Isgec Heavy Engineering Limited vs Shree Vishnu Power And Energy Private ... on 5 December, 2023

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Delhi High Court - Orders

Isgec Heavy Engineering Limited vs Shree Vishnu Power And Energy Private ... on 5 December, 2023

1. The present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 [hereinafter, "Act"] seeks appointment of a Sole Arbitrator for adjudication of disputes that have arisen between the parties under the Deed of Settlement dated 04th December, 2015 and subsequent Deeds executed between the parties.

2. Brief facts leading to the filing of the present petition are as follows:

2.1. Petitioner is engaged in the business of manufacturing plants and equipment that are utilized in various sectors. On 23rd March, 2014, they entered into a Contract for Supply with Respondent No. 1 for design, engineering, procurement, manufacture, and purchase of boiler and auxiliaries for biomass based 10 MW independent power plant. The total contract price was agreed as Rs. 38.75 crores. Petitioner and Respondent No. 1 later executed an agreement for Erection and Commissioning of Machineries and Equipment for a price of Rs. 3.25 Crores.

ARB.P. 391/2023 Page 1 of 5

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/12/2023 at 22:43:56 2.2. Since Respondent No. 1 committed defaults in payments under the afore-noted Agreements and failed to clear the outstanding dues despite demands, the parties executed a Deed of Settlement on 04th December, 2015 wherein, Respondents No. 2 to 6 stood as guarantors and also executed Deed(s) of Personal Guarantees in Petitioner's favour. Under the said settlement, Respondent No. 1 had agreed to pay an amount of Rs. 5,50,17,243/- towards the outstanding principal amount and Rs. 39,32,877/- towards interest to the Petitioner. For this purpose, eight post-dated cheques were issued, which were dishonoured due to insufficient funds. 2.3. The Petitioner thereafter issued legal notices to the Respondents for the payments due to them, but to no avail. In the meanwhile, proceedings under Section 138 of the Negotiable Instruments Act, 1888 and the Insolvency and Bankruptcy Code, 2016 were also initiated by Petitioner against Respondent No. 1. This led to further attempts at amicable resolution, resulting in execution of another Deed of Settlement on 06th October, 2020. Under this new arrangement, part payments were received by the Petitioner, but for the remaining amount, cheques issued in their favour were again dishonoured.

2.4. Petitioner issued a notice invoking arbitration clause contained in the Deed of Settlement dated 04th December, 2015, on 23rd September, 2022. In the meantime, a petition was also preferred under Section 9 of the Act [O.M.P.(I) COMM. 265/2022], wherein, on 13th March, 2023, this Court directed the Respondents to take further steps for constitution of the Arbitral Tribunal, within one month from the date of the said order. A direction restraining the Respondents from creating any third-party interest in the properties mentioned in Annexure C to the Settlement Deed dated 04th ARB.P. 391/2023 Page 2 of 5 This is a digitally signed order.

2.5. Till date, the Respondents have not responded to Petitioner's notice invoking arbitration and thus, the present petition has been filed for appointment by this Court.

3. Mr. Pramod Gupta, counsel for Respondents, has raised the following three objections:

3.1. The Court lacks the territorial jurisdiction to entertain the present petition as neither the contract was executed in Delhi, nor are the parties' registered offices situated in Delhi.

3.2. All amounts due under the Deeds of Settlement have been duly paid and no residual claims, as projected by the Petitioner, remain outstanding.

Since the inception of contractual relations, Respondents have paid an amount of Rs. 42 crores towards the principal liabilities. The Petitioner is now claiming interest thereon, to which they are not entitled. That apart, Respondents also dispute the computation of the claimed interest amount. 3.3. The Deeds of Settlement were executed under duress by the Respondents.

4. The Court has considered the afore-noted contentions. Insofar as the issue of territorial jurisdiction is concerned, although there is no seat or place of arbitration defined in the Deed of Settlement dated 04th December, 2015, it is noticed that the Deed was executed at Delhi. Further, under Clause 15 of the said Deed, the parties have submitted to the exclusive jurisdiction of Delhi Courts. In view of the above, the plea of lack of territorial jurisdiction of this Court is misconceived, and is accordingly rejected.

ARB.P. 391/2023 Page 3 of 5

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/12/2023 at 22:43:56

5. As regards the plea of non-voluntary execution of Deed of Settlement dated 04th December, 2015, in the opinion of the Court, this is a dispute which must be urged before the Arbitral Tribunal. The signatures and thumb impressions on the Deed are not denied. The issue whether the Deed was entered into by the Respondents under coercion or pressure would have to be established before the Arbitral Tribunal, by leading evidence. Likewise, the contention that there is no amount payable is again, touching upon the merits of the case, which cannot be adjudicated by this Court under Section 11 of the Act.

6. In the Court's opinion, the requisites for appointment of an Arbitral Tribunal are met. The existence of Arbitration Agreement is established; disputes have certainly arisen, and invocation of arbitration is a matter of record. However, as the arbitration clause (Clause 15 of the Deed of Settlement dated 04th December, 2015) provides an exclusive right to the Petitioner to appoint a Sole Arbitrator, it is no longer enforceable in light of the judgement of the Supreme Court in Perkins Eastman Architects DPC v. HSCC India Ltd.1 Therefore, the present petition has been filed.

7. Accordingly, the present petition is allowed and Hon'ble Mr. Justice (Retd.) A.K. Chawla, former Judge of High Court of Delhi [Contact No.:

+91 9910384636] is appointed as the Sole Arbitrator to adjudicate the disputes that are stated to have arisen between the parties.

8. The parties are directed to appear before the Sole Arbitrator, as and when notified. This is subject to the Arbitrator making necessary disclosure(s) under Section 12(1) of the Act, and not being ineligible under Section 12(5) of the Act.

ARB.P. 391/2023 Page 4 of 5

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/12/2023 at 22:43:56

9. The Arbitrator will be entitled to charge their fee in terms of the provisions of the Fourth Schedule appended to the Act.

10. It is clarified that the Court has not examined any of the claims of the parties and all rights and contentions on merits are left open. Both the parties shall be free to raise their claims/counter-claims before the Arbitrator in accordance with law.

11. Disposed of.

SANJEEV NARULA, J DECEMBER 5, 2023 as 1 ARB.P. 391/2023 Page 5 of 5 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/12/2023 at 22:43:56

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Delhi High Court - Orders