Delhi High Court
Telecommunications Consultants India ... vs Nangia Constructions (India) Pvt. Ltd. on 1 August, 1995
Equivalent citations: 59(1995)DLT438
Author: K. Ramamoorthy
Bench: K. Ramamoorthy
JUDGMENT K. Ramamoorthy, J.
(1) This O.M.P. is filed for a declaration that the arbitration under the sub-contract dated March 21, 1985 be conducted in accordance with the Rules of International Chamber of Commerce. Paris.
(2) In view of the prior proceedings in this Hon'ble Court in Suit No. 690A/91, instituted by the respondent herein, it is not necessary to set out the facts in full. However, to appreciate the contention of the petitioner herein, a few facts have to be noticed. On 2.2.1985 there was a contract between the Ministry of Posts and Telecommunications, Saudi Arabia (shortly, PTT) for External Plant Work in Dammam, Saudi Arabia and Beta Company, a Company incorporated in Saudi Arabia. This is called the main contract by the petitioner. The said Beta Company assigned the contract to the petitioner, which is called a sub-contract. On 21.3.1985 the petitioner awarded sub-contract to the respondent. Article 146 of the sub-contract is the arbitration clause, which is in the following terms:-
"IF any dispute or difference arises in connection with the Main Contract and such dispute touches or concerns the Sub-Contract Works, then the decision by the Grievances Board of Kingdom of Saudi Arabia (as foreseen under the provisions of the Main Contract) shall also be finally binding upon the Sub-contractor in so far it touches or concerns the Sub-contract works.
If any dispute or difference arises between the Contractor and Sub-Contractor in connection with the sub-contract either party may give notice to the other in writing of the existence of such dispute or difference, specifically its nature, and if the Contractor determines that the dispute does not concern the Main Contract, it shall be subject to the provisions of the Rules of Conciliation and Arbitration of the International Chamber of Commerce thereupon be referred to arbitration for final decision of one or more Arbitrators appointed in accordance with said Rules. Such arbitration shall be held in English language and shall take place in Geneva, Switzerland. Notwithstanding any of the provisions of this Clause performance of the Sub-Contract shall continue during such arbitration proceedings except to the extent that the Ministry or the Contractor may order the suspension of the Sub-Contract Works or any part thereof." It is stated by the parties that the work under the sub-contract has been completed. In accordance with that clause for referring the disputes between the parties, as stated above Suit No. 690A/91 was instituted. Mr. Justice V.S. Despande was appointed as Arbitrator by Mr. Justice Y.K. Sabharwal by order dated 21.10.91. The order reads as follows :- "Suit No. 690/91 Mr. Sikri states that his clients will have no objection if Mr. Justice V.S. Despande, Former Chief Justice of this Court is appointed as a Sole Arbitrator to adjudicate the disputes specified in the petition and the counter claims of the respondent, if any. Mr. Chandhiok has no objection to the name suggested by Mr. Sikri. In view of the aforesaid, Mr. Justice V.S. Despande is appointed as a Sole Arbitrator to adjudicate the disputes specified in the petition as also counter claims of the respondent, if any, in accordance with law."
(3) Mr. Justice V.S. Despande unfortunately died. Parties moved for appointing a fresh Arbitrator. Mr. Justice Arun Kumar by order dated 1.10.1993 appointed Mr. Justice G.C. Jain as the Arbitrator in his place. Justice G.C. Jain had entered on reference and arbitration proceedings are going on.
(4) The learned Counsel for the petitioner submitted that the main Contract between Ptt and Beta Company formed part of the sub-contract and, therefore, the matter should be adjudicated upon in accordance with the main contract and, therefore, the disputes should be adjudicated upon on the basis of I.C.C. Rules of Conciliation and Arbitration. Article 15 of the said Contract is referred to in the petition, which reads as follows :- "Article 15 Entire Agreement Acceptance of this agreement shall be unqualified, unconditional and subject to and expressly limited to the terms and conditions herein. Both parties shall not be bound by additional provisions at variance herewith that may appear in quotation, acknowledgement, invoice or in any other communication unless such provision is expressly agreed to in writing. Upon acceptance this agreement shall constitute the entire agreement between both the parties and may not be modified or rescinded except by writing signed by both parties. This agreement shall be governed by and construed in accordance with Saudi Law." . In paragraph 11 of the petition, it is stated by the petitioner itself as under:- "The respondent filed yet another Suit No.-690/91 on same facts on which its earlier suits baring Nos.1371-A/86 and 1703/87 had been dismissed praying that the Arbitration Agreement be filed in the Court. The petitioner pointed out that the Arbitration clause of the Sub-Contract where under Arbitration was to be held in accordance with the Rules of Conciliation of International Chamber of Commerce, Paris (hereinafter called the "ICC Rules")." Therefore, this point was argued before this Court in Suit No. 690/91 is admitted by the petitioner. In paragraph 12.2 a very interesting stand is taken by the petitioner stating that what was done by this Court was an administrative function. Para 12.2 reads as follows :- "The petitioner most respectfully submit that the Court was performing administrative function in recording the consent of both the parties to the appointment of a Sole Arbitrator which was in conformity with Article 2(3) of the Icc Rules. It is further submitted that this Hon'ble Court was not performing judicial function of adjudicating the matter, otherwise this Hon'ble Court would have ordered the filing of the Arbitration Agreement in the Court as per the mandatory provision of Section 20(4) of the Arbitration Act." It is further asserted by the petitioner that .the earlier order passed by this Court makes it abundantly clear that it is an administrative order and not a judicial order as it was made with the consent of both the parties.
