Ram Kripal Singh Construction Pvt. Ltd. v. NTPC

5.11. Bharat Broadband Network vs. United Telecoms Ltd. 11,on whetherthe filing of a statement of claim before an arbitral tribunalimplies a ‘written waiver’as envisaged under section 12(5) of the A&C Act.

6. Mr. Pawan lays special emphasis on the decisions of the Supreme Court in TRF Ltd.(supra), Bharat Broadband Network (supra) and Perkins Eastman DPC &Anr. vs. HCC (India) Ltd.12, which make the said officers ineligible to be, or to appoint, an arbitrator in the matter. Mr. Pawan further submits that the part of clause 56 which says that no person other than an appointee of the CMD, NTPC should act as arbitrator, and, if that is not possible, disputes cannot be referred to arbitration at all, is also illegal and void.

7. Counsel for the petitioner also highlights the two judgements of Coordinate Benches of this court itself in T.K Engineering Consortium Pvt Ltd. (supra) and ARSS Infrastructure Pvt. Ltd. (supra), have already dealt with similar arbitration clauses, and have rejected the argument that if the respondent cannot appoint an arbitrator, parties cannot be sent to arbitration at all.

8. It is accordingly the petitioner’s submission, that there is a subsisting arbitration agreement between the parties; and since admittedly, disputes have arisen between them from the letter of award and the contract, the same are required to be referred for arbitration to an arbitrator to be appointed by this court.

9. Opposing the prayer for appointment of an arbitrator, Mr. R. Sudhinder, learned counsel for the respondent argues that an arbitration agreement is founded on the consent of parties and must therefore be restricted to whatever the consenting parties have agreed to. It is argued that as per clause 56 of the GCCs, which contains the arbitration agreement between the petitioner and the respondent, it is quite plain that only the GM, NTPC or other person appointed by the CMD of NTPC can act as arbitrator and “ …no person other than a person appointed by CMD., NTPC Ltd. as aforesaid should act as arbitrator.”It is emphasized that the parties have also expressly agreed in clause 56 that “...if for any reason, that is not possible, the matter is not to be referred to arbitration at all.” The argument presented is that, since by reason of insertion of section 12(5) by way of amendment to the A&C Act and the decisions of the Supreme Court in TRF Ltd and in Perkins Eastman (supra), the GM or other appointee of the CMD, NTPC is rendered ineligible to be appointed as arbitrator, the arbitration clause becomes inoperative and impossible of performance by the respondent, thereby vitiating the agreement for arbitration itself.

10. Mr. Sudhinder further argues that consent of parties is a crucial requirement for reference to arbitration; and that since the respondent has not consented for appointment of an arbitrator otherwise than as agreed to in clause 56, outside of that procedure, the respondent has not consented to arbitration at all.

11. It is also contended on behalf of the respondent that the court cannot sever from clause 56, that part by which the parties have agreed to arbitration by the GM or other appointee of the CMD, NTPC; and it is impermissible to give effect only to the part that contains the consent of the parties to go to arbitration, without giving effect to the part that provides as to who would be the arbitrator under the same agreement.

12. On another note, Mr. Sudhinder also submits that the disputes raised by the petitioner that are subject matter of the present proceedings are ex-facie time-barred, since they relate to the year 2014; while the remedy is sought to be invoked vide notice dated 29.09.2020; and that neither the notice invoking arbitration, nor the present petition, disclose any intervening facts which might extend or exclude limitation. Counsel relies on the judgement of the Supreme Court in Bharat Sanchar Nigam Limited and Anr. vs. Nortel Networks India Pvt. Ltd13 to support the submission that time-barred disputes are not to be referred to arbitration.

13. That apart, counsel for the respondent also points-out that notice dated 29.09.2020 invoking arbitration does not specify the quantum of the disputes raised; in contrast to the petitioner’s earlier notice invoking arbitration dated 27.01.2014, wherein such specifics were stated. This, counsel argues, is not in conformity with the requirements of the arbitration clause, which requires that specifics of the disputes and amounts claimed are to be stated; and therefore notice dated 29.09.2020 does not amount to valid invocation or commencement of the arbitral proceedings.

