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Wednesday, April 18, 2018

Arbitration and Conciliation Act - if the parties are not able to agree on the said procedure, or constitute the Arbitral Tribunal to their mutual satisfaction, either of the party has an option to route to an appropriate remedy under Section 11 of the Act, which provides detailed machinery for appointment of Arbitrator through judicial intervention. = IBI Consultancy India Private Limited- Versus - DSC Limited

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REPORTABLE
IN THE SUPREME COURT OF INDIA
 CIVIL ORIGINAL JURISDICTION
 ARBITRATION CASE (C) NO. 53 OF 2016
IBI Consultancy India Private Limited …Petitioner(s)
Versus
DSC Limited …Respondent(s)
WITH
 ARBITRATION CASE (C) NO. 63 OF 2016
 ARBITRATION CASE (C) NO. 54 OF 2016
 ARBITRATION CASE (C) NO. 57 OF 2016
 J U D G M E N T
R.K.Agrawal J.
1) The IBI Consultancy India Private Limited-the
petitioner-Company is the Indian subsidiary of the IBI Group
based in Canada. The above petitions, under Section 11(6)
read with Section 11(9) of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as ‘the Act’), have been filed by
the petitioner-Company as well as by the IBI Group for
appointment of an Arbitrator to adjudicate the disputes that
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have arisen between the parties in connection with the
contracts in question.
2) The petitioner-Company has filed two petitions for the
appointment of Arbitrator and its parent company viz., IBI
Group has also filed two petitions of the same nature. Since
the point of consideration is same in all these four petitions,
purpose would be served if we moot the case of either of the
petition and would be disposed off by this common judgment.
Arbitration Case No. 53 of 2016
3) The petitioner-Company is a multi-disciplinary company
engaged in the business of providing system integration and
maintenance service for Toll and Traffic Management Systems
whereas the DSC Limited, the respondent-Company is a
Company registered under the Companies Act, 1956 having
two subsidiary companies. First subsidiary Company of the
respondent-Company is the Lucknow Sitapur Expressway
Limited (LSEL) which is a special purpose vehicle (SPV) of the
respondent-Company and has signed a Concession Agreement
with the National Highways Authority of India (NHAI) for
developing Lucknow-Sitapur Highway Project (LSEL Project)
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for widening the existing 2-Lane Road to 4-Lane dual
carriageway between Km 413.200 to Km 488.270 on NH-24 in
the State of Uttar Pradesh. Second subsidiary Company of the
respondent-Company is Raipur Expressway Limited (REL),
which is also a special purpose vehicle (SPV) of the
respondent-Company and has signed a Concession Agreement
with the NHAI for developing the Raipur-Aurang Highway
Project (REL Project) for widening the existing 2-lane Road to
4-Lane dual carriageway between Km 239 to Km 281 on NH-6
in the State of Chhattisgarh.
4) Vide e-mail dated 16.02.2010, the respondent-Company
sent a Request for Proposal (RFP) to the petitioner-Company,
inviting technical and commercial proposal for their LSEL and
REL Projects. Vide letter dated 07.06.2010, the
petitioner-Company had given a proposal to execute the
contract for installation, erection and commissioning of the
Toll Collection and Traffic Control Equipments at NH-24. The
respondent-Company, vide letter dated 14.06.2010, accepted
the said proposal. Pursuant thereto, a Contract Agreement
dated 30.08.2010 was executed between the parties. The
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value of the Contract was mutually finalized at Rs.
1,55,20,700.00 in pursuance of the Contract Agreement. In
total, the IBI group and the petitioner-Company had entered
into 6 (six) separate contracts for the respective LSEL and REL
Projects with the respondent-Company.
5) During completion of the projects, the
respondent-Company defaulted in releasing the agreed
payment to the petitioner-Company and the IBI Group.
Though several verbal and written communication were
exchanged between the parties to this effect, the
respondent-Company could not release the outstanding
payment. On 06.09.2012, a legal notice was sent to the
respondent-Company by the IBI Group as well as by the
petitioner-Company for the recovery of outstanding payment
for all the contracts. Further, on 12.06.2013, a reminder for
outstanding payment was sent to the respondent-Company.
6) On 24.04.2014, a legal notice for invoking Arbitration
Clause and appointment of Arbitrators was sent to the
respondent-Company and the name of Mr. Debashish Moitra,
Advocate was suggested as a Sole Arbitrator, however, there
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was no reply from the other side. The IBI Group and the
petitioner-herein filed petitions under Section 11 of the Act
before the High Court being Arbitration Petition Nos. 443, 448,
444 and 449 of 2014 before the High Court of Delhi at New
