VALECHA ENGINEERING LIMITED  Vs DELHI METRO RAIL CORPORATION LIMITED

ARB.P. 234/2020 Page 1 of 16
$~8
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on 15th
+ ARB.P. 234/2020 January, 2021
VALECHA ENGINEERING LIMITED ….. Petitioner
Through: Mr. Rajeev Sharma, Mr.
Abhishek Birthray, Ms. Somya Budholia, Mr. Prateek Seth, Mr.
Rajat Krish na and Mr. Adeem
Ahmed, Advs.

versus
DELHI METRO RAIL CORPORATION LIMITED ….. Respondent
Through: Mr. Prashant Mehta and Ms.
Neha Tanwar , Advs .

CORAM:
HON’BLE MR. JUSTICE C .HARI SHANKAR

% 15.01.2021
JUDGEMENT (ORAL)
(Video-Conferencing)

1. This is a petition under Section 11(6) of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as “1996 Act”), to refer
certain disputes, which have arisen between the petitioner and the respondent, to arbitration.

2. Having heard Mr. Rajeev Sharma, learned counsel for the
petitioner and Mr. Prashant Mehta, learned counsel for the respondent
at length, I proceed to dispose of the present petition, the issue in the petition being limited.
2021:DHC:186ARB.P. 234/2020 Page 2 of 16

3. Consequent to a letter of award, dated 30th
November, 2011, a
contract , for constructing underground link tunnel between the All
India Institute of Medical Sciences (AIIMS) and the Jai Prakash Narayan Apex Trauma Centre, was awarded to the petitioner by the
respondent.
4. The Agreement provided for resolution of disputes between the
parties, initially, by conciliation and thereafter, on failure of
conciliatory process, by arbitration. Clause 17.9 of the Agreement,
which provided for arbitration, reads thus:

“17.9. If the efforts to resolve all or any of the disputes
through conciliation fails, then such disputes or differences,
whatsoever arising between the parties, arising out of
touching or relating to construction/manufacture, measuring
operation or effect of the Contract or the breach thereof shall
be referred to Arbitration in accordance with the following
provisions.

(a) Matters to be arbitrated upon shall be referred to
a sole Arbitrator if the total value of the claims is upto
Rs. 5 million and to a panel of three Arbitrators if total
value of claims is more than Rs. 5 million. The
Employer shall provide a panel of three arbitrators
which may also include DMRC officers for the claims
upto Rs. 5 million and a panel of five Arbitrators
which may also include DMRC officers for claims of
more than Rs. 5 million. The Contractor shall have to
choose the sole Arbitrator from the panel of three
and/or one Arbitrator from the panel of five in case
three Arbitrators are to be appointed. The Employer shall also chose one Arbitrator from this panel of five
and the two so chosen will choose the third arbitrator
from the panel only. The Arbitrator(s) shall be
appointed within a period of 30 days from the date of
2021:DHC:186ARB.P. 234/2020 Page 3 of 16
receipt of written notice/ demand of appointment of
Arbitrator from either party. Neither party shall be
limited in the proceedings before such arbitrators) to the evidence of arguments put before the Engineer for
the purpose of obtaining his decision. No decision
given by the Engineer in accordance with the
foregoing provisions shall disqualify him from being
called as a witness and giving evidence before the
arbitrator(s) on any matter, whatsoever, relevant to dispute or difference referred to arbitrator/s. The
arbitration proceedings shall be held in Delhi only. The
language of proceedings, that of documents and
communication shall be English.

(b) The Employer at the time of offering the panel
of Arbitrator(s) to be appointed as Arbitrator shall also supply the information with regard to the qualifications
of the said Arbitrator nominated in the panel along
with their professional experience, phone nos. and
addresses to the contractor.

