# MIS. DURO FELGUERA, S. A v. MIS. GANGAVARAM PORT LIMITED

- **Citation:** [2017] 10 S.C.R. 285
- **Court:** Supreme Court of India
- **Decided:** 2017-10-10
- **Case number:** Arbitration Petition No. 30 of2016
- **Bench:** Kurian Joseph, R. Banumathi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-duro-felguera-s-a-v-mis-gangavaram-port-limited-31608
- **Pages:** 45

## Headnote

A
B
c
Arbitration and Conciliation (Amendment) Act, 2015: ss. 11 (6)
and 11 (6A) - GPL awarded tender work to applicant-Foreign
company and FGJ-its lndian subsidiary - Later original contract
split into five different and separate packages with different job
description - One contract with the applicant and four with FGl -
Each contract had separate arbitration clause - Dispute between
parties - Arbitration clause invoked - FGJ issued four arbitration
notices, applicant issued one arbitration notice whereas GPL issued
comprehensive arbitration notice consisting single arbitral tribunal D
oi1 basis of MoU - Whether there has to be a single arbitral tribunal
for International Commercial Arbitration or Multiple Arbitral
Tribunals - Held: Since the dispute between the parties arose in
2016, the instant issue is governed by the amended provision of
s. 11 (6A) as per which the power of the court is con.fined only to
examine the existence of the arbitration agreement - On facts, there
are five separate Letters of Award; five separate contracts awarded
to applicant and FGJ; separate suliject matters; separate and distinct
work; each containing separate arbitration clause signed by the
respective parties to the contract - Original Package split into five
different Packages, each having different works prima facie
indicates the intention of the parties to split-up Original Package
into jive different packages - Thus, when there are five separate
contracts, one with foreign company and four with Indian subsidiary,
each having independei1t existence with separate arbitration clauses,
and Corporate Guarantee also contains an arbitration clause, there
cannot be a single arbitral tribunal for "International Commercial
Arbitration".
Disposing of the matters, the Court
HELD: Per Banumathi, J.:
E
F
G
1.1 As per the amended provision of sub-section (6A) of H
285
286
A
B
c
SUPREME COURT REPORTS
[2017] 10 S.C.R.
Section 11 of the Arbitration and Conciliation (Amendment) Act,
2015(Act 3 of 2016), the power of the court is confined only to
examine the existence of the arbitration agreement. It further
clarifies that the decision of appointment of an arbitrator will be
made by the Supreme Court or the High Court (instead of Chief
Justice) and under Section 11(7), no appeal shall lie against such
an appointment. The language in Section 11(6) of the Act "the
Chief Justice or any person or institution designated by him" has
been substituted by "Supreme Court or as the case may be the
High Court or any person or institution designated b.v such Court".
As per sub-section (6A) of Section 11, the power of the Court
has now been restricted only to see whether there exists an
arbitration agreement. The amended provision in sub-section (7)
of Section ll provides that the order passed under Section 11(6)
shall not be appealable and thus, finality is attached to the order
passed under this Section. [Paras 13, 17] [299-H; 300-A-B; 301D D-EJ
E
F
G
l.2 There is no dispute between the parties that the issue
at hand is governed by the amended pro,ision of sub-section
(6A) of Section 11. Even though Letters of .\ward are dated
17.03.2012 and five separate contracts were enterl:'d into between
the parties on 10.05.2012, the dispute arose between the parties
in 2016, GPL invoked the Bank Guarantee on 07.01.2016 and
the applicant and its Indian Subsidiary-FGI issued notice of
dissatisfaction on 04.02.2016 and 07.02.2016 respectively to GPL
The applicant issued arbitration notice on 05.04.2016 for contract
relating to Package No. 4 and FGI issued four arbitration notices
dated 07.04.2016 for contracts relating to Packages No. 6 to 9.
GPL also issued an arbitration notice on 13.04.2016. Since the
dispute between the parties arose in 2016, the amended provision
of sub-section (6A) of Section 11 would govern the issue, as per
which the power of the Court is confined only to examine the
existence of the arbitration agreement. ll'ara 191 [306-E-Gl
l.3 Original Package No.4 Te

## Text

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[2017] 10 S.C.R. 285
MIS. DURO FELGUERA, S. A.
v.
MIS. GANGAVARAM PORT LIMITED
(Arbitration Petition No. 30 of2016)
OCTOBER 10, 2017
[KURIAN JOSEPH AND R. BANUMATHI, JJ.]
A
B
c
Arbitration and Conciliation (Amendment) Act, 2015: ss. 11 (6)
and 11 (6A) - GPL awarded tender work to applicant-Foreign
company and FGJ-its lndian subsidiary - Later original contract
split into five different and separate packages with different job
description - One contract with the applicant and four with FGl -
Each contract had separate arbitration clause - Dispute between
parties - Arbitration clause invoked - FGJ issued four arbitration
notices, applicant issued one arbitration notice whereas GPL issued
comprehensive arbitration notice consisting single arbitral tribunal D
oi1 basis of MoU - Whether there has to be a single arbitral tribunal
for International Commercial Arbitration or Multiple Arbitral
Tribunals - Held: Since the dispute between the parties arose in
2016, the instant issue is governed by the amended provision of
s. 11 (6A) as per which the power of the court is con.fined only to
examine the existence of the arbitration agreement - On facts, there
are five separate Letters of Award; five separate contracts awarded
to applicant and FGJ; separate suliject matters; separate and distinct
work; each containing separate arbitration clause signed by the
respective parties to the contract - Original Package split into five
different Packages, each having different works prima facie
indicates the intention of the parties to split-up Original Package
into jive different packages - Thus, when there are five separate
contracts, one with foreign company and four with Indian subsidiary,
each having independei1t existence with separate arbitration clauses,
and Corporate Guarantee also contains an arbitration clause, there
cannot be a single arbitral tribunal for "International Commercial
Arbitration".
