Rajasthan High Court appoints sole arbitrator where performance security was forfeited without considering force majeure clause

rajasthan high court

Rajasthan High Court: In a case wherein, the arbitration applications were filed under Section 11 of the Arbitration and Conciliation Act, 1996 (‘the Act') for referring the dispute between the parties to arbitration by appointment of a sole arbitrator, Pushpendra Singh Bhati, J., opined that the agreement clause related to appointment of the arbitrator was required to be invoked and accordingly appointed the sole arbitrator to adjudicate the dispute between the parties.

In the present case, the petitioner was a firm registered under the Micro, Small and Medium Enterprises Development Act, 2006 and the respondent herein had issued an e-tender notice for maintenance and provisioning of Bharat Sanchar Nigam Limited (‘BSNL') network. The petitioner was declared as successful bidder and an agreement was entered between the petitioner and the respondent, according to which, an advance work order was issued in favour of the petitioner.

Thereafter, the dispute arose between the parties regarding the work in question. Subsequently, the petitioner sent a letter to the respondent requesting to refer the dispute for the arbitration and for appointment of an arbitrator, as per Arbitration Clause 20 of the agreement.

The petitioner submitted that the respondent violated Clause 17.01 of the agreement, as it did not take into consideration the force majeure i.e., Covid-19 Pandemic and forfeited the performance security of the petitioners. The petitioner further submitted that the parties were bound by the arbitration clause and thus, the dispute deserved to be referred for arbitration.

The respondent submitted that as per Section 5-A, Clause 8 of the tender document, the Appointing Authority to appoint an arbitrator was the Chief General Manager Telecom, Rajasthan (‘CGMT') and since, the petitioner did not adhere to the provisions and did not approach the CGMT, the applications should be dismissed.

The Court relied on Perkins Eastman Architects DPSC v. HSCC Ltd., (2020) 20 SCC 760 and opined that this Court was conscious that any further issues could be raised by either of the parties before the arbitrator who would deal with the issues in accordance with the law.

Thus, the Court opined that the agreement clause related to appointment of the arbitrator was required to be invoked and thus, accordingly allowed the applications.

The Court exercised the powers conferred under Section 11 of the Act and appointed, Jai Prakash Narayan Purohit, Retired Additional District Judge, as the sole Arbitrator to adjudicate the dispute between the parties. The Court further stated that the payment of cost of arbitration proceedings and arbitration fee should be made as per the Schedule 4 of the Act.

[Yogesh Somani v. Bharat Sanchar Bhawan Janpath, 2023 SCC OnLine Raj 1357, order dated 18-8-2023]

Advocates who appeared in this case :

For the Petitioners: Harsh Tikoo, Advocate

For the Respondents: Rajesh Shah, Advocate

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