Airone Charters Pvt. Ltd. vs Jetsetgo Aviation Services Pvt. ... on 12 October, 2021
1. Three Aircraft Charter Agreements (in short, "ACAs") dated
11th August, 2017, were executed between the petitioner and the
respondent. Disputes arose. They stand referred, through the
intervention of this Court, to an arbitral tribunal comprising Hon'ble
Mr. Justice Mukul Mudgal (Retd.), Hon'ble Mr. Justice S.S. Saron
(Retd.) and Hon'ble Mr. Justice R.S. Sodhi (Retd.). The respondent is
the claimant therein, and the present petitioner, the respondent. The
petitioner desired to file counter-claims in the said proceedings.
Permission was denied, reserving liberty with the petitioner, however,
to avail all such remedies as are available to it in law. The petitioner
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issued a notice, invoking arbitration, to the respondent, under Section
21 of the Arbitration and Conciliation Act, 1996 ("the 1996 Act").
The petitioner suggested that its claims be referred to the arbitral
tribunal comprising Hon'ble Mr. Justice Mukul Mudgal (Retd.),
Hon'ble Mr. Justice S.S. Saron (Retd.) and Hon'ble Mr. Justice R.S.
Sodhi (Retd.), which was already seized of the disputes between the
petitioner and the respondent, albeit at the instance of the respondent.
The respondent demurred. The petitioner has, therefore, approached
this Court under Section 11(6) of the 1996 Act, for referring the
claims of the petitioner to the learned arbitral tribunal comprising
Hon'ble Mr. Justice Mukul Mudgal (Retd.), Hon'ble Mr. Justice S.S.
Saron (Retd.) and Hon'ble Mr. Justice R.S. Sodhi (Retd.).
2. The record has been perused, and learned Counsel heard at
length. Mr Manish Sharma appeared for the petitioner, and Mr Amit
Sibal, learned Senior Counsel, for the respondent.
3. The petitioner claims to be an intermediary, which arranges for
aircraft charters for its clients, from third parties. The respondent
provides charter flights to its customers. Three ACAs, dated 11th
August, 2017, were executed between the petitioner and the
respondent. The aircraft, to which the ACAs related, were Legacy
650 Tail Number VT-AOK, Legacy 650 Tail Number VT-AOL and
Cessna XLS Tail Number VT-AON. Each agreement related to one
aircraft. Under each of these agreements, the respondent agreed to
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charter the aircraft covered by the agreement, belonging to third
parties, through the petitioner, for the period of one year.
4. Clauses 26 of the ACAs, which was identical in all the ACAs,
read thus:
performance of the rights and in New Delhi, India in
accordance with the terms of Indian Arbitration and
Conciliation Act,1996 (as amended by the Arbitration and
Conciliation(Amendment) Act, 2015]. The language used in
the arbitral proceedings shall be English. Arbitration shall be
conducted by three (3) arbitrators, each Party appointing one
Arbitrator and both Parties having to agree on the third
Arbitrator to be appointed by the one Arbitrator appointed by
each party as per Arbitration and Conciliation Act, 1996 [as
amended by the Arbitration and Conciliation (Amendment)
Act, 2015] The arbitral award shall be in writing and shall be
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final and binding on each party and shall be enforceable in
any court of competent jurisdiction."
5. As already noted, vide Section 21 notice dated 13th April, 2018,
the respondent sought reference of its claims, vis-à-vis the petitioner,
to arbitration. The notice was consolidated in nature, and expressly
purported to be issued "under Clause 26" of the ACAs. Various
infractions, of the ACAs, were alleged against the petitioner. The
notice also informed the petitioner that the respondent had appointed
Hon'ble Mr. Justice S.S. Saron (retd), as its arbitrator. The
respondent, therefore, called upon the petitioner to do likewise, so that
the presiding arbitrator could then be nominated by the two arbitrators
appointed by the parties.
6. On the petitioner failing to appoint its arbitrator as requested by
the respondent, the respondent moved this court under Section 11 of
the 1996 Act, vide Arb P 540/2018, Arb P 541/2018 and Arb P
542/2018, calling upon this court to appoint the petitioner's arbitrator.
7. Before this Court, the petitioner submitted that it desired
Hon'ble Mr Justice R.S. Sodhi (retd) to be its arbitrator. The
respondent did not object. Accordingly, vide order dated 31st August,
2018, this court disposed of the three arbitration petitions by
appointing Hon'ble Mr. Justice R.S. Sodhi (retd) as the petitioner's
nominee arbitrator. The two learned arbitrators were requested to
proceed to appoint the presiding arbitrator. Saron, J. and Sodhi, J.,
appointed, between themselves, Hon'ble Mr. Justice Mukul Mudgal
(retd) the presiding arbitrator.
8. Vide email dated 6th December, 2018, addressed to both parties,
the learned Arbitral Tribunal set up the following schedule:
9. Vide order dated 7th May, 2019, the learned Arbitral Tribunal
granted extension of time till 17th May, 2019 to the petitioner to file
its Statement of Defence and counter-claim. Corresponding extension
of time for responding, thereto, was also granted to the respondent.
10. The petitioner, however, filed its Statement of Defence only on
21st May, 2019, and counter-claims on 6th July, 2019.
11. While condescending to take the Statement of Defence on
record, the learned Arbitral Tribunal refused to extend similar latitude
to the counter-claims. Observing, first, that there was no application
for condonation of delay in filing the counter-claims, the learned
Arbitral Tribunal also noted that the time for passing the final award,
under the 1996 Act, would expire on 15th March, 2020. Unless the
petitioner were to obtain at least six months' extension of the mandate
of the learned arbitral tribunal, it was noted that the counter-claims
could not possibly be taken on record.
12. Vide order dated 24th July, 2019, the learned Arbitral Tribunal
directed the parties, "for the sake of convenience", to trifurcate the
pleadings in the three claims. In its next meeting held on 9th August,
2019, the learned Arbitral Tribunal directed the respondent to file its
Statement of Claims, after trifurcation, on or before 9th September,
2019, with reply and rejoinder to be filed on or before 1st October,
2019 and 9th October, 2019 respectively. Further dates for admission
and denial of documents and recording of evidence were also fixed.
13. At this stage, the petitioner filed OMP (Misc) (Comm)
290/2019 before this court under Section 29A(5) of the 1996 Act, for
extension of the mandate of the learned Arbitral Tribunal. Vide order
26th September, 2019, the petitioner was permitted to withdraw the
petition, in the following terms:
14. The petitioner, thereafter, moved the learned Arbitral Tribunal,
requesting that its counter-claims be taken on record. Vide order dated
25th October, 2019, the learned arbitral tribunal disposed of the
request, thus:
2. However, as per the said Order of the Hon'ble High
Court the Respondent will be at liberty to avail such remedy
as available in law."
15. Vide Section 21 notice dated 6th May, 2020, the petitioner
sought reference of its claims (which the learned arbitral tribunal had
refused to take on record, as counter-claims to the claims of the
respondent) to arbitration. Given the commonality of issues involved,
the petitioner suggested that reference of its claims could be made to
the learned arbitral tribunal comprising Hon'ble Mudgal, Saron and
Sodhi, JJ. The respondent was requested to communicate its assent.
16. The respondent replied on 14th May, 2020, squarely refusing
the petitioner's request for reference of the petitioners' claims to
arbitration. The following six reasons were adduced:
(iv) OMP (Misc) (Comm) 290/2019, which sought extension
of the mandate of the learned arbitral tribunal so as to enable the
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petitioner to refer its counter-claims to arbitration, was
withdrawn by the petitioner.
(v) The petitioner's claims were time-barred.
(vi) Clause 26.4 of the ACAs required all disputes to be
referred to arbitration. It stood invoked by the respondent,
while referring its claims against the petitioner to arbitration.
The petitioner could not seek to invoke the clause anew, in
order to refer its claims to arbitration.
17. The petitioner, in the circumstances, moved this court under
Section 11 of the 1996 Act, vide Arb P 197/2020. The prayer Clause
in the petition read thus:
18. Vide the following order dated 27th May, 2020, this Court
disposed of Arb P 197/2020:
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"1. The present petition has been taken up for hearing
through video conferencing.
2. Vide the present petition under Section 11 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to
as Act), the petitioner seeks appointment of an Arbitrator for
adjudication of disputes qua three agreements, all dated
11.08.2017 entered into between the petitioner and the
respondent for chartering of planes through the petitioner.
3. Learned counsel for the petitioner submits that upon a
petition being filed by the respondent, the matter was referred
to a three members Tribunal and the claims raised by the
petitioner are a matter of consideration before the Tribunal,
wherein the petitioner had also sought to raise counter claims
qua the same agreements in respect of the dues payable to the
petitioner from the respondent. He submits that as there was a
delay on the part of the petitioner in raising the counter
claims, the learned Tribunal vide its order dated 06.07.2019
declined to accept the same unless the time for completion of
the arbitral proceedings was extended by six months by this
Court. The petitioner had then approached this Court by way
of a petition under Section 29A of the Act seeking extension
of time in accordance with the observations of the Tribunal,
which petition was permitted to be withdrawn by this Court
vide its order dated 26.09.2019 with liberty to the petitioner
to avail other remedies as may be available in law. He
therefore submits that the petitioner is fully justified in
invoking arbitration qua the said counter claims
independently for which purpose he relies on a decision dated
06.04.2018 of the Coordinate Bench of this Court in OMP
(Comm) 319/2016 [Union Of India & Ors. v. Arun Kumar
Gupta]. He further submits that even though the Tribunal
vide its order dated 25.10.2019 had recorded that the
petitioner's counter claims were being struck off the record of
the Tribunal, the counter claims had in fact not been filed and
only liberty was sought from the Tribunal to file the same
belatedly.
4. On the other hand, the learned counsel for the
respondent vehemently opposes the petition and submits that
once the petitioner's counter claims was struck off from the
record by the learned Arbitral Tribunal, which order has
attained finality, the petitioner cannot be allowed to invoke
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arbitration qua the very same counter claims especially when
its petition under Section 29A of the Act already stands
rejected by this Court. He further submits that no such liberty
to invoke arbitration qua the same counter claims was granted
to the petitioner by this Court while permitting the petitioner
to withdraw its petition under Section 29A of the Act.
