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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
R.D. DHANUKA, J.
DLF Power Limited – Petitioner
Versus
Mangalore Refinery & Petrochemicals Limited – Respondent
Arbitration Petition No. 509 of 2011
Decided On : 20-07-2016
ARBITRATION - ASSIGNMENT OF CONTRACT - ARBITRATION AGREEMENT - JURISDICTION - LOCUS STANDI - SECTION 7, 16 OF ARBITRATION & CONCILIATION ACT, 1996 - WHETHER AN ARBITRATION AGREEMENT CAN BE ASSIGNED - WHETHER A SEPARATE ARBITRATION AGREEMENT WAS REQUIRED TO BE EXECUTED BETWEEN THE PETITIONER AND THE RESPONDENT.
Fact of the Case:
The petitioner, Eastern India Power-tech Limited (formerly known as DLF Power Limited), filed a petition under section 37 of the Arbitration & Conciliation Act, 1996 (the Arbitration Act), challenging the order dated 2nd February, 2011 passed by the arbitral tribunal accepting the plea of the respondent, Mangalore Refinery & Petrochemicals Limited, under section 16 of the Arbitration Act and dismissing the arbitral proceedings on the ground of jurisdiction. The petitioner contended that it was the absolute successor in interest of DLF Industries Limited (DIL) and DLF Universal Limited (DUL) of the two contracts which were initially entered into between DIL and the respondent. The respondent, on the other hand, argued that the arbitration agreement was not assigned in favor of the petitioner and that there was no separate arbitration agreement between the petitioner and the respondent.
Finding of the Court:
The court held that an arbitration agreement can be assigned along with the main contract or even otherwise. The court further held that in the present case, the respondent had accepted the petitioner as the assignee of the contracts dated 16th April, 1997 and had dealt with the petitioner exclusively in respect of all the benefits, obligations, rights, and duties under the said contracts. Therefore, the court held that the petitioner had locus standi and had rightly invoked the arbitration agreement. The court also held that the impugned order passed by the arbitral tribunal was illegal and set it aside.
Issues: 1. Whether an arbitration agreement can be assigned? 2. Whether a separate arbitration agreement was required to be executed between the petitioner and the respondent?
Ratio Decidendi: 1. An arbitration agreement is a benefit under a contract which can be assigned along with the main contract or even otherwise. 2. In the present case, the respondent had accepted the petitioner as the assignee of the contracts dated 16th April, 1997 and had dealt with the petitioner exclusively in respect of all the benefits, obligations, rights, and duties under the said contracts. Therefore, the petitioner had locus standi and had rightly invoked the arbitration agreement.
Final Decision: The court allowed the petition filed by the petitioner and set aside the impugned order passed by the arbitral tribunal. The court directed the parties to proceed with the arbitral proceedings expeditiously.
R.D. DHANUKA, J.
1. By this petition filed under section 37 of the Arbitration & Conciliation Act, 1996 (for short hereinafter referred to as “the Arbitration Act”), the petitioner has impugned the order dated 2nd February, 2011 passed by the arbitral tribunal accepting the plea of the respondent under section 16 of the Arbitration Act and dismissing the arbitral proceedings on the ground of jurisdiction. It is made clear in the impugned order that the parties were left to pursue such legal remedies as were available to them for resolution of their dispute arising out of the contracts entered into between the parties. Some of the relevant facts for the purpose of deciding this petition are as under:
2. On 16th April, 1997 and 30th April, 1997, DLF Industries Limited (DIL) signed two contracts with the respondent i.e. contract No.E-10010 for engineering and supply of equipments for 3 x 26.5 MW power project and contract No.E-11011 for civil works for carrying out erection and commissioning of the power plant equipment respectively. It is the case of the petitioner that the said DLF Industries Limited (DIL) undertook the performance and execution of contracts in right earnest.
3. It was the case of the petitioner that the said DLF Industries Limited (DIL) however, could not commission the power plant within the original contractual time on account of various reasons not attributable to the said company but attributable to the defaults of Mangalore Refinery & Petrochemicals Limited in meeting its reciprocal obligations under the contract. The said DLF Industries Limited (DIL) commissioned four units of the Co-generation Power Plant on 30th May, 1999, 23rd July, 1999, 7th August, 1999 and 18th April, 2000 respectively.
4. On or about 19th October, 1999, the High Court of Delhi and Punjab & Haryana High Court approved a scheme of merger by which the Energy System Business of the said DLF Industries Limited (DIL) merged with DLF Universal Limited (DUL) as its energy system division. The Registrar of Companies, NCT, Delhi and Haryana granted certificates of registration. It is the case of the petitioner that pursuant to the said scheme sanctioned by the Delhi High Court and Punjab & Haryana High Court, the rights and liabilities of DLF Industries Limited (DIL) in the said contracts stood transferred to DLF Universal Limited (DUL) and on such transfer the said DLF Universal Limited (DUL) discharged the rights and liabilities under the contracts.
5. It is the case of the petitioner that the respondent accepted and acknowledged the said DLF Universal Limited (DUL) as a party to the contract in its entirety including the arbitration agreement contained therein and accepted the performance of contract from the said DLF Universal Limited (DUL). It was the case of the petitioner that the said DLF Universal Limited (DUL) had succeeded to the said two contracts executed between DLF Industries Limited (DIL) and the respondent herein and executed them in the capacity of a party to these two contracts and was therefore, entitled to enforce the contracts in its entirety along with the arbitration agreement contained therein.
6. On or about 14th December, 2000, the said DLF Universal Limited (DUL) in its capacity as the contractor under the two contracts requested the respondent to release the pending payment and to execute the bank guarantee. On 3rd January, 2001, the said DLF Universal Limited (DUL) furnished a bank guarantee being BG No.43/2 for a sum of Rs.4,66,58,621/- representing 2.5% of the basic purchase price of the two contracts.
7. On 28th June, 2001, the energy system division of the said DLF Universal Limited (DUL) was purchased through a memorandum of sale by the petitioner i.e. DLF Power Limited, now known as Eastern India Power-tech Limited with effect from 31st March, 2001. It is the case of the petitioner that the petitioner is absolute successor in interest of the DLF Industries Limited (DIL) and DLF Universal Limited (DUL)
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