Madras High Court
Also At vs Carriage Works – Perambur Southern ... on 22 November, 2022
Author: Senthilkumar Ramamoorthy
Bench: Senthilkumar Ramamoorthy
Arb.O.P.(Com. Div.)No.526 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 22.11.2022
CORAM
THE HONOURABLE MR.JUSTICE SENTHILKUMAR RAMAMOORTHY
Arb.O.P.(Com. Div)No.526 of 2022
Sherisha Rooftop Solar SPV Three Private Limited,
No.1/171, Old Mahabalipuram Road,
Thiruporur, Kancheepuram,
Chennai, Tamil Nadu-603 110;
Also at:
11th Floor, Bascon Futura,
SV IT Park, Venkatanarayana Road,
T Nagar, Chennai, Tamil Nadu-600 017
Represented by its Authorized Signatory,
Mr.Kalpesh Kumar ... Petitioner
vs.
Carriage Works – Perambur Southern Railway,
Ayanavaram, Chennai, Tamil Nadu-600 023
Represented by Deputy Chief Electrical Engineer,
Carriage Works, Perambur, Chennai ... Respondents
PRAYER: Original Petition filed under Section 11(6) of the Arbitration and
Conciliation Act 1996 pleased (a) Appoint a sole arbitrator, in accordance
with the provisions of the Arbitration and Conciliation Act, 1996 to
adjudicate upon the disputes/differences between the Petitioner and the
Respondent under the Contract, (b) Direct the Respondent to pay the costs of
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Arb.O.P.(Com. Div.)No.526 of 2022
these proceedings; and (c) to pass such other or further order(s) as this
Hon'ble Court may deem fit in the circumstances of the case and thus render
justice.
For Petitioner : Mr.Arun Karthik Mohan for
M/s.Ashwini Vaidialingam
For Respondent : Mr. Rajesh Vivekanandan
Deputy Solicitor General of India
ORDER
The petitioner seeks the constitution of an arbitral tribunal to adjudicate disputes arising out of a Power Purchase Agreement dated 24.12.2019 (the PPA).
2. The petitioner states that the aforesaid PPA was entered into by the petitioner and the respondent herein. Article 33 thereof deals with dispute resolution. The said Article provides for the resolution of disputes through conciliation in the first instance and, if such conciliation fails, for reference of such disputes to arbitration. If the claims made by the aggrieved party are of a total value up to Rs.5 million, a sole arbitrator shall be appointed. If the claims exceed Rs.5 million, a panel of three arbitrators should be appointed.
3. Upon disputes arising, the petitioner issued a communication dated 2/10 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com. Div.)No.526 of 2022 19.06.2022 through its lawyers. At paragraph 13 of such communication, the key points of disputes between the parties were summarized. By invoking Article 33.3 of the PPA, the petitioner nominated an arbitrator and called upon the respondent to follow suit. This communication was responded to by the respondent on 05.07.2022. In the reply, the respondent raised several objections. The first objection was on the ground that the request for arbitration has been made by counsel and that no authorization letter was received from the petitioner. The second objection was on the ground that the arbitral tribunal should be formed in accordance with Article 33 of the PPA. The present petition is filed in these facts and circumstances.
4. Learned counsel for the petitioner submitted that clause 33.3.1 is unenforceable insofar as it prescribes the method of constitution of the arbitral tribunal. Since the relevant clause provides for the appointment of either a sole arbitrator or a panel of three arbitrators, as the case may be, from and out of a panel of serving or retired government employees or of the public sector by the respondent, learned counsel submits that the said clause contravenes Section 12(5) read with Schedule VII of the Arbitration and 3/10 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com. Div.)No.526 of 2022 Conciliation Act 1996 (the Arbitration Act). He further submits that the respondent did not provide a panel in response to the notice under Section 21 of the Arbitration Act. Therefore, by relying upon the judgment of the Hon'ble Supreme Court in Datar Switchgears Ltd. v. Tata Finance Ltd 2000 Supp 2 JT 226, it was submitted that the respondent forfeited its right to provide a panel once the petition under Section 11 was filed.
5. Learned standing counsel for the respondent opposes this petition on the following grounds:
(i) the Section 21 notice was not issued by an authorized representative. By referring to clause 1.2.1(u), he contended that any notice under the PPA would be valid and effective only if issued in writing under the hand of a duly authorized representative of such party. Since such authorization was not provided, he states that the Section 21 notice is not valid.
(ii) The next contention is that the request for constitution of the arbitral tribunal by the petitioner is not in conformity with clause 33.3.1. In order to substantiate this contention, reliance is placed on the judgment of the 4/10 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com. Div.)No.526 of 2022 Hon'ble Supreme Court in Municipal Corporation, Jabalpur v. M/s.Rajesh Construction Co., Civil Appeal No.1945 of 2007. In the said case, the Hon'ble Supreme Court interfered with the appointment of a retired Chief Justice of the Punjab and Haryana High Court as the sole arbitrator on the ground that it contravened clause 29 of the relevant contract.
