IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Arbitration Petition No. 21 of 2017 KLA Const. Technologies Private Limited..Petitioner Versus Kajima India Private Limited Respondent Present:- Dr. Amit George, Advocate with Mr. Ajay Singh Bisht, Mr. K.K. Shukla, Advocates for the petitioner. Mr. Rahul Malhotra, Advocate with Mr. Shobhit Saharia, Advocate for the respondent. Hon ble Sudhanshu Dhulia, J. (Oral) This petition is filed under sub-section (6) of Section 11 of the Arbitration and Conciliation Act (from hereinafter referred to as the Act ), for appointment of an Arbitrator. 2. A contract was executed on 11.09.2015 at Delhi between the petitioner and respondent. Both the petitioner and the respondent are private limited companies, incorporated under the Indian Companies Act, having their registered Office at 2, Ground Floor, Shambhu Dayal Bagh, Main Kalkaji Road, New Delhi, and 112021, 11 th Floor, Tower- A, DLF Towers Jasola, District Centre, New Delhi, respectively. The contract between them was for the construction of a factory at SIDCUL, District Haridwar where the respondent was the employer. The contract admittedly has an arbitration clause, which reads as under:- 20.6. Arbitration. Unless settled amicably, any dispute in respect of which the DAB s decision (if any) has not become final and binding shall be finally settled by international arbitration. Unless otherwise agreed by both the Parties: (a) the dispute shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce,
2 (b) the dispute shall be settled by three arbitrators appointed in accordance with these Rules, and (c) the arbitration shall be conducted in the language for communications defined in Sub-Clause 1.4 [Law and Language]. The arbitrator(s) shall have full power to open up, review and revise any certificate, determination, instruction, opinion or valuation of the Engineer, and any decision of the DAB, relevant to the dispute. Nothing shall disqualify the Engineer from being called as a witness and giving evidence before the arbitrator(s) on any matter whatsoever relevant to the dispute. Neither Party shall be limited in the proceedings before the arbitrator(s) to the evidence or arguments previously put before the DAB to obtain its decision, or to the reasons for dissatisfaction given in its notice of dissatisfaction. Any decision of the DAB shall be admissible in evidence in the arbitration. Arbitration may be commenced prior to or after completion of the Works. The obligations of the Parties, the Engineer and the DAB shall not be altered by reason of any arbitration being conducted during the progress of the Works. 3. A bare perusal of the arbitration clause shows that the reference there is for an international arbitration. All the same, the case of the petitioner as well as that of the respondent is that the dispute between them cannot be settled by an international arbitration, as it is a domestic dispute referable to a domestic arbitration alone, for which this Court alone has the jurisdiction! 4. As per the terms of the contract the respondent had employed the petitioner i.e. KLA Construction Technologies Private Limited for construction of a factory building in Uttarakhand. There is now a dispute between them and all attempts for settlement of the dispute amicably have so far been in vain. The arbitration clause speaks that the dispute has to be settled by an international arbitration, under the
3 Rules of Arbitration of the International Chamber of Commerce. The petition for an appointment of an arbitrator nevertheless has been filed before a High Court. 5. Mr. Rahul Malhotra, learned counsel for the respondent, had earlier given a statement at the Bar on 14.09.2017, that under instructions of his client he has been asked to state that the respondent though had already approached the International Chamber of Commerce in this matter but now he has instruction that his client has agreed to submit to the jurisdiction of this Court. He too admits to the position that the dispute presently before this Court cannot be categorized as an International Commercial Arbitration. He had also given a statement that the request for arbitration made by him earlier under the International Chamber of Commerce will shortly be withdrawn. This Court though was satisfied that the nature of the dispute was such which could not be called as an international commercial arbitration, and had said so in an order, though the order could not be signed, as before the order could be signed, it was noticed that since there was nothing on record, (except the statement of the counsels), as to the settlement of dispute as domestic arbitration, the matter was listed again for rehearing on 22.09.2017, when the respective counsels agreed to bring on record their agreement. It has now been said by the respondent in paragraph nos. 3, 4 and 5 of the fresh affidavit as under:- 3. I state that the Respondent Company agrees and understands that the disputes between it and the petitioner, which are Companies incorporated under the provisions of the Indian Companies Act, 1956, fall within the scope and ambit of domestic arbitration being governed by the provisions of the Arbitration and Conciliation Act, 1996 (as amended till date). I further state that the Respondent Company has already invoked the arbitration clause as contained in the contract executed between the parties and in compliance
4 thereof, has sent a Request for Arbitration to the International Chambers of Commerce. 4. That without prejudice to the rights and contentions/objections of the Respondent Company to the petition filed by the petitioner under Section 11 of the Arbitration and Conciliation Act, 1996, I state that the Respondent Company hereby gives its consent for appointment of Mr. Justice J.S. Khehar, Retd. (Former Chief Justice of India) as the sole arbitrator to adjudicate upon the disputes that have arisen between it and the petitioner. I further state that the above-stated consent is being accorded by the Respondent Company subject to the seat of arbitration being New Delhi. 5. I State that pursuant to confirmation of appointment of Mr. Justice J.S. Khehar, Retd. As the sole arbitrator, the Respondent Company shall withdraw its Request for Arbitration pending consideration in the International Chambers of Commerce and also request the International Chambers of Commerce for refund of the advance fee of USD 5,000 already paid by the Respondent. The Respondent reserves its right to claim USD 5,000 or any part thereof from the petitioner, subject to the decision of International Chambers of Commerce. 6. A similar affidavit has also been filed by the petitioner, which is also on record. 7. The first aspect which must be examined is the very jurisdiction of this Court, which will depend upon the terms of the contract, the arbitration clause and the law of arbitration presently applicable. The terms of the contract plainly speak of an International arbitration, and the dispute to be settled under the Rules of Arbitration of the International Chamber of Commerce! Both the parties are unanimous in their submission that as far as the nature of the contract executed between them is concerned which was on 11.09.2015, there is no element of international trade or business. Apart from the fact that both the Companies are Indian Companies and the contract was executed in India, the work was also executed in
5 India. The dispute, if any, is a domestic dispute which calls for a domestic arbitration, and not international arbitration. 8. Learned counsel for the petitioner Dr. Amit George would further submit that International Commercial Arbitration has been defined under Section 2 (f) of the Act. Section 2 (f) of the Act reads as under:- 2. Definitions. (1) in this Part, unless the context otherwise requires,- (a). (b). (c). (d). (e). (f) international commercial arbitration means an arbitration relating to dispute arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is- (i) an individual who is a national of, or habitually resident in, any country other than India; or (ii) a body corporate which is incorporated in any country other than India; or (iii) an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) the Government of a foreign country; 9. Mr. George further submits that neither of the parties i.e. the petitioner or the respondent fall under any of the categories given under Section 2 (1) (f) of the Act. Both the petitioner as well as the respondent are companies incorporated in India under the Indian Companies Act, no aspect of their management, leave aside central management is controlled or exercised from abroad or from any other country, and lastly none of them is a government of a foreign country. In short there is no ingredient of Section 2 (f) i.e. any of the ingredients from (i) to (iv) are present in their case.
