Full Judgment Text
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
ARBITRATION PETITION NO.6 OF 2013
Schlumberger Asia Services Ltd.
...Petitioner
VERSUS
Oil & Natural Gas Corporation Ltd. …
Respondent
J U D G M E N T
SURINDER SINGH NIJJAR,J.
1. This petition is filed under Section 11(6) of the
Arbitration and Conciliation Act, 1996 seeks a direction
from this Court for appointment of the nominee Arbitrator
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on behalf of the respondent and also appointment of third
Arbitrator (Presiding Arbitrator) in the Arbitral Tribunal to
adjudicate the disputes arises between the parties.
2. The petitioner is a Company incorporated and
registered under the law of Hong Kong having its project
office in India and one of the base offices at Mumbai. The
respondent is a Corporation registered under the
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Companies Act, 1956 having its registered office at Jivan
Bharti Tower-2, 124, Circus New Delhi.
3. In its counter-affidavit, the respondent has raised a
preliminary objection to the maintainability of the petition.
It is submitted by the respondent that the petitioner has
filed the present case only to bring unnecessary litigation.
The arbitration petition is an abuse of process of law and
the claims made are barred by a long period of time and
are, therefore, dead claims.
4. In order to decide the preliminary objection, it would
be necessary to take note of certain relevant events.
5. The petitioner and the respondent had entered into
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and executed a contract dated 7 December, 2004
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(effective from the date of issue of the firm order dated 6
August, 2004). The contract under Clause 27 provides for
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arbitration as the mechanism for resolution of any dispute
that may arise between the petitioner and the respondent.
The arbitration clause reads as under:
“ 27 ARBITRATION
27.1 Except as otherwise provided
elsewhere in the CONTRACT if any dispute,
difference, question or disagreement arises, at
any time before or after completion or
abandonment of work, between the parties
hereto or their respective representatives or
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assignees, at any time in connection with
construction, meaning, operation, effect,
interpretation or out of the CONTRACT or breach
thereof the same shall be decided by an Arbitral
Tribunal consisting of three Arbitrators. Each
party shall appoint one Arbitrator and the
Arbitrators so appointed shall appoint the third
Arbitrator who will act as Presiding Arbitrator.
The party desiring the settlement of dispute shall
give notice of its intention to go for arbitration
clearly stating all disputes to be decided by
arbitral tribunal and appoint its own arbitrator
and call upon the other party to appoint its own
arbitrator within 30 days. In case a party fails to
appoint an arbitrator within 30 days from the
receipt of the request to do so by the other party
or the two Arbitrators so appointed fail to agree
on the appointment of third Arbitrator within 30
days from the date of their appointment, upon
request of a party, the Chief Justice of India or
any person or institution designated by him (in
case of International Commercial Arbitration)
shall appoint the Arbitrators/Presiding Arbitrator.
In case of domestic Contracts, the Chief Justice of
the High Court or any person or institution
designated by him within whose jurisdiction the
subject purchase order/CONTRACT has been
placed/made, shall appoint the
arbitrator/Presiding Arbitrator upon request of
one of the parties.
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If any of the Arbitrators so appointed dies,
resigns, incapacitated or withdraws for any
reason from the proceedings, if shall be lawful for
the concerned party/arbitrators to appoint
another person in his place in the same manner
as aforesaid. Such person shall proceed with the
reference from the stage where his predecessor
had left if both parties consent for the same;
otherwise, he shall proceed de novo.
It is a term of the CONTRACT that the party
invoking arbitration shall specify all disputes to
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be referred to arbitration at the time of
invocation of arbitration and not thereafter.
It is also a term of the CONTRACT that neither
party to the CONTRACT shall be entitled for any
ante-lite (pre-reference) or pendent-lite interest
on the amount of the award.
The Arbitral Tribunal shall give reasoned award
and the same shall be final, conclusive and
binding on the parties.
The venue of the arbitration shall be at Mumbai,
India.
It is a term of the CONTRACT that the cost of the
arbitration will be borne by the parties in equal
shares.
