Delhi High Court
Larsen And Toubro Limited vs Punatsangchhu-1 Hydroelectric ... on 11 December, 2020
Author: C. Hari Shankar
Bench: C. Hari Shankar
$~10
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on : 11th December, 2020
+ ARB.P. 461/2020
LARSEN AND TOUBRO LIMITED ..... Petitioner
Through: Mr. Gourab Banerji, Sr.
Advocate with Mr. Ananya
Kumar, Mr. Rajat Joneja and
Mr. Kartikey Gupta, Advs.
Versus
PUNATSANGCHHU-1 HYDROELECTRIC
PROJECT AUTHORITY ..... Respondent
Through: Mr. Bharat Singh, Adv.
CORAM:
HON' BLE MR. J USTICE C .HARI SHANKAR
J UDGEMENT (ORAL)
% 11.12.2020
(Video-Conferencing)
1. This petition, at the instance of the petitioner M/s. Larsen and
Toubro Limited, calls on this Court, to appoint an arbitrator on behalf
of the respondent Punatsangchhu-1 Hydroelectric Project Authority,
so that the arbitrator appointed by the petitioner, and the arbitrator thus
appointed by this Court on behalf of the respondent, could appoint a
presiding arbitrator, and the Arbitral Tribunal, so constituted, could
proceed to arbitrate on the dispute between the parties.
2. Mr. Bharat Singh, learned counsel for the respondent, very
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fairly states that his client does not question the existence of an
arbitrable dispute between the parties, or the necessity to refer the
dispute to arbitration. He, however, submits that the petition is not
maintainable before this Court, under Section 11(6) of the Arbitration
and Conciliation Act, 1996 (hereinafter referred to as "1996 Act"), but
that the petitioner would have to approach the High Court of Thimpu,
Bhutan.
3. A fasciculus of the dispute. A contract was executed between
the petitioner and the respondent on 14th April, 2009. The respondent
was required by the contract, to execute work relating to the
construction of diversion tunnel, dam, intake and de-silting
arrangement, including hydro-mechanical works of the
Punatsangchhu-I Hydroelectric Project, located in the Wangdue
Phodrang District of Bhutan. The averments in the petition, setting
out the dispute with the respondent, may, without prejudice to the
right of the respondent to question the correctness thereof, be
reproduced thus:
"(i) The Respondent invited bids for the Construction of
Diversion Tunnel, Dam, Intake and Desilting Arrangement,
including Hydro-Mechanical works of the Punatsangchhu-I
Hydroelectric Project (1200 MW), located in Wangdue
Phodrang District of Bhutan ("Project Works").
(ii) The Petitioner submitted its bid. Upon evaluation of
the techno-commercial and the price bids submitted by
various bidders, the Respondent found the Petitioner's bid to
be the most qualified. Accordingly, by way of a Letter of
Award dated 27.03.2009 ("LoA"), the Petitioner was awarded
the Project Works by the Respondent.
(iii) Subsequently, the parties entered into the Contract.
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(iv) Under the Contract, the Petitioner was required to carry
out the Project Works on an item rate basis. The agreed
contract price was INR 1245,51,73,905/- (Rupees Twelve
Hundred Forty-Five Crore Fifty-One Lakh Seventy-Three
Thousand Nine Hundred and Five only).
(v) In terms of Clause 43 of the Contract, the Petitioner
was required to complete the Project Works within a period of
66 months from the 30th date of issue of the LoA. The
commencement date of the Project works was 26.04.2009 and
the scheduled completion date was 26.10.2014.
(vi) In addition to the overall completion date, the Contract
stipulated certain Intermediate Milestones ("Intermediate
Milestones"), which were agreed to in the construction
programme in terms of Clause 14(i) of the Contract ("Work
Programme").
(vii) Upon issuance of the LoA, Petitioner duly mobilized the
required resources for completion of the work within the
agreed timelines. However, right from inception, the Project
Works were delayed on account of multiple variation orders
issued by the Respondent. These variation orders resulted in
an increased scope of work, substantially beyond what was
originally agreed by the parties.
