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2023 Supreme(Del) 1732
IN THE HIGH COURT OF DELHI AT NEW DELHI
Chandra Dhari Singh, J.
Tata Power Company Limited – Appellant
Versus
Genesis Engineering Company – Respondent
Arb.P. 1415 of 2022
Decided On : 12-04-2023
Appearance not given, for the Petitioner.
Appearance not given, for the Respondent.
The main legal point established in the judgment is that disputes arising from composite work contracts are not amenable to the jurisdiction of the Facilitation Council under the MSME Act and are arbitrable in nature, allowing for the appointment of an arbitrator to adjudicate such disputes.
Headnote:
Arbitration and Conciliation Act - Appointment of Arbitrator - Section 11(6) - Work Orders - General Conditions of Contract - MSME Act - Section 18 - Composite Work Contract - Dispute Resolution - Arbitration and Conciliation Act 1996
Fact of the Case:
The petitioner sought the appointment of an arbitrator to adjudicate disputes arising from work orders related to a project. The respondent invoked Section 18 of the MSME Act and filed a claim before the Facilitation Council. The parties attempted to settle the dispute but failed, leading to the petitioner filing the present petition seeking the appointment of an arbitrator.
Finding of the Court:
The court found that the work orders qualified as composite work contracts and were not amenable to the jurisdiction of the Facilitation Council under the MSME Act. The court also noted that the agreement between the parties provided for arbitration, and the disputes were arbitrable in nature. Therefore, the court appointed a sole arbitrator to adjudicate the disputes.
Issues: The primary issue was the applicability of the MSME Act to the case at hand and whether the disputes were arbitrable. The court also addressed the nature of the work orders and the validity of the arbitration agreement.
Ratio Decidendi: The court held that the work orders qualified as composite work contracts and were not amenable to the jurisdiction of the Facilitation Council under the MSME Act. The court also found that the disputes were arbitrable in nature and appointed a sole arbitrator to adjudicate the disputes.
Final Decision: The court appointed Mr. Rohan Jaitley as a sole arbitrator to adjudicate the disputes between the parties and directed the parties to appear before the arbitrator. The petition was disposed of accordingly.
Key Points:- The work orders are held to qualify as composite work contracts involving supply of goods and labour/services, not amenable to Facilitation Council under MSME Act.[11000775520019]- Disputes are arbitrable and the agreement provides for arbitration; Court appointed a sole arbitrator under Section 11(6) of the Act.[11000775520025]- The Court directed appointment of a sole arbitrator with compliance of Section 12(1) and DIAC fees, and scheduled initial appearance. (!) (!) (!) - The MSME Act applicability to works contracts is rejected; policy and judgments indicate works contracts are not covered. (!) (!) (!) - The dispute resolution clause provides for arbitration and mutual appointment of arbitrator; in absence of mutual agreement, Court appoints a sole arbitrator. (!) (!) (!) - The petition was filed seeking appointment of Justice G.S.Sistani as sole arbitrator under Clause 23 of GCC; later orders appoint Mr.Rohan Jaitley as sole arbitrator. (!) (!) (!)
What is the applicability of the MSME Act to work contracts that are composite in nature?What is the scope of arbitrability and appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act when a dispute arises from work orders deemed as composite contracts?What is the effect of the arbitration clause and the procedural path for appointment of a sole arbitrator in disputes arising from work orders?
ORDER
Chandra Dhari Singh, J. (Oral)--The instant petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter "the Act") has been filed on behalf of the petitioner seeking the following reliefs:
"(a) Allow the present Petition and appoint Justice G.S Sistani (Retd.) as the Ld. Sole Arbitrator in terms of Clause 23 of the GCC for adjudicating the disputes between Petitioner and Respondent;
(b) Pass such other and further orders which this Hon'ble Court may deem fit and proper in the facts and circumstances of the case and in the interest of justice."
2. Learned counsel for the petitioner submitted that the instant petition has been filed in terms of the liberty granted by this Court vide Order dated 20.09.2022 passed in Arbitration Petition No. 1237 of 2021, seeking the Court's directions for appointment of an Arbitrator to adjudicate upon the disputes which has arisen between the Petitioner and the Respondent with respect to the Work Orders dated 11.02.2019 and 28.05.2019 read with General Conditions of Contract (hereinafter referred to as the "GCC") executed between parties.
3. It is stated that on 05.06.2017, the Municipal Corporation of Ludhiana issued Request for Proposal (hereinafter referred to as the "RfP") for selection of concessionaire for implementing smart LED streetlights and Centralized Control and Monitoring System (hereinafter referred to as the "CCMS") for the city of Ludhiana on Energy Services Companies (hereinafter referred to as the "ESCO") model (hereinafter referred to as the "Project"). Accordingly, Tata Project Limited (hereinafter referred to as the "TPL") emerged as the successful bidder for carrying out works for the Project. Thereafter, TPL delegated the works for the Project to the Petitioner. The Petitioner to sub-delegate the works for the Project issued a Notice Inviting Tender thereby inviting bidders for replacement of conventional street lights for the Project. It is submitted that the Respondent emerged as a successful bidder for undertaking the work for the Project and a Letter of Comfort (hereinafter referred to as the "LoC") in this regard was issued to the Respondent by the Petitioner.
4. It is stated that pursuant to the LoC being issued to the Respondent, the Petitioner issued Work Orders in favour of the Respondent. However, soon after the work was commenced by the Respondent, the Petitioner observed various laxities in the work of Respondent. Accordingly, the Petitioner from time to time issued Notice for Non Performance of Services, Show Cause Notice, several emails and letters to the Respondent thereby pointing out various deficiencies in the work pertaining to the Project. It is submitted that despite various notices, emails and letters issued to the Respondent, the Respondent failed to rectify the deficiencies.
5. It is stated that on 04.08.2021, Petitioner issued a Show Cause Notice and a Final Reminder letter calling upon the Respondent to perform its obligations within one week from receipt of the Show Cause Notice, failing which the Petitioner may take appropriate actions in terms of the GCC. The Respondent in response to the Show Cause Notice issued by the Petitioner issued a letter dated 22.08.2021 disputing the claims as raised by the Petitioner and raised its own claim to the tune of Rs.4,86,67,058/-. Moreover, the Respondent in order to shy away from its contractual obligations issued a Termination Notice dated 23.08.2021 to M/s Tata Power Delhi Distribution Company Limited alleging that it has acted in violation of contractual obligation and directed to release its alleged dues under the Work Order. Thereafter on 03.09.2021, TPDDL issued a response to the Termination Notice issued by Respondent stating that:
(a) There is no contract between TPDDL and the Respondent.
(b) TPDDL is not a party to the Work Order dated 11.02.2019 and 28.05.2019 entered between the Petitioner and the Respondent.
(c) The Termination Notice has been wrongly issued to
