IMPORTANT POINT
Any objection with respect to existence or validity of arbitration agreement, can be raised only by way of an application under Section 16 of Arbitration and Conciliation Act, 1996 and Civil Court cannot have jurisdiction to go into such question.

JUDGMENT

R. Subhash Reddy, J.

1. Leave granted.

2. This civil appeal is filed by the first defendant/National Aluminum Company Limited (NALCO), a Government of India Enterprise, in pending Civil Suit No. 2610 of 2015, on the file of Learned Senior Civil Judge, Gurgaon, Haryana, aggrieved by the order dated 22.10.2016, passed in Civil Revision No.2471 of 2016 (O&M) by the High Court of Punjab & Haryana at Chandigarh.

3. The appellant-Company, a Government of India enterprise, has issued a tender notice on 05.05.2011, inviting tenders for construction of Ash Pond-IV in District Angul of Odisha State. The first respondent herein i.e Subhash Infra Engineers Pvt. Ltd. (for short ‘SIE’) has submitted its offer/tender on 06.06.2011. On 09.11.2011, the appellant herein has accepted the offer/tender submitted by the first respondent herein and issued the work order to the said respondent. By a letter dated 18.11.2011, the appellant addressed the first respondent to attend a kick off meeting on 19.11.2011. As no one on behalf of first respondent attended the meeting proposed on 19.11.2011, the appellant again issued a letter dated 21.11.2011, requesting the first respondent once again to come for a kick off meeting. In response to the letter dated 21.11.2011, the first respondent/SIE herein vide letter dated 21.11.2011, expressed his inability to execute the work, unless certain specifications are changed/revised. In the said letter dated 21.11.2011, the first respondent/SIE herein has agreed that the appellant- Company has accepted the offer made by it. Further, vide letter dated 02.12.2011, the respondent/SIE informed the appellant that the work order is not acceptable to them.

4. Subsequently, when the first respondent herein was not coming forward to participate in the kick off meeting and instead addressed a letter dated 02.12.2011, vide letter dated 30.01.2012, the appellant-company informed the respondent/SIE that the contract work will be carried out, through some other agency, at the risk and cost of the respondent/SIE. Further by letter dated 06.02.2015, the appellant-company has informed the first respondent/SIE that it suffered a financial loss of Rs.4,86,61,440/-(Rupees Four Crore Eighty-Six Lakh Sixty-One Thousand Four Hundred and Forty Only). The respondent/SIE was directed to deposit the said amount otherwise the appellant will be forced to invoke Arbitration Clause as per Clause 22 of NIT and Clause 87 of the General Conditions of Contract. Then, the first respondent/SIE has disputed the claim made by the appellant, on the ground that there is no binding contract, that came into existence between the parties, as such, the demand is illegal and unjustified. A letter dated 28.02.2015 was communicated to that effect, to the appellant.

5. Further, when the appellant-company asked the respondent/SIE to select an arbitrator from a panel of three names sent by it, the respondent/SIE, vide letter dated 23.07.2015, informed the appellant that, as much as, there is no binding contract that came into existence between the parties, the disputes cannot be resolved by the arbitrator.

6. The appellant herein, having regard to terms and conditions of contract, invoked the arbitration clause, by proceeding dated 02.09.2015 and appointed the second respondent Shri C.R. Pradhan, who was the Former Chairman(CMD) of the Company, as an arbitrator. The learned arbitrator initiated the proceeding by issuing notice dated 07.09.2015, asking the appellant, as well as the first respondent to attend the preliminary meeting on 09.10.2015 at Bhubaneswar.

7. On receipt of such notice issued by the arbitrator, the first respondent herein approached the Civil Court and filed Civil Suit No.2610 of 2015 on the file of Senior Civil Judge, Gurgaon, seeking relief of declaration that the appointment of second respondent, as a sole arbitrator, is null and void. Further, relief of permanent injunction was also sought restraining the arbitrator, from proceeding with