(viii) As a consequence, the timeline for achievement of the
intermediate milestones was also impacted. Acknowledging
the effect of the variation orders, the Respondent revised the
duration for achievement of Milestone-l and the completion
date for the said milestone was extended from October 2010
to November 2011. The Petitioner achieved Milestone-l, in
terms of the revised schedule.
(ix) In terms of the requirements of the Contract, Petitioner
also mobilized resources and carried out the various
preparatory works required for dam concreting (forming part
of Milestone-2). The Petitioner mobilized and deployed a
substantial number of resources, including specialized site-
specific equipment, to be able to achieve the average
excavation progress required as per the agreed Work
Programme.
(x) Though the Petitioner was diligently executing the
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work as required, in July 2013 there was a slope failure on the
right bank of the river. As a consequence, the right bank
worksite became unavailable for excavation and / or
concreting of the dam. The dam excavation work was brought
to a halt and all the resources deployed by the Petitioner for
excavation works, as well as the concreting equipment, were
rendered idle.
(xi) Acknowledging the slope failure that had taken place
in July 2013, as well as the consequent non-availability of the
worksite, the Engineer-in Charge issued variation orders in
September 2013 for right bank stabilization works, in order to
make the site available for excavation and concreting activity.
(xii) The Petitioner carried out the additional work required
in terms of the variation orders issued by the Engineer-in-
Charge. Thereafter, in June 2014 some portion of the
excavation work was re-started at the right bank, albeit in a
restricted manner. However, the concreting work could not be
started.
(xiii) It was, however, found that the variation
orders/remedial measures directed by the Engineer-in-Charge
were insufficient to deal with the issue of slope failure,
therefore, the excavation works at the dam pit could also not
be continued after January 2015.
(xiv) Based on further variation orders issued by the
Engineer-In-Charge, a second phase of stabilization work was
started by the Petitioner in the month of June 2015. However,
even before the stabilization work could be completed and
excavation and concreting work could commence, there was
another right bank slope failure in August 2016, in an area
where additional stabilization measures had not been carried
out.
(xv) Thereafter, even though further stabilization measures
were ordered and executed, the Respondent could not arrive at
a solution to address the slope failure issue. As a result, work
at the right bank was completely suspended by the Engineer-
in-Charge from May 2017 to September 2017, due to rock
movement. While the excavation work resumed in October
2017, it progressed at a very slow pace since rock movement
at the right bank had not stopped.
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(xvi) The Petitioner was also instructed to carry out
additional cable anchors at different elevations of right bank
which were subsequently suspended or abandoned midway at
a few locations.
(xvii) In December 2018, the Petitioner was instructed to off-
load the mass that had slid in August L016. While the off-
loading activity was being carried out, on 22 January 2019
reactivation (slope failure) of the August 2016 slide took
place at right bank.
(xviii) The excavation works have come to a complete
standstill since the last major slope failure that occurred in
January 2019.
(xix) Effectively, therefore, the Respondent has been unable
to provide the Petitioner effective access to the right bank
worksite, for both excavation and concreting works, right
from 2013 till date. It is also unclear when the Respondent
will be able to provide such access.
(xx) Though the Project Works were scheduled to be
completed in 66 months, more than 135 months have already
elapsed. The Petitioner, for no fault of its own has, however,
been able to complete less than 40% of the intended scope of
the Contract. The Respondent has already accorded approval
for MileStone-2 till December 2019 (which has resulted in
MileStone-3 & MileStone-4 standing extended to March 2021
and September 2022, respectively) and a request on behalf of
the Petitioner, for further extension of time, is pending
consideration.
(xxi) The Respondent's inability to provide access to the
Site, as detailed above, has resulted in the Petitioner's
deployed resources remaining idle for substantial periods of
time. Despite the Petitioner's best efforts to mitigate the losses
it was suffering, on account of the location of the Project as
well as the uncertainties caused by the Respondent's lack of
clear instructions, these losses were substantial. All these
losses were caused on account of the Respondent's inability to
provide access to the site to the Petitioner; and are
reimbursable by the Respondent under the Contract.
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(xxii) In addition, the Petitioner is also entitled to payment of
various amounts under different provisions of the Contract.
