Delhi High Court
Irb Chitradurga Tollway Private ... vs National Highways Authority Of ... on 16 March, 2022
$~3 (2020)
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 16th March, 2022
+ ARB.P. 573/2019
IRB CHITRADURGA TOLLWAY PRIVATE LIMITED
(EARLIER KNOWN AS IRB TUMKUR CHITRADURGA
TOLLWAY PRIVATE LIMITED ..... Petitioner
Through Mr. Saurabh Kirpal, Sr. Adv.
with Mr. Parthiv Goswami, Mr.
H.P. Chaturvedi, Mr. Sarthak
Sachdev, Mr. Apoorva Agarwal
& Ms. Teresa R. Daulat, Advs.
Versus
NATIONAL HIGHWAYS AUTHORITY
OF INDIA ..... Respondent
Through Mr. Ankur Mittal, Mr. Abhay
Gupta & Mr. Debojyoti
Sengupta, Advs.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
VIBHU BAKHRU, J. (ORAL)
1. The petitioner has filed the present petition under Section 11(6)
of the Arbitration & Conciliation Act, 1996 (hereafter the 'A&C Act'),
inter alia, praying that an Arbitrator be appointed to adjudicate the
disputes between the parties.
2. The parties had entered into a Concession Agreement dated
16.08.2010 for six-laning of the Tumkur-Chitradurga section from
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KM 75 to KM 189 of National Highway-4 in the state of Karnataka
and for operation and maintenance of the Project Highway for a period
of 26 years on 'Design Build Finance Operate Transfer Basis'.
3. In terms of the aforesaid Concession Agreement, the petitioner
was required to pay a premium of ₹140.40 crores to the respondent for
each year with an annual increase at the rate of 5%. The petitioner
states that there was revenue shortfall from the realization of the
project. Similar issues were also faced by other Concessionaires.
4. In this backdrop, the Central Government floated a 'Premium
Deferent Scheme' by a Circular dated 04.03.2014. It is stated that in
terms of the said Scheme, the premium payment to the extent of
shortfall was deferred to a later stage. The petitioner applied to avail
benefit of the said Scheme and sought modification of the terms of
payment of premium as agreed under the Concession Agreement. The
respondent by a letter dated 06.06.2014 approved the same and
granted deferment of the premium to the extent of the revenue
shortfall as projected.
5. The petitioner states that in terms of Clause 3(b) of the Scheme,
interest at the rate of 2% per annum above the bank rate, was payable
on the deferred premium amounts.
6. Thereafter on 06.06.2014, the parties entered into a
Supplementary Agreement.
7. Certain disputes have arisen between the parties with regard to
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the shortfall of revenue. The petitioner claims that shortfall of revenue
was required to be re-evaluated and, on such re-evaluation, it was
found that the shortfall was higher than the earlier projected shortfall.
This is contested by the respondent. The respondent claims that the
revenue deficit was lesser by more than 5% of the projected revenue
and therefore, has demanded additional premium from the petitioner.
8. In view of the disputes between the parties, the petitioner
invoked the Dispute Resolution Mechanism as provided under Article
44.2 of the Concession Agreement and sought resolution of the
disputes by conciliation. According to the petitioner, the conciliation
proceedings were not successful and by a letter dated 03.05.2019, the
petitioner declared that the conciliation proceedings had failed. The
petitioner invoked the Arbitration Agreement in terms of Article 44.3.
of the Conciliation Agreement and also nominated an Arbitrator. It is
stated that certain meetings were held between the parties, however,
NHAI has failed to appoint an Arbitrator.
9. In the meanwhile, the petitioner filed a petition under Section 9
of the A&C Act [being OMP(I)(COMM) no.270/2019]. The said
petition was allowed and certain interim reliefs were granted to the
petitioner.
10. Article 44.3 of the Concession Agreement reads as under:
"44.3 Arbitration
44.3.1 Any Dispute which is not resolved amicably
by conciliation, as provided in Clause 44.2,
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shall be finally decided by reference to
arbitration by a Board of Arbitrators
appointed in accordance with Clause 44.3.2.
Such arbitration shall be held in accordance
with the Rules of Arbitration of the
International Centre for Alternative Dispute
Resolution, New Delhi (the "Rules"), or
such other rules as may be mutually agreed
by the parties, and shall be subject to the
provisions of the Arbitration Act. The
venue of such arbitration shall be Delhi, and
the language of arbitration proceedings shall
be English.
44.3.2 There shall be a Board of three arbitrators,
of whom each Party shall select one and the
third arbitrator shall be appointed by the
two arbitrators so selected, and in the event
of disagreement between the two arbitrators,
the appointment shall be made in
accordance with the Rules.
44.3.3 The arbitrators shall made a reasoned award
(the "Award"). Any Award made in any
arbitration held pursuant to this Article 44
shall be final and binding on the Parties as
from the date it is made, and the
Concessionaire and the Authority agree and
undertake to carry out such Award without
delay.
44.3.4 The Concessionaire and the Authority agree
that an Award may be enforced against the
Concessionaire and / or the Authority, as the
case may be, and their respective assets
wherever situated.
