Delhi High Court
M/S Oasis Projects Ltd vs Managing Director, National Highway ... on 7 February, 2023
Author: Navin Chawla
Bench: Navin Chawla
Neutral Citation Number: 2023/DHC/000828
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on:25.01.2023
Date of decision:07.02.2023
+ ARB.P. 1364/2022
M/S OASIS PROJECTS LTD ..... Petitioner
Through: Mr. Bharat Chugh & Mr.
Siddharth Shiva Kumar, Advs.
versus
MANAGING DIRECTOR, NATIONAL HIGHWAY AND
INFRASTRUCTURE DEVELOPMENT CORPORATION
LIMITED ..... Respondent
Through: Mr. Debal Kumar Banerjee, Sr.
Adv. with Mr. Dharmender
Verma & Mr. Vishal Singh,
Advs.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
1. This petition has been filed under Section 11(6) of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as the
„Act‟) seeking appointment of an Arbitrator for adjudicating the
disputes that have arisen between the parties in relation to the
"Balance work for Four-Laning of NH-39 Dimapur-Kohima Road
from Design 152.490 to Km. 166.700 (Existing Km 156.000 to Km.
172.900), in the State of Nagaland under SARDP-NE through an
Engineering, Procurement and Construction (EPC) Contract (Package
-III)" (hereinafter referred to as the "Contract").
2. The Arbitration Agreement between the parties is contained in
Article 26 of the Agreement, which is reproduced hereinunder:-
"Article 26
Dispute Resolution
26.1 Dispute Resolution
(i) Any dispute, difference or controversy of
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under or out of or in relation to this
Agreement (including its interpretation)
between the Parties, and so notified in
writing by either Party to the other
Party (the "Dispute") shall, in the first
instance, be attempted to be resolved
amicably in accordance with the
conciliation procedure set forth in
Clause 26.2.
(ii) The Parties agree to use their best
efforts for resolving all Disputes arising
under or in respect of this Agreement
promptly, equitably and in good faith,
and further agree to provide each other
with reasonable access during normal
business hours to all non-privileged
records, information and data
pertaining to any Dispute.
26.2 Conciliation
In the event of any Dispute between the
Parties, either Party may call upon the
Authority's Engineer, or such other
person as the Parties may mutually
agree upon (the "Conciliator") to
mediate and assist the Parties in
arriving at an amicable settlement
thereof. Failing mediation by the
Conciliator or without the intervention
of the Conciliator, either Party may
require such Dispute to be referred to
the Chairman of the Authority and the
Chairman of the Board of Directors of
the Contractor for amicable settlement,
and upon such reference, the said
persons shall meet no later than 7
(seven) business days from the date of
reference to discuss and attempt to
amicably resolve the Dispute. If such
meeting does not take place within the
30 (thirty) business day period or the
Dispute is not amicably settled within 30
(thirty) days of the meeting or the
Dispute is not resolved as evidenced by
the signing of written terms of settlement
within 30 (thirty) days of the notice in
writing referred to in Clause 26.1.1 or
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such longer period as may be mutually
agreed by the Parties, either Party may
refer the Dispute to arbitration in
accordance with the provisions of
Clause 26.3 but before resorting to such
arbitration, the parties agree to explore
conciliation by the Conciliation
Committees of Independent Experts set
up by the Authority in accordance with
the procedure decided by the panel of
such experts and notified by the
Authority on its website including its
subsequent amendments. In the event of
the conciliation proceedings being
successful, the parties to the dispute
would sign the written settlement
agreement and the conciliators would
authenticate the same. Such settlement
agreement would then be binding on the
parties in terms of Section 73 of the
Arbitration Act. In case of failure of the
conciliation process even at the level of
the Conciliation Committee, either party
may refer the Dispute to arbitration in
accordance with the provisions of
Clause 26.3.
