Telangana High Court
Hyderabad Ring Road Project Limited vs Hyderabad Metropolitan Development ... on 29 April, 2024
Author: B. Vijaysen Reddy
Bench: B. Vijaysen Reddy
HONOURABLE SRI JUSTICE B. VIJAYSEN REDDY
ARBITRATION APPLICATION No.173 OF 2021
JUDGMENT :
1. This arbitration application is filed by the applicant - Hyderabad Ring Road Project Private Limited under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 (for short 'Arbitration Act') seeking to appoint an Arbitrator on behalf of the respondents, preferably a Former Judge of the High Court, to constitute an Arbitral Tribunal to adjudicate upon the disputes between the parties and to make an Arbitral Award within a specified period as contemplated under the Arbitration Act.
2. In response to the tender notice issued by respondent No.1 - Hyderabad Metropolitan Development Authority, Hyderabad, Telangana, inviting proposal under a single stage process from bidders for proposal No.HGCL/CGM(T)/ORR/6/2006-07 dated 22.02.2007 "for the design, construction, development, finance, operation and maintenance of eight lane access controlled expressway under Phase II, a programme as an extension of Phase I of ORR to Hyderabad City, in the State of Andhra Pradesh, India, for the package from Narsingi to Kollur from Km 0.00 to Km 12.00 on Build, Operate and Transfer (BOT) (Annuity) basis for a 2 concession period of 15 years (180) months) including the Concession Period of 2.5 years (30) months)"; the applicant submitted its proposal / bid on 10.04.2007. Respondent No.1 accepted the applicant's bid on BOT Annuity basis and issued Letter of Acceptance bearing No.515/CGM(T)DGMIV/ BOT/06-07 dated 14.06.2007 awarding the aforesaid contract to the applicant for a semi annuity amount of Rs.30.90 crores. Thereafter, the applicant and the respondents executed the Concession Agreement dated 17.08.2007. The Concession Agreement provided arbitration clause for dispute resolution. The applicant provided performance security through Bank Guarantees No.41370IGL0005807 and 41370IGL0005907 dated 04.07.2007 for a sum of Rs.9,01,08,000/- and Rs.6,00,72,000/- respectively from the Union Bank of India, Arun Asaf Ali Road Branch, New Delhi, to enter into the Concession Agreement pursuant to the Letter of Acceptance. Commencement of work has to take place within sixty (60) days from the date of execution of Concession Agreement, however, the same was mutually extended to 118 days resulting in commencement of work on 12.12.2007. The revised commencement of work and handing over of Right of Way ( ROW) was 12.12.2007. Based on the revised commencement of work date, the Scheduled Project Completion Date was 11.06.2010 and Commercial Operation Date (COD) shall be the date on which the Provisional 3 Certificate of Completion / Completion Certificate is issued by the Independent Consultant.
3.1. The case of the applicant is that as per Clause 13.5 read with Schedule H of the Concession Agreement, the following is the proposed schedule of handing over Right of Way:
"1. At-least 50% of the ROW (other than junctions) shall be handed over to the Concessionaire on the Commencement Date.
2. At-least 80% of the ROW (other than junctions) shall be handed over to the Concessionaire within 90 days the Commencement date.
3. At-least 90% of the ROW (other than junctions) shall be handed over to the Concessionaire within 180 days the Commencement date.
4. Balance 10% of the ROW (other than junctions) shall be handed over to the Concessionaire within 365 days (1 year) the Commencement Date.
Any deviations in handing over schedule of ROW shall be mutually discussed and agreed between the HUDA and the Concessionaire and also the extension of the Construction period shall be automatic on such agreement.
The ROW shall be made available to the Concessionaire free from the entire encumbrance and without the Concessionaire being required to make any payment to the 4 HUDA. Pursuant to the Agreement, the HUDA shall procure for the Concession access to the entire ROW free from encumbrances as per Schedule-H."
3.2. It is submitted that respondent No.1 committed breach of the Concession Agreement. The handing over of the Right of Way (ROW) was delayed for a long duration of time i.e., 1085 days which further resulted in delay in construction work. The original scheduled date of handing of the entire ROW, according to the terms of the Concession Agreement, was 12.12.2008 (365 days from the date of Commencement of the work), the handing over of the ROW was completed on 02.12.2011 with the delay of 1085 days from the scheduled date of handing over.
