Madras High Court

South Ganga Waters Technologies (P) Ltd vs Vedanta Limited on 26 February, 2025

Author: Abdul Quddhose

Bench: Abdul Quddhose

    2025:MHC:574



                                                                                    Arb.OP.(comdiv) No.19 of 2025

                                   IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                      DATED: 26.02.2025

                                                               CORAM

                              THE HONOURABLE MR.JUSTICE ABDUL QUDDHOSE

                                             Arb.O.P.(Comm.Div.) No.19 of 2025

                     South Ganga Waters Technologies (P) Ltd.,
                     Rep. By its Authorized Signatory
                           Mr.Vijay Ramesh,
                     Chennai.                                                                ..   Petitioner


                                                                   -vs-



                     Vedanta Limited,
                     (formerly known as
                     1.SESA Sterlite Limited and;
                     2. Sterlite Industries Limited)
                     Thoothukudi.                                                            ..   Respondent



                                  Petition under Section 11 of the Arbitration and Conciliation Act,
                     1996, has been filed seeking to appoint a sole arbitrator to resolve the
                     dispute between the parties arising out of the contract dated 25.07.2013
                     and 01.10.2014.


                                              For Petitioner            : Mr.Anirudh Krishnan
                                              For Respondent            : Mr.Rahul Balaji


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                                                                                    Arb.OP.(comdiv) No.19 of 2025

                                                                ORDER

This petition has been filed under Section 11 of the Arbitration and

Conciliation Act, 1996 (in short “the Act”) seeking for appointment of an

Arbitrator by this Court.

2. A dispute has been raised by the petitioner against the

respondent, which arises out of the water supply agreement dated

25.07.2013 and another agreement dated 01.10.2014. At the outset, the

learned counsel for the petitioner would submit on instructions that since

a proper arbitration invocation notice was not sent as per the provisions

of Section 21 of the Act for the agreement dated 01.10.2014, the

petitioner will be satisfied if an Arbitrator is appointed by this Court for

the dispute arising out of the water supply agreement dated 25.07.2013

alone. However, he seeks liberty for the petitioner to file a fresh petition

seeking for appointment of an Arbitrator after issuing a proper invocation

notice insofar as the second agreement dated 01.10.2014 is concerned.

Therefore, this Court for the present will have to decide only whether the

dispute raised by the petitioner arising out of the water supply agreement

dated 25.07.2013 is arbitrable or not.

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3. The petitioner, as per the agreement dated 25.07.2013, has to

supply desalinized water to the respondent. According to the petitioner,

the respondent has committed breach of the contract. According to the

petitioner, certain sums of money are due and payable by the respondent

arising out of the terms and conditions of the agreement dated

25.07.2013, which contains an arbitration clause, and the same is

extracted hereunder:-

“20. DISPUTES AND ARBITRATION 20.1. Any differences or disputes arising from the contract or from Contracts regarding its performance shall be settled by an amicable effort on the part of both Parties to the contract. An attempt to arrive at a settlement shall be deemed to have failed as soon as one of the Parties to the contract so notifies the other Party in writing.

If an attempt at settlement has failed, the dispute, controversy or claim shall be finally settled by a Sole Arbitrator appointed by the Chief Executive Officer, Sterlite Copper, Tuticorin, in accordance with the Arbitration & Conciliation Act, 1996. The arbitration proceedings shall be conducted in accordance with the Arbitration &

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Conciliation Act, 1996. Arbitration shall be conducted in the English language the arbitration award shall be final and binding on both the Parties who shall abide the same. The place of arbitration shall be Tuticorin, Tamil Nadu, India.

Each Party will bear their own expenses with respect to arbitration except for common expenses which shall be shared equally. The Parties will have a right to claim the expenses which shall be decided by the Arbitral Tribunal.

20.2. Performance under the Contract shall be continued during the arbitration proceedings unless otherwise directed by Purchaser in writing or unless the matter is such that the performance cannot be possibly continued until the decision of arbitrators or the umpire, as the case may be, is obtained. No payment due or payable by Purchaser shall be withheld on arbitration proceedings unless it is the subject matter of arbitration.

4. The petitioner has invoked arbitration in accordance with the

arbitration clause by issuing notice to the respondent on 10.09.2024,

which, according to the petitioner, is as per the provisions of Section 21

of the Act. A reply dated 09.10.2024 has also been received to the said

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notice and in the said reply, the respondent has disputed the claim of the

petitioner, but, at the same time, has chosen to nominate their Arbitrator,

who is a former Judge of this Court. Since there was no consensus

between the parties for arbitration, the petitioner has filed this petition

under Section 11 of the Act seeking for appointment of an Arbitrator by

this Court.

