Bombay High Court
Dhargalkar Technoesis (I) Pvt. Ltd vs Mumbai Metropolitan Regional ... on 3 December, 2020
Author: G.S. Patel
Bench: G.S.Patel
Dhargalkar Technoesis (I) Pvt Ltd v MMRDA
9-ARBAPL-55-2020.docx
Shephali
REPORTABLE
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION (L) NO. 55 OF 2020
Dhargalkar Technoesis (I) Pvt Ltd
Having its Regd. Office at:
D-104, Radha Govind Radha Residency CHS,
Opp Dheeraj Savera, Off W.E. Highway, Borivali
(E), Mumbai 400 066. ...Petitioner
~ versus ~
Mumbai Metropolitan Regional
Development Authority,
A corporation/authority constituted under the
provisions of the Mumbai Metropolitan
Development Act, 1974 having its registered
office at MMRDA Building,
Plot No. C-14, and C-15, Bandra Kurla Complex,
Bandra (E), Mumbai 400 051,
through its Commissioner ...Respondent
A PPEARANCES
Shephali FOR THE PETITIONER Mr VP Sawant, Senior Advocate,
Mormare
with Mr Nikhil Patil, i/b Mr
Digitally signed
by Shephali
Mormare
Prabhakar Jadhav.
Date: 2020.12.03
11:10:32 +0530
FOR THE RESPONDENT Mr Ajay Khaire
Page 1 of 12
3rd December 2020
Dhargalkar Technoesis (I) Pvt Ltd v MMRDA
9-ARBAPL-55-2020.docx
CORAM : G.S.Patel, J.
JUDGMENT RESERVED ON : 27th November 2020
JUDGMENT PRONOUNCED ON : 3rd December 2020
JUDGMENT:
1. Dhargalkar Technoesis (I) Pvt Ltd ("DTIPL") applies for an order under Section 11 of the Arbitration & Conciliation Act, 1996, referring contractual disputes between it and the Mumbai Metropolitan Regional Development Authority ("MMRDA")1 to arbitration. DTIPL says there is a valid and binding arbitration agreement. MMRDA says there is not.
2. Sixteen years ago, in 2004, MMRDA invited Expressions of Interest from eligible consultants. They were to be empanelled as consultants for proof checking and supervision consultancy on rehabilitation tenement construction projects. DTIPL put in a bid. MMRDA accepted it by its letter of 31st May 2004. A formal contract followed on 21st June 2004. This is the subject matter of the present application. I am not concerned, in a Section 11 application, with the minutiae of the disputes between these parties. The only question is whether or not there exists an arbitration agreement.
3. There is the DTIPL-specific contract itself, and then there are the "General Conditions".2 1 A State Government authority constituted under the Mumbai Metropolitan Region Development Authority Act, 1974. 2 At some places, the reference is to SC or Special Conditions. Both sides agree that the reference to SC or GC are to be read interchangeably to mean the Page 2 of 12 3rd December 2020 Dhargalkar Technoesis (I) Pvt Ltd v MMRDA 9-ARBAPL-55-2020.docx
4. Clause 8 of the Contract says this:3 8 Settlement of Disputes 8.1 Amicable Settlement The Parties shall use their best efforts to settle amicably all disputes arising out of or in connection with this Contract or the interpretation thereof 8.2 Dispute Settlement Any dispute between the Parties as to matters arising pursuant to this Contract which cannot be settled amicably within thirty (30) days after receipt by one Party of the other Party's request for such amicable settlement may be submitted by either Party for settlement in accordance with the provision specified in the SC.
5. This clause was amended by the GC. It was substituted with the following:4 8.2 Dispute Settlement For any dispute, matter will be referred to Jt. Metropolitan Commissioner and Project Director, MMRDA, and his decision will be final.
6. Mr Sawant says this is a sufficient arbitration clause. Mr Khaire for MMRDA maintains that this does not satisfy the requirements of an arbitration agreement at all.
same thing, viz., the conditions from page 71 of the paper book. The caption on that page is "General Conditions".
