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2014 (2) TMI 1252 - SC - Indian LawsArbitration and Conciliation - High Court has appointed/nominated an Arbitrator on behalf of the appellant herein on the ground that in spite of notice by the respondent in this behalf, the appellant had failed to nominate its Arbitrator in terms of Clause 25 of the Agreement entered into between the parties - Held that - 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 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.
Issues Involved:
1. Validity of the High Court's appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. 2. Interpretation and modification of Clause 25 of the original contract by supplementary agreements. 3. Determination of the appropriate arbitration mechanism between the appellant and the respondent. 4. Equitable resolution of disputes and claims between the parties. Issue-wise Detailed Analysis: 1. Validity of the High Court's Appointment of an Arbitrator: The High Court appointed an arbitrator on behalf of the appellant under Section 11(6) of the Arbitration and Conciliation Act, 1996, due to the appellant's failure to nominate its arbitrator as per Clause 25 of the original agreement. The appellant contested this appointment, arguing that Clause 25 had been modified by supplementary agreements, negating the need for arbitration at this stage. The Supreme Court found that the High Court erred in its decision, as Clause 25 had indeed been materially altered by the supplementary agreements, thus invalidating the High Court's appointment of an arbitrator. 2. Interpretation and Modification of Clause 25: Clause 25 of the original agreement provided for arbitration to settle disputes between the appellant and the respondent. However, this clause was significantly modified by three supplementary agreements. The first supplementary agreement (dated 31.1.1990) established that disputes involving the respondent's work would be treated as joint disputes between the appellant and SCOPE, to be settled through negotiation or arbitration with SCOPE. The second supplementary agreement (dated 8.12.1993) reinforced this mechanism, stating that no arbitration would occur between the appellant and the respondent regarding these claims until the project's completion. The third supplementary agreement (dated 6.2.1995) further confirmed this approach and specified that any arbitration would follow the modified terms of the first supplementary agreement. 3. Determination of the Appropriate Arbitration Mechanism: The modified arbitration mechanism required the appellant to raise the respondent's claims with SCOPE, with the respondent's assistance and cooperation. Only if disputes remained unresolved after arbitration with SCOPE could arbitration occur between the appellant and the respondent. The Supreme Court emphasized that the modified Clause 25 did not permit the respondent to unilaterally seek arbitration with the appellant at this stage, as the claims first had to be addressed through the joint mechanism with SCOPE. 4. Equitable Resolution of Disputes and Claims: The Supreme Court acknowledged the respondent's frustration with delays but emphasized that the contractual agreements between the parties must be honored. The Court directed the appellant to ensure that SCOPE settled the final bill within two months. If disputes remained after SCOPE's settlement, the appellant was to invoke arbitration with SCOPE, with the respondent's cooperation. If the appellant chose not to pursue arbitration with SCOPE but the respondent still had legitimate claims, arbitration between the appellant and the respondent would proceed under Clause 25. The arbitral tribunal was instructed to render its award within six months of its constitution. Conclusion: The Supreme Court allowed the appeal, setting aside the High Court's order and providing clear directions to expedite the resolution of disputes through the agreed arbitration mechanisms. The judgment emphasized adherence to the modified contractual terms and aimed to balance the equities between the parties.
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