5. In response, learned counsel for the petitioner reiterates
that the petitioner has now invoked arbitration in accordance
with the liberty granted to it by this Court vide its order dated
26.09.2019. In view of the stand taken by learned counsel for
the respondent, learned counsel for the petitioner prays for
leave to withdraw the petition with liberty to approach the
Court to seek clarification of order dated 26.09.2019 passed
by this Court in OMP (MISC) (COMM) 290/2019.
6. The petition is dismissed as withdrawn along with the
pending application with liberty as prayed for.
7. The order be uploaded on the website forthwith. A
copy of the order be also forwarded to the learned counsel
through email."
19. Availing the liberty granted in para 5 of the above order, the
petitioner moved IA 4320/2020, seeking a clarification of the order
dated 26th September, 2019, passed in OMP (Misc) (Comm)
290/2019. The petitioner asserted, inter alia, that it could not be
rendered remediless to agitate its claims, which were otherwise
maintainable and within time.
20. IA 4320/2020 was disposed of by the following order dated 15th
July, 2020:
3. Petition under Section 11 of the Act was accordingly
dismissed by the Coordinate Bench in view of the objection
by the Respondent. However, liberty was given to the
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Petitioner to approach this Court for seeking a clarification of
the Order dated 26.09.2019, passed in the present petition.
4. Although Reply and Rejoinder to the application have
been filed, but they are lying under objections and are thus not
on record. Learned counsels for the parties, however, submit
that they are willing to proceed with the matter without Reply
and Rejoinder.
5. I have heard learned counsels for the parties.
6. Vide order dated 26.09.2019, this Court had permitted
the Petitioner to withdraw the petition with liberty to pursue
appropriate remedies that may be available to it in law.
7. In my view, the order is crystal clear and needs no
further clarification. However, with a view to give a quietus to
the controversy, it is clarified that Petitioner has liberty to
avail all such remedies as are available to it in law and Court
has not foreclosed any remedy, so available.
8. Application is disposed of in the above terms."
21. It is in these circumstances that the petitioner has re-approached
this Court vide the present petition, for referring its claims to
arbitration by the learned arbitral tribunal comprising Hon'ble
Mudgal, Sodhi and Saron, JJ., which is presently in seisin of the
respondent's claims. The prayer Clause in the petition reads as under:
22. Mr Sharma asserts that the petitioner's claims are not time-
barred, as three years, from the date of accrual of cause of action, have
yet to expire. Besides, the petitioner relies on the orders passed by the
Supreme Court in Suo Moto Writ Petition (Civil) No. 3/20201,
which extends limitation in all cases where the statutory limitation
period expired on or after 15th March, 2020. The petitioner has also
relied on the judgment of the Supreme Court in State of Goa v.
Praveen Enterprises2 as well as of this Court in UoI v. Arun Kumar
Gupta3.
23. The rejection, by the learned Arbitral Tribunal, of the
petitioner's request to take its counter-claims on record, cannot,
submits Mr Sharma, derogate from the petitioner's right to agitate the
claims substantively by way of fresh arbitral proceedings. He points
out that this right was specifically protected by the learned arbitral
tribunal in its order dated 25th October, 2019, and by this court in its
order dated 15th July, 2020 in IA 4320/2020 in OMP (Misc) (Comm)
290/2019.
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24. Mr. Sharma has contended that the learned Arbitral Tribunal
had ample time to take on record, and adjudicate, the counterclaims,
as the time for passing the arbitral award was first extended on 1st
October, 2021, thereafter, till 1st April, 2021 and, I am informed, has
still not expired. He has submitted, further, that the petitioners' claims
are well within time and that, in any event, it was for the learned
arbitral tribunal to take a call on the issue of limitation. The contention
of the respondent that the petitioner was invoking the same arbitration
clause twice, he submits, was incorrect, as the petitioner was invoking
the arbitration clause for the first time. Mr. Sharma submits that the
petitioner could not be placed in a position in which it would become
impossible for the petitioner to agitate its claim which is, otherwise,
within time. He has also placed reliance on the Judgment of this
Court in A.K.M. Enterprises Pvt. Ltd. v. Ahluwalia Contracts
(India) Ltd.4, to contend that the petitioner had the option either to
file a counterclaim or to preserve its claims as substantive claims
referred to arbitration.
25. Qua an argument, advanced by the respondent in its counter-
affidavit, that the petitioner ought to have filed three arbitration
petitions, Mr. Sharma relies on para 25 of the judgment of the High
Court of Bombay in United Shippers Ltd. v. Tata Power Company
Ltd5. Mr. Sharma has also reiterated the reliance, placed by the
petitioner in its petition, on Praveen Enterprises2 and on Gammon
India Ltd. v. N.H.A.I.6. He relies particularly on the second decision
to contend that, where the disputes involve similar issues, arising out
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of the same contracts, the disputes ought to be referred to one arbitral
tribunal.
26. Responding to the submissions of Mr. Sharma, Mr. Amit Sibal
contends that there was no genuine justification for the petitioner not
filing its counterclaims within the time granted, for the said purpose,
by the learned arbitral tribunal. Emphasizing the fact that even as per
the petition, the cause of action in the petitioner's favour arose on 11th
December, 2017 and 21st March, 2018, he contends that was no
reason for the petitioner waiting till 6th May, 2020 to invoke
arbitration. Nor, submits Mr Sibal, was there any explanation as to
why the petitioner did not invoke arbitration on 6th July, 2019,(when
the learned arbitral tribunal declined to take the petitioner's
counterclaims on record), or on 26th September, 2019, (when this
court refused to grant six months' extension of time as sought by the
petitioner and the petitioner unconditionally withdrew its application
for extension of time).
27. Mr Sibal submits that claims and counter-claims, which were
alive at the inception of the arbitral proceedings, were required to be
raised then, and could not be permitted to be raised belatedly. The
cause of action in respect of the petitioner's counter-claims having
arisen prior to the invocation of the arbitral process by the respondent,
Mr. Sibal submits that the petitioner is estopped from raising the said
claims at this stage. He has relied, for this purpose, on para 33 of the
decision in Gammon India6 as well as on the words "any and all
disputes", in Clause 26.4 of the ACAs. The claims and counter-claims,
submits Mr. Sibal, were required to be decided at one go.
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28. Mr Sibal further submits that the present petition is not
maintainable, as the petitioner has not exhausted the pre-arbitral
protocol of mutual consultation, envisaged by Clause 26.2 of the
ACAs. This protocol, according to Mr Sibal, is mandatory and was, in
fact, followed by the respondent, before invoking the arbitration
clause for reference of its disputes to arbitration.
29. Mr Sibal further contends that, once the learned Arbitral
Tribunal had struck the petitioner's counter claims off the record, it
was not open to the petitioner to initiate a parallel arbitral proceeding
"as per its own whims and fancies". In this context, the counter-
affidavit filed by the respondent again relies on Gammon India6. The
submissions made, in this regard, in paras 68 to 72 of the counter
affidavit, in my opinion, merit reproduction verbatim:
However, the Respondent's Counsel pointed that the said
assertion was incorrect and no such specific liberty was
granted by this Hon'ble Court, in its Order dated 26.09.2019,
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while permitting the Petitioner to withdraw its Petition under
Section 29A of the Act.
70. In view of the same, this Hon'ble Court was pleased to
dismiss the said Petition filed by the Petitioner under Section
11 of the Act, vide Order dated 27.05.2020. However, the
Petitioner sought leave of this Hon'ble Court to seek
clarification of the Order dated 26.09.2019 passed in O.M.P.
(Misc.) (Comm.) No. 290 of 2019 regarding, whether the
Petitioner had been granted a specific liberty in the said Order
dated 26.09.2019 to file a separate Petition under Section 11
of the Act for seeking reference of its Claims to Arbitration.
71. After the said Petition under Section 11 of the Act was
dismissed, on 06.06.2020, the Petitioner filed an Application
under Section 151 of the Code of Civil Procedure, 1908, for
allegedly seeking clarification of the Order dated 26.09.2019
passed in O.M.P. (Misc.) (Comm.) 290 of 2019. ...
72. Even in the said Clarification Application, this Hon'ble
Court did not find it appropriate to grant the aforesaid reliefs
as prayed for by the Petitioner. The Hon'ble Court was also
of the considered view that no clarification can be made to the
Order dated 26.09.2019, specifically stating that the
Petitioner was at liberty to file a separate Petition under
Section 11 of the Act for seeking reference of its Claims to
Arbitration. Thus, the Hon'ble Court, vide its Order dated
15.07.2020, observed that its previous Order dated 26.09.2020
is crystal clear and does not require any clarification and that
the Petitioner has liberty to pursue appropriate remedies that
may otherwise be available to it in law. The relevant portion
of the Order dated 15.07.2020, is being extracted below:
8. Application is disposed of in the above
terms."
(Italics and underscoring supplied)
30. As to why I have emphasized certain assertions in the pleadings
of the respondent, would become apparent later in this judgement.
31. Mr Sibal has also objected to the petitioner having filed a
consolidated petition, though the ACAs are three in number. This,
according to him, is impermissible. He submits that, prior to 6th May,
2020 (the date of issuance of the notice invoking arbitration by the
petitioner), the petitioner had never asserted its claims with the
respondent. He submits that, had the petitioner's claims been preferred
as counter-claims, they would attract Section 23(2A) of the 1996 Act7.
Mr. Sibal submits that the three ACAs are not interconnected and that,
therefore, a single arbitration petition, for reference of disputes
relating to all the ACAs, was not maintainable. He relies, for this
purpose, on the judgment of the Supreme Court in Duro Felguera,
S.A. v. Gangavaram Port Ltd8. and the judgment of the High Court
of Madras in Padam Chand Kothari v. Shriram Transport Finance
Co. Ltd9. and Alaska Export USA Inc. v. M/s. Alaska Exports10 as
well as the judgment of this Court in ABB India Ltd. v. The Indure
Pvt. Ltd11. and of the Bombay High Court of Bombay in United
Shippers supra.
*****
(2A) The respondent, in support of his case, may also submit a counter-claim or plead a set-off,
which shall be adjudicated upon by the arbitral tribunal, if such counter-claim or set-off falls within
the scope of the arbitration agreement."
