OMP No.176/2009 Page 1 of 26 *IN THE HIGH COURT OF DELHI AT NEW DELHI + OMP No.176/2009 % Date of decision: 21.08.2009 NATIONAL HIGHWAYS AUTHORITY OF INDIA …Petitioner Through: Mr. Sandeep Sethi, Sr. Advocate with Ms. Padma Priya, Advocate Versus SHELADIA ASSOCIATES, INC. ..Respondent Through: Mr. Janaranjan Das, Mr. Swetaketu Mishra & Mr. P.P. Nayar, Advocates CORAM :- HON’BLE MR. JUSTICE RAJIV SAHAI ENDLAW 1. Whether reporters of Local papers may be allowed to see the judgment? Yes 2. To be referred to the reporter or not? Yes 3. Whether the judgment should be reported Yes in the Digest? RAJIV SAHAI ENDLAW, J. 1. This petition under Section 20 r/w Section 2(6) of the Arbitration Act, 1996 is preferred for a direction to be issued to the arbitrator to hold the arbitration proceedings at Delhi as provided in the written agreement between the parties. This court, vide ex-parte order dated 2nd April, 2009 which continues to be in force, has stayed the proceedings before the arbitrator. The respondent has contested the petition, inter-alia on the ground of maintainability thereof. 2. The parties hereto are parties to a contract dated 31st January, 2001. Though in the said contract, the place of execution thereof has not been stated but the address therein of the petitioner is of New OMP No.176/2009 Page 2 of 26 Delhi and of the respondent of USA. The contract is signed by an official of the petitioner whose rubber stamp bears the address of New Delhi. From the contract, it is not clear as to where the same has been signed on behalf of the respondent. However, since it has been signed on behalf of the petitioner as well as the respondent on the same day, it is presumed to have been executed at New Delhi. In any case, the address given of the petitioner in the said agreement for service of all notices etc. is that of New Delhi and the address so given of the respondent is of USA. This court thus is the court within the meaning of Section 2(e) of the Act. The respondent also has neither in its reply nor its arguments disputed the territorial jurisdiction of this court. 3. The contract between the parties is for the respondent to provide the construction supervision services to the petitioner for development of the Golden Quadrilateral constituting inter-alia the road on NH-5 & NH-60 from Chennai to Calcutta and, particularly four laning and strengthening of the stretches between Khurda to Bhubaneswar, Chandikhole to Bhadrak and Bhadrak to Balasore all in the State of Orissa. 4. The contract provides for settlement of disputes by arbitration. The arbitration was agreed to be either of a sole arbitrator or of an arbitration panel composed of three arbitrators; where the parties agreed that the dispute concerns a technical matter, they were given liberty to agree to appointment of a sole arbitrator and failing such agreement within 30 days, procedure is provided for the President, Indian Roads Congress, New Delhi to furnish five nominees of which OMP No.176/2009 Page 3 of 26 the parties were entitled to select one; if the parties could not select out of the said nominees also, the sole arbitrator is to be appointed by the President, Indian Roads Congress, New Delhi; however, where the parties do not agree that the dispute concerns a technical matter, each party was to appoint an arbitrator with the two arbitrators jointly appointing the third arbitrator; if the two arbitrators are unable to agree on the third arbitrator, the same was agreed to be appointed by the Secretary, Indian Council of Arbitration, New Delhi (ICA). It is further the agreement that if either parties fails to appoint its arbitrator within 30 days after the other has appointed its arbitrator, the party which has appointed the arbitrator may apply to the ICA to appoint a sole arbitrator for the matter in dispute. It is further the agreement in Clause 8.2.5 of the Special Conditions of contract as under:- “8.2.5 Miscellaneous In any arbitration proceedings hereunder: a. Proceedings shall, unless otherwise agreed by the parties, be held in Delhi b. ………….” 5. It is the case of the respondent that disputes and differences having arisen between the parties and the parties having not considered the same as technical, the respondent appointed its arbitrator and called upon the petitioner to nominate its arbitrator; upon failure of the petitioner to so appoint the arbitrator, the respondent approached the ICA which vide its letter dated 10th September, 2008 appointed Mr. B.C. Tripathi, retired Chief Engineer-cum-Member (Technical), Arbitration Tribunal C/8 404 OMP No.176/2009 Page 4 of 26 Radhika Tower, Tankapani Road, Bhubaneswar, to act as the sole arbitrator in the case. 6. The respondent had also filed Writ Petition (C) No.3765/2008 in High Court of Orissa, inter-alia for directions to the petitioner to stop deducting amounts towards the damage liability from the bills of the respondent. The petitioner took inter-alia a stand in the said proceeding before the Orissa High Court that Shri B.C Tripathi aforesaid having been appointed as the arbitrator and the arbitration being underway, the writ was not maintainable. 