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IN THE HIGH COURT OF DELHI AT NEW DELHI
S. MURALIDHAR, J.
SMS LIMITED – Petitioner
Versus
SOUTH DELHI MUNICIPAL CORPORATION – Respondent
ARB.P. 793 of 2016
Decided On : 09-03-2017
Arbitration - Dispute Resolution - Arbitration & Conciliation Act, 1996, Section 11(6)(a), Section 11(12)(b) - 20, 20.1, 20.2, 20.3 - The court examined the existence of an arbitration clause in the agreement and concluded that Article 20 read with Sections 20.1 to 20.3 constituted an arbitration clause agreed between the parties. The court proposed a former Judge of the Bombay High Court as the Sole Arbitrator to adjudicate the disputes between the parties including the claims and counter-claims.
Fact of the Case:
The petitioner, SMS Limited, sought reference of disputes with South Delhi Municipal Corporation (SDMC) to arbitration under the Arbitration & Conciliation Act, 1996. The disputes arose from a Concession Agreement for the construction of a parking facility, where the petitioner alleged loss due to delays and non-cooperation by SDMC.
Finding of the Court:
The court found that Article 20 read with Sections 20.1 to 20.3 of the Concession Agreement constituted an arbitration clause agreed between the parties. The court proposed a former Judge of the Bombay High Court as the Sole Arbitrator to adjudicate the disputes.
Issues: The main issue was whether the clauses in the Concession Agreement could be construed as an arbitration agreement.
Ratio Decidendi: The court examined the legal position as explained in several decisions of the Supreme Court and the High Courts to determine the existence of an arbitration clause. It concluded that the clauses in the Concession Agreement satisfied the attributes of an arbitration agreement.
Final Decision: The court overruled the objections of the SDMC and concluded that Article 20 read with Sections 20.1 to 20.3 constituted an arbitration clause agreed between the parties. The court proposed a former Judge of the Bombay High Court as the Sole Arbitrator to adjudicate the disputes between the parties including the claims and counter-claims.
1. This is a petition by SMS Limited under Section 11(6)(a) read with Section 11(12)(b) of the Arbitration & Conciliation Act, 1996 (‘Act’) seeking reference of the disputes between the Petitioner and the Respondent, South Delhi Municipal Corporation (‘SDMC’) to arbitration.
2. Originally, a Concession Agreement (‘CA’) was entered into on 20th April, 2012 between the Municipal Corporation of Delhi (‘MCD’) and the Petitioner in terms of which a multi-storeyed, state-of-the-art parking facility was to be constructed at Defence Colony, New Delhi on a commercial Design, Build, Finance, Operate and Transfer basis. Some time thereafter in April 2012, the MCD was trifurcated into three Corporations i.e., the North Delhi Municipal Corporation, East Delhi Municipal Corporation and the SDMC. As a result thereof, the rights and obligations of MCD under the CA stood transferred to SDMC. It is stated that on 4th December, 2012, SDMC executed a Lease Deed of the Project site where by all the land and rights comprising the Project site were leased to the Petitioner. According to the Petitioner a huge expenditure was incurred by it in the preparation of architectural drawings for the layout of the said project which was submitted to SDMC. The Petitioner alleges that SDMC stalled the approval of layout and drawings for a long time resulting in loss of time, profit and opportunity cost.
3. The Petitioner states that when the construction activity was in full swing, the Defence Colony Welfare Association filed a writ petition being WP(C) No. 1076/2013 in this Court praying for quashing of the CA and restraining the Petitioner from constructing the parking complex. By an order dated 20th February, 2013, status quo was ordered by the Court. According to the Petitioner, the SDMC failed to get the requisite clearances and also failed to mitigate the Material Adverse Effects that were caused on account of the writ petition. It is stated that the SDMC took no steps to defend the writ petition leaving the Petitioner with no option but to terminate the Agreement in terms of Section 13.1 of the Agreement.
4. The Petitioner served the Respondent with a letter dated 15th January 2014 terminating the CA and demanding refund of the amounts deposited, expenses incurred and Bank Guarantee (‘BG’). At a meeting held with the Commissioner, SDMC on 18th February, 2014, it was mutually agreed that the concession fee deposited by the Petitioner would be refunded and the CA would be closed subject to necessary approval of the Competent Authority. Subsequently, by the letter dated 28th February, 2014, SDMC informed the Petitioner that the Competent Authority has agreed to close the CA and refund the concession fee of Rs. 19 crores and the BG of Rs. 11.24 crores. Soon after the above letter was received, the project site was handed back to the SDMC. The refund of the concession fee and the BG was duly executed by the SDMC in favour of the Petitioner.
5. The Petitioner states that the letter dated 28th February, 2014 wrongly recorded that the Petitioner would not claim any interest on the amount deposited. It is denied that any such consent or waiver was given by the Petitioner. On 13th January, 2015, the Petitioner served a further notice on SDMC claiming the following amounts:
i. Loss of profit in the sum of Rs. 275 crores.
ii. Interest on concession fee in the sum of Rs. 7.40 crores.
iii. Refund of miscellaneous expenses invested under various heads in the sum of Rs. 2.80 crores.
6. With SDMC not responding to the above letter, the Petitioner on 7th December, 2015 called upon the SDMC to refer the issues to ‘Mediation’. It was added in the said letter that although there was no arbitration clause in the CA, the Petitioner was ready and willing to submit its claim to arbitration by a sole arbitrator.
7. The Petitioner states that its earlier understanding that there was only a mediation clause and not an arbitration clause was based on incorrect legal advice. Later the
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