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Wednesday, September 30, 2015

Whether there is a dispute and whether there is necessary to appoint arbitrator - invoking Bank Guarantee without intimation and without justifiable cause is a good ground to say that there is a dispute= by invoking the bank guarantee without any justifiable reason and without giving any prior intimation to the petitioner company, the respondent company committed breach of the terms of the contract =I am of the view, that there is a dispute between the parties which requires to be resolved by an Arbitrator under the provisions of the Act. 11. There is no dispute to the effect that there is a clause with regard to arbitration in the contract which had been entered into between the parties on 24.12.2007. The arbitration clause incorporated in the contract reads as under: “33.0 Arbitration. 33.1 Where any dispute is not resolved as provided for in the preceding clause 32.1 then such dispute shall be referred to and settled by arbitration under and in accordance with the provisions of the rules applicable in land of Law. The Award shall be final and binding upon the Supplier and Purchaser. The place of arbitration shall be Paris. 33.2 During settlement of disputes and arbitration proceedings, unless otherwise agreed in writing both Supplier and Purchaser shall be obliged to carry out their respective obligations under the Contract.” 12. As there was a dispute with regard to quality of material supplied, some letters were exchanged between the parties and the representatives of both the parties had also met for the purpose of resolving their disputes but unfortunately, the disputes with regard to quality of the material supplied could not be resolved and ultimately the respondent company had to invoke the bank guarantee. 13. In the aforestated circumstances, it cannot be said that there is no dispute between the parties and therefore, in my opinion, an Arbitrator is required to be appointed as per the provisions of Section 11(6) of the Act. 14. In view of the aforestated circumstances, Mr. Justice A.P. Shah, former Chief Justice of High Court of Delhi, having his office at F-15, Hauz Khas Enclave, New Delhi-110016, is appointed as an arbitrator and the place of arbitration shall be Delhi. Remuneration to be paid shall be fixed by the learned Arbitrator. The parties to the litigation have agreed to the above appointment and they have also agreed that they would request the learned Arbitrator to complete the arbitral proceedings preferably within six months and they shall extend their cooperation to the learned Arbitrator so that the proceedings can be concluded at an early date. 15. Intimation of this order be forwarded to the learned Sole Arbitrator by the Registry of this Court. The Arbitration Petition is allowed in the aforesaid terms.No Costs.

                                                   NON-REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                         CIVIL ORIGINAL JURISDICTION

                     ARBITRATION PETITION NO. 8 OF 2014



M/s. TBEA Shenyang Transformers
Group Co. Ltd.                                     …Petitioner


                                   Versus



M/s. Alstom Projects India Ltd.                    …Respondent



                               J U D G M E N T




ANIL R. DAVE, J.





1.  This is a  petition  under  the  provisions  of  Section  11(6)  of  the
Arbitration and Conciliation Act, 1996  (hereinafter  referred  to  as  “the
Act”).


2. By virtue of this  petition,  the  petitioner  company,  incorporated  in
Republic of China, has prayed that an  Arbitrator  be  appointed  so  as  to
arbitrate the dispute which the  petitioner   company  is  having  with  the
respondent company, incorporated under the provisions of the Companies  Act,
1956, in India.


3.     According  to  the  learned  counsel  appearing  for  the  petitioner
company, the petitioner company had entered into a  contract  on  24.12.2007
with the respondent company for supply of  Transformers  and  certain  other
electrical equipments which were necessary for the  purpose  of  setting  up
Transformers.  The said Transformers  were  to  be  supplied  for  Chuzachen
Project at Sikkim.


4.    According to the respondent company, there were some  defects  in  the
material supplied by the petitioner company and when the said  defects  were
brought to the notice of the petitioner company, the petitioner company  had
agreed to replace the defective parts.  It is pertinent to note that a  bank
guarantee  had  also  been  furnished  by  the  petitioner  company  to  the
respondent company  which  was  to  be  invoked  in  certain  circumstances.
According to the learned  counsel  appearing  for  the  petitioner  company,
though there was no reason for invocation of  the  bank  guarantee,  without
giving any intimation to the  petitioner  company,  the  respondent  company
invoked the bank guarantee on 22.06.2013.


5.     In  the  aforestated  circumstances,  the  petitioner   company   was
constrained to file an application  under  Section  9  of  the  Act  in  the
District Court at Vadodra, State of Gujarat, but the  said  application  had
been dismissed on 02.09.2013.