(2017) 9 SCC 729
2020 SCC OnLine Mad 138
2016 SCC OnLine Mad 5961
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32. Mr. Sibal has placed reliance on the judgments of the Supreme
Court in Srei Infrastructure Finance Ltd. v. Tuff Drilling Ltd12.
and NHAI v. Bumihiway DDB Ltd13. and of this Court in Haldiram
Manufacturing Company Pvt. Ltd. v. DLF Commercial
Complexes Ltd14, and NHAI v. PATI-BEL (JV)15.
33. Invoking, for the purpose, Section 11(6A) of the 1996 Act, Mr.
Sibal submits that the procedure, for invocation of arbitration by the
petitioner has, in fact, not even begun.
34. Mr. Sibal has also pointed it out that Clause 26.4 of the
agreement required each party to appoint its own arbitrator and,
thereafter, for the two arbitrators so appointed to appoint the presiding
arbitrator. The request, in the notice invoking arbitration, dated 6th
May, 2020, issued by the petitioner to the respondent was not, he
submits, in terms of Clause 26.4, as it did not name an arbitrator and
call upon the respondent to name its arbitrator, but, rather, sought
reference of the dispute to the three-member arbitral tribunal already
in existence. Submitting that, even if the petitioner were to appoint
Hon'ble Mr. Justice R.S. Sodhi (retd.) as its arbitrator, the respondent
may or may not have appointed Hon'ble Mr. Justice S.S.Saron (retd.)
and that the two arbitrators would then have to appoint a third,
presiding arbitrator, who may also have been different from the
presiding arbitrator in the existing arbitral proceedings between the
(2018) 11 SCC 470
(2006) 10 SCC 763
2012 SCC OnLine Del 2139
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parties, Mr. Sibal submits that the manner in which the arbitral
process, envisaged by Clause 26.4 of the agreement, has been
jettisoned by the petitioner, is completely unsustainable in law.
35. Gammon India6, he submits, has no application, as that
decision applied to a case where the Section 11 petition, before the
court, was competent in the first instance. Mr. Sibal has also placed
reliance on paras 12 and 13 of the report in the judgment of the
Supreme Court in Central Organisation for Railway Electrification
v. M/S ECI-SPIC-SMO-MCML (JV)16.
36. Mr. Sibal submits, in conclusion, that the observations, in the
order dated 25th October, 2016, of the learned Arbitral Tribunal, that
the counter-claim of the petitioner "will not be considered and are
accordingly struck off the record of this tribunal" was, strictly
speaking, not accurate, as the counter claims had never been filed in
the first place.
37. Mr. Sibal placed especial reliance on paras 136, 147 and 151 of
the counter-affidavit of the respondent, to the present petition, which
read as under:
"136. The contents of Paragraph 4.34 are false and
vehemently denied. It is submitted that the Petitioner never
raised the said issues during the mutual discussion between
the parties in February -March 2018 (a bare perusal of the
correspondence pertaining to the said period clearly shows
this). Further, the Petitioner has failed to comply with the
mandatory procedure before invocation of arbitration as per
Clause 26.2 of the Aircraft Charter Agreements. In addition to
16 2019 SCC OnLine 1635
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it, the Petitioner is seeking a composite reference of claims to
arbitration, which is impermissible in law. Lastly, all the
claims raised by the Petitioner are the same as that which had
been raised in its Counter-Claim and the same having been
struck off the record of the Ld. Arbitral Tribunal vide Order
dated 25.10.2019, the Petitioner has been sitting and did
nothing until 06.05.2020 and by that time the arbitration
proceedings had already come to a near conclusion as the
dates for final hearing had already been fixed by the Ld.
Arbitral Tribunal, however, the same had to be deferred to
start from 29.07.2020 due Covid-19 pandemic.
*****
147. The contents of Paragraph 7 are incorrect and therefore
denied. It is submitted that this Hon'ble Court in the case of
Gammon India Limited v. National Highways Authority
(supra) has held that the party choosing to initiate fresh
arbitration must show good and special reasons as to why it
could not raise the same claims by way of Counter-Claim, if
the same had been arisen between the parties when reference
to arbitration was made. Moreover, it is an admitted fact that
the claims which the Petitioner is seeking to refer to
arbitration by way of the present petition already stood arisen
between the parties when the claims raised by the Respondent
were referred to the Ld. Arbitral Tribunal for adjudication.
Therefore, in the absence of any justification for not filing its
Counter-Claim, the present petition cannot be allowed. In
addition to it, if the present Petition is allowed, then it may
also lead to multiplicity of proceedings between the parties
and possibly contrary findings, which will be against the
fundamental spirit of arbitration.
*****
151. The contents of Paragraph 11 are false and denied. The
contents of Paragraph 139 are reiterated in response."
38. He has also referred me to various paragraphs of the statement
of claim and the corresponding paragraphs of statement of defence, as
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filed before the existing learned Arbitral Tribunal, to contend that the
petitioner's claims were strongly traversed by the respondent.
39. In fine, Mr. Sibal submits that the petition deserves to be
dismissed as not maintainable as well as on merits.
40. Responding to the submissions of Mr. Sibal, by way of
rejoinder, Mr. Manish Sharma, at the outset, draws attention to para 6
of the termination notice dated 21st March, 2018, issued by the
petitioner to the respondent, which clearly stated thus:
"6. That email dated 26th Feb'18 with the subject "notice
for initiating mutual discussion" was received by AirOne.
Hence, a dialogue had been initiated to resolve the day to day
business dealing with one another."
41. He has also relied on the following passages, from the statement
of defence of the respondent before the learned Arbitral Tribunal:
"20. That the contents of the paragraph 19 are false and
misleading. The Claimant has chosen to appraise the tribunal
with partial facts. In consistency with the agreement and in
order to avoid gross financial exposure, the Respondent had
written to the claimant on 22·Feb. 18 intimating the Claimant
of the outstanding amounts of Rs.1,26,80,150/-. It is clearly
stated in a following email on the same day that all invoices
were to be cleared immediately as no further flights will be
undertaken till all the outstanding are paid. The same e-mail
was a mere invocation of clause no. 8 c), and there was no
mention of the termination clause of the agreement. Further it
is pertinent to note that at the time of this outstanding
payment demand, the Claimant wanted the Respondent to take
a further exposure of Rs. 34,00,000/- (rupees 34 lakhs), which
is clearly not in spirit with clause 8a) which clearly states that
both parties understand that the aircraft provider will not take
any financial exposure on account of this agreement and all
the planned utilization needs to be paid in advance by the
charterer. It is pertinent to note that the Respondent
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subsequent to this attempt of the frustration of the agreement
by the Claimant sent a whatsapp to the Claimant stating the
availability of the aircraft, upon payment of the outstanding.
21. That the contents of paragraph no. 20 a) are false,
malicious and in clear contradiction of the agreement. It is
pertinent to take note of clause 8 e) which states that at no
time, security deposit will be considered as advance for a
charter request. Hence, claimant's request to utilize security
deposit amount lying in excess for the purpose of charter
agreements was in contradiction to the covenants of the
charter agreement. Further, the contents of paragraph no.20 b)
are false and misleading. The exclusion monies were paid on
the basis of a mutually agreed exclusion sheet. The
Respondent has annexed all bills of exclusions in order to
demonstrate the authenticity of the exclusion amounts. It is
therefore, incorrect on the part of the Claimant to wrongly
claim that the Respondent was wrongfully in possession of
funds to the tune of Rs. 77,61,397/-. The contents of
paragraph 20 c) are false and misleading and contrary to the
payment terms of the charter agreement. It is clearly stated
under clause 8g) that guaranteed block hours and excess
flying of each month is to be paid each month.
22. That the contents of paragraph no. 21 are false and
misleading. It is vehemently denied that the Claimant suffered
any financial or other losses or was forced to abandon any
prearranged commercial charter. From the aforementioned
paragraphs and the payment terms clause, it is abundantly
clear that the aircraft provider is not to take any financial
exposure on account of this agreement. All the planned
utilization needs to be paid in advance by the charterer.
Furthermore, the Respondent had cautioned and requested the
Claimant a day prior on 22nd Feb '18 vide an e-mail to clear
the running default as otherwise clause 8c) suspending/
ceasing services would have to be invoked. Hence, with prior
notice it was an absolute responsibility to clear the
outstanding amounts for continued charter services. As such,
the alleged loss to the Claimant charterer if any, knowing that
there is default In their part under the Agreement and then
confirming a charter is clearly a bad decision attributed to the
Claimant and the respondent cannot be held liable for the
same.
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23. That the contents of the paragraph no. 22 are false and
misleading. The Claimant misconstrued an articulate clause of
the agreement to suit their convenience. Termination if any,
has to be in accordance with the terms of the contract and not
in accordance with the Claimant's whims. Non availability of
aircraft on 23rd Feb' 19 was a consequence of outstanding
payments to the tune of Rs.1.25 crores. As a result of this
outstanding, there was suspension/cessation of charter
services. Nowhere does the invocation of clause 8 c) suggest
termination of the agreement in its entirety. In fact it exhibits
the malafide intent of the Claimant to frustrate the contract as
the Claimant was unable to meet their ambitions of chartering
three aircrafts. It is pertinent to note that the Respondent
subsequent to this attempt of the frustration of the agreement
by the Claimant sent a whatsapp to the Claimant stating the
availability of the aircraft, upon payment of the outstanding."
42. Mr. Sharma further submits that the petitioner's counter claims
were raised, with the respondent, not once, but on several occasions,
including in Claims A, B, D, E and G of the notice invoking
arbitration dated 6th May, 2020, as well as before the learned Arbitral
Tribunal and also in OMP (Misc) (Comm) 290/2019, preferred by the
petitioner under Section 29(A)(5) of the 1996 Act, which read thus:
"A. Claim of Rs. 33,86,865/- towards the pending dues
payable under the Agreement dated 11.08.2017, in respect of
aircraft Legacy 650 having Tail No. VT-AOK:
B. Claim of Rs. 1,54,95,760/- towards the amount payable
in respect of the notice period of 30 days for premature
release of the aircraft Legacy 650 having Tail No. VT- AOK
under the Agreement dated 11.08.2017:
*****
D. Claim of Rs. 1,49,35,441/- towards pending dues
payable under the Agreement dated 11.08.2017, in respect of
aircraft Legacy 650 having Tail No. VT-AOL;
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E. Claim of Rs. 1,58,67,667- towards the dues payable in
respect of the notice period of 30 days in respect of aircraft
Legacy 650 having Tail No. VT-AOL under the Agreement
dated 11.08.2017, on account of its premature termination on
21.03.2018;
*****
G. Claim of Rs. 51,33,157/- towards the dues payable
under the Agreement dated 11.08.2017, in respect of aircraft
Cessna Citation XLS having Tail No. VT-AON:"
43. Mr. Sharma has seriously disputed the submission of Mr. Sibal
that no counter claim was filed before the learned Arbitral Tribunal.
