Allowed

Fourth Partner Energy Pvt. Ltd. v. Dr. Shakuntala Misra National Rehabilitation University

Telangana HC27 Sept 2022ARBAPPL/76/2021

Case brief

AI extract

What is this about?

The High Court allowed an arbitration application under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996, appointing a sole arbitrator to resolve disputes arising from a Power Purchase Agreement. The Court held that the scope under Section 11(6) is limited to determining the existence of an arbitration agreement and a dispute without touching upon merits.

What did the court decide?

The Arbitration Application is allowed; Mr. Chall Kodanda Ram, retired Judge of the High Court for the State of Telangana, is appointed as the sole arbitrator.

Fourth Partner Energy Pvt. Ltd. Vs Dr. Shakuntala Misra… — Arbitration | Telangana HC (2022)

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IN THE HIGH COURT FOR THE STATE OF TELANGANA A,T HYDERABAD

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TUESDAY ,THE TWENTY SEVENTH DAY OF SEPIEN/BER TWO THOUSAND AND TWENTY TWO

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PRESENT

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THE HONOURABLE SRI JUSTICE A.ABHISHEK REDDY

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ARBITRATION APPLICATIO N NO: 76 OF 2021

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Betwee n:

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Fourth Partner Energy Pvt. Ltd, Having its registered office at Plot No. N46, H.No. 4- 9-10, HMT Nagar, Hyderabad, Telangana- 500076.

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...APPLICANT

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AND

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Dr. Shakuntala [r,4 isra National Rehabilitation University, Mohan-RasanganjRasulabad lVarg, Sarosa Bharosa, Lucknow - 226017, Uttar Pradesh.

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...RESPONDENT

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Arbitration Application Under Sectron 11 (5) and (6) of the Arbitration and Conci ation Act 1996 praying that this Hon'ble Court may be pleased to appoint Mr. V. Subramanian as the sole arbitrator to resolve the disputes between the Applicant and the Respondent arising out to the PPA dated 06/10/2017 entered into between the Applicant and the Respondent.

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Counsel for the Petitioner: SRI K. VIVEK REDDY Senior Counsel for M/s. SANGEETA BHASKAR

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Counsel for the Respondent: SRI SUDEEP SETH SENIOR COUNSEL FOR SRI C. VIKRAM CHANDRA

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The Court made the following: ORDER

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THE HON'BLE SRI JUSTICD A. ABHISHEK REDDY ARtsITRATION APPL ICATION Ho.75 OF 2A2i ORDEE:

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'l lrs rlrlrlicarion is lilecl Lln(ler S(,ctiun i 1 (5) irnrl t6l of the i\rbitrzitio:t :rnd Concilirrtl()L A(.t, 1,.196 (tor sltort .l)te Act,), seel<ing apr)oirltmcnL of .. Arbitr.tor irr ternrs 'r' trre p.wer Prtrchasc Aqr(.1-rne nr clatcd 06. l0.2O17 (in short ,l)PA,) enterecl lt, t,,t,,-lt In, I).rrlt,.s

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L3r'l( l-li,.Ls of thc r:lLst: rrr. thirt altplir:ar:rl ..Lrrrl r.t.s1t.nclc't

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Irrrr"r' clrli .r'ri irlrr f\r* i-r I)rrr-ch.sc A rlr-L:r'lrr c l r t c1,t(i(l (){) li).2017 I.r'iII( iIrI 1I r:r: r:r1 sallinq LLI) rr SLtritr l,0tr i,r- j)l.,rnt lrt lir. rtR,ntiscs ()l 11tc il,. :il)r)nclcnt Unir,r:r.siti.. p-u.suillll there[o. rlrr, lrr;plir:ant has invest,.'(l llLtgc arnollltt:j and sct up thc solar pot;c.r-nlant at thc prerni.;i.s of thc rcsponclent-[Jnivcrsity. .l.hc tt,r-m ol the irgrcelnenl rvrrs lor il 1:r.r.iorl of 2.j r.cars lllrn tltc clatc ol conrmissionirrq of the solar ltot,er pliint. Thc sol.rr po\.cr plant

