Full Judgment Text
2020:BHC-OS:6308
20-ARBAPL-2573-2020.DOCX
Pioneer Publicity Corp v AAI & Anr
Shephali
REPORTABLE
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION APPLICATION (L) NO. 2573 OF 2020
Pioneer Publicity Corporation
Pvt Ltd ,
A company registered under the Companies
Act 1956 and thus deemed to be registered
under the Companies Act 2013, having its
registered office at: Pioneer House, Plot No.6,
Block No.02C, Near Rohtak Road, WEA, Karol
Bagh New Delhi- 110 005 And having its
Corporate office at: Office No. 410 - 416, “B”
Wing, Anjani Complex, Periera Hill Road, Opp.
Gurunanak Petrol Pump, Off. Andheri-Kurla
Road, Andheri (E), Mumbai-400 099
… Applicant
~ versus ~
1. Airport Authority of India,
Western Region Headquarters having its
office at: The office of the Regional
Executive Director (W.R.), Opp. Parsi-
wada, Sahar Road, Vile Parle (E), Mumbai -
400 099
2. Union of India,
Having its Legal Cell at: Aayakar Bhavan,
Marine Lines, Mumbai 400 020
… Respondents
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Pioneer Publicity Corp v AAI & Anr
A PPEARANCES
FOR THE APPLICANT ,
PIONEER
“ ”
Mr Dineshkumar Seth ,i/b Mehul Rathod
FOR THE 1 ST
Mr Ajay Khaire
RESPONDENT
“AAI”
FOR THE 2 ND
Ms Shilpa Kapil
RESPONDENT
,
U NION OF I NDIA
CORAM: GS PATEL, J
By Video Conferencing)
DATED: 29th September 2020
ORAL JUDGMENT:–
1. Heard through video conferencing.
2. This is an application under Section 11 of the Arbitration and
Conciliation Act 1996. The 1st Respondent is the Airport Authority
of India ( “AAI” ) and is joined through its Western Region
Headquarters in Mumbai. The 2nd Respondent is the Union of India.
3. The Applicant ( “Pioneer” ) was the successful tenderer for
AAI’s September 2017 e-tender inviting bids for the display of 8,000
sq ft advertising hoardings at the New Airport Colony along the
Western Express Highway in Mumbai. A photocopy of e-tender
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Pioneer Publicity Corp v AAI & Anr
document is annexed. By its letter dated 28th March 2018, AAI
selected Pioneer as the successful bidder for a term of three years at
a monthly licence fee of Rs. 16.40 lakhs with an escalation clause of
10%.
4. Pioneer paid the necessary security deposit towards electricity
charges and then made an advance payment of Rs. 17,71,200/- as the
licence fee for the first month. Pioneer then sent to AAI a bank
guarantee dated 3rd April 2018 in the amount of Rs. 79,37,600/-
towards a security deposit. This amount was computed exactly as
stipulated in the e-tender read with award letter of 28th March 2018.
The bank guarantee was towards the security deposit.
5. Pioneer claims that it then proceeded to apply for the necessary
permissions from various authorities. There was some delay, and
changes in the permissible height of the display hoardings. I am not
concerned with these factual aspects in a Section 11 application. They
lie in the remit of an arbitration.
6. What is, however, of relevance is that by its letter dated 10th
January 2019 AAI amended the terms of the contract and reduced the
hoarding size from 8,000 sq ft to 5,000 sq ft. All other terms and
conditions were kept intact.
7. Pioneer then began applying once again with various
departments for the necessary permissions. These included the
Mumbai Metropolitan Regional Development Authority
(“ MMRDA ”) and the Public Works Department ( “PWD” ). In this
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Pioneer Publicity Corp v AAI & Anr
time, there was some local jurisdictional wrangle as to the Western
Express Highway and which authority would have jurisdiction over
it. The result, it seems, was that Pioneer was being shunted from one
authority to the other, continually making fresh applications. There
then followed a Government of Maharashtra Notification on 19th
March 2019 saying that the jurisdiction over the Western Express
Highway had been removed from the PWD and now stood vested
with the MMRDA. This drove the Pioneer to once again applying to
the MMRDA for permission. But Pioneer’s woes had still not ended.
For there then intervened the Parliamentary Elections in April–May
2019 with all the attendant restrictions that elections usually entail.
8. It seems that it was not until late June 2019 that Pioneer
received a response from MMRDA.
9. The present Application notes this in some detail to attempt an
explanation of the delays that undoubtedly occurred. On 9th April
2019 and 27th June 2019, Pioneer wrote to AAI saying there had been
these delays in obtaining permissions. Pioneer requested that the
contract be allowed to start from the day of installation of the contract
hoardings. AAI rejected this request by its letter dated 8th May 2019.
