2014 (11) TMI 1242 - HC - Indian Laws

Termination of the contract - whether notice of termination of the contract in issue can operate as an order of termination? - HELD THAT - The contract in issue is being executed through the Engineering Consultant i.e., RITES Ltd. (respondent no.2). Therefore, in view of the order that I propose to pass, both counsels say that the notice need not be issued to the other respondents including respondent no.2. In view of what is stated by the learned ASG, whereby in effect he has accepted the offer of the petitioner, no further orders are called for in the petition filed under Section 9 of the Act. Parties will abide by the contents of paragraph 5(i) to (iv), which have fructified into a consent order - Since, counsels for parties are agreed that the procedure of DRE, as encapsulated in the contract in issue, has been rendered inefficacious, the parties will proceed to arbitration straightaway. The captioned petition is disposed of.

Summary

Issues:
1. Termination of contract by respondent no.2
2. Bank guarantees and their encashment
3. Appointment of arbitrators
4. Procedure for arbitration

Termination of Contract:
The petitioner's counsel highlighted the letter of termination issued by respondent no.2 concerning the contract in question. The termination was acknowledged without prejudice to the petitioner's rights to challenge its legality. The parties agreed that notice need not be served to other respondents, including respondent no.2, as the contract was being executed through an Engineering Consultant.

Bank Guarantees and Encashment:
The learned ASG accepted the petitioner's offer regarding bank guarantees. Out of six bank guarantees, four advance bank guarantees were to be encashed subject to the petitioner lodging their claim before the arbitrator. The remaining two performance bank guarantees were not to be encashed until respondent no.1 moved an application before the arbitrator. The fate of these guarantees would be determined by the arbitrator's orders.

Appointment of Arbitrators:
Both parties agreed to appoint arbitrators in accordance with the petitioner's offer. Each party was to nominate an arbitrator within two weeks from the date of the judgment. The third arbitrator, acting as the Presiding Officer, would be appointed by the two nominees of the petitioner and respondent no.1. Any claims related to plant and machinery retrieval were to be presented before the arbitrator under Section 17 of the Arbitration and Conciliation Act, 1996.

Procedure for Arbitration:
The parties acknowledged that the Dispute Resolution Expert (DRE) procedure outlined in the contract was ineffective. Therefore, they agreed to proceed directly to arbitration as per the terms discussed and accepted. The judgment disposed of the petition under Section 9 of the Act, and the parties were free to submit their claims and counterclaims as advised.

This detailed analysis of the judgment addresses the termination of the contract, the handling of bank guarantees, the appointment of arbitrators, and the agreed procedure for arbitration as outlined in the court's decision.