MEARS GROUP INC. v. FERNAS INSAAT A.S. (FERNAS CONSTRUCTION COMPANY INC)

Case Details & Bench

Court: High Court
Hon'ble Judges: T. S. Thakur
D. Y. Chandrachud
Judgment Date: 2016-12-14
Court Decision / Holding: Appointment of Mr. Justice FM Ibrahim Kalifulla (former Supreme Court judge) as the sole arbitrator under the Arbitration and Conciliation Act, 1996; the arbitrator to determine his own fees; the arbitration petition disposed of accordingly.
Final Disposition: Arbitration Petition disposed of; sole arbitrator appointed.

Parties to the Case

Appellants / Petitioners

MEARS GROUP INC.

Respondents

FERNAS INSAAT A.S. (FERNAS CONSTRUCTION COMPANY INC)

Legal Representation & Advocates

Counsels for Petitioners

• Ankit Gyan

Counsels for Respondents

• Jivan Pal Singh
• Mrinmayee Sahu

Case Synopsis & Summary

MEARS GROUP INC. v. FERNAS INSAAT A.S. (FERNAS CONSTRUCTION COMPANY INC) concerns an arbitration clause embedded in a Bangladesh pipeline construction contract. The petition, under Section 11(5) of the Arbitration and Conciliation Act, 1996, sought the appointment of a sole arbitrator after the parties failed to reach amicable settlement within 30 days of differences arising. The petitioner, an American company, claimed unpaid dues of about US$38,13,723.76 and invoked arbitration by email on 2 November 2015, proposing the appointment of two former judges of the Delhi High Court as potential arbitrators and seeking the respondent's concurrence as required by the arbitration agreement. The respondent offered no reply to the petition. The Supreme Court noted the existence of the arbitration agreement and the absence of any settlement prospects, and exercised its power under Section 11(5) to appoint a sole arbitrator. It appointed Justice FM Ibrahim Kalifulla, a former Supreme Court judge, as the sole arbitrator, with the fees to be determined by him. The matter is disposed of accordingly; the court underscored that the arbitration clause required settlement through arbitration, and that the respondent had not provided any grounds to reject the appointment. The proceedings reflect the diligent enforcement of the arbitration agreement and the Court’s willingness to ensure a neutral arbitrator to resolve the dispute.

Provisions of Law Cited

Arbitration and Conciliation Act, 1996, s.11(5)

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioner argued that an arbitration agreement existed in the work order. After disputes arose and amicable settlement failed within the 30-day window, the matter should be referred to arbitration under the Arbitration and Conciliation Act, 1996. The petitioner invoked arbitration by email on 2 November 2015, proposing the appointment of a sole arbitrator and suggesting two former Delhi High Court judges as candidates, seeking the respondent’s concurrence as required by the agreement. With no response, the petitioner approached the Court under s11(5) for appointment of a sole arbitrator, contending that the agreement contemplated mutual consent and that a neutral, independent appointment was essential; hence, the Court should appoint a former Supreme Court judge to ensure finality and integrity.

Contentions of Respondents

The respondent did not file a reply to the arbitration petition and, while indicating willingness to negotiate a settlement, did not challenge the arbitration clause or process. The Court found the existence of an arbitration agreement and lack of a mutual settlement, and proceeded to appoint a neutral arbitrator to resolve the disputes.

Extracted Judgment Text

Exact text extracted from official judgment records.

## [2016) 11 S.C.R. 872 A ## MEARS GROUP INC. ## v. FERNAS INSAAT A.S. (FERNAS CONSTRUCTION COMPANY INC) (Arbitration Petition No. 13 of2016) ## B 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_ c _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_ D _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. - E 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. - F 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 G 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 H 872 873 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:- A B ## **"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. c D E F G 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 H 874 [2016] II S.C.R. SUPREME COURT REPORTS - A 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 - B 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 c 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 D 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 E 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 F Petition disposed of