IN THE HIGH COURT OF DELHI AT NEW DELHI
Yashwant Varma, J.
Shapoorji Pallonji And Company Private Limited – Appellant
Versus
Union of India – Respondent
Arb.P. 222 of 2023, I.A. 8724 of 2023 (Direction)
Decided On : 23-05-2023
ARBITRATION - APPOINTMENT OF ARBITRATOR - QUALIFICATIONS - INTERPRETATION OF CLAUSE - POWER OF AUTHORITIES TO APPOINT ARBITRATOR - SECTION 11 OF THE ARBITRATION AND CONCILIATION ACT, 1996 - PERKINS EASTMAN ARCHITECTS DPC V. HSCC (INDIA) LTD. - VOESTALPINE SCHIENEN GMBH V. DELHI METRO RAIL CORP. LTD. - CENTRAL ORGANISATION FOR RAILWAY ELECTRIFICATION V. ECI-SPIC-SMO-MCML (JV) - UNION OF INDIA V. A.B. SHAH - SHREE BALAGANESH VS. M.N. SHANMUGAM CHETTY - WALTER BAU AG V. MUNICIPAL CORP. OF GREATER MUMBAI - TRF LTD. V. ENERGO ENGG. PROJECTS LTD. - STATE OF ORISSA V. COMMR. OF LAND RECORDS & SETTLEMENT - BEHARI KUNJ SAHKARI AWAS SAMITI V. STATE OF U.P. - INDORE VIKAS PRADHIKARAN V. PURE INDUSTRIAL COKE & CHEMICALS LTD. - PRATAPCHAND NOPAJI V. KOTRIKE VENKATA SETTY & SONS -
Fact of the Case:
Petitioner sought to invoke the jurisdiction of the Court conferred by Section 11 of the Arbitration and Conciliation Act, 1996 [The Act] and for the appointment of a nominee arbitrator of the respondent consequent to an asserted failure on its part to abide by the appointment procedure.
Finding of the Court:
1. The Court held that the power vested in the CE, ADG or the DG to appoint a constituent member of the Arbitral Tribunal cannot be recognized or upheld. 2. The Court interpreted the phrase "any member" in Clause 25 to mean that at least one or more of the members of the Arbitral Tribunal must possess the qualifications as prescribed in Clause 25, but not all members. 3. The Court read down the clause specifying qualifications in Clause 25 to mean a retired government employee.
Issues: 1. Whether the authorities have the power to appoint an arbitrator. 2. Whether the qualifications prescribed in Clause 25 apply to all members of the Arbitral Tribunal.
Ratio Decidendi: 1. The Court held that the power vested in the CE, ADG or the DG to appoint a constituent member of the Arbitral Tribunal cannot be recognized or upheld, as it is in violation of the principles enunciated by the Supreme Court in Perkins Eastman Architects DPC v. HSCC (India) Ltd. 2. The Court interpreted the phrase "any member" in Clause 25 to mean that at least one or more of the members of the Arbitral Tribunal must possess the qualifications as prescribed in Clause 25, but not all members. The Court reasoned that the clause does not specify that "all members" of the Arbitral Tribunal must hold the prescribed qualifications. 3. The Court read down the clause specifying qualifications in Clause 25 to mean a retired government employee, in order to sustain and uphold the clause and save the appointment of a person who holds those qualifications and who would not otherwise fall foul of the prohibitions contained in the Seventh Schedule of the Act.
Final Decision: A. It shall be open to the petitioner to address a fresh communication indicating the name of its nominee arbitrator. B. Upon receipt of the said intimation, it would be open to the respondent to nominate its arbitrator. The two nominated arbitrators may, in turn, then proceed to appoint a presiding arbitrator. C. The Court further clarifies that it shall be open to the respondent to nominate an arbitrator who possesses the qualifications as prescribed in Clause 25. However, if it chooses not to do so, the two nominated arbitrators would then be entitled to appoint a presiding arbitrator who meets the qualifications as stipulated in Clause 25.
ORDER
1. The present petition seeks to invoke the jurisdiction of the Court conferred by Section 11 of the Arbitration and Conciliation Act, 1996 [The Act] and for the appointment of a nominee arbitrator of the respondent consequent to an asserted failure on its part to abide by the appointment procedure.
2. When the present petition was initially taken up for consideration on 10 March 2023, Mr. Kurup, learned CGSC appearing for the respondent, had referred to Clause 25 of the Contract providing for parties approaching the Dispute Redressal Committee [DRC] before seeking reference of disputes to an Arbitral Tribunal. The petitioner had, on the other hand, contended that bearing in mind the composition of the DRC, the relegation of the petitioner to pursue that process would be an empty formality. However, and without prejudice to its rights and contentions, the petitioner ultimately stated that they would participate in any proceedings that may be drawn by the DRC during the pendency of the instant petition.
3. The proceedings before the DRC are stated to have been initiated on 28 April 2023. Since 11 out of the 13 claims raised by the petitioner remained unresolved, the matter was thereafter adjourned to 03 May 2023. The proceedings were thereafter preponed to 02 May 2023. However parties could not resolve their differences in the meeting that was held on that date and consequently the proceedings before the DRC concluded without any settlement being reached. The existence of disputes between the parties and the same being resolved by way of arbitration is essentially not disputed. However, the respondent raised various objections with respect to the prayer made for constitution of the Arbitral Tribunal based not only on an asserted failure on the part of the petitioner to abide by the procedure prescribed under the Contract but also on the ground of it not being entitled to nominate an arbitrator otherwise than in accordance with the contract terms.
4. In order to evaluate the merits of the objections which stand raised, the Court firstly deems it apposite to extract Clause 25 of the Contract which reads thus:
"CLAUSE 25
Settlement of Disputes & Arbitration
Except where otherwise provided in the contract, all questions and disputes relating to the meaning of the specifications, design, drawings and instructions here-in before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these condition or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof shall be dealt with as mentioned hereinafter:
(i) If the contractor considers any work demanded of him to be outside the requirements of the contract, or disputes any drawings, record or decision given in writing by the Engineer-in-Charge or if the Engineer in Charge considers any act or decision of the contractor on any matter in connection with or arising out of the contract or carrying out of the work, to be unacceptable and is disputed, such party shall promptly within 15 days of the arising of the disputes request the Chief Engineer or where there is no Chief Engineer, the Additional Director General (CE/AOG) who shall refer the disputes to Dispute Reressal Committee (DRC) within 15 days along with a list of disputes with amounts claimed if any in respect of each such dispute. The Dispute Redressal Committee (DRC) shall give the opposing party two weeks for a written response, and, give its decision within a period of 60 days extendable by 30 days by consent of both the parties from the receipt of reference from CE/ADG. The constitution of Dispute Redressal Committee (DRC) shall be as indicated in Schedule 'F'. Prov
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