OMP No.88/2009 Page 1 of 31 * IN THE HIGH COURT OF DELHI AT NEW DELHI + Date of Decision: 27.09.2010 % O.M.P. No.88/2009 DENEL (PROPRIETARY LIMITED) SOUTH AFRICA ..... Petitioner Through: Mr. V. Giri and Mr. Chetan Sharma, Senior Advocates with Mr. Ravinder Singhania, Mr. Vikas Goel and Mr. Abhishek Kumar, Advocates. versus LORD GORDON SLYNN & OTHERS ..... Respondent Through: Mr. P.P.Malhotra, Additional Solicitor General with Ms. Mamta Tiwari and Mr. Akshat Hanaria, Advocates. CORAM: HON'BLE MR. JUSTICE VIPIN SANGHI 1. Whether the Reporters of local papers may No be allowed to see the judgment? 2. To be referred to Reporter or not? Yes 3. Whether the judgment should be reported Yes in the Digest? VIPIN SANGHI, J. (Oral) 1. This petition has been preferred by the petitioner under Section 14(2) of the Arbitration and Conciliation Act, 1996 to seek a declaration that the mandate of respondent Nos. 1 and 2, as arbitrators, stand terminated. Further directions are sought with regard to the entitlement of the fee paid and payable to respondent Nos. 1 and 2 as arbitrators. OMP No.88/2009 Page 2 of 31 2. The petitioner entered into various contracts with the respondent UOI for supply of defence equipments and technology. Disputes in relation to three of those contracts, namely: “(i) Contract no.18 (6)/99 D (GS-IV) dated 23.4.2002 (hereinafter referred as contract no. 18 (2002 BMCS) (ii) Contract no.10 (1)/CON/2005/D (GS-IV) dated 7th March 2005, (hereinafter referred to as Contract no.10 (2005 NTW). (iii) Contract no.120 (R & D)/OFT/AMR/P/W dated 7th March 2005, (hereinafter referred to as Contract no. 120 (2005 TOT), were referred for resolution by an arbitral tribunal consisting of three learned arbitrators. The petitioner nominated Mr. Justice R.N. Mishra, former Chief Justice of India as one of the nominee arbitrators. The Union of India nominated Mr. Justice V.N. Khare former Chief Justice of India Respondent No. 2 as the second Arbitrator, and Hon’ble Lord G. Slynn Respondent No. 1 was appointed as the Chair Person by the two parties. The Tribunal accepted the mandate and started the arbitral proceedings. 3. The petitioner, vide its communication dated 21.08.2008 sought to terminate the mandate of the arbitral Tribunal. Consequently, Mr. Justice R. N. Mishra (Retd.) resigned from the Tribunal on 1/2.9.2008. During the pendency of this petition, Lord Slynn, the Chair Person has also passed away. Mr. Justice V.N. Khare (Retd.) Chief Justice of India Respondent No.2 is the only surviving Arbitrator from the aforesaid panel. In the meantime, the petitioner OMP No.88/2009 Page 3 of 31 has nominated Mr. Justice Arun Kumar, (Retd.) Judge, Supreme Court of India as an Arbitrator in place of Mr. Justice R.N. Mishra, former Chief Justice of India. The parties have not yet been able to agree upon the replacement of Lord Slynn to act as the Chair Person of the arbitral tribunal. Since Mr. Justice R.N. Mishra had resigned from his position as one of the Arbitrators, the remaining two learned Arbitrators, namely Lord Slynn and Mr. Justice V.N. Khare, vide communication 24.09.2008 held that the mandate of the arbitral tribunal does to stand terminated by operation of law for any reason alleged by the petitioner in its communication dated 21.08.2008. Consequently, the petitioner has preferred the present petition. Upon issuance of notice, the respondents have filed their reply and a rejoinder has also been filed by the petitioner. 4. The first submission of learned counsel for the petitioner is that before the arbitral Tribunal, both parties had set out the documents that they desired the opposite party to produce. While the request of the petitioner for production of documents by the respondent was rejected, the petitioner was directed to produce practically all the documents required by the respondent vide procedural order No. 4 dated 09.04.2008. This, according to the petitioner, smacks of bias on the part of the arbitral tribunal. The next contention of the petitioner is that the petitioner had sought interim relief under Section 17 from the arbitral tribunal. Though the Tribunal heard detailed submissions of the parties on 3rd, 4th and 5th February, 2008 on the aspect of grant of interim relief, the Tribunal passed an OMP No.88/2009 Page 4 of 31 unreasoned order, being procedural order No.4 dated 05.08.2008, thereby rejecting the prayers made by the petitioner for interim measures. The third submission of learned counsel for the petitioner is that the petitioner had thereafter moved an application to seek a partial award. That application has also been rejected by the arbitral tribunal in its procedural order No.5 dated 05.08.2008. He further submits that in paragraph 16 of this order, the Tribunal granted time to the petitioner to produce the documents (earlier ordered to be produced vide procedural