Disposing of the matters, the Court
HELD: Per Banumathi, J.:
E
F
G
1.1 As per the amended provision of sub-section (6A) of H
285
286
A
B
c
SUPREME COURT REPORTS
[2017] 10 S.C.R.
Section 11 of the Arbitration and Conciliation (Amendment) Act,
2015(Act 3 of 2016), the power of the court is confined only to
examine the existence of the arbitration agreement. It further
clarifies that the decision of appointment of an arbitrator will be
made by the Supreme Court or the High Court (instead of Chief
Justice) and under Section 11(7), no appeal shall lie against such
an appointment. The language in Section 11(6) of the Act "the
Chief Justice or any person or institution designated by him" has
been substituted by "Supreme Court or as the case may be the
High Court or any person or institution designated b.v such Court".
As per sub-section (6A) of Section 11, the power of the Court
has now been restricted only to see whether there exists an
arbitration agreement. The amended provision in sub-section (7)
of Section ll provides that the order passed under Section 11(6)
shall not be appealable and thus, finality is attached to the order
passed under this Section. [Paras 13, 17] [299-H; 300-A-B; 301D D-EJ
E
F
G
l.2 There is no dispute between the parties that the issue
at hand is governed by the amended pro,ision of sub-section
(6A) of Section 11. Even though Letters of .\ward are dated
17.03.2012 and five separate contracts were enterl:'d into between
the parties on 10.05.2012, the dispute arose between the parties
in 2016, GPL invoked the Bank Guarantee on 07.01.2016 and
the applicant and its Indian Subsidiary-FGI issued notice of
dissatisfaction on 04.02.2016 and 07.02.2016 respectively to GPL
The applicant issued arbitration notice on 05.04.2016 for contract
relating to Package No. 4 and FGI issued four arbitration notices
dated 07.04.2016 for contracts relating to Packages No. 6 to 9.
GPL also issued an arbitration notice on 13.04.2016. Since the
dispute between the parties arose in 2016, the amended provision
of sub-section (6A) of Section 11 would govern the issue, as per
which the power of the Court is confined only to examine the
existence of the arbitration agreement. ll'ara 191 [306-E-Gl
l.3 Original Package No.4 Tender Document for GPL
Expansion-2011 consisted of "Bulk Materiul Handling Systems
including Engineering, Design, Procurement of Materials,
Manufacturing, Supply erection, testing and commissioning of bulk
material handling systems including all other associated works and
H integration of the same with the existing coal handling systems
MIS. DURO FELGUERA, S. A. v. M/S. GANGAVARAM PORT
287
LIMITED
(Package 4-"Works'J. By mutual consent and agreement of the A
parties, Original Package No.4 TD was split into five different
Packages-New Package No. 4 (awarded to the applicant (Spanish
Company)] and Packages No. 6, 7, 8 and 9 awarded to its Indian
subsidiary-FGI. Letters of Award dated 17.03.2012 was awarded
to the applicant and FGI for various Packages. Pursuant to Letters B
of Award, parties have entered into contract agreement on
10.05.2012. There are five separate Letters of Award; five
separate Contracts; separate subject matters; separate and
distinct work; each containing separate arbitration clause signed
by the respective parties to the contract. All the five contracts
awarded to the applicant and FGI have independent arbitration
clauses. The Original Package No. 4 TD split into five different
Packages, each having different works prima facie indicates the
intention of the parties to split-up original Package No. 4 TD into
. five different packages. [Paras 20-23] [307-A-C; 308-E-G; 310A-B]
1.4 In the contract agreement, the parties have agreed
that the documents mentioned in clause (2) of the agreement will
have priority. Clauses as to the priority of the documents was
incorporated in all other contract agreements-Package No. 4
awarded to the applicant, Packages No. 6, 7, 8 and 9 awarded to
Indian subsidiary FGI. In the sequence of documents of clause
(2) of the contract agreement, the Tender Document is mentioned
in the sequence only as (g) and all other documents or the other
documents like Letters of Award, Special conditions of contract
c
D
E
F
etc. have priority over the same. While so, the terms contained
in Original Package No. 4 TD including the arbitration clause
cannot have priority over the Special Conditions of contract of
the split-up contracts. When the Original Package No. 4 TD has
been split-up into five different Packages, GPL is not right in
contending that inspite of split-up of the work, the Original
Package No.4 TD collectively covered all the five Packages. After
the Original Package No. 4. was split into five different contracts, G
the parties cannot go back to the. Original Package No.4 nor can
they merge them into one·. It cannot be said that sub-clause 20.6
of the Original Package No. 4 TD will still collectively cover all
the five Packages to justify constitution of single Arbitral Tribunal.
(Para 24] (310-B-C, F-H; 311-A]
H
288
A
B
c
D
E
F
SUPREME COURT REPORTS
[2017] IO S.C.R.
