Case: M/s. Duro Felguera, S.A Vs. M/s. Gangavaram Port Limited

Mere reference to Original Package No.4 Tender Document in the sequence of priority of documents (as serial No.4) indicates that the documents Original Package No. 4 TD containing arbitration clause was not intended to be incorporated in its entirety but only to have clarity in priority of the documents in execution of the work. Be it noted that Original Package No.4 TD occurs as Serial No.4 in sequence, after three other documents viz..., "(i) Annexure 1 to the Letter of Award issued for Package No. 4 Contract; and (ii) Annexure III to the Letter of Award issued for Packages No. 4, 6, 7, 8 and 9 contracts; and (iii) Clarifications/Addendums No.1 to 4 (in the descending order) issued by the Employer to the Original Package No. 4 Tender Document." There are a number of contract agreements between the parties - GPL, Duro Felguera and FGI. It is pertinent to note that MoU dated 11.08.2012 itself does not contain an arbitration clause. When reference is made to the priority of documents to have clarity in execution of the work, such general reference to Original Package No.4 Tender Document will not be sufficient to hold that the arbitration clause 20.6 in the Original Package No.4 TD is incorporated in the MoU. 36. The submission of GPL is that since reference to Original Package No.4 TD is made in MoU, the arbitration clause is incorporated in the MoU and there has to be a composite reference for settling the disputes under different contracts by constitution of single arbitral tribunal for dealing with the international commercial arbitration. As discussed earlier, as per the amended provision of sub-section (6A) of Section 11, the power of the court is only to examine the existence of arbitration agreement. When there are five separate contracts each having independent existence with separate arbitration clauses that is New Package No.4 (with foreign company Duro Felguera) and Packages No. 6, 7, 8 and 9 [with Indian subsidiary (FGI)] based on MoU and Corporate Guarantee, there cannot be a single arbitral tribunal for "International Commercial Arbitration".37. It was submitted that if the request of GPL is accepted and all Packages are considered under the same reference, they shall be treated as international commercial arbitrations, then FGI may lose the opportunity of challenging the award under Section 34(2A) of the Act. In response to the above submission, GPL offered to concede and submitted that Section 34 (2A) of the Act may be invoked by Indian subsidiary-FGI, though Section 34(2A) is not applicable to international commercial arbitration. Such a concession is against the provisions and specific mandate of legislature and cannot be accepted. 38. The Corporate Guarantee dated 17.03.2012 was executed by the foreign company-Duro Felguera undertaking to compensate for the delay, damages to the GPL. Since the Corporate Guarantee was by the foreign company-Duro Felguera which contains separate arbitration clause, there has to be a separate arbitral tribunal for resolving the disputes arising out of the said Corporate Guarantee. 39. New Package No. 4 TD- F.O.B. Supply of Bulk Material Handling Equipments USD 26,666,932 has been awarded to the foreign company-Duro Felguera. Since Duro Felguera is a foreign company, in so far as the contract awarded to Duro Felguera i.e. New Package No.4 and the dispute arising out of the Corporate Guarantee executed by the foreign company-Duro Felguera is concerned, the arbitral tribunal has to be for the international commercial arbitration. 40. The learned Senior Counsel for GPL relied upon Chloro Controls India Private Ltd. (supra), to contend that where various agreements constitute a composite transaction, court can refer disputes to arbitration if all ancillary agreements are relatable to principal agreement and performance of one agreement is so intrinsically interlinked with other agreements. Even though Chloro Controls has considered the doctrine of "composite reference", "composite performance" etc., ratio of Chloro Controls may not be applicable to the case in hand. In Chloro Controls, the arbitration clause in the principal agreement i.e. clause (30) required that any dispute or difference arising under or in connection with the principal (mother) agreement, which could not be settled by friendly negotiation and