order No. 4 dated 09.04.2008) on or before 07.08.2008 and held that if the documents are not so produced, the petitioner would not be entitled to rely upon the same. He submits that the tribunal acted with undue haste by giving only three days time to the petitioner to produce the said documents. According to the petitioner all these orders demonstrate bias in the mind of the arbitral tribunal while passing the said orders. It is further submitted by learned counsel for the petitioner that the procedural order no.5, in paragraph 19, had merely set out the view of Mr. Justice R.N.Mishra (Retd.) without their being a separate order passed by him. He submits that the procedural order No.5 has been issued by the President of the Tribunal and the same does not bear the signature of Mr. Justice R.N. Mishra (Retd.), even though Mr. Justice R.N. Mishra (Retd.) has attributed a different point of view in the matter. 5. Learned counsel for the petitioner submits that despite successive attempts to seek interim measures and partial award, the petitioner has not been given any relief in the arbitral proceedings OMP No.88/2009 Page 5 of 31 even though costs to the tune of Rs.2.10 crores had been incurred by the parties towards the arbitral tribunal’s fees and expenses. 6. Learned counsel for the petitioner places strong reliance on the decision of this Court in Alcove Industries Ltd. V. Oriental Structural Engineers Ltd., 2008(1), ARBLR 393(Del). He also places reliance on the judgment of the Gauhati High Court in State of Arunachal Pradesh V. Subhash Projects & Marketing Ltd. and Anr., 2007(1) Arb.LR 564 (Gauhati) (DB) and the Supreme Court judgment in Saurabh Prakash V. DLF Universal Ltd, (2007) 1 SCC 228 . 7. On the other hand, the learned Additional Solicitor General, Mr. P.P.Malhotra, submits that the present proceedings are dilatory tactics on the part of the petitioner to scuttle the arbitration proceedings. He submits that if the petitioner was aggrieved by the orders passed by the arbitral tribunal on the petitioner’s application under Section 17, it was open to the petitioner to prefer an appeal under Section 37 of the Act. He submits that no appeal has been preferred by the petitioner under Section 37 of the Act and the present is an indirect way to impugn the said order. The procedural orders bearing No.4 and 5 were passed by the Tribunal on 09.04.2008 and 05.08.2008, whereas the present petition has been preferred on 03.02.2009. By the time the present petition was preferred, the statutory appeal under Section 37 was also barred by limitation. 8. Mr. Malhotra has referred to the narration contained in the OMP No.88/2009 Page 6 of 31 reply filed by the respondent, of the proceedings which have transpired before the arbitral tribunal. He submits that the petitioner has not controverted there averments and there is no dispute with regard to the facts, as they are a matter of record. By reference to these averments, Mr. Malhotra submits that the consistent modus operandi of the petitioner was to scuttle the hearings fixed by the arbitral tribunal, by making one application after another just before the dates of hearing before the arbitral tribunal were to arrive. 9. Mr. Malhtora submits that merely because the Tribunal did not pass any interim orders as sought by the petitioner and orders were not being passed to the liking of the petitioner, is not a ground to either allege bias or to seek to terminate the mandate of the arbitral tribunal. The nature of the interim reliefs sought by the petitioner was such, as possibly could not have been awarded by the arbitral tribunal by way of an interim measure. The petitioner was seeking: “An order restraining the Respondent from continuing to act wrongfully or to act in any manner to the prejudice of the Claimant” … … … “such as: 1.1 withholding legitimate payments due and payable to the Claimant; 1.2 encashing bank guarantees or compelling the Claimant wrongfully to extend the validity of bank guarantees in contracts other than the Subject Contracts; 1.3 continuing the operation of the blacklisting of OMP No.88/2009 Page 7 of 31 Claimant i.e. the suspension of all business dealings with the Claimant by not allowing the Claimant to participate in any of the tender issued by the Respondent, and in particular the BHIM/T6 Contract alternatively the Respondent’s requirement for 155mm Towed or Tracked Howitzer Guns. 1.4 not considering any offers made by the Claimant in respect of tenders or requests for proposal issued by the Respondent.” 