He has placed the counter claim on record as one of an index set of
additional documents and has referred me to the prayer clause in the
said counter claim, in para 16 thereof, which reads thus:
"16. In view of the facts and circumstances and in the
interest of justice, it is most humbly prayed that this Hon'ble
Tribunal may be pleased to:
a. Direct the Claimant to pay Rs. 1,36,12,7721-
(Rupees one crore thirty six lakhs twelve thousand
seven hundred and seventy two only) on account of the
outstanding payment as on 22nd Feb 2018
b. Direct the claimant to pay Rs. 11,85,321/-
(Rupees eleven lakhs eighty five thousand three
hundred and twenty one only) on account of the
interest accrued on delayed payments till 22nd Feb 2018
c. Direct the claimant to pay Rs. 1,50,33,200/-
(Rupees one crore fifty thousand thirty three thousand
two hundred only) on account of the payable notice
period post termination of legacy 1(VT-AOK)
agreement.
d. Direct the claimant to pay Rs. 137,51,977/-
(Rupees one crore thirty seven lakhs fifty one thousand
nine hundred and seventy seven only) on account of
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the pro rata minimum guaranteed hours for the VT
AOL agreement;
e. Direct the claimant to pay Rs.1,58,67,667/-
(Rupees one crore fifty eight lakhs sixty seven
thousand six hundred and sixty seven only) on account
of the payable notice period post termination of legacy
2 (VT-AOL) agreement;
f. Direct the respondent to pay interest @ 2 % per
month on the total aforementioned outstanding amount
till date, amounting to Rs. 190,24,300/- (Rupees one
crore ninety lakhs twenty four thousand three hundred
only) (till Feb 2019)
g. Pass any other order(s) as may be deemed fit in
the interest of justice."
44. Apropos Mr. Sibal's reliance on Clause 26.2 of the ACAs, Mr.
Sharma submits that, had the learned Arbitral Tribunal allowed the
counter-claim to be taken on record, no benefit of the said clause
could have been reaped by the respondent. If the petitioner's claims
are otherwise maintainable and within limitation, therefore, he
submits, the respondent cannot seek to oppose the reference of the
claims to arbitration by insisting on the petitioner exhausting any pre-
arbitral procedure under Clause 26.2. He has relied, for this purpose,
on paras 4 and 5 of the report in Demerara Distilleries Pvt. Ltd. v.
Demerara Distilleries Ltd.17, and paras 15 and 16 of Swiss Timing
Limited v. Organizing Committee, Commonwealth Games18, as
well as paras 5 to 7 and 8 to 11 of the judgment of this Court in
Ravindra Kumar Verma v. BPTP Ltd19., and the decisions in
(2015) 13 SCC 610
(2014) 6 SCC 677
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Siemens Ltd. v. Jindal India Thermal Power Ltd.20 and Union of
India v. Baga Brothers21 and JK Technosoft Ltd. v. Ramesh
Sambamoorthy22.
45. Distinguishing the decision in Srei Infrastructure12, Mr.
Sharma submits that, in that case, no statement of claim had been filed
at all, so that there could be no question of any counter claim being
filed.
46. Apropos the submission that the notice invoking arbitration,
dated 6th May, 2020, of the petitioner was not in accordance with
Clause 26.4 of the ACAs, Mr. Sharma refers to Clause 31 of the said
notice, which suggested reference of the claims of the petitioner to the
existing learned Arbitral Tribunal comprising of Hon'ble Mr. Justice
Mukul Mudgal (Retd.), Hon'ble Mr. Justice S.S. Saron (Retd.) and
Hon'ble Mr. Justice R.S. Sodhi (Retd.), pointing out that the
suggestion was only in the nature of a "proposal". It was not,
therefore, as though the petitioner had appointed, or nominated, the
said learned Arbitral Tribunal to adjudicate on the petitioner's claim.
Mr. Sharma submits that, instead of taking a hyper-technical view of
the matter, the petitioner could be treated as having appointed, by the
said notice, Hon'ble Mr. Justice R.S. Sodhi (retd.) as its arbitrator, and
the respondent could be called upon to appoint its arbitrator, so that
the quorum of the arbitral tribunal could be completed and the claims
proceed to arbitration.
MANU/DE/0627/2018
MANU/DE/1880/2017
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47. To substantiate this proposal, Mr. Sharma has relied on paras 13
to 15 of the judgment of the High Court of Bombay in Rajiv Vyas v.
Johnwin Manavalan23. He submits that the respondent had, in its
reply to the notice invoking arbitration of the petitioner, dated 6th
May, 2020, completely refused the proposal to refer the petitioner's
claim to arbitration, under the existing arbitral tribunal or under any
other arbitral tribunal. As such, he submits, the respondent cannot, at
this stage, seek to capitalize on the procedure stipulated in Clause 26.4
of the ACAs.
48. Mr. Sibal, who was permitted to advance short submissions in
surrejoinder, seeks to distinguish the decision of the High Court of
Bombay in Rajiv Vyas23. There, submits Mr Sibal, the party had
abandoned the arbitration clause. In the present case, however, the
respondent had never defaulted in appointing its arbitrator, which was
a pre-condition for invoking Section 11(6). The present petition, he
submits, therefore, is pre-mature. He draws the attention of this Court
to the prayer clause in the petition, which specifically prays for
referring the disputes to the existing arbitral tribunal of Hon'ble
Mudgal, Sodhi and Saron, JJ., which, according to him, is completely
impermissible. This suggestion is, in any case, he submits, not
acceptable to his client.
49. Mr. Sibal further submits that the judgments, on which Mr.
Sharma relies, did not require a written notice to be issued by the
respondent to the petitioner, by one party to the other, initiating a 30
day discussion, before invoking the arbitral process. That such a
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requirement was contained in the ACAs, he points out, is not disputed
by the petitioner.
50. Demerara Distilleries17, submits Mr. Sibal, was
distinguishable as there was no discussion, in the said decision,
regarding the respondent's counter-claim.
51. Mr. Sibal further points out that while, in its earlier
communication to the respondent, the petitioner claim was of ₹
1,76,80,150/-, in its notice invoking arbitration dated 6th May, 2020,
the petitioner had inflated its claim to ₹ 13.92 crores. He submits that
his client has never been put to notice regarding the said inflated
claims.
52. Ravindra Kumar Verma19, on which Mr. Sharma had relied,
stands distinguished, points out Mr. Sibal, in NHAI v. PATI-BEL
(JV)15 which chose, in preference to the decision in Ravindra Kumar
Verma19, to follow Haldiram Manufacturing Company14.
53. Mr. Sibal finally reiterates his contention that the counter claim
had never been filed by the petitioner before the learned Arbitral
Tribunal. He submits that the petitioner had only annexed, to its
Section 29(A) petition (OMP (Misc) (Comm) 290/2019) a draft
counter claim. Besides, he submits, the said petition was also
withdrawn.
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Analysis
A prefatory note
54. Before proceeding to examine the rival contentions, one aspect
needs to be noted. I have reproduced in para 29 supra, paras 68 to 72
of the counter affidavit filed by the respondent in the present case.
Certain averments contained in the said paragraphs have been
italicized and underscored by me. These averments, in my view, are,
ex facie, legally objectionable.
55. While referring to the order dated 27th May, 2020, passed by
this Court in Arb P 197/2020, para 70 of the counter affidavit seeks to
convey an impression that, in view of the averments of learned
counsel, to which paras 68 and 69 allude, Arb P 197/2020 was
dismissed. No such indication is to be found, however, in the order
dated 27th May, 2020. In paras 2 to 4 of the said order, this Court has
only set out the contentions advanced by the learned counsel before it.
Thereafter, para 5 only records the petitioner's contention that it had
invoked arbitration, and its request for being permitted to withdraw
the petition so as to seek a clarification of the order dated 26th
September, 2019 passed in OMP (Misc) (Comm) 290/2019. There is
nothing to indicate that the order of this Court was passed, "in view
of" the contentions advanced by the learned counsel before it, as
recorded in paras 3 and 4 of the order.
56. Similarly, while alluding to the order dated 15th July, 2020, the
respondent has averred that "this Hon'ble Court did not find it
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appropriate to grant the ... reliefs as prayed by the petitioner". No
such indication is to be found in the order dated 15th July, 2020. In
fact, even while holding that the order dated 26th September, 2019,
earlier passed, by it, was clear, this Court did go on, nonetheless, to
clarify that the petitioner was at liberty to avail all remedies available
to it in law, and that no such remedy stood foreclosed. This
clarification, in my view, definitely enures in the petitioner's favour.
57. It would be advisable that, while referring to judicial orders in
pleadings, parties are circumspect in ensuring that no words, not
contained in the order, are read into it, and no impression, of the order
having been passed on grounds, which do not find place in the order
itself, is sought to be conveyed. Else, it would amount to a clear
attempt to mislead the Court.
58. I say no more on this aspect, and proceed to examine the merits
of the petition.
Ubi jus, ibi remedium
59. Ubi jus, ibi remedium24 is a doctrine which stands fossilized in
legal lore. Invoking this principle, a Division Bench of this Court in
NTPC v. Deconar Services Pvt Ltd25, speaking through Vikramajit
Sen, J. (as he then was), held that the right to legal redress cannot be
obliterated altogether. To the same effect, para 29 of the report of the
Where there is a right, there is a remedy.
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judgment of the Constitution Bench in Anita Kushwaha v. Pushap
Sudan26, holds thus:
"29. To sum up: access to justice is and has been
recognized as a part and parcel of right to life in India and in
all civilized societies around the globe. The right is so basic
and inalienable that no system of governance can possibly
ignore its significance, leave alone afford to deny the same to
its citizens. The Magna Carta, the Universal Declaration of
Human Rights, the International Covenant on Civil and
Political Rights, 1966, the ancient Roman Jurisprudential
maxim ubi jus ibi remedium, the development of fundamental
principles of common law by judicial pronouncements of the
courts over centuries past have all contributed to the
acceptance of access to justice as a basic and inalienable
human right which all civilized societies and systems
recognize and enforce."
