Sai Infra Equipments Private Limited vs. Gannon Dunkerly And Company Limited

Facts

Sai Infra Equipments Private Limited (Applicant) filed an Arbitration Application seeking the appointment of an arbitrator to adjudicate disputes arising from a Work Order dated February 25, 2020, issued by Gannon Dunkerly & Company Limited (Respondent). The Applicant, a hirer of construction equipment, deployed a batching plant and other machinery to the Respondent's project at Udangudi. The Applicant sought clarifications and amendments to the work order, including incorporating the Tamil Nadu GST number, but deployed the equipment at the Respondent's request. The Respondent allegedly failed to make timely payments, leading the Applicant to stop raising invoices for the minimum guarantee quantity (MGQ) amounting to Rs. 1,84,98,823/- to avoid immediate GST payment. The Applicant claimed Rs. 2,21,47,902.16 as of November 16, 2021, towards rental charges. The Respondent terminated the work order on December 21, 2021, citing the Applicant's failure to adhere to contract terms, including delays in plant erection and stopping concrete supply. The Respondent also claimed a refund of Rs. 14,63,695/- for excess advance payments and alleged that the Applicant's breaches led to BHEL terminating the Respondent's contract, imposing penalties of Rs. 55,59,55,000/-.

Held

The Court found that Clause 28 of the Work Order dated February 25, 2020, explicitly contains an arbitration clause, stating that arbitration shall be as per the Indian Arbitration and Conciliation Act, 1996, with Hyderabad as the venue and governed by the laws of India. The Respondent did not dispute the existence of this clause in their counter affidavit or during arguments. The Court acknowledged that disputes have arisen between the parties concerning the Work Order. Therefore, the Court held that an arbitrable dispute exists and is required to be referred to arbitration in terms of Clause 28 of the Work Order. Consequently, the Court allowed the Arbitration Application and appointed Smt. Justice T. Rajani, a retired High Court Judge, as the sole Arbitrator to resolve the disputes between the Applicant and the Respondent. Both parties were directed to appear before the Arbitrator on December 6, 2023. The cost of arbitration was to be borne equally by both parties. No issue was expressly left undecided.

Key Issues

1. Whether an arbitrable dispute exists between the Applicant and the Respondent concerning the Work Order dated February 25, 2020, and connected issues, as contemplated by Clause 28 of the said Work Order, thereby warranting the appointment of an arbitrator under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996? Contentions: Applicant: Argued that Clause 28 of the Work Order clearly provides for arbitration and that a legal notice was issued invoking this clause. The Applicant reiterated its claims for outstanding rental charges, interest, and compensation for financial losses due to the Respondent's alleged defaults. Respondent: Denied the Applicant's averments, stating that the Applicant breached the contract by delaying plant erection and stopping concrete supply, which led to the termination of the Respondent's contract with BHEL and imposition of substantial penalties. The Respondent claimed the Applicant was liable to reimburse them for these penalties and excess advance payments.