Delhi High Court - Orders
M/S Ketan Infra Pvt Ltd & Anr vs The Kunj Vihar Co Operative Group ... on 26 July, 2022
Author: V. Kameswar Rao
Bench: V. Kameswar Rao
$~37
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB.P. 434/2021
M/S KETAN INFRA PVT LTD & ANR. ..... Petitioners
Through: Mr. Mohit Ramdeo, Adv.
versus
THE KUNJ VIHAR CO OPERATIVE GROUP HOUSING
SOCIETY ..... Respondent
Through: Mr. Vikas Bhatia, Adv.
CORAM:
HON'BLE MR. JUSTICE V. KAMESWAR RAO
ORDER
% 26.07.2022
1. The present petition has been filed by two petitioners for appointment of an Arbitrator.
2. The facts as noted from the petition and so contended by Mr. Mohit Ramdeo, learned counsel appearing for the petitioners that petitioner No.1 is a registered private limited company and Shiv Kumar Malik is the authorised representative of the petitioner No.1 vide resolution dated November 10, 2020 and petitioner No.2 is a sole proprietorship concern owned by the wife of Shiv Kumar Malik.
3. The respondent which is a Cooperative Group Housing Society had on January 12, 2010 awarded a work order to the petitioner No.2 for carrying out various electrical & civil works, internal and external development. The total value of the work awarded was at ₹10 Crore.
Signature Not Verified Digitally Signed By:ASHEESH KUMAR YADAV Signing Date:06.08.2022 12:54:254. In terms thereof, the petitioners have carried out the work relating to civil & electrical including internal work and external development work.
5. He states, a sum of ₹90,82,000/- was due and payable to the petitioner on the date of filing of the petition. A further amount of ₹60 Lacs remained deposited with the respondent which is the retention money, deducted by the respondent at 5% out of the total cost of the work carried out by the petitioners from time to time, which has not been refunded.
6. It is the case of the petitioners that since 2016-2017, petitioner No.1 has been corresponding with the respondent for the release of the aforesaid amount, but to no avail.
7. Mr. Ramdeo also states respondent Society is being run by an Administrator appointed by the Registrar of Cooperative Societies. As no complete resolution was provided by the respondent to the grievances of the petitioners, the petitioners invoked the arbitration clause vide notice dated November 24, 2020 which has been duly served on the respondent. No reply to the same was received which resulted in the filing of the petition.
8. Mr. Ramdeo has drawn my attention to the tender documents issued by the respondent against which the petitioner No.2 had applied. He has also drawn my attention to the Arbitration Clause at Page 26 of the documents which is reproduced as under:
"35. Settlement of Dispute, Arbitration All disputes and differences of any kind what ever arising out of or in connection with the Contract or the carrying out of works (whether during the progress of works or after their completion, and whether before or after the termination abandonment or breach of the Contract) shall be referred to and settled by the Employer/Architect who shall state their decision in writing. Such decision may be in the form of a final certificate or Signature Not Verified Digitally Signed By:ASHEESH KUMAR YADAV Signing Date:06.08.2022 12:54:25 otherwise. The decision of the Employer/Architect with respect to any of the excepted matters shall be final and without Appeal as stated in clause No.. But if either the employer or the Contractor be dissatisfied with the decision of the Employer/Architect or any matter question or the dispute of any kind (except any of the excepted matters) or as to withholding by the Employer/Architect of any certificate to which the Contractor may claim to be entitled, then and in any such case either party (the Employer or the Contractors) may within 28 days after receiving notice to such decision give a written notice to the other party through the Employer/Architect requiring that such matters in dispute, be arbitrated upon. Such written notice shall specify the matters which are in dispute and such dispute of difference of which such written notice has been given and 'no other shall be and is hereby referred to the arbitration and final decision of a single Arbitrator being Fellow of the Indian Institute of Architects to be agreed upon and appointed by both parties or in case of disagreement as to the appointment of a single arbitrator, to the arbitration of two Arbitrators being both fellows of the Indian Institute of Architects one to be appointed by each party, which Arbitrators shall before taking upon themselves the burden of reference