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M/s. NAPC Limited, Represented by the Authorised Signatory, N. Padmanabhan v/s The Project Director, Kerala State Transport Project, Thiruvananthapuram

    AR No. 104 of 2019

    Decided On, 23 July 2021

    At, High Court of Kerala


    For the Petitioner: K.L. Varghese, Sr.Advocate, Santha Varghese, Rahul Varghese, Ranjith Varghese, Advocates. For the Respondent: K.V. Manoj Kumar, Sr.GP.

Judgment Text

1. The applicant in this Arbitration Request is stated to be a Company engaged in various business operations - including open cast mining, land development, airfield construction, dam, reservoir and canal building, along with its core strengths of earth moving and road construction works - all over India. They say that they had entered into Annexure-A2 Agreement with the respondent - Kerala State Transport Project (hereinafter referred to as “the KSTP” for short) and that several works were completed by them satisfactorily over a period of time.

2. The applicant submits that several disputes arose during the time when the agreement was in force; and that, as per the dispute resolution mechanism agreed between the parties in the said agreement, a Dispute Board had been validly constituted, which entertained the said disputes on its merits and found resolution at various times. They say that, however, when it came to the disputes with which this Request is concerned with, the respondent abruptly and without cause, refused to accept the Chairman of the Dispute Board and contested his authority; and thus that said Board made an order without the junction of its member nominated by the respondents. They say that since they find this order to be partly unacceptable on its merits, they issued a “Notice of Dissatisfaction”, as is required under Clause 20.4 of Annexure-A2 Agreement, which is the precursor step for appointment of Arbitrators as per the said agreement.

3. The applicant submits that they thus requested the respondent to appoint an Arbitrator from their side, so as to form a Panel, along with the Arbitrator named by them through Annexure-A19; but that respondent refused to accede to this, consequently constraining them to approach this Court under the provisions of Section 11 (4) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act” for short), seeking that an Arbitrator be appointed on behalf of the respondent, so as to pave way for the constitution of a three member Arbitral Tribunal, which they assert is mandated under Annexure-A2 Agreement.

4. I have heard Sri.Rahul Varghese, learned counsel appearing for the applicant and Sri.K.V.Manoj Kumar, learned Senior Government Pleader appearing on behalf of the respondent.

5. Sri.K.V.Manoj Kumar, opposed the plea of the applicant in this Arbitration Request vehemently contending that the procedure envisioned under Annexure-A2 agreement for dispute resolution has not been yet complied with or fulfilled by the applicant. He argued that, as is evident from Clause 20.2 of Annexure-A2 Agreement, all disputes ought to be referred to a Dispute Board comprising of three members, one of whom is nominated by the applicant; the other nominated by the respondent; while the third – who is designated as its Chairman – nominated by the said two members. Sri.K.V.Manoj Kumar then expressly admitted that, in fact, a Dispute Board was so constituted with Sri.V.G.Koshy, being the nominee of the applicant; Sri.P.C.Balan, being the nominee of the respondent and Sri.V.R.Jayadas being nominated by the said two members to be the Chairman of the said Board.

6. Sri.K.V.Manoj Kumar then accepted that the afore constituted Dispute Board had looked into the disputes with respect to the agreement on earlier occasions, obtaining resolutions to the same; but that when it came to the disputes now raised by the applicant, some information was received by the respondent that Sri.V.R.Jayadas was incompetent to consider the same for various reasons. He submitted that, therefore, the respondent addressed Annexure R1(a) letter to the applicant requesting them to suggest another person as the Chairman of the Dispute Board; but that when they refused to do so, the respondent was constrained not to participate in the proceedings of the said Board, which then issued an order, without hearing the version of the respondent.

7. Sri.K.V.Manoj Kumar then explained that, in fact, the decision of the Dispute Board was taken only by the Chairman and the nominee of the applicant, since, by then, the nominee of the respondent had to leave India for a short period; and though he informed other members of the Board of his inconvenience through Annexure R1(b) E-Mail, they still went on to adjudicate the dispute in his absence. Sri.K.V.Manoj Kumar thus asserted that the Dispute Resolution Mechanism under Annexure-A2 Agreement has not yet been satisfied by the applicant and therefore, that they cannot now seek that an Arbitrator be appointed by this Court.

