Full Text
HIGH COURT OF DELHI
JUDGMENT
TALAIPALLI COAL MINING PVT. LTD. ..... Petitioner
For the Petitioner: Mr Parag P Tripathi, Senior Advocate with
Mr Atul Shanker Mathur, Mr Prabal Mehrotra, Mr Umang Katariya, Ms Mishika
Bajpai and Mr Amlaan Kumar, Advocates.
For the Respondent: Mr Puneet Taneja, Ms Laxmi Kumari and
Mr Manmohan Singh Narula Advocates.
1. The petitioner (hereafter ‘TCMPL’) has filed the present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereafter the ‘A&C Act’) praying that an Arbitrator be appointed on behalf of the respondent (hereafter ‘NTPC’), in accordance with Clause 23 of the Project Agreement.
TCMPL had nominated its Arbitrator and it further prays that the two Arbitrators (one nominated by TCMPL and the other as may be appointed by this Court on behalf of NTPC), be 2022:DHC:773 directed to appoint the Presiding Arbitrator. Factual Context
2. On 31.12.2015, NTPC had issued a Notice Inviting Tender (hereafter ‘NIT’) for the “Development and Operation of the Talaipalli Coal Block, State of Chhattisgarh, India” and for the appointment of a Mine Development Operator for the said Coal Block. 2.[1] M/s NCC Limited and M/s BGR Mining and Infra Limited (hereafter referred to as the ‘Consortium Members’) participated in the tendering process as NCC-BGR Consortium. 2.[2] The bid submitted by NCC-BGR Consortium was accepted and they were declared as the ‘Selected Bidder’. Thereafter, on 13.11.2017, NTPC issued a Letter of Acceptance (hereafter ‘LoA’) to the NCC- BGR Consortium. 2.[3] In terms of the Instructions to Bidders (hereafter ‘ITB’), the Consortium Members constituted and incorporated TCMPL as a Joint Venture Company on 11.12.2017. It is stated in the petition that NTPC was informed on 12.12.2017 that TCMPL was incorporated by the Consortium Members as a representative of the Mine Operator. 2.[4] Thereafter, on 13.12.2017, the Consortium Members informed NTPC regarding certain intimations issued by TCMPL on behalf of the NCC-BGR Consortium. This was followed by certain other communications issued by TCMPL seeking issuance of a No Objection Certificate from NTPC for approval of construction of the Diesel Bunk in Raikera Village. 2.[5] On 14.12.2017, TCMPL requested NTPC to issue a Form-III certificate as it was proposing to apply for a labour license for the Talaipalli Coal Mining Project operations. 2.[6] NTPC states that after issuance of the LoA, the Central Bureau of Investigation (CBI) registered an FIR (being FIR No. RC AC[1] 2017 A0007 dated 07.12.2017) against one of the directors of M/s BGR Mining and Infra Limited under various provisions of the Indian Penal Code, 1860 and the Prevention of Corruption Act, 1988. NTPC states that in view of the registration of the FIR, it did not recognise the incorporation of TCMPL and declined to sign the Project Agreement with TCMPL. 2.[7] However, TCMPL contends to the contrary. It relies upon a letter dated 19.12.2017 addressed by NTPC to TCMPL conveying it’s ‘No Objection’ for construction of a Diesel Bunk in Raikera Village. It also claims that NTPC had issued a Form-III certificate to TCMPL for obtaining a labour license under the provisions of the Contract Labour (Regulation and Abolition) Act, 1970 and its relevant rules. However, NTPC had thereafter, on 26.12.2017, called upon TCMPL to return the original copy of the Form-III certificate and to desist from seeking any license on the strength of the Form-III certificate issued by NTPC under the provisions of the Contract Labour (Regulation and Abolition) Act,1970 and the Contract Labour (Regulation and Abolition) Central Rules, 1971. 2.[8] On 20.12.2017, NTPC issued a notice for suspension of the mining services in terms of Clause 24.[1] of the Project Agreement. This was followed by a Show Cause Notice issued on 29.12.2017, by NTPC to the Consortium Members for terminating the services under Clause 24.4(a) of the Project Agreement. 2.[9] The Consortium Members issued a letter dated 08.01.2018 and sought discussions in good faith for resolution of the disputes under Clause 24.4(c) of the Project Agreement. Thereafter, by a letter dated 17.01.2018, the Consortium Members invoked the Disputes Resolution Clause in terms of Clause 23.[1] of the Project Agreement.
