IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF OCTOBER, 2019 BEFORE THE HON’BLE MR. JUSTICE B. VEERAPPA CIVIL MISCELLANEOUS PETITION No.367/2017 BETWEEN:
M/S ABHIJEET TOLL ROAD (KARNATAKA) LTD., REP. BY MR. ASHOK JAISWAL, ABHIJEET CENTRE, LEVEL 2, 79/4, PRASHANTH NAGAR, AJNI, NAGPUR – 440012.
ALSO AT REGISTERED OFFICE THE KNOWLEDGE HUB, 5TH FLOOR, PLOT NO. DN- 23, SECTOR V, SALT LAKE CITY, KOLKATTA – 700091. WEST BENGAL.
...PETITIONER (BY SRI N. RAVINDRANATH KAMATH, ADVOCATE) AND:
1. GOVERNOR OF KARNATAKA REP. BY PRINCIPAL SECRETARY TO THE GOVERNMENT, PUBLIC WORKS, PORTS AND INLAND WATER TRANSPORT DEPARTMENT (PW,P & IWTD) 3RD FLOOR VIKASA SOUDHA, VIDHANA VEEDHI, BANGALORE -560001.
2 . KARNATAKA ROAD DEVELOPMENT CORPORATION LTD., REP. BY SUPERINTENDING ENGINEER, PLOT NO 16/J, MILLERS TANK BUND AREA, THIMMAIAH ROAD CROSS, BENGALURU – 560052.
…RESPONDENTS (BY SRI YASHODHAR HEGDE, ADVOCATE FOR SRI AJAY J. NANDALIKE, ADVOCATE FOR R1 & R2 ) ***** THIS CIVIL MISCELLANEOUS PETITION IS FILED UNDER SECTION 11(4), (6)(a)(c) & 8 OF THE ARBITRATION AND CONCILIATION ACT 1996, PRAYING TO PASS ON ORDER APPOINTING A SUITABLE, INDEPENDENT AND IMPARTIAL ARBITRATORS BETWEEN THE PETITIONER AND THE RESPONDENTS UNDER SECTION 11 OF THE ARBITRATION AND CONCILIATION ACT, 1996 ETC.
THIS CIVIL MISCELLANEOUS PETITION COMING ON FOR ADMISSION THIS DAY, THE COURT MADE THE FOLLOWING:
O R D E R The petitioner filed the present Civil Miscellaneous Petition under the provisions of Section 11(4),(6)(a)(c) & 8 of the Arbitration and Conciliation Act, 1996 (‘the Act’ for short) for appointment of suitable, independent and impartial arbitrators between the petitioner and the respondents, in terms of Clauses 44.1.1, 44.1.2, 44.3.1 and 44.3.2 of the concession agreement dated 3.6.2011 as per Annexure-C entered into between the parties.
2. It is the case of the petitioner that the Respondent No.1 had entrusted the work of improvements to Chikkanayakanahalli-Tiptur-Hassan road measuring 76.22 kilometers on Build-Operate-Transfer (‘BOT’ for short) basis to Respondent No.2 and the Respondent No.2 invited proposals by notification dated 9.7.2010 for short listing of bidders for improvements, operation and maintenance of the above project on a BOT basis. Pursuant to the evaluation of the bids, the Respondent Nos. 1 and 2 accepted the bid of a consortium comprising of petitioner and M/s Corporate Ispat Alloys Limited by way of a Letter of Acceptance dated 30.4.2011. Accordingly, both the parties entered into concession agreement dated 3.6.2011, detailing the rights and obligations of the parties. According to the petitioner, the respondents in violation of the terms of the Concession Agreement handed over 11.40% of the vacant access and ROW (Hindrance free) against the requirement of 90% on the appointed date, being notified as 5.1.2012. The petitioner had incurred an expenditure of Rs.147,22,00,000/- after having invested its full equity.
