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Black Canyon Sez Private Limited vs Shapoorji Pallonji And Company Private ... on 22 July, 2022

Author: Neena Bansal Krishna

Bench: Neena Bansal Krishna

                          $~1
                          *      IN THE HIGH COURT OF DELHI AT NEW DELHI
                          +      ARB.P. 431/2022
                                 BLACK CANYON SEZ PRIVATE LIMITED                       ..... Petitioner
                                                   Through:     Mr. Tejas Karia, Ms. Shruti
                                                                Sabharwal & Mr. Ujval Mohan,
                                                                Advocates.
                                                   versus

                                 SHAPOORJI PALLONJI AND COMPANY PRIVATE LIMITED
                                                                                    ..... Respondent
                                                   Through:     Ms. Aakansha Kaul, Mr. Aman
                                                                Sahani, Mr. Babit Jamwal & Mr.
                                                                Manek Singh, Advocates.
                                 CORAM:
                                 HON'BLE MS. JUSTICE NEENA BANSAL KRISHNA
                                                   ORDER

% 22.07.2022

1. The present petition has been filed under Section 11 (6) of the Arbitration and Conciliation Act, 1996 on behalf of the petitioner seeking appointment of a Sole Arbitrator to adjudicate the disputes between the parties.

2. It is submitted in the petition that ASF being desirous of developing an office building in Gurgaon, Haryana executed the Works Contract with the respondent on 21st November, 2016. Post execution of the Works Contract dated 21st November, 2016; a Supplementary Works Contract dated 09th February, 2018 was entered into between the ASF and the respondent to give effect to the GST compliances applicable to the subject works.

3. In 2018, the ASF and the parties entered into a Novation Agreement on 17th April, 2018 to record the respondent's unconditional acceptance of the petitioner as the owner under the Works Contract dated 21st November, 2016 in substitution of ASF. As per the Novation Agreement, the petitioner stood substituted in place of ASF as the owner under the Works Contract and assumed all rights, claims, entitlements, liabilities, obligations and duties of ASF under the Works Contract.

4. It is submitted that an Addendum No. 1 dated 27th February, 2019 was executed between the parties to the Works Contract to extend the Contract period and record other contractual arrangements.

5. Post the onset of the COVID-19 pandemic, the parties mutually decided to bring their contractual relationship to an end. The petitioner proposed foreclosure of the Works Contract on 31st March, 2020, subject to the respondent completing its demobilization obligations in a timely manner. The respondent on the same day agreed and accepted the Foreclosure, subject to the clearance of outstanding dues and payments by the petitioner.

6. In May, 2020, the respondent submitted its claims on account of the Foreclosure, which led to various meetings and discussions between the parties for finalization of the modalities of the said Foreclosure. These discussions eventually culminated in the execution of the Settlement Agreement dated 24th July, 2020.

7. Under the Settlement Agreement dated 24th July, 2020, the parties agreed to various obligations to be performed by either party. It is claimed by the respondent that the petitioner was prompt to honour the obligations towards the respondent in terms of the Settlement Agreement dated 24th July, 2020.

8. The petitioner released an amount of Rs. 1,50,00,000/- on 31st July, 2020 towards the settlement for the month July, 2020. Similar amounts were released for subsequent months.

9. However, the respondent had failed to comply with its obligations of reconciliation and demobilization by 15th September, 2020 as agreed to under the Settlement Agreement dated 24th July, 2020 and, therefore, committed a breach of the Settlement Agreement dated 24th July, 2020.

10. The respondent continued to unilaterally make demands for release of payments despite being in default of its own obligations. The petitioner has suffered direct and consequential monetary losses under different heads, due to the failure of the respondent to comply with its own obligation as per the Settlement Agreement dated 24th July, 2020.

11. On 26th August, 2021, the respondent issued a baseless Demand Notice to the petitioner under Section 8 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "IBC, 2016") demanding an alleged debt of Rs. 8,46,13,763.38/- purportedly due from the petitioner under the Settlement Agreement dated 24th July, 2020. The efforts were made to resolve the disputes between the parties and meetings were held but the respondent continued to be in breach of its own obligations under the Settlement Agreement dated 24th July, 2020.

