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IN THE HIGH COURT OF DELHI AT NEW DELHI
Sanjeev Narula, J.
M/s Oriental Structural Engineers Pvt Ltd - Appellant
Versus
M/s Seven Hills Project Private Limited - Respondent
Arb.P. No. 644 of 2020, 658 of 2020
Decided On : 15-03-2021
Arbitration - Appointment of Sole Arbitrator - Arbitration and Conciliation Act, 1996 - Work Order No. OSE/NSBP/SC-W0/2015-16111, OSE/C/NBP-F/SC-W0/007 - Clauses 8.09, 10.09 - Settlement of Disputes clause - IBC - Unilateral right to appoint arbitrator - Disputed settlement clause - Invocation of arbitration clause - Appointment of Hon'ble Mr. Justice Brijesh Sethi (Retd.) as Sole Arbitrator
Fact of the Case:
The Petitioner seeks appointment of a Sole Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, due to disputes arising from Work Orders and a demand notice under the Insolvency and Bankruptcy Code, 2016.
Finding of the Court:
The Court found that the disputes between the parties require adjudication through arbitration, as agreed upon in the Settlement of Disputes clause. The Court allowed the petition and appointed Hon'ble Mr. Justice Brijesh Sethi (Retd.) as the common Sole Arbitrator.
Issues: Dispute over work orders, demand notice under IBC, invocation of arbitration clause, and appointment of arbitrator.
Ratio Decidendi: Existence of an arbitrable dispute, invocation of arbitration clause, and appointment of arbitrator as per the extant law.
Final Decision: The petition is allowed, and Hon'ble Mr. Justice Brijesh Sethi (Retd.) is appointed as the common Sole Arbitrator to adjudicate the disputes under the Work Orders. The parties are directed to appear before the arbitrator, subject to necessary disclosures and fee payment.
JUDGMENT
Sanjeev Narula, J. - The present petitions under Section 11(6) of the Arbitration and Conciliation Act, 1996, seek appointment of a Sole Arbitrator.
PETITIONER'S CONTENTIONS
2. The case of the Petitioner is that the Respondent has been working as a sub-contractor in respect of the following Work Orders
A. Work Order No. OSE/NSBP/SC-W0/2015-16111 dated 23rd July, 2015 towards special repair works towards Nagpur Betul Road project. (Giving rise to ARB.P. 644/2020).
B. Work Order No. OSE/C/NBP-F/SC-W0/007 dated 19th September, 2015 towards embankment and subgrade construction for Nagpur Bypass road project. (Giving rise to ARB.P. 658/2020).
3. It was agreed between the parties that the bills raised under the Work Orders shall be verified and certified at the time of completion of Works and submission of the Final Bill, for which, the Respondent had to submit measurements and necessary records. According to the Petitioner, the Respondent has failed to perform its obligations under the afore-noted Work Orders. It had to submit the royalty challans as contemplated under Clauses 8.09 (Taxes, Duties, Royalty etc.) and 10.09 of the Work Order for finalization of the Final Bill. In absence of the requisite documents, the Petitioner was left with no option but to prepare and reconcile the accounts on the basis of the records at site. The said accounts cannot be considered to be final, because the royalty challans and other government dues that were to be furnished by the Respondent, have not been accounted for. In a nutshell, according to the Petitioner, the Respondent has: (a) made false representations to the Petitioner; (b) has not submitted true and correct statement of accounts and reports; (c) is in receipt of an excess amount to the tune of Rs. 71,27,414/- over and above the certified payments under the Work Order dated 19th September, 2015, for which ARB. P 658/2020 has been filed; and moreover, (d) the Respondent has made a fraudulent claim of Rs. 25,44,86,464/- under various Work Orders. The Petitioner further contends that the Respondent, with the intention to force the Petitioner to accede to its unlawful demands, issued a demand notice dated 23rd September, 2019 under Section 8 of the Insolvency and Bankruptcy Code, 2016 [hereinafter referred to as 'the IBC'].
4. In this background, the Petitioner, vide letter dated 8th January, 2020, invoked the Settlement of Disputes clause as envisaged under Clause 9.04 of Work Order. The said clause also contains the Arbitration Agreement between the parties, which reads as under:
"Settlement of Disputes: Any Dispute arising out of this Sub Contract shall be settled amicably through the Project head of OSEPL within the terms of this Sub Contract. In case of failure to settle amicably within 30 days of a request to this effect from either party to other, the Dispute shall be finally resolved in accordance with the Arbitration & Conciliation Act 1996 by sole arbitrator to be nominated (including nomination of replacement Arbitrator, if necessitated by vacancy of the post caused by any reason whatsoever) by the Managing Director of OSEPL, New Delhi. The Managing Director of OSEPL shall nominate the Arbitrator within 30 days of receiving a request to this effect from either party. In case no such nomination is made by the Managing Director within the stipulated time period of 30 days, then the Director (Technical) of OSEPL, New Delhi shall act as the Arbitrator for adjudicating the Dispute. The venue of arbitration shall be New Delhi."
5. Since disputes have arisen between the parties, the same are required to be adjudicated in terms of the Arbitration Agreement. The arbitration clause is in conflict with the judgment of the Supreme Court Perkins Eastman Architects DPC and Ors. v. HSCC (India) Ltd., (2020) AIR SC 59.
, as it gives a unilateral right to the Managing Director of the Petitioner to make an appointment. In these circumstances, the present petition has been filed before this Co
The court ruled that the existence of a bona fide dispute necessitates arbitration, and a unilateral appointment mechanism for an arbitrator violated established legal standards.
. In the absence of any demand with specific reference to the work order, it is not possible to determine what is the disputed amount with regard to the work order
The main legal point established is that the fulfillment of agreed procedures, such as conciliation as a condition precedent, is necessary before invoking the arbitration clause. The Court emphasized....
The main legal point established is that a party to a contract cannot absolve its liabilities and must comply with dispute resolution clauses, and claims must be within the period of limitation.
Unilateral appointment of an arbitrator is impermissible; parties must appoint an arbitrator jointly or seek court appointment to ensure unbiased dispute resolution.
The court's decision emphasized the appointment of a sole Arbitrator to adjudicate disputes under the Arbitration and Conciliation Act, 1996.
Court under Section 11(6) appoints arbitrator upon undisputed invocation of arbitration clause in contract, permitting respondents to raise limitation and merits objections before tribunal.
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