The Delhi High Court has underscored the importance of completing proceedings before the Dispute Resolution Committee for the nomination of arbitrators. The High Court’s decision highlighted that the right of both parties to nominate their respective arbitrators arises only after the Dispute Resolution Committee takes a decision or concludes proceedings in the event of a failure to reach a settlement.
Brief Facts:
An Arbitration Petition was filed before the High Court for the appointment of a nominee arbitrator.
Brief Background:
The Petitioner in the case filed a petition seeking the Court's jurisdiction under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Act,1996”). The purpose of the petition was to request the appointment of a nominee arbitrator on behalf of the respondent due to the alleged failure of the Respondent to comply with the prescribed appointment procedure.
The proceedings before the Dispute Redressal Committee (hereinafter referred to as “DRC”) commenced on April 28, 2023. Since 11 out of the 13 claims raised by the petitioner remained unresolved, the matter was adjourned and later preponed.
Unfortunately, the parties could not reach a settlement during the meeting held on that date, resulting in the conclusion of the proceedings before the DRC without any resolution
Observations of the Court:
It was determined that interpreting Clause 25 as suggested would result in an Arbitral Tribunal consisting solely of Graduate Engineers with experience in government contracts. This interpretation would violate the principle of party autonomy, which is fundamental to the adjudicatory process. It was also noted that the clause does not consider Graduate Engineers with experience in contracts outside the government and specifies that their experience should be equivalent to that of a Chief Engineer (Joint Secretary, Government of India).
This would restrict the nominated arbitrator to someone with experience in government contracts only. Consequently, the Court concluded that Clause 25 should be read down to mean that at least one member of the Arbitral Tribunal must possess the prescribed qualifications, but it does not require all members to have those qualifications.
Another aspect that arose from the clause was whether the nominated arbitrator should be a serving or retired government employee and whether they could be selected from departments or ministries other than those affiliated with the respondent. To uphold Clause 25 and its qualification requirements, the Bench determined that a retired government employee could be appointed as the nominated arbitrator, allowing for someone with the necessary qualifications who do not violate the prohibitions in the Seventh Schedule of the Act, 1996.
It was held that the completion of proceedings before the DRC was significant because the right of both parties to nominate their respective arbitrators arises only after the DRC takes a decision or concludes proceedings in the event of a failure to reach a settlement.
The decision of the Court:
Accordingly, The Delhi High Court dismissed the petition.
Case Title: Shapoorji Pallonji and Company Private Limited v Union of India
Case No.: Arbitration Application 222 of 2023
Coram: Hon'ble Mr. Justice Yashwant Varma
Advocates for Petitioner: Advs. Mr. Ciccu Mukhopadhyay, Mr. Saurav Agrawal, Ms. Sonali Jaitley, Mr. Jaiyesh Baksh, Mr. Ravi Tyagi , Mr. Mayank Mishra, Mr. Chirag Sharma, Ms. Mayuri Shukla and Ms. Sakshi Tibrewal
Advocates for Respondent: Advs. Mr. Apoorv Kurup, Mr. Ajay Arjun Sharma
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