8. In reply, Sri.Rahul Varghese – learned counsel for the applicant, submitted that opposition of the respondent to Sri.V.R.Jayadas in continuing as the Chairman of the Dispute Board, was extremely malafide and grossly improper, because the said Board, under his Chairmanship, had already decided various disputes between the parties and had found satisfactory resolutions to the same. He submitted that, however, when the present lot of disputes arose, respondent committed volte face, to allege that Sri.V.R.Jayadas is not competent to continue as the Chairman of the Dispute Board and he argued that this stand is vitiated with gross impropriety and for confutative reasons. 9. Sri.Rahul Varghese, thereafter, pointed out that, even assuming that respondent had any genuine reason to oppose Sri.V.R.Jayadas, what they should have done was not to terminate him unilaterally, as has been done in this case, but to approach the designated Authority under Annexure -A2 agreement to appoint a different person; however, immediately adding that there is no specified procedure prescribed in Annexure-A2 agreement, either for changing of the Chairman of the Dispute Board or for the nomination of another by either of the parties.

10. Sri.Rahul Varghese proceeded to then predicate that, in fact, the malafides involved in this case becomes manifest when one examines Annexure-A3(c), wherein, appointment of Sri.V.R.Jayadas had been expressly accepted by the respondent as early as on 12.04.2014; and that, as is limpid from Annexure-A10 - issued in the year 2018, which was four years after his initial appointment - the respondent had no objection to Sri.V.R.Jayadas, though they now contest his competence without any cogent cause being shown and without citing any discernible reason. Sri.Rahul Varghese, therefore, reiteratingly prayed that this Arbitration Request be allowed and an Arbitrator be appointed on the side of the respondent by this Court.

11. The afore narration of the dialectical contentions of the rival parties renders it inescapable that there are disputes between them as regards Annexure -A2 agreement, which requires to be resolved as per law. However, the only reason why the respondent is opposing the request of the applicant for appointment of an Arbitrator by this Court is because they say that the contractually mandated course of dispute resolution, through the aegis of the Dispute Board, has not been properly complied with. They adscititiously contend that Annexure-A15 proceedings of the said Board is improper and illegal, since it has been issued only by two of its members, without being subscribed by the third and therefore, that no arbitration can proceed edificed on the said proceedings.

12. Before answering these contentions, I must certainly have a look at the relevant Clauses of Annexure-A2 agreement. As per Clause 20.2, the disputes between the parties will have to be first referred to the Dispute Board for its decision. It then provides that said Board shall be constituted by a nominee of each of the parties, who will thereafter nominate and appoint another to be the Chairman. Pertinently, the provisions of the agreement make it luculent that such a nomination by two members shall be binding on both sides and these are absolutely no provisions therein, as per which, either of the parties can choose to change the Chairman or to contest him.

13. That apart, as rightly stated by Sri.Rahul Varghese, appointment of the Dispute Board was as early as in the year 2014 and they continued without any cloud on their competence for at least four or five years thereafter, during which period several disputes were, admittedly, referred to them and resolved, however, when it came to the present set of disputes, the respondent suddenly contested the competence of Sri.V.R.Jayadas to be the Chairman of the Dispute Board and issued Annexure R1(a) letter to the applicant asking that a new Chairman be appointed. Of course, it is also asserted by the respondent before this Court that even prior to this, three other letters were issued to the applicant for the same purpose. However, that is beside the real point. The acme question is whether respondent could have challenged the competence of the Chairman of the Dispute Board or to have sought his removal under the provisions of Annexure -A2 Agreement.

14. Sri.K.V.Manojkumar – learned Senior Government Pleader, in spite of my searching query to him on this issue, could not point out any stipulation in Annexure -A2 agreement, whereby, this could have been done by either party.

15. That being so said, Annexure R1(b) has also great importance in this case. This is an E-Mail issued by Sri.P.C.Balan, who was the nominee of the respondent in the Dispute Board, informing its other members that he is out of India and will be back only on 04.03.2019. However, in the said E-Mail, he has made it unambiguously clear that it will not be proper for the Dispute Board to proceed with the hearings, when the respondent is not co-operating, on account of their opposition to the Chairman and he then notified the Dispute Board that they cannot publish any decision without the participation of the respondent. This E-Mail was evidently issued in the context of the refusal of the respondent to participate in the meetings of the Dispute Board; and Sri.P.C.Balan appears to have been under the impression that since he was the nominee of the respondent, it would not be proper for him to conduct hearings in the said Board or to arrive at a decision, without their participation.