2.10 NTPC issued a Termination Notice dated 04.07.2019 to the consortium members under Clause 24.4(d) of the Project Agreement terminating the Project Agreement. NTPC also issued a Show Cause Notice dated 07.08.2019 barring the Consortium Members from participating in any contract with NTPC.
2.11 An Arbitral Tribunal has been constituted for adjudication of the disputes between the Consortium Members and NTPC.
2.12 It is stated by TCMPL that on 26.08.2020, NTPC awarded the work of development and operations of the Talaipalli Coal Block to another entity, without terminating the Project Agreement.
2.13 On 10.05.2021, TCMPL issued a Show Cause Notice/Termination Notice under Clause 24.2(b) of the Project Agreement, due to an event of default on the part of NTPC. Thereafter, by a letter dated 21.05.2021, TCMPL called upon NTPC to enter into a ‘Good Faith Discussion’ in terms of Clause 24.4(c) of the Project Agreement. This was followed by a communication dated 10.06.2021 terminating the Project Agreement with NTPC.
2.14 NTPC responded by a letter dated 14.06.2021 denying that it had entered into the Project Agreement with TCMPL.
2.15 On 25.06.2021, TCMPL issued a Dispute Notice under Clause 23.1(a) of the Project Agreement for resolution of the disputes by initiating ‘Good Faith Discussions’ as contemplated under Clause 23.1(b) of the Project Agreement. NTPC refrained from entering into any such discussions on the ground that it had not entered into the Project Agreement with TCMPL.
2.16 Thereafter, TCMPL issued a letter on 09.07.2021 calling upon NTPC to appoint an Adjudicator, in terms of Clause 23.2(b) of the Project Agreement. Consistent with its stand, NTPC responded by a letter dated 30.07.2021, inter alia, stating that the letter invoking the Dispute Resolution Clause by TCMPL was without any basis.
2.17 Thereafter, on 23.08.2021, TCMPL issued a notice for commencement of arbitration proceedings under Clause 23.3(a) of the Project Agreement and appointed Justice (Retd.) J. Chalameswar, former Judge of the Supreme Court as its nominee arbitrator under Clause 23.3(d) of the Project Agreement.
TCMPL further called upon NTPC to appoint its nominee arbitrator within a period of forty-two days from the date of the said letter.
2.18 In view of the above, NTPC filed a petition [being OMP(T)(COMM) 101/2021 captioned “NTPC Limited v. Talaipalli Coal Mining Pvt. Ltd and Anr.”] under Section 14(1)(a) and 14(2) of the A&C Act seeking termination of the mandate of the Arbitrator appointed by TCMPL. The said petition was dismissed by an order dated 11.10.2021. Reasons and Conclusion
3. In terms of Section 11(6A) of the A&C Act, the scope of examination under Section 11 of the A&C Act is limited to the existence of the arbitration agreement. Admittedly, NTPC and TCMPL have not signed any agreement However, TCMPL claims that the parties are bound by the Project Agreement. It claims that in terms of Clause 6.4.[4] of the ITB, the Project Agreement was deemed to have been executed between the parties on the issuance of the LoA by NTPC.
