Karnataka High Court
M/S East Coast Constructions And ... vs M/S The Commissioner on 27 June, 2025
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CMP No. 482 of 2023
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 27TH DAY OF JUNE, 2025
BEFORE
THE HON'BLE MR JUSTICE ASHOK S.KINAGI
CIVIL MISC. PETITION NO. 482 OF 2023
BETWEEN:
M/S EAST COAST CONSTRUCTIONS AND
INDUSTRIES LIMITED
REGISTERED OFFICE AT BUKARIA BUILDINGS,
NO.4, MOORES ROAD,
CHENNAI-600006
REPRESENTED BY ITS
AUTHORIZED SIGNATORY MR. K.T.M AHAMED
MUSTAFA
...PETITIONER
(BY SRI. VIVEKANANDA S., ADVOCATE)
AND:
Digitally
signed by M/S THE COMMISSIONER
SUNITHA K S BRUHAT BENGALURU MAHANAGARA PALIKE,
Location: NR SQUARE,
HIGH COURT BENGALURU-560002.
OF ...RESPONDENT
KARNATAKA
(BY SRI. SATYANAND B S., ADVOCATE)
THIS CIVIL MISC. PETITION IS FILED UNDER SECTION
11(5) AND (6) OF THE ARBITRATION AND CONCILIATION ACT,
1996, PRAYING TO 1) TO APPOINT HON'BLE MR. JUSTICE N.
JAGANATHAN, RETIRED JUDGE, HIGH COURT OF KARNATAKA,
BENGALURU AS A SOLE ARBITRATOR TO ADJUDICATE THE
DISPUTE ARISING OUT OF THE AGREEMENT DATED
20.03.2006 (ANNEXURE A) AS PER ARTICLE 17.1.
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2) GRANT SUCH OTHER AND FURTHER RELIEF/S AS THIS
HON'BLE COURT DEEMS FIT TO PASS UNDER THE FACTS AND
CIRCUMSTANCES OF THE CASE, IN THE INTEREST OF JUSTICE
AND EQUITY.
THIS PETITION, COMING ON FOR ADMISSION, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE ASHOK S.KINAGI
ORAL ORDER
This Civil Miscellaneous Petition is filed under Section
11(6) of the Arbitration and Conciliation Act,1996 (for
short, the 'Act') seeking the appointment of a sole
arbitrator to resolve the dispute and difference between
the parties to the petition in terms of the Contract
agreement dated 20.03.2006 evidenced at Annexure-A.
2. After receipt of a notice, respondents have
tendered appearance through learned counsel.
3. The petitioner asserts that despite being
declared the successful bidder and entering into a formal
agreement with the respondent on 20.03.2006, the
respondent failed to hand over the project sites within the
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stipulated timeframe. This delay in site handover resulted
in significant setbacks in issuing the necessary drawings
and fulfilling further contractual obligations. As a
consequence of these delays, the respondent unilaterally
decided to foreclose the contract on 12.09.2013.
Aggrieved by this action, the petitioner filed W.P. No.
42088/2014 before this Hon'ble Court, challenging the
foreclosure order. While disposing of the said writ petition
on 30.05.2022, the Court, while refraining from granting
immediate relief, reserved liberty to the petitioner to
challenge the Government Order dated 12.09.2013, in the
event the respondents initiated any demand pursuant to
the said order.
4. Subsequently, on 05.09.2023, the petitioner
issued a notice under Section 21 of the Arbitration and
Conciliation Act, 1996, invoking the arbitration clause as
specified in Clause 17 of the agreement. The petitioner
reiterated that the primary cause of delay was attributable
to the respondents, particularly their failure to hand over
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the project site in a timely manner, which consequently
prevented the petitioner from commencing work as per
the contractual schedule. As per the terms of the
agreement, the project was to be completed within 18
months from the date of site handover, however, due to
the respondent's inaction, the stipulated period could not
be adhered to. The petitioner contends that despite having
executed work valued at over Rs.18 Crores, the abrupt
and unlawful termination of the contract deprived them of
rightful compensation and entitlements. Accordingly, the
petitioner asserts that they are entitled to a refund of the
earnest money deposit and additional security deposit,
amounting to a total sum of Rs.56,47,28,351/-.
5. In support of the claim, the petitioner's counsel
has relied upon various judicial precedents, which
substantiate their contention regarding arbitration and
contractual obligations. The cited judgments include:
a) Smt. Rukmanibai Gupta v. Collector,
Jabalpur & Ors., (1980) 4 SCC 556.
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b) Lachmanna B. Horamani v. State of
Karnataka & Ors., ILR 1998 KAR 2385.
c) Harbajan Sarabjeet & Associates v.
Maharashtra Krishna Valley Development
Corporation, 2010 SCC OnLine 1513.
d) Sarkar and Sarkar v. State of West
Bengal and Anr., 2006 SCC OnLine Cal 265.
e) Mohan Singh v. HP State Forest
Corporation, 1998 SCC OnLine HP 22.
f) Bhagwan Devi v. Chairman, Delhi
Agricultural Marketing Board, 2006 (90)
DRJ 86.
6. The petitioner particularly relies on the
judgment of the Hon'ble Supreme Court in Smt.
Rukmanibai Gupta v. Collector, Jabalpur & Ors
reported in (1980) 4 SCC 556 to assert that an
arbitration clause does not necessarily need to explicitly
mention the term "arbitration." If it is evident from the
agreement's terms that disputes were intended to be
decided through a quasi-judicial mechanism, such a
provision must be construed as an arbitration clause. The
petitioner contends that the agreement in question
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satisfies this requirement, thereby making Clause 17 an
arbitration clause by implication.
