High Court Intervenes to Break Deadlock in Transport Lease Dispute

The High Court of Delhi has stepped in to facilitate the resolution of a commercial conflict between M/S SMAS Auto Leasing India Private Limited and M/S PNM Transport and Mobility Private Limited. In a recent order, Hon'ble Mr. Justice Amit Bansal invoked the powers vested under the Arbitration and Conciliation Act, 1996, to appoint a sole arbitrator to resolve the outstanding disputes between the parties.

The Genesis of the Dispute

The conflict stems from a Master Lease Agreement signed on October 23, 2019. As often seen in complex commercial contracts, the agreement featured a multi-tiered dispute resolution mechanism under Clause 25.1. This clause mandated that parties first attempt an amicable settlement through a "Consultation Period," followed by formal conciliation before proceeding to arbitration.

The deadlock arose when, following a dispute, the petitioner—M/S SMAS Auto Leasing India—formally invoked the arbitration clause on July 30, 2024. Despite the petitioner’s efforts to nominate a sole arbitrator, the respondent, M/S PNM Transport and Mobility, categorically rejected the proposal in their response dated August 26, 2024, leaving the petitioner with no alternative but to approach the High Court.

Arguments Captured in Court

While the petitioner sought judicial intervention under Section 11(6) of the Act to break the impasse, the respondent failed to appear before the court despite being duly served via email. Consequently, the court proceeded to assess the plea based on the materials provided by the petitioner, verifying that the prerequisites for arbitration—failed consultation and failed conciliation—had been met.

Key Observations

Highlighting the standard procedure for such appointments, the court noted:

> "The present petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (‘Act’) seeking appointment of the Sole Arbitrator for adjudication of disputes between the parties arising out of Master Lease Agreement dated 23rd October, 2019 (‘Lease Agreement’)."

The court emphasized that its order was strictly procedural, ensuring the dispute moves toward a merit-based resolution:

> "It is made clear that all the rights and contentions of the parties, including the arbitrability of any of the claims and/ or counter claims, any other preliminary objections as well as claims on merits of the dispute of either of the parties, are left open for adjudication by the Arbitrator."

The Path Forward

In its decision, the High Court appointed Ms. Prachi Vashisht as the Sole Arbitrator to oversee the proceedings. The court mandated the following:

• Declaration : The arbitrator must furnish a declaration under Section 12 of the Act prior to entering the reference.
• Remuneration : Fees for the proceedings will be governed by the Fourth Schedule of the Act.
• Timeline : The parties are directed to approach the appointed arbitrator within two weeks.

By issuing this order, the Court has ensured that the "pendency" of the disagreement does not stall the business operations of the entities, leaving the final adjudication of the substantive merits to the chosen arbitrator. This ruling serves as a standard reminder of the judiciary's role in supporting private dispute resolution frameworks meant to streamline commercial justice.