Delhi District Court
Brg Energy Systems Limited vs Indian Council Of Arbitration on 27 February, 2018
IN THE COURT OF GAURAV RAO, ADJ02 & Wakf Tribunal /
NEW DELHI DISTRICT, PATIALA HOUSE COURTS, NEW DELHI.
CS No. 488/2017
CNR No. DLND010043772017
BRG Energy Systems Limited,
Through its Authorized signatory
Registered Office at : A5, Pannamgadu
Industrial Estate, Ramapuram Post,
Sullurpet Taluk, Nellore District,
Andhra Pradesh
Corporate Office at : 443, Guna Complex,
Anna Salai, Tuyenampet, Chennai 600018
........Plaintiff
Vs.
1. Indian Council of Arbitration
Through its Registrar
Federation House, Tansen Marg,
New Delhi110001.
2. GJF Construction Co. Pvt. Ltd.
Through it Director
3rd Floor Surya Towers
Block F1, Saradar Patel Road
Secunderabad, Telangana .......Defendants
Date of institution : 29.03.2017
Date on which reserved for judgment : 27.02.2018
Date of decision : 27.02.2018
Decision : Application dismissed.
CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 1/23
ORDER
1. The present order shall dispose off application dated 21.12.2017 filed under Section 151 CPC and application under Order 39 Rule 1 and 2 CPC dated 21.03.2017.
Plaintiff's version
2. It is the case of the plaintiff that it had awarded a work of the Balance of Plant Package for Vijayawada Thermal Power Station Stage IV Unit 7, 1X500 MW Power Project at Vijayawada, Andhra Pradesh to defendant no. 2 vide work order no. GIX/PPD/064/182 dated 17.11.2006 accepted by defendant no. 2 on 19.11.2006.
2.1 It is further its case that during the currency of the work/contract dispute arose between the parties and defendant no. 2 invoked the arbitration clause contained in the agreement and accordingly the dispute was referred to defendant no. 1.
2.2 It is further its case that ultimately all the disputes and differences between it and defendant no. 2 was settled vide memorandum of compromise dated 27.11.2009 and accordingly plaintiff paid all the sums and dues payable to defendant no. 2 and an award in terms of the memorandum of compromise was passed by Arbitral Tribunal on CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 2/23 23.12.2009. It is further its case that defendant no. 2 issued No Due Certificate to the plaintiff on 31.07.2012 indicating that there are no dues or claims payable by the plaintiff to defendant no. 2 relating to aforementioned contract.
2.3 It is further its case that after lapse of seven years plaintiff received copy of letter dated 13.09.2016 from defendant no. 2 which was addressed to defendant no. 1 whereby defendant no. 2 had registered its case with defendant no. 1. It is further its case that on 14.10.2016 plaintiff was asked to submit its defence statement by 15.11.2016 in respect of defendant no. 2's claim of Rs. 6 crores approximately. It is further its case that the it was also called upon to deposit tentative amount of Rs. 11 lacs approximately towards plaintiff's share of arbitration fees, administrative charges etc. 2.4 It is further its case that it sent a letter dated 10.11.2011 to defendant no. 1 clarifying that on payment of Rs. 1.50 lacs in full and final settlement of all claims and dues and award dated 23.12.2009 there is no subsisting agreement or claim or arbitration for reference to Arbitral Tribunal and as such defendant no. 1 has no authority to act on the claim of defendant no. 2. However defendant no. 1 insisted upon the plaintiff to make the payment of Rs. 11 lacs and file its defence statement vide letter dated 18.11.2016 and 21.12.2016.
CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 3/23 2.5 It is further its case that the assumption of jurisdiction by defendant no. 1 is perse illegal, against the ICA Rules and also the Indian Arbitration and Conciliation Act, 1996. Hence the present suit.
Application under Order 39 Rule 2 CPC
3. In the applications at hand, it is the plaintiff's case that its application for stay of proceedings before the Arbitral Tribunal is pending.
3.1 It is its case that defendants have filed their respective written statements and reply to the interlocutory/stay application. It is its case that defendant no. 2 has not filed any application under section 8 of the Arbitration & Conciliation Act, 1996 for referring the case to arbitration and hence defendant no. 2 has submitted to the jurisdiction of this court.