3.3. It is submitted that there was delay by the respondents in handing over the sites as mentioned in paragraph Nos.11 and 12 of the application.
3.4. It is submitted that in adherence to the terms of the agreement and assurance given by the respondents, the applicant successfully completed the work on 30.03.2012. The applicant had to bear huge financial loss and remained under financial stress/burden while achieving the target.
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3.5. As per the Concession Agreement, the date of commencement of work was 12.12.2007 and the Scheduled Project Completion Date (SPCD) was 11.06.2010. However, due to various reasons which are not at all attributable to the Concessionaire and attributable to the respondents and material breaches committed by the respondents, the Commercial Operation Date was achieved only on 30.03.2012. Due to unreasonable and unlawful stand taken by the respondents, a dispute in terms of Clause 39.1(a) of the Concession Agreement regarding payment of Annuities and Bonus etc., has arisen between the parties.
3.6. By the letter dated 03.09.2013, independent engineer has reviewed the invoices and recommended payment of invoices for annuities 1st, 2nd and 3rd in full and part of 4th annuity along with bounce of one annuity. Two meetings were conducted in terms of Clause 39.1(a) of the Concession Agreement. On 11.02.2014 meeting, it was decided that the matter be referred back to the Independent Consultant under Clause 39 of the Concession Agreement to examine and furnish report on the items along with its recommendations on the issues keeping in view the provision of the Concession Agreement and relevant NHAI circulars on the said items / disputes / claims.
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3.7. The independent consultant vide letter dated 30.04.2014 sent its recommendation. Though several meetings were held, the disputes were not settled. In such circumstances, the applicant has invoked arbitration clause on 18.07.2016, as per Clause 39.2 of the Concession Agreement. Despite the same, the respondents did not choose to nominate their Arbitrator. After expiry of thirty (30) days period as per the statute, the applicant filed Arbitration Application No.103 of 2016 under the provisions of the Arbitration Act before this Court. During pendency of the said arbitration application, the parties agreed to amend the dispute resolution Clause i.e., Clause 39.2 of the Concession Agreement and consequent to the said agreement, it was agreed that the parties would nominate their respective Arbitrators and the nominated Arbitrators will appoint the Presiding Arbitrator.
3.8. There was exchange of correspondence / letters between the applicant and the respondents. Respondent No.2 issued the letter dated 25.09.2018. It is contended that in response to the letter of the applicant dated 30.08.2018, respondent No.2 issued letter dated 25.09.2018 according consent to the draft of supplementary agreement for arbitration clause for amendment of Clause 39.2, however, the applicant was informed that supplementary agreement to amend Clause 39 cannot be 7 executed as A.A. No.103 of 2016 was pending and respondent No.2 asked the applicant to withdraw the same.
3.9. Pursuant to the letters dated 25.09.2018 and 14.12.2018, the applicant filed application in I.A. No.1 of 2018 for withdrawal of A.A. No.103 of 2016 and the same was allowed by this Court by the order dated 09.04.2019 withdrawing A.A. No.103 of 2016. Pursuant to withdrawal of A.A. No.103 of 2016, the applicant requested the respondents to sign the supplementary agreement, for which the respondents delayed the same on one pretext or the other.
4.1. It is contended by the respondents in their counter affidavit that the applicant has not followed the mechanism contemplated under Clause 39 of the Concession Agreement, as such, invocation of arbitration is invalid and improper. The applicant has not approached the Indian Council of Arbitration as per Clause 39.2 of the Concession Agreement. Thus, appointment of Justice M.B. Naik, Former Judge, who is not on the Panel of Indian Council of Arbitration, as Arbitrator, is null and void being outside the scope of Clause 39.2 of the Concession Agreement. It is, inter alia, submitted that on the date of filing of the instant arbitration application, there was no amendment to Clause 39.2 of the Concession Agreement. It is further stated that liquidated damages 8 imposed on the applicant was strictly in accordance with the Concession Agreement. The respondents are not responsible for the delay in completion of the work as alleged by the applicant. The claim of the applicant regarding annuity is barred by limitation.
