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

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1.1 As per the amended provision of sub-section (6A) of H 285 286 SUPREME COURT REPORTS [2017] 10 S.C.R. A B c 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; 301- D D-EJ 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 integration of the same with the existing coal handling systems E F G H MIS. DURO FELGUERA, S. A. v.

M/S. GANGAVARAM PORT LIMITED 287 (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 [307-A-C; 308-E-G; 310- . five different packages. [Paras 20-23] c A-B] D E

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 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] F 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 LIMITED 289 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) F G

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 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 C 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 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) F Chloro Contmls India Private ltd. v. Severn Trent Water 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 LIMITED 291 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] [320- C 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. D E F Per Kurian, J. (Supplementing):

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 A B SUPREME COURT REPORTS [2017] 10 S.C.R. 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 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 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] E

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 domestic. [Para 14] G H 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) 7 SCC 201 : [2000) 2 Suppl. SCR 563; Konkan Railway MIS. DURO FELGUERA, S. A. v. MIS. GANGAVARAM PORT LIMITED 293