appoint an Umpire. The Arbitrator, the Arbitrators or the Umpire shall have power to open up, review and revise any certificate, opinion, requisition or notice, save regard to the excepted matters referred to in Clause and to determine all matters in dispute which shall be submitted to him or them and of which notice shall have been given as aforesaid. Upon every or any such reference the cost of and incidental to the Reference and Award respectively shall be in the direction of the Arbitrator or 'Arbitrators' or the Umpire who may determine the amount thereof, or direct the same to do taxed as between Attorney and Client or as between party and shall direct by whom and to whom and in what manner the same shall be borne and paid. The submission shall be deemed to be a submission to Arbitration within the meaning of the Indian Arbitration and conciliation Act 1996 or any statutory modification thereof. The award of the Arbitrator or Arbitrators or the Umpire shall be Signature Not Verified Digitally Signed By:ASHEESH KUMAR YADAV Signing Date:06.08.2022 12:54:25 final and binding on the parties. Such Reference except as to the with holding by the Architects of any Certificates under Clause to which the Contractor claims to be entitled shall not be opened or entered upon until after the completion or alleged completion of the works or until after the practical cessation of the works arising from any cause unless with written consent of Employer, and the Contractor. Provided always that the Employer shall not withhold the payment of the Interim Certificate nor the Contractor except with the consent in writing of the Architects in any way delay the carrying out of the works by reason of any such matter, question or dispute referred to Arbitration but shall proceed with the work with all due diligence and shall until the decision of the Arbitrator or Arbitrators or the Umpire be given abide by the decision of the Architects and no award of the Arbitrator or arbitrators or the Umpire shall relieve the Contractor of the obligation to adhere strictly to the Employer/Architect Instructions with regard to the Actual carrying out of the work. The Employer and the Contractor hereby also agree that Arbitration under this clause shall be condition precedent to any right or Action under the Contract."
9. He has also drawn my attention to various correspondences exchanged between the respondent Society with both the petitioners herein. According to him, at page 7 of the documents, is the certificate issued by the Society, wherein the Society has acknowledged that petitioner No.1 has also carried out the work being the sister concern of M/s. Raj Associates, petitioner No.2. He states, no doubt the contract was with petitioner No.2, but considering the fact that petitioner No.1 has also carried out the work as a sister concern, which aspect has been acknowledged by the respondent, both the parties shall be required to be referred to the Arbitrator for adjudication of their disputes. He states, as of today ₹1,50,82,000/- is due and payable by the respondent. In this regard, he has drawn my attention to Signature Not Verified Digitally Signed By:ASHEESH KUMAR YADAV Signing Date:06.08.2022 12:54:25 Page 34 of the documents in support of his submission, wherein the petitioners have reproduced their claims.
10. On the other hand, Mr. Vikas Bhatia, learned counsel appearing for the respondent Society states that as of today the Society is being run by an Administrator appointed by the Registrar of Cooperative Societies and he has been authorised by the Administrator to represent the Society in these proceedings. His submission is primarily with regard to the maintainability of the petition on behalf of petitioner No.1, i.e., M/s. Ketan Infra Developers Pvt. Ltd. as according to him, there is no privity of contract between the respondent and M/s. Ketan Infra Developers Pvt. Ltd., and in the absence of any privity of contract, this petition on behalf of the said entity is not maintainable. That apart, he also states, the present petition is premature as the petitioners have not followed the procedure contemplated under the contract inasmuch as the petitioners were required to raise their claims with the Architect of the project, which admittedly the petitioners have not done. That apart, he states, that the claims of the petitioners is even otherwise barred by time as it is the case of the petitioners themselves that the work was completed in the year 2016 and the invocation of the arbitration clause was only in the year 2020, i.e., beyond the period of three years.
