Madras High Court

M/S.Kpm Constructions Co vs M/S.Tirunelveli Smart City ... on 9 March, 2022

                                                                          Arb.O.P (Com.Div).No.189 of 2021


                                  IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                     Dated : 09.03.2022

                                                          Coram

                                  THE HONOURABLE MR. JUSTICE M.SUNDAR

                                           Arb.O.P (Com.Div).No.189 of 2021


                    M/s.KPM Constructions Co.
                    Represented by its Managing Partner
                    Mr.K.P.Mohanasundaram
                    S/o.Late K.Palanisamy
                    Having office at No.159, Mangalam Road
                    Tirupur – 641604.                                              ... Petitioner

                                                            vs.

                    M/s.Tirunelveli Smart City Limited
                    Represented by its Managing Director
                    Tirunelveli City Municipal Corporation
                    S.N.High Road, Tirunelveli – 627001.                           ... Respondent

                    Prayer:
                              Arbitration Original Petition filed under Section 11(6) of Arbitration
                    and Conciliation Act, 1996 r/w Section 2(1)(c)(vi) of the Commercial
                    Courts Act, 2015 to appoint arbitrators to adjudicate the disputes between
                    the petitioner and the respondent in terms of the arbitration agreement
                    dated 02.12.2019 and direct the respondent to pay the costs.
                              For Petitioner     :   Mr.J.Vinodh,
                                                              for Mr.K.Raja

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https://www.mhc.tn.gov.in/judis
                                                                       Arb.O.P (Com.Div).No.189 of 2021



                              For Respondent    : Mr.Edwin Prabhakar, Spl.G.P.,

                                                      ORDER

Captioned Arb OP has been presented in this Court on 09.09.2021

under Section 11(5) of 'The Arbitration and Conciliation Act, 1996 (Act

No.26 of 1996)' (hereinafter 'A and C Act' for the sake of convenience and

clarity) with a prayer for appointment of Arbitrator.

2. Mr.J.Vinodh, learned counsel representing the counsel on record

for the petitioner and Mr.Edwin Prabhakar, learned Special Government

Pleader representing on behalf of the respondent are before this Court.

3.This Court finds that the arbitration agreement between the

petitioner and the respondent i.e., arbitration agreement within the

meaning of Section 2(1)(b) 'read with' ('r/w' for brevity) Section 7 of A and

C Act is in the form of a covenant which is captioned and styled as

'SPECIAL CONDITIONS OF CONTRACT'. Clause 4 of Special

Conditions of Contract incorporates Clause 25.3 of the General Conditions

of Contract and the same reads as follows:

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'4.ARBITRATION (GCC Clause 25.3) The procedure for arbitration will be as follows: 25.3 (a) In case of Dispute or difference arising between the Employer and a domestic contractor relating to any matter arising out of or connected with this agreement, such disputes or difference shall be settled in accordance with the Arbitration and Conciliation Act, 1996. The arbitral tribunal shall consists of 3 arbitrators one each to be appointed by the Employer and the Contractor. The third Arbitrator shall be chosen by the two Arbitrators so appointed by the Parties and shall act as Presiding Arbitrator. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding Arbitrator shall be appointed by the President of the Institution of Engineers (India), Tamil Nadu chapter.

(b) In the case of dispute with the Foreign contractor the dispute shall be settled in accordance with provisions of UNCITRAL Arbitration Rules. The Arbitral Tribunal shall consist of three Arbitrators one each to be appointed by the Employer and the Contractor. The third Arbitrator shall be chosen by the two Arbitrators so appointed by the Parties, and shall act a presiding arbitrator. In case of failure of the

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two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding arbitrator shall be appointed by the President of the Institution of Engineers (India), Tamil Nadu chapter.

(c) If one of the parties fails to appoint the arbitrator in pursuance of sub-clause (a) and (b) above within 30 days after receipt of the notice of the appointment of its arbitrator by the other party, then the President of the Institution of Engineers (India) Tamil Nadu chapter, both in cases of the Foreign Contractor as well as Indian Contractor, shall appoint the arbitrator. A certified copy of the order of the President of the Institution of Engineers (India) Tamil Nadu chapter making such an appointment shall be furnished to each of the parties.

(d) Arbitration proceedings shall be held at Tirunelveli, Tirunelveli District, Tamil Nadu, India, and the language of the arbitration proceedings and that of all documents and communications between the parties shall be English.

(e) The decision of the majority of arbitrators shall be final and binding upon both parties. The cost and expenses of Arbitration proceedings will be paid as determined by the arbitral tribunal. However, the expenses incurred by each party in connected with the preparation, presentation, etc. of

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its proceedings as also the fees and expenses paid to the arbitrator appointed by such party or on its behalf shall be borne by each party itself.

(f) Where the value of the contract is Rs.50 millions and below, the disputes or differences arising shall be referred to the Sole Arbitrator. The Sole Arbitrator should be appointed by agreement between the parties; failing such agreement, the appointing authority, namely the President of the Institution of Engineers (India), Tamil Nadu Chapter.

(g) Performance under the contract shall continue during the arbitration proceedings and payments due to the contractor by the owners shall not be withheld, unless they are the subject matter of the arbitration proceedings.'

4.The Arbitral dispute centers around allegations of the petitioner

that the respondent has not handed over the site to the petitioner for

commencement of work. To be noted, there are other ancillary issues but it

is not necessary to dilate on the same considering the narrow scope of a

legal drill under Section 11 of A and C Act. A legal drill under Section 11 of

A and C Act is broadly controlled by sub section (6-A) thereat which reads

as follows:

'(6-A). The Supreme Court or, as the case may be, the

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High Court, while considering any application under sub- section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement'.

5.The above principle was reiterated by Hon'ble Supreme Court in

Mayavati Trading case law in Mayavati Trading Pvt. Ltd vs Pradyuat

Deb Burman reported in 2019 (8) SCC 714. The relevant paragraph is

paragraph No.10 and the same reads as follows:

'10. This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgement, as Section 11(6-A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgement in Duro Felguera'

6.As there is no disputation or disagreement about the existence of

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arbitration agreement between the parties, this Court deems it appropriate

to appoint Hon'ble Mr.Justice T.Sudanthiram, Former Judge, High Court

of Madras residing at Old No.39/2, New No.20, Anandavelu Street,

Perambur, Chennai – 600 011 [Mobile : 9841016353] as sole arbitrator.

Hon'ble sole arbitrator is requested to enter upon reference, adjudicate

arbitrable disputes that have arisen between the petitioner and the

respondent by holding sittings at Madras High Court Arbitration Centre

[MHCAC] under the aegis of this Court in accordance with the Madras

High Court Arbitration Proceedings Rules, 2017 and Hon'ble Arbitrator's

fee shall be as per Madras High Court Arbitration Centre (MHCAC)

(Administrative Cost and Arbitrator's Fees) Rules 2017.

7.The arbitration agreement provides for arbitration by three

arbitrators and it mentions the seat/venue as Tirunelveli. It is submitted

that it would be desirable to downsize the Arbitral Tribunal and appoint a

sole arbitrator as the claim is in the region of a little over Rupees Three

crores. The legal position that a Section 11 Court can downsize the Arbitral