The Delhi High Court elucidated on the essential aspects of arbitration, underscoring the pivotal role played by the consent of the parties in initiating the arbitral process.
The High Court, observing that arbitration is a voluntary alternative method for resolving disputes instead of resorting to the courts, highlighted the need for mutual agreement among the parties to submit their disputes to an arbitral tribunal
Brief Facts:
An Arbitration Petition was filed before the High Court under Section 11(6) of the Arbitration and Conciliation, 1996 (hereinafter referred to as “Act, 1996”). The petitioners sought the intervention of the court to facilitate the appointment of a qualified arbitrator who would be responsible for adjudicating the disputes.
Contentions of the Petitioners:
It was argued that the Arbitration Agreement can be divided into separate parts, with the latter portion stating that if the Head Technical Board of Governance (hereinafter referred to as “TBG”) of Bharat Heavy Electricals Limited (hereinafter referred to as “BHEL”) or a person nominated by them is unable to act as an arbitrator, the matter will not be referred to arbitration.
According to the petitioner, since the agreement could be severed, the Arbitration Agreement should remain valid. It was contended that the provision in the Agreement, which states that only a person appointed by the Head TBG can act as an arbitrator and if that is not possible, the matter will not go to arbitration, was an unfair and unconscionable condition.
Contentions of the Respondents:
It was argued that the Arbitration Agreement between the parties was clear and unambiguous. In the event that the designated individual could not be appointed or act as an arbitrator for any reason, the agreement specified that the matter should not be referred to arbitration at all.
Observations of the Court:
The High Court, observing that arbitration is a voluntary alternative method for resolving disputes instead of resorting to the courts, highlighted the need for mutual agreement among the parties to submit their disputes to an arbitral tribunal. The Supreme Court's judgement in Vidya Drolia & Ors. v. Durga Trading Corporation, [(2021) 2 SCC 1], outlined the private nature of arbitration, where parties waive their right to court resolution. The arbitration agreement grants authority to the arbitral tribunal to settle disputes and bind the parties, with the jurisdiction of the arbitrator determined by the parties' expressed will in the agreement.
In the present case, it was explained that the Arbitration Agreement explicitly stated that if the appointed person by the Head TBG could not act as an arbitrator, the dispute would not be referred to arbitration. Consequently, the Bench determined that the Arbitration Agreement ceased to be effective according to their terms, obliging the parties to seek ordinary civil remedies to settle any disputes.
The decision of the Court:
The Delhi High Court, therefore, dismissed the petition.
Case Title: M/S Vindhya Vasini Construction Co v M/S Bharat Heavy Electricals Ltd
Case No.: Arbitration Application 1298 of 2022
Coram: Hon'ble Mr. Justice Navin Chawla
Advocates for Petitioners: Advs. Mr. Somiran Sharma, Mr. Dhrubajit Saikiaand and Mr. Tabarak Husain
Advocates for Respondents: Advs. Mr. Himanshu Gupta, Mr. Aditya Sikka, Ms. Padamja Sharma and Ms. Vasudha Vijaysheel
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