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u,as commissioned on lO.O7.2olg and the plant has generated b,7 1,572 urrits o[ clectricity for thc pcriod from 1O.07 ,)01g Lo 15.O7.2O1<,,. I-lori,ever, irt spite of rcpcat.ecl demands, thc bills raised by tltc applicant from July, 20 L g onwarcls rcmaine d unpaid. Tht:reafter, the planr tas clircctcd to be switcl_recl off by tlrc respcrnrkrn t Dicle lettt.l rlatcd 15.06.2019 and.rccordinsly the plant ,"r,:rs st,itc;hercl oll orr 16.07.2019. Aftcr issriirrg several communicatiorls to tlte respondenl for ri:solving tlte isslres. thc

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aPl)lican t got issLlc(i tho rloil( c (l.ttc(l O7 OS.2O2O lty irty3iiip:l Articlc 16..1.1 oi tltr, I)[,A c.allinq Lrpop the respondcpt ro pa] Llte duc :rmounts. ht s1:it<t of rr,criltt ol. thc said nottcc, thc rcsporrdcrlt It:ts ftrilr.rJ tr) (:trfr titc dellrr-rl1s u,ittrin thc tirnclines. Thertlbre. rltr i,rpplic::,rnl in t xt r.cise ()1. thc right 'ested under claus<' 16.4 of tlrc pI)A qot issLl(.cl a lcgal ltotice cl.rted 29.IO.2O2O t.rrntill:ttilrg rlle ppA :tnd cailirlg upolt the rcsponclent Io itnrncrjiatclr p:r-y the termination charge_s of Ils.2.!r5..33.()o().., rrl,,rrg rr ilit 0ulst:rncling llnlount aIl(l lir[c i)u-'l)l( ll[ < ltrr.qr:s .rl lis.!)-].,'2.()1,;. lrt rcsPonsc tltcreto, tltc r-csltortrlcnI rSrl issrir,cl :t r.r,,^ rt.lir:c: rl;ttr:cl 0.?.12.202{J raisi,g tttlti'tt;tltlc grorrrtrls :rrrr1 rt,liisir.r11 lo g91111111. u.itit the rlcr,.arr<ls of the apltlicant. Henr:r,. lltt :rltpiir.rtnr Lr.t. irtr.oking clausc 17.2 ol the PPA issucrl the lt,gal noticc cl:rteci 30. 12.,)-O2O norrlinating Mr. V. Subrarn:uri:tn :rs llrr. arbilr.:rtor lrrr resolving tlrc issLtcs. Ii.r'e'et, the resportrlcltt I.t:1s ,ol r-esit.rr<le<1 to thc s.tid noticc. Hence, the applicalr t has filcd thc present Arbitration Application.

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The respondent has filed a counter stating that the applicant has approached the Court with unclean hands and suppressed the material facts as the petitioner has not disclosed about the reccipt of the repty to the legal notice dated 30.12.2O20 bv thc Uni,,,ersitl and also the subsequent rcmindcr. 'l'llat thr: PPr\ itsr-if is an rrrr;rlrd .rrrrl nnn crrforrr_,tlblc clocuntent

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as ilr( si ri:r \r5 cxu('LrLe(l i-,r' tltt Llt(n Rcr,,islrlrf o[ tlte UtLivL:rsit,,'in zr collusir,c lnal)lrer \i'it.it lhc petitioner.^'l1tat l.hc lixccrrli,,,r-^('r;uncil ol tlre Uni,,,crsily is tl'rc onll. cornpr: te I'rt aLlth()r'il\ t() i'nl-cr- into Or carrt cl alt, c.i11t|ilcL orr behzill' of tl'rc lJnirr:rsitr'. Ir is hrrthcr conLended that cxoept thc pcrson s'l-ro has signed Il]c cor)trac't is narned as the ltroposed :rrbitrator, u'hiclr is coutrirrn to the provisions of lhe Aot. Hctrce, 1tr:r,ved for clislnissriI of^,hr- ;\l lritr:Ltion A1;plic:rtion.

