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MCNALLY Bharat Engineering Co. Ltd. v/s Marg Limited & Another

    AP 1156 of 2017

    Decided On, 30 April 2018

    At, High Court of Judicature at Calcutta

    By, THE HONOURABLE MR. JUSTICE ASHIS KUMAR CHAKRABORTY

    For the Petitioner: Malay Ghosh, Sr. Advocate, Anubhav Sinha, Advocate. For the Respondents: R1, Jayjit Ganguli, Pradip Sanchiti, R2, Joy Saha, Sr.Advocate, Lopita Banerjee, Advocates.



Judgment Text

This is an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, as amended by the amending Act No.3 of 2016 (in short, "the Act of 1996") for appointment of the Presiding Arbitrator of the Arbitral Tribunal to adjudicate the disputes between the parties.

At the very outset, strong objection was raised by the respondents with regard to the maintainability of the application before this Court. According to the respondents, this Court lacks the jurisdiction to entertain the present application and the petitioner ought to have filed the same before the High Court of Judicature at Madras. The petitioner, however, contended that this Court has the jurisdiction to entertain the present application as also to pass orders as prayed for.

In order to decide the preliminary question whether, this Court can entertain the petitioner's present application it is necessary to consider the brief facts giving rise to this application which are stated hereinbelow.

By an agreement dated January 25, 2006 the Government of Puducherry awarded the contract in favour of the first respondent for setting up and management of the all weather deep-water port at Karaikal (hereinafter referred to as "the said port"). The second respondent was incorporated as a Special Purpose Vehicle (SPV) to undertake the development and operation of the said port and the latter in its turn appointed the first respondent as the contractor to build the port and provide various facilities for berthing of vessels and movement of cargo. The first respondent and the second respondent entered into a contract agreement for EPC work in respect of the said port Phase 2A and 2-extension and further addendum thereto. Thereafter, the first respondent invited offers from experienced sub-contractors for installation of conveyor belt package at the said port. The petitioner submitted its offer to supply, erect, commission and test of the said conveyor belt of coal work at the said port. The first respondent accepted the said offer of the petitioner and issued a letter of intent dated January 12, 2011 for supply and commission of the said conveyor belt system for coal work at the said port. The terms and conditions under which the petitioner was awarded the sub-contract relating to the supply, erection and commission of the conveyor belt system of coal work at the said port were recorded in the agreement dated March 1, 2011 executed between the petitioner and the first respondent. During the execution of the work by the petitioner, under the said agreement dated March 1, 2011, certain disputes arose between the parties on account of delayed payments by the first respondent to the petitioner. Thus, in order to resolve such disputes on August 23, 2012 a tripartite agreement (hereinafter referred to as "the agreement dated August 23, 2012") was entered into between the petitioner, the first respondent and the second respondent. In the said agreement dated August 23, 2012 both the respondents acknowledged the outstanding dues of the petitioner amounting to Rs. 34.52 crores and the parties agreed that the said outstanding amount would be paid by the first respondent to the petitioner through post-dated cheques. The parties further agreed that with effect from the appointed date, that is, August 23, 2012 the second respondent shall settle and release all due payments directly to the petitioner. Clause 19 of the said agreement dated August 23, 2012 contained the arbitration clause for adjudication of the disputes between the parties, relating to the said agreement through arbitration which is extracted hereinbelow:

"Clause 19. All disputes and differences that may arise between any two Parties to this Agreement with regard to any obligations of the Parties to this Agreement or with regard to the interpretation of this Agreement shall be referred to a panel of three arbitrators where each disputing Party shall have the right to appoint one arbitrator, the third to be appointed by the two arbitrators so appointed. In the event that the dispute or difference is between all the three Parties, then such dispute shall be referred to a panel of three arbitrators, one arbitrator to be jointly appointed by the Employer and the Contractor, the second to be appointed the Sub-contractor and the third to be appointed by the two arbitrators so appointed. The arbitration shall be governed and conducted under the provisions of the Arbitration and Conciliation Act, 1996 including its statutory modification or restatement. The place of arbitration shall be Chennai and the proceedings shall be conducted in English."

In terms of the said agreement dated August 23, 2012 the first respondent made over post-dated cheques for the amount of Rs.34.52 crores to the petitioner. However, when the petitioner deposited the said post dated cheques issued by the first respondent to its bank for encashment, many of them were dishonoured. The second respondent even had not fulfilled its financial obligation to the petitioner as contemplated in the said agreement dated August 23, 2012. In such circumstances, on March 6, 2013 a supplementary agreement was executed by the parties herein (hereinafter referred to as "the supplementary agreement dated March 06,2013"), inter alia, for variation of the original payment schedule mentioned in the said agreement dated August 23, 2012. The supplementary agreement dated March 06, 2013 was executed in Kolkata.

