Delhi High Court
C.E. Constructions Ltd. And Anr. vs Intertoll Ics India (P) Ltd. And Ors. on 21 November, 2014
Author: Rajiv Shakdher
Bench: Rajiv Shakdher
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 17.11.2014
% Judgment delivered on: 21.11.2014
+ OMP1282/2014
C.E. CONSTRUCTIONS LTD.
AND ANR. ..... PETITIONERS
VERSUS
INTERTOLL ICS INDIA (P) LTD.
AND ORS. ..... RESPONDENTS
Advocates who appeared in this case:
For the Petitioners : Mr. Deepak Khosla, Advocate
For the Respondents: Mr. Balaji Subramanium, Ms. Jasleen K. Oberai,
Ms. Surbhi Mehta and Mr. Ayud Sharma,
Advocates for R-8
Mr. Jos Chiramel and Mr. Ramesh Kumar,
Advocates for R-9
CORAM:
HON'BLE MR. JUSTICE RAJIV SHAKDHER
RAJIV SHAKDHER, J.
1. This is a petition filed under Section 9 of the Arbitration and Conciliation Act, 1996 (in short the Act) which came up for hearing on urgent basis during vacations. At that stage, while issuing notice, as a protem measure, respondent no.8 was directed to maintain status quo as of that date as regards funds, if any, received pursuant to settlement with the National Highways Authority of India (hereinafter referred to as NHAI). The settlement was, according to the petitioner, arrived at in August / September 2014. It was made clear that the interim order will operate till OMP 1282/2014 Page 1 of 12 today i.e., 17.11.2014.
2. At the hearing held today, respondent no.8 was represented by Mr. Balaji Subramanium. The learned counsel informed the court that as directed, a reply had been filed and a copy had been despatched to the counsel for the petitioner at the address given in the captioned petition. The reply alongwith proof of service, which is the courier receipt, has been placed on record.
2.1 In so far as respondent no. 9 was concerned, it was also represented by counsel.
2.2 The report of the Registry did show that service qua respondent nos. 1, 5, 6, 8 to 11 through ordinary post is awaited. As regards respondent nos.2, 3, 4 to 7 was concerned, no steps were taken on behalf of the petitioners to have the notices collected which were to be sent by speed post. Notably, no steps were taken by the petitioners to collect notices which were to be served by dasti, courier, e-mail and/ or fax vis-a-vis respondent nos.1 to 8 and 11. As indicated above, counsels have entered appearance on behalf of respondent nos.8 and 9. Counsels were also present in court on behalf of the said respondent. In so far as respondent no.11 is concerned, while a vakalatnama was filed, there was no counsel present in court on its behalf.
2.3 I must record when the matter was called out, for a considerable period of nearly half an hour, if not more, there was no representation on behalf of the petitioners. The counsel for respondent no.8, Mr. Subramanium, pressed for a hearing in view of the fact that the interim order granted by this court on 20.10.2014 was gravely affecting the interest of his client.
2.4 It is in these circumstances that proceedings were continued. Mr. OMP 1282/2014 Page 2 of 12 Khosla, learned counsel for the petitioner joined the proceedings and thereafter, made his submissions again for a considerable period of time. At one stage, Mr. Khosla sought adjournment in the proceedings on the ground that he had not been served with a copy of the reply filed by respondent no.8. Mr. Subramanium in response submitted that even though service been effected on the counsel for the petitioner contrary to what was stated in court, he was willing to argue the matter based on the petition and document placed on the record by the petitioners, without relying upon the reply filed on behalf of respondent no.8.
2.5 I must only note with concern the assertion of Mr. Khosla, that, he had not received a copy of the reply of respondent no.8, to say the least, appears to be inaccurate. In this day and time, the tracking reports of courier are available on the internet and a visit to the site would show that delivery was effected on Mr. Khosla as far back as on 13.11.2014. In any event, in so far as this court is concerned, respondent no.8's reply was filed well within the time allotted by the court, which is 05.11.2014. 2.6 Be that it may, since Mr. Khosla has made an issue with regard to the receipt of reply and the given stand taken by the counsel for respondent no.8 that he was willing to argue based on the records as filed by the petitioners, I intend not to refer to the reply of respondent no.8, at all. 2.7 In so far as the other respondents are concerned (except respondent nos.1 & 2), the non-completion of service qua them is of no consequence as even according to the petitioners, the said respondents are not party to any arbitration agreement. This is clear upon perusal of the following averments made in paragraph 3 (b) & (c), 4 to 7 of the petition. The petitioners broadly seemed to stress that the only reason other respondents have been impleaded, is because their interest might get affected. As a OMP 1282/2014 Page 3 of 12 matter of fact, in paragraph 3(b), the petitioners have clearly stated that because they are not party to the arbitration proceedings, reliefs cannot be obtained against them from an arbitral tribunal even when it is constituted. The reference to constitution of the tribunal, in future, is premised on an assertion that a petition under Section 11 is shortly to be filed for appointment of an arbitrator as the earlier arbitrator, one Sh. Krishan Prem Narayan i.e., respondent no.3, does not wish to arbitrate the dispute adverted to in the present petition.
