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Taiyo Membrane Corporation Pty. Limited v. Shapoorji Pallonji And Company Limited .
Factual and Procedural Background
Taiyo Membrane Corporation Pty. Ltd. filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator to resolve disputes arising from three sub-contracts connected with the renovation of the Jawaharlal Nehru Stadium, New Delhi. The respondent had received the main contract from the Central Public Works Department (CPWD) and, in turn, entered into the sub-contracts. The dispute is limited to the petitioner’s claim for release of the final 5 % of the contract amount, which the respondent has withheld. When the respondent failed to appoint an arbitrator, the petitioner approached the Court for relief.
Legal Issues Presented
- Whether Taiyo Membrane Corporation Pty. Ltd., which is not formally named in two of the three written sub-contracts, is nonetheless the contractual party entitled to invoke the arbitration clauses.
- Whether the invocation of arbitration by the petitioner is valid despite the alleged misdescription of parties and the existence of one sub-contract between two Indian entities.
- Whether the Court’s jurisdiction under Section 11(6) is ousted because one sub-contract is between two Indian entities.
Arguments of the Parties
Respondent's Arguments
- The petitioner is not a signatory to the sub-contracts; two contracts are with “Taiyo Membrane Corporation” and one with “Taiyo Membrane Corporation (India),” not with “Taiyo Membrane Corporation Pty. Ltd.”
- Because the petitioner is not a party to the agreements, its notice invoking arbitration is invalid, and no failure can be attributed to the respondent in appointing an arbitrator.
- The sub-contract between two Indian entities removes the matter from the purview of the Court’s jurisdiction under Section 11(6).
- The petitioner has not fulfilled its contractual obligations; therefore, the demand for release of the withheld 5 % is unjustified.
Petitioner's Arguments
- Letters of intent (LOIs) for the works were issued to Taiyo Membrane Corporation Pty. Ltd., demonstrating that it is the true contractual party.
- Extensive correspondence between the respondent and Taiyo Membrane Corporation Pty. Ltd. confirms that “Taiyo Membrane Corporation” and the petitioner are the same entity.
- Subsequent communications clarify that Taiyo Membrane Corporation Pty. Ltd. is involved even where “Taiyo Membrane Corporation (India)” appears in the written agreement.
- Under Section 57-A of the Australian Corporations Act, 2001, a proprietary company limited by shares (Pty. Ltd.) is a “corporation,” supporting the petitioner’s identity argument.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court first noted that the objections relating to the petitioner’s alleged non-performance raise arbitrable issues that should be left to the arbitrator. It therefore confined itself to the threshold jurisdictional objections:
- Identity of the Contracting Party: After examining the LOIs, correspondence, and statutory definition in the Australian Corporations Act, the Court concluded that “Taiyo Membrane Corporation” and “Taiyo Membrane Corporation Pty. Ltd.” are one and the same entity. Any misdescription is, therefore, not fatal to the petition.
- Sub-contract with Indian Entities: The Court found that the presence of one sub-contract between two Indian entities does not divest it of jurisdiction under Section 11(6) in circumstances where multiple connected contracts exist and the parties themselves treated the petitioner as the contracting entity.
- Validity of Invocation: Because the petitioner is deemed a party to the sub-contracts, its notice invoking arbitration is valid. The respondent’s failure to appoint an arbitrator thus triggers the Court’s power under Section 11(6).
Having resolved these preliminary issues, the Court held that the remaining disputes—including the respondent’s performance-based objections—must be adjudicated by the arbitrator.
Holding and Implications
Holding: The Court appointed Dr. Justice M. K. Sharma (retired) as the sole arbitrator and referred all disputes between the parties to him. The petition was DISPOSED OF on these terms.
Implications: The arbitration proceedings will now commence under the sole arbitrator, who may set his own fees and procedure in consultation with the parties. The Court’s order resolves only the threshold jurisdictional objections and does not create new precedent on substantive arbitrability, leaving all remaining disputes to be decided in arbitration.
Judgment
1. This application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) has been lodged by one Taiyo Membrane Corporation Pty. Ltd. seeking appointment of an arbitrator to resolve certain disputes that have arisen out of three sub-contracts executed with the respondent in respect of works relating to renovation of the Jawaharlal Nehru Stadium, New Delhi. The said works were awarded to the respondent by CPWD.
