Delhi High Court
Usae Equipment Private Limited vs Krishna Shanker Tripathi on 24 August, 2016
Author: Vibhu Bakhru
Bench: Vibhu Bakhru
$~2
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB.P. 139/2016
USAE EQUIPMENT PRIVATE LIMITED ..... Petitioner
Through: Mr Dayan Krishnan, Senior Advocate
with Mr R. Chandrachud and Mr D.
Terdinand, Advocates.
versus
KRISHNA SHANKER TRIPATHI ..... Respondent
Through: Dr Anurag Kumar Aggarwal, Mr Umesh Mishra and Mr Karan Bahal, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU VIBHU BAKHRU, J
1. The petitioner has filed the present petition under Section 11 of the Arbitration and Conciliation Act, 1996 inter alia praying that this Court may be pleased to appoint an Arbitrator for adjudication of the disputes that have arisen between the parties in respect of the USAE Equipment Private Limited Employment Agreement dated 18.04.2011 (hereafter „the Agreement‟).
2. Mr. Dayan Krishnan, the learned senior counsel appearing for the petitioner drew the attention of this Court to the arbitration clause contained in the Agreement and submitted that although in terms of Clause 14.3 of the Agreement, the petitioner has the right to appoint an arbitrator, the petitioner would have no objection if an independent arbitrator is appointed by this Court. Article 14 of the Agreement is set out below:-
"14. ARBITRATION 14.1 Where any controversy, claims dispute or disagreement arises between the Employee and the Company as to the interpretation or application of any of the terms, conditions, requirements or obligation under this Agreement or the performance hereof which the Parties are unable to resolve by agreement, the Parties hereby agree to refer the controversy, dispute or disagreement to arbitration in accordance with the provisions of Arbitration and Conciliation Act, 1996. 14.2 The Parties hereby agree that a matter may be referred to arbitration as provided herein, the Parties shall nevertheless, pending the resolution of the controversy, dispute or disagreement, continue to fulfil their obligations under this Agreement, so far as they are reasonably able to do so.
14.3 The Company reserve its right to refer such disputes to be adjudicated by a sole arbitrator appointed by the Company and the Employee and his/her decision shall be final and binding on the parties hereto. The place of arbitration shall be New Delhi. The Court at New Delhi India alone shall have exclusive jurisdiction to deal with all matters relating to or arising out of the present Agreement.
14.4 All interpretations shall be construed reasonably for furtherance and promotion of the project."
3. There is no dispute as to the existence of the aforesaid Agreement. However, the learned counsel appearing for the respondent submits that the arbitration clause is invalid as according to him it lacks mutuality of contract and, thus, is unenforceable. He referred to the decision of this Court Lucent Technologies Inc. v. ICICI Bank Limited & Ors.:MANU/DE/2717/2009 in support of his contention that an agreement which is unilateral and lacks mutuality is not enforceable and would also be void under Section 28 of the Indian Contract Act, 1872. In addition, the learned counsel also referred to the decision of the Supreme Court in Dharma Prathishthanam v. Madhok Construction (P) Ltd.: (2005) 9 SCC 686 and on the strength of the said decision contended that one party cannot usurp the jurisdiction and proceed to act unilaterally; therefore, a unilateral appointment and reference would be illegal.
4. The learned counsel further emphasised that in terms of Clause 14.3 of the Arbitration Agreement, the right to refer the disputes to arbitration was reserved exclusively with the petitioner and, therefore, the arbitration clause was void and unenforceable.
5. I have heard the learned counsel for the parties.
6. In my view, the submissions advanced by the learned counsel for the respondent are fundamentally flawed. A bare perusal of clause 14.3 of the Agreement indicates that it only refers to the right of the company to refer the disputes to a Sole Arbitrator to be appointed by the company. This clause cannot be read to mean that only the company (petitioner) has a right to refer the disputes to arbitration, as is contended by the learned counsel for the respondent.