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'l'itc l.1rg;lir:arrt has lilrcl a rcjoirrcler ni;rinll slltLinrl tlt:Lt tlte 1151,'11,lq ni !r;rrinrq .rrlrrritted^r.lre cxisLcn('(: cl lltc :ltlt ricm('nt lrt'lr,r-t lt.t tlr, irrr-tils. no\' (':1nn(,I raist ttittcttlrltlc tlroltrtrl ,tf rnttla /irL'to^{rvrigl,.ll orrt r.rl iLs lilLbilittrs. [itrrthi'rilis sralcc][ltattlte} pc-rsorl \,h(i lras sirlnecl thlj contr,ict on bchalf ol the Cornpirny and thc^pr(it)osed l\r'bitriltor arc totall-r,trvo <lillcr<:nt pers()rls and mcrell, l;ss;1,.q5e [lt( names arc sirnilar, it cannot lte c<tnstrr-tcd that thcr, alr c onc and thc same person.

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Ilearrl Sri I(. Vivek Reddy, learncd Senior CounseJ appearing r,n behall of applicant, ancl Sri Sudcep Seth, lcarncd Senior Courrsel, appearing on behalf of Sri C. Vil<ram Cl-randra, learnecl coutrsel lor the respondent. Perused the rccord.

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A pcnrsal of thc Power PLlrchasc Agrcement dated 06.10.2017 riiscloscs tirat Clause l7-2 tl'rcreol' contains the arbilr:rtion cllrtrsc, rviricit reads as lollo$.s:

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17.2 Arbitrdtion :

(al In iir, irer,', ol iltl\ (llsl)Lttc, c()rItro;ersY or diflorencc bct!,ccit lllc [';rrlits lrisitrg o]tl ol or l.cl:lling to ll)rs .\qr d]lticitl lin( iri(llilll ,r clisl)lttt r.llrlilraa to lit(' .rli(lit\ (). cxistcr)ce of tllis qrcclucrt ,tnd alr! ol)liilittiolts arising oltt of or itlx)rtt this Ag.r)ellrl i]t( la I)tsi)u1e) sit;rll bc rr,[r':-rr:rl to and [inall-v rcsolrtrl llt. arbil r a lior)

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(b)

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(c) (dl 'fire placr: ol thc iribirration shall bc Hl,dcrabacl an.l thc langriagc ol tlrc arbitration slraii be English. The arbitr:rtiorl slrzrll bc rorrductcd in accor-darrce rvirh the Rrrlt:s $,bich llrllcs are Lle.nrc(l to 1)c ill(.orporatcd bv rcleren(:( llt th is Arti.:1e.

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t.) (0 igl th)

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Legal notice datcd ilo,12.202O was sent by the applicant proposing the name of Sri V. Subramanian, CDO and Secretary General at Indian Wind Encrgy Association and former Secretary Gcneral to thc Government of India in the Ministry oi New and Renewable Energr as the sole Arbitrator.

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The main grounds on which the present application^. is opposed by the respondent is that the arbitrator nominated by the applicant is none other than the CBO of the applicant Company which is totally inrpermissible under the Act. Further the learncd counsel has contended that there is no legally cnforceable agrcemcnl between the parties rvhich can be relerrcd to the arbitrator. That thc so-c:rlled contract entered

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)

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bot\,een tl)r'apl)licant and LIir respondent University has becn enterecl l;,,' rhe thet-i Regisir:rr oi thc Universiry, rvho haci nrt jurisdiction or authority to do so on behalf of thc Univcrsity rvitlrout tlrerc being any resolutiorl or alltl)orization ll.orn [he Dxccutive Council of thc Univcrsity. It is furtl]er conten(icd that Executivc Council of thc Univcrsity is alone competent to enter into any contract and therefore the contract relied b.y the pctitioner is an invalid onc. 'lh:rt the conlract is a result o[ the collLrsicln l)rt\'cclt lhc applictrnl and [hc tl](.n Rcgistrar ol t]re Univr:rsit1,. That tl'ie Univer.sit-1'on coming to knou, atrolrt the sarrrt, has rrgistct'cd a <:r.imirlrl c:rsc against the tlrr:n Rcqistr:rr. LciLrned or)uns(-l lras furrt]rer statcd that even though the respondcnt h:rs givcn a reply to the legal notice dated 3O.12.2O2O issucd bv tl-re applicant, the appticarr t has stated that no rc1;11, u,as given by the rcspondent, rl,,hich is clear suppression of material fact. Thercfore, the present petition is liable to be rejected on the solc ground that the applicant hag approached this Court with unclean hands. To buttress his contention that any person having interest in the subject matter of the arbitration cannot be appointed as an Arbitrator, the learrred counsel has relied on (Jnion of India us. BholroLt Battery ManuJacturing Co. (p) Ltd..,t and Northern Railulag Ad,ministratton, Ministry of Raituag, New Delhi us. pqtel

