Back
2016 Supreme(Del) 2678
IN THE HIGH COURT OF DELHI AT NEW DELHI
MANMOHAN SINGH, J.
M/S ERA INFRA ENGINEERING LTD - Petitioner
Versus
ARAVALI POWER COMPANY PVT. LTD. - Respondent
O.M.P. (T) (COMM.) No.13/2016, Arb. P. No.136/2016
Decided on : 29-07-2016
Advocate Appeared:
For the Petitioner: Mr.Harish Malhotra, Sr. Adv. with Mr.Nilava Bandhyopadhyay & Mr.Rahul Pandey, Advs.
For the Respondent: Mr.Vikas Singh, Sr. Adv. with Mr.Bharat Sangal, Mr.Kapish Seth, Ms.Daggar Malhotra & Ms.Vernika Tomar, Advs.
The main legal point established in the judgment is the need for an independent and impartial arbitrator in accordance with the provisions of the Arbitration and Conciliation Act, 1996, to ensure fairness and neutrality in the arbitration process.
Headnote:
Arbitration - Construction Work Dispute - Arbitration and Conciliation Act, 1996, Section 14, Section 11(6) - Summary of Acts and Sections: The court discussed the provisions of Section 14 and Section 11(6) of the Arbitration and Conciliation Act, 1996, which provide for the appointment of arbitrators and the resolution of disputes through arbitration. The court emphasized the need for an independent and impartial arbitrator and the procedure for challenging the appointment of an arbitrator under the Act.
Fact of the Case:
The petitioner was awarded a construction contract by the respondent, but disputes arose regarding delays and cancellations of work. The petitioner invoked the arbitration clause for appointment of an independent arbitrator, challenging the appointment of the CEO of the respondent as the sole arbitrator. The respondent failed to appoint an independent arbitrator, leading to the filing of petitions by the petitioner.
Finding of the Court:
The court found that the appointment of the CEO of the respondent as the sole arbitrator raised justifiable doubts about his independence and impartiality. The court emphasized the need for an independent and impartial arbitrator to ensure fairness in the arbitration process.
Issues: The main issue was the challenge to the appointment of the CEO of the respondent as the sole arbitrator and the request for the appointment of an independent arbitrator.
Ratio Decidendi: The court held that the appointment of an arbitrator with a relationship or interest in the parties or the subject matter of the dispute gives rise to justifiable doubts about neutrality. The court emphasized the need for an independent and impartial arbitrator to ensure fairness in the arbitration process.
Final Decision: The court allowed the petitioner's petitions, directing the respondent to suggest names of three panel arbitrators from different departments, from which the petitioner could choose one to adjudicate the disputes. In case of failure by the respondent, the court would appoint the sole arbitrator.
MANMOHAN SINGH, J.
1. By way of this order, I propose to decide the above mentioned two petitions filed by the same petitioner on 10th February, 2016 against the respondent. The first petition being O.M.P. (T) (COMM.) No.13/2016 under Section 14 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Act”) and the second being Arb. P. No.136/2016 under Section 11(6) of the Act.
2. Few facts, which are relevant and mentioned in the pleadings, are that the respondent issued Notice Inviting Tender (NIT) bearing No.CS-0330-364-9 dated 13th June, 2008, inviting tenders/bids regarding construction work of 'Permanent Township package for Indira Gandhi Super Thermal Power Project, Jhajjar, Haryana [3 X 500 MW]’ (hereinafter referred to as the “Contract Work”).
2.1. In furtherance of the aforesaid NIT, the petitioner submitted its tender/bid, upon scrutiny of which, the respondent issued the Letter of Award (LoA) dated 20th May, 2009, awarding the aforesaid Contract Work to the petitioner. A formal Contract/Agreement came to be executed between the parties on 17th November, 2009. Clause 56 of the General Conditions of Contract (GCC) provides for resolution of disputes by way of arbitration.
2.2. It is the case of the petitioner that after having awarded of the aforesaid Contract/Agreement, the petitioner mobilized all its resources and manpower for timely execution of the Contract Works. However, the respondent failed to adhere to the covenants undertaken by it under the aforesaid Contract/ Agreement, on account of which the Contract Works got delayed. In this regard, the petitioner time and again put the respondent to notice of the various delays and lapses attributable to the respondent, all of which contributed to the delay in execution of Contract Works. In nut-shell, some of the following deficiencies on the part of the respondent were made known to it by the petitioner through various communications addressed from time to time.
i. Delay in issuance of Drawings, Technical decisions from the respondent.
ii. Delay due to constraints on account of non-availability of Work Front on time.
iii. Hold up/Delay in supply of FOC material.
iv. Delay in release of RA Bills, hold payments and various claims.
v. Delay due to extraordinary increase in prices/shortage of crushed stone aggregate and coarse/fine aggregate consequent to the ban on queries by the state Administration.
vi. Delay due to Power Supply Problem.
2.3. The petitioner has alleged that the respondent issued letter dated 18th July, 2014 of part cancellation (being the 1st Part cancellation) to the petitioner whereby the remaining work of "C-Type Quarters" was cancelled/withdrawn from the scope of work awarded to the petitioner. By way of the said communication, the respondent erroneously and illegally sought to intimate the petitioner of its intent to get the said withdrawn work completed at the risk and cost of the petitioner and the respondent, yet again in a complete erroneous and illegal manner, further sought to withdraw part of the work contracted to the petitioner by way of communication dated 24th October, 2014 (being the 2nd Part cancellation), whereby the fencing work of Transformers came to be withdrawn from the petitioner's scope of work with the intent of getting the same done at the risk and cost of the petitioner. The relevant date of 3rd Part Cancellation in respect of the balance work of C & D Type Quarters under PTC Package is 30th June, 2015 and 4th Part cancellation dated 8th July, 2015 in respect of balance work of hospital, community centre and training centre under PTC Package.
3. It is alleged by the petitioner that in the meantime, in view of the action of the respondent, the petitioner by way of its letter dated 29th July, 2015, inter-alia, highlighting various reasons of delay in the project which were solely attributable to the respondent. As the dispute arose the petitioner by virtue of the said letter invoked the Arbitration Cl