60. Right to legal redress is a fundamental right. It cannot be
compromised. When parties entered into a contract, agreeing to
submit disputes, which arise, to arbitration, arbitrable disputes, which
come within the four corners of the clause, cannot be refused
arbitration.
61. There are well-recognized exceptions to the principle that the
right to legal redress carries, with it, a remedy. Considerations such as
limitation, constructive res judicata and the like can render the
remedy unavailable, though the right subsists. These, however, are
considerations, which the Court (or arbitrator) would take into
account, once it is in seisin of the dispute. They do not foreclose the
claimant, or petitioner, from placing its dispute before the Court, or
arbitrator. Moreover, these are considerations which are essentially
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intended to balance equities, and prevent prosecution of claims which,
owing to passage of time or other circumstances, would render grant
of relief to the claimant entirely inequitable to the opposite party.
Balancing of equities is, therefore, the raison d' etre behind these
conceptual exceptions to the ubi jus ibi remedium principle.
62. What the respondent seeks, in the present case, is wholesale
rejection of the request, by the petitioner, to refer its claims to
arbitration. In other words, the respondent seeks that the arbitral doors
should be closed to the petitioner.
63. Allowing this request would, in effect, render the petitioner
remediless to agitate its claims, even in the face of an existing
arbitration clause and the prima facie arbitrable nature of the claims
themselves. Such a consequence must, at all costs, be avoided if
possible, as it impinges on the right to legal redress, otherwise
available to the petitioner.
Re. contention that the claims are time barred
64. Mr. Sibal sought to contend that the petitioner's claims were
time barred. No real basis, for this contention, is, however,
forthcoming. The claims have admittedly been preferred within three
years from 11th December, 2017 and 21st March, 2018, when,
according to the petitioner, the cause of action arose. The respondent
does not dispute the petitioner's averment that the cause of action
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arose on the said dates. If that be so, the claims cannot, prima facie, be
treated as time barred.
65. No doubt, the petitioner had initially sought to agitate the
present claims as counterclaims before the learned Arbitral Tribunal
and on the petitioner's failing to do so within the time granted by the
learned Arbitral Tribunal, the counterclaims were struck off the
record. That cannot, however, be a ground to deny the petitioner the
right to arbitration, treating them as substantive claims. In fact, the
intent of the clarification, contained in para 7 of the order dated 15th
July, 2020, passed by this Court in IA 4320/2020 appears to be
precisely this. In para 2 of the said order, this Court has noted the
contention, of the respondent, that once the petitioner's counterclaims
were struck off the record by the learned Arbitral Tribunal, the
petitioner could not seek to invoke arbitration qua the very same
counterclaims, especially after rejection of its Section 29-A petition.
This submission has, at the very least, not been accepted by this Court
in the order dated 15th July, 2020. Rather, this Court has clarified that
the petitioner had liberty to avail all such remedies as were available
to it in law and that no such remedy stood foreclosed. All that is
required to be seen, therefore, is whether the reference of the
petitioner's claims to arbitration, was a "remedy available to it in
law". If it was, the petitioner is entitled to avail the said remedy in
view of para 7 of the order dated 15th July, 2020 which has attained
finality, never having been challenged.
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66. The judgments of the Supreme Court in Praveen Enterprises2
and A.K.M. Enterprises4, on which Mr. Sharma places reliance, in
my view, are relevant in this context. Para 26 of Praveen
Enterprises2 read thus:
"26. A counter claim by a Respondent pre-supposes the
pendency of proceedings relating to the disputes raised by the
claimant. The Respondent could no doubt raise a dispute (in
respect of the subject matter of the counter claim) by issuing a
notice seeking reference to arbitration and follow it by an
application under Section 11 of the Act for appointment of
Arbitrator, instead of raising a counter claim in the pending
arbitration proceedings. The object of providing for counter
claims is to avoid multiplicity of proceedings and to avoid
divergent findings. The position of a Respondent in an
arbitration proceedings being similar to that of a Defendant
in a suit, he has the choice of raising the dispute by issuing a
notice to the claimant calling upon him to agree for reference
of his dispute to arbitration and then resort to an independent
arbitration proceedings or raise the dispute by way of a
counter claim, in the pending arbitration proceedings."
(Emphasis supplied)
67. A.K.M. Enterprises4, rendered by a Coordinate Bench of this
Court, relies on Praveen Enterprises2 and holds thus:
"11. Be that as it may, in State of Goa (supra), the
Supreme Court has clarified that the object of providing for
counter claims is to avoid multiplicity of proceedings and to
avoid divergent findings. Keeping this object in view, the
respondent in an arbitration proceeding has a choice of
raising the dispute (counter claim) by issuing a notice to the
claimant calling upon him to agree for reference of this
dispute (counter-claim) to arbitration and then resort to an
independent arbitration proceedings or raise the dispute by
way of a counter claim in the pending arbitration
proceedings. The only effect of such counter claim would be
on the issue of limitation."
(Emphasis supplied)
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68. The striking off, from the record, of the counter-claims of the
petitioner does not, in my view invite, in its wake, rejection of the
request of the petitioner to refer the claims to arbitration under Section
11 of the 1996 Act. The counterclaims were filed by the petitioner on
6th July, 2019. (Though Mr. Sibal disputed this fact, the learned
Arbitral Tribunal has, by "striking the counterclaims off the record"
recognized that the counterclaims were on record at the time they
were struck off.) The learned Arbitral Tribunal refused to take the
counterclaims on record unless six months' extension of its mandate
was obtained from this Court. The petitioner, accordingly, filed OMP
(Misc) (Comm) 290/2019, seeking extension of the mandate of the
learned Arbitral Tribunal by six months. For reasons unknown, the
petitioner withdrew the said petition on 26th September, 2019. Even
so, this Court reserved liberty to the petitioner "to pursue the
appropriate remedy that may be available to him in law". In view of
the withdrawal, by the petitioner, of OMP (Misc) (Comm) 290/2019,
the learned Arbitral Tribunal struck the petitioner's counterclaims off
the record. Even while doing so, the learned Arbitral Tribunal
reserved liberty, with the petitioner, to avail such remedy as was
available to it in law.
69. Thereafter, the petitioner issued, to the respondent, a Section 21
notice on 6th May, 2020, seeking reference of its claims to arbitration.
On the respondent refusing to accede, the petitioner moved Arb P
197/2020 before this Court under Section 11. A reading of the order
dated 27th May, 2020, disposing of the said arbitration petition,
discloses that the arbitrability of the petitioner's claims was seriously
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contested by the respondent. (Incidentally, the contentions advanced
by the respondent before this Court on 27th May, 2020 substantially
overlap with the contentions advanced by Mr. Sibal before me.) This
Court noted the contention of the petitioner that, in accordance with
the liberty granted by its earlier order dated 26th September, 2019, the
petitioner had invoked arbitration. Having noted this contention, the
Court permitted the petitioner to withdraw the petition to seek
clarification of the order dated 26th September, 2019 passed in OMP
(Misc) (Comm) 290/2019.
70. IA 4320/2020 was, accordingly, moved by the petitioner,
seeking such clarification. Again, during arguments on IA 4320/2020
on 15th July, 2020, the respondent seriously contested the right of the
petitioner to have its claims referred to arbitration, especially after the
very same claims had earlier been preferred as counter-claims and
struck off the arbitral record. This Court clarified that the petitioner
was at liberty to avail all such remedies as were available to it in law
and no such remedies should stand foreclosed.
71. Having failed to convince this Court regarding the entitlement
of the petitioner to have its claims referred to arbitration on two
occasions, first on 27th May, 2020 and, thereafter, on 15th July, 2020,
the respondent seeks to urge the very same contention, yet again, in
the present proceedings before it - effectively, a third bite at the
cherry.
72. It is not, therefore, as if the learned Arbitral Tribunal had held
the petitioner not to be entitled to prefer its claims. The counterclaims,
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which were earlier on record, were struck off the record only because
of the time constraint within which the learned Arbitral Tribunal
would have to render its award and the withdrawal, by the petitioner,
of OMP (Misc) (Comm) 290/2019. That impediment does not apply,
where the petitioner desires to agitate the claims substantively in
arbitral proceedings. The independent right of the petitioner, to do so,
stands recognized by the Supreme Court in Praveen Enterprises2 and
by this Court in A.K.M. Enterprises4.
73. I cannot, therefore, accept the submission of Mr. Sibal that, the
petitioner was barred from seeking reference of its claims to
arbitration under Section 11 of the 1996 Act, owing to its
counterclaims having been struck off the record by the learned
Arbitral Tribunal.
74. As an ancillary submission, Mr. Sibal contended that, in the
absence of any explanation as to why the petitioner did not move for
referring its claims to arbitration immediately after 6th July, 2019,
when the learned Arbitral Tribunal declined to take the petitioner's
counterclaims on record, or after 26th September, 2019, when the
petitioner withdrew its application for extension of time, the petitioner
ought not to be allowed to seek reference of its claims to arbitration at
this belated stage. He has also relied, in this context, on the words "all
disputes", contained in Clause 26.4 of the ACAs. The use of the
expression "all disputes", contends Mr. Sibal, indicates that all
disputes existing on the date when the respondent referred its claims
to arbitration, were required to be so referred and decided at one go.
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This would include, according to Mr. Sibal, the counterclaims of the
petitioner. In other words, Mr. Sibal's contention is that, when the
respondent referred its claims to arbitration, the petitioner ought also
to have sought reference to its counterclaims to arbitration. Having not
do so, the petitioner cannot now seek reference of its counterclaims to
arbitration. The expression "all disputes" in Clause 26.4, according to
Mr. Sibal, forecloses the petitioner's right to do so. Piecemeal
adjudication of claims of the parties is impermissible. He relies on the
judgment of the Supreme Court in Dolphin Drilling v. O.N.G.C.27
and on the judgment of a Coordinate Single Bench of this Court in
Gammon India6, which followed Dolphin Drilling27. I am unable to
accept the submission.