2.8 In order to consider the prayer of counsel for respondent no.8, I need not wait for completion of service qua those respondents against whom service is neither awaited nor effected as the interim order dated 20.10.2014 is presently, if at all, affecting the interest of only respondent no.8.
3. For the aforesaid purposes, the following facts are required to be noticed :-
3.1 Respondent no.9 i.e., NHAI had floated a tender for operation and maintenance of contracts concerning National Highway No.8 (Delhi-Jaipur Section) and National Highways Nos.2 and 24 concerning Delhi, Agra and Muradabad bypass.
3.2 A consortium was formed, it appears, amongst petitioner no.1, respondent no.1 and respondent no.2. The said consortium, it appears, also executed two agreements amongst themselves for the said purpose. The first agreement was a shareholders agreement dated 31.07.2002, while the second agreement was a tripartite joint venture agreement dated 03.08.2002.
3.3 It is by virtue of the latter agreement that respondent no.8 company came into existence. The consortium, which comprised off, in substance, joint venture partners, acquired shares in respondent no.8 company to the OMP 1282/2014 Page 4 of 12 following extent : petitioner no.1 - 30%; respondent no.1 - 46%; and respondent no.2 - 24%. It is the case of the petitioners that as amongst the joint venture partners, petitioner no.1 was given the work pertaining to:
routine road maintenance, period road maintenance, building maintenance, and asset value enhancement.
3.4 It is in the background of the above, that respondent no.8 entered into contracts of even date i.e., 08.08.2002 with NHAI for executing the work of operation and maintenance of the Highway sections referred to above. 3.5 Apparently, as averred in the petition, petitioner no.1 and respondent no.8 entered into an agreement dated 15.03.2003, whereby "petitioner no.1 was appointed as a sub-contractor to execute the work of laying fibre optic cabling system on Delhi-Agra section of NH-2 (Muradabad bypass), NH-24 and also on Gurgaon-Amer Kotpuli Section of NH-8."
3.6 The petitioner avers that since "irrevocable differences" erupted amongst the joint venture partners, the disputes were referred to arbitration resulting in two awards passed by one Sh. Krishen Premnarayan, who it is stated is the brother of respondent no.5 i.e., Deepak Narayan, Director of respondent no.1. The first award is dated 07.09.2003, while the second award, which is said to be a supplementary award, is dated 11.10.2003. Admittedly, both these awards have not been filed.
3.7 Notwithstanding the above, the awards resulted in petitioner no.1 exiting from respondent no.8 company by selling its entire shareholding in favour of respondent nos.1 and 2 for a total sale consideration of Rs.14.5 Crores pursuant to the execution of a Share Purchase Agreement (SPA) dated 29.01.2004.
3.8 To be noted, on that very date petitioner no.1, also executed yet another agreement, which is a tripartite agreement dated 29.01.2004 whereby, it OMP 1282/2014 Page 5 of 12 assigned rights inhering in it in the fibre optic supply and installation contract dated 15.03.2003, in favour of, an entity by the name of RPG Cables Ltd. (hereinafter referred to as RPG). This is an agreement to which respondent no.8, is also a party.
3.9 Apparently, disputes arose thereafter between respondent no.8 and NHAI in respect of work assigned to it for operation and maintenance of various sections of National Highways as indicated above. NHAI terminated the agreement, it appears on 21.11.2005, which led to a dispute and consequent constitution of an arbitral tribunal. These disputes were settled which, led ultimately to the petitioners approaching this court. 3.10 As noticed right at the beginning of this narration, the petitioners had come to court with the captioned petition that under the settlement arrived at between respondent no.8 and NHAI, sums to the tune of Rs.50 to 55 Crores, (in the petition, this range given is Rs. 55 to Rs. 65 Crores), have been received, in which, they claim a stake of Rs.9 Crores odd alongwith interest plus damages, etc. The total claim though, as indicated in paragraph 35, is pegged at Rs.200 Crores or so.
4. Continuing with the narration, it is claimed by the petitioners that a consortium agreement dated 21.03.2005, was executed between petitioner no.1 and RPG in view of the latter seeking assistance for financing, management and execution of their role as sub-contractors of respondent no.8 for laying of optic fibres, which as noticed above, vide tripartite agreement dated 29.01.2004, had been assigned to RPG.
