Standard Corrosion Controls Pvt. Ltd v. Sarku Engineering Services SDN BHD

ARBITRATION APPLICATION NO. 6 OF 2008 decided on 11 November, 2008 by Markandey Katju J.

Standard Corrosion, an Indian Company, applied before the Supreme Court for the appointment of arbitrator under S. 11(5) of the Arbitration and Conciliation Act, 1996 ("Act") for resolving contractual disputes with Sarku Engineering Services SDN BHD (“Sarku”), a Malaysian Company.

ONGC awarded Sarku a contract for building 26 Well Unmanned Platforms. Sarku entered into a contract with subcontractor- Standard Corrosion on 21.2.2006. On 8.9.2006, Sarku terminated the Contract with Standard Corrosion under Article VII of he agreement on the ground that Standard Corrosion was unable to furnish the bank guarantee and feedback confirmation of Standard Corrosion’s readiness to work.

On 14.4.2007 Standard Corrosion invoked Article X, the arbitration clause in the agreement. The applicant also mentioned in the said letter that in the event the Sarku failed to send the list of eminent arbitrators as required by Standard Corrosion, the applicant shall approach the High Court to appoint the Sole Arbitrator. After several communications, Sarku stated that in "Article X of the Arbitration it was mentioned that in case of any dispute or difference between the parties regarding the contract, the matter should be settled, as far as possible, by mutual consultation and consent, failing which by arbitration to be held at Mumbai, applying the Arbitration Rules of the International Chamber of Commerce". Article X of the Agreement read:

"Arbitration: Any dispute or difference in view regarding this CONTRACT shall be settled, in so far as is possible, by mutual consultation and consent, failing which by arbitration to be held at Mumbai, India applying the Arbitration Rules of the International Chamber of Commerce by a single arbitrator"

Standard Corrosion applied before the Supreme Court under S. 11(5) of the Act. Markandey Katju J. held:

1. 
   
   The application is not maintainable as the applicant has not approached ICC Secretariat for the appointment of arbitrator. The Court held: "the applicant has to apply to the Secretariat of the ICC, as mentioned in the Arbitration Rules of the ICC, and it cannot approach this Court for appointment of an Arbitrator. No doubt, the arbitration will have to be held at Mumbai, but the entire procedure of appointment of the Arbitrator has to be in accordance with the Arbitration Rules of the ICC, which requires that first a request has to be made to the Secretariat of the ICC. The Court relied on the following decisions: Iron & Steel Co. Ltd. vs. Tiwari Road Lines 2007(5) SCC 703, Rite Approach Group Ltd. vs. Rosoboronexport 2006(1) SCC 206 etc.
2. 
   
   Standard Corrosion had also relied on Article IX of the Agreement, which read: "This CONTRACT shall be governed by the laws of India. The CONTRACTOR shall be responsible to keep itself informed and comply with all laws, rules, regulations, standards, codes and the like applicable to the WORKS, CONTRACTORS and its subcontractors and CONTRACTOR shall protect, indemnify and hold ONGC, SARKU, their AFFILIATES and associated companies and their stockholders, directors, agents, employees, and representative of each of the aforementioned parties harmless from and against all liabilities for any breach thereof attributable to CONTRACTOR or its subcontractors."Article IX has no relevance to the controversy in this case as it only says that the contract shall be governed by the laws of India. The laws of India would mean the Contract Act, Limitation Act, Specific Relief Act etc. Article/Clause IX does not deal with the procedure by which the arbitrator has to be appointed. That is governed by Clause X.

The Court dismissed the arbitration petition.