1.5 The foreign company-applicant had executed a
Corporate Guarantee dated 17.03.2012 guaranteeing the due
performance of all the works awarded to the applicant and FGI.
The Corporate Guarantee itself has its own separate and distinct
arbitration clause. In the Corporate Guarantee, the applicant has
undertaken to ensure performance of all the works both by the
applicant and also the contracts pertaining to Packages No. 6 to
9 awarded to FGI. The applicant has also undertaken that in the
event of any delay in completion of the works as per the time
stipulated for completion of the contracts, the applicant had
undertaken to compensate for the delay, damages to GPL which
will be based on the overall contrart price collectively of all the
contracts. [Paras 25, 261 (311-B, E-FI
1.6 As per the terms of Corporate Guarantee, it shall cease
on issuance of the performance certificate under all the contracts.
Of course, the applicant has given the Corporate Guarantee for
all the five contracts viz., New Package No.4, Packages No. 6 to
9. Corporate Guarantee executed by the applicant dated
17 .03.2012 also recognizes the split up of thl' original Package
No. 4 Tender Document. As per the terms of the Corporate
Guarantee, it is to be invoked only if breach is established in one
of the five contracts. Since the Corporate Guarantee by itself has
a separate arbitration clause, it cannot be contended that by virtue
of the Corporate Guarantee executed by the applicant, there has
to be a 'composite reference' of 'lnternatio11al Commercial
Arbitration' which would cover all the five Packages. The
Corporate Guarantee by the applicant cannot supersede the five
split-up contracts and the special conditions of contract thereon.
(Para 28] (312-G-H; 313-A-B]
l. 7 The applicant and FGI have executed a tripartite
Memorandum of Understanding (Mou) on 11.08.2012 which,
according to GPL, covers all the five l'Ontracts namely New
G Package No. 4, Package No. 6, Package No. 7, Package No. 8
and Package No. 9. In the said MoV both the applicant and FGI
have agreed to carry out the works as per the priority of the
documents listed therein which includes the Original Package
No.4 Tender Document issued and final bid submitted by the
applicant and FGI. [Para 29] [313-B-C]
H
M/S. DURO FELGUERA, S. A. v. M/S. GANGAVARAM PORT
289
LIMITED
l.8 As per Section 7(5) of the Act, even though the contract A
between the parties does not contain a provision for arbitration,
an arbitration clause contained in an independent document will
be imported and engrafted in the contract between the parties,
by reference to such independent document in the contract, if
the reference is such as to make the arbitration clause in such B
document, a part of the contract. Section 7(5) requires a conscious
acceptance of the arbitration clause from another document, as a
part of their contract, before such arbitration clause could be read
as a part of the contract between the parties. The question
whether or not the arbitration clause contained in another
document, is incorporated in the contract, is always a question of C
construction of document in reference to intention of the parties.
The terms of a contract may have to be ascertained by reference
to more than one document. [Para 33] [315-D-.E]
l.9 In the MoU, Original Package No.4 Tender Document
is merely referred only to have more clarity on technical and D
execution related matters and the parties agreed that the works
shall be carried out as per the priority of the documents indicated
thereon. Mere reference to Original Package No.4 Tender
Document in the sequence of priority of documents (as serial
No.4) indicates that the documents Original Package No. 4 TD
containing arbitration clause was not intended to be incorporated
E
· in its entirety but only to have Clarity in priority of the documents
in execution of the work. Original Package No.4 TD occurs as
Serial No.4 in sequence, after three other documents. There are
a number of contract agreements between the parties - GPL,
petitioner company and FGI. MoU dated 11.08.2012 itself does
not contain an arbitration clause. When reference is made to the
priority of documents to have clarity in execution of the work,
such general reference to Original Package N o.4 Tender
Document will not be sufficient to hold that the arbitration clause
20.6 in the Original Package No.4 TD is incorporated in the MoU.
[Para 35) [317-G-H; 318-A, C-D)
1.10 As per the amended provision of sub-section (6A) of
Section 11, the power of the court is only to examine the existence
of arbitration agreement. When there are five separate contracts
each having independent existence with separate arbitration
F
G
H
290
SUPREME COURT REPORTS
[2017] lO S.C.R.
A clauses that is New Package No.4 (with foreign company) and
Packages No. 6, 7, 8 and 9 [with Indian subsidiary (FGI)) based
on MoU and C_orporate Guarantee, there cannot be a single
arbitral tribunal for "lllternational Commercia/Arbitratio11". [Para
361 [318-E-FJ
B
l.ll The Corporate Guarantee dated 17.03.2012 was
executed by the foreign company undertaking to compensate for
the delay, damages to the GPL. Since the Corporate Guarantee
was by the foreign company which contains separate arbitration
clause, there has to be a separate arbitral tribunal for resolving
C
the disputes arising out of the said Corporate Guarantee. [Para
38J (319-B)
1.12 New Package No. 4 TD- F.O.B. Supply of Bulk
Material Handling Equipments USD 26,666,932 has been
awarded to the foreign company-petitioner company. Since it is a
foreign company, in so far as the contract awarded to the petitioner
D company i.e. New Package No.4 and the dispute arising out of
the Corporate Guarantee executed by the foreign company is
concerned, the arbitral tribunal has to be for the international
commercial arbitration. [Para 39) [319-C)
1.13 In the instant case, all five different Packages as well
E
as the Corporate Guarantee have separate arbitration clauses
and they do not depend on the terms and conditions of the Original
Package No.4 TD nor on the MoU, which is intended to have
clarity in execution of the work.[Para 40] (319-G-H; 320-A)
