M/S. WEXFORD FINANCIAL INC PANAMA Vs. BHARAT HEAVY ELECTRICALS LTD.

Arbitration and Conciliation Act, 1996

Tags Arbitration

Supreme Court of India (Full Bench (FB)- Three Judge)

Arbitration Case, 19 of 2015, Judgment Date: Jul 13, 2016

NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

ARBITRATION PETITION (CIVIL) NO.19 OF 2015

M/s. Wexford Financial Inc. Panama …Petitioner

Versus

Bharat Heavy Electricals Ltd. …Respondent

O R D E R

T.S. THAKUR, CJI.

1. In this petition under Section 11(5) read with Section 11(12) of the
Arbitration and Conciliation Act, 1996, the petitioner prays for the
appointment of a sole arbitrator for adjudication of disputes that have
arisen between the parties in relation to a “Service Provider Agreement”
executed between them. The facts in brief are as under:

2. The petitioner-company is registered under the Laws of Panama with
its Registered Office at Microjacket-359003, Roll 64778, Frame 53, Panama
and a representative office at C-204, LGF, Greater Kailash-I, New Delhi-
110048. The company, it appears, is engaged in providing liaison services
to companies in public as well as in private sector within and outside the
country including procurement of contracts from Government agencies for its
clients and providing facilitation of pre and post contractual obligations
and activities agreed upon by the parties. The company claims a small
percentage of the value of the contract towards its fee for the Agency
services rendered to its clients.

3. The petitioner’s case is that M/s. Mass Global Investment Company
incorporated under the Iraqi Law and engaged in power production for
Kurdistan Regional Government is one of its clients. Its further case is
that in January-February 2006, the petitioner introduced respondent-Bharat
Heavy Electricals Limited, a public sector undertaking engaged in
integrated power equipment plant manufacturing to the said M/s Mass Global
Investment company in connection with a “Turnkey Supply of Arbeel Power
Plant” in the State of Kurdistan. A contract was, according to the
petitioner, signed between M/s Mass Global Investment Company (“the MGIC”
for short) and the respondent on 6th May, 2006. The petitioner claims that
the respondent had agreed to pay 1.1% of the contract value as agency fee
for the services rendered by the petitioner in connection with the said
Arbeel project for the respondent. The project could not, however,
materialize for no fault of the petitioner. That did not deter the
petitioner from using its good offices to procure another project by the
name “Sulaymaniah Gas Power Project”. A Memorandum of Agreement was signed
between the petitioner’s client and the respondent- Corporation on 20th
January, 2007 for execution of the said project which was followed by
signing of a Turnkey contract on 4th March, 2007. The original contract
value of the project aforementioned was US $ 117,000,000 which was later
increased to US $ 118,181,750. The petitioner asserts that as in the case
of Arbeel project, the respondent had agreed to pay 1.1% of the contract
value towards agency fee to the petitioner without the requirement of
providing any further service.

4. The petitioner asserts that work of the execution of the project
aforementioned started and was undertaken with the participation of the
petitioner, in the course of which the petitioner claims to have rendered
various services to the respondent for facilitating execution of the
project including logistic support at Amman/Jordon. The petitioner submits
that the Service Provider Agreement in respect of Sulaymaniah Gas Power
Project was executed between the petitioner, on the one hand, and the
respondent, on the other, on 11th May, 2010 providing for pre-contractual
and post-contractual activities and for payment of a fee equivalent to 1.1%
of the total contractual value within thirty days from the receipt of the
payment of the respondent-BHEL. The petitioner alleges that progressive
payments were received by the respondent from the company but no payment
towards agency fee was realized in favour of the petitioner. After several
reminders and persuasion, the respondent-BHEL is said to have disbursed a
sum of US $ 3,60,282 only to the petitioner on 22nd June, 2010 for the
services so rendered. The petitioner claims the balance sum of US $
9,39,718 towards agency fee after adjustment of the amount of US $ 3,60,282
towards the payment already received by it. The petitioner submits that the
respondent has not responded to several e-mails sent by the petitioner
seeking payment of the balance amount and that by a final communication
date 21st December, 2011 the respondent has declined to make the payment of
the balance on the ground that the claim of the petitioner is baseless,
unfounded and untenable. The petitioner, in the above backdrop, asserts
that disputes have arisen between the parties in relation to the Service
Provider Agreement executed between them, Clause 7, whereof provides for
adjudication of the same by way of Arbitration. Clause 7 reads as under :