26.3 Arbitration
(i) Any dispute which remains unresolved
between the parties through the
mechanisms available/ prescribed in the
Agreement, irrespective of any claim
value, which has not been agreed upon/
reached settlement by the parties, will
be referred to the Arbitral Tribunal as
per the Arbitration and Conciliation
Act.
xxxxx"
(Emphasis supplied)
3. Disputes arose between the parties pursuant to the alleged
Notice of Termination of the Contract dated 17.08.2022 by the
petitioner and the Notice for intention to Terminate the Contract dated
16.11.2022 issued by the respondent. The petitioner invoked the
Arbitration Agreement vide notice dated 19.11.2022. In response, the
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respondent, vide letter dated 25.11.2022, called upon the petitioner to
first explore Conciliation by the Conciliation Committees of
Independent Experts (hereinafter referred to as the „Committee‟), as
provided in Article 26.2 of the Contract. However, the petitioner
proceeded to file the present petition.
4. The learned senior counsel for the respondent maintains that the
present petition is not maintainable as the petitioner has failed to
follow the procedure prescribed for invocation of the arbitration, as
contained in Article 26 of the Contract. He submits that Article 26.2
specifically states that the parties agree to explore Conciliation by the
Committee before resorting to arbitration. He submits that as the
petitioner has failed to follow the said procedure, the present petition
is liable to be dismissed on the ground of it being premature. In
support, he places reliance on the judgment of the Supreme Court in
Iron & Steel Co. Ltd. v. Tiwari Road Lines, (2007) 5 SCC 703 and of
this Court in Sushil Kumar Bhardwaj v. Union of India, 2009 SCC
Online Del 4355.
5. The learned senior counsel for the respondent, placing reliance
on the judgment of Bharat Sanchar Nigam Limited and Another v.
Nortel Networks India Private Limited, (2021) 5 SCC 738, submits
that the petitioner approached this Court without giving adequate time
to the respondent to reply to its request for arbitration and to bring to
the notice of the petitioner that the Committee has been set up by the
respondent. He submits that, therefore, the present petition is not
maintainable.
6. On the other hand, the learned counsel for the petitioner submits
that the process of Conciliation as mentioned in Article 26 is directory
in nature. He submits that such Conciliation process cannot, in any
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manner, affect the right of the petitioner to invoke the Arbitration
Agreement. He further submits that before invoking arbitration, the
petitioner had taken steps to arrive at an amicable settlement of
disputes with the respondent, however, such attempts had failed. He
submits that, therefore, the present petition cannot be said to be
premature. In support, he places reliance on Visa International
Limited v. Continental Resources (USA) Limited, (2009) 2 SCC 55;
Ravindra Kumar Verma v. M/s BPTP Ltd. & Anr., 2014 SCC
OnLine Del 6602; Saraswati Construction Company v. East Delhi
Co-operative Group Housing Society Ltd., 1994 SCC OnLine Del
563; Sarvesh Security Services Pvt. Ltd. v. Managing Director,
DSIIDC, 2018 SCC OnLine Del 7996; Siemens Limited v. Jindal
India Thermal Power Limited, 2018 SCC OnLine Del 7158; Union
of India v. M/s Baga Brothers & Anr., 2017 SCC OnLine Del 8989;
M/s Sikand Construction Co. v. State Bank of India, 1978 SCC
OnLine Del 180; M/s IMZ Corporate Pvt. Ltd. v. MSD Telematics
Pvt Ltd., ARB. P 204/2021; Demerara Distilleries Private Limited v.
Demerara Distillers Limited, (2015) 13 SCC 610; Quick Heal
Technologies Limited v. NCS Computech Private Limited, (2020)
SCC OnLine Bom 693; and Republic of Sierra Leone v. SL Mining
Ltd., [2021] EWHC 268 (Comm).
7. He further submits that the respondent having refused to give
consent to the appointment of an Arbitrator, the petitioner need not
have waited for a period of 30 days before approaching this Court.
8. He submits that as on the date of filing of the present petition,
the website of the respondent did not reflect/provide the constitution
or the procedure of the Committee.