3 Application, p. 92.
4 Application, p. 96.
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7. Clause 7.2 of the GC5 is part of a general section on "Fairness and Good Faith".6 Clause 7.2 says:
7.2 Operation of the Contract The Parties will use their best efforts to agree on such action as may be necessary to remove the cause or causes of such unfairness, but no failure to agree on any action pursuant to this Clause shall give rise to a dispute subject to arbitration in accordance with Clause GC 8 hereof.
8. Mr Sawant submits that the last portion of this clause makes it clear that it was always the intention of the parties that Clause 8.2 would be understood to mean the agreement of the parties to refer any disputes to arbitration. All that Clause 7.2 says is that a failure of good faith efforts is to be seen as an arbitrable dispute. But that does not mean there is no arbitration agreement. To the contrary; Clause 7.2 clearly posits that except for any failed good faith settlement, other disputes are specifically arbitrable.
9. He invites my attention to the "Termination" clauses in the SC/GC. This is clause 2.9.7 It is in two parts. Clause 2.9.1 and its sub- clauses deal with termination by the client, i.e. MMRDA. Clause 2.9.2 and its sub-clauses have corresponding provisions for termination by the Consultants, DTIPL. Clause 2.9.1(c)8 is one of the grounds on which MMRDA can terminate. It reads thus:
5 Application, p. 92. 6 Application pp. 91-92. 7 Application, pp. 77-79. 8 Application p. 77.Page 4 of 12
3rd December 2020 Dhargalkar Technoesis (I) Pvt Ltd v MMRDA 9-ARBAPL-55-2020.docx 2.9 Termination 2.9.1 By the Client The Client may, by not less 1ess than thirty (30) days' written notice of termination to the Consultants (except in the event listed in paragraph (f) below, for which there shall be a written notice of not less than sixty (60) days), such notice to be given after the occurrence of any of the events specified in paragraphs (a) through (g) of this Clause GC 2.9.1, terminate this Contract:
(a) ... ...
(b) ... ... ...
(c) if the Consultants fail to comply with
any final decision reached as a result of
the arbitration proceedings pursuant to
Clause GC 8 hereof.
10. There is a corresponding provision for termination by DTIPL, in clause 2.9.2(d), i.e. if MMRDA "fails to comply with any final decision reached as a result of the arbitration proceedings pursuant to Clause GC 8".
11. Mr Sawant maintains that the reference in these sub-clauses is two-fold. First, it directly references Clause 8 (as substituted); and, second, it confirms or re-affirms that Clause 8.2 is indeed an arbitration clause.
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12. He invites my attention to the Supreme Court decision in Jagdish Chander v Ramesh Chander & Ors.9 There, the Supreme Court analysed Section 7 of the Arbitration Act and reiterated settled principles.10 In paragraph 8(ii), on which Mr Sawant strongly relies, the Supreme Court held that the absence of words like 'arbitration' and 'arbitral tribunal' or 'arbitrator' are not determinative. An arbitration agreement may well be valid even without such wording. It must, however, have the element and attributes of a valid arbitration agreement. These are, the Supreme Court said, that: (a) the agreement must be in writing; (b) The parties must have agreed to refer any present or future disputes to the decision of a private tribunal; (c) The private tribunal should be empowered to adjudicate upon the disputes in an impartial manner, giving the parties due opportunity to put forth their respective cases; (d) the parties should 9 (2007) 5 SCC 719.
10 Section 7:
7. Arbitration agreement.--(1) In this Part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in--
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of telecommunication including communication through electronic means which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
Page 6 of 123rd December 2020 Dhargalkar Technoesis (I) Pvt Ltd v MMRDA 9-ARBAPL-55-2020.docx have agreed that the decision of the private tribunal in respect of the disputes will bind them.
13. According to Mr Sawant, every one of these ingredients or elements is met in the present case. Therefore, there is a valid and binding arbitration agreement.
14. Mr Khaire responds in the following fashion. First, as to Jagdish Chander, he submits that the Supreme Court itself held in paragraph 9 that the main attribute of any arbitration agreement is consensus ad idem, a meeting of minds, to refer disputes to arbitration. If this is missing, there is no arbitration agreement. Overall, this is true. But this must, in fairness, be read with the clause in question before the Supreme Court. This is set out in paragraph 2 of the decision. It only said that any disputes were to be 'mutually decided by the partners or shall be referred for arbitration if the parties so determine.' It was in this context that the Supreme Court held, on facts, that there was no consensus ad idem to refer parties to arbitration. That does not mean, however, that the requirement that the parties be ad idem is dispensable. It is not.
