Case: SOUTH DELHI MUNICIPAL CORPORATION Vs. SMS AAMW TOLLWAYS PRIVATE LIMITED

Brief Facts      3. The National Highways Authority of India (hereinafter referred to as ‘NHAI?) entered into a State Support Agreement (hereinafter referred to as ‘the SSA?) dated 27.5.2004/22.2.2005 with M/sVentures Limited (hereinafter referred to as ‘Concessionaire?) for the design, engineering, financing, procurement, construction, completion, operation, maintenance and the toll collection of certain sections of thehighway.      4. The arrangement under the SSA was that the Concessionaire of the NHAI shall not only collect the toll under the concession agreement executed between NHAI and its Concessionaire, but also the entry toll (toll tax) levied by theon entry of specified commercial vehicles into the territory of NCT of Delhi. Theis a ‘designated agency? of the Government of NCT of Delhi under the SSA.      5. Thefor the purpose of collection of toll tax from all border entry points within the NCT of Delhi, decided to engage a contractor and accordingly floated a tender, inviting bids from interested parties. TheAAMW being the successful bidder was awarded the work for collection of toll tax for a period of 3 years and a Bilateral Agreement dated 14.05.2011 (hereinafter referred to as ‘the Agreement?) was entered into between theSMS AAMW.      6. As per the Agreement, theAAMW was obliged to pay an amount of Rs.26 crores every month to thein lieu of the tax collected from all entry points within the NCT of Delhi. However, the said toll tax for Rajokri integrated toll plaza was said to be collected vide the mechanism set out under the SSA i.e. it will be collected by the NHAI?s Concessionaire and passed on to theAAMW.      7. Thereafter, on 19 th February 2014, the Rajokri integrated toll plaza was dismantled, apparently, as a result of an understanding between the parties to the SSA. It is the case ofAAMW that due to this situation, it was forced to incur the expenses to arrange for the collection of thetoll tax from the Rajokri Integrated toll plaza. As a result, theAAMW suffered a huge loss amounting to approximately Rs.80 crore.      8. Thereafter, a notice of Arbitration dated 09.03.2015 was sent by theAAMW to theand to the other parties under the SSA, detailing the issues and disputes that had arisen under Clause 9 of the SSA. Thevide letter dated 7.5.2015 raised a demand of Rs.97,08,76,449/MS AAMW. T o thisAAMW responded vide letter dated 11.05.2015, clarifying the mistakes in computation, by theMC reconciled the accounts and reduced the demand to Rs.80,46,31,504/vide letter dated 13.05.2015.      9. TheAAMW being dissatisfied with the decision contained in the letter dated 13.05.2015, preferred an appeal under Clause 16.3 of the Agreement vide letter dated 26.05.2015. Subsequently, thevide letter dated 17.06.2015, intimated to theAAMW that since there is no arbitration clause in existence between the parties, the arbitration is not acceptable.      10. However, theAAMW filed the Arbitration Petition No.475/2015 under Section 11(6) of the Act before the High Court of Delhi for appointment of an Arbitrator relying on Clause 9 of the SSA and Clause 16 of the Agreement dated 14.05.2011. The learned Single Judge of Delhi High Court allowed the petition filed by the presentAAMW under Section 11(6) of the Act, and appointed Justice Deepak Verma, Former Judge of this Court as the sole Arbitrator.      11. The decision of this case turns on the answer to the question whether Clause 16.3 of the Agreement dated 14.05.2011 between theon the one hand and theAAMW on the other hand contains an agreement for arbitration.      12. The Agreement dated 14.05.2011 provides for the various mutual rights, liabilities and obligations of the two parties for the collection of toll tax from specified commercial vehicles at all border entry points within the NCT of Delhi. Clause 16 of the Agreement in its entirety reads asDISPUTE RESOLUTION      16.1 Except where otherwise provided in the Agreement, all questions and disputes in any way arising out of or relating to the Agreement shall be dealt with as mentioned below.      16.2 In the event the Contractor considers any work demanded of it as being outside the requirements of the Agreement, or disputes any record or decision given in writing by the Competent Officer in any matter in connection with or arising out of the Agreement, to be unacceptable, it shall promptly within [15] days request the Competent Officer in writing to give his instructions or decision in respect of the same. Thereupon, the Competent Officer shall give his written instructions or decision within a period of [30] days from the receipt of the Contractor?s letter.      16.3 If the Competent Officer fails to give his instructions or decision in writing within the aforesaid period or if the Contractor is dissatisfied with the instructions or decision of the Competent Officer, the Contractor may, within [15] days of receipt of the Competent Officer?s instructions or decision, appeal to the Commissioner who shall afford an opportunity to the Contractor to be heard, if the latter so desires, and to offer evidence in support of its appeal. The Commissioner shall give his decision in writing within [30] days of receipt of Contractor?s appeal which shall be acceptable to the Contractor.Furthermore, Clause 20 which makes reference to disputes arising out of the agreement reads asMISCELLANEOUS PROVISIONS      20.1 Governing Laws and Jurisdiction      (a)……      (b) All disputes arising out of this Agreement shall be subject to sole and exclusive jurisdiction of the courts of Delhi only.Thus, from a plain reading of Clause 16 one can see that it provides for the resolution of disputes at two stages. First, by the Competent Officer of the SDMC vide Clause 16.2 followed by the Commissioner of the Municipal Corporation vide Clause 16.3.      