“Article 7 – Arbitration

7.1 Any and all disputes arising between the PARTIES in connection with
the performance and/or interpretation of this Agreement shall be settled in
an amicable manner. In case the parties fail to arrive at a settlement
within Sixty (60) days of the matter being referred by the aggrieved PARTY
to the other, such disputes shall be finally settled in accordance with the
provisions of Indian Arbitration and Conciliation Act, 1996 and rules
framed there under

7.2 The Arbitrator (s) appointed shall have its seat in New Delhi and the
arbitration proceedings shall be in English. The Arbitrator (s) shall
record reasons for the award. Courts at New Delhi shall have exclusive
jurisdiction relating to adjudication of any dispute which may arise
between the PARTIES hereto.”

5. The petitioner has, in the light of the above, approached this Court
for appointment of an arbitrator and for reference of the disputes for
adjudication to him.

6. The respondent-company has in its reply opposed the grant of any
relief to the petitioner inter alia on the ground that the notice for
arbitration served upon the respondent is not a proper one and that the
claim made by the petitioner is barred by limitation. The respondent’s
further case is that the main service which the petitioner was obliged to
provide under the Service Provider Agreement was to ensure that there was
an amicable settlement of the disputes between the respondent and the
client and that the bank guarantee provided by the respondent for US $ 15.7
million to MGIC was returned to it. The petitioner having failed to
fulfill that obligation under the agreement was not entitled to claim any
amount from the respondent.

7. We have heard learned counsel for the parties at some length. The
material facts are not in dispute. That a Service Provider Agreement was
executed between the parties is admitted. That Article 7 of the said
agreement provides for settlement of the dispute in relation to the
agreement by way of arbitration is also not in dispute. That disputes have
actually arisen between the parties in relation to the agreement is also
evident from the averments made in the pleadings. The only method for
determination of such disputes is by way of arbitration. Whether or not
the petitioner has provided the services envisaged under the agreement and,
if so, whether the said services were adequate and satisfactory are matters
that can be examined only by the Arbitrator. So also the question whether
the claim made by the petitioner is time barred cannot be examined in the
present proceedings and shall have to be left open to be raised before the
Arbitrator. There is, in that view, no gainsaying that the present
petition under Sections 11(5) and 11(12) shall have to be allowed with
appropriate directions, particularly when this Court is concerned primarily
with the question whether an arbitration agreement exists between the
parties and if so whether the disputes falling within the scope of the
agreement have arisen for determination. Our answer to both these
questions being in the affirmative, the petitioner has made out a case for
appointment of an Arbitrator and for reference of the disputes for
adjudication to him/her.

8. In the result, we allow this petition, and appoint Ms. Justice Rekha
Sharma, former Judge of the High Court of Delhi as a Sole Arbitrator for
adjudication of the disputes that have arisen between the parties in
relation to the Service Provider Agreement executed between them. We leave
it open for the parties to make their claims and counter claims in relation
to the agreement afore-mentioned before the Arbitrator. All contentions
otherwise open to the parties on facts and in law shall be open to be urged
before the Arbitrator. The petition, is accordingly, allowed with the above
directions leaving the parties to bear their own costs.

9. Parties are directed to appear before the Arbitrator on 22nd August,
2016.

.…………….……………….CJI.
[T.S. Thakur]

..…………………….………….J.
[R. Banumathi]

...………………..…….……….J.
[Uday Umesh Lalit]
New Delhi;
July 13, 2016

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