15. There is no doubt that every one of the four elements set out in Jagdish Chander must be met; it is not enough to have only some of them in play. But what Mr Khaire suggests is not only too broad, but without context. A better approach is, in my view, to consider the various clauses in context.
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16. As a general truism, every arbitration is a form of alternate dispute resolution or ADR, but not every ADR is necessarily and only by arbitration. There are other modes of ADR known to law, including mediation and conciliation.
17. Substituted Clause 8.2, set out above, only says that any dispute is to be referred to the Joint Metropolitan Commissioner and Project Director of MMRDA, whose decision will be final. On its own
-- and even allowing that the absence of words like 'arbitration' and 'arbitrator' is immaterial -- this is not necessarily an arbitration clause. The named authority may, on such disputes being brought to him, attempt a mediation or a conciliation. We cannot unequivocally say this is to be an arbitration and nothing else.11
18. Crucially, substituted Clause 8.2 does not in fact satisfy all the elements of a valid arbitration agreement as set out in paragraph 8(ii) of Jagdish Chander. A critical component is missing -- item (c):
(c) The private tribunal should be empowered to adjudicate upon the disputes in an impartial manner, giving due opportunity to the parties to put forth their case before it.
(Emphasis added) 11 The naming of an individual or the holder of a particular office will not invalidate an otherwise binding arbitration agreement. Such a clause or a unilateral appointment would only force a change of arbitrator, not void the arbitration agreement, following the decisions in: Perkins Eastman Architect DPC & Anr vs HSSC (India) Ltd, 2019 (9) SCC OnLine SC 1517; Voestalpine Schienen GmbH v Delhi Metro Rail Corporation Ltd, (2019) 4 SCC 665; and TRF Limited v Energo Engineering Products Ltd, (2017) 8 SCC 377. I considered all these in Lite Bite Foods Pvt Ltd v AAI, 2019 SCC OnLine Bom 5163.
Page 8 of 123rd December 2020 Dhargalkar Technoesis (I) Pvt Ltd v MMRDA 9-ARBAPL-55-2020.docx None of the emphasized portions are to be found in substituted Clause 8.2. It does not meet the requirement of this sub-item (c) of paragraph 8(ii) in Jagdish Chander at all.
19. Are there, as Mr Sawant says, clues elsewhere to indicate that this is indeed an arbitration agreement? The reference to Clause 7.2 is, prima facie, less than helpful. It must be read in context. That context is the contractual requirement of good faith and efforts by both parties to continually resolve any issues in that spirit. Clause 7.2 only says that a failure to achieve that goal will not make that particular dispute arbitrable, and then references clause 8.2. If the non-use of a word or phrase like 'arbitration' or 'arbitrator' is not determinative, then, by the same token, the mere use of these words is not determinative either.
20. This takes us to the two termination clauses I have set out earlier. As I noted, these tell us the circumstances in which the two sides can, respectively, terminate. The clauses each say that one of the available grounds for termination is the failure of the other side to abide by the 'arbitration' decision under GC Clause 8. But -- at least generally -- a termination would precede an arbitration, not follow or succeed it. This leads me to believe that what the designated authority is to do under substituted GC Clause 8.2 is not to arbitrate at all, but to take up a dispute and settle it in some other fashion. That decision binds both sides. A subsequent failure to abide by that decision is then cause for termination. That is the only logical sequencing and harmonizing of these clauses. The mere use of the word 'arbitration' in clauses 2.9.1(c) and 2.9.2(d) are immaterial. Instead, what these clauses indicate is that the 'dispute resolution' Page 9 of 12 3rd December 2020 Dhargalkar Technoesis (I) Pvt Ltd v MMRDA 9-ARBAPL-55-2020.docx provision in substituted clause 8.2 is not an arbitration agreement at all.