Chloro Contmls India Private ltd. v. Severn Trent Water
F
Purification Inc. and Ors. (2013) 1 SCC 641 : (20121
13 SCR 402 - distinguished.
1.14 The petitioner company being a foreign company, for
each of the disputes arising under New Package No.4 and
Corporate Guarantee, International Commercial Arbitration
G Tribunal are to be constituted. The petitioner has nominated
Justice D.R. Deshmukh, Former Judge of Chhattisgarh High
Court as their arbitrator. GPL has nominated Justice M. N. Rao,
Former Chief Justice of Himachal Pradesh High Court. Alongwith
the above two arbitrators Mr. Justice R.M. Lodha, Former Chief
H
MIS. DURO FELGUERA, S. A. v. MIS. GANGAVARAM PORT
291
LIMITED
Justice of India is appointed as the Presiding Arbitrator of the A
International Commercial Arbitral Tribunal. [Para 41] [320-.B-C]
1.15 Package No.6 (Rs.208,66,53,657/-); Package No.7
(Rs.59,14,65,706/-); Package No.8 (Rs.9,94,38,635/-); and
Package No.9 (Rs.29,52,85, 558/-) have been awarded to the
Indian company-FGI. Since the issues arising between the parties B
are inter-related, the same arbitral tribunal, Justice R.M. Lodha,
Former Chief Justice of India, Justice D.R. Deshmukh, Former
Judge of Chhattisgarh High Court and Justice M. N. Rao, Former
Chief Justice of Himachal Pradesh High Court, shall separately
constitute Domestic Arbitral Tribunals for resolving each of the
disputes pertaining to Packages No.6, 7, 8 and 9. [Para 42] [320C
D-E]
Konkan Railway Corpn. Ltd. and Ors. v. Mehu/
Construction Co. (2000) 7 SCC 201 : [2000] 2 Suppl.
SCR 563; Konkan Railway Corpn. Ltd. & Am:. v. Rani
Construction Pvt. Ltd. (2002) 2 SCC 388 : [2009) 10
SCR 373; S.B.P & Co v. Patel Engineering Ltd and
Anr. (2005) 8 SCC 618 : [2005) 4 Suppl. SCR 688;
National Insurance Company Limited v. Boghara
Pol;jab Private Limited (2009) 1 SCC 267 : [2008) 13
SCR 638; Shree Ram Mills Ltd. v. Utility Premises (P)
Ltd, (2007) 4 SCC 599 : [2007) 4 SCR 279; Arasmeta
Captive Power Company Private Limited and Anr. v.
Lafarge India Private Limited (2013) 15 SCC 414 :
[2013] 17 SCR 496; MR. Engineers and Contractors
Pvt. Ltd. v. Som Datt Builders Ltd. (2009) 7 SCC 696 :
[2009) 10 SCR 373 - referred to.
Per Kurian, J. (Supplementing):
D
E
F
1.1 The submission that the Memorandum of Understanding
(MoU) has subsumed all the separate agreements and therefore
and thereafter there can only be one agreement and, if so, only
G
one Arbitral Tribunal for all the disputes emanating from the five
different agreements and the Corporate Guarantee, is
misconceived. The whole purpose of the MoU is evident from
its text. It is clear that there is no novation by substitution of all
the five agreements nor is there a merger of all into one. The
H
292
SUPREME COURT REPORTS
[2017] 10 S.C.R.
A reference to Original Package No. 4 Tender Document is only
for better clarity on technical and execution related matters. 7.
The said finding is wholly in line with Section 7(5) of the 1996
Act, which deals with incorporation by reference. The words "the
reference is such as to make that arbitration clause part of the
B contract" are of relevance. Essentially, the parties must have
the intention to incorporate the arbitration clause. The detailed
analysis of Section 7(5) in M.R. Engineers case fortifies the
conclusion that the MoU does not incorporate an arbitration
clause. [Para 5, 6, 7]
1.2 The submission that it is expedient that a single Arbitral
C Tribunal is constituted, also cannot be appreciated. The parties
are free to agree to anything for their convenience but once such
terms are reduced to an agreement, they can resile from them
only in accordance with law. [Para 9J
1.3 The scope of the power under Section 11 (6) of the 1996
D Act was considerably wide in view of the decisions in SBP and
Co. and Boghara Poly/ab cases. This position continued till the
amendment brought about in 2015. After the amendment, all that
the Courts need to see is whether an arbitration agreement exists
- nothing more, nothing less. The legislative policy and purpose
E is essentially to minimize the Court's intervention at the stage of
appointing the arbitrator and this intention as incorporated in
s. 11 (6A) ought to be respected. [Para 13]
1.4 Jn the instant case, there are six arbitrable agreements
(five agreements for works and one Corporate Guarantee) and
F
each agreement contains a provision for arbitration. Hence, there
has to be an arbitral tribunal for the disputes pertaining to each
agreement. While the arbitrators can be the same, there has to
be six tribunals - two for international commercial arbitration
involving the Spanish Company-petitioner and four for the
G
domestic. [Para 14]
M.R. Engineers and Contractors Pvt. Ltd v. Som Datt
Builders Ltd. (2009) 7 SCC 696 : [2009) 10 SCR 373;
S.B.P & Co v. Patel Engineering Ltd and Anr. (2005) 8
SCC 618 : [20051 4 Suppl. SCR 688; Konkan Railway
Corpn. Ltd. and Ors. v. Mehul Construction Co. (2000)
H
7 SCC 201 : [2000) 2 Suppl. SCR 563; Konkan Railway
MIS. DURO FELGUERA, S. A. v. MIS. GANGAVARAM PORT
293
LIMITED
Corpn. Ltd. & Anr. v. Rani Construction Pvt. Ltd (2002)
A
2 SCC 388 : [2009) 10 SCR 373; National Insurance
Company Limited v. Boghara Polyfab Private Limited
(2009) 1 SCC 267 : (2008) 13 SCR 638 - referred to.
