Plea That Claimant’s Claim Cannot Stand In The Absence Of A Third Entity, Can Be Raised Before The Arbitral Tribunal: Delhi High Court

The bench of Justice Sachin Datta made the observation while hearing a petition filed under Section 11(2) and (6) of the Arbitration and Conciliation Act, 1996 (A&C Act) seeking appointment of a Sole Arbitrator.

The court dismissed the contention of the respondent that since it had entered into two separate agreements in relation to a project, one with the petitioner and another with the third entity, there was a tripartite understanding/agreement between all the three parties.

The court remarked that prima facie, the inter se rights and obligations of the petitioner and the respondent were to be exclusively determined on the basis of the bilateral agreement executed between them, which contained an arbitration clause. The court thus referred the parties to arbitration.

The respondent, M/s Devi Engineering and Construction Pvt Ltd, is engaged in the business of construction and providing services of ‘Shot Hole Drilling’ for oil and gas exploration.

To participate in a tender floated by M/s Oil India Ltd, the respondent entered into a bilateral agreement with the petitioner, M/s Wave Geo-Services Pvt Ltd, who claimed to be an ‘Oil & Gas Project Management and Consultancy Company’. Under the said agreement, the petitioner was obliged to provide a technical collaborator who would jointly participate in the bid process along with the respondent on the basis of its technical experience.

After some disputes arose between the petitioner and the respondent, the petitioner invoked the arbitration clause contained in the bilateral agreement executed between them.

The petitioner thereafter filed a petition under Section 11 (2) and (6) of the A&C Act before the Delhi High Court seeking appointment of an arbitrator to adjudicate the dispute between the parties.

The respondent, M/s Devi Engineering, submitted before the court that it had entered into two agreements, one with the petitioner (i.e., the bilateral agreement) and another with the technical collaborator who is a foreign entity.

The respondent alleged that the purport of both the agreements was to bring about a tripartite understanding/agreement between all the three parties. Therefore, it claimed that it was not permissible for the petitioner to initiate/invoke arbitration without making the technical collaborator a party.

Thus, it contended that since the technical collaborator was a foreign entity and a necessary and proper party to the proposed arbitral proceedings, the present case should be construed as an “international commercial arbitration” as defined in Section 2(1)(f) of the A&C Act.

Relying upon Section 11 (12) of the A&C Act, it argued that jurisdiction in matters pertaining to international commercial arbitration vests only in the Supreme Court. Therefore, it pleaded that the High Court lacked jurisdiction to entertain the present petition.

Dismissing the contention raised by the respondent, the court observed that the agreement between the petitioner and the respondent was a bilateral one and that the technical collaborator was not a party to the said agreement. “The petitioner has taken a clear stand that his claims against the respondent do not fall under, or impacted by the agreement dated 20.05.2019 between the respondent and its technical collaborator,” the bench said.

The court noted that the petitioner had sought to pursue its claims against the respondent solely on the strength of the bilateral agreement executed between the parties, which contained an arbitration agreement.

The bench added that the respondent’s plea that the petitioner’s claim cannot stand in the absence of the technical collaborator, is an aspect touching upon the maintainability of the claim(s) sought to be raised by the petitioner/ claimant. The court held that the said plea can be urged before a duly constituted Arbitration Tribunal. “However, the same cannot preclude the petitioner from seeking/invoking Arbitration in terms of the arbitration agreement between the parties,” the bench said.

The court further referred to the relevant clause (Clause-7) contained in the bilateral agreement between the parties which provided that the said agreement was exclusive for both the parties for the project. The court thus concluded, “Prima facie, there is also merit in the contention of the petitioner that the purport of Clause-7 of the bilateral agreement is that the inter se rights and obligations of the parties would be exclusively determined on the basis of the stipulations in the bilateral agreement between the petitioner and the respondent.”

The bench thus held that since the bilateral agreement between the parties admittedly contained an arbitration clause and since neither of the parties were foreign entities, the court had the jurisdiction to appoint an arbitrator.

The court thus allowed the petition and appointed a Sole Arbitrator to adjudicate the dispute between the parties.

Case Title: M/s Wave Geo-Services Pvt Ltd vs M/s Devi Engineering and Construction Pvt Ltd

Citation: 2023 LiveLaw (Del) 563

Dated: 03.07.2023

Counsel for the Petitioner: Mr. Shashank Deo Sudhi, Adv.

Counsel for the Respondent: Ms. Mumtaz J. Shaikh, Mr. Nishant Singh and Mr. Sanjay Kumar, Advs.

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