Bombay High Court
Tatva Global Environment (Deonar) ... vs The Municipal Corporation Of Greater ... on 19 March, 2015
Author: S.J. Kathawalla
Bench: S.J. Kathawalla
KPPNair 1 arbap-15
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION APPLICATION NO. 15 OF 2014
Tatva Global Environment (Deonar) Ltd. ...Applicant
vs.
The Municipal Corporation of Gr. Mumbai ... Respondent
Mr. Mustafa Doctor, Senior Advocate, along with Mr. Deepak Deshmukh and Mr.
Rohan Agarwal, instructed by M/s. Juris Corp for the Applicant.
Mr. H.S. Deshpande along with Mr. Sandeep Patil, for the Respondent.
CORAM: S.J. KATHAWALLA, J.
Order reserved on : 17
October, 2014
th
Order pronounced on: 19 March, 2015.
th
ORDER:
By the present Application filed under Section 11 of the Arbitration and Conciliation Act, 1996 ("the said Act"), the Applicant seeks appointment of an Arbitrator to adjudicate upon the disputes between the Applicant -Tatva Global Environment (Deonar) Limited and the Respondent - The Municipal Corporation of Greater Mumbai, arising out of the Agreement dated 31 st October 2011.
2. The Applicant and the Respondent had on 31 st October 2011, entered into an Agreement titled as "Concession Agreement between Municipal Corporation of Greater Mumbai (hereinafter referred to as "MCGM") and Tatva Global Environment (Deonar) ::: Downloaded on - 25/03/2015 00:00:30 ::: KPPNair 2 arbap-15 Limited (hereinafter referred to as "the said Agreement")." As per the terms of the said Agreement, the Applicant was required to take over the Deonar dumping ground ("the said land") belonging to the Respondent and was required to construct on the said land a plant for processing of garbage at the site. The Respondent had an obligation to lease the said land in question to the Applicant at a nominal rent of Rupee 1/- per sq. mtr. per annum for the term of the said Agreement. Prior to the execution of the said Agreement, the Respondent had on 30th October, 2009 issued the Letter of Acceptance in favour of the Applicant and pursuant thereto had placed the Applicant in possession of the said land.
3. Clauses 21 and 23 of the Agreement which are relevant for the purposes of deciding the present Application are reproduced hereunder:
"21. DISPUTE RESOLUTION If any dispute, difference or claim arises by either party to any matter arising out of this agreement, the agreed party may refer such dispute within a period of 7 days to the concerned Additional Municipal Commissioner,who shall constitute a committee comprising of three officers i.e. concerned D.M.C or Dir. (E.S. & P.) Chief Engineer other than the Engineer of Contract and Concerned Chief Accountant. The Committee shall give its decision within 60 days.
Appeal from the order of the Committee may be referred to Municipal Commissioner within 7 days. Thereafter, the Municipal Commissioner shall constitute the Committee comprising of three Additional Municipal Commissioners including Additional Municipal Commissioner Incharge of Finance Department. The decision given ::: Downloaded on - 25/03/2015 00:00:30 ::: KPPNair 3 arbap-15 by this committee shall be final and binding upon the parties.
23. JURISDICTION Subject to clause 21, only the Courts in Mumbai shall have jurisdiction to try all disputes and matters arising out of or under this agreement, after reference to Arbitration."
4. According to the Applicant, the Respondent not only failed to execute the lease in favour of the Applicant in respect of the said land, but has also not made payments due to the Applicant and is holding back huge payments for reasons which are solely attributable to the non-performance of the obligations by the Respondent which is causing grave hardship to the Applicant.
5. The Applicant addressed a letter dated 13 th May 2012, to the Respondent setting out the various difficulties and impediments faced by the Applicant and requested the Respondent to urgently resolve the various issues set out therein. The Applicant reiterated its request by its letter dated 24 th July 2013 addressed to the Respondent. However, the Respondent did not respond to the said letters.