3.2 It is further its case that defendant no. 1 has constituted the Arbitral Tribunal and issued a letter dated 07.11.2017 and a meeting was held by tribunal on 24.11.2017 and the plaintiff was informed about the date of hearing as 08.01.2018. It is its case that the illegally constituted Arbitral Tribunal cannot be allowed to act and proceed further in the matter as existence of arbitration agreement and the validity of Arbitral Tribunal is directly an issue before this court. It is thus prayed that the defendants and CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 4/23 the Arbitral Tribunal be restrained from acting in any manner or from proceeding further in the so called arbitration proceedings scheduled for 08.01.2018.
Defendant no. 1's version
4. In reply it is the stand of defendant no. 1 that present suit is not maintainable being barred by Section 5 of the Arbitration and Conciliation Act 1996 as there is an arbitration agreement governing the contract entered into between plaintiff and defendant no. 2 and defendant no. 1 has been appointed as the institution which will facilitate the arbitration between the plaintiff and defendant no. 2. It is further its stand that in view of clause 12.2 of the arbitration agreement between the parties this court has no jurisdiction to adjudicate upon the present suit.
4.1 It is further its stand that present suit is not maintainable as the relief of declaration is guided by section 34 of the Specific Relief Act 1963 and this court has no jurisdiction to try the present suit and grant the aforesaid relief in view of the presence of arbitration agreement between the plaintiff and defendant no.2. It is further its case that the suit is not maintainable being barred under section 41 (h) of the Specific Relief Act, 1962 as the plaintiff has equally efficacious relief u/s 16 of the Arbitration Act to raise all the objections, as raised in the present suit, before the CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 5/23 Arbitral Tribunal.
4.2 It is further its stand that on 13.09.2016 defendant no. 2 filed statement of claim requesting it to constitute the arbitral tribunal under the ICA Rules of Commercial Arbitration and Conciliation 2016 for the resolution of its dispute with plaintiff in relation to work order dated 17.11.2006 which contains arbitration clause being Clause 12.2 of the Work order dated 17.11.2006.
4.3 It is further its stand that it upon receiving the reference vide letter dated 14.10.2016 plaintiff was intimated regarding claim and forwarded the statement of claim along with supporting documents. It is further its stand that as the claim amount was more than 5 crores the dispute would be decided by a panel of three arbitrators as per the said ICA Rules of Arbitration and invited the plaintiff to choose its nominee arbitrator from the panel maintained by it. It is further its stand that it advised the plaintiff to submit its statement of defence by 15.11.2016 and deposit Rs. 10,91,653/ towards plaintiff's share in the arbitration fee/ charges.
4.4 It is further its stand that on 10.11.2016 plaintiff challenged its jurisdiction to entertain the reference for arbitration and constitute an arbitration tribunal on the ground the arbitration had earlier been invoked between the parties and dispute of the same nature was adjudicated which CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 6/23 ended up in a compromise and plaintiff had already paid an amount of Rs. 150 lacs as full and final settlement of all the claims. It is further its stand that on 17.11.2016 it forwarded the objection of the plaintiff to defendant no. 2 for its information and reply.
4.5 It is further its stand that on 18.11.2016 it replied to the letter of plaintiff dated 10.11.2016 categorically stating that the objection of the plaintiff was on merits of the dispute and it was neither competent nor authorized to decide any issue on the merits of the case. It is further its stand that it further provided a fresh extension of time till 30.11.2016 for filing of statement of defence, name of nominee arbitrator and arbitral expenses.
4.6 It is further its stand that on 28.11.2016 plaintiff replied to its letter dated 18.11.2016 stated that there was no valid contract or arbitration agreement between the parties and the present reference was not valid.
4.7 It is further its stand that on 16.12.2016 defendant no. 2 vide letter addressed to it stated that the present claim is wholly different from the claim made before the earlier tribunal culminating into a compromise and award dated 23.12.2009 and it was further stated that payment of Rs. 150 lacs did not include pending RA bills upto bill no. 18 and service tax reimbursement.
CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 7/23 4.8 It is further its stand that on 21.12.2016 it forwarded the letter dated 16.12.2016 addressed to defendant no. 2 and further strongly urged the plaintiff to comply with the previous directions to file statement of defence and make necessary payment by 09.01.2017.
