MEARS GROUP INC. Vs. FERNAS INSAAT A.S. (FERNAS CONSTRUCTION COMPANY INC)
Supreme Court of India (Division Bench (DB)- Two Judge)
Arbitration Petition, 13 of 2016, Judgment Date: Dec 14, 2016
REPORTABLE
IN THE SUPREME COURT OF INDIA
ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION No. 13 OF 2016
MEARS GROUP INC. ..... PETITIONER
VERSUS
FERNAS INSAAT A.S.
(FERNAS CONSTRUCTION COMPANY INC) .....RESPONDENT
O R D E R
Dr D Y CHANDRACHUD, J
1 The Petitioner is a company incorporated in the US. The Respondent
is incorporated in Turkey. The Respondent was awarded a contract for
the construction of a pipeline by the Gas Transmission Company Ltd.,
Bangladesh. A Letter of Intent was issued by the Respondent to the
Petitioner on 16 April 2012 for performing Horizontal Directional Drilling
works for six river crossings under the above-mentioned project in
Bangladesh. A detailed work order was issued on 12 June 2012 to the
Petitioner for a total contract price of USD 7,225,000/-. The work to be
executed by the Petitioner involved the installation of thirty inch
diameter and six inch diameter gas pipelines under six rivers in
Bangladesh. According to the Petitioner the effective date of the contract
was 16 April 2012, while the scheduled date of completion was on 13 March
2013. The Petitioner is stated to have furnished a performance bank
guarantee equivalent to ten per cent of the contract price. Clause 24 of
the work order contained an Arbitration Agreement in the following terms :-
“24.0 Disputes and Arbitration
24.2 Arbitration :
In case the amicable resolution or settlement is not reached between the
Parties within a period of 30 days from the day on which the dispute(s) or
difference(s) arose, such dispute(s) or difference(s) shall be referred to
a sole Arbitrator for settlement by way of arbitration in accordance with
the provisions of the Arbitration and Conciliation Act 1996 of Government
of India or any applicable law on arbitration that may be in force then,
and any amendments made thereto. The sole arbitrator shall be appointed by
the mutual consent of both the Parties. The decision of the Arbitrator
shall be final and binding on both the Parties. The venue of such
arbitration shall be at New Delhi, India. The Language of the arbitration
proceeding shall be in English.
The existence of any dispute(s) or difference(s) or the initiation or
continuance of the arbitration proceedings shall not permit the Parties to
postpone or delay the performance by the Parties of their respective
obligations under this indenture”.
According to the Petitioner, four letters of credit were opened by the
Respondent so as to facilitate the completion of four crossings. The
remaining letter of credits, it is alleged, were not opened. According to
the Petitioner, it successfully completed work under all the six crossings
and its bank guarantee was allowed to lapse.
2 Disputes have arisen between the parties, resulting in an exchange of
e-mails. The Petitioner has a claim for unpaid dues. The Petitioner
invoked arbitration by an e-mail dated 2 November 2015 addressed by its
advocate to the respondent. The Petitioner claimed an amount of USD
38,13,723.76 together with interest by its e-mail and suggested the names
of two former judges of the Delhi High Court. The Petitioner sought the
concurrence of the Respondent to the appointment of one of them as sole
arbitrator, in terms of the arbitration agreement. Finding no response,
these proceedings were instituted under Section 11(5) of the Arbitration
and Conciliation Act, 1996.
3 Notice was issued in these proceedings on 8 March 2016. On
7 October 2016 the Respondent informed this Court that it was willing to
negotiate an amicable settlement with the Petitioner and would either
finalize a settlement or file its objections to the petition for
appointment of an arbitrator within four weeks. Neither has any settlement
been arrived at between the parties nor has a reply been filed to the
Arbitration Petition.
4 During the course of the hearing, learned counsel have not disputed
the existence of the arbitration agreement. Disputes have evidently arisen
between the parties and a mutual settlement has not been possible.
5 In the circumstances, we hereby appoint Mr Justice FM Ibrahim
Kalifulla, former judge of the Supreme Court of India to act as a sole
Arbitrator in terms of the arbitration agreement. The learned arbitrator
shall be at liberty to determine the fees payable to him for the
arbitration.
6 The Arbitration Petition is accordingly disposed of in the above
terms.
….......................................CJI
[T S THAKUR]
…..........................................J
[Dr D Y CHANDRACHUD]
New Delhi
December 14, 2016