Section 11(6) Jurisdiction Cannot Be Invoked Where Agreement Expressly Ousts Application of the Arbitration Act

The Petitioner and Respondent entered into an agreement on 24.02.2015 for renovation work at Pachmarhi.

Following project completion in 2018, a dispute arose regarding unpaid final bills and the Respondent’s demand for penalties due to substandard work.

In April 2024, the Petitioner sought dispute resolution through the Administrative Mechanism for Resolution of Central Public Enterprises Disputes (AMRCD) per Clause 7 of the agreement.

However, the Ministry of Jal Shakti/Department of Public Enterprises declined the reference on 17.05.2024, advising the Petitioner to explore legal mechanisms.

The Petitioner subsequently filed this petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 for the appointment of an arbitrator.

1. Whether Clause 7 of the agreement constitutes a valid arbitration agreement that permits the invocation of Section 11(6) of the Arbitration and Conciliation Act, 1996.

2. Whether the Court can appoint an arbitrator when the contract specifically ousts the applicability of the Arbitration and Conciliation Act, 1996.

Section 11(6) of the Arbitration and Conciliation Act, 1996 regarding the appointment of arbitrators.

The principle that the intention of parties to refer disputes to arbitration must be clear and obligatory to vest jurisdiction in the High Court.

Mahanadi Coalfields Ltd. v. IVRCL AMR Joint Venture (2022), which held that if a substantive provision shows no intent to refer disputes to statutory arbitration, a Section 11 application is not maintainable.

The Court examined Clause 7 of the agreement, titled "Arbitration of Dispute." While the clause used the word "arbitration," the Court observed that it explicitly stated, "The Arbitration and Conciliation Act 1996 shall not be applicable to arbitration under this clause".

The clause instead established a specific departmental mechanism involving a nominee of the Secretary of Public Enterprises and a revision process through the Law Secretary.

The Court reasoned that the parties had intentionally devised an alternative dispute resolution mechanism independent of the Act and had expressly ousted the Act's applicability.

Following Mahanadi Coalfields, the Court determined that in the absence of a valid agreement to submit to the 1996 Act, the petitioner could not invoke the Court’s jurisdiction under Section 11(6).

The petition was dismissed, though the Petitioner was granted liberty to avail other remedies in accordance with the law.