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2024 Supreme(Online)(DEL) 21091
HIGH COURT OF DELHI
Subramonium Prasad, J
STATE OF KERALA – Appellant
Versus
NATIONAL HIGHWAY AUTHORITY OF INDIA & ANR. – Respondent
W.P.(C)-7404/2023
The principle of party autonomy in arbitration prevents a non-signatory from being compelled into arbitration proceedings without consent, safeguarding their right to appoint an arbitrator.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 9.2 - Concession Agreement - State Support Agreement - The Petitioner challenged the Arbitral Tribunal's order to implead it in arbitration proceedings between Respondent No.1 and Respondent No.2, asserting it was not a party to the Concession Agreement. The Tribunal ruled the State Support Agreement was intrinsically linked to the Concession Agreement, necessitating the Petitioner’s involvement. (Paras 1, 3, 10, 22)
(B) Jurisdiction of High Courts - The High Court's jurisdiction under Article 227 is limited, but interference is warranted when a party's rights are compromised, such as the right to appoint an arbitrator. (Paras 9, 22)
(C) Party Autonomy in Arbitration - The principle of party autonomy is fundamental in arbitration, and a non-signatory should not be compelled into arbitration proceedings without consent. (Paras 5, 22)
Facts of the case:
The Petitioner, State of Kerala, contested an order from the Arbitral Tribunal that allowed Respondent No.1 to implead it in arbitration concerning a Concession Agreement for highway widening. The Petitioner argued it was not a party to the Concession Agreement, which had its own arbitration clause.
Findings of Court:
The Court found that the Petitioner was not a necessary party to the Concession Agreement and that its rights to appoint an arbitrator were infringed by the Tribunal's order.
Issues: The main issues included whether the Petitioner could be impleaded in the arbitration and the implications of the distinct agreements.
Ratio Decidendi: The Court ruled that the Petitioner’s right to appoint its own arbitrator was compromised, and the two agreements were separate, thus the Petitioner should not be compelled into the arbitration of the Concession Agreement.
Result: The writ petition was allowed, and the Tribunal's order was set aside.
1. The Petitioner/State of Kerala has approached this Court assailing the Order dated 15.03.2022 passed by the Arbitral Tribunal in Arbitration Proceedings initiated by Respondent No.2/Guruvayoor Infrastructure Pvt. Ltd against Respondent No.1/NHAI. By the Order dated 15.03.2022, the Arbitral Tribunal has allowed the application filed by Respondent No.1 to implead the Petitioner as a party to the Arbitration Proceedings.
2. The facts, in brief, leading to the filing of the instant writ petition which are necessary for disposal of the instant writ petition are as under:
- i.
- On 27.03.2006, a Concession Agreement was entered into between Respondent No.1 and Respondent No.2 for widening the existing 2 lane portion from Thrissur to Angamali, covering a distance about 40 kms on National Highway 47 in the State of Kerala, to 4 lanes and Improvement, Operation and Maintenance from Angamali to Edapalli through a concession on Build, Operate and Transfer (BOT) basis.
- The said agreement had an arbitration clause. At this juncture, it is pertinent to incorporate certain clauses of the said Concession Agreement entered into between Respondent No.1 and Respondent No.2. Clause 2 of the said Concession Agreement lays down the scope of project. Clause 2.1 of the Concession Agreement reads as under:
- "2.1 The Project shall be executed on to Site which is described in Schedule 'A' of this Agreement. The scope of the Project shall include performance and execution by the Concessionaire of all design, engineering, financing, procurement, construction, completion, operation and maintenance of the Project Highway as described in Schedule 'B' and Schedule 'C' of this Agreement. It shall include widening the existing 2 lane portion from Km 270.00 (Thrissur) - Km 316.70 (Angamali) on NH-47 in the State of Kerela to 4 lanes and improvement, Opeiation and Maintenance of Km 316.70 (Angamali) to Km 342.0 (Edapalli) on NH-47 in accordance with the Specifications and Standards set forth in Schedule 'D' and operation and maintenance thereof in accordance with Schedule `L'.
- It shall also include the performance and fulfilment of other obligations by the Concessionaire under this Agreement.
- The Concessionaire shall undertake its obligations at its own cost and risk."
- ii.
- Clause 26 of the Concession Agreement provides for a State Support Agreement. Clause 26 of the Concession Agreement reads as under:
- "XXVI. STATE SUPPORT AGREEMENT
26.1 The Concessionaire acknowledges that for the performance of its obligations under this Agreement, it requires support and certain services from Government of Kerela. The nature and scope of such support and services required by the Concessionaire from Government of Kerela are fully described in the draft State Support Agreement set forth at Schedule 'R'.
26.2 The. Concessionaire acknowledges its obligation to enter into the State Support Agreement and accordingly the Concessionaire agrees and undertakes to enter into at its cost and expense the State Support Agreement with NHAI and Government of Kerela substantially in form and content as set forth in Schedule 'R'."
iii.
Chapter VII of the Concession Agreement deals with suspension and termination of the contract. Clause 32.4 of Chapter VII deals with termination by NHAI in the Event of Default. Clause 32.4.1 which enumerates the events of default read as under:
- "32.4.1 The Concessionaire may after giving 90 (ninety) days notice in writing to NHAI terminate this Agreement upon the occurrence and continuation of any of the following events (each a "NHAI Event of Default"), unless any such NHAI Event of Default has occurred as a result of Concessionaire Event of Default or due to a Force Majeure Event.
(1) NHAI is in breach of this Agreement and such breach has a Material Adverse Effect on the Concessionaire and NHAI has failed to cure such breach or take effective steps for curing such breach within 90 (ninety) days of receipt of notice in this behalf from the Concessionaire;
(2) NHAI repu