4. Mr Tripathi, learned senior counsel appearing for the petitioner, has drawn the attention of this Court to the relevant Clauses of the ITB (Clauses 3.1.5; 3.1.26; 3.1.27; 3.1.37; 3.1.45; 3.1.52; 4.1; 6.4.4; and 12.[3] of the ITB). He also referred to the draft of the Project Agreement annexed with the ‘Bidding Documents’ and submitted that the draft of the Project Agreement clearly indicated that NTPC, various Consortium Members as well as the Mine Operator, are parties to the Project Agreement. He submitted that TCMPL was the Mine Operator; and, NTPC had also initially issued a Form-III certificate to TCMPL in order to secure a labour license for execution of the work regarding the development and operation of the Talaipalli Coal Block, in terms of the Project Agreement. He contended that in view of the ITB, the Project Agreement was deemed to have been entered into between TCMPL and NTPC and, it includes an Arbitration Clause. Thus, an Arbitration Agreement, in terms of Clause 23.[3] of the Project Agreement, exists between the parties.
5. Next, Mr Tripathi referred to the order dated 11.10.2021 passed by a Coordinate Bench of this Court in OMP(T)(COMM) 101/2021 captioned “NTPC Limited v. Talaipalli Coal Mining Pvt. Ltd and Anr.”. He submitted that the said petition was filed by NTPC under Section 14 of the A&C Act. Thus, it is implicit that NTPC had accepted the existence of the Arbitration Agreement. He submitted that a petition for terminating the mandate of an Arbitral Tribunal would arise only in cases where an Arbitration Agreement is recognized and accepted. He also submitted that the contents of the said order make it amply clear that NTPC had not disputed the existence of an Arbitration Agreement. It had, on the contrary, sought that the disputes be referred to the Arbitral Tribunal constituted, for adjudication of the disputes between the consortium members and NTPC.
6. At this stage, it would be relevant to refer to certain clauses of the ITB, which are relevant for determining whether prima facie a binding Arbitration Agreement came into existence between TCMPL and NTPC.
7. It is also relevant to refer to the definitions of the terms, “Letter of Acceptance”; “Mine Developer Cum Operator” or “MDO” or “Mine- Operator”; and “Selected Bidder”. The relevant Clauses of the ITB defining the said terms are set out below:- “3.1.26“Letter of Acceptance” means the written official intimation by NTPC notifying the Selected Bidder that it’s Project Proposal has been accepted as per the terms and conditions mentioned therein. 3.1.27 “Mine Developer Cum Operator” or “MDO” or “Mine Operator” shall have the meaning ascribed to it in the preamble to Project Agreement. xxxxx 3.1.45 “Selected Bidder” means the Bidder selected pursuant to terms and conditions of RFP and Project Agreement through Bidding Process.
8. In the present case, the LoA was issued to the Consortium Members on 13.11.2017. In terms of Clause 6.4.[3] of the ITB, the Project Agreement (the draft of which was annexed to the ITB) is deemed to have come into existence on the issuance of the LoA.
9. Clause 6.4.[3] of the ITB reads as under:- “6.4.[3] Letter of Acceptance NTPC shall, after determination of the Selected Bidder in accordance with Chapter 11, notify the Selected Bidder in writing by registered letter or by telefax, to be confirmed in writing by registered letter, that its Project Proposal has been accepted. For the avoidance of doubt, it is clarified that upon issuance of the Letter of Acceptance, the Project Agreement shall come into effect and force on the date of issuance of the Letter of Acceptance and shall constitute valid and binding obligations enforceable against either Party in accordance with and subject to its terms and conditions.”
10. Prima facie, the issuance of the LoA resulted in NTPC and the Selected Bidders (Consortium Members) being bound by the Project Agreement. The essential question is whether the said Project Agreement came into existence between TCMPL and NTPC, as is contended by TCMPL.
11.
TCMPL claims that in terms of Clause 3.1.37 of the ITB, the Project Agreement is deemed to have come into existence between TCMPL and NTPC on issuance of the LoA.
12. The aforesaid contention is unmerited. The LoA was issued on 13.11.2017 and, admittedly, TCMPL did not exist on that date. Clearly, there cannot be a contractual fiction, which results in an agreement with a non-existent person.