5. A counter affidavit has been filed by the respondent raising the

following objections:-

a) The claim of the petitioner is hopelessly barred by law of

limitation, since the contract dated 25.07.2013 got expired on 31.12.2015

itself, but, arbitration was initiated by the petitioner only in the year

2024.

b) The Arbitration invocation notice dated 10.09.2024 issued by

the petitioner, prior to the filing of this petition under Section 11 of the

Act, does not pertain to the contract dated 25.07.2013, but, it pertains to

other contracts only including the contract dated 01.10.2014.

6. The learned counsel for the petitioner in support of his

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submission that there exists an arbitration clause in the contract and this

petition is well within the period of limitation drew the attention of this

Court to the following authorities:-

(a) Re: Interplay between arbitration agreements under the Arbitration and Conciliation Act, 1996, and the Indian Stamp Act, 1899 [AIR 2024 SC 1];

(b) SBI General Insurance Co. Ltd. Vs. Krish Spinning [2024 (6) ALD 69]; and

(c) Vedanta Limited Vs. State of Tamil Nadu (SLP (Civil) Nos.10159-10168 of 2020 and Civil Appeal Nos.276-285 of 2021, dated 29.02.2024.

7. Referring to the aforesaid decisions, the learned counsel for the

petitioner would submit as follow:-

(a) While deciding an application under Section 11 of the Act, the

referral court need to look only, on a prima-facie basis, whether there

exists an arbitration clause or not. An indepth analysis is not required at

the referral stage.

(b) The limitation for filing a petition under Section 11 of the Act

is within a period of 3 years from the date of the arbitration invocation

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notice issued as per the provisions of Section 21 of the Act.

8. On the other hand, the learned counsel for the respondent relied

upon the contract dated 25.07.2013, which is the subject matter of the

dispute raised by the petitioner, as well as Amendment No.1 to the Water

Supply Agreement dated 24.07.2015, and would submit that as seen from

those contracts, the contract itself got expired on 31.12.2015 itself and

therefore, the claim of the petitioner against the respondent is hopelessly

barred by law of limitation. He would submit that the arbitration

invocation notice dated 10.09.2024 issued by the petitioner is not a valid

notice. He would submit that in the said notice, the claim has not been

made by the petitioner arising out of the contract dated 25.07.2013, but,

the claim arises out of various other contracts including the contract

dated 01.10.2014, which is not the dispute raised by the petitioner in this

petition. He would submit that eventhough the respondent has

nominated an Arbitrator through their reply dated 09.10.2024 sent by

them to the arbitration invocation notice dated 10.09.2024 issued by the

petitioner, in the said reply, it has been made clear by the respondent that

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the claim of the petitioner is hopelessly barred by law of limitation and

therefore, the nomination of an Arbitrator by the respondent in their reply

dated 09.10.2024 has no relevancy for adjudicating this petition filed

under Section 11 of the Act.

9. The learned counsel for the respondent would further submit

that in the arbitration invocation notice dated 10.09.2024 issued by the

petitioner, a dispute has not been raised insofar as the contract dated

25.07.2013 is concerned. However, the same is disputed by the learned

counsel for the petitioner and he would point out to the reference made in

the arbitration invocation notice dated 10.09.2024, which refers to the

contract dated 25.07.2013 as well. The learned counsel for the petitioner

has disputed all the other factual issues raised by the learned counsel for

the respondent.

DISCUSSION:

10. To decide the issue on hand, namely, whether the dispute

raised by the petitioner is an arbitrable dispute or not, or whether the

petition filed under Section 11 of the Act seeking for appointment of an

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Arbitrator by this Court is barred by limitation or not, it is first required

to analyse the march of law insofar as the powers of the referral court

under Section 11 of the Act are concerned. The law with regard to

Section 11 of the Act as laid down by various decisions of the Hon'ble

Supreme Court has evolved through various interpretations. The details

of the same are set out hereunder:-

(a) Pre-amendment of 2015:

(i) The precedents laid down in pre-amendment of 2015 gave the

referral court ample power to decide the appointment of an Arbitrator or

Arbitrators. In Konkan Rly Corporation Vs. Rani Construction Pvt Ltd.

[2002 (2) SCC 388], a five-Judge Bench of the Supreme Court observed

that the power exercised by the referral court under Section 11 of the Act

is an administrative power and thus the Chief Justice or his designate do

not have the power to decide any preliminary issue at the referral stage.

