Parties to a contract must adhere to the prescribed dispute resolution procedure before seeking arbitration, and non-compliance with the preceding steps renders the arbitration request premature.

This arbitration request is filed by the applicant under Section 11(6) of the Arbitration and Conciliation Act to appoint an arbitrator to resolve the entire disputes between the applicant and the 1st respondent as per the agreement entered into between the applicant and the 1st respondent dated 10-5-1997. It is contended by the applicant that while the execution of the work was in progress the 1st respondent illegally and unilaterally terminated the agreement on 5-1-1999. It is also contended that the 1st respondent did not resort to the decision of the adjudicator specified under clause 36(1) of the agreement or referring the matter to the arbitrator as specified in clause 25(1) of the agreement and unilaterally terminated the contract. Therefore it is necessary to appoint an arbitrator to adjudicate the entire disputes between the applicant and the 1st respondent relating to the contract.

2. The respondents have resisted this arbitration request on several grounds. The main objection raised by the 1st respondent is that the applicant has filed this arbitration request without complying with the procedure laid down in clauses 24 and 25 of the agreement and therefore, this arbitration request is not maintainable being premature.

3. Clause 24 of the agreement deals with disputes which reads as follows :

"24. Disputes.

24.1 If the Contractor believes that a decision taken by the Engineer was either outside the authority given to the Engineer by the contract or that the decision was wrongly taken, the decision shall be referred to the Adjudicator within 14 days of the notification of the Engineer's decision."

Therefore, it is clear that the contractor has right to refer the decision taken by the Engineer to the adjudicator within 14 days of the notification of the Engineer's decision, if he believes that the decision taken by the Engineer is either outside the authority given to the Engineer by the contract or the decision was wrongly taken by the Engineer. In this case, though the Engineer as well as the adjudicator are named in the agreement, it is the common case that no decision was rendered by the Engineer and no dispute was referredto the adjudicator as provided under clause 24(1) of the agreement.

4. Clause 25 of the agreement deals with procedure for disputes, which reads as follows :

"25. Procedure for Disputes :

25.1 The Adjudicator shall give a decision in writing within 28 days of receipt of a notification of a dispute.

25.2 The adjudicator shall be paid daily at the rate specified in the Contract Date together with reimbursable expenses of the types specified in the contract data and the cost shall be divided equally between the Employer and the Contractor, whatever decision is reached by the Adjudicator. Either party may refer a decision of the Adjudicator to an Arbitrator within 28 days of the Adjudicator's written decision. If neither party refers the dispute to arbitration within the above 28 days, the Adjudicator's decision will be final and binding.

25.3 The arbitration shall be conducted in accordance with the arbitration procedure published by the institution named and in the place shown in the Contract Data."

Therefore, it is clear that clause 25 lays down that when the dispute is referred to the adjudicator and he has given a decision, either party has the right to refer the decision of the adjudicator to an arbitrator within 28 days of the adjudicator's decision in writing. Clause 25.3 stipulates that the arbitration shall be conducted in accordance with the arbitration procedure published by the institution named and the place shown in the contract data. In the contract data which forms part of the agreement it is stipulated that the arbitration will take place in accordance with the Indian Arbitration and Reconciliation, Act 1996.

5. The counsel for the applicant submitted that even though provisions are made in the agreement to refer the dispute first to the Engineer, if dissatisfied with the Engineer's de