12. The respondent issued a Second Demand Notice on 13 th January, 2022 to the petitioner alleging an operational unpaid debt of Rs. 5,59,81,925 from the petitioner. And upon receiving of the Second Demand Notice dated 13th January, 2022, it became manifestly clear that there was no scope of amicable settlement.

13. It is submitted that in terms of Clause 61.0 of the GCC to the Works Signature Not Verified Digitally Signed By:NIRMLA TIWARI Signing Date:08.08.2022 14:51:53 Contract read with Clause 12 of the Settlement Agreement dated 24th July, 2020 and Section 21 of the Arbitration and Conciliation Act, 1996, the petitioner was constrained to invoke arbitration by issuing a Notice Invoking Arbitration dated 24th January, 2022. The petitioner in its Notice dated 24th January, 2022 had proposed the name of Hon'ble Mr. Justice J.R. Midha, former Judge of this Court as the Sole Arbitrator to adjudicate the disputes and requested the respondent to confirm the name of the Sole Arbitrator within 30 days of the receipt of the Notice. A Reply dated 04th March, 2022 was received by the petitioner from the respondent making baseless allegations and was not agreeable to the name of the proposed Sole Arbitrator.

14. A prayer has, therefore, been made for appointment of the Arbitrator.

15. The respondent in its short reply has asserted that the present petition is nothing but a counter-blast to the Demand Notice dated 13th January, 2022 sent by the respondent to the petitioner under Section 8 of the IBC, 2016. The disputes raised in the petition are nothing but a moonshine defence and an afterthought to thwart the proceedings initiated by the respondent.

16. It is admitted that the Settlement Agreement dated 24 th July, 2020 was arrived at between the parties, but it is claimed that since the petitioner failed to make payments in terms of the Settlement Agreement dated 24 th July, 2020, the respondent was constrained to issue Demand Notice under Section 8 of the IBC, 2016 dated 26th August, 2021 to BCSPL as well as to AISPL. Discussions and negotiations happened between the parties, pursuant to which the petitioner made payment of Rs. 2,00,00,000/- in October, 2021 as part payment towards the total outstanding amount.

17. It is claimed on behalf of the respondent that the Settlement Agreement dated 24th July, 2020 crystallized the amount that the petitioner was liable to pay to the respondent under the Works Contract. Since, the claims of the petitioner are not rooted in the Works Contract, it is submitted that they are not arbitrable. The respondent, however, is entitled to seek the recovery of money.

18. It is further asserted that the AISPL is a necessary and proper party as a Comfort Letter was issued by the AISPL to SPCPL stating that AISPL and BCSPL are group of Companies of ASF group and both the Companies are under the management and control of the same set of management/owners. AISPL undertakes that if the petitioner does not make payments with regard to duly certified works under the Contract, the AISPL shall intervene and ensure prompt payment of such dues by the petitioner. Moreover, a perusal of E-mail dated 02nd June, 2021 sent, on behalf of the petitioner, makes it evident that the payments were to be released by the ASF Management.

19. It is also submitted that the petitioner and the AISPL are jointly and severally liable to make payments under the Settlement Agreement dated 24th July, 2020. In addition to that, the petitioner and the AISPL were also liable to pay money towards TDS and cement consumption.

20. The respondent has denied that it has caused any delay in demobilization of the entire work site or has caused any delay in reconciliation process/exercise and submitted that the delay is entirely attributable to the petitioner.

21. Submissions heard.

22. The only objection taken on behalf of the respondent is that there is no independent Arbitration Clause in the Settlement Agreement dated 24th Signature Not Verified Digitally Signed By:NIRMLA TIWARI Signing Date:08.08.2022 14:51:53 July, 2020. It is further asserted that the ASF, which was the original signatory to the Works Contract, be also made a party.

23. Without prejudice, learned counsel for the respondent submits that she has no objection if the Arbitrator is appointed with liberty that the respondent may be able to raise these contentions before the learned Sole Arbitrator.

24. In view of the above, Hon'ble Mr. Justice R.K. Gauba, former Judge of Delhi High Court, Mobile No. 9650411919, is appointed as the Sole Arbitrator.

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

NEENA BANSAL KRISHNA, J JULY 22, 2022 S.Sharma Signature Not Verified Digitally Signed By:NIRMLA TIWARI Signing Date:08.08.2022 14:51:53