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I (2007) 7 sCC 684

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Engineering Compang Limited). lJou cvt'r, llrl lctit ttcci coirrrsL:i h:rs tirirLv slrrle(l tir.tt lre: has no olrjct:liott |,r rPplrntrng an Arbilrtrlor otircr- tlran th(' one sitgccstcrl bv ti-rC trpplit'rrl'rt. liavirrrl rr:g:rrcl to tlrrr rrbovc, llrrs Corrrl is not inciinctl 1o go in to lhr;rlror,,e ollt cLiorr rr riscd.

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t\clrnittrrrlh, tl'rcrc is :trt arbitr:ttion clar-tse in tltc contl'act cntercd bct$'ct:rl tlre partics and this Court calnnot go into tlre lcg:rlitr, or o[]rcr\'ls('ol thc sirid coutract^r,r'l.tilc dczrlittq rl'ith t]te Ar-bitnrl.iorr Applir:ntiorr utrcltrt'Sec[iott J I (6) ol the.\t]1.

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ltt IBI Consultancg (India) (P) Ltd. u. DSC LtrL3, i lr(,' llr:rn lrlc Srrpr', nrt:^('our'l \'llilc clt'rrlirrq sillr tlrc: Arlrittlrliott ApplrL';rLion lik,'ci t.urrilr Sccli()n I l{t)) t.i1d u'i1h Set tiotr 1l(()) oL t I'rc Arbitration arn(i Conciliirtior Act, lor irppointtnc:nt o1' trn arbitrator to :rdjucllcate the clrsputcs that hrrvc ariscn betr.r,t:cn the ir:rrLics llrcrcin in cont-rct:liott t'ith tite collll'acts Itr clucsti,,rl, has hcld, zrt i):rra 8,:rs undcr:

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Ttre first and the forcmost thing is thc existence of an arbitration agrecment betlveen thc partics to the pctition under Section 11 of the Act and the existence of dispute(s) to be rc[erred to arbitrator is condition precedent for appointing an arbitrator undcr Section 11 of the Acr. It is also a rvell sellled law lhat while deciding the question of appointment of arbitrator, the court has not to touch tlrc merits of thc casc as it may cause pr-cjudice to the case of the parties. The scope under Scct ion 1 I (6) rcad .,ith Section t I (9) is vcry limitc(l to

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, (2008) t0 SCC 24O :r l2ot8) t7 SCC 9s

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I I

th1⁽ \leni^(rl .rl)I)oiirur.nl r)i arlritt,.rror.^'l'his Court lr:Ls to :joc \.i1(:ti1r'r' thcie (:xrsls aD arbitrarlion agreemcrrt b.t\'i^(-n tlre l)artirts irr(l if tit,. ansurr is in tirt: aifir rnatir.'c the n !!'hcth{rr the petitione. has n)ade orrl i1 cils( iir thc al)pointmcnt o[.irbitrator."

