IN THE HIGH COURT OF DELHI AT NEW DELHI
Neena Bansal Krishna, J.
Millennium Automation Private Limited - Appellant
Versus
Hfcl Limited (Fonnally Himachal Futuristic Communications Ltd.) - Respondent
Arb.P. 1342 of 2023
Decided On : 13-03-2024
Arbitration - Appointment of Arbitrator - Arbitration & Conciliation Act, 1996, Section 11(6)
Fact of the Case:
The petitioner sought appointment of an arbitrator under Section 11(6) of the Arbitration & Conciliation Act, 1996 due to disputes arising from sub-contracts for procurement, supply, installation, testing, and maintenance of GIS based Optical Fibre Cable Network Management Systems.
Finding of the Court:
The court found that the disputes under the sub-contracts were arbitrable and that the appointment of a sole arbitrator was necessary to adjudicate the disputes.
Issues: The issues included the validity of the arbitration clause, the specificity of the disputes, and the objection of time-barred claims.
Ratio Decidendi: The court held that the disputes were arbitrable, the issue of limitation should be left for the arbitrator, and the notice of invocation of arbitration complied with the prerequisite conditions.
Final Decision: The court appointed Hon'ble Mr. Justice Ajit Bharihoke (Retired) as the Sole Arbitrator to adjudicate the disputes between the parties, with liberty to register three separate arbitrations for the three sub-contracts.
JUDGMENT (Oral)
NEENA BANSAL KRISHNA, J.
1. A petition under Section 11(6) of the Arbitration & Conciliation Act, 1996 has been filed on behalf of the petitioner.
2. It is submitted that in the year 2018, Bharat Sanchar Nigam Limited (BSNL) vide Purchase/Work Orders under GOFNMS Tract-I Project under Tender Ref. BSNL PO NO.CT/PO/14/2018 dated 19.07.2018 awarded a composite Work Order to respondent for procurement, supply, installation, testing and maintenance of GIS based Optical Fibre Cable Network Management Systems (GOFNMS), to be used by Defence Forces.
3. The respondent sub-contracted the three sub-projects namely: (i) Precision Air Conditioner' (PAC-Project), (ii) `Electrical Integration Work at Communication Nodes' (Electrical-Project) and (iii) `Uninterruptible Power Supply Project' (UPS-Project) to the petitioner vide separate composite Work Order/ Purchase Orders for each of the said three subprojects. The petitioner successfully and timely completed all the awarded works under the three sub-projects.
4. The respondent paid and released part of the invoiced amount for each of the sub-project and unjustifiably withheld the remaining part of the payable amount for each sub-project illegally and arbitrarily. Cumulatively, a total sum of Rs.2,58,52,855/-has been withheld under the three subprojects by the respondent arbitrarily on which interest @ 18% per annum w.e.f. 31.03.2020 amounting to Rs.1,66,88,903/-up to 31.10.2023 is payable.
5. The petitioner served a Demand Notice dated 20.05.2023 claiming a total sum of Rs.3,68,52,217/-along with interest. The respondent vide its reply dated 09.06.2023 refuted the entire payment of the petitioner for the demanded amount.
6. The petitioner thus, issued an Invocation Notice dated 08.06.2023 for referring the disputes to Arbitration in the light of Arbitration clause in all the three sub-contracts and suggested three names for appointment of the Arbitrator. The respondent vide its Reply dated 12.06.2023 in suppression of the three names, proposed alternate names to be appointed as the Sole Arbitrator. Vide rejoinder dated 24.06.2023 both the parties agreed to one name, but the Ld. Sole Arbitrator vide email response dated 10.07.2023 expressed his inability to take up the appointment.
7. The petitioner then vide letter dated 05.07.2023 requested the respondent to propose additional names. The respondent suggested two additional names of the retired judges of the High Court and upon deliberation via email dated 13.07.2023, the petitioner agreed for the appointment of one retired Hon'ble Judge of Delhi High Court. However, the respondent failed to take requisite steps for formal appointment of the learned Sole Arbitrator which necessitated the petitioner to send letter dated 23.08.2023 to the learned Sole Arbitrator informing him of the consent for his appointment and to enter reference. However, because of the email dated 24.08.2023 of the respondent, the whole matter came to a standstill. Hence, the present petition has been filed for appointment of the Arbitrator.
8. A formal Reply has been filed on behalf of the respondent, wherein the objections are taken that the petitioner has sought appointment of the Arbitrator in respect of 74 Purchase Orders issued at different times for different part of the Projects pertaining to different works. The petitioner has failed to disclose and specify under which of these Purchase Orders the petitioner is seeking reference of the disputes to arbitration. He has also failed to specify which dispute under which Purchase Order is to be referred to arbitration.
9. The other objection is that the Purchase Orders attached to the petition, do not contain any arbitration clause.
10. The petitioner has further submitted that the Purchase Orders which have been annexed with the petition prima facie are barred by limitation except few Purchase Orders. Further, the Notice dated 08.06.2023 under Section 21 of the Arbitration & Conciliation Act seeks reference of d
Court determined claims are not time-barred and appointment of an arbitrator is valid despite the respondent's challenges regarding jurisdiction and limitations.
Arbitrator shall ensure compliance of Section 12 of Arbitration and Conciliation Act, 1996 before commencing arbitration.
The unilateral appointment of an arbitrator is impermissible under the Arbitration and Conciliation Act, 1996, unless there is a valid express waiver of ineligibility subsequent to the dispute arisin....
Unilateral appointment of an Arbitrator by a party is impermissible, and the ineligibility of the Arbitrator under Section 12(5) of the A&C Act is a valid ground for challenging the appointment.
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.
Disputes concerning alleged payments are referable to arbitration despite claims of prior resolution efforts, where the existence of disputes was upheld.
The court established that an arbitration agreement exists between the petitioner and the respondents, as the executing agency was acting on behalf of the principal; claims related to payment dispute....
The court emphasized that its role under Section 11 is solely to confirm the existence of an arbitration agreement, minimizing intervention, and facilitating dispute resolution through arbitration.
The Court's decision emphasizes the need to examine each agreement independently for the existence of an arbitration agreement, and the importance of demonstrating the intention of the parties regard....
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