4.1 It is also averred by the petitioners that because RPG was not able to obtain its payment to the tune of Rs.9 Crores odd, it entered into a settlement agreement dated 17.03.2006. Admittedly, under the said settlement agreement, respondent no.8 agreed to pay RPG a sum of Rs.3.50 OMP 1282/2014 Page 6 of 12 Crores, and further undertook an obligation to pay additional sums upon realization of amounts from NHAI, which were contingent upon the outcome of legal proceedings initiated between respondent nos.8 and 9. [See clause 1(c) of the agreement dated 17.03.2006]. Similarly, under clause 1(d) of the said agreement, RPG could also approach NHAI, for negotiating payments of amounts, which it claimed as due in respect of work executed by it.
4.2 It appears that the petitioner no.1 after nearly five (5) years executed a closure agreement dated 06.09.2011 with RPG, which, apparently, relinquished all its rights, interests, entitlements and claims, emanating under the consortium agreement dated 21.03.2005, and further, assigned all rights, claims, and entitlements which emanated in its favour under settlement deed dated 17.03.2006 and tripartite agreement dated 29.01.2004.
4.3 It is in this background that the petitioners, pending constitution of the arbitration tribunal, seek continuation of the interim order passed on 20.10.2014.
5. I have heard Mr. Khosla in support of his case as also Mr. Balaji Subramanium.
6. The facts as gleaned from the petition and the record would demonstrate that petitioner no.1 company had formed a consortium with respondent nos.1 and 2 which, led to the birth of respondent no.8. Respondent no.8, which is the joint venture company, made a bid against the tender floated by NHAI.
6.1 Upon being declared a successful tenderer, the work of maintenance of sections of National Highways 2, 8 and 24 was awarded to respondent no.8. 6.2 It appears that petitioner no.1 was appointed as a sub-contractor by OMP 1282/2014 Page 7 of 12 respondent no.8 with respect to optical fibre work which, was required to be executed on sections of the National Highways as indicated by me above.
6.3 Since disputes erupted amongst the joint venture partners, two agreements of even date i.e., 29.01.2004, were drawn up. The first was a SPA, while the second was a tripartite agreement. By virtue of the SPA, petitioner no.1 exited from respondent no.8 for a valuable consideration of Rs.14.50 Crores. The second agreement, which, as indicated above, was the tripartite agreement, envisaged petitioner no.1 assigning its rights under the agreement dated 15.03.2003, in favour of RPG.
6.4 It is the case of the petitioners that petitioner no.1 and RPG entered into a consortium agreement dated 21.03.2005 whereby, the former, it appears, agreed to extend assistance qua the sub-contract with respondent no.1, which in any case, had been assigned in favour of RPG. Respondent no.8 admittedly was not a party to this arrangement. 6.5 In the meanwhile, since disputes arose between respondent no.8 and NHAI pertaining to the award of contract for operation and maintenance of National Highways, an arbitral tribunal was constituted to adjudicate upon the disputes. Almost at the same time, RPG vide an agreement dated 17.03.2006 entered into a settlement with respondent no.8. 6.6 In terms of the said settlement, RPG gave up its claims qua respondent no.8 upon payment of Rs.3.50 Crores, with the assurance that, if respondent no.8 was to recover any sums, it would be used to settle the claims of the RPG. Petitioner no.1, was not a party to the settlement. The said settlement agreement does not contain any arbitration clause qua possible disputes that may arise vis-a-vis the said agreement. 6.7 Undoubtedly, respondent no.8 has received sums in a settlement OMP 1282/2014 Page 8 of 12 arrived with NHAI in the arbitral proceedings which were pending adjudication qua them. The fact that seven (7) years later, the petitioner has entered into a closure agreement with RPG, will not confer upon it rights which are not contained in the settlement agreement arrived at between RPG and respondent no.8.
6.8 Mr. Khosla's argument that the closure agreement would enable resuscitation of rights contained in the settlement agreement by virtue of provisions embedded in the shareholders agreements and the tripartite agreement dated 29.01.2004, in my view, is completely misconceived. Those agreements have worked themselves out. One of the consequences of the tripartite agreement dated 29.01.2004 was that, RPG Cables would step into the shoes of petitioner no.1. A reversal of that, by virtue of the closure agreement dated 06.09.2011 (assuming it can be done, as one of the arguments advanced on behalf of the respondent no.8 was that its consent was necessary), petitioner no.1 cannot don itself with a right which was not available to its assignor, that is, RPG. Admittedly, in the settlement agreement dated 17.03.2006, there is no arbitration mechanism envisaged, and therefore, in so far as respondent no.8 is concerned, this petition would not lie as it can only be in aid of an arbitral proceeding. 6.9 It may be noted that in so far as averments made in the petition are concerned, they are completely vague as to which agreement, if any, the petitioner seeks to raise a dispute about. There are, as indicated above, several agreements.
