NDLI: Lombardi Engineering Limited Vs. Uttarakhand Jal Vidyut Nigam Limited

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Arbitration and Conciliation Act 1996
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Case(s) Referred	Referred Case 0 Referred Case 1 Referred Case 2 Referred Case 3 Referred Case 4 Referred Case 5 Referred Case 6 Referred Case 7 Referred Case 8 Referred Case 9 Referred Case 10 Referred Case 11 Referred Case 12 Referred Case 13 Referred Case 14 Referred Case 15 Referred Case 16 Referred Case 17 Referred Case 18 Referred Case 19 Referred Case 20 Referred Case 21
Case Type	Arbitration Petition
Court	Supreme Court of India
Disposal Nature	Application Allowed
Headnote	Issue for consideration:Whether the dictum as laid down in ICOMM Tele Limited’s casecan be made applicable to the instant case, when Clause 55 ofthe General Conditions of Contract provides for a pre-deposit of7% of the total claim for the purpose of invoking the arbitrationclause; whether there is any direct conflict between the decisions ofthis Court in S.K. Jain’s case and ICOMM Tele Limited ’s case;whether this Court while deciding a petition filed u/s. 11(6) of theArbitration and Conciliation Act, 1996 for appointment of a solearbitrator can hold that the condition of pre-deposit stipulated inthe arbitration clause as provided in the Contract is violative of theArticle 14 of the Constitution; and whether the arbitration Clause No.55 of the Contract empowering the Principal Secretary/Secretary(Irrigation) to appoint an arbitrator of his choice is in conflict withthe decision of this Court in Perkins Eastman’s case.Arbitration and Conciliation Act, 1996 – Arbitration agreement– Arbitration clause – Invocation of – Clause 55 of the GeneralConditions of Contract providing for a pre-deposit of 7% ofthe total claimHeld: As regards 7% pre-deposit condition, nothing has beenprovided as to how this amount of 7% is to be ultimately adjusted atthe end of the arbitral proceedings – Clauses 3 and 4 respectivelyrelating to security deposit for performance and refund of the same,has no nexus at all with the pre-deposit amount of 7% as stipulatedin Clause 55 of the GCC – Such vague and ambiguous condition of7% pre-deposit of the total claim makes the same more vulnerableto arbitrariness thereby violating Article 14 of the Constitution –Thus, the Conditions contained in Clause 55 of the GCC, relatingto 7% deposit of the total amount claimed should be ignored.[Para 66, 68]Arbitration and Conciliation Act, 1996 – Arbitration agreement– Pre-deposit clause – S.K. Jain’s case and ICOMM TeleLimited ’s case where substantive challenges made to thepre-deposit clause , if any direct conflict between the saiddecisions of this Court:Held: There is no conflict between S.K. Jain’s case and ICOMMTele Limited’s case, as the relevant arbitration clauses that fell forthe consideration of this Court in both the cases stood completelyon a different footing. [Para 61]Arbitration and Conciliation Act, 1996 – s. 11(6) – Petitionunder, for appointment of arbitrator – Validity of the pre-depositcondition as contained in the arbitration clause – If it couldbe looked into and decided on the anvil of Article 14 of theC onstitution in the petition:Held: It cannot be said that this Court while considering anapplication u/s. 11(6) for the appointment of arbitrator should nottest the validity or reasonableness of the conditions stipulated inthe arbitration clause on the touchstone or anvil of Article 14 of theConstitution – It would be too much to say that it is only the writcourt in a petition u/Art. 226 that can consider whether a particularcondition in the arbitration clause is arbitrary – Concept of “partyautonomy” cannot be stretched to an extent where it violates thefundamental rights under the Constitution – For an arbitrationclause to be legally binding it has to be in consonance with the“operation of law” which includes the Grundnorm-the Constitution– There can be no consent against the law and there can be nowaiver of fundamental rights. [Para 70, 71, 84, 85]Arbitration and Conciliation Act, 1996 – s. 11(6) – Appointmentof an arbitrator – Arbitration Clause of the Contract empoweringthe Principal Secretary/Secretary (Irrigation) to appoint anarbitrator of his choice, if covered by the decision of this Courtin Perkins Eastman’s case:Held: If circumstances exist giving rise to justifiable doubts as tothe independence and impartiality of the person nominated or if othercircumstances warrant appointment of an independent arbitratorby ignoring the procedure prescribed, the Chief Justice or hisdesignate may, for reasons to be recorded ignore the designatedarbitrator and appoint someone else – On facts, the conditioncontained in Clause 55 of the GCC as regards the stipulationempowering the Principal Secretary (Irrigation) Government ofUttarakhand to appoint a sole arbitrator is ignored and proceedto appoint an independent arbitrator. [Para 87, 102]s. 12(5) – Neutrality of Arbitrators:Held: Term “neutrality” used is relatable to impartiality andindependence of the arbitrators, without any bias towardsany of the parties – Sub-section (5) of s. 12 lays down thatnotwithstanding any prior agreement to the contrary, any personwhose relationship with the parties or counsel or the subject-matter of the dispute falls under any of the categories specifiedin the Seventh Schedule, he shall be ineligible to be appointed asan arbitrator – In such an eventuality, when the arbitration clausefinds foul with the amended provisions, the appointment of anarbitrator would be beyond pale of the arbitration agreement,empowering the court to appoint such arbitrator(s) as may bepermissible – That would be the effect of the non obstanteclause contained in s. 12(5) and the other party cannot insist onappointment of the arbitrator in terms of the arbitration agreement.[Para 90, 91]Jurisprudence – Kelson’s Pure Theory of Law on the basic norm –Application of “Grundnorm” in India:Held: In the context of the Arbitration Agreement, the layers of theGrundnorm as per Kelsen’s theory would be in the following hierarchy-Constitution of India; Arbitration and Conciliation Act, 1996 & anyother Central/State Law; and Arbitration Agreement entered intoby the parties in light of s. 7 of the Arbitration and ConciliationAct, 1996 – Thus, the Arbitration Agreement has to comply withthe requirements of the following and cannot fall foul of s. 7 ofthe Arbitration and Conciliation Act; any other provisions of theArbitration and Conciliation Act, 1996 & Central/State Law; andthe Constitution of India – Arbitration and Conciliation Act, 1996– Constitution of India .[Paras 78,81,82]
Judge	Hon'ble Mr. Justice J.B. Pardiwala
Neutral Citation	2023 INSC 976
Petitioner	Lombardi Engineering Limited
Respondent	Uttarakhand Jal Vidyut Nigam Limited
SCR	[2023] 13 S.C.R. 943
Judgement Date	2023-11-06
Case Number	43

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Lombardi Engineering Limited Vs. Uttarakhand Jal Vidyut Nigam Limited

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