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IBI Consultancy India Private Limited v. DSC Limited

Arbitration Case · 2018 INSC 349Decided 16 Apr 2018
Arbitration Case (Civil) No. 53 of 2016
Justice R.K. Agrawal · Justice S. Abdul Nazeer

Background

IBI Consultancy India (an Indian subsidiary of Canada's IBI Group) and its parent company had separately entered into contracts with DSC Limited to install toll and traffic equipment on two highway projects in Uttar Pradesh and Chhattisgarh. After DSC Limited allegedly defaulted on payments, IBI tried to invoke the arbitration clause in the contracts, but DSC did not respond, so IBI moved the Delhi High Court for appointment of an arbitrator. The High Court held that since one party was a foreign entity, this counted as "international commercial arbitration," meaning only the Supreme Court (not the High Court) had the power to appoint the arbitrator, so IBI filed four connected petitions directly before the Supreme Court.

Decision Breakdown

The Supreme Court examined the contract documents and held that a letter of intent referenced in the contract (containing the arbitration clause) was an integral part of the agreement, so a valid arbitration agreement did exist between the parties, rejecting DSC's argument to the contrary. Since the parties could not mutually agree on an arbitrator, the Court exercised its power under Section 11 of the Arbitration Act and appointed Justice Amitava Roy, a former Supreme Court judge, as the sole arbitrator to decide the underlying payment dispute, subject to standard independence/disclosure safeguards under Section 12 of the Act. All four connected petitions were disposed of on this basis.

Lesson Learnt

When a contract is in dispute and the parties cannot agree on an arbitrator, courts will look at the substance of the documents (including referenced letters/annexures) to decide whether a valid arbitration clause exists, and if one does, the court itself can step in to appoint an arbitrator so the underlying dispute can proceed to resolution.

Official source (sci.gov.in)View Judgment (PDF)

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