(c) The award of the sole Arbitrator or the award
by majority of three Arbitrators as the case may be
shall be binding on all parties.”
(Emp hasis supplied)

5. According to the petitioner, failure, on the part of the
respondent, to fulfil certain obligations , cast on it under the aforesaid
contract, resulted in prejudice to the petitioner and delay in completion
of the contract. The petitione r issued a notice of demand, to the
respondent, on 23rd
May, 2018, raising several demands, for being
recompensed itself for losses suffered by the petitioner owing to
alleged default on the part of the respondent.
6. The communication also put the respondent on notice that in the
event of default on the part of the respondent , to pay the alleged
outstanding differences of the petitioner within 28 days, the petitioner
2021:DHC:186ARB.P. 234/2020 Page 4 of 16
would seek reference of the dispute to the Conciliator, in accordance
with Clause 17.9 of the Agreement.

7. The respondent, in response to the request, appointed one Mr.
S.N. Yadav as Conciliator vide letter dated 19th December, 2018. It is
not in dispute that formal discussions , between the parties , were held
by the Conciliator on 9th January, 2019, 22nd January, 2019, 18th
February, 2019, 14th March, 2019 and 4th October, 2019, but to no
avail. Ultimately, on 30th
October, 2019, the Conciliator declared the
conciliation process as having been failed.
8. On 18th
November, 2019, the petit ioner addressed a notice to
the respondent, calling on the respondent to provide a panel of three
arbitrators, in accordance with Clause 17.9(a) of the Agreement.
9. Mr. Rajeev Sharma, learned counsel for the petitioner, submits
that as the respondent did not act in accordance with Clause 17.9(a) of
the contract within a period of 30 days as stipulated therein, there was
failure of the process contemplated in the contract for invocation of
arbitration by the parties, resulting in the necessity of an arbitr ator
being appointed by this Court.

10. As against this, Mr. Prashant Mehta, learned counsel for the
respondent , seeks to refute the aforesaid submission of Mr. Sharma ,
by reference, essentially, to a communication, dated 23rd
June, 2020,
from the petitio ner to the respondent, which read thus:
2021:DHC:186ARB.P. 234/2020 Page 5 of 16
“Ref: VEL/DMRC/AIIMS -01/49
Date: 23/06/2020
To,

Office of the Chief Project Manager -3,
Delhi Metro Rail Corporation Ltd .,
Gr. Floor, Mayur Vihar, phase -1,
Metro Station,
New Delhi 110091 .
Sub: Design and Construction of Road Tunnel , Ramps
and Grade Road between AIIMS and JPN Apex Trauma
Center by Cut & Cover method. (Contra ct no. AIIMS -01)
Reg:- Application for appointment Arbitrator

Ref:- Our letter No. VEL/ DMRC/AI IMS-01/SBW/31
dated 18/11/2019

Dear Sir,

We refer to our earlier letter dated 18 11 2019, wherein we
have requested for appointment of the arbitrator.

However now we understand that a new Dispute Resolution
Mechanism has been in prevalence recently in DMRC so you
may refer our dispute to this panel at the earliest in order to
achieve early resolution.

Kindly note that as all our records are in Delhi and in Covid
19 situation it may not be possible for us to present our case
now hence we shall revert to when possible.

Warm Regards,

Thanking y ou,

With Regards

For VALECHA ENGINEERING
Sd/Seal
(AUTHORISED SIGNATORY)”

2021:DHC:186ARB.P. 234/2020 Page 6 of 16
11. Mr. Mehta submits that, having thus reopened the conciliatory
avenue, by addressing the aforesaid communication dated 23rd June,
2020 to the respondent, the petitioner could not again seek to rely on
its earlier communication dated 18th November, 2019. The counter
affidavit filed by the respondent, to the present petition, gave serious
exception to the fact that, having thus written to the respondent on 23rd
June, 2020, request ing that the dispute be referred for settlement under
the Dispute Resolution Mechanism, the petitioner, nevertheless, filed
the present petition before this Court on 9th
July, 2020.
12. Mr. Mehta submits that even after filing the present petition, the
petitioner wrote, to the respondent, 30th July, 2020 and 5th
August,
2020, seeking that the dispute be referred for amicable settlement to
the Dispute Resolution Board of the DMRC .
13. Mr. Rajeev Sharma, learned counsel for the petitioner, however,
points out that the petitioner had clearly stated in its communication
that the request was made without prejudice to his right to invoke arbitration and its claim in the present petition pending before this
Court.

