Delhi High Court - Orders
Vihaan Networks Ltd vs Bharat Sanchar Nigam Ltd on 3 March, 2021
Author: Sanjeev Narula
Bench: Sanjeev Narula
$~3
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB.P. 491/2020
VIHAAN NETWORKS LTD. ..... Petitioner
Through: Mr. Mudit Sharma, Advocate with
Mr. Ashok K. Aggarwal and Mr.
Parvez A. Khan, Advocates.
versus
BHARAT SANCHAR NIGAM LTD. ..... Respondent
Through: Mr. Puneet Taneja and Ms. Laxmi
Kumari, Advocates.
CORAM:
HON'BLE MR. JUSTICE SANJEEV NARULA
ORDER
% 03.03.2021
[VIA VIDEO CONFERENCING]
1. The present petition under Section 11(5) of the Arbitration and Conciliation Act, 1996 [hereinafter referred to as the 'Act'] seeks appointment of a Sole Arbitrator for adjudication of the disputes that have arisen between the parties.
2. Briefly stated, the facts of the case are that the Respondent floated a tender notice dated 8th April, 2016 for survey, planning, supply, installation, testing, commissioning, integration with the existing core network and operation and maintenance for five years (extendable by two years) of 2G, GSM, BSS Network in uncovered villages of Arunachal Pradesh and Karbi Anglong & Dima Haso districts of Assam along with radio and VSAT backhaul for 2817 sites to provide mobile coverage to approx. 4118 villages.
Signature Not Verified Digitally Signed By:SAPNA SETHI ARB.P. 491/2020 Page 1 of 7 Signing Date:09.03.2021 13:11The Petitioner participated therein and declared as the successful bidder.
3. Accordingly, on 21st March, 2018, the Respondent issued an Advance Purchase Order [hereinafter referred to as 'APO'] in favour of the Petitioner. The said APO stipulated that it would be converted into a Purchase Order [hereinafter referred to as 'PO'] on Petitioner conveying their acceptance to the terms of the APO and providing a Performance Bank Guarantee [hereinafter referred to as 'PBG'] for an amount of Rs. 28.55 Crores. The Petitioner contends that it duly conveyed acceptance to the APO and also performed all the obligations under the Tender Documents including the additional demands raised by the Respondent during the validity of the tender. However, the Respondent vide letter dated 10th February, 2020, withdrew the APO dated 21st March, 2018. The Petitioner contends that this action is arbitrary, illegal, unjust, and in utter disregard of and in breach of terms of the Tender Documents, and without any cause or affording an opportunity of being heard.
4. In the circumstances noted above, the Petitioner invoked the arbitration Clause vide notice dated 31st August, 2020 and proposed the name of a retired former Judge of the Supreme Court as the Sole Arbitrator. The Respondent failed to give his consent and accordingly, left with no other option, the Petitioner has filed the present petition.
5. Mr. Mudit Sharma, learned counsel for the Petitioner submits that the existence of the arbitration agreement cannot be disputed. He submits that the APO contains an arbitration clause, under condition No. 36 to the effect -
Signature Not Verified Digitally Signed By:SAPNA SETHI ARB.P. 491/2020 Page 2 of 7 Signing Date:09.03.2021 13:11"(as per clause 20 of section 5 Part-A (General (Commercial) Conditions of Contract) of tender document with subsequent amendments/clarifications thereof". Thus, the Arbitration Agreement is contained in Clause 20.1 of Section 5, Part-A, General (Commercial) Conditions of Contract of the Tender Document [hereinafter referred to as 'GCC'], which reads as follows: -
"20.1 In the event of any question, dispute or difference arising under this agreement or in connection therewith (except as to the matters. the decision to which is specifically provided under this agreement), the same shall be referred to the sole arbitration of the CMD BSNL or in case his designation is changed to his office is abolished, then in such cases to the sole arbitration of the officer for the time being entrusted (whether in addition to his own duties or otherwise) with the functions of the CMD, BSNL or by whatever designation such as officer may be called (hereinafter referred to as the said officer), and if the CMD or the said officer is unable or unwilling to act as such, then to the sole arbitration of some other person appointed by the CMD or the said officer. The agreement to appoint an arbitrator will be in accordance with the Arbitration and Conciliation Act, 1996 as amended from time to time. There will be no abjection to any such appointment on the ground that the arbitrator is a Government Servant or that he has to deal with the matter to which the agreement relates or that in the course of his duties as a Government Servant he has expressed his views on all or any of the matters in dispute. The award of the arbitration shall be final and binding on both the parties to the agreement. In the event of such an arbitrator to whom the matter is originally referred, being transferred or vacating his office or being unable to act for any reason whatsoever, the CMD BSNL or the said officer shall appoint another person to act as an arbitrator in accordance with terms of the agreement and the person so appointed shall he entitled to proceed from the stage at which it was left out by the predecessors."
