National Highways Authority of India Vs. Sheladia Associates, Inc.

Court: HIGH COURT OF DELHI
Case No.: OMP No. 176/2009
Date of Judgement: 21.08.2009

Judge: Rajiv Sahai Endlaw, J.
Provision of Law: Petition under S 20 r/w Section 2(6) of the Indian Arbitration and Conciliation Act, 1996

S 20 (1) The parties are free to agree on the place of arbitration.

(2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.

(3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property.

S 2(6) Where this Part, except section 28, leaves the parties free to determine a certain issue, that freedom shall include the right of the parties to authorize any person including an institution, to determine that issue.

The Contract:

• Contract between NHAI and Sheladia is for the Sheladia to provide the construction supervision services to the petitioner for development of certain portions of the Golden Quadrilateral Project.
• Failure of the parties to agree upon the arbitral tribunal would mean that the sole arbitrator or, in case of a three arbitrator tribunal, the third arbitrator would be appointed by the Secretary, Indian Council of Arbitration, New Delhi (ICA).
• Venue of arbitration was to be New Delhi

Post-dispute facts:

• Certain disputes arose and Sheladia appointed an arbitrator but NHAI did not. Hence Sheladia approached ICA for the appointment of an arbitrator. The ICA appointed Mr. B.C. Tripathi, retired Chief Engineer-cum-Member (Technical) based at Bhubaneshwar on 10th September, 2008
• The arbitrator issued notice dated 18th October, 2008 for holding the first sitting at Bhubaneswar on 4th November, 2008. In spite of the notice being given, the petitioners did not turn up for the sitting, prompting the arbitrator to adjourn the proceedings. The arbitrator in his order also stated: "till further decision, the place of arbitration will continue to remain at the Conference Hall of Radhika Tower, Tankapani Road, Bhubaneswar".
• In the next sitting NHAI brought to the notice of the arbitrator that the contracted venue of arbitration was New Delhi and the arbitrator was requested to hold the arbitration proceedings at New Delhi, which the arbitrator failed to consider
• NHAI failed to attend subsequent proceedings before the arbitrator.
• NHAI approached the Delhi High Court asking for the change of venue

Judgement:

“It is thus found that the Arbitral Tribunal by refusing to hold the arbitration proceedings at Delhi, in spite of attention having been invited to the agreement providing so, has become de facto unable to perform his functions and/or has failed to act without undue delay. The mandate of the arbitrator thus has to be declared to have stood terminated.”

Observations by the Delhi High Court:

Apart from deciding in favour of NHAI, the Single Judge made certain comments on the way in which arbitration is conducted in India. The said comments are indicative of the corruption involved in arbitration and why developments in Indian arbitartion such as ONGC v SAW Pipes were not anti-arbitration. Relevant portions of the comments are reproduced herebelow:

"48. Before parting with the case, I must record that the chain of events as happened herein is what brings bad name to arbitration. In spite of the arbitrator having been appointed nearly one year ago, nothing has been achieved till date and now the mandate of the arbitrator has to be held to have terminated. I find the Indian Council of Arbitration, the arbitrator as well as the respondent to be blamed for the same. The Indian Council for Arbitration being the appointing authority, in spite of clause in the agreement for the place of arbitration to be at Delhi, appointed the arbitrator based at Bhubaneswar. The arbitrator so appointed also in contravention of the agreement insisted upon holding the arbitration proceedings at Bhubaneswar and the respondent in contravention of its agreement in writing supported such stand of the Arbitrator… When the respondent is aware of the agreement of the place of arbitration being Delhi and further when Section 34 (2) (a) (v) permits the award to be set aside on this ground, such action is not understandable. In the face of the written agreement as to the place of the arbitration and the same being supreme under Section 20 (1), it can reasonably be said that even in the event of the petitioner losing in the arbitration, notice of a petition under Section 34 on this ground alone is likely to be issued and the arbitral award even, if any, in favour of respondent would remain in abeyance. It was with this motive only that on one of the earlier dates it was suggested to the counsel for the respondent to, for the sake of expediency agree to the arbitration proceedings at Delhi in accordance with the agreement. However, the counsel has expressed inability and the matter was fully argued. It is in these circumstances that finding that the case can be said to be covered under Section 14 of the Act, I was loath to allow the respondent and the Arbitral Tribunal to continue proceedings in contravention of the agreement and to allow the proceedings to be multiplied in such manner.

49. Arbitration as a mode of settlement of disputes was evolved to lessen the load on the court and to provide for expeditious resolution of disputes. However, stand of the parties such as has emerged in these proceedings is not allowing the same to happen. Though, undoubtedly the jurisdiction of the courts is limited but wherever permissible and wherever needed to be exercised for achieving the said purposes, the courts ought not to fail from exercising their jurisdiction to serve the said objectives."

PS: The Single Judge also imposed costs to the tune of Rs 50,000 on Sheladia.