4.2. It is contended by Mr. A. Venkatesh, learned senior counsel appearing for the applicant, that consent was given by the respondents to the draft agreement circulated between the parties on 30.08.2018 and also filed before this Court on the basis of which A.A. No.103 of 2016 was withdrawn. However, no effective steps have been taken by the respondents to nominate their Arbitrator as per the amended Clause 39.2 of the Concession Agreement. It is submitted that several disputes have arisen between the parties and a claim is made for a sum of Rs.650,65,63,446/-.
4.3. The learned senior counsel appearing for the applicant referred to Clause 39.2 of the Concession Agreement. The learned senior counsel referred to the letter dated 30.08.2018 (Annexure -A-12) and the draft supplementary agreement and the letter dated 25.09.2018. The learned senior counsel also referred to the letter dated 14.12.2018 (Annexure - A-13) and the order dated 09.04.2019 passed by this Court in I.A. No.1 of 9 2018 in A.A. No.103 of 2016 whereby the arbitration application was withdrawn by the applicant.
5. Mr. Ratan K. Singh, learned senior counsel appearing for the respondents, submitted that there is no concluded contract between the parties. There is no novation of contract as contended by the learned senior counsel for the applicant. For novation, there should be a new contract. The draft supplementary agreement is in the nature of an agreement to enter into an agreement. It is clear from the letter dated 25.09.2018 and other correspondences / letters, the respondents never consented for the terms of the draft supplementary agreement. Even as per the letters addressed by the applicant, it is clear that it is a draft agreement circulated for giving consent. The parties did not sign the supplementary agreement. The applicant did not take liberty for withdrawal of A.A. No.103 of 2016 to file fresh application. The original agreement is valid and at the most applicant is entitled to invoke Clause 39.2.1 for appointment of Institutional Arbitrator as per Section 11(6)(c) of the Arbitration Act; the applicant cannot directly approach this Court unless it approaches the institution for appointment of Arbitrator and institution fails to appoint an arbitrator. The principles of Order - XXIII of C.P.C. are applicable to the arbitration matters. If the 10 applicant wanted to withdraw the arbitration application, it should have sought liberty of this Court to file fresh arbitration application.
6. The learned senior counsel appearing for the applicant submitted that Order - XXIII Rule 3 of C.P.C. is not applicable to the Andhra Pradesh Arbitration Rules 2000. The letter dated 30.08.2018 clearly reveals that there was consent between the parties.
7. The leaned senior counsel appearing for the applicant relied upon the following decisions:
1. Trimex International FZE Ltd. v. Vedanta Aluminium Ltd. 1
2. Govind Rubber Ltd. v. Louids Dreyfus Commodities Asia (P) Ltd. 2
3. Shipping Services (P) Ltd. v. Premier Sea Foods Exim (P) Ltd. 3
4. MTNL v. Canara Bank 4
5. Masroor Shaikh v. Bharat Bhushan Gupta 5
8. The leaned senior counsel appearing for the respondents relied upon the following decisions which are as under:
1. National Highways Authority of India v. Bumihiway DDB Ltd. (JV) 6
2. BSNL v. Nortel Networks (India) (P) Ltd. 7
3. Speech and Software Technologies (India) (P) Ltd. v. Neos 8 Interactive Ltd.
1 (2010) 3 SCC 1 : (2010) 1 SCC (Civ) 570 : 2010 SCC OnLine SC 214 2 (2015) 13 SCC 477 : (2016) 1 SCC (Civ) 733 : 2014 SCC OnLine SC 1131 3 (2019) 11 SCC 461 : (2019) 4 SCC (Civ) 720 : 2018 SCC OnLine SC 2417, Page 464 4 (2020) 12 SCC 767 : 2019 SCC OnLine SC 995 at page 775 5 (2022) 4 SCC 156 : (2022) 2 SCC (Civ) 419 : 2022 SCC OnLine SC 132 at page 160 6 (2006) 10 SCC 763 7 (2021) 5 SCC 738 : 2021 SCC OnLine SC 207 at page 763 11
9.1. In Trimex International FZE Limited's case (Supra 1), the Hon'ble Supreme Court held as under:
" 48. Mr C.A. Sundaram, learned Senior Counsel for the respondent taking me through the same e-mails/correspondence submitted that such clauses being unclear and ambiguous, cannot be permitted to stand on its own footing so as to deprive the respondent of its valid defence. He also reiterated that in the absence of a concluded and binding contract between the parties, the arbitration clause contained in the draft agreement cannot be relied on by the petitioner. He further pointed out that the arbitration clause as contained in the commercial offer suffers from the vice of being unclear and ambiguous and, therefore is not capable of being enforced.
