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HIGH COURT OF DELHI
JUDGMENT
Through: Mr. A. P. Singh and Mr. Varhit Vashishtha, Advocates.
1. The present petition filed under section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred as ‘A&C Act’) seeks appointment of a sole arbitrator to adjudicate the disputes between the parties.
JUDGMENT
2. The petitioner in the present petition is a Government of India Undertaking/Enterprise which is under the administrative control of the Department of Telecommunications (DOT), Ministry of Communication, Government of India and is engaged in telecommunications consultancy and execution of turnkey projects in India and abroad in the field of telecommunication for supply and installation of optical fibre network, switching systems, data communication networks etc. The respondent is a private company incorporated under the Companies Act, 2013 having experience in execution/installation of various power transmission lines/substation projects in India and abroad.
3. The present petition is filed in backdrop of a Memorandum of Understanding dated 02.12.2002 (hereinafter referred as ‘the MoU’) executed between the petitioner and respondent exclusively for ‘installation of power transmission lines and substations in Algeria.’ In terms of the MoU, the respondent was to provide information (both non-technical and commercial) required for (i) submission of the bid/s for the installation of power lines/substation project in Algeria and (ii) technical evaluation of the said bid/s to the petitioner. The petitioner was to consider the aforementioned information for the purpose of bidding and in event of winning a tender, engage the services of respondent for installation of works under the said tender/s.
4. The petitioner on 16.12.2002 participated in Tender NO. 003/DTE/ET/2002 floated by M/s Sonelgaz, an Algerian Government owned electricity and gas utility company for construction of 60kV and 220kV power transmission lines in Algeria. The petitioner was declared as a successful bidder and consequently, Contract No. 2002/080/DTE-ET/029 dated 17.03.2003 (hereinafter referred as ‘the main contract’) was executed between the petitioner and M/s Sonelgaz for the aforementioned works.
5. Subsequently, on 19.06.2003, the petitioner entered into a subcontract with the respondent for execution of civil and electrical works ‘in connection with the contract for Construction of 60 kV and 220 kV lines vide Contract No. 2002/080/DTE-ET/029 of Sonelgaz, Algeria’. The said sub-contract contains an arbitration clause which reads as under: “ARTICLE 16 ARBITRATION, JURISDICTION AND GOVERNING LAWS If any disputes and/or difference arises between the Contractor and the sub-contractor in relation to or in. connection with the Agreement, such disputes and /or differences shall be referred to arbitration. CMD, TCIL shall either be the arbitrator himself or may nominate any person to act as the arbitrator. The venue of such arbitration shall be New Delhi and the arbitration shall be governed by the Indian Arbitration and Conciliation Act, 1996. Only the courts of New Delhi shall have the exclusive jurisdiction to entertain matters arising out of or concerning this sub-contract agreement. This agreement shall be governed by the laws of India. It is expressly agreed by the sub-contractor that performance of the subcontract works shall continue during such arbitration proceedings.”
6. During the subsistence of the contracts (main contract and subcontract), disputes between the parties arose whereby the petitioner alleged that it has incurred a loss due to negligence attributable to the respondent. The aforesaid loss was communicated to the respondent vide a letter dated 05.03.2004 which reads as under:
7. The allegations stated in the aforesaid communication were strenuously opposed by the respondent vide a letter dated 02.04.2004 wherein, inter-alia, it was stated as under:
8. Since the aforementioned disputes between the parties persisted, a sole arbitrator was appointed by the petitioner in terms of the clause 16 of the sub-contract for adjudication of the dispute/s between the parties. Subsequently, an Award dated 20.09.2008 (hereinafter referred as ‘the first award’) was passed by the learned Sole Arbitrator. The impugned award came to be challenged before this Court under Section 34 of the A&C Act by the petitioner in OMP No. 95/2009 and the respondent in OMP(COMM) 84/2020 (registered as OMP No. 2/2009 and later renumbered). The petition filed by the respondent is still pending before this Court whereas the petition filed by the petitioner was allowed by this Court vide order dated 16.12.2016. The relevant portion of the said order reads as under:
9. The present petition is confined to those claims which are subject matter of the arbitral award dated 20.09.2008, which has been set aside (qua the claims of petitioner) by this Court in OMP No. 95/2009 vide order dated 16.12.2016.
10. It transpires that apart from the aforesaid arbitration (which culminated in the award dated 20.09.2008), there was another arbitration between the parties with regard to another set of claims under the same contract. The said award dated 30.03.2021 is the subject matter of a pending petition under Section 34 of the A&C Act [OMP(COMM) 67/2022] filed by the petitioner.
