Full Judgment Text
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CASE NO.:
Arbitration Petition 12 of 2007
PETITIONER:
YOU ONE MAHARIA \026 JV THR.YOU ONE ENG.& CONSTRUCTION CO.LTD. & ANR
RESPONDENT:
NATIONAL HIGHWAYS AUTHORITY OF INDIA
DATE OF JUDGMENT: 21/08/2007
BENCH:
C.K. THAKKER
JUDGMENT:
J U D G M E N T
C.K. THAKKER, J.
This petition is filed by the petitioners under Section
11(6) and Section 11(12) of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as \021the Act\022)
read with paragraph 2 of the Appointment of Arbitrators
by the Chief Justice of India Scheme, 1996 for
appointment of Third/Presiding Arbitrator in accordance
with the Agreement/Contract Package No. NS-23/AP
dated May 31, 2001 entered into between the petitioners
and the respondent.
The petitioners are a \021Joint Venture\022 who came
together by virtue of Joint Venture Agreement dated May
10, 2001 for execution of certain contracts for National
Highways Authority of India (\021NHAI\022 for short). Petitioner
No.1 is a Company registered under the Laws of the
Republic of Korea having its registered office at 75-95,
Seosomoon Dong, Chung Ku, Seoul, Korea 100 110.
Originally it was known as YOU ONE Engineering and
Construction Co. Ltd. at the time of Joint Venture
Agreement and also at the time of contract dated May 31,
2001 with NHAI. The Company has since merged with
and known as Ultra Construction and Engineering Co.
Ltd., Seoul, Korea; i.e. in a country other than India
within the meaning of Section 2(f)(ii) of the Act. Petitioner
No.2 is a Private Limited Company incorporated and
registered under the Companies Act, 1956 having its
registered office at A-10, Panchvati, Azadpur, Delhi 110
033.
According to the petitioners, they entered into an
Agreement on May 31, 2001 with the respondent for
execution of Contract Package No. NS-23/AP being a
project for 4-Laning of KM. 464.000 to KM. 474.000 of
Nagpur-Hyderabad section and KM. 9.400 and KM.
22.300 of Hyderabad-Bangalore section of National
Highway 7 in the State of Andhra Pradesh at a contract
price of Rs.74,88,79,544.69. The Agreement contains an
arbitration clause which I will refer to at an appropriate
stage.
According to the petitioners, in September, 2004,
i.e. after more than three years of Contract-Agreement, it
was alleged by the respondent that the petitioners had
furnished forged Bank Guarantees for availing
mobilization and other advances under the Contract
Agreement. The respondent, in view of the Arbitration
Clause, filed OMP No. 342 of 2004 in the High Court of
Delhi against the petitioners under Section 9 of the Act
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for interim relief. The High Court passed interim
directions restraining the petitioners from removing
and/or transferring machinery and stock placed by them
at the site for execution of work. On December 13, 2004,
the respondent invoked Clause 59 of the Agreement and
terminated the contract. There was exchange of letters
and notices between the parties. Ultimately, by a
communication dated April 7, 2005, the petitioners
intimated the respondent that in accordance with the
Arbitration Clause, they had appointed Hon\022ble Mr.
Justice A.K. Srivastava, a retired Judge of the High Court
of Delhi as their nominee Arbitrator. According to the
petitioners, in the second half of June, the respondent
addressed a letter to Mr. C.S. Balaramamurthi,
purported to have been written on April 7, 2005
appointing him as the nominee Arbitrator of NHAI. From
the record, it appears that the two Arbitrators could not
agree to an appointment of Third Arbitrator. The
respondent intended to appoint a \021technical\022 man as the
Third Arbitrator as the matter was of a \021highly technical
nature\022, but the arbitrator appointed by the petitioners
insisted that the Presiding Arbitrator should be a retired
Chief Justice or a Judge of a High Court, who should be
senior to him (Justice Srivastava). It is also on record
that the respondent appointed Mr. K.P. Mohanty as the
Presiding Arbitrator. Subsequently, however, his
appointment was not continued. In February, 2006,
Justice Srivastava had shown his unwillingness to
continue as Arbitrator and the petitioners nominated
Hon\022ble Mr. Justice V.A. Mohta, retired Chief Justice of
High Court of Orissa as their nominee Arbitrator in place
of Justice Srivastava. Since the parties could not agree as
to appointment of Third/Presiding Arbitrator, the
petitioners have filed the present petition praying therein
that the Chief Justice of India may be pleased to appoint
a retired Judge of the Supreme Court of India or a retired
Chief Justice of a High Court as Presiding Arbitrator. The
Hon\022ble Chief Justice of India designated me to deal with
the matter and to pass an appropriate order on the
application. Accordingly the petition was placed before
me.
