Delhi High Court
M/S Oriental Structural ... vs M/S Seven Hills Project Private ... on 15 March, 2021
$~28 & 29
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 15.03.2021
+ ARB.P. 644/2020
M/S ORIENTAL STRUCTURAL ENGINEERS PVT LTD
..... Petitioner
Through: Mr. Anil Kumar Airi, Senior
Advocate with Mr. Ravi Kishan
Chandna, Mr. Manit Moorjani and
Mr. Mudit Ruhella, Advocates.
versus
M/S SEVEN HILLS PROJECT PRIVATE LIMITED ..... Respondent
Through: Mr. Krishna Kumar, Mr. Parijat
Kishore and Mr. Abhay Singh,
Advocates.
+ ARB.P. 658/2020
M/S ORIENTAL STRUCTURAL ENGINEERS PVT LTD
..... Petitioner
Through: Mr. Anil Kumar Airi, Senior
Advocate with Mr. Ravi Kishan
Chandna, Mr. Manit Moorjani and
Mr. Mudit Ruhella, Advocates.
versus
M/S SEVEN HILLS PROJECT PRIVATE LIMITED ..... Respondent
Through: Mr. Krishna Kumar, Mr. Parijat
Kishore and Mr. Abhay Singh,
Advocates.
Signature Not Verified
Digitally Signed ARB.P. 644/2020 & ARB.P. 658/2020 Page 1 of 9
By:SAPNA SETHI
Signing Date:26.03.2021
19:31
CORAM:
HON'BLE MR. JUSTICE SANJEEV NARULA
JUDGMENT
SANJEEV NARULA, J. (Oral):
1. The present petitions under Section 11(6) of the Arbitration and
Conciliation Act, 1996, seek appointment of a Sole Arbitrator.
PETITIONER'S CONTENTIONS
2. The case of the Petitioner is that the Respondent has been working as a
sub-contractor in respect of the following Work Orders -
A. Work Order No. OSE/NSBP/SC-W0/2015-16111 dated 23rd July,
2015 towards special repair works towards Nagpur Betul Road
project. (Giving rise to ARB.P. 644/2020).
B. Work Order No. OSE/C/NBP-F/SC-W0/007 dated 19th September,
2015 towards embankment and subgrade construction for Nagpur
Bypass road project. (Giving rise to ARB.P. 658/2020).
3. It was agreed between the parties that the bills raised under the Work
Orders shall be verified and certified at the time of completion of Works
and submission of the Final Bill, for which, the Respondent had to submit
measurements and necessary records. According to the Petitioner, the
Respondent has failed to perform its obligations under the afore-noted Work
Orders. It had to submit the royalty challans as contemplated under Clauses
8.09 (Taxes, Duties, Royalty etc.) and 10.09 of the Work Order for
finalization of the Final Bill. In absence of the requisite documents, the
Signature Not Verified
By:SAPNA SETHI
Signing Date:26.03.2021
19:31
Petitioner was left with no option but to prepare and reconcile the accounts
on the basis of the records at site. The said accounts cannot be considered to
be final, because the royalty challans and other government dues that were
to be furnished by the Respondent, have not been accounted for. In a
nutshell, according to the Petitioner, the Respondent has: (a) made false
representations to the Petitioner; (b) has not submitted true and correct
statement of accounts and reports; (c) is in receipt of an excess amount to
the tune of Rs. 71,27,414/- over and above the certified payments under the
Work Order dated 19th September, 2015, for which ARB. P 658/2020 has
been filed; and moreover, (d) the Respondent has made a fraudulent claim of
Rs. 25,44,86,464/- under various Work Orders. The Petitioner further
contends that the Respondent, with the intention to force the Petitioner to
accede to its unlawful demands, issued a demand notice dated 23rd
September, 2019 under Section 8 of the Insolvency and Bankruptcy Code,
2016 [hereinafter referred to as 'the IBC'].
4. In this background, the Petitioner, vide letter dated 8th January, 2020,
invoked the Settlement of Disputes clause as envisaged under Clause 9.04 of
Work Order. The said clause also contains the Arbitration Agreement
between the parties, which reads as under:
"Settlement of Disputes: Any Dispute arising out of this Sub Contract
shall be settled amicably through the Project head of OSEPL within
the terms of this Sub Contract. In case of failure to settle amicably
within 30 days of a request to this effect from either party to other, the
Dispute shall be finally resolved in accordance with the Arbitration &
Conciliation Act 1996 by sole arbitrator to be nominated (including
nomination of replacement Arbitrator, if necessitated by vacancy of
the post caused by any reason whatsoever) by the Managing Director
of OSEPL, New Delhi. The Managing Director of OSEPL shall
Signature Not Verified
By:SAPNA SETHI
Signing Date:26.03.2021
19:31
nominate the Arbitrator within 30 days of receiving a request to this
effect from either party. In case no such nomination is made by the
Managing Director within the stipulated time period of 30 days, then
the Director (Technical) of OSEPL, New Delhi shall act as the
Arbitrator for adjudicating the Dispute. The venue of arbitration shall
be New Delhi."
