Delhi High Court
Aurionpro Solutions Limited vs Government Of Nct Of Delhi Transport ... on 25 October, 2024
Author: Sachin Datta
Bench: Sachin Datta
$~7
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision : 25.10.2024
+ ARB.P. 1489/2024
AURIONPRO SOLUTIONS LIMITED .....Petitioner
Through: Ms. Manasi Chatpalliwar, Mr. Pranav
Proothi and Mr. Aditya Singh,
Advocates.
versus
GOVERNMENT OF NCT OF
DELHI TRANSPORT DEPARTMENT .....Respondent
Through: Mr. Vedansh Vashisht, Advocate.
CORAM:
HON'BLE MR. JUSTICE SACHIN DATTA
SACHIN DATTA, J. (Oral)
1. The present petition under Section 11(6) of the Arbitration and
Conciliation Act, 1996 (hereinafter 'the A&C Act') seeks appointment of a
Sole Arbitrator to adjudicate the disputes between the parties. The disputes
between the parties have arisen in the context of a Master Service
Agreement for implementation of Automatic Fare Collection System, dated
01.10.2020, subsequently amended by way of an amendment agreement
dated 01.09.2021 (hereinafter 'the Agreement'), under which the Petitioner
was appointed as the System Integrator for implementation of Automatic
Fare Collection System in cluster buses in NCT Delhi.
2. A perusal of the Agreement shows that the same contains a dispute
resolution clause as under:-
"25. GOVERNING LAW AND DISPUTE RESOLUTION
(a) This Agreement shall be governed by and construed in accordance
with the laws of India, without giving effect to conflict of law rules.
(b) Any dispute arising out of or in connection with this Agreement or
the SLA shall in the first instance be dealt with in accordance with the
escalation procedure as set out in the Governance Schedule set out as
Schedule V of this Agreement.
(c) Parties agree that they would try to resolve the dispute mutually
through management discussions at various levels. and if not satisfied
with such resolution, the matter would be referred to Deputy
Transport Commissioner and then next level to Commissioner
(Transport)
(d) If not satisfied with the resolution provided by Commissioner
(Transport), disputes or differences shall be referred for adjudication
through arbitration by a sole arbitrator appointed by Commissioner
(Transport).
(e) Further, within thirty (30) days of receipt of such notice from
either party, any dispute or difference whatsoever arising between the
parties to this Contract out of or relating to the construction,
meaning, scope, operation or effect of this Contract or the validity of
the breach thereof shall be referred to a sole Arbitrator. There shall
be a single arbitrator with the following preference - Retired High
court judge; Retired Chief Secretary of Govt.; Retired Joint Secretary
or above rank from Govt. of India. If the parties cannot agree on the
appointment of the Arbitrator within a period of one month from the
notification by one party to the other of existence of such· dispute,
then the Arbitrator shall be appointed by the High Court of New
Delhi, India. The provisions of the Arbitration and Conciliation Act,
1996 will be applicable and the award made there under shall be final
and binding upon the parties hereto, subject to legal remedies
available under the law. Such differences shall be deemed to be a
submission to arbitration under the Indian Arbitration and
Conciliation Act, 1996, or of any modifications, Rules or re-
enactments thereof. The Arbitration proceedings will be held Delhi,
India. Any legal dispute will come under the sole jurisdiction of New
Delhi, India.
(f) The award of the Arbitrator shall be final and binding as per
Arbitration and Conciliation Act 1996. The cost of Arbitration
proceeding shall be equally borne by the Parties.
(g) The Arbitrator with the written consent of the parties can extend
the time to make and publish his award as per Arbitration
Conciliation Act, 1996.
(h) The venue of the arbitration proceeding shall be New Delhi.
(i) Compliance with laws: Each party will comply with all applicable
export and import laws and regulations.
(j) Risk of Loss: For each hardware item, System Integrator bears the
risk of loss or damage up to the time it is delivered to the System
lntegrator/TRANSPORT DEPARTMENT-GNCTD-designated carrier
for shipment to TRANSPORT DEPARTMENT-GNCTD or
TRANSPORT DEPARTMENT GNCTD' s designated location.
(k) Third party components: System Integrator will provide all third-
party components solely on a pass through basis in accordance with
the relevant third-party terms and conditions."
3. According to the petitioner, the disputes between the parties have
arisen on account of the fact that despite the petitioner having carried out its
contractual obligations and having concluded 98% of its performance
obligations, it has not been paid its contractual dues. Further, on 07.06.2024,
a termination order was issued by the respondent. The respondent also
invoked the petitioner's performance bank guarantees submitted in terms of
the Agreement.
4. It is also disclosed that the petitioner had also filed a petition under
Section 9 of the A&C Act pursuant to invocation of the performance bank
guarantees by the respondent, which was disposed of by this Court,
specifically noting that it shall be open to the petitioner to agitate its disputes
before the Arbitrator to be appointed in terms of the aforesaid dispute
resolution clause.
