crystal clear i.e. the court should and
need only look into one aspect--the existence of an
arbitration agreement. What are the factors for deciding
as to whether there is an arbitration agreement is the next
question. The resolution to that is simple--it needs to be
seen if the agreement contains a clause which provides for
arbitration pertaining to the disputes which have arisen
between the parties to the agreement.
xxx xxx xxx
59. The scope of the power under Section 11(6) of the 1996
Act was considerably wide in view of the decisions in SBP
and Co. [SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC
618] and Boghara Polyfab [National Insurance Co.
Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 :
(2009) 1 SCC (Civ) 117] . This position continued till the
amendment brought about in 2015. After the amendment,
all that the courts need to see is whether an arbitration
agreement exists--nothing more, nothing less. The
legislative policy and purpose is essentially to minimise
the Court's intervention at the stage of appointing
the arbitrator and this intention as incorporated in Section
11(6- A) ought to be respected."
34. The Supreme Court again in the case of Mayavati (supra) after
referring to the Pre-Amendment position and the Amendment in Section
11 held as under :
"10. This being the position, it is clear that the law prior
to the 2015 Amendment that has been laid down by this
Court, which would have included going into whether
accord and satisfaction has taken place, has now been
legislatively overruled. This being the position, it is
difficult to agree with the reasoning contained in the
aforesaid judgment [United India Insurance Co.
Ltd. v. Antique Art Exports (P) Ltd., (2019) 5 SCC 362 :
(2019) 2 SCC (Civ) 785] , as Section 11(6-A) is confined
to the examination of the existence of an arbitration
agreement and is to be understood in the narrow sense as
has been laid down in the judgment in Duro Felguera,
SA [Duro Felguera, SA v. Gangavaram Port Ltd., (2017) 9
SCC 729 : (2017) 4 SCC (Civ) 764] -- see paras 48 & 59"
35. Supreme Court recently in the case of Uttarakhand Purv Sainik
Kalyan Nigam Limited v. Northern Coal Field Limited (2019 SCC
OnLine SC 1518), where the High Court had dismissed the application
under Section 11 of the Act on the ground that it was barred by limitation,
after noticing the 2015 Amendment, observed that by virtue of the non-
obstante clause in Section 11(6A), the earlier judgments in Patel
Engineering and National Insurance Co. Ltd. v. Boghara Polyfab (P)
Ltd. [(2009) 1 SCC 267], were legislatively overruled and the scope of
examination is now confined only to the existence of the Arbitration
Agreement at this stage and nothing more. Court placed reliance on the
judgment in case of Duro Felguera (supra). Court also held that the
Arbitral Tribunal is empowered under Section 16 of the Act to rule on its
own jurisdiction, including determining all other jurisdictional issues.
This doctrine according to the Court is intended to minimize judicial
intervention so that the arbitral process is not thwarted at the threshold,
when a preliminary objection is raised by one of the parties. Court held
that limitation being a mixed question of fact and law is a jurisdictional
issue and would be determined by the Arbitral Tribunal. It is not within
the scope of examination under Section 11 by the Court to delve into
issues of jurisdiction such as limitation etc. Relevant paras of the
judgment are as under :
25. By virtue of the non obstante clause incorporated in
Section 11(6-A), previous judgments rendered in Patel
Engg. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618]
and Boghara Polyfab [National Insurance Co.
Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 :
(2009) 1 SCC (Civ) 117], were legislatively overruled. The
scope of examination is now confined only to the existence
of the arbitration agreement at the Section 11 stage, and
nothing more.
26. Reliance is placed on the judgment in Duro Felguera
S.A. v. Gangavaram Port Ltd. [Duro Felguera
S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729 : (2017)
4 SCC (Civ) 764. Refer to TRF Ltd. v. Energo Engg.
Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] ,
wherein this Court held that: (SCC p. 759, para 48)
"48. ... From a reading of Section 11(6-A), the
intention of the legislature is crystal clear i.e. the
court should and need only look into one aspect--
the existence of an arbitration agreement. What
are the factors for deciding as to whether there is
an arbitration agreement is the next question. The
resolution to that is simple -- it needs to be seen if
the agreement contains a clause which provides
for arbitration pertaining to the disputes which
have arisen between the parties to the agreement."
27. In view of the legislative mandate contained in Section
11(6-A), the Court is now required only to examine the
existence of the arbitration agreement. All other
preliminary or threshold issues are left to be decided by
the arbitrator under Section 16, which enshrines the
kompetenz-kompetenz principle.
28. The doctrine of "kompetenz-kompetenz", also referred
to as "compétence-compétence", or "compétence de la
recognized", implies that the Arbitral Tribunal is
empowered and has the competence to rule on its own
jurisdiction, including determining all jurisdictional
issues, and the existence or validity of the arbitration
agreement. This doctrine is intended to minimise judicial
intervention, so that the arbitral process is not thwarted at
the threshold, when a preliminary objection is raised by
one of the parties.
xxx xxx xxx
35. Limitation is a mixed question of fact and law. In ITW
Signode (India) Ltd. v. CCE [ITW Signode (India)
Ltd. v. CCE, (2004) 3 SCC 48] a three-Judge Bench of this
Court held that the question of limitation involves a
question of jurisdiction. The findings on the issue of
limitation would be a jurisdictional issue. Such a
jurisdictional issue is to be determined having regard to
the facts and the law."
