Judgment Name: Consulting Engineers Group Ltd. v. National Highways Authority of India (NHAI)

Citation: O.M.P.(I) (COMM.) 244 of 2022

Court: The High Court of Delhi

Coram: Mini Pushkarna, J.

Date: 6th October 2022

Keywords: Joint Venture, Invocation of Arbitration Clause, Section 9, Arbitration & Conciliation Act, 1996.

Overview

A Single-Judge bench of the Delhi High Court held that a member of a joint venture cannot, in its individual capacity, invoke the dispute resolution clause and independently approach the court. Consequently, the Petition by Consulting Engineers Group Ltd. was dismissed by the High Court.

Facts

The Respondent, the National Highways Authority of India (“NHAI”), had in a notice dated 15th March 2018 invited tenders for consultancy services to supervise the construction of an expressway. According to the tender, applications could come from sole firms or joint ventures.

The Petitioner, M/s Consulting Engineering Group Ltd. (“Consulting Engineering Group”) formed a consortium with M/s Aecom Asia Company Ltd. (“Aecom”) to bid for this project, with the latter as the lead partner. A Memorandum of Understanding (“MoU”) dated 14th May 2018 was signed to this effect, and the Petitioner entered the bidding process as a joint venture with Aecom.

Subsequently, a Letter of Award (“LOA”) dated 22nd October 2018 was issued to the consortium, addressed to Aecom as lead partner and authorized representative. A Consultancy Agreement was also entered into. Clause 8 of the General Conditions of Contract (“GCC”) provided for the amicable settlement of disputes between the parties. Clause 1.8 of the Special Conditions of Contract (“SCC”) mentioned that the member-in-charge was Aecom.

Meanwhile, Larsen and Toubro Ltd. were awarded the contract for the construction of the expressway. The consortium of the Petitioner and Aecom was to supervise this construction. During the construction, an accident occurred on 28th March 2021. In September 2021, the Expert Committee constituted by the Respondent concluded that the accident occurred due to lax monitoring of quality control measures, and a lack of coordination between various parties.

Consequently, the Respondent sent a show cause notice dated 16th September 2021 to the Petitioner. Post a hearing on the 1st of December 2021, the Petitioner received an order of debarment dated the 2nd of August 2022. This order was challenged by the Petitioner in a Petition filed under Section 9 of the Arbitration and Conciliation Act, 1996. The Respondent, on the other hand, submitted that the Petition was not maintainable as there was no valid and existing arbitration clause between itself and the Petitioner in their independent capacity.

Issue

Whether a member of a joint venture can invoke a dispute resolution clause and approach the court in its individual capacity?

Analysis

The Court held that Consulting Engineering Group could not approach the Court by invoking the dispute resolution clause in its independent capacity. In arriving at this decision, the Court placed emphasis on the following facts:

i. The Petitioner entered into an MoU with Aecom, as per which it would form a consortium to provide services to the Respondent. As per the MoU, Aecom would be the lead partner, and the Petitioner would be the associate partner. The terms of the MoU did not confer any authority (whether express or implied) to the Petitioner to pursue contractual matters in its individual capacity without the lead member’s authorization or consent.

ii. The GCC further reflects that the Petitioner was not the lead member or authorized member of the consortium. The dispute resolution clause of the GCC refers to “parties”, that is, the consultants (the consortium of the Petitioner and Aecom) and the Respondent. The Petitioner is not referred to individually.

iii. The SCC shows that the member-in-charge was Aecom.

iv. The Consultancy Agreement was signed by the lead partner, Aecom, and not the Petitioner.

v. The show cause notice was issued by the Respondent to the consortium through the authorized representatives of Aecom.

vi. The technical and financial bid in the tender process conducted by the Respondent was submitted by Aecom, and not the Petitioner.

In addition, the Court relied on mainly two cases to reach its decision. First, in Geo Miller & Co. Pvt. Ltd. v. Bihar Urban Infrastructure Development Corporation Ltd. and Anr., the Delhi High Court had held that in cases where an agreement is with a consortium, the intention is not for one member to invoke the arbitration clause separately. Second, in Gammon India Ltd. v. Commissioner of Customs, Mumbai, the Supreme Court recognized a joint venture as a legal entity and consequently held that actions by one member of the joint venture would not be acceptable or legally tenable.

Conclusion

Therefore, the Court concluded that the Petitioner, being an associate member of a joint venture, could not invoke the dispute resolution clause in its individual capacity. Consequently, it dismissed the Petition with respect to the Respondent’s order of debarment dated 2nd August 2022.

[This case note has been authored by Tarasha Gupta, an Editor at Mapping ADR.]