5. Since disputes have arisen between the parties, the same are required to be
adjudicated in terms of the Arbitration Agreement. The arbitration clause is
in conflict with the judgment of the Supreme Court 1, as it gives a unilateral
right to the Managing Director of the Petitioner to make an appointment. In
these circumstances, the present petition has been filed before this Court
seeking appointment of an independent Arbitrator.
RESPONDENT'S CONTENTIONS
6. The counsel for the Respondent has contested the present petition on
several grounds. His argument can be summarized as follows: (i) that there
is no genuine dispute between the parties; (ii) the procedure for seeking
appointment of an Arbitrator has not been followed; (iii) the present petition
is an abuse of the process of the Court; and iv) the Petitioner has initiated the
present proceedings in order to circumvent the proceedings under the IBC.
7. Elaborating on these submissions, Mr. Krishna Kumar, learned counsel
for the Respondent, submits that while the Respondent does not dispute the
Work Orders in question, however, there is no dispute between the parties
arising under the afore-noted Work Orders. He avers that, besides the Work
Perkins Eastman Architects DPC and Ors. v. HSCC (India) Ltd., AIR 2020 SCC 59.
Signature Not Verified
By:SAPNA SETHI
Signing Date:26.03.2021
19:31
Orders, there are independent and ongoing transactions between the parties
arising out of mining contracts. The said mining contracts neither have an
arbitration clause, nor are the same in any way connected to the road
construction and the afore-noted two Work Orders. With respect to the
Work Order for road construction, the work has been carried out in
accordance with the specifications provided therein and the quality of the
work done was according to the standards and the project was completed by
the Respondent on time and there has been no allegation of any defect or
deficiency in the construction of the road under the said project. The
Respondent has furnished Final Bills for an amount of Rs. 19,47,49,331/-
with regard to NH-69 and with respect to NH-7, the approved amount of Rs.
10,86,80,109/-. He submits that the bills have been duly accepted, payments
recommended and approved by the Project Officer. The value of the work
done has also been approved and the amount stated in the bills has been
accepted for payment. Consequently, a total amount of Rs. 25,44,86,464/-,
due and payable by the Petitioner has been, deliberately withheld without
any justifiable reason. He also denies the allegation that payment of excess
monies was made by the Petitioner to the Respondent in respect of any claim
whatsoever. In this regard, Mr. Kumar refers to a letter dated 16th August,
2019 issued by the Petitioner, in reply to the Respondent's demand notice
dated 19th July, 2019. In the said reply, the Petitioner has denied the claims
of the Respondent regarding outstanding dues, and pertinently, has not
claimed any refund from the Respondent. He further relies upon the demand
notice dated 23rd September, 2019 issued by the Respondent under the IBC.
It is pointed out that in response Petitioner vide reply dated 7th October,
2019, specifically denied the claim and in order to withhold payment, sought
Signature Not Verified
By:SAPNA SETHI
Signing Date:26.03.2021
19:31
details that were in fact already part of the record. The procedure for
referring the matter to arbitration has not been followed and the present
petition is therefore liable to be rejected on this ground. The disputed
settlement clause in the Work Orders (extracted above) consists of two parts,
the first one sets out the agreement between the parties to amicably settle the
dispute and the second one deals with the reference of the disputes to
arbitration. The Petitioner's letter dated 8th January, 2020 mentions the
amicable settlement and does not express the intent of the Petitioner to refer
the matter to arbitration. The other letter of the Petitioner, dated 24th
January, 2020, is also inadequate as it too does not purport to refer the
matter to arbitration. Thus, in absence of any letter issued by the Petitioner
invoking the arbitration clause, and on account of lack of invocation of the
arbitration clause, the present petition should not be entertained.
8. Mr. Kumar further submits that the petition is an abuse of the process of
Court and is an attempt to circumvent the proceedings initiated under the
IBC. The conduct of the Petitioner demonstrates that, but for the initiation of
the proceedings under the IBC, the Petitioner could not have raised the issue
or disputes. From the Petitioner's reply dated 7th October, 2019 as well as
the present petition, it is apparent that there is no specific allegation of work
not having been performed in terms of the Work Orders. On a perusal of the
statement and the ledger provided, it becomes further apparent that the value
of the amount payable with regard to the work done is recommended,
settled, approved and accepted by the Petitioner. For the first time, the
Petitioner has made an allegation that some amounts are due or payable,
which are in fact completely unrelated to the Work Orders and pertain to an
Signature Not Verified
By:SAPNA SETHI
Signing Date:26.03.2021
19:31
entirely different contract relating to mining.
