Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB.P. 498/2024
M/S BKSONS INFRASTRUCTURE PVT. LTD .....Petitioner
Through: Mr. K.G. Gopalakrishnan and
Mr. Rakesh Kumar Singh, Advocates
versus
MANAGING DIRECTOR, NATIONAL HIGHWAYS
AND INFRASTRUCTURE DEVELOPMENT
CORPORATION .....Respondent
Through: Mr. Balendu Shekhar, Mr. Raj
Kumar Maurya and Mr. Krishna Chaitanya,
Advocates
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
JUDGMENT (ORAL)
% 12.08.2024
1. This is a petition under Section 11(6) of the Arbitration and
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Conciliation Act, 1996 for appointment of an Arbitrator to arbitrate
on the disputes between the parties.
2. The disputes arise in the context of an Engineering,
Procurement and Construction (EPC) Contract dated 1 June 2020,
executed between the petitioner and the respondent. The petitioner
was contracted for transforming a two lane stretch of NH 117 to a 4
lane stretch.
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“the 1996 Act” hereinafter
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KUMAR
Signing Date:14.08.2024
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HARI SHANKAR
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ARB. P. 498/2024 Page 1 of 8
3. Article 26 of the contract between the parties envisages
resolution of disputes by arbitration. Sub Article 26(1), 26(2) and
26.3(i) thereof, read thus :
“ 26.1 Dispute Resolution
(i) Any dispute, difference or controversy of whatever nature
howsoever arising under or out of or in relation to this Agreement
(including its interpretation) between the Parties, and so notified in
writing by either Party to the other Party (the "Dispute") shall, in
the first instance, be attempted to be resolved amicably in
accordance with the conciliation procedure set forth in Clause 26.2.
(ii) The Parties agree to use their best efforts for resolving all
Disputes arising under or in respect of this Agreement promptly,
equitably and in good faith, and further agree to provide each other
with reasonable access during normal business hours to all non-
privileged records, information and data pertaining to any Dispute.
26.2 Conciliation
In the event of any Dispute between the Parties, either Party may
call upon the Authority's Engineer, or such other person as the
Parties may mutually agree upon (the "Conciliator") to mediate and
assist the Parties in arriving at an amicable settlement thereof.
Failing mediation by the Conciliator or without the intervention of
the Conciliator, either Party may require such Dispute to be
referred to the Chairman of the Authority and the Chairman of the
Board of Directors of the Contractor for amicable settlement, and
upon such reference, the said persons shall meet no later than 7
(seven) business days from the date of reference to discuss and
attempt to amicably resolve the Dispute. If such meeting does not
take place within the 30 (thirty) business day period or the Dispute
is not amicably settled within 30 (thirty) days of the meeting or the
Dispute is not resolved as evidenced by the signing of written
terms of settlement within 30 (thirty) days of the notice in writing
referred to in Clause 26.1.1 or such longer period as may be
mutually agreed by the Parties, either Party may refer the Dispute
to arbitration in accordance with the provisions of Clause 26.3 but
before resorting to such arbitration, the parties agree to explore
conciliation by the Conciliation Committees of Independent
Experts set up by the Authority in accordance with the procedure
decided by the panel of such experts and notified by the Authority
on its website including its subsequent amendments. In the event of
the conciliation proceedings being successful, the parties to the
dispute would sign the written settlement agreement and the
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KUMAR
Signing Date:14.08.2024
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HARI SHANKAR
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ARB. P. 498/2024 Page 2 of 8
conciliators would authenticate the same. Such settlement
agreement would then be binding on the parties in terms of Section
73 of the Arbitration Act. In case of failure of the conciliation
process even at the level of the Conciliation Committee, either
party may refer the Dispute to arbitration in accordance with the
provisions of Clause 26.3.
26.3 Arbitration
(i) Any dispute which remains unresolved between the parties
through the mechanisms available/ prescribed in the Agreement,
irrespective of any claim value, which has not been agreed
upon/reached settlement by the parties, will be referred to the
Arbitral Tribunal as per the Arbitration and Conciliation Act. ”
4. As disputes arose between the parties, the petitioner wrote to
the Managing Director of the respondent on 2 January 2023
submitting that as the Engineer of the respondent had already
communicated, in writing, disagreeing with the petitioner’s claim,
referring the matter to the Authority Engineer (AE) would be futile.
The Managing Director of the respondent was therefore called upon to
appoint a Conciliator to look into the matter and seek to resolve the
disputes. This was followed by letter dated 8 June 2023 reiterating the
request for appointment of a Conciliator and 25 July 2023, in which
the petitioner suggested the names of three experts, of which the
respondent was requested to choose one as the Conciliator to settle the
disputes.
5. On the respondent remaining silent, the petitioner approached
the Chairman of the respondent by way of letter dated 18 November
2023, praying that, in accordance with Clause 26.2 of the contract, a
mutual meeting between the petitioner and the respondents be
convened within seven days so that the matter could be resolved. The
meeting took place on 27 December 2023. However, the petitioner
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HARI SHANKAR
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ARB. P. 498/2024 Page 3 of 8
was informed by the respondent vide letter dated 11 January 2024 that
the petitioner’s claims were rejected.
6. The petitioner thereupon proceeded to issue a notice to the
respondent under Section 21 of the 1996 Act on 11 January 2024,
seeking reference of the disputes to arbitration.
7. The respondent replied on 5 February 2024, requiring the
petitioner to approach the Conciliation Committee of Independent
Experts constituted by the respondent in terms of Clause 26.2.
