ATLANTA LIMITED v. NATIONAL HIGHWAYS & INFRASTRUCTURE DEVELOPMENT COPORATION LIMITED

1. The petitioner has filed the present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereafter „the Act‟), inter alia, praying that a sole arbitrator be appointed to adjudicate the claims and disputes that have arisen between the parties in respect of the Engineering, Procurement & Construction Agreement (hereafter „the EPC Agreement‟) entered into between the parties on 11.02.2016 for execution of the works relating to “Four Laning of End of Moran Bypass to Bogibell Junciton near Lapetkila section from km 561.700 2018:DHC:3106 to km 580.778 (Design km 561.700 to km 580.778)”. The EPC Agreement includes a Dispute Resolution Clause – Article 26 – which the petitioner claims is an arbitration clause. The respondent contests that Article 26 of the EPC Agreement could be construed as an arbitration clause and disputes the existence of an arbitration agreement.

2. At the outset, it would be necessary to refer to Article 26 of the EPC Agreement, which is set out below:- “ARTICLE 26 DISPUTE RESOLUTION 26.[1] Dispute Resolution 26.1.[1] Any dispute, difference or controversy of whatever nature howsoever arising under or out of or in relation to this Agreement (including its interpretation) between the Parties, and so notified in writing by either Party to the other Party (the “Dispute”) shall, in the first instance, be attempted to be resolved amicably in accordance with the conciliation procedure set forth in Clause 26.2. 26.1.[2] The Parties agree to use their best efforts for resolving all Disputes arising tinder or in respect of this Agreement promptly, equitably and in good faith, and further agree to provide each other with reasonable access during normal business hours to all nonprivileged records, information and data pertaining to any Dispute. 26.[2] Conciliation In the event of any Dispute between the Parties, either Party may call upon the Authority‟s Engineer, or such other person as the Parties may mutually agree upon (the '”Conciliator”) to mediate and assist the Parties in arriving at an amicable settlement thereof. Failing mediation by the Conciliator or without the intervention of the Conciliator, either Party may require such Dispute to be referred to the Chairman of the Authority and the Chairman of the Board of Directors of the Contractor for amicable settlement, and upon such reference, the said persons shall meet no later than 7 (seven} business days from the date of reference to discuss and attempt to amicably resolve the Dispute. If such meeting does not take place within the 7 (seven) business day period or the Dispute is not amicably settled within 15 (fifteen) days of the meeting or the Dispute is not resolved as evidenced by the signing of written terms of settlement within 30 (thirty) days of the notice in writing referred to in Clause 26.1.[1] or such longer period as may be mutually agreed by the Parties, either Party may refer the Dispute to arbitration in accordance with the provisions of Clause

26.3. 26.3. Adjudication by Regulatory Authority, Tribunal or Commission In the event of constitution of a statutory regulatory authority, tribunal or commission, as the case may be, with powers to adjudicate upon disputes between the Contractor and the Authority, all Disputes arising after such constitution shall, instead of reference to arbitration under Clause 26.3, be adjudicated upon by such regulatory authority, tribunal or commission in accordance with the Applicable Law and all references to Dispute Resolution Procedure shall be construed accordingly. For the avoidance of doubt, the Parties hereto agree that the adjudication hereunder shall not be final and binding until an appeal against such adjudication has been decided by an appellate tribunal or court of competent jurisdiction, as the case may be, or no such appeal has been preferred within the time specified in the Applicable Law.”

3. The only controversy that falls for consideration of this Court is whether the aforementioned Clause 26.[2] or 26.[3] of the EPC Agreement constitutes an arbitration agreement within the meaning of Section 7 of the Act.

4. Mr Parag Tripathi, learned Senior Counsel appearing for the petitioner contended that the last line of Clause 26.[2] of the EPC Agreement – which reads as “either Party may refer the Dispute to arbitration in accordance with the provisions of Clause 26.3” – clearly constituted an arbitration agreement between the parties. He submitted that Clause 26.[3] contained the agreement between the parties to refer the disputes to be adjudicated by a Regulatory Authority, Tribunal or a Commission after such Authority or Tribunal has been constituted. He submitted that since no such Tribunal or Authority had been constituted, the parties were required to refer the disputes to arbitration.

