The Delhi High Court disposed of a petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Arbitration Act’) for the appointment of a Sole Arbitrator to adjudicate the disputes between the parties by stating that “respondent having agreed to constitute the Arbitral Tribunal cannot now seek to resist arbitration by seeking to rely upon Clause 63 of the GCC.”
Brief Facts:
A petition was filed under Section 11(6) of the Arbitration Act for the appointment of a Sole Arbitrator to adjudicate disputes arising from a contract between the parties. The said contract had an arbitration clause in the applicable General Conditions of the Contract (hereinafter referred to as "GCC").
The petitioner invoked arbitration as per the terms of their contract. The respondent, in response, terminated the contract. The petitioner then filed a petition under Section 9 of the Arbitration Act, obtaining an interim order.
Contentions of the Parties:
The petitioner contended that despite mobilising resources to commence the work, the respondent had failed to fulfil its obligations which caused the delay. The petitioner argued that the appointment procedure adopted by the respondent violated legal principles established in the Supreme Court's judgment in Perkins Eastman Architect DPC & Ors. v. HSCC (India) Ltd., AIR 2020 SC 59 which had established the need for an arbitrator to adjudicate such matters.
The respondent did not dispute this and both the parties acknowledged the necessity of constituting an independent Arbitral Tribunal. However, the respondent raised a specific objection, asserting that the present petition was premature. According to the respondent's stand, the petitioner had not availed the remedies available under the GCC before approaching the Court. The respondent emphasised the mandatory nature of the term "shall" in the GCC, arguing that it obligated the parties to refer the dispute to the General Manager before invoking the arbitration clause.
In response to this objection, the petitioner stated that the respondent's communications indicated the respondent's initiative in constituting an arbitral tribunal.
Observations by the Court:
In response to the petitioner's invocation letter, the respondent had initially agreed to the constitution of an Arbitral Tribunal. However, this agreement was contingent upon the petitioner waiving Section 12(5) of the Arbitration Act. Despite the respondent's initial willingness to form the Arbitral Tribunal, the Court said that the respondent could not now resist arbitration by relying on the GCC.
Upon perusing the invocation letter, the Court found that none of the claims raised fell within the category of ‘excepted matters.’ The Court acknowledged that a detailed examination of the facts was necessary in such cases which is a task best suited for a duly constituted Arbitral Tribunal as per the Supreme Court's guidance in Vidya Drolia v. Durga Trading Corpn[1].
The Court referred to decisions in Margo Networks (P) Ltd. v. Railtel Corpn. of India Ltd.[2] and Perkins Eastman Architect DPC & Ors. v. HSCC (India) Ltd.[3] reinforcing the need for an independent Sole Arbitrator.
The decision of the Court:
The Court appointed Mr. Kirit Javali as the Sole Arbitrator to adjudicate the disputes. The respondent was allowed to raise jurisdiction/arbitrability objections before the arbitrator. The Court directed the arbitrator to proceed with the arbitration, subject to necessary disclosures under Section 12 of the Arbitration Act. The parties were instructed to share arbitrator fees and costs equally, keeping all rights and contentions open for the arbitrator's decision.
Case Title: N.K. Sharma vs. The General Manager Northern Railway
Coram: Hon'ble Mr. Justice Sachin Datta
Case No.: ARB.P. 893 of 2022
Advocates for the Petitioner: Mr. Avinash Trivedi, Mr. Anurag Kaushik and Mr. Jatin Arora, Advs.
Advocates for the Respondent: Mr. Bhagvan Swarup Shukla, CGSC (through v/c), Mr. Sarvan Kumar, G.P. and Mr. Arun Kumar, Sr. DenIII, Mr. Shiv Raj Meena, CLA and Mr. Pankaj, OS/W-III.
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