Arbitration Petition No. 509 of 2011. Case: DLF Power Limited Vs Mangalore Refinery & Petrochemicals Limited. High Court of Bombay (India)
| Case Number | Arbitration Petition No. 509 of 2011 |
| Counsel | For Appellant: Mr. Zal Andhyarujina with Mr. Harsh Meghani, Mr. Samshed Garud and Mr. Vishwabhushan Kamble i/b Jaykar & Partners and For Respondents: Mr. Kevic Setalvad, Senior Counsel with Ms. Rashna Khan, Ms. Pooja Garg and Mr. Parikshit B. i/b Mulla & Mulla & C. B. & C. |
| Judges | R. D. Dhanuka, J. |
| Issue | Arbitration & Conciliation Act, 1996 - Sections 7, 9, 16, 37, 7(5) |
| Judgement Date | July 20, 2016 |
| Court | High Court of Bombay (India) |
Judgment:
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By this petition filed under section 37 of the Arbitration & Conciliation Act, 1996 (for short hereinafter referred to as "the Arbitration Act"), the petitioner has impugned the order dated 2nd February, 2011 passed by the arbitral tribunal accepting the plea of the respondent under section 16 of the Arbitration Act and dismissing the arbitral proceedings on the ground of jurisdiction. It is made clear in the impugned order that the parties were left to pursue such legal remedies as were available to them for resolution of their dispute arising out of the contracts entered into between the parties. Some of the relevant facts for the purpose of deciding this petition are as under:
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On 16th April, 1997 and 30th April, 1997, DLF Industries Limited (DIL) signed two contracts with the respondent i.e. contract No.E-10010 for engineering and supply of equipments for 3 x 26.5 MW power project and contract No.E-11011 for civil works for carrying out erection and commissioning of the power plant equipment respectively. It is the case of the petitioner that the said DLF Industries Limited (DIL) undertook the performance and execution of contracts in right earnest.
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It was the case of the petitioner that the said DLF Industries Limited (DIL) however, could not commission the power plant within the original contractual time on account of various reasons not attributable to the said company but attributable to the defaults of Mangalore Refinery & Petrochemicals Limited in meeting its reciprocal obligations under the contract. The said DLF Industries Limited (DIL) commissioned four units of the Co-generation Power Plant on 30th May, 1999, 23rd July, 1999, 7th August, 1999 and 18th April, 2000 respectively.
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On or about 19th October, 1999, the High Court of Delhi and Punjab & Haryana High Court approved a scheme of merger by which the Energy System Business of the said DLF Industries Limited (DIL) merged with DLF Universal Limited (DUL) as its energy system division. The Registrar of Companies, NCT, Delhi and Haryana granted certificates of registration. It is the case of the petitioner that pursuant to the said scheme sanctioned by the Delhi High Court and Punjab & Haryana High Court, the rights and liabilities of DLF Industries Limited (DIL) in the said contracts stood transferred to DLF Universal Limited (DUL) and on such transfer the said DLF Universal Limited (DUL) discharged the rights and liabilities under the contracts.
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It is the case of the petitioner that the respondent accepted and acknowledged the said DLF Universal Limited (DUL) as a party to the contract in its entirety including the arbitration agreement contained therein and accepted the performance of contract from the said DLF Universal Limited (DUL). It was the case of the petitioner that the said DLF Universal Limited (DUL) had succeeded to the said two contracts executed between DLF Industries Limited (DIL) and the respondent herein and executed them in the capacity of a party to these two contracts and was therefore, entitled to enforce the contracts in its entirety along with the arbitration agreement contained therein.
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On or about 14th December, 2000, the said DLF Universal Limited (DUL) in its capacity as the contractor under the two contracts requested the respondent to release the pending payment and to execute the bank guarantee. On 3rd January, 2001, the said DLF Universal Limited (DUL) furnished a bank guarantee being BG No.43/2 for a sum of Rs.4,66,58,621/- representing 2.5% of the basic purchase price of the two contracts.
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On 28th June, 2001, the energy system division of the said DLF Universal Limited (DUL) was purchased through a memorandum of sale by the petitioner i.e. DLF Power Limited, now known as Eastern India Powertech Limited with effect from 31st March, 2001. It is the case of the petitioner that the petitioner is absolute successor in interest of the DLF Industries Limited (DIL) and DLF Universal Limited (DUL) of the said two contracts which were initially entered into between the DLF Industries Limited (DIL) and the respondent.
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On 2nd August, 2001, the petitioner requested the respondent for release of the balance payment, extension of contractual completion period, release of bank guarantee, return of excess material, payment of additional expenses incurred by it due to non-release of payment by the respondent within 20 days as provided under the contracts, expenses of Skoda representatives which were not to be borne by the petitioner, as the respondent had directly contracted with them etc.