(5) It is also stated in the petition that the petitioner appeared before Mr. Justice G.C. Jain moved an application dated 12.2.93 that the arbitration shall be in accordance with I.C.C. Rules. The learned Sole Arbitrator by this order dated October 16,1993 held that the arbitration shall be under the Indian Arbitration Act, 1940 and not under I.C.C. Rules. That order has become final and that was never challenged. It is also stated by the petitioner that another application dated November 18, 1993 was filed before the learned Arbitrator praying that the Arbitrator may state the case to this Court as important and substantial question of law concerning the jurisdiction of this Court are involved. This application was filed under Section 13(b) of the Indian Arbitration Act. It is also stated by the petitioner that the sub-contract was never amended in accordance with the procedure laid down in Article 15. In para 23 the reason for filing this application is stated, which reads as follows :- "A lot of complications shall arise in Saudi Arabia if a contract signed by a party is modified outside the Kingdom of Saudi Arabia. Many of matters raised by respondents are subject-matter of main contract which were supposed to be raised in the grievance board and not before arbitration. Further the petitioner has been awarded several contracts in Saudi Arabic and if it is known to the Government of Saudi Arabia that after signing the contract in Saudi Arabia, the party amends the contract by its conduct, the petitioner's existing contracts would be jeopardized and may not get future contracts. This would not only be a loss to the petitioner but also would be loss of foreign exchange to country." In paragraph 25 the petitioner has stated the reasons for the ultimate relief prayed for by the petitioner. Para 25 reads as under :- "In view of the brief facts and circumstances stated above, the petitioner submits that:- (i) the Contract between the respondent and the petitioner is an international contract; (ii) the said Contract was to be executed in Saudi Arabia and not in India; (iii) payments were to be made in Saudi Arabia in Saudi Riyals and not in India or in Indian Rupees; (iv) the contract is governed by the Laws of Kingdom of Saudi Arabia and not Indian laws. (v) arbitration is to be held under the Rules of Conciliation and Arbitration of International Chamber of Commerce, Paris; (vi) the Contract specifically provides that it cannot be varied except in accordance with the provisions contained in Article 15 of the Contract; (vii) respondent filed several suits on the same facts and for similar relief; (viii) its earlier two suits were dismissed by the High Court and in the third one, this Hon'ble Court by consent of the parties appointed Mr. Justice V.S. Deshpande and on his demise, Mr. Justice G.C. Jain. (ix) the parties did not and could not vary or modify the Contract in view of the specific provision in the Contract about the procedure of modification. The parties by their conduct could not modify the Contract. (x) the appointment of the Sole Arbitrator by the consent of the parties is in accordance with Article 2(3) of the Icc Clause and hence the order of this Hon'ble Court was not in conflict with the Icc Rules but in harmony with the said Rules. The High Court was careful and conscious of the international character of the Contract and also the fact that the Contract was governed by the Laws of Kingdom of Saudi Arabia and not Indian laws and it contained Icc Arbitration Clause, this Hon'ble High Court accordingly by its order dated October 21, 1991 did not deliberately order the filing of Arbitration Agreement, which is mandatory under Section 20(4) of the Arbitration Act."
(6) The respondent contested the petition contending, inter-alia, that the petitioner had enough opportunity in Suit No. 690/91 to put forth its objections and having failed to take any objection and having allowed the matter to become final it is not open to the petitioner to file this petition. It is stated in the reply that the petitioner had willingly on of its own accord had abandoned the plea of arbitration by International Chambers of Commerce and it was the petitioner who suggested the name of Justice V.S. Despande as Sole Arbitrator and having participated in the arbitration proceedings acquiesced in the arbitration to be in accordance with Indian law. Further, it is stated that the respondent filed an application for extension of time and that was ordered by this Court on 24.4.95 inspite of objections by the petitioner. The respondent prayed for the dismissal of the petition.
(7) Mr. Raj Birbal, learned Senior Advocate for the petitioner relied upon the decision of the Supreme Court reported in National Thermal Power Corporation v. Singer Company and Others, the proposition of law that the arbitration has to be in accordance with the law in Saudi Arabia. When I asked the learned Counsel as to what the law that is prevalent in Saudi Arabia governing the rights of the parties herein, the reply was that it has to be examined and what he intended to submit was that the arbitration has to be in accordance with I.C C. Rules of Conciliation and Arbitration. The learned Counsel relied on the ratio reported in Setabganj Sugal Mills Ltd. v. The Commissioner of income-tax, Central, Calcutta, . In my view, that does not help the petitioner at all.
(8) The order passed by this Court appointing Arbitrator in 1991 has become conclusive and the petitioner is precluded from contending that the arbitration proceedings cannot go on and it has to be in accordance with Icc Rules. Section 11 of the Code of Civil Procedure would squarely apply and the position of law in this behalf is well settled and I do not want to dwell at length on the case law on the point. The petitioner is barred under the provisions of 'might and ought also'.
(9) For all these reasons, the petition is dismissed. No costs.