Imc Limited vs Board Of Trustees Of Deendayal

“If a strong case is made out for impleadment, it is always open for the Courts and Tribunals to order impleadment and to give an opportunity before deciding the main claim.”

Case name:Imc Limited vs Board Of Trustees Of Deendayal
Case number:SPECIAL CIVIL APPLICATION NO. 5694 of 2018
Decided on:28 September, 2018
Relevant Act/Sections:
  • The 1st respondent Kandla Port Trust decided to develop Berth Nos. 13 to 16 by private participation on Build, Operate and Transfer (“BOT” basis). Acting on the Resolution, notice inviting tenders was published inviting bids from the prospective parties for the respective berths in two-stage process for selection.
  • The appellant – M/s. IMC Limited submitted its bid for licence of Berth No. 15. The bid of the appellantCompany was accepted and a Letter of Intent for Award of Concession was issued to M/s. IMC Limited on 07.12.2010. Vide communication dated 27.01.2011, the appellant-Company was conveyed by the 1st respondent – DPT that it was required to form a Special Purpose Vehicle (“SPV”).
  • The appellant – IMC constituted Special Purpose Vehicle (SPV) i.e. JRE Infra Private Limited – the 2nd respondent herein (hereinafter referred to as “JRE” or “SPV”) which has executed the Concession Agreement with the Concessioning Authority. The Concession Agreement has an arbitration clause, as a part of the dispute resolution mechanism. Disputes having arisen, the 1st respondent alleging breach of agreement, invoked arbitration clause and initiated arbitration proceedings.
  • The 2nd respondent-JRE filed Statement of Defence in the arbitration proceedings and also preferred Counter Claim. On completion of pleadings, before recording evidence, the 1st respondent – DPT moved an application for impleadment of appellant – IMC as a party to the arbitration proceedings.
  • The learned Arbitral Tribunal, by considering the respective pleas of the 1st respondent and 2nd respondent and by considering the clauses in the agreement, by prima-facie accepting the case of the 1st respondent, allowed the application for impleadment.
  • The appellant-Company, which responded to Request for Qualification (“RFQ”) and Request for Proposal (“RFP”), has filed the Special Civil Application under Articles 226 and 227 of the Constitution of India with the prayer, inter alia, that an appropriate Writ, order or direction may be issued for quashing and setting aside the order dated 14.03.2018 (with the reasons as recorded on 26.03.2018) passed by the learned Arbitral Tribunal on various grounds.
  • Whether any prejudice is caused to the party which has complained that it was ordered to be impleaded without notice?
  • Whether the dispute raised by the respondent in the suit is incapable of settlement through arbitration
  • Whether Appellant entitled for relief on ground that single judge had committed error in dismissing petition filed by Appellant
  • On the issue that whether any prejudice is caused to the party which has complained that it was ordered to be impleaded without notice, the court opined that no prejudice is caused to the appellant. Whether notice is required to be issued to a party before ordering impleadment, or not, is a matter which depends on facts and circumstances of each case. If a strong case is made out for impleadment, it is always open for the Courts and Tribunals to order impleadment and to give an opportunity before deciding the main claim. The order of the learned Arbitral Tribunal cannot be said to be not in conformity with law merely on the ground that appellant was not issued notice before passing the order of its impleadment. Even the learned Single Judge has also rightly rejected the plea of the appellant for quashing the order of the learned Arbitral Tribunal on the aforesaid ground.
  • The court pointed out that the appellant, as an applicant, responded to the RFQ and as it was found to be qualified, RFP was furnished to it and in response to the same, bid documents were submitted by the appellant. Various clauses in the RFP make it clear that the appellant, as an applicant, has incorporated the Concessionaire, i.e. 2nd respondent as a Special Purpose Vehicle to implement the project and ‘applicant’ is defined even in the Concession Agreement, namely, “M/s. IMC Limited”, i.e. the appellant herein.
  • It later observed that the very terms of the Concession Agreement itself clears that the obligations are created on the appellant – applicant by the 2nd respondent Concessionaire of which management and control is fully that of the appellant. In addition to the same, the appellant – Company has also addressed a letter dated 28.04.2011 accepting the terms and conditions of the Concession Agreement entered into between the first respondent – DPT and the 2nd respondent – Special Purpose Vehicle.
  • The court observed that while interpreting a document, the document as a whole is to be considered, but by not referring to one single clause in such document and, further intention of the parties has to be culled out by looking at all the terms and conditions of the document. Hence, from a composite reading of all the terms and conditions of the Concession Agreement, the appellant cannot be termed as a third party and as such, cannot be impleaded in arbitral proceedings.
  • It was stated by the court that there is nothing in law which prohibits an Arbitral Tribunal from lifting the corporate veil on the basis of doctrine of alter ego. The Arbitral Tribunal has a right to take up all disputes which a Court can undertake, except certain disputes generally treated as non-arbitrable, viz. (i) patent, trade marks and copyright, (ii) anti-trust/competition laws, (iii) insolvency/winding up, (iv) bribery/corruption, (v) fraud, (vi) criminal matters.
  • It was later added that The Arbitration and Conciliation Act, 1996, does not make any provision excluding any category of disputes treating them as non-arbitratble but the Courts have held that certain kinds of disputes may not be capable of adjudication through means of arbitration. In the instant case, there is no dispute about the arbitration agreement inasmuch as there is a specific arbitration clause in the partnership deed.
  • The court disagreed with the submission made by Shri S.N.Soparkar, learned Senior Counsel for the appellant, that the learned Arbitral Tribunal has no jurisdiction to examine the issue by lifting the corporate veil and opined that on facts, no case is also made out to examine the claim of alter ego by lifting the corporate veil. Whether a case is made out for impleading a third party by applying the doctrine of lifting of corporate veil, is a matter which is to be examined having regard to facts of each case and keeping in mind the concept of group Companies.
  • The court observed that various clauses in the Concession Agreement also create rights and obligations not only against parties to the agreement but also against the appellant-Company, which is a holding Company of the 2nd respondent – SPV and it cannot be said that the appellant-Company is a third party, has nothing to do with the disputes which have arisen between the 1st and 2nd respondents and has no obligations to the contract
  • In view of the clauses in the Concession Agreement and further, having regard to plea of the 1st respondent – DPT that appellant is an alter ego of the 2nd respondent, the plea of the appellant that prelude to a contract cannot be confused with the contract itself, also would not render any support to accept the case of the appellant.
  • The court disapproved of the stand adopted by some of the High Courts that any order passed by the arbitral tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution of India.
  • The court referred to Lalitkumar V. Sanghavi And Another v. Dharamdas V. Sanghavi And Others and opined that the object of minimizing judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court could be approached under Article 227 of the Constitution of India or under Article 226 of the Constitution of India against every order made by the arbitral tribunal. it is necessary to indicate that once the arbitration has commenced in the arbitral tribunal, parties have to wait until the award is pronounced unless, of course, a right of appeal is available to them under Section 37 of the Act even at an earlier stage.
  • The Court held that the learned Single Judge has not committed any error in dismissing the petition filed by the appellant herein..
  • Appeal accordingly dismissed, with no order as to cost.

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