Telangana High Court

M/S Ramkybarbrik Jv vs National Highways Authority Of India on 18 September, 2024

Author: K. Lakshman

Bench: K. Lakshman

        HONOURABLE SRI JUSTICE K. LAKSHMAN

       ARBITRATION APPLICATON NOs.224 OF 2023,
                        29 AND 52 OF 2024
COMMON ORDER:

Heard Mr. V.V.N.K. Sarath Saran, learned counsel for the

applicants and M/s M.V. Kini, Advocate Solicitor appearing for

respondent No.1. As per cause title, respondent Nos.2 and 3 are

proforma parties.

2. These three Arbitration Applications are filed under Section 11

of the Arbitration and Conciliation Act, 1996 (hereinafter 'the Act,

1996') for appointment of a Nominee Arbitrator to adjudicate the

disputes between the parties.

3. Considering the lis in these three Arbitration Applications is

identical and since the common questions of fact and law arise in

these three Applications, they are being heard together and disposed

of by this common order.

4. The Applicant, M/s Ramky-Barbik, is a Joint Venture formed

by two distinct entities engaged in executing various projects under

the purview of both the Central and State Governments. The

Respondent No. 1 is an authority responsible for the construction,

maintenance, and upkeep of National Highways. Respondent No. 2,

acting as the execution arm of the Chhattisgarh Public Works

Department, had floated a tender for the rehabilitation and

upgradation of several sections of NH-43 into a two-lane highway

with paved shoulders in Chhattisgarh under the NHDP-IV through an

Engineering, Procurement & Construction (EPC) basis.

5. The Applicant participated in the bidding process and was

awarded the contract for the execution of the work after being

adjudged as the lowest bidder. Subsequently, three different

agreements were executed concerning the project and all relevant

details are mentioned below;

 Particulars          Arb.Appl.          Arb.Appl.       Arb.Appl.

 Agreement            19.12.2014         28.01.2015      19.12.2014
 Entered on
 Purpose of the       81.50 - 130 Kms 180-240 Kms    241-298 Kms
 Agreement (Rehab     (Dhantari     to (Bedma     to (Dahikonda to
 & Up-gradation       Kanker)          Dhaikonda)    Jagdalpur)
 NH3) to extent of
 Commencement &       24.03.2015    & 24.03.2015      & 24.03.2015    &
 Completion           23.09.2016      24.03.2017        24.03.2017
 (Total Days)         (550 Days)      (730 days )       (730 days )
 Letters issued by    28.03.2022,     24.07.2023        24.07.2023
 the      Applicant
 intimating     the
 claims    to   the
 respondents



 Notice issued by 06.09.2022            27.09.2023     27.09.2023
 the      Applicant
 invoking
 Arbitration Clause
 Reply to Notice    18.10.2022          11.10.2023     11.10.2023
 Claim Value (Rs.)   42,27,50,536       59,52,61,225   63,15,11,545

6. On 07.03.2019, Respondent No.1 took over the project from

Respondent Nos. 2 and 3 under a Tripartite Agreement. Respondent

No. 2 had been entrusted with the development, maintenance, and

management of the work by Respondent No. 3.

7. The applicant contended that Respondent No. 1, hereby

becomes an essential party to the contract, having assumed all rights,

obligations, benefits, responsibilities, and interests related to the

operation and maintenance of the project, previously held by

Respondent No. 3. Additionally, Respondent No. 1 took over the

associated assets and liabilities in accordance with the provisions of

the National Highways Authority of India Act, 1988.

8. Respondent Nos. 2 and 3 have been arrayed as Proforma

Parties since the original agreement for the work was signed between

the Applicant and Respondent No. 2 on behalf of Respondent No. 3.

9. Upon the agreements entered, the Applicant mobilized

sufficient manpower and machinery to ensure the timely completion

of the project. However, the Applicant encountered substantial delays

due to the failure of Respondent No. 2, acting on behalf of

Respondent No. 3, to fulfil its obligations. Various structures,

including private, governmental, and religious buildings, obstructed

the execution of the work. Despite the responsibility of Respondents

Nos. 2 and 3 to remove these structures in consultation with each

other, their failure of swift action resulted in delays and there were

dues payable to the applicant post completion of the project(s).

10. Applicant completed the said work in terms of the agreements

and certificates of completion were also issued in respect of the

aforesaid three contracts. Despite completion of the work in terms of

the agreements, issuance of notices of claim, respondents did not

settled the same. Therefore, it has issued notices invoking the

arbitration clause and nominated arbitrators and sought consent of

respondents. Despite receiving the notices, respondents did not give

consent, therefore, applicant filed the present applications.