14. On 12
th
August, 2020, the respondent wrote to the petitioner,
providing a list of five arbitrators and calling on the petitioner to select
an arbitrator out of the said list. This, submits Mr. Mehta, is in
accordance with the protocol prescribed in Clause 17.9(a) of the
Agreement between the pa rties.
2021:DHC:186ARB.P. 234/2020 Page 7 of 16
15. Mr. Mehta submits that once the respondent had provided a list
of arbitrators to the petitioner on 12th August, 2020, and called on the
petitioner to choose an arbitrator from the said list, this petition was no
longer maintainable. He relies, for the purpose, on the judgment of
the Supreme Court in Datar Switch gears Ltd. v. Tata Finance Ltd. .1
He also submits that a mechanism, similar to that in the present case,
was specifically held, by the Supreme Court in Central Organization
for Railway Electrification v. ECI-SPIC -SMO -MCML (JV)2, to be in
accordance with law and not to infract Section 12(5) of the 1996 Act
or the earlier decisions of the Supreme Court in Bharat Broadband Network Ltd. v. United Telecom Ltd.
3 and Perkins Eastman
Architects DPC & Anr. v. HSCC (India ) Limited4. As such, submits
Mr. Mehta, the present petition is not maintainable any further, and the petitioner would be required to select an arbitrator from the list of five arbitrators, provided by the respondent under cover of its letter dated
12
th
16. Mr. Sharma contends, on the other hand, that, having invoked
the arbitration clause vide notice dated 18 August, 2020.

th

1 (2000) 8 SCC 151
2 2019 SCC OnLine SC 1635
3 (2019) 5 SCC 755
4 2019 SCC Online S C 1517
November, 2019 after
exhausting the conciliatory mechanism provided in the contract, and
the respondent having failed to appoint an arbitrator within 30 days of
the said notice, the present petition was clearly maintainable under
Section 11(6) of the 1996 Act. The pre-arbitration dispute resolution
mechanism, which was thereafter devised by the respondent a nd in
2021:DHC:186ARB.P. 234/2020 Page 8 of 16
respect of which communications were exchanged between the
petitioner and the respondent, according to Mr. Sharma, can make no difference as no such mechanism was contemplated in the contract
between the parties. Besides, submits Mr. Sharma, the pet itioner had,
in its communications, to the respondent, clearly stated that its request
for referring the dispute for resolution under the said mechanism was
without prejudice its claim in the present petition.
17. Datar Switchgears Ltd.
1, submits Mr. Sha rma, has no
application to the facts of this case, as the principles in that case were expressly enunciated in the context of the fact that the arbitration
agreement in the said case did not contemplate appointment of the
arbitrator within 30 days of issua nce of notice by one party to the
other. Where such stipulation is specifically contained in the contract between the parties, as in the present case, Mr. Sharma submits that Datar Switchgears Ltd.
1
can have no application at all.
Analysis
19. There is no dispute about the fact that , prior to invoking the
arbitration agreement with the respondent, as contained in Clause 17.9(a), the petitioner exhausted the provision for conciliation,
contained in the Agreement. Equally, it is not in dispute that tho ugh
Clause 17.9(a) of the Agreement, specifically, required the arbitrator
to “be appointed within a period of 30 days from the date of receipt of
written notice/demand of appointment of Arbitrator from either party”,
the respondent did not take any action within 30 days of receipt of
notice dated 18
th November, 2019 from the petitioner. Section 11(6)
2021:DHC:186ARB.P. 234/2020 Page 9 of 16
of the 1996 Act read s thus:
“(6) Where, under an appointment procedure agreed upon
by the parties, –