7. Further, relying on the judgment of the
Coordinate Bench in Lachmanna B. Horamani v. State
of Karnataka & Ors., reported in ILR 1998 KAR 2385
the petitioner emphasizes that even if a contract stipulates
that disputes shall be referred to a specific authority, such
a provision can be construed as an arbitration clause,
provided it establishes a dispute resolution mechanism
akin to arbitration.
8. The petitioner's counsel also places reliance on
the decision of the Punjab and Haryana High Court in
Mohan Singh v. HP State Forest Corporation, reported
in 1998 SCC OnLine HP 22 wherein it was held that for a
clause to be recognized as an arbitration clause, it is not
mandatory for it to contain the words "reference" or
"arbitration." The statute merely requires a written
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agreement to submit disputes to arbitration, which the
petitioner contends is satisfied in the present case.
9. Conversely, the respondent's counsel argues
that the agreement executed between the parties does not
include an arbitration clause. It is contended that Clause
17 of the agreement only requires the parties engage in
discussions to amicably resolve disputes. If such
discussions fail, the disputes must be referred to the
Commissioner, BMP, for adjudication. According to the
respondent, Clause 17 does not contain any provision
expressly referring disputes to arbitration and, therefore,
cannot be considered an arbitration clause. However, the
referral Court, under Section 11(6) of the Arbitration and
Conciliation Act, cannot examine or adjudicate these
contentions at this stage.
10. The respondent further counters the petitioner's
reliance on the judgment in Smt. Rukmanibai Gupta v.
Collector, Jabalpur & Ors. (supra), asserting that the
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said judgment is not applicable in the present case since
Clause 17 lacks the essential elements required to
constitute an arbitration agreement. Nevertheless, the
referral court under Section 11(6) of the Act is precluded
from delving into the merits of such arguments at this
stage.
11. The second primary contention raised by the
respondent is that the present application under Section
11(6) of the Arbitration and Conciliation Act is barred by
limitation. The respondent argues that since the contract
was foreclosed in 2013 and the petitioner filed a writ
petition in 2014, the present attempt to seek the
appointment of an arbitrator after a lapse of more than a
decade is untenable and legally unsustainable. However,
the referral Court under Section 11(6) of the Act is not
required to examine the question of limitation at this
stage, as it falls within the domain of the arbitral tribunal.
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12. Upon a careful reading of Clause 17 of the
agreement, it is evident that the clause explicitly provides
for a mechanism to resolve disputes between the parties.
Clause 17.1 states that if a dispute is not resolved
amicably, it shall be finally settled by the Commissioner of
BBMP. While the clause does not expressly use the terms
"reference" or "arbitration," the overall language and
intent of the clause indicate that it constitutes an
arbitration agreement within the meaning of Section 2 of
the Arbitration and Conciliation Act, 1996. This
interpretation aligns with the principles laid down by the
High Court of Jammu and Kashmir in Dewan Chand v.
State of Jammu and Kashmir, reported in AIR 1967
J&K 58 wherein it was held that an agreement can
amount to an arbitration agreement even if specific
terminologies are absent, as long as it provides a final and
binding resolution mechanism.
13. In light of the 2015 amendment to the
Arbitration and Conciliation Act, particularly Section 12(3)
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of the Act, read with Schedule 7, the Commissioner of
BBMP is legally disqualified from acting as an arbitrator.
Section 12(5) of the Act categorically states that a person
who is a manager, director, or part of the management or
who exercises similar control over one of the parties is
ineligible to act as an arbitrator. Since the Commissioner
of BBMP holds an administrative position and has
managerial control over BBMP, he is clearly incapacitated
from serving as an arbitrator under the agreement.
14. Recognizing this legal bar, the petitioner has
correctly invoked the arbitration clause by issuing a notice
under Section 21 of the Act and has sought recourse under
Section 11(6) for the appointment of an independent
arbitrator. Given the statutory prohibition against the
appointment of the Commissioner, the arbitration process
must proceed with an impartial adjudicator to ensure
compliance with the principles of fairness and neutrality as
enshrined in the Arbitration and Conciliation Act, 1996.
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15. After thoroughly examining the petition, its
annexures, and the supporting documents, this Court finds
that the petitioner has complied with the procedural
requirements prescribed under Section 11(5) of the Act for
invoking the arbitration clause. The Court is satisfied that
the dispute, as presented, warrants adjudication through
arbitration as provided for in the terms of the agreement.
16. In view of the foregoing discussions, this Court
deems it appropriate to consider the present petition for
the appointment of an arbitrator to resolve the disputes
between the parties.
17. In the light of the aforesaid clause of arbitration
and the contentions advanced by the petitioner and
respondent, this Court proceeds to pass the following:
ORDER
(i) This civil miscellaneous petition is allowed
appointing Sri. Mohan S. Sankolli, Retired
District Judge as the sole Arbitrator to enter
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reference of the disputes between the petitioner
and the respondents and conduct proceedings
at the Arbitration and Conciliation Centre
(Domestic and International), Bengaluru,
according to the Rules governing the said
Arbitration Centre;
(ii) All contentions inter se parties are kept open
for adjudication in the arbitration proceedings;
(iii) The Office is directed to communicate this order
to the Arbitration and Conciliation Centre and
Sri. Mohan S. Sankolli, Retired District Judge as
required under the Arbitration and Conciliation
Centre Rules, 2012.
(iv) All contentions raised by the respondent in the
R.P.159/2025 can be raised before the Arbitral
Tribunal.
(v) All the contentions raised by the respondent in
R.P.No.159/2025 can be raised before the
Arbitral Tribunal.
Sd/-
(ASHOK S.KINAGI)
JUDGE
BVK