10. The contract itself only allowed for a 60-day ‘gestation’ period.
That period ended on 11th March 2019. What the gestation period
provision meant was that after the gestation period Pioneer was liable
to pay AAI a monthly licence fee. AAI then began raising monthly
bills commencing from 29th March 2019 on Pioneer. There appear to
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Pioneer Publicity Corp v AAI & Anr
be five such bills or invoices from AAI between 29th March 2019 and
4th July 2019.
11. On 1st July 2019, AAI gave Pioneer a 30-day notice of
termination of the contract.
12. Pioneer invoked arbitration in terms of Clause 20, which says:
20. All disputes and differences arising out of or in any
way touching or concerning this Agreement (except those
...), shall, in the first instance, be referred to a Dispute
Resolution Committee (DRC) set up at the airport for which
a Written application should be obtained from the party and
the points clearly spelt out. In case the dispute is not resolved
within 45 days of the reference, then the case shall be
referred to the Sole Arbitration of a person to be appointed
by the Chairman / Member of the Authority. The award of
the Arbitrator so appointed shall be final and binding on the
parties. The Arbitration and Conciliation Act 1996 shall be
applicable. ... The case shall be referred to the Sole
Arbitrator by the Chairman / Member of the Authority,
subject to the condition that the Licensee shall have to
deposit the disputed amount with AAI as condition
precedent before making reference to the Arbitration for
adjudication of dispute. ...
There is no dispute that jurisdiction is with courts in the towns where
the airport in question is situated. In this case, the jurisdiction would
therefore be Mumbai.
13. As Clause 20 indicates, disputes must first pass through the
Dispute Resolution Committee ( “DRC” ).
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14. Mr Seth points out from the exhibits to the Petition that the
Petitioners made not one but two such representations to the DRC.
1
The first of these is of 12th July 2019. AAI rejected this by its letter
2
dated 22nd July 2019. The reason for rejection is both interesting and
relevant in the context of the opposition to this Section 11
Application.
15. The rejection letter from AAI of 22nd July 2019 refers to the
very same Clause 20 of the general terms and conditions of the
contract, i.e. the arbitration clause, and demands payment of an
amount of Rs. 56,84,650/- and a consent letter to accept the
recommendations of the DRC. The letter clearly states that
compliance with these two requisitions was required and, once
received, the request for a reference to DRC ‘would be considered’.
It seems that Pioneer did make that payment and, by its later letter
3
dated 3rd September 2019, presented an application under Clause
20, setting out some of the terms and the background facts. The
request was for a resolution of the disputes by the DRC.
16. AAI rejected this second application too by its letter of 23rd
4
September 2019. Again, and for the same reasons, this letter is
important. The letter is partly in Hindi and partly in English. In
paragraph 1, AAI again referred to Clause 20 of the general terms and
conditions of the contract. It then said that ‘the contract’ had been
terminated for non-submission of the requisite NOC from the
1 Exhibit ‘P’, Vol 04, printed page 79, PDF page 56.
2 Exhibit ‘Q’, Vol 04, printed page 81, PDF page 57.
3 Exhibit ‘V’, Vol 04, printed page 139, PDF page 115.
4 Exhibit ‘W’, Vol 04, printed page 142, PDF page 118.
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statutory authorities. It then went on to say that this Court had
disposed of an earlier Arbitration Petition (under Section 9) filed by
Pioneer. For these reasons, the DRC had concluded that there was no
substance in Pioneer’s reference.
17. What is of relevance in both AAI’s letters referred to above is
that at no time did AAI dispute the existence of the contract or the
arbitration agreement. To the contrary: AAI itself expressly referred
to and invoked the arbitration clause; and that arbitration clause is to
be found in, and only in, the contract. AAI demanded payment of an
advance amount — again, under the arbitration clause. In the second
letter, it specifically mentioned that the contract had been
‘terminated for non-submission of the requisite NOC’, i.e. that there
was non-compliance with a contractual requirement.
18. In this context, a reference to the actual termination letter
5
dated 1st July 2019 is instructive. This one-page letter does not say
that there was no contract at all. It specifically alleges non-compliance
by Pioneer of contractual terms and conditions. Further, it quotes
extensively from the contract in question. The letter refers to the
contract, the award letter of 28th March 2018, the revised award
letter of 10th January 2019 and describes in more than one place the
document as ‘ the subject contract ’. The allegation in the very first
paragraph is that Pioneer failed to submit the NOC as per the ‘NID
provisions’. This is a reference to the contract in question and nothing
else. In the second paragraph, there is a specific invocation of
paragraph 1(b) of the licence agreement citing termination for
5 Exhibit ‘O’, Vol 04, printed page 78, PDF page 55.
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Pioneer Publicity Corp v AAI & Anr
unsatisfactory performance. In the third paragraph, AAI proceeds—
and these are its own words—
‘to terminate the subject contract, i.e. Advertising Hoarding
Contract at New Airport Colony’.