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Iiuril.r,-:r, in Duro Felguera, S.A. u. Gangduardm Port Ltd.,a Lhc llorr'ble Supremc Court. at para 59, has he ld as uncier

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"'l'lrc sc,rp" ol the l)r)\er un<lcr Scctior] Il{6) of tlt,l l')tlrr /\ct rrlrs r:orisidi:r';rbly rr,1ck. irr r icrr ol Lllr decist{)nri r r/i/'crrcl^/ ,,^sarf irrr i^(-,., i, 1, ,.1 !,tLqq /-l(l . l-200:.)^.j jL( uL8: rrrrl li,rryltlrrr !\ltl.fAb lNr.L:l.;n,rl /rtsur.1ncr] (i,. ,:,iti \ Roglt.oe I'oLyJcrlt 1t') Ltd.. l2(.)O9j I SC(l 2()7 'lO')r)) I SCtC lCi,) i l;i '1'lris PosirLon contilLred 1i1l tlr,, i1!ricndlrlcnt broLrght irt)out itr 20I5. /[tcr tht: irtrrentlIrcllr. .tll tlrat Lh(, courLs ccd to s..c rs \r'llctlr( r alil iir'lJitratlol itgrcemcnt e\ists trotlting utorc, notltir):,, Icss.^'Ihe icEiisltrtivc pollcy and l)Llrpose is csscntially t(, tnirriluise th(' Corrrl's irrterventiort at thr) stage ot.lpl)ointing tlr( arbitr ator .rn(l this intcntioi-t irs incolporated in Scction ll((>-A) ortght to bc respected."

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Having regard to the above, without going into the merits or demerits of ltre case, and also the judgments of the Hon'trle Supreme Court in IBI Consultantcg (Indid) (P) Ltd. arrd Duro Felguera, S,A. (referred supra), this Court dcems it fit ro allow the Arbitration Application and refer the matter for arbitration to be conducted by a sole arbitrator.

) I

1120t7) I SCC 72()

Irr rlti ri,,sLrli. tirr' r\rbilration Ap1;lit.:rtic,n is :rllou.ccl apPr;rn[ing Srr CitzrlLr iiorlanr]a Ranr, retirr.ci ,Juclgc OI' Lhe Ilrgh Court for tlte Statr. of l't:l:rngana, as thc sole ;\rbilraror. tct arllilriltc ol'l thc clisPutes ltel$,ccr.r lhe applir:arrt and tlre rcsllorldent zrncl tltc siLid arltitrator- slr:rll entr:r on relerr:nc.e;rrrcl proct:cd u.itlt.:rs cn-joincd lt-1,thc Act.

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'lhe lcarncd Albitrtrtor sl-rail fix his rcrnrrn..r.rrtioll as pcr the statur()r\ ;tror.isions. Ilc sh:tll also [ix Lhr] (.osts iulcl exll('nscs ()l llt{' s( (.r'attariirl :rssislltrrr:c Iitr llt. ,rltitr.rtir, llfo('(^{a(line:,ul),)lt dcliirrr;,ttiOrt} :rnrl r.OnsrtLtiLti.,rt rr-ith tltt: p;1rtiCS. All tir. costs :rrrrl r:rp..ses ,f tltc ,rl;iIr.Ii.. irrrrc.r:rli.gs shirll bc lr,r'rre l;r. lralh tlrL' pa*tias irr r:r1ir.l slr.rc. TIr. lc:rrrtt:rl Arbitr:ttor is rccluestr:cl to r..rnltictc ir.ltitrati.r.r ltr-ocr-r,cli.gs, rrrtrl pass an au,ard at tl'rc cariiest, prefcrably rvithin six months frorn l-hc (lalC' Of t:otntnerrr','nrClt ()[ th3 :trbitral ltro6ecclipgs. It is macle clcar tlr:t1 this or.dr:r <loes not preclude the r.r,sponcft:nt from raising all lcgally rcnable objections as may be pcrmissible under the lau,.

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Miscellaneous Applications, if any, per-rding in the Arbitration Applicarion shall stand closcd.

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SD/.K.SRINIVASA AO JOINT RE RAR ,TRUE COPY// SECTION FICER

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Sri Chall Kodanda Ram, retired Judge of^High Court for the^{State of} Telangana , Plot No. 68, Road No. 7.1 , Phase lll, Jubilee Hills, Hyderabad 500 034 ( By Special Messenger)^{( along} with a^{copy of} affidavit and material^papers)

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