Telangana High Court: An application was filed under Section 11(6)(a) of the Arbitration and Conciliation Act, 1996 (‘the Act’) by applicant, East Hyderabad Expressway Limited seeking to intervene into the matter and appoint a nominee Arbitrator of respondents to resolve the dispute. C. V. Bhaskar Reddy, J. appointed a nominee Arbitrator for respondents and held that whether applicant’s claim was barred by lapse of time was a matter which was to be decided by Arbitral Tribunal at the time of making an order under Section 20 of the Act.
Background
Applicant and Respondent 2 were a company incorporated under provisions of the Companies Act, 1956 and Respondent 1 was a statutory body constituted under the provisions of Andhra Pradesh Urban Areas (Development) Act, 1975. Respondent 1 invited proposals under a single stage process from bidders and prescribed commercial terms and conditions for selection of a successful bidder for design, construction, development, finance, operation, and maintenance of eight lane access-controlled expressway. In response to the same, a consortium of IL & FS Transportation Networks Limited and KMC Constructions Limited submitted its bid for the project and the same was accepted by respondents. A Concession Agreement was executed between applicant and respondents containing detailed terms and conditions and it was further amended vide Supplementary Agreement whereby, a clause to refer the dispute to arbitration was added as Clause 39.2 (‘the arbitration clause’).
Applicant submitted that “Project Completion Schedule” had to be met not later than 30 months from the commencement date, which would fall on or before 09-06-2010 and this condition in the concession agreement was subject to respondents being able to handover Right of Way for the site to applicant. Applicant submitted that respondents materially failed to handover the site in accordance with the agreement and the delay severely affected the completion of the project within the stipulated timeline. It was further submitted that consequent to the delay in handing over the land by respondents, construction works of the project witnessed delays and applicant was entitled to an extension of time under the Concession agreement. It was stated that the correspondence exchanged between the parties revealed that applicant had made numerous requests to respondents seeking extension of time. However, respondents never intimated an extension of time to applicant.
Applicant submitted that Respondent 2 issued a letter to applicant’s banker directing the bank to release Rs 29.39 crores to Respondent 2 and threatened to recover the amount from applicant’s 15th Annuity Payments, if failed to do so. Applicant submitted that in the proceedings dated 06-03-2018, Respondent 2 specifically recorded that independent consultant verified the invoice and recommended for payment of Rs 33.3 crores, but Respondent 2 illegally and in contrary to the express provisions of the Concession Agreement deducted Rs 29.39 crores and accorded for payment of Rs 2,99,35,000 as opposed to Rs 33.3 crores.
Applicant submitted that it issued a letter to Respondent 2, requesting not to recover the said amount and pleaded respondent to release the 15th annuity, in entirety, besides bonus and 1st annuity which was due. A meeting was held and respondents admitted that the issue of bonus was being considered, however, even after considering applicant’s claim in a meeting held with Metropolitan Commissioner of Respondent 1, respondents did not release the amount. Further when respondents did not come forward to settle the disputes, applicant issued a letter to respondents invoking arbitration clause between parties and nominated Justice Devinder Gupta, Former Chief Justice of Andhra Pradesh High Court, as its nominee Arbitrator and requested respondents to nominate an arbitrator on their behalf within a period of 15 days. Respondents issued a reply, disagreeing with applicant’s request stating that the same was barred by limitation. Hence, the present arbitration application under Section 11(6) of the Act was filed by applicant seeking appointment of nominee arbitrator on behalf of respondents.
Analysis, Law, and Decision
The Court observed that while considering application filed under Section 11(6) of the Act, the Court had to see whether there was an arbitral dispute between parties and whether agreement between parties contained arbitration clause or not. Further, it was observed that while deciding question of appointment of arbitrator, the Court should not touch the merits of the case as it might cause prejudice to the case of parties.
The Court noted that in the instant case applicant had issued a letter to respondents invoking the arbitration clause and nominated its nominee Arbitrator and requested respondents to nominate their arbitrator. However, respondents rejected the request, stating it to be barred by limitation. The Court opined that there was no such provision in the Act specifying the period of limitation for filing an application under Section 11 of the Act. The Court noted that Section 43 of the Act stated that the Limitation Act, 1963 (‘Limitation Act’) provided a time period for filing an application for appointment of arbitrator under Section 11 of the Act. Further, it would be covered by the residual provision under Article 137 of Limitation Act which provided that the period of limitation was three years for any other application for which no period of limitation was provided elsewhere. Thus, the limitation period of three years would commence from the date when the cause of action arose.
The Court further opined that in the instant case, applicant had issued a letter dated 25-03-2022 to respondents nominating its nominee Arbitrator and for the purpose of the cause of action, limitation had to be calculated from the date of assertion of claim. Once applicant had asserted the claim and respondent failed to respond to such claim, such failure would be treated as denial of applicant’s claim giving rise to a dispute. The Court thus held that whether applicant’s claim was barred by lapse of time was a matter which was required to be decided by the Arbitral Tribunal at the time of making an order under Section 20 of the Act.
The Court noted that respondents had suggested M. Krishna Murthy, Retd. Chief Engineer, R & B Department, as nominee Arbitrator on their behalf and applicant objected to the nomination stating that he was disqualified in view of Fifth Schedule of the Act as he was an ex-employee of the organization. The Court opined that since respondents had failed to appoint the nominee Arbitrator on their behalf within 15 days from the date of request from applicant, therefore it would be appropriate for the Court to appoint a nominee Arbitrator. Hence, the Court appointed Justice V.V.S. Rao, Former Judge of Andhra Pradesh High Court as nominee Arbitrator on behalf of respondents. The Court further opined that both nominee Arbitrators should mutually appoint the Presiding Arbitrator and the arbitration process should be governed by provisions of the Act.
[East Hyderabad Expressway Ltd. v. Hyderabad Metropolitan Development Authority, 2024 SCC OnLine TS 12, order dated: 22-01-2024]
Advocates who appeared in this case :
Advocate for the Applicant: S. Ram Babu, Advocate
Advocate for the Respondent: Y. Rama Rao, Standing Council
Buy Arbitration and Conciliation Act, 1996 HERE