This was later overruled in SBP & Co. Vs. Patel Engg. Ltd. [2005 (8)

SCC 618], wherein a seven-Judge Bench held that the appointment of

arbitrator under Section 11(6) of the Act was not only an administrative

power but also a judicial power as well. The Chief Justice or his

designate had the power to decide all preliminary issues at the referral

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stage under Section 11(6) of the Act. The Hon'ble Supreme Court took

such a view on the premise that Section 16 of the Act, which empowers

the Arbitral Tribunal to rule on its own jurisdiction, applies only when

the parties go before the Tribunal without having taken recourse to

Section 8 or Section 11 of the Act first.

(ii) Then in National Insurance Co. Ltd. v. Boghara Polyfab (P)

Ltd. [2009 (1) SCC 267], the Hon'ble Supreme Court examined the

extent of judicial interference at the referral stage under Section 11(6) of

the Act as laid down in Patel Engg. (cited supra) and elucidated three

categories of issues which could arise before the referral court as

follows:

(a) Whether the party making the application has approached the

appropriate High Court, whether there is an arbitration agreement and

whether the party who has applied under Section 11 of the Act, is a party

to such an agreement.

(b) Whether the claim is a dead (long-barred) claim or a live claim.

Whether the parties have concluded the contract/transaction by recording

satisfaction of their mutual rights and obligation or by receiving the final

payment without objection.

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example, a matter which is reserved for final decision of a departmental

authority and excluded from arbitration) and merits or any claim

involved in the arbitration.

(b) Post-amendment of 2015:

(i) The decisions of the Supreme Court in Patel Engg. (cited

supra) and Boghara Polyfab (cited supra) conferred the referral courts

the discretion to conduct mini-trials and indulge in the appreciation of

evidence on the issues concerned with the subject-matter of arbitration.

This allowed for greater judicial interference at the pre-arbitral stage. The

Law Commission of India in its 246th Law Report took note of the issue

of delay in arbitration proceedings by significant judicial intervention

especially during the referral stage under Section 11(6) of the Act and

considered changes by way of amendment in 2015. The Arbitration and

Conciliation (Amendment) Act, 2015, minimalized the judicial

interference at the referral stage by incorporating Section 11(6-A), where

the competent court at the referral stage was to confine to the

examination of the existence of an arbitration agreement. However,

interestingly, Section 11(6-A) was omitted vide a 2019 amendment, but,

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the omission is still not yet notified.

(ii) The Supreme Court in Vidya Drolia v. Durga Trading

Corporation [2021 (2) SCC 1] presumed that the omission of Section

11(6-A) vide a 2019 Amendment was made effective and held that the

principle laid down in Patel Engg.(cited supra) would become

applicable post-omission. It also held that the exercise of power for

interference by the referral court is only allowed in exceptional cases

where ex-facie meritless claims are sought to be referred to arbitration

claim.

(iii) In BSNL Vs. Nortel Networks India (P) Ltd. [2021 (5) SCC

738], the Hon'ble Supreme Court held that at the referral stage, the court

can interfere only when it is “manifest” that the claims are ex facie time-

barred and dead, or there is no subsisting dispute and knockdown ex-

facie meritless, frivolous, and dishonest litigation, which would ensure

expeditious and efficient disposal at the referral stage.

(iv) An eye of the needle test was crystallised in NTPC Ltd. v.

SPML Infra Ltd. [2023 (9) SCC 385], where the Court at the referral

stage should examine the existence and validity of an arbitration

agreement and the non-availability of a dispute thoroughly. However,

the finding in Vidya Drolia(cited supra) with respect to the power of the https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/03/2025 08:41:32 pm )

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Referral Court post-amendment and post-omission of Section 11(6-A)

was found erroneous by a seven-Judge Constitutional Bench in Interplay

(cited supra), wherein it was held that the omission of Section 11(6-A)

has not yet been notified by the Central Government and therefore it was

incumbent upon the Court to give true effect to the legislative intent and

since Section 11(6-A) continues to remain in force, the referral court is

not the appropriate forum to conduct a mini-trial by allowing the parties

to adduce evidence with regard to the existence or validity of an

arbitration agreement and the courts at the referral stage should only

confine to the determination of the arbitration agreement notwithstanding

that even if a prima facie view as to the existence of an arbitration

agreement is taken away by the referral court, it does not take away the

competence of the Arbitral Tribunal under Section 16 of the Act to

examine the issue in depth.