6. The Applicant by its letter dated 11th September 2013, addressed to the Respondent recorded that a dispute had arisen between the Parties which the Applicant would pursue in accordance with the terms of the said Agreement between the Parties. By a letter dated 19 th September, 2013, the Applicant sent a statement of claim to be placed before the appropriate Committee that was required to be appointed under the provisions of Clause 21 of the said Agreement.
::: Downloaded on - 25/03/2015 00:00:30 :::KPPNair 4 arbap-15 Copies of the said statement of claim were sent to the various Officers of the Respondent. On 1st October 2013, the Applicant once again reiterated its request to constitute the Committee as per Clause 21 of the Agreement and to place the matter before the Committee at the earliest.
7. By a letter dated 5th October 2013, the Respondent informed the Advocates for the Applicant that it was forming a Dispute Resolution Committee for resolving the disputes raised by the Applicant. Since the Applicant did not thereafter hear from the Respondent in this regard, the Applicant sent two letters dated 12 th November 2013, and 23rd November 2013, to the Respondent, reminding the Respondent to constitute the said Committee. The Applicant received no reply to the said letters from the Respondent.
8. The Applicant therefore filed the present Application on 23 rd December 2013, under the provisions of Section 11 (6) of the Act seeking appointment of the Arbitral Tribunal.
9. The Respondent appointed a Committee only in August 2014. The Applicant has contended that the Respondent has forfeited its right to appoint a Committee referred to in Clause 21 of the said Agreement and is bound by the appointment of the Arbitral Tribunal as directed by the Hon'ble the Chief Justice and/or his nominee.
10. The Respondent filed its Affidavit dated 15 th September 2014. In the said ::: Downloaded on - 25/03/2015 00:00:30 ::: KPPNair 5 arbap-15 Affidavit, the Respondent has raised the following defences:
10.1 That Clause 21 of the Agreement cannot be construed as an arbitration agreement. There is in fact no arbitration clause in the said Agreement. Clause 21 of the Agreement only refers to an internal procedure for any dispute, difference or claim arising out of the Agreement. It does not contemplate referral of any such difference or claim etc to any third party for adjudication.
10.2 That the Applicant by their letter dated 19 th September 2013, requested for constitution of the Dispute Resolution Committee as per Clause 21 of the said Agreement. Thereafter in all their letters upto letter dated 23 rd November 2013, the Applicant has reiterated the said request. Having reiterated the said request beyond the period of 60 days, the Applicants have in fact acquiesced in the said procedure of referring the so-called dispute to the Committee for its decision. The Applicant therefore cannot be heard to say that the right to appoint a Committee under Clause 21 of the said Agreement is lost to the Respondent.
10.3 In fact the Dispute Resolution Committee has already been formed under the directions of the Additional Municipal Commissioner (City) in August 2014.
However, the Applicant by their letter dated 26 th August 2014, informed the Respondent that they will not attend the hearing as the matter is subjudice and accordingly refused to attend the meeting.
10.4 That the Applicant has referred to two grievances, one, in respect of non-
execution of the lease of the land in favour of the Applicant and the other is non-
::: Downloaded on - 25/03/2015 00:00:30 :::KPPNair 6 arbap-15 payment or holding back the payments to which the Applicant is entitled.
10.5 That in view of the Applicant's grievance of non-execution of the lease agreement on the part of the Respondent, the Applicant could have taken a decision and opted for termination of the Agreement as provided in Clause 17 of the Agreement on account of the Respondent's default. However, they have not done so and chose to continue with the Agreement, which itself shows that there is in fact no dispute as such making it necessary to refer the matter for arbitration.
10.6 That the present Application is totally untenable inasmuch as there is no dispute as contemplated by law so as to refer the matter for arbitration by appointing any Arbitrator.
10.7 That the present Application is therefore totally untenable on facts and in law and the same deserves to be dismissed.