Subject to as aforesaid the provisions of the
Arbitration and Conciliation Act, 1996 and any
statutory modifications or re-enactment in lieu
thereof shall apply to the arbitration proceedings
under this clause.”
Clause 26 of the Contract further provides as under:
“ 26 JURISDICTION AND APPLICABLE LAW:
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This agreement including all matter connected
with this Agreement, shall be governed by the
laws of India (both substantive and procedural)
for the time being in force and shall be subject
to exclusive jurisdiction of the Indian Court at
Mumbai. Foreign Companies, operating in
Indian or entering into Joint ventures in India,
shall have to obey the law of the Land and there
shall be no compromise or excuse for the
ignorance of the Indian legal system in any
way.”
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6. The petitioner together with its affiliates is a leading
oilfield service provider. It is trusted to deliver superior
results and improved E&P performance for oil and gas
companies around the world, including India. Through its
well site operations, research and engineering facilities, it
is working to develop products, services and solutions that
optimize customer performance in a safe and
environmentally sound manner. It employs over 113,000
people of more than 140 nationalities working
in 85 countries, including India.
7. The respondent was desirous of hiring four sets of
Measurement While Drilling (MWD) and one set of Gyro
Equipment & Services (Gyro) collectively referred to as
“Equipments” for carrying out its operation. Accordingly,
the respondent issued a tender No.MR/DS/MAT/CT/MWD/
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142(390) 2003-04/P46KC04002. The petitioner had the
necessary experience of carrying out operation as stated
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in the tender and submitted a bid on 8 June, 2004 under
offer No.SASL/D&M/ONGC 4002/2002-02 for providing the
required services against the respondent’s tender in
accordance with the terms and conditions set-forth
therein. The respondent accepted the bid of the petitioner
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and placed a firm order dated 6 August, 2004 under
No.MR/DS/MAT/CT/MWD/142(390)2003-04/DY8DF0301/
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9010002261. Accordingly, on 7 December, 2004, the
parties entered into and duly executed a contract
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effective from the date of issue of the firm order i.e. 6
August, 2004. The petitioner agreed to perform a work
defined in Appendix-III of the Contract. The respondent in
consideration thereto promised to pay the amounts set
out in Appendix-IV of the Contract at the time and in the
manner prescribed in the contract. The duration of the
contract was initially for a period of 2 years from the date
of receipt of “Equipments” at Nhava base. The
respondent had the option of extending the contract by
one more year in two equal installments of six months
each at the same rate, terms and conditions. The contract
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was automatically extendable for completion of jobs in
ongoing wells, at the same rates, terms and conditions.
The petitioner claims that as it was providing excellent
services to the respondent, the contract was extended
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from 16 October, 2006 to 15 April, 2007 for the
first installment of six months. Thereafter, it was
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extended from 16 April, 2007 to 15 October,
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2007 for the second installment of six months on the
same rates, terms and conditions as contained in Clause
2.0 of the Special Terms and Conditions of the Contract.
8. The petitioner further claims that it performed the
work in terms of the contract and raised invoices for the
work performed from time to time. However, invoices
amounting to USD 481,252.65 and INR 9,565,616 were
either short paid or not paid despite the work under the
contract was satisfactorily performed by the petitioner.
The details of the invoices raised by the petitioner are as
under:
Invoice No. Period Amount
(USD)
800001820 March 2006 128,630.00
800001821 March 2006 89,149.00
800001828B March 2006 31,053.00
800001829B March 2006 41,406.00
800002119 September 2006 192,169.00
800002120B September 2006 63,729.00
800002860 September 2007 71,304.00
800002861B September 2007 96.00
800002862B September 2007 49,487.00
Total 667,023.00
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9. The petitioner further claims that the respondent has
refused to make payment against the aforesaid invoices.
The respondent totally rejected the various Lost in Hole
(LIH) claims of the petitioner. According to the petitioner,
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in the event of “Equipments” are lost, destroyed or
damaged in the site well, the respondent is liable to pay
the depreciated replacement value of the “Equipments”
stuck/lost in the hole subject to a limit of 50% calculated
from the date of first use of such “Equipments” in India.
