HC reiterate: No single party can be permitted to unilaterally appoint the Arbitrator, as it would defeat the purpose of unbiased adjudication of the dispute between the parties [Read Judgment]

12 Feb 2022

By : Mehak

High Court of Delhi was dealing with the petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking appointment of sole Arbitrator to adjudicate the disputes inter-se the parties.

Brief Facts:

Petitioner is a company registered under the Companies Act, 1956, and is engaged in the business of undertaking civil construction projects. Respondent is also a company registered under the Companies Act, 1956, and is working as a Central Public Sector Undertaking to implement power projects in the country. The respondent-company invited the bid/tender for the subject package, on 05.08.2014 and after final bid, the aforesaid work was awarded to the petitioner in form of Purchase Order dated 07.01.2015 amounting to work value of about Rs.27.50 crores having overall completion period of 20 months wherein the works of Dyke ‘A’ was to be executed within 11 months starting from 10.01.2015 to 09.12.2015, and thereafter, the works of Dyke ‘B’ within 9 months from 10.12.2015 to 09.09.2016. Subsequently, parties entered into a Contract Agreement dated 15.01.2015.

Though the petitioner mobilised the machineries and manpower to execute the awarded works from day one, yet due to many reasons of delay, work of Dyke ‘A’ and divide bund was handed over to respondent. Though the respondent was well aware of the reasons of delay which were not in control of petitioner, respondent deducted huge amount of about Rs.67.51 lacs towards the Liquidated Damages, holding amount from the due payments of running account bills of the petitioner which were raised for the works of Dyke ‘A’ and divide bunds and the same was in complete violation and de hors to terms and conditions of the said Contract Agreement.

Petitioner’s Contention:

Learned counsel for the petitioner submitted that for commencement of Dyke ‘B’ works, the respondent failed to handover the required working fronts for a period of 57 days and the same were partially made available on 05.05.2016. Thus, a justified revised time schedule to give effect to envisaged original 9 months for completing Dyke ‘B’ works starting from 05.05.2016 was ought to be fairly extended up to 04.02.2017 by the respondent, yet the respondent issued unfair and unjust time extension stating that “completion period provisionally extended up to 04.02.2017 without prejudice to levy LD”.

It was submitted that for the reasons/delays attributable to the respondent six extensions of time for completion of said awarded works of the Contract were issued by the respondent, coupled with unfair deduction of 7.5 % amount in name of “LD Hold amount” from the RA bills raised for the progressive executed works for Dyke ‘B’. It was further submitted that the defect liability period of 12 months for such executed works has also ended on 31.10.2019. However, the respondent has not paid the outstanding due payments till date to the petitioner and rather it imposed LD amount in May, 2021.

Respondent’s Contention:

Learned Counsel for the respondent submitted that as per Clause 56 and 57 of the General Conditions of Contract of the underlying contract Agreement postulates that the disputes shall be referred to the sole arbitration of the General Manager of NTPC limited, and if General Manager is unable or unwilling to act, to the sole arbitration of some other person appointed by the Chairman and Managing Director, NTPC Limited, willing to act as such Arbitrator.

HC’s Observations and Held:

After hearing both the sides Court stated that

The Hon’ble Supreme Court’s in Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Ltd., has categorically stated that no single party can be permitted to unilaterally appoint the Arbitrator, as it would defeat the purpose of unbiased adjudication of dispute between the parties. HC observed that the aforesaid decision in Perkins has been followed by a Coordinate Bench of this Court in Proddatur Cable TV Digi Services Vs. Citi Cable Network Limited. Thus, the Arbitrator either has to be appointed with the consensus of the parties or by this Court.