(v) Similarly, a five-Judge Constitutional Bench in Cox & Kings

Ltd. v. SAP India (P) Ltd. [2022 (8) SCC 1] also while dealing with the

scope of inquiry under Section 11 of the Act when it comes to

impleading the non-signatories in the arbitration proceedings and

whether the non-signatory party is a veritable party to the arbitration

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complexities of the facts involved and should leave it for the Arbitral

Tribunal to decide since the issue of determining parties to an arbitration

agreement goes to the very root of the jurisdictional competence of the

Arbitral Tribunal under Section 16 and it should be rightly done on the

basis of the factual, legal and circumstantial aspects upholding the

principles of natural justice.

11. Thus, after numerous trials, errors and rigorous detailed

interpretations by way of judgment and precedents, the law with respect

to the arbitral autonomy under Section 16 of the Act and the judicial

authority at the referral stage under Section 11 has been perspicaciously

distinguished by a seven-Judge constitutional judgment in

Interplay(cited supra) and on the same footing, the Supreme Court in a

recent ruling in SBI General Insurance Co. Ltd. (cited supra) elucidated

the domain of the referral court under Section 11 of the Act and that an

application under Section 11(6-A) is preferred when either of the parties

fail to appoint an arbitrator and the court is empowered to prime facie

“examine” the existence of an arbitration agreement in terms of Section 7

of the Act. The word “examine” has a very narrow scope in terms of

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Section 11(6-A) and is limited to the requirement of a formal validity. It

opined that the use of the term ‘examination’ under Section 11(6-A) as

distinguished from the use of the term ‘rule’ under Section 16 implies

that the scope of enquiry under Section 11(6-A) is limited to a prima

facie scrutiny of the existence of the arbitration agreement, and does not

include a contested or laborious enquiry, which is left for the Arbitral

Tribunal to rule under Section 16. The prima facie view on existence of

the arbitration agreement taken by the referral court does not bind either

the Arbitral Tribunal or the court enforcing the arbitral award.

12. In the light of the pertinent observations made in SBI General

Insurance Co. Ltd. (cited supra) and Interplay (cited supra) after

detailed explications and elucidations, it is affirmed that the scope of

judicial interference under Section 11(6-A) of the Act is only confined to

the limited scrutiny of “prima facie existence of the arbitration agreement

nothing more and nothing else” and the competence of the Arbitral

Tribunal under Section 16 of the Act confers complete arbitral autonomy

to rule, determine and act on the issues pertaining to impleadment or

deletion of a party, signatory or non-signatory, arbitrality or non-

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arbitrality, necessary or not necessary party, joinder or non-joinder to the

arbitration in depth even if the ruling is contrary to that of the referral

court under Section 11(6) of the Act.

13. Therefore, while deciding a petition filed under Section 11 of

the Act, the law is now well settled as seen from the decisions referred to

supra that the referral court will have to look only into the prima-facie

existence of the arbitration clause and once the court is satisfied that

there exists an arbitration clause, necessarily, the court will have to refer

the dispute to arbitration. In the case on hand, admittedly, there exists an

arbitration clause, extracted above, in the contract dated 25.07.2013, out

of which, the petitioner has raised a dispute against the respondent.

14. The petitioner has also invoked arbitration in accordance with

the arbitration clause by issuing the notice to the respondent on

10.09.2024. Though the learned counsel for the respondent contends that

the said arbitration invocation notice is not a valid notice complying with

the requirement of Section 21 of the Act, this Court, while deciding a

petition under Section 11 of the Act, need not make a roving enquiry as

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to whether the said notice is a valid notice or not. Section 21 of the Act

reads as follows:-

Section 21: Commencement of arbitral proceedings Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commences on the date on which a request for that dispute to be referred to arbitration is received by the respondent.

15. As seen from the aforesaid provision, the procedure as to how

a notice has to be issued for complying with Section 21 of the Act has

not been stipulated. But, the only requirement for any party to initiate

arbitration is to send a request to the other party for referring the dispute

to arbitration. Since the petitioner has made a request to the respondent

through their notice dated 10.09.2024 in compliance with Section 21 of

the Act and there is a reference to the contract dated 25.07.2013 in the

said notice, which is the subject matter of the dispute, this Court is of the

considered view that for the purpose of filing a petition under Section 11

of the Act, the petitioner has satisfied the statutory requirement of

Section 21 of the Act. It is also to be noted from the reply dated

09.10.2024 sent by the respondent to the petitioner's arbitration

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invocation notice dated 10.09.2024 that the respondent has nominated its

Arbitrator, who is a former Judge of this Court, though the respondent

has disputed the claim of the petitioner as being barred by law of

limitation.