14. To support his submissions, counsel for the respondent relies on the following judicial precedents:

14.1. S.P Singla Constructions Pvt. Ltd. vs. State of Himachal Pradesh and Anr.14, for the proposition that a challenge to the appointment of an arbitrator is to be considered as per the terms of the agreement between the parties;

14.2. Union of India vs. Parmar Constructions15, on the applicability of the Amendment Act-2015 on proceedings which have commenced under section 21 of the A&C Act prior to the amendment coming into effect;

14.3. Veekay General Industries vs. Union of India 16, on the proposition that arbitration cannot be thrust upon parties, if one of the parties (the Railways in that case) cannot appoint an arbitrator as stipulated in the arbitration clause;

14.4. Bharat Sanchar Nigam Ltd. and Anr. (supra), on the period of limitation for filing a petition under section 11 of the A&C Act; and entertaining a reference to arbitration when the claims are ex-facie time barred;

14.5. Indian Oil Corporation Ltd. &Ors vs. Raja Transport Pvt. Ltd.17, on the point that the appointment of an employee of one of the parties as an arbitrator, in the pre-amendment time, cannot per-se be a bar to his acting as an arbitrator;

14.6. Sapna Gupta vs. Ajay Kumar Gupta &Ors.18 andBihar State Mineral Dev. Corpn. and Ors. vs. Encon Builders (I) Pvt. Ltd.19 on the proposition that consensus ad-idem is essential for reference of parties to arbitration;

14.7. Union of India vs. Pradeep Vinod Construction Company20, on the proposition that the Amendment Act-2015 is not applicable to arbitrations where notice for arbitration was issued prior to Amendment Act-2015 coming into force; and that therefore appointment of arbitrator should be as per the procedure in the arbitration clause; and

14.8. Vidya Drolia and Ors. vs. Durga Trading Corporation21,on the proposition that a mere agreement to arbitrate is not legally binding, unless it satisfies the core contractual requirements concerning consent, consideration, legal relationship etc. Petitioner’s Rejoinder

15. In rejoinder, Mr. Pawan submits that the Amendment Act-2015 would apply to the present proceedings, since the notice invoking arbitration was issued on 29.09.2020, which is well after the date the amendment came into effect from 23.10.2015. It is argued that since, as per the amended provision, the procedure for appointment of arbitrator under clause 56 is no longer valid and enforceable, the petitioner had no alternative but to approach this court under section 11(6) of the A&C Act seeking appointment of a neutral arbitrator.

16. Responding to the objection that the claims are time-barred, Mr.Pawan submits that the (second) notice invoking arbitration dated 29.09.2020 has been issued in relation to claims that have arisen subsequent to issuance of the (first) notice dated 27.01.2014; and it is in relation to such later claims that the petitioner is now seeking appointment of an arbitrator through court. It is stated that though some of the disputes that are subject matter of invocation notice dated 29.09.2020 arise under the same ‘heads of claim’ as those in invocation notice dated 27.01.2014, since the project is still on-going, the claims relate to a subsequent period and the cause of action for such subsequent claims has arisen after the earlier notice and the claims are within time. Discussion & Conclusions

17. Upon a conspectus of the averments contained in the petition and the reply, as also the submissions made by counsel, and on a reading of the judicial precedents cited, the following inferences arise:

17.1. The respondent does not dispute the existence of the arbitration agreement between the parties, except to say, that since a certain procedure for appointment of an arbitrator was embedded in the arbitration clause, which procedure has now become illegal, invalid and unenforceable, the entire arbitration agreement perishes along therewith. The respondent’s contention is that it was expressly agreed between the parties that if an arbitrator could not be appointed as per that agreed procedure, there would be no arbitration at all;

17.2. Now, clauses that are same or similar to clause 56 of the GCCs, which contains the arbitration agreement in the present case, have been dealt with by at least three different Co-ordinate Benches of this court; and the consistent view taken is that just because the procedure for appointment of an arbitrator has been rendered invalid or unenforceable by reason of the amendment to the A&C Act, by insertion of section 12(5) and by the subsequent decisions of the Supreme Court in TRF Ltd. and Perkins Eastman (supra), that does not mean that the entire arbitration clause is rendered invalid or void. Such arbitration clauses have been held to be valid and enforceable. Reference in this regard may be made to TK Engineering22 (supra), ARSS Infrastructure23 (supra) as also to NIIT Technologies Ltd. vs. Directorate General, Border Security Force24;

17.3. Expatiating upon the aforesaid consistent view, in the opinion of this court, an ‘arbitration agreement’ may narrate and include several other aspects relating to arbitration - such as the procedure for appointment of arbitrator(s); seat or venue of arbitration proceedings; the substantive and procedural law that would govern arbitral proceedings; specifics of disputes that are ‘excepted’ from the purview of arbitration; liability of costs for paras 19, 22, 33, 34. para 17, 19. 2017 SCCOnLine Del 12538; para 11 arbitral proceedings and such-like other matters - so as to detailout the arbitral mechanism and to make the arbitration agreement more comprehensive. Even if embedded in the self-same arbitration clause, these aspects relate to different strands of the agreed arbitral mechanismand are distinct and separable from the core arbitration agreement itself, viz. the primary consent of parties to refer their inter-se disputes arising from a given contract or transaction to arbitration;