7. The controversy which has led to the filing of the present petition is as to the venue of arbitration. The arbitrator appointed by the ICA, being based at Bhubneshwar issued notice dated 18th October, 2008 for holding the first sitting of arbitration at Bhubaneswar on 4th November, 2008. The order of the arbitrator of that date shows that though the said notice was served on the petitioner but none on behalf of the petitioner appeared before the arbitrator. The arbitration proceedings were adjourned by issuing certain directions. At the end of the said order, it is recorded “till further decision, the place of arbitration will continue to remain at the Conference Hall of Radhika Tower, Tankapani Road, Bhubaneswar”. 8. The next hearing before the arbitrator was fixed for 4th December, 2008. The Project Director of the petitioner at Bhubaneswar attended the said hearing. The order of the arbitrator of that date shows that the official of the petitioner raised certain OMP No.176/2009 Page 5 of 26 points before the arbitrator on that date. It is the case of the petitioner that one of the points raised by it before the arbitrator on that date was of the agreement between the parties providing for the venue of arbitration at New Delhi and the arbitrator was thus requested to hold the arbitration proceedings at New Delhi. However, the arbitrator at the end of the order of the said date again recorded as aforesaid that till further decision the place of arbitration shall remain at Bhubaneswar. 9. The petitioner filed an application dated 23rd December, 2008 before the arbitrator in which also it was stated that in the 2nd hearing the question of venue of arbitration was raised. In the said application, it was also stated that the hearings held at Bhubaneswar were not legal and valid. The petitioner also requested the arbitrator to treat the pleas taken in the said application as preliminary objections and deal with the same first. Though in the body of the said application, no provision of law is mentioned but in the letter dated 23rd December, 2008 of the petitioner under cover of which the said application was forwarded, the application is described to be under Section 16 of the Act. 10. The petitioner besides the said application filed another application dated 1st January, 2009 before the arbitrator to intimate the date and venue of the arbitration at New Delhi, to enable the petitioner to participate in the proceedings. 11. The third sitting was held by the arbitrator at Bhubaneswar on 3rd January, 2009. None appeared on behalf of the petitioner before OMP No.176/2009 Page 6 of 26 the arbitrator on that date. With respect to the applications aforesaid of the petitioner the arbitrator preserved the same for consideration on compliance of the directions earlier issued regarding fee etc. and which had not been complied with by the petitioner. The next date of sitting was peremptorily fixed on 19th January, 2009 again at Bhubaneswar. The copy of the order dated 3rd January, 2009 was forwarded to the petitioner also. 12. On the next date before the arbitrator i.e. 19th January, 2009 also the petitioner remained unrepresented. The arbitrator thus proceeded ex-parte against the petitioner. No reference in the proceeding of that date is made to the applications aforesaid of the petitioner. The case was adjourned to 21st January, 2009 and intimation thereof sent to the petitioner also. 13. The petitioner continued to abstain from appearing before the arbitrator at Bhubaneswar. On 21st January, 2009 it appears that the respondent filed an objection dated 3rd January, 2009 before the arbitrator to the application dated 23rd December, 2009 of the petitioner. With respect to the venue of arbitration, it was stated in the said opposition that the petitioner had already taken part in the arbitration proceedings and had also not raised any question of jurisdiction or competency of the arbitral in the writ petition before the Orissa High Court also, and in fact it was owing to the plea of the petitioner, of the arbitrator having been appointed that the writ petition was disposed of; it was further contended that the cause of action for the dispute had