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IN THE HIGH COURT OF DELHI AT NEW DELHI
SACHIN DATTA, J.
Subhash Infraengineers Pvt. Ltd. - Petitioner
Versus
NTPC Ltd. - Respondent
ARB.P. No.1295 Of 2022
Decided On : 17-04-2023
Arbitration & Conciliation Act, 1996 - Appointment of Sole Arbitrator - Disputes arising out of a Contract - Appointment of Sole Arbitrator under Section 11 of the Act - Appointment of Sole Arbitrator by the Court - Unilateral appointment of conciliators by one party - Refusal to participate in conciliation proceedings - Invocation of arbitration by the petitioner - Respondent's objection to the appointment of arbitrator - Appointment of Sole Arbitrator by the Court
Fact of the Case:
The petitioner sought appointment of a sole arbitrator to adjudicate the disputes arising out of a Contract. The disputes arose in the context of a Letter of Award for works relating to a thermal power project. The petitioner invoked conciliation proceedings, but refused to participate due to unilateral appointment of conciliators by the respondent. Subsequently, the petitioner invoked arbitration, which was objected to by the respondent on the grounds of non-compliance with pre-arbitral steps as per the contract.
Finding of the Court:
The Court found no merit in the respondent's objections and appointed an independent sole arbitrator to adjudicate the disputes between the parties. The Court held that the respondent's proposed appointment procedure for the arbitrator was not in line with the contractual stipulation and the law laid down by the Supreme Court. The Court also noted that the petitioner had taken recourse to conciliation as per the contract, but was within its rights to refuse participation due to unilateral appointment of conciliators by the respondent.
Issues: The issues involved the refusal of the petitioner to participate in conciliation proceedings due to unilateral appointment of conciliators by the respondent, and the respondent's objection to the appointment of an arbitrator by the Court based on non-compliance with pre-arbitral steps as per the contract.
Ratio Decidendi: The Court held that the appointment of an independent sole arbitrator was necessary, and the respondent's proposed appointment procedure for the arbitrator was not in line with the contractual stipulation and the law laid down by the Supreme Court. The Court also noted that the petitioner had taken recourse to conciliation as per the contract, but was within its rights to refuse participation due to unilateral appointment of conciliators by the respondent.
Final Decision: The Court appointed an independent sole arbitrator to adjudicate the disputes between the parties, and directed the parties to proceed with the arbitration proceedings as per the appointment of the arbitrator by the Court.
JUDGMENT :
(Sachin Datta, J.) :—
1. The present petition filed under Section 11 of the Arbitration & Conciliation Act, 1996, [“the Act”] seeks appointment of a sole arbitrator to adjudicate the disputes between the parties.
2. The disputes between the parties have arisen in the context of a Letter of Award in the form of Purchase Order dated 17.10.2019 for works relating to “Starter Ash Dyke package For Barauni Thermal Power Project (2 × 250MW)”.
3. The said Letter of Award was followed by a Contract Agreement dated 31.10.2019. Various disputes are stated to have arisen between the parties in the context of the said contract including, inter alia, on account of the alleged non-handing over of the work fronts and reimbursement of recurring overhead expenses stated to have been incurred by the petitioner.
4. Admittedly, the applicable General Conditions of Contract, [“GCC”] include an arbitration clause which is in the following terms:—
7.1 Mutual Consultation
If any dispute of any kind whatsoever shall arise between the Employer and the Contractor in connection with or arising out of the Contract, including without prejudice to the generality of the foregoing, any question regarding its existence, validity or termination, or the execution of the Works, whether during the progress of the works or after their completion and whether before or after the termination, abandonment or breach of the Contract, the parties shall seek to resolve any such dispute or difference by mutual consultation. If the parties fail to resolve such a dispute or difference by mutual consultation, then the dispute may be settled through Expert Settlement Council/Arbitration/other remedies available under the applicable laws.
7.2 Resolution of Dispute through Expert Settlement Council
If the parties fail to resolve such a dispute or difference by mutual consultation, the dispute if the parties agree, may be referred to Conciliation in cases involving disputed amount up to Rs. 250 crores, which is to be arrived at considering the claim and counter claim of the parties to the dispute.
7.2.1 Invitation for Conciliation:
7.2.1.1 A party shall notify the other party in writing about such a dispute it wishes to refer for conciliation within a period of 30 days from the date of raising of the dispute in case of failure to resolve the sake through mutual consultation. Such invitation for Conciliation shall contain sufficient information as to the disputes to enable the other party to be fully informed as to the nature of the dispute, amount of the monetary claim, if any, and apparent cause of action.
7.2.1.2 Upon acceptance of the invitation to conciliate, the other party shall submit its counter claim, if any, within a period of 30 days from the date of the invitation to conciliate. If the other party rejects the invitation or disputed amount exceeds Rs. 250 crores, there will be no Conciliation proceedings. There shall be no Conciliation where claim amount is only up-to Rs. 5 Lakhs.
7.2.1.3 If the party initiating Conciliation does not receive a reply within thirty days from the date on which it sends the invitation, or within such other period of time as specified in the invitation, it shall treat this as rejection of the invitation to conciliate from the other party.
7.2.2 Conciliation:
7.2.2.1 Where invitation for Conciliation has been furnished under GCC sub clause 7.2.1, the parties shal attempt to settle such dispute through Expert Settlement Council (ESC) which shall be constituted by CMD, NTPC.
7.2.2.2. ESC will be formed from experts comprising of three members from the panel of conciliators maintained by NTPC. However, there will be single member ESC for disputes involving claim and counter claim (if any) up-to Rs. 1 crore. CMD will have authority to reconstitute an ESC to fill any vacancy.
7.2.2.3 The eligible persons for consideration for e
The main legal point established in the judgment is that the appointment of an independent sole arbitrator is necessary, and the refusal of the petitioner to participate in conciliation proceedings d....
The conciliation process under the Arbitration Agreement was not mandatory, and the petitioner's attempts at mutual consultation satisfied the requirements of the contract.
The Conciliation process mentioned in the Contract was not mandatory and could not affect the petitioner's right to invoke the Arbitration Agreement, especially when there was justified urgency to pr....
The conciliation process in the contract agreement was not mandatory, and non-compliance did not bar the petitioner from invoking arbitration.
The court affirmed that the inquiry under Section 11(6) of the Arbitration Act is restricted to the existence of an arbitration agreement, allowing disputes to proceed to arbitration without mandator....
The main legal point established is that the arbitration application was not premature, and a case was made for the appointment of an arbitrator to decide the disputes between the parties.
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