4.9 It is further its stand that on 21.01.2017 plaintiff issued a legal notice stating that action of assuming the jurisdiction to constitute the tribunal, seeking filing of statement of defence and nomination of the arbitrator along with payment of arbitral fee/charges in unilateral and arbitrary manner and not binding on the plaintiff.
4.10 It is further its stand that plaintiff has till date not filed its statement of defence, nominated its arbitrator or paid it share of fee/charges of the arbitration while defendant no. 2 has already complied with all the requirements of the ICA rules.
Defendant no. 2's version
5. In reply it is the stand of defendant no. 2 that there has been concealment of material facts and documents by the plaintiff and it has not approached the court with clean hands.
5.1 It is its case that arbitral proceedings commenced on 13.09.2016 CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 8/23 and the plaintiff is delaying the matter by not filing the reply/objections to the statement of claim made by defendant no. 2.
5.2 It is further its case that the court has no jurisdiction to entertain the present suit, application and it is the Arbitral Tribunal constituted as per the arbitration agreement which is the appropriate authority to adjudicate upon the dispute. It is further its case that as per the work order it is the Chennai courts which have the exclusive jurisdiction in all the matters arising under the said work order. It is further submitted that plaintiff must submit itself to the jurisdiction of defendant no. 1 instead of approaching this court.
5.3 It is further its case that the arbitration clause was invoked, defendant no. 1 approached and statement of claim dated 13.09.2016 filed with regard to unresolved, live and pending disputes. It is its case that these disputes were expressively excluded from the memorandum of compromise and pertain to payment of service tax, interest and penalty on account of notice issued by Commissioner of Customs, Central Excise and Service tax etc. It is its case that minutes of meeting dated 10.11.2009 as referred in para 12 of the memorandum of compromise excluded the dispute in respect of above subject matters. It is further its case that even after the consent award the work was executed and completed upto 25.01.2011.
CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 9/23 5.4 It is its case that the plaintiff failed to discharge its contractual obligations, faltered and delayed in payment of RA bills which caused financial loss to defendant no. 2. It is its case that as per the contract the plaintiff is obligated to reimburse defendant no. 2 for payment made to service tax department but the same was not done so which led to the dispute and invocation of the arbitration clause.
Findings
6. I have heard the rival contentions raised at bar and perused the record carefully. After considering the entire material available on record, I am of the considered opinion that no grounds are made out for grant of stay, allowing the application under Order 39 Rule 1 and 2 CPC as moved by the plaintiff.
6.1 Work order no. GIX/PPD/064/182 dated 17.11.2006 issued by the plaintiff was accepted by defendant no. 2 on 19.11.2006. Clause 12 of the General and Commercial Conditions of the contract as was entered between the plaintiff and defendant no. 2 provides for settlement of the disputes through arbitration. Same is reproduced hereunder:
"12.0.0 SETTLEMENT OF DISPUTES 12.1.0 Any dispute (s) or difference(s) arising out of or in connection with the Contract shall, to the extent possible in the first instance be resolved amicably between the Supplier and the Purchaser's Engineer. In the event dispute could not be resolved amicably between the parties then either party may apply Arbitration in accordance with the Arbitration CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 10/23 Clause.
12.2.0 Arbitration 12.2.1 any dispute or difference whatsoever, arising between the parties out of or relating to the construction, meaning, scope, operation or effect of this Contract or the validity or the breach thereof shall be settled by arbitration in accordance with the Rules of Arbitration and Conciliation of the Indian Council of Arbitration and the Award made in pursuance thereof shall be binding on the parties. The seat of Arbitration shall be in Chennai."
6.2 After the initial dispute arose between the parties, they held a meeting to resolve the same, settle out the dispute and in the minutes of meeting dated 10.11.2009 held at the Chennai office of the plaintiff the parties arrived at the following agreement:
"The outstanding issues including the disputes pending before the Arbitral Tribunal were discussed & following terms were agreed by both parties.
1. Towards settlement of all claims Rs. 150.0 Lacs will be paid by BGR as a one time full & final settlement to GJF.
2. The above amount of Rs. 150 lacs would exclude the following:
(a) Pending RA Bills upto RA Bill no. 18.
(b) Service Tax reimbursement
(c) Claim under 2 (b) (iii) relating to SAP quantity withheld in the bills.
(d) Work Contract Tax beyond RA Bill no. 18.
