IMPORTANT POINT
The main legal point established is that once an application is filed under Section 11(6) of the Arbitration and Conciliation Act 1996, the right of the opposite party to appoint the arbitrator ceases, and the need to exhaust the dispute resolution mechanism provided in the agreement before invoking arbitration.

ORDER :

1. The present application under Section 11(6) of the Arbitration and Concilliation Act 1996, (hereinafter referred to as the ‘Act of 1996’) has been preferred for appointment of an independent and impartial arbitrator.

2. The facts of the case are that an agreement was entered into between the parties for the work of “Execution of construction of various buildings for permanent campus IIT Jodhpur (Phase-2) at Karwar, NH-65, Jodhpur, Rajasthan”. In terms of the agreement, the work was to be completed within a period of 21 months from the date of the integrity agreement and for the purpose, Letter of Acceptance dated 29.09.2017 was issued by the respondent department. However, the work in question could not be completed within the time stipulated i.e. by 12.07.2019, hence, the application for extension of time was preferred by the applicant company and the time was hence extended up to 31.07.2021. Ultimately, the work was completed and the completion certificate dated 27.08.2021 was issued by the respondent department.

3. As per the applicant firm, the reasons for the delay caused in completion of the work were not attributable to it and hence it was entitled for the compensation/ damages/ extra cost incurred towards completion of the delayed work. Vide letter dated 18.12.2021, a demand for the payment of the said additional costs was made and a claim of Rs.71.60 crores qua the same was raised by the firm. However, the said claims were rejected by the respondent authority vide letter dated 13.01.2022.

4. Hence, in terms of Clause 25 of the agreement in question, a request to the Superintending Engineer for deciding the dispute pertaining to the payment of the additional costs of Rs.71.60 crores was made. However, the Superintending Engineer failed to decide the dispute within the time stipulated as per Clause 25 and hence, an appeal to the Chief Engineer was preferred on 19.04.2022 but the same was also not decided within the stipulated period of 30 days.

5. Consequently, vide letter dated 31.05.2022, the Chief Engineer was requested to constitute a Dispute Redressal Commission (hereinafter referred to as ‘DRC’) for resolution of the dispute but the same was not constituted within the time frame as prescribed under Clause 25 and therefore, notice dated 16.11.2022 was served on the competent authority for reference of the dispute to Arbitration. Vide the said notice, Clause 25 of the General Conditions of the Contract, as entered into between the parties, was invoked by the applicant company. Vide the said notice, three names of the proposed arbitrators were also suggested and respondent department was called upon to agree to any one of the said names or to suggest three names on their behalf so that a sole arbitrator could be appointed. However, instead of responding to the said notice, letter dated 05.01.2023 was issued by the respondent department informing that a DRC has been constituted. But, the applicant firm, at that stage, refused to participate in the proceedings of the said Committee on the premise that the same was not constituted within the stipulated period. The applicant firm also denied participation in proceedings of the said Committee for the reason that it had already invoked the Arbitration Clause.

6. As the notice invoking Arbitration Clause was served on the respondent department and the same was not responded to within a period of 30 days of the service, the present application for appointment of a sole arbitrator has been preferred on behalf of the applicant firm.

7. Learned counsel for the applicant firm submitted that the firm adopted the complete procedure as provided under Clause 25 of the agreement but as the same was not adhered to by the respondent department, an independent arbitrator now deserves to be appointed by this Court.

8. Per contra, learned counsel for the respondent submitted that acting upon the notice of the applicant company, a DRC was very well constituted by the department and henc