Arbitration and Conciliation Act – if the parties are not able to agree on the said procedure, or constitute the Arbitral Tribunal to their mutual satisfaction, either of the party has an option to route to an appropriate remedy under Section 11 of the Act, which provides detailed machinery for appointment of Arbitrator through judicial intervention. = IBI Consultancy India Private Limited- Versus – DSC Limited

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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

ARBITRATION CASE (C) NO. 53 OF 2016

IBI Consultancy India Private Limited …Petitioner(s)

Versus

DSC Limited …Respondent(s)

WITH

ARBITRATION CASE (C) NO. 63 OF 2016

ARBITRATION CASE (C) NO. 54 OF 2016

ARBITRATION CASE (C) NO. 57 OF 2016

J U D G M E N T

R.K.Agrawal J.

1) The IBI Consultancy India Private Limited-the

petitioner-Company is the Indian subsidiary of the IBI Group

based in Canada. The above petitions, under Section 11(6)

read with Section 11(9) of the Arbitration and Conciliation Act,

1996 (hereinafter referred to as ‘the Act’), have been filed by

the petitioner-Company as well as by the IBI Group for

appointment of an Arbitrator to adjudicate the disputes that

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have arisen between the parties in connection with the

contracts in question.

2) The petitioner-Company has filed two petitions for the

appointment of Arbitrator and its parent company viz., IBI

Group has also filed two petitions of the same nature. Since

the point of consideration is same in all these four petitions,

purpose would be served if we moot the case of either of the

petition and would be disposed off by this common judgment.

Arbitration Case No. 53 of 2016

3) The petitioner-Company is a multi-disciplinary company

engaged in the business of providing system integration and

maintenance service for Toll and Traffic Management Systems

whereas the DSC Limited, the respondent-Company is a

Company registered under the Companies Act, 1956 having

two subsidiary companies. First subsidiary Company of the

respondent-Company is the Lucknow Sitapur Expressway

Limited (LSEL) which is a special purpose vehicle (SPV) of the

respondent-Company and has signed a Concession Agreement

with the National Highways Authority of India (NHAI) for

developing Lucknow-Sitapur Highway Project (LSEL Project)

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for widening the existing 2-Lane Road to 4-Lane dual

carriageway between Km 413.200 to Km 488.270 on NH-24 in

the State of Uttar Pradesh. Second subsidiary Company of the

respondent-Company is Raipur Expressway Limited (REL),

which is also a special purpose vehicle (SPV) of the

respondent-Company and has signed a Concession Agreement

with the NHAI for developing the Raipur-Aurang Highway

Project (REL Project) for widening the existing 2-lane Road to

4-Lane dual carriageway between Km 239 to Km 281 on NH-6

in the State of Chhattisgarh.

4) Vide e-mail dated 16.02.2010, the respondent-Company

sent a Request for Proposal (RFP) to the petitioner-Company,

inviting technical and commercial proposal for their LSEL and

REL Projects. Vide letter dated 07.06.2010, the

petitioner-Company had given a proposal to execute the

contract for installation, erection and commissioning of the

Toll Collection and Traffic Control Equipments at NH-24. The

respondent-Company, vide letter dated 14.06.2010, accepted

the said proposal. Pursuant thereto, a Contract Agreement

dated 30.08.2010 was executed between the parties. The

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value of the Contract was mutually finalized at Rs.

1,55,20,700.00 in pursuance of the Contract Agreement. In

total, the IBI group and the petitioner-Company had entered

into 6 (six) separate contracts for the respective LSEL and REL

Projects with the respondent-Company.

5) During completion of the projects, the

respondent-Company defaulted in releasing the agreed

payment to the petitioner-Company and the IBI Group.

Though several verbal and written communication were

exchanged between the parties to this effect, the

respondent-Company could not release the outstanding

payment. On 06.09.2012, a legal notice was sent to the

respondent-Company by the IBI Group as well as by the

petitioner-Company for the recovery of outstanding payment

for all the contracts. Further, on 12.06.2013, a reminder for

outstanding payment was sent to the respondent-Company.