Case Law Reference
In the .Judgment of Banumathi2 J :
[2000) 2 Suppl. SCR 563
refer.red to
Para 14
[2009) 10 SCR 373
referred to
Para 14
[2005] 4 Suppl. SCR 688
referred to
Para 15
[2008) 13 SCR 638
referred to
Para 16
[2007) 4 SCR 279
referred to
Para 16
(2013] 17 SCR 496
referred to
Para 16
[2012] 13 SCR 402
distinguished
Para 40
[2009) 10 SCR 373
referred to
Para 34
In the Judgment of Kurian2 J.:
[2009] 10 SCR373
referred to
Para 7
[2005) 4 Suppl. SCR 688
referred to
Para 11
[2000] 2 Suppl. SCR 563
referred to
Para 11
[2009) 10 SCR 373
referred to
Para 11
[2008] 13 SCR 638
referred to
Para 12
CIVIL ORIGINAL JURISDICTION : Arbitration Petition No.
30 of2016
WITH
Arbitration Petition No. 31 of2016
T. C. (C) No.25 of2017
T. C. (C) No.26 of2017
T. C. (C) No.27 of2017
T. C. (C) No.28 of2017
B
c
D
E
F
G
H
294
SUPREME COURT REPORTS
[2017] 10 S.C.R.
A
Mukul Rohatgi, Raju Ramachandran. Sunil Gupta, Dr. Abhishek
Manu Singhvi, Sr. Advs., Ms. Anitha Shenoy, Ms. Rashmi Nandakumar,
Ms. Srishti Agnihotri, Ms.Hamsini Shankar, lshwar Mohanty. Tarun
Dua, Ms.Geetanjali Sethi, Faisal Sherwani,A. Paul, Ms.Sumati Sharma.
Advs. for the appearing parties.
B
The Judgment of the Court was delivered by
BANUMATHI, J. Arbitration Petition No.30 of 2016 has been
filed by Mis Duro Felguera, S.A. under Section I l(6)(a) read with
Sectiion I! ( l 2)(a) of the Arbitration and Conciliation Act, l 996 (for short,
'the Act·) to appoint the nominee arbitrator on behalf of the respondent
c (second arbitrator) in terms of sub-clause 20.6 of the Special Conditions
of the Contract with respect to the arbitration arising under the Contract
dated l 0.05.2012. T.C. No.25 of 2017, T.C. No.26of2017, T.C. No.27
of2017 and T.C. No.28 of 2017 have been filed by M/s. Felguera Gruas
India Private Limited (hereinafter referred to as 'the FGI') for
appointment of Domestic Arbitral Tribunal for resolving the dispute
D pertaining to the contract awarded to FGI. Arbitration Petition No.31 of
2016 has been filed by M/s. Gangavaram Port Limited (hereinafter
referred to as 'the GPL') to appoint an arbitrator under the Memorandum
of Understanding (MoU) dated 11.08.2012 and to constitute a single
Arbitral Tribunal by a composite reference for adjudication of all the
E disputes between the parties in connection with the "Works" covered
under all the five Package Contracts and the Corporate Guarantee dated
17.03.2012 executed by Duro Felguera.
2. As the pa1ties and issues in both the arbitration petitions and the
transfeJTed cases are one and the same, both arbitration petitions and
F
the transferred cases shall stand disposed of by this common order. For
convenience, parties arc referred to as per their array in Arbitration
Petition No.30of2016.
3. BriefFacts: The Respondent-Gangavaram Port Limited (GPL)
developed a green-field, ultra-modern, all-weather sea-port near
G Gangavaram Village in Visakhapatnam District in the State of Andhra
Pradesh. This sea-port commenced operations in the year 2009. The
Respondent intended to expand its facilities in the Pm1 with respect to
Bulk Material Handling Systems. This included Engineering, Design,
Procurement of Materials, Manufacturing, Supply, Erection, Testing and
Commissioning of Bulk Material Handling Systems, as well as all other
H
MIS. DURO FELGUERA, S. A. v. M/S. GANGAVARAM PORT
295
LIMITED [BANUMATHI, J.]
associated works and integration of the same with the existing coal
A
handling systems etc. For this purpose, on 08.08.2011, Gangavaram Port
Limited invited a tender/bid. In response to the aforementioned tender
dated 08.08.2011, the Spanish Company-Duro Felguera Plantas
Industrials S.A. (since merged with the petitioner) along with its Indian
'subsidiary-Mis. Felguera Gruas India Private Limited (FGI) submitted a B
Single Bid/Tender-Original Package No.4 Tender Document on
15.11.2011. This included the Commercial Bid and the Technical Bid.
After post-bid negotiations, the petitioner Duro Felguera and its subsidiary
(FGI) were considered by GPL and Duro Felguera and FGI were selected
as "the Contractors" for the work.