agreement between the parties, would be finally settled by arbitration conducted in accordance with Rules of ICC. The words thereon "under and in connection with" in the principal agreement was very wide to make it more comprehensive. In that background, the performance of all other agreements by respective parties including third parties/non-signatories had to fall in line with the principal agreement. In such factual background, it was held that all agreements pertaining to the entire disputes are to be settled by a "composite reference". The case in hand stands entirely on different footing. As discussed earlier, all five different Packages as well as the Corporate Guarantee have separate arbitration clauses and they do not depend on the terms and conditions of the Original Package No.4 TD nor on the MoU, which is intended to have clarity in execution of the work. 41. Duro Felguera being a foreign company, for each of the disputes arising under New Package No.4 and Corporate Guarantee, International Commercial Arbitration Tribunal are to be constituted. M/s. Duro Felguera has nominated Mr. Justice D.R. Deshmukh (Former Judge of Chhattisgarh High Court) as their arbitrator. Gangavaram Port Limited (GPL) has nominated Mr. Justice M.N. Rao (Former Chief Justice of Himachal Pradesh High Court). Alongwith the above two arbitrators Mr. Justice R.M. Lodha, Former Chief Justice of India is appointed as the Presiding Arbitrator of the International Commercial Arbitral Tribunal.42. Package No.6 (Rs.208,66,53,657/-); Package No.7 (Rs.59,14,65,706/-); Package No.8 (Rs.9,94,38,635/-); and Package No.9 (Rs.29,52,85, 558/-) have been awarded to the Indian company-FGI. Since the issues arising between the parties are inter-related, the same arbitral tribunal, Justice R.M. Lodha, Former Chief Justice of India, Justice D.R. Deshmukh, Former Judge of Chhattisgarh High Court and Justice M. N. Rao, Former Chief Justice of Himachal Pradesh High Court, shall separately constitute Domestic Arbitral Tribunals for resolving each of the disputes pertaining to Packages No.6, 7, 8 and 9.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]19. There is no dispute between the parties that the issue at hand is governed by the amended provision of(6A) of Section 11. Even though Letters of Award are dated 17.03.2012 and five separate contracts were entered into between the parties on 10.05.2012, the dispute arose between the parties in 2016 as pointed out earlier, Gangavaram Port Limited invoked the Bank Guarantee on 07.01.2016 and M/s. Duro Felguera and its Indianissued notice of dissatisfaction on 04.02.2016 and 07.02.2016 respectively to Gangavaram Port Limited. M/s. Duro Felguera issued arbitration notice on 05.04.2016 for contract relating to Package No. 4 and FGI issued four arbitration notices dated 07.04.2016 for contracts relating to Packages No. 6 to 9. Gangavaram Port Limited also issued an arbitration notice on 13.04.2016. Since the dispute between the parties arose in 2016, the amended provision of(6A) of Section 11 shall govern the issue, as per which the power of the Court is confined only to examine theclauses as to the priority of the documents was incorporated in all other contractNo. 6, 7, 8 and 9 awarded to Indian subsidiary FGI. In the sequence of documents of clause (2) of the contract agreement quoted above, the Tender Document is mentioned in the sequence only as (g) and all other documents or the other documents like Letters of Award, Special conditions of contract etc. have priority over the same. While so, the terms contained in Original Package No. 4 TD including the arbitration clause cannot have priority over the Special Conditions of contract of thecontracts. When the Original Package No. 4 TD has beeninto five different Packages, GPL is not right in contending that inspite ofof the work, the Original Package No.4 TD collectively covered all the five Packages. After the Original Package No. 4 was split into five different contracts, the parties cannot go back to the Original Package No.4 nor can they merge them into one. We do not find merit in the submissions of GPL that20.6 of the Original Package No. 4 TD will still collectively cover all the five Packages to justify constitution of single Arbitral Tribunal.25. The foreignFelguera had executed a Corporate Guarantee dated 17.03.2012 guaranteeing the due performance