The First Stage:      If a case arises wherein a Contractor finds that if the work demanded is outside the scope of the agreement or feels the need to dispute any decision of the Competent Officer or if any record created by him is unacceptable, he may request the Competent Officer to decide its representation or give instructions. The Competent Officer is obliged to decide within 30 days from the receipt of such a letter from the Contractor.      The Second Stage:      If the Competent Officer fails to decide within 30 days or if the Contractor is dissatisfied with his decision, the Contractor may, within 15 days from receipt of the decision by the Competent Officer, file an appeal to the Commissioner, SDMC. The Commissioner is obliged to afford an opportunity to the Contractor to be heard and the Contractor is entitled to produce evidence in support of this case. At this stage, the Commissioner may give his decision in writing within 30 days. The clause makes the decision compulsorily ‘acceptable? to the Contractor presumably meaning that it shall be binding on him.      15. In the present case as stated earlier, the notice of arbitration was sent by the Contractor on 09.03.2015 under the SSA. By letter dated 26.05.2015, the Contractor i.e. SMS AAMW filed an appeal under Clause 16.3 of the Agreement. This appeal was preferred against the decision contained in the letter of the Competent Officer, SDMC dated 13.05.2015. Thesought to produce additional evidence and further sought that the decision should be taken under Clause 16.3. There is no doubt that theAAMW resorted to the provision of appeal against the decision of thein its letter dated 13.05.2015. In that letter, they did not seek the appointment of an arbitrator but merely sought decision by an officer higher in rank than the members of high level committee, akin to invoking an appellate provision.

Court's reasoning:
19. We see no reason, why this Court should adopt a different approach while construing a clause in a contract executed by a statutory body and providing for an appeal. The language of Clause 16.3 does not lend itself to any other construction other than that it provides for an appeal against the decision of a Competent Officer rendered under Clause 16.2.This was relied on by theAAMW to support the submission that Clause 16.3 does not provide for an appeal to the Commissioner but provides for arbitration by the Commissioner. The passage above clearly contemplates that an arbitration should be an enquiry in the nature of a judicial enquiry i.e. an enquiry which involves hearing both the parties. The appeal involved in the present case clearly does not involve hearing both the parties. On the contrary, the authority which decides the appeal is in a sense the other party. The Commissioner is a higher officer than the Competent Officer in the same organization. It is, therefore, clear that the appeal to the Commissioner is not intended to provide a forum for a decision by an impartial adjudicator but is only intended to ascertain some matter for the purpose of preventing differences from arising and not for settling them after they have arisen. It is thus clear that the Commissioner is not intended to be an arbitrator, as his jurisdiction cannot be invoked by both parties.Arbitration has always been understood to mean the process by which a dispute is resolved by an arbitrator chosen or acceptable to both sides under an arbitration agreement between the two parties. In the present case, under Clause 16 of the Agreement only the party dissatisfied by the order of the Competent Officer can approach the Commissioner. It is, therefore, not possible to hold that the proceedings before the Commissioner constitutes as an arbitration.The scope of Clause 16 is limited. Clause 16.1 provides that all the questions and disputes arising out of the Agreement shall be dealt with as follows i.e. as provided in Clause 16.2 and Clause 16.3. Clause 16.2 enables a Contractor to request the Competent Officer to give his instructions or decisions in writing, in case of either when (a) the Contractor considers any work demanded of him as being outside the requirements of the Agreement, or (b) disputes any record or decision given in writing by the Competent Officer in connection to the Agreement as unacceptable. The Competent Officer is enjoined to give his written instructions or decisions within a period of 30 days. He enjoys complete discretion in deciding the dispute. Clause 16.3 provides that in case of an instance whereby the Competent Officer does not come to a decision, the Contractor may appeal to the Commissioner who shall afford an opportunity to the Contractor to be heard and offer evidence. Neither the Competent Officer nor the Commissioner is enjoined to act judicially i.e. the decision on the basis of evidence adduced by both the parties. In fact, both the authorities, the Competent Officer and the Commissioner are required to deal with only one party i.e. the Contractor. This cannot be characterized as an enquiry of a judicial nature which necessarily involves a consideration of the case of both sides by an independent Arbitrator. Additionally, there is no provision in Clause 16.3 of the Agreement to refer any dispute or reference to arbitration.We find that the present Clause 16 and in particular Clause 16.3 does not provide for the reference of any dispute that may arise between the parties to an Arbitrator. The purpose of this Clause is to vest the Competent Officer and the Commissioner with supervisory control over the execution of work and administrative control over it from time to time and thus to prevent disputes. The intention is not to provide for a forum for resolving disputes.