19. I have noted this at some length because the response on
instructions from Mr Khaire, to my very great surprise, is that there is
no contract at all . When pressed for an explanation of what this is
supposed to mean, he states that his instructions are to submit that
there is no document ‘that has been signed by the parties on the
necessary stamp paper; therefore there was no contract, and
therefore there is no arbitration agreement’. It is his submission that
an actual physical signature on the document is required for a contract
to come into existence and that without such a signed document,
there can be no contract and no arbitration agreement.
20. Whatever may be Mr Khaire’s instructions, that argument is
neither the law nor is it in facts. It may well be self-defeating. If there
was no contract, AAI could not have raised invoices. It could not have
demanded a bank guarantee, security deposit or any other amount.
What did AAI terminate if not the contract? Why did it demand
amounts under the contract? If there was no contract, how could it
complain of ‘non-compliance’ of anything except the terms of the
very contract? There are, besides, the two rejections by the DRC of
Pioneer’s reference to dispute resolution. These rejections are also
specifically anchored to contractual provisions.
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Pioneer Publicity Corp v AAI & Anr
21. As to the law on the subject, I believe this is reasonably well
settled and admits of a very little dispute.
22. Mr Khaire’s reliance on the decision on PSA Mumbai
6
Investments Pte Ltd v Board of Trustees of JNPT is wholly misplaced.
That was a case where JNPT issued a Request for Qualification or
RFQ. That was a two-stage process: eligibility, to be followed by an
RFP or a Request for Proposal. The appellant’s consortium qualified
and succeeded in the RFP, obtaining a letter of award. JNPT called
on the consortium to perform its part of the bid . That not having been
done, JNPT withdrew the award. It claimed damages and invoked
arbitration. It was the appellant who resisted arbitration. The court
held that there was no absolute and unqualified acceptance by JNPT
of the bid by its letter of award. There was, therefore, no enforceable
contract. The matter, therefore, stood at the acceptance stage of the
bid itself. Those facts could not be further from the facts in this case.
Here, it is not AAI invoking arbitration. It is AAI that acted on its
letter of award. Indeed, it amended it and issued an amended letter.
It demanded performance, including a bank guarantee. It raised
invoices. It complained of non-performance of the contract, and it
demanded a deposit before the complaint could be taken to the DRC.
It then terminated the contract itself. PSA Mumbai has no application
at all in a situation like this.
23. Far more apposite are the decisions Mr Seth cites. First,
7
Caravel Shipping Services Pvt Ltd v Premier Sea Foods Exim Pvt Ltd ,
6 (2018) 10 SCC 525.
7 (2019) 11 SCC 461.
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Pioneer Publicity Corp v AAI & Anr
which clearly says the signing of an arbitration agreement is not
mandatory when the agreement satisfies the test of being in writing.
Second, there is the Supreme Court decision in Unissi (India) Pvt Ltd
8
v Post Graduate Institute of Medical Education & Research , which dealt
with precisely the question of the need to execute a ‘formal arbitration
agreement’ in the context of an open tender. Finding that the tender
document itself had an arbitration clause (as in the present case) and
that the appellants’ tender was accepted and the contract awarded (as
in this case), the Supreme Court held that a valid arbitration
agreement had come into existence even without a formally signed
document. Indeed, in paragraph 15, the Supreme Court noted that in
the respondent’s letter, there was ‘a reference to the aforementioned
tender enquiry number’. The present case is on even surer ground,
for, as I have noted, AAI acted extensively and repeatedly on the
contract — invoking it, citing it, making demands under it, raising
invoices under it, complaining of its non-performance and finally
terminating it. The conduct of the parties is enough to bring this case
on parity with Unissi , especially given the further observations in
paragraph 17 of that decision.
24. Finally, Mr Seth places the 2009 decision of the Supreme
9
Court in MR Engineers & Contractors Pvt Ltd v Som Datt Builders Ltd .
While this is principally on the question of incorporation by reference
of an arbitration agreement in another contract, the underlying
8 (2009) 1 SCC 107.
9 (2009) 7 SCC 696. Specifically referenced in Caravel Shipping , 2019,
paragraph 9, SCC p. 464.
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Pioneer Publicity Corp v AAI & Anr
principle is the same: once there is a written agreement and parties
have acted on it, that is sufficient.
25. As a general principle, I would venture to add this: the trend in
the last few years has been to affirm and re-affirm the existence of
arbitration agreements and to hold parties to the bargain they struck.
PSA Mumbai strikes no discordant note as Mr Khaire faintly attempts
to suggest. To the contrary: it found that no concluded contract had
been reached because there was not an unconditional acceptance of
the offer. It did not hold that there was no valid contract only for want
of signature on a formal document.
26. Inevitably, I must return the finding that there is no substance
at all in AAI’s opposition. There was and is a valid arbitration
agreement contained in Clause 20 set out above. There is simply no
substance to the argument by AAI that there ‘exists no contract and
no arbitration clause’.
