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2017 Supreme(Del) 714
IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
GSBA BUILDER PVT. LTD. - Petitioner
Versus.
RADHA SOAMI SATSANG BEAS - Respondent
ARB.P. 774 of 2016 & IA Nos.15151 of 2016 & 2090 of 2017
Decided On : 01-03-2017
For the Appellant :Mr S. K. Jain, Ms Khushboo Bhardwaj, Ms Stuti Jain, Mr Ranjan Kumar Rai and Ms Reetika Wadhwa, Advocates.
For the Respondent:Mr Anish Kapur and Mr Navroop Bakshi, Advocates. Mr Vikas Dutta, Mr Siddhanth Silwal, Ms Neha Jain, Advocates for Impleader (Fortis Hospital Limited).
An arbitration clause in an agreement cannot survive if the agreement containing the arbitration clause has been superseded/novated by a later agreement.
Headnote:
Arbitration - Jurisdiction - Arbitration and Conciliation Act, 1996 - Section 11 - 9, 10 - The court discussed the agreements dated 03.12.2010 and 03.03.2011, the MoU dated 22.05.2014, and the relevant clauses 9, 10, 11, and 12 of the Agreement and clauses 4, 5, 9, 11, and 12 of the MoU. The court found that the agreements stood novated with the MoU and the arbitration clause contained therein perished. The court also examined the jurisdiction issue and held that the courts at Ludhiana would have exclusive jurisdiction and the place of arbitration would be at Ludhiana. The court dismissed the petition and pending applications.
Fact of the Case:
The petitioner filed a petition under Section 11 of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator to decide disputes related to agreements dated 03.12.2010 and 03.03.2011. The respondent disputed the existence of an arbitration clause, claiming that the agreements stood discharged and the arbitration clause perished due to a MoU entered into with a third party. The petitioner alleged breach of agreements, delay in completion of works, and wrongful invocation of bank guarantees.
Finding of the Court:
The court found that the agreements stood novated with the MoU and the arbitration clause contained therein perished. It also held that the courts at Ludhiana would have exclusive jurisdiction and the place of arbitration would be at Ludhiana. The court dismissed the petition and pending applications.
Issues: The issues involved the existence of an arbitration agreement, jurisdiction of the court, and the impact of the MoU on the arbitration clause.
Ratio Decidendi: The court held that the agreements stood novated with the MoU, and the arbitration clause contained therein perished. It also determined that the courts at Ludhiana would have exclusive jurisdiction and the place of arbitration would be at Ludhiana.
Final Decision: The court dismissed the petition and pending applications.
VIBHU BAKHRU, J.
1. The petitioner (hereafter ‘GBPL’) has filed the present petition under Section 11 of the Arbitration and Conciliation Act, 1996 (hereafter ‘the Act’) praying that an arbitrator be appointed to decide the disputes between the petitioner and the respondent in relation to the agreements dated 03.12.2010 and 03.03.2011 entered into between the parties.
2. The respondent (hereafter ‘RSSB’) disputes the existence of an arbitration clause as it claims that the agreements in question stand discharged and the arbitration clause contained therein has also perished. GBPL had entered into a Memorandum of Understanding (hereafter ‘MoU’) dated 22.05.2014 with Fortis Hospitals Limited (hereafter ‘Fortis’), which is stated to be the assignee of RSSB. RSSB claims that the effect of this MoU is that the agreements in question stood discharged by novation. RSSB has also opposed the present petition on the plea that this court does not have the jurisdiction to entertain the present petition as the construction works were executed in Ludhiana and the agreement dated 03.12.2010 expressly provided that the courts at Ludhiana would have the exclusive jurisdiction regarding the subject agreement.
3. Briefly stated, the relevant facts necessary to address the controversy in this petition are as under:-
3.1 GBPL is a private company and is, inter alia, engaged in the business of civil construction. RSSB is a society registered under the Societies Registration Act, 1860. RSSB awarded the work of a 200 bedded hospital at village Mundian Kalan, Ludhiana to GBPL on turnkey basis, by a letter of intent dated 01.09.2010. Subsequently, the parties entered into the agreement dated 03.12.2010 (hereafter ‘the Agreement’) for construction of the hospital. GBPL states that initially, the construction at Oncology Block was removed from the scope of works but subsequently, on 03.03.2011, the parties entered into an agreement -captioned as “Form of Contract” (hereafter ‘FoC’) -for construction of the said block. The FoC and the Agreement are hereafter collectively referred to as ‘the agreements’.
3.2 GBPL claims that the work could not be completed in time on account of various reasons attributable to RSSB and Fortis. It is alleged that RSSB committed a breach of the agreements which resulted in delay in completion of the works. GBPL further claims that in July, 2012, a team from Fortis took over the work which was earlier being monitored by Project Management Committee (PMC). It is further claimed that RSSB transferred the hospital to Fortis in a clandestine manner.
3.3 It is stated that RSSB wrongfully invoked one of the bank guarantees furnished by GBPL on 09.05.2013. GBPL further claims that it submitted a bill for a sum of Rs.20,34,10,790/-under the cover of its letter dated 08.07.2013. However, the said bill was not settled and in retaliation, Fortis threatened encashment of the remaining bank guarantee.
3.4 It is claimed that the works were completed in September, 2013 and GBPL requested RSSB to issue the completion certificate but the same was not issued.
3.5 On 02.01.2014, GBPL filed a suit (being Suit No. 32/2014), arraying RSSB and Fortis as defendants, inter alia, praying as under:-
“a) to pass a decree for permanent injunction restraining the Defendants themselves or through their agents, associates, attorneys etc. to Sell the 200 Bed Hospital Building Constructed by the Plaintiff at the Site of Radha Soami Satsang Beas, Mundian, Chandigarh Road, Ludhiana, or enter into the deed of novation or any other transaction/contract whatsoever until and unless the bill of the Plaintiff is finalized and be paid, by the Defendant No.1 or alternatively Direct the Defendant No.1 to deposit a sum of Rs.22,83,31,788.15 (Rupees Twenty two crores eighty three lacs thirty one thousand seven hundred eighty eight and paisa fifteen only) and service tax thereto in this Hon’ble Court. ”
3.6 GBPL also filed another suit (C.S. No. 52199/2013) before the Civil Ju
