Hindustan Prefab Ltd. (hereinafter ‘HPL’) has filed the present
appeal under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter the ‘A&C Act’) impugning an order dated
09.04.2021 (hereinafter ‘the impugned order’) passed by the learned Arbitral Tribunal. By the impugned order, the Arbitral Tribunal rejected the appellant’s application to implead National Law University, Orissa (hereinafter ‘NLUO’) in the arbitral proceedings pending between HPL and the respondent (hereafter ‘NCC’).
5. First of all, this Court has serious reservations as to whether the present appeal is maintainable. Impleadment of a party is not an “interim measure”, which as the expression suggests would be
operative till conclusion of the arbitral proceedings. The application for seeking impleadment of NLUO before the Arbitral Tribunal cannot be considered as an application for an interim measure of protection. Thus, such a relief would not fall within the scope of an application under Section 17 of the A&C Act. Consequently, it is doubtful whether any order of the Arbitral Tribunal for refusing to join any other party in the arbitral proceedings can be made a subject matter of an appeal under Section 37 of the A&C Act.
IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Judgment : 3rd June, 2021
ARB. A. (COMM.) 26/2021 and IA Nos. 7261/2021
& 7262/2021
HINDUSTANT PREFAB LTD. Vs M/S. NCC LIMITED
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
Dated: 03.06.2021
1. Hindustan Prefab Ltd. (hereinafter ‘HPL’) has filed the present
appeal under Section 37(2)(b) of the Arbitration and Conciliation Act,
1996 (hereinafter the ‘A&C Act’) impugning an order dated
09.04.2021 (hereinafter ‘the impugned order’) passed by the learned
Arbitral Tribunal. By the impugned order, the Arbitral Tribunal
rejected the appellant’s application to implead National Law
University, Orissa (hereinafter ‘NLUO’) in the arbitral proceedings
pending between HPL and the respondent (hereafter ‘NCC’).
2. HPL contends that since disputes between the parties arise in
relation to a contract for construction of the proposed building of
NLUO, NLUO would be a proper and necessary party to the arbitral
proceedings.
3. Mr. Gupta, learned counsel appearing for the appellant,
submitted that since HPL was only entitled to retain a small
commission on the amounts payable by NLUO and the entire fund for
the construction and development of the project in question was
required to be paid by NLUO, it would necessarily have to be
impleaded in the arbitral proceedings. He submitted that in absence of
impleading NLUO, HPL may be held liable for the amounts due to
NCC. However, HPL had little stake in the construction contract as it
was only acting as an executing agency on behalf of NLUO.
4. I have heard the learned counsel for the appellant.
5. First of all, this Court has serious reservations as to whether the
present appeal is maintainable. Impleadment of a party is not an
“interim measure”, which as the expression suggests would be
operative till conclusion of the arbitral proceedings. The application for seeking impleadment of NLUO before the Arbitral Tribunal cannot be considered as an application for an interim measure of protection. Thus, such a relief would not fall within the scope of an application under Section 17 of the A&C Act. Consequently, it is doubtful whether any order of the Arbitral Tribunal for refusing to join any other party in the arbitral proceedings can be made a subject matter of an appeal under Section 37 of the A&C Act.
6. Having stated the above, this Court also considers it apposite to
examine the petitioner’s claim, whether it is entitled to join NLUO as
a party to the arbitral proceedings.
7. HPL and NLUO had entered into an agreement dated
07.09.2010 (hereinafter ‘the Principal Agreement’). The first recital
of the Principal Agreement indicates that NLUO had accepted the
offer submitted by HPL and appointed HPL as a “Principal
Contractor for executing the construction work of proposed National
Law University, Orissa, Naraj, Cuttack.” In terms of Clause 18 of the
Principal Agreement, HPL was required to submit a bar chart
providing details for the items of construction as stated in the said
Clause. In terms of Clause 19 of the said Agreement, HPL had agreed
to “complete all the work as per the bar chart submitted by them”.
The said Clause also provided that in the event the Principal
Contractor (HPL) failed to execute the contract on schedule, NLUO
would have the power to employ any other agency. The Principal
Agreement also contained provisions to enable HPL to appoint a subcontractor.
Clause 21 of the Principal Agreement is relevant and is set
out below:
“21. M/s. HPL can appoint if required sub contractor’
whose engagement as sub contractor which will be
confirmed by NLUO for executing works like
Civil, Structural, P.H., Electrical etc.”