44.3.5 This Agreement and the rights and
obligations of the Parties shall remain in full
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force and effect, pending the Award in any
arbitration proceedings hereunder."
11. The respondent has opposed the present petition on the ground
that the disputes relate to the Supplementary Agreement and there is
no agreement to refer such disputes to arbitration; the Supplementary
Agreement does not include an arbitration clause.
12. The petitioner contends that the Supplementary Agreement is in
addition to and forms a part of the Concession Agreement and
therefore, the disputes between the parties arise in connection with the
Concession Agreement. He submitted that mere deferment of the
premium payable under the Concession Agreement does not constitute
a separate agreement disjunct from the Concession Agreement.
13. Mr. Kripal, learned senior counsel appearing for the petitioner,
also referred to the decision of a Coordinate Bench of this Court in
OMP(I)(COMM) No.270/2019 captioned IRB Tumkur Chitradurga
Tollway Ltd. v. National Highways Authority of India. On the
strength of the said decision, he submitted that the Coordinate Bench
of this Court has taken a prima facie view as to the existence of the
Arbitration Agreement after considering the rival contentions in this
regard. He further submitted that the question whether the disputes are
arbitrable is itself required to be considered by the Arbitral Tribunal
following the doctrine of kompetenz-kompetenz.
14. The learned counsel for the respondent states that the aforesaid
decision is a subject matter of appeal before the Division Bench of this
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Court in FAO(OS)(COMM) No.24/2020. However, it is conceded
that no order of stay is granted in the said appeal.
15. At this stage (referral stage), the Court is required to take a
prima facie view as to the existence of an Arbitration Agreement. It is
only in cases where the Court conclusively finds that an arbitration
agreement does not exist, that the reference of the disputes to
arbitration is required to be denied.
16. The Law Commission of India in its 246 th Report had referred
to the decision of the Supreme Court in Shin-Etsu Chemical Co.
Ltd. v. Aksh Optifibre Ltd.: (2005) 7 SCC 234 and observed as
under:-
"32. In relation to the nature of intervention, the
exposition of the law is to be found in the decision of the
Supreme Court in Shin-Etsu Chemical Co. Ltd. v. Aksh
Optifibre Ltd. [Shin-Etsu Chemical Co. Ltd. v. Aksh
Optifibre Ltd., (2005) 7 SCC 234], (in the context of
Section 45 of the Act), where the Supreme Court has
ruled in favour of looking at the issues/controversy only
prima facie.
33. It is in this context, the Commission has
recommended amendments to sections 8 and 11 of the
Arbitration and Conciliation Act, 1996. The scope of the
judicial intervention is only restricted to situations where
the Court/Judicial Authority finds that the arbitration
agreement does not exist or is null and void. In so far as
the nature of intervention is concerned, it is
recommended that in the event the Court/Judicial
Authority is prima facie satisfied against the argument
challenging the arbitration agreement, it shall appoint the
arbitrator and/or refer the parties to arbitration, as the case
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may be. The amendment envisages that the judicial
authority shall not refer the parties to arbitration only if it
finds that there does not exist an arbitration agreement or
that it is null and void. If the judicial authority is of the
opinion that prima facie the arbitration agreement exists,
then it shall refer the dispute to arbitration, and leave the
existence of the arbitration agreement to be finally
determined by the arbitral tribunal. However, if the
judicial authority concludes that the agreement does not
exist, then the conclusion will be final and not prima
facie. The amendment also envisages that there shall be a
conclusive determination as to whether the arbitration
agreement is null and void. In the event that the judicial
authority refers the dispute to arbitration and/or appoints
an arbitrator, under sections 8 and 11 respectively, such a
decision will be final and non-appealable. An appeal can
be maintained under section 37 only in the event of
refusal to refer parties to arbitration, or refusal to appoint
an arbitrator."
17. The aforesaid view was also accepted by the Supreme Court in
Vidya Drolia v. Durga Trading Corporation: (2021) 2 SCC 1. In the
present case, prima facie existence of the Arbitration Agreement is
accepted by the Coordinate Bench of this Court in the proceedings
instituted under Section 9 of the A&C Act.
18. In view of the above, this Court considers it apposite to allow
the present petition.
19. Accordingly, Justice (Retd.) Balbir Singh Chauhan
(Mob.9717393516), a former Judge of the Supreme Court, is
appointed as the Arbitrator on behalf of the respondent-NHAI. In
terms of Arbitration Clause, the two nominated Arbitrators shall
appoint the third Arbitrator for constitution of the Arbitral Tribunal as
expeditiously as possible.
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20. It is clarified that this is subject to the learned Arbitrators
making the necessary disclosure as required under Section 12(1) of the
A&C Act and not being ineligible under Section 12(5) of the A&C
Act.
21. It is further clarified that all rights and contentions of the parties
are reserved including the existence of the Arbitration Agreement and
the arbitrability of the disputes.
22. The petition is disposed of in the aforesaid terms.
VIBHU BAKHRU, J
MARCH 16, 2022
'gsr' Click here to check corrigendum, if any
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