49. In the light of the details which have been extracted in the earlier paragraphs, I am unable to accept the stand of the respondent. It is clear that if the intention of the parties was to arbitrate any dispute which arose in relation to the offer of 15- 10-2007 and the acceptance of 16-10-2007, the dispute is to be settled through arbitration. Once the contract is concluded orally or in writing, the mere fact that a formal contract has to be prepared and initialled by the parties would not affect either the acceptance of the contract so entered into or implementation thereof, even if the formal contract has never been initialled.
8 (2009) 1 SCC 475 12
56. Mr Venugopal pointed out that the charter party agreements are governed as per international shipping practices. The normal procedure is that the brokers from both sides first agree on the vital terms over phone/telex [these terms relate to freight, type of ship, lay can (period of shipping), demurrage rate, cranes, etc.] At this stage, no agreement is formally signed but the terms are binding on both the parties, as per the contract of affreightment (CoA), which in the present case was entered into on the next day i.e. 17-10-2007. Certain minor modifications could go on from either side on mutual agreement but in the absence of any further modification, the originally agreed terms of CoA are binding on both the parties. Till the agreement is actually signed by both the parties, the term "draft" is used. This does not mean that the terms are not binding as between the petitioner and the shipowners. Further, according to him, the existence of the charter party, various international shipping practices, etc. which are to be pleaded in detail before the Arbitral Tribunal once it is constituted and not before this Court since this means extensive quoting of shipping laws and decided cases which cannot be done in the present arbitration petition. The above submissions cannot be underestimated.
57. Both in the counter-affidavit as well as at the time of arguments Mr C.A. Sundaram, learned Senior Counsel for the respondent has pointed out various differences between the version of the respondent and the petitioner. However, a close scrutiny of the same shows that there were only minor differences that would not affect the intention of the parties. It 13 is essential that the intention of the parties be considered in order to conclude whether the parties were ad idem as far as adopting arbitration as a method of dispute resolution was concerned. In those circumstances, the stand of the respondent that in the absence of signed contract, the arbitration clause cannot be relied upon is liable to be rejected."
9.2. In Govind Rubber Limited's case (Supra 2), the Hon'ble Supreme Court held as under:
" 12. There may not be any dispute with regard to the settled proposition of law that an agreement even if not signed by the parties can be spelt out from correspondence exchanged between the parties. However, it is the duty of the court to construe correspondence with a view to arrive at the conclusion whether there was any meeting of mind between the parties which could create a binding contract between them. It is necessary for the court to find out from the correspondence as to whether the parties were ad idem to the terms of contract.
13. It is equally well settled that while construing an arbitration agreement or arbitration clause, the courts have to adopt a pragmatic and not a technical approach. In Rukmanibai Gupta v. Collector [(1980) 4 SCC 556] , this Court held that:
(SCC p. 560, para 6) "6. Arbitration agreement is not required to be in any particular form. What is required to be ascertained is whether the parties have agreed that if disputes arise between them in respect of the subject-matter of contract such dispute shall be 14 referred to arbitration, then such an arrangement would spell out an arbitration agreement."
15. A perusal of the aforesaid provisions would show that in order to constitute an arbitration agreement, it need not be signed by all the parties. Section 7(3) of the Act provides that the arbitration agreement shall be in writing, which is a mandatory requirement. Section 7(4) states that the arbitration agreement shall be in writing, if it is a document signed by all the parties. But a perusal of clauses (b) and (c) of Section 7(4) would show that a written document which may not be signed by the parties even then it can be arbitration agreement. Section 7(4)(b) provides that an arbitration agreement can be culled out from an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement.