6. The PPA admittedly provides for dispute resolution by arbitration if conciliation fails. The petitioner has placed on record documents evidencing attempts at conciliation. Clause 33.3.1 and 33.3.2 are set out below:
33.3 Arbitration 33.3.1. If the efforts, to resolve all or any of the Disputes through conciliation fail, then such disputes shall be referred to a sole arbitrator if the total value of the claim is up to Rs.[5million]; and to a panel of three arbitrators if total value of claims is [Railways] than Rs.[5 million]. For this purpose, Railways will make out a panel of engineers with the requisite qualification and professional experience relevant to the field to which the Agreement relates. This panel will be from among serving or retired government employees or of public sector. Railways shall provide a panel of three arbitrators for claims up to Rs.[5 million] and a panel of five 5/10 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com. Div.)No.526 of 2022 arbitrators for claims of Railways than Rs.[5 million]. SPD shall choose the sole arbitrator from the panel of three and/or one arbitrator from the panel of five in case three arbitrators are to be appointed. The Railways shall also choose one arbitrator from this panel of five and the two so chosen will choose the third arbitrator from the panel only. The arbitrator(s) shall be appointed within a period of [30] days from the date of receipt of written notice/demand of appointment of arbitrator from either Party.
33.3.2. The venue of such arbitration shall be Chennai. The arbitral award shall be binding on both Parties. The cost of arbitration shall be equally shared by both Parties.
7. The aforesaid clause provides for the formation of an arbitral tribunal consisting of a sole arbitrator if the total value of claims is up to Rs.5 million and by a panel of three arbitrators if the total value of claims exceeds Rs.5 million. The petitioner asserts that the total value of claims is in excess of Rs.5 million. The annexure to the Section 21 notice indicates that the claim is in the region of Rs.2.45 crore, which is equivalent to Rs.24.51 million. The procedure for formation of the tribunal is also specified. The panel is required to be from serving or retired government employees or employees of the 6/10 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com. Div.)No.526 of 2022 public sector. Section 12(5) of the Arbitration Act stipulates that any person whose relationship with the parties or counsel or subject matter falls within any category specified Schedule VII shall be ineligible for appointment as the arbitrator unless parties waive this requirement after disputes arose between them. The first entry under Schedule VII pertains to an arbitrator who is an employee of a party. Since clause 33.3.1 specifies that the panel would be formed from serving or retired government employees and does not exclude employees of the respondent, the clause clearly contravenes Section 12(5) read with Schedule VII. To that extent, clause 33.3.1 cannot be enforced. Moreover, the respondent did not provide a panel to the petitioner upon receipt of the Section 21 notice.
8. The objection that the notice should be issued by an authorized representative is liable to be rejected out of hand inasmuch as the lawyer for the petitioner stated categorically that the notice was issued under instructions from the petitioner. In terms of the Advocate Act 1961, undoubtedly, an advocate is entitled to act on behalf of the client under instructions from such client.
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9. Notwithstanding the unenforceability of clause 33.3.1 as regards the manner of formation of the arbitral tribunal, the intention to resolve disputes through arbitration is manifest in the said clause. To the extent such clause is enforceable, full efforts should be made to give effect thereto. Accordingly, a three member panel should be formed because the claims are well in excess of Rs.5 million.
10. Accordingly, Arb.O.P.(Com.Div.) No.526 of 2022 is allowed by appointing Mr.Justice K.Kannan, former Judge of this Court and Punjab and Haryana High Court, residing at New No.3, Old No.11, Lakshmi Colony, North Crescent Road, T.Nagar, Chennai-600 017, Mobile: 97800 08145, 044-28154145, 044-48687374 email:[email protected] as the Presiding Arbitrator and Ms.Chitra Narayan, Advocate, Mobile No.9094031934 and Mr.P.Giridharan, Advocate, Mobile No.9884672733, are appointed as arbitrators. The arbitral tribunal is called upon to enter upon reference and adjudicate the dispute. The fees and expenses in relation to the arbitral proceedings shall be decided in consultation with the parties. 8/10 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com. Div.)No.526 of 2022 22.11.2022 Index : Yes Internet: Yes kal SENTHILKUMAR RAMAMOORTHY, J kal 9/10 https://www.mhc.tn.gov.in/judis Arb.O.P.(Com. Div.)No.526 of 2022 Arb.O.P.(Com. Div)No.526 of 2022 22.11.2022 10/10 https://www.mhc.tn.gov.in/judis