5. Mr Tripathi also referred to the decision of the Supreme Court in Govind Rubber Limited v. Louis Dreyfus Commodities Asia Private Limited: (2015) 13 SCC 477 in support of his contention that an agreement must be interpreted in a manner so as to give effect to the arbitration clause rather than to invalidate it. He submitted that merely because the arbitration clause had been drafted inartistically, it would not detract from the facts that the parties intended to refer their disputes to arbitration and a valid arbitration agreement existed between the parties.

6. Mr Rajiv Bansal, learned Senior Counsel appearing for the respondent countered the submissions made by Mr Tripathi. He stated that Clause 26.[3] of the EPC Agreement only referred to adjudication of the disputes by a statutory Regulatory Authority, Tribunal or Commission with the powers to adjudicate the disputes between the contractor and the authority. However, since no such authority had been constituted, there was no agreement between the parties to resolve the disputes by an ad hoc arbitration.

7. I have heard the learned counsel for the parties.

8. Undisputedly, there is much ambiguity in the manner, in which Clauses 26.[2] and 26.[3] of the EPC Agreement have been drafted. Mr Tripathi‟s contention that an inartistic drafting would not detract from discerning the true intention of the parties is merited. In order to ascertain whether there is an arbitration agreement between the parties, it would be necessary to ascertain the intention of the parties. In Rukmanibai Gupta v. Collector, Jabalpur & Ors: (1980) 4 SCC 556, the Supreme Court had observed as under:- “6…. Arbitration agreement is not required to be in any particular form. What is required to be ascertained is whether the parties have agreed that if disputes arisen between them in respect of the subject-matter of contract such dispute shall be referred to arbitration, then such an arrangement would spell out an arbitration agreement.”

9. It is, thus, essential to understand the reason why the Dispute Resolution Clause (Article 26) of the EPC Agreement has been drafted in the manner that it has. The respondent had pointed out that it had modified a standard form of contract used by it. It has also produced other agreements entered into with other parties. It is relevant to note that agreements entered into by the respondent with other parties, copies of which have been produced on record, indicate that the said agreements also contain a Dispute Resolution Clause. Clauses 26.1, 26.[2] and 26.[4] in those agreements are identically worded, as the corresponding clauses in the EPC Agreement, except that Clause 26.[3] of the EPC Agreement is numbered as 26.[4] in the other agreements. In addition, the other agreements also include Clause 26.[3] which reads as under:- “26.[3] Arbitration 26.3.[1] Any Dispute which is not resolved amicably by conciliation, as provided in Clause 26.2, shall be finally decided by reference to arbitration by a Board of Arbitrators appointed in accordance with Clause 29.3.2. Such arbitration shall be held in accordance with the Rules of Arbitration of the International Centre for Alternative Dispute Resolution, New Delhi (the “Rules”), or such other rules as may be mutually agreed by the Parties, and shall be subject to the provisions of the Arbitration Act. The venue of such arbitration shall be Delhi, and the language of arbitration proceedings shall be English. 26.3.[2] There shall be a Board of three arbitrators, of whom each Party shall select one, and the third arbitrator shall be appointed by the two arbitrators so selected and in the event of disagreement between the two arbitrators, the appointment shall be made in accordance with the Rules. 26.3.[3] The arbitrators shall make a reasoned award (the “Award”). Any Award made if. any arbitration held pursuant to this Article 26 shall be final and binding on the Parties as from the date it is made, and the Contractor and the Authority agree and undertake to carry out such Award without delay. 26.3.[4] The Contractor arid the Authority agree that an Award may be enforced against the Contractor and/or the Authority, as the case may be, and their respective assets wherever situated. 26.3.[5] This Agreement and the rights and obligations of the Parties shall remain in full force and effect, pending the Award in any arbitration proceedings hereunder. 26.3.[6] In the event the Party against whom the Award has been granted challenges the Award for any reason in a court of law, it shall make an interim payment to the other Party for an amount equal to 75% (seventy five per cent) of the Award, pending final-settlement of the Dispute. The aforesaid amount shall be paid forthwith upon furnishing an irrevocable Bank Guarantee for a sum equal to 120% (one hundred and twenty per cent) of the aforesaid amount. Upon final settlement of the Dispute, the aforesaid interim payment shall be adjusted and any balance amount due to be paid or returned, as the case may be, shall be paid or returned with interest calculated at the rate of 10% (ten per cent) per annum from the date of interim payment to the date of final settlement of such balance”