6 10. A judgment of the Hon ble Apex Court has also been placed before this Court which is TDM Infrastructure Private Limited Vs. UE Development India Private Limited, reported in (2008) 14 SCC 271. In a petition filed before it under Section 11 of the Act for appointment of an arbitrator before the Hon ble Apex Court, after considering the facts that as both the parties are incorporated in India, the Apex Court came to the conclusion that the dispute cannot be categorized as International Commercial Dispute, referable for an International Commercial Arbitration and the matter was exclusively for a domestic arbitration and the power lies with the concerned High Court for appointment of an arbitrator, as both the companies were Indian companies. The relevant part of the aforesaid judgment reads as under:- 19. Determination of nationality of the parties plays a crucial role in the matter of appointment of an arbitrator. A company incorporated in India can only have Indian nationality for the purpose of the Act. It cannot be said that a company incorporated in India does not have an Indian nationality. Hence, where both parties have Indian nationalities, then the arbitration between such parties cannot be said to be an international commercial arbitration. 11. Since there is nothing like a foreign element or foreign trade or international commercial trade between the parties, the matter is solely governed under Part I of the Act. The reference in the agreement, as suggested by learned counsel for the petitioner Dr. Amit George as well as Mr. Rahul Malhotra, learned counsel for the respondent to international arbitration and International Chamber of Commerce seems to be due to oversight. Learned counsel for the petitioner Dr. Amit George as well as Mr. Rahul Malhotra learned counsel for the respondent have also filed their respective affidavits in this regard before this Court.
7 12. In SBP & Co. Vs. Patel Engineering Ltd. and another, reported in (2005) 8 SCC 618, it has been held by the Hon ble Supreme Court that the appointment of an arbitrator in a judicial order and not an administrative order. What this Court therefore has to see is not merely the language used in the contract but the context in which it has been used. In the case at hand what has to be seen is whether the parties to the contract qualify the definition as given in Section 2 (f) of the Act, and whether the dispute between them has to be referred to an International Commercial Arbitration. Since the companies which entered into the contract are both Indian Companies and the nature of the dispute between them does not qualify the definition of Section 2 (1) (f) of the Act, I am of a considered view that the case before me cannot be said to be of an International Commercial Arbitration. It is purely a domestic dispute and the matter has to be referred for a domestic arbitration, under Part I of the Act.* 13. To sum up, in my considered view there being no element of international arbitration in the present matter and the arbitration which is to take place not being an international commercial arbitration, as defined under Section 2 (1) (f) of the Act, the dispute and subsequently the appointment of the arbitrator has to be treated as a domestic dispute and therefore the dispute being a domestic dispute is to be referred to a domestic arbitration alone. 14. As far as the Rules of Arbitration of the International Chamber of Commerce are concerned, the same will not be applicable necessarily as the terms of the contract under Clause 20.6 clearly stipulate that these Rules shall be applicable unless otherwise agreed by both the parties. * Domestic arbitration unlike international commercial arbitration has nowhere been defined under the Act, and the reference to it here would be to an arbitration alone.
8 Therefore, the Rules of Arbitration of the International Chamber of Commerce would only be applicable, if the parties agree for it. 15. The second issue before this Court is that the arbitration clause again speaks of three arbitrators but the petitioner as well as the respondent have agreed that the dispute be adjudicated by a sole arbitrator. Since there is now a consent of both the parties for adjudication of the dispute by the sole arbitrator, it can be safely presumed that there is now a new contract by way of novation (paragraph 13 of Ashoka Tubewell and Engineering Corporation & others Vs. Union of India & others, reported in (2015) 5 SCC 702). 16. Learned counsel for the petitioner Dr. Amit George and learned counsel for the respondent Mr. Rahul Malhotra both agree to the name of Hon ble Mr. Justice Jagdish Singh Khehar, retired Chief Justice of India as their sole arbitrator in the matter. 17. This Court, therefore, appoints Hon ble Mr. Justice Jagdish Singh Khehar, retired Chief Justice of India as the sole arbitrator in the matter to adjudicate the dispute between the parties, subject to the learned Arbitrator s disclosure under Section 11 (8) read with Section 12 of the Act. 18. In view of the aforesaid, the arbitration petition stands disposed. Ankit/ (Sudhanshu Dhulia, J.) 05.10.2017