75. Dolphin Drilling27 is, in my view, clearly distinguishable. The
arbitration clause, in Dolphin Drilling27, read thus:
"28. Settlement Of Disputes
28.1 Except as otherwise provided elsewhere in the
Agreement, if any dispute, difference, question or
disagreement or matter whatsoever shall, before or
after completion or abandonment of work or during
extended period, hereafter arises between the parties
hereto or respective representative or assignees
concerning with the construction, meaning, operation
or effect of the Agreement or out of or relating to the
Agreement or breach thereof shall be referred to
arbitration.
28.2 The reference to arbitration shall be to an
arbitral tribunal consisting of three arbitrators. Each
party shall appoint one arbitrator and the two appointed
arbitrators shall appoint the third arbitrator, who shall
act as the presiding arbitrator.
27 2010 (3) SCC 267
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28.3 The party desiring the settlement of dispute
shall give notice of its intention to go in for arbitration
clearly stating all disputes to be decided by arbitral
tribunal and appoint its own arbitrator and call upon
the other party to appoint its own arbitrator within 30
days. If the other party fails to appoint its arbitrator
within stipulated period or the two arbitrators fail to
appoint the third arbitrator, Chief Justice of High Court
of competent jurisdiction or Chief Justice of India as
the case may be or any person or institution designated
by them shall appoint the Second Arbitrator and/or the
Presiding arbitrator as the case may be."
76. Dolphin Drilling Ltd ("DDL", hereafter) filed an application
under Section 11(6) of the 1996 Act before the Supreme Court, for
reference of the disputes between DDL and ONGC to arbitration.
Notice invoking arbitration, under Section 21, was addressed by DDL
to ONGC on 29th January, 2008. DDL had appointed a former Chief
Justice of India as its arbitrator. ONGC did not respond to the notice.
DDL moved the Supreme Court.
77. While acknowledging the arbitrability of the disputes raised by
DDL, ONGC contended that DDL had, in connection with different
disputes, arising under the same agreement, already invoked the
arbitration clause. ONGC contended, therefore, that DDL could not
invoke the arbitration clause anew, as the remedy of arbitration under
the agreement was a one-time measure.
78. Reliance was placed, for the purpose, on the words "all
disputes", as contained in Clause 28.3.
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79. The Supreme Court rejected the contention. Paras 8 to 10 of the
report read thus:
"8. The plea of the respondent is based on the words
"all disputes" occurring in paragraph 28.3 of the agreement.
Mr. Agrawal 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 28 of the agreement cannot be said to be
a onetime 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.
9. The issue of financial burden caused by the arbitration
proceedings is indeed a legitimate concern but the problem
can only be remedied by suitably amending the arbitration
clause. In future agreements, the arbitration clause can be
recast making it clear that the remedy of arbitration can be
taken recourse to only once at the conclusion of the work
under the agreement or at the termination/cancellation of the
agreement and at the same time expressly saving any
disputes/claims from becoming stale or time-barred etc. and
for that reason alone being rendered non-arbitrable.
10. For the reasons aforesaid I am unable to sustain the
objection raised on behalf of the respondent. In the result, the
application is allowed. The applicant has nominated Justice
S.P. Bharucha, a former Chief Justice of India, as its
arbitrator. Justice Mrs. Sujata V. Manohar, a former judge of
this court, is appointed arbitrator on behalf of the respondent,
subject to her consent and on such terms as she may deem fit
and proper."
(Emphasis supplied)
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80. Clause 28.3 of the contract between ONGC and DDL required
the notice invoking arbitration to clearly state all disputes to be
decided by the learned Arbitral Tribunal and to appoint an arbitrator.
The Supreme Court interpreted this covenant as requiring all disputes,
in existence on the date of notice invoking arbitration to be included in
such notice. Disputes, which arose thereafter could not, however, be
excluded from the arbitral process.
81. Unlike the clause in Dolphin Drilling27, Clause 26.4 of the
ACAs merely required all disputes arising out of or in connection with
the ACAs to be referred for arbitration. There was no requirement of
all such disputes having to be referred in the notice invoking
arbitration issued at the first instance. The principle that all disputes in
existence on the date of issuance of the notice invoking arbitration had
to be referred to arbitration at that stage, cannot, therefore, apply in
the present case, where no such requirement of inclusion of all
existing disputes in the notice invoking arbitration is contained in the
ACAs.
82. Dolphin Drilling27 cannot, therefore, help the respondent.
83. The decision of the Coordinate Bench of this Court in
Gammon India6 supports the case of the petitioner rather than that of
the respondent. In paras 24 and 25 of the decision, this Court has held
thus:
"24. A perusal of the provisions of the Arbitration and
Conciliation Act, 1996 shows that the statute envisages that
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disputes can be raised at different stages and there can be
multiple arbitrations in respect of a single contract. ...... All
these provisions show that there can be multiple claims and
multiple references at multiple stages.
25. Filing of different claims at different stages of a
contract or a project is thus permissible in law, inasmuch as
the contract can be of a long duration and the parties may
wish to seek adjudication of certain disputes, as and when
they arise. Despite this permissibility, multiplicity ought to be
avoided as discussed hereinafter."
84. This Court proceeded, thereafter, to advise against multiple
arbitrations in respect of disputes arising under the same
contract/agreement, to avoid confusion and delay. Thereafter, the
Court proceeded to rely on Dolphin Drilling27 and went on to hold, in
para 33 thus:
"33. A perusal of the above finding of the Supreme Court
clearly shows that the Court has expressed its displeasure
about the arbitration process becoming a highly expensive and
time-consuming means for resolution of disputes. Owing to
the wording of the clause, in the said case, the Supreme Court
referred the parties to arbitration for the second time. The
underlying ratio of Dolphin (supra), on a careful reading, is
that all disputes that are in existence when the arbitration
clause is invoked, ought to be raised and referred at one go.
Though there is no doubt that multiple arbitrations are
permissible, it would be completely contrary to public policy
to permit parties to raise claims as per their own convenience.
While provisions of the CPC do not strictly apply to arbitral
proceedings, the observations of the Supreme Court in
Dolphin (supra) show that when an arbitration clause is
invoked, all disputes which exist at the time of invocation
ought to be referred and adjudicated together. It is possible
that subsequent disputes may arise which may require a
second reference, however, if a party does not raise claims
which exist on the date of invocation, it ought not to be given
another chance to raise it subsequently unless there are legally
sustainable grounds. This is necessary in order to ensure that
there is certainty in arbitral proceedings and the remedy of
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arbitration is not misused by parties. The constitution of
separate arbitral tribunals is a mischief which ought to be
avoided, as the intent of parties may also not be bona fide."
85. Thereafter, this Court proceeded to express the following
opinion:
"i. In respect of a particular contract or a series of
contracts that bind the parties in a legal relationship, the
endeavour always ought to be to make one reference to one
Arbitral Tribunal. The solution proposed by the Supreme
Court (Aftab Alam, J.,) in paragraph 9 of Dolphin (supra)
i.e., to draft arbitration clauses in a manner so as to ensure that
claims are referred at one go and none of the claims are barred
by limitation, may be borne in mind. The said observation in
Dolphin (supra) reads:
"9. The issue of financial burden caused by the
arbitration proceedings is indeed a legitimate concern
but the problem can only be remedied by suitably
amending the arbitration clause. In future agreements,
the arbitration clause can be recast making it clear that
the remedy of arbitration can be taken recourse to
only once at the conclusion of the work under the
agreement or at the termination/ cancellation of the
agreement and at the same time expressly saving any
disputes/claims from becoming stale or time-barred
etc. and for that reason alone being rendered non-
arbitrable."
ii. If under a contract, disputes have arisen and the
arbitration clause is to be invoked, at different stages, the
party invoking arbitration ought to raise all the claims that
have already arisen on the date of invocation for reference to
arbitration. It would not be permissible for the party to refer
only some disputes that have arisen and not all. If a dispute
and a claim thereunder has arisen as on the date of invocation
and is not mentioned, either in the invocation letter or in the
terms of reference, such claim ought to be held as being
barred/waived, unless permitted to be raised by the Arbitral
Tribunal for any legally justifiable/sustainable reasons.
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iii. If an Arbitral Tribunal is constituted for adjudicating
some disputes under a particular contract or a series thereof,
any further disputes which arise in respect of the same
contract or the same series of contracts, ought to ordinarily be
referred to the same Tribunal. The Arbitral Tribunal may
pronounce separate awards in respect of the multiple
references, however, since the Tribunal would be the same,
the possibility of contradictory and irreconcilable findings
would be avoided.
iv. In cases belonging to Category (iii) involving different
parties and the same organisation, where
common/overlapping issues arise, an endeavor could be made
as in the IRCTC cases (supra) to constitute the same
Tribunal. If that is however not found feasible, at least
challenges to the Awards rendered could be heard together, if
they are pending in the same Court.
*****
vi. If there are multiple challenges pending in respect of
awards arising out of the same contract, parties ought to bring
the same to the notice of the Court adjudicating a particular
challenge so that all the challenges can be adjudicated
comprehensively at one go. This would ensure avoiding a
situation as has arisen in the present case where Award Nos.1
and 3 have attained finality and the challenge to Award No.2
continued to remain pending."
86. I have no difficulty in agreeing with the principles enunciated in
para 33 of the Gammon India6, subject, however, to the clear
understanding that these principles, as derived from the judgment of
the Supreme Court in Dolphin Drilling27, would apply where, as in
Dolphin Drilling27, invocation of the arbitration at the first instance is
required, per contract, to embrace all existing claims. It may not,
however, be possible to postulate this as an inflexible rule in a case
where the arbitration clause in the agreement between the parties does
not expressly require reference of all existing disputes to arbitration
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at the initial stage. Where, however, the arbitration clause requires the
notice invoking arbitration to include "all disputes", the expression
"all disputes" must necessarily embrace all disputes in existence on
the date when the notice invoking arbitration is issued. In other words,
if such an express stipulation is contained in the arbitration clause, the
party invoking arbitration cannot seek piecemeal reference of disputes
which were in existence on the date when arbitration was initially
invoked, and refer them to arbitration at different stages. It is required
to include, in the notice invoking arbitration, all existing disputes.
Disputes, which arise thereafter can, however, of course be referred to
arbitration as and when they arise, as Dolphin Drilling27 itself
clarifies.
