MEARS GROUP INC. versus FERNAS INSAAT A.S.

Citation: [2016] 11 S.C.R. 872 · Decided: 14-12-2016 · Supreme Court of India · Bench: T.S. THAKUR · Disposal: Disposed off
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Judgment (excerpt)

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[2016) 11 S.C.R. 872 
MEARS GROUP INC. 
v. 
FERNAS INSAAT A.S. 
(FERNAS CONSTRUCTION COMPANY INC) 
(Arbitration Petition No. 13 of2016) 
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 
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 
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. 
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. 
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 
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 
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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:-
"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. 
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 
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SUPREME COURT REPORTS 
[2016] II S.C.R. 
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 Se
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