Name: Saurabh Chaudhari
Roll no. M2144
Subject: Business Law
STEEL AUTHORITY OF INDIA LIMITED (SAIL)
vs
TATA PROJECTS LIMITED (TPL)
The Case
On 24-07-2007, the Steel Authority of India ltd (SAIL) issued a tender for the construction of a blast furnace. Two companies are Tata projects limited (TPL) which is an Indian corporation and DC systems (DC) a company based in the Netherlands together formed a consortium and submitted the bid to the SAIL The bid was finally won by Tata projects limited (TPL), DC systems and SAIL and the contract was executed on 2-10-2008
Further, SAIL requested that the wireless fire detection alarm (FDA) installation should be done as per the contract instead of the regular fire detection alarm, as specified in the contract. Despite this the TPL ordered the installation of wireless fire detection alarm with Diaonics Automation despite its concerns.
While the commissioning of the wireless FDA was pending, SAIL issued the Preliminary Acceptance Certificate to respondents. When the wireless FDA didn’t commission then DC asked SAIL to produce and give the Final Acceptance Certificate (FAC) and the payments linked to FAC. SAIL furthermore refused the FAC and FAC payments and therefore told DC and TPL to complete the remaining balance work in order to FAC-related funds to be disbursed or released.
FAC is a Final Acceptance Certificate which is given by the owner company to a contractor after completing the work and all the requirements tied to it.
There were also few other disagreements and disputes amongst the parties. But in 2017, DC and TPL both referred the matter to the another arbitration invoking claims for FAC and FAC payments. This led to award in which Arbital tribunal partially upheld TPL and DC’s claims.
Upset by this award, SAIL approached Delhi High court and filed an application under the Arbitration and conciliation Act (1996 act) and requested that the award should be kept aside since the award was not the result of an International commercial arbitration or ICA. And argued that it might be illegal according to the section 32 of (2A) under the act. It also argued that consortium was treated as having partly physical presence in India because TPL was the leader and the central management control lied with TPL. Furthermore SAIL argued because the arbitration was actually conducted domestically, the award was illegal and not according with the fundamental principles of moral justice.
Section 32 (2A) of Arbitration and conciliation act
2.The arbitral panel will therefore issue an order to end the arbitration in following circumstance-
A)The claimant withdraws claim, Unless until the respondant objects to order and justifiable interest is in his side or favour in reaching a final resolution of the dispute
TPL and DC’s Assertation
TPL and DC asserted that because the award was approved by an ICA, there is less ground to challenge it.
Back to the SAIL, The High court dismissed SAIL’s petition after hearing them from the parties on the grounds that the award by ICA was with accordance with the section 2 (1) (f) of the act. The high court therefore concluded that the DC has been referred to the contract as both the party to the consortium member and a contractor. SAIL, which signed the contract which outlined the responsibilities and duties to be carried out independently by DC, was completely aware of the fact.
Section 2 (1) (f) of ARBITRATION AND CONCILIATION ACT of 1996
According to the section , ICA refers to arbitrations involving legal disputes if they are contractual or not ,they are deemed to be commercial under the Indian law and in which at least one of the parties is :
1. An individual who is national of India and resides in other country.
2. A body corporate that is incorporated in any other country than India
3. A company or association whose central level of management is
exercised in any other country than India
4. The foreign government
Conclusion
The judgement concluded that the even when an Indian entity is a consortium leader and contractor, If the foreign entity is defined as a consortium member and contractor having separate and specific rights, such a member is a party to the Agreement and such an arbitration would be an “International Commercial Arbitration” .