Gr Green Life Energy Pvt. Ltd. vs Leitwind Shriram Manufacturing … on 22 February, 2021


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Supreme Court of India

Gr Green Life Energy Pvt. Ltd. vs Leitwind Shriram Manufacturing … on 22 February, 2021

Author: Hon’Ble Ms. Malhotra

Bench: Hon’Ble Ms. Malhotra, Ajay Rastogi

                                                                                                 REPORTABLE


                                             IN THE SUPREME COURT OF INDIA

                                              CIVIL APPELLATE JURISDICTION

                                             CIVIL APPEAL NO.692 OF 2021
                                      (ARISING OUT OF SLP (C) NO. 16027 OF 2020)


                   GR GREEN LIFE ENERGY PVT. LTD.                                              … APPELLANT


                                                               VERSUS


                   LEITWIND SHRIRAM MANUFACTURING PVT. LTD.                                   … RESPONDENT



                                                              ORDER

Leave granted.

1. The present Civil Appeal has been filed by the Appellant-Contractor to
challenge the Order dated 16.09.2020 passed on an Application filed under
Section 11 of the Arbitration and Conciliation Act, 1996 by the Madras High
Court in Original Petition No. 300 of 2019.

2. The Appellant and the Respondent had entered into a Development
Agreement dated 10.02.2014 to set up a Wind Farm Project in Sangli District
in Maharashtra, which contained an arbitration clause.

Clause 20 of the Agreement reads as :

“20. Governing Law and Jurisdiction and Service of Process
….

c) All disputes, differences and claims or any non-payment concerning the
project work hereby created and / or touching this presents, arising out of or in
relation to anything contained herein shall be referred to arbitration to be held
at Chennai, under the provisions of Arbitration and Conciliation Act, 1996
(inforce from time to time). The arbitration panel shall consist of three
arbitrators, one arbitrator shall be appointed by each party and the arbitrators
so appointed shall appoint the presiding arbitrator. The parties here to shall
duly observe any interim award/s or direction/s of the arbitration tribunal and
Signature Not Verified the award in pursuance to arbitration shall be final and binding on the parties
Digitally signed by Dr.
Mukesh Nasa
hereto. The arbitration proceedings shall be in English language.”
Date: 2021.02.23
17:55:24 IST
Reason:

1

3. Disputes arose between the parties with respect to claims raised by the
Appellant-Contractor, which led to issuance of a legal notice dated
21.04.2018 seeking payment of outstanding dues of Rs. 3,26,08,545/-.

4. The Respondent vide letter dated 21.01.2019 rejected the allegations in
the notice, and contended that the Contractor had failed to provide services
as agreed under the Development Agreement. It was further contended that
the Appellant-Contractor was liable to refund an amount of
Rs.10,26,00,000/- with Interest @ 15% p.a., and pay liquidated damages of
Rs. 1,54,00,000/- to the Respondent-Company.

The Respondent invoked arbitration under Clause 20 of the Agreement,
and nominated its arbitrator, with a request to the Appellant herein to make
nomination of its arbitrator.

5. On 18.03.2019, the Respondent herein filed a Petition under Section
11(6) of the 1996 Act before the High Court of Madras, wherein it was
prayed that the Court may appoint an arbitrator on behalf of the Appellant in
terms of Clause 20 of the Development Agreement, since the Contractor had
failed to do so.

6. Subsequently, the Appellant-Contractor, registered itself under the Micro,
Small and Medium Enterprises Development Act, 2006 (“MSMED Act”), and
filed an application for resolution of disputes before the Facilitation Council,
Pune established under the MSMED Act.

7. In the meanwhile, the Petition under Section 11 was taken up for hearing
before the High Court, wherein it was observed that there is no provision
under the MSMED Act for reference of counter-claims to the Facilitation
Council, and adjudication thereof. Sections 15 to 18 of the MSMED Act
provide for reference of disputes with respect to claims made by a supplier /
contractor registered under the MSMED Act. Even though Section 24 of the
MSMED Act gives overriding effect to the MSMED Act, it would not be
applicable in this case, since there is no provision under this Act to deal with
counter-claims filed against the supplier-contractor.

2

The High Court took the view that since there is no provision for raising
counter-claims under the MSMED Act, and the parties had in the
Development Agreement dated 10.02.2014 agreed to refer all their disputes
under the 1996 Act, it was a fit case for appointment of the arbitrator. The
arbitration agreement provided for a three-member tribunal. The Applicant
(Respondent herein) had already nominated its arbitrator, the Contractor
was directed to appoint an arbitrator. On such nomination, the two arbitrators
would appoint the presiding arbitrator.

8. The Appellant-Contractor challenged the aforesaid Order dated
16.09.2020 before this Court vide Special Leave Petition (C) No. 16027 of
2020.

During the course of the proceedings, the parties have agreed to have
their disputes adjudicated under the Arbitration & Conciliation Act, 1996 by a
Court-appointed Sole Arbitrator.

In view of the statement made by the Counsel for both parties on
instructions, Clause 20 of the Development Agreement dated 10.02.2014
stands superseded to the extent that the arbitration will be conducted by a
three-member tribunal.

We appoint Justice K. Kannan, former Judge of the Madras High Court,
as the Sole Arbitrator to adjudicate on all the claims and counter claims
made by the parties arising out of the Development Agreement dated
10.02.2014. The arbitration will be conducted in accordance with the
Arbitration and Conciliation Act, 1996. The arbitral proceedings shall be
conducted by the Madras High Court Arbitration Centre in accordance with
its Rules.

The appointment of the Sole Arbitrator is subject to the Declarations to
be made under Section 12 of the Arbitration and Conciliation Act, 1996 with
respect to independence and impartiality, and the ability to devote sufficient
time to complete the arbitration. The Sole Arbitrator will be paid fees as per
the Schedule of the Madras High Court Arbitration Centre (Administrative
Cost and Arbitrators’ Fees) Rules, 2017.

3

A copy of this Order be despatched to the Madras High Court Arbitration
Centre, and Justice K. Kannan (Retd.) at the following address :

“Justice K. Kannan
3/11, Lakshmi Colony,
North Crescent, T. Nagar
Chennai – 600017
Mob: +91-9780008145”

9. In view of the aforesaid directions, the Application filed by the Appellant-

Contractor under the MSMED Act, registered as MSFEC Case No.
MH/26/M/PNE/02000 on 22.10.2020, will stand closed by the Facilitation
Council, Pune.

10. The Appeal is disposed of in the aforesaid terms. Pending applications, if
any, stand disposed.

…………………………………………….J.

(INDU MALHOTRA)

…………………………………………….J.

(AJAY RASTOGI)

New Delhi;

February 22, 2021.

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