of all the works awarded to Duro Felguera and FGI. The Corporate Guarantee itself has its own separate and distinct arbitration clause.As per the terms of Corporate Guarantee, it shall cease on issuance of the performance certificate under all the contracts. Of course, Duro Felguera has given the Corporate Guarantee for all the five contracts viz., New Package No.4, Packages No. 6 to 9. Corporate Guarantee executed by Duro Felguera dated 17.03.2012 also recognizes the split up of the original Package No. 4 Tender Document. As per the terms of the Corporate Guarantee, it is to be invoked only if breach is established in one of the five contracts. Since the Corporate Guarantee by itself has a separate arbitration clause, it cannot be contended that by virtue of the Corporate Guarantee executed by Duro Felguera, there has to be a composite reference of International Commercial Arbitration which would cover all the five Packages. The Corporate Guarantee by Duro Felguera cannot supersede the fivecontracts and the special conditions of contractquestion whether or not the arbitration clause contained in another document, is incorporated in the contract, is always a question of construction of document in reference to intention of the parties. The terms of a contract may have to be ascertained by reference to more than one document.Considering the MoU, in light of the above ratio, as pointed out earlier, in the MoU, Original Package No.4 Tender Document is merely referred only to have more clarity on technical and execution related matters and the parties agreed that the works shall be carried out as per the priority of the documents indicated thereon. Mere reference to Original Package No.4 Tender Document in the sequence of priority of documents (as serial No.4) indicates that the documents Original Package No. 4 TD containing arbitration clause was not intended to be incorporated in its entirety but only to have clarity in priority of the documents in execution of theare a number of contract agreements between the partiesGPL, Duro Felguera and FGI. It is pertinent to note that MoU dated 11.08.2012 itself does not contain an arbitration clause. When reference is made to the priority of documents to have clarity in execution of the work, such general reference to Original Package No.4 Tender Document will not be sufficient to hold that the arbitration clause 20.6 in the Original Package No.4 TD is incorporated in the MoU.The Corporate Guarantee dated 17.03.2012 was executed by the foreignFelguera undertaking to compensate for the delay, damages to the GPL. Since the Corporate Guarantee was by the foreignF.O.B. Supply of Bulk Material Handling Equipments USD 26,666,932 has been awarded to the foreignFelguera. Since Duro Felguera is a foreign company, in so far as the contract awarded to Duro Felguera i.e. New Package No.4 and the dispute arising out of the Corporate Guarantee executed by the foreignFelguera is concerned, the arbitral tribunal has to be for the international commercialdiscussed earlier, all five different Packages as well as the Corporate Guarantee have separate arbitration clauses and they do not depend on the terms and conditions of the Original Package No.4 TD nor on the MoU, which is intended to have clarity in execution of the work.Duro Felguera being a foreign company, for each of the disputes arising under New Package No.4 and Corporate Guarantee, International Commercial Arbitration Tribunal are to be constituted. M/s. Duro Felguera has nominated Mr. Justice D.R. Deshmukh (Former Judge of Chhattisgarh High Court) as their arbitrator. Gangavaram Port Limited (GPL) has nominated Mr. Justice M.N. Rao (Former Chief Justice of Himachal Pradesh High Court). Alongwith the above two arbitrators Mr. Justice R.M. Lodha, Former Chief Justice of India is appointed as the Presiding Arbitrator of the International Commercial Arbitral Tribunal.42. Package No.6Package No.8and Package No.9 (Rs.29,52,85,have been awarded to the IndianSince the issues arising between the parties arethe same arbitral tribunal, Justice R.M. Lodha, Former Chief Justice of India, Justice D.R. Deshmukh, Former Judge of Chhattisgarh High Court and Justice M. N. Rao, Former Chief Justice of Himachal Pradesh High Court, shall separately constitute Domestic Arbitral Tribunals for resolving each of the disputes pertaining to Packages No.6, 7, 8 and 9.