Pre-Arbitration Reference To DRC Would Not Be A Bar To Appointment Of Arbitrator When The Chief Engineer Has Failed To Respond To Notice Of Dispute: Delhi High Court

The Delhi High Court has held that in a multi-tier dispute resolution clause which provides for pre-arbitration reference to Dispute Resolution Committee (DRC), the failure to refer the dispute to DRC would not be a ground to refuse appointment of arbitrator when the Chief Engineer against whose decision an appeal was to be filed before DRC failed to respond to notice of dispute. The bench of Sachin Datta held in a multi-tier arbitration clause, a party would have no occasion to file an appeal before the DRC when the Chief Engineer has failed respond to that party’s notice of dispute, therefore, not approaching the DRC would be no ground to dismiss the arbitration petition. It further held that it is incumbent upon the Chief Engineer to render its decision within the time period provided in the agreement. The Court reiterated that limitation of claims is a mix question of fact and law, requires detailed examination which can only be done by the arbitrator and not the court exercising powers under Section 11 of the A&C Act. Facts The parties entered into an agreement dated 23.02.2017 for ‘Constriction of 100 seater JSC/toilets at JJ Cluster G.T. Road, Lal Bagh, Delhi’. In terms of the agreement, the petitioner was to carry out the construction work. Clause 25 of the agreement provided for resolution of disputes, it provided that any dispute arising out or in connection with the agreement would be first referred to the Chief Engineer for its decision, a party aggrieved by the decision of the Chief Engineer would have to file an appeal before DRC and any party aggrieved by the decision of the DRC would finally invoke the arbitration clause. A dispute arose between the parties in relation to non-payment of bills raised by the petitioner for the work carried out by it. Consequently, it wrote a letter to the Chief Engineer to resolve the dispute, however, the it failed to respond to petitioner’s letter. Accordingly, the petitioner invoked the arbitration clause and issued the notice of arbitration. On failure of the parties to mutually appoint the arbitrator, the petitioner filed a petition under Section 11(6) of the A&C Act. Contention of the Parties The respondent objected to the maintainability of the petition on the following grounds: The petitioner has approached the Court without exhausting the existing remedies given under the agreement. In terms of Clause 25, the petitioner should have approached the DRC and sought its decision on the dispute, however, it has directly approached the Court, therefore, the petition is pre-mature. The claims of the petitioner are time barred as the cause of action for the same arose way back in the year 2017, however, the petition was filed after the expiry of 3 years limitation period. Analysis by the Court The Court observed that the petitioner has issued several letters to the respondent seeking resolution of its dispute. It has issued letters to the Executive as well as the Chief Engineer seeking resolution of its dispute, however, there was response from the respondent to those letters which prompted the petitioner to invoke the arbitration clause. The Court observed that in terms of Clause 25, the Chief Engineer had to give its decision within 30 days from the date of letter issued by the petitioner, however, it failed to respond to such letters. Accordingly, the Court found the objections to be misplaced as it was only its decision that the petitioner was supposed to file an appeal before the DRC and as there was no decision from the Chief Engineer, there was no occasion for the petitioner to approach the DRC. The Court reiterated that limitation of claims is a mix question of fact and law, requires detailed examination which can only be done by the arbitrator and not the court exercising powers under Section 11 of the A&C Act. Accordingly, the Court allowed the petition and appointed a sole arbitrator. Case Title: Y.K. Goyal v. Delhi Urban Shelter Improvement BoardCitation: 2023 LiveLaw (Del) 701 Date: 14.08.2023 Counsel for the Petitioner: Mr. J.K. Nayyar Counsel for the Respondent: Mr. Anuj Chaturvedi and Ms. Richa Dhawan Click Here To Read/Download Order

Pre-Arbitration Reference To DRC Would Not Be A Bar To Appointment Of Arbitrator When The Chief Engineer Has Failed To Respond To Notice Of Dispute: Delhi High Court

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