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2023 Supreme(Online)(DEL) 13660
DELHI HIGH COURT
SURYA ALLOY INDUSTIRES LTD. – Appellant
Versus
UNION OF INDIA AND ANR. – Respondent
ARBP-655_2023
A party cannot resist arbitration by relying on the terms of the contract dealing with pre-arbitral procedures/requirements once it has agreed to constitute an arbitral tribunal.
Headnote:
ARBITRATION - APPOINTMENT OF ARBITRATOR - PRE-MATURITY - WAIVER - INDIAN RAILWAYS STANDARD CONDITIONS OF CONTRACT - SECTION 12(5) OF THE ARBITRATION AND CONCILIATION ACT, 1996
Fact of the Case:
The petitioner, Surya Alloy Industries Ltd., entered into a contract with the respondents, Union of India and Northern Railway, for the supply of metal liners. Disputes arose between the parties regarding the non-return of security deposit by the respondents. The petitioner invoked the arbitration agreement contained in the Indian Railways Standard Conditions of Contract and requested the respondents to appoint an arbitrator. The respondents objected to the appointment of an arbitrator on the grounds that the petitioner had not followed the pre-requisite for invoking arbitration and that the matter was premature as the petitioner had not first approached the General Manager/Northern Railway for settlement of disputes. The petitioner rejected the respondents' request for waiver under Section 12(5) of the Arbitration and Conciliation Act, 1996.
Finding of the Court:
The court held that the respondents' objections were without merit and that the petitioner had validly invoked the arbitration agreement. The court further held that the provision for conciliation in the Standard Conditions of Contract was voluntary and that the petitioner was not precluded from seeking arbitration once it had opted out of conciliation.
Issues: 1. Whether the petitioner had validly invoked the arbitration agreement?2. Whether the matter was premature as the petitioner had not first approached the General Manager/Northern Railway for settlement of disputes?3. Whether the respondents were entitled to a waiver under Section 12(5) of the Arbitration and Conciliation Act, 1996?
Ratio Decidendi: 1. The court held that the respondents had agreed to constitute an arbitral tribunal and could not later seek to resist arbitration by relying on the terms of the contract dealing with pre-arbitral procedures/requirements.2. The court held that the provision for conciliation in the Standard Conditions of Contract was voluntary and that the petitioner was not precluded from seeking arbitration once it had opted out of conciliation.3. The court held that the respondents were not entitled to a waiver under Section 12(5) of the Arbitration and Conciliation Act, 1996, as they had failed to send a panel of arbitrators to the petitioner within 60 days from demand for arbitration.
Final Decision: The court appointed Ms. Natasha Sood as the Sole Arbitrator to adjudicate the disputes between the parties.
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IN THE HIGH COURT OF DELHI AT NEW DELHI
Pronounced on: 20.12.2023
+
ARB.P. 655/2023
SURYA ALLOY INDUSTIRES LTD
..... Petitioner
Through:
Mr. Pukhrambam Ramesh Kumar,
Adv.
versus
UNION OF INDIA AND ANR.
..... Respondents
Through:
Ms. Richa Dhawan, Sr. Panel
Counsel,
alongwith
Mr.
Anuj
Chaturvedi, Adv. (through VC) and
Ms. Shreya Manjari, Adv
CORAM:
HON'BLE MR. JUSTICE SACHIN DATTA
1.
The present petition under Section 11(6) of the Arbitration and
Conciliation Act, 1996 (the ‘A&C Act’) has been filed seeking appointment
of a Sole Arbitrator to adjudicate the disputes between the parties.
JUDGMENT
2.
The disputes between the parties have arisen in atender process
initiated by the respondents for “Manufacturing and Supply of Metal liner
for wider sleeper”. The bid submitted by the petitioner was accepted by the
respondents vide communication/letter of counter offer dated 07.08.2019. It
was mentioned in the said communication that upon acceptance of the
counter offer, the said letter of counter offer will automatically become a
formal letter of acceptance, which shall constitute a binding and concluded
Digitally Signed
By:KAMLA RAWAT
Signing Date:21.12.2023
18:10:06
Signature Not Verified
contract between the parties. The petitioner vide communication dated
12.08.2019 accepted the said counter offer.
3.
Thereafter, the petitioner as per contractual provisions has submitted
two FDRs amounting to Rs.27,44,600/- towards Security Deposit to the
respondents. Subsequently, the respondents have issued two formal purchase
orders on the petitioner.
4.
It is averred in the petition that although the petitioner has completed
the supplies and has even submitted “No Claim Certificate”, the respondents
have not released and/or returned the FDRs.
5.
The applicable ‘Indian Railways Standard Conditions’ of the Contract
contains an arbitration agreement between the parties in the following terms:
Digitally Signed
By:KAMLA RAWAT
Signing Date:21.12.2023
18:10:06
Signature Not Verified
1)
“2903 Demand for Arbitration:
Digitally Signed
By:KAMLA RAWAT
Signing Date:21.12.2023
18:10:06
Signature Not Verified
2)
3)
i.
Digitally Signed
By:KAMLA RAWAT
Signing Date:21.12.2023
18:10:06
Signature Not Verified
ii.
of them has served in the Accounts Department.”
6.
Disputes having arisen between the parties on account of non-
return/release of security deposit, the petitioner in the first instance
submitted a grievance in the CPGRAMS Portal of Government of India on
22.10.2022. The respondents vide their communication dated 24.11.2022
informed the petitioner that supplies made by the petitioner is subject to a
vigilance check and the report of the vigilance is awaited. Thereafter, the
petitioner vide legal notice dated 05.12.2022 again requested the
Digitally Signed
By:KAMLA RAWAT
Signing Date:21.12.2023
18:10:06
Signature Not Verified
respondents to release and return the FDRs. However, there was no response
to the said letter.
7.
Thereafter, the petitioner vide letter dated 25.03.2023 invoked the
arbitration agreement between the parties. The respondents in reply dated
05.04.2023 requested the petitioner for waiver as contemplated in Section
12(5) of A&C Act. The petitioner vide letter dated 10.04.2023 rejected the
said request of the respondents.
8.
The present petition is opposed by the learned counsel for the
respondents on the ground that vide letter dated 16.05.2023, the Vigilance
Department of the Northern Railway submitted the findings of the vigilance
check; and thereby informed that the samples of the metal liners taken for
the check had failed to pass the checks for quality. It is submitted that till
date the petitioner has failed to discharge its contractual obligations to
replace the failed metal liners, and therefore, the security deposit cannot be
released to