PETITIONER'S REJOINDER
9. In his rejoinder, Mr. Anil Kumar Airi controverts the submissions made
by the Respondent. He submits that firstly, there has been no adjustment as
contended by the Respondent. Secondly, if the adjustments were done
wrongfully, as is contended by the Respondent, the question of adjustment
would also be a disputed question which would require adjudication. Mr
Airi reiterates that no Final Bills have ever been submitted, and the payment
certificates referred to by the Respondent, are interim payment certificates as
per Clause 6.01, and not Final Bills. The Respondent had only raised interim
bills for work done, in accordance with which payments were realised.
Payments against interim bills are mere advances which are subject to
adjustment in the Final Bill. All accounts were to be settled in accordance
with the terms of the Work Orders dated 23rd July, 2015 and 19th September,
2015 at the time of the submission of the Final Bill. Thus, the liability of the
Respondent is still continuing till the Final Bills and documents (pertaining
to rates, including royalty, taxes, duties cess etc.) are pending, as the
Petitioner can still be exposed to liabilities. Mr. Airi submits that till the time
the Respondent submits all the documents as are required under the contract,
the accounts cannot be finalised.
10. Next, referring to Clause 9.04 of the Work Orders, Mr. Airi submits that
the letter dated 8th January, 2020 invoking arbitration clause is in
consonance with the agreement between the parties.
Signature Not Verified
By:SAPNA SETHI
Signing Date:26.03.2021
19:31
ANALYSIS AND REASONING OF THE COURT
11. The contentions of the parties have been heard at length. At the stage of
deciding an application under Section 11, the Court does not have to
meticulously examine rival contentions of the parties on the merits of the
claim. 2 These disputed facts have to be adjudicated by way of the alternate
dispute resolution mechanism as agreed upon by the parties. The
Respondent contends that it has to recover payment from the Petitioner, and
the Petitioner on the other hand contends that it has made payment to the
Respondent in excess of the work done by it. In the opinion of the Court,
this itself is a dispute which requires adjudication by way of arbitration. The
argument of the Respondent that there is no bona fide dispute between the
parties, is therefore, completely misconceived. The test is whether there is
existence of an arbitrable dispute, and not whether the dispute is bona fide or
germane. The judgment3relied upon by the Respondent is distinguishable on
facts, as the contractor therein had issued no-claim certificates and accepted
the amount voluntarily, thus leading to the court holding that the contract
stood discharged and there was no arbitrable dispute between the parties. As
regard the objection relating to invocation of arbitration, the court finds that
the letter clearly specifies that in the event an amicable settlement is not
arrived at, there will be an invocation of the recourse provided under Clause
9.04, which, upon a single glance of the clause, can only mean an arbitration
mechanism. Thus, upon failure of settlement talks, the Petitioner was
See: Vidya Drolia v. Durga Trading Corporation , 2020 SCC OnLine SC 1018.
Union of India v. Master Constructions (2011) 12 SCC 357.
Signature Not Verified
By:SAPNA SETHI
Signing Date:26.03.2021
19:31
constrained to take recourse as decided by the parties under Clause 9.04 for
appointment of the Arbitral Tribunal. However, as the extant law invalidates
the mechanism for nomination of a sole arbitrator as envisaged in Clause
9.04, the only recourse available to the Petitioner is by way of filing the
present petition.
12. In view of the above, the present petition is allowed and accordingly,
Hon'ble Mr. Justice Brijesh Sethi (Retd.) former Judge of this Court
[Contact No.: +91 9910384669] is appointed as the common Sole
Arbitrator to adjudicate the disputes that are stated to have arisen between
the parties under the aforenoted Work Orders .
13. The parties are directed to appear before the learned Sole Arbitrator as
and when notified. This is subject to the Arbitrator making the necessary
disclosure under Section 12(1) of the Act and not being ineligible under
Section 12(5) of the Act.
14. The learned Arbitrator will be paid his fee in terms of the provisions of
the Fourth Schedule appended to the Act.
15. It is clarified that the Arbitral Tribunal would consider the claims before
it on merits, uninfluenced by any observations made by the Court.
SANJEEV NARULA, J
MARCH 15, 2021
nk
(corrected and released on 26th March, 2021)
Signature Not Verified
By:SAPNA SETHI
Signing Date:26.03.2021
19:31