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9. On the submission of the website not reflecting the constitution
or procedure of the Committee, the learned senior counsel for the
respondent submits that though the constitution as also the procedure
was duly available on the website of the respondent, it was available
under the icon „MoA (Memorandum of Association) & Notices‟. He
submits that now the same is duly reflected under a separate icon of
„Dispute Resolution Mechanism‟. He submits that had the petitioner
given sufficient time to the respondent to respond on the above, the
respondent would have pointed out the icon under which the petitioner
can access the constitution as also the procedure of the Committee.
10. I have considered the submissions made by the learned counsels
for the parties.
11. As far as the constitution and the procedure of the Committee
not being available on the website of the respondent on the date of
filing of the petition is concerned, for the reason that the case of the
petitioner is that such procedure even otherwise is directory in nature
and is not to be mandatorily followed prior to invoking the arbitration,
in my opinion, the same need not detain this Court any further. Prima
facie, however, the respondent has been able to satisfy this Court that
the information regarding the constitution and the procedure of the
Committee was available on the website of the respondent albeit
under an obscure link.
12. The primary issue to be decided in the present petition is,
therefore, as to whether it was mandatory for the petitioner to resort to
the Conciliation process by the Committee before invoking
arbitration. Though Article 26.2 clearly states that before resorting to
arbitration, the parties agree to explore Conciliation by the
Committee, in my opinion, the same cannot be held to be mandatory
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in nature. It needs no emphasis that Conciliation as a Dispute
Resolution Mechanism must be encouraged and should be one of the
first endeavours of the parties when a dispute arises between them.
However, having said that, Conciliation expresses a broad notion of a
voluntary process, controlled by the parties and conducted with the
assistance of a neutral third person or persons. It can be terminated by
the parties at any time as per their free will. Therefore, while
interpreting Article 26.2, the basic concept of Conciliation would have
to be kept in mind.
13. In addition to the above, even the Office Memorandum dated
03.07.2020 (hereinafter referred to as the „OM‟), giving the
establishment, constitution and procedure of the Committee, published
by the respondent on its website, clearly evidences that such
Conciliation process is voluntary and can be resorted to only where
the Contractor agrees to such process after the disputes have arisen
and inspite of the earlier agreement, as recorded in the Agreement.
Clause 3.1 of the OM is reproduced hereinunder:-
"3.1 On receipt of a reference from the
Contractor (reference to Contractor
made herein includes
Consultant/Concessionaire) as per
provision in the agreement for
conciliation of disputes, the Concerned
Technical Division shall send a
response within 7 working days.
NHIDCL shall offer the other party to
refer the matter to the Conciliation
Committee of Independent Experts as
the conciliation is intended to be one
consolidated package of settlement.
Subject to consent of the other party, the
matter would be referred to CCIE
established under these guidelines."
(Emphasis supplied)
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14. A reading of the above Clause would show that the respondent,
on receipt of a notice from the Contractor, shall „offer‟ the Contractor
to refer the matter to the Committee. It is subject to the consent of the
Contractor that the matter would eventually be referred to the
Committee.
15. In Ravindra Kumar Verma (Supra), this Court had stated that
any doubt on the aspect of whether Conciliation proceedings, as
required by the arbitration clause, is directory or mandatory in nature,
is removed when reference is placed on Section 77 of the Act, which
reads as under:
"77. Resort to arbitral or judicial
proceedings
The parties shall not initiate, during the
conciliation proceedings, any arbitral or
judicial proceedings in respect of a dispute
that is the subject-matter of the conciliation
proceedings except that a party may initiate
arbitral or judicial proceedings where, in his
opinion, such proceedings are necessary for
preserving his rights."
