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IN THE HIGH COURT OF ALLAHABAD
ROHIT RANJAN AGARWAL, J.
M/S Larsen and Toubro Limited - Applicant
Versus
The Director (Other Units) M/S Bharat Electronics Limited - Opposite Party
Arbitration and Concili. Appl. U/S 11(4) Nos. 79, 80, 81 of 2022
Decided On : 13-02-2023
Arbitration - Appointment of Arbitrators - Arbitration and Conciliation Act, 1996 - Section 11(6)
Fact of the Case:
The case involves three connected arbitration applications filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of arbitrators. The dispute arises from a contract for the construction of underground specialized RCC integrated structures at Air Force Station at eight different places.
Finding of the Court:
The court found that the pre-arbitral procedure provided in the contract was not followed by the respondent, leading to the applicant exhausting all remedies before approaching the court for the appointment of an arbitrator.
Issues: The main issue was whether the applicant had exhausted the pre-arbitral procedure before seeking the appointment of an arbitrator under Section 11(6) of the Act.
Ratio Decidendi: The court held that the pre-arbitral procedure outlined in the contract must be adhered to, and the respondent's failure to comply with the timeline for decision-making and appointment of an arbitrator left the applicant with no other option but to approach the court for the appointment of an arbitrator.
Final Decision: The court allowed all three applications for the appointment of an arbitrator and appointed a former Chief Justice as the arbitrator.
JUDGMENT :
1. These three connected arbitration applications having been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter called as “Act of 1996”) seeking appointment of arbitrators.
2. These three arbitration applications are being heard and decided together with the consent of both the parties as the matters relate to one and the same contract for three different places.
3. The applicant before this Court is a company incorporated under the provisions of Companies Act, 1956 (hereinafter called as “Act of 1956”) having its registered office at Mumbai. Respondent No.1 M/s Bharat Electronics Limited (for short “BEL”) is a Public Sector Undertaking under the control of Ministry of Defence, Government of India, having its registered office at Bengaluru.
4. The respondent/BEL on 11.7.2006 invited tender for construction of underground specialized RCC integrated structures at Air Force Station, at eight (8) different places. The applicant Company submitted its bid for “Package two” consisting of three locations i.e. Ambala (ZB), Shillong (ZF) and Port Blair (ZH1). The tender of the applicant was accepted and letter of acceptance was issued for the three locations on 16.9.2016. On 03.10.2016 a contract was executed between the applicant and BEL for “Package two” comprising of Letter of Acceptance (LOA), price scheduled (bill) of quantities, notice inviting tender and instruction to tenders, special conditions of contract, schedules A to F, technical specifications, drawings, General Conditions of Contract (GCC), corrigendum to transfer document etc.
5. The contract was to be completed within thirty months and the construction commenced from 01.11.2016. On 23.10.2017, 23.4.2020, 28.11.2020 and 03.6.2021 extension of time was sought by the applicant. On 10.09.2021, the applicant submitted claims to Engineer for payment of additional cost on account of extended stay/ prolongation of contract period.
6. On 28.9.2021, the Engineer rejected the claim of applicant on the ground that project, which was scheduled to be completed within a period of thirty months, was going to surpass more than double the period of contract i.e. sixty months. Dissatisfied with the decision of the Engineer, the applicant submitted his claim on 11.10.2021 before Engineer-in-Charge (EIC). On 09.12.2021, EIC required certain documents from the applicant. On 07.01.2022, the applicant filed an appeal before the Appellate Authority in terms of Clause 25.1 of GCC. Respondent/BEL on 27.01.2022 sent a communication through e-mail to the applicant for scheduling a meeting on 07.02.2022 or 08.02.2022. On 01.02.2022 the applicant confirmed 08.02.2022 as the meeting date.
7. The respondent /BEL on 03.02.2022 requested the applicant for confirming meeting on 07.02.2022. However, on 03.02.2022 respondent through e-mail informed the applicant that 07.02.2022 was not feasible due to non-availability of CMD.
8. On 04.02.2022 request for completing the process before 09.02.2022 was made as timeline of thirty days for decision by Appellate Authority was going to expire. In the correspondence made by the respondent on 05.02.2022 they did not commit for any meeting on or before 09.02.2022 rather it was stated that mutually agreed date will not be a bar on the provision of the contract. The applicant yet again on 06.02.2022 requested for completing the proceedings before 09.02.022.
9. The respondent/BEL on 07.02.2022 stated that appeal filed by appellant was delayed. Another correspondence was made by the respondent on 08.02.2022 informing the applicant that there was delay in filing the appeal before the Appellate Authority within 15 days of the receipt of decision of Engineer-in-Charge. When there was no response by the Appointing Authority, the applicant on 12.02.2022 gave a notice requesting the Appellate Authority for appointment of an Arbitrator, mutually acceptable to the parties.
10. After receipt of the notice, respondent/BEL on 07.03.2022 again req
The main legal principle established in the judgment is that parties must adhere to the pre-arbitral procedure outlined in the contract before seeking the appointment of an arbitrator, and failure to....
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....
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....
Appointment of arbitrator by designation is permissible. Arbitration clauses in government contracts providing that an employee of the department will be the sole arbitrator are neither void nor unen....
The main legal point established in the judgment is that the appointment of an arbitrator must be in accordance with the law, and if found to be invalid, the court has the jurisdiction to set it asid....
Disputes arising from a construction contract are arbitrable, and failure to follow conciliation procedures does not bar the appointment of an arbitrator.
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