8. The petitioner has, instead of doing so, approached this Court
by means of the present petition under Section 11(6) of the 1996 Act,
seeking resolution of the disputes by arbitration.
9. Mr. Balendu Shekhar, learned counsel for the respondent,
submits that the present petition is not maintainable as the petitioner
has not exhausted the mandatory pre-arbitral protocol contained in
Clause 26.2 read with Clause 26.1 of the contract. He submits that,
once the claims of the petitioner were rejected by the Chairman,
Clause 26.2 envisaged the petitioner approaching the Committee of
Conciliators before seeking recourse to arbitration.
10. Mr. Gopalakrishnan, learned counsel for the petitioner has, on
the other hand, chosen to rely on the judgment of a coordinate Bench
of this Court in Oasis Projects Ltd v. M.D. National Highway and
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ARB. P. 498/2024 Page 4 of 8
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Infrastructure Development Corporation Ltd which has, to an
extent, held that provision for conciliation contained in Clause 26.2 of
the contract is only voluntary and directory in nature and it is not
necessary for a party to travel that path before invoking arbitration.
11. Mr. Shekhar submits that the decision in Oasis Projects Limited
is distinguishable as that was a case in which the Court relied on
Section 77 of the 1996 Act, which permits a party to seek recourse to
arbitration before exhausting the prescribed conciliation procedure in
the case of urgency, and the Court found that the facts before it
disclosed such a situation. He submits that per contra , in the present
case, there are no pleadings, as would disclose any such situation of
urgency, as would justify invocation of Section 77 of the 1996 Act.
12. To my mind, it is not necessary for this Court to venture into
that thicket. Clause 26.2 envisages a three stage procedure. Stage 1
requires the contractor to seek a decision on its claim by the AE or by
an independent Conciliator. In the event of the Conciliator not doing
so, or arriving at a decision adverse to the contractor, Stage 2 requires
the contractor to approach the Chairman of the respondent, who would
then convene a joint meeting between the party and the respondent
within seven business days to examine the merits of the contractor’s
claim. Should this exercise also prove abortive, Stage 3 requires the
contractor to seek recourse to the Conciliation Committee of
Independent Experts. It is only thereafter that Clause 26.2 envisages
the dispute being referred to arbitration.
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2023 SCC OnLine Del 645
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KUMAR
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ARB. P. 498/2024 Page 5 of 8
13. The jurisdiction of the Court under Section 11(6) of the 1996
Act is galvanized when, under the procedure agreed upon between the
parties for appointment of the Arbitral Tribunal, one or the other party
fails to act. Thus, the Court acquires jurisdiction immediately on the
default, of either party, in adhering to the pre-arbitral or arbitral
procedure envisaged in the contract.
14. In the present case, Mr. Shekhar is unable to dispute the fact
that, despite three reminders issued by the petitioner for exhausting
Stage 1 of the procedure envisaged by Clause 26.2, which requires the
matter to be referred to an independent Conciliator to be appointed by
the respondent, the respondent did not do so.
15. In my opinion, the matter ends there. Once the respondent failed
to adhere to the pre-arbitral protocol envisaged by Clause 26.2, the
petitioner ipso facto became entitled to invoke arbitration.
16. The fact that the petitioner may have thereafter approached the
Chairman, who may have not condescended to accede to the
petitioner’s claim, cannot wish away the default of the respondent not
appointing a Conciliator, to comply with Stage 1 of the procedure
envisaged by Clause 26.2 of the contract.
17. The default of the respondent to appoint a Conciliator as
envisaged by Clause 26.2 despite three reminders having been sent by
the petitioner, amounts to failure on the part of the respondent, to act
as required by the procedure for appointment of the Arbitrator, which
would include the pre-arbitral protocol within the meaning of Section
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KUMAR
Signing Date:14.08.2024
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HARI SHANKAR
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ARB. P. 498/2024 Page 6 of 8
11(6)(a) of the 1996 Act.
18. That being so, the petitioner was justified in approaching this
Court for appointment of the Arbitrator.
19. Mr. Gopalakrishnan, submits that though the amount due from
the respondent, as per his client is yet to be quantified, it would be in
the region of approximately ₹18 Crores.
20. In these circumstances, this Court appoints Mr. A.K. Behera,
Senior Advocate (Tel. 9810022498), as the arbitrator, to arbitrate on
the disputes between the parties.
21. The arbitration shall take place under the aegis of the Delhi
International Arbitration Centre (DIAC) and would abide by its rules
and regulations.
22. The learned arbitrator shall be entitled to charge fees as per
schedule of fees maintained by the DIAC.
23. The learned arbitrator is also requested to file the requisite
disclosure under Section 12(2) of the 1996 Act, within a week of
entering on reference.
24. All questions of fact and law are left open for being urged in the
arbitral proceedings. This order is being passed without prejudice to
the contentions of both sides and without prejudice to their respective
rights.
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Digitally Signed By:AJIT
KUMAR
Signing Date:14.08.2024
17:13:11
Digitally Signed
By:CHANDRASHEKHARAN
HARI SHANKAR
Signing Date:14.08.2024
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ARB. P. 498/2024 Page 7 of 8
25. The petition stands allowed in the aforesaid terms with no
orders as to costs.
C.HARI SHANKAR, J
AUGUST 12, 2024/yg
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Digitally Signed By:AJIT
KUMAR
Signing Date:14.08.2024
17:13:11
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By:CHANDRASHEKHARAN
HARI SHANKAR
Signing Date:14.08.2024
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ARB. P. 498/2024 Page 8 of 8