# 11 S.C.R. 872 MEARS GROUP INC v. FERNAS INSAAT A.S

- **Citation:** [2016] 11 S.C.R. 872
- **Court:** Supreme Court of India
- **Decided:** 2016-12-14
- **Case number:** Arbitration Petition No. 13 of2016
- **Bench:** T. S. Thakur, Dr. D. Y. Chandrachud
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/11-s-c-r-872-mears-group-inc-v-fernas-insaat-a-s-31190
- **Pages:** 3

## Headnote

Arbitration and Conciliation Act, 1996 - s.11 (5) -Appointment
of sole arbitrator - Contract for construction of pipeline - Drilling
work - Work order issued to petitioner contained arbitration
agreement - Dispute between parties - Petitioner claimed unpaid
dues and invoked arbitration by e-mail - Sought concurrence of
respondent for appointment of sole arbitrator, in terms of the
arbitration agreement - Finding no response, proceedings instituted
by petitioner u/s.11 (5) - No reply filed by respondent -No possibility
of any settlement between the parties - Held: Jn the circumstances,
a former Supreme Court judge appointed to act as a sole arbitrator
in terms of the arbitration agreement.
ORIGINAL CIVIL JURISDICTION: Arbitration Case (C) No.
13 of2016.
From the Judgment and Order dated 20.07.2016 of the High Court
of Delhi in Writ Petition No. 3104of2016.
Arvind Minocha, Adv. for the Petitioner.
Ji wan Pal Singh, Ms. Mrinmayee Sahu, Advs. for the Respondent.
The Order of the Court was delivered by
DR. D. Y. CHANDRACHUD, J. I. 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 USO 7,225,000/-. The work to be executed by the
872
Petitioner involved the installation of thirty inch diameter and six inch
diameter gas pipe I ines 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 Pa1ties.
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
873
A
B
c
D
E
F
G
H
874
A
B
c
D
E
F
SUPREME COURT REPORTS
[2016] II S.C.R.
addressed by its advocate to the respondent. The Petitionerclaimed an
amount of USO 38, 13,723.76together with interest by its e-mail and
suggested the names of two former judges of the Delhi High Court. The
Petitioner sought the co

## Text

A
B
c
D
E
F
G
H
[2016) 11 S.C.R. 872
MEARS GROUP INC.
v.
FERNAS INSAAT A.S.
(FERNAS CONSTRUCTION COMPANY INC)
(Arbitration Petition No. 13 of2016)
DECEMBER 14, 2016
[T. S. THAKUR, CJI AND DR. D. Y. CHANDRACHUD, J.)
Arbitration and Conciliation Act, 1996 - s.11 (5) -Appointment
of sole arbitrator - Contract for construction of pipeline - Drilling
work - Work order issued to petitioner contained arbitration
agreement - Dispute between parties - Petitioner claimed unpaid
dues and invoked arbitration by e-mail - Sought concurrence of
respondent for appointment of sole arbitrator, in terms of the
arbitration agreement - Finding no response, proceedings instituted
by petitioner u/s.11 (5) - No reply filed by respondent -No possibility
of any settlement between the parties - Held: Jn the circumstances,
a former Supreme Court judge appointed to act as a sole arbitrator
in terms of the arbitration agreement.
ORIGINAL CIVIL JURISDICTION: Arbitration Case (C) No.
13 of2016.
From the Judgment and Order dated 20.07.2016 of the High Court
of Delhi in Writ Petition No. 3104of2016.
Arvind Minocha, Adv. for the Petitioner.
Ji wan Pal Singh, Ms. Mrinmayee Sahu, Advs. for the Respondent.
The Order of the Court was delivered by
DR. D. Y. CHANDRACHUD, J. I. 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 USO 7,225,000/-. The work to be executed by the
872
Petitioner involved the installation of thirty inch diameter and six inch
diameter gas pipe I ines 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 Pa1ties.
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
873
A
B
c
D
E
F
G
H
874
A
B
c
D
E
F
SUPREME COURT REPORTS
[2016] II S.C.R.
addressed by its advocate to the respondent. The Petitionerclaimed an
amount of USO 38, 13,723.76together 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 Sec;tion
11(5) of the Arbitration and Conciliation Act, 1996.
3. Notice was issued in these proceedings on 8 March 2016. On7
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.
Ankit Gyan
Petition disposed of