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2017 Supreme(Del) 2688
IN THE HIGH COURT OF DELHI AT NEW DELHI
JAYANT NATH, J.
M.V. Omni Projects (I) Ltd. - Petitioner
Versus
Gail Gas Ltd & Anr. - Respondents
Arb.P. 63 Of 2017
Decided On : 08-08-2017
Advocate Appeared:
For the Petitioner: Mr.O.P.Bhadani and Mr.S.S.Pandey, Advs.
For the Respondent:Mr. Dhruv Mehta, Sr. Adv. With Ms.Purnima Maheshwari, Advocate, Mr. V.V.Monoharan and Ms. Shailaja Singh, Advs.
A composite reference to arbitration should only be made in exceptional cases, and the main dispute should not take a back seat in such a reference.
Headnote:
Arbitration - Appointment of Sole Arbitrator - Arbitration and Conciliation Act, 1996 - Section 11(6)
Fact of the Case:
The petitioner sought the appointment of a sole arbitrator for adjudication of disputes arising from a construction contract. The respondent No. 1 accepted notice and impleaded respondent No. 2, leading to a dispute over their liability for the claims.
Finding of the Court:
The court analyzed the Business Transfer Agreement between respondent No. 1 and respondent No. 2 to determine their liability for the claims. The court found that a composite reference to arbitration involving both respondents was neither necessary nor desirable, and deleted respondent No. 2 from the array of parties.
Issues: The main issue was the liability for the claims raised by the petitioner, and whether a composite reference to arbitration involving both respondents was necessary.
Ratio Decidendi: The court held that a composite reference to arbitration should only be made in exceptional cases where there is a direct relationship, commonality of subject matter, and a composite transaction. The court also emphasized that the main dispute should not take a back seat in a composite reference.
Final Decision: The court appointed a sole arbitrator to adjudicate the disputes between the petitioner and respondent No. 1, and deleted respondent No. 2 from the array of parties.
JAYANT NATH, J.
1. This petition is filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) seeking appointment of a sole arbitrator for adjudication of the disputes between the parties.
2. Some of the brief relevant facts are that respondent No.1 invited a bid for composite construction of CNG Stations at Vadodara through tender. The petitioner being a successful bidder was issued a letter of Award on 12.04.2010 and was allotted the work of commissioning CNG Stations at Vadodara. It is the case of the petitioner that due to non-availability of work, the petitioner requested respondent No. 1 to close the contract. Respondent No. 1 however requested the petitioner to take up job for two stations i.e. M/s Swatik Sales and M/s Shreeji Associates. The petitioner states that as per the terms and conditions of the contract, the petitioner was awarded four different CNG Stations at Vadodara. A total work of Rs. 23,21,196/- was awarded to the petitioner as against the contract value of a much higher amount. The awarded work being substantially low, the petitioner suffered losses by way of idle establishment charges and other business loss.
3. As disputes arose between the parties, the petitioner invoked the arbitration clause on 24.12.2014 requesting respondent No.1 to suggest a panel of three persons in terms of the arbitration agreement between the parties. As no steps were taken by respondent No.1, the present petition was filed.
4. When this matter came up for hearing before this court on 19.01.2017, learned counsel for respondent No.1 accepted notice and stated that under the Business Transfer Agreement signed between Gail Gas Ltd.(GGL) and Vadodara Gas Ltd. (VGL), the subject matter of the agreement has fallen to the responsibility of Vadodara Gas Ltd. On the request of learned counsel for respondent No. 1, the court impleaded Vadodara Gas Ltd. as respondent No.2 to the present petition.
5. Respondent No.2 entered appearance and have filed their reply. They have strongly objected to their being impleaded as a respondent without service of notice. It is urged that there is no privity of contract between the petitioner and respondent No.2. Hence, it is asserted that there can be no arbitration between the petitioner and respondent No.2. It is further urged that the petitioner seeks to claim that the final bill for their contract amount for construction of CNG Stations at Vadodara was submitted by them to respondent No.1 on 7th May, 2014. Hence, the said transaction was completed between the petitioner and respondent No.1 before the date of the Business Transfer Agreement. Hence, the cause of action to file the present petition arose prior to the execution of the Business Transfer Agreement and respondent No.2 has no concern with the said liability. Further, it is urged that respondent No.2 has acquired only the rights of entitlement in the acquired business of respondent No.1 without acquiring any liability or responsibility of respondent No.1. Hence, it is claimed that even otherwise, respondent No.2 has no liability for the dues, if any, of the petitioner.
6. The respondent No.1 has filed a rejoinder specifically denying the contentions of respondent No.2.
7. I have heard learned counsel for the parties.
8. Learned senior counsel for respondent No. 1 has not disputed that an arbitration clause exists between the parties and an arbitrator should be appointed. Learned senior counsel relies on the Business Transfer Agreement dated 13.06.2014 executed between respondent Nos.1 and 2. Reliance is placed on Clauses 1.1.1 and 1.1.2 to contend that the entire project that is said to have been executed by the petitioner has now been taken over by respondent No. 2 and that respondent No. 2 is now liable for the dues, if any, that may arise due to the claims of the petitioner. It is clarified that under Clause 8.15 of the said Agreement, respondent No. 2 is not a successor for any of th
