Arbitration Petition No. 34 of 2013. Case: Swiss Timing Limited Vs Organising Committee, Commonwealth Games 2010. Supreme Court (India)

Case NumberArbitration Petition No. 34 of 2013
JudgesSurinder Singh Nijjar, J.
IssueArbitration and Conciliation Act, 1996 - Sections 5, 8, 11, 11(4), 11(6), 12, 14, 15, 16, 16(1), 17, 18, 19, 30, 42, 45; Societies Registration Act, 1860; Prevention of Corruption Act - Sections 13(1), 13(2); Partnership Act, 1932; Indian Contract Act, 1872 - Section 2; Indian Penal Code (IPC) - Sections 120B, 420, 427, 477, 488
Judgement DateMay 28, 2014
CourtSupreme Court (India)


Surinder Singh Nijjar, J.

1. This is a petition Under Section 11(4) read with Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Arbitration Act"), with a prayer to appoint the nominee arbitrator of the Respondent and to further constitute the arbitral tribunal, by appointing the presiding arbitrator in order to adjudicate the disputes that have arisen between the parties.

2. The relevant facts as set out in the Arbitration Petition are as under:

3. The Petitioner is a company duly incorporated under the laws of Switzerland, having its registered office in Corgemont, Switzerland. The Respondent is the Organising Committee, Commonwealth Games, 2010. It is a society registered under the Societies Registration Act, 1860 (hereinafter referred to as "the Organising Committee"), established for the primary purpose of planning, organising and delivering the Commonwealth Games, 2010 Delhi (hereinafter referred to as "Commonwealth Games") and having its registered office in New Delhi, India.

4. The Petitioner entered into an agreement dated 11th March, 2010 with the Respondent for providing timing, score and result systems ("TSR systems/services") as well as supporting services required to conduct the Commonwealth Games. According to the Petitioner, Clause 11.1 of the aforesaid agreement stipulated the fees, as set out in Schedule 3, which shall be paid to the Petitioner for performance of the obligations contained in the agreement. The aforesaid Schedule 3 gives details of the amounts which were to be paid, in instalments, by the Organising Committee. The service provider/Petitioner was to submit monthly tax invoices, detailing the payments to be made by the Organising Committee. These invoices were to be paid within 30 days of the end of the month in which the tax invoices were received by the Organising Committee. All payments were to be made in Swiss Francs, unless the parties agree otherwise in writing. Clause 11.5 provides that on the date of the agreement, the service provider must provide the Performance Bank Guarantee to the Organising Committee to secure the performance of its obligations under the agreement. Certain other obligations are enumerated in the other clauses, which are not necessary to be noticed for the purposes of the decision of the present petition.

5. It is also noteworthy that in consideration of the Petitioner's services as stipulated in the agreement, the Petitioner was to receive a total amount of CHF 24,990,000/- (Swiss Francs Twenty Four Million Nine Hundred and Ninety Thousand only). It was also provided in Schedule 3 that payment of the 5% of the total service fees was to be made upon completion of the Commonwealth Games. Accordingly, the Petitioner sent the invoice No. 33574 dated 27th October, 2010 for the payment of CHF 1,249,500 (Swiss Francs One Million Two Hundred Forty Nine Thousand Five Hundred only). This represents the remaining 5% which was to be paid upon completion of the Commonwealth Games on 27th October, 2010. The Petitioner had also paid to the Organising Committee a sum of Rs. 15,00,000/- (INR 1.5 million) as Earnest Money Deposit (EMD), for successfully completing the TSR services as provided in the agreement.

6. According to the Petitioner, the Respondent defaulted in making the payment without any justifiable reasons. Not only the amount was not paid to the Petitioner, the Respondent sent a letter dated 15th December, 2010 asking the Petitioner to extend the Bank Guarantee till 31st January, 2011. The Petitioner informed the Respondent that the Bank Guarantee had already been terminated and released on completion of the Commonwealth Games in October, 2010. It is also the case of the Petitioner that there is no provision in the service agreement for extension of the Bank Guarantee. The Petitioner reiterated its claim for the aforesaid amount. Through letter dated 26th January, 2011, the Petitioner demanded repayment of Rs. 15 lakhs deposited as EMD. Instead of making the payment to the Petitioner and other companies, the Respondent issued a Press Communique on 2nd February, 2011 declaring that part payments to nine foreign vendors, including the Petitioner, have been withheld for "non-performance of the contract". The Petitioner is said to have protested against the aforesaid communique through letter dated 4th February, 2011. It was reiterated that the Petitioner had satisfactorily performed the obligations in the service agreement of 11th March, 2010. Since the Respondent was disputing its liability to pay the amounts, the Petitioner served a formal Dispute Notification on the Respondent under Clause 38 of the agreement.