11. The Applicant has denied and disputed all the contentions raised by the Respondent. The Learned Senior Advocate appearing on behalf of the Applicant has relied on the decisions of the Hon'ble Supreme Court in the case of Bihar State Mineral Development Corporation & Anr. vs. Encon Builders (I) (P)Ltd. 1 and in the case of Jagdish Chander vs. Ramesh Chander & Ors.2 and has submitted that it is clear from a perusal of Clause 21 of the said Agreement that it meets the tests of an arbitration agreement as laid down in the said judgments of the Hon'ble Supreme 1 (2003 7 SCC 418arbap-15 2 (2007) 5 SCC 719 ::: Downloaded on - 25/03/2015 00:00:30 ::: KPPNair 7 arbap-15 Court of India. It is submitted that it is also clear from a conjoint reading of Clauses 21 and 23 of the Agreement between the Parties that the Parties intended that their disputes be adjudicated upon by arbitration. It is submitted that the argument that the Applicant cannot approach this Court by way of the present Application since the Applicant pursued its request for constitution of the Dispute Resolution Committee beyond a period of 60 days, is untenable and without any legal basis. It is submitted that much after the present Application was filed on 23 rd December, 2013, the Respondents on 25 th August 2014 purported to form the Dispute Resolution Committee. The Applicant was justified in not attending the meeting since the Respondent had forfeited its right to form the Committee after the present Application was filed. In support of its contention, the Applicant relied on the decision of the Hon'ble Supreme Court in Datar Switchgears Ltd. vs. Tata Finance Ltd. 3 and Deep Trading Company vs. Indian Oil Corporation4.
12. It is next submitted on behalf of the Applicant that Section 11 (8) of the Act provides that the Chief Justice or the person or institution designated by him while appointing an arbitrator is required to have due regard to the qualifications required of the Arbitrator in the Agreement between the Parties, and other considerations as are likely to secure the appointment of an independent and impartial arbitrator. In the present case, the arbitration clause does not provide for any specific qualifications required of the Arbitrator. The Clause however states that the Committee will consist of three Officers of the Respondent, two of whom are "the concerned officers", viz. DMC or Director (E.S. & P) and the Chief Accountant. It is 3 2000 (8) SCC 151 4 (2013) 4 SCC 35 ::: Downloaded on - 25/03/2015 00:00:30 ::: KPPNair 8 arbap-15 submitted that in a similar situation in the case of Deep Trading Company vs. Indian Oil Corporation supra), the Hon'ble Supreme Court while considering its obligation to appoint an independent and impartial arbitrator has held that an Officer of the Respondent Corporation in that case the Indian Oil Corporation, would not secure the appointment of an independent and impartial arbitrator. It is submitted that this Court in its judgment dated 9 th December 2013 passed in the case of M/s.
Navkar Corporation ltd. vs. Div. Railway Manager and another also had an occasion to consider an arbitration clause for appointment of officers of the Railway as Arbitrator and held that an Officer connected with the disputes could not be impartial or independent. It is therefore submitted on behalf of the Applicant that once a party has forfeited its right to appoint an arbitrator, then the Arbitrator is to be appointed by the Chief Justice or his nominee. Due regard must be given to the provision of Section 11 (8) of the Act. If the Court ex-facie on a bare reading of the arbitration clause and based on the law laid down by the Hon'ble Supreme Court comes to the conclusion that the appointment of the Arbitrator referred to in the arbitration agreement might not result in the appointment of an independent and impartial tribunal, it would be contrary to the provision of Section 11 (8) of the Act to proceed to appoint such person as an Arbitrator.
13. The Learned Senior Advocate appearing for the Applicant has further submitted that the contention raised by the Respondent that since the Applicant has not terminated the Agreement, but has continued to perform its obligations thereunder, no dispute can be said to have arisen between the Parties, merely needs ::: Downloaded on - 25/03/2015 00:00:30 ::: KPPNair 9 arbap-15 to be stated to be rejected. It is therefore submitted on behalf of the Applicant that the present Application deserves to be allowed.
