Delhi High Court
Rites Ltd vs Apex Construction Company ... on 6 January, 2022
$~3(2020)
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 6th January, 2022
+ O.M.P. (COMM) 24/2020 & IA Nos.634/2020 & 635/2020
RITES LTD. ..... Petitioner
Through Mr. G. S. Chaturvedi, Adv.
Versus
APEX CONSTRUCTION COMPANY THROUGH ITS
MANAGING DIRECTOR & ANR ..... Respondent
Through Mr. Kunwar Chandresh, Adv.
for R-1.
Ms. Nupur Agrawal, Adv. for
R-2.
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
[Hearing Held Through Videoconferencing]
VIBHU BAKHRU, J (ORAL)
1. The petitioner (hereafter 'RITES') has filed the present petition
under Section 34 of the Arbitration & Conciliation Act, 1996
(hereafter 'the A&C Act'), inter alia, impugning the orders dated
28.09.2019 and 20.12.2019 passed by the Arbitral Tribunal.
2. By the order dated 28.09.2019, the Arbitral Tribunal noted that
RITES was also a Power of Attorney holder of Delhi Police
(respondent no.2) and held that since it had, acting as an agent of
respondent no. 2, proceeded with the defence in arbitration without the
independent participation of respondent no.2, it could not insist on
separate participation by respondent no.2. Further, the Arbitral
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Tribunal also observed that participation of respondent no. 2 was
optional. The Arbitral Tribunal directed the parties to submit the
claims and counter-claims by 08.10.2019.
3. By the impugned order dated 20.12.2019, the Arbitral Tribunal
rejected the application of RITES to separately implead respondent
no.2 principally on two grounds. First, that the reference required the
Arbitral Tribunal to decide the disputes between respondent no.1 and
RITES, which was defending the claims on behalf of respondent no. 2.
And second, that RITES had also proceeded with submitting the
Statement of Defence; submission of counter-claims; acceptance and
denial of documents; and submission of draft issues.
4. Mr. Chaturvedi, learned counsel appearing for RITES, states
that the said order is required to be treated as an interim award and
therefore, is amenable to challenge under Section 34 of the A&C Act.
5. The learned counsels for the respondents contest the same and
submit that the order passed by the Arbitral Tribunal is merely an
order and cannot be construed as an arbitral award (either final or
interim).
Factual Context
6. RITES had floated a tender in the month of September, 2011
inviting offers for construction of Delhi Police Housing at Sector 11,
Rohini, Delhi. According to RITES, it had done so on behalf of
respondent no.2.
7. On 30.09.2011, respondent no.1 (hereafter 'Apex') submitted its
tender, which was opened on 27.01.2012. Subsequently, by a Letter of
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Acceptance dated 28.02.2012, RITES accepted the bid submitted by
Apex. It claims that it did so as an agent / Power of Attorney holder
of respondent no.2. RITES and Apex entered into an Agreement dated
16.04.2012 for execution of the said works (hereafter 'the
Agreement'). The opening paragraph of the Agreement indicates that
RITES had entered into the Agreement "acting for and on behalf of
and as an Agent / Power of Attorney Holder of Delhi Police, Delhi".
Delhi Police (respondent no.2) was referred to as the 'Employer'.
8. The Conditions of Contract as applicable to the Agreement
includes an arbitration clause. The relevant extract of the Arbitration
Clause is set out below:
"CLAUSE 25
Settlement of Disputes & Arbitration
Except where otherwise provided in the Contract all
questions and disputes relating to the meaning of the
specifications, design, drawings and instructions
hereinbefore mentioned and as to the quality of
workmanship or materials used on the work or as to
any other question, claim, right matter or thing
whatsoever in any way arising out of or relating to
the Contract, designs, drawings, specifications,
estimates, instructions, orders or these conditions or
otherwise concerning the works or the execution or
failure to execute the same whether arising during
the progress of the work or after the cancellation,
termination, completion or abandonment thereof
shall be dealt with as mentioned hereinafter:
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RAWAL
1) If the Contractor considers any work demanded of
him to be outside the requirements of the Contract or
disputes any drawings, record or decision given in
writing by the Engineer on any matter in connection
with or arising out of the Contract or carrying out of
the work to be unacceptable, he shall promptly
within 15 days request the Engineer-in-Charge in
writing for written instruction or decision.
Thereupon, the Engineer-in-Charge shall give his
written instructions or decision within a period of
one month from the receipt of the Contractor's letter.