10. He submits that the Tribunal passed a reasoned order rejecting the said prayers made by the petitioner while passing the procedural order No.4 dated 09.04.2008 by, inter alia, observing that many contentions relied upon by the claimant/petitioner involve issues of law and facts which are contested by the Respondent and the determination of these issues requires hearing of evidence and full arguments. Mr. Malhotra submits that the reliefs sought as interim relief were, in fact, in the nature of final relief which could not be granted as there were disputed question of fact and law raised by the parties. Mr. Malhtora points out that the petitioner had been repeatedly granted time for production of the documents as ordered by the tribunal in its procedural order No. 4 dated 09.04.2008. He has referred to procedural Order no.4 dated 04.04.2008 whereby the tribunal had directed the petitioner to disclose the documents, not later than 14.04.2008. The petitioner had not complied with the said order and it is for this reason that in the hearings held between 26th and 29th May, 2008, the Tribunal, by a majority had again directed the production of the documents by 07.08.2008. He submits that though the order of the Tribunal dated 05.08.2008 was signed and circulated OMP No.88/2009 Page 8 of 31 on that date, during the course of the proceedings held between 26th and 29th May, 2008, the said issue had been considered by the Tribunal and appropriate directions issued. Therefore, it could not said that the petitioner was not granted sufficient time for production of documents. Mr. Malhotra further submits that directions with regard to the production of witnesses statements had been made as early as on 10.01.2008 while passing procedural order No.3. He relies on paragraph 6 of the said order. It is for this reason that the tribunal while passing the procedural order No. 5 dated 05.08.2008 had limited the further time that it granted to the petitioner for filing witness statements. 11. Having heard learned counsel for the parties, I am of the view that the present petition is a gross abuse of the process of the court and it is writ large from the record that the petitioner has tried every trick to scuttle the arbitral proceedings. It is also evident that the attempt of the petitioner has been to browbeat the arbitral tribunal and to black mail the learned Arbitrators merely because the Tribunal did not pass an interim order in favour of the petitioner; directed the petitioner to make disclosure of certain documents; mostly rejected the petitioners request for production of documents sought from the respondent; rejected the petitioners application to seek separation of issues, and; did not pass a partial award in its favour. 12. Since the petitioner has not controverted the factual position as narrated by the respondent in its reply and the same is also a OMP No.88/2009 Page 9 of 31 matter of record, I think it appropriate to extract the relevant portions from the factual narration contained in the respondent’s reply in paragraphs 22 to 45, bereft of the allegations made against the petitioner:- “22. The first hearing in the matter before the Tribunal took place on the 9th May 2007 through video exchange/conference wherein the suggestions/ submissions on the draft Terms of Engagement were made on behalf of the parties and the same were finalized by the Arbitral Tribunal. Subsequently, Procedural Order No. 1 was passed on 21.05.2007, which recorded that the draft Terms of Engagement of the Arbitrators, as earlier circulated, were agreed subject to certain amendments during the course of the hearing on 9th May, 2007. The next date of hearing was fixed on 20.07.2007. 23. The second hearing before the Tribunal was held on 20th July 2007 wherein following aspects were discussed and decided: (i) The time-schedule for completion of pleadings by the parties; (ii) The time-schedule for tendering the request for production of documents; (iii) The time-schedule for serving the draft issues falling for determination; and (iv) The dates for the next hearing in the matter. Procedural Order No.2 dated 15th August, 2007 was passed recording the aforesaid proceedings. 24. In compliance of the Procedural Order No.2 both the parties vide letters dated 30th November, 2007, served upon the other a notice for the Discovery of Documents they sought relevant for the adjudication of the subject dispute. The Respondent asked for documents under four specific heads. Whereas the Petitioner gave a request for documents running into six pages … …. 25. Thereafter, in accordance with the said Procedural Order No.2, as revised in terms of letter dated 4.10.2007, the Respondent vide letter dated 4.12.2007 forwarded the proposed issues which were OMP No.88/2009 Page 10 of 31 in fact the same as framed by Lord Slynn under the "Terms of Reference" dated 14.06.2007 subject to certain modifications. On the same date i.e. 4.12.2007, the Respondent also filed its reply to the Petitioner's request for production of documents. 