11. Learned counsel for the respondent does not dispute the existence of the arbitration agreement and accedes to appointment of a sole arbitrator to adjudicate the disputes between the parties.[1]
12. Thus, even though the parties are mutually agreeable that an arbitral tribunal is liable to be constituted by this Court in these proceedings, there is a controversy as regards the scope of the proposed arbitral proceedings. However, the same does not inhibit this Court from exercising jurisdiction under Section 11 of the A&C Act and constituting an arbitral tribunal. The controversy as regards the scope of arbitration and/or whether any claim/s or counter claim/s are precluded on account of pending / earlier proceedings, shall necessarily be considered by the arbitral tribunal. It shall be open to the parties to make their respective submissions in this regard before the arbitral tribunal. However, it is stated that the scope of arbitration must also subsume the counter-claims of the respondent which were subject matter of the award dated 20.09.2008 (in respect of which the respondent’s petition under Section 34 of the A&C Act is still pending) and claims of the petitioner which were subject matter of award dated 30.03.2021 (in respect of which the petitioner’s petition under Section 34 of the A&C Act is still pending).
13. In terms of judgments rendered by the Supreme Court in SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 INSC 532, and Interplay between Arbitration Agreements under the Arbitration & Conciliation Act, 1996 & the Indian Stamp Act, 1899, In re, 2023 SCC OnLine SC 1666, it is incumbent upon this Court to confine itself to examine prima facie existence of arbitration agreement between the parties and ‘nothing else’. “In view of award, it is clarified that the Respondent is not objecting to appointment of Arbitrator but is merely objecting to piecemeal adjudication of dispute and is, therefore, praying for a common independent arbitrator to be appointed by this Hon’ble Court”
14. The relevant observations in In re, Interplay (supra) are as under:-
15. In SBI General Insurance Co. Ltd (supra), it has been observed as under:-
of the arbitration agreement, but also include any other issues which are a consequence of unnecessary judicial interference in the arbitration proceedings (Emphasis supplied). Accordingly, the “other issues” also include examination and impounding of an unstamped instrument by the referral court at the Section 8 or Section 11 stage. The process of examination, impounding, and dealing with an unstamped instrument under the Stamp Act is not a timebound process, and therefore does not align with the stated goal of the Arbitration Act to ensure expeditious and time-bound appointment of arbitrators. […]”
114. In view of the observations made by this Court in In Re. Interplay, it is clear that the scope of enquiry at the stage of appointment of arbitrator is limited to the scrutiny of prima facie existence of the arbitration agreement, and nothing else. For this reason, we find it difficult to hold that the observations made in Vidya Drolia and adopted in NTPC v. SPML Infra Ltd. that the jurisdiction of the referral court when dealing with the issue of “accord and satisfaction” under Section 11 extends to weeding out ex-facie non-arbitrable and frivolous disputes would continue to apply despite the subsequent decision in In Re. Interplay. xxx xxx xxx
123. The power available to the referral courts has to be construed in the light of the fact that no right to appeal is available against any order passed by the referral court under Section 11 for either appointing or refusing to appoint an arbitrator. Thus, by delving into the domain of the arbitral tribunal at the nascent stage of Section 11, the referral courts also run the risk of leaving the claimant in a situation wherein it does not have any forum to approach for the adjudication of its claims, if it Section 11 application is rejected.”
16. Moreover, it has been held by the Supreme Court in McDermott International Inc v. Burn Standard Co. Ltd., (2006) 11 SCC 181, that after setting aside of an arbitral award in proceedings under Section 34 of the A&C Act, the parties are free to reinitiate arbitration, if so desired. The relevant extract from the said judgment reads as under:
bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it.”
17. Further, in terms of the judgments of the Supreme Court in Perkins Eastman Architects DPC v. HSCC (India) Ltd (2020) 20 SCC 760, TRF Limited v. Energo Engineering Projects Ltd, (2017) 8 SCC 377 and Bharat Broadband Network Limited v. United Telecoms Limited, 2019 SCC OnLine SC 547, it is incumbent on this Court to appoint an independent sole arbitrator to adjudicate the disputes between the parties.
18. Accordingly, Mr. Justice (Retd.) Najmi Waziri, former Judge, Delhi High Court (Mob. No.: +91 9810097311) is appointed as the Sole Arbitrator to adjudicate the disputes between the parties.
19. The respondent 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.
20. The learned Sole Arbitrator may proceed with the arbitration proceedings subject to furnishing to the parties requisite disclosure as required under Section 12 of the A&C Act.
21. The learned Sole Arbitrator shall be entitled to fee in accordance with IVth
22. All rights and contentions of the parties in relation to the claims/counter claims are kept open, to be decided by the learned Sole Arbitrator on their merits, in accordance with law. Schedule to the A&C Act; or as may otherwise be agreed to between the parties and the learned Sole Arbitrator.
23. Needless to say, nothing in this order shall be construed as an expression of opinion of this Court on the merits of the case.
24. The present petition stands disposed of in the above terms.
SACHIN DATTA, J JULY 8, 2025