* IN THE HIGH COURT OF DELHI AT NEW DELHI
%thDate of decision: 29 January, 2018
+ CS(COMM) 439/2017 & IA No.14152/2017 (u/O VIII R-1 r/W Sections 148 & 151 CPC)
HUGHES COMMUNICATIONS
INDIA LTD. & ORS. .... Plaintiffs
Through: Mr. Ankur Mahindru, Ms. Aarzoo Aneja & Mr. Shresth Chaudhary, Advs.
Versus
UNION OF INDIA ..... Defendant
Through: Mr. Praveen Kumar Jain, Mr. Naveen Kumar Jain, Mr. Sachin Kumar Jain & Mr. Kamal
Pandey, Advs.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW IA No.13734/2017 (of the defendant under Section 8 of the Arbitration & Conciliation Act, 1996)
1. The three plaintiffs viz. i) Hughes Communications India Ltd.,
ii) Hughes Communications India Ltd. Comtel (sic), and, iii) Hughes Network Systems India Ltd. have instituted this suit for recovery of Rs.1,15,66,360/- along with interest from the defendant.
2. The defendant, not later than submitting its first statement on the substance of the dispute has filed this application for reference of the parties to arbitration.
3. The counsel for the plaintiffs states that a reply to the application though has been filed, is not on record.
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4. A copy of the reply is handed over in the Court and is taken on record.
5. The counsels have been heard.
6. The counsel for the defendant / applicant draws attention to the letter No.95106/Q/BCCS(2)D(IT/Coord)/2006 dated 29thAugust, 2006 of the defendant to Wipro Ltd. placing a supply order on Wipro Ltd. for "supply of hardware, software, training, site preparation, installation of software, solution / security Networking equipments etc. for computerisation of the Depots of Canteen Stores Departments (Phase-II)" and to Clause 29 of the Schedule „A" to the said supply order as under:
"29. Arbitration:
In the event of any dispute arising out of the contract, it shall be referred to the sole arbitrator, Secretary, Ministry of Defence, Govt. of India or his nominee. The award of the arbitrator shall be final and binding on both parties to the contract.
Notwithstanding any provision of the above paragraph the contractor shall not be liable to any damages for any period of delay during which the goods are packed and ready for dispatch but cannot be shipped because of lack of shipping opportunity."
7. Attention is next invited to the letter dated 11thJune, 2008 of the defendant/applicant to the plaintiff no.1 placing work order on the plaintiff no.1 "as a part component of the Order
No.95106/Q/BCCS(2)D(IT/Coord)/2006 dated August 29, 2006 placed on Wipro Limited for implementation of the ICSDS Phase-II Project" and further recording that "this Word Order is being placed on Specific request of Hughes Communications India Ltd. (HCIL) as it was mentioned by you that Wipro Limited cannot resell VSAT
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Services as per the TRAI/DOT Guidelines" and asking the plaintiff no.1 to "arrange to provide the VSAT Services as per enclosed letter from Wipro Ltd." and further informing plaintiff no.1 that "Wipro Ltd. has also specified that payment for the aforesaid VSAT Services would be paid by them till the project handover period" and "beyond that the service charges would be borne by the CSD". The said letter further provides that "All terms and conditions would be governed by the terms and conditions in the No.95106/Q/BCCS(2)D (IT/Coord)/2006 dated August 29, 2006, placed on Wipro Limited.
8. The counsel for the defendant / applicant has thus contended that the claim of the plaintiffs, subject matter of the present suit, is subject matter of Arbitration Agreement aforesaid.
9. The counsel for the plaintiffs / non-applicants in opposition, has first drawn attention to Section 12(5) of the Arbitration & Conciliation Act, 1996 and thereafter to the Seventh Schedule to the said Act, particularly to Clause 12 thereof and contends that the Arbitrator in the Clause aforesaid viz. Secretary, Ministry of Defence, Government of India or its nominee is not entitled to be an Arbitrator. Reliance is placed on TRF Ltd. Vs. Energo Engineering Projects Ltd. (2017) 8 SCC 377, where it has been held that when the Managing Director of a party to the agreement was disqualified from being the Arbitrator, he was also not entitled to nominate any other person as the Arbitrator.