3. With regard to the above excluded items in para 2 above, the parties have agreed as under:
(a) Pending RA Bills payment upto RA Bill no. 18 : The amount will be released within (10) ten days from date of meeting.
(b) Service Tax reimbursement pending upto RA Bill no. 18 will be released with in (10) ten days from date of meeting and for subsequent RA Bill, within (7) seven days of submission of challan.
(c) Claim under 2 (b) (iii) : The quantities will be reconciled and mutually accepted for payment within (15) fifteen days of the meeting.
(d) Work Contract Tax for RA Bill No. 19 onwards : BGR will provide to GJF Form 501 B Certificate of transfer of Tax deduction at source by the contractor to the Subcontractor for the total gross bill amount paid to GJF."
CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 11/23 6.3 Pursuant to the meeting one memorandum of compromise dated 27.11.2009 was filed, with reference to the minutes of meeting as above, before the Ld. Arbitral Tribunal and finally award was passed by the Ld. Arbitral Tribunal on 23.12.2009 in terms of the memorandum of compromise. However it is to be seen that obligations were casted upon the respective parties to perform certain works in terms of the original contract/award. Clause 6 of the memorandum of compromise reveals that major work was to be completed by 31.12.2009 and the minor work upto 15.01.2010. Furthermore as per Clause 12, the minutes of meeting dated 10.11.2009, as discussed above, formed part of the memorandum of compromise. The minutes of meeting as discussed above makes it amply clear that issues relating to payment of RA Bills upto RA Bill no. 18 and Service Tax reimbursement were specifically excluded from the settlement.
6.4 Defendant no. 2 has placed on record communication dated 15.03.2012 received by it from the Superintendent of Central Excise regarding the observations made during the audit for the period April 2007 to March 2011 whereby the defendant was communicated regarding certain short payment of service tax due to non inclusion of value of free supplied material in the taxable value. Some of these materials were supplied by the plaintiff. Non payment of service tax on the mobilization advanced received from the plaintiff was also highlighted apart from payment of interest on the RA bills.
CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 12/23 6.5 Defendant no. 2 has also placed on record communication dated 21.05.2012 whereby plaintiff was called upon to settle the outstanding issues relating to payment which included bill payment as well as payment towards taxes and also for providing the certificate towards tax deductions. Issue relating to service tax was also highlighted in detail in the said communication.
6.6 Hence even after the arbitral award was passed, the parties had certain outstanding liabilities, obligations to be performed and certain issues, dispute also arose in between the parties on account of subsequent developments, communications received by defendant from the authorities as discussed above. All these disputes had their genesis in the work order/contract which as discussed above, contains an arbitration clause for settlement of disputes through arbitration.
6.7 Undoubtedly plaintiff has relied upon No Due Certificate dated 01.08.2012 and vehemently argued that after issuance of No Due Certificate not only the contract came to an end, but once the contract came to an end even the arbitration clause ceased to exist. However I do not find merit in the claims of the plaintiff. Apart from No Due Certificate dated 01.08.2012 there is another No Due Certificate dated 31.07.2012 on record. The relevant portions of the two No Due Certificates are reproduced hereunder:
CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 13/23 Certificate dated 31.07.2012 We, M/s G J F Construction Company Limited declare that we have received FULL and FINAL SETTLEMENT of Rs. 84,11,681 vide RTGS Ref 32350 dated 30.07.12, against the order No. GIX/PPD/064/182 dt. 17.11.2006 issued by M/s. BGR ENERGY SYSTEMS LIMITED for the execution of civil works for VTPS Project. We declare that we have no dispute/claims against M/s. BGR Energy Systems Limited under any context with this settlement and all the payments have been made as per the Full and Final settlement excepting the issue of Form 501B towards Work Contract Tax and the reimbursement of Service Tax.
M/s. BGR Energy Systems Limited shall not be held responsible in any manner for any claims/dues payable by M/s GJF Construction Company Limited, to any third party which could have arisen during the period of the above mentioned contracts excepting for the liability under Work Contract Tax and Service Tax relating to the above contract.
