Telangana High Court
Fourth Partner Energy Pvt Ltd vs Dr. Shakuntala Misra National ... on 27 September, 2022
Author: A. Abhishek Reddy
Bench: A. Abhishek Reddy
THE HON'BLE SRI JUSTICE A. ABHISHEK REDDY
ARBITRATION APPLICATION No.76 OF 2021
ORDER:
This application is filed under Section 11 (5) and (6) of the Arbitration and Conciliation Act, 1996 (for short 'the Act'), seeking appointment of an Arbitrator in terms of the Power Purchase Agreement dated 06.10.2017 (in short 'PPA') entered between the parties.
Brief facts of the case are that applicant and respondent have entered into Power Purchase Agreement dated 06.10.2017 for the purpose of setting up a Solar Power Plant at the premises of the Respondent-University. Pursuant thereto, the applicant has invested huge amounts and set up the solar power plant at the premises of the respondent-University. The term of the agreement was for a period of 25 years from the date of commissioning of the solar power plant. The solar power plant was commissioned on 10.07.2018 and the plant has generated 6,71,572 units of electricity for the period from 10.07.2018 to 15.07.2019. However, in spite of repeated demands, the bills raised by the applicant from July, 2018 onwards remained unpaid. Thereafter, the plant was directed to be switched off by the respondent vide letter dated 15.06.2019 and accordingly the plant was switched off on 16.07.2019. After issuing several communications to the respondent for resolving the issues, the 2 applicant got issued the notice dated 07.08.2020 by invoking Article 16.3.1 of the PPA calling upon the respondent to pay the due amounts. In spite of receipt of the said notice, the respondent has failed to cure the defaults within the timelines. Therefore, the applicant in exercise of the right vested under clause 16.4 of the PPA got issued a legal notice dated 29.10.2020 terminating the PPA and calling upon the respondent to immediately pay the termination charges of Rs.2,95,33,000/- along with outstanding amount and late payment charges of Rs.92,72,915/-. In response thereto, the respondent got issued a reply notice dated 02.12.2020 raising untenable grounds and refusing to comply with the demands of the applicant. Hence, the applicant by invoking clause 17.2 of the PPA issued the legal notice dated 30.12.2020 nominating Mr. V. Subramanian as the arbitrator for resolving the issues. However, the respondent has not responded to the said notice. Hence, the applicant has filed the present Arbitration Application.
The respondent has filed a counter stating that the applicant has approached the Court with unclean hands and suppressed the material facts as the petitioner has not disclosed about the receipt of the reply to the legal notice dated 30.12.2020 by the University and also the subsequent reminder. That the PPA itself is an invalid and non-enforceable document 3 as the same was executed by the then Registrar of the University in a collusive manner with the petitioner. That the Executive Council of the University is the only competent authority to enter into or cancel any contract on behalf of the University. It is further contended that except the person who has signed the contract is named as the proposed arbitrator, which is contrary to the provisions of the Act. Hence, prayed for dismissal of the Arbitration Application.
The applicant has filed a rejoinder mainly stating that the respondent having admitted the existence of the agreement between the parties, now cannot raise untenable ground of mala fide to wriggle out of its liabilities. Further it is stated that the person who has signed the contract on behalf of the Company and the proposed Arbitrator are totally two different persons and merely because the names are similar, it cannot be construed that they are one and the same person.
Heard Sri K. Vivek Reddy, learned Senior Counsel appearing on behalf of applicant, and Sri Sudeep Seth, learned Senior Counsel, appearing on behalf of Sri C. Vikram Chandra, learned counsel for the respondent. Perused the record.
A perusal of the Power Purchase Agreement dated 06.10.2017 discloses that Clause 17.2 thereof contains the arbitration clause, which reads as follows: 4
17.2 Arbitration :
(a) In the event of any dispute, controversy or difference between the Parties arising out of or relating to this Agreement (including a dispute relating to the validity or existence of this Agreement and any obligations arising out of or about this Agreement( (a Dispute) shall be referred to and finally resolved by arbitration.
(b) ......
(c) ......
(d) The place of the arbitration shall be Hyderabad
and the language of the arbitration shall be English. The
arbitration shall be conducted in accordance with the Rules which Rules are deemed to be incorporated by reference in this Article.
(e) ......
(f) ......
(g) ......
(h) ......
Legal notice dated 30.12.2020 was sent by the applicant proposing the name of Sri V. Subramanian, CEO and Secretary General at Indian Wind Energy Association and former Secretary General to the Government of India in the Ministry of New and Renewable Energy as the sole Arbitrator.