7. A plain reading of Clause 14.1 indicates that the parties had agreed to refer all disputes as to interpretation or application of any of the terms, conditions, requirements or obligation under the Agreement or the performance thereof to arbitration. Clause 14.3 must be read in conjunction to Clause 14.1 of the Agreement and cannot be read independently. The expression „such disputes' as used in Clause 14.3 of the Agreement, obviously, refers to the disputes as specified in Clause 14.1 of the Agreement. The right reserved to the Company (the petitioner) under the said clause is to make a reference to a sole arbitrator appointed by it. Clause 14.3 does not dilute the import of Clause 14.1 in any manner but only reserves to the petitioner, a right to refer disputes to a Sole Arbitrator appointed by it.
8. The decision in the case of Lucent Technologies (surpa) is wholly inapplicable in the facts and circumstances of this Case. In that case, the relevant clause of the agreement between the parties read as under:-
"Governing Law and Jurisdiction The Financing Agreement shall be governed by and construed in accordance with Indian law. The courts at Delhi shall have jurisdiction in respect of all matters related to the Financing Agreements. The Lenders reserve their right to approach any other alternate dispute resolution forum with it venue at Delhi, and the Borrower, the Sponsors and the Guarantor, as the case may be, shall submit to such forum."
9. As is plainly evident from the language of the said clause, the borrower did not have any right to refer any dispute to arbitration or approach any alternate dispute resolution forum; in fact, one of the controversies raised in the above matter was whether the aforesaid clause could be considered as an arbitration clause at all. The decision rendered by this Court in Lucent Technologies (surpa) must be read in the context of the subject clause with which the court was concerned in that case. The reliance placed by the respondent on the said decision is, thus, completely out of context.
10. The decision in the case of Dharma Prathishthanam (supra) is also not applicable in the facts of the present case. In that case, the Arbitration clause read as under:-
"Settlement of disputes shall be through arbitration as per the Indian Arbitration Act"
11. The respondent therein unilaterally appointed one Sh. Swami Dayal as a Sole Arbitrator. The appellant (therein) did not participate in the arbitration proceedings. The Arbitrator proceeded ex parte and made an award. It is in that context, the Court observed as under:-
"The essence of arbitration without assistance or intervention of the Court is settlement of the dispute by a Tribunal of the own choosing of the parties. Further, this was not a case where the arbitration clause authorized one of the parties to appoint an arbitrator without the consent of the other. Two things are, therefore, of essence in cases like the present one: firstly, the choice of the Tribunal or the arbitrator; and secondly, the reference of the dispute to the arbitrator. Both should be based on consent given either at the time of choosing the arbitrator and making reference or else at the time of entering into the contract between the parties in anticipation of an occasion for settlement of disputes arising in future."
12. Since in the aforesaid case, the Arbitrator had been appointed unilaterally, the Court held that the procedure followed and the methodology adopted by the respondent was wholly unknown to law. Consequently, appointment of the Arbitrator; reference of the disputes; ex parte proceedings; and award given by the Arbitrator, were held to be void ab initio.
13. The decision in Dharma Prathishthanam (supra) is not an authority for the proposition that an arbitration agreement cannot provide that the right to appoint an Arbitrator would vest with one party. On the contrary, the Supreme Court had expressly observed that the essence of Arbitration is settlement of disputes by a Tribunal of own choosing and the parties could give consent for appointment of an Arbitrator while making the reference or at the time of entering into the contract. Thus, if at the time of entering into the contract, the parties agree that one of them would have the right to appoint a sole arbitrator, it would not be open for the other party to contest the same at a later stage.
14. In the present case, even though the Arbitration clause entitled the petitioner to appoint an Arbitrator, the petitioner has given up the said right and has requested the Court to appoint an Arbitrator.
15. For the reasons stated above, the contentions advanced on behalf of the respondent, cannot be accepted.
16. Accordingly, it is directed that an Arbitrator be appointed under the Rules of the Delhi International Arbitration Centre (DIAC). The representatives of the parties shall appear before the co-ordinator, DIAC on 21.09.2016 at 10:30 AM. The Arbitration shall be conducted under the aegis of DIAC and in accordance with its Rules.
17. The petition is disposed of.
VIBHU BAKHRU, J AUGUST 24, 2016 MK