If the Engineer-in-Charge fails to give his
instructions or decision in writing within the
aforesaid period or if the Contractor is dissatisfied
with the Instructions or decision of the Engineer-in-
Charge, the contractor may, within 15 days of the
receipt of the Engineer-in-Charge decision, appeal to
the Appellate Authority specified in Schedule 'F'
who shall afford an opportunity to the Contractor to
be heard, if the latter so desires, and to offer
evidence in support of his appeal. The Appellate
Authority shall give his decision within 30 days of
receipt of Contractor's appeal. If the Contractor is
dissatisfied with this decision, the Contractor shall
within a period of 30 days from receipt of the
decision, give notice to the Accepting Authority
specified in Schedule 'F' for appointment of
arbitrator failing which the said decision shall be
final binding and conclusive and liable to
adjudication by the Arbitrator.
2) Except where the decision has become final, binding
and conclusive in terms of Sub Para (1) above,
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disputes or difference shall be referred for
adjudication through arbitration by a sole arbitrator
appointed by the Accepting Authority. The selection
of Arbitrator by the Accepting Authority will be
governed by the fact whether the dispute is (i)
between two Public Sector Enterprises or (ii)
between a Public Sector Enterprise and a
Government Department or (iii) Otherwise.
In case the disputes does not fall under item (i) or (ii)
of this Para the Accepting Authority, shall appoint
the sole Arbitrator within 30 days of receipt of notice
from the Contractor to refer the dispute for
Arbitration, the Accepting Authority stipulated in
Schedule F shall send to the Contractor a list of three
serving officers of RITES of appropriate status
depending on the total value of claim, who have not
been connected with the work under the Contract.
The Contractor shall, within 15 days of receipt of
this list select and communicate to the Accepting
Authority, the name of one officer from the list who
shall then be appointed as the Sole Arbitrator. If the
Contractor fails to communicate his selection of
name within the stipulated period, the Accepting
Authority shall without delay, select one officer from
the list and appoint him as the Sole Arbitrator.
**** **** ****
6) Parties to be impleaded in the arbitration
proceedings.
In case of any claims by the Contractor, the
Employer as well as RITES Ltd acting as Agent to
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the Employer will implead themselves as parties to
the Arbitration Proceedings."
9. By a letter dated 03.06.2019, Apex invoked the Arbitration
Clause and requested the Executive Director (The Accepting
Authority) to appoint an arbitrator.
10. By a letter dated 01.07.2019, RITES forwarded the names of all
persons on its panel to Apex and by a letter dated 03.07.2019, Apex
chose Mr Arvind Kumar Arora to be appointed as the Arbitrator.
Accordingly, by a letter dated 11.07.2019, RITES appointed Mr
Arvind Kumar Arora as the Sole Arbitrator "...to decide and make his
award regarding claims/disputes by the contractor as well as
counterclaims of RITES, if any, arising out of the same contract..."
11. On 24.09.2019, RITES made a representation to the Arbitral
Tribunal to implead Delhi Police (respondent no.2), which was
rejected by the impugned order dated 28.09.2019.
12. Thereafter, RITES informed respondent no. 2 about the
progress of the arbitration and requested for legal fees for pursuing the
proceedings, which was declined by respondent no. 2.
13. On 19.12.2019, RITES made another application to the Arbitral
Tribunal for impleading Delhi Police (respondent no. 2), which was
rejected by the impugned order dated 20.12.2019.
14. Aggrieved by the same, RITES has filed the present petition.
Reasons and Conclusion
15. It is clear from the Agreement entered into between the parties
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RAWAL
that RITES had entered into the Agreement with Apex on behalf of
Delhi Police (respondent no.2) as its Power of Attorney Holder. A
copy of the Power of Attorney has also been placed on record.
16. This Court in RPP Constructions (P) Ltd. v. RITES Ltd.: 2017
SCC OnLine Del 6464 has considered a similar controversy, whether
an Employer was required to be made a party to the arbitral
proceedings. The relevant extract of the said decision is set out below:
"16. At the outset it is necessary to note that the tenders
were invited by RITES on behalf of Sri Lankan Railways.
The opening words of the notice inviting tenders clearly
indicated that tenders were invited by "RITES LIMITED
for and on behalf of SRI LANKA RAILWAYS". The LOA
dated 08.02.2010 also clearly indicated that RIPL's tender
had been accepted by the Competent Authority of RITES
LIMITED "in its capacity as an Agent/Power of Attorney
Holder acting for and on behalf of Sri Lankan Railway".
17. The Agreement also clearly stated that the agreement
was entered into by RITES for and on behalf of Sri Lankan
Railways who was referred to as the "employer". The
opening paragraph of the Agreement which describes the
parties thereto reads as under:-
"THIS AGREEMENT is made on 7th day of May
Two thousand Ten between RITES Ltd. a
Government of India Enterprise and a Company
registered under Companies Act, 1856 having its
registered office at SCOPE Minar, Laxmi Nagar,
(Delhi) - 110092 and its Corporate Office at
RITES BHAWAN, Plot No.1, Sector 29, Gurgaon
(Haryana) representing through General Manager,
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RITES LIMITED for and on behalf of Sri Lankan
Railways hereinafter called the Employer (which
expression shall, wherever the context so demands
or requires, include their successors in office and
assigns) on one part and M/s R. P. P.