The main grounds on which the present application is opposed by the respondent is that the arbitrator nominated by the applicant is none other than the CEO of the applicant Company which is totally impermissible under the Act. Further the learned counsel has contended that there is no legally enforceable agreement between the parties which can be referred to the arbitrator. That the so-called contract entered 5 between the applicant and the respondent University has been entered by the then Registrar of the University, who had no jurisdiction or authority to do so on behalf of the University without there being any resolution or authorization from the Executive Council of the University. It is further contended that Executive Council of the University is alone competent to enter into any contract and therefore the contract relied by the petitioner is an invalid one. That the contract is a result of the collusion between the applicant and the then Registrar of the University. That the University on coming to know about the same, has registered a criminal case against the then Registrar. Learned counsel has further stated that even though the respondent has given a reply to the legal notice dated 30.12.2020 issued by the applicant, the applicant has stated that no reply was given by the respondent, which is clear suppression of material fact. Therefore, the present petition is liable to be rejected on the sole ground that the applicant has approached this Court with unclean hands. To buttress his contention that any person having interest in the subject matter of the arbitration cannot be appointed as an Arbitrator, the learned counsel has relied on Union of India vs. Bharat Battery Manufacturing Co. (P) Ltd.,1 and Northern Railway Administration, Ministry of Railway, New Delhi vs. Patel 1 (2007) 7 SCC 684 6 Engineering Company Limited2. However, the learned counsel has fairly stated that he has no objection for appointing an Arbitrator other than the one suggested by the applicant. Having regard to the above, this Court is not inclined to go in to the above objection raised.
Admittedly, there is an arbitration clause in the contract entered between the parties and this Court cannot go into the legality or otherwise of the said contract while dealing with the Arbitration Application under Section 11 (6) of the Act.
In IBI Consultancy (India) (P) Ltd. v. DSC Ltd.3, the Hon'ble Supreme Court while dealing with the Arbitration Application filed under Section 11(6) read with Section 11(9) of the Arbitration and Conciliation Act, for appointment of an arbitrator to adjudicate the disputes that have arisen between the parties therein in connection with the contracts in question, has held, at para 8, as under:
8. The first and the foremost thing is the existence of an arbitration agreement between the parties to the petition under Section 11 of the Act and the existence of dispute(s) to be referred to arbitrator is condition precedent for appointing an arbitrator under Section 11 of the Act. It is also a well-settled law that while deciding the question of appointment of arbitrator, the court has not to touch the merits of the case as it may cause prejudice to the case of the parties. The scope under Section 11(6) read with Section 11(9) is very limited to
2 (2008) 10 SCC 240 3 (2018) 17 SCC 95 7 the extent of appointment of arbitrator. This Court has to see whether there exists an arbitration agreement between the parties and if the answer is in the affirmative then whether the petitioner has made out a case for the appointment of arbitrator."
Further, in Duro Felguera, S.A. v. Gangavaram Port Ltd.,4 the Hon'ble Supreme Court, at para 59, has held as under:
"The scope of the power under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. [SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] and Boghara Polyfab [National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 :
(2009) 1 SCC (Civ) 117] . This position continued till the amendment brought about in 2015. After the amendment, all that the courts need to see is whether an arbitration agreement exists nothing more, nothing less. The legislative policy and purpose is essentially to minimise the Court's intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected."
Having regard to the above, without going into the merits or demerits of the case, and also the judgments of the Hon'ble Supreme Court in IBI Consultancy (India) (P) Ltd. and Duro Felguera, S.A. (referred supra), this Court deems it fit to allow the Arbitration Application and refer the matter for arbitration to be conducted by a sole arbitrator.
4 (2017) 9 SCC 729 8 In the result, the Arbitration Application is allowed appointing Sri Challa Kodanda Ram, retired Judge of the High Court for the State of Telangana, as the sole Arbitrator to arbitrate on the disputes between the applicant and the respondent and the said arbitrator shall enter on reference and proceed with, as enjoined by the Act.
The learned Arbitrator shall fix his remuneration as per the statutory provisions. He shall also fix the costs and expenses of the secretarial assistance for the arbitration proceedings upon deliberation and consultation with the parties. All the costs and expenses of the arbitration proceedings shall be borne by both the parties in equal share. The learned Arbitrator is requested to complete arbitration proceedings, and pass an award at the earliest, preferably within six months from the date of commencement of the arbitral proceedings. It is made clear that this order does not preclude the respondent from raising all legally tenable objections as may be permissible under the law.
Miscellaneous Applications, if any, pending in the Arbitration Application shall stand closed.
____________________ A. ABHISHEK REDDY, J Date : 27.09.2022 sur