GR Green Life Energy Private Limited Vs Leitwind Shriram Manufacturing Pvt. ltd 

CITATION	Civil Appeal No. 692 of 2021
DATE OF JUDGMENT	February 22, 2021
COURT	Supreme Court of India
APPELLANT	GR Green Life Energy Private Limited
RESPONDENT	Leitwind Shriram Manufacturing Pvt. Ltd.
BENCH	Justice L. Nageswara RaoJustice S. Ravindra Bhat

INTRODUCTION

This particular case deals with a case on a Development Agreement that was entered into between GR Green Life Energy Private Limited and Leitwind Shriram Manufacturing Pvt. Ltd. on the 10 of February, 2014, in relation to the construction and development of a Wind Farm Project seated in the District of Sangli, Maharashtra. The dispute resolution part of the said agreement clearly mentioned that all the disputes if any are to be referred to arbitration at Chennai and as per the Arbitration and Conciliation Act of 1996.

FACTS OF THE CASE 

•  The Appellant GR Green Life Energy Private Limited and the Respondent Leitwind Shriram Manufacturing Pvt. Ltd. signed a Development Agreement on February 10, 2014, for promoting Wind Farm Project in Sangli District of Maharashtra. The necessary and sufficient factors have been agreed to in the form of an arbitration clause which provided that any issues arising out of or relating to this agreement must be resolved through arbitration in Chennai under the arbitration and conciliation act, 1996 
•  The Appellant was owed monies by the Respondent and due to the failure of the Respondent to make payments the appellant issued a legal notice dated 21 April, 2018 stating outstanding amount of ₹3,26,08,545. The Appellant asserted that these dues are owed for the performance under the Development Agreement.
  In response, on January 21, 2019, the Respondent dismissed all the allegations of the Appellant and alleged the following: Apps sue for non-performance. The Respondent sought the Auction Sale Proceeds of ₹10,26,00,000 being returned with 15% interest per annum and said further claimed Liquidated Damages of ₹1,54,00,000.
• Respondent referred to the arbitration clause from the agreement entered into and appointed an arbitrator. They did not appoint their arbitrator leading the Respondent to approach the high court of Madras by filing a petition under section 11(6) of the Arbitration and Conciliation Act, 1996. The prayer was to approach the court to order the appointment of an arbitrator for the Appellant 
• The Appellant was a MSME being registered under the MSMED Act 2006 for settling the disputes, it moved an application to the Facilitation Council, Pune.
  The High Court ruled out that the MSMED Act did not make provisions for the counter-claim therefore supporting the arbitration agreement under the 1996 Act. Thus, the court supported the arbitration clause and demanded arbitration in Chennai.

ISSUE RAISED

• Whether the arbitration clause in the Development Agreement is valid and enforceable?
•  Whether the registration under the Micro, Small and Medium Enterprises Development Act, 2006, affected the dispute resolution process?

CONTENTIONS OF APPEALENT

•  Leitwind Shriram Manufacturing Pvt Ltd stated there was a Development Agreement for which the Company was entitled to ₹3,26,08,545 for render services of work carried out by them. As stated by the appellant, these dues were unpaid although contractual covenants were performed, The Appellant claimed that due to the arbitration clause in the Development Agreement the disputes shall be referred to arbitration and any and all disputes arising out of this agreement should be referred to arbitration in Chennai according to the Arbitration and Conciliation Act of 1996
•  The appellants of the case, GR Green Life Energy Private Limited argued to stay operation by given a status of a registered entity under the Micro, Small and Medium Enterprises Development Act, 2006 commonly nicknamed MSMED Act for short. He and other appellants stated that the MSMED Act offered them an avenue for appealing against the arbitrator’s decision, which was inserted an arbitration clause.
  
