International Commerce Limited vs Coal India Ltd. & Another

Ashis Kumar Chakraborty, J

This is an application under Section 11 (6) of the Arbitration and Conciliation Act, 1996, as amended by Act 3 of 2016 (in short, "the Act of 1996").

The petitioner is a company incorporate under the Companies Act, 1956. The petitioner carries on business in coal sector. The respondent no.2, Central Coalfields Limited (CCL), is a coal producer of India and is claimed to be wholly owned subsidiary of the respondent no.1 Coal India Limited. In response to the E- Tender Notice issued by the respondent no.2 on January 07,2014, for outsourcing of OB removal and coal extraction at Section I at Rajarappa OCP for a period of 4 (four) years, the petitioner submitted its tender. On May 06, 2015 the respondent no.2 issued the work order in favour of the petitioner for removal of OB from quarry, re-handling of OB and extraction and transfer of W-III grade Coal in tippers. The petitioner had submitted the tender from its office at Bangalore (now known Bengaluru) to the respondent no.2 at its office at Ranchi, in the State of Jharkhand. The respondent no.2 had also issued the said work order dated May 06, 2015 from its office at Ranchi to the petitioner at its office at Bangalore (now known Bengaluru). These are evident from the said work order dated May 6, 2015 disclosed as Annexure-'B' to the petition. The petitioner has alleged that due to various breaches committed by the respondent no.2 it was not only unable to complete the work allotted by the said work order dated May 06, 2015 and it has also suffered damages. Thus, according to the petitioner, various disputes and differences have arisen between itself and respondent no.2 relating to the said work order dated May 06, 2015. It is further alleged that the respondent no.2 has refused to pay lawful dues of the petitioner under the said work order dated May 06, 2015. Admittedly, there is no arbitration agreement in writing between the petitioner and the respondent no.2 for adjudication of the disputes or differences arisen between the parties relating to the said work order dated May 06, 2015 through arbitration.

In the application the petitioner has disclosed a circular dated April 07, 2017 issued by the respondent no.1 to its subsidiary coal companies, including the respondent no.2 that all future contracts and work orders to be issued by the coal companies including the respondent no.2 shall incorporate a procedure for settlement of disputes and differences through arbitration for parties other than Government agencies. Clause 5 of the said circular issued by the respondent no.1 also provided that with regard to disputes and differences cropping up in the existing work order/contract, employer, being the coal company shall adopt a procedure for settlement of the same through arbitration. The petitioner asserted that the said circular dated April 07, 2017 issued by the respondent no.1 is binding upon the respondent no.2 and as such, the respondent no.2 is duty bound to refer the disputes and differences arisen between the parties relating to the said work order dated May 16, 2015 to arbitration.

It was urged that by a letter dated June 09, 2018 and other communications the petitioner repeatedly requested the respondent no.2 to take steps to refer the disputes to arbitration but the respondent no.2 refused to accede to such request. In support of its contention the petitioner relied on an order dated October 23, 2018 passed by the Division Bench of the High Court at Madhya Pradesh High Court, Jabalpur, in the case of JISCO Infrustractures -Vs- Coal India Limited and a decision of the Supreme Court in the case of IBI CONSULTANCY INDIA PRIVATE LIMITED -Vs- DSC LIMITED reported in (2018) 17 SCC 95. The petitioner also referred to Section 11 (5) of the Act of 1996. It was strenuously urged that in the present case, in spite of the said circular dated April 07, 2017 issued by the respondent no.1 when the respondent no.2 has refused to refer the disputes arisen between itself and the petitioner to arbitration, this court would appoint a Sole Arbitrator in exercise of power under Section 11 (5) of the Act of 1996.

On the other hand, the respondent in the affidavit-in-opposition raised strong objection with regard to the maintainability of the present application on two grounds. In the first place, it was stated that the petitioner, from their the then registered office at Bangalore (now known Bengaluru), submitted the tender to the respondent no.2 at its office at Ranchi, in the state of Jharkhand. Even, the respondent no.2 issued the said work order from its office at Ranchi which the same was addressed to and received by the petitioner at its the office at Bangalore (now known Bengaluru). The entire contract is being executed by the petitioner at Rajarappa in the State of Jharkhand.