(a) a party fails to act as required under that
procedure; or

(b) the parties, or the two appointed arbitrators, fail
to reach an agreement expected of them under that
procedure; or

(c) a person, including an institution, fails to
perform any function entrusted to him or it under that
procedure,
a party may request the Supreme Court, or, as the case may
be, the High Court or any person or institution designated by
such court to take the necessary measure, unless the
agreement on the appointment procedure provides other means for securing the appointment.”

20. The default on the part of the respondent, in appointing
arbitrator or even in providi ng a panel of arbitrators to the petitioner
within 30 days of issuance, by the petitioner, of its notice invoking
arbitration on 18th
November, 2019, in my opinion, clearly resulted in
failure , on the part of the respondent, to act in accordanc e with the
procedure for arbitration envisaged in the agreement between the
petitioner and the respondent. Section 11(6) of the 1996 Act,
therefore, directly applies.
21. The decision in Datar Switchgears Ltd.1
“14. The above decision has no application to the facts of
this case as in the present case, the Arbitrator was already is expressly
inapplicable to the facts of the present ca se. I say so because , in para
14 of the report, the Supreme Court clearly observed thus:
2021:DHC:186ARB.P. 234/2020 Page 10 of 16
appointed before the appellant invoked Section 11 of the Act.
The Counsel for the appellant contended that the Arbitrator
was appointed after a long lapse of time and that too without
any previous consultation with the appellant and therefore it
was argued that the Chief Justice should have appointed a
fresh arbitrator. We do not find much force in this contention,
especially in view of the specific words used in the
Arbitration clause in the Agreement, which is extracted above. This is not a case where the appellant requested and
gave a notice period for appointment of arbitrator and the
latter failed to comply with that requested. The 1
st respondent
asked the appellant to make payment within a stipulated
period and indicated that in the event of non -payment of the
amount within fourteen days, the said notice itself was to be
treated as the notice under the Arbitration clause in the Agreement. The amount allegedly due from the appellant was
substantial and the 1
st
(Emphasis supplied) respondent cannot be said to be at fault
for having given a larger period for payment of the amount
and setting the dispute. It is pertinent to note that the
appellant did not file an application even after the 1st
respondent invoked Section 9 of the Act and filed a petition
seeking interim relief. Under such circumstances, it cannot be
said that there was a failure of the procedure prescribed under
the contract.”