• It was to these counterarguments that the Appellant vehemently denied all the accusations of non-performance levelled by the Respondent. Their argument was that they have met all their contractual obligations and they thus should be paid the stated outstanding balances 
• The Appellant rejected the counter-claims purported by the Respondent where they sought the following; refund of ₹10,26,00,000, interest and liquidated damages. They stated that this counter-brief was misleading empty and unjustified

CONTENTIONS OF RESPONDENT

• In the Disputes, Leitwind Shriram Manufacturing Pvt. Ltd. claimed that GR Green Life Energy Private Limited had not met it’s side of the bargain as for the Development Agreement. They also claimed that the situations when the Respondent was left with half-baked work to be delivered to the clients, financial and operational losses suffered by the Respondent 
• The Respondent stated categorically that because the Appellant had not delivered as agreed they were entitled to a refund of ₹10,26,00,000. Furthermore, they affirmed that interest for the money in the account as 15 % per annum and requested for the liquidated damages of ₹1,54,00,000 to make good for the loss caused to them by the Appellant for its breach of the contract 
• The Respondent justified the existence of the arbitration clause in the Development Agreement and submitted that the question on whether or not it ought to be enforced is irrelevant since the parties intended for the dispute to be solved through arbitration in Chennai in accordance with the governing laws as provided in the Arbitration and Conciliation Act, 1996. They approached the High Court of Madras to direct the appointment of an arbitrator in favour of the Appellant wherein the latter has not appointed one. 
• Leitwind Shriram Manufacturing Pvt. Ltd. opposed the action of the Appellant seeking its settlement under the MSMED Act with the Facilitation Council. They contended that there are no provisions that deal with counter-claims under the MSMED Act; that as a result, the arbitration agreement under the Arbitration and Conciliation Act, 1996 should apply. 
• Since the Appellant failed in his/her duty to appoint an arbitrator, the Respondent moved to the court on Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator and starting of the arbitration process.

JUDGEMENT

• The arbitrator affirmed to the arbitration clause contained in the Development Agreement between the appellant, GR Green Life Energy Private Limited and the respondent, Leitwind Shriram Manufacturing Pvt. Ltd. The clause of arbitration stated that any controversy, dispute, question or difference arising out of or in relation to the agreement had to be referred to arbitration in Chennai that too under the Indian Arbitration and Conciliation Act of 1996.
• Due to the situation where the Appellant had failed to nominate their arbitrator, the Supreme Court came in to facilitate the execution of arbitration. As per the terms of the Development Agreement, all the disputes arising therefrom, claim or counterclaim, were referred to be heard by the learned sole arbitrator Justice K. Kannan, a retired Judge of the Madras High Court. The arbitration was going to be conducted in near reference to the Arbitration and Conciliation Act, 1996 within the Madras High Court Arbitration Centre.
• The Court observed that the Appellant was operating under the MSMED Act, however, the same was silent on the manner in which counter-claims could be entertained and disposed of. Therefore, the arbitration clause in the Development Agreement according to which the arbitral proceedings would take place under the Arbitration and Conciliation Act, 1996 was still binding and effective 

CASE ANALYSIS

• Arbitration Agreement: The case reaffirms arbitration clauses’ enforceability, even when other legal frameworks, such as the MSMED Act, are used. It emphasizes the judiciary’s role in upholding contractual agreements and ensuring that disputes are resolved in accordance with the agreed-upon terms. 
• Judicial Intervention: The Supreme Court’s intervention in appointing an arbitrator demonstrates the judiciary’s role in facilitating arbitration when parties are unable to agree on an arbitrator, ensuring that arbitration proceedings do not stall. 
• Interplay with MSMED Act: The decision clarifies that, while the MSMED Act provides some benefits to registered entities, it does not supersede specific dispute resolution mechanisms agreed upon in contracts, such as arbitration clauses. 
• Commercial Implications: The decision emphasizes the need for clear and enforceable dispute resolution clauses in commercial contracts. It sets a precedent for future disputes involving comparable contractual agreements and arbitration clauses. 
• Practical Impact: The case ensures that businesses can use arbitration to resolve disputes quickly and efficiently, fostering a more predictable and stable business environment.

CONCLUSION

The Supreme Court decision emphasized the importance of arbitration clauses in commercial agreements and clarified the relationship between the Arbitration and Conciliation Act of 1996 and the MSMED Act of 2006. It ensured that any disputes between GR Green Life Energy Private Limited and Leitwind Shriram Manufacturing Pvt. Ltd. would be resolved through arbitration, as agreed upon by the parties.

REFERENCE

• https://indiankanoon.org/doc/119978482/
• Indian Employees

Written by Tanishka Rana an intern under legal Vidhiya.

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