27. The arbitration clause itself requires reference to a sole
Arbitrator to be appointed by the Chairman/Member of AAI. A
unilateral appointment of that kind, even if Mr Seth for the Applicant
is agreeable, would be in the teeth of the settled law of this Court in
10
view of Perkins Eastman Architect DPC & Anr vs HSSC (India) Ltd ;
11
Voestalpine Schienen GmbH v Delhi Metro Rail Corporation Ltd ; and
12
TRF Limited v Energo Engineering Products Ltd. I considered all these
10 2019 (9) SCC OnLine SC 1517.
11 (2019) 4 SCC 665.
12 (2017) 8 SCC 377.
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13
in Lite Bite Foods Pvt Ltd v AAI . This leads to the conclusion that
there are in the current state of the law only two modes of
appointment of an arbitral tribunal. One is by consent of the parties,
and the other is an appointment by the Court. Clearly, in the present
case, the first is not possible.
28. It remains, therefore, for me to appoint an Arbitrator.
Accordingly, I nominate Mr Mayur Khandeparkar, learned Advocate
of this Court as the Arbitrator before whom all disputes and
differences arising from the contract comprised in e-tender document
AAI/RHQ/WR/COMML/04/2017 read with the award letter dated
28th March 2018 and the amendment letter dated 10th January 2019
from AAI (itself to be read with Pioneer’s response letter also of 10th
January 2019 accepting the revised letter issued by AAI).
29. The appointment is on the usual terms and conditions set out
at the end of this order.
30. Ms Kapil is correct in saying that the Union of India has been
needlessly joined to the Section 11 Application. It is not a necessary
party. Mr Seth on instructions agrees to delete the name of the 2nd
Respondent. Leave to amend. Amendment to be carried out in hard
copy without need of re-verification within three weeks from today.
31. I dispose of the Arbitration Application in these terms with no
order as to costs.
13 2019 SCC OnLine Bom 5163.
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Pioneer Publicity Corp v AAI & Anr
32. The Private Secretary of this Court will digitally sign this
order. All concerned will act on production by fax or email of a
digitally signed copy of this order.
TERMS OF REFERENCE
(a) Appointment of Arbitrator : By consent, Mr Mayur
Khandeparkar, learned Advocate, is hereby nominated
to act as a Sole Arbitrator to decide the disputes and
differences between the parties arising from the contract
comprised in e-tender document
AAI/RHQ/WR/COMML/04/2017 read with the
award letter dated 28th March 2018 and the amendment
letter dated 10th January 2019 from AAI (itself to be
read with Pioneer’s response letter also of 10th January
2019 accepting the revised letter issued by AAI).
(b) Communication to Arbitrator of this order :
(i) A copy of this order will be communicated to
the learned Sole Arbitrator by the Advocates
for the Applicant within one week from the
date this order is uploaded.
(ii) In addition, within one week of this order
being uploaded, the Registry will forward an
ordinary copy of this order to the learned Sole
Arbitrator at the following postal and email
addresses:
Arbitrator Mr Mayur Khandeparkar, Advocate.
Address 102, Oval House
British Hotel Lane, Fort
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Pioneer Publicity Corp v AAI & Anr
Mumbai 400 001
Mobile +91 98192 67999
Email khandeparkar_mayur@yahoo.com
(c) Disclosure : The learned Sole Arbitrator is requested to
forward the necessary statement of disclosure under
Section 11(8) read with Section 12(1) of the Arbitration
Act to the Prothonotary and Senior Master of this
Court, referencing this arbitration application, as soon
as possible, and in any case sufficiently before entering
upon the reference to arbitration. That statement will be
retained by the Prothonotary & Senior Master on the file
of this application. Copies will be given to both sides.
(d) Appearance before the Arbitrator : Parties will appear
before the learned Sole Arbitrator on such date, and at
such place as the learned Sole Arbitrator nominates to
obtain appropriate directions regarding fixing a schedule
for completing pleadings, etc.
(e) Contact/communication information of the parties :
Contact and communication particulars are to be
provided by both sides to the learned Sole Arbitrator
within one week of this order being uploaded. The
information is to include a valid and functional email
address.
(f) Section 16 application : The respondent is at liberty to
raise all questions of jurisdiction within the meaning of
section 16 of the Arbitration Act. All contentions are left
open.
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(g) Interim Application/s :
(i) Liberty to the parties to make an interim
application or interim applications including
(but not limited to) interim applications under
Section 17 of the Arbitration & Conciliation
Act, 1996 before the learned Sole Arbitrator.
Any such application will be decided in such
manner, and within such time as the learned
Sole Arbitrator deems fit.
(ii) The learned Sole Arbitrator is requested to
dispose of all interim applications at the
earliest.
(h) Fees : The arbitral tribunal’s fees shall be governed by
the Bombay High Court (Fee Payable to Arbitrators)
Rules, 2018.
(i) Sharing of costs and fees : Parties agree that the two
sides will bear all arbitral costs and the fees of the
arbitrator in equal shares in the first instance.
(j) Consent to an extension if thought necessary . Parties
immediately consent to a further extension of up to six
months to complete the arbitration should the learned
Sole Arbitrator find it necessary.