3. It is further case of the petitioner that it had further incurred expenses more than Rs.153 crores as on 23.8.2014. Despite this, the respondents failed to release the grant in accordance with the provisions of the Concession Agreement. Therefore, the petitioner issued notice of termination dated 23.8.2014, which details the list of defaults on the part of the respondents. As no reply came forward from the respondents, the petitioner by way of another letter dated 8.9.2014 terminated the contract and requested for release of the Performance Bank Guarantee. However, the respondents instead of curing its defaults, issued a suspension notice to the petitioner on 8.9.2014. The respondents with the intention to unjustly enrich themselves refused to release the Performance Bank Guarantee and instead issued a notice to Punjab National Bank on 14.10.2014 for encashing the Performance Bank Guarantee in their favour. Therefore, the petitioner addressed a letter to the 2nd respondent on 21.10.2014 raising its claim. However, no amounts were paid. Therefore, the petitioner issued legal notice on 27.4.2015 invoking Article 44.3 of the Concession Agreement and appointed one Mr. Surjeet Singh as an Arbitrator to form the Board of three Arbitrators. On 26.5.2015, the respondents issued a reply directing the petitioner to submit to the jurisdiction of the Indian Council of Arbitration (‘ICA’ for short). Therefore, the petitioner has approached this Court by filing CMP No.55/2016 under the provisions of Section 11(4) and (6) of the Act. Subsequently on the memo filed by the learned counsel for the petitioner therein seeking to withdraw the said CMP with liberty to approach the Court in the event of ICA does not approve/appoint the Arbitrators, the said CMP came to be dismissed as withdrawn with liberty as sought for by the order dated 18.11.2016.
4. It is further case of the petitioner that as on the date of withdrawal of CMP No.55/2016, the petitioner already approached ICA on 14.10.2016. The ICA by letter dated 21.10.2016 addressed to the petitioner demanded to deposit a tentative amount of Rs.72,34,813/- towards claimant’s share of arbitrator’s fee and administrative charges inclusive of service tax @ 15% on or before 21.11.2016 and further Rs.23,45,000/- towards stamp duty.
5. Thereafter, the petitioner by letter dated 5.11.2016 requested the ICA to accommodate and allow it to deposit the fee of the learned Arbitrators in three equal installments, 1st to be paid within a month from approval, further 2nd and 3rd installments quarterly during hearings as the matter proceeds. This request was rejected by the ICA vide letter dated 10.11.2016 and stated that although ICA has discretionary power to grant installments, but that power is only exercised for the respondent, if it is unwilling to make the payment for creating obstruction to arbitration and the said measure is not applicable to the claimant, as the initiator of this arbitration and any encouragement to the claimant in this regard will only withhold the natural fluency of arbitral process and therefore, the claimant’s prayer for payment of fees in installments cannot be accepted by the Council and instead, the claimant was granted another extension of time till 12th December 2016 for making payment of the whole amount i.e., Rs.72,34,813/- towards its share of arbitration costs and expenses on the basis of claim amount.
6. It is further case of the petitioner that subsequently, the Registrar, ICA by another letter dated 11.1.2017 addressed to the petitioner has stated that the main objective of arbitration being speedy resolution of dispute, claimant’s request for three months’ extension of time for payment of Rs.72,34,813/- and Rs.23,45,000/- towards its share of arbitration costs and expenses on claim as well as towards the stamp duty is absolutely unacceptable to the Council and however, the claimant was granted the last and final extension of time till 21.2.2017 for payment of the above amount. Subsequently, the Registrar, ICA by letter dated 8.3.2017 exercising the powers under Rule 38 of the ICA Rules of Arbitration closed the matter on file on the ground of non-persuasion of arbitration by the claimant and held that the Council will not be liable for any adverse consequences of this action. The said letter by the Registrar, ICA closing the proceedings initiated by the petitioner has reached finality.