arisen within the State of Orissa and as per the law jurisdiction could not be limited merely as per the OMP No.176/2009 Page 7 of 26 condition of agreement; that the venue of arbitration though fixed prior to the disposal of the writ petition had also not been challenged by the petitioner before the High Court – rather the petitioner had admitted the said venue; that the ICA while appointing the sole arbitrator had taken into consideration that the arbitrator may be required to inspect documents, place of performance of contract, convenience of parties and all of which was at Bhubaneswar and in the absence of any compelling reason to insist on Delhi as the venue of arbitration meetings, the petitioner ought to abide by the decision of the Arbitral Tribunal as to the venue of the meeting of the arbitration. It was further pleaded that both the parties had their offices at Bhubaneswar, execution of the work was in Orissa and thus the arbitration proceedings should continue at Orissa only. 14. The arbitrator in the 5th sitting held at Bhubaneswar on 21st January, 2009 and from which the petitioner continued to abstain, merely recorded that “the objection filed by the respondent stands accepted and the petition filed by the petitioner (apparently of 23rd December, 2008 and 1st January, 2009) without any evidence is dismissed”. It was further held that challenging the arbitrator is equal to challenging the appointing authority and the party aggrieved on this account is at liberty to move the Competent Authorities for appropriate actions like withdrawal of appointment of arbitrator/replacement of arbitrator. The case was adjourned to 24,25&26th February, 2009 at Bhubaneswar only. OMP No.176/2009 Page 8 of 26 15. The hearings before the arbitrator continued thereafter in the absence of the petitioner until the same were stayed vide ex-parte order dated 2nd April, 2009 (Supra) of this court. 16. The senior counsel for the petitioner has drawn attention to Section 20 (1) of the Act which gives freedom to the parties to agree on the place of arbitration; Section 20 (2) empowers the Arbitral Tribunal to determine the place of arbitration having regard to the circumstances of the case including the convenience of the party only “failing any agreement referred to in sub-Section (1)”. It has further been contended that the arbitrator being a creature of the agreement between the parties has no jurisdiction to hold hearings at a place other than the place agreed upon by the parties. It is further highlighted that in the agreement between the parties, while providing for the venue of arbitration at Delhi, Delhi is underlined. Attention is also invited to para 30 of the judgment of this court in Alcove Industries Ltd. Vs. Oriental Structural Engineer’s Ltd. (2008) 1 ARBLR 393 (Delhi) on the basis whereof it is urged that the courts ought to, where it is so warranted nip any illegality being committed by the Arbitral Tribunal in the bud rather than allow the arbitration proceedings to go on and to deal with the same at the stage of Section 34 of the Act. It is urged that procedure is the handmaid of justice and the order sought by the petitioner is in aid of justice and this court ought not to refrain from exercising jurisdiction to stop the illegality being committed by the Arbitral Tribunal and the action of the Arbitral Tribunal in contravention of the agreement between the parties. It is argued that such conduct ought not to be permitted to be perpetuated and powers of the courts cannot be stifled. It is further contended that the Supreme OMP No.176/2009 Page 9 of 26 Court in Sanshin Chemicals Industry Vs. Oriental Carbons & Chemicals Ltd. (2001) 3 SCC 341 has held that a decision regarding the venue of arbitration could be assailed even in an appeal under Section 34 of the Act. It is further argued that in any case the matter is not res integra in view of the judgment of the single judge of this court in Jagson Airlines Ltd. Vs. Bannari Amman Exports Pvt. Ltd. 2003 (2) Arb. LR 315 (Delhi) where the order of the Arbitral Tribunal fixing the venue of arbitration proceedings at a place other than that agreed by the parties was set aside. It was further argued that this court in Sharma Enterprises Vs NBCC Ltd. (2008) 9 AD Delhi 571 has also leaned in favour of the court under Section 14 of the Act being empowered to terminate the mandate of the arbitrator. It was contended that in the present case in-spite of the petitioner having taken objection to the venue of arbitration on the very first opportunity, the arbitrator has not decided on the same and is continuing to hold the proceedings at a place not agreed upon by the parties. 