(Emphasis supplied)
16. Section 77 of the Act as also Clause 16 of the OM state that
where, in the opinion of a party, immediate initiation of the arbitral
proceedings is necessary to preserve the rights of the said party, the
said party may initiate arbitral or judicial proceedings even during the
Conciliation proceedings. Therefore, in case of urgency, arbitral
proceedings can be initiated even when conciliation proceedings are
pending. To determine whether there is such an urgency or it is
necessary to immediately invoke arbitration, it is the opinion of the
party concerned which is the relevant and the governing factor. This is
so because Conciliation, as noted hereinabove, is a voluntary process
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and by its very nature directory. It can be terminated at any point of
time by any party.
17. In the present case, it is also to be noted that in terms of Article
23.1(v) of the Contract, in case the respondent terminates the
Contract, the petitioner shall be deemed to have been debarred for a
period of two years and shall not be able to bid any Contract of the
respondent. The petitioner also fears the invocation of the
performance guarantee. Therefore, in terms of Section 77 read with
Clause 16 of the OM, the petitioner is justified in expressing urgency
in initiating arbitration for preserving its rights.
18. In Iron & Steel Co. Ltd. (Supra), the Court was considering an
Arbitration Agreement which provided that the disputes between the
parties shall be settled by arbitration in accordance with the rules of
arbitration of the Indian Council of Arbitration. It was not disputed
therein that the party approaching the Court did not make any effort to
have the disputes settled in accordance with rules of arbitration of the
Indian Council of Arbitration and, on the contrary, had straightaway
moved an application under Section 11 of the Act. It was in those facts
that the Supreme Court held that the agreed procedure having not been
followed, the petition under Section 11 of the Act was not
maintainable.
19. In Sushil Kumar Bhardwaj (Supra), the Court was considering
an Arbitration Agreement wherein the Contractor was first to raise the
dispute with the Superintending Engineer, and in case the
Superintending Engineer fails to give his instructions or „decision in
writing‟ or the Contractor is dissatisfied with such instructions or
decision, the Contractor was to appeal the same to the Chief Engineer,
„who shall afford an opportunity to the contractor to be heard, if the
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latter so desires, and to offer evidence in support of his appeal.' The
Chief Engineer was thereafter to give his „decision‟ within a period of
30 days of receipt of contractor‟s appeal. It was only thereafter that
the Contractor could invoke the arbitration. In such circumstances, the
Court held that the Contractor must follow the procedure prescribed
before approaching the Court under Section 11 of the Act. In the said
case, therefore, the procedure prescribed was multi-tiered and
arbitration was to be invoked on failure of the previous stages of the
said procedure.
20. As far as the submission of the learned senior counsel for the
respondent that the petitioner should have waited for the respondent to
have informed the petitioner of the website duly showing the
constitution of the Committee, and, in any case, for a period of 30
days, in my opinion, also deserves to be rejected. In Bharat Sanchar
Nigam Limited and Another (Supra), the Supreme Court has held that
the period for filing of the petition under Section 11 of the Act arises
upon the failure of the parties to appoint an Arbitrator. In the present
case, with the respondent, vide its notice dated 25.11.2022, insisting
upon the petitioner to first initiate the Conciliation process by the
Committee before seeking initiation of arbitration, the failure for
appointment of the Arbitrator occurred. The present petition,
therefore, cannot be said to be premature.
21. As the Arbitration Agreement and due invocation thereof are
established, I see no impediment in appointing an Arbitrator for
adjudicating the disputes that have arisen between the parties in
relation to the Contract.
22. I accordingly appoint Mr. Justice Manmohan Sarin, Former
Chief Justice of Jammu & Kashmir High Court, [Off. Add.: D-73
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Basement, Block-D, Panchsheel Enclave, New Delhi-110017; Mobile:
9818000210] as a Sole Arbitrator to adjudicate the disputes that have
arisen between the parties in relation to the above Contract.
23. The learned Arbitrator shall give a disclosure under Section 12
of the Act before proceeding with the reference.
24. The fee of the learned Arbitrator shall be in accordance with
Schedule IV of the Act.
25. The petition is allowed in the above terms.
NAVIN CHAWLA, J.
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