Certificate dated 01.08.2012 We, M/s G J F Construction Company Limited declare that we have received FULL and FINAL SETTLEMENT of Rs. 84,11,681 vide RTGS Ref 32350 dated 30.07.12, against the order No. GIX/PPD/064/182 dt. 17.11.2006 issued by M/s. BGR ENERGY SYSTEMS LIMITED for the execution of civil works for VTPS Project. We declare that we have no dispute/claims against M/s. BGR Energy Systems Limited under any context with this settlement and all the payments have been made as per the Full and Final settlement.
M/s BGR Energy Systems Limited shall not be held responsible in any manner for any claims/dues payable by M/s G J F Construction Company Limited, to any third party which could have arisen during the period of the above mentioned contracts.
6.8 No Due Certificate dated 31.07.2012 as discussed above absolves the plaintiff from any liability whatsoever excepting the issue of Form 501B towards Work Contract Tax and the reimbursement of Service Tax and for the liability under Work Contract Tax and Service Tax relating to the above contract. A bare perusal of two certificates would reveal that the subsequent certificate is absolutely silent regarding the rights and liabilities of the parties, their obligations in respect of service tax etc. In fact issuance of two certificates itself proves that even till August 2012 there were disputes inter CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 14/23 se the parties, unresolved issues remained on account of service tax, its payment and liability. Nonetheless even after issuance of No Due Certificate the issue regarding payment of service tax and issuance of relevant certificates for reimbursement of service tax remained a bone of contention between the parties. Plaintiff cannot take a shield behind the No Due Certificate and avoid subjecting itself to the arbitration proceedings.
6.9 Defendant has placed on record letter dated 28.08.2012 written to the plaintiff, the relevant portion of which is reproduced hereunder:
Sub : Construction of VTPS 1X500 MW - Civil Works - reg.
Re : Service Tax Payment & bill for reimbursement.
We are submitting our invoices claiming for reimbursement of service tax paid viz.,
1) Invoice for RA Bill no. 21 claiming reimbursement of Rs. 4,45,184/ with challan.
2) Invoice of RA bill no. 20 claiming reimbursement of Rs. 2,41,567/ with challan.
3) Invoice for EIRL Bill claiming reimbursement of Rs. 3,08,759/ with challan.
We have addressed Mr. Ramesh Kumar/M/s Jacintha requesting for the control statement/bill details for RA Bill No. 22 & final to facilitate the payment of Service Tax. Kindly arrange for the same.
We have received Form 501B for RA Bill no. 19, 20 and 21. We request you to kindly arrange the form 501B for R.A. Bill no. 22 & Final.
6.10 Defendant has also relied upon one letter written to it on behalf of the plaintiff i.e. letter dated 08.09.2012 which is reproduced hereunder:
Sub : Returning of Invoice No,. EIRL dt. 28.08.2012 Ref : Your letter ref. no. GJFCCL : BGR ; 2012131014 dt. 28.08.2012. We are returning your above referred bill towards claim for the service tax amount which is not as per the agreed terms.
Kindly acknowledge receipt.
6.11 There are various letters including letter dated 09.10.2013 with reference to communication dated 17.06.2013 and letter dated 20.01.2016 CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 15/23 with reference to communication dated 28.12.2015 all in respect of reimbursement of service tax which makes it amply clear that dispute arising out of, having its basis in the contract is still subsisting between the parties.
Hence it thus becomes evident that certain issues still remain to be settled between the parties and no question of the contract having received accord and satisfaction arises. The dispute, as discussed above, arose in discharge of the contractual obligations in terms of the contract/award which contains an arbitration clause. In terms of the arbitration clause as has been discussed above the parties ought to be referred to the arbitration in terms of section 8 of the Arbitration and Conciliation Act, 1996 however in the case at hand arbitral proceedings have already commenced and it is the plaintiff who has to submit itself to the jurisdiction of the Arbitral Tribunal. The question regarding the maintainability of the dispute, limitation, jurisdiction of the tribunal etc. can be raised before the Ld. Arbitrator, Arbitrial Tribunal who/which has sufficient power to give a finding upon all such issues as might be agitated before him/it as is provided in section 16 of the above act.