16. On reading the provisions it can safely be concluded that an arbitration agreement even though in writing need not be signed by the parties if the record of agreement is provided by exchange of letters, telex, telegrams or other means of telecommunication. Section 7(4)(c) provides that there can be an arbitration agreement in the exchange of statements of claims and defence in which the existence of the agreement is alleged by one party and not denied by the other. If it can be prima facie shown that the parties are at ad idem, then the mere fact of one party not signing the agreement cannot absolve him from the liability under the agreement. In the present day of e- commerce, in cases of internet purchases, tele purchases, ticket booking on internet and in standard forms of contract, terms and conditions are agreed upon. In such agreements, if the 15 identity of the parties is established, and there is a record of agreement it becomes an arbitration agreement if there is an arbitration clause showing ad idem between the parties. Therefore, signature is not a formal requirement under Section 7(4)(b) or 7(4)(c) or under Section 7(5) of the Act." 9.3. In Shipping Services (P) Limited's Case (Supra 3), the Hon'ble Supreme Court held as under:
" 8. In addition, we may indicate that the law in this behalf, in Jugal Kishore Rameshwardas v. GoolbaiHormusji [Jugal Kishore Rameshwardas v. GoolbaiHormusji, AIR 1955 SC 812] , is that an arbitration agreement needs to be in writing though it need not be signed. The fact that the arbitration agreement shall be in writing is continued in the 1996 Act in Section 7(3) thereof. Section 7(4) only further adds that an arbitration agreement would be found in the circumstances mentioned in the three sub-clauses that make up Section 7(4). This does not mean that in all cases an arbitration agreement needs to be signed. The only pre-requisite is that it be in writing, as has been pointed out in Section 7(3). "
9.4. In MTNL's case (Supra 4), the Hon'ble Supreme Court held as under:
" The existence of a valid arbitration agreement
9. A valid arbitration agreement constitutes the heart of an arbitration. An arbitration agreement is the written agreement between the parties, to submit their existing, or future disputes or differences, to arbitration. A valid arbitration agreement is the foundation stone on which the entire edifice of the arbitral 16 process is structured. A binding agreement for disputes to be resolved through arbitration is a sine qua non for referring the parties to arbitration.
9.2. The arbitration agreement need not be in any particular form. What is required to be ascertained is the intention of the parties to settle their disputes through arbitration. The essential elements or attributes of an arbitration agreement is the agreement to refer their disputes or differences to arbitration, which is expressly or impliedly spelt out from a clause in an agreement, separate agreement, or documents/ correspondence exchanged between the parties.
9.3. Section 7(4)(b) of the 1996 Act, states that an arbitration agreement can be derived from exchange of letters, telex, telegram or other means of communication, including through electronic means. The 2015 Amendment Act inserted the words "including communication through electronic means" in Section 7(4)(b). If it can prima facie be shown that parties are ad idem, even though the other party may not have signed a formal contract, it cannot absolve him from the liability under the agreement [Govind Rubber Ltd. v. Louis Dreyfus Commodities Asia (P) Ltd., (2015) 13 SCC 477 :
(2016) 1 SCC (Civ) 733] .
9.5. A commercial document has to be interpreted in such a manner so as to give effect to the agreement, rather than to invalidate it. An "arbitration agreement" is a commercial document inter partes, and must be interpreted so as to give effect to the intention of the parties, rather than to invalidate it on technicalities.
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9.6. In Khardah Co. Ltd. v. Raymon & Co. (India) (P) Ltd. [Khardah Co. Ltd. v. Raymon & Co. (India) (P) Ltd., (1963) 3 SCR 183 : AIR 1962 SC 1810] , this Court while ascertaining the terms of an arbitration agreement between the parties, held that : (AIR p. 1820, para 30) "30. ... If on a reading of the document as a whole, it can fairly be deduced from the words actually used therein, that the parties had agreed on a particular term, there is nothing in law which prevents them from setting up that term. The terms of a contract can be express or implied from what has been expressed. It is in the ultimate analysis a question of construction of the contract."
emphasis supplied) 9.7. In interpreting or construing an arbitration agreement or arbitration clause, it would be the duty of the court to make the same workable within the permissible limits of the law. This Court in Enercon (India) Ltd. v. Enercon GmbH [Enercon (India) Ltd. v. Enercon GmbH, (2014) 5 SCC 1 : (2014) 3 SCC (Civ) 59] , held that a common sense approach has to be adopted to give effect to the intention of the parties to arbitrate the disputes between them. Being a commercial contract, the arbitration clause cannot be construed with a purely legalistic mindset, as in the case of a statute."