Constructions (P) Ltd., P&C Tower, 3rd floor
No.140, Perundurai Road, Erode-638011, Tamil
Nadu, India hereinafter called the Contractor
(which expression shall wherever the context so
demands or requires, include his/their successors
and assigns) of the other part."
18. The Agreement was also signed by RITES "in the
capacity of Agent and Power of Attorney Holder for and on
behalf of Sri Lankan Railways (The Employer)". It is
apparent from the above that RITES was not a party to the
Agreement and the Agreement was only between RIPL and
Sri Lankan Railways. Although, RITES had a significant
role to play in the execution of the works, the same was
only in its capacity as an Agent and a Power of Attorney
Holder of Sri Lankan Railways.
**** **** ****
29. It is not RIPL‟s case that there is no privity of
contract with Sri Lankan Railways. Clearly, the Agreement
is between RIPL and Sri Lankan Railways albeit acting
through RITES.
30. Having stated above, at this stage, the only limited
question to be examined is whether Sri Lankan Railways is
a necessary party to the arbitration. In my view, the express
terms of sub clause (6) of Clause 25 of GCC clinches the
issue; it expressly provides that RITES acting as an Agent
to the Employer as well as the Employer will implead
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RAWAL
themselves as parties to the arbitration proceedings. In
view of this express clause, it is no longer open for RIPL to
contend that Sri Lankan Railways is not a necessary party
to the disputes sought to be referred to arbitration. Thus,
plainly, the arbitration would fall within the definition of
"International Commercial Arbitration" as given in Section
2(1)(f) of the Act and, therefore, by virtue of 11(9) of the
Act, an application for appointment of an Arbitrator can
only be made to the Supreme Court and not this Court."
17. The observations made by this Court in the aforesaid decision
are also clearly applicable in the facts of the present case. However, it
is material to note that the said decision was rendered in a petition
filed under Section 11 of the A&C Act.
18. Having stated the above, this Court is also of the view that the
present petition is not maintainable as the impugned orders are not
arbitral awards. The Arbitral Tribunal has merely rejected the
application of RITES seeking impleadment of respondent no.2 as the
same was beyond the terms of reference.
19. The Arbitral Tribunal may not have the jurisdiction to suo motu
implead any party to the arbitral proceedings. As noted above, the
learned Sole Arbitrator was appointed by RITES to adjudicate the
"claims/disputes by the contractor as well as counterclaims of
RITES". The Arbitral Tribunal had noted that RITES had proceeded
with the arbitration.
20. It is also open for any of the parties to seek appointment of an
arbitrator for adjudication of disputes between the parties if a party is
not willing to concur on the appointment of a sole arbitrator. However,
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once the arbitrator is appointed, he is bound by the reference and it is
not permissible for him to go beyond the same.
21. Mr. Chaturvedi, referred to the decision of a Coordinate Bench
of this Court in HLS Asia Limited v. Geopetrol International Inc. &
Ors.: 2012 SCC OnLine Del 5833, in support of his contention that an
order rejecting the application of RITES for impleadment of
respondent no.2 would be an interim award. The said contention is
unpersuasive. The decision in HLS Asia Limited v. Geopetrol
International Inc. & Ors. (supra) was rendered in an appeal under
Section 37 of the A&C Act against an order dated 29.05.2012. More
importantly, in that case, the arbitral tribunal had accepted the
application of NTPC Ltd. - one of the parties to the arbitral
proceedings - to be deleted as a party to the arbitral proceedings. The
import of that order was clearly the termination of the claim against
NTPC. This would be a final decision and would amount to rejecting
the claim made by the claimant against NTPC.
22. In the present case, the decision of the Arbitral Tribunal to not
implead respondent no.2 as a party does not in any manner terminate
the claim against respondent no.2. It is the case of RITES that it is
defending the arbitral proceedings on behalf of respondent no.2 and
the Arbitrator has accepted the same. Respondent no. 2 has not
challenged the decision of the Arbitral Tribunal to accept RITES as its
agent.
23. In view of the above, the present petition is disposed of. It is
clarified that RITES as well as Apex would be well within their rights
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to seek appropriate remedies to include respondent no.2 as a party
independent of RITES.
24. The petition is accordingly, disposed of.
VIBHU BAKHRU, J
JANUARY 6, 2022
'gsr'/v
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By:DUSHYANT
RAWAL