6.12 In Shree Subhlaxmi Fabrics Pvt. Ltd vs Chand Mal Baradia And Others AIR 2005 SC 2161 it was held as under:
"In Konkan Railway Corpn. Ltd. vs. Mehul Construction Co . 2000 (7) SCC 201, a three Judge Bench of this Court held that at the stage when a party has approached the Chief Justice for appointment of an arbitrator, the contentious issues should not be decided at that stage and the aggrieved party can raise all the objections including objection regarding nonexistence of an arbitration clause before the Arbitral Tribunal. The Bench observed as under in para 4 of the report: "When the matter is placed before the Chief Justice or his nominee under Section 11 of the Act it CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 16/23 is imperative for the said Chief Justice or his nominee to bear in mind the legislative intent that the arbitral process should be set in motion without any delay whatsoever and all contentious issues are left to be raised before the Arbitral Tribunal itself. At that stage it would not be appropriate for the Chief Justice or his nominee to entertain any contentious issue between the parties and decide the same. A bare reading of Sections 13 and 16 of the Act makes it crystal clear that questions with regard to the qualifications, independence and impartiality of the arbitrator, and in respect of the jurisdiction of the arbitrator could be raised before the arbitrator who would decide the same ....
Section 16 empowers the Arbitral Tribunal to rule on its own as well as on objections with respect to the existence or validity of the arbitration agreement. Conferment of such power on the arbitrator under the 1996 Act indicates the intention of the legislature and its anxiety to see that the arbitral process is set in motion. This being the legislative intent, it would be proper for the Chief Justice or his nominee just to appoint an arbitrator without wasting any time or without entertaining any contentious issues at that stage, by a party objecting to the appointment of an arbitrator. If this approach is adhered to, then there would be no grievance of any party and in the arbitral proceeding, it would be open to raise any objection, as provided under the Act." Similar view has been taken in State of Orissa and others vs. Gokulananda Jena 2003 (6) SCC 465, where this Court held as under: "However, we must notice that in view of Section 16 read with Sections 12 and 13 of the Act, as interpreted by the Constitution Bench of this Court in Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd. [(2002) 2 SCC 388] almost all disputes which could be presently contemplated can be raised and agitated before the arbitrator appointed by the Designated Judge under Section 11(6) of the Act. From the perusal of the said provisions of the Act, it is clear that there is hardly any area of dispute which cannot be decided by the arbitrator appointed by the Designated Judge."
In Food Corporation of India vs. Indian Council of Arbitration and others 2003 (6) SCC 564 (para 14), it was emphasized that the legislative intent underlying the 1996 Act is to minimize the supervisory roles of courts in the arbitral process and nominate/ appoint the arbitrator without wasting time, leaving all contentious issues to be urged and agitated before the arbitral tribunal itself. It was further held that even in the old law, common sense approach alone was commended for being adopted in construing an arbitration clause more to perpetuate the intention of the parties to get their disputes resolved through the alternate disputes redressal method of arbitration rather than thwart it by adopting a narrow, pedantic and legalistic interpretation. The consistent view taken by this Court, therefore, is that contentious issues should not be gone into or decided at the stage of appointment of an arbitrator and no time should be wasted in such an exercise. The remedy of the aggrieved party is to raise an objection before the arbitral tribunal as under Section 16 of the Act it is empowered to rule about its own jurisdiction. It is, therefore, open to the plaintiff to raise all the pleas before defendant No. 2 including a plea that there is no arbitration agreement between the parties for referring any dispute for arbitration before the Hindustan Chamber of Commerce, Mumbai. It is also important to note that in response to the notice issued by defendant No. 2 the plaintiff had sent a communication raising certain pleas and had also remitted an amount of Rs.200/ as fee for arbitration. In such circumstances we are of the opinion that the view taken by the City Civil Court was just and CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 17/23 proper and the High Court erred in granting an injunction in favour of the plaintiff and staying the proceedings before defendant No. 2."
6.13 In Jayesh Engineering Works Vs. New India Assurance (2000) 10 SCC 178 it was held as under:
"At that stage, an application was filed under Section 33 of the Arbitration Act seeking a declaration that the agreement dated 741981 between the parties no longer subsists as the work has already been completed and the payment was received by Respondent 1 in full and final settlement..............Whether any amount is due to be paid and how far the claim made by the appellant is tenable are matters to be considered by the arbitrator. In fact, whether the contract has been fully worked out and whether the payments have been made in full and final settlement are questions to be considered by the arbitrator when there is a dispute regarding the same.
6.14 There is one more aspect i.e. regarding the jurisdiction of this court. As per clause 15 of the work order/ award/contract which is reproduced hereunder it is the Chennai court which has the jurisdiction.