17. Per contra, the counsel for the respondent has made submission under four heads. Firstly, it is contended that the petition is not maintainable. Secondly, it is contended that the petitioner has by its conduct, express and/or implied agreed to the arbitrator holding the proceedings at Bhubaneswar and has filed the present petition as an after though. Thirdly, it is contended that since the arbitrator is at Bhubaneswar, all the records are at Bhubaneswar, it is convenient that the arbitration proceedings be held at Bhubaneswar only. Lastly, it is contended that the clause in the agreement providing for the venue of the arbitration at Delhi does not provide for the said venue exclusively and on the same reasoning OMP No.176/2009 Page 10 of 26 as applied to a clause qua the jurisdiction of the courts, the arbitrator is entitled to hold the proceedings at Bhubaneswar also, in the exercise of his power under Section 20(2) of the Act. 18. On the aspect of maintainability, it is contended that the judgment of this court in Jagson Airlines Ltd. (Supra) is no longer good law in view of subsequent decision of the seven judge bench of the Supreme Court in SBP & Co. Vs. Patel Engineering Ltd. (2005) 8 SCC 618. Attention is drawn to the summary of conclusions arrived at in the said judgment in para 142, to sub-paras (iv) to (vi) where it has been laid down that the Arbitral Tribunal has power to rule on its own jurisdiction under sub-Section (1) of Section 16 of the Act; where the Arbitral Tribunal holds that it has jurisdiction, it shall continue with the arbitral proceedings and make the arbitral award; remedy available to the party aggrieved is to challenge the award in accordance with Section 34 or Section 37 of the Act. It is argued that the application in which the petitioner raised the plea of the venue of arbitration was described by the petitioner itself in the covering letter to the said application as under Section 16 of the Act, the arbitrator has already dealt with the said application in the order dated 21st January, 2009 (Supra) wherein the said objection of the petitioner has been rejected. It is argued that the remedy, if any, if the petitioner is now only under Section 34 of the Act and the court is not empowered to interfere before that. 19. It is further contended that the reliance by the senior counsel for the petitioner during the hearing on Section 14 of the Act is misconceived in as much as the said plea was neither taken before OMP No.176/2009 Page 11 of 26 the arbitrator nor pleaded and cannot be permitted to be taken orally. 20. On the argument of convenience, the submissions have already been noted herein above. 21. On the petitioner having expressly or impliedly consented to the venue of arbitration at Bhubaneswar, it is contended that the ICA had appointed the arbitrator prior to the petitioner filing the counter affidavit in the Orissa High Court; in the said counter affidavit no plea was taken that the arbitrator was at Bhubaneswar while the agreement was for arbitration at Delhi; it is further contended that in fact prior to the disposal of the said writ petition the arbitrator had already issued a notice for first hearing of arbitration to be held at Bhubaneswar; the petitioner still did not raise the said aspect in the writ proceedings and allowed the writ petition to be disposed of. In this regard only, it is further pointed out that the petitioner had vide its letter dated 2nd December, 2008 appointed its Project Director at Bhubaneswar to represent the petitioner in the case and from the appointment of an officer at Bhubaneswar (and not at Delhi) it is apparent that the petitioner also intended the arbitration proceedings at Bhubaneswar. It is further contended that the petitioner participated in the second hearing before the arbitrator and thereby also consented to the arbitration hearings at Bhubaneswar only. It is further argued that this court ought not to be swayed by the pleas of the conduct of the arbitration being contrary to the agreement as much as similar questions can arise in a large number of other arbitrations and which if allowed would lead OMP No.176/2009 Page 12 of 26 to courts interfering in arbitral proceedings otherwise than as permitted under the statute. 