On January 24, 2007 notice was issued. Affidavits
and further affidavits had been filed by the parties.
I have heard learned counsel on both the sides.
The learned counsel for the petitioners submitted
that the respondent-NHAI ought to have agreed to
appoint a retired Judge of the Supreme Court or a retired
Chief Justice of a High Court as Presiding/Third
Arbitrator. It was submitted that when the petitioners
have nominated a retired Chief Justice of a High Court as
their Arbitrator, the respondent ought to have considered
the said fact and ought to have agreed to nominate a
Judge, senior in rank to the Arbitrator appointed by the
petitioners. It was also submitted that the dispute relates
to interpretation of terms and conditions of the contract
and there is no \021technical\022 element which requires
appointment of a \021technical\022 man. It was also stated that
in similar circumstances, between the same parties, a
dispute had arisen earlier, arbitration petitions were filed
before the Chief Justice of High Court of Delhi and the
nominee of the Chief Justice had appointed Hon\022ble Mr.
Justice Arun Kumar, retired Judge of this Court as the
Presiding Arbitrator. In the instant case also, such a
course ought to have been adopted by the respondent.
Since it was not done, the petitioners are constrained to
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approach this Court.
The learned counsel for the respondent, on the
other hand, submitted that the relevant clause empowers
the Council of Indian Road Congress (\021IRC\022 for short) to
appoint Presiding Arbitrator in case of failure of the two
Arbitrators to appoint Third Arbitrator. Since two
Arbitrators appointed by the parties (the petitioners on
the one hand and the respondent on the other hand)
could not arrive at a consensus, it is the power of IRC to
appoint a Third Arbitrator and the petition is liable to be
dismissed. It was also submitted that a similar question
came up for consideration before this Court between the
same parties in YOU ONE Engineering & Construction Co.
Ltd. & Anr. v. National Highways Authority of India,
(2006) 4 SCC 372 and this Court has held that it is the
right of IRC to appoint Third Arbitrator and the
petitioners could not insist for a particular Arbitrator.
Regarding the order passed by the Nominee of the Chief
Justice of High Court of Delhi, it was submitted that it
was an agreed order and the respondent had consented
to in appointing Hon\022ble Mr. Justice Arun Kumar, retired
Judge of this Court as the Third Arbitrator. The said
decision, therefore, does not help the petitioner. It was
also urged that the question is of \021highly technical\022 nature
and hence IRC is insisting to appoint a \021technical\022 man as
the Third/Presiding Arbitrator. It was, therefore, prayed
that the petition be dismissed.
Having considered rival contentions of the parties
and having gone through the Agreement and Arbitration
Clause, I am of the view that the prayer of the petitioners
cannot be granted. It is not in dispute that the
Agreement, dated May 31, 2001 contains an Arbitration
Clause (Clause 3). The relevant part of the said Clause
reads thus:
\023In case of dispute or difference arising
between the employer and a domestic
contractor relating to any matter arising out
of or connected with this Agreement, such
dispute or difference shall be settled in
accordance with the Arbitration and
Conciliation Act, 1996. The Arbitral
Tribunal shall consist of 3 Arbitrators, one
each to be appointed by the employer and
the contractor. The third arbitrator shall be
chosen by the two arbitrators so appointed
by the parties and shall act as Presiding
Arbitrator. In case of the failure of the
two arbitrators appointed by the parties
to reach upon a consensus within a
period of 30 days from the appointment
of the arbitrator appointed
subsequently, the Presiding Arbitrator
shall be appointed by the Council of
Indian Road Congress\024.
(emphasis supplied)
A bare reading of the above clause leaves no room
for doubt that in case of failure of the two Arbitrators
appointed by the parties to reach upon a consensus, the
Presiding Arbitrator \021shall be appointed by the Council of
IRC\022.
It may be stated at this stage that when the matter
was placed before me on April 24, 2007, the parties
invited my attention to the aforesaid clause and it was
submitted that no consensus could be arrived at by the
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parties. Considering the fact situation and the
Agreement, I thought it proper that the parties should
undertake fresh exercise in the direction. I accordingly
passed an order to make one more attempt.
