This is an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short, “the Act of 1996”) preferred by GE Power India Limited against the respondent-Navayuga Engineering Company Limited, for appointment of an arbitrator.
2. Facts of the case necessary to be referred are that the respondent, i.e. Navayuga Engineering Company Limited (NECL) was awarded a contract, under the agreement dated 20.12.2017 by APGENCO, which is popularly known as Polavaram Project. The respondent-NECL thereafter entered into E&M Turnkey Contract being Contract No.NEC/1296/POLA/001 with the applicant-GEPIL on 29.12.2017 for performing the scope of works pertaining to the Polavaram Hydro Electric Project including its “Design, engineering, manufacturing, testing at manufacturer’s works before dispatch, supply, transportation, storage at site, insurance, erection, testing and commissioning of 12 Nos. X 80 MW capacity Vertical full Kaplan Turbine generator units along with all associated auxiliary and ancillary equipment and power evacuation structures (Pothead yard equipment), excluding 400 KV GIS, GSU Transformers, all civil works of power house, pressure tunnels, approach channel, intake pool, intake structure, T.R.P., T.R.C. etc., and Hydro Mechanical works (Gates, Hoists & Trash Rack etc.) of Polavaram Hydro Electric Project on EPC (TURN KEY) basis”.
3. As per the contention of the applicant, it expeditiously undertook the works as envisaged under the contract and completed 18% of the total work; however, on 19.07.2019, APGENCO issued a letter to the respondent-NECL directing it to stop all works and activities under the EPC Contract. The respondent-NECL forwarded a copy of the above letter to the applicant on 20.07.2019 together with a cover note instructing the applicant to stop all works and activities under the EPC Contract until further notice. Thereafter, both the parties exchanged various letters. However, the work remained suspended. Thereafter, the applicant issued a letter dated 12.03.2020 to the respondent terminating the contract. The respondent invoked the Advance Bank Guarantees on 16.03.2020 and eventually, the contract was terminated.
4. Clause 17.2 of the Conditions of the Contract provides for settlement of disputes by arbitration. The applicant by its letter dated 17.03.2020 called upon the respondent to appoint a representative to resolve the dispute between the parties. The applicant also preferred an application under Section 9 of the Act of 1996 in the Commercial Court, Ibrahimpatnam bearing Commercial Arbitration O.P.No.1 of 2020 to stay the invocation/encashment of the Advance Bank Guarantees by the respondent. By order dated 19.03.2020, the Commercial Court directed maintenance of status quo by the respondent in respect of the third Advance Bank Guarantee. Despite the said order, the respondent invoked the Performance Bank Guarantee.
5. In the above factual matrix, the applicant submits that disputes have arisen between the parties, which need to be resolved by appointment of an arbitrator for the reason that Clause 17.2 of the conditions of contract mandates resolution of dispute by arbitration.
6. In the counter-affidavit filed by the respondent, it is impliedly admitted that dispute exists between the parties. However, according to the respondent, an arbitrator has already been appointed to resolve disputes between APGENCO and NECL in respect of the Polavaram Project, further stating that since the dispute between the applicant- GEPIL and the respondent-NECL is as a result of illegal termination of the mother contract, i.e. Polavaram Project contract by APGENCO and an arbitration is already pending to resolve the dispute between APGENCO and NECL, the present dispute between the applicant GEPIL and the respondent-NECL may also be referred to the same arbitral tribunal for effective adjudication and to avoid multiplicity of proceedings and conflicting decisions.
7. It seems, both the parties are on the same page in respect of the existence of a dispute. However, the applicant wants a different arbitrator to be appointed than the one who is resolving the dispute between APGENCO and the respondent-NECIL and the respondent- NECIL seeks resolution of the present dispute by the same arbitrator.
8. The Hon’ble Supreme Court in Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. and others (2013) 1 SCC 641) has held that in the cases of group companies or where various agreements constitute a composite transaction like mother agreement and all other agreements being ancillary to and for effective and complete implementation of the mother agreement, the court may have to make reference to arbitration even of the disputes existing between signatory or even non-signatory parties.
9. Though it is strictly not on the issue of resolution of all disputes by a single arbitrator, I may draw support from the observation made by the Hon’ble Supreme Court that arbitration in relation to ancillary agreements may also be decided in the same course when the dispute in relation to the mother agreement is being considered. It will avoid multiplicity of litigation or complication in resolving the dispute between the parties in relation to a contract, which is ancillary and which would not have been entered between the parties unless the mother agreement was entered between the same or some other parties.
10. Similarly, in P.R. Shah, Shares and Stock Brokers Private Limited v. B.H.H. Securities Private Limited (2012) 1 SCC 594), the Hon’ble Supreme Court had an occasion to consider a joint arbitration in a case where arbitration agreement exists, though in a separate contract between three different parties. The Hon’ble Supreme Court has held thus in paragraph 19:
“19. If A had a claim against B and C, and there was an arbitration agreement between A and B but there was no arbitration agreement between A and C, it might not be possible to have a joint arbitration against B and C. A cannot make a claim against C in an arbitration against B, on the ground that the claim was being made jointly against B and C, as C was not a party to the arbitration agreement. But if A had a claim against B and C and if A had an arbitration agreement with B and A also had a separate arbitration agreement with C, there is no reason why A cannot have a joint arbitration against B and C. Obviously, having an arbitration between A and B and another arbitration between A and C in regard to the same claim would lead to conflicting decisions. In such a case, to deny the benefit of a single arbitration against B and C on the ground that the arbitration agreements against B and C are different, would lead to multiplicity of proceedings, conflicting decisions and cause injustice. It would be proper and just to say that when A has a claim jointly against B and C, and when there are provisions for arbitration in respect of both B and C, there can be a single arbitration.”
11. In view of the above, I am of the considered view that the disp
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ute between the parties arising out of Contract No.NEC/1296/POLA/001 entered into between them on 29.12.2017 can be adjudicated by the same arbitral tribunal before which the arbitration for resolution of dispute between APGENCO and the respondent-NECIL is pending. 12. Accordingly, the application is allowed by appointing the same arbitral tribunal as arbitrator to resolve the dispute between the parties arising out of Contract No.NEC/1296/POLA/001 entered into between them on 29.12.2017. The parties shall approach the arbitrator within a period of one month. The fee of the arbitrator as well as the other terms and conditions shall be settled by the parties in consultation with the arbitrator so appointed. No costs. Pending miscellaneous applications, if any, shall stand closed.