Jindal Steel & Power Limited v. N.S. Atwal

1. Whether the Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not? Yes

3. Whether the judgment should be reported in the Digest? Yes % JUDGMENT (ORAL) VALIMIKI J. MEHTA, J.

1. This is a petition under Section 11 of the Arbitration and Conciliation Act,

1996. The petitioner seeks reference of the disputes pertaining to and arising out of 2009:DHC:5134 Arb.P.No.53/09 Page 2 a Soft Loan of Rs.7.17 crores requested by the respondent vide its letter dated 13.6.2005 from the petitioner. The relevant portion of this letter reads as under:

2. “We would be grateful, if you kindly help us with one-time Soft Loan of Rs.7.17 Crores recoverable over a period of five years”.

3. Pursuant to this request, the petitioner advanced a sum of Rs. 6.63 crores as loan to the respondent.

4. It may be noted that the parties had already entered into another commercial relationship vide a work order dated 2.3.2001 issued by the petitioner upon the respondent whereby the respondent was to carry out various services of excavation for the petitioner at a site near DongaMohua Village District Rajgarh, M.P..

5. This work order dated 2.3.2001, was for a period of four years. The work order contained an Arbitration Clause 18 and which is reproduced below: “Arbitration Clause- In the event of any dispute, it will be settled as per the provisions of the Arbitration & Conciliation Act, 1996 where award shall be binding on both the parties and cannot be challenged in the court of law.”

6. Mr.Nigam, learned senior counsel for the petitioner has contended that the commercial relationship with respect to the grant of Soft Loan was a part and parcel of the first commercial relationship of providing excavation works vide the work Arb.P.No.53/09 Page 3 order dated 2.3.2001. Mr. Nigam has drawn my attention to the letter dated 22.11.2006 of the respondent to the petitioner, para 10 of which reads as under:-

7. Mr. Nigam has contended that since the respondent accepts that the loans have to be repaid from the running bills, consequently, the main work order dated 2.3.2001 gets incorporated by reference in the Soft Loan Agreement in terms of the letter dated 13.6.2005 of the respondent.

8. The counsel for the respondent per contra has argued that there are two separate independent commercial relations between the parties. One under the work order dated 2.3.2001 and the second pursuant to the respondent’s letter dated 13.6.2005. The counsel for the respondent has also contended that merely because the respondent choose the method of making repayment of the Soft Loan from the bills payable under the work order dated 2.3.2001, cannot thereby mean that the Soft Loan becomes part of the work order dated 2.3.2001 or that it has been agreed that both the commercial relationships get automatically inter-twined and that the Arb.P.No.53/09 Page 4 arbitration clause in the work order dated 2.3.2001 would become a part and parcel of the Soft Loan transaction also.

9. Mr. Nigam, in rejoinder has stated that the repayment of the loan was to be co-terminous with the work order and consequently, once the repayment is coterminous with the work order, the terms of the work order which contained the arbitration clause will entitle the petitioner to seek reference of the disputes with respect to the Soft Loan also, in terms of clause 18 of the work order dated 2.3.2001. At this stage, I may state that the work order dated 2.3.2001 was apparently substituted by a work order dated 4.8.2006 and in which there is a same arbitration clause except that it is clause 19 and not clause 18 as contained in the work order dated 2.3.2001, though this is denied by the respondent. In view of what is decided by me hereafter, nothing will turn on the fact whether there was a subsequent work order or not.

10. In a petition under Section 11, the Court, before the disputes are referred to arbitration, has to be satisfied that the disputes which are sought to be referred to arbitration are covered by an arbitration agreement. In this case, admittedly, the arbitration clause is only in the work order dated 2.3.2001 by which the respondent was awarded work of excavation by the petitioner. The Soft Loan was provided much later, and in fact, after the expiry of the original period of four years of the work order dated 2.3.2001. A reference to the letter dated 13.6.2005 makes it quite Arb.P.No.53/09 Page 5 clear that the transaction of loan is a totally independent transaction and is not intertwined with the main work order dated 2.3.2001 and it cannot be said that both contracts merged with each other. During the course of arguments, I specifically put a query to the learned senior counsel for the petitioner as to whether while granting the loan in terms of the request dated 13.6.2005 of the respondent, was any written confirmation given by the petitioner that the soft loan which is being provided would be treated as an advance in terms of the work order dated 2.3.2001. To this query, Mr. Nigam very fairly stated that neither was any written communication given pursuant to the letter dated 13.6.2005 of the respondent nor is there any mention of any such communication in the petition. The query of the court was for the reason that unless and until there is a written intimation pursuant to the letter dated 13.6.2005, from the petitioner to the respondent that the Soft Loan which is being provided would be treated as an advance under the work order dated 2.3.2001, only then, would the court arrive at the conclusion that both the contracts get merged and the arbitration clause gets incorporated by reference. Since, admittedly, there is no written document on record to support the contention of the petitioner that the loan which was given would in fact be treated as an advance under the work order, I am unable to agree with the contention of the counsel for the petitioner that the arbitration clause contained in the work order dated 2.3.2001 and Arb.P.No.53/09 Page 6 also the subsequent work order dated 4.8.2006 will get incorporated in the Soft Loan transaction entered into between the parties.