Madras High Court
M/S.Kpm Constructions Co vs M/S.Tirunelveli Smart City Limited on 9 March, 2022
Author: M.Sundar
Bench: M.Sundar
Arb.O.P (Com.Div).No.189 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 09.03.2022
Coram
THE HONOURABLE MR. JUSTICE M.SUNDAR
Arb.O.P (Com.Div).No.189 of 2021
M/s.KPM Constructions Co.
Represented by its Managing Partner
Mr.K.P.Mohanasundaram
S/o.Late K.Palanisamy
Having office at No.159, Mangalam Road
Tirupur – 641604. ... Petitioner
vs.
M/s.Tirunelveli Smart City Limited
Represented by its Managing Director
Tirunelveli City Municipal Corporation
S.N.High Road, Tirunelveli – 627001. ... Respondent
Prayer:
Arbitration Original Petition filed under Section 11(6) of Arbitration
and Conciliation Act, 1996 r/w Section 2(1)(c)(vi) of the Commercial
Courts Act, 2015 to appoint arbitrators to adjudicate the disputes between
the petitioner and the respondent in terms of the arbitration agreement
dated 02.12.2019 and direct the respondent to pay the costs.
For Petitioner : Mr.J.Vinodh,
for Mr.K.Raja
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https://www.mhc.tn.gov.in/judis
Arb.O.P (Com.Div).No.189 of 2021
For Respondent : Mr.Edwin Prabhakar, Spl.G.P.,
ORDER
Captioned Arb OP has been presented in this Court on 09.09.2021 under Section 11(5) of 'The Arbitration and Conciliation Act, 1996 (Act No.26 of 1996)' (hereinafter 'A and C Act' for the sake of convenience and clarity) with a prayer for appointment of Arbitrator.
2. Mr.J.Vinodh, learned counsel representing the counsel on record for the petitioner and Mr.Edwin Prabhakar, learned Special Government Pleader representing on behalf of the respondent are before this Court.
3.This Court finds that the arbitration agreement between the petitioner and the respondent i.e., arbitration agreement within the meaning of Section 2(1)(b) 'read with' ('r/w' for brevity) Section 7 of A and C Act is in the form of a covenant which is captioned and styled as 'SPECIAL CONDITIONS OF CONTRACT'. Clause 4 of Special Conditions of Contract incorporates Clause 25.3 of the General Conditions of Contract and the same reads as follows:
2/10https://www.mhc.tn.gov.in/judis Arb.O.P (Com.Div).No.189 of 2021 '4.ARBITRATION (GCC Clause 25.3) The procedure for arbitration will be as follows:
25.3 (a) In case of Dispute or difference arising between the Employer and a domestic contractor relating to any matter arising out of or connected with this agreement, such disputes or difference shall be settled in accordance with the Arbitration and Conciliation Act, 1996.
The arbitral tribunal shall consists of 3 arbitrators one each to be appointed by the Employer and the Contractor. The third Arbitrator shall be chosen by the two Arbitrators so appointed by the Parties and shall act as Presiding Arbitrator. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding Arbitrator shall be appointed by the President of the Institution of Engineers (India), Tamil Nadu chapter.
(b) In the case of dispute with the Foreign contractor the dispute shall be settled in accordance with provisions of UNCITRAL Arbitration Rules. The Arbitral Tribunal shall consist of three Arbitrators one each to be appointed by the Employer and the Contractor. The third Arbitrator shall be chosen by the two Arbitrators so appointed by the Parties, and shall act a presiding arbitrator. In case of failure of the 3/10 https://www.mhc.tn.gov.in/judis Arb.O.P (Com.Div).No.189 of 2021 two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding arbitrator shall be appointed by the President of the Institution of Engineers (India), Tamil Nadu chapter.
(c) If one of the parties fails to appoint the arbitrator in pursuance of sub-clause (a) and (b) above within 30 days after receipt of the notice of the appointment of its arbitrator by the other party, then the President of the Institution of Engineers (India) Tamil Nadu chapter, both in cases of the Foreign Contractor as well as Indian Contractor, shall appoint the arbitrator. A certified copy of the order of the President of the Institution of Engineers (India) Tamil Nadu chapter making such an appointment shall be furnished to each of the parties.