9.5. In Masroor Shaikh's case (Supra 5), the Hon'ble Supreme Court held as under:
" 18. The learned counsel appearing for Respondent 1 has relied upon what has been held in paras 95 and 98 of the 18 decision of this Court in Vidya [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] . The conclusions of this Court have been summarised in para 154 of the said decision, which reads thus : (SCC p. 121) "154. Discussion under the heading "Who Decides arbitrability?" can be crystallised as under:
154.1. Ratio of the decision in Patel Engg. Ltd. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] on the scope of judicial review by the court while deciding an application under Sections 8 or 11 of the Arbitration Act, post the amendments by Act 3 of 2016 (with retrospective effect from 23-10-2015) and even post the amendments vide Act 33 of 2019 (with effect from 9-8-2019), is no longer applicable.
154.2. Scope of judicial review and jurisdiction of the court under Sections 8 and 11 of the Arbitration Act is identical but extremely limited and restricted.
154.3. The general rule and principle, in view of the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and the principle of severability and competence-
competence, is that the Arbitral Tribunal is the preferred first authority to determine and decide all questions of non- arbitrability. The court has been conferred power of "second look" on aspects of non-arbitrability post the award in terms of sub-clauses (i), (ii) or (iv) of Section 34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration Act.
154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the 19 disputes are non-arbitrable, though the nature and facet of non- arbitrability would, to some extent, determine the level and nature of judicial scrutiny. The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably "non-arbitrable" and to cut off the deadwood. The court by default would refer the matter when contentions relating to non-arbitrability are plainly arguable; when consideration in summary proceedings would be insufficient and inconclusive; when facts are contested; when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitration proceedings. This is not the stage for the court to enter into a mini trial or elaborate review so as to usurp the jurisdiction of the Arbitral Tribunal but to affirm and uphold integrity and efficacy of arbitration as an alternative dispute resolution mechanism."
(emphasis supplied)
19. Thus, this Court held that while dealing with petition under Section 11, the Court by default would refer the matter when contentions relating to non-arbitrability are plainly arguable. In such case, the issue of non-arbitrability is left open to be decided by the Arbitral Tribunal. On perusal of the impugned order, we find that the issues of non-arbitrability and the claim being time-barred have not been concluded by the learned Single Judge of the Bombay High Court. In fact, in SCC OnLine Bom para 6(vii) of the operative part of the impugned order [Bharat Bhushan Gupta v. M.M. Developers, 2020 SCC OnLine Bom 11658] , the learned Single Judge has observed that the contentions of the parties have been kept open. The petitions filed by the appellant under Section 34 of 20 the Arbitration Act, challenging the order dated 25-5-2021 are pending before the High Court in which the appellant can raise all permissible contentions."
10.1. In National Highways Authority of India's case (Supra 6), the Hon'ble Supreme Court held as under:
"20. In the facts of the present appeal, the following questions of law have arisen for consideration and determination by this Court from the arguments of both the sides:
(a) What is the scope of jurisdiction of the Court on the resignation of an arbitrator considering a specific mandate and mechanism under Section 15(2) of the Arbitration and Conciliation Act, 1996 and clause 67.3 [Ed.: See paras 5 and 43 in this regard.] of the contract?
(b) Whether on resignation of one of the arbitrators, the statutory provision that comes into play is Section 15(2) or Section 11(6) of the Arbitration and Conciliation Act, 1996?
(c) Whether an arbitration clause, which is a sacrosanct clause, can be rewritten by appointment of a judicial arbitrator when no qualification therefor is provided in the agreement?
(d) Whether the consent given by one of the parties (if treated to be so on assumption) is enough for the clause to be rewritten?
23. In the present case, for the purpose of appointment of presiding arbitrator, the respondent unilaterally approached the 21 High Court of Orissa at Cuttack under Section 11(6) of the Arbitration and Conciliation Act, 1996, in express violation of the contract agreement without first requesting the Indian Roads Congress being the designated authority for appointment of the presiding arbitrator.