13. Clause 3.1.37 of the ITB must be viewed keeping the aforesaid in mind. The said clause reads as under:- “3.1.37 “Project Agreement” means the agreement entered into between NTPC and the Selected Bidder selected through the bidding process, for execution of the Project; it is being clarified that the Project Agreement shall be deemed executed by NTPC and the Selected Bidder upon issue by NTPC of the Letter of Acceptance.”
14. It is clear from the reading of Clause 3.1.37 of the ITB that the Project Agreement is deemed to have been executed by NTPC on the issuance of the LoA. However, the deeming provision expressly indicates that the Agreement is deemed to be executed “by NTPC and the Selected Bidder”.
15. The LoA was issued to the Consortium Members and therefore, on the issuance of LoA, the Project Agreement is deemed to have been executed by NTPC and the Consortium Members. Clause 3.1.37 of the ITB cannot be read as a deeming provision by virtue of which the Project Agreement had come into existence between TCMPL and NTPC.
TCMPL was not the Selected Bidder but is a Joint Venture Company, which was subsequently incorporated by the Selected Bidders.
16. Clause 6.4.[3] of the ITB provides that the Project Agreement “shall constitute valid and binding obligations enforceable against either Party”. This Court has little doubt that the expression “either Party” as used in Clause 6.4.[3] of the ITB did not include TCMPL on the date LoA was issued as it did not exist at the relevant time.
17. In view of the above, this Court is unable to accept the contention that the Project Agreement had come into existence between TCMPL and NTPC, on issuance of the LoA.
18. In addition to the above, TCMPL further claims that the Project Agreement had come into existence between TCMPL and NTPC by virtue of Clause 12.[3] of the ITB. The said clause is set out below: “12.[3] Consortium Operating Agreement In case the Bidder is a Consortium and has sought qualification on the consolidated strength/experience of all the Consortium members, Bidder shall be required to furnish a legally enforceable Consortium Operating Agreement in original as per format enclosed at Exhibit-9 of Appendix-7C. Consortium Operating Agreement shall not be amended, modified and/or superseded by any agreement, deed or document by the Consortium Members. The Selected Bidder (in case of bidding through Consortium Route) shall form a Joint Venture Company constituted under the applicable Indian Laws and shall sign Project Agreement in line with Clause 6.4.[4] of this ITB within 60 days of the Date of issue of LOA. Any further agreement that may be entered into amongst the Consortium Members with respect to the Joint Venture Company shall not be contrary to or in conflict with the Consortium Operating Agreement. The composition and percentage shareholding of equity of the consortium members in Joint Venture Company shall be as declared in the Consortium Operating Agreement and no change in this regard shall be allowed till incorporation of the JV Company. Upon being determined as selected Bidder by way of issuance of Letter of Acceptance, all the Consortium Members shall decide mutually the modality for developing and operating TALAIPALLI Coal Block through formation of a Joint Venture Company constituted under the applicable Indian Law. Consortium Leader shall have at least 51% of the total paid up share Capital of the Joint Venture Company and each of the other Consortium members shall have at least 10% of the total paid up share Capital of the Joint Venture Company. All members of the consortium shall continue to retain above minimum till complete terms of the Contract. No change in the equity shareholding in the Joint Venture Company shall be allowed till the mine achieves 85% of the Contracted Capacity of the Project. After the Mine has achieved 85% of the Contracted capacity, the Consortium members shall continue to maintain their shareholding in Joint Venture Company in such a manner that, the Consortium leader shall have at least 51% of the total paid up share capital of the Joint Venture Company and each of the other Consortium members shall have at least 10% of the total paid up share capital of the Joint Venture Company, till complete term of the Contract. Provided further that no change in the shareholding of Joint Venture Company shall be permissible without prior consent of the Owner. The Owner may grant such consent subject to the terms & conditions as it may deem fit. The Consortium shall necessarily identify one of the members as Consortium Leader, the authorisation for which shall be evidenced by submitting with the bid a Power of Attorney in favour of the Consortium Leader signed by legally authorized signatories of all the Consortium Members. The Consortium Leader shall be authorized to incur liabilities and receive instruction for and on behalf of any and all members of the Consortium and entire correspondence till the formation of Joint Venture Company shall be done exclusively with the Lead Member. Subsequent to its formation, Joint Venture Company shall be responsible for complete execution of the Contract. All payments under the Contract shall be made to the Joint Venture Company only. The case of Consortium, the Bid Security and in the event of award to Consortium the Contract Performance Bank Guarantee shall be in the name of all the members of the Consortium. However, obligations under above CPG shall not be affected by any change in the constitution or control of the Consortium and continue to be applicable to the Joint Venture Company formed by the Consortium in line with the provisions of bidding document.” [underlined for emphasis]
19. Clause 12.[3] of the ITB expressly provides that subsequent to its formation, the Joint Venture Company “shall be responsible for complete execution of the Contract”. Thus, according to TCMPL, it had become a party to the Project Agreement even though it had not executed the same.