7. It is further case of the petitioner that on 5.7.2017, the respondents made representation to the ICA after paying the amount of Rs.34,500/- and other amounts and requested to treat the said letter as the notice invoking arbitration under the ICA Rules and initiate the arbitration proceedings to adjudicate the claims raised by the claimant. On 19.7.2017, the Registrar, ICA addressed a letter to the present petitioner inviting the attention to Rule 43 of the ICA Rules of Arbitration relating to Optional conciliation under which the parties may opt for conciliation and request the arbitrator to settle their disputes through conciliation before commencement of the arbitration and also to Rule 44 under which the parties may alternatively like to avail of Fast Track Arbitration and request the arbitrator, before the commencement of the proceedings, to decide the dispute within a fixed time frame of 3 to 6 months or any other duration as agreed by the parties. Again the Registrar, ICA by letter dated 1.11.2017 rejected the request made by the petitioner for payment of the amount due in installments stating that there is no such provision in the ICA Rules. Therefore, the petitioner is before this Court for the reliefs sought for.
8. I have heard the learned counsel for the parties to the lis.
9. Sri Ravindranath Kamath, learned counsel for the petitioner reiterating the averments made in the CMP contended that when the petitioner sought permission to deposit the amount in three installments by letter dated 5.11.2016, the same was refused by ICA mainly on the ground that payment of the dues in installments cannot be granted to the petitioner, who has initiated the proceedings and it can be availed only by the respondents, who have initiated the proceedings in A.C. No.2107. Therefore, it amounts to discrimination. The Council cannot pick and choose while conducting the proceedings. He would further contend that according to the Fourth Schedule of the Act, the maximum fee is Rs.30,00,000/-. Therefore, he would contend that the proceedings initiated by the ICA cannot be sustained and the petitioner is entitled for appointment of suitable independent, impartial arbitrator, in terms of Clauses 44.3.1 and 44.3.2 of the agreement dated 3.6.2011 entered into between the parties. Therefore, he sought to allow the present CMP.
10. In support of his contentions, learned counsel for the petitioner relied upon the judgment of the Madras High Court in the case of Madras Fertilizers Limited vs. SICGIL India Limited and others reported in (2010)2 CTC 357 (paragraph-20).
11. Per contra, Sri Yashodar Hegde, learned counsel for the respondents reiterating the averments made in the statement of objections, mainly contended that the very CMP filed before this Court for appointment of independent, impartial arbitrator under the provisions of Section 11(4)(6)(a)(c)(8) of the Act is not maintainable and liable to be dismissed with costs. He would further contend that earlier, the very petitioner approached this Court in CMP No.55/2016 invoking the provisions under Section 11(4) & (6) of the Act for appointment of the sole Arbitrator to adjudicate the dispute between the petitioner and the respondents, in terms of the very agreement dated 3.6.2011 and during the pendency of the proceedings, he has also approached ICA on 14.10.2016 itself and therefore, learned counsel for the petitioner therein represented by the very petitioner filed memo before this Court to withdraw the said CMP No.55/2016 with liberty to approach this Court in the event of ICA does not approve/appoint the Arbitrators. Accordingly, the said CMP No.55/2016 came to be dismissed as withdrawn by the order dated 18.11.2016 and the said order has reached finality. He would further contend that inspite of ICA by letter dated 11.1.2017 granting time till 21.2.2017 for payment of arbitration costs and expenses, the petitioner has not availed the opportunity and therefore, the ICA by letter dated 8.3.2017 closed the matter for non-persuasion of the arbitration by the claimant and also for non-payment of the dues. The said order passed by the ICA has reached finality. He further contended that the petitioner has participated in the proceedings initiated by the respondents in AC 2107 and the request of the petitioner for payment of the dues in installments, was refused in the said proceedings. Once, the petitioner has participated in the proceedings, he is estopped from filing the present CMP and therefore, the present CMP is liable to be dismissed on that ground also. In the circumstances, the present CMP is not maintainable and therefore sought to dismiss the CMP.
12. In support of his contentions, learned counsel relied upon the judgment of the Hon’ble Supreme Court in the case of Iron & Steel Company Limited vs. Tiwari Road Lines reported in(2007)5 SCC 703 (paragraphs 6,7 and 8) and sought to dismiss the CMP.