These payments are due as reimbursements for amounts spent
by the Petitioner as well as compensation for additional work
executed by the Petitioner on account of Respondent's
instructions."
5. Clause 67 of the General Conditions of Contract (hereinafter
referred to as "GCC") provided for resolution of the disputes, between
the parties, by arbitration, and reads thus:
"67. ARBITRATION
Except where otherwise provided in the Contract all
questions and disputes relating to the meaning of the
specifications, design, drawings and instructions here-
in before mentioned and as to the quality of
workmanship or materials used on the Work or as to
any other question, claim, right, matter or thing
whatsoever in any way arising out of or relating to the
Contract, design, drawings, specifications, estimates,
instructions, orders to these conditions or otherwise
concerning the Works or the execution or failure to
execute the same whether arising during the progress
of the Work or after the cancellation, termination
completion or abandonment thereof shall be dealt with
as mentioned hereinafter.
i) If the Contractor considers any work
demanded of him to be outside the requirements
of the Contract, or considers any decision of the
Engineer-in-Charge on any matter in connection
with or arising out of the Contract or carrying
out of Work to be unacceptable, he shall
promptly ask the Engineer-in-Charge in writing,
for written instructions or decision. There upon
the Engineer-in-Charge shall give his written
instructions or decision within a period of thirty
days of such request. Upon receipt of the written
instructions or decision, the Contractor shall
promptly proceed without delay to comply with
such instructions or decision.
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If the Engineer-in-Charge fails to give his
instructions or decision in writing within a
period of thirty days after being requested for or
if the Contractor is dissatisfied with the
instructions or decision of the Engineer-in-
Charge, the Contractor may within thirty days
after receiving the instructions of decision file a
written appeal to the Managing Director, PHPA
who will constitute a Committee of which the
Director (Technical) will be convenor, to
resolve the dispute. The Committee shall afford
an opportunity to the Contractor to be heard and
to offer evidence in support of his appeal within
forty five days of the receipt of the appeal by the
Director (Technical). The Director (Technical)
shall give a decision on behalf of the Committee
within a period of thirty days after the
Contractor has been heard and the Contractor
has given evidence in support of his appeal. If
the Director (Technical) does not give a
decision within thirty days, the Contractor will
have the right to refer the dispute to arbitration.
If the Contractor is dis-satisfied with the
decision of the Director (Technical), the
Contractor, within a period of thirty days from
receipt of the decision, shall indicate his
intention to refer the dispute to arbitration
failing which the said decision shall be final and
conclusive.
ii) Except where the decision has become
final, binding and conclusive in terms of Sub
Para (i) above disputes or difference shall be
referred for adjudication through arbitration to
an Arbitral Tribunal of three arbitrators
appointed jointly by the PHPA and the
Contractor. Where the mandate of an arbitrator
terminates a substitute arbitrator shall be
appointed according to the rules that were
applicable to the appointment of the arbitrator
being replaced.
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In the absence of an Arbitration Act in Bhutan,
the Arbitral Tribunal shall follow/be guided by
the basic principles and procedures as contained
in the Indian Arbitration and Conciliation Act
1996. The parties shall be free to agree on a
procedure for appointing the Arbitrators. Failing
any agreement for appointment of Arbitrators,
each party shall appoint one Arbitrator and the
two appointed Arbitrators shall appoint the third
Arbitrator, who shall act as the presiding
Arbitrator.
iii) The said arbitrators shall have full power
to open up, revise and review any decision,
opinion, direction, certificate of valuation of the
PHPA.
iv) If either of the parties fail to appoint its
arbitrators in pursuance of sub-clause (ii) above,
within 30 days after receipt of the notice of the
appointment of its arbitrators or the two
appointed Arbitrators fail to agree on third
Arbitrator within thirty days from the date of
their appointment then the appointment shall be
made, upon request of a party, by the Chief
Justice, Delhi High Court, India/Thimphu High
Court, Bhutan or any person or institutions
designated by him.
v) Neither party shall be limited in the
proceedings before such arbitrators to the
evidence or arguments put before any authority
herein above for the purpose of obtaining its
said decision. No decision given by any
authority in accordance with the foregoing
provisions shall disqualify it from being called
as a witness and giving evidence before the
arbitrators on any matter what-so-ever relevant
to the dispute or difference referred to the
arbitrators as aforesaid.