20. Mr Taneja, learned counsel appearing for NTPC, contended that the scheme of the ITB is to ensure that in case the Selected Bidder is a consortium; on issuance of the LoA, the consortium members become bound by the Project Agreement until the Project Agreement is executed with the Joint Venture Company. He contended that the Joint Venture Company (TCMPL) would become a party to the Project Agreement only on it signing the Project Agreement.
21. The contention that the Consortium Members would be liable under the Project Agreement till the Joint Venture Company signs the Project Agreement, is unmerited. In terms of the ITB as well as the LoA, the Consortium Members would continue to be liable for performance of the Project Agreement after issuance of the LoA. After incorporation of the Joint Venture Company, it would be liable for due performance of the contract. However, the Consortium Members would continue to be jointly and severally liable for the same. The obligation to perform the Project Agreement is imputed on the Joint Venture Company not from the date it signs the Project Agreement, but from the date of its incorporation.
22. There is no dispute that the Consortium Members were required to constitute a Joint Venture Company within a period of sixty days of the date of issuance of the LoA. They are also obliged to ensure that the parties sign the Project Agreement within a period of sixty days. Since the ITB expressly provides that on its incorporation, the Joint Venture Company – in this case TCMPL – would be responsible for execution of the contract; it does prima facie appear that TCMPL was obliged to perform the work in terms of the Project Agreement and was bound by it. It thus, stands reason that TCMPL would also acquire the contractual rights as a party to the said Project Agreement along with the corresponding obligations.
23. NTPC’s contention that no agreement came into existence between NTPC and TCMPL as it did not recognize TCMPL as the Joint Venture Company, is unpersuasive. The rights and obligations of a party are not dependent upon a unilateral decision of NTPC to recognize TCMPL as a Joint Venture Company. If TCMPL was incorporated as a Joint Venture Company in terms of the ITB, rights and obligations would arise on incorporation and the same are not contingent on any further recognition by NTPC. Clearly, if there was a failure on the part of TCMPL to comply with any of its obligations or responsibilities after its incorporation, NTPC would be well within its right to refer to the ITB to prefer a claim against TCMPL, even though it may not have signed the Project Agreement. This is apparent from the express stipulation that the Joint Venture Company (TCMPL), would be responsible for executing the contract subsequent to its incorporation.
24. Before proceeding further, it would be relevant to refer to the Arbitration Clause as included in the Project Agreement. Clause 23.[3] of the Project Agreement is set out below: “23.[3] Arbitration (a) If either the Owner or the Mine Operator is dissatisfied with the Adjudicator’s decision, or if the Adjudicator fails to give a decision within twenty eight (28) days of a dispute being referred to it, then either the Owner or the Mine Operator may, within fifty six (56) days of such reference, give notice to the other party, with a copy for information to the Adjudicator, of its intention to commence arbitration, as hereinafter provided, as to the matter in dispute, and no arbitration in respect of this matter may be commenced unless such notice is given. (b) Any dispute in respect of which a notice of intention to commence arbitration has been given, in accordance with Clause a), shall be finally settled by arbitration.