"15.0.0 Jurisdiction of court:
The laws applicable to the contract shall be the laws applicable in India. The courts of Chennai shall have exclusive jurisdiction in all matters arising under this order."
6.15 In Shree Shublaxmi Fabrics Pvt. Ltd. (supra) it was held as under: ..............The other point, which needs consideration, is that the appellant had raised a specific plea by moving an application under Section 20 read with Section 151 CPC before the trial court that the court at Calcutta had no territorial jurisdiction to try the suit. According to the appellant the indent (contract) contained a clause that the dispute under the contract shall be decided by the court at Bombay and by no other court. That apart it was defendant No. 1, which had commenced arbitration proceedings before defendant No. 2 and both are situate in Bombay.
The plaintiff wants that the Hindustan Chamber of Commerce (defendant No. 2) may be restrained from proceeding with arbitration of the dispute, which has been raised by the CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 18/23 appellant Shree Subhlaxmi Fabrics Pvt. Ltd. (defendant No. 1). Both defendant No. 1 and defendant No. 2 have their offices at Bombay. Insofar as commencement of proceedings before defendant No. 2 by defendant No. 1 is concerned, no part of cause of action has accrued in Calcutta. In Hakam Singh vs. Gammon (India) Ltd. 1971 (1) SCC 286, it has been held that it is not open to the parties to confer by their agreement jurisdiction on a court which it does not possess under the Code. But where two courts or more have under the Code of Civil Procedure jurisdiction to try a suit or a proceeding, an agreement between the parties that the disputes between them shall be tried in one of such courts is not contrary to public policy and that such an agreement does not contravene Section 28 of the Contract Act. In A.B.C. Laminart (P) Ltd. vs. A.P. Agencies 1989 (2) SCC 163, it was held as under: "When the court has to decide the question of jurisdiction pursuant to an ouster clause it is necessary to construe the ousting expression or clause properly. Often the stipulation is that the contract shall be deemed to have been made at a particular place. This would provide the connecting factor for jurisdiction to the courts of that place in the matter of any dispute on or arising out of that contract. It would not, however, ipso facto take away jurisdiction of other courts. Where an ouster clause occurs, it is pertinent to see whether there is ouster of jurisdiction of other courts. When the clause is clear, unambiguous and specific accepted notions of contract would bind the parties and unless the absence of ad idem can be shown, the other courts should avoid exercising jurisdiction. As regards construction of ouster clause when words like 'alone', 'only', 'exclusive' and the like have been used there may be no difficulty. Even without such words in appropriate cases the maxim 'expressio unius est exclusion alterius' expression of one is the exclusion of another may be applied. What is an appropriate case shall depend on the facts of the case. In such a case mention of one thing may imply exclusion of another. When certain jurisdiction is specified in a contract an intention to exclude all others from its operation may in such cases be inferred. It has therefore to be properly construed." This view has been reiterated in Angile Insulation vs. Davy Ashmore India Ltd. 1995 (4) SCC
153. In the case on hand the clause in the indent is very clear, viz., "court of Bombay and no other court". The trial court on consideration of material on record held that the court at Calcutta had no jurisdiction to try the suit."
6.16 In B.E. Simoese Von Staraburg Niedenthal and anr Vs. Chhattisgarh Investment Ltd. (2015) 12 SCC 225 it was held as under:
"In a very recent judgment delivered on 1092014 in State of W.B v. Associated Contractors, the threeJudge Bench (speaking through one of us, Rohinton Fali Nariman, J.), noticing the decisions of this Court in FCI v. A.M Ahmed & Co. FCI v. A.M Ahmed & Co.
, 2001 10 SCC 532 (SCC para 6); Neycer India Ltd. v. Gmb Ceramics Ltd. Neycer India Ltd. v. Gmb Ceramics Ltd., 2002 9 SCC 489 (SCC para 3) with reference to section 31(4) of the arbitration act, 1940 and the decisions of this Court in Jatinder Nath v. Chopra Land Developers (P) Ltd.
CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 19/23 Jatinder Nath v. Chopra Land Developers P Ltd., 2007 11 SCC 453 (SCC para 9); Rajasthan State Electricity Board v. Universal Petrol Chemicals Limited (SCC paras 33 to 36) and Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd. (SCC para 32), held that where the agreement between the parties restricted jurisdiction to only one particular court, that court alone would have jurisdiction as neither section 31(4) nor section 42 (of the 1996 act) contains a non obstante clause wiping out a contrary agreement between the parties. On the basis of the above decisions, it was further held that applications preferred to courts outside the exclusive court agreed to by parties would also be without jurisdiction."
6.17 It thus primarily appears that it is only the Chennai courts which have the jurisdiction to entertain the dispute which otherwise is arbitrable, subject matter of arbitration as discussed above. Merely on the strength of the notice issued by defendant no. 1 no jurisdiction can be vested in this court.
6.18 Though Ld. counsel for the plaintiff has relied upon Today's Homes And Infrastructure Pvt. Ltd. Vs. Ludhiana Improvement Trust and anr. (2014) 5 SCC 68 however the said case law rather supports the defendant's version as it reiterates the fact that it is the Ld. Arbitrator who can adjudicate all such questions regarding the claim being dead or time barred and that the arbitration agreement, the arbitration clause which forms part of the contract has to be treated as an agreement independent of the other terms of the contract. Once the arbitral tribunal, as discussed above, has already been constituted all questions ought to be agitated before the tribunal and not before this court. For similar reasons Ashapura Mine Chem Ltd. Vs. Gujarat Mineral Development Corporation (2015) 8 SCC CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 20/23 193 does not apply to the facts of the present case.
6.19 Similarly though Ld. counsel for the plaintiff relied upon Chatterjee Petrochem Company and anr Vs. Haldia Petrochemicals Limited and ors (2014) 14 SCC 574 however from a careful reading of the said case law it becomes evident that section 5 of the Arbitration bars intervention by Judicial authorities. The jurisdiction aspect was also considered as per the agreement which vested exclusive jurisdiction in a particular court, court situated in a particular state i.e. Calcutta in that particular case. Furthermore in view of subsisting arbitration clause the suit for declaration and injunction was held to be not sustainable in the eyes of law and thus liable for dismissal. In the case at hand it has been discussed above that there is a valid arbitration clause in a contract wherein dispute has arisen and in terms of the arbitration clause the dispute has to be resolved by taking recourse to clause 12.
6.20 As far as Young Achievers Vs. IMS Learning Resource Pvt. Ltd. (2013) 10 SCC 535 is concerned it does not apply to the facts of the present case as the agreement has neither been superseded nor novated by any later agreement. Furthermore no question of accord and satisfaction in the present case arises as what was settled between the parties as per the memorandum of compromise was the dispute which arose at that point of time while the other obligations and liabilities under the contract continued.
CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 21/23 Disputes/issues arose subsequently for which statement of claim has been made to the Arbitral Tribunal and those disputes/issues have their roots in the contract.
6.21 As far as Chloro Controls India Pvt. Ltd. Vs. Severn Trent Water Purification Inc and other (2013) 1 SCC 641 is concerned there is no applicability of the said case law to the present case. The work order, contract which contains the arbitration clause is not disputed. No question of same being null, void or incapable of being performed arises or has been raised. Plea regarding the contract having been concluded, accord in satisfaction is not tenable as discussed above. Moreover all the above case laws as discussed above categorically lay down that it is obligatory upon the court to make a reference to the arbitration in case there is an arbitration clause in a contract, agreement.
6.22 In view of the above observations nothing remains to be decided in the original action. Reliance may be placed upon the law laid down in P. Anand Gajapathi Raju Vs. P.V.G. Raju (dead) 2000 (4) SCC 539 and Venture Global Engineering Vs. Sathyam Computers Services Ltd. AIR 2008 SC 1061. This court would have referred the parties to arbitration however as discussed above arbitral proceedings have already commenced and in fact vide proceedings dated 05.02.2018 the Ld. Arbitral Tribunal has already ruled in favour of its competence, jurisdiction to decide the dispute.
CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 22/23 6.23 Applications stands dismissed. Therefore nothing survives in the present matter.
6.24 File be consigned to record room.
Announced in the open Court (Gaurav Rao)
on 27th February 2018 ADJ02 & Wakf Tribunal /
New Delhi District,
Patiala House Courts, Delhi.
CS No. 488/17 BGR Energy systems Ltd. Vs. Indian Council of Arbitration and anr 23/23