NIC Construction (India) Pvt. Ltd vs M/s Sunil Hi Tech Engineer Ltd.

In this application filed under section 11(6) of the Arbitration and Conciliation Act, 1996 (Arbitration Act), the applicant has prayed for

appointment of an independent arbitrator to resolve the dispute between the parties.

Learned counsel for the applicant submits that the document dated 13.2.2015 must be treated as an arbitration agreement in consonance with

section 7 of the Arbitration Act and this agreement contains a dispute resolving clause. As per this clause, the applicant nominated one arbitrator

and requested the other side to appoint one arbitrator. The respondent acceded to the said request of the applicant and hence the present

application is filed.

Shri Atulanand Awasthy, learned counsel for the applicant placed reliance on section 7(2) of the Act and contended that the document dated

13.2.2015 falls within the ambit of ''arbitration agreement''. In addition, reliance is placed on section 7 (4)(b) of the Act by contending that the

aforesaid document is an arbitration agreement. Thus, the respondents were bound to appoint the arbitrator of their side so that the dispute could

have been resolved. Since they have not acted as per the agreement, this court may appoint a suitable arbitrator.

Per contra, Shri Jaideep Sirpurkar, learned counsel for the respondent contended that the document dated 13.2.2015 cannot be treated to be

an arbitration agreement as per section 7 of the Act. Sub section 2 of section 7, in no uncertain terms makes it clear that the agreement or contract

must be in writing and it must be in the form of a separate agreement. The aforesaid document does not contain any signature of the present

applicant and, therefore, the document dated 13.2.2015, cannot be treated as an arbitration agreement. So far sub clause(b) of sub section 4 of

section 7 is concerned, the contention of Shri Sirpurkar is that the said provision employs the expression ""an exchange of letters"". As per this

expression, it is clear that one sided communication by the respondent dated 13.2.2015 cannot be treated as ""an exchange of letters"" and,

therefore, this document dated 13.2.2015 will not fall within the ambit of clause (b) aforesaid. Lastly, it is submitted that section 10 of the

Arbitration Act mandates that although parties are free to determine the number of arbitrators, such numbers shall not be in even number. He relied

on the judgment of Bombay High Court in Atul R.Shah Vs. M/s V.Vrijlal Lalloobhai and Co.-AIR 1999 Bom-67 wherein it was held that if an

award is passed by the arbitrators who were even in number, even if there was consent of the parties before them, the award cannot be upheld in

the teeth of mandatory provision of the Arbitration Act.

No other point is pressed by learned counsel for the parties.

During the course of arguments, learned counsel for the parties fairly admitted that the order passed in W.P.No.1128/17 (M/s Sunil Hi Tech

Engineers Ltd. Vs. NIC Construction (India) Pvt. Ltd and another) which was decided on 17.3.2017 was unsuccessfully challenged by the

respondent before the Supreme Court and the Supreme Court has dismissed the SLP. In view of section 20(a) and (b) of CPC, in the said case,

between the same parties, this court opined that the civil court had jurisdiction. Admittedly, in the present case, the arbitration agreement does not

provide any exclusion clause for the parties regarding territorial jurisdiction.

On the basis of aforesaid contention of the parties, following issues emerge for decision :-

(1) Whether the document dated 13.2.2015 can be treated to be an agreement as per section 7 of the Arbitration Act ?

(2) Whether the arbitration agreement, to the extent it contains a dispute resolution clause, can be treated to be a void agreement because it

provides for appointment of even number of arbitrators ?

(3) Whether the necessary ingredients for invoking power under section 11(6) of the Arbitration Act are available in the present case ?

Issue No.1

The document dated 13.02.2015 (Annexure-A) contains following clause:

Disputes:-

1) Dispute if any with KDA shall be dealt by M/s NIC Construction on behalf of M/s SHEL.

2) Any Dispute if arising between SHEL and NIC Construction out of this contract shall be settled amicably. If it is not settled amicably, both the

parties will appoint one arbitrator from each side. Decision of such arbitrator shall be conclusive and binding on both the parties.

[Emphasis Supplied]

This letter dated 13.02.2015 is written by the respondents to the applicant. In the first page of letter, the respondents have given reference to the

earlier letter written by the applicant dated 20.01.2015. In addition, in the said reference, final notification and confirmation of mail sent by the

applicant is also mentioned. In the end of the letter dated 13.02.2015, the respondents directed the applicant to acknowledge the receipt of the

letter. Thus, in this backdrop, whether this document dated 13.02.2015 can be treated to be an agreement is the pivotal question. The relevant

portion of Section 7 reads as under:

Arbitration agreement. -

(1) In this Part, ""arbitration agreement"" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which

may arise between them in respect of a defined legal relationship, whether contractual or not.

(4) An arbitration agreement is in writing if it is contained in -

(a) xxx.

(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or

(c) xxxx.

[Emphasis Supplied]

In the opinion of this Court, the document dated 13.02.2015 is in fact amounts to exchange of letter because this document is written in

pursuance to the letter/communication made by the present applicant and mentioned in the reference clause. Thus, I am not convinced with the

argument of Shri Sirpurkar that this document being a single letter does not fall within the ambit of Clause (b) of Sub-section (4) of Section 7.

Thus, in my view the letter dated 13.02.2015 is an agreement as per Section 7 of the Arbitration Act.