ARB. A. (COMM) 26/2021 Page 4 of 7
8. The Principal Agreement was amended by the concerned
parties (HPL and NLUO) in terms of their agreement dated
23.02.2012 (hereinafter ‘the Amendment Agreement’). Amongst other
amendments, the reference to HPL as the Principal Contractor was
amended to read as Executing Agency. The reference to a ‘subcontractor’
was amended to read as ‘Contractor’. Thus, HPL was now
required to act as an executing agency and the works would be
executed by a contractor selected by HPL. Clause 21 of the
Agreement was amended to read as under:
“21. M/s. HPL can appoint ‘contractor’ whose
engagement as contractor which will be confirmed
by NLUO for executing works like Civil,
Structural, P.H., Electrical etc. Engagement of
contractor by HPL will not in any way absolve
them from their duties, responsibilities and
liabilities under this Agreement”.
9. As is apparent from the plain language of the last line of Clause
21 of the Principal Agreement as amended by the Amendment
Agreement, HPL continued to be responsible for execution of the
works and contracting the works to a Contractor (as subsequently did
in favour of M/s NCC Ltd.). HPL did not absolve itself of its
responsibilities and obligations under the Principal Agreement.
10. HPL floated a tender for construction of the proposed National
Law University and, issued a Notice Inviting Tenders (NIT). Pursuant to the NIT, on 09.10.2010, M/s NCC Ltd. (then known as ‘Nagarjuna Construction Co. Ltd.’) submitted its bid for execution of the said works. The rates of M/s NCC Ltd. (hereinafter ‘NCC’) were found to
be the lowest and on 10.12.2010, HPL entered into an agreement
(hereafter ‘the Agreement’) with NCC for construction of the
proposed National Law University. Apparently, disputes arose
between the parties (HPL and NCC) in connection with the Agreement
and NCC invoked the Arbitration Clause as contained in the
Agreement dated 10.12.2010.
11. It is relevant to note that the NIT tender issued by HPL
indicated that it had been appointed as the executing agency for
construction of the National Law University at Cuttack, Orissa.
However, it did not indicate that the tenders were being invited for and on behalf of NLUO.
12. The Agreement entered into between HPL and NCC refers to
NCC as a sub-contractor. Although the terminology may not be
relevant, however, the said Agreement indicates that NCC had
submitted its bid, which was accepted by HPL. The Agreement also
does not state that HPL was entering the contract as an agent of
NLUO. A plain reading of the Agreement indicates that it is a contract
between a principal and a principal.
13. The General Conditions of the Contract (GCC), which form a
part of the Agreement entered into between HPL and NCC, also
includes an Arbitration Clause.
14. At the outset, Mr Gupta conceded that the said Arbitration
Clause as included in the Agreement, is applicable only to the disputes
between HPL and NCC and, NLUO is not a party to the said
Agreement to refer the disputes arising from the Agreement to
Arbitration.
15. It is also relevant to note that the Principal Agreement between
HPL and NLUO also includes an agreement to refer the disputes to
arbitration. Clause 46, 47 and 48 of the Principal Agreement are set
out below:
“46. All differences or dispute arising between M/s.
HPL & NLUO on any matter connected with the
agreement or in regard to the interpretation of the
content their of shall be referred to the Vice
Chancellor of the National Law University,
Orissa whose decision will be accepted by M/s.
HPL.
47. Any dispute arising under this agreement between
the parties hereto shall be referred for
adjudication to a sole arbitrator in the manner and
in terms of the provisions as laid down in the
General Conditions of Contract. The Chancellor
of National Law University, Orissa will appoint
an Arbitrator. The award of the arbitrator shall be
final and binding on both the parties.
48. All disputes arising out of or in any way
connected with this agreement shall be deemed to
have arisen at Cuttack, Orissa and courts in
Cuttack alone shall have jurisdiction to determine
the same.”
16. As is apparent from the above, reference of any disputes
between HPL and NLUO to arbitration would be in terms of the
aforesaid clauses and not in terms of the Arbitration Clause included
in the Agreement between HPL and NCC.
17. Since it is conceded that NLUO is neither a signatory nor a
party to the agreement between HPL and NCC to refer the disputes to
arbitration, NLUO cannot be impleaded as a party to the pending
arbitral proceedings between HPL and NCC.
18. The appeal is accordingly, dismissed. All pending applications
are also disposed of.
VIBHU BAKHRU, J
JUNE 03, 2021
RK
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