10. I have however enquired from the counsel for the plaintiffs / non-applicants, whether not he is mixing up Arbitration Agreement with the Arbitrator and which are in fact distinct from each other. Merely because the named Arbitrator may be disqualified from acting
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as the Arbitrator does not mean that there is no Arbitration Agreement between the parties, on finding which this Court under Section 8 of the Arbitration Act is mandated to refer the parties to arbitration.
11. An arbitration agreement is defined in Section 7 of the Arbitration Act as an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between the parties in respect of a defined legal relationship, whether contractual or not. The Arbitration Act does not define an „Arbitrator"
but Section 2(d) defines „Arbitral Tribunal" as meaning a sole arbitrator or a panel of arbitrators and Section 11 providing for appointment of arbitrators provides that a person of any nationality may be an arbitrator unless otherwise agreed by the parties. Section 12 providing for grounds for challenge, in clause (a) of sub-section(1) thereof lays down that an Arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his independence or impartiality or he does not possess the qualifications agreed to by the parties. Section 13 lays down the Challenge Procedure and under sub-Section (3) thereof considers the eventuality of the Arbitrator so challenged withdrawing from his office. Section 15 titled „Termination of mandate and substitution of arbitrator"
provides that the mandate of an Arbitrator shall terminate when he so withdraws from office and further provides that where the mandate of an Arbitrator terminates, a substitute Arbitrator shall be appointed. It thus follows that Arbitration Agreement is different from Arbitrator and the Arbitration Agreement survives the termination of mandate of Arbitrator. It follows that if the named Arbitrator is disqualified from
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acting as an Arbitrator, a substitute Arbitrator is to be appointed and it cannot be said that the Arbitration Agreement is void or unenforceable for the reason of ineligibility of the named Arbitrator to arbitrate.
12. In my view the question is not res integra. Section 10 of the Arbitration Act provides that the parties are free to determine the number of Arbitrators provided that such number shall not be an even number and failing such determination by the parties, the Arbitral Tribunal shall consist of a sole Arbitrator. Supreme Court in
M.M.T.C. Limited Vs. Sterlite Industries (India) Ltd. (1996) 6 SCC 716 held that the validity of an arbitration agreement does not depend on the number of Arbitrators and therefore an arbitration agreement specifying an even number of Arbitrators cannot be a ground to render the arbitration agreement invalid. The contention, that because Section 10 does not envisage appointment of an even number of Arbitrators as agreed upon by the parties in that case, the only remedy in such a case was by way of a suit and not by way of an arbitration, was rejected. Similarly here, merely because the Arbitrator agreed upon by the parties is ineligible to be appointed as the Arbitrator, will not nullify the arbitration agreement.
13. To be fair to the counsel for the plaintiffs / non applicants, he has not pressed this aspect further.
14. The counsel for the plaintiffs / non applicants has next contended that the claim of the plaintiffs / non-applicants in the present suit, besides under the Agreement / Work Order / Delivery Order aforesaid, is also under other Purchase Orders placed by the defendant on the plaintiffs from time to time. Attention in this regard
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is drawn to pages 10,12 and 15 of Part-III file being the Purchase Orders and / or e-mail from the defendant to the plaintiffs / non- applicants. It is stated that there are similar other Purchase Orders placed by the defendant on the plaintiffs from time to time. It is stated that while the Delivery Order / Purchase Order containing the arbitration clause aforesaid was for supply of VSAT Services only, the other Purchase Orders, whereunder also claim is made are with respect to hardware, commissioning charges, installation charges etc. It is contended that there is no arbitration clause contained therein.
15. I have enquired from the counsel for the plaintiffs as to how much is the claim of the plaintiffs / non-applicants in the present suit against the Purchase Order / Delivery Order containing an arbitration clause and how much is the claim against other Purchase Orders which are stated to be without arbitration clause.