Clause 7 of the supplementary agreement dated March 6, 2013 provided that save and except those explicitly modified by the said agreement all other obligations, performance and duties of the respective parties under the principal agreement and the agreement dated August 23, 2013 shall remain the same and shall supersede only which has been categorically identified in the said agreement. Further, clause 12 of the supplementary agreement contained an arbitration clause between the parties which reads as follows:

"Clause 12. All disputes and differences that may arise between any two Parties to this Supplementary Agreement with regard to any obligations of the Parties to this Supplementary Agreement or with regard to the interpretation of this Supplementary Agreement shall be referred to a panel of three arbitrators where each disputing Party shall have the right to appoint one arbitrator, the third to be appointed by the two arbitrators so appointed. In the event that the dispute or difference is between all the three Parties, then such dispute shall be referred to a panel of three arbitrators, one arbitrator to be jointly appointed by the Employer and the Contractor, the second to be appointed the Sub-contractor and the third to be appointed by the two arbitrators so appointed. The arbitration shall be governed and conducted under the provisions of the Arbitration and Conciliation Act, 1996 including its statutory modification of restatement. The place of arbitration shall be Kolkata-Chennai and the proceedings shall be conducted in English."

According to the petitioner, both the respondents failed to perform their respective obligations towards making payment even under the supplementary agreement dated March 6, 2013 and prevented it to complete the balance work. Thus, various disputes and differences have arisen between the petitioner on the one hand and the first and second respondent on the other. By a letter dated September 15, 2017 addressed to both the respondents, the petitioner invoked the arbitration agreement contained in Clause 12 of the supplementary agreement dated March 6, 2013 and appointed its nominee arbitrator for adjudication of the disputes between the parties. By a letter dated October 10, 2017 Shri R. Palaniandavan, Advocate informed the petitioner that he is representing both the respondents who have nominated a former Judge of the Madras High Court as their nominee arbitrator of the arbitral tribunal for adjudication of the disputes arising out of the said agreement dated August 23, 2012 and the supplementary agreement dated March 6, 2013. By another letter dated October 25, 2017 another advocate, namely, Akhil R. Bhansati informed the petitioner that he is representing the first respondent who is agreeable to the nomination of the former Judge of the Madras High Court already nominated by the second respondent to be also their nominee arbitrator.The petitioner also filed an application, AP No. 887 of 2017 before this Court seeking various reliefs, under Section 9 of the Act of 1996, against the respondents. The said application is pending disposal before this Court.

The respondents also filed an application, OA No.6182 of 2017 with OA No. 958 of 2017, before the Madras High Court, against the petitioner herein seeking relief under Section 9 of the Act of 1996. By an order dated December 7, 2017 a learned Single Judge of the Madras High Court rejected the said application of the respondents. The learned Single Judge of the Madras High Court held that a conjoint reading of clause 19 of the said agreement dated August 23, 2012 and clauses 7 and 12 of the supplementary agreement dated March 06, 2013 makes it clear that clause 12 of the supplementary agreement dated March 06, 2013 supersedes clause 19 of the earlier agreement. By the said order dated December 7,2017 it was further held that in view of clause 12 of the supplementary agreement the Madras High Court and this Court would have concurrent jurisdiction to entertain any application of the parties under the Act of 1996 and in view of Section 42 of the said Act the appropriate jurisdiction would vest in the Court approached first by a party to the dispute.

