1. Petitions under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator following payment defaults in system integration contracts. (Para 1 , 3 , 4 , 5 , 6 )
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2018 Supreme(SC) 346
SUPREME COURT OF INDIA
R.K. AGRAWAL, S. ABDUL NAZEER, JJ.
IBI Consultancy India Private Limited – Petitioner
Versus
DSC Limited – Respondent
ARBITRATION CASE (C) NOS. 53, 54, 63, 57 OF 2016
Decided on : 16-04-2018
Important Points
IMPORTANT POINT
Court can appoint arbitrator if existence of arbitration clause is established.
Court can appoint arbitrator if existence of arbitration clause is established.
Subject
Arbitration Law - Appointment of Arbitrator
Act Referred
Headnote
Arbitration and Conciliation Act, 1996 – Section 11(6) r/w Section 11(9) – Scope u/s 11(6) r/w 11(9) is very limited – Court to ascertain existence of arbitration agreement – And, whether a case has been made out for appointment of arbitrator – Section 11(6A) now confines the scope only to ascertaining existence of arbitration agreement – Instantly, an arbitration clause exists – Arbitrator appointed. (Para 7, 8, 9)
Facts of the case:
The parties have filed applications for appointment of arbitrators.
Finding of the Court:
There exists an arbitration agreement between the parties.
Result: Appeal allowed. Arbitrator appointed.
Legal Category Hierarchy
Table of Contents
2. Dispute regarding the existence of a valid arbitration agreement between the parties. (Para 9 )
3. The letter of indent is an integral part of the contract agreement, thereby establishing the existence of a valid arbitration clause. (Para 9 )
4. For appointment of an arbitrator under Section 11, the court's examination is primarily confined to the existence of a valid arbitration agreement. (Para 7 , 8 )
5. Sole arbitrator appointed to adjudicate disputes, subject to mandatory disclosures under Section 12 of the Act. (Para 11 , 12 )
6. What is the primary requirement for the court to appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996?
The court must verify the existence of an arbitration agreement between the parties. Following the insertion of Section 11(6A), the court's examination is confined only to the existence of the arbitration agreement. (Para 7 , 8 )
7. How is the existence of an arbitration agreement determined when the clause is referenced in external documents?
If a contract agreement specifies that other documents, such as a letter of indent, constitute an integral part of the contract, the arbitration clause contained in those documents is considered part of the agreement. (Para 9 )
8. What is the judicial remedy when parties fail to agree on the appointment of an arbitrator?
If parties cannot mutually agree on the procedure or the constitution of the Arbitral Tribunal, they may seek judicial intervention for the appointment of an arbitrator under Section 11 of the Act. (Para 10 )
9. What conditions must be met by a court-appointed arbitrator before commencing proceedings?
The appointed arbitrator must make the necessary disclosures required under Section 12 of the Act and must not be ineligible under Section 12(5) of the Act. (Para 11 )
JUDGMENT :
R.K.Agrawal J.
1. The IBI Consultancy India Private Limited-the petitioner-Company is the Indian subsidiary of the IBI Group based in Canada. The above petitions, under Section 11(6) read with Section 11(9) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’), have been filed by the petitioner-Company as well as by the IBI Group for appointment of an Arbitrator to adjudicate the disputes that have arisen between the parties in connection with the contracts in question.
2. The petitioner-Company has filed two petitions for the appointment of Arbitrator and its parent company viz., IBI Group has also filed two petitions of the same nature. Since the point of consideration is same in all these four petitions, purpose would be served if we moot the case of either of the petition and would be disposed off by this common judgment.
Arbitration Case No. 53 of 2016
3. The petitioner-Company is a multi-disciplinary company engaged in the business of providing system integration and maintenance service for Toll and Traffic Management Systems whereas the DSC Limited, the respondent-Company is a Company registered under the Companies Act, 1956 having two subsidiary companies. First subsidiary Company of the respondent-Company is the Lucknow Sitapur Expressway Limited (LSEL) which is a special purpose vehicle (SPV) of the respondent-Company and has signed a Concession Agreement with the National Highways Authority of India (NHAI) for developing Lucknow-Sitapur Highway Project (LSEL Project) for widening the existing 2-Lane Road to 4-Lane dual carriageway between Km 413.200 to Km 488.270 on NH-24 in the State of Uttar Pradesh. Second subsidiary Company of the respondent-Company is Raipur Expressway Limited (REL), which is also a special purpose vehicle (SPV) of the respondent-Company and has signed a Concession Agreement with the NHAI for developing the Raipur-Aurang Highway Project (REL Project) for widening the existing 2-lane Road to 4-Lane dual carriageway between Km 239 to Km 281 on NH-6 in the State of Chhattisgarh.
4. Vide e-mail dated 16.02.2010, the respondent-Company sent a Request for Proposal (RFP) to the petitioner-Company, inviting technical and commercial proposal for their LSEL and REL Projects. Vide letter dated 07.06.2010, the petitioner-Company had given a proposal to execute the contract for installation, erection and commissioning of the Toll Collection and Traffic Control Equipments at NH-24. The respondent-Company, vide letter dated 14.06.2010, accepted the said proposal. Pursuant thereto, a Contract Agreement dated 30.08.2010 was executed between the parties. The value of the Contract was mutually finalized at Rs. 1,55,20,700.00 in pursuance of the Contract Agreement. In total, the IBI group and the petitioner-Company had entered into 6 (six) separate contracts for the respective LSEL and REL Projects with the respondent-Company.
5. During completion of the projects, the respondent-Company defaulted in releasing the agreed payment to the petitioner-Company and the IBI Group. Though several verbal and written communication were exchanged between the parties to this effect, the respondent-Company could not release the outstanding payment. On 06.09.2012, a legal notice was sent to the respondent-Company by the IBI Group as well as by the petitioner-Company for the recovery of outstanding payment for all the contracts. Further, on 12.06.2013, a reminder for outstanding payment was sent to the respondent-Company.
6. On 24.04.2014, a legal notice for invoking Arbitration Clause and appointment of Arbitrators was sent to the respondent-Company and the name of Mr. Debashish Moitra, Advocate was suggested as a Sole Arbitrator, however, there was no reply from the other side. The IBI Group and the petitioner-herein filed petitions under Section 11 of the Act before the High Court being Arbitration Petition Nos. 443, 448, 444 and 449 of 2014 before the High Court of Delhi at New Delhi. Learned