30. It is pertinent to state that under Section 11(6) of the Act, the Court has jurisdiction to make the appointment only when the person including an institution, fails to perform any function entrusted to it under that procedure. In the present case, the relief claimed by the respondents by invoking Section 11(6) is wholly erroneous as prior to the order dated 1-7-2005, the respondents only sought a clarification from IRC and without making a reference to them, immediately filed the petition under Section 11(6) on the purported ground that the Indian Roads Congress had failed to make the appointment within the stipulated time. Therefore, the reliance placed by the respondent on the judgment of this Court in Punj Lloyd Ltd. v. Petronet MHB Ltd. [(2006) 2 SCC 638] is wholly erroneous and is not applicable to the facts of the present case. 10.2. In BSNL's Case (Supra 7), the Hon'ble Supreme Court held as under:
"44. The issue of limitation which concerns the "admissibility" of the claim, must be decided by the Arbitral Tribunal either as a preliminary issue, or at the final stage after evidence is led by the parties.22
46. The upshot of the judgment in Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] is affirmation of the position of law expounded in Duro Felguera [Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729 : (2017) 4 SCC (Civ) 764] and Mayavati Trading [Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman, (2019) 8 SCC 714 : (2019) 4 SCC (Civ) 441] , which continue to hold the field. It must be understood clearly that Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] has not resurrected the pre-amendment position on the scope of power as held in SBP & Co. v. Patel Engg. Ltd. [SBP & Co. v. Patel Engg.
Ltd., (2005) 8 SCC 618]
47. It is only in the very limited category of cases, where there is not even a vestige of doubt that the claim is ex facie time-barred, or that the dispute is non-arbitrable, that the court may decline to make the reference. However, if there is even the slightest doubt, the rule is to refer the disputes to arbitration, otherwise it would encroach upon what is essentially a matter to be determined by the tribunal."
10.3. In Speech and Software Technologies' Case (Supra 8), the Hon'ble Supreme Court held as under:
"20. It is not the case of the respondent at all that the draft of the services agreement was signed by the applicant at any point of time. Hence, automatic termination of the Tripartite Share Purchase Agreement has nothing to do with the existence 23 of the services agreement dated 15-7-2006, which was already separately executed between the parties. The record would indicate that the services agreement was executed before the Tripartite Share Purchase Agreement was executed. The existence of the said agreement was not dependent upon the completion of events as contemplated by the Tripartite Share Purchase Agreement and, therefore, it is wrong to contend that the services agreement ceased to exist on termination of the Tripartite Share Purchase Agreement.
22. The said letter of intent on a bare reading is nothing but an agreement to enter into another agreement because it is provided in the said letter that "both parties agree to have set a deadline to sign this agreement by 15-9-2006". It is well-settled legal position that an agreement to enter into an agreement is not enforceable nor does it confer any right upon the parties. The agreement in terms of the said letter of intent was to be signed on or before 15-9-2006.
23. It is not the case of the respondent that any agreement was executed between the parties on or before 15-9-2006. The respondent has not stated in its counter-reply that the agreement, which was to be executed by 15-9-2006, was in fact executed. During the course of hearing of the instant application it was fairly conceded by the learned counsel for the respondent that no such agreement was executed between the parties at all. Hence, as the agreement contemplated by the letter of intent was never executed, it cannot be said that the agreement contemplated by the said letter of intent had 24 novated, rescinded or superseded the Tripartite Share Purchase Agreement."
11. Both the learned senior counsel did not touch upon any point relating to arbitrability of the claims. There is no contest as to the dispute arisen between the parties and the matter to be adjudicated by the Arbitral Tribunal.
12. I have carefully perused the material on record and relevant correspondences / letters exchanged between the parties.
13. In the above background of facts and circumstances, the only issue which remains to be decided is "whether there was an amendment to Clause 39.2 of the Concession Agreement dated 17.08.2007?"
14. The contention of the applicant is that in terms of the amended Clause 39.2 of the Concession Agreement, arbitration notice dated 27.07.2021 was issued, and therefore, the instant application has to be allowed. On the other hand, the contention of the respondents is that there is no concluded contract between the parties and there was only exchange of correspondences and draft amendment to Clause 39.2 of the Concession Agreement.
