M/S Duro Felguera S.A vs M/S. Gangavaram Port Limited

2. As the parties and issues in both the arbitration petitions and the transferred cases are one and the same, both arbitration petitions and the transferred cases shall stand disposed of by this common order. For convenience, parties are referred to as per their array in Arbitration Petition No.30 of 2016.

3. Brief Facts: The Respondent-Gangavaram Port Limited (GPL) developed a green-field, ultra-modern, all-weather sea-port near Gangavaram Village in Visakhapatnam District in the State of Andhra Pradesh. This sea-port commenced operations in the year 2009. The Respondent intended to expand its facilities in the Port with respect to Bulk Material Handling Systems. This included Engineering, Design, Procurement of Materials, Manufacturing, Supply, Erection, Testing and Commissioning of Bulk Material Handling Systems, as well as all other associated works and integration of the same with the existing coal handling systems etc. For this purpose, on 08.08.2011, Gangavaram Port Limited invited a tender/bid. In response to the 2 aforementioned tender dated 08.08.2011, the Spanish Company-Duro Felguera Plantas Industrials S.A. (since merged with the petitioner) along with its Indian subsidiary-M/s. Felguera Gruas India Private Limited (FGI) submitted a Single Bid/Tender-Original Package No.4 Tender Document on 15.11.2011. This included the Commercial Bid and the Technical Bid. After post-bid negotiations, the petitioner Duro Felguera and its subsidiary (FGI) were considered by GPL and Duro Felguera and FGI were selected as "the Contractors" for the work.

4. After discussion between the parties, Original Package No. 4 TD was divided into five different and separate Packages, namely, New Package No. 4-F.O.B. Supply of Bulk Material Handling Equipments (awarded to foreign company-M/s Duro Felguera), Package No. 6-design, manufacture, supply, installation, erection, testing, commissioning of Bulk Material Handling Equipments and all other activities related therewith; Package No. 7-Civil Works and all other activities related therewith; Package No. 8-International Transportation of Bulk Material Handling Equipments and parts through sea including insurance and all related activities; Package No. 9-Installation, Testing and Commissioning of Ship Unloaders and all other activities related therewith (Packages No.6 to 9 awarded to Indian subsidiary-FGI). Separate Letters of Award (dated 17.03.2012) for five different Packages were issued to M/s Duro Felguera, S.A. and the Indian Subsidiary-FGI for the above said work respectively.

6. Duro Felguera and FGI have executed a tripartite Memorandum of Understanding (MoU) with M/s Gangavaram Port Limited (GPL) on 11.08.2012. In the said MoU, Duro Felguera and FGI have agreed to carry out the works as per the priority of documents listed therein. Case of GPL is that the MoU dated 11.08.2012 being the latest covers all the five contracts namely New Package No. 4 awarded to M/s Duro Felguera and Packages No. 6 to 9 awarded to FGI. According to GPL, since MoU refers to original Package No. 4 Tender Document (TD) which contains arbitration clause, the Original Package No. 4 TD with its arbitration clause shall be deemed to have been incorporated in the MoU.

7. Case of M/s. Gangavaram Port Limited is that the petitioner-M/s Duro Felguera, S.A. and its Indian Subsidiary-FGI failed to perform their obligations, 4 including their obligation to attend and rectify faulty works and complete the pending works etc. Further grievance of GPL is that though the works were scheduled to be completed at the latest by 16.03.2014, the petitioner-M/s Duro Felguera, S.A. and its Indian Subsidiary (FGI) caused inordinate delay in execution of the work and, therefore, GPL was constrained to invoke the Bank Guarantee on 07.01.2016 given by petitioner-M/s Duro Felguera. GPL had also issued Notices of Termination dated 31.01.2016 to the Foreign Company-M/s Duro Felguera and its Indian Subsidiary(FGI). M/s Duro Felguera, S.A. and its Indian Subsidiary (FGI) issued notice of dissatisfaction on 04.02.2016 and 07.02.2016 to GPL. Subsequently M/s. Duro Felguera issued an arbitration notice dated 05.04.2016 for New Package No. 4 Contract and FGI issued four arbitration notices dated 07.04.2016 for Packages No. 6 to 9 Contracts. Both M/s. Duro Felguera and FGI have separately nominated Mr. Justice D.R. Deshmukh (Former Judge, Chhattisgarh High Court) as their nominee arbitrator for each of the five contracts.

29. Duro Felguera and FGI have executed a tripartite Memorandum of Understanding (MoU) on 11.08.2012 which, according to GPL, covers all the five contracts namely New Package No. 4, Package No. 6, Package No. 7, Package No. 8 and Package No. 9. In the said MoU both Duro Felguera and FGI have agreed to carry out the works as per the priority of the documents listed therein which includes the Original Package No.4 Tender Document 22 issued and final bid submitted by Duro Felguera and FGI. The relevant portion of Memorandum of Understanding reads as under:-

covering ship unloaders, stackers, reclaimers, in-motion wagon loading system, conveyors, transfer towers, electrical and control works, civil works, etc. and in order to have more clarity on technical and execution related matters, the parties hereby agree that the works shall be carried out as per the following priority of documents.

3. Clarifications/Addendum No.1 to 4 (in the descending order) issued by the Employer to the Original Package 4 Tender Document.

43. Arbitration Petition No. 30 of 2016 filed by Duro Felguera shall stand allowed and Arbitration Petition No.31 of 2016 filed by GPL shall stand disposed of in the same line. Transfer Case No. 25/2017, Transfer Case No. 26/2017, Transfer Case No. 27/2017 and Transfer Case No. 28/2017 filed by FGI shall also stand disposed of in the above lines. Parties shall bear their respective costs.

(vii) Since an order passed by the Chief Justice of the High Court or by the designated Judge of that Court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution to the Supreme Court.

Rani Construction (P) Ltd is overruled.” (Emphasis Supplied)

22.1. The issues (first category) which the Chief Justice/his designate will have to decide are:

22.2. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are:

22.3. The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are:

(i) Whether a claim made falls within 43 the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration).

(ii) Merits or any claim involved in the arbitration.”

.…......................J. (KURIAN JOSEPH) New Delhi;

October 10, 2017.

Hon'ble Mrs. Justice R. Banumathi pronounced the reportable Judgment of the Bench comprising Hon'ble Mr. Justice Kurian Joseph and Her Lordship.

While agreeing with the conclusions in the Judgment pronounced by Hon'ble Smt. R. Banumathi, J, Hon'ble Mr. Justice Kurian Joseph also pronounced the reportable Judgment with concurrent opinion.