ATLANTA LIMITED vs 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 to km 580.778 (Design km

561.700 to km 580.778)†. The EPC Agreement includes a Dispute Resolution Clause â€" Article 26 â€" 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

“Disputeâ€) 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 'â€Conciliatorâ€) 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.â€​

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.

Mr Parag Tripathi, learned Senior Counsel appearing for the petitioner contended that the last line of Clause 26.2 of the EPC Agreement â€" which

reads as “either Party may refer the Dispute to arbitration in accordance with the provisions of Clause 26.3†â€" 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.

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.

I have heard the learned counsel for the parties.

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 unde:r- “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.â€​

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 “Rulesâ€), 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 “Awardâ€). 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 balanceâ€​

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.

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 â€"which is obvious from the fact that agreements containing an identically worded dispute resolution clause have been

produced by the respondent â€" 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.â€​

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.

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.

In K.K. Modi v. K.N. Modi and Ors. (1998) 3 SCC 573, the Supreme Court had listed out the attributes of an arbitration agreement. The relevant

extract of the said decision is set out below:-“17. Among the attributes which must be present for an agreement to be considered as an arbitration

agreement are:

(1)The arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement,

(2)That the jurisdiction of the tribunal to decide the rights of parties must derive either from the consent of the parties or from an order of the Court or

from a statute, the terms of which make it clear that the process is to be an arbitration,

(3)The agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal,

(4)That the tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness

towards both sides,

(5)That the judgment of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law and lastly,

(6)The agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is

made to the tribunal.â€​

16.Considered in the light of the above decision, it is apparent that the said Clause 26.2 and Clause 26.3 of the EPC Agreement lack the attributes of

an arbitration agreement as spelt out by the Supreme Court in K.K. Modi v. K.N. Modi and Ors. (supra). First of all, it is not possible to hold that the

parties had agreed that a decision of the Arbitral Tribunal would be final. The last line of Clause 26.2 of the EPC Agreement merely states that either

party may refer the disputes to arbitration in accordance with the provision of Clause 26.3. There is no commitment that any decision rendered by any

arbitral tribunal would be binding on the parties. The last line of Clause 26.2 of the EPC Agreement also indicates that, what was agreed was

reference to arbitration in accordance with its provisions of Clause 26.3 of the EPC Agreement. Clause 26.3 of the EPC Agreement does not

contemplate any arbitration but only specifies that if a statutory Regulatory Authority, Tribunal or a Commission has been constituted with powers to

adjudicate then all disputes after constitution of such Regulatory Authority, Tribunal or Commission would be decided by such Authority, Tribunal or

Commission. Clause 26.3 of the EPC Agreement further provides that such adjudication would not be final and binding until an appeal against such

adjudication has been decided by an appellate tribunal or a court of competent jurisdiction. 17. Mr Tripathi, had also contended that petitioner had

moved this Court for interim measures or protection under Section 9 of the Act on three previous occasions and no objection as to the effect that an

arbitration agreement does not exist between the parties, was taken before this Court. He submitted that in the circumstances, the respondent cannot

now be heard to state that there is no arbitration agreement between the parties. This contention is also unpersuasive for the reason that, concededly,

the respondent had not field a reply to any of the applications preferred by the petitioner under Section 9 of the Act. The first application â€" O.M.P.

(I) (COMM) 266/2016 â€" was filed seeking an interim order to challenge the termination notice dated 08.06.2016, the said matter was listed for the

first time on 17.06.2016 and was disposed of as infructuous on the same date. The second petition under Section 9 of the Act â€" O.M.P. (I)

(COMM) 244/2017 â€" as also disposed of on 01.08.2017 in view of the settlement between the parties without the petitioner joining any issues in the

matter. The third application − O.M.P. (I) (COMM) 90/2018 − was filed to restrain the respondent from invocation of the bank guarantee. The said

matter was also heard and disposed of without issuing a formal notice or affording the respondent any opportunity to file a reply. In the circumstances,

it is not possible to accept that respondent is precluded from asserting that there is no arbitration agreement between the parties in response to the

petitioner‟s prayer for appointment of an arbitrator.

18.Although, there is merit in Mr Tripathi‟s contention that a contract must be interpreted in the manner so as to give effect to the agreement rather

than invalidate it, it would be plainly erroneous to assume existence of an arbitration agreement where the parties have consciously adopted a standard

form of contract, albeit, by deleting the arbitration clause. Undoubtedly, this is a case of inartistic drafting. However, it is not a case of an inartistic

drafting of an arbitration clause; it is a case of deletion of an arbitration clause in an inartistic manner.

For the reasons stated above, this Court cannot accept that an arbitration agreement exists between the parties. The petition is accordingly

dismissed.