10. It is at once clear that reference to Clause 26.[3] in the last sentence of Clause 26.[2] of the EPC Agreement refers to Clause 26.[3] of the standard form of contract and not Clause 26.[3] (which is Clause 26.[4] of the standard form of contract) of the EPC Agreement. This also explains a reference to Clause 26.[3] in Clause 26.[3] of the EPC Agreement. It is, thus, obvious that what has happened is that the respondent has modified the standard format contract by deleting the arbitration clause (which is numbered as Clause 26.3) from the standard form of contract and consequently Clause 26.[4] has been renumbered as 26.[3] in the EPC Agreement.

11. Mr Tripathi submitted that the agreement entered into by the respondent with other parties would have no relevance in determining the question whether an arbitration agreement exists between the parties. This contention is not persuasive as the object of examining the relevant clauses of the EPC Agreement is to ascertain whether the parties intended to enter into an arbitration agreement. In order to address this question, it would be necessary to understand as to why the dispute resolution clauses read in the manner as they do. Once it is found that the respondent had used a standard form of contract –which is obvious from the fact that agreements containing an identically worded dispute resolution clause have been produced by the respondent – a reference to such standard form of contract would be relevant.

12. In Louis Dreyfus & Cie v. Parnaso Cia. Naviera S.A: (1959) 1 Q.B. 498, the Court held as under:- “It is my misfortune, apparently, to have to try to make sense of it. The exceptions clause, clause 2 of the charterparty, consists of three printed paragraphs, the third of which has been deleted and typed words substituted for it. The first question which I have to consider is whether, in order to assist myself in construing the paragraphs that remain, I can look at the one which has been deleted. There is a pleasant diversity of authority on this subject which the curious can find conveniently listed in a note in Scrutton on Charterparties, 16th ed. (1955), p. 33. But the court, in construing a contract, is seeking to ascertain the intention of the parties as expressed in the words that they have used. Where there is a standard form of words familiar to commercial men and contained in a printed form in general use, such as the “Gencon” charter, it seems unreal to suppose that when the contracting parties strike out a provision dealing with a specific matter, but retain other provisions, they intend to effect any alteration other than the exclusion of the provision struck out. I cannot, prima facie at any rate, ascribe to them any intention of altering the meaning of the words in the provisions which they have chosen to retain. I say “prima facie” because there may be added or substituted words which drive one to the conclusion that they did intend to ascribe to the words retained a meaning modified by the added or substituted provisions; but, while I think that I must look first at the clause in its actual form without the deleted words, if I find the clause ambiguous, I think that I am entitled to look at the deleted words to see if any assistance can be derived from them in solving the ambiguity, bearing in mind the prima facie rule which I have indicated.”

13. As noticed above, it is obvious that the respondent has deleted the arbitration clause in the EPC Agreement entered into between the parties and this would indicate the intention of the respondent not to enter into an arbitration agreement with the petitioner.

14. Even if the contention of Mr Tripathi is accepted that Clauses 26.[2] and 26.[3] of the EPC Agreement must be read without reference to any standard form agreement used by the respondent for entering into a contract with third parties, it would nonetheless be essential to determine whether those clauses have the necessary attributes for being construed as an arbitration agreement.