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Perkins Eastman Architects DPC & Anr. V. HSCC (India) Ltd.

“Whatever advantage a party may derive by nominating an arbitrator of its choice would get counter balanced by equal power with the other party.”

Case name:Perkins Eastman Architects DPC & Anr. V. HSCC (India) Ltd.
Case number:ARBITRATION APPLICATION NO.32 OF 2019
Court:THE SUPREME COURT OF INDIA
Bench:HON’BLE MR. JUSTICE UDAY UMESH LALIT, HON’BLE MS. JUSTICE INDU MALHOTRA
Decided on:November 26, 2019
Relevant Act/Sections:
  • BRIEF FACTS AND PROCEDURAL HISTORY:
  • This application was filed under Section 11(6) read with Section 11(12)(a) of The Arbitration and Conciliation Act, 1996 and under the The Appointment of Arbitrators by the Chief Justice of India Scheme, 1996.
  • A request for Proposals bearing RFP No.HSCC/3-AIIMS/Guntur/2016 was issued on 15.07.2016 for appointment of Design Consultants for the “comprehensive planning and designing for the proposed All India Institute of Medical Sciences at Guntur, Andhra Pradesh.
  • Letter of Intent was issued on 31.01.2017 awarding the project to the Applicants, the consideration being Rs.15.63 crores. A letter of award was issued in favour of the Applicants on 22.02.2017 and a contract was entered into between the Applicants (Perkins Eastman Architects DPC, Edifice Consultants Private Limited) and the respondent on 22.05.2017, which provided inter alia for dispute resolution in Clause 24.
  • In letter dated 26.5.2017 the respondent alleged failure on part of the Applicants which was followed by stop work notice dated 03.11.2017.
  • Later, a termination notice was issued by the respondent on 11.01.2019 alleging non-compliance of contractual obligations on part of the Applicants, which assertions were denied. However, termination letter was issued on 20.02.2019. On 11.04.2019 a notice was issued by the Advocate for the applicants invoking the dispute resolution Clause namely Clause 24 as aforesaid raising a claim of Rs.20.95 crores.
  • An appeal was filed by the Applicants before the Director (Engineering) in terms of said Clause 24 but there was complete failure on part of the Director (Engineering) to discharge the obligations in terms of said Clause 24. Therefore, by letter dated 28.06.2019 the Chief Director of the respondent was called upon to appoint a sole arbitrator in terms of said Clause 24. However, no appointment of an arbitrator was made within thirty days but a letter was addressed by Chief General Manager of the respondent on 30.07.2019 purportedly appointing one Major General K.T. Gajria as the sole arbitrator

ISSUE BEFORE THE COURT:

  • Whether the arbitration in the present case would be an International Arbitration Commercial Arbitration or not?
  • Whether a case is made out for exercise of power by the Court to make an appointment of an arbitrator?
  • Whether the power can be exercised by this Court under Section 11 of the Act when the appointment of an arbitrator has already been made by the respondent
  • Whether the appellant should be left to raise challenge at an appropriate stage in terms of remedies available in law

RATIO OF THE COURT

  • The Court referred to the case Larsen and Toubro Limited SCOMI Engineering BHD and observed that the lead member of the Consortium company i.e. Applicant No.1 being an Architectural Firm having its registered office in New York, satisfies the requirements of Section 2(1)(f) of the Act and makes the arbitration in the present case an “International Commercial Arbitration”.
  • The communication invoking arbitration in terms of Clause 24 was sent by the Applicants on 28.06.2019 and the period within which the respondent was to make the necessary appointment expired on 28.07.2019. The court opined that the appointment was not technically within the time stipulated but such delay on part of the respondent could not be said to be an infraction of such magnitude that exercise of power by the Court under Section 11 of the Act merely on that ground is called for.
  • The court referred to the case TRF Limited v. Energo Engineering Projects Limited and opined that whatever advantage a party may derive by nominating an arbitrator of its choice would get counter balanced by equal power with the other party. But, in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (Act 3 of 2016)

DECISION HELD BY COURT:

  • The Court accepted the application and annulled the effect of the letter dated 30.07.2019 issued by the respondent and of the appointment of the arbitrator.
  • The court conferred its power by Section 11(6) of the Act, and appointed Dr. Justice A.K. Sikri, former Judge of this Court as the sole arbitrator to decide all the disputes arising out of the Agreement dated 22.05.2017, between the parties, subject to the mandatory declaration made under the amended Section 12 of the Act with respect to independence and impartiality and the ability to devote sufficient time to complete the arbitration within the period as per Section 29A of the Act.

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