11. The Applicant sought to resolve the issues amicably through

communication with the Respondents; however, these efforts were

unsuccessful. Respondent No. 1 subsequently denied liability under

the Contract, asserting that its involvement in the project was limited

to the completion of the Defect Liability Period and toll collection,

and that any claims related to the construction phase should be

directed to Respondent No. 2, acting on behalf of Respondent No. 3.

This stance, taken by Respondent No. 1, was in direct violation of

both the Tripartite Agreement and Sections 11, 12, and 13 of the

National Highways Authority of India Act, 1988.

12. Respondent No. 1 further contended that, as per the terms and

conditions of the agreement, it was only responsible for liabilities

arising from the operation and maintenance of the EPC project. Since

the claims raised by the Applicant pertained primarily to the

construction phase, and Respondent No. 1 was unaware of their

accuracy or authenticity, the Applicant was advised to address these

claims with Respondent Nos. 2 and 3. It is important to note that all

communications related to the invocation of arbitration under Clause

26.3, the request for amicable settlement under Clause 26.2, and the

intimation of claims under Clause 26.1, were duly sent to Respondent

Nos. 2 and 3, in addition to Respondent No. 1, yet no action was

taken by the Opposite Parties.

13. In its counter, Respondent No. 1 further contended that the

agreement dated 19.12.2014 was executed between the Applicant and

the respondent Nos.2 and 3/proforma parties for the rehabilitation and

upgradation of NH-43 in the State of Chhattisgarh under NHDP-IV

through an EPC basis, and not with Respondent No. 1. Therefore, the

claims raised in the current arbitration application, which pertain to

the construction phase, fall outside the purview of Respondent No. 1.

Consequently, Respondent No. 1 rejected the Applicant's claims,

instructing them to approach the Proforma Respondents for

resolution.

14. Considered the rival submissions and perused the record.

Disputes have arisen between the parties even after repeated attempts

to amicably settle the disputes regarding the non-payment of amounts

due to applicant. The applicant invoking Clause 26.3 from the

Engineering Procurement and Construction (EPC) of the parent

agreements, issued legal notices dated 06.09.2022 and 27.09.2023.

15. The said Clause 26.3 of the subject agreement is relevant andis

extracted hereinbelow;

26.3 Arbitration

26.3. 1 Any Dispute which is not resolved amicably by conciliation, as provided in Clause-26.2, shall in accordance with Clause

26.3.2. 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 to shall be (Hyderabad), and the language of arbitration proceedings shall be English.

26.3.2 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 and in the event of disagreement between the two arbitrators, the appointment shall be made in accordance with the Rules.

16. The disputes between the parties arose when the Applicant

raised concerns regarding the outstanding dues for the completed

work, asserting that Respondent No. 1 is a necessary party to the

contract, having assumed all rights and liabilities pursuant to the

execution of the Tripartite Agreement dated 07.03.2019. Respondents

No. 2 and 3 have been arrayed as proforma parties in the present

proceedings, given that the agreement for the work in question was

originally signed with Respondent No. 2 on behalf of Respondent No.

3. The Applicant alleges that Respondents failed to fulfil its

contractual obligations, which led to considerable financial losses.

Despite numerous efforts by the Applicant to resolve the matter,

including issuance of a legal notice to initiate arbitration, the

Respondent evaded an amicable settlement of the dispute.

17. In the context of referring matters to the arbitration tribunal, the

role of the Court is now, in any event, severely circumscribed. The

guiding principles enshrined in the Arbitration and Conciliation Act,

1996, have always aimed at minimizing judicial intervention. In this

regard, Section 5 of the Act, is relevant which reads as under:

5. Extent of judicial intervention.--

Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.

18. Significant amendments were made to the Arbitration Act in

2015, particularly to Sections 8 and 11, with the objective of further

limiting judicial interference. The amended Section 8 of the

Arbitration Act now reflects this intent, mandating that the judiciary's

involvement in arbitration matters is restricted, except in cases where

it is prima facie evident that no valid arbitration agreement exists.

Section 8 is extracted herein;

8. Power to refer parties to arbitration where there is an arbitration agreement. -- (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that court.

(3) Notwithstanding that an application has been made under sub- section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.

19. The primary aim of amending Section 8, alongside Section 11,

was to curtail the scope of judicial authority in arbitration matters,

thereby reinforcing the autonomy of the arbitral process and ensuring

that parties could resolve their disputes with minimal interference

from judicial bodies, except where absolutely necessary where there

is prima facie no agreement for arbitration inter alia.

20. In the present case, it is ipso facto evident that all three parent

agreements, the Engineering, Procurement, and Construction

agreements executed by the parties on 19.12.2014 (two agreements

on same date) and 28.01.2015 expressly incorporate an arbitration

clause under Clause 26.3. There is no dispute regarding the existence

of such an arbitration agreement among the parties.

