TMI Blog2014 (2) TMI 1252X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitration agreement between the appellant and SCOPE. In raising such disputes the appellant and the respondent shall act in unison as per the understanding arrived at between them vide supplementary agreements. In that event, arbitral tribunal shall be constituted within 2 months thereof. (3) In case the appellant is satisfied with the final bill and chooses not to raise the claims with SCOPE but the respondent feels that their claims are legitimate then it would be treated as dispute between the appellant and the respondent. In that event, arbitral tribunal shall be constituted as per Clause 25 of the agreement dated 3.3.1998 between the parties within a period of two months of that event. (4) In either of the aforesaid arbitrations, the arbitral tribunal shall endeavour to render its award within six months from the date of the constitution of the arbitral tribunal. - CIVIL APPEAL NO.7586 OF 2009 - - - Dated:- 25-2-2014 - Surinder Singh Nijjar A.K. Sikri, JJ. JUDGMENT A.K.SIKRI,J. 1. On an application preferred by the respondent herein under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act), the High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the appellant to the respondent. As can be seen from the reading of this Clause, as reproduced below, amount under this sub contract was payable to the respondent by the appellant only on receipt of corresponding receipts from SCOPE: Clause 2 L T shall pay MHB the said contract amount or such other sum as shall become payable only as and when the said payments are received by L T from SCOPE at the time and in the manner hereinafter specified in the terms and conditions of this Contract. 3. Another important stipulation in this sub contract was Clause 6, as per which the respondent was to perform the work awarded to it to the satisfaction of SCOPE, namely the Principal. It reads as under: Clause 6 All obligations in respect of ancillary works undertaken by MHB shall be performed by MHB itself and will not jeopardize the interest and contract of L T with SCOPE. Satisfaction of SCOPE, their representatives and Architects shall form the basis of this agreement. 4. Clause 25 of the agreement between the appellant and the respondent provides for arbitration for settlement of disputes. Relevant part of this Clause reads as under: Clause 25 Except where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aims of the respondent and the appellant in turn raised those claims with SCOPE. A settlement was reached between the appellant and SCOPE with respect to those claims whereby the appellant was given a sum of ₹ 2.15 crores by SCOPE. The appellant and the respondent entered into an agreement dated 31.1.1990 for apportioning the aforesaid amount, whereby a sum of RS.77.40 lacs was paid to the respondent towards full and final settlement of claims/ price escalation on works due to hindrance caused in execution of work and to complete the balance work. At the same time, another important understanding was also reached between the parties. While making this apportionment, the modalities of settling the disputes between the parties through arbitrator also underwent a significant change. This is clear from Clause (viii) of the first supplementary agreement which reads as under: The Agreement provides that all disputes between the parties shall be settled through arbitration. It is now expressly agreed that any dispute or difference which MHB might have with L T under the agreement or SCOPE might have with L T under the main contract between then relating to the part of work that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the two parties synergize, was too obvious. Since the respondent has undertaken the work, its inputs could immensely help the appellant in prosecuting the claims efficaciously and potently. Further, by participating the respondent would have satisfaction that its interest is appropriately taken care of. It was even supposed to bear proportionate cost of arbitration. It was, thus, clear intention that the claims of the respondent were to be taken up by the appellant and raise with SCOPE and in the event SCOPE disputing those claims, get those claims adjudicated through arbitration. In that sense, both the appellant and respondent were on one side as co-claimants. However, since the respondent is not a party to the main agreement dated 29.9.1988 which is entered into between the appellant and SCOPE, the respondent was supposed to give the assistance and cooperate in the manner provided in this Clause. It is for this reason that this Clause unambiguously further provided that in view of the arbitration between the appellant and SCOPE, pertaining to the claims of the respondent as well, even if the disputes between the appellant and the respondent were deemed to have been settled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and raise claims against SCOPE was reinforced by Clause 6 in the said agreement which again provided an underlined message that in so far as the appellant and the respondent are concerned, they shall not resort to any arbitration between themselves on this account. For better appreciation, we reproduce Clause 6 herein below, of the second supplementary agreement, dated 8.12.1993: That L T and MHB shall not undertake any other arbitration as between them in respect of the claims referred to pending arbitration, except to share the proceeds or liabilities as stated above by way of accord and satisfaction. 11. In the aforesaid arbitration, two Member Arbitral Tribunal awarded a sum of ₹ 15.02 crores approximately (which was subsequently reduced to ₹ 13.23 crores by mutual negotiation) and as per the second supplementary agreement, that amount was shared between the appellant and the respondent whereby appellant paid a sum of ₹ 4.58 crores to the respondent. So much so, when the amount of ₹ 15.02 crores, as awarded by the Arbitral Tribunal against SCOPE and in favour of the appellant was reduced to 13.23 crores, this arrangement was endoresed by the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the arbitration was specifically made subject to the logistic provided in the first supplementary agreement dated 31.1.1990 making it abundantly clear that Clause 25 stood modified by the supplementary agreement. 13. Some further claims, out of the aforesaid contract arose and the appellant submitted those claims to SCOPE in October, 2000 which were up to date in November 2000. These were made jointly by these parties on SCOPE in August 2001. They were up dated again in December 2002 and January 2003 in concert with each other. 14. Now the stage came which led to present proceedings. While the things stood at the aforesaid level, the respondent decided to close the contract sometime in the year 2002. We are not required to go into the nitty gritty of this event viz. as to whether the respondent abandoned the site or it had completed the project. Suffice it is to note that the respondent raised many claims with the appellant and also served legal notice dated 31.1.2004 in this behalf. It nominated its arbitrator and called upon the respondent to appoint its arbitrator for settling the disputes between them. The appellant replied by denying the contents of the legal notice. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute between the appellant and the respondent, that there can be an arbitration in respect of those disputes between these two parties. We are, therefore, of the opinion that the High Court is not correct in holding that Clause 25 of the original agreement in unamended form holds the field. In fact, even the respondent knew fully well that said clause had been drastically altered by supplementary agreements. It is for this reason that in the prayer (a) of the application under Section 11 of the Act filed by the respondent, it has itself acknowledged this change by mentioning that arbitrator be appointed in terms of Clause 25 of the contract agreement dated 3rd March 1988 as modified by supplementary agreements dated 31st January 1990 and 6th February 1995 . What, however, is lost sight of by the respondent in the process, is that the modification in Clause 25 did not permit the respondent to move this kind of application for appointment of arbitrator between the parties, at that stage. 17. Fully realizing the sequittor of the modified clause, Ms. Priya Kumar, learned Advocate appearing for the respondent tried to paint a different story alleging non-cooperation of the appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant to hold a meeting to discuss on the pending issues. Meanwhile the appellant L T has been continuing to extend the Bank Guarantee which was submitted to SCOPE. 20. In such a scenario, when the final bill is almost at the stage of finalization the only aspect that can be taken care of at this stage is to hasten the process of arbitration, in case after the passing of the final bill by SCOPE, some claims of the respondent still survive. 21. Accordingly while allowing this appeal and setting aside the order of the High Court, we would like to give the following directions, in order to balance the equities: (1) It shall be ensured by the appellant that final bill is settled by SCOPE within two months from the date of receiving the copy of this order. For this purpose, this order shall be brought to the notice of SCOPE as well so that SCOPE acts swiftly for settling the bill. (2) In case there are certain claims of the respondent which are not agreed to while passing the final bill and disputes remain, those will be taken up by the appellant with SCOPE immediately thereafter by invoking arbitration between the appellant and SCOPE as per the arbitration agreement betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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