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15. It is a matter of record that during pendency of A.A. No.103 of 2016, the draft amendment of Clause 39.2 of the Concession Agreement was forwarded by the applicant to the respondents. The applicant enclosed the supplementary agreement to the letter dated 30.08.2018 (Annexure - A-12) issued to the respondents. The applicant clearly stated that the said letter is being issued in furtherance of the meeting and discussion held in the office of the respondents on 23.08.2018; the applicant expressed consensus to enter into supplementary agreement; upon signing of supplementary agreement, application for withdrawal will be moved in A.A. No.103 of 2016. In response thereto, the respondents by the letter dated 25.09.2018 requested the applicant to withdraw A.A. No.103 of 2016 so as to proceed further as per the rules of Clause 39.2 of the Concession Agreement. It was followed by another letter dated 14.12.2018 (Annexure - A-13) wherein it is mentioned by the respondents that A.A. No.103 of 0216 is still pending and till the same is withdrawn, the agreement to amend Clause 39.2 of the Concession Agreement cannot be entered into. In pursuance thereof, the applicant filed I.A. No.1 of 2018 to withdraw A.A. No.103 of 2016. In the affidavit in I.A. No.1 of 2018, the applicant clearly asserted at paragraph No.4 that the parties have come to an understanding to resolve the dispute and agreed to amend Clause 39.2 of the Agreement dated 17.08.2007 and that 26 as per the amended clause, both the parties would nominate their respective Arbitrators who would nominate the Presiding Arbitrator. At paragraph No.7 of the affidavit, the applicant stated that it reserves its right to file appropriate application if the parties fail to abide by the supplementary agreement pertaining to appointment of Arbitrators. Eventually, A.A. No.103 of 2016 was dismissed as withdrawn by the order dated 09.04.2019.
16. It is pertinent to note the conduct of the respondents in insisting the applicant to withdraw A.A. No.103 of 2016 so as to proceed further on the supplementary agreement. In the letters dated 25.09.2018 and 14.12.2018, it was never stated by the respondents that they did not agree for the proposed amendment. The learned senior counsel appearing for the respondents vehemently contended that all the correspondence would disclose that supplementary agreement was only a draft and there is no concluded contract; the supplementary agreement was not signed and unless both the parties affix their signatures, the document would not be treated as a concluded contract.
17. In such circumstances, what is relevant to be seen is intention of the parties as per the ratio laid down in the decisions relied on by the learned Senior Counsel appearing for the applicant. Section 7 of the 27 Arbitration Act clearly lays down that arbitration agreement can also be in the form of letters, e-mails, correspondence etc. As stated above in the letters dated 25.09.2018 and 14.12.2018 issued by the respondents in response to the letter dated 30.08.2018 (enclosing draft supplementary agreement) of the applicant, the respondents never raised any objection to the draft agreement. Further, the conduct of the respondents in not opposing the withdrawal application in I.A. No.1 of 2018 and not filing counter to the said withdrawal leads to an irresistible conclusion that the parties had arrived at a consensus to amend the agreement. Thus, contention of the learned senior counsel appearing for the respondents that there was no concluded contract is unacceptable.
18. Therefore, the Arbitration Application is allowed. The applicant by its notice dated 27.07.2021 already nominated Justice M.B. Naik, Former Judge, erstwhile High Court of Andhra Pradesh, Hyderabad, as its Arbitrator. Justice A. Santhosh Reddy, Former Judge, High Court for the State of Telangana, Hyderabad, is appointed as Arbitrator on behalf of the respondents. Both the Arbitrators shall appoint a Presiding Arbitrator. The Arbitral Tribunal so constituted shall arbitrate on the disputes between the applicant and the respondents and shall enter on reference and proceed with, as enjoined by the Arbitration Act. 28 The parties are at liberty to raise all factual and legal grounds in support of their respective claims. The Members of the Arbitral Tribunal are entitled to fees as per the rates specified in Schedule - IV of the Arbitration Act, inserted by Act 3 of 2016 with effect from 23.10.2015, which shall be borne by both parties in equal shares. No order as to costs.
As a sequel thereto, miscellaneous applications, if any, pending in the arbitration application stand closed.
______________________ B. VIJAYSEN REDDY, J Date: April 29, 2024.
PV/RRK