6) On 24.04.2014, a legal notice for invoking Arbitration

Clause and appointment of Arbitrators was sent to the

respondent-Company and the name of Mr. Debashish Moitra,

Advocate was suggested as a Sole Arbitrator, however, there

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was no reply from the other side. The IBI Group and the

petitioner-herein filed petitions under Section 11 of the Act

before the High Court being Arbitration Petition Nos. 443, 448,

444 and 449 of 2014 before the High Court of Delhi at New

Delhi. Learned single Judge of the High Court, vide order

dated 24.02.2015, disposed of the petitions while holding that

since one of the parties to the petition is an entity incorporated

outside India, therefore, the arbitration of the dispute

involving such an entity would be an ‘international commercial

arbitration’ within the meaning of Section 2(1)(f) of the Act and

for seeking appointment of an Arbitrator in a dispute involving

such an entity, an application will have to be filed before the

Supreme Court under Section 11(9) of the Act. The petitioners

herein have therefore invoked the jurisdiction of this Court by

filing the above petitions.

7) The first and the foremost thing is the existence of an

arbitration agreement between the parties to the petition

under Section 11 of the Act and the existence of dispute(s) to

be referred to Arbitrator is condition precedent for appointing

an Arbitrator under Section 11 of the Act. It is also a well

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settled law that while deciding the question of appointment of

Arbitrator, court has not to touch the merits of the case as it

may cause prejudice to the case of the parties. The scope

under Section 11(6) read with Section 11(9) is very limited to

the extent of appointment of Arbitrator. This Court has to see

whether there exists an Arbitration Agreement between the

parties and if the answer is affirmative then whether the

petitioner has made out a case for the appointment of

Arbitrator.

8) It is worth mentioning that the position after the

insertion of sub-Section 6(A) of Section 11 of the Act dated

23.10.2015 has been changed. The extent of examination is

now confined only to the existence of the Arbitration

Agreement. At this juncture, it is pertinent to set out Article-1

as well as Clause 3.14 of the Contract Agreement dated

30.08.2010 which are as under:-

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“Article-1

Contract Documents

The following document shall constitute the Contract

between the client and the contractor, and each shall be

read and construed as an integral part of the Contract;

(i) This Contract Agreement and Appendices hereto

(ii) Letter or indent ref no. No LSEL/Tolling/IBI/HO-2 dated

14th June 2010…..”

“Clause 3.14

Arbitration (as mentioned in ref. No LSEL/Tolling/IBI/HO-1

dated 14th June 2010)

1. In the event of any dispute or difference arising out or

touching upon any of the terms and conditions of this

contract and /or in relation to the implementation or

interpretation hereof, the same shall be resolved initially by

mutual discussion and conciliation but in the event of failure

thereof, the same shall be referred to an independent

arbitrator mutually agreed by the two parties. The decision

of the arbitrator shall be final and binding upon the parties.

The arbitration shall be in Delhi and the arbitrator shall give

his award in accordance with “The Arbitration and

conciliation Act, 1996”.

2. In the event of arbitrator dying, neglected or refusing to

act or resigning or being unable to act for any reason or his

award being set aside by the court for any reason the parties

will mutually agree another to act as Arbitrator.

(Emphasis supplied by us)”

9) On a careful perusal of Article-1 as well as Clause 3.14 of

the Contract dated 30.08.2010 along with the Letter of Indent

dated 14.06.2010, it is evident that the letter dated

14.06.2010 is a part of the Contract and it shall be read and

construed as an integral part of the Contract. Therefore, the

contention of the respondent-Company that there does not

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exist any arbitration agreement between the parties is not

sustainable in the eyes of law. We are of the considered view

that Arbitration clause exists in the Contract and we hold this

point in favour of the petitioner-Company.

10) It is a cardinal principle of the Arbitration and

Conciliation Act that the parties are free to decide the number

of arbitrators, provided, it is an odd number, as well as the

procedure for appointing them. However, if the parties are not

able to agree on the said procedure, or constitute the Arbitral

Tribunal to their mutual satisfaction, either of the party has

an option to route to an appropriate remedy under Section 11

of the Act, which provides detailed machinery for appointment

of Arbitrator through judicial intervention.

11) Accordingly, Justice Amitava Roy, a former Judge of this

Court, is appointed as the sole Arbitrator to adjudicate the

disputes between the parties on such fees he may fix.

Nevertheless to say, the said appointment is subject to the

necessary disclosure being made under Section 12 of the Act

and the Arbitrator not being ineligible under Section 12(5) of

the Act. 

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12) The petitions as well as interlocutory application, if any,

are disposed of accordingly.

..…………….………………………J.

(R.K. AGRAWAL)

.…….…………………………………J.

(S. ABDUL NAZEER)

NEW DELHI;

APRIL 16, 2018.