Delhi High Court
Alstom vs North Eastern Electric Power Corp. on 9 November, 2005
Equivalent citations: 129(2006)DLT274, AIR 2006 (NOC) 357 (DELHI)
Author: Badar Durrez Ahmed
Bench: Badar Durrez Ahmed
JUDGMENT Badar Durrez Ahmed, J.
1. This is an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (herein referred to as the said Act). The petitioner/applicant seeks the appointment of an arbitrator to enter upon the reference and adjudicate the differences and disputes between the parties in terms of clause 27 of the general conditions of contract. The said clause 27 contains the arbitration clause and the entire procedure for arbitration and it would be material to reproduce the same for disposal of this application:
27. ARBITRATION 27.1 If any dispute or difference of any kind whatsoever shall arise between the purchaser and the Contractor, arising out of the Contract for the performance of the works whether during the progress of the works or after its completion or whether before or after the termination, abandonment or breach of the Contract, it shall, in the first place, be referred to and settled by the Engineer, who, within a period of thirty (30) days after being requested by either party to do so, shall give written notice of his decision to the Purchaser and the Contractor.
27.2. Save as hereinafter provided, such decision in respect of every matter so referred shall be final and binding upon the parties until the completion of the entire work under the Contract and shall forthwith be given effect to by the Contractor who shall comply with all such decisions, with all due diligence, whether he or the Purchaser requires arbitration as hereinafter provided or not.
27.3. If after the Engineer has given written notice of his decision to the parties, no claim to arbitration has been communicated to him by either party within thirty (30) days from the receipt of such notice, the said decision shall become final and binding on the parties.
27.4. In the event of the Engineer failing to notify his decision as aforesaid within thirty (30) days after being requested as aforesaid, or in the event of either the Purchaser or the Contractor being dissatisfied with any such decision, or within thirty (30) days after the expiry of the first mentioned period of thirty (30) days, as the case may be, either party may require, by written notice to the other party, that the matters in dispute be referred to arbitration as hereinafter provided.
27.5. All disputes or differences in respect of which the decision, if any, of the Engineer has not become final or binding as aforesaid, shall be settled by arbitration in the manner hereinafter provided.
27.6 In the event of the Contractor being an Indian party, that is to say a citizen and/or a permanent resident of India, a firm or a company duly registered or incorporated in India, the arbitration shall be conducted by three arbitrators, one each to be nominated by the Contractor and the Purchaser and the third to be named by the President of the Institution of Engineers, India. If either of the parties fails to appoint its arbitrator within sixty (60) days after receipt of a notice from the other party invoking the Arbitration clause, the President of the Institution of Engineers, India, shall have the power at the request of either of the parties, to appoint the arbitrator. A certified copy of the said President making such an appointment shall be furnished to both the parties.
27.7. The arbitration shall be conducted in accordance with the provisions of the Indian Arbitration Act, 1940 or any statutory modification thereof. The venue of arbitration shall be Delhi, India.
27.8 In the event of foreign Contractor, the arbitration shall be conducted by three arbitrators, one each to be nominated by the Purchaser and the Contractor and the third to be named by the President of the International Chamber of Commerce, Paris, save as above all Rules of Conciliation and Arbitration of the International Chamber of Commerce shall apply to such arbitrations. The arbitration shall be conducted at Delhi, India. The language of arbitration shall be English.
27.9. The decision of the majority of the arbitrators shall be final and binding upon the parties. The expense of the arbitration shall be paid as may be determined by the arbitrators. The arbitrators may, from time to time, with the consent of all the parties enlarge the time for making the award. In the event of any of the aforesaid arbitrators dying, neglecting, resigning or being unable to act for any reason, it will be lawful for the party concerned to nominate another arbitrator in place of the outgoing arbitrator.
27.10. The arbitrators shall have full powers to review and/or revise any decision, opinion, directions, certification or valuation of the Engineer in consonance with the Contract, and neither party shall be limited in the proceedings before such arbitrators to the evidence or arguments put before the Engineer for the purpose of obtaining the said decision.