11. Having heard the learned counsel for the parties, in so far as the first submission on the maintainability of the petition is concerned, no doubt the tender was submitted by the petitioner No.2, i.e., M/s. Raj and Associates and it is M/s. Raj and Associates which were awarded the work. But it is a fact that the work was being carried out by M/s. Ketan Infra Developers Pvt. Ltd. and the respondent had acknowledged this fact in their various communications at pages 6, 7 and 8 of the documents, which read as under:
Signature Not Verified Digitally Signed By:ASHEESH KUMAR YADAV Signing Date:06.08.2022 12:54:25"TO WHOM SO EVER IT MAY CONCERN This is to certify that M/s Ketan Infra Developers Pvt. Ltd. carried out the civil work and Rail Water Harvesting Special work successfully in our State at above mentioned address. Details of Works
1. 3 No rain water harvesting well dug as per DJB Specifications."
xxx xxx xxx "TO WHOM SO EVER IT MAY CONCERN This is to certify that we have awarded the construction work in our project to M/s Ketan Infra Developers (P) Ltd renting to civil, electrical works including internal work and External Development work. Part of the work was carried out by their sister company M/s Raj &Associates. The total value of work awarded is Rs. 10 Crore approximately. Till date work valued at approx Rs. 7 crore has been executed comprising Basement under ground car park, overhead water tanks, internal and external civil, electrical works, water & sewage pipes and internal finish work including fixing of doors & windows alongwith fixture etc."
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"To,
Ketan Infradevelopers Private Limited
F-96(A) Adhyapak Nagar, Nagloi, New Delhi-110041 Sub: Construction of Kunj vihar CGSH Ltd. Plot No. 19 Section- 12 Dwarka.
You are requested to submit your Full and Final Bill for all the Building Works/Electrical work done by you against the agreements /work orders issued by the Society for Construction of above mention Society, so that your final claim may be settled."
12. Even in the document at page 9 which is the letter dated October 13, 2018 written by the respondent to M/s. Raj and Associates wherein the Signature Not Verified Digitally Signed By:ASHEESH KUMAR YADAV Signing Date:06.08.2022 12:54:25 respondent has referred to a reminder letter dated March 24, 2018, which in fact was written by M/s. Ketan Infra Developers, i.e., petitioner No.1, to the Administrator of the respondent Society. So it follows the respondent had never raised any objection that the petitioner No.1 is not a sister concern of the petitioner No.2 and the petitioner No.1 has not carried out any work or it has no privity of contract with the respondent.
13. The submission of Mr. Ramdeo is that, because of this understanding of the respondent, even the petitioner No.1 has been raising the bills on the respondent for the work carried out by both the petitioners. Even the present claims are with regard to the work carried out by both the petitioners and hence the petition cannot be dismissed qua petitioner No.1 only on the ground that there is no privity of contract.
14. During his submissions, Mr. Ramdeo has relied upon the Judgment of the Coordinate Bench of this Court in the case of Vistrat Real Estates Private Limited v. Asian Hotels North Ltd., Arb. Petition No.1124/2021 wherein a similar issue of maintainability of a petition qua a third party arose. The Court after noting the Judgment of the Supreme Court in the case of Chloro Controls India Private Ltd. v. Severn Trent Water Purification Inc. and Ors. (2013) 1 SCC 641 held that in exceptional cases, by virtue of the principles of composite performance or implied authority, even a third party who is not a signatory to the arbitration agreement can be jointed in the arbitration. In paragraphs 11 & 12, of Vistrat Real Estates Private Limited (supra) this Court has held as under:-
"11. Hon‟ble Supreme Court in the decision reported as (2013) 1 SCC 641 Chrolo Controls India Private Ltd. Vs. Severn Trent Water Purification Inc. and Ors. though dealing with an international arbitration under Section 45 of the Act, held that Signature Not Verified Digitally Signed By:ASHEESH KUMAR YADAV Signing Date:06.08.2022 12:54:25 even third parties who are not signatories to the arbitration agreement can be joined in arbitration. It laid down categories where the third parties can be impleaded to the arbitration and held that the expression „claiming through them‟ should be construed strictly. It was held as under:
"70. Normally, arbitration takes place between the persons who have, from the outset, been parties to both the arbitration agreement as well as the substantive contract underlining (sic underlying) that agreement. But, it does occasionally happen that the claim is made against or by someone who is not originally named as a party. These may create some difficult situations, but certainly, they are not absolute obstructions to law/the arbitration agreement. Arbitration, thus, could be possible between a signatory to an arbitration agreement and a third party. Of course, heavy onus lies on that party to show that, in fact and in law, it is claiming "through" or "under" the signatory party as contemplated under Section 45 of the 1996 Act. Just to deal with such situations illustratively, reference can be made to the following examples in Law and Practice of Commercial Arbitration in England (2nd Edn.) by Sir Michael J. Mustill:
"1. The claimant was in reality always a party to the contract, although not named in it.