In 2007 (5) SCC 719 [Jagdish Chander vs. Ramesh Chander & others], the Apex Court held that where the clause provides that in the event

of disputes arises between the parties, the parties shall be referred to arbitration, it is an arbitration agreement. Where there is a specific direct

expression of intent to have the disputes settled by arbitration, it is not necessary to set out the attributes of an arbitration agreement to make it an

arbitration agreement. If the clause of agreement reproduced herein above is examined on the anvil of said principles, it will be clear that the said

agreement contains a dispute resolution clause through arbitration.

The contention that the agreement even if not signed by the parties can be spelt out from the correspondence exchanged between the parties,

admits of no doubt. In 1999 (1) SCC 1 [Rickmers Verwaltung GMBH vs. Indian Oil Corporation Ltd.], the Apex Court opined that the intention

of the parties is to be gathered from the expression used in the correspondence and meaning it conveys and in case it shows that there may be

meeting of mind between the parties and they had actually reached an agreement upon all material terms, it cannot be said that a binding contract is

capable of being spelt out from the correspondence.

In 2009 (2) SCC 134 [Shakti Bhog Foods Limited vs. Kola Shipping Limited], Chatterjee, J speaking for the Bench held that from the

provisions of Section 7, it is clear that an agreement need not to be by written consent by both the parties and this could as well be made out from

the acts of the parties to the agreement by way of their exchange of letters and communication through fax, email etc. This aspect came up for

consideration in 2015 (13) SCC 477 [Govind Rubber Limited vs. Louis Dreyfus Commodities Asia Pvt. Ltd.], wherein the Apex Court held as

under:

Section 7(4) states that the arbitration agreement shall be in writing, if it is a document signed by all the parties. But a perusal of clauses (b) and (c)

of section 7(4) would show that a written document which may not be signed by the parties even then it can be arbitration agreement. section 7(4)

(b) provides that an arbitration agreement can be culled out from an exchange of letters, telex, telegrams or other means of telecommunication

which provide a record of the agreement. On reading the provisions it can safely be concluded that an arbitration agreement even though in writing

need not be signed by the parties if the record of agreement is provided by exchange of letters, telex, telegrams or other means of

telecommunication

In the aforesaid case, it was further held that in a commercial document an arbitration clause has to be interpreted in such a manner as to give

effect to the agreement rather than invalidate it. If it is shown that parties are at ad idem, then the mere fact of one parties not signing the agreement

cannot absolve him from the liability under the agreement. In the present days of e-commerce, in cases of internet purchases, tele purchases, ticket

booking on internet and in standard forms of contract, terms and conditions are agreed upon. No such agreement, if identity of parties is

established, and there is a record of agreement it becomes an arbitration agreement if there is an arbitration clause showing ad idem between the

parties. Hence, signature is not a formal requirement under Section 7(4)(b) or (c) or under Sub-section (5) of Section 7 of the Act.

In view of this analysis, in my view, Issue No. 1 must be decided in favour of the applicant. Hence document (Annexure-A) is treated as an

arbitration agreement.

Issue No.2

No doubt, Section 10 of the Act of 1996 mandates that the arbitrators cannot be even in number. As per aforesaid clause relating to dispute

resolution, it appears that parties have mistakenly decided to appoint one arbitrator from each side which will result into appointment of even

number of arbitrators. This is clearly impermissible in the teeth of Section 10 of the Act. However, it cannot be forgotten that the parties are at ad

idem in deciding the dispute through arbitration. In view of the judgments of Supreme Court in the cases of Datar Switchgears vs. Tata Finance

Ltd. & Anr reported in 2000 (8) SCC 151 and Deep Trading Co. vs. M/S Indian Oil Corporation & Ors. reported in 2013 (4) SCC 35, the

respondent now cannot be permitted to propose and appoint an arbitrator. Since the intention of parties is clear to appoint arbitrator and resolve

the dispute through arbitration mechanism, the decision to appoint one arbitrator from each side will not make the said intention as redundant. In

other words, the arbitration clause itself will not become void. So far as the judgment of Atul R. Shah (Supra) is concerned, in the said case, the

tribunal was constituted in utter violation of Section 10 of the Arbitration Act. In this backdrop, it was held that such constitution of tribunal is bad

in law. No court can confer jurisdiction, even by consent of the parties, when it runs contrary to statutory provision. In the present case, the

arbitrators, even in numbers have not been appointed. Hence, the said judgment of Bombay High Court is of no assistance to the petitioner.

Accordingly, Issue No.2 is decided against the respondent.

Issue No.3

As discussed above, the document dated 13.02.2016 must be treated as an agreement as per Section 7 of the Arbitration Act. Thus, there

exits a dispute, a dispute resolution clause and inaction of respondents in appointing the arbitrator. Hence, necessary ingredients for invoking

power under Section 11(6) of the Act are available. Issue No.3 is decided accordingly.

In the result, it is a fit case for appointment of an independent arbitrator for resolution of dispute. Accordingly, this Court deems it proper to

provisionaly appoint Hon''ble Shri Justice N.K. Jain, (Retired Judge), E-7, HIG 478, Arera Colony, Bhopal (M.P.)- 462016 as an arbitrator. The

Registry of this Court is directed to obtain declaration/consent from the said arbitrator as per Sub-section (8) of Section 11 of the Act of 1996.

List this matter with the said consent/declaration on 22.01.2018.