Pre-referral conciliation in arbitration agreements is directory, allowing parties to proceed directly to arbitration if amicable resolution fails.

JUDGMENT :

MANOJ KUMAR OHRI, J.

1. By way of present petition filed under Section 9 of the Arbitration & Conciliation Act, the petitioner seeks the following prayers:-

“...A. Restrain the Respondent no. 1 from recovering an amount of Rs. 44,28,32,815/- from the Petitioner and also from the Escrow account pursuant to the letter dated 02.01.2025.

B. Restrain respondent no. 2 from releasing any such amount of Rs. 44,28,32,815/- pursuant to the letter dated 02.01 .2025 till the pendency of the Arbitral proceedings.

C. Any amount released 111 the violation of the Concession Agreement...”

2. The petitioner and respondent No.1/NHAI entered into a Concession Agreement dated 05.03.2012 and Escrow Agreement dated 27.08.2021, and Clause 44.3 of the Concession Agreement thereof stipulates resolution of disputes through arbitration as governed under the A&C Act and further provides for the venue of Arbitration to be Delhi.

3. The present dispute arises in the context of enhanced fee collected by the petitioner for overloaded vehicles in compliance with amended Fee Rules, which, as per respondent No.1, had to be remitted to respondent No.1/NHAI in terms of the subject Concession Agreement, whereas it is the case of the petitioner that it is liable to pay only the concession fee and premium under the subject agreement. Resultantly, respondent No.1 directed respondent No.2/Axis Bank Ltd., which maintains the escrow account in terms of the Escrow Agreement between the parties, vide letter dated 02.01.2025, to deposit the contested amount as penalty from the escrow account into the account of respondent No.1. This Court, vide order dated 31.01.2025, has directed the parties to maintain status quo regarding the operation of the aforesaid letter.

4. Learned counsel for the petitioner, on instructions, prays that the Arbitration Agreement not being denied, the disputes arising in the context of the subject agreement be referred to the Arbitral Tribunal comprising of three Arbitrators, one nominated by each party and the third Arbitrator to be jointly appointed by the two selected Arbitrators. It is further prayed that the present petition filed under Section 9 of the A&C Act be treated as an application under Section 17 of the A&C Act. Learned counsel further submits, on instructions, that the aforesaid prayer for reference of the present dispute to arbitration is only pressed against respondent No.1 since respondent No. 2 is a non-signatory to the subject agreement and the dispute persists qua respondent No.1 only.

5. Learned counsel appearing for respondent No.1 disputes neither the subject agreement nor the jurisdiction of this Court. However, he objects to the reference of the present dispute to arbitration by contending that the petitioner has failed to follow the pre-referral dispute resolution process as stipulated in the subject Concession Agreement. He submits that Clause 44.2 of the subject agreement stipulates the parties to first undergo conciliation and only upon failure to resolve the disputes amicably by way of conciliation, the parties shall refer the matter to arbitration under Clause 44.3. It is the case of the respondent No.1 that even though the petitioner had initiated conciliation regarding the subject dispute vide letter dated 22.07.2021, the petitioner never pursued the same and in fact, abandoned the process.

6. At this stage, learned counsel for the petitioner, while disputing the above contentions of the respondent No.1, submits that even though the petitioner took requisite steps and referred the dispute for conciliation under Clause 44.2 of the Concession Agreement vide Concessionaire letter no.1675 dated 22.07.2021 and even requested the Chairman, NHAI/respondent No.1 to refer the disputes to Conciliation & Settlement Committee of Independent Experts, however, respondent No.1 failed to take effective steps to complete the process. It is further pointed out that the petitioner had even given detailed response to the Independent