7. The Petitioner further points out that on 7th February, 2011, the Respondent called upon the Petitioner to fulfil its alleged outstanding obligations under the agreement including handing over of the Legacy Boards, completion of the formalities of the material, which were required to be shipped out and to fulfil certain other requirements as set out in its earlier e-mails in order to prepare the "agreement closure report". The Respondent also stated that they were not addressing the issue of invoking the Dispute Resolution Clause as they were interested in settling the dispute amicably. The Petitioner pleads that the Respondent failed in its commitment for payments towards services rendered, not only towards the Petitioner but also towards other international companies from Australia, Belgium, England, France, Germany, Italy, the Netherlands and Switzerland, which had provided various services to the Respondent at the Commonwealth Games. It also appears that collective letters were written on behalf of various companies by the ambassadors of the concerned countries, to the Finance Minister of India indicating the default in payments of the amounts due. The Petitioners, therefore, claim that they were left with no alternative but to invoke arbitration as provided under Clause 38.6 of the agreement. The Petitioners have nominated the arbitrator on its behalf namely Justice S.N. Variava, former Judge of the Supreme Court of India. A notice to this effect was served on the Respondent through a communication dated 22nd April, 2013. Since no response was received a reminder was issued on 29th May, 2013. Upon such failure, the Petitioners have filed the present petition.

8. In the counter affidavit all the averments made by the Petitioners have been denied, as being incorrect in facts and in law. The Respondents have raised two preliminary objections, which are as follows:

(i) The Petitioner has not followed the dispute resolution mechanism as expressly provided in the agreement dated 11th March, 2010. No efforts have been made by the Petitioner to seek resolution of the dispute as provided under Clause 38. On the other hand, the Respondent through numerous communications invited the Petitioner for amicable resolution of the dispute. The Respondent relies on communications dated 3rd January, 2011, 9th January, 2011, 10th January, 2011, 1st February, 2011 and 2nd February, 2011.

(ii) The contract stands vitiated and is void ab initio in view of Clauses 29, 30 and 34 of the Agreement dated 11th March, 2010. Hence, the Petitioner is not entitled to any payment whatsoever in respect of the contract and is liable to reimburse the payments already made. Therefore, there is no basis to invoke arbitration clause.

The Respondent points out that a combined reading of Clause 29 and Clause 34 would show that the Petitioner had warranted that it will never engage in corrupt, fraudulent, collusive or coercive practices in connection with the agreement. The Petitioner would be liable to indemnify the Respondent against all losses suffered or incurred as a result of any breach of the agreement or any negligence, unlawful conduct or wilful misconduct. The Respondent may terminate the agreement whenever it determines that the Petitioner had engaged in any corrupt, fraudulent, collusive or coercive practice in connection with the agreement. The Respondent seeks to establish the aforesaid non-liability clause on the basis of registration of Criminal Case being CC No. 22 of 2011 Under Section 120-B, read with Sections 420, 427, 488 and 477 Indian Penal Code and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act against Suresh Kalmadi, the then Chairman of the Organising Committee and other officials of the Respondent alongwith some officials of the Petitioner, namely Mr. S. Chianese, Sales & Marketing Manager, Mr. Christophe Bertaud, General Manager and Mr. J. Spiri, Multi Sports Events & Sales Manager.

9. It is further the case of the Respondent that due to the pendency of the criminal proceedings in the trial court, the present petition ought not to be entertained. In case the arbitration proceeding continues simultaneously with the criminal trial, there is real danger of conflicting conclusions by the two fora, leading to unnecessary confusion.

10. I have heard the learned Counsel for the parties.

11. The submissions made in the petition as well as in the counter...

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