36. Reading of Section 11(6A) and the judgments of the Supreme
Court, as mentioned above, leaves no doubt that the law on the scope of
examination by the Court in a petition under Section 11 is no longer res
integra. At this stage, the scope and power is restricted only and only to
examining the existence of the Arbitration Clause and not even its
validity. Therefore, the objection raised by the Respondent requiring this
Court to examine whether the disputes sought to be raised are
overlapping with the claims in the earlier arbitrations between the parties
and / or are barred by principles of Order II Rule 2 CPC cannot be
sustained in law. These are issues which clearly fall in the domain of the
Arbitral Tribunal and would be decided if and when raised by the
Respondent before the Tribunal.
37. At this stage, it is also important to note that in Arbitration Petition
724/2018 between the same parties, the Respondent had raised similar
objections to the disputes being referred to Arbitration such as bar under
Order II Rule 2 CPC, waiver, estoppel etc. The Co-ordinate Bench of this
Court had observed that the Arbitration Agreement had been invoked by
the Petitioners and its existence was not in question. The issues of res
judicata or estoppel or claims being barred under the principles of Order
II Rule 2 CPC touch upon the merits of the claim and can be decided only
by the Tribunal. The Court also held that an Arbitration Agreement can
be invoked any number of times as held by the Supreme Court in
Dolphin Drilling Ltd. vs. Oil and Natural Gas Corporation Ltd. [(20l0)
3 SCC 267]. Relevant part of the judgment dated 31.10.2018 is as
under :-
"10. In my opinion, the existence of the Arbitration
Agreement itself is not in dispute. The dispute is whether
the claim now sought to be raised by the Petitioner would
be barred by the principles of Order II Rule 2 of the CPC
and/or principles of res judicata and/or estoppel. It cannot
be denied that an Arbitration Agreement can be invoked a
number of times and does not cease to exist only with the
invocation for the first time. The Supreme Court in
Dolphin Drilling Ltd. vs. Oil and Natural Gas Corporation
Ltd. (20 l 0) 3 SCC 267, has held as under:
"8. The plea of the Respondent is based on the
words "all disputes" occurring in Para 28.3 of
the agreement. Mr.Aggrawal submitted that
those two words must be understood to mean
"all disputes under the agreement" that might
arise between the parties throughout the period
of its subsistence. However, he had no answer
as to what would happen to such disputes that
might arise in the earlier period of the contract
and get barred by limitation till the time comes
to refer "all disputes" at the conclusion of the
contract. The words "all disputes" in Clause
28.3 of the agreement can only mean "all
disputes" that might be in existence when the
arbitration clause is invoked and one of the
parties to the agreement gives the arbitration
notice to the other. In its present form Clause 2
8 of the agreement cannot be said to be a one-
time measure and it cannot be held that once
the arbitration clause is invoked the remedy of
arbitration is no longer available in regard to
other disputes that might arise in future. "
11. The question whether the claim of the Petitioner would
be barred by the principles of res judicata or estoppel or
by Order II Rule 2 of the CPC are not matters to be
considered by this Court while exercising its jurisdiction
under Section 11 of the Act. (Indian Oil Corporation Ltd.
vs. SPS Engineering Ltd. (2011) 3 SCC 507).
12. The legislature by amending the Act by way of the
Arbitration and Conciliation (Amendment Act) 2015 and
the insertion of Section 11 (6A) of the Act has also
restricted the scrutiny of the Court at the stage of
adjudicating an application under Section 11 of the Act
only to the existence of the Arbitration Agreement."
38. In the present case also the Respondent is raising similar objections
as raised in the earlier litigation on the maintainability of the petition. In
my view, the judgment of the Co-ordinate Bench would squarely apply to
the present case. This Court cannot expand the scope of examination
beyond examining the existence of the Arbitration Agreement and the
other issues raised by the Respondent are in the domain of the Arbitral
Tribunal.
39. It can hardly be disputed by the Respondent that the Agreement
between the parties contains an Arbitration Clause as the parties have
already subjected themselves to three Arbitrations. The argument of the
Respondent that the plea of overlapping is a plea of accord and
satisfaction and, therefore, the petition cannot be allowed, has no merit.
Supreme Court in the case of Mayavati (supra) overruled the judgment in
the case of United India Insurance Co. Ltd. v. Antique Art Exports (p)
Ltd. [2019 5 SCC 362], wherein the Supreme Court had held that once
there was accord and satisfaction, no arbitral dispute subsisted for
reference to Arbitration. This is clear from reading of para 10 of the
judgment which has been extracted in the earlier part of the judgment.
Even the issue of arbitrability or existence of any dispute, between the
parties, is a matter to be adjudicated by the Tribunal.
40. This Court is satisfied that there exists an Arbitration Agreement
between the parties and therefore, the disputes raised by the Petitioners
herein deserve to be referred to Arbitration.
41. The earlier proceedings are being conducted by Mr. Justice
Vikramajit Sen, Former Judge of the Supreme Court, as a Nominee
Arbitrator of the Respondent.
42. I accordingly appoint Mr. Justice Vikramajit Sen, Former Judge of
the Supreme Court, as the Nominee Arbitrator of the Respondent. The
two Arbitrators shall proceed to appoint the Presiding Arbitrator as per
the Arbitral Procedure agreed between the parties.
43. The address of the learned Arbitrator is as under :
Mr. Justice Vikramajit Sen,
Former Judge, Supreme Court of India
Off. D-17, 1st Floor, Kalandi Colony, New Delhi-110065.
Ph.: 8447333366, 26317274.
Email Id: [email protected]
44. The Learned Arbitrators shall give disclosure under Section 12 of
the Act before entering upon reference.
45. Petition is allowed in the above terms with no orders as to costs.
46. All contentions raised by the parties herein are left open to be
decided by the Arbitral Tribunal, if and when raised.
47. Copy of this order be sent to the Learned Arbitrator.
JYOTI SINGH, J.
MAY 19th , 2020
yg /rd