26. Since the Petitioner failed to file and serve the draft proposed issues in the matter, which were required to be filed by 4th December, 2007, the Respondent, vide email dated 6th December, 2007 inquired about the status of the same. 27. It is stated, that rather than complying with Procedural Order No.2, just one day prior to the hearing scheduled for 8th December 2007, the Petitioner vide letter dated 7th December, 2007, filed an Application for Interim Relief, purportedly under Section 17 of the Act of 1996 … …. 28. The third hearing of the Tribunal took place, as scheduled on 8th-10th December, 2007. The Respondent sought time to file an appropriate Reply to the Application for Interim Relief filed by the Petitioner on 7th December, 2007. Accordingly, the Hon'ble Tribunal permitted the Respondent to file the said Reply by 10th January, 2007 and directed the Petitioner to file Rejoinder thereto by 15th January, 2008. After consulting the parties, the Hon'ble Tribunal observed that the said Application for Interim Relief would be heard on 23rd-25th January, 2008 or in the alternative on 3rd-5th February, 2008, as may be subsequently confirmed by the Tribunal. (i) The draft issues as proposed by the Respondent vide letter dated 4th December, 2007 were discussed and were agreed to by the Tribunal subject to minor suggestions by the Petitioner. (ii) It was discussed and agreed that since certain issues and matters are common to the arbitration proceedings under the three contracts, being Contract No.10, Contract No.120 and Contract No.18, the arbitration in Contract No.10 would be taken first and only after the conclusion of the oral hearing in the arbitration in Contract No.10, the Hon'ble Tribunal, after hearing the parties, would OMP No.88/2009 Page 11 of 31 determine the issues and matters in the arbitrations in Contract No.18 and Contract No.120. (iii) Submissions were heard by the Tribunal on the respective requests for production of documents by both the parties and the response thereto during the course of the said hearing. The Respondent also filed and relied upon the submissions and compilation case law in support of its claim for privileges vis-à-vis the documents requested to be disclosed by the Petitioner. The Respondent also sought time till 1st January, 2008 to file an Affidavit in support of the refusal to provide documents as requested by the Petitioner on the ground that the same are confidential or privileged documents; or relate to affairs of the state; or, that the disclosure of the same would be contrary to public interest; or, that they are not relevant to the issues in the arbitration. The Petitioner was given the liberty to file its Affidavit in reply to the said Affidavit by 10th January, 2008 and the Respondent was permitted to file its Rejoinder thereto by 18th January, 2008. (iv) Accordingly, the Hon'ble Tribunal provisionally decided that the hearing of the issues in Contract No.10 would take place during the course of 5 days beginning on 19th December, 2008, which dates, however, were subject to review during the hearing fixed on 3rd-5th February, 2008. In view of the said scheduled final hearing, the Hon'ble Tribunal directed: (a) The Petitioner to serve its Memorial of arguments on the Respondent and the Arbitrators not later than 8 weeks before the first date fixed for hearing and directed the Respondent to file its Reply to Memorial of the Petitioner's arguments including the arguments in the counterclaim not later than 4 weeks before the said date. The Respondent was also directed to serve its Memorial of arguments in Rejoinder and in Defence to the Counterclaim not later than 2 weeks before the first date so fixed for hearing. (b) The Respondent filed the written statements of its witnesses on the OMP No.88/2009 Page 12 of 31 opposing party and the Arbitrator not later than 14 days before the date fix for the hearing. (c) The parties to agree and serve on the Arbitrators a bundle of copies of documents, which each party wishes to include in chronological or some other agreed convenient order not later than 14 days before the first date fixed for hearing. It was agreed that after the opening statements on behalf of both the parties, the witnesses of the Petitioner followed by the witnesses of the Respondent's will be examined and cross-examined. Accordingly, the Procedural Order No.3 dated 10th January, 2008 was passed in the matter, which recorded the aforesaid proceedings of 8th-1 Oth December, 2007. Vide the said Order, the Tribunal appointed 3rd-5th February, 2008 for holding further hearing in the matter. 29. In accordance with Procedural Order No. 3, the Respondent filed its Affidavit claiming Privilege on the Disclosure of Documents on 31.12.2007. The Petitioner filed its reply to the same on 10.1.2008, in response to which the Rejoinder was filed on 23.01.2008. 