21. Finally, there is the 27th August 2019 decision of GS Kulkarni J in similar circumstances in Impact Design Group v MMRDA.12 There were two agreements in question, an architectural consultancy agreement and a project management consultancy agreement. Impact Design, the applicant, claimed there was an arbitration agreement. It, too, relied on one clause, 6.2, which is very close to the present clause 7.2. That clause 6.2 also related to 'operation of the contract'. It too required parties to use their best efforts to resolve any issues of perceived unfairness in contractual operation. It too said that no failure to agree on any action pursuant to that clause would give rise to an arbitrable dispute 'in accordance with Clause GC 8'. In those contracts, the dispute settlement provision was in clauses 7.1 and 7.2, corresponding to the present clauses 8.1 and 8.2. But clause 7.2 was differently worded. It said that any dispute that could not be settled within 30 days of receipt by one party of the other's request for amicable settlement 'may be submitted by either party for settlement in accordance with the provisions specified in the SC'. There again, the reference to SC was a reference to the GC. Kulkarni J held that there was no arbitration clause at all and dismissed the application. He held that the reference in clause 6.2 to 'arbitration in accordance with Clause GC 8' was not determinative and could not make clause 7.2 an arbitration agreement. I accept that clause 7.2 in Impact Design is not identically worded to our substituted clause 8.2. The two clauses, juxtaposed, are:
12 Commercial Arbitration Application (L) 342 of 2019.Page 10 of 12
3rd December 2020 Dhargalkar Technoesis (I) Pvt Ltd v MMRDA 9-ARBAPL-55-2020.docx Present Case Impact Design 8.2 Dispute Settlement 7.2 Dispute Settlement For any dispute, matter will be Any dispute between the Parties as referred to Jt. Metropolitan to matters arising pursuant to this Commissioner and Project Contract which cannot be settled Director, MMRDA, and his within thirty (30) days after receipt decision will be final. by one Party of the other Party's request for such amicable settlement may be submitted by either Party for settlement in accordance with the provisions specified in the SC.
22. It may be true that the present Clause 8.2 is something of an improvement or advance on Clause 7.2 before Kulkarni J. But this must be read in the context of Jagdish Chander, and the determinants it sets out. Principal among these is the need for parties to be ad idem on a reference of their contractual disputes to arbitration. Courts will do their utmost to uphold an arbitration agreement and, where one exists, will not readily let it be dislodged. But the existence of a clear and unequivocal arbitration agreement is a pre-requisite. There must be a demonstrated consensus ad idem to refer disputes to arbitration, and all four elements set out in Jagdish Chander must be shown to exist. In Impact Design, no such meeting of minds could be shown, and the application failed.
23. The same fate must befall the present application. We do not know from Clause 8.2 the purpose of the reference to the Jt Metropolitan Commissioner & Project Director. It does not say arbitration. We are asked to gather or infer that the reference is to Page 11 of 12 3rd December 2020 Dhargalkar Technoesis (I) Pvt Ltd v MMRDA 9-ARBAPL-55-2020.docx arbitration from other clauses. But, as we have seen, those cross- references (in clauses 7.2 and 2.9.1(c) and 2.9.2(d) of the GC) will not assist. The reference in the present case in Clause 7.2 is fully covered by Kulkarni J's decision in Impact Design (and the corresponding clause 6.2 there). To that extent, the decision binds me; and, in any case, I am in the most complete and respectful agreement with it. The remaining two clauses, in fact, militate against there being an arbitration agreement, as earlier discussed.
24. Mr Sawant finally urges that his client will be left with no remedy if the application is rejected. A writ will not lie because of disputed questions of fact. An arbitration is his clients' only recourse. This is incorrect, and unfortunate. We have too much become used to seeing only two alternatives in this Court -- either a writ petition or an arbitration as if to suggest that the most basic form of litigation, a regular civil suit, no longer exists. It does.
25. The application fails. It is rejected.
26. This is entirely without prejudice to the civil remedies of the Applicant. All observations in this order are only for the purposes of this Section 11 application. I have not addressed any of the disputes between the parties on merits. All contentions of the Applicant for an appropriate civil proceeding are expressly kept open.
(G.S. PATEL, J.) Page 12 of 12 3rd December 2020