(k) Venue and seat of arbitration : Parties agree that the
venue and seat of the arbitration will be in Mumbai.
(G. S. PATEL, J)
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Pioneer Publicity Corp v AAI & Anr
Shephali
REPORTABLE
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION APPLICATION (L) NO. 2573 OF 2020
Pioneer Publicity Corporation
Pvt Ltd ,
A company registered under the Companies
Act 1956 and thus deemed to be registered
under the Companies Act 2013, having its
registered office at: Pioneer House, Plot No.6,
Block No.02C, Near Rohtak Road, WEA, Karol
Bagh New Delhi- 110 005 And having its
Corporate office at: Office No. 410 - 416, “B”
Wing, Anjani Complex, Periera Hill Road, Opp.
Gurunanak Petrol Pump, Off. Andheri-Kurla
Road, Andheri (E), Mumbai-400 099
… Applicant
~ versus ~
1. Airport Authority of India,
Western Region Headquarters having its
office at: The office of the Regional
Executive Director (W.R.), Opp. Parsi-
wada, Sahar Road, Vile Parle (E), Mumbai -
400 099
2. Union of India,
Having its Legal Cell at: Aayakar Bhavan,
Marine Lines, Mumbai 400 020
… Respondents
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Pioneer Publicity Corp v AAI & Anr
A PPEARANCES
FOR THE APPLICANT ,
PIONEER
“ ”
Mr Dineshkumar Seth ,i/b Mehul Rathod
FOR THE 1 ST
Mr Ajay Khaire
RESPONDENT
“AAI”
FOR THE 2 ND
Ms Shilpa Kapil
RESPONDENT
,
U NION OF I NDIA
CORAM: GS PATEL, J
By Video Conferencing)
DATED: 29th September 2020
ORAL JUDGMENT:–
1. Heard through video conferencing.
2. This is an application under Section 11 of the Arbitration and
Conciliation Act 1996. The 1st Respondent is the Airport Authority
of India ( “AAI” ) and is joined through its Western Region
Headquarters in Mumbai. The 2nd Respondent is the Union of India.
3. The Applicant ( “Pioneer” ) was the successful tenderer for
AAI’s September 2017 e-tender inviting bids for the display of 8,000
sq ft advertising hoardings at the New Airport Colony along the
Western Express Highway in Mumbai. A photocopy of e-tender
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document is annexed. By its letter dated 28th March 2018, AAI
selected Pioneer as the successful bidder for a term of three years at
a monthly licence fee of Rs. 16.40 lakhs with an escalation clause of
10%.
4. Pioneer paid the necessary security deposit towards electricity
charges and then made an advance payment of Rs. 17,71,200/- as the
licence fee for the first month. Pioneer then sent to AAI a bank
guarantee dated 3rd April 2018 in the amount of Rs. 79,37,600/-
towards a security deposit. This amount was computed exactly as
stipulated in the e-tender read with award letter of 28th March 2018.
The bank guarantee was towards the security deposit.
5. Pioneer claims that it then proceeded to apply for the necessary
permissions from various authorities. There was some delay, and
changes in the permissible height of the display hoardings. I am not
concerned with these factual aspects in a Section 11 application. They
lie in the remit of an arbitration.
6. What is, however, of relevance is that by its letter dated 10th
January 2019 AAI amended the terms of the contract and reduced the
hoarding size from 8,000 sq ft to 5,000 sq ft. All other terms and
conditions were kept intact.
7. Pioneer then began applying once again with various
departments for the necessary permissions. These included the
Mumbai Metropolitan Regional Development Authority
(“ MMRDA ”) and the Public Works Department ( “PWD” ). In this
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Pioneer Publicity Corp v AAI & Anr
time, there was some local jurisdictional wrangle as to the Western
Express Highway and which authority would have jurisdiction over
it. The result, it seems, was that Pioneer was being shunted from one
authority to the other, continually making fresh applications. There
then followed a Government of Maharashtra Notification on 19th
March 2019 saying that the jurisdiction over the Western Express
Highway had been removed from the PWD and now stood vested
with the MMRDA. This drove the Pioneer to once again applying to
the MMRDA for permission. But Pioneer’s woes had still not ended.
For there then intervened the Parliamentary Elections in April–May
2019 with all the attendant restrictions that elections usually entail.
8. It seems that it was not until late June 2019 that Pioneer
received a response from MMRDA.
9. The present Application notes this in some detail to attempt an
explanation of the delays that undoubtedly occurred. On 9th April
2019 and 27th June 2019, Pioneer wrote to AAI saying there had been
these delays in obtaining permissions. Pioneer requested that the
contract be allowed to start from the day of installation of the contract
hoardings. AAI rejected this request by its letter dated 8th May 2019.