16. The counsel for the plaintiffs / non-applicants draws attention to para no.14 of the plaint but which is found to be only containing as to how much principal amount is due from the defendant to the plaintiffs and shows the principal amount due to plaintiff no.1 to be Rs.69,05,126/-, the principal amount due to the plaintiff no.2 to be Rs.59,700/- and the principal amount due to the plaintiff no.3 to be Rs.8,505/-.
17. The counsel for the plaintiffs on enquiry as to how much out of Rs.69,05,126/- is due to the plaintiff no.1 under the Purchase / Supply Order containing the arbitration clause and how much under other Purchase Orders, states that the two are so intertwined that they could not be separated.
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18. I have however again enquired whether not the statement of the counsel for the plaintiffs / non-applicants that the claim under the Purchase Order containing the arbitration clause and the claim under other Purchase Orders are intertwined itself indicative of the said Purchase Orders being under the umbrella Purchase Order containing the arbitration clause.
19. I may also mention that some of the "other" Purchase Orders are with reference to the quotation submitted by the plaintiffs / non- applicants and copies of which have not been supplied and / or filed and are not available with the counsel for the plaintiffs / non- applicants. It is well nigh possible that the said quotations have been given under the umbrella Purchase Order.
20. Mention may also be made of the fact that though the counsel for the plaintiffs / non-applicants has argued that the umbrella Purchase Order was only for supply of VSAT Services but the Purchase / Supply Order placed by the defendant on Wipro Ltd. and of which the plaintiff no.1 is admittedly the successor, is for supply of hardware, software, training, site preparation, installation of software, solution / security Networking equipments etc. for computerisation of the Depots of Canteen Stores Departments (Phase-II). As would be obvious from the same, the umbrella Purchase Order was also for supply of hardware, software, training, site preparation, installation which is the subject matter of "other" Purchase Orders under which the plaintiffs / non-applicants are making a claim.
21. I am otherwise also of the opinion that an Arbitration Agreement cannot be permitted to be defeated merely by including in
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the claim, besides the claim under the Arbitration Agreement, some other claims under some other independent contracts which the two parties may be having. Even if it were to be held that the "other"
Purchase Orders are not under the umbrella Purchase Order containing the arbitration clause, the parties to the Arbitration Agreement would in such a case not be entitled to join a claim subject matter of Arbitration Agreement along with other claims if any which are not subject matter of Arbitration Agreement. Moreover, from the argument of the counsel for the plaintiffs / non-applicants himself, that the claims are intertwined, it is evident that the parties at the contemporaneous time were treating the orders placed by the defendant/applicant on the plaintiffs / non-applicants as under the Wipro contract only. There is thus no merit in the said contention either.
22. Supreme Court in Chloro Controls India Private Limited Vs. Severn Trent Water Purification Inc. (2013) 1 SCC 641 held that in cases involving execution of multiple agreements, two essential features exist; firstly all ancillary agreements are relatable to the mother agreement and secondly, performance of one is so intrinsically interlinked with the other agreements that they are incapable of being beneficially performed without performance of the others or severed from the rest; the intention of the parties to refer all the disputes between all the parties to the Arbitral Tribunal, is one of the determinative factors. In the same breath, it was noticed that this doctrine does not have universal acceptance and the Court will have to examine such pleas with greater caution and by definite reference to
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the language of the contract and intention of the parties. Applying the said law, this Court in HLS Asia Ltd. Vs. M/s. Geopetrol International Inc. (2013) 196 DLT 52 held that individual members of the consortium may not have been party to the contract which contains the arbitration clause but would be necessary parties to the arbitral proceedings in light of the inter relationship between the members of the consortium.
23. Applying the aforesaid test to the present circumstances, it is not the case of the plaintiffs that the orders of purchase of hardware placed by the defendant on the plaintiffs were independent of the contract between defendant and Wipro Ltd. and of which the plaintiff no.1 is the successor. I may in this context also notice Chatterjee Petrochem Company Vs. Haldia Petrochemicals Limited (2014) 14 SCC 574. Supreme Court recently in Duro Felguera Vs. Gangavaram Port Ltd. (2017) 9 SCC 729 clarified that a general reference to another contract will not be sufficient to incorporate the arbitration clause from the referred contract into the contract under consideration and there should be a special reference indicating a mutual intention to incorporate the arbitration clause from another document into the contract. However, in the present case, the supplies under the purchase orders claimed to be without arbitration clause are admitted to be intertwined with the supplies under the Agreement containing the arbitration clause and rather it has been found that purchase orders claimed to be without arbitration clause themselves are under the Agreement containing the arbitration clause.