It was submitted by the respondent no.2 that by the letters dated July 12, 2018 and July 18, 2018 addressed to the respondent no.2 at its office at Ranchi and Ramgarh in the State of Jharkhand the petitioner claimed that the disputes and differences arisen between the parties be referred to arbitration. By the letter dated July 27, 2018 addressed to the petitioner at their site office at Rajarappa Project the respondent no.2 refused to refer the disputes to arbitration on the ground of absence of any arbitration agreement between the parties. Thus, according to the respondent no.2, this Court lacks its territorial jurisdiction to entertain the present application. It was further argued that in the present case, the Chairman-cum-Managing Director of the respondent no.1 Coal India Limited has no authority to refer the disputes raised in relation to the said work order dated May 06, 2015 to arbitration. Thus, the communications issued by the petitioner to the Chairman-cum-Managing Director at New Town Kolkata have no bearing in the instant case and such communications does not confer any jurisdiction of this Court to entertain this application.

The second ground urged by the respondent no.2 was that in the instant case it is the said work order dated May 06, 2015 which constitute the contract between the parties under which the petitioner has to carry out the work. Indisputably, there exists no arbitration agreement between the petitioner and the respondent no.2. Even, there is no communications exchanged between the petitioner and the respondent no.2 to indicate that they have ever agreed to have the disputes and differences relating to the said work order dated May 06, 2015 being adjudicated through arbitration. The respondent no.2 issued the said work order dated May 06, 2015 independently and the respondent no.1 had no role in the performance to the contract by the petitioner and the respondent no.2, respectively. It was vehemently urged that in the absence of any arbitration agreement between the petitioner and the respondent no.2, the said circular dated April 07, 2017 issued by the respondent no. 1 cannot constitute any arbitration agreement between the parties. It was further submitted that the decision of the learned Single Judge of the Madhya Pradesh High Court in the case of JISCO Infrustractures (supra) and the decision of the Supreme Court in the case of IBI Consultancy India Private Limited (supra) have no application in the present case. Urging the above facts learned counsel urging these grounds, the respondent no.2 pressed for dismissal of the application even the ground of absence of any arbitration agreement between the parties.

I have considered the materials-on-record as well as the arguments advanced on behalf of the petitioner and the respondent no.2. There is nothing on record that the petitioner has served a copy of the application on the respondent no.1. In the present case, it was the respondent no.2 who issued the Notice Inviting Tender from its office at Ranchi for outsourcing of OB removal and coal extraction at Rajarappa OCP also situated at in the State of Jharkhand. The petitioner from its office at Bengaluru submitted the tender to the respondent no.2 at its office at Ranchi in the State of Jharkhand. Even the respondent no.2 from its office at Ranchi issued the said work order dated May 6, 2015 which was sent to and received by the petitioner at its office at Bengaluru. It is the said work order dated May 6, 2015 which constituted the contract between the parties and the same was entered into between the petitioner and the respondent no.2 outside the jurisdiction of this Court. The petitioner's alleged claims against the respondent no.2 arose out of the execution of the contract at Rajarappa in the State of Jharkhand, outside the jurisdiction of this Court. The respondent no.2 does not have any office within the State of West Bengal. The communications by which the petitioner requested the Chairman-cum-Managing Director and the other officers of the respondent no.2 to refer the disputes and differences to arbitration were addressed to the offices at Ranchi and Ramgarh, respectively in the State of Jharkhand. By the letter dated July 27, 2018 addressed to the petitioner at its project office at Rajarappa, being Annexure-'S' to the petition the respondent no.2 refused to refer the disputes and differences to arbitration. In these facts, I find that the respondent no.2 is correct in its contention that this Court lacks the jurisdiction to entertain this application under Section 11 (6) of the Arbitration and Conciliation Act, 1996. When the Chairman-cum-Managing Director of respondent no.1 Coal India Limited has no authority to appoint any Arbitrator to adjudicate the disputes raised by the petitioner against the respondent no.2 relating to the said work order dated May 6, 2015 the petitioner could not have filed this application before this Court by impleading the respondent no.1 who has an office at New Town, Kolkata.

In view of my above finding, with regard to lack of jurisdiction of this Court to entertain this present application it is not necessary to decide the issue whether the said circular dated April 07, 2017 issued by the respondent no.1 can be construed to constitute any arbitration agreement between the petitioner and the respondent no.2.

For the reasons as aforesaid, the application fails on the ground of lack of jurisdiction of this Court to entertain the same. The petitioner shall, however, pay costs assessed at Rs.30,000/- (Rupees Thirty Thousand only) to the High Court Legal Services Authority within January 10, 2020.

The application will appear, under the heading "To Be Mentioned", on January 14, 2020 to ascertain if the petitioner has complied with the above direction for payment of costs.