HYDROELECTRIC PROJECT AUTHORITY, BHUTAN versus LARSEN & TOUBRO LTD.

Citation: [2021] 1 S.C.R. 587 · Decided: 22-02-2021 · Supreme Court of India · Bench: INDU MALHOTRA, AJAY RASTOGI · Disposal: Disposed off

Judgment (excerpt)

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587
   [2021] 1 S.C.R. 587
587
PUNATSANGCHHU – 1 HYDROELECTRIC PROJECT
AUTHORITY, BHUTAN
v.
LARSEN & TOUBRO LTD.
(Civil Appeal No. 693 of 2021)
FEBRUARY 22, 2021
[INDU MALHOTRA AND AJAY RASTOGI, JJ.]
Arbitration and Conciliation Act, 1996 – s.11 – Contract
between appellant-authority and respondent-contractor in relation
to a Hydro-electric Project in Bhutan – Disputes between the parties
– Respondent sent notice of arbitration to appellant under Clause
67 (ii) of the contract, and nominated its own nominee arbitrator –
Appellant stated it was agreeable for arbitration; however,
arbitration would be governed by Alternative Dispute Resolution
Act, 2013 of Bhutan and the place of arbitration shall be at Thimphu,
Bhutan – Thereafter, respondent filed application u/s.11(6) of the
Act, 1996 before High Court for appointment of arbitrator on behalf
of appellant – High Court held that Clause 67 (ii) of the contract
did not indicate that applicability of the 1996 Act would cease on
enactment of the Bhutan Act of 2013 – Since appellant had failed
to appoint its arbitrator, High Court exercised its jurisdiction u/
s.11, and made the appointment and further directed that the two
arbitrators would proceed to appoint the presiding arbitrator, and
the arbitral proceedings would be governed by the provisions of
the 1996 Act – Hence the instant appeal – Meanwhile, the arbitral
tribunal was constituted, as the two arbitrators had appointed a
presiding arbitrator – However, thereafter, consensus arrived at
between appellant and respondent with respect to the applicable
statute and the seat of arbitration – Accordingly, order of High
Court modified to the extent that all disputes arising out of the
contract in question shall be conducted in accordance with the
Bhutan Act of 2013 with the seat of arbitration at Thimphu – The
tribunal will, however, be at liberty to conduct some of the hearings,
in consultation with the parties, at such venues as may be convenient
– Alternative Dispute Resolution Act, 2013 (enacted by Kingdom of
Bhutan).
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588
SUPREME COURT REPORTS
[2021] 1 S.C.R.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 693
of 2021.
From the Judgment and Order dated 11.12.2020 of the High Court
of Delhi at New Delhi in Arbitration Petition No. 461 of 2020.
Tushar Mehta, SGI Ranjeet Kumar, Gourab Banerjee, Sr. Advs.
Bharat Singh, Dhruv Gupta, Amit Pawan, Ananya Kumar, Rajat Joneja,
Ms. Neeharika Aggarwal, Divyam Agarwal, Advs. for the appearing
parties.
The following Order of the Court was passed:
ORDER
Leave granted.
1. On 14.04.2009, a Contract Agreement was executed between
the Appellant and the Respondent-Contractor for the Construction of
Diversion Tunnel, Dam, Intake and Desilting Arrangement including
Hydro-mechanical Works of the Punatsangchhu-I Hydro-electric Project
located in Wangdue Phodrang District in Bhutan. The contract provided
for resolution of disputes through arbitration. The relevant terms of the
Contract are as under :
Clause 5 (i) (b)
The law to which the Contract is to be subject and according to
which the Contract is to be construed shall be the law for the time
being in force in Bhutan and within the jurisdiction of Thimphu
courts.
Clause 67
(ii) Except where the decision has become final, binding and
conclusive in terms of Sub Para (i) above disputes or differences
shall be referred for arbitration through to an Arbitral Tribunal of
three arbitrators appointed jointly by the PHPA and the Contractor.
Where the mandate of an arbitrator terminates a substitute
arbitrator shall be appointed according to the rules that were
applicable to the appointment of the arbitrator being replaced.
In the absence of an Arbitration Act in Bhutan, the Arbitral Tribunal
shall follow / be guided by the basic principles and procedures as
contained in the Indian Arbitration and Conciliation Act 1996. The
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PUNATSANGCHHU – 1 HYDROELECTRIC PROJECT
AUTHORITY, BHUTAN v. LARSEN & TOUBRO LTD.
parties shall be free to agree on a procedure for appointing the
Arbitrators. Failing any agreement for appointment of Arbitrators,
each party shall appoint one Arbitrator and the two appointed
Arbitrators shall appoint the third Arbitrator, who shall act as the
presiding Arbitrator.
Clause 67 (iv)
If either of the parties fail to appoint its arbitrators in pursuance of
sub-clause (ii) above, within 30 days after the receipt of the notice
of the appointment of its arbitrators or the two appointed 

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