2. The area of dispute is small and narrow, namely, the entitlement of the petitioner to 5% of his claimed dues which, according to the petitioner, has been wrongly withheld by the respondent.
3. The respondent has objected to the appointment of an arbitrator by the Court, inter alia, on the ground that the contractual obligations incumbent on the applicant-petitioner have not been fulfilled without which the demand for release of the amount, as aforesaid, is not justified. As the said objection itself raises an arbitrable issue the same need not engage the attention of the Court. Such attention, however, has to be focused on the principal objection of the respondent. The same is to the effect that the two of the sub-agreements were between Taiyo Membrane Corporation and the respondent Company whereas one sub-agreement was between Taiyo Membrane Corporation (India) and the respondent. The applicant is Taiyo Membrane Corporation Pty. Ltd. which is not a party to any of the said sub-agreements. Besides, it is contended that invocation of the arbitration clause was by the applicant who is not a party to the agreements. On the said basis, it is urged that there is no valid invocation of the arbitration clause and consequently there is no failure on the part of the respondent to appoint the arbitrator so as to warrant an order from the Court under Section 11(6) of the Act. It is also urged that one of the sub-agreements being between two Indian entities i.e Taiyo Membrane Corporation (India) and the respondent Company any appointment of an arbitrator would fall outside the jurisdiction of this Court under Section 11(6) of the Act.
4. The above objections of the respondent have been sought to be met by the petitioner by filing a rejoinder-affidavit to point out that the letters of intent with regard to the works allotted under the sub-agreements were issued in favour of Taiyo Membrane Corporation Pty. Ltd. That apart, several correspondences exchanged between the respondent Company and Taiyo Membrane Corporation Pty. Ltd. with regard to the works covered by the sub-contracts have also been referred to and relied upon to contend that there is no doubt and ambiguity with regard to the fact that Taiyo Membrane Corporation Pty. Ltd. and Taiyo Membrane Corporation are one and the same entity. Insofar as the agreements executed by Taiyo Membrane Corporation (India) is concerned, it is urged that the above position has also been clarified by subsequent communications exchanged between the respondent Company and Taiyo Membrane Corporation Pty. Ltd. with respect to the work covered by the agreement in which one of the parties is Taiyo Membrane Corporation (India).
5. While it is correct that there is some confusion with regard to the description of the parties in the sub-agreements; the legal notice(s); the letter(s) of invocation; the LOIs issued in respect of the works and the correspondences exchanged by and between the parties make it clear that the applicant Taiyo Membrane Corporation Pty. Ltd. and Taiyo Membrane Corporation are one and the same entity and the works under the sub-agreements had been allotted by the respondent to the said entity. In this regard it may also be relevant to note that under the Australian Corporations Act, 2001 (Section 57-A) a corporation includes a company and a proprietary company limited by shares is incorporated as Pty. Ltd.
6. In the above circumstances the alleged misdescription will not affect the maintainability of the present application. As already observed, the Court does not find any ambiguity or inconsistency in the description of parties so as to non-suit the applicant-petitioner by dismissing its application on the above basis. The ambiguity, if any, in the description of the parties having been explained and the respondent Company itself having issued LOIs and having exchanged subsequent correspondences with the applicant with regard to the works under the sub-contracts, though executed in the name of Taiyo Membrane Corporation and Taiyo Membrane Corporation (India), the applicant's petition cannot be held to be not maintainable as urged on behalf of the respondent.
7. Having held as aforesaid and the remaining objections, as noticed, being within the province of the arbitrator the Court is inclined to grant the prayers made. Accordingly, Dr Justice M.K Sharma, a former Judge of this Court is appointed as the sole arbitrator.
8. All disputes including the disputes raised in the present petition are hereby referred to the learned sole arbitrator. The learned arbitrator shall be at liberty to fix his own fees/remuneration/other conditions in consultation with the parties.
9. Let this order be communicated to the learned arbitrator so that the arbitration proceedings can commence and conclude as expeditiously as possible.
10. The arbitration petition is disposed of in the above terms.
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