13. Having heard the learned counsel for the parties, it is undisputed fact that the respondents and the petitioner have entered into a Concession Agreement dated 03.06.2011 detailing the rights and obligations of the parties. According to the petitioner, petitioner has incurred expenses of more than Rs.153 crores and same was not paid by the respondents inspite of repeated demands. Therefore, petitioner was constrained to issue notice of termination dated 23.08.2014. It is also not in dispute that, the respondents did not pay the amount and therefore, the petitioner terminated the contract and requested for release of performance bank guarantee. Therefore, petitioner issued legal notice on 27.04.2015 and on reply issued by the respondent 26.05.2015, petitioner was before this Court seeking the very relief sought in the present Civil Miscellaneous Petition. It is also not in dispute that during pendency of the said Civil Miscellaneous Petition before this Court, the petitioner approached Indian Council of Arbitration on 14.10.2016 in terms of the conditions of the agreement dated 03.06.2011 and certain proceedings were held before the Indian Council of Arbitration and ultimately, installment sought by the petitioner was not granted, and due to non payment of the amount and non-persuasion of the proceedings, the Indian Council of Arbitration, by the Order dated 08.03.2017 has closed the proceedings initiated by the petitioner in A.C.No.2078. The said Order passed by the Indian Council of Arbitration has reached finality.
14. It is also not in dispute that the petitioner participated in the proceedings initiated by the present respondents in A.C.No.2107 before the Indian Council of Arbitration. It is also not in dispute that the respondents have paid the prescribed fee including the petitioner’s fee and expenses before the Indian Council of Arbitration and there is no impediment for the petitioner to proceed with the proceedings before the Indian Council of Arbitration. Later, Tribunal came to be constituted and the proceedings is pending before the Tribunal and petitioner is also participating. Very strangely, present Civil Miscellaneous Petition is filed for appointment of sole arbitrator, when this Court dismissed CMP No.55/2016 with liberty to approach this Court in the event of Indian Council of Arbitration does not approve or appoint an Arbitrator. Admittedly, that stage has not yet accrued. Even though the proceedings before the Indian Council of Arbitration in A.C.2078 was closed on 08.03.2017, in view of pendency of A.C.2107 initiated by the respondents before the very same Indian Council of Arbitration and the matter being ceased before the Arbitration Tribunal, the stage to approach this Court has not yet accrued. Therefore, the present Miscellaneous Civil petition filed by the petitioner is mischievous and nothing but abuse of process of Court.
15. Petitioner cannot take advantage of the proceedings and abuse the process of the Court, thereby, deprive the other litigants valuable and precious time before this Court. The judgment in the case of the Madras Fertilizers Limited vs. SICGIL India Limited and others reported in 2010(2) CTC 357 relied upon by the petitioner is entirely different from the facts and circumstances of the present case and has no application to the present case. Therefore, the contention of the learned counsel for the petitioner cannot be accepted.
16. The Hon’ble Supreme Court, in identical circumstances, in the case of Iron and Steel Co. Ltd. Vs. Tiwari Road Lines reported in (2007)5 SCC 703 at paragraphs 6, 7, 8 and 9, has held as under:
6. It is not disputed that the respondent did not make any effort to have the dispute settled by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration. On the contrary, it straightaway moved an application under Section 11 of the Arbitration and Conciliation Act, 1996 before the City Civil Court, Hyderabad, which was the Designated Court, in accordance with the scheme framed by the High Court of Andhra Pradesh. The principal question, which requires consideration is, whether such an application moved by the respondent was maintainable. Sub-sections (1) to (7) of Section 11 of the Act read as under: “11. Appointment of arbitrators.—(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub- section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub- section (3) applies and— (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(5) Failing any agreement referred to in sub- section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(6) Where, under an appointment procedure agreed upon by the parties,— (a) a party fails to act as required under that procedure; or (b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or (c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(7) A decision on a matter entrusted by sub- section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him is final.”
