Virender Khanna and Associates v. Airports Authority of India

14. Subsequently, the petitioner again invoked arbitration by sending a notice dated 23.03.2024. In response, the respondent, through an email dated 03.07.2024, proposed a panel of three arbitrators for the petitioner’s consideration. However, on 15.07.2024, the petitioner declined to consent to any of the proposed names, citing the history of disputes between the parties.

15. In the above backdrop, the present petition has been filed by the petitioner seeking appointment of a sole arbitrator to adjudicate the disputes between the parties. These disputes arise out of and relate to the Agreement dated 27.08.2007, which governed the Architectural and Engineering Consultancy Services for the International Terminal Component of the proposed New Integrated Passenger Terminal Building at NSCBI Airport, Kolkata.

16. The central bone of contention is as regards the fee payable under the agreement. The initial agreement, dated 11.07.2005, stipulated a consultancy fee of 5% of the actual cost of work or the tendered cost, whichever was lower. The subsequent agreement dated 27.08.2007, in clause 2.3, provided as under – “2.[3] In consideration of the professional services rendered by the Consultant, he shall the paid a professional fee of 5% of the actual cost of the work or the awarded cost whichever is lower Items like travellators, escalators, elevators, counters, concourse and security hold chairs and furniture would be included towards payment till stage 4. of the subhead of the works for which consultant has rendered Professional services. Jn addition to the professional fee, service tax will be paid as per the Act in vogue at the time of the payment of the bill. The initial payment shall be made on approved preliminary estimated cost. The cost of the work shall not include costs of aerobridges, in-line Baggage handling Conveyor system, Baggage claim Belts, telephone exchange equipment, Specialized hand/Baggage security-scanning items, DG Sets, FIDs, CCTV, Surveillance CCTV, check-in counters, custom and immigration counters and dust bins. For effecting stage wise payments the cost of works shall be as specified in clause 4.1. Nothing extra shall be paid to the Consultant on account of Soil Investigation, site survey, vetting from IIT, presentations, model, computer simulation, presentation drawings etc. The payment to State Electricity Board for dedicated power supply may be included in the cost estimate of the project but not to be included/or payment to Consultant.” (emphasis supplied)

17. The dispute emerged following a communication from AAI, dated 24.01.2011, addressed to petitioner, which identified “discrepancies” in the agreement dated 27.08.2007. AAI claimed that the fee for professional services stated in the agreement differed from what had been authorized by its Board. According to AAI, the consultancy fee was to be calculated as 5% of the estimated cost or awarded cost, whichever was lower, as opposed to the actual cost of work.

18. The Consulting Agreement dated 27.08.2007 between the petitioner and the respondent contains an arbitration clause (Clause 12), which provides for resolution of disputes under the agreement. The same is reproduced as under – “12.0. DISPUTE REDRESSAL In the event of any dispute, difference or question arising out of or concerning the agreement for the execution of work herein specified which can not be settled mutually the same shall be referred to the sole arbitrator appointed by Chairman, AAI. The arbitration proceedings will be governed by the provision contained in the Arbitration and Conciliation Act 1996 at New Delhi. The decision of the Arbitrator shall be final and binding for both the parties. Even in case of any dispute, difference or question arising out of this contract and the same is referred to arbitration, the Consultant shall continue to perform his duties under this agreement with due diligence and Authority will make the payment to the Consultant to the extent incorporated in the Agreement. Action to appoint an Arbitrator shall be taken within two month from the date of communication made in writing by any party to the Chairman Airports Authority of India, Authority stating that a dispute has arisen and that the matter be referred to arbitration in accordance with this Agreement along with the list of quantified dispute to be referred for arbitration. In all cases where the total amount of claims in dispute is Rs.75,000/- (rupees seventy five thousand only) and above, the arbitrator shall give reasons for the award. Subject as aforesaid the provision of the Arbitration & Conciliation Act 1996 or any statutory modification or re-enactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceeding under this clause.”

