A Party Cannot Insist On Fulfilment Of Pre-Arbitral Steps After Terminating The Contract: Delhi High Court

The bench of Justice Pratibha M. Singh held that once a party has itself proceeded to terminate the agreement without approaching the Project Manager for conciliation, it cannot object to the maintainability of the petition seeking appointment of the arbitrator on the ground of non-fulfilment of pre-arbitral steps.

The Court held that once the agreement has been terminated, no resolution or settlement or conciliation through Project Manager would be possible as designated authority would cease to exist upon the termination of the agreement.

Facts

The parties entered into an agreement dated 13.11.2021 for construction/setting up of a school. Clause 52 of the agreement was a multi-tier dispute resolution clause. It provided that any dispute would be first attempted to be resolved amicably through mutual talks and upon the failure thereof, the decision on the dispute to shall be taken by the project manager. It further provided that any party aggrieved by the decision of the project manager could invoke arbitration.

A dispute arose between the parties in context of certain bills raised by the petitioner for the work carried out in terms of the agreement. The agreement was terminated by the respondent vide a letter dated 13.11.2022.

Aggrieved by the rejection of its claim and the termination of the agreement, the petitioner invoked the arbitration clause and approached the Court for the appointment of the arbitrator.

Objection to Maintainability

The respondent objected to the maintainability of the petition on the following ground(s):

• That the petition is pre-mature as in terms of the agreement, the dispute was to be first referred to the project manager for its decision.
• That the petition is not maintainable due to non-fulfilment of pre-arbitral steps.
• Pre-arbitral steps are mandatory in nature, non-compliance of which renders a petition not maintainable.

Analysis by the Court

The Court observed that the respondent had terminated the agreement vide a letter dated 13.11.2022 and before taking such an action, it did not refer the matter to the project manager.

The Court held that a party cannot insist on fulfilment of pre-arbitration conciliation once it has itself terminated the agreement. It held that pre-arbitration conciliation provided in the agreement falls with the termination of the agreement.

The Court held that once a party has itself proceeded to terminate the agreement without approaching the Project Manager for conciliation, it cannot object to the maintainability of the petition seeking appointment of the arbitrator on the ground of non-fulfilment of pre-arbitral steps.

The Court held that once the agreement has been terminated, no resolution or settlement or conciliation through Project Manager would be possible as designated authority would cease to exist upon the termination of the agreement.

Accordingly, the Court rejected the objections and allowed the petition by appointing a sole-arbitrator.

Case Title: Mr. Gajendra Mishra v. Pokhrama Foundation, ARB.P. 969/2023

Citation: 2024 LiveLaw (Del) 74

Date: 10.01.2023

Counsel for the Petitioner: Mr. Subhasish Bhowmick and Ms. Manisha Pandey.

Counsel for the Respondent: Mr. Satendra K. Rai and Ms. Saloni Sharma.

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