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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, J.
M/s. Technocrats Advisory Services Private Limited - Appellant
Versus
Ministry Of Road Transport & Highways - Respondent
Arb P No. 815 of 2019
Decided On : 19-02-2021
Arbitration - Appointment of Sole Arbitrator - Arbitration and Conciliation Act, 1996 - Indian Road Congress (IRC) - Clause 4.5 of the Special Conditions of the Contract (SCC)
Fact of the Case:
TASPL filed a petition under the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator to adjudicate the claims against MoRTH. Disputes arose between the parties regarding a consultancy agreement, and TASPL invoked the Arbitration Clause. IRC failed to appoint an arbitrator prior to TASPL filing the petition.
Finding of the Court:
The court found that IRC's failure to appoint an arbitrator prior to TASPL approaching the court resulted in the forfeiture of its right to do so. The court also held that the clause stating that no person other than the one appointed by IRC could act as an arbitrator was in violation of the A&C Act. The court appointed an arbitrator from the panel of IRC to adjudicate the disputes.
Issues: Dispute over the appointment of a sole arbitrator, interpretation of the Arbitration Clause, and the jurisdiction of the court to appoint an arbitrator.
Ratio Decidendi: IRC's failure to appoint an arbitrator prior to the party approaching the court under Section 11(6) of the A&C Act results in the forfeiture of its right to appoint an arbitrator. Clauses restricting the appointment of an arbitrator to a specific person nominated by a party are in violation of the A&C Act and cannot control the operation of the Arbitration Agreement.
Final Decision: Mr M.S. Sodhi, ADG (Retd.) BRO, was appointed as the Sole Arbitrator to adjudicate the disputes between the parties falling within the scope of the Arbitration Clause.
JUDGMENT
Vibhu Bakhru, J. - Technocrats Advisory Services Private Limited (hereafter "TASPL"),a private company incorporated under the Companies Act, 2013, has filed the present petition under the Arbitration and Conciliation Act, 1996 (hereafter the "A&C Act"), inter alia, praying as under:
"(a) a sole arbitrator may kindly be appointed by this Hon'ble Court to adjudicate the claims of the Petitioner against the Respondent from among the names on the panel of the Indian Road Congress (as annexed herewith);
(b) award the costs of this Petition in favor of the Petitioner and against the Respondent;"
2. On 28.10.2015, the respondent (hereafter "MoRTH") had entered into an Agreement for consultancy services (hereafter "the Agreement") with MC Consulting Engineers Private Limited, in association with Sugam Technocrats Private Limited (hereafter "the Original Consultant"). The said consultancy agreement was with regard to collection and analysis of Highways for a period of three years.
3. The Original Consultant demerged its consultancy business in the field of Road / Highways and Bridges in terms of a Scheme of Arrangement cum Demerger, which was approved by the High Court of Telangana and Andhra Pradesh as well as by this Court. In terms of the said Scheme, the specified consultancy business including the business conducted under the Agreement dated 28.10.2015 between the Original Consultant and MoRTH stood vested with TASPL. Thereafter, TASPL and MoRTH entered into a Substitution Agreement dated 10.02.2017, whereby MORTH transferred and conveyed on, "as is where is and continuing basis" all rights and liabilities under the Agreement dated 28.10.2015 to TASPL. In terms of the said Substitution Agreement, TASPL assumed and undertook all rights and liabilities of the Original Consultant arising out of or in terms of the Agreement and, for all intents and purposes, TASPL was substituted as a party in place of the Original Consultant, in the Agreement dated 28.10.2015, between the Original Consultant and MoRTH.
4. The Special Conditions of the Contract (SCC) between the parties includes an Arbitration Clause that reads as under:
"4.5 ARBITRATION
(a) In the event of any question, dispute or difference arising under general conditions or special conditions of contract, or in connection with this contract (except as to any matters the decision of which is specially provided for by the general or the special conditions), the same shall be referred to the sole arbitrator, appointed by the Indian Road Congress (IRC). The arbitrator will be a retired Government Servant of Chief Engineer Level. The "Award" of the arbitrator shall be final and binding on the parties to this contract.
(b) In the event of the Arbitrator's dying, neglecting or refusing to act or resign or being unable to act for any reason, or his Award being set aside by the Court for any reason, it shall be lawful for the IRC to appoint another arbitrator in place of the outgoing arbitrator in the manner aforesaid.
(c) It is further a term of this contract that no person, other than the person appointed by the IRC as aforesaid, should act as arbitrator and that, if for any reason that is not possible, the matter is not to be referred to Arbitration at all.
(d) The arbitrator may, from time to time with the consent of all the parties to the contract, extend the time for making the Award.
(e) Upon every and any such reference, the assessment of the costs incidental to the reference and Award, respectively, shall be at the discretion of the arbitrator.
(f) Subject as aforesaid, the Arbitration Act, 1996 as amended and the rules there under and any statutory modification thereof for the time being in force shall be deemed to apply to the Arbitration proceedings under this clause.
(g) If the value of the claim in a reference exceeds Rs. 1 lakh, the arbitrator shall give reasoned Award.
(h) The venue of arbitration shall be the place from which formal Acceptance of Tender is issued or such other
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