19. Learned counsel for the respondent has sought to oppose the present petition on the following grounds:i. It is submitted that the petitioner, referred to as the “Consultant” in the contracts, entered into agreements with the respondent both as a “Partner” and as a “Proprietor.” It is submitted that the petitioner has not provided authorization from its partner, M/s APDi of Paris, for invoking arbitration. Citing a judgment of the Bombay High Court in the case of Shailesh Ranka v. Windsor Machines Limited ii. The respondent contends that the petitioner’s application for the appointment of an arbitrator under Section 11(6) is premature. It is submitted that the respondent is open to refer the matter to mediation under the AAI Mediation Policy, and the petitioner’s request to invoke arbitration bypasses the option for mutual settlement., 2023 SCC Online Bom 2704, the respondent argues that a partner cannot unilaterally initiate arbitration proceedings without the consent of the other partner(s), as per Section 19(2) of the Partnership Act, 1932. iii. It is submitted that the dispute resolution clause specifies that the arbitration proceedings will be governed by the A&C Act, and the arbitrator will be appointed by the AAI. The Respondent maintains that given the technical nature of the dispute, particularly in the field of Architectural/Engineering Consultancy Services, it would be appropriate for an arbitrator from the respondent’s panel to be appointed. It is also submitted that, if the Court is inclined to appoint an arbitrator, it should consider the names provided by the respondent, who are suitably qualified to adjudicate the dispute.

20. For the purpose of the present petition, I find no merit in the aforesaid objections raised on behalf of the respondent.

21. The first objection raised by the respondent is that the petitioner has no authorisation from its “partner”, M/s APDi of Paris, to invoke arbitration. In support of this contention, the respondent relies upon Shailesh Ranka

22. In the present case, the description of the parties in the agreement itself makes it unambigously clear that the contract was awarded to a “consortium” [and not to a partnership firm, unlike in the case of Shailesh Ranka (supra)], of which the petitioner is the “lead consultant”. In several judicial pronouncements, distinction has been made between a consortium and a partnership firm (supra) which was rendered in the context of Section 19(2)(a) of the Partnership Act, 1932. The Court in that case held that the notice invoking arbitration was defective inasmuch as the same had not been issued by/or on behalf of all the partners of the concerned partnership firm.

23. In. Automation Technologies (I) P. Ltd v. Unitech Ltd. & Ors, 2008 SCC OnLine Del 315,

24. “14. Taking the first objection raised by the respondents as to the maintainability of the present petition on the ground that the petitioner being only one constituent from amongst seven constituents who collectively form a part of the “party of the first part” as described in the Agreement dated 28th January, 1998 is disentitled from invoking the arbitration clause, it is necessary to examine the Agreement. It is pertinent to note that the Agreement starts by describing all the three parties by referring to them individually. Thus the RG Group which has been collectively described as the ‘party of the first part’ comprises seven persons from item Nos. 1(a) to this Court recognised the right of a party (which was referred to in concerned agreement as part of a ‘group’) to independently invoke the arbitration agreement for the purpose of adjudication of disputes arising thereunder. The relevant observations are as under:- M/S I.S. Enterprises vs Jamia Millia Islamia & Anr, 2021:DHC:3259-DB 1(g), the name of the petitioner finding place at item No. 1(f). However, although all the aforesaid constituents are collectively described as the ‘RG Group’ and as Directors/Shareholders in respondent No. 8 company and M/s. Continental Properties (P) Ltd., it is not as if the constituents of the party of the first part decided to form an association of persons and designated one from amongst them as authorized to deal for and on behalf of all the constituents, with the remaining parties to the Agreement, namely, party of the second and the third part respectively. This is not only borne out by a perusal of the Agreement, but also by glancing at the last page of the Agreement where signatures of the parties are affixed. In the column of the “party of the first part”, all the seven constituents of the RG Group are independent signatories. It is also pertinent to note that respondent No. 8 company of which all the rest of the six constituents are stated to be the Directors/Shareholders, etc., is represented in its own right, through its Director, Mr. Ramnik Agarwal, duly authorized by the Board of Directors to sign and execute the Agreement on its behalf.”

25. Furthermore, it is germane to note that the respondent, while responding to the arbitration notice dated 23.03.2024, did not deny either the existence of the arbitration agreement or the arbitrability of the dispute sought to be raised, or the capacity of the petitioner herein to invoke arbitration. Instead, the respondent proposed a panel of three arbitrators and suggested that a sole arbitrator be appointed from the said panel. Since the same was not acceptable to the petitioner, the present petition came to be filed.