10. The contract itself only allowed for a 60-day ‘gestation’ period.
That period ended on 11th March 2019. What the gestation period
provision meant was that after the gestation period Pioneer was liable
to pay AAI a monthly licence fee. AAI then began raising monthly
bills commencing from 29th March 2019 on Pioneer. There appear to
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be five such bills or invoices from AAI between 29th March 2019 and
4th July 2019.
11. On 1st July 2019, AAI gave Pioneer a 30-day notice of
termination of the contract.
12. Pioneer invoked arbitration in terms of Clause 20, which says:
20. All disputes and differences arising out of or in any
way touching or concerning this Agreement (except those
...), shall, in the first instance, be referred to a Dispute
Resolution Committee (DRC) set up at the airport for which
a Written application should be obtained from the party and
the points clearly spelt out. In case the dispute is not resolved
within 45 days of the reference, then the case shall be
referred to the Sole Arbitration of a person to be appointed
by the Chairman / Member of the Authority. The award of
the Arbitrator so appointed shall be final and binding on the
parties. The Arbitration and Conciliation Act 1996 shall be
applicable. ... The case shall be referred to the Sole
Arbitrator by the Chairman / Member of the Authority,
subject to the condition that the Licensee shall have to
deposit the disputed amount with AAI as condition
precedent before making reference to the Arbitration for
adjudication of dispute. ...
There is no dispute that jurisdiction is with courts in the towns where
the airport in question is situated. In this case, the jurisdiction would
therefore be Mumbai.
13. As Clause 20 indicates, disputes must first pass through the
Dispute Resolution Committee ( “DRC” ).
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14. Mr Seth points out from the exhibits to the Petition that the
Petitioners made not one but two such representations to the DRC.
1
The first of these is of 12th July 2019. AAI rejected this by its letter
2
dated 22nd July 2019. The reason for rejection is both interesting and
relevant in the context of the opposition to this Section 11
Application.
15. The rejection letter from AAI of 22nd July 2019 refers to the
very same Clause 20 of the general terms and conditions of the
contract, i.e. the arbitration clause, and demands payment of an
amount of Rs. 56,84,650/- and a consent letter to accept the
recommendations of the DRC. The letter clearly states that
compliance with these two requisitions was required and, once
received, the request for a reference to DRC ‘would be considered’.
It seems that Pioneer did make that payment and, by its later letter
3
dated 3rd September 2019, presented an application under Clause
20, setting out some of the terms and the background facts. The
request was for a resolution of the disputes by the DRC.
16. AAI rejected this second application too by its letter of 23rd
4
September 2019. Again, and for the same reasons, this letter is
important. The letter is partly in Hindi and partly in English. In
paragraph 1, AAI again referred to Clause 20 of the general terms and
conditions of the contract. It then said that ‘the contract’ had been
terminated for non-submission of the requisite NOC from the
1 Exhibit ‘P’, Vol 04, printed page 79, PDF page 56.
2 Exhibit ‘Q’, Vol 04, printed page 81, PDF page 57.
3 Exhibit ‘V’, Vol 04, printed page 139, PDF page 115.
4 Exhibit ‘W’, Vol 04, printed page 142, PDF page 118.
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statutory authorities. It then went on to say that this Court had
disposed of an earlier Arbitration Petition (under Section 9) filed by
Pioneer. For these reasons, the DRC had concluded that there was no
substance in Pioneer’s reference.
17. What is of relevance in both AAI’s letters referred to above is
that at no time did AAI dispute the existence of the contract or the
arbitration agreement. To the contrary: AAI itself expressly referred
to and invoked the arbitration clause; and that arbitration clause is to
be found in, and only in, the contract. AAI demanded payment of an
advance amount — again, under the arbitration clause. In the second
letter, it specifically mentioned that the contract had been
‘terminated for non-submission of the requisite NOC’, i.e. that there
was non-compliance with a contractual requirement.
18. In this context, a reference to the actual termination letter
5
dated 1st July 2019 is instructive. This one-page letter does not say
that there was no contract at all. It specifically alleges non-compliance
by Pioneer of contractual terms and conditions. Further, it quotes
extensively from the contract in question. The letter refers to the
contract, the award letter of 28th March 2018, the revised award
letter of 10th January 2019 and describes in more than one place the
document as ‘ the subject contract ’. The allegation in the very first
paragraph is that Pioneer failed to submit the NOC as per the ‘NID
provisions’. This is a reference to the contract in question and nothing
else. In the second paragraph, there is a specific invocation of
paragraph 1(b) of the licence agreement citing termination for
5 Exhibit ‘O’, Vol 04, printed page 78, PDF page 55.
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unsatisfactory performance. In the third paragraph, AAI proceeds—
and these are its own words—
‘to terminate the subject contract, i.e. Advertising Hoarding
Contract at New Airport Colony’.
19. I have noted this at some length because the response on
instructions from Mr Khaire, to my very great surprise, is that there is
no contract at all . When pressed for an explanation of what this is
supposed to mean, he states that his instructions are to submit that
there is no document ‘that has been signed by the parties on the
necessary stamp paper; therefore there was no contract, and
therefore there is no arbitration agreement’. It is his submission that
an actual physical signature on the document is required for a contract
to come into existence and that without such a signed document,
there can be no contract and no arbitration agreement.