6.    Being aggrieved by the order, whereby an application under  Section  9
of the Act had been rejected, the  petitioner  company  had  approached  the
High Court of Gujarat at Ahmedabad.  The said appeal filed before  the  High
Court had also been dismissed on  27.09.2013  and  being  aggrieved  by  the
order passed by the High Court dismissing the  appeal,  the  petitioner  had
filed Special  Leave  Petition   before  this  Court  which  had  also  been
dismissed on 07.10.2013 as this Court did not  find  any  infirmity  in  the
order of the High Court.


7.     In  view  of  the  aforestated  background,  mainly  on  account   of
invocation of the bank guarantee, the petitioner company, according  to  the
learned counsel appearing for the petitioner, has approached this Court  for
appointment of an Arbitrator as per the provisions of Section 11(6)  of  the
Act.


8.    The  learned  counsel  appearing  for  the  petitioner-company  mainly
submitted that by  invoking  the  bank  guarantee  without  any  justifiable
reason and without giving any prior intimation to  the  petitioner  company,
the respondent company committed breach of the terms of the  contract.   The
learned counsel also drew my attention  to  the  contents  of  the  contract
entered into between the parties on 24.12.2007 and  submitted  that  in  the
aforesaid circumstances an Arbitrator be appointed by  this  Court  so  that
the dispute which has arisen between the parties can be resolved by  way  of
arbitration under the provisions of the Act.


9.    On the other hand, the learned counsel appearing for  the  respondent-
company submitted that, in fact, there is no  dispute  between  the  parties
and there is no reason for appointment of an Arbitrator.  He submitted  that
the application filed under Section 9 of the Act by the  petitioner  company
had been rejected and the said order of rejection  had  been  confirmed  not
only by the High Court, but also by this Court.  The fact  that  no  interim
protection was granted  denotes  that  there  was  no  dispute  which  would
require appointment of an arbitrator. He further submitted that by  invoking
the bank guarantee and by encashing the amount  payable  to  the  respondent
company, the issue with regard to  invocation  of  the  bank  guarantee  has
become infructuous and there cannot be any  dispute  on  the  said  subject.
Thus, the learned counsel appearing for the respondent submitted  that  this
is not a case where an Arbitrator should be appointed as per the  provisions
of the Act.


10.   Upon hearing the learned counsel for the  parties  and  going  through
the provisions of the contract, I am of the view, that there  is  a  dispute
between the parties which requires to be resolved  by  an  Arbitrator  under
the provisions of the Act.
11.   There is no dispute to the effect that there is a clause  with  regard
to arbitration in the contract which  had  been  entered  into  between  the
parties on 24.12.2007.  The arbitration clause incorporated in the  contract
reads as under:

“33.0 Arbitration.


33.1   Where any dispute is not resolved as provided for  in  the  preceding
clause  32.1  then  such  dispute  shall  be  referred  to  and  settled  by
arbitration under and  in  accordance  with  the  provisions  of  the  rules
applicable in land of Law.  The Award shall be final and  binding  upon  the
Supplier and Purchaser.  The place of arbitration shall be Paris.


33.2  During settlement of  disputes  and  arbitration  proceedings,  unless
otherwise agreed in writing both Supplier and Purchaser shall be obliged  to
carry out their respective obligations under the Contract.”





12.   As there was a dispute with regard to quality  of  material  supplied,
some letters were exchanged between the parties and the  representatives  of
both the parties had also met for the purpose of  resolving  their  disputes
but unfortunately, the disputes with  regard  to  quality  of  the  material
supplied could not be resolved and ultimately the respondent company had  to
invoke the bank guarantee.


13.   In the aforestated circumstances, it cannot be said that there  is  no
dispute between the parties and therefore, in my opinion, an  Arbitrator  is
required to be appointed as per the provisions of Section 11(6) of the  Act.



14.   In view of the  aforestated  circumstances,  Mr.  Justice  A.P.  Shah,
former Chief Justice of High Court of Delhi,  having  his  office  at  F-15,
Hauz Khas Enclave, New Delhi-110016, is appointed as an arbitrator  and  the
place of arbitration shall be Delhi.   Remuneration  to  be  paid  shall  be
fixed by the learned Arbitrator.  The parties to the litigation have  agreed
to the above appointment and they have also agreed that they  would  request
the learned Arbitrator  to  complete  the  arbitral  proceedings  preferably
within six months and they shall extend their  cooperation  to  the  learned
Arbitrator so that the proceedings can be concluded at an early date.

15.   Intimation of this order be forwarded to the learned  Sole  Arbitrator
by the Registry of this Court.

 16. The Arbitration Petition is allowed in the aforesaid terms. No costs.

                                                               ……………………………J.
                                                             [Anil R. Dave]
New Delhi;
September 21, 2015.



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