Restraining Party From Participating In Any Tender Process U/S 9 of Arbitration Act Will Actually Thwart Competition: Delhi High Court

The Delhi High Court Bench of Chief Justice Subramonium Prasad has held that if the respondent is denied participating in any tender process and ultimately, in the arbitration proceedings and then in the award, it is held that the claim of the petitioner is to be rejected, then irreparable loss will be caused to the respondent. The court held that restraining the respondent from participating in the bid will actually thwart competition. Additionally, the court held that it is not going into the nuances of Section 27 of the Contract Act because this would be posed to the arbitrator while adjudicating the dispute for which the Arbitral Tribunal would be constituted. If this issue is decided in these petitions, then there would be no other question left in the arbitration to be decided. Brief Facts: The present applications were filed under Section 9 of the Arbitration and Conciliation Act, 1996 to restrain the respondent from participating in the tender process for Ranchi and Vijayawada Airports initiated by Airport Authority of India (“AAI”). Also, restraining the respondent from participating in any tender process for Ground Handling Services at any Airport managed by the AAI. The petitioner No.1 and Respondent submitted a bid and succeeded in the tender for providing Ground Handling Services at the Chennai Airport, Goa Airport, Bagdogra Airport, Udaipur Airport and Jodhpur Airport. Then, petitioner No. 1 and the respondent entered a Shareholders' Agreement for the creation of a Special Purpose Vehicle (“SPVs”). However, petitioner No.2 would provide Ground Handling Services at Bagdogra Airport. Then the parties entered into an Exclusivity Agreement and a Collaboration Agreement. The arbitration clause mentioned in all the agreements has different seats and venue of arbitration. The dispute arose between the parties in terms of the Exclusivity and Collaboration Agreements. Since, the respondent is a Company incorporated outside India, petitioner No.1 approached the Apex Court under the terms of the Exclusivity and Collaboration Agreements for appointment of Arbitrator. Then, the Apex Court nominated arbitrators for both parties and instructed them to complete the constitution of the Arbitral Tribunal. Thereafter, the Arbitral Tribunal was constituted, and AAI issued a tender notice for Ground Handling Services at Ranchi Airport and Vijaywada Airport, and it is stated that the respondent would make its bid for the said tender which would cause irreparable loss to the petitioners. So, both the Petitioners No.1 and 2 approached the court under Section 9 of the act seeking interim relief. .Observation of the court: The court noted that if the respondent is denied participating in any tender process and ultimately, in the arbitration proceedings and then in the award, it is held that the claim of the petitioner is to be rejected, then irreparable loss will be caused to the respondent. The respondent would have been precluded from participating in the tender, whereas in case the claim is allowed, the petitioner can be compensated by damages and the respondent can be asked to render accounts. Therefore, the test of balance of convenience and irreparable loss lies in favour of the respondent and not in favour of the petitioner. Further the court observed that there are two entities, i.e., petitioner No.1 and respondent and both deal in providing ground handling services. The petitioner No.1 and the respondent had come together to collaborate to provide ground handling services for individual airports. They had also entered into an agreement restraining each other from competing to provide services at other airports. The Exclusivity Agreement entered into between the petitioner and respondent has been terminated. Looking at the conduct of the parties and the fact that the parties have entered into a separate exclusive agreement. Therefore, the Court held that there is no prima facie case in favour of the petitioner. The Court is not going into the nuances of Section 27 of the Contract Act because this would be posed to the arbitrator while adjudicating the dispute for which the Arbitral Tribunal would be constituted. If this issue is decided in these petitions, then there would be no other question left in the arbitration to be decided. Additionally, the court held that restraining the respondent from participating in the bid will actually thwart competition. Therefore, the balance of convenience also lies in permitting the respondent to participate in the contract. Moreover, the court affirmed that Clause 14 prima facie cannot be extended to other airports, particularly when the Exclusivity Agreement already stands terminated and Petitioner No.2 in both the Petitions cannot compete in the tender process in the Vijaywada and the Ranchi Airports. Finally, the court dismissed the petitions. Case Title: LAS GROUND FORCE ...

Restraining Party From Participating In Any Tender Process U/S 9 of Arbitration Act Will Actually Thwart Competition: Delhi High Court

Soumya Chakrabarti

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