Mr. Malay Ghosh, learned senior advocate appearing in support of the present application submitted that the petitioner has filed this application by invoking the arbitration agreement between the parties contained in the supplementary agreement dated March 06, 2013. The petitioner has prayed for appointment of the presiding arbitrator of the arbitral tribunal for adjudication of the disputes between the parties as per the arbitration agreement contained in clause 12 of the supplementary agreement dated March 06, 2013. According to Mr. Ghosh, inasmuch as the supplementary agreement dated March 06,2013 was executed Kolkata, a part of the petitioner's cause of action to file this application arose within the jurisdiction of this Court and on this ground alone this Court has the jurisdiction to entertain the present application. Referring to the decision of the Supreme Court in the case of Indus Mobile Distribution Pvt. Ltd. vs. Datawind Innovations Pvt. Ltd. & Ors. reported in (2017) 7 SCC 678, it was further argued for the petitioner that the designated place of arbitration mentioned in the arbitration agreement also confers jurisdiction on a Court, to entertain any application under the Act of 1996. It was submitted that in any event, as per clause 7 of the supplementary agreement dated March 06, 2013 in respect of any matter where the said agreement contemplated a position different from that contemplated by the agreement dated August 23, 2012 the provisions of the supplementary agreement shall supersede the provision of the earlier agreement. Thus, according to the petitioner, the arbitration agreement contained in clause 19 of the agreement dated August 23, 2012 providing that the place of arbitration shall be only at Chennai was superseded by the arbitration agreement contained in clause 12 of the supplementary agreement dated March 06, 2013 providing that the place of arbitration shall be Kolkata-Chennai. It was stressed that even by the order dated December 05, 2017 a learned Single Judge of the Madras High Court held that in the present case the arbitration agreement contained in clause 19 of agreement dated August 23, 2012 stands superseded by the arbitration agreement contained in clause 12 of the supplementary agreement dated March 06, 2013. The said decision of the learned Single Judge of the Madras High Court has attained finality between the parties and none of the respondents can re-agitate the same issue once again before this Court.

Mr. Ghosh strenuously urged that inasmuch as clause 12 of the arbitration agreement dated March 06, 2013 provides that the place of arbitration sittings may be both at Kolkata and Chennai, the objection of the respondents to the maintainability of the present application under Section 11(6) of the Act of 1996 before this Court is devoid of any merit. It was submitted that on September 15, 2017 the petitioner issued the letter of invocation of the arbitration agreement contained in the said supplementary agreement dated March 6, 2013 after the Amending Act 3 of 2016 came into force with effect from October 23, 2015 and the provisions of sub-Section (6A) of Section 11 of the Act of 1996 are squarely applicable in the present case. In view of the provisions of sub-Section (6A) of Section 11 of the Act of 1996 when the existence of the arbitration agreement between the parties contained in clause 12 of the supplementary agreement dated March 06, 2013 is not in dispute, the respondent cannot raise any objection to the prayer of the petitioner in this application.

On the other hand, Mr. Joy Saha, learned senior advocate appearing for the second respondent strenuously contended that this Court lacks the jurisdiction to entertain this application of the petitioner. He submitted that the second respondent does not dispute the position of law that the Court within whose jurisdiction the agreed place of arbitration proceeding is situate shall have the jurisdiction to entertain any application by any party to the arbitration agreement. In this connection, Mr. Saha relied upon the decisions of the Supreme Court in the case of Enercon (India)Ltd. & Ors. vs. Enercon GMBH & Anr. reported in (2014)5 SCC 1 (paras- 97-101, 114-116 and 132-133). He also relied on the decision of the Supreme Court in the case of Indus Mobile Distribution Pvt. Ltd. (supra) cited by the petitioner. It was argued that the submission of the petitioner that in view of clause 7 of the supplementary agreement, the arbitration agreement between the parties under clause 19 of earlier the agreement dated August 23, 2012 was superseded by the arbitration agreement contained in clause 12 of the supplementary agreement is not correct. The second respondent urged that as per clause 5 of the supplementary agreement dated March 06, 2013 except the terms and conditions modified thereby, all other terms and conditions of the agreement dated August 23, 2012 shall remain valid upon the parties herein. Mr. Saha contended that the disputes raised by the petitioner in this case are to be adjudicated in arbitration as per the arbitration agreement contained in clause 19 of the agreement dated August 23, 2012 and not as per the arbitration agreement contained in clause 12 of the said supplementary agreement dated March 06, 2013. Since the disputes between the parties are to be adjudicated in arbitration as per clause 19 of the agreement dated August 23, 2012 the only place of arbitration as contemplated in the said arbitration agreement is Chennai and this Court lacks the jurisdiction to entertain the present application. It was further submitted that in any event, in this case when there are two arbitration agreements between the same parties, the disputes between the parties are be adjudicated as per the arbitration agreement which is earlier in point of time contained in the agreement dated August 23, 2012 and not as per the arbitration agreement contained in the supplementary agreement dated March 06, 2013. In support of such contention, Mr. Saha relied on the decision of the Supreme Court in the case of Olympus Superstructures Pvt. Ltd. vs. Meena Vijay Khetan & Ors. reported in (1999) 5 SCC 651. It was further submitted by the second respondent that against the order dated December 05, 2017 passed by the learned Single Judge of the Madras High Court the present respondents have filed an appeal before the Division Bench of the Madras High Court, the same has not yet been taken up for hearing and there is no order directing stay of operation of the said order dated December 05, 2017. It was lastly contended that even if it were to be accepted that in the present case, the arbitration agreement contained in clause 12 of the supplementary agreement dated March 06, 2013 is applicable, considering the balance of convenience of the respondents this Court should refrain from entertaining the present application and direct the petitioner to approach the Madras High Court for seeking similar relief. According to him, this is necessitated in view of the facts that the respondents have their respective offices at Chennai in the State of Tamil Nadu and at Karaikal in the State of Puducherry, the contract was awarded by the concerned respondent to the petitioner at Chennai and the contract was also executed by the petitioner at Karaikal in the State of Puducherry. Therefore, it would, therefore, be convenient for the respondents to produce all the documents and the relevant witnesses in the arbitral proceeding, if the same are held in Chennai and as also before the competent Court of Chennai. It was strenuously urged that considering the balance of convenience of the respondents, this Court would not entertain the present application and direct the petitioner to approach the Madras High Court for seeking similar relief. In this connection, the second respondent referred to the decisions of the Supreme Court in the cases of Kusum Ingots & Alloys Ltd. Vs. Union of India and Anr. reported in (2004) 6 SCC 254 and Dashrath Rupsingh Rathod vs. State of Maharashtra & Anr. reported in (2014) 9 SCC 129.

