Use of Permissive Language "May" in Pre-Arbitral Tiers Renders Recourse to Dispute Redressal Committee Optional.

The Petitioner, M/S Rudra Interiors Pvt. Ltd., entered into an agreement dated 19.08.2020 with Respondent No. 1 (HPL)

Following disputes, the Petitioner initiated the multi-tier dispute resolution process under Clause 26 of the Special Conditions of Contract (SCC). The Petitioner’s grievances were rejected by the Project-In-Charge on 19.12.2024

Subsequently, the Petitioner appealed to the CMD of HPL, who refused to treat the communication as an appeal, citing a lack of "cogent reasons" and "justification," and directed the filing of a fresh appeal

After further correspondence and a demand for the constitution of a Dispute Redressal Committee (DRC), which Respondent No. 1 resisted by claiming the Petitioner had skipped mandatory procedural steps, the Petitioner invoked arbitration under Section 21 of the A&C Act and filed the present petition under Section 11

1. Whether the pre-arbitral deposit/appeal to the Dispute Redressal Committee (DRC) was a mandatory prerequisite for invoking arbitration under Clause 26 of the SCC

2. Whether the Court, under Section 11 of the A&C Act, is required to conduct a detailed inquiry into the compliance of pre-arbitral procedures formulated by the parties

The Court primarily applied Section 11(6) of the Arbitration and Conciliation Act, 1996 regarding the appointment of arbitrators

It relied on the seven-judge bench decision in Interplay Between Arbitration Agreements under Arbitration Act, 1996 & Stamp Act, 1899, In re, which established that judicial intervention at the Section 11 stage is confined to a prima facie examination of the existence of an arbitration agreement

Furthermore, it applied the principles from SBI General Insurance Co. Ltd. v. Krish Spinning, which clarified that the Referral Court should not delve into contested factual or legal issues like "accord and satisfaction" or procedural technicalities, as these fall within the exclusive jurisdiction of the Arbitral Tribunal under the principle of competence-competence

The court also applied Perkins Eastman Architects DPC v. HSCC (India) Ltd. regarding the impermissibility of unilateral arbitrator appointments

The Court reviewed Clause 26 of the SCC and found that the language used regarding appeals was "may," indicating that recourse to the DRC was directory rather than a mandatory bar to arbitration

The Court criticized Respondent No. 1 for reading extra-contractual requirements (such as "detailed reasons") into the appeal process, characterizing its conduct as an attempt to impose "manifestly onerous" interpretations on the Petitioner

Based on Krish Spinning, the Court held that since a valid arbitration agreement exists, any dispute regarding whether the Petitioner sufficiently complied with pre-arbitral procedural steps is a "mixed question of law and fact" that must be decided by the Arbitral Tribunal, not the Referral Court

The Court noted that the unilateral appointment power reserved for the CMD in the contract was legally invalid under the Perkins Eastman doctrine

The Court appointed Mr. V. K. Jain (Retd. Delhi High Court Judge) as the Sole Arbitrator to adjudicate the disputes

It directed that all rights and contentions regarding the merits and procedural compliance remain open for the Arbitrator to decide. Final relief was granted by referring the parties to arbitration and directing the Arbitrator to file a Section 12(2) disclosure