27.11. No decision given by the Engineer in accordance with the foregoing provisions shall disqualify him as being called as a witness or giving evidence before the arbitrators on any matter whatsoever relevant to the dispute or difference referred to the arbitrators as aforesaid.
27.12. During settlement or disputes and arbitration proceedings, both parties shall be obliged to carry out their respective obligations under the Contract."
2. At the outset the learned counsel for the respondent submitted that this application is not maintainable inasmuch as the very first step to be undertaken under the said clause and, in particular, clause 27.1 was not undertaken by the petitioner/applicant. According to the learned counsel for the respondent in terms of clause 27.1 in the first place the dispute or difference is to be referred to and settled by the Engineer who, within a period of 30 days after being requested by either party to do so, is required to give a written notice of his decision to the purchaser and the contractor. In terms of clause 27.3 if no claim to the arbitration has been communicated to the Engineer within 30 days of his having given written notice of his decision then the decision of the Engineer at the first instance would become final and binding on the parties. In terms of clause 27.4 if the Engineer fails to notify his decision within the said period of 30 days as required under clause 27.1 then it is open to either party to require by written notice to the other party to refer the matters in disputes to arbitration as provided in the arbitration clause. Where the disputes and differences in respect of which the decision of the Engineer has not become final or binding as indicated above in clause 27.3 and 27.4, the same are to be settled by arbitration in the manner indicated. Once the disputes are ripe for arbitration in terms of clause 27.6, the contractor being an Indian company, the same is to be conducted by three arbitrators, one each to be nominated by the contractor and the purchaser and the third to be nominated by the President of the Institute of Engineers, India. The entire procedure has been set out in the said clause.
3. The learned counsel for the applicant pointed out that on 31.1.2002 a notice was given by the contractor to the respondent and the subject of the notice was as under:
"notice under clause 27.1 for reference to the Engineer for settlement of claims.
4. The learned counsel for the applicant/petitioner further pointed out that it was prayed in that notice as under:
"Therefore, in view of the various disputes having arisen between the parties it would be expedient that you nominate an Engineer in terms of Clause 27.1 of the Contract and refer the matter for decision by the Engineer. Please treat this representation as a written representation by the Contractor to the Engineer for adjudicating the disputes between NEEPCO and us within the time of thirty (30) days provided for in the contract. We reserve our right to make detailed claims/representations before the Engineer prior to his adjudication.
5. Therefore, according to the learned counsel for the petitioner it is not correct for the respondent to allege that the procedure as stipulated in clause 27.1 had not been followed and to submit that this application is liable to be dismissed. Unfortunately, no response was sent by the respondent to this notice dated 31.1.2002.
6. The learned counsel for the respondent, however, submitted that this letter of 31.3.2002 was not strictly in compliance with the requirements of clause 27.1 inasmuch as by this letter the petitioner sought the nomination of an Engineer before whom the detailed claims could be made. According to him such a request ought not to have been made because vide the respondent's letter dated 10.12.1994 (annexure `A' to the application), the Engineer had already been nominated. Be that as it may and shorn of all technicalities, it appears that no decision has been taken by the Engineer and no response to the letter dated 31.1.2002 was received by the petitioner. As such, it is a fit case where clause 27.5 would be attracted. In other words the disputes and differences will have to be settled by arbitration.
7. The learned counsel for the parties submitted that the procedure prescribed for appointment of the Arbitral Tribunal under clause 27.6 need not be strictly followed in this case. However, it is agreed by them that one arbitrator shall be nominated by each party and the third arbitrator shall be nominated by the two arbitrators so nominated. It is further stated that the parties shall nominate their respective arbitrator within four weeks and, thereafter the said nominated arbitrators will be requested to nominate the third arbitrator. The parties shall be entitled to raise all contentions before the arbitral tribunal so appointed. It is also stated by learned counsel for the parties that they shall agree on the procedure to be followed before the Arbitral Tribunal within the said four weeks.
8. This petition stands disposed of.