Case Note & Summary
The Supreme Court dismissed two civil appeals arising from a High Court order appointing an Arbitral Tribunal under Section 11(6) of the Arbitration and Conciliation Act, 1996. The appellant, Andhra Pradesh Power Generation Corporation Limited (APGENCO), had floated a tender for an EPC contract for its Rayalseema Thermal Power Plant. A consortium of three companies—Tecpro Systems Ltd. (first respondent), VA Tech Wabag Ltd., and Gammon India Ltd.—was formed and awarded the contract. The consortium agreement designated Tecpro as the leader. During execution, Tecpro faced financial distress, leading to delays. VA Tech took over Tecpro's scope and became the lead member. Tecpro was later admitted into Corporate Insolvency Resolution Process and liquidation. APGENCO issued a notice to Tecpro for delays, and Tecpro denied liability, claiming breaches by APGENCO. Tecpro invoked the arbitration clause in the General Conditions of Contract (GCC) individually. APGENCO opposed, arguing that the arbitration agreement was with the consortium, not individual members. The High Court appointed an Arbitral Tribunal. The Supreme Court held that at the Section 11 stage, only a prima facie view of arbitrability is required. The court found that the High Court was justified in appointing the tribunal. The Supreme Court directed the Arbitral Tribunal to decide the preliminary issue of whether Tecpro can individually maintain the arbitration as a preliminary issue, after hearing all parties, including the other consortium members. The appeals were dismissed, and the tribunal was directed to proceed expeditiously.
Headnote
A) Arbitration Law - Appointment of Arbitral Tribunal - Section 11(6) of the Arbitration and Conciliation Act, 1996 - Prima Facie Test - The High Court appointed an Arbitral Tribunal under Section 11(6) in a dispute where the appellant contended that the first respondent, a member of a consortium, could not individually invoke arbitration as the arbitration agreement was with the consortium. The Supreme Court held that at the stage of Section 11, only a prima facie view of arbitrability is required, and the detailed examination of whether the individual member can invoke arbitration is left to the Arbitral Tribunal. (Paras 2, 10-12) B) Arbitration Law - Consortium Agreement - Arbitration Clause - Interpretation - The arbitration clause in the General Conditions of Contract (GCC) referred to disputes between the purchaser and the 'Contractor', defined as the consortium. The Supreme Court noted that the issue of whether an individual member can invoke arbitration requires consideration of the consortium agreement and surrounding circumstances, which is best left to the Arbitral Tribunal. (Paras 3-4, 13-15) C) Arbitration Law - Preliminary Issue - Jurisdiction of Arbitral Tribunal - Section 16 of the Arbitration and Conciliation Act, 1996 - The Supreme Court directed the Arbitral Tribunal to decide the preliminary issue of maintainability of the arbitration by the first respondent as a preliminary issue, after hearing all parties, including the other consortium members who are also respondents. (Paras 16-18)
Issue of Consideration
Whether a member of a consortium can individually invoke the arbitration clause when the arbitration agreement is between the purchaser and the consortium as a whole, and whether the High Court was justified in appointing an arbitral tribunal under Section 11(6) of the Arbitration and Conciliation Act, 1996 on a prima facie basis.
Final Decision
The Supreme Court dismissed the appeals, upheld the High Court order appointing the Arbitral Tribunal, and directed the Arbitral Tribunal to decide the preliminary issue of maintainability of the arbitration by the first respondent as a preliminary issue after hearing all parties.
Law Points
- Prima facie test for arbitrability under Section 11(6) of the Arbitration and Conciliation Act
- 1996
- Individual member of consortium can invoke arbitration if arbitration agreement is with consortium
- Arbitral tribunal to decide preliminary issue of maintainability of arbitration by individual member