4. After discussion between the parties, Original Package No. 4
TD was divided into five different and separate Packages, namely, New
Package No. 4-F.O.B. Supply of Bulk Material Handling Equipments
(awarded to foreign company-Mis Duro Felguera), Package No. 6design, manufacture, supply, installation, erection, testing, commissioning
c
of Bulk Material Handling Equipments and all other activities related
D
therewith; Package No. 7-Civil Works and all other activities related
therewith; Package No. 8-International Transportation of Bulk Material
Handling Equipments and parts through sea including insurance and all
related activities; Package No. 9-Installation, Testing and
Commissioning of Ship Unloaders and all other activities related therewith
(Packages No.6 to 9 awarded to Indian subsidiary-FGI). Separate
Letters of Award (dated 17.03.2012) for five different Packages were
issued to Mis Duro Felguera, S.A. and the Indian Subsidiary-FGI forthe
above said work respectively.
E
5. Five different contracts were entered into on 10.05.2012 for
five split-up Packages with different works viz. namely New Package
No. 4 with foreign company-Mis Duro Felguera and Packages No. 6, 7,
8 and 9 with FGI. Each of the Packages has special conditions of contract
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as weU as general conditions of contract. Each one of the Contract/
Agreement for works under split-up Packages contains an arbitration
clause namely sub-clause 20.6. Duro Felguera had also entered into a G
Corporate Guarantee dated 17.03.2012 guaranteeing due performance
of all the works awarded to Duro Felguera and FGI. The said Corporate
Guarantee had its own arbitration clause namely clause (8).
6. Duro Felguera and FGihave executed a tripartite Memorandum
of Understanding (MoU) with Mis Gangavaram Port Limited (GPL) on
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11.08.2012. In the said MoU. Duro Felguera and FGI have agreed to
carry out the works as per the priority of documents listed therein. Case
ofGPL is that the MoU dated 11.08.2012 being the latest covers all the
five contracts namely New Package No. 4 awarded to M/s Duro
Felguera and Packages No. 6 to 9 awarded to FGI. According to GPL,
since MoU refers to original Package No. 4 Tender Document (TD)
which contains arbitration clause, the Original Package No. 4 TD with
its arbitration clause shall be deemed to have been incorporated in the
MoU.
7. Case of Mis. Gangavaram Port Limited is that the petitionerM/s Duro Felguera, S.A. and its Indian Subsidiary-FGI failed to perform
their obligations, including their obligation to attend and rectify faulty
works and complete the pending works etc. Further grievance ofGPL
is that though the works were scheduled to be completed at the latest by
16.03.2014, the petitioner-Mis Duro Fclgucra, S.A. and its Indian
Subsidiary (FGI) caused inordinate delay in execution of the work and,
therefore, GPL was constrained to invoke the Bank Guarantee on
07.01.2016 given by petitioner-Mis Duro Felguera. GPL had also issued
Notices of Termination dated 31.01.2016 to the Foreign Company-Mis
Duro Felguera and its Indian Subsidiary(FGI). Mis Duro Felguera, S.A.
and its Indian Subsidiary (FGI) issued notice of dissatisfaction on
04.02.2016 and 07.02.2016 to GPL. Subsequently Mis. Duro Felguera
issued an arbitration notice dated 05.04.2016 for New Package No. 4
Contract and FGI issued four arbitration notices dated 07.04.2016 for
Packages No. 6 to 9 Contracts. Both Mis. Duro F elguera and FG I have
separately nominated Mr. Justice D.R. Deshmukh (Former Judge,
Chhattisgarh High Court) as their nominee arbitrator for each of the five
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contracts.
8. GPL issued a comprehensive arbitration notice on l 3.04.2016
appointing Mr. Justice M.N. Rao (Former Chief Justice, Himachal
Pradesh High Court) as its nominee arbitrator under sub-clause 20.6 of
the conditions of contract which form part of the "Original Package No.
G 4 Tender Document". Contention ofGPL is that "Original Package No.
4 (TD) and the Corporate Guarantee by Mis. Duro Felguera" and the
MoU dated 11.08.2012 cover all the five contracts, namely, New Package
No. 4, Package No. 6, Package No. 7, Package No. 8 and Package No.
9 as well as the Corporate Guarantee. Further case ofGPL is that five
individual arbitration notices issued by Mis. Duro Felguera and FGI are
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MIS. DURO FELGUERA, S. A. v. MIS. GANGAVARAM PORT
297
LIMITED [BANUMATHI, J.]
untenable and since Duro Felguera-the foreign company has guaranteed
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the due performance of the works covered under all the five packages
and there has to be only one single Arbitral Tribunal for resolving the
disputes of"International Commercial Arbitration" arising between the
parties.