(i). Let me first deal with, sub-contract dated 15.03.2003. The said agreement is executed between petitioner no.1 and respondent no.8. This contract has a dispute resolution clause. A perusal of the clause would show that it does not encapsulate an arbitration agreement giving definitive OMP 1282/2014 Page 9 of 12 right to petitioner no.1 to approach the court. The narration of facts set out above would show that this contract was assigned to RPG.
(ii). The other agreement is the SPA, dated 29.01.2004. This SPA contains an arbitration agreement which, is set out in clause 9.1. The SPA provided for transfer of shares by petitioner no.1 in favour of respondent nos.1 and 2. Admittedly out of 15000 shares of respondent no.8, 14500 shares have been transferred against a consideration of Rs.14.50 Crores received by petitioner no.1. Petitioner no.1, has in its possession, purportedly, 500 shares. Mr. Khosla during the course of his argument had stated that his clients i.e., the petitioners, had no intention to transfer these shares. Respondent nos.1 and 2, have not sought transfer of the balance 500 shares. There is no articulation in the petition as to what is the dispute with regard to these shares except some vague submissions made as regards fraud having been employed. I have dealt with that position in the later part of my judgment. This agreement appears to have worked itself out.
(iii). That leaves me with the tripartite agreement dated 29.01.2004. The tripartite agreement was executed among, petitioner no.1, respondent no.8 and RPG. By virtue of this agreement, the sub-contract dated 15.03.2003 executed between petitioner no.1 and respondent no.8 was assigned in favour of RPG. It is stated that this contract dated 29.01.2004, contains an arbitration agreement which is incorporated in clause 50.2 of the agreement. A perusal of various provisions of the agreement would show that assignment in the first instance of the sub-contract dated 15.03.2003 was made in favour of RPG by petitioner no.1 with the consent of respondent no.8. Petitioner no.1, seeks to re-agitate rights contained in the tripartite agreement by virtue of a closure agreement dated 06.09.2011. Respondent no.8 is not a party to the said agreement. Re-assignment of OMP 1282/2014 Page 10 of 12 rights which were assigned long ago in favour of RPG without the consent of respondent no.8, seems prima facie untenable. In any event, the grievance articulated in the petition does not flow from this agreement. The grievance, if at all, flows from the settlement agreement dated 17.03.2006.
(iv). The settlement agreement dated 17.03.2006, was executed between respondent no.8 and RPG, as noted hereinabove. This agreement unfortunately for petitioner no.1, does not contain an arbitration clause. The claims in respect of moneys, which respondent no.8 has received under a separate settlement with NHAI can, if at all, be pegged on this agreement.
7. There being no arbitration mechanism incorporated in the settlement agreement, petitioner no.1 cannot maintain, as noted above, the present petition under Section 9 of the Act.
7.1 I may only add a post script to what is stated, which is, that petitioner no.2 is not a party in his individual capacity to any of the agreements referred to above.
7.2 One of the grievances that was raised by Mr. Khosla during the course of his submission was that petitioner no.1 was blacklisted by NHAI because of acts of omission and commissions of the private respondents. This submission is also completely untenable for the simple reason that there is no averment whatsoever to this effect in the petition.
8. Furthermore, Mr. Khosla has submitted that a fraud was employed on the petitioners which, resulted in the SPA and the tripartite agreement being executed. It is also been contended that the settlement between respondent nos.8 and 9, is collusive and has been filed "only to close criminal allegations inter alia against respondent nos.3 to 6 and by extension against respondent nos.1, 2 and 7." It is alleged that there was a allegation of OMP 1282/2014 Page 11 of 12 pilferage of toll by NHAI which, led to the settlement being executed, contrary to the interest of respondent no.8.
8.1 Mr. Balaji Subramanium has quite correctly submitted that in law when there are allegations of fraud, the party against whom fraud is alleged is entitled to seek public trial. I tend to agree with this submission which is another reason why arbitration may not be an appropriate remedy. (See Russel v. Russel [1880] 14 Ch. 'D. 471, Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak AIR 1962 SC 406, N Radhakrishnan v Maestro Engineers & Ors. (2010) 1 SCC 72) 8.2 However, in this petition, at the present juncture, all that I have to examine is whether the interim order dated 20.10.2014 ought to be continued.
8.3 Having regard to the discussions hereinabove, in my view, the interim order deserves to be vacated. It is ordered accordingly.
9. List the petition for further proceedings on 08.01.2015.
10. Fresh summons will issue on requisite steps being taken to respondents in respect of whom either service is not effected, or awaited. Reply be filed within four weeks. Rejoinder, if any, be filed before the next date of hearing.
RAJIV SHAKDHER, J NOVEMBER 21, 2014 yg OMP 1282/2014 Page 12 of 12