16. This Court is surprised by the stand taken by the respondent

before this Court that there is no arbitral dispute insofar as the contract

dated 25.07.2013 is concerned, when they themselves have nominated

their Arbitrator of their choice through their reply dated 09.10.2024. If

the claim of the petitioner is hopelessly barred by law of limitation, there

was no necessity for the respondent to nominate an Arbitrator of their

choice.

17. In SBI General Insurance's case (cited supra), relied upon by

the learned counsel for the petitioner, it has been made clear that the

limitation period for filing a petition under Section 11 of the Act can

commence only when a valid notice invoking arbitration has been sent by

the petitioner to the respondents. Therefore, as per the provisions of the

Act, a party can seek for appointment of an Arbitrator by this Court

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under Section 11 of the Act only after he/she invokes arbitration by

making a request to the other party in accordance with Section 21 of the

Act. In the instant case, the petitioner invoked arbitration in accordance

with the arbitration clause by issuing the arbitral referral notice to the

respondent on 10.09.2024. Therefore, the 3 years' limitation period

commences only from 10.09.2024 for the purpose of filing this petition

under Section 11 of the Act. Admittedly, this petition has been filed

within the 3 years' period from 10.09.2024, being the date of the

arbitration invocation notice issued by the petitioner. Therefore, this

Court is of the considered view that this petition is filed within the period

of limitation, and is in accordance with the decision relied upon by the

learned counsel for the petitioner in SBI General Insurance's case

(cited supra).

18. Insofar as the contention of the learned counsel for the

respondent that the claim of the petitioner is hopelessly barred by law of

limitation is concerned, the learned counsel for the petitioner drew the

attention of this Court to the following documents:-

(a) A letter dated 16.04.2018 issued by the respondent to the

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petitioner invoking force majeure clause and intimating the petitioner

that they are not in a position to accept supplies from the petitioner under

the contract dated 25.07.2013 and the second Amendment dated

01.10.2017.

(b) The notice of termination issued by the petitioner to the

respondent dated 31.05.2024 terminating the contracts with the

respondent, which includes the contract dated 25.07.2013.

19. As seen from the aforesaid documents, the petitioner has

terminated the contract only on 31.05.2024. But, the same is disputed by

the learned counsel for the respondent, who would submit that the

question of termination of the contract does not arise when the contract

itself is a stale contract, and therefore, the termination of contract by the

petitioner on 31.05.2024 will not save limitation. Whenever a party is

approaching the Court for appointment of an Arbitrator under Section 11

of the Act and there arises a doubt in the mind of the Court as to whether

the claim is barred by limitation or not, the benefit of doubt should be

given to the petitioner and not the respondent as the limitation issue is a

mixed question of fact and law. The object of the Arbitration and

Conciliation Act is for expeditious resolution of commercial disputes

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within a time bound period. Admittedly, in the instant case, even

according to the respondent, they were unable to perform their part of the

contract on account of force majeure circumstances. It is also an

admitted fact that the respondent themselves has nominated their

Arbitrator through their reply dated 09.10.2024, though they may claim

that the claim of the petitioner is hopelessly barred by law of limitation.

20. As observed supra, this Court will have to only look into the

prima-facie existence of a valid arbitration clause in the agreement

entered into between the parties. Once this Court is prima-facie satisfied

that there exists an arbitration clause in the contract, which is the subject

matter of the dispute raised by the petitioner, and the petitioner having

complied with the statutory requirement of issuing notice as per the

provisions of Section 21 of the Act, this Court will have to necessarily

appoint an Arbitrator when there is no consensus between the parties

with regard to the name of the Arbitrator. The petitioner has also

satisfied the requirements of Section 21 of the Act, which stipulates that

a mere request has to be made to the respondent for arbitration and

nothing more is mandated. Therefore, the contention of the learned

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counsel for the respondent that a valid notice as per Section 21 of the Act

was not sent by the petitioner has to be rejected by this Court. However,

liberty has to be granted to the respondent to raise all objections either by

filing an application under Section 16 of the Act before the Arbitrator or

through their counter filed in the main arbitral claim made by the

petitioner. Kompetenz-kompetenz principle also allows the arbitral

tribunal the power to rule on its own jurisdiction, which is also

recognised through Section 16 of the Act.

21. For the foregoing reasons, this petition is allowed by issuing

the following directions:-

(a) This Court hereby appoints the Hon'ble Mr.Justice Sanjib

Banerjee, former Chief Justice of Madras High Court & Meghalaya High

Court, residing at Greater Kailash I, C96, New Delhi-110 048 (Mobile

No.9836268256) as the sole arbitrator to adjudicate the dispute between

the petitioner and the respondent arising out of the Water Supply

Agreement dated 25.07.2013.