Furthermore, in terms of the Clause 17 of the Contract,
the respondent was under an obligation to make an
attempt to recover or retrieve the said tools but the
respondent failed to discharge this obligation also.
10. Since no payment had been received, the petitioner
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sent a letter to the respondent on 11 July, 2008
demanding the payment of the outstanding amount.
However, there was no response to the aforesaid
communication. The petitioner, therefore, issued a legal
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notice dated 14 November, 2008 invoking arbitration
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under Clause 27 of the Contract. In the aforesaid notice,
the petitioner detailed the disputes that have arisen
between the parties. In the same notice, the petitioner
informed the respondent that it has nominated the
Arbitrator and called upon the respondent to nominate
their Arbitrator within 30 days from the date of receipt of
the notice, failing which the petitioner shall be constrained
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to initiate legal steps for appointment of Arbitrator on
behalf of the respondent. According to the petitioner, the
aforesaid notice was duly served upon the respondent but
no steps were taken by them for appointment of
Arbitrator. Thereafter, the petitioner sent a reminder
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letter on 21 May, 2009 calling upon the respondent to
nominate an Arbitrator within 30 days from the date of
receipt of the notice. The petitioner reiterated that in
case the respondent still failed to nominate the Arbitrator,
the petitioner shall initiate proceedings for appointment of
Arbitrator on behalf of the respondent. Another reminder
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was issued by the petitioner on 11 August, 2010 in the
same terms as the earlier notices and the reminders. Still
there was no response from the respondent, which led the
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petitioner to send another notice on 9 January, 2012.
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Finally, on 29 February, 2012, the respondent sent a
reply to the petitioner denying that any amount as
claimed by the petitioner was due.
11. At this stage, the petitioner finally accepted that
disputes have arisen between the parties and filed the
present petition under Section 11(6) of the Arbitration and
Conciliation Act, 1996 seeking appointment of the
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nominee Arbitrator on behalf of the respondent as well as
the third Arbitrator (Presiding Arbitrator).
12. I have heard the learned counsel for the parties.
Mr. Siddharth Luthra, learned senior counsel has
submitted that: (1) the petitioner had accepted the
payment without demur in 2007. The claims are,
therefore, already settled.; (2) The contract had come to
an end long time ago upon the petitioner accepting
payment in 2007.; (3) The cause of action, if any, arose in
2007, while the arbitration petition is filed in January,
2013.; (4) According to Mr. Luthra, even on pleadings of
the petitioner, the cause of action arose to the petitioner
for filing petition under Section 11(6) of the Arbitration
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and Conciliation Act from 14 December, 2008 i.e. on
expiry of 30 days from the first notice
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dated 14 November, 2008 invoking arbitration. Learned
senior counsel submitted that the present petition ought
to have been filed within a maximum period of 3 years
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from the said date, i.e., on or before 14 December, 2011
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while the present petition has been filed on 11 January,
2013. Learned senior counsel emphasized that this Court
would not entertain the present petition as it raises dead
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claims. The contract expired after the de-hiring of last
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unit on 21 October, 2007. The respondent had received
the entire amount in the years 2006-07. Pointing out to
the averments made in the counter-affidavit, Mr. Luthra
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submits that the letter dated 14 November, 2008, 21
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May, 2009 and 11 August, 2010, which were written to
ONGC, were not received in the concerned section of
ONGC. The address in the contract for correspondence
was given as ONGC Limited, Drilling Services, Mumbai
Region, 3B, Vasundhara Bhavan, Bandra-East, Mumbai-51.
This was changed to ONGC Limited, Drilling Services,
nd
Directional Drilling Section, Mumbai Region, 2 Floor, 11-
High, ONGC, Sion (W), Mumbai-400017 in October, 2005.
This was known to the petitioner as it had submitted the
invoices to ONGC at new address. However, notices dated
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21 May, 2009 and 11 August, 2010 were still sent to the
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earlier address. In any event, notice dated 14
November, 2008 was never received by the respondent.
