Petition U/S 11 Of Arbitration Act Is Maintainable If Statutory Remedy Before Invoking Arbitration Clause Is Exhausted: J&K And Ladakh HC

The Jammu & Kashmir and Ladakh High Court bench of Chief Justice Tashi Rabstan has held that once the statutory remedy under contract is exhausted, arbitration clause can be invoked and appointment of the arbitrator can be sought under section 11 of the Arbitration Act.In this case, the respondent had to constitute Dispute resolution Board (DRB) within 30 days after execution of the contract for resolving any dispute arising between the parties but no DRB was constituted. Brief Facts The instant petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') is for seeking appointment of an independent sole Arbitrator. The petitioner-company is engaged in the business of construction of buildings and all connected services like roads, Electrification, water supply, Central heating, Air Conditioning etc. and is said to have successfully executed and completed various works. In response to a NIT floated by the respondents for Provn. of KLP ACCN at Samba dated 29.03.2017 and subsequently amended and revised tender uploaded vide letter no. T-89125/78/E8 dated 04.08.2017), the petitioner was declared as a successful bidder and the order for execution of the work was issued in its favour. The contract agreement for PROVIN of KLPACCN at Samba came to be executed between the petitioner, M/s Pardeep Electricals and Builders Pvt. Ltd., and the respondents on 14.10.2017. As per the terms and conditions of the contract, the period for completion of work was 30 months and project site was handed over on 24.10.2017 and the work at site commenced on 24.10.2017. The said buildings, structures etc. were required to be constructed in accordance with the drawings and structures provided to the petitioner by the Chief Engineer. Out of 69 buildings to be constructed, the petitioner has completed 34 No's of buildings in all respects. Action/inaction on the part of the Respondents in granting of the extension of the work in a delayed and piece meal manner led to substantial delay in completion of the work. The disputes and differences have arisen relating to and arising out of the Tender Notice in accordance with clause 70 of the IAFW 2249. Contentions The petitioners submitted that the petitioner served various notices upon the respondents seeking redressal of the grievances through Arbitration mode, but, no response was received from the respondents. The petitioner on 19.08.2023 issued notice seeking resolution of disputes through Disputes Resolution Board (hereinafter referred to as 'DRB') mechanism as provided under the Contract. The Respondents have failed to appoint the members of the DRB for adjudication of the disputes inter se the parties. Per contra, the respondents submitted that in view of Condition 70 of IAFW 2249 unless both parties agree in writing such reference shall not take place until after the completion or alleged completion of the work or termination or determination of the contract. That the petitioner abandoned the work on 12th Sep. 2023 and approached the Court. There is also a provision of DRB in the contract vide condition No.71 of IAFW-2249 and dispute, if any, during the execution of work is to be resolved through DRB. That the extension of time was granted as requested by the petitioner. The petitioner stopped the work w.e.f. 12th Sep. 2023 and has taken legal course with an intention not to complete the work in near future. The contention of petitioner that he has undergone financial losses due to non-grant of advance extension is beyond facts. However, the claimant has not submitted his claim to the DRB till date and unnecessarily approached this court. Court's Analysis The first question before the court Whether petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, for appointment of arbitrator is maintainable in view of condition 71 of the Dispute Resolution Board (DRB). The court after perusing the relevant clauses of the agreement noted that as per the relevant clause of Special Conditions of Dispute Resolution Board (DRB), the respondents were under an obligation to constitute a DRB and intimate the same to the petitioner-contractor within a specified period of time, i.e., one month. Since time period for constitution and intimation of DRB was incorporated in the contract by way of amendment of 2018, therefore, it was an obligation upon the respondents to intimate the same within a period of one month from the date of incorporation of amendment, i.e., 26.09.2018. The respondents had to constitute a DRB by or before 26.10.2018 i.e. 30 days from 26.09.2018. Admittedly, neither the DRB was constituted nor the same was intimated to the claimant-contractor within stipulated period under the relevant clause, the court noted. The court noted that in Pardeep Electricals and Building Pvt. Ltd. V/s Union of...

Petition U/S 11 Of Arbitration Act Is Maintainable If Statutory Remedy Before Invoking Arbitration Clause Is Exhausted: J&K And Ladakh HC

Mohd Malik Chauhan

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