M/s JMC Projects (India) Limited Versus South Delhi Municipal Corporation
Court / Forum : Delhi High Court
Case Number : ARB. P. 632/2017
Coram : Justice Jyoti Singh
Subject : Section 11 of the Arbitration and Conciliation Act, 1996 (“1996 Act”)
Date of Decision : August 13, 2020
- In the present petition a contract was entered into between the Petitioner and the Respondent on September 24, 2012 for carrying out the work of covering of Nallah and for providing Parking/Road cum Parking under the jurisdiction of Municipal Corporation of Delhi (“MCD”).
- Disputes had arisen between the parties regarding the completion of the work and the Petitioner requested the Respondent to consider the various claims and refer for adjudication by the Dispute Resolution Committee ( ‘DRC’). The said request was based on Clause 46 of Special Conditions of Contract (“SCC”) which is reproduced as follows:
“46. SETTLEMENT OF DISPUTES For settlement of disputes (if any), a Dispute Resolution Committee (DRC) consisting of representative of the contractor shall be formed and the same shall be presided by Chief Engineer, MCD. The decision of the DRC shall be binding on the both parties i.e. the contractor and the department”.
- The DRC directed the Respondent to pay amounts of Rs. 69,13,247/- and Rs. 11,15,841/-along with the interest @ 7.5% p.a. to the Petitioner. The order was signed only by the Chief Engineer as the Petitioner’s representative refused to sign the same.
- Thereafter, Petitioner sent a notice to the Respondent invoking the Arbitration Agreement and sought appointment of an Arbitrator. The alleged failure on the part of the Respondent to appoint an Arbitrator led to filing of the present Petition under Section 11(6) of the 1996 Act and the Petitioner has sought appointment of an Arbitrator on the premise that Clause 46 of SCC is an Arbitration Clause between the Parties.
- Whether Clause 46 of SCC can be construed as an ‘arbitration clause’?
- Whether the proceedings carried out by DRC can be contrued as ‘arbitration proceedings’?
- With respect to the first issue the Court relied upon the case of AMR India Ltd. v. South Delhi Municipal Corporation, (2018) SCC OnLine Del 8243 whereby the Court had held the following:
“14. The Supreme Court explained that “Arbitration agreement is not required to be in any particular form. What is required to be ascertained is whether the parties have agreed that if disputes arise between them in respect of the subject-matter of contract such dispute shall be referred to arbitration, then such an arrangement would spell out an arbitration agreement.”
- The Court held that Clause 46 of the SCC has to be construed as an Arbitration Agreement between the parties as the clause meets all the four ingredients/essentials of an Arbitration Agreement, highlighted by the Supreme Court in the case of Bihar State Mineral Development Corporation and Another v. Encon Builders (I) (P) Ltd. (2003) 7 SCC 418.
- The Court also observed that in the judgement passed by Supreme Court in M.M.T.C. Limited v. Sterlite Industries (India) Limited, (1996) 6 SCC 716 it was held that validity of an Arbitration Agreement does not depend on the number of Arbitrators and the Arbitration Agreement specifying an even number of Arbitrators cannot be a ground to render the Agreement invalid under the 1996 Act. Further, a plain reading of section 10(2) of the 1996 Act enables appointment of a Sole Arbitrator where the parties fail to provide an odd number of Arbitrators under Section 10(1).
- With respect to the second issue the Court observed that the parties are ad idem that DRC proceedings were never prosecuted or defended as Arbitral Proceedings and even the members of DRC were conscious of this fact.
- Further, no procedure of conduct of Arbitral Proceedings, as prescribed under the 1996 Act, was followed as there was no reference and declaration given under Section 12(5) of the 1996 Act. Claims and Counter claims were not filed and parties had no opportunity to lead evidence.
- The order of DRC reveals that it was merely an internal mechanism with no semblance to the nature of proceedings that are held during arbitration. Thus, the Court held that there were no trappings of Arbitral proceedings and DRC proceedings cannot result into an Arbitral Award as provided under Section 31 of the Act.
- Thereafter, the Court relying upon the principles laid by the Supreme Court in Perkins Eastman Architects DPC and Another v. HSCC (India) Ltd. (2019) SCC OnLine SC 1517) that unilateral appointments is impermissible, held that present Petition deserves to be allowed by appointing a Sole Arbitrator to adjudicate the disputes between the parties.