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On 24th September, 2001, the respondent admitted that a sum of Rs.523.84 lacs consisting of Rs.362.11 lacs shown as payable against the original contract price and Rs.161.73 lacs against extra work was due and payable by the respondent to the petitioner but failed and neglected to pay the said sum alleged to have been admitted by them.
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On 24th September, 2001 and 1st October, 2001, the petitioner requested the respondent to release its bank guarantee alleging that the respondent was continuously delaying the performance guarantee tests.
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On 2nd December, 2003, 29th November, 2004 and 25th November, 2005, the petitioner informed the respondent that its bankers had issued amendment extending the validity and claim period of the bank guarantee.
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On 28th December, 2002, 17th November, 2003, 25th November, 2004, 29th September, 2005, 24th July, 2006 and 8th March, 2007, the respondent addressed letters to the bankers of the petitioner i.e. Central Bank of India directing them to extend the validity of the bank guarantee for further periods ranging from three to six months. According to the petitioner, the respondent sought 45 extensions by writing letters to the bankers of the petitioner and such extensions had been issued by the bankers of the petitioner.
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On 25th September, 2004, the respondent informed the petitioner that they were reviewing at their end various issues relating to the contracts and shall be forwarding their comments to their new management for their consideration. The respondent also requested the petitioner to keep the bank guarantee for liquidated damages duly extended and valid.
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On 20th April, 2007, the petitioner received a letter from the respondent in which the respondent informed the petitioner that it had recovered an amount of Rs.443.20 lacs towards liquidated damages and after adjusting sums of Rs.3,72,92,861/- which according to the respondent was due to the petitioner, sum of Rs.70.28 lacs was claimed as payable by the petitioner to the respondent. By the said letter, the respondent called upon the petitioner to send the demand draft of Rs.70.28 lacs as full and final payment and agreed to return the bank guarantee No.43/2 of Rs.4,68,58,621/- in return of the said demand draft of Rs.70.28 lacs. The respondent threatened the petitioner that it would encash the bank guarantee against the liquidated damages in the event of failure of the petitioner to pay a sum of Rs.70.28 lacs.
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The petitioner filed a petition under section 9 of the Arbitration Act in the month of May, 2007 inter-alia praying for interim measures of protection against the respondent from encashing the bank guarantee No.43/2 dated 3rd January, 2001 or receiving any moneys thereunder.
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In the month of June, 2007, the petitioner invoked arbitration clause and appointed its arbitrator. The respondent in turn appointed its arbitrator. The two arbitrators agreed and nominated the presiding arbitrator.
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On 27th July, 2001, this Court disposed of the said arbitration petition filed by the petitioner with a direction that upon the petitioner depositing a sum of Rs.70.28 lacs in this Court within a period of six weeks, the respondent shall not eacash the bank guarantee and it would stand released and discharged.
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On 20th June, 2008, during the pendency of the arbitral proceedings, the petitioner changed its name to Eastern India Powertech Limited. The Deputy Registrar of Companies, Delhi and Haryana issued a fresh certificate of incorporation consequent upon the change of name of the petitioner.
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The respondent filed an application under section 16 of the Arbitration Act before the arbitral tribunal raising the plea of jurisdiction of the arbitral tribunal to entertain, try and dispose of the claim filed by the petitioner. The said application was resisted by the petitioner on various grounds. The arbitral tribunal framed the issues including preliminary issue "whether the claimant proves that it has locus to initiate, sustain and pursue the present proceedings". After recording of evidence, the arbitral tribunal heard the arguments on the said preliminary issue. By an order dated 2nd February, 2011, the arbitral tribunal dismissed the arbitral proceedings on the ground that it had no jurisdiction to entertain the said proceedings. This order of the arbitral tribunal is impugned by the petitioner in the present petition filed under section 37 of the Arbitration Act on various grounds.
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Mr.Andhyarujina, the learned counsel for the petitioner invited my attention to the contract agreement dated 16th April, 1997 and various provisions of the said contract agreement entered into between the respondent herein and DLF Industries Limited, including clause 19.1 which provided that neither party to the contract shall, except with the explicit prior approval in writing of the other, assign its obligations or any benefit interests in this contract or any part thereof in any manner whatsoever. Reliance is also placed on clause 36.1 which provided for arbitration. The said clause is extracted as under:
"36.1 If at any time any dispute or difference shall arise between the parties hereto as to the interpretation of this Contract or any covenants or conditions thereof or as to the rights, duties or liabilities of any party hereunder or as to any act, matter or thing arising out of or relating to or under this Contract...
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