SIME DARBY ENGINEERING SDN. BHD. v. ENGINEERS INDIA LTD

Citation: [2009] 11 S.C.R. 287

Court: Supreme Court of India

Bench: A.K. GANGULY

Case summary

SIME DARBY ENGINEERING SDN. BHD. v. ENGINEERS INDIA LTD.pdf

Judgment text

[2009] 11 S. C. R. 287 SIME DARBY ENGINEERING SON. BHD. v. ENGINEERS INDIA LTD. (Arbitration Petition No. 3 of 2009) JULY 22, 2009 [ASHOK KUMAR GANGULY, J. ] _.. , ARBITRATION AND CONCILIATION ACT, 1996: ss. 2(1)(d), (f), 10(2) and 11 - International Commercial Arbitr3tion - Appointment of arbitral tribunal - Number of arbitrators - Dispute regarding - Held: In the instant case, the relevant arbitration clause ofagreement is silent about1: the number of arbitrator - Therefore, s. 10(2) squarely applies·- In view of the arbitration clause read with s. 10(2)1 clear that 'arbitral tribunal in the instant case would be consisting of ... , sole arbitrator - Policy decision that for contracts costing over a particular amount B committee of arbitrators would be composed of, cannot change the contractual clause - Besides, the policy decision coming into force after the contract between the parties had been entered into, the said policy decision cannot override the contract - UNCITRAL .

Model Law on International Commercial Arbitration - Articles . 2(b) and 10(2)-Administrative Law-Policy decision vis-a7vis, ~ contractual clause. ~ 'F s. 10(2) - Number of arbitrators - Held: Parties' autonomy in the arbitration agreement must be given due importance in construing intention of parties - Parties have freedom to change the number of arbitrators even after the contract has been entered, and by mutual consent parties may amend the contract - Interpretation of commercial arbitration agreements. -t. ·---1 Redfern and Hunter, Law and Practice of International Commercial Arbitration, IV Edition, 2004, page 185 and Mustil and Boyd on Commercial Arbitration, 2nd Edition, page 174, referred ·to. CIVIL ORIGINAL JURISDICTION : Arbitration Petition No. 3 of 2009. Petition Under Section 11 Sub section (5) r/w Sub section (12) of The Arbitration & Conciliation Act, 1996. Oipankar Gupta, Anil Bhatnagar, Amit Dhingra, Aman ~ Leekha and Dua Associates for the Petitioners.

Mukul Rohtagi, Syed Naqvi, Namrata ,Kapoor Sharma, Diksha Rai Ninad Laud, Nikhil Rohtagi and Surya Kant for the Respondents. The following Order of the Court was delivered ORDER ;i 1. This petition has been filed under Section 11 of Arbitration and Conciliation Act 1996 (hereinafter referred "the said Act") by the petitioner praying for appointment of the arbitral tribunal to adjudicate the claims and disputes between the petitioner and the respondent. 2. The petitioner is a company incorporated and existing under the laws of Malaysia and is engaged in the business of :iv fabrication of all types of offshore and onshore structures and t>'complexes. The respondent on the other hand is the company incorporated under the (Indian) Companies Act, 1956 and is inter alia engaged in the business of providing engineering and related technical services for petroleum refineries and other industrial projects. 3. The necessary facts of the case are that Oil and Natural ~.. ?

-- Gas Corporation Limited (ONGC) invited a tender vide notification dated November 17, 2003 for carrying work of Survey, Design, Engineering, Procurement, Fabrication, ~ Anticorrosion and Weight coating, Laying of submarine pipeline, Installation of SPM, Load out, Tie-down/Sea-fastening and various other jobs in respect of Mumbai High South Field offshore site. 4. In connection with the said tender issued by ONGC, respondent and petitioner entered into a Business Agreement on 22/01/2004 by which it was agreed that the respondent shall quote as a bidder against the said Tender with the petitioner -{. as a sub~contractor for identified scope of work. The tender was awarded by ONGC to the respondent by notice dated 10/03/ 2004 for the said fabrication and installation of D-1 Well-Cum- Water Injection Platform at Mumbai High South field Off-shore site on a turnkey basis for a sum of US $ 62,3000,000/- and thereafter an agreement between the respondent and ONGC was entered into.

Then, the respondent entered into a subcontract with the petitioner which was signed on 29th of . i. ,- October 2004 and for Fabrication, Load Out and Transportation of Jacket, Piles, Conductors and Deck for D-1 Well-Cum-Water Injection Platform Project of ONGC 13t Bombay High South field off-shore site for a lump sum subcontract price of US $ 20, 162,460/-. In terms of the said subcontract the petitioner carried out its scope of work in terms of its contractual obligations. As it did not receive the full payment from the respondent disputes and differences between them cropped up. -~ These disputes between the parties remained unresolved despite some joint negotiations between them. 5. The petitioner by jts Advocate's notice on 19/02/2008 invoked the arbitration Clause and referred. all disputes and differences between them and respondent to arbitration including its claim of US $ 14,244,2.

02 and claim for loss ans:i damage on account of financing charges and foreign ~1 exchange and such other damages. In the said letter the petitioner also suggested the names of a few arbitrators. The respondent by its letter dated 26/02/2008 did not accept the stand of the petitioner and stated that petitioner's stand to _,_,,___ proceed with arbitration is premature and the respondent requested the petitioner to withdraw the Notice Invoking Arbitration and come out with a viable proposal to create a joint settlement mechanism to settle the dispute amicably. ,6. However, the learned counsel for the petitioner tried to show before this Court that several meetings were held between the parties for settling the dispute amicably but the said efforts ultimately did not succeed. However before this .. ,..