9. Mr. Mukul Rohtagi and Mr. RajuRamachandran, learned Senior
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Counsel for Mis Gangavaram Port Limited (GPL) submitted that the
split up of the "Works" into five separate contracts was made only on
the basis of the requests made by the Duro Felguera for convenience of
the contractors. It was contended that all the works are inter-connected
and inter-linked and if there arc separate arbitrations for each of the
packages, and separate arbitration for New Package No. 4 and the
Corporate Guaritntee take place, then in each arbitration, the respondent
party will blame the lapse on the part of GPL in another Package and
thereby attempt to escape liability. It was urged that the appointment of
a single arbitral tribunal, under the MoU and the Corporate Guarantee
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will avoid conflicting awards between the pa1iics, huge wastage of time,
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resources and expenses; and would be consistent with law and public
policy. The learned Senior Counsel further submitted that MoU was
executed by Duro Felguera and FGI on 11.08.2012 and the contents of
MoU including the priority of the documents referred therein prevail
over the contents of the Letters of Award and the Contracts. It was,
therefore, submitted that the arbitration clause covered under sub-clause
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20. 6 of the conditions of contract, which forms part of the "Original
Package No. 4 Tender Document" which is incorporated in the MoU
shall prevail over the arbitration clause covered under sub-clause 20.6
of the contract for five packages. It was further submitted that having
regard to the nature of disputes which extend over each of the Packages
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and collectively covered the Corporate Guarantee executed by Duro
Fclguera under MoU, it would be just and proper to· make a 'composite
reference' and have a single arbitral tribunal of "international
commercial arbitration' for settling the dispute arising between the
parties and the same would be consistent with the intention of the parties
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and public policy. It was urged that the contract for the "Works" has
always been envisaged by the parties as one composite contract even
though the contracts were split into various Packages and there cannot
be multiple arbitral tribunals for adjudication of disputes between the
_parties as it would lead only to complications in settling the disputes and
execution of the awards.
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JO. Mr. Sunil Gupta learned Senior Counsel appearing for Duro
Felguera-Spanish Company submitted that by conscious agreement of
the parties, the Original Package No.4 Tender Document was superseded
by five new Contracts with different works namely New Package No.
4, Packages No.6, 7, 8 and 9, each of which have special co~ditions as
well as general conditions of contract. It was further submitted that the
Corporate Guarantee dated 17.03.2012 executed by Duro Felgucra
g1,1aranteeing due performance of the works awarded to Duro Felguera
and FGI has its own separate and distinct arbitration clause and the
same has no connection with the arbitration clauses (sub-clause 20.6) of
the five different contracts for New Package No. 4 and Packages No.
6, 7, 8 and 9. The learned Senior Counsel further submitted that the
MoU dated 11.08.2012 which enlists priority of the documents to be
considered is only to have clarity in carrying out the works and the MoU
cannot override the terms of the contracts for five different packages
including the arbitration clauses contained therein. It was submitted that
D the five new split-up Packages followed by five different Letters of
Award and five difforent contracts were substantially different,
independent and separate in their content and subject matter and there
cannot be a 'composite reference' for efficacious settlement of disputes,
it would be just and proper to have multiple arbitral tribunals and may be
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by the same arbitrators. The learned Senior Counsel submitted that so
far as New Package l'-io.4 and the issues J'ertaining to the Corporate
Guarantee executed on 17.03.2012 by Duro Felguera-the foreign
Company, the arbitral tribunal has to be for International Commercial
Arbitration.
II. Reiterating the above submissions, Mr. Singhvi, the learned
F Senior Counsel appearing for Indian subsidiary-FGI contended that by
conscious decision and agreement of the parties, Original Package No.
4 (TD) was superseded and five new TDs with different works namely
TD for New Package No. 4 and Packages No. 6, 7, 8 and 9 were
brought into existence and there were separate Letters of Award and
five separate contracts for each one of those split-up packages. It was
G · submitted that each of the contracts contain special conditions as well
as general conditions of contract apart from the arbitration clause, (subclause 20.6), which is relevant for governing the contractual and arbitral
relations between the parties and in case of dispute arising between the
parties under any of the respective contracts or the Corporate Guarantee,
H the aggrieved party would have to invoke the respective arbitration clauses
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MIS. DURO FELGUERA, S. A. v. M/S. GANGAVARAM PORT
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in the respective contracts in question and cannot invoke the MoU dated
A
11.08.2012. It was further submitted that the Corporate Guarantee dated
17 .03 .2012 was executed by Duro Felguera under which it had
gtiaranteed the due performance of all the works awarded to Duro
Felguera and FGI and FGI is not a party under the said Corporate
Guarantee. It was further submitted that the MoU dated 11.08.2012
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came into existence long after the Contracts and it does not contain any
arbitration clause and MoU does not intend to alter the nature of the
rights, responsibilities and obligations of the pat1ies arising from the
respective contracts and, therefore, for settling the disputes arising under
the Packages No. 6, 7, 8 and 9 awarded to FGI, there have to be four
domestic arbitral tribunals and there cannot be a 'composite reference'
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by invoking MoU.
12. Considering the facts and circumstances and rival contentions
of the pat1ies, the following points arise for determination:
(1)
Whether Gangavaram Port Limited (GPL) is right in
contending that Memorandum of Understanding (MoU)
D
dated 11.08.2012 and Original Package No. 4 Tender
Document and Corporate Guarantee dated I 7 .03.2012
executed by Duro Felguera covers all the five split-up
Packages awarded to Duro Felguera and FGI and whether
there has to be a composite reference/single arbitral tribunal
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for "International ·Commercial Arbitration" covering all
the five different Packages and also the Corporate
-. Guarantee executed by Duro Fclguera?