Mr. Jayjit Ganguly, learned counsel appearing for the first respondent adopted the arguments advanced on behalf of the second respondent, raising objection to the jurisdiction of this Court to entertain this application. He also relied on the decision of the Supreme Court in the case of Olympus Superstructures Pvt. Ltd. (supra).

I have considered the materials on record and the arguments advanced by the learned counsel appearing for the respective parties. Since the learned counsel appearing for the first and second respondent advanced their respective arguments to oppose the prayer of the petitioner in this application on the basis of the documents disclosed by the petitioner in its application, the respondents were not required to file any affidavit-in-opposition to this application.In the present case, the parties admit that the disputes between the petitioner on the one hand and the respondents on the other are required to be adjudicated by an arbitral tribunal comprising three arbitrators, one arbitrator to be jointly appointed by the respondents, the second to be appointed by the petitioner and the third to be appointed by the two arbitrators so appointed. It is also an admitted fact that the petitioner has already nominated its arbitrator and both the respondents jointly have also nominated their arbitrator but the said two arbitrators have failed to appoint the third arbitrator, to be the presiding arbitrator of the arbitral tribunal. It is to be noted that the two arbitration agreements between the parties under clause 19 of the said agreement dated August 23, 2012 and clause 12 of the said supplementary agreement dated March 06, 2013 provide for adjudication of the disputes between the parties by an arbitral tribunal comprising three members to be appointed in the manner indicated above. The only difference between the two arbitration agreements contained in the said agreement dated August 23, 2012 and the said supplementary agreement dated March 06, 2013 is that the first agreement stipulated the place of arbitration only at Chennai whereas the subsequent agreement stipulates both Chennai and Kolkata as the place of arbitration. If the disputes between the parties in the present case are covered by the arbitration agreement contained in clause 19 of the agreement dated August 23, 2012 the place of arbitral proceeding would be restricted to Chennai but, if the arbitration agreement in clause 12 of the supplementary agreement dated March 06, 2013 is applicable then the places of the arbitral proceeding can be both in Kolkata, as well as in Chennai. Indisputably, the supplementary agreement dated March 06, 2013 was executed by the parties in Kolkata subsequent to the agreement dated August 23, 2012.

Now, the decision with regard to the issue whether the disputes between the parties in the present case are covered by the arbitration agreement contained in clause 19 of the agreement dated August 23, 2012 or by the one contained in clause 12 of the supplementary agreement dated March 06, 2013 is dependent upon the purport and effect of clause 7 of the supplementary agreement. In this regard, clause 7 of the supplementary agreement dated March 06, 2013 is extracted hereinbelow.