vi) The reference to arbitration may proceed
notwithstanding that the works shall not then be
or be alleged to be complete, provided always
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that the obligations of the PHPA, and the
Contractor shall not be altered by reason of the
arbitration being conducted during the progress
of the Works. Neither party shall be entitled to
suspend such Work to which the dispute relates
and payment to the Contractor shall be
continued to be made in terms of the Contract.
vii)a) All arbitration shall be held at New
Delhi, India/Thimphu, Bhutan.
b) The language of the arbitration
proceedings and that of all documents and
communications between the parties shall be
English.
viii) The decision of the majority of
arbitrators shall prevail.
ix) The cost of the arbitration as fixed by the
arbitrators shall be borne equally by the parties
unless the settlement agreement provides for a
different apportionment. However, the expenses
incurred by a party in connection with the
preparation, presentation etc. of its cases prior
to, during and after the arbitration proceedings
shall be borne by that party.
x) All awards of arbitration shall be in
writing and shall state reasons for the amount
awarded."
(Emphasis supplied)
6. Additionally, Clause 5 of the GCC, on which Mr. Bharat Singh
places great reliance, reads as under:
"5. Language and Law
i)a) The Contract documents shall be drawn up in
English. All correspondence and documents relating to
the bid, exchanged by the bidder and the PHPA, shall
be submitted in the prescribed form in English. All
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supporting documents and printed literature in
connection with the bid shall be preferably in English.
b) The law to which the Contract is to be subject
and according to which the Contract is to be construed
shall be the law for the time being in force in Bhutan
and within the jurisdiction of Thimphu courts.
ii) Documents Mutually Explanatory
Several documents forming the Contract are to be
taken as mutually explanatory of one another, but in
case of ambiguities or discrepancies, the documents
shall take precedence in the order in which they are set
out in the Proforma of Agreement (Annex-III)."
7. As is apparent from the reading of Clause 67 of the GCC, any
claim was, at the first instance, required to be raised before the
Engineer-In-Charge of the project. Dissatisfaction, with the decision
of the Engineer-In-Charge, entitled the petitioner to represent to the
Managing Director of the respondent, who was required to constitute a
Committee, with the Director (Technical), as its convenor. Rejection
of the claim by the said Committee entitled the petitioner to seek
recourse to arbitration.
8. The petition avers, and the respondent does not dispute, that the
petitioner's claims were submitted to, and successively rejected by the
Engineer-In-Charge as well as the Committee constituted by the
Managing Director of the respondent. The petitioner has, thus,
undisputedly become entitled to seek reference of the dispute to
arbitration.
9. On 28th July, 2020, a notice invoking arbitration was issued by
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the petitioner to the respondent, in which the petitioner suggested the
name of Hon'ble Mr. Justice Deepak Verma, a retired Judge of the
Supreme Court, as its arbitrator. The respondent was requested to
appoint its nominee arbitrator within 30 days from the said notice.
10. In its response, dated 4th August, 2020, the respondent while
agreeing to reference of the dispute to arbitration, asserted that the
arbitration would be covered not by the 1996 Act, but by the
Alternative Dispute Resolution Act of Bhutan, 2013 (hereinafter
referred to as "the 2013 Bhutan Act"), and that the place of arbitration
would be Thimphu. The respondent called upon the petitioner to
agree with these covenants and register for arbitration with the Bhutan
Alternative Dispute Resolution Centre.
11. The petitioner wrote back to the respondent on 7th August,
2020, disagreeing with the contention of the respondent that the
arbitration would abide by the 2013 Bhutan Act or that it would be
conducted at Thimphu. The petitioner asserted that the covenants of
the GCC clearly make the 1996 Act applicable to the arbitral
proceedings, and fixed the seat of arbitration at New Delhi.
12. As the situation between the petitioner and the respondent has,
thus, reached an impasse, the petitioner has invoked the jurisdiction of
this Court under Section 11(6) of the 1996 Act. Mr. Bharat Singh
would, however, submit that this Court does not possess any such
jurisdiction in the facts of the present case.