(2)
Whether there have to be 'mult1]J/e arbitral tribunals' for
each of the five different Packages of Work awarded to
the foreign company-Duro Felguera and Indian SubsidiaryFGI (one International Commercial Arbitral Tribunal plus
four Domestic Arbitral Tribunals) and another one arbitral
tribunal for 'international commercial arbitration' under
Corporate Guarantee (17 .03.2012) executed by the foreign
company-Duro Felguera?
13. The Arbitration and Conciliation (Amendment) Act, 2015
(w.e.f. 23.10.2015) has brought in substantial changes in the provisions
of the Arbitration and Conciliation Act, 1996. After the Amendment Act
3 of2016, as per the amended provision of sub-section (6A) of Section 11,
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A the power of the court is confined only to examine the existence of the
arbitration agreement. It further clarifies that the decision of appointment
of an arbitrator will be made by the Supreme Court or the High Court
(instead of Chief Justice) and under Section 11 (7), no appeal shall lie
against such an appointment.
B
Position prior to Amendment Act 3 of 2016
14. Under Section 11 (6) of the Arbitration and Conciliation Act,
1996, as it stood prior to Amendment Act 3 of 2016, on an application
made by any of the parties, the Chief Justice of the High Court appoints
an arbitrator for adjudication. Initially, the line of decisions ruled that the
c appointment of arbitrator is an administrative order passed by the Chief
Justice. In Konkan Railway Corporation Limited and Others v. Mehul
Construction Company, (2000) 7 SCC 20 l, it was held that the powers
of the ChiefJustice under Section 11(6) of the Arbitration and Conciliation
Act, 1996 are of administrative nature and that the Chief Justice or his
designate does not act as a judicial authority while appointing an arbitrator.
D The same view was reiterated in the subsequent judgment of this Court
in Konkan Railway Corporation Limited and Another v. Rani
Construction Private Limited, (2002) 2 SCC 388.
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F
15. However, in the year 2005, a Constitution Bench of Seven
Judges in SBP and Co. v. Patel Engineering Limited and Another,
(2005) 8 sec 618, made a departure from the previous judgments and
held that the order passed by the Chief Justice is not administrative but
judicial in nature and hence the same is subject to appeal under Article
136 of the Constitution ofindia. The Court further held that in deciding
the appointment of an arbitrator, the Chit:f Justice could first by way of
a preliminary decision decide the court's own jurisdiction of that matter
to entertain the arbitration petition, the existence of a valid arbitration
agreement, the subsistence of a "live claim i.e. the claim that is not
barred by limitation".
16. The judgment in SBP and Co. (supra) was further clarified
G in National /11s11rance Company Limited v. Boghara Poly/ab Private
Limited, (2009) l SCC 267, wherein this Court held that while appointing
an arbitrator, the following could be considered:-
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"22. Where the intervention of the court is sought for
appointment of an Arbitral Tribunal under Section 11, the
duty of the Chief Justice or his designate is defined in
MIS. DURO FELGUERA, S. A. v. MIS. GANGAVARAM PORT
301
LJMITED [BANUMATHI, J.]
SBP & Co. (2005) 8 SCC 618. This Court identified and
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segregated the preliminary issues that may arise for
consideration in an application under Section 11 of the Act
into three categories, that is, (i) issues which the Chief
Justice or his designate is bound to decide; (ii) issues
which he can also decide, that is, issued which he may
B
choose to decide; and (iii) issues which should be left to
the Arbitral Tribunal to decide."
The judgments in Shree Ra111 Mills Ltd. v. Utility Premises (P) Ltd,
(2007) 4 SCC 599 and Aras111eta Captive Power Co111pany Private
Limited and Another v. Lafarge India Private Limited, (2013) 15
sec 414, are on the same line pertaining to the issues which have to be
dealt with by the Chief Justice or his designate.
Changes brought about by the Arbitration and Conciliation
(Amendment) Act, 2015 (Amendment Act 3 of 2016)
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17. The language in Section II ( 6) of the Act "the Chief.Justice
D
or any person or institution designated by him" has been substituted
by "Supreme Court or as the case may be the High Court or any
persoi1 or institution designated by such Court". Now, as per subsection ( 6A) of Section 11, the power of the Court has now been restricted
only to see whether there exists an arbitration agreement. The amended
provision in sub-section (7) ofScction 11 provides that the order passed
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under Section I I (6) shall not be appealable and thus finality is attached
to the order passed under this Section. The amended Section 11 reads
as under:-
"11. Appointment of arbitrators.- (I) A person of any
nationality may be an arbitrator, unless otherwise agreed by the
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paiiies.
(2) Subject to sub-section (6), the parties are free to agree on
a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an
arbitration with three arbitrators, each party shall appoint one
arbitrator, and the two appointed arbitrators shall appoint the third
arbitrator who shall act as the presiding arbitrator.
( 4) If the appointment procedure in sub-section (3) applies
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(a) a party fails to appoint an arbitrator within thirty days from
the receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third
arbitrator within thirty days from the date of their
appointment,
the appointment shall be made, upon request of a party, by '[the
Supreme Court or, as the case may be, the High Court or
any person or institution designated by suclt Court].
(5) Failing any agreement referred to in sub-section (2), in an
arbitration with a sole arbitrator.