20. Whatever may be Mr Khaire’s instructions, that argument is
neither the law nor is it in facts. It may well be self-defeating. If there
was no contract, AAI could not have raised invoices. It could not have
demanded a bank guarantee, security deposit or any other amount.
What did AAI terminate if not the contract? Why did it demand
amounts under the contract? If there was no contract, how could it
complain of ‘non-compliance’ of anything except the terms of the
very contract? There are, besides, the two rejections by the DRC of
Pioneer’s reference to dispute resolution. These rejections are also
specifically anchored to contractual provisions.
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21. As to the law on the subject, I believe this is reasonably well
settled and admits of a very little dispute.
22. Mr Khaire’s reliance on the decision on PSA Mumbai
6
Investments Pte Ltd v Board of Trustees of JNPT is wholly misplaced.
That was a case where JNPT issued a Request for Qualification or
RFQ. That was a two-stage process: eligibility, to be followed by an
RFP or a Request for Proposal. The appellant’s consortium qualified
and succeeded in the RFP, obtaining a letter of award. JNPT called
on the consortium to perform its part of the bid . That not having been
done, JNPT withdrew the award. It claimed damages and invoked
arbitration. It was the appellant who resisted arbitration. The court
held that there was no absolute and unqualified acceptance by JNPT
of the bid by its letter of award. There was, therefore, no enforceable
contract. The matter, therefore, stood at the acceptance stage of the
bid itself. Those facts could not be further from the facts in this case.
Here, it is not AAI invoking arbitration. It is AAI that acted on its
letter of award. Indeed, it amended it and issued an amended letter.
It demanded performance, including a bank guarantee. It raised
invoices. It complained of non-performance of the contract, and it
demanded a deposit before the complaint could be taken to the DRC.
It then terminated the contract itself. PSA Mumbai has no application
at all in a situation like this.
23. Far more apposite are the decisions Mr Seth cites. First,
7
Caravel Shipping Services Pvt Ltd v Premier Sea Foods Exim Pvt Ltd ,
6 (2018) 10 SCC 525.
7 (2019) 11 SCC 461.
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which clearly says the signing of an arbitration agreement is not
mandatory when the agreement satisfies the test of being in writing.
Second, there is the Supreme Court decision in Unissi (India) Pvt Ltd
8
v Post Graduate Institute of Medical Education & Research , which dealt
with precisely the question of the need to execute a ‘formal arbitration
agreement’ in the context of an open tender. Finding that the tender
document itself had an arbitration clause (as in the present case) and
that the appellants’ tender was accepted and the contract awarded (as
in this case), the Supreme Court held that a valid arbitration
agreement had come into existence even without a formally signed
document. Indeed, in paragraph 15, the Supreme Court noted that in
the respondent’s letter, there was ‘a reference to the aforementioned
tender enquiry number’. The present case is on even surer ground,
for, as I have noted, AAI acted extensively and repeatedly on the
contract — invoking it, citing it, making demands under it, raising
invoices under it, complaining of its non-performance and finally
terminating it. The conduct of the parties is enough to bring this case
on parity with Unissi , especially given the further observations in
paragraph 17 of that decision.
24. Finally, Mr Seth places the 2009 decision of the Supreme
9
Court in MR Engineers & Contractors Pvt Ltd v Som Datt Builders Ltd .
While this is principally on the question of incorporation by reference
of an arbitration agreement in another contract, the underlying
8 (2009) 1 SCC 107.
9 (2009) 7 SCC 696. Specifically referenced in Caravel Shipping , 2019,
paragraph 9, SCC p. 464.
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principle is the same: once there is a written agreement and parties
have acted on it, that is sufficient.
25. As a general principle, I would venture to add this: the trend in
the last few years has been to affirm and re-affirm the existence of
arbitration agreements and to hold parties to the bargain they struck.
PSA Mumbai strikes no discordant note as Mr Khaire faintly attempts
to suggest. To the contrary: it found that no concluded contract had
been reached because there was not an unconditional acceptance of
the offer. It did not hold that there was no valid contract only for want
of signature on a formal document.
26. Inevitably, I must return the finding that there is no substance
at all in AAI’s opposition. There was and is a valid arbitration
agreement contained in Clause 20 set out above. There is simply no
substance to the argument by AAI that there ‘exists no contract and
no arbitration clause’.
27. The arbitration clause itself requires reference to a sole
Arbitrator to be appointed by the Chairman/Member of AAI. A
unilateral appointment of that kind, even if Mr Seth for the Applicant
is agreeable, would be in the teeth of the settled law of this Court in
10
view of Perkins Eastman Architect DPC & Anr vs HSSC (India) Ltd ;
11
Voestalpine Schienen GmbH v Delhi Metro Rail Corporation Ltd ; and
12
TRF Limited v Energo Engineering Products Ltd. I considered all these
10 2019 (9) SCC OnLine SC 1517.
