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