6. Mr. Sharma argues that disputes have arisen inter alia on account of a recent communication dated 10th February, 2020, referred above, whereby Signature Not Verified Digitally Signed By:SAPNA SETHI ARB.P. 491/2020 Page 3 of 7 Signing Date:09.03.2021 13:11 the Respondent has withdrawn the APO that was issued in favour of the Petitioner by citing the reason of termination of the agreement between the Respondent and Universal Service Obligation Fund [hereinafter referred to as 'USOF'. Therefore, disputes have arisen under the APO and the Tender Documents. The contention of the Respondent regarding non-compliance on part of the Petitioner to the terms of the APO is factually incorrect. Mr. Sharma refers to the letter dated 5th October, 2018 issued by the Respondent wherein a PBG was sought from the Petitioner along with acceptance of the APO. He submits that the in response to the said communication, the Petitioner vide letter dated 12th December, 2018, conveyed its unequivocal and unconditional acceptance to the terms of the APOs along with the requisite PBG.
7. He further argues that since the arbitration Clause afore-noted is in conflict with the decision of the Supreme Court in Perkins Eastman Architects DPC and Ors. Vs. HSCC (India) Ltd., 2019 SCC OnLine SC 1517, a Sole Arbitrator has to be appointed by this Court.
8. Mr. Taneja, learned counsel for the Respondent on the other hand, contests the present petition by arguing that, firstly, there is no Arbitration Agreement between the parties; secondly, the agreement between the parties being only an APO, constitutes only an intention of the purchaser to enter into a contract with the bidder; thirdly the APO does not constitute as a concluded contract between the parties. To buttress this contention, Mr. Taneja refers to Clauses 27, 28 and 29 of the General Instruction to Bidders ['GIB'] which is part of Tender Documents. The said clauses are reproduced Signature Not Verified Digitally Signed By:SAPNA SETHI ARB.P. 491/2020 Page 4 of 7 Signing Date:09.03.2021 13:11 hereinbelow: -
"27 ISSUE OF ADVANCE PURCHASE ORDER 27.1 The issue of Advance Purchase Order shall constitute an intention of the Purchaser to enter into contract with the bidder.
27.2 The bidder shall within 14 days of issue of advance purchase order, give its acceptance along with performance security in conformity with the proforma provided with the bid document at Section-7C.
28 SIGNING OF CONTRACT 28.1 The issue of Purchase order shall constitute the award of contract on the bidder.
28.2 Upon the successful bidder furnishing performance security pursuant to clause 27, the Purchaser shall discharge the bid security in pursuant to clause 12, except in case of L-1 bidder, whose EMBG/ EMD shall be released only after finalization of ordering of complete tendered quantity in pursuance to clause no. 24.4 & 27.3 of this section..
29. ANNULMENT OF AWARD Failure of the successful bidder to comply with the requirement of clause 27 & 28 shall constitute sufficient ground for the annulment of the award and the forfeiture of the bid security in which event the Purchaser may make the award to any other bidder at the discretion of the purchaser of call for new bids."
9. Mr. Taneja argues that, the Petitioner did not strictly comply with the conditions stipulated in APO, and the acceptance by the Petitioner was not in accordance with terms stipulated therein. Thus, it never became a binding document between the parties. Besides, since the parent contract that existed between the Respondent and USOF stood terminated, in terms of Clause 29, Signature Not Verified Digitally Signed By:SAPNA SETHI ARB.P. 491/2020 Page 5 of 7 Signing Date:09.03.2021 13:11 the APO stood annulled.
10. The court has considered the submissions of the parties. In the opinion of the court, the existence of the arbitration agreement is evident from the terms of the APO itself as it clearly makes a reference to Clause 20.1 of GCC. Therefore, Respondent's contention disputing the existence of the arbitration agreement is devoid of merit. The fact that the Final PO was not placed by the Respondent, also cannot be a ground for this Court to reject the present petition. As correctly pointed out by the learned counsel for the Petitioner, disputes have arisen between the parties are on account of the withdrawal of the APO by the Respondent. Petitioner has a right to contend that such a withdrawal is a breach of the terms of the APO. These disputes have to be adjudicated in terms of the arbitration agreement between the parties. The contentions raised by the Respondent regarding the legally binding effect of the APO, and whether it constitutes a concluded contract, would have to be considered by the Arbitral Tribunal. This can however not be a ground to deny the arbitration agreement. Similarly, Respondent's justification for annulment/withdrawal of the APO or whether the acceptance of APO was not in conformity with the terms stipulated therein are aspects that would require adjudication by the Arbitral Tribunal.
11. In view of the above, the court does not find any merit in the contentions of the Respondent. Having regard to the wording of the arbitration clause and the judgment of the Supreme Court in Perkins Eastman Architects (supra), the only recourse available now is for the Court to appoint an independent Sole Arbitrator.
Signature Not Verified Digitally Signed By:SAPNA SETHI ARB.P. 491/2020 Page 6 of 7 Signing Date:09.03.2021 13:1112. In view of the above, the present petition is allowed and accordingly, Hon'ble Mr. Justice A.K. Sikri, (Retd.) former Judge, Supreme Court of India [Contact No.: +91 9818000300] is appointed as the Sole Arbitrator to adjudicate the disputes that are stated to have arisen between the parties.
13. The parties are directed to appear before the learned Sole Arbitrator as and when notified. This is subject to the Arbitrator making the necessary disclosure under Section 12(1) of the Act and not being ineligible under Section 12(5) of the Act.
14. The learned Arbitrator will be paid his fee in terms of the provisions of the Fourth Schedule appended to the Act.
SANJEEV NARULA, J MARCH 3, 2021 nd Signature Not Verified Digitally Signed By:SAPNA SETHI ARB.P. 491/2020 Page 7 of 7 Signing Date:09.03.2021 13:11