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13. The contest by Mr. Bharat Singh, to the jurisdiction of this
Court to entertain the present petition, is essentially founded on what
he perceives to be the correct interpretation of Clauses 5 and 67(ii) of
the GCC, when seen in conjunction. Mr Bharat Singh contends thus:
(i) Clause 67(ii) of the GCC made the basic principles and
procedures, contained in the 1996 Act, applicable in the absence
of an Arbitration Act in Bhutan. In the first place, therefore, the
1996 Act has not bodily, or by reference, been incorporated into
Clause 67(ii) of the GCC, which merely applies the "basic
principles and procedures", contained in the said Act. The basic
principles and procedures contained in the 2013 Bhutan Act,
were the same as those contained in the 1996 Act. As such,
applying the 2013 Bhutan Act would not infract, in any manner,
Clause 67(ii) of the GCC.
(ii) Besides, Clause 67(ii) of the GCC made the basic
principles and procedures of the 1996 Act applicable only "in
the absence of an Arbitration Act in Bhutan". This covenant, in
order to be correctly understood and interpreted, would have to
be read in juxtaposition with Clause 5 of the GCC, which made
"the law for the time being in force in Bhutan and within the
jurisdiction of Thimphu Courts", applicable to the contract. As
such, the very enactment of 2013 Bhutan Act, resulted in the
entire contract, ipso facto, being made subject thereto, and the
application of the 1996 Act stood, thereby, completely ousted.
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(iii) The applicable law would also be Bhutanese law. As
such, the 1996 Act, being an Indian statute, would not apply for
appointment of an arbitrator.
(iv) The project was located at Bhutan, and the parties are
located at Bhutan. The entire cause of action has arisen within
the jurisdiction of the Bhutan Court and, as such, this Court
ought not to exercise jurisdiction, even for appointment of an
arbitrator.
(v) Reliance has also been placed on the judgment of the
Supreme Court in Radha Sunder Dutta v. Mohd. Jahadur
Rahim 1 to assert that, where there is a conflict between two
provisions in a contractual instrument, the provision which
occurs earlier in the contract would have precedence. As such,
Mr. Bharat Singh submits that the issue of jurisdiction of this
Court, to entertain the present petition, would have to be gauged
on the anvil of Clause 5 of the GCC.
14. Mr. Gourab Banerji, learned Senior Counsel for the petitioner,
responded by submitting that the arguments of Mr. Bharat Singh were
completely tangential to the actual issue at hand. He drew my
attention to Clause 67(iv) of the GCC, which specifically entitles the
parties to approach either the Chief Justice of this Court or the High
Court of Thimphu, for appointment of the arbitrator. As such, he
submits, there being a specific dispensation, in the contract, allowing
1
AIR 1959 SC 24
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either party to approach this Court for appointment of an arbitrator, all
other covenants in the contract pale into insignificance. Reliance is
placed, in this context, on the recent judgment of this Court in Cars24
Services Pvt. Ltd v. Cyber Approach Workspace LLP 2.
15. Mr. Gourab Banerji also points out that the seat of arbitration is
not Thimphu, but New Delhi, India/ Thimphu, Bhutan, as per Clause
67(vii)(a) of the GCC. Even on the basis of the "seat of arbitration
test", therefore, Mr. Gourab Banerji would submit that this Court has
jurisdiction to adjudicate the present dispute and appoint the arbitrator
on behalf of the respondent.
16. Apropos the submission of Mr. Bharat Singh that Clause 67 was
to be read in juxtaposition with Clause 5 of the GCC, Mr. Banerji
submits that this argument loses sight of the fundamental distinction
between the substantive law governing the dispute and the curial law.