"7. For removal of doubts, it is expressly undertaken, recognized and acknowledged by all the Parties that, save and except those explicitly modified by virtue of this Supplementary Agreement, all other obligations, performance and duties of the respective Parties under the Contractor Principal Agreement and the Tripartite Agreement shall remain the same and shall supersede only which has been categorically identified in this Supplementary Agreement and be accordingly govern the respective Parties and be given effect to. The execution, performance and giving effect to this Agreement shall not in any manner affect or prejudice the effect, validity or otherwise of anything already done or agreed to be done or omitted to be done under the Employer Principal Agreements, the Contractor Principal Agreements and the Tripartite Agreement and the parties shall have the right to invoke the same at any time during the period of Contract. In case of any dispute or discrepancy, the terms of Contractor Principal Agreement shall prevail."A comparison of clause 19 of the agreement dated August 23, 2012 and clause 12 of the supplementary agreement dated August 06, 2013 makes it clear that while the parties intended to retain the mode of adjudication of disputes between them through an arbitral tribunal comprising three members, the earlier arbitration agreement restricted the place of arbitration to be at Chennai only, but in the supplementary arbitration agreement the parties agreed that the place of arbitration shall be 'Kolkata Chennai'. It appears that the wording of the place of arbitration in clause 12 of the supplementary agreement dated March 06, 2013 with regard to the place of arbitration is not ideal as there is no conjunction like 'and' or 'or' between Kolkata and Chennai. However, a reading of clause 19 of the agreement dated August 23, 2012 and clause 12 of the supplementary agreement dated March 06, 2013 leaves no doubt that when the place of arbitration under the earlier agreement was restricted to only Chennai, by the subsequent arbitration agreement, the parties agreed that the place of arbitral proceeding can also be in Kolkata. Therefore, from a conjoint reading of clause 19 of the agreement dated August 23, 2012 and clauses 7 and 12 of the supplementary agreement dated March 06, 2013 I find that clause 12 of the arbitration agreement dated March 06, 2013 supersedes the earlier agreement. In view of the decision of the Supreme Court in the case of Indus Mobile Distribution (supra) when the sittings of the arbitral tribunal can take place in Kolkata, this Court has the jurisdiction to entertain the present application of the petitioner.

Even if it be accepted for the sake of argument that the decision of the Supreme Court in the case of Indus Mobile Distribution (supra) has no application in this case, in that event also since the said supplementary agreement dated March 06, 2013 was executed at the office of the petitioner, within the jurisdiction of this Court, a part of cause of action for the petitioner in this application arose within the jurisdiction of this Court and this application is well maintainable before this Court.

The learned Single Judge of the Madras High Court rejected the application filed by the respondent under Section 9 of the Act of 1996 upholding the contention of the present petitioner that this Court as the jurisdiction to entertain any application of the parties under the Act of 1996 and in view of Section 42 of the said Act, the appropriate jurisdiction would vest in the Court approach first by a party to the dispute, the said decision of the learned Single Judge of the Madras High Court has not been interfered with by the superior forum. Admittedly, the application of the petitioner filed, A.P. No. 887 of 2017 under 9 of the Act of 1996 and the first point of time which is pending before this Court. Therefore, in view of Section 42 of the Act of 1996 the petitioner's pres

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ent application is well maintainable before this Court. In the case of Olympus Superstructures Pvt. Ltd. (supra) the Supreme Court found that there were two sets of agreements between the appellant and the respondents. Under the first set of agreements, namely, "the Flat Purchase Agreement" the appellant agreed to sell different flats to the respective respondents and by the second set of agreements, the "Interior Design Agreements", the respondents appointed the appellant as the interior designer for decorating their respective flats for lump sum payment. The Flat Purchase Agreements and the Interior Design Agreements contained separate arbitration agreements between the parties. The Supreme Court, however, held that the said arbitration agreements contained in the Flat Purchase Agreements were wide enough to cover the disputes arisen between the parties under the Interior Design Agreements. Thus, the said decision of the Supreme Court in the case of Olympus Superstructures Pvt. Ltd. (supra) cited by the second respondent has no application in this case. The parties agreed that the place of arbitration can also be in Kolkata and this Court has the jurisdiction to entertain the petitioner's present application. Hence, the contention raised on behalf of the respondents that this Court should refrain from admitting this application on the ground of balance of convenience has no merit. The decision of the Supreme Court in the case of Kusum Ingots and Alloys Ltd. (supra) cited by the second respondent is an authority for the proposition that in view of clause (2) of Article 226 of the Constitution of India, if a part of cause of action arises within the jurisdiction a writ. The observation of the Supreme Court in paragraph 30 of the said decision that in appropriate cases, the Court may refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum convenience has no bearing in the facts of the present case. Similarly, the decision of the Supreme Court in the case of Dashrath Rupsingh Rathod (supra) while dealing with a case under Sections 138 and 142 of the Negotiable Instruments Act, 1882 and Sections 177 and 178 of the Criminal Procedure Code has no application in the present case. For all the foregoing reasons, the present application filed by the petitioner succeeds and Justice Bhaskar Bhattacharyya, the former Chief Justice of Gujarat High Court is appointed as the presiding arbitrator of the arbitral tribunal with the two other member arbitrators already nominated by the respective parties for adjudication of the disputes between them. There shall, however, be no order as to costs. Urgent certified copy of this judgment, if applied for, be made available to the parties.
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