26. Thus, it is evident that in the response to the notice of invocation of arbitration dated 23.03.2024, the respondent has acceded to the appointment of a sole arbitrator. The only point of difference between the parties was as regards the choice/selection of the sole arbitrator to adjudicate the disputes between the parties.

27. In the above circumstances, the objection raised by the respondent in the present proceedings to the constitution of an Arbitral Tribunal is belied by the stand taken by the respondent in its reply to the notice invoking arbitration.

28. In any event, for the purpose of the present proceedings only a prima facie view has to be taken by this Court as regards the existence of the arbitration agreement. This is now conclusively settled by the Supreme Court in In Re: Interplay between Arbitration Agreement under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act, 1899, 2023 SCC OnLine SC 1666 and SBI General Insurance Co. Ltd. v. Krish Spinning

29. The second objection of the respondent is to the effect that the parties must be relegated to mediation prior to the invocation of arbitration. The same is also without merit. In this regard, the legal position has been reiterated in numerous judgments to the effect that a pre-arbitral mechanism for amicable resolution (including mediation) is directory in nature and does not necessarily preclude invocation of arbitration without taking recourse thereto. 2024 INSC 532. Any objection/s as regards the capacity/ locus of the petitioner to invoke arbitration or any objection/s as regards absence of capacity/authorisation in favour of the petitioner, are aspects which will necessarily be considered by a duly constituted Arbitral Tribunal. Since, prima facie, the existence of the arbitration agreement is established, there is no impediment to constituting an Arbitral Tribunal in these proceedings.

30. In the case of Oasis Projects Ltd. v. National Highway & Infrastructure Development Corporation Limited 2023 SCC OnLine Del 645, it was held as under:-

31. In Kunwar Narayan v. Ozone Overseas Pvt. Ltd. 2021: DHC: 496, it was held as under:-

an arbitrator by this Court would not act as an impediment in the parties resolving their disputes amicably, should it be possible at any point of time.”

32. This Court, in Pele Khezhie v. National Highways and Infrastructure Development Corporation Limited, 2023:DHC:6221, while relying upon the observations of the Court in Oasis Projects Ltd.

33. The aforesaid observations of the Court are squarely applicable to the present case, wherein the disputes between the parties have already been the subject of earlier arbitral proceedings, and the resultant award pursuant thereto has been set aside by this Court. At this stage, it will be utterly futile to subject the parties to mediation. As held in the aforesaid judgments, the same is not legally mandatory. Also, in any event, it shall be open to the arbitrator to take recourse to Section 30 of the A&C Act to encourage settlement through mediation; conciliation or other procedures.

34. There is also no merit in the third objection of the respondent viz that given the technical nature of the disputes, a technical arbitrator from the respondent’s panel should be appointed. It is now well settled that an appointment procedure mandating appointment/s from a panel unilaterally maintained by the respondent is no longer a valid procedure. In this regard reference may be made to Perkins Eastman Architects DPC v. HSCC (India) Ltd (2020) 20 SCC 760, TRF Limited v. Energo Engineering Projects Ltd, (2017) 8 SCC 377 Bharat Broadband Network Limited v. United Telecoms Limited, 2019 SCC OnLine SC 547 and Central Organisation for Railway Electrification Vs.

35. In the circumstances, there is no impediment to this Court appointing an independent arbitrator to adjudicate the disputes between the parties.

36. Accordingly, Ms. Justice (Retd.) Rekha Palli, Former Judge, Delhi High Court (Mobile No. 9810012120) is appointed as the Sole Arbitrator to adjudicate the disputes between the parties.

37. The learned Sole Arbitrator may proceed with the arbitration proceedings subject to furnishing to the parties the requisite disclosure as required under Section 12 of the A&C Act.

38. The learned sole arbitrator shall be entitled to fee in accordance with the IVth Schedule to the A&C Act; or as may otherwise be agreed to between the parties and the learned sole arbitrator.

39. Both parties shall be at liberty to raise preliminary objections as regards arbitrability/jurisdiction, if any, which shall be decided by the arbitrator, in accordance with law.

40. All rights and contentions of the parties in relation to the claims/counter-claims are kept open, to be decided by the learned Arbitrator on their merits, in accordance with law.

41. Needless to say, nothing in this order shall be construed as an expression of opinion of this court on the merits of the case.

42. The present petition stands disposed of in the above terms.

SACHIN DATTA, J MARCH 28, 2025/uk/sv