(c) Any dispute submitted by a Party to arbitration shall be heard by an arbitration panel composed of three arbitrators, in accordance with the provisions set forth below.
(d) The Owner and the Mine Operator shall each appoint one arbitrator, and these two arbitrators shall jointly appoint a third arbitrator, who shall chair the arbitration panel. If the two arbitrators do not succeed in appointing a third arbitrator within twenty eight (28) days after the latter of the two arbitrators has been appointed, the third arbitrator shall, at the request of either party, be appointed by the following appointing authority ("Appointing Authority").
(i) President, Institution of Engineers in case of a Mine Operator having its registered office in India
(ii) President, International Chambers of
Commerce, Paris, in case of a Mine Operator having its registered / principal place of business outside India. (e) If one Party fails to appoint its arbitrator within forty-two (42) days after the other party has named its arbitrator, the party which has named an arbitrator may request the Appointing Authority to appoint the second arbitrator. (f) If for any reason an arbitrator is unable to perform its function, the mandate of the Arbitrator shall terminate in accordance with the provisions of Applicable Laws and; a substitute shall be appointed in the same manner as the original arbitrator. (g) Any arbitration proceeding pursuant to this Clause 23.[3] shall be conducted in the English language. The venue of arbitration shall be New Delhi. The arbitration proceedings shall be governed by the rules of procedure for arbitration· proceedings as under:
(i) Indian Arbitration and Conciliation
(ii) United Nations Commission on
International Trade Law (UNCITRAL) - Arbitration Rules of 1976, in case of a Mine Operator having its registered/principal place of business outside India.
(iii) In case, the Mine Operator is an
Indian Public Sector Enterprise/ Government Department (but not a. State Govt. Undertaking or Joint Sector Undertaking which is not a subsidiary of Central Govt. Undertaking), the dispute arising between the Employer and the Mine Operator shall be referred for resolution to a Permanent Arbitration Machinery (PAM) of the Department of Public Enterprises, Government of India. (h) The decision of a majority of the arbitrators (or of the third arbitrator chairing the arbitration, if there is no such majority) shall be final and binding and shall be enforceable in any court of competent jurisdiction as decree of the court. The parties thereby waive any objections to or claims of immunity from such enforcement.
(i) The cost of arbitration shall be shared equally by the Parties.
(j) The arbitrator(s) shall give a reasoned award. (k) Notwithstanding any reference to the Adjudicator or arbitration herein:
(i) the Parties shall continue to perform their respective obligations under the
(ii) the Owner shall pay the Mine Operator any monies due to the Mine Operator.”
25. Sub-clause (a) of Clause 23.[3] of the Project Agreement makes it amply clear that the Arbitration Clause can be invoked by either the Owner or the Mine Operator. The arbitration contemplates reference of disputes between the Owner (NTPC) and the Mine Operator. In terms of Sub-clause (d) of Clause 23.[3] of the Project Agreement, the Mine Operator and the Owner are required to nominate their respective arbitrators, and the two nominated arbitrators are required to jointly appoint the Presiding Arbitrator.
26. The expression ‘Mine Operator’ has been defined in Clause 3.1.27 of the ITB to have the same meaning as ascribed to the Preamble to the Project Agreement. The said expression is similarly defined under Clause 1.[1] of the draft Project Agreement annexed to the ITB.