17.4. The procedure for appointment of an arbitrator is clearly distinct and separable from the agreement to refer disputes to arbitration, even if these are contained in the same arbitration clause. If therefore, by reason of amendment, re-statement or reinterpretation of the law, as has happened in the present case by insertion of section 12(5) in the A&C Act and the verdicts of the Supreme Court in TRF Ltd. and Perkins Eastman (supra), the procedure for appointment of arbitrator at the hands of one of the parties becomes legally invalid, void and unenforceable, that does not mean that the core agreement between the parties to refer their inter-se disputes to arbitration itself perishes. In the opinion of this court - this “my way or the highway” approach is not tenable in law; and in such circumstances, that part of the arbitration agreement which has been rendered invalid, void and enforceable is to be severed or excised from the arbitration clause, while preserving the rest of the arbitration agreement;

17.5. Accordingly, this court is of the view, that there is a valid and subsisting arbitration agreement between the parties, though the procedure for appointment of the arbitrator at the hands of the CMD, NTPC is no longer valid, and must therefore be severed from the remaining arbitration clause;

17.6. The aforesaid view taken by this court is also in consonance with the extant legislative and judicial policy that arbitration agreements are not to be readily invalidated unless there is compelling basis to do so; and arbitration is to be encouraged as an alternative mode of disputes adjudication (cf. Chloro Controls India Pvt. Ltd vs. Severn Trent Purification Inc. and Ors.25 )

17.7. Insofar as the respondent’s objection that the claims sought to be raised by the petitioner are time-barred is concerned, a plain reading of the (second) invocation notice dated 29.09.2020, which is the basis of the present arbitration petition, it is seen that the petitioner‟s assertion is that the claims sought to be raised and referred to arbitration by seeking appointment of an arbitrator in the present proceedings, are subsequent claims, which are not time-barred. Reference in this behalf may be made to the following portions of invocation notice dated 29.09.2020 issued by the petitioner to the respondent: “Disputes had earlier arisen between the parties and the Contractor M/s Ram Kripal Singh Construction Pvt. Ltd. had invoked the arbitration clause vide its notice dated 27.01.2014, whereafter arbitral proceedings had commenced. However, the said arbitral proceedings were terminated by the Sole Arbitrator vide order dated

22.06.2016, The Contractor M/s Ram Kripal Singh Construction Pvt. Ltd, has moved an application seeking recall of the aforesaid order dated, 22.06.2016, under Section 25 of the Arbitration & Conciliation Act, 1996, which is yet to be adjudicated. Meanwhile, the work in question, awarded by the Owner to the Contractor is still going on. Further disputes have arisen between the parties, even after the previous invocation of arbitration, which can be briefly summarised under the following four broad heads.

1. Non handing over of work front by the Owner to the Contractor at multiple places.

2. Non supply of all the approved working drawings by the Owner to the Contractor.

3. Change of specifications by the Owner.

4. Claim on account of change in law- introduction of GST, Change In Labour Law etc.

5. Breach of multiple clauses of the Agreement and other Contract Documents by the Owner. The aforesaid are the broad heads of the disputes and the Contractor reserves the right to raise any and all further claims arising out of or in connection with the disputed matters described in this Notice or otherwise arising between the parties. The Contractor further reserves the right to Add, amend, elaborate, explain, revise and/or supplement the claim.” (emphasis supplied) Though, as is evident from the aforesaid extracts from the (second) invocation notice, the petitioner has not detailed the claims sought be made by it, it is not the remit of this court to get into the specifics of the claims; and, as enunciated by the Supreme Court in Bharat Sanchar Nigam Ltd.(supra), this court is persuaded to proceed on the basis that unless claims are exfacie time-barred, the court would lean in favour of reference to arbitration on the principle „when in doubt, do refer‟. In this view of the matter, the allegation that the claims are timebarred will not deter this court from appointing an arbitrator, of course leaving it to the arbitrator to decide the issue of limitation, as may be raised, as a mixed question of fact and law, in the course of arbitral proceedings.

18. Accordingly, the present petition is allowed and Hon’ble Mr. Justice Aftab Alam, former Judge, Supreme Court of India (Cellphone No.: +91 986821900[5]) is appointed as the learned Sole Arbitrator to adjudicate upon the disputes between the parties.

19. The learned Arbitrator may proceed with the arbitral proceedings subject to furnishing to the parties requisite disclosures as required under section 12 of the A&C Act; and in the event there is any impediment to the appointment on that count, the parties are given liberty to file an appropriate application in this court.

20. The learned Arbitrator shall be entitled to fee in accordance with Fourth Schedule to the A&C Act; or as may otherwise be agreed to between the parties and the learned Arbitrator.

21. Parties shall share the arbitrator’s fee and arbitral costs, equally.

22. 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 own merits, in accordance with law.

23. Parties are directed to approach the learned Arbitrator appointed within 10 days.

24. The petition stands disposed-of in the above terms.

25. Other pending applications, if any, also stand disposed-of.

ANUP JAIRAM BHAMBHANI, J NOVEMBER 09, 2022 Ne/uj/ds