Gr Green Life Energy Pvt. Ltd vs Leitwind Shriram Manufacturing Pvt. Ltd.

Leave granted.

The present Civil Appeal has been filed by the Appellant-Contractor to challenge the Order dated 16.09.2020 passed on an Application filed under

Section 11 of the Arbitration and Conciliation Act, 1996 by the Madras High Court in Original Petition No. 300 of 2019.

The Appellant and the Respondent had entered into a Development Agreement dated 10.02.2014 to set up a Wind Farm Project in Sangli District in

Maharashtra, which contained an arbitration clause.

Clause 20 of the Agreement reads as :

“20. Governing Law and Jurisdiction and Service of Process ….

c) All disputes, differences and claims or any non-payment concerning the project work hereby created and / or touching this presents, arising out of

or in relation to anything contained herein shall be referred to arbitration to be held at Chennai, under the provisions of Arbitration and Conciliation Act,

1996 (inforce from time to time). The arbitration panel shall consist of three arbitrators, one arbitrator shall be appointed by each party and the

arbitrators so appointed shall appoint the presiding arbitrator. The parties here to shall duly observe any interim award/s or direction/s of the arbitration

tribunal and the award in pursuance to arbitration shall be final and binding on the parties hereto. The arbitration proceedings shall be in English

language.â€​

Disputes arose between the parties with respect to claims raised by the Appellant-Contractor, which led to issuance of a legal notice dated

21.04.2018 seeking payment of outstanding dues of Rs. 3,26,08,545/-.

The Respondent vide letter dated 21.01.2019 rejected the allegations in the notice, and contended that the Contractor had failed to provide services

as agreed under the Development Agreement. It was further contended that the Appellant-Contractor was liable to refund an amount of

Rs.10,26,00,000/- with Interest @ 15% p.a., and pay liquidated damages of Rs. 1,54,00,000/- to the Respondent-Company.

The Respondent invoked arbitration under Clause 20 of the Agreement, and nominated its arbitrator, with a request to the Appellant herein to make

nomination of its arbitrator.

On 18.03.2019, the Respondent herein filed a Petition under Section 11(6) of the 1996 Act before the High Court of Madras, wherein it was prayed

that the Court may appoint an arbitrator on behalf of the Appellant in terms of Clause 20 of the Development Agreement, since the Contractor had

failed to do so.

Subsequently, the Appellant-Contractor, registered itself under the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED

Actâ€​), and filed an application for resolution of disputes before the Facilitation Council, Pune established under the MSMED Act.

In the meanwhile, the Petition under Section 11 was taken up for hearing before the High Court, wherein it was observed that there is no provision

under the MSMED Act for reference of counter-claims to the Facilitation Council, and adjudication thereof. Sections 15 to 18 of the MSMED Act

provide for reference of disputes with respect to claims made by a supplier / contractor registered under the MSMED Act. Even though Section 24 of

the MSMED Act gives overriding effect to the MSMED Act, it would not be applicable in this case, since there is no provision under this Act to deal

with counter-claims filed against the supplier-contractor. The High Court took the view that since there is no provision for raising counter-claims under

the MSMED Act, and the parties had in the Development Agreement dated 10.02.2014 agreed to refer all their disputes under the 1996 Act, it was a

fit case for appointment of the arbitrator. The arbitration agreement provided for a three-member tribunal. The Applicant (Respondent herein) had

already nominated its arbitrator, the Contractor was directed to appoint an arbitrator. On such nomination, the two arbitrators would appoint the

presiding arbitrator.

The Appellant-Contractor challenged the aforesaid Order dated 16.09.2020 before this Court vide Special Leave Petition (C) No. 16027 of 2020.

During the course of the proceedings, the parties have agreed to have their disputes adjudicated under the Arbitration & Conciliation Act, 1996 by a

Court-appointed Sole Arbitrator.

In view of the statement made by the Counsel for both parties on instructions, Clause 20 of the Development Agreement dated 10.02.2014 stands

superseded to the extent that the arbitration will be conducted by a three-member tribunal.

We appoint Justice K. Kannan, former Judge of the Madras High Court, as the Sole Arbitrator to adjudicate on all the claims and counter claims made

by the parties arising out of the Development Agreement dated 10.02.2014. The arbitration will be conducted in accordance with the Arbitration and

Conciliation Act, 1996. The arbitral proceedings shall be conducted by the Madras High Court Arbitration Centre in accordance with its Rules.

The appointment of the Sole Arbitrator is subject to the Declarations to be made under Section 12 of the Arbitration and Conciliation Act, 1996 with

respect to independence and impartiality, and the ability to devote sufficient time to complete the arbitration. The Sole Arbitrator will be paid fees as

per the Schedule of the Madras High Court Arbitration Centre (Administrative Cost and Arbitrators’ Fees) Rules, 2017.

A copy of this Order be despatched to the Madras High Court Arbitration Centre, and Justice K. Kannan (Retd.) at the following address :

“Justice K. Kannan

3/11, Lakshmi Colony,

North Crescent, T. Nagar

Chennai - 600017

Mob: +91-9780008145â€​

In view of the aforesaid directions, the Application filed by the Appellant-Contractor under the MSMED Act, registered as MSFEC Case No.

MH/26/M/PNE/02000 on 22.10.2020, will stand closed by the Facilitation Council, Pune.

The Appeal is disposed of in the aforesaid terms. Pending applications, if any, stand disposed.