IMPORTANT POINT
The court established that an arbitration clause that restricts a party's access to justice and imposes unilateral conditions is violative of constitutional rights and thus unenforceable.

JUDGMENT :

Sabyasachi Bhattacharyya, J.

1. Both the applications under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as, “the 1996 Act”) arise from arbitration clauses embodied in two similar contracts between the parties. The issues involved being the same, the matters are taken up together for hearing.

2. Both the agreements are works contracts issued to the petitioner by the respondent Bridge and Roof Company (India) Limited (in short, “the B&R”). The principal contract was executed between Indian Oil Corporation of India Limited (IOCL) and the respondent in respect of work regarding mechanical equipments, erection and pending works by VGO-DHT Units of Paradwip Refinery Project of M/s. IOCLO, Paradwip, Orissa. The work was sub-contracted to the petitioner. Disputes and differences having arisen between the petitioner and the respondent, the present applications have been filed.

3. The relevant clause in both the works contracts is Clause 14.0.

4. Learned senior counsel for the petitioner argues that the said Clause provides for resolution of disputes between the petitioner/sub-contractor and B&R. However, in case of the petitioner desires to refer the matter to arbitration, it has to approach B&R with such request substantiating its claim and only if B&R feels justified to initiate an arbitration, it will invoke the arbitration clause with M/s. IOCL. The decision of the Arbitrator will be final and binding on the petitioner/sub-contractor. The sub-contractor has to bear pro rata cost of the arbitration expenses in respect of its portion of the claim.

5. Learned senior counsel highlights the inherent lopsidedness of the clause. Even if the petitioner seeks to raise a dispute by invoking the Arbitration clause, it has to approach B&R, despite the dispute being against B&R itself. In such case, the petitioner has to depend on the decision of B&R to invoke the arbitration clause. Even then, the petitioner cannot itself participate independently in the arbitral proceedings but, on the other hand, would be bound by the award passed by the Arbitrator.

6. The other injustice implicit in the clause is that the petitioner is to bear its portion of expenses regarding its claim, without having any participation in the arbitral process.

7. It is argued that the said conditions of the arbitration clause are unreasonable and violative of Article 14 of the Constitution of India and ought to be set aside. It is argued that such question can be entered into by the Court while taking up an application under Section 11 of the 1996 Act and such challenge need not be restricted to applications under Article 226 of the Constitution. In support of such contention, learned senior counsel cites Lombardi Engineering Ltd. v. Uttarakhand Jal Vidyut Nigam Ltd., reported at 2023 SCC OnLine SC 1422.

8. It is further argued that since the expression of intention to refer the disputes to arbitration finds place in the clause, the portion of the said clause which is violative of Article 14 of the Constitution ought to be struck down and the petitioner ought to be permitted to independently refer the matter to arbitration in disputes between the petitioner and the B&R.

9. For such proposition, the petitioner relies on Jagdish Chander v. Ramesh Chander, reported at (2007) 5 SCC 719, which lays down the well-settled principle of law that if arbitration is expressly or impliedly provided, the matter ought to be referred to arbitration.

10. Learned senior counsel appearing for the petitioner further argues that even if the petitioner consented to the arbitration clause, there can no waiver of fundamental rights embodied in Article 14.

11. The arbitration agreement, it is argued, does not comply with and falls fowl of Section 7 of the 1996 Act as well as the Constitution of India and militates against the concept of party autonomy, which is inherent in arbitration.

12. The court, it is contended, has jurisdiction to sever the unconscionable