22. The Supreme Court, therefore, was cautious in conditioning the
law enunciated by it in Datar Switchgears Ltd.1, with a caveat that it
was not considering the case in which the notice invoking arbitration
called on the respondent to appoint an arbitrator within a particular
period, and the respondent failed to do so. Inasmuch as there was no
stipulated period, within which the arbitrator was to be appointed by
one party after receipt of notice from the other, and no such period was to be found in Section 11(6) of the 1996 Act, either, the Supreme Court went on to observe that merely by failing to appoint the
arbitrator within 30 days of receipt of notice from the other side, the
right of the respondent before it to appoint the arbitrator did not stand
2021:DHC:186ARB.P. 234/2020 Page 11 of 16
eviscerated. It is in these circumstances that the Supreme Court held
that in the absence of any statutory or contractual stipulation,
requiring appointment of t he arbitrator by either party to the contract
within 30 days of receipt of notice from the other, the arbitrator could be appointed till such of filing of the petition before the Court under Section 11(6) of the 1996 Act. Per contra , in the present case, the
contract expressly prescribes a period of 30 days, from the date of
receipt of notice invoking arbitration by one party, for the other party
to appoint the arbitrator. That period having elapsed, and the respondent having failed to appoint the arbitr ator, Section 11(6) is
clearly applicable and the judgment in Datar Switchgears Ltd.
1
is,
equally clearly, distinguishable.
23. Mr. Prashant Mehta seeks to submit, apropos the italicized
observation in the paragraph above from Datar Switchgears Ltd.1, that
there is no distinction between the situation that obtained in that case
and in this. In the present case, too, submits Mr Mehta, the notice
invoking arbitration , dated 18th November, 2019, did not call on the
respondent to appoint its arbitrator within 30 days. To my mind, this
distinction cannot make Datar Switchgears Ltd.1 applicable to the
facts of the present case. The notice dated 18th November, 2019 did
not merely invoke Clause 17.9 of the Agreement , but extracted, in
extenso , the entire Clause (as extracted in para 4 (supra )). Clause 17.9
required, in express and unmistakable terms, for “the Arbitrator(s) (to)
be appointed within a period of 30 days from the date of receipt of
written notice/demand of appointment of Arbitrator from either party ”.
It was hardly required for the petitioner, having extracted the said
2021:DHC:186ARB.P. 234/2020 Page 12 of 16
Clause in full, to again call upon the respondent to appoint the
arbitrator within 30 days. In fact, after extracting the Clause, the notice
calls on the respondent to provide a list of five arbitrators “as per
operation of this Clause”. The respondent, however, did not do so.
Ergo, the facts in the present case are clearly distinguishable from the
facts in Datar Switchgears Ltd.1
23. The Supreme Court did, in certain later decisions, hold that,
even where the notice invoking arbitration called on the opposite party to appoint its arbitrator within 30 days, the right to appoint the
arbitrator continued till the first party approached the Court under
Section 11(6) of the 1996 Act, notably in Punj Lloyd Ltd. v. Petronet
MHB Ltd. and in fact, attract the exception
engrafted in para 14 of the report in the said case .

5 and U.O.I. v Bharat Battery Manufacturing Co. (P) Ltd.6
in which, despite the notice invoking arbitration calling on the
opposite party to appoint its arbitrator , the right of the opposite party
to do so was held to stand forfeited only on the first party approaching the Court under Section 11(6), following Datar Switchgears Ltd.
1.
Those, however, were not cases in which a period for appointing of arbitrator, reckoned from the issuance of the notice invoking
arbitrator, was contained in the arbitration agreement between the
parties. Where such a time period was contained in the arbitration
agreement between the parties, the Supreme Court, in U.O.I. v.
Premco -DKSPL (JV)
7

5 (2006) 2 SCC 638
6 (2007) 7 SCC 684
7 (2016) 14 SCC 651 held, in unmistakable terms, that “the terms of
the agreement bind the parties unless they have chosen to repudiate
2021:DHC:186ARB.P. 234/2020 Page 13 of 16
the same”. In a similar vein, Arijit Pasayat, J., heading a bench of
three Hon’ble Judges of the Supreme Court, observed, in Northern
Railway Administration v. Patel Engineering Co. Ltd.8
24. The reliance, by Mr. Mehta, on the communications between
the petitioner and the respondent, commencing 20, that “a bare
reading of the scheme of Section 11 shows that the emphasis is on the terms of the agreement being adhered to and/or given effect as closely as po ssible”. This is no more than a judicial recapitulation of Section
11(6), for the applicability of which “failure”, on the part of a party,
“to act as required under” the agreed procedure for appointment of the
arbitrator, is the statutory sine qua non .

th June, 2020, in my
view, cannot be of any help to the respondent. Section 11(6) of the 1996 Act, which became applicable in favour of the pe titioner, on the
expiry of 30 days, from 18
th November, 2019, cannot be treated as
having become inapplicable merely because the petitioner was
agreeable to reference of the dispute to the pre -arbitration Dispute
Resolution Mechanism devised by the respondent – incidentally after
18th November, 2019, when the notice invoking arbitration was issued
by the petitioner. The petition also asserts, in this regard, that the
petitioner moved this Court only after the expiry of over two weeks
from the request dated 23rd June, 2020, for reference of the dispute to
the pre -arbitration dispute resolution mechanism of the respondent.
That apart, as already noticed hereinabove, detailed attempts at conciliation were undertaken prior to the petitioner issuing the notice
invoking arbitration to the respondent on 18
th

