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2025 Supreme(Telangana) 291
IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
K. LAKSHMAN, J.
Danieli India Limited - Appellant
Versus
Mishra Dhatu Nigam Limited - Respondent
Arbitration Application No.266 Of 2024
Decided On : 02-05-2025
Advocate Appeared:
For the Appellant : S RAM BABU
For the Respondent: V UMA DEVI
The court upheld the intention to arbitrate despite the designated institution's defunct status, appointing a sole arbitrator for the disputes arising from the contract.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 11(6)(c) - Appointment of arbitrators - Disputes arose from a contract dated 28.04.2017 for setting up a steel plant - Delays attributed to both parties, including civil works and pandemic impacts - Respondent's imposition of liquidated damages contested by applicant - Court found disputes arbitrable and appointed a sole arbitrator. (Paras 3, 11, 19, 20)
(B) Arbitration Clause - Intention to arbitrate must be upheld even if the designated arbitral institution becomes defunct - Courts should adopt a pragmatic approach to enforce arbitration agreements. (Paras 14, 16, 18)
Facts of the case:
The applicant, a company, entered into a contract with the respondent for setting up a steel plant. Delays occurred due to various reasons, including civil work delays and the COVID-19 pandemic. The respondent imposed liquidated damages, which the applicant contested, leading to the present arbitration application.
Findings of Court:
The court found that the disputes were arbitrable and that the intention to arbitrate should be upheld despite the defunct status of the designated arbitral institution.
Issues: The main issues were whether the disputes were arbitrable and if the court could appoint an arbitrator despite the designated institution being defunct.
Ratio Decidendi: The court ruled that the intention to arbitrate must be given effect to, and disputes arising from the contract were arbitrable. The court appointed a sole arbitrator to adjudicate the disputes.
Result: Application allowed.
ORDER :
K. LAKSHMAN, J.
Heard Mr. S. Ram Babu, learned counsel for the applicant and Ms. V. Uma Devi, learned counsel for the respondent.
2. This application is filed under Section - 11 (6) (c) of the Arbitration and Conciliation Act, 1996 (for short ‘Act, 1996’), to appoint three (03) Arbitrators to adjudicate the disputes between the parties.
3. CONTENTIONS OF THE APPLICANT
i) The applicant is a Company incorporated under the Companies Act, 1956. It is engaged in the design, engineering, and supply of steel plant equipment. It has entered into a Contract with respondent dated 28.04.2017 for setting up Single Stand Reversing 4- HI Wide Plate Hot Rolling Mill for Rolling of Plates (Phase-I) at the respondent premises in Hyderabad.
ii) The said contract was for design, supply and commissioning of various plant equipment and technological structures. It is the specific contention of the applicant that as per the terms of the contract, the applicant has agreed to undertake design, engineering, manufacture and supply of plant and equipment, technological structures, supply of refractory’s, civil and structural consultancy work, intermediate storage, insurance and handling, erection work, testing, start-up ,commissioning and demonstration of performance guarantee parameters of the facilities. Time is the essence of the contract. Adhering to the stipulated timeline, the applicant invested substantial funds and allocated significant resources for the execution of the contract.
iii) In terms of Clause - 4 of the Special Conditions of the Contract, site delivery of plant, machinery and equipment shall start from 15th month and shall be completed by 24th month from the effective date i.e. 28.04.2017. Erection, start up and putting into commissioning (Provisional Acceptance) shall start from the 18th month and shall be completed by 30th month from 28.04.2017 and scheduled to be completed by 28.10.2019.
iv) It is the specific contention of the applicant that project completion was delayed by 26 months due to various reasons attributable to the respondent, such as Civil and Structural works delay, utilities and cranes readiness delays, equipment delivery and unavailability of slab, for which the applicant incurred additional costs due to project prolongation.
v) A meeting was held between the parties, wherein it was agreed that delay on the part of the respondent in handing over the site for erection, the PAC (Provisional Acceptance Certificate) dates originally targeted for 28.04.2019 for Phase-II and 28.10.2019 for Phase-I needed to be arranged. It was also proposed that PAC for both the phases were to be conducted by 28.08.2020 based on the anticipated availability of civil front for erection by July, 2019 and make the project economically efficient for the respondent by utilizing the plates produced from Phase I in Phase II instead of procuring the same separately.
vi) There was an exchange of letters between the applicant and the respondent. The schedule was extended due to several factors, including delays in civil and structural works, readiness of utilities & cranes, equipment delivery issues, slab unavailability, dengue pandemic, impact of the COVID-19 pandemic, flooding in the cellars, and fire damage. The said reasons were explained to the respondent vide letter dated 27.02.2020.
vii) On 12.03.2020, the respondent sent a letter to the applicant extending the time for completion of the contract from August, 2020 to 31.03.2021. The respondent in contrary to the agreement, and by exercising its dominant position, reserved its right to impose Liquidated Damages, even though the said extension was provided due to the reset of the ‘erection start date’ due to failure of the respondent to release the completed civil and structural work as per contractual timelines. The respondent, for the reasons attributable to it, requested the applicant to defer the works due to the absence of erection fronts for erection, and the relevant constructions was ye