14. The Learned Advocate appearing for the Respondent has submitted that none of the judgments relied upon by the Applicant help the Applicant in support of their Application. The Respondent has for the first time in its written submissions contended that the Committee to be nominated by the Municipal Commissioner, is a Committee of experts and their expertise cannot be found in one person.
15. I have considered the submissions advanced on behalf of the Applicant as well as the Respondent. The main contention of the Respondent is that Clause 21 of the said Agreement does not amount to an arbitration clause/arbitration at all. Clause 21 of the Agreement only refers to an internal procedure for any dispute, difference or claim arising out of the Agreement. It does not contemplate referral of any such difference or claim etc. to any third party for adjudication. The contention raised for the first time before the Court that Clause 21 provides for reference of the dispute to a highly placed officer of the Respondent, who in turn is required to constitute a Committee of three experts, is nowhere mentioned in the Affidavit In Reply. The Hon'ble Supreme Court of India has in its judgment in the case of Bihar State Mineral Development Corporation & Anr. vs. Encon Builders (I) (P) Ltd. (supra) laid down the essential elements of an arbitration agreement. The Hon'ble Supreme Court has inter alia held that the essential elements of an arbitration agreement are that:
::: Downloaded on - 25/03/2015 00:00:30 ::: KPPNair 10 arbap-15
(i) there must be a present or a future difference in connection with some
contemplated affair.
(ii) there must be an intention of the parties to settle such differences by a private
tribunal.
(iii) the parties must agree in writing to be bound by the decision of such tribunal,
(iv) the parties must be ad idem.
In the case of Jagdish Chander vs. Ramesh Chander and others (supra), it has been held that the intention of the parties to enter into an arbitration agreement must be gathered from the terms of the agreement and that it is not necessary that the words "arbitration" and "Arbitral Tribunal (or arbitrator)" are used in the agreement in order for it to constitute an arbitration agreement. In the facts of the present case, I am satisfied from a perusal of Clause 21 of the Agreement that it meets the test of an arbitration agreement as laid down in the aforesaid judgments of the Hon'ble Supreme Court and that the Parties intended that the disputes be decided and adjudicated upon by arbitration. The fact that Clause 21 provides that the decision given by the Committee "shall be final and binding upon the parties" establishes that Clause 21 has to be construed as an arbitration agreement and not a mere internal procedure. Even if there is an iota of doubt as to whether Clause 21 of the Agreement can be construed as an arbitration clause/agreement, the same is put to rest from a conjoint reading of Clauses 21 and 23 of the Agreement between the Parties which makes it clear that the Parties intended that their disputes be determined and adjudicated upon by arbitration. Clause 23, while making a reference to Clause 21 clearly "speaks of arbitration between the parties".
::: Downloaded on - 25/03/2015 00:00:30 :::KPPNair 11 arbap-15 Therefore the contention of the Respondent that Clause 21 of the said Agreement does not constitute an arbitration agreement and Clause 23 of the said Agreement lends no assistance in interpreting Clause 21, cannot be accepted and is hereby rejected.
16. The next main contention raised by the Respondent is that the Applicant by their letter dated 19th September 2013 requested for constitution of the Dispute Resolution Committee as per Clause 21 of the said Agreement and thereafter renewed its request upto 23 rd November 2013, and in view of such renewal of request beyond the period of 60 days, the Applicant has in fact acquiesced in the said procedure for reference of the dispute to the Committee for its decision and the present Application is therefore not maintainable. It is true that the Applicant by its letter dated 11 th September, 2013 addressed to the Respondent requested for constitution of the Dispute Resolution Committee as per Clause 21 of the said Agreement. Within a period of thirty days therefrom, the Respondent did inform the Advocates for the Applicant by its letter dated 5 th October 2013 that it was forming a Dispute Resolution Committee for resolving the disputes raised by the Applicant.