7. Sub-section (2) of Section 11 of the Act provides that subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator. The opening part of sub-sections (3) and (5) of Section 11 of the Act use the expression “failing any agreement referred to in sub-section (2)”. Therefore, sub-sections (3) and (5) will come into play only when there is no agreement between the parties as is referred to in sub-section (2) of Section 11 of the Act viz. that the parties have not agreed on a procedure for appointing the arbitrator or arbitrators. If the parties have agreed on a procedure for appointing arbitrator or arbitrators, sub-sections (3) and (5) of Section 11 of the Act can have no application. Similarly, under sub-section (6) of Section 11 request to the Chief Justice or to an institution designated by him to take the necessary measures, can be made if the conditions enumerated in clause (a) or (b) or (c) of this sub-section are satisfied. Therefore, recourse to sub-section (6) can be had only where the parties have agreed on a procedure for appointment of an arbitrator but (a) a party fails to act as required under that procedure; or (b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or (c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure. Therefore, a combined reading of the various sub-sections of Section 11 of the Act would show that the request to the Chief Justice for appointment of an arbitrator can be made under sub-sections (4) and (5) of Section 11 where parties have not agreed on a procedure for appointing the arbitrator as contemplated by sub- section (2) of Section 11. A request to the Chief Justice for appointment of an arbitrator can also be made under sub-section (6) where parties have agreed on a procedure for appointment of an arbitrator as contemplated in sub-section (2) but certain consequential measures which are required to be taken as enumerated in clause (a) or (b) or (c) of sub-section (6) are not taken or performed.
8. In the present case the agreement executed between the parties contains an arbitration clause and clause 13.1 clearly provides that all disputes and differences whatsoever arising between the parties out of or relating to the construction, meaning and operation or effect of the contract or the breach thereof shall be settled by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration and the award made in pursuance thereof shall be binding on the parties. This clause is in accordance with sub-section (2) of Section 11 of the Act. There being an agreed procedure for resolution of disputes by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration sub-sections (3), (4) and (5) of Section 11 can have no application. The stage for invoking sub-section (6) of Section 11 had also not arrived. In these circumstances, the application moved by the respondent before the City Civil Court, Hyderabad, which was a designated authority in accordance with the scheme framed by the Chief Justice of the Andhra Pradesh High Court, was not maintainable at all and the City Civil Court had no jurisdiction or authority to appoint an arbitrator. Thus the order dated 31-3-2004 passed by the Chief Judge, City Civil Courts, Hyderabad, appointing a retired judicial officer as arbitrator is clearly without jurisdiction and has to be set aside.
9. The legislative scheme of Section 11 is very clear. If the parties have agreed on a procedure for appointing the arbitrator or arbitrators as contemplated by sub-section (2) thereof, then the dispute between the parties has to be decided in accordance with the said procedure and recourse to the Chief Justice or his designate cannot be taken straightaway. A party can approach the Chief Justice or his designate only if the parties have not agreed on a procedure for appointing the arbitrator as contemplated by sub-section (2) of Section 11 of the Act or the various contingencies provided for in sub- section (6) have arisen. Since the parties here had agreed on a procedure for appointing an arbitrator for settling the dispute by arbitration as contemplated by sub-section (2) and there is no allegation that any one of the contingencies enumerated in clause (a) or (b) or (c) of sub-section (6) had arisen, the application moved by the respondent herein to the City Civil Court, Hyderabad, was clearly not maintainable and the said court had no jurisdiction to entertain such an application and pass any order. The order dated 27-12-2004, therefore, is not sustainable.
17. In view of the aforesaid circumstances, the petitioner has not made out any case for appointment of an independent Arbitrator in exercise of powers under Section 11 of the Arbitration and Conciliation Act, 1996.
Accordingly, the Civil Miscellaneous Petition is dismissed with cost of Rs.10,000/- payable by the petitioner to the Chief Minister Flood Relief Fund within three weeks from the date of the receipt of certified copy of this order.
Ordered accordingly.
Sd/- JUDGE Pages 1 to 13 ..gss 14 to end .. kcm.