22. The senior counsel for the petitioner has in rejoinder contended that the agreement provides for the venue of arbitration at Delhi, “unless otherwise agreed by the parties”. Such agreement has to be in writing only and cannot be by conduct. It is further contended that there cannot be question of any acquiescence in as much as the objection was taken to the venue on the very first date. It is also contended that the arbitrator has not dealt with the said aspect and has not treated the said objection as under Section 16 of the Act. It is also contended that the use of the word “only” or “exclusively” is not essential for vesting exclusive jurisdiction to a certain place. Reliance in this regard is placed on Jatinder Nath Vs. Chopra Land Developers Pvt. Ltd. AIR 2007 SC 1401. It is argued that in the present case the intent to hold the arbitration proceedings at Delhi is clear from the agreement of the parties. 23. The aspect of maintainability of the present petition has obviously to be considered first in as much as if the petition is found to be not maintainable, even if this court were to agree with the contention of the petitioner on merits, the court would be unable to grant any relief to the petitioner. 24. The petition as filed is under Section 20 & Section 2(e) of the Act. Neither of the said provisions is of a nature whereunder any role is attributed to the “court”. The said provisions are not actionable and the petition does not lie thereunder. However, the OMP No.176/2009 Page 13 of 26 nomenclature under which the a petition is filed is irrelevant, if otherwise is found to be maintainable in law. 25. The effect of Section 5 of the Act barring the courts from intervening in arbitral proceedings except where so provided in the Act, need not be restated. In this case, as will be clear from the above, the respondent is a foreign party. The arbitration under Section 2 (f) relating to disputes arising out of commercial legal relationship where at least one of the parties is a body corporate which is incorporated in any country other than India, is an “international commercial arbitration”. At one stage, it was considered whether the provisions of Section 5 and Section 20 would be applicable to such arbitration. However, Section 2 (2) makes part I of the Act applicable where the place of arbitration is in India. In the present case there is no dispute that the place of arbitration is in India and hence part I i.e. Sections 2 to 43 apply. 26. Though the counsels have during the hearing referred to Section 14 & Section 16 r/w 37 only whereunder courts can interfere, I had during the course of hearing, in the light of the judgment of a single judge of the Bombay High Court in Maharashtra State Electricity Board Vs. Datar Switch Gears Ltd. MANU/MH/1187/2002 also drawn attention of the counsels to Section 9 (ii) (e) of the Act, whereunder the court can be approached for “such other interim measure of protection as may appear to be just and convenient”. Question was posed as to whether the said provision can be said to permit interference by the courts. OMP No.176/2009 Page 14 of 26 27. First the applicability of Section 16 r/w Section 37 will be considered in as much as if it is found that the plea of the petitioner as to the venue of arbitration was under Section 16 of the Act and/or if the order of the arbitrator thereon is under Section 16 of the Act, then in view of the legislative provisions i.e. of Sections 16(5) and (6) of the Act, the remedy, if any, of the petitioner would be at the stage of Section 34 only and not before that. In the face of the legislative provisions, no inherent powers of the court can also be invoked in such as case. 28. I had during the hearing inquired from the counsel for the respondent as to how the plea of venue of arbitration could be said to be a plea of the jurisdiction of the arbitrator or with respect to the existence of the arbitration agreement. No arguments were addressed on this aspect. The petitioner in contending that the arbitration proceedings be held at Delhi in accordance with the agreement cannot be said to be calling upon the arbitral tribunal to rule on its jurisdiction. Similarly the existence or validity of the arbitration agreement was/is not being questioned by the petitioner. The petitioner in insisting that the arbitration proceedings be held at Delhi was rather seeking enforcement of the arbitration agreement. Section 16 (3) refers to the Arbitral Tribunal exceeding the scope of its authority. However, the same has to be read in conjunction with Section 16(1) i.e. whether a particular dispute is arbitrable or not and would not include objection as to the venue of arbitration. Thus, in my view Section 16 is not attracted to such a plea and thus even if it were to be said that the arbitrator had rejected the said plea, the provisions of Section 16 (5) and (6) would not apply. OMP No.176/2009 Page 15 of 26 29. I also do not find any merit in the contention of the counsel for the respondent that the petitioner in the covering letter