30. Further, in terms of Procedural Order No. 3, the Respondent filed its Reply to the Petitioner's Application for Interim Relief dated 7.12.2007 purportedly under Section 17 of the "Act of 1996" on 31.12.2007. By virtue of the said Application for Interim Relief, the Petitioner, inter alia, sought final relief of full payment by the Respondent to the Petitioner, encashment of bank guarantee and allowing the Petitioner to participate in future tenders issued by the Respondent to be granted at the interim stage. The Rejoinder to the said Application of Interim Relief was filed on 10.01.2008 by the Petitioner. 31. It is pertinent to state that 10 days before the hearing scheduled for 3rd to 5th February 2008, the Petitioner, on 24.01.2008, filed another Application, viz., an Application for Separation of Issues. … …. the Petitioner sought to … … …. a prayer for deciding the same as preliminary issues separately from issues of OMP No.88/2009 Page 13 of 31 fact … … … the Petitioner had accepted and agreed to the issues as framed during the course of hearing on 8th to 10th December, 2007. 32. The fourth hearing before the Tribunal was held from 3rd to 5th February 2008. Pursuant to the aforesaid hearing, the Hon'ble Tribunal was pleased to pass the Procedural Order No. 4 dated 09.04.2008 which unanimously by a reasoned order refused/rejected the Petitioner's Application for Interim Relief and its Application for Separation of Issues. Vide the said order the Tribunal also decided on the Application for Disclosure of Documents by the parties. By the said Procedural Order No. 4, the Hon'ble Tribunal also recorded an estimated period of 5 days beginning on 22'd May, 2008 for further hearing in the matter. 33. That, however, the Petitioner failed and omitted to disclose the documents in terms of the Procedural Order No. 4 and also failed to give any intimation to the Respondent and the Tribunal in this regard. Accordingly, the Respondent through its Solicitors, vide letter dated 8th May, 2008 requested the Petitioner to disclose the requisite documents in compliance of Procedural Order No. 4 and also informed that the Respondent was examining the documents directed to be disclosed to the Petitioner and would intimate them about the same. However, despite the express directions and the order from the Arbitral Tribunal, the Petitioner till date has deliberately not disclosed the said documents to the Respondent… ... 34. It is further submitted that the Petitioner failed to file its Memorial of Arguments in terms of Procedural Order No.3, which required the Petitioner to file the same not later than eight weeks before the scheduled hearing on 22.5.2008 i.e. not later than 27.03.2008. Since, the Respondent was required to file the Memorial of its arguments only subsequent to the Petitioner's Memorial, which the Petitioner failed to file, the Respondent was unable to file the same. Further, since the Procedural Order No.3 required the parties to file the written statements of their witnesses only subsequent to the filing of Memorial of Arguments, the Respondent was also unable to file the Witness Statements in the matter, which also awaited the Witness Statements of the Petitioner's witnesses, which were also not filed. 35. That rather than complying with the Procedural Order OMP No.88/2009 Page 14 of 31 Nos.3 and 4, the Petitioner herein, just 6 days before the scheduled date of hearing i.e. on 16th May 2008, … … filed an Application for Interim Award. Since the said Application was filed just 6 days prior to the scheduled hearing, the Petitioner vide letter dated 16.5.2008, sought a postponement of the said hearing scheduled for 22.05.2008 in order to file a detailed Reply to the same. 36. That after having considered the submissions of both the parties, in the interest of justice, the Tribunal granted time to the Respondent to reply to the aforesaid Application for Interim Award by the Petitioner and directed that the hearing of the said application would commence on 26.05.2008 and that the hearing of the main matter be postponed to a date to be decided after hearing the said application. 37. The Respondent, on 23.5.2008, filed its Reply to the Petitioner's Application for Interim Award. Further, since the Petitioner failed to file its witness statements and contended that it did not need trial on merits, the Respondent filed an Application for closing of Petitioner's evidence under Section 25 (c) of the "Act of 1996". 38. That the fifth hearing before the Tribunal was held from 26-29th May 2008, Pursuant to the aforesaid hearing, the Hon'ble Tribunal, was pleased to pass a Procedural Order No. 5 dated 5th August, 2008 which unanimously, by a reasoned order, rejected the Petitioner's Application for Interim Award. By the said Procedural Order No.5 the Hon’ble Tribunal also fixed 1st – 10th September 2008 for holding further final hearing (other than quantum) in the matter. 39. However, yet again …. …, the Petitioner