87. This principle, however, would have no applicability in a
situation in which the two sets of claims being sought to be referred to
arbitration are by different parties to the contract. Neither Dolphin
Drilling27 nor Gammon India6 can, in my view, be understood to me
that, if there are two parties to a contract, one party is necessarily
required to refer its counterclaims to arbitration at the time of
reference to arbitration, by the other party, of its claims, so that the
claims and counterclaims could be adjudicated together "at one go".
Such a proposition would, in my view, be fundamentally erroneous in
law.
88. A party invoking arbitration cannot bifurcate its claims,
choosing to refer some claims at one stage and others at another, if the
contract requires arbitration to be invoked in respect of "all disputes"
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at the initial stage. Even in such a situation, however, the invocation
of arbitration by one party to a contract and the consequent reference
of the claims of that party to arbitration would not require, of
necessity, the opposite party to also simultaneously refer its counter
claims to arbitration. Such a requirement would create chaos in the
arbitral process. One may easily visualize a situation in which, for
example, the claims of one party (let us say, party A) may involve
several contested facts and issues, whereas the claim of the other party
(say, party B) may be, for example, a simple claim for interest. Can it
be said that party A would be bound to refer, to arbitration, all its
claims along with the reference to arbitration of the claims of party B?
Even if the arbitration clause between party A and party B requires all
disputes to be referred to the Arbitral Tribunal at one go, that, in my
view, can only mean that all disputes raised by any one party would
have to be referred simultaneously to arbitration. The reference, by
one party to the contract, of its disputes to arbitration, cannot bind the
other party to simultaneously, or even proximately, also refer its
disputes to arbitration, whether as claims or counter-claims.
89. Of course, in the present case, as I have already noted, the
contract between the parties did not require all disputes to be included
in the notice invoking arbitration, unlike the situation which existed in
Dolphin Drilling27. There was no embargo, therefore, on the
petitioner referring its claims to arbitration at a later stage - or even at
a much later stage - provided the claims were within time.
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90. The submission, of Mr. Sibal, that the petitioner ought to have
referred its claims to arbitration simultaneously with the reference of
the claims of the respondents is, therefore, rejected.
91. Even otherwise, in the peculiar facts of the present case, where
the counter claims were raised by the petitioner before the learned
Arbitral Tribunal, struck off the record and, thereafter, liberty was
reserved with the petitioner to seek all remedies available in law, I do
not think the petitioner can be non-suited on the ground that it did not
initiate the arbitral process, in respect of its claims, prior to the notice
dated 6th May, 2020.
Re. Contention that the petitioner was disentitled from seeking
reference of its claims to arbitration, as the petitioner's counter claims
had been struck off the record by the learned Arbitral Tribunal
92. To support this contention, Mr. Sibal has sought to place
reliance on the judgment of the Supreme Court in Srei Infrastructure
Finance Ltd. v. Tuff Drilling Ltd.12
93. The facts before the Supreme Court, in the said case, were as
follows. Tuff Drilling Ltd. ("Tuff", in short) filed an application
under Section 11 of the 1996 Act, for referring disputes, relatable to
the contract between Srei Infrastructure Finance Ltd ("Srei") and Tuff
to arbitration. As an arbitrator was appointed, the Section 11 petition
was dismissed as not pressed. The arbitrator directed Tuff to file its
statement of claim. On failure of Tuff to do so, the arbitrator
terminated Tuff's claim under Section 25(a) of the 1996 Act.
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94. Tuff filed an application seeking recall of the said order, also
explaining the delay in filing statement of claim. Srei objected to the
maintainability of the application on the ground that, once the
proceedings stood terminated under Section 25(a), the Arbitral
Tribunal had become functus officio. This objection was upheld by
the learned Arbitral Tribunal, and, consequently, the application of
Tuff was rejected on 26th April, 2012.
95. Tuff filed a revision application before the High Court of
Calcutta. The High Court allowed the revision application, holding
that the Arbitral Tribunal enjoyed the power to recall its order. The
matter was, therefore, remanded to the Arbitral Tribunal to decide the
application of Tuff, for recall of the order dated 12th December, 2011,
terminating the arbitral proceedings. Aggrieved by this decision, Srei
appealed to the Supreme Court.
96. The Supreme Court delineated the issues which arose for
consideration thus:
"12.1. (i) Whether the Arbitral Tribunal which has
terminated the proceeding under Section 25(a) due to non-
filing of claim by the claimant has jurisdiction to consider the
application for recall of the order terminating the proceedings
on sufficient cause being shown by the claimant?
12.2. (ii) Whether the order passed by the Arbitral
Tribunal under Section 25(a) terminating the proceeding is
amenable to jurisdiction of the High Court under Article 227
of the Constitution of India?
12.3. (iii) Whether the order passed under Section 25(a)
terminating the proceeding is an award under the 1996 Act so
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as to be amenable to the remedy under Section 34 of the
Act?"
97. The Supreme Court held, on a conjoint reading of Section 23(1)
and Section 25 that, even after terminating the proceedings, on the
party adversely affected showing sufficient cause, the Arbitral
Tribunal was empowered to accept the statement of claim and recall
the order terminating the proceedings. In view thereof, the Supreme
Court held that other issues did not survive for consideration.
98. Clearly, the issues before the Supreme Court in Srei
Infrastructure12 have no similarity whatsoever, with the issue arising
in the present case. I am unable to understand how the said decision is
being cited for the proposition that, once the learned Arbitral Tribunal
has struck the petitioner's counter claim off the record, the petitioner
could not file the said counter claims substantively as fresh claims
referable to arbitration.
99. To my mind, in the absence of any inhibiting factor which finds
specific place in the 1996 Act, or in any judicial authority, the request
for reference of the claims of the petitioner to arbitration cannot be
denied. In its judgment in Vidya Drolia v Durga Trading
Corporation28, the Supreme Court has examined all contours of this
issue in great and exhaustive detail. The said decision - which I have
also had an occasion to examine in some detail in Mahindra Susten
v. NHPC Ltd.29 - holistically read, requires advocates reference, to
arbitration, of nearly every dispute that could be raised, except where
(2021) 2 SCC 1
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the subject matter of the dispute is inherently non-arbitrable in nature,
such as cases relating to sovereign rights, national security or
intellectual property rights in rem. While holding that issues relating
to maintainability and arbitrability of the dispute may be examined by
the Section 11 Court, the Supreme Court has held that these issues,
too, ought appropriately to be left for decision to the Arbitral Tribunal.
Re. Objection regarding non-compliance with Section 26.4
100. Mr. Sibal has also opposed the maintainability of the present
petition on the ground that the petitioner has not exhausted the pre-
arbitration protocol as envisaged by Clause 26.4 of the ACAs. This
Clause contemplates mutual discussion between the parties, within 30
days of receipt of written notice from one party to the other, setting
out the particulars of the dispute or claim. The issuance of the notice
of reference, invoking the arbitral process, is envisaged only where
resolution of the dispute through mutual discussion does not take
place within 30 days of issuance of such notice.
101. Clause 26.4 does not require issuance of a notice, by one party
to the other, calling on the other party to engage in mutual discussion.
All it states that an attempt at resolving the dispute by mutual
discussion should be made within 30 days from receipt of the notice
setting out the dispute. The petitioner had served a Section 21 notice
on the respondent on 6th May, 2020, setting out its claims. In its reply,
dated 14th May, 2020, the respondent questioned the very
maintainability of the petitioner's claims and the referability of the
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claims to arbitration. That apart, Mr. Sharma has correctly pointed out
that the claims of the petitioner were set out, prior to the notice dated
6th May, 2020, even in OMP (Misc) (Comm) 290/2019. The
respondent had, in no uncertain terms, questioned the claims of the
petitioner, even on merits, at every stage. In such circumstances,
relegating the parties to any mutual discussion, at this stage, would
undoubtedly be an empty formality as Mr. Sharma correctly submits.
102. This issue is no longer res integra. A similar objection was
rejected by the Supreme Court in paras 4 and 5 of the report in
Demerara Distilleries17 thus:
"4. The respondent Company further contends that
invocation of the arbitration clause, even if the same is held to
be applicable, is premature as under Clause 3 of the
Agreement, differences are required to be resolved first by
mutual discussions, followed by mediation, and, only on
failure of mediation recourse to arbitration is contemplated. It
is also contended that the disputes raised are not arbitrable
inasmuch as what the petitioners really want is the winding up
of the Company. It is further submitted that the respondent
Company had initiated a proceeding alleging oppression and
mismanagement in the administration of the joint venture
company, which is presently pending before the Company
Law Board. It is stated that, in the said proceedings, the
petitioners have appeared and sought reference to arbitration
under Section 8 of the Act. All the aforesaid facts have not
been stated in the application/petition under Section 11(6) of
the Act. It is on the aforesaid broad basis that the assertions
and the claims made in the present petition have been sought
to be resisted by the respondent.
5. Of the various contentions advanced by the respondent
Company to resist the prayer for appointment of an arbitrator
under Section 11(6) of the Act, the objections with regard the
application being premature; the disputes not being
arbitrable, and the proceedings pending before the Company
Law Board, would not merit any serious consideration. The
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elaborate correspondence by and between the parties, as
brought on record of the present proceeding, would indicate
that any attempt, at this stage, to resolve the disputes by
mutual discussions and mediation would be an empty
formality. The proceedings before the Company Law Board at
the instance of the present respondent and the prayer of the
petitioners therein for reference to arbitration cannot logically
and reasonably be construed to be a bar to the entertainment
of the present application. Admittedly, a dispute has occurred
with regard to the commitments of the respondent Company
as regards equity participation and dissemination of
technology as visualised under the Agreement. It would,
therefore, be difficult to hold that the same would not be
arbitrable, if otherwise, the arbitration clause can be
legitimately invoked. Therefore, it is the objection of the
respondent Company that the present petition is not
maintainable at the instance of the petitioners which alone
would require an in-depth consideration."
(emphasis supplied)
103. In Swiss Timing Limited18, the Supreme Court held that,
where the dispute between the parties could not be settled despite
exhaustive correspondence between them, the invocation of arbitration
could not be treated as premature.
104. NHAI v. PATI-BEL (JV)15 and NHAI v. Bumihiway13, on
which Mr. Sibal relied, deal with arbitration agreements which
envisaged multi-tiered consultative discussions, envisaged as pre-
cursors to initiation of the arbitral process. Where, as in the present
case, the agreement merely refers to mutual discussions, preceding
invocation of arbitration, these decisions would have no applicability.