(d) Arbitration proceedings shall be held at Tirunelveli, Tirunelveli District, Tamil Nadu, India, and the language of the arbitration proceedings and that of all documents and communications between the parties shall be English.
(e) The decision of the majority of arbitrators shall be final and binding upon both parties. The cost and expenses of Arbitration proceedings will be paid as determined by the arbitral tribunal. However, the expenses incurred by each party in connected with the preparation, presentation, etc. of 4/10 https://www.mhc.tn.gov.in/judis Arb.O.P (Com.Div).No.189 of 2021 its proceedings as also the fees and expenses paid to the arbitrator appointed by such party or on its behalf shall be borne by each party itself.
(f) Where the value of the contract is Rs.50 millions and below, the disputes or differences arising shall be referred to the Sole Arbitrator. The Sole Arbitrator should be appointed by agreement between the parties; failing such agreement, the appointing authority, namely the President of the Institution of Engineers (India), Tamil Nadu Chapter.
(g) Performance under the contract shall continue during the arbitration proceedings and payments due to the contractor by the owners shall not be withheld, unless they are the subject matter of the arbitration proceedings.'
4.The Arbitral dispute centers around allegations of the petitioner that the respondent has not handed over the site to the petitioner for commencement of work. To be noted, there are other ancillary issues but it is not necessary to dilate on the same considering the narrow scope of a legal drill under Section 11 of A and C Act. A legal drill under Section 11 of A and C Act is broadly controlled by sub section (6-A) thereat which reads as follows:
'(6-A). The Supreme Court or, as the case may be, the 5/10 https://www.mhc.tn.gov.in/judis Arb.O.P (Com.Div).No.189 of 2021 High Court, while considering any application under sub- section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement'.
5.The above principle was reiterated by Hon'ble Supreme Court in Mayavati Trading case law in Mayavati Trading Pvt. Ltd vs Pradyuat Deb Burman reported in 2019 (8) SCC 714. The relevant paragraph is paragraph No.10 and the same reads as follows:
'10. This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgement, as Section 11(6-A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgement in Duro Felguera'
6.As there is no disputation or disagreement about the existence of 6/10 https://www.mhc.tn.gov.in/judis Arb.O.P (Com.Div).No.189 of 2021 arbitration agreement between the parties, this Court deems it appropriate to appoint Hon'ble Mr.Justice T.Sudanthiram, Former Judge, High Court of Madras residing at Old No.39/2, New No.20, Anandavelu Street, Perambur, Chennai – 600 011 [Mobile : 9841016353] as sole arbitrator.
Hon'ble sole arbitrator is requested to enter upon reference, adjudicate arbitrable disputes that have arisen between the petitioner and the respondent by holding sittings at Madras High Court Arbitration Centre [MHCAC] under the aegis of this Court in accordance with the Madras High Court Arbitration Proceedings Rules, 2017 and Hon'ble Arbitrator's fee shall be as per Madras High Court Arbitration Centre (MHCAC) (Administrative Cost and Arbitrator's Fees) Rules 2017.
7.The arbitration agreement provides for arbitration by three arbitrators and it mentions the seat/venue as Tirunelveli. It is submitted that it would be desirable to downsize the Arbitral Tribunal and appoint a sole arbitrator as the claim is in the region of a little over Rupees Three crores. The legal position that a Section 11 Court can downsize the Arbitral Tribunal is indisputable. Likewise, the seat/venue is a matter of party autonomy. As there cannot be any disputation that it would be viable to 7/10 https://www.mhc.tn.gov.in/judis Arb.O.P (Com.Div).No.189 of 2021 hold sittings at Madras High Court Arbitration Centre, the seat/venue shall be MHCAC.
8.Captioned Arbitration O.P is disposed of in the aforesaid manner.
There shall be no order as to costs.
09.03.2022 Speaking/Non-speaking order Index : Yes / No Internet : Yes / No pgp Note: Registry is directed to communicate a copy of this order forthwith to
1. Hon'ble Mr.Justice T.Sudanthiram, Former Judge, High Court of Madras Old No.39/2, New No.20, Anandavelu Street, Perambur, Chennai – 600 011.
[Mobile : 9841016353]
2.The Director Tamil Nadu Mediation and conciliation Centre
-cum-
Ex Officio Member, Madras High Court Arbitration Centre Madras High Court, Chennai – 600 104.
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