Delhi High Court: In a petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (‘Act’) to seek the appointment of a Sole Arbitrator for the adjudication of disputes between the parties, a Single Judge Bench of Jasmeet Singh, J. stated that the petitioner had duly complied with the conciliation process in terms of Clause 26 of the Agreement and directed the appointment of a Sole Arbitrator to adjudicate the dispute between the parties.
Background
The facts of the present matter are that the National Highway and Infrastructure Development Corporation Ltd. (‘NHIDCL’) (respondent) had floated a tender on 20-11-2017 for the construction of two lanes with hard shoulders of Merangkong-Tamlu-Mon road in Nagaland on EPC basis from existing Km 20.456 to Km. 41.065.
The petitioner was awarded the tender vide letter of acceptance dated 28-03-2018 followed by an agreement that was executed between the parties on 18-04-2018 for a contract value of Rs. 161,98,50,000/-.
Since there were disputes between the parties, the petitioner invoked arbitration vide legal notice dated 03-08-2023. Notice in the present petition was issued on 21-03-2024 and thereafter, the respondent filed a reply wherein it had been stated that the petitioner had not followed the dispute resolution mechanism as envisaged under Clause 26.
NHIDCL stated that the petitioner was required to undertake conciliation proceedings before invoking arbitration as envisaged under Clause 26.2 and 26.3 of the Agreement and that since the Agreement was foreclosed by a Foreclosure Agreement dated 16-08-2021 and the last and final bill was given by the petitioner in terms of the same, the present petition would not lie as the petitioner himself had assailed the foreclosure.
It was also contended by NHIDCL that on one hand the petitioner stated that the Foreclosure Agreement was signed under duress and on the other hand, was raising disputes under the same.
Analysis and Decision
The Court noted that the notice for invoking arbitration was issued by the petitioner on 03-08-2023 but NHIDCL recommended that the disputes between the parties be sent to a conciliation committee, and this was agreed by the petitioner vide letter dated 30-09-2023.
It was further noted that a conciliation committee of three members was formed, and the respondent asked the petitioner to deposit a demand draft of Rs. 5 lakhs to commence the conciliation proceedings. The petitioner was intimated about this committee and an objection was raised by him vide letter dated 10-11-2023 on account of the same not being as per the terms of the Agreement. However, NHIDCL did not respond to this.
The petitioner, vide letter dated 20-12-2023, again reminded NHIDCL regarding the initiation of conciliation proceedings but no steps were taken in furtherance of this.
The Court stated that in terms of Clause 26.2 of the Agreement, it was the Chairman/Managing Director of the Board of Directors of Contractors who was to do the conciliation and not the committee that had been constituted by NHIDCL. It was also said that in any case, the petitioner could not have been asked to deposit Rs. 5 lakhs to commence the conciliation proceedings.
The Court said that the petitioner had duly complied with the mandate of Clause 26.2 of the Agreement and NHIDCL did not proceed further, hence the petitioner followed the conciliation process as per Clause 26 of the Agreement.
The Court noted that NHIDCL submitted that the arbitration clause of the Agreement mandated that the arbitration must be as per the rules of arbitration of the Society for Affordable Redressal of Disputes (‘SAROD’).
The Court referred to Rani Construction Pvt. Ltd. v. Union of India 2024 SCC OnLine Del 2164 wherein it was held that the arbitral procedure under SAROD Rules could not be implemented unless and until both the petitioner and the respondent were members of SAROD. It was admitted that the petitioner was not a member of SAROD and had no intention to become one.
In the above-mentioned decision, it was also said that the insistence upon one of the parties to take membership of SAROD as a precondition for taking steps to constitute an Arbitral Tribunal impinges upon the validity of the appointment procedure.
The Court allowed the petition for the appointment of a Sole Arbitrator since SAROD Rules could not be applied for conducting Arbitration. The Court issued a direction to appoint a Sole Arbitrator to adjudicate the disputes between the parties.
The Court directed that the arbitration would be held under the aegis of the Delhi International Arbitration Centre, Delhi High Court. Further, the Arbitrator was requested to furnish a declaration in terms of Section 12 of the Act before entering into reference.
The parties were directed to approach the Arbitrator within two weeks.
[Manaranjan Brahma v. National Highway and Infrastructure Development Corporation Ltd., 2024 SCC OnLine Del 6078, Decided on 23-08-2024]
Advocates who appeared in this case :
For Petitioner — Advocate George Pothan Poothicote, Advocate Manisha Singh, Advocate Prakarsh Kumar, Advocate Jyoti Singh, Advocate Ashu Pathak
For Respondent — Advocate Reema Khurana, Advocate Vikash Kumar, AR Sonu Sharma
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