27. The Mine Operator is a party to the Project Agreement and included amongst the parties of the “other part”, which also include the consortium members. The Recitals to the draft project agreement are material and the relevant extract of the same are set out below: “a) The Owner [is/shall become] the leaseholder of the Talaipalli Coal Block as set out in 8.1(b) pursuant to which it intends to develop and operate the Talaipalli Coal Block through a Mine Operator as provided under this Agreement. b) The Owner invited proposals for development and operation of the Talaipalli Coal Block through a Mine Operator as provided under this Agreement on international competitive bidding basis. c) [Name of selected Bidder] having sufficient resources and capacity to develop, construct and operate the Talaipalli Coal Block as a Mine Operator as provided under this Agreement has participated in such international competitive bidding by submitting its Project Proposal comprising of Proposal for Qualification and Technical Proposal bearing ref. No. [ _ ]dated [ ] and Price Proposal bearing ref. No [ ] dated [ ] (hereinafter collectively called “Proposal”) xxxx xxxx xxxx **The Mine Operator is a Joint Venture Company incorporated by the Consortium Members having combined resources and capacity to develop, construct and operate the Talaipalli Coal Block relying on the strengths, experience, expertise & qualification of its members to meet the qualifying requirements specified in the Owner’s Request for Proposal Documents and therefore entered into a Consortium Operating Agreement among the members of the Consortium, a copy of which is provided at Schedule-13 to this Agreement. The Joint Venture Company incorporated by the Consortium Members and each of the Consortium Members shall jointly and severally be responsible and liable to Owner for performance of contractual obligations by the Joint Venture Company throughout the term of contract. This Agreement is being executed by the Joint Venture Company and all the Consortium Members, who have incorporated the Joint Venture Company.”
28. Prima facie, the Joint Venture Company (TCMPL) incorporated by the Consortium Members would be the Mine Operator in terms of the Preamble to the Project Agreement.
29. It is also relevant to note that NTPC had preferred a petition under Section 14 of the A&C Act being OMP(T)(COMM) 101/2021 captioned “NTPC Limited v. Talaipalli Coal Mining Pvt. Ltd and Anr.”. The said petition was disposed of by an order dated 11.10.2021 passed by a Coordinate Bench of this Court. The relevant extract of the said order is reproduced below: “3. NTPC, as the petitioner in this petition, preferred under Section 14(1)(a) & (2) of the Arbitration & Conciliation Act, 1996, (“the 1996 Act” hereinafter), seeks “(termination of) the mandate of the arbitration commenced by Respondent No. 1 vide notice dated 23rd August, 2021, thereby appointing Hon’ble Mr. Justice J. Chalamaswar, former Judge, Supreme Court of India, as its nominee arbitrator”. Respondent No. 1, I may note, is M/s Talaipalli Coal Mining Pvt. Ltd. (“TCMPL”).
4. Ms. Acharya, frankly concedes to a preliminary query from the Bench in that regard, that the present petition would not, in fact, lie under Section 14(1)(a) or 14(2) of the 1996 Act, or for that matter, under any other provision of the said statute. She, nonetheless prays that, as the dispute between the petitioner and the Consortium, emanating from the agreement in relation to which the respondent has issued the notice dated 23rd August, 2021, is pending before the aforementioned learned Arbitral Tribunal, the present dispute between the petitioner and Respondent No. 2, may also be referred to the same Arbitral Tribunal, so that disputes emanating from one agreement are not decided by different arbitral tribunals.
5. She has placed reliance in this context, on a judgment of the coordinate Bench of this Court in Gammon India Ltd. v. NHAI: MANU/DE/1284/2020 Unfortunately, the present petition is not maintainable before this Court, under any provision of the 1996 Act. This Court, cannot pass orders in thin air, in proceedings which cannot be maintained before it. Orders regulating arbitral proceedings have to abide by the discipline of the 1996 Act. Once it is accepted that the present application does not lie under the 1996 Act, no orders can be passed by this Court thereon.