Clause 5, he points out, relates to the substantive law governing the
dispute, whereas Clause 67 deals with the curial law, and it would be
completely fallacious to confuse these two aspects. He draws my
attention to the following observations of the Supreme Court in
Government of India vs. Vedanta Ltd. & Ors. 3
"We will now briefly touch upon the four types of laws which
are applicable in an international commercial arbitration, and
court proceedings arising therefrom. These are:
a) The governing law determines the substantive
rights and obligations of the parties in the underlying
2
MANU/DE/2017/2020
3
2020 SCC OnLine SC 749
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commercial contract. The parties normally make a
choice of the governing law of the substantive contract;
in the absence of a choice of the governing law, it
would be determined by the tribunal in accordance
with the conflict of law rules, which are considered to
be applicable.
b) The law governing the arbitration agreement
must be determined separately from the law applicable
to the substantive contract. The arbitration determine
the validity and extent of the arbitration agreement;
limits of party autonomy, the jurisdiction of the
tribunal, etc.
c) The curial law of the arbitration is determined
by the seat of arbitration. In an international
commercial arbitration, it is necessary that the conduct
of the arbitral proceedings are connected with the law
of the seat of arbitration, which would regulate the
various aspects of the arbitral proceedings. The parties
have the autonomy to determine the choice of law,
which would govern the arbitral procedure, which is
referred to as the lex arbitri, and is expressed in the
choice of the seat of arbitration. The curial law governs
the procedure of the arbitration, the commencement of
the arbitration, appointment of arbitrator/s in exercise
of the default power by the court, grant of provisional
measures, collection of evidence, hearings, and
challenge to the award. The courts at the seat of
arbitration exercise supervisory or "primary"
jurisdiction over the arbitral proceedings, except if the
parties have made an express and effective choice of a
different lex arbitri, in which event, the role of the
courts at the seat will be limited to those matters which
are specified to be internationally mandatory and of a
nonderogable nature.
d) The lex fori governs the proceedings for
recognition and enforcement of the award in other
jurisdictions. Article III of the New York Convention
provides that the national courts apply their respective
lex fori regarding limitation periods applicable for
recognition and enforcement proceedings; the date
from which the limitation period would commence,
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whether there is power to extend the period of
limitation. The lex fori determines the court which is
competent and has the jurisdiction to decide the issue
of recognition and enforcement of the foreign award,
and the legal remedies available to the parties for
enforcement of the foreign award."
14. Even without entering into the fine niceties of "conflict of
jurisdiction" law, the controversy, to my mind, is elementary. Clause
67(iv) of the GCC is clear and categorical. It specifically states that,
on failure of the arbitral mechanism provided in the contract, either
party could approach the Chief Justice of this Court or the High Court
of Thimphu, to appoint the arbitrator. Where such a specific
contractual dispensation exists, this Court has already taken a view in
its recent decision in Cars242, that such specific dispensation would
take precedence over other contractual covenants. As in the present
case, this Court was seized, in the said case, with a similar situation,
wherein though the seat of the arbitration was fixed at New Delhi,
India, specific jurisdiction for appointment of the arbitrator was vested
in the Court of competent jurisdiction at Haryana. Following the
judgment of the Supreme Court in Mankastu Impex Pvt. Ltd. v.
Airvisual Ltd. 4, which accorded pre-eminence to such contractual
covenants, catering to specific exigencies contemplated by the 1996
Act, it was held that, once the contract permitted the parties to
approach the Courts at Haryana for appointment of the arbitrator, the
jurisdiction in that regard, would be possessed by that Court alone.
Para 53 of the judgement in Cars242 may, in this context, be
reproduced thus:
4
(2015) 12 SCC 225
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"As already observed hereinabove, I am not inclined to agree
with this submission. Once the agreement between the parties
specifically confers Section 11 jurisdiction, for appointment of
an arbitrator, on courts at Haryana, this Court, in my view,
would be doing violence to the contractual covenant, if it were
to exercise such jurisdiction. There is no judgment of the
Supreme Court, to which my attention has been invited, which
permits a Court to exercise jurisdiction contrary to the
exclusive jurisdiction clause in the agreement between the
parties. Rather, the decisions in Swastik Gases Pvt. Ltd.,
(2013) 9 SCC 32 and Brahmani River Pellets Ltd. - both of
which have been approvingly cited in BGS SGS Soma JV,
(2020) 4 SCC 234 - emphasised the need to adhere to the
exclusive jurisdiction clause. At the cost of repetition yet
again, all decisions, which decide the question of territorial
jurisdiction on the basis of the seat of arbitration as delineated
in the agreement, deal with contracts in which there is no
separate exclusive jurisdiction clause, fixing jurisdiction
elsewhere. Where such a clause exists, and, especially, where
such a clause fixes Section 11 jurisdiction with courts located
elsewhere, I am not inclined to hold that this Court can,
contrary to the explicit words and intent of said clause,
exercise Section 11 jurisdiction and appoint an arbitrator."