8 (2008) 10 SCC 240 November, 2019 and,
2021:DHC:186ARB.P. 234/2020 Page 14 of 16
therefore, the pre -arbitral regimen, as contemplated by the contract,
stood exhausted. The petitioner having waited for 30 days from 18th
November, 2019 and, even after the notice dated 23rd
June, 2020
having waited for two more weeks before moving the present petition,
it is clear that the petition is maintainable before this Court.
25. That being so, the respondent had, by 12th August, 2020,
already lost its right to act in accordance with the procedure prescribed
in Clause 17.9(a) of the Agreement. That right continued only till the
expiry of 30 days from 18th November, 2019. It could not be sought to
be revi ved as late as on 12th August, 2020. The communication dated
12th
August, 202 0 from the respondent to the petitioner whereunder
the respondent provided a list of arbitrators and called on the
petitioner to select one from the said list, was, therefore, incompetent. It cannot, therefore, militate against the maintainability , or the merit s,
of the present petition.
26. In view thereof, there is no necessity for me to return any
finding on the applicability on the judgment of the Supreme Court in Central Organization for Railway Electrification
2, as the said
decision basically seeks to justify the procedure to be followed by the
respondent under Clause 17.9(a) of the Agreement, and as I have already held hereinabove that the right of the respondent to act in accordance with the said procedure was exhausted much prior to 12
th

August, 2020, when the respondent decided to do so.
27. I may observe, in this regard, that the petition does not make
2021:DHC:186ARB.P. 234/2020 Page 15 of 16
any reference to the communication dated 23rd June, 2020 from the
petitioner to the respondent, seeking reference of the dispute to the
pre-arbit ration dispute resolution mechanism of the respondent. This is
unfortunate, and could have been avoided. Mr. Sharma submits that the default was not deliberate. I am not inclined to enter into that
controversy as, in my view, the right of the petitioner to invoke
Section 11(6) of the 1996 Act stood crystallized as far back as on 18
th
December, 2019, when the period of 30 days from the notice , dated
18th
November, 2019 from the petitioner to the respondent, invoking
arbitration , had elapsed, with the respo ndent failing to act in
accordance with Clause 17.9(a) of the Agreement.
28. In view thereof, the petition deserves to succeed.
29. This Court appoints Hon’ble Ms. Justice G. Rohini, former
Chief Justice of this Court, as the arbitrator to arbitrate on the disputes
between the parties. The contact details of the learned arbitrator are as under:

Flat No.1001, Tower -12,
Supreme Towers,
Sector -99
NOIDA-201304
Mobile Nos.8527027027 & 8826000333 Email ID: justicegrohini@gmail.com

30. The parties are directed to contact the learned arbitrator at the
aforesaid contact details within 48 hours of receipt, from the Registry,
of a copy of this judgment by e- mail.
2021:DHC:186ARB.P. 234/2020 Page 16 of 16

31. The fees of the learned arbitrator shall be fixed by the learned
arbitrator in consultat ion with the parties. Mr Mehta contends that the
DMRC has a fixed “fee schedule”. The arbitrator having been appointed by this Court under Section 11(6) of the 1996 Act, and not by the DMRC, the applicability of this schedule may be questionable. It is, however, left open to the DMRC to so urge before the learned
arbitrator, and for the learned arbitrator to take a decision thereon.
32. The le arned arbitrator will furnish the requisite disclosure under
Section 12(2) of the 1996 Act, within a week of ent ering on reference.
33. This petition is, accordingly allowed in the aforesaid terms, with
no orders as to costs.

C. HARI SHANKAR, J
JANUARY 15, 2021
r.bararia

2021:DHC:186