Writ or suit against power corporation
Surrender K Singal
(Querist) 02 September 2014
This query is : Resolved
A State Power Utility having placed a purchase Order on Micro Industrial Unit requiring 10% security deposit before establishing Letter of Credit for payment of ordered goods to be supplied. But, showing urgency, it procured almost 50% of the ordered material without opening LC on assurances of arranging LC and in the meantime, it cancelled the Order alleging delay in supply even though the basic leg of the contract being mode of payment remained neglected. Apparently, Power Corporation did not need balance material for which the MSE unit had already invested in inventory and to add fuel to fire, Corporation forfeited Security Deposit and other unpaid dues for material supplied in good faith. Writ Petition against arbitrary cancellation and forfeiture of Security Deposit remains to be considered even after notice to Respondent which has filed preliminary objection about Court's jurisdiction vis-a-vis Arbitration clause that was available in Tender but omitted in Purchase Order. Any advisory help in support of WRIT jurisdiction, please ?
ajay sethi
(Expert) 02 September 2014
you have mentioned that tender provides for arbitration clause . it is your case that micro unit has suffered loss on account of cancellation of contract . it is in your interest to invoke arbitration clause . in writ jurisdiction court will not go into disputed questions of facts .
Kiran Kumar
(Expert) 02 September 2014
I agree with Mr. Sethi that it will be better to invoke the Arbitration Clause. Even if we move with Civil litigation, ultimately the court will compel us to go for arbitration first.
malipeddi jaggarao
(Expert) 03 September 2014
Agreed with the experts.
Since the State Govt.undertaking though indicated Letter of Credit as mode of payment, as it did not open the LC and procured the goods partly and later cancelled the order is not justified. Invoke Arbitration Clause.
Surrender K Singal
(Querist) 03 September 2014
Can the High Court be requested during next hearing of Writ Petition to appoint a neutral Arbitrator while disposing of WP, even though Contract (Purchase Order) did not contain Arbitration clause but provided for legal jurisdiction of court ?
In fact, WP remains pending for over 10 months even for admission (after notice);
Is there any remedy for such frustration due to DATE - AFTER - DATE - after - Date..
Dr J C Vashista
(Expert) 03 September 2014
The High Court can be prayed for appointment of arbitrator.
Advocate. Arunagiri
(Expert) 03 September 2014
If there is no arbitration clause, you can not pray the high court for the appointment of arbitrator.
Advocate. Arunagiri
(Expert) 03 September 2014
If there is no arbitration clause, you can not pray the high court for the appointment of arbitrator.
Raj Kumar Makkad
(Expert) 03 September 2014
High Court can definitely refer the matter to arbitrator even if there is no such clause in the agreement.
T. Kalaiselvan, Advocate
(Expert) 07 September 2014
Agreed, even if there is no clause for appointing arbitrator, high court may in its discretion order for appointment of one such arbitrator.
Raj Kumar Makkad
(Expert) 07 September 2014
Mr. singal! Your subsequent query is academic and the same is also boundary-less which cannot be sum up here.
V R SHROFF
(Expert) 07 September 2014
HIGH COURT HAVE INHERENT POWER TO DO WHAT DELIVERS QUICK JUSTICE.
Advocate. Arunagiri
(Expert) 07 September 2014
I am reproducing certain portion of the SC ruling in Jagdish Chander –Vs- Ramesh Chander and Others, (2007) 5 SCC 719
Para 9.....In the absence of an arbitration agreement, the question of exercising
power under section 11 of the Act to appoint an Arbitrator does not arise.
Para 11. The existence of an arbitration agreement as defined under section 7 of the Act is a condition precedent for
exercise of power to appoint an Arbitrator/Arbitral Tribunal, under section 11 of the Act by the Chief Justice
or his Designate. It is not permissible to appoint an Arbitrator to adjudicate the disputes between the parties,
in the absence of an arbitration agreement or mutual consent. The designate of the Chief Justice of Delhi
could not have appointed the Arbitrator in the absence of an arbitration agreement.
So, in the absence of the arbitration clause, HC is not having power to appoint any arbitrator.
Raj Kumar Makkad
(Expert) 07 September 2014
The Delhi High Court held that where the existence or non-existence of an arbitration agreement is not clear, it is settled law that it would be proper for the arbitrator to determine the question under Section 16 of the the Act. The Court observed, "It is because the power that is exercised by the Court under Section 11 is in the nature of an administrative order."2The Court observed that it is the Arbitral Tribunal which would rule on its own jurisdiction including the existence and validity of the arbitration agreement. "The Arbitral Tribunal authority under Section 16 is not confined to width of its jurisdiction but goes also to the root of its jurisdiction."3
The Court accordingly went on to appoint a retired judge of the Delhi High Court as a sole arbitrator (despite the fact that the arbitration clause under the SAC Agreement prescribed for a 3 member tribunal) who was to determine questions relating to the existence of the arbitration agreement and accordingly disposed of the Section 11 Petition.