Mr. Luthra submits that mere sending of subsequent show
cause notice/letters would not extend the limitation as the
date of cause of action was fixed on the expiry of 30 days
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from the first notice dated 14 November, 2008. Mr.
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Luthra points out that Section 43 of the Arbitration and
Conciliation Act, 1996 provides that the Limitation Act,
1963 shall apply to arbitrations as it applies to
proceedings in Court. Relying on Section 43(2) read with
Section 21 of the aforesaid Act, the learned counsel
submitted that the arbitration shall be deemed to have
commenced on the date on which a request for that
dispute referred to arbitration is received by the
respondent. The petitioner having sent the first notice
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on 14 November, 2008, the arbitration petition ought to
have been filed after the expiry of 30 days therefrom.
Learned counsel relies on the Constitution Bench of this
Court in SBP & Co. Vs. Patel Engineering Ltd. & Anr.
(2005) 8 SCC 618 , in support of the submission that the
present petition is barred by limitation. He relies on para
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39 of the judgment, which reads as under:
“ 39. It is necessary to define what exactly the
Chief Justice, approached with an application
under Section 11 of the Act, is to decide at that
stage. Obviously, he has to decide his own
jurisdiction in the sense whether the party
making the motion has approached the right
High Court. He has to decide whether there is an
arbitration agreement, as defined in the Act and
whether the person who has made the request
before him, is a party to such an agreement. It
is necessary to indicate that he can also decide
the question whether the claim was a dead one;
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or a long-barred claim that was sought to be
resurrected and whether the parties have
concluded the transaction by recording
satisfaction of their mutual rights and
obligations or by receiving the final payment
without objection. It may not be possible at that
stage, to decide whether a live claim made, is
one which comes within the purview of the
arbitration clause. It will be appropriate to leave
that question to be decided by the Arbitral
Tribunal on taking evidence, along with the
merits of the claims involved in the arbitration.
The Chief Justice has to decide whether the
applicant has satisfied the conditions for
appointing an arbitrator under Section 11(6) of
the Act. For the purpose of taking a decision on
these aspects, the Chief Justice can either
proceed on the basis of affidavits and the
documents produced or take such evidence or
get such evidence recorded, as may be
necessary. We think that adoption of this
procedure in the context of the Act would best
serve the purpose sought to be achieved by the
Act of expediting the process of arbitration,
without too many approaches to the court at
various stages of the proceedings before the
Arbitral Tribunal.”
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13. Relying on the aforesaid observations, the learned
senior counsel has submitted that this Court would have
to decide as to whether the petition is liable to be
dismissed on the ground of limitation as it raises dead
claims. It would not be necessary for this Court to leave
the matter to be decided by the Arbitral Tribunal.
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14. On the other hand, Mr. Sanjiv Puri, learned senior
counsel appearing for the petitioner submits that the
limitation stops running from the date mentioned in the
notice invoking arbitration and in the present case, the
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notice invoking arbitration was sent on 14 November,
2008. Learned counsel also relied on Section 3 of the
Arbitration and Conciliation Act, 1996 in support of the
submission that the notice is deemed to have been
received by respondent as it was delivered to the
addresses mentioned in the contract. In any event, the
learned counsel submitted that the petitioner had sent the
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final notice on 9 January, 2012 and the respondent had
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denied the claim through its letter dated 29 February,
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2012. The disputes clearly arose only w.e.f. 29 February,
2012. Therefore, the preliminary objection raised by the
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respondent deserves to be rejected.
15. In any event, learned senior counsel submitted that
this Court in the case of Indian Oil Corporation Ltd. Vs.
SPS Engineering Ltd. (2011) 3 SCC 507 has
considered and explained the observations made by the
Constitution Bench in SBP & Company’s case (supra) .
It is submitted that on the question of limitation, this Court
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had categorically held that the matter will be left to the
decision of the Tribunal to decide whether the claim made
is barred by limitation or not.
