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Nkg Infrastructure Ltd vs U.P. Rajkiya Nirman Nigam Ltd on 5 October, 2021

Author: Sanjeev Narula

Bench: Sanjeev Narula

$~1 & 2 (2020)
*      IN THE HIGH COURT OF DELHI AT NEW DELHI
+      ARB.P. 287/2020
       NKG INFRASTRUCTURE LTD.                                 ..... Petitioner
                               Through:   Mr. Ashish Aggarwal, Advocate.

                               versus

       U.P. RAJKIYA NIRMAN NIGAM LTD.             ..... Respondent
                      Through: Mr. Pankaj Kumar, Advocate.

+      ARB.P. 290/2020
       NKG INFRASTRUCTURE LTD.                                 ..... Petitioner
                               Through:   Mr. Ashish Aggarwal, Advocate.

                               versus

       U.P. RAJKIYA NIRMAN NIGAM LTD.             ..... Respondent
                      Through: Mr. Pankaj Kumar, Advocate.


       CORAM:
       HON'BLE MR. JUSTICE SANJEEV NARULA
               ORDER

%              05.10.2021
[VIA VIDEO CONFERENCING]

1. The present petitions under Section 11 of the Arbitration and Conciliation Act, 1996 [hereinafter, 'the Act'], seek appointment of a Sole Arbitrator for adjudication of disputes pertaining to: -

(i) Contract Agreement dated 19th January, 2010 for Construction of ESIC Medical College at Basaidarapur, Delhi, allotted vide ARB.P. 287/2020 & ARB.P. 290/2020 Page 1 of 5 Acceptance Letter dated 13th January 2010 for an Award Price of Rs. 430,98,66,196.00; and

(ii) Contract Agreement dated 19th January, 2010 for Construction of ESIC Medical College (Staff Housing) at Basaidarapur, Delhi, allotted vide Acceptance Letter dated 15th January 2010 for an Award Price of Rs. 157,75,50,730.00.

2. The Arbitration Clause contained in Clause 20.6 of the afore-noted Contracts is identical, and is reproduced hereinbelow: -

"In case of any disputes or differences in connection with or arising out of this Agreement the same shall be referred to the sole Arbitrator to be appointed by the Managing Director, UPRNN Ltd, Lucknow. The award of the sole arbitrator shall be final and binding on both the parties."

3. In terms of the afore-noted clause, the Arbitrator is to be appointed by the Managing Director of the Respondent. However, this is no longer permissible in law, as explained by the Supreme Court in TRF Ltd. v. Energo Engineering Projects Ltd.1 and Perkins Eastman Architects DPC v. HSCC (India) Limited2.

4. Mr. Pankaj Kumar, counsel for the Respondent, does not dispute the existence of the arbitration agreement, however, objects to the maintainability of the present petition on the ground that in the absence of Employee State Insurance Corporation [hereinafter, 'ESIC'], the present arbitration petitions cannot lie. ESIC is a part and parcel of the Contracts and thus by not impleading them, the instant petitions suffer from inherent defect for misjoinder of cause of action and parties. The Respondent has no role in the projects and all decisions have to be taken by ESIC. He relies 1 (2017) 8 SCC 377.

AIR 2020 SC 59.

upon Clauses 2.4 and 9.2 of the Contracts to contend that the payment to the Petitioner/ Contractor had to be made by the Respondent only after it received payment from ESIC. Respondent had requested the Petitioner several times to have a consultation for settlement of account, but they chose to remain silent. He further submits that although no dispute exists between the Petitioner and the Respondent, even then, if the Petitioner has to raise any grievance, then the same can be amicably resolved under the terms of the Contracts. He draws support from the observations made in Cheran Properties v. Kasturi and Sons Ltd & Ors.3.

5. Controverting the allegations of the Respondent, Mr. Ashish Aggarwal, counsel for the Petitioner states that the Contracts in question is between the Petitioner and the Respondent. ESIC is not a signatory to the agreement and besides its presence is not necessary as the obligation under the contract is that of the Respondent. He submits that regardless, as the Respondent is disputing and contesting the claims of the Petitioner, the claims/ disputes would have to be adjudicated against the Respondent.

6. Having considered the contentions of the parties, in the opinion of the Court, the objection of the Respondent is devoid of merit. The signatories to the Contract Agreements are only the Petitioner and Respondent. The award of work to the Petitioner was by the Respondent. Thus, prima facie there is no privity of contract between the Petitioner and ESIC. The payment obligation under the clauses relied upon by the Respondent do not mean that there is a privity between Petitioner and ESIC so as to make them a necessary party for adjudication of disputes urged by the Petitioner and reference has to be confined to them. The judgment relied upon by the 3 (2018) 16 SCC 413.

Respondent is inapplicable in the present case. In Cheran Properties (Supra), the Supreme Court was dealing with the group of companies Doctrine in the context of binding a non-signatory to arbitration agreement. In that context, the Court observed that, an arbitration agreement which is entered into by a company within a group of companies, may bind non- signatory affiliates, if the circumstances are such as to demonstrate the mutual intention of the parties to bind both signatories and non-signatories. In applying the doctrine, the law seeks to enforce the common intention of the parties, where circumstances indicate that both signatories and non-signatories were intended to be bound. In the instant case, ESIC is an entity separate and distinct from the Respondent and therefore, the submission of the Respondent is devoid of merit. the present petitions deserve to be allowed.

7. Accordingly, Hon'ble Mr. Justice R. V. Raveendran, (Retd.) former Judge, Supreme Court of India [Contact No.: 080-26601279], is appointed as the common Sole Arbitrator to adjudicate the disputes that have arisen between the parties pertaining to the two Contract Agreements, both dated 19th January, 2010, between the Petitioner and the Respondent.

8. The parties are directed to appear before the learned Arbitrator as and when notified. This is subject to the learned Arbitrator making the necessary disclosure under Section 12(1) of the Act and not being ineligible under Section 12(5) of the Act.

9. The learned Arbitrator shall be entitled to charge his fees in terms of the Fourth Schedule appended to the Act.

10. It is clarified that the Court has not examined any of the claims of the parties and all the rights and contentions on merits are left open. Both the ARB.P. 287/2020 & ARB.P. 290/2020 Page 4 of 5 parties shall be free to raise their claims/ counter claims before the learned Arbitrator, in accordance with the law.

11. In view of the foregoing, the present petitions are allowed and disposed of.

SANJEEV NARULA, J OCTOBER 5, 2021 as ARB.P. 287/2020 & ARB.P. 290/2020 Page 5 of 5