21. It is apposite to acknowledge that the High Court's jurisdiction

under Section 11 of the Arbitration and Conciliation Act, 1996, is

narrowly confined. The Court's sole responsibility is to ascertain

whether, prima facie, an arbitration agreement exists between the

parties.

22. Regarding the issue of waiver of Respondent No.1 were to be

examined in isolation under a petition filed pursuant to Section 11 of

the Act, the limited scope of the Court's review would necessitate

referring the question of waiver to the arbitral tribunal itself,

particularly given that the respondents are signatories to a subsequent

agreement intended to fulfil the obligations of the original (parent)

agreement containing the arbitration clause now invoked.This Court

at the referral stage cannot go into disputed questions of facts which

are to be decided by the arbitrator.

23. In DuroFelguera, S.A. v. Gangavaram Port Ltd.1 the Apex

Court, at para 59, has held as under:

"The scope of the power under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. [SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] and BogharaPolyfab [National Insurance Co.Ltd. v. BogharaPolyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117]. This position continued till the amendment brought about in 2015. After the amendment, all that the courts need to see is whether an arbitration agreement exists nothing more, nothing less. The legislative policy and purpose is essentially to minimise the Court's intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected."

24. After 2015 amendment to the Arbitration and Conciliation Act,

1996, the scope under Sections - 11 (5) and 11 (6) of the Act, 1996 is

very limited. The said fact was also considered by the Apex Court in

(2017) 9 SCC 729

Vidya Drolia v. Durga Trading Ltd.2 laid down the test to exercise

power under Section 11 of the Act, 1996 as follows:

244. Before we part, the conclusions reached, with respect to Question 1, are:

244.1. Sections 8 and 11 of the Act have the same ambit with respect to judicial interference. 244.2. Usually, subject- matter arbitrability cannot be decided at the stage of Section 8 or 11 of the Act, unless it is a clear case of deadwood. 244.3. The court, under Sections 8 and 11, has to refer a matter to arbitration or to appoint an arbitrator, as the case may be, unless a party has established a prima facie (summary findings) case of nonexistence of valid arbitration agreement, by summarily portraying a strong case that he is entitled to such a finding.

244.4. The court should refer a matter if the validity of the arbitration agreement cannot be determined on a prima facie basis, as laid down above i.e. "when in doubt, do refer".

244.5. The scope of the court to examine the prima facie validity of an arbitration agreement includes only: 244.5.1. Whether the arbitration agreement was in writing? Or 244.5.2. Whether the arbitration agreement was contained in exchange of letters, telecommunication, etc.?

244.5.3. Whether the core contractual ingredients qua the arbitration agreement were fulfilled? 244.5.4. On rare occasions, whether the subject-matter of dispute is arbitrable?

25. Upon perusing the submissions and material placed on record,

it is prima facie evident that there are arbitral disputes between the

(2021) 2 SCC 1

applicant and the respondents which form the subject matter of

adjudication by an arbitrator.

26.25. As discussed supra, there is no dispute between the parties

regarding the Arbitration Clause contained in Clause 26.3 of the

agreement. However the respondent No.1 contended that the claims

raised by the applicant in the present applications pertains to the

period that pertains to construction phase and NHAI being unaware

about its execution and authenticity. In the light of the said

contention, it is apt to note that the applicant, respondent No.1, 2

entered into the aforesaid tripartite agreements on the specific terms

and conditions mentioned therein. Clause No.i and ii are relanvant

and the same are extracted below:-

i. That upon signing of this agreement, NHAI will perform all rights, obligations, benefits, responsibilities and interests in respect of operation and maintenance of the authority arising out of the EPC contract shall stand novated to and be performed by and between NHAI and the contractor (Applicant) with effect from 07.03.2019.

ii. As the project High Way is already entrusted to NHAI, all assets and liabilities of Ministry of Road, Transport and High Ways, pertaining to the project High Way will deemed to rest with NHAI, in accordance to para-12 under the head PROPERTY AND

CONTRACTS of the NHAI Act, 1988 with effect from 07.03.2019.

27. In the light of the same, the aforesaid contentions of the 1st

respondent are disputes that are to be adjudicated by the Arbitration

Tribunal. Therefore, it is appropriate to refer the dispute to

arbitration. The parties are at liberty take all the available defences

before the learned arbitrator.

28. In light of the aforesaid discussion and the law laid down by

the Supreme Court, the present arbitration application is allowed.

Accordingly, Sri Justice V. Ramasubramanian, Former Judge,

Supreme Court of India is appointed as the sole arbitrator to

adjudicate the disputes between the parties.

As a sequel thereto, miscellaneous applications, if any, pending

in these Arbitration Applications shall stand closed.