Delhi. Learned single Judge of the High Court, vide order
dated 24.02.2015, disposed of the petitions while holding that
since one of the parties to the petition is an entity incorporated
outside India, therefore, the arbitration of the dispute
involving such an entity would be an ‘international commercial
arbitration’ within the meaning of Section 2(1)(f) of the Act and
for seeking appointment of an Arbitrator in a dispute involving
such an entity, an application will have to be filed before the
Supreme Court under Section 11(9) of the Act. The petitioners
herein have therefore invoked the jurisdiction of this Court by
filing the above petitions.
7) The first and the foremost thing is the existence of an
arbitration agreement between the parties to the petition
under Section 11 of the Act and the existence of dispute(s) to
be referred to Arbitrator is condition precedent for appointing
an Arbitrator under Section 11 of the Act. It is also a well
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settled law that while deciding the question of appointment of
Arbitrator, court has not to touch the merits of the case as it
may cause prejudice to the case of the parties. The scope
under Section 11(6) read with Section 11(9) is very limited to
the extent of appointment of Arbitrator. This Court has to see
whether there exists an Arbitration Agreement between the
parties and if the answer is affirmative then whether the
petitioner has made out a case for the appointment of
Arbitrator.
8) It is worth mentioning that the position after the
insertion of sub-Section 6(A) of Section 11 of the Act dated
23.10.2015 has been changed. The extent of examination is
now confined only to the existence of the Arbitration
Agreement. At this juncture, it is pertinent to set out Article-1
as well as Clause 3.14 of the Contract Agreement dated
30.08.2010 which are as under:-
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“Article-1
Contract Documents
The following document shall constitute the Contract
between the client and the contractor, and each shall be
read and construed as an integral part of the Contract;
(i) This Contract Agreement and Appendices hereto
(ii) Letter or indent ref no. No LSEL/Tolling/IBI/HO-2 dated
14th June 2010…..”
“Clause 3.14
Arbitration (as mentioned in ref. No LSEL/Tolling/IBI/HO-1
dated 14th June 2010)
1. In the event of any dispute or difference arising out or
touching upon any of the terms and conditions of this
contract and /or in relation to the implementation or
interpretation hereof, the same shall be resolved initially by
mutual discussion and conciliation but in the event of failure
thereof, the same shall be referred to an independent
arbitrator mutually agreed by the two parties. The decision
of the arbitrator shall be final and binding upon the parties.
The arbitration shall be in Delhi and the arbitrator shall give
his award in accordance with “The Arbitration and
conciliation Act, 1996”.
2. In the event of arbitrator dying, neglected or refusing to
act or resigning or being unable to act for any reason or his
award being set aside by the court for any reason the parties
will mutually agree another to act as Arbitrator.
 (Emphasis supplied by us)”
9) On a careful perusal of Article-1 as well as Clause 3.14 of
the Contract dated 30.08.2010 along with the Letter of Indent
dated 14.06.2010, it is evident that the letter dated
14.06.2010 is a part of the Contract and it shall be read and
construed as an integral part of the Contract. Therefore, the
contention of the respondent-Company that there does not
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exist any arbitration agreement between the parties is not
sustainable in the eyes of law. We are of the considered view
that Arbitration clause exists in the Contract and we hold this
point in favour of the petitioner-Company.
10) It is a cardinal principle of the Arbitration and
Conciliation Act that the parties are free to decide the number
of arbitrators, provided, it is an odd number, as well as the
procedure for appointing them. However, if the parties are not
able to agree on the said procedure, or constitute the Arbitral
Tribunal to their mutual satisfaction, either of the party has
an option to route to an appropriate remedy under Section 11
of the Act, which provides detailed machinery for appointment
of Arbitrator through judicial intervention.
11) Accordingly, Justice Amitava Roy, a former Judge of this
Court, is appointed as the sole Arbitrator to adjudicate the
disputes between the parties on such fees he may fix.
Nevertheless to say, the said appointment is subject to the
necessary disclosure being made under Section 12 of the Act
and the Arbitrator not being ineligible under Section 12(5) of
the Act. 
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12) The petitions as well as interlocutory application, if any,
are disposed of accordingly.
..…………….………………………J.
 (R.K. AGRAWAL)
.…....…………………………………J.
 (S. ABDUL NAZEER)
NEW DELHI;
APRIL 16, 2018. 

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