__ Court the learned counsel for the respondent fairly accepted the position but disputes between the parties virtually cannot be resolved amicably anymore and the matter should be resolved through arbitration. 7~ Learned counsel for the respondent submitted that he does not dispute that there are arbitrable disputes between the parties. Nor does he dispute. that the petitioner has invoked the arbitration clause between the parties. The only point on which ? I. the case is argued is that in this case. the arbitration panel must consist of three arbitrators, one is to be nominated by each party and the third arbitrator is to be chosen by the nominated arbitrators. Learned counsel for the petitioner on the other t:iand did not accept -the said_ stand of the learned counsel for the respondent and submitted_ thatin·terms of the agreem~nt in this· case dispute can be decided by th~ sole: arbitrator. Matter was actually heard before this Court on the ~for~said coptrovetSY. );. -- 8.

Learned counsel for the petitioner submitted that admittedly the arbitration clauses in the contract which govern the rights of the parties in the matter of arbitration are as follows: "12. 1 This Subcontract shall be governed by and construed in accordance with the Laws of India. The Courts at Delhi· shall have sole jurisdiction. 12. 2 The Parties shall endeavour to resolve any dispute or difference amicably through joint negotiation and when -necessary by reference to the Chief Executive of Ell and ,. I .. ___ -or SSE. If any dispute or difference, which cannot be mutually resolved by the parties, the same shall be referred to . t 15. . Learned counsel for the respondent on the other hand submits that reference of the matter to a panel of three arbitrators is not ruled out if the arbitration clause is properly construed alongwith Section 10 of the said Act. •} 16. Learned counsel admitted that Clause 12. 2 is silent - i,'about the number of arbitrators but Clause 12.

3 refers to an j expression 'arbitrator(s)'. By relying on the said expression in J- ) itral tribunaLshall consistofa:sole arbitrator-. In this connection if UNCITRAL rules are referred the position will remain the same. UNCITRAL model law on International Commercial Arbitration also accepts the same -definition of Arbitration Tribunal in Article 2(b). Article 10 of ~hose rules is almost identical with Section 10 of the said Act Article 2(b) and Article 10 of those rules are extracted hereinbelow:- "Article 2. Definition and rules of interpretation - For the purposes of this Law: (a) xxx xxx (b) "arbitral tribunal" means a sole arbitrator or a panel ). -___,, of arbitrators. " "Article 10. Number of arbitrators - (1) The parties are free ,. ,,,. in consultation with colleagues in an endeavour to arrive at an agreed or majority determination of the matters in dispute. " ' ,) (Page 184) 30. Similar opinion has been expressed in Russell on Arbitration 23rd Edition.

At page 129, paragraph 4-035 with reference to arbitration it has been said "Where no choice is made, the law implied a reference to a tribunal consisting of a sole arbitrator. " In fact Section 15(3) of the (English) Arbitration Act, 1996 provides for the same. 'r- ,Y 31. Mustil and Boyd on Commercial Arbitration, 2nd Edition also contains the same statement of law. At page 174 of the said book it has been provided that "an arbitration agreement calls for a reference to a single arbitrator, either if it contains an express stipulation to that effect, or if it is silent as to the mode of arbitration. " ' , 32. In the instant case, the arbitration clause 12. 2 is silent as to the number of arbitrator. The said clause re? d with Section 10(2) of the Act makes it very clear that arbitral tribunal in the instant case would be consisting of a sole arbitrator. 33. The learned counsel for the respondent has referred to its policy decision which has been quoted hereinabove.

Such policy decision cannot change the contra\;fual clause. In any event the contract between the parties was entered into in ~ 2004. The said policy decision came into effect in 2005. Therefore, the said policy decision cannot in any way override contract between the parties. 34. The parties autonomy in the arbitration agreement must be given due importance in construing the intention of the parties. In so far as reference to the expression 'arbitrator(s)' in clause 12. 3 is concerned, the same does not in any way )o--r affect the intention of the parties in clause 12. 2. 35. It is noted in this connection that parties have freedom SIME DAR6Y ! ;NGINEERING SON. SHP. v. 297 to change the number of arbitrator even after the contract has been entered and by mutual consent the parties may amend the contract. If that takes place, in such cm eventuality cla1,1se 12. 3 provides that the arbitrator or arbitrators have to give.

reasoned award in respect of each dispute and differencH referred. Here also the expression which has been used is 'him' . which also points to a sole arbitrator. 36. It is clec;1rly provided in the said Act that an arbitrCll tribunal can, if necessary, take the help of experts in terms of Section 27 of· the said Act. If the sole arbitrator requires the · assistance of an expert it can always take such assistance. . ;: 37. Mr. Mukul Rohtagi, learned counsel for the respondent ' has fairly submitted that if his argument is not accepted by the . Court then his client has no objection to the appointment of Hon'ble Mr. Justice D. P . Wadhwa, a former Judge of this Court, to be the sole arbitrator in this case. The name of Justice Wadhwa also finds place in the li:;t of names suggested by the petitioner. Therefore, appointment of Justice Wadhwa is fairly by consensus. 38. Since I am unable to accept the argument of learned counsel for the respondent, I accordingly appoint Justice D.

P, · Wadhwa, a former Judge of this Court, the sole arbitrator in this case. 39. The Hon'ble arbitrator is requested to decide the dispute as early as possible and preferably within a period of six months from the date of entering upon the reference. The terms of arbitration proceeding are left to be decided by learned arbitrator. 40. The petition is allowed accordingly. No order as to costs. R. P. Petition allowed.