5. A perusal of the dispute resolution clause reveals that prior to
invocation of the arbitration, it is contemplated that the parties would make
an attempt to resolve the disputes through mutual discussions. In the regard,
reference is apposite to certain judgments rendered by this Court wherein it
has been held that any prescription in a dispute resolution clause which
requires the parties to exhaust amicable resolution process/conciliation etc.,
are directory and not mandatory.
6. In the case of Oasis Projects Ltd. v. National Highway &
Infrastructure Development Corporation Limited 2023 SCC OnLine Del
645, it was held as under:-
"12. The primary issue to be decided in the present petition is, therefore,
as to whether it was mandatory for the petitioner to resort to the
Conciliation process by the Committee before invoking arbitration.
Though Article 26.2 clearly states that before resorting to arbitration, the
parties agree to explore Conciliation by the Committee, in my opinion,
the same cannot be held to be mandatory in nature. It needs no
emphasis that Conciliation as a Dispute Resolution Mechanism must be
encouraged and should be one of the first endeavours of the parties when
a dispute arises between them. However, having said that, Conciliation
expresses a broad notion of a voluntary process, controlled by the parties
and conducted with the assistance of a neutral third person or persons. It
can be terminated by the parties at any time as per their free will.
Therefore, while interpreting Article 26.2, the basic concept of
Conciliation would have to be kept in mind."
(emphasis supplied)
7. In Kunwar Narayan v. Ozone Overseas Pvt. Ltd. 2021: DHC: 496, it
was held as under:-
"5. Ms. Pahwa, learned Counsel for the respondents submitted that her
only objection, to the petition, was that the petitioner has not exhausted
the avenue of amicable resolution, contemplated by Clause 12 of the Share
Buyback Agreement. I am not inclined to agree with this submission. The
recital of facts, as set out in the petition, indicate that efforts at trying to
resolve the disputes, amicably were made, but did not succeed. Even
otherwise, the Supreme Court in Demarara Distilleries
Pvt. Ltd. v. Demerara Distilleries Ltd. and this Court, in its judgment
in Ravindra Kumar Verma v. BPTP Ltd., opined that relegation of the
parties to the avenue of amicable resolution, when the Court is moved
under Section 11(6) of the 1996 Act, would be unjustified, where such
relegation would merely be in the nature of an empty formality. The
arbitration clause in the present case does not envisage any formal
regimen or protocol for amicable resolution, such as issuance of a notice
in that regard and completion of any stipulated time period thereafter,
before which arbitral proceedings could be invoked. In the absence of any
such stipulation, I am of the opinion, following the law laid down in
Demarara Distilleries Pvt. Ltd. and Ravindra Kumar Verma v. BPTP Ltd.
nothing worthwhile would be achieved, by relegating the parties to
explore any avenue of amicable resolution. Besides, the appointment of an
arbitrator by this Court would not act as an impediment in the parties
resolving their disputes amicably, should it be possible at any point of
time."
8. While placing reliance on the aforementioned judgments, this Court in
Ranjit Construction Company v. Gujarat State Road & Building
Department and Others, 2023 SCC OnLine Del 3905, rejected the
contention of one of the parties that, before resorting to arbitration, it was
mandatory for the parties to exhaust the prescribed pre-arbitral conciliation
mechanism.
9. Also, in a very recent case, Jhajharia Nirman Ltd. v. South Western
Railways, 2024:DHC:7801, this Court has reiterated that clauses in
arbitration agreements requiring parties to engage in pre-arbitral dispute
resolution processes, such as amicable settlement or conciliation, are
directory in nature and not mandatory.
10. The existence of the arbitration agreement is apparent from the
perusal of the Clause 25(e) of the Agreement between the parties. In view of
the judgments of the Supreme Court in Interplay between Arbitration
Agreements under the Arbitration & Conciliation Act, 1996 & the Indian
Stamp Act, 1899, In re, 2023 SCC OnLine SC 1666, and in SBI General
Insurance Co. Ltd. v. Krish Spinning, 2024 INSC 532, it is incumbent on
this Court to appoint an independent Sole Arbitrator to adjudicate the
disputes between the parties.
11. Accordingly, Ms. Justice (Retd.) Deepa Sharma, Former Judge, Delhi
High Court (Mob. No.:9910384631) is appointed as the Sole Arbitrator to
adjudicate the disputes between the parties.
12. It is also agreed by the parties that any preliminary/jurisdictional
objection raised by the respondent including as to whether the claim sought
to be raised by the petitioner are barred by limitation or otherwise, shall be
considered and decided by the Arbitrator at the outset before adjudicating
the disputes on merit. It is directed accordingly.
13. The learned Sole Arbitrator may proceed with the arbitration
proceedings subject to furnishing to the parties requisite disclosure as
required under Section 12 of the A&C Act.
14. It is agreed between the parties that the arbitration shall take place
under the aegis of and under the rules of Delhi International Arbitration
Centre (DIAC). It is directed accordingly.
15. It is clarified that this Court has not expressed any opinion as regards
merits of the respective contentions of the parties, on the merits of the
matter.
16. The present petition stands disposed of in the above terms.
SACHIN DATTA, J
OCTOBER 25, 2024/at