11 (2019) 4 SCC 665.
12 (2017) 8 SCC 377.
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13
in Lite Bite Foods Pvt Ltd v AAI . This leads to the conclusion that
there are in the current state of the law only two modes of
appointment of an arbitral tribunal. One is by consent of the parties,
and the other is an appointment by the Court. Clearly, in the present
case, the first is not possible.
28. It remains, therefore, for me to appoint an Arbitrator.
Accordingly, I nominate Mr Mayur Khandeparkar, learned Advocate
of this Court as the Arbitrator before whom all disputes and
differences arising from the contract comprised in e-tender document
AAI/RHQ/WR/COMML/04/2017 read with the award letter dated
28th March 2018 and the amendment letter dated 10th January 2019
from AAI (itself to be read with Pioneer’s response letter also of 10th
January 2019 accepting the revised letter issued by AAI).
29. The appointment is on the usual terms and conditions set out
at the end of this order.
30. Ms Kapil is correct in saying that the Union of India has been
needlessly joined to the Section 11 Application. It is not a necessary
party. Mr Seth on instructions agrees to delete the name of the 2nd
Respondent. Leave to amend. Amendment to be carried out in hard
copy without need of re-verification within three weeks from today.
31. I dispose of the Arbitration Application in these terms with no
order as to costs.
13 2019 SCC OnLine Bom 5163.
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Pioneer Publicity Corp v AAI & Anr
32. The Private Secretary of this Court will digitally sign this
order. All concerned will act on production by fax or email of a
digitally signed copy of this order.
TERMS OF REFERENCE
(a) Appointment of Arbitrator : By consent, Mr Mayur
Khandeparkar, learned Advocate, is hereby nominated
to act as a Sole Arbitrator to decide the disputes and
differences between the parties arising from the contract
comprised in e-tender document
AAI/RHQ/WR/COMML/04/2017 read with the
award letter dated 28th March 2018 and the amendment
letter dated 10th January 2019 from AAI (itself to be
read with Pioneer’s response letter also of 10th January
2019 accepting the revised letter issued by AAI).
(b) Communication to Arbitrator of this order :
(i) A copy of this order will be communicated to
the learned Sole Arbitrator by the Advocates
for the Applicant within one week from the
date this order is uploaded.
(ii) In addition, within one week of this order
being uploaded, the Registry will forward an
ordinary copy of this order to the learned Sole
Arbitrator at the following postal and email
addresses:
Arbitrator Mr Mayur Khandeparkar, Advocate.
Address 102, Oval House
British Hotel Lane, Fort
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Pioneer Publicity Corp v AAI & Anr
Mumbai 400 001
Mobile +91 98192 67999
Email khandeparkar_mayur@yahoo.com
(c) Disclosure : The learned Sole Arbitrator is requested to
forward the necessary statement of disclosure under
Section 11(8) read with Section 12(1) of the Arbitration
Act to the Prothonotary and Senior Master of this
Court, referencing this arbitration application, as soon
as possible, and in any case sufficiently before entering
upon the reference to arbitration. That statement will be
retained by the Prothonotary & Senior Master on the file
of this application. Copies will be given to both sides.
(d) Appearance before the Arbitrator : Parties will appear
before the learned Sole Arbitrator on such date, and at
such place as the learned Sole Arbitrator nominates to
obtain appropriate directions regarding fixing a schedule
for completing pleadings, etc.
(e) Contact/communication information of the parties :
Contact and communication particulars are to be
provided by both sides to the learned Sole Arbitrator
within one week of this order being uploaded. The
information is to include a valid and functional email
address.
(f) Section 16 application : The respondent is at liberty to
raise all questions of jurisdiction within the meaning of
section 16 of the Arbitration Act. All contentions are left
open.
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(g) Interim Application/s :
(i) Liberty to the parties to make an interim
application or interim applications including
(but not limited to) interim applications under
Section 17 of the Arbitration & Conciliation
Act, 1996 before the learned Sole Arbitrator.
Any such application will be decided in such
manner, and within such time as the learned
Sole Arbitrator deems fit.
(ii) The learned Sole Arbitrator is requested to
dispose of all interim applications at the
earliest.
(h) Fees : The arbitral tribunal’s fees shall be governed by
the Bombay High Court (Fee Payable to Arbitrators)
Rules, 2018.
(i) Sharing of costs and fees : Parties agree that the two
sides will bear all arbitral costs and the fees of the
arbitrator in equal shares in the first instance.
(j) Consent to an extension if thought necessary . Parties
immediately consent to a further extension of up to six
months to complete the arbitration should the learned
Sole Arbitrator find it necessary.
(k) Venue and seat of arbitration : Parties agree that the
venue and seat of the arbitration will be in Mumbai.
(G. S. PATEL, J)
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