The High Court of Calcutta, while dismissing applications filed under Section 11 of the Arbitration and Conciliation Act, 1996, arising from arbitration clauses embodied in two similar contracts between the parties, held that the decision of whether to take the claim of the petitioner to arbitration lies within the exclusive discretion of the respondent, which is unjust and lopsided. The petitioner, in such case, has to pay according to its portion of the claim but has no participation in the arbitration, which is violative of Article 14 of the Constitution of India and ought to be struck down.
Brief Facts:
Both the agreements are works contracts issued to the petitioner by the respondent. The principal contract was executed between Indian Oil Corporation of India Limited (IOCL) and the respondent. The work was subcontracted to the petitioner. Disputes and differences having arisen between the petitioner and the respondent, the present applications have been filed. The relevant clause in both the works contracts is Clause 14.0 which provides for the resolution of disputes between the petitioner/subcontractor and B&R.
Contentions of the Petitioner:
The learned counsel appearing on behalf of the Petitioner submitted that even if the petitioner seeks to raise a dispute by invoking the Arbitration clause, it has to approach B&R, despite the dispute being against B&R itself. In such a case, the petitioner has to depend on the decision of B&R to invoke the arbitration clause. Even then, the petitioner cannot participate independently in the arbitral proceedings but, on the other hand, would be bound by the award passed by the Arbitrator. He argued that the said conditions of the arbitration clause are unreasonable and violative of Article 14 of the Constitution.
Contentions of the Respondent:
The learned counsel appearing on behalf of the Respondent submitted that the arbitration clause specifically bars reference to arbitration in respect of disputes exclusively between the petitioner/sub-contractor and the respondent (B&R). In view of such a negative clause, the matter cannot be referred to arbitration, since the present dispute is between the petitioner and B&R, and IOCL is not involved at all.
Observations of the court:
The court noted that according to the second limb of the arbitration clause, in case the subcontractor desires B&R to raise a dispute pertaining to its claim for reference to arbitration, the sub-contractor shall approach B&R with such request. If B&R feels it justified to initiate arbitration on the said claim, regarding which the decision of the General Manager of B&R will be final, arbitration may be invoked by B&R with M/s IOCL.
The Court observed that the second part is unjust and violative of party autonomy, since the petitioner would not, in such case, have any participation in the arbitral process with IOCL, although it has a stake in the outcome of the same. Moreover, the decision of whether to take the claim of the petitioner to arbitration also lies within the exclusive discretion of the respondent, which is also unjust and lopsided. The petitioner, in such case, has to pay according to its portion of the claim but has no participation in the arbitration, which definitely is violative of Article 14 of the Constitution of India and ought to be struck down.
The decision of the Court:
The Calcutta High Court, dismissing the petition, held that the second limb of the arbitration clause, being violative of Article 14 of the Constitution of India, is struck down insofar as the petitioner is concerned.
Case Title: M/s Zillion Infraprojects Pvt. Ltd. v Bridge and Roof Co. India Ltd.
Coram: Hon’ble Justice Sabyasachi Bhattacharyya
Case No.: AP-COM No. 77 of 2024
Advocate for the Petitioner: Mr. Kishore Datta
Advocate for the Respondent: Mr. Amitabh Shukla
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