Arbitration Clause Enforcement: Supreme Court Appoints Arbitrator in DSC Limited Dispute

The case of IBI Consultancy India Private Limited vs. DSC Limited deals with the enforcement of an arbitration clause in contracts involving toll collection and traffic management system projects. The Supreme Court had to decide whether the appointment of an arbitrator was justified under Section 11(6) read with Section 11(9) of the Arbitration and Conciliation Act, 1996.

The petitioner, IBI Consultancy India Private Limited, a subsidiary of the Canada-based IBI Group, sought the appointment of an arbitrator to adjudicate disputes that arose with DSC Limited regarding contracts for the Lucknow-Sitapur Expressway and the Raipur Expressway projects. The Supreme Court upheld the petition and appointed Justice Amitava Roy, a former Supreme Court judge, as the sole arbitrator.

Background of the Case

IBI Consultancy India Private Limited entered into six separate contracts with DSC Limited for providing system integration and maintenance services for Toll and Traffic Management Systems. Two key projects were:

• Lucknow-Sitapur Expressway Project (LSEL) – widening of NH-24 between Km 413.200 to Km 488.270 in Uttar Pradesh.
• Raipur Expressway Project (REL) – widening of NH-6 between Km 239 to Km 281 in Chhattisgarh.

Despite executing agreements and undertaking work, DSC Limited defaulted on payments to IBI Consultancy India Private Limited. Several verbal and written communications were exchanged, but no payments were made. On September 6, 2012, a legal notice was issued to DSC Limited seeking payment, followed by another reminder on June 12, 2013.

On April 24, 2014, IBI invoked the arbitration clause and nominated Mr. Debashish Moitra as the sole arbitrator. However, DSC Limited failed to respond, prompting the petitioner to file arbitration petitions before the Delhi High Court. The High Court ruled that the matter involved an international commercial arbitration and directed the petitioner to approach the Supreme Court.

Arguments by the Parties

Petitioner’s Arguments (IBI Consultancy India Private Limited)

The petitioner contended that:

• There was a valid arbitration agreement between the parties.
• The arbitration clause explicitly provided that disputes should be resolved through arbitration under the Arbitration and Conciliation Act, 1996.
• DSC Limited failed to pay for services rendered despite multiple requests.
• The respondent’s refusal to participate in the arbitration process necessitated judicial intervention.

Respondent’s Arguments (DSC Limited)

The respondent argued that:

• No arbitration agreement existed between the parties.
• The letter of intent did not constitute a legally binding contract.
• The petitioners had not made out a case for appointing an arbitrator.

Supreme Court’s Analysis

The Supreme Court examined the relevant provisions of the contract and the Arbitration and Conciliation Act, 1996.

• Article 1 of the Contract Agreement recognized the Letter of Indent dated June 14, 2010 as an integral part of the contract.
• Clause 3.14 of the contract specifically provided for arbitration in case of disputes.
• Section 11(6) and Section 11(9) of the Arbitration Act permitted judicial intervention when a party refused to appoint an arbitrator.

Key Observations by the Court

The Supreme Court ruled:

“It is evident that the letter dated 14.06.2010 is a part of the Contract and shall be read and construed as an integral part of the Contract. The contention of the respondent-Company that there does not exist any arbitration agreement between the parties is not sustainable in the eyes of law.”

The Court further held:

“Since the existence of the arbitration agreement is established, the appointment of an Arbitrator is warranted.”

Final Judgment

The Supreme Court appointed Justice Amitava Roy, a former Supreme Court judge, as the sole arbitrator. The appointment was subject to disclosures under Section 12 of the Arbitration and Conciliation Act. The Court ruled:

“Justice Amitava Roy is appointed as the sole Arbitrator to adjudicate the disputes between the parties. The appointment is subject to the necessary disclosure being made under Section 12 of the Act and the Arbitrator not being ineligible under Section 12(5).”

Conclusion

This ruling reinforces the principle that arbitration clauses in contracts must be enforced when disputes arise. The Supreme Court’s decision ensures that parties to a commercial agreement must adhere to their agreed dispute resolution mechanisms. The judgment also highlights the judiciary’s role in appointing arbitrators when a party refuses to comply with contractual obligations.

Petitioner Name: IBI Consultancy India Private Limited.
Respondent Name: DSC Limited.
Judgment By: Justice R.K. Agrawal, Justice S. Abdul Nazeer.
Place Of Incident: New Delhi.
Judgment Date: 16-04-2018.

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