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24. The counsel for the plaintiffs has lastly contended that the defendant in the present case had appeared on 10thJuly, 2017 when the suit came up first and accepted summons of the suit and kept on filing applications for extension of time for filing the written statement and did not file the written statement till the expiry of 120 days from 10thJuly, 2017 and whereupon the right of the defendant to file written statement stood closed.
25. It is argued that this application under Section 8 of the Arbitration & Conciliation Act is filed on the 130thday from 10thJuly, 2017. It is argued that the application under Section 8 of the Arbitration & Conciliation Act does not lie after the right to file written statement has been closed. Reliance in this regard is placed on
Anil Mahindra & Anr. Vs. Surender Kumar Makkar & Anr. 2017 SCC OnLine Del 11532 where this Court has reasoned that the petitioners therein having appeared and sought time to file written statement and having thereafter deliberately let the period of 90 days expire, could not have thereafter woken up and filed the application under Section 8 of the Arbitration & Conciliation Act.
26. The language of Section 8 of the Arbitration & Conciliation Act as under:
"8. Power to refer parties to arbitration where there is an arbitration agreement.—
(1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.
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(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:
Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.
(3) Notwithstanding that an application has been made under sub- section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."
does not permit any such interpretation.
27. The judgment in Anil Mahindra supra where this Court in exercise of jurisdiction under Article 227 of the Constitution of India has refused to interfere with the order of the Court below does not discuss the said aspect and cannot be said to be a precedent binding a co-ordinate Bench. The only limitation in Section 8 of the Arbitration & Conciliation Act as distinct from Section 21 of the 1940 Act is that the application is required to be filed "not later than the date of submitting first statement on the substance of the dispute". Merely because the defendant may have sought time to file written statement, has not been made a ground under the 1996 Act for refusing reference to arbitration as it was under the 1940 Act. Similarly, the closure of the defence or striking off of the defence of the defendant is also not made a ground for rejection of the application under Section 8 of the Arbitration & Conciliation Act. It is also not as if the defendant has
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allowed any proceedings in the suit to take place after the time for filing the written statement expired, for it to be said that the defendant has allowed the suit to go beyond the stage of written statement. In fact, till date there is no order also of striking off the defence of the defendant or closing the right of the defendant to file the written statement.
28. In this view of the matter, it cannot be said that the application is not maintainable for this reason. I find the Division Bench of the High Court of Madras in Ragavendra Advertising Vs. Prasar Bharati, (Broadcasting Corpn. of India) 2009 SCC OnLine Mad 1599.
28. The only other ground on which this Court can refuse reference under Section 8 of the Arbitration & Conciliation Act is if prima facie finds no valid Arbitration Agreement exists. That is however not even the plea of the plaintiffs / non-applicants.
29. Thus the application succeeds.
30. The suit is disposed of by referring the parties to arbitration.
31. The counsel for the plaintiffs / non-applicants states that an Arbitrator may be appointed.
32. The counsel for the defendant has no instructions.
33. Since the defendant is Union of India (UOI), it is not deemed appropriate for this Court also to, without having the view of the UOI in this regard, appoint any Arbitrator. It is felt that the same would lengthen rather than shorten the proceedings. However, to ensure that there is no delay, it is deemed appropriate that the counsel obtains instructions in this regard.
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34. The counsel for the defendant is reminded of the repeated statements issued by the Prime Minister that red tapism is to be removed. If it is found that the defendant, notwithstanding the directives in this regard is indulging in the same, appropriate action shall follow.
35. List on 23rdFebruary, 2018.
36. The date already given of 22ndMarch, 2018 before the Joint Registrar is cancelled.
RAJIV SAHAI ENDLAW, J
JANUARY 29, 2018
„gsr"..
(Corrected & released on 21st February, 2018)
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