6. Ms. Acharya also acknowledges, candidly, that her client would have a remedy, before the learned Arbitral Tribunal, in seisin of the claims now being raised by the respondent, under Section 16 of the 1996 Act. Her concern is that, if her objection in that regard is rejected, her client would have to undergo the rigor of a protracted arbitral proceeding and reserve its right to challenge the constitution of the arbitral tribunal only after the final award is passed. This entire abortive exercise, in her submission could be avoided if the disputes now being sought to be raised by the respondent are also referred to the existing arbitral tribunal comprising Hon’ble Mr. Justice R.C. Lahoti, Hon’ble Mr. Justice A.K. Sikri and Hon’ble Mr. Justice Reddy, for adjudication.
30. It is apparent that NTPC did not contend that the Arbitration Agreement did not exist between the parties. On the contrary, it requested that the parties be referred to the Arbitral Tribunal, as constituted, pursuant to the Consortium Members invoking the Arbitration Agreement.
31. It is necessary to note that no such submission to the effect that the parties be referred to the said Arbitral Tribunal (as constituted, pursuant to the consortium members invoking the Arbitration Agreement) was advanced on behalf of NTPC and therefore this Court has refrained from considering the same.
32. This Court is, prima facie, of the view that the Arbitration Agreement in terms of Clause 23.[3] of the Project Agreement exists between the parties even though, neither TCMPL nor NTPC has formally signed the Project Agreement.
33. Having stated the above, this Court must necessarily clarify that the views expressed by this Court are prima facie and does not preclude the parties from contesting the issue regarding existence of the Arbitration Agreement before the Arbitral Tribunal.
34. In this context, it also relevant to refer to the 246th report of the Law Commission, which is substantially the basis for enactment of the Arbitration and Conciliation (Amendment) Act, 2015. Paragraphs 32 and 33 of the said report are set out below: “32. In relation to the nature of intervention, the exposition of the law is to be found in the decision of the Supreme Court in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. [Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234], (in the context of Section 45 of the Act), where the Supreme Court has ruled in favour of looking at the issues/controversy only prima facie.
33. It is in this context, the Commission has recommended amendments to sections 8 and 11 of the Arbitration and Conciliation Act, 1996. The scope of the judicial intervention is only restricted to situations where the Court/Judicial Authority finds that the arbitration agreement does not exist or is null and void. In so far as the nature of intervention is concerned, it is recommended that in the event the Court/Judicial Authority is prima facie satisfied against the argument challenging the arbitration agreement, it shall appoint the arbitrator and/or refer the parties to arbitration, as the case may be. The amendment envisages that the judicial authority shall not refer the parties to arbitration only if it finds that there does not exist an arbitration agreement or that it is null and void. If the judicial authority is of the opinion that prima facie the arbitration agreement exists, then it shall refer the dispute to arbitration, and leave the existence of the arbitration agreement to be finally determined by the arbitral tribunal. However, if the judicial authority concludes that the agreement does not exist, then the conclusion will be final and not prima facie. The amendment also envisages that there shall be a conclusive determination as to whether the arbitration agreement is null and void. In the event that the judicial authority refers the dispute to arbitration and/or appoints an arbitrator, under sections 8 and 11 respectively, such a decision will be final and non-appealable. An appeal can be maintained under section 37 only in the event of refusal to refer parties to arbitration, or refusal to appoint an arbitrator.”
35. The Supreme Court in the case of Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd.: (2005) 7 SCC 234 dealt with the question concerning the standards of examination at the stage of referring the parties to arbitration albeit, in the context of Section 45 of the A&C Act. The relevant extract from the opinion of B.N. Srikrishna, J. is set out below:
36. The aforesaid view was also approved by the Supreme Court in the later decision in Vidya Drolia v Durga Trading Corporation:
37. In view of the above, Justice Madan B. Lokur, former Judge of the Supreme Court, is appointed as an Arbitrator on behalf of NTPC. The nominated Arbitrators shall jointly appoint the Presiding Arbitrator.
38. The petition is allowed in the aforesaid terms.
VIBHU BAKHRU, J FEBRUARY 25, 2022 RK/pkv/gsr/v