Unfortunately, however, the effort could not succeed and
both the counsel stated that the matter will have to be
decided on merits. Accordingly, the matter was heard.
In my opinion, the learned counsel for the
respondent is right that apart from clear language of
Arbitration Clause, the point is also covered by YOU ONE
Engineering. Almost in identical circumstances, this
Court was called upon to consider the provisions of the
Act and the right of the respondent to appoint Presiding
Arbitrator under the Agreement. The Court held that it is
the right of IRC to appoint Presiding Arbitrator in case
the parties are not ad idem in appointment of
Third/Presiding Arbitrator.
This Court stated:
\023The arbitration agreement clearly envisages
the appointment of the presiding arbitrator by
IRC. There is no qualification that the
arbitrator has to be a different person
depending on the nature of the dispute. If the
parties have entered into such an
agreement with open eyes, it is not open to
ignore it and invoke exercise of powers in
Section 11(6)\024.
(emphasis supplied)
It is, no doubt, true that the High Court of Delhi has
appointed Hon\022ble Mr. Justice Arun Kumar, retired
Judge of this Court as Presiding Arbitrator in OMP No.
342 of 2004 vide its order dated May 22, 2006. The said
order is on record of this case. Three paragraphs of the
said order are important and they read as under:
\0233. Learned counsel for the parties jointly
state that whole issue can be sorted
out by having a panel of three arbitrators, with
one arbitrator as nominated by
each of the parties and the presiding arbitrator
to be appointed by this Court
with the joint consent of the learned counsel
for the parties. It may be
noticed that as on date the petitioner has
nominated Mr.L.R.Gupta, Director
General Works, CPWD (Retd.) while
respondent has nominated Justice S.B.Wad
(Retd.). Justice S.B.Wad was nominated in
place of Justice A.K.Srivastava
(Retd.), who expressed his inability to act as an
arbitrator.
4. Learned counsel for the parties
propose that Justice Arun Kumar (Retd.
Judge of the Supreme Court), 10, Krishna
Menon Marg, New Delhi - 110 001 (Phone :
2301-2175) be appointed as the presiding
arbitrator and arbitral tribunal be
constituted accordingly.
5. The constitution of the presiding
arbitrator and arbitral tribunal as
proposed by learned counsel for the parties
is accepted by this Court and the said
tribunal shall proceed to enter upon reference
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and determine the dispute between
the parties. Ordered accordingly. The
constitution of the tribunal be Justice
Arun Kumar (Retd.) as the presiding arbitrator,
Mr.L.R. Gupta and Justice S.B. Wad
(Retd.) as the two other members of the
arbitral tribunal. The fee shall be
fixed by the tribunal itself\024.
(emphasis supplied)
The learned counsel for the respondent was right
when he submitted that the order was based on \021consent\022
of the parties. As in the present case, there is no such
consent, the Court has to consider the matter by
interpreting an Arbitration Clause. Clause 3, as observed
earlier, is explicitly clear and there is no ambiguity.
Again, the controversy is decided by this Court in YOU
ONE Engineering. In my view, therefore, the petitioners
cannot compel the respondent to agree for a retired
Judge of this Court or retired Chief Justice of a High
Court, senior to Hon\022ble Mr. Justice Mohta as Presiding
Arbitrator.
It was finally submitted that even if this Court is of
the view that no such direction can be issued or order
can be passed, it may be appreciated that the petitioners
have chosen a retired Chief Justice of a High Court as
their Arbitrator and appropriate observations may be
made so that IRC may appoint retired Judge of this Court
or a retired Chief Justice of a High Court to be the
Presiding Arbitrator. That would enable the petitioners to
avail services of an Arbitrator appointed by them.
I appreciate the anxiety of the petitioners. In my
view, however, when the Arbitration Clause is clear and
the point is concluded by a decision of this Court, it
would not be proper on my part to make any such
observation. It is, however, open to the respondent to
take an appropriate decision in the matter keeping in
view the facts in their entirety. I may only state that this
decision will not inhibit the respondent in taking any
decision as it thinks fit.
In view of the above legal position, I express no
opinion on the contention of the parties as to whether the
controversy raised is or is not of a \021technical\022 nature.
Since it is not necessary for me to enter into that
question, I leave the matter there.
For the foregoing reasons, the application deserves
to be dismissed and is accordingly dismissed, however,
leaving the parties to bear their own costs.