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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
UJJAL BHUYAN, J.
M/s Sri. Consultants – Petitioner
Versus
M/s Loesche India Pvt. Ltd. – Respondent
Arbitration Application No. 81 of 2018
Decided On : 02-03-2022
Arbitration Agreement - Appointment of Arbitrator - Arbitration and Conciliation Act, 1996
Fact of the Case:
The applicant, a registered partnership firm, was awarded a contract work by the respondent for executing engineering work. Disputes arose regarding additional work and payment, leading to the applicant seeking appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.
Finding of the Court:
The Court found that a dispute between the parties and the intention to resolve it through arbitration can be inferred from the exchange of letters and emails. Consequently, the Court appointed a sole arbitrator to arbitrate on the dispute.
Issues: The main issue was the existence of an arbitration agreement between the parties, as the respondent denied its existence, while the applicant sought appointment of an arbitrator.
Ratio Decidendi: The Court relied on Section 7 of the Arbitration and Conciliation Act, 1996, which defines an arbitration agreement and provides that it may be inferred from an exchange of letters or other means of communication. The Court also considered the intention of the parties to resolve disputes through arbitration.
Final Decision: The Court appointed a sole arbitrator to arbitrate on the dispute raised by the applicant, directing both parties to appear before the arbitrator on a specified date.
ORDER :
1. Heard Mr. Ram Mohan, learned counsel for the applicant and Mr. Rahul Sarella, learned counsel for the respondent.
2. This application has been filed under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (briefly ‘the 1996 Act’ hereinafter) for appointment of arbitrator.
3. Case of the applicant is that it is a registered partnership firm and engaged in the business of civil construction work. Respondent awarded a contract work to the applicant vide Work Order dated 23.07.2014 for executing basic and detail engineering work for civil and steel structures for 7 Nos. of coal handling and grinding plants at Nigeria for an amount of Rs. 1.40 crores.
4. According to the applicant, the contractual works commenced as scheduled and the applicant was successful in completing the same. However, certain additional works were assigned by the respondent to the applicant on account of revision in mechanical drawings supplied by the respondent while the above projects were pending. Applicant wrote to the respondent on 26.12.2014 and on 27.12.2014 stating that it was agreeable to carry out the revised work at the revised fee of Rs. 125 lakhs plus Rs. 20.00 lakhs. It was brought to the notice of the respondent that applicant had been carrying out various additional works due to revision in the mechanical drawings for which it was assured by the respondent that it would be paid extra, the quantum of which would be mutually agreed upon. It was also pointed out that in case of differences of opinion in finalizing quantum of compensation, the decision of head of the civil engineering of the respondent Mr. Lurtz would be final and binding on both the parties. The above work was stated more in detail in letter dated 27.12.2014.
5. Respondent replied vide e-mail dated 15.01.2015 to the same. Applicant was assured that its concerns would be settled amicably. Applicant was requested to provide the details with relevant documents for verification of the respondent. Thereafter, another email was sent by the respondent to the applicant on 22.01.2015. As regards additional work due to revision in mechanical drawings, reference was made to the earlier letter dated 15.01.2015 as well as to letter of the applicant dated 27.12.2014.
6. Applicant thereafter submitted bill dated 01.08.2016 to the respondent as per which applicant claimed an amount of Rs. 67,26,120-00.
7. Respondent, vide their e-mail dated 09.02.2017, while appreciating the efforts put in by the applicant, stated that it had engaged an external agency for review, rectification and release of structural and civil drawings which resulted in extra cost. However, considering their business relationship, respondent agreed to pay Rs. 5,00,000-00 additionally to the applicant as a gesture of goodwill. Subsequently, in their letter dated 02.02.2018, respondent contended that there was no arbitration agreement between the parties in terms of Section 7 of the 1996 Act; therefore, question of nominating an arbitrator would not arise. However, it was reiterated that respondent was still willing to offer an amount of Rs. 5,00,000-00 to the applicant purely as a gesture of goodwill and on account of their longstanding business relationship.
8. Continuing with the correspondence, applicant vide e-mail dated 20.04.2017 requested the respondent to settle the bill expeditiously, failing which to appoint an arbitrator on mutually agreed terms and conditions. As there was still no response, applicant wrote to the respondent on 13.07.2017 requesting the respondent to appoint Mr. Lurtz, head of civil engineering unit of the respondent as the arbitrator. In its letter dated 03.10.2017, respondent informed the applicant that it cannot appoint an arbitrator to adjudicate upon the alleged disputes between the parties. However, respondent proposed a meeting at its office to settle the outstanding disputes between the parties. It is at that stage the present application came to be filed seeking a direction f
The main legal point established is that the existence of an arbitration agreement can be inferred from the exchange of letters and emails between the parties, and the intention to resolve disputes t....
The main legal point established in the judgment is the importance of party autonomy in arbitration, the enforceability of the entire arbitration clause, and the conditional acceptance of arbitration....
The Court's limited jurisdiction under Section 11 of the Act does not allow for a detailed consideration of the disputes, which is to be determined by the arbitrator.
The judgment establishes the requirement of a written agreement for arbitration, the interpretation of settlement of disputes clauses, and the significance of party conduct in determining the existen....
Failure to appoint an arbitrator within the agreed timeframe under Arbitration Agreement allows the court to intervene and appoint an arbitrator under Section 11(6) of the Arbitration and Conciliatio....
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