(Emphasis supplied)
15. In the present case, too, Clause 67(iv) of the GCC entitles either
party, on failure of the arbitral mechanism provided in the GCC, to
approach this Court or the High Court of Thimphu, for appointment of
the arbitrator. Section 11 jurisdiction, thereby, stands specifically
conferred on this Court, by contract between the parties, and I fail to
understand how the respondent could contend otherwise. The choice,
between this Court and the High Court of Bhutan at Thimphu has been
left to the party who seeks to approach the court for appointment of
the arbitrator. Either which way, it cannot be gainsaid that this Court
does not possess the jurisdiction to entertain the prayer of the
petitioner for appointment of the arbitrator on behalf of the
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respondent. Even on this sole ground, therefore, the present petition
under Section 11(6) of the 1996 Act, would be maintainable before
this Court.
16. Significantly, Mr. Bharat Singh did not choose to advance any
submission regarding Clause 67(iv) of the GCC.
17. Mr. Bharat Singh has, instead, sought to question the very
applicability of the 1996 Act. According to him, a conjoint reading of
Clauses 5 and 67(ii) of the GCC would result in the applicability of
the 1996 Act being entirely eviscerated, on the enactment of the 2013
Bhutan Act. According to Mr. Bharat Singh, the 1996 Act was
applicable only till the enactment of 2013 Bhutan Act. This, in his
submission, would also accord with Clause 5(b), which makes the
contract subject to the law applicable in Bhutan.
16. I am unable to agree. Acceptance of this submission of Mr.
Bharat Singh, in my view, would, in fact, require this Court to rewrite
Clause 67(ii) of the GCC. There is nothing in the said Clause, which
indicates that the applicability of the 1996 Act, is by way of an ad hoc
arrangement, to subsist only till the enactment of an Arbitration Act in
Bhutan. Mr. Bharat Singh, in my view, is seeking to read far too
much into the expression "in the absence of an Arbitration Act in
Bhutan", as contained in Clause 67(ii). All that, this phrase indicates
is that there was no Arbitration Act in Bhutan at the time when the
contract was executed and that the Arbitral Tribunal would be guided
by the principles and procedures contained in the 1996 Act. There is
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not even the hint of a suggestion, in Clause 67(ii), that the 1996 Act
would cease to apply, on an arbitration statute coming into effect in
Bhutan. The words used in Clause 67(ii) cannot, by any stretch of
imagination, be extrapolated to mean that, immediately on enactment
of an Arbitration Act in Bhutan, the 1996 Act would vanish into thin
air, insofar as the contract was concerned, and that the Bhutan Act
would stand substituted in place of the 1996 Act, in Clause 67(ii).
This, essentially, would require rewriting of the contractual provision,
which no Court can do.
17. To reiterate, there is nothing in Clause 67(ii) which indicates
that the stipulation, therein, that the Arbitral Tribunal would be guided
by the principles and procedures contained in the 1996 Act, would
subsist only till the enactment of the Arbitration Act in Bhutan, or that
until there is an enactment of the Arbitration Act in Bhutan, or that,
immediately on enactment of 2013 Bhutan Act, the procedure for
appointment of arbitrator under the said Act would come into
application and the 1996 Act would cease, pro tanto, to apply.