Analysis:
The principle that the Arbitral Tribunal can rule on its own jurisdiction is well settled. The Supreme Court has also held that a civil court does not have the power to stay arbitration on the grounds that no arbitration agreement exists since it is the premise of the arbitrator to make decisions with respect to its jurisdiction and the existence and / or validity of an arbitration agreement.4 However in the heavily criticized decision of SBP Co. v. Patel Engineering5 a seven judge bench had held that in a Section 11 application the Court's power is not merely administrative but judicial and it can determine the existence of a valid arbitration agreement, the existence of a claim, and on the qualifications of the arbitrator or arbitrators. It appears that the present case has not referred to Patel Engineering. In any event, since the proposition set out by Patel Engineering is sweeping it remains to be seen what will happen in the present case once it is appealed. Interestingly, in National Insurance Co. Ltd v. Boghara Polyfab Pvt. Ltd.6while interpreting Patel Engineering the Supreme Court observed (in para 17.1 (b)) that the Court will have to decide whether there is an arbitration agreement. It would be important to see if the present case falls within this category and if so whether it would withstand the scrutiny of the Supreme Court.
Interestingly, the Delhi High Court appointed a single arbitrator although the clause provided for a panel of 3. There have been other decisions where upon failure of appointment of a panel it has been understood that agreement failed and Courts have appointed a sole arbitrator even when the clause required three.7
The other important aspect of the questions examined in this case is the doctrine of negative effect Kompetenze-Kompetenze. The Kompetenze-Kompetenze doctrine provides that the Arbitrator has the power to rule on its jurisdiction. Negative effect of Kompetenze-Kompetenze states that in order for the Arbitrator to be able to decide on its jurisdiction Courts ought not to needlessly interfere and must transfer the matter before the arbitrator. This is a fine balance to tread. In matters where a party is being dragged into arbitration and if the court exercises negative Kompetenze-Kompetenze then the losing party would have to wait until the final award is passed in order to challenge this order under Section 34 of the Act. Therefore, courts ought to tread with caution even when exercising their discretion in a pro-arbitration manner. The scheme of the Act with respect to jurisdictional challenge under the Act is provided below.
Advocate. Arunagiri
(Expert) 08 September 2014
The case referred by Mr.Makkad is Delhi High Court Indeen Bio Power Limited vs Dalkia India Pvt. Ltd. on 22 January, 2013.
http://indiankanoon.org/doc/27735785/
In this particular case the Petitioner approached the high court for appointment of Arbitrator based on the Arbitration clause mentioned in their agreement with the Respondent. The High Court reproduces the Arbitration clause of that agreement as follows:-
Clause 13.2 of the agreement is reproduced as under:
"13.2 Dispute Resolution: All disputes, controversies, claims or counter claims resulting from the Contract Agreement or relating to the Contract or to a breach of this Agreement, to its rescission or its invalidity, shall be settled by arbitration in accordance with the (Indian) Arbitration and Conciliation Act, 1996 as amended from time to time. There shall be three arbitrators. The seat of arbitration shall be New Delhi, India. The language used for the arbitration procedure shall be English. The Contract Agreement shall be governed by the laws of India."
The Delhi High court found the existence of the above arbitration clause and then only ordered for the appointment of the Arbitrator.
The decision referred by Mr.Makkad is not supporting his opinion.
Where as the judgement quoted by me is Jagdish Chander –Vs- Ramesh Chander and Others, (2007) 5 SCC 719. In this case the SC had held that:-
"The designate of the Chief Justice of Delhi could not have appointed the Arbitrator in the absence of an arbitration agreement."
I will update my knowledge if there is any decision of the High Court or Supreme Court which says the arbitration clause is not necessary for the appointment of Arbitrator.
Raj Kumar Makkad
(Expert) 08 September 2014
My issue is just to highlight the fact that one of the parties to the dispute before high court claimed having the arbitration clause whereas the other party denied it. The high court also gone through the agreement and held that let the arbitrator be appointed and he shall only see whether there is such clause or not.
In nutshell Delhi High Court even after finding in the agreement non-existence of the clause for the appointment of arbitrator, appointed it which shows its discretionary power though the same is opposite to the judgment quoted by Expert Arunagiri.
Surrender K Singal
(Querist) 08 September 2014
All that would imply extra costs and time till AT decides its jurisdiction over the matter; Did DHC not exceeded its discretion for no useful purpose ?
Raj Kumar Makkad
(Expert) 08 September 2014
We cannot comment upon the discretionary power of any high court as this section is not meant for the academic discussions.
Advocate. Arunagiri
(Expert) 08 September 2014
The Delhi High court found the existence of the above arbitration clause and then only ordered for the appointment of the Arbitrator.
Raj Kumar Makkad
(Expert) 08 September 2014
Delhi High Court clearly held that whether there is such clause or not is to be seen by arbitrator only which shows that it was not confirmed about the clause existing therein regarding the appointment of the arbitrator.
Raj Kumar Makkad
(Expert) 08 September 2014
Delhi High Court clearly held that whether there is such clause or not is to be seen by arbitrator only which shows that it was not confirmed about the clause existing therein regarding the appointment of the arbitrator.