Since the Applicant did not thereafter hear from the Respondent in this regard, the Applicant did send two reminder letters dated 12 th November, 2013 and 23rd November, 2013 to the Respondent, reminding the Respondent to constitute the said Committee. In my view the fact that the Applicant sent reminders to the Respondent beyond a period of 30 days from its letter of invocation, cannot be used against them to contend or to hold that the right of the Applicant to file the present ::: Downloaded on - 25/03/2015 00:00:30 ::: KPPNair 12 arbap-15 Application stands forfeited. In fact even after the last reminder letter dated 23 rd November 2013, received by the Respondent from the Applicant, the Respondent did not take any steps to constitute the Committee thereby compelling the Applicant to file the above Application under Section 11 (6) of the Act on 23 rd December 2013. Long after the present Application was filed on 23 rd December 2013, the Respondent on 25th August 2014 purported to form the Dispute Resolution Committee. As held by the Hon'ble Supreme Court in Datar Switchgears Ltd. vs. Tata Finance Ltd. (supra), the appointment of the Arbitrator has to be made before an application is filed under Section 11 of the Act after which the right to make such an appointment ceases. This proposition has once again been reaffirmed by the Hon'ble Supreme Court in the case of Deep Trading Company vs. Indian Oil Corporation (supra). In my view, the Respondent has therefore forfeited its right to appoint the Tribunal as contemplated under Clause 21 of the Agreement and the Applicant is fully entitled to file the above Application seeking the aforestated relief.
17. Section 11 (8) of the Act provides that the Chief Justice or the person or institution designated by him while appointing an arbitrator is required to have due regard to the qualifications required of the arbitrator in the agreement between the parties, as also other considerations as are likely to secure the appointment of an independent and impartial arbitrator. In the present case the arbitration clause does not provide for any specific qualifications required of the arbitrator. The Clause, however, states that the Committee will consist of three Officers of the Respondent, two of whom are "the concerned officers" viz. DMC or Director (E.S. & P) and the ::: Downloaded on - 25/03/2015 00:00:30 ::: KPPNair 13 arbap-15 Chief Accountant. As set out earlier, the Respondent has in its Affidavit-In-Reply nowhere mentioned that in the present case the Committee to be nominated by the Additional Municipal Commissioner is a Committee of Experts. This contention for the first time surfaced in the course of arguments. The Respondent has stated in the Affidavit that the Applicant has referred to two grievances, one in respect of non-
execution of the lease of land in favour of the Applicant and the other is non-
payment or holding back the payments to which the Applicant is entitled. To decide such grievances, no special qualification is required of an Arbitrator. In fact, it would be fit and proper to appoint an independent Arbitrator instead of appointing "the concerned officers" viz. DMC or Director (E.S. & P) and the Chief Accountant.
18. The contention of the Respondent that the Applicant has not terminated the Agreement but continued to perform its obligations thereunder and therefore no dispute can be said to have arisen between the Parties is also untenable and the same is rejected.
19. In the circumstances I am satisfied that Clause 21 of the said Agreement constitutes a valid and subsisting arbitration agreement between the Parties ; the invocation of arbitration by the Applicant is legal and valid; the Respondent did not appoint a Committee even after having agreed to appoint one which entitled the Applicant to file the above Application under Section 11 (6) of the Act; and that no special qualifications are required of the Arbitrator to decide the present dispute ::: Downloaded on - 25/03/2015 00:00:30 ::: KPPNair 14 arbap-15 between the Parties. I, therefore, appoint Shri Sharan Jagtiani, Advocate, as the Sole Arbitrator to decide the disputes arising out of the Agreement dated 31 st October 2011. The Application is accordingly disposed of.
(S.J. KATHAWALLA, J.) ::: Downloaded on - 25/03/2015 00:00:30 :::