Back
IN THE HIGH COURT OF DELHI AT NEW DELHI
Sachin Datta, J.
Rani Constructions Pvt. Ltd. - Appellant
Versus
Union Of India - Respondent
ARB.P. 1011 of 2023
Decided On : 22-03-2024
Arbitration - EPC Agreement - Arbitration and Conciliation Act, 1996, Section 11
Fact of the Case:
The petitioner sought constitution of an arbitral tribunal to adjudicate disputes arising from an EPC agreement for a road project. The disputes included non-payment, land encumbrances, liquidated damages, and work prolongation.
Finding of the Court:
The court found that the arbitration mechanism prescribed in the EPC Agreement was unworkable due to the requirement of primary membership of SAROD, a pre-condition for invoking arbitration under SAROD Rules. The court held that such a requirement impinged on the validity of the appointment procedure and invoked Section 11(6)(c) of the A&C Act, 1996 to appoint a sole arbitrator.
Issues: The issues involved the unworkability of the arbitration mechanism due to the SAROD membership requirement and the validity of such a requirement in light of the arbitration agreement.
Ratio Decidendi: The court held that an arbitration agreement does not subsume an additional obligation to become a member of the arbitral institution. It invoked Section 11(6)(c) of the A&C Act, 1996 to appoint a sole arbitrator when the prescribed arbitration mechanism was unworkable.
Final Decision: The court appointed a sole arbitrator to adjudicate the disputes between the parties, allowing the respondent to raise preliminary objections as regards jurisdiction/arbitrability, and directing the arbitrator to fix fees, share costs equally, and decide on claims/counter-claims.
JUDGMENT
1. The present petition under Section 11 of the Arbitration and Conciliation Act, 1996 ('A&C Act, 1996') seeks constitution of an arbitral tribunal to adjudicate the disputes between the parties.
2. The disputes between the parties have arisen in the context of an EPC agreement dated 16.11.2017 executed between the parties in respect of the work of "Rehabilitation and Upgradation to 2-Lane with Paved Shoulder Configuration from existing Km. 122.00 (Dharasu Bend) to Km. 147.230 (Silkyara Bend) (Design Chainage 0.00 to 24.30) of NH-94 in the State of Uttarakhand".
3. The bids were invited for the said project on behalf of the Ministry of Road Transport and Highway (MORT&H) on 31.03.2017. After valuation of the bids, the authority accepted the bid of the petitioner and issued a letter of acceptance dated 07.09.2017 awarding the contract to the petitioner at a contract price of Rs.149.67 Crores. Subsequent thereto, the aforesaid EPC Agreement was executed between the parties.
4. The disputes between the parties have arisen on various counts, interalia, the alleged failure on the part of the respondent to pay the legitimate dues of the petitioner against the executed quantities of work, alleged inability of the respondent in making available 90% of the land free from encumbrances at the time of declaration of the appointed date, the deduction of substantial amount from the bills of the petitioner towards liquidated damages, alleged losses sustained by the petitioner on account of prolongation of the work etc.
5. The EPC Agreement between the parties contains a dispute resolution/arbitration clause in the following terms:
"26.1 Dispute Resolution
26.1. 1 Any dispute, difference or controversy of whatever nature howsoever arising under or out of or in relation to this Agreement (including its interpretation) between the Parties, and so notified in writing by either Party to the other Party ("the Dispute'') shall, in the first instance, be attempted to be resolved amicably in accordance with the conciliation procedure set forth in Clause 26.2.
The Parties agree to use their best efforts for resolving all Disputes arising under or in respect of this Agreement promptly, equitably and in good faith and further agree to provide each other with reasonable access during normal business hours to all non-privileged records, information and data pertaining to any Dispute.
26.2 Conciliation
In the event of any Dispute between the Parties, either Party may call upon the Authority's Engineer, or such other person as the Parties may mutually agree upon (the "Conciliator'') to mediate and assist the Parties in arriving at an amicable settlement thereof Failing mediation by the Conciliator or without the intervention of the Conciliator, either party may require such Dispute to be referred to the Chairman of the Authority and the Chairman of the Board of Directors of the Contractor for amicable settlement and upon such reference, the said persons shall meet no later than 7 (seven) business days from the date of reference to discuss and attempt to amicably resolve the Dispute. If such meeting does not take place within the 7 (seven) business days period or the Dispute is not amicably settled within 15 (fifteen) days of signing of written terms of settlement within 30 (thirty) days of the notice in writing referred to in Clause 26.1.1 or such longer period as may be mutually agreed by the Parties, either Party may refer the Dispute to arbitration in accordance with the provisions of Clause 26.3.
26.3 Arbitration
(i) Any Dispute, which is not resolved amicably by conciliation as provided in Clause 26.2, shall be finally settled by arbitration in accordance with the rules of arbitration of the SOCIETY FOR AFFORDABLE REDRESSAL OF DISPUTES (SAROD)
(ii) Deleted
(iii) The arbitrators shall make a reasoned award (the "Award"). Any Award made in any arbitration held pursuant to this Article 26 shall be final and binding on the Parties as from the date it is made, a
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....
Under Section 11(6) of the Act seeking appointment of sole Arbitrator are not maintainable and are hereby dismissed, while directing the parties to nominate one Arbitrator each from the panel of SARO....
Arbitration - Appointment of Arbitrator - Court is not required to examine any other contentious issues regarding the disputes between the parties at the stage of referring the parties to arbitration....
Parties must adhere to arbitration agreements, and judicial intervention is permitted only if arbitration procedures are exhausted; allegations of bias against SAROD were not substantiated.
The pre-arbitration procedures under the arbitration clause are not always mandatory, and the court may refer disputes to arbitration if the requisites of arbitrability and notice under the Arbitrati....
An arbitration agreement remains valid and enforceable despite procedural limitations on arbitrator appointment, ensuring disputes are addressed effectively.
The main legal point established in the judgment is that the petitioner's failure to exhaust the mandatory dispute resolution procedure as per the contract rendered the petition premature and non-mai....
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