16. I have considered the submissions made by the
learned counsel for the parties. A bare perusal of the
observations made by this Court in paragraph 39 of the
judgment in SBP & Co. (supra) makes it clear that the
Chief Justice or the designated Judge can also decide
whether the claim was dead one or a long-barred claim.
But it is not imperative for the Chief Justice or his
designate to decide the questions at the threshold. It can
be left to be decided by the Arbitral Tribunal. The
observations made in SBP & Co. (supra) were explained
by this Court in Indian Oil Co. Ltd. (supra) , which are as
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under:
“ 14. To find out whether a claim is barred by res
judicata, or whether a claim is “mala fide”, it will
be necessary to examine the facts and relevant
documents. What is to be decided in an
application under Section 11 of the Act is
whether there is an arbitration agreement
between the parties. The Chief Justice or his
designate is not expected to go into the merits
of the claim or examine the tenability of the
claim, in an application under Section 11 of the
Act. The Chief Justice or his designate may
however choose to decide whether the claim is
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a dead (long-barred) claim or whether the
parties have, by recording satisfaction,
exhausted all rights, obligations and remedies
under the contract, so that neither the contract
nor the arbitration agreement survived. When it
is said that the Chief Justice or his designate
may choose to decide whether the claim is a
dead claim, it is implied that he will do so only
when the claim is evidently and patently a long
time-barred claim and there is no need for any
detailed consideration of evidence. We may
elucidate by an illustration: if the contractor
makes a claim a decade or so after completion
of the work without referring to any
acknowledgment of a liability or other factors
that kept the claim alive in law, and the claim is
patently long time-barred, the Chief Justice or
his designate will examine whether the claim is
a dead claim (that is, a long time-barred claim).
On the other hand, if the contractor makes a
claim for payment, beyond three years of
completing of the work but say within five years
of completion of work, and alleges that the final
bill was drawn up and payments were made
within three years before the claim, the Court
will not enter into a disputed question whether
the claim was barred by limitation or not. The
Court will leave the matter to the decision of the
Tribunal. If the distinction between apparent
and obvious dead claims, and claims involving
disputed issues of limitation is not kept in view,
the Chief Justice or his designate will end up
deciding the question of limitation in all
applications under Section 11 of the Act.
JUDGMENT
These observations make it clear that it is optional
for the Chief Justice or his designate to decide whether the
claim is dead (long-barred). It is also made clear by this
Court that the Chief Justice or his designate would do so
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only when the claim is evidently and patently a long time-
barred claim. The claim could be said to be patently long
time-barred, if the contractor makes it a decade or so
after completion of the work without referring to any
acknowledgment of a liability or other factors that kept
the claim alive in law. On the other hand, if the contractor
makes a claim, which is slightly beyond the period of three
years of completing the work say within five years of
completion, the Court will not enter into disputed
questions of fact as to whether the claim was barred by
limitation or not. The judgment further makes it clear that
there is no need for any detailed consideration of
evidence.
17. In the present case, there is a dispute as to whether
the repeated notices sent by the petitioner to the
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respondents were ever received. There are further
disputes (even if the notices were received by ONGC) as
to whether they were actually received in the correct
section of ONGC. These are matters of evidence which
are normally best left to be decided by the Arbitral
Tribunal.
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18. In my opinion, it would be appropriate for this Court
to constitute the entire Arbitral Tribunal in exercise of my
powers under Section 11(6) of the Arbitration and
Conciliation Act, 1996. In exercise of the aforesaid
powers, I nominate Justice V.N. Khare, Former Chief
Justice of India as the Chairman and Justice D.P. Wadhwa
and Justice S.N. Variava, former Judges of this Court as
Arbitrators to adjudicate the disputes that have arisen
between the parties. The arbitrators shall fix their own
remuneration in consultation with the parties.
19. The Registry is directed to communicate this order to
the Chairman of the Arbitral Tribunal, as well as to the
other Arbitrators, so that they can enter upon reference,
as soon as possible.
20. With these observations, the Arbitration Petition is
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allowed with no order as to costs.
.……..…………………..J.
[Surinder Singh
Nijjar]
New Delhi;
May 09, 2013.
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