2. The claimant has succeeded by operation of law to the rights of the named party.
3. The claimant has become a party to the contract in substitution for the named party by virtue of a statutory or consensual novation.
4. The original party has assigned to the claimant either the underlying contract, together with the agreement to arbitrate which it incorporates, or the benefit of a claim which has already come into existence.
xxx xxx xxx
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Signature Not Verified
Digitally Signed By:ASHEESH
KUMAR YADAV
Signing Date:06.08.2022
12:54:25
73. A non-signatory or third party could be subjected to arbitration without their prior consent, but this would only be in exceptional cases. The court will examine these exceptions from the touchstone of direct relationship to the party signatory to the arbitration agreement, direct commonality of the subject-matter and the agreement between the parties being a composite transaction. The transaction should be of a composite nature where performance of the mother agreement may not be feasible without aid, execution and performance of the supplementary or ancillary agreements, for achieving the common object and collectively having bearing on the dispute. Besides all this, the court would have to examine whether a composite reference of such parties would serve the ends of justice. Once this exercise is completed and the court answers the same in the affirmative, the reference of even non-signatory parties would fall within the exception afore-discussed.
74. In a case like the present one, where origin and end of all is with the mother or the principal agreement, the fact that a party was non-signatory to one or other agreement may not be of much significance. The performance of any one of such agreements may be quite irrelevant without the performance and fulfilment of the principal or the mother agreement. Besides designing the corporate management to successfully complete the joint ventures, where the parties execute different agreements but all with one primary object in mind, the court would normally hold the parties to the bargain of arbitration and not encourage its avoidance. In cases involving execution of such multiple agreements, two essential features exist; firstly, all ancillary agreements are relatable to the mother agreement and secondly, performance of one is so intrinsically interlinked with the other agreements that they are incapable of being beneficially performed Signature Not Verified Digitally Signed By:ASHEESH KUMAR YADAV Signing Date:06.08.2022 12:54:25 without performance of the others or severed from the rest. The intention of the parties to refer all the disputes between all the parties to the Arbitral Tribunal is one of the determinative factors.
75. We may notice that this doctrine does not have universal acceptance. Some jurisdictions, for example, Switzerland, have refused to recognise the doctrine, while others have been equivocal. The doctrine has found favourable consideration in the United States and French jurisdictions. The US Supreme Court in Ruhrgas AG v. Marathon Oil Co. [143 L Ed 2d 760 : 526 US 574 (1999)] discussed this doctrine at some length and relied on more traditional principles, such as, the non-signatory being an alter ego, estoppel, agency and third-party beneficiaries to find jurisdiction over the non-signatories.
76. The Court will have to examine such pleas with greater caution and by definite reference to the language of the contract and intention of the parties. In the case of composite transactions and multiple agreements, it may again be possible to invoke such principle in accepting the pleas of non-signatory parties for reference to arbitration. Where the agreements are consequential and in the nature of a follow-up to the principal or mother agreement, the latter containing the arbitration agreement and such agreements being so intrinsically intermingled or interdependent that it is their composite performance which shall discharge the parties of their respective mutual obligations and performances, this would be a sufficient indicator of intent of the parties to refer signatory as well as non-signatory parties to arbitration. The principle of "composite performance"
would have to be gathered from the conjoint reading of the principal and supplementary agreements on the Signature Not Verified Digitally Signed By:ASHEESH KUMAR YADAV Signing Date:06.08.2022 12:54:25 one hand and the explicit intention of the parties and the attendant circumstances on the other.
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103. Various legal bases may be applied to bind a non- signatory to an arbitration agreement:
103.1. The first theory is that of implied consent, third-
party beneficiaries, guarantors, assignment and other transfer mechanisms of contractual rights. This theory relies on the discernible intentions of the parties and, to a large extent, on good faith principle. They apply to private as well as public legal entities.
