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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, J.
Spml Infra Ltd - Appellant
Versus
NTPC Limited - Respondent
Arb.P. No. 477 of 2020
Decided On : 08-04-2021
The Court held that the existence of an arbitration agreement is a threshold question that must be examined by the Court before referring a dispute to arbitration. The Court must examine whether there is a valid arbitration agreement between the parties and whether the dispute falls within the scope of that agreement. However, the Court's examination is limited to a prima facie review and the Court should not engage in a detailed examination of the merits of the dispute. In the present case, the Court found that there was a valid arbitration agreement between the parties and that the dispute fell within the scope of that agreement. Accordingly, the Court referred the dispute to arbitration.
Fact of the Case:
The petitioner, SPML Infra Ltd. (SPML), is a company incorporated under the Companies Act, 1956 and undertakes civil engineering works. The respondent (hereafter 'NTPC') is a public sector undertaking and is largely involved in commissioning and operation of thermal power plants. Spml has filed the present petition under Section 11 of the Arbitration and Conciliation Act, 1996 (hereafter the 'A&C Act'), inter alia, praying that an Arbitral Tribunal be constituted to adjudicate the disputes that have arisen between the parties in relation to the Contract Agreement being "01/CS-3530-131-2R-FC-COA-5288 & 5299" dated 22.06.2009 in respect of a Project for "Installation Services for Station Piping Package for Simhadri Super Thermal Power Project Stage II (2X500 MS) at NTPC Simhadri, Vishakapatnam".
Finding of the Court:
The Court held that the existence of an arbitration agreement is a threshold question that must be examined by the Court before referring a dispute to arbitration. The Court must examine whether there is a valid arbitration agreement between the parties and whether the dispute falls within the scope of that agreement. However, the Court's examination is limited to a prima facie review and the Court should not engage in a detailed examination of the merits of the dispute. In the present case, the Court found that there was a valid arbitration agreement between the parties and that the dispute fell within the scope of that agreement. Accordingly, the Court referred the dispute to arbitration.
Issues: 1. Whether the Court should examine the existence of an arbitration agreement before referring a dispute to arbitration? 2. What is the scope of the Court's examination of the existence of an arbitration agreement? 3. Whether the Court should engage in a detailed examination of the merits of the dispute at the stage of examining the existence of an arbitration agreement?
Ratio Decidendi: 1. Yes, the Court should examine the existence of an arbitration agreement before referring a dispute to arbitration. 2. The Court's examination of the existence of an arbitration agreement is limited to a prima facie review. 3. No, the Court should not engage in a detailed examination of the merits of the dispute at the stage of examining the existence of an arbitration agreement.
Final Decision: The Court allowed the petition and appointed an arbitrator to adjudicate the dispute between the parties.
JUDGMENT
Vibhu Bakhru, J. - The petitioner, SPML Infra Ltd. (hereafter 'SPML') is a company incorporated under the Companies Act, 1956 and undertakes civil engineering works.
2. The respondent (hereafter 'NTPC') is a public sector undertaking and is largely involved in commissioning and operation of thermal power plants.
3. Spml has filed the present petition under Section 11 of the Arbitration and Conciliation Act, 1996 (hereafter the 'A&C Act'), inter alia, praying that an Arbitral Tribunal be constituted to adjudicate the disputes that have arisen between the parties in relation to the Contract Agreement being "01/CS-3530-131-2R-FC-COA-5288 & 5299" dated 22.06.2009 in respect of a Project for "Installation Services for Station Piping Package for Simhadri Super Thermal Power Project Stage II (2X500 MS) at NTPC Simhadri, Vishakapatnam" (hereafter the 'Contract Agreement').
4. In terms of the Contract Agreement, SPML had furnished Performance Bank Guarantees and Advance Bank Guarantee of a total amount of Rs. 14,96,89,136/- to secure NTPC. The details of the said Bank Guarantees are set out as below:
Nature of BG | Bank Guarantee No. | Opening Date of BG | Bank Guarantee Amount | Final Validity Period |
Advance | 0040ILG002609 | 11.08.2009 | Rs. 1,91,99,725 | 19.05.2019 |
PBG | 0040ILG0009 | 01.07.2009 | Rs. 2,26,31,532 | 18.06.2019 |
PBG | 0040ILG001209 | 01.07.2009 | Rs. 8,23,63,368 | 18.06.2019 |
Advance | 0040ILG001309 | 01.07.2009 | Rs. 2,54,94,501 | 18.06.2019 |
5. The Performance and Advance Bank Guarantees as set out above are hereafter referred to as the Bank Guarantees.
6. Spml claims that the execution of the project was hampered for reasons attributable to NTPC. Nonetheless, SPML completed the project on 18.12.2015 and accordingly, was granted a completion certificate. It is SPML's case that even after issuance of the completion certificate, NTPC failed and neglected to release the Bank Guarantees.
7. Ntpc on 10.04.2019 informed SPML that the final payment would be released upon receipt of "CCP-11" (No Demand Certificate) from SPML and further undertook that the Bank Guarantees would be released only after the final payment is released. Final payment amounting to a sum of Rs. 1,40,00,000/- was released by NTPC towards SPML in April 2019. However, despite repeated reminders, NTPC did not release the Bank Guarantees.
8. By an e-mail dated 14.05.2019, NTPC informed SPML that the Bank Guarantees were being withheld on the pretext that some liabilities and/or arbitral disputes were pending between the parties in respect of other projects at other sites. SPML responded to the above email by a letter dated 15.05.2019 clarifying that the said disputes are not attributable to it, and raised interim claims amounting to Rs. 72,01,53,898/-. SPML also called upon NTPC to make payment within a period of fifteen days from the date of receipt of the said letter. The interim claims raised by SPML are set out below:
A. | Revocation of the imposed liquidated damages | Rs. 86,19,871/- |
B. | Compensation for extended stay at the site, beyond stipulated Contract period as per the following break up: |
|
| i. Retaining on Site establishment | Rs. 3,04,36,3030/- |
ii. Retaining off Site establishment | Rs. 10,77,12,644/- | |
iii. Additional BG Commission Charges | Rs. 1,02,90,824/- | |
iv. Additional Insurance Premium | Rs. 25,52,382/- | |
v. Loss of Profit | Rs. 52,90,88,568/- | |
vi. Additional Price Variation | Rs. 2,63,48,767/- | |
C. | Additional works | Rs. 35,92,200/- |
D. | Wrongful deduction | Rs. 15,12,340/- |
TOTAL | Rs. 72,01,53,898/- | |
9. No response was received from NTPC to the letter dated 15.05.2019. Accordingly, on 12.06.2019, SPML issued a notice calling upon NTPC to appoint an Adjudicator within thirty days in terms of the Dispute Resolution Clause as mandated under Clause 6 of the General Conditions of the Contract (GCC) read with Clause 3 of the Special Conditions of the Contract (SCC).
10. Aggrieved by the fact that the Bank Guarantees were not yet released despite repeated assurances given by NTPC, SPML filed a Writ Petition being W.P. (C) No. 7213 of 2019 captioned M/S SPML Infra
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