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105. Haldiram Manufacturing Company14, however, was
undoubtedly a decision in which the arbitration clause merely
envisaged "mutual discussions" with no specified procedure.
Haldiram Manufacturing Company14 cannot, however, be followed
in the light of the subsequent enunciation of the law in Demerara
Distilleries17 with which Haldiram Manufacturing Company14 is
clearly in conflict. Besides after noticing Haldiram Manufacturing
Company14, a Coordinate Bench of this Court in Ravindra Kumar
Verma19 expressed its opinion thus:
"11. Whereas the existence of conciliation or mutual
discussion should not be a bar in seeking to file proceedings
for reference of the matter to arbitration and which is
necessary for preserving rights as envisaged by Section 77 of
the Act, however, since in many contracts there is an effective
need of conciliation etc. in terms of the agreed procedure
provided by the contract, the best course of action to be
adopted is that existence of conciliation or mutual discussion
procedure or similar other procedure though should not be
held as a bar for dismissing of a petition which is filed under
Sections 11 or 8 of the Act or for any legal proceeding
required to be filed for preserving rights of the parties,
however before formally starting effective arbitration
proceedings parties should be directed to take up the agreed
procedure for conciliation as provided in the agreed clause for
mutual discussion/conciliation in a time bound reasonable
period, and which if they fail the parties can thereafter be held
entitled to proceed with the arbitration proceedings to
determine their claims/rights etc."
106. Ravindra Kumar Verma19 has subsequently been followed by
this Court in Siemens20, Baga Brothers21 and JK Technosoft22 and
by me in Kunwar Narayan v. Ozone Overseas Pvt.Ltd.30
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107. The petitioner's request to refer its claims to arbitration cannot,
therefore, be rejected for want of compliance with the pre-arbitratral
protocol envisaged by Clause 26.4 of the ACAs.
Re. Objection to notice of invocation of arbitration not being in
accordance with Clause 26.4
108. Mr. Sibal contends that Clause 26.4 of the ACAs envisages one
of the parties issuing a notice to the other, invoking the arbitral
process and nominating its arbitrator, the second party responding
with its arbitrator within 30 days of such notice and, thereafter, the
two arbitrators appointing a presiding arbitrator. The notice dated 6th
May, 2020, from the petitioner to the respondent is not, therefore, in
terms of Clause 26.4 as the petitioner has not appointed its arbitrator,
but has instead sought reference of the dispute to the existing Arbitral
Tribunal comprising Hon'ble Mudgal, Sodhi and Saron JJ. Such a
request, submits Mr. Sibal, is not in accordance with Clause 26.4. It is
not, therefore, a valid notice invoking arbitration within the meaning
of Section 21 of the 1996 Act.
109. The contention appears, to me, to be no more than hairsplitting.
Mr. Sharma has correctly pointed out that the reference of the
petitioner's claims to the existing Arbitral Tribunal was merely in the
nature of a "proposal". The submission is clearly borne out by para 31
of the notice, which expressly states that it was "proposed on behalf of
our client that the reference be made to the same learned Arbitral
Tribunal in order to avoid multiplicity of proceedings......" It cannot,
therefore, be said that the petitioner had appointed the existing
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Arbitral Tribunal as the Arbitral Tribunal to adjudicate the petitioner's
claims. In fact, by suggesting reference of the petitioner's claims to
the learned Arbitral Tribunal comprising Hon'ble Mudgal, Sodhi and
Saron JJ, the petitioner evinced its intention to appoint Hon'ble Sodhi
J as its arbitrator. Even if, therefore, the notice dated 6th May, 2020
may be regarded as not adhering strictly to the letter of Clause 26.4 of
the ACAs, I am inclined to accept the submission, of Mr. Sharma, that
the notice should be treated as one appointing Sodhi, J. as the
petitioner's arbitrator.
110. I agree, however, with Mr. Sibal that there can be no automatic
reference of the petitioner's claims to the existing Arbitral Tribunal
comprising Hon'ble Mudgal, Sodhi and Saron, JJ. Party autonomy
entitles parties to choose their arbitrators. On either party defaulting
to the agreement in this regard, the other party can, in a Section 11
petition, only request the Court to appoint an arbitrator for the
defaulting party. It cannot insist that the arbitration must be conducted
by a pre-existing Arbitral Tribunal, unless the opposite party consents
to that arrangement.
111. As worded, therefore, the prayer in the present petition, for
referring the petitioner's claims to the existing Arbitral Tribunal
comprising Hon'ble Mudgal, Sodhi and Saron, JJ, cannot be granted.
112. As the notice, dated 6th May, 2020, invoking arbitration also
contained a similar proposal, and in view of my decision to accept the
petitioner's submission that the notice should be treated as one by the
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petitioner appointing Hon'ble Sodhi, J as its arbitrator, I am inclined
to grant the respondent 30 days time [in line with Section 11(4)(a)31 of
the 1996 Act, though the provision may not strictly apply] to appoint
its arbitrator, whereafter the two learned Arbitrators would appoint a
presiding arbitrator.
113. At this point, it becomes necessary to revert to Duro Felguera8.
Duro Felguera8 also emanated from a Section 11 petition. In that
case, the Supreme Court referred the disputes relating to all packages
of the contract between the parties to the same Arbitral Tribunal. Mr.
Sharma sought to rely on this decision to justify his request for
reference of his client's claim to the existing Arbitral Tribunal
comprising Hon'ble Mudgal, Sodhi and Saron, JJ. There is, however,
a fundamental distinction between Duro Felguera8 and the present
case, to which Mr. Sibal has rightly drawn attention. Duro Felguera8
was a case in which Duro Felguera, S.A. appointed its arbitrator, in
accordance with the protocol contained in the agreement between the
parties, and called upon Gangavaram Port Ltd. to do likewise.
Gangavaram Port Ltd. defaulted. Duro Felguera, S.A, therefore,
approached the Court. In such a situation, the right of Gangavaram
Section 11: Appointment of arbitrators:
*****
(4)If the appointment procedure in sub-section (3) applies and
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to
do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days
from the date of their appointment,
the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may
be, the High Court or any person or institution designated by such Court;
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Port Ltd. to choose its arbitrator stood extinguished by virtue of
Section 11(6) of the 1996 Act, as the choice of the arbitrator was then
with the Court. The second party could not object to the arbitrator
chosen by the Court. In the present case, however, the petitioner, in
the notice dated 6th May, 2020, did not nominate its arbitrator. No
occasion, therefore, arose for the respondent to do likewise. The
petitioner sought reference of its claims to the existing Arbitral
Tribunal comprising Hon'ble Mudgal, Sodhi and Saron, JJ. The
respondent objected to the proposal. It is only by the present order
that the said proposal is being treated as a proposal by the petitioner
nominating Sodhi, J as its arbitrator. The right of the respondent to do
likewise cannot, therefore, be denied. It is not open for this Court to
thrust on the respondent any arbitrator, including Saron, J, despite the
respondent having elected for Saron, J, as its arbitrator in the existing
arbitration. That choice, must, in the first instance, rest with the
respondent. I cannot, therefore, follow the course of action which was
followed by the Supreme Court Duro Felguera8 and refer the
petitioner's claims for arbitration to the existing Arbitral Tribunal
comprising Mudgal, Sodhi and Saron, JJ.
114. Save and except to this limited extent, the objection of Mr.
Sibal regarding the prayer for referring the petitioner's claims to the
existing three member Arbitral Tribunal, presided over by Mudgal, J
is rejected.
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SINGH NEGI
15:00:10
Re. objection to filing of a single Section 11 petition
115. The sole surviving objection of Mr. Sibal is regarding the
maintainability of a single arbitration petition, for reference of the
disputes relatable to three ACAs, to arbitration. Interestingly, though
the respondent had filed three Section 11 petitions before this Court,
the statement of claim filed by the respondent before the learned
Arbitral Tribunal was a single consolidated claim. The claim was
trifurcated consequent on directions issued by the learned Arbitral
Tribunal. Having said that, the decision in Duro Felguera8 clearly
requires independent arbitrations for each of the ACAs. At the same
time, the mere fact that the petitioner has filed a consolidated Section
11 petition, instead of filing three separate petitions under Section11,
cannot, in my view, be a ground to reject the petition altogether. I am
fortified by the view expressed by the High Court of Bombay,
speaking through Vazifdar, J (as he then was) in United Shippers5,
which reads thus:
"25. Technically, there are three contracts between the
parties viz. the contracts dated 25th March, 2003, 27th
February, 2004 and the MOU dated 6th April, 2005. The
agreements, however, are between the same parties, are
identical in nature and the arbitration clause in the second
agreement was incorporated in the MOU. In these
circumstances, it would be far too technical to dismiss the
application on the ground that three applications ought to have
been filed. No prejudice whatsoever has been caused to the
Respondent as a result of a composite petition. More
important is the fact that the Applicant justifiably presumed
that the Respondent was willing to have the disputes and
differences under the three agreements referred to the same
sole arbitrator and that the only point of disagreement was as
to the name of the arbitrator. This is evident from the letter
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SINGH NEGI
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dated 24th February, 2006, the relevant portion whereof I
have extracted earlier."
Conclusion
116. For all the aforesaid reasons, the present petition stands
disposed of in the following terms:
(i) The letter dated 6th May, 2020, from the petitioner to the
respondent, shall be treated as a notice of arbitration, appointing
Sodhi, J, as the petitioner's arbitrator, to arbitrate on the claims
of the petitioner.
(ii) The respondent is directed to appoint its nominee
arbitrator within 30 days of receipt, by the respondent, of an
electronic copy of this judgment.
(iii) The two learned Arbitrators would, thereafter, proceed to
appoint the presiding arbitrator.
117. Needless to say, should the parties be agreeable to the
petitioner's claims being decided by the existing Arbitral Tribunal
comprising Hon'ble Mudgal, Sodhi and Saron, JJ, that would be an
eminently advisable course to pursue. It would also aid in expeditious
disposal of the arbitral proceedings. This order would not inhibit the
parties from doing so.
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SINGH NEGI
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118. The present petition stands allowed in the aforesaid terms and
to the aforesaid extent with no orders as to costs.
C. HARI SHANKAR, J.
OCTOBER 12, 2021
dsn/ss/r.bararia/kr
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Digitally Signed By:SUNIL
SINGH NEGI
15:00:10
