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REPORTABLE

 IN THE SUPREME COURT OF INDIA ORIGINAL CIVIL JURISDICTION

ARBITRATION PETITION No. 13 OF 2016

MEARS GROUP INC. ..... PETITIONER

VERSUS

FERNAS INSAAT A.S. (FERNAS CONSTRUCTION COMPANY INC)         .....RESPONDENT

O R D E  R

Dr D Y CHANDRACHUD, J

1 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  USD

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7,225,000/-.  The work to be executed by the Petitioner involved the installation

of thirty inch diameter and six inch diameter gas pipelines 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 :-

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“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 Parties. 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.  

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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 addressed by its

advocate to the respondent.  The Petitioner claimed an amount of USD

38,13,723.76  together 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 Section 11(5) of the Arbitration and

Conciliation Act, 1996.  

3 Notice  was  issued  in  these  proceedings  on  8  March  2016.  On

7 October 2016 the Respondent informed this Court that it was willing to

negotiate  an  amicable  settlement  with  the  Petitioner  and  would  either

finalize a settlement or file its objections to the petition for appointment of

an arbitrator within four weeks.  Neither has any settlement been arrived at

between the parties nor has a reply been filed to the Arbitration Petition.

4 During the course of the hearing, learned counsel have not disputed

the existence of the arbitration agreement.  Disputes have evidently arisen

between the parties and a mutual settlement has not been possible.

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5 In  the  circumstances,  we  hereby  appoint  Mr  Justice  FM  Ibrahim

Kalifulla,  former  judge  of  the  Supreme Court  of  India  to  act  as  a  sole

Arbitrator in terms of the arbitration agreement.  The learned arbitrator shall

be at liberty to determine the fees payable to him for the arbitration.

6 The Arbitration Petition is accordingly disposed of in the above terms.

….......................................CJI                                  [T S  THAKUR]  

           …..........................................J

                    [Dr D Y  CHANDRACHUD]   

New Delhi December 14, 2016