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2020 (10) TMI 1371 - HC - Indian LawsInvocation of bank guarantee that had been furnished by the petitioner as security deposit - requirement to fulfill certain preconditions before invoking the arbitration - HELD THAT - There is a clear indication therein that the terms of the Concessionaire Agreement are to be accorded priority over all other agreements and documents that formed part of the Concessionaire Agreement. The recital 'F' of the Concessionaire Agreement, no doubt, indicates that the RFQ, RFP and LOIA would all form integral parts of the Concessionaire Agreement. The point to be noted, however, is that in the event of ambiguities and discrepancies arising between clauses in the Concessionaire Agreement and clauses in the RFP, as in this case, it is the clause in the Concessionaire Agreement that has to prevail. No doubt, it is only in the event of a 'conflict' that the relevant clause in the Concessionaire Agreement would prevail over the corresponding clause in the RFP. On an overall perusal of the clauses in the RFP as also in the Concessionaire Agreement, I find that the clauses in the Concessionaire Agreement which deal with the same subject matter as the corresponding clause in the RFP were intended to override the latter clauses in the RFP. The contention of the learned senior counsel for the respondent cannot be accepted that it is only in the event of a challenge to clause 5.15 of the RFP on the ground that it is violative of the fundamental rights of the petitioner under Article 14 of the Constitution of India, that this Court can hold the said clause, in the RFP, as illegal. After the amendment of the 1996 Act in 2015, the law must be taken to be that any clause in an agreement, that requires one of the contracting parties to make a deposit of amount as a precondition for invoking the arbitration, has to be seen as rendering the entire clause arbitrary, being not only excessive or disproportionate but leading to a wholly unjust situation in arbitration proceedings, that are ordinarily to be encouraged on account of the high pendency of cases in courts and the ever-increasing cost of litigation - it is opined that even if the clause in the RFP is to be treated as supplementing Article 22 of the Concessionaire Agreement, the offending conditions in the RFP would have to be ignored in view of the declaration of law by the Supreme Court. Article 22 of the Concessionaire Agreement constitutes the arbitration agreement between the parties, discretion required under Section 11 of the 1996 Act, and appointment of a sole arbitrator is made - Justice (Retd.) Sri. T.R. Ramachandran Nair, a former Judge of this Court is nominated as the sole arbitrator to arbitrate on the disputes that have arisen between the parties herein. This Arbitration Request is allowed.
Issues Involved:
1. Delay in operationalization of the project due to respondent's actions. 2. Wrongful invoicing by the respondent. 3. Unilateral invocation of bank guarantee and blacklisting of the petitioner. 4. Validity and enforceability of preconditions for invoking arbitration. 5. Existence and priority of arbitration agreement clauses. Detailed Analysis: 1. Delay in Operationalization of the Project: The petitioner, a company incorporated under the Companies Act, 1956, alleged that various acts of omission and commission by the respondent, the Airports Authority of India, led to delays in operationalizing the food and beverage outlets at Calicut International Airport. The petitioner claimed that these delays prevented them from commencing commercial operations before obtaining BCAS clearance on 20.7.2018, thus disputing the invoices raised by the respondent for the period prior to this date. 2. Wrongful Invoicing by the Respondent: The petitioner contended that the respondent wrongfully raised invoices effective from 6.4.2018, despite the petitioner not being able to commence operations due to the aforementioned delays. Some payments were made under protest. The petitioner issued a termination notice on 16.4.2019 and vacated the premises on 13.8.2019 due to accumulated losses. 3. Unilateral Invocation of Bank Guarantee and Blacklisting: Following the termination notice, the respondent unilaterally invoked the bank guarantee provided by the petitioner as a security deposit and blacklisted the petitioner from future tenders for three years. The invocation of the bank guarantee was injuncted by an order from the Principal District Judge, Manjeri. The petitioner sought an amicable resolution, which failed, leading to the invocation of arbitration on 23.9.2019. 4. Validity and Enforceability of Preconditions for Invoking Arbitration: The respondent argued that the arbitration request was premature due to non-fulfillment of preconditions stipulated in clause 5.15(i) and (ii) of the RFP, which required the petitioner to deposit the disputed amount and obtain consent for the arbitrator's recommendations. The petitioner countered that these conditions were invalid based on Supreme Court rulings, specifically citing Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd. and ICOMM Tele Ltd. v. Punjab State Water Supply and Sewerage Board and Anr., which deemed such preconditions as arbitrary and contrary to the objectives of arbitration. 5. Existence and Priority of Arbitration Agreement Clauses: The court examined the relevant clauses in the RFP and the Concessionaire Agreement. It was determined that Article 1.2 of the Concessionaire Agreement, which accorded priority to its terms over those in the RFP in case of conflict, applied. Therefore, Article 22 of the Concessionaire Agreement, which detailed the arbitration procedure, was deemed the binding arbitration agreement between the parties. The court rejected the respondent's contention that the preconditions in the RFP were valid, emphasizing that post-2015 amendments to the Arbitration and Conciliation Act, 1996, limited the court's role to determining the existence of an arbitration agreement. Conclusion: The court concluded that Article 22 of the Concessionaire Agreement constituted the arbitration agreement between the parties. Consequently, the court appointed Justice (Retd.) T.R. Ramachandran Nair as the sole arbitrator to adjudicate the disputes. The order included detailed directions for communication, appearance, and procedural aspects of the arbitration, ensuring compliance with the Kerala High Court (Fee Payable to Arbitrators) Rules, 2017, and maintaining equal sharing of costs and fees by the parties. All contentions before the arbitrator were kept open, and the arbitration request was allowed. The disclosure statement was scheduled for 12.11.2020.
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