16. The afore view of Sri.P.C.Balan is reiteratingly carried forward in Annexure R1(b) letter issued by him to the parties, wherein, he has objected to Annexure-A15 decision of the Dispute Board saying that he was not a party to the same and inditing that when the same disputes were considered by the Board earlier in the year 2018, respondent had given their defence statement, which has not been considered in the present decision.

17. The afore perspicuously exhibits that there had been complete disarray among the parties, as also the members of the Dispute Board, as far as the mechanism for dispute resolution as envisaged in Annexure-A2 agreement is concerned.

18. As I have already seen above, even when there was no provision in Annexure-A2 agreement to contest the authority of the Chairman of the Dispute Board or to seek his removal, respondent choose to do so, but without assigning any particular reason. The nominee of the respondent in the Dispute Board, namely Sri.P.C.Balan, thereafter went on to maintain that it will not be proper for the said Board to continue their deliberations in the absence of co-operation from the respondent, thus virtually making it obvious that he would not like to be a part of such decision making process.

19. This can, therefore, only lead to the irresistible interference that the mechanism of dispute resolution as per Annexure-A2 agreement has failed on account of various actions on the part of the respondent; and indubitably, therefore, their contention that arbitration cannot be now invoked in the absence of the decision of the Dispute Board, cannot find favour, because it is solely on account of their actions that the said Board was incapacitated to enter a proper decision.

20. That said, however, I am certainly in favour of the respondent's contention that Annexures A15 and A16 decisions of the Dispute Board cannot be held to be a proper, and that same cannot be the hypostasis of any arbitration proceedings. I record that this view was affirmed by Sri.Rahul Varghese, who submitted that his client has already issued a “Notice of Dissatisfaction” against the decision of the Dispute Board to the respondent.

21. On discerning my mind as afore, at the Bar, Sri.K.V.Manoj Kumar – learned Senior Government Pleader, submitted that if this Court is inclined to appoint a sole Arbitrator, who will act without being guided, in any manner, by Annexures A15 and A16, then his client will not stand in the way; but he prayed that all contentions of his client be left open to be pursued before the Said Authority, as and when it becomes necessary.

22. At this time, Sri.Rahul Varghese – learned counsel for the Applicant, submitted that Annexure-A2 agreement, stipulates an Arbitration Panel of three members; and then prayed that this Court appoint one on behalf of the respondent, since his client has already nominated their member through Annexure-A19.

23. I am afraid that this submission of Sri.Rahul Varghese also does not appeal to me, because, going strictly by Annexure-A2 agreement, what is provided for is not an Arbitral Panel, but an Arbitrator. It may be true that in one place in the agreement, the word 'Arbitrators' is used, but there is nothing therein anywhere else to show that this means a Panel of Arbitrators, because in all other places, the word “arbitration” is used synonymously or in conjunction with the word “Arbitrator”.

24. Sri.Rahul Varghese, at this time, conceded that if this Court is inclined only to appoint a sole Arbitrator, then his client does not oppose it, since their intention is only that the disputes in question be resolved at the earliest.

25. When a consensus between the parties has finally been arrived in such a manner, it is certain that this Court will be now justified in appointing a sole Arbitrator for the purpose of deciding and adjudicating the disputes between them.

26. Needles

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s to say, on account of my above observations, I request the learned Arbitrator not to advert to Annexures-A15 and A16 decisions of the Dispute Board, while the process of arbitration is carried on and completed. In summation: (a) I nominate Mr.Justice Thottathil B. Radhakrishnan, Chief Justice (Retd.), 'Sai Gayathri, B.T.S Road, Keerthi Nagar, Elamakkara P.O., Kochi-682 026, as the sole Arbitrator to adjudicate and resolve the disputes and differences between the parties to this case, arising from and relating to Annexure-A2 agreement. (b) The Registry is directed to communicate a copy of this order to the learned Arbitrator within a period of two weeks from today and to obtain a Statement of Disclosure from him under Section 11(8) read with Section 12(1) of the Arbitration and Conciliation Act, 1996. (c) Once the Disclosure Statement is obtained from the learned Arbitrator, the Registry shall release the certified copy of this order, with a copy of the said statement appended to it, retaining the original of the same on the files of this case. (d) The fees of the Arbitrator shall be governed by the fourth Schedule of the Arbitration and Conciliation Act, 1996. (e) The parties to this case are ad idem that they will share the arbitration costs and fees equally and it is so recorded. (f) In order to enable the Arbitrator to commence the proceedings without delay, I direct the parties to mark appearance before him at 11 AM on 06.09.2021. This Arbitration Request is thus ordered.