103.2. The second theory includes the legal doctrines of agent-principal relations, apparent authority, piercing of veil (also called "the alter ego"), joint venture relations, succession and estoppel. They do not rely on the parties' intention but rather on the force of the applicable law.
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107. If one analyses the above cases and the authors' views, it becomes abundantly clear that reference of even non-signatory parties to an arbitration agreement can be made. It may be the result of implied or specific consent or judicial determination. Normally, the parties to the arbitration agreement calling for arbitral reference should be the same as those to the action.
But this general concept is subject to exceptions which are that when a third party i.e. non-signatory party, is claiming or is sued as being directly affected through a party to the arbitration agreement and there are principal and subsidiary agreements, and such third party is signatory to a subsidiary agreement and not to the mother or principal agreement which contains the arbitration clause, then depending upon the facts and Signature Not Verified Digitally Signed By:ASHEESH KUMAR YADAV Signing Date:06.08.2022 12:54:25 circumstances of the given case, it may be possible to say that even such third party can be referred to arbitration".
12. The decision in Chrolo Controls (supra) clearly holds that in exceptional cases applying the principle of "composite performance" or implied authority, even a third party who is not a signatory to the arbitration agreement can be joined in arbitration."
15. That apart, this Court finds that if the subject matter of the work carried out by both the petitioners are the same and the respective claims of the petitioners are for the work carried out by them emanating from the same tender, they cannot be relegated to different remedies.
16. In view of the above conclusion, the first submission of Mr. Bhatia is liable to be rejected.
17. The second submission of Mr. Bhatia is that the present petition is pre-mature inasmuch as the petitioners have not approached the Architect with the claims before filing this petition. Suffice to state, it is quite late in the day for this Court to relegate the parties to the process stipulated under the contract. More so, when Mr. Bhatia himself has also taken a plea of limitation. In any case, I am not inclined to relegate the petitioner to Architect at this stage.
18. To buttress his plea of limitation, Mr. Bhatia has referred to the judgment of the Supreme Court in the case of Vishram Varu & Co. v. Union of India, Civil Appeal No. 2964/2022. In that case, the appellant had received work order in the year 1982 and had executed the work in 1986. The notice invoking arbitration was sent in the year 2018, i.e., after a period of 32 years. It is in this factual scenario that the Supreme Court affirmed the decision of the High Court dismissing the application under Section 11(6) of Signature Not Verified Digitally Signed By:ASHEESH KUMAR YADAV Signing Date:06.08.2022 12:54:25 the Arbitration and Conciliation Act, 1996 on the ground that the same is hopelessly barred by time and is a stale claim. In the present case, the work was completed in the year 2016 and the final bill was submitted on June 22, 2017 and again on July 20, 2017 and the invocation of the arbitration was vide letter dated November 24, 2020. The issue of limitation is a mixed question of fact and law. Even the Supreme Court in the case of Bharat Sanchar Nigam Ltd. & Anr. v. M/s Nortel Networks India Pvt. Ltd., Civil Appeal Nos.843-844/2021, March 10, 2021 has held, if there is a little doubt on the aspect of limitation, appropriate shall be to refer the matter to the arbitration. Suffice it to state, the judgment in the case of Vishram Varu & Co. (supra) shall have no applicability in the facts of this case.
19. In view of the aforesaid discussion, this Court is of the view that disputes exist between the parties and the parties are required to be relegated to the arbitration process. This Court accordingly, appoints Ms. R. Kiran Nath, Retired District and Sessions Judge (Mobile No. 9910384659) as the Sole Arbitrator who shall adjudicate the disputes between the parties through claims and counter-claims, if any. The fee of the learned Arbitrator shall be as per Schedule-IV of the Arbitration and Conciliation Act, 1996. She shall give a disclosure in terms of Section 12 of the Act. All the pleas of the parties, both on facts and in law are left open.
20. The petition is disposed of.
V. KAMESWAR RAO, J JULY 26, 2022/jg Signature Not Verified Digitally Signed By:ASHEESH KUMAR YADAV Signing Date:06.08.2022 12:54:25