18. Mr. Bharat Singh also sought to submit that Clause 67(ii) of the
GCC merely applied the "basic principles and procedures" contained
in the 1996 Act, and did not bodily incorporate the Act into the
Clause. He has advanced a somewhat ingenious submission that, as
the principles and procedures contained in the 2013 Bhutan Act are
similar to those contained in the 1996 Act, those principles and
procedures should apply, once the 2013 Bhutan Act come into being,
as application of the principles and procedures stipulated in the 2013
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Bhutan Act would also be in accordance with Clause 67(ii) of the
GCC. The argument is not only unacceptable, but is largely difficult
to understand, even on first principles. To my mind, Clause 67(ii) of
the GCC clearly stipulates that the Arbitral Tribunal would be guided
by the principles and procedures contained in the 1996 Act, without
altering this dispensation at any future point of time, either upon
enactment of the 2013 Bhutan Act, or otherwise. Whether the
principles and procedures for appointment of the arbitrator, under the
2013 Bhutan Act are, or are not, similar, or even identical, to those
contained in the 1996 Act is, to my mind, wholly irrelevant. The point
for determination is as to which Act would apply, and has obviously to
be answered as per the contractual covenants which, in any
relationship governed by contract, are supreme. Seen thus, the
procedure for appointment of the arbitrator, which also finds mention
in the same covenant, would necessarily abide by the 1996 Act. The
enactment of the 2013 Bhutan Act cannot result in rewriting of Clause
67(ii) of the GCC, making the 2013 Bhutan Act applicable to the
procedure to be followed by the Arbitral Tribunal as well as to the
exercise of appointment of the arbitrator, consequent on the arbitral
mechanism in the contract having failed.
20. I do not deem it necessary to enter any specific observation
regarding the applicability of the judgment of the Supreme Court in
Radha Sunder Dutta1, on which Mr. Bharat Singh has relied. It is
axiomatic, in law, that, if two covenants in a contractual instrument
are in conflict with each other, and are irreconcilable, the former
would have precedence over the latter. No such occasion, however,
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arises in the present case. There is no conflict between Clauses 5 and
67(ii) of the GCC. As Mr. Banerji has correctly pointed out, and as
enunciated most recently by the Supreme Court in Vedanta Ltd.3,
Clauses 5 and 67(ii) of the GCC deal with two separate dispensations,
the former dealing with the substantive law governing resolution of
the dispute between the parties under the contract, and the latter
relating to the applicable curial law. These provisions, therefore,
operate in different spheres, and there is no conflict between the two,
nor, for that matter, is there even occasion for any such conflict. As
such, no occasion arises to seek recourse to the principles enunciated
in Radha Sunder Dutta1.
21. To my mind, therefore, the objection, of Mr. Bharat Singh,
regarding the lack of territorial jurisdiction of this Court to entertain
the present petition has necessarily to be rejected.
22. The arbitral procedure, as set out in the GCC, has failed,
inasmuch as, though the petitioner suggested the name of Hon'ble Mr.
Justice Deepak Verma, as its arbitrator, the respondent failed to
appoint its arbitrator within the time stipulated in the GCC, thereby
necessitating the appointment of an arbitrator, on behalf of the
respondent, by this Court.
23. Accordingly, this Court appoints Hon'ble Ms Gita Mittal,
former Chief Justice of the High Court of Jammu and Kashmir and
Acting Chief Justice of this Court, as the arbitrator on behalf of the
respondent. Her contract details are as follows:
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Hon'ble Ms Justice Gita Mittal (Retired),
Former Chief Justice of the High Court of Jammu & Kashmir,
(Address : E-327, Greater Kailash Part - I, New Delhi - 110048
Email id : [email protected]
Tel. No.: +91 98113 22190 )
24. The respondent is directed to contact the learned arbitrator, as
per the details furnished hereinabove, within a period of three days
from the forwarding of a copy of this judgement to Mr Bharat Singh
by e-mail by the Registry or the uploading of this judgement on the
website of this Court, whichever is later, so as to obtain the
concurrence of the learned arbitrator, to arbitrate on the disputes
between the parties.
25. The learned Arbitrator would be entitled to fees in accordance
with the Fourth Schedule to the 1996 Act.
26. The two arbitrators would, thereafter, proceed to appoint a
presiding arbitrator, in accordance with the dispensation to that effect
as contained in the GCC, and the arbitral proceedings would,
thereafter, take off, in accordance with the provisions of the 1996 Act.
27. The petition stands disposed of in the aforesaid terms with no
orders as to costs.
C. HARI SHANKAR, J.
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