Once Agreed To Constitute An Arbitral Tribunal, A Party Cannot Turn Around And Insist On Fulfilment Of Pre-Arbitral Steps: Delhi High Court

The bench of Justice Sachin Datta also held that issue of 'excepted matters' requires in-depth examination of the factual matrix, therefore, the same can only be done by the arbitral tribunal and goes beyond the scope of examination permissible under Section 11 of the A&C Act.

Facts

The dispute stemmed from a contract for the "Replacement of Old Washing cum pit line nos. 20 and 21 & building of sewerage disposal arrangement."

The contract had a specific arbitration clause stating that a Panel of three retired Railway Officers should serve as arbitrators. The petitioner claimed it faced hindrances in completing the work due to the respondent not fulfilling its responsibilities.

After issuing a termination notice due to slow progress, the respondent received a notice from the petitioner invoking arbitration and presenting certain claims. In response, the respondent terminated the contract and planned to complete the remaining work independently.

The arbitration process started with the respondent sharing a panel of retired Railway Officers for arbitration. However, a disagreement arose when the petitioner refused to waive a specific section of the Arbitration and Conciliation Act. Accordingly, the petitioner approached the Court for the appointment of the arbitrator.

Contention of the Parties

Petitioner's Submissions

• Contended that the respondent's letter dated 14.07.2022 and the appointment procedure violated the law as per Margo Networks (P) Ltd. v. Railtel Corpn. of India Ltd. and Perkins Eastmen Architect DPC & Ors. v. HSCC (India) Ltd.
• Argued for the appointment of an independent Sole Arbitrator.

Respondent's Submissions

• Did not dispute the applicability of the judgments cited by the petitioner.
• Raised an objection stating the petition was premature, as the petitioner had not utilized Clause 63 of the GCC before approaching the court.
• Argued that the use of the word "shall" in Clause 63 of the GCC made it mandatory for the parties to refer the dispute to the General Manager before invoking the arbitration clause.

Analysis by the Court

The Court dismissed the objection raised by the respondent regarding the petition being premature.

The Court held that the respondent, by agreeing to constitute the Arbitral Tribunal in response to the petitioner's invocation letter, cannot later resist arbitration by relying on Clause 63 of the GCC. It held that held that once a party has agreed to constitute an arbitral tribunal, it cannot turn around and resist appointment of arbitrator on the ground of non-fulfilment of pre-arbitral steps.

The Court held issue of 'excepted matters' requires in-depth examination of the factual matrix, therefore, the same can only be done by the arbitral tribunal and goes beyond the scope of examination permissible under Section 11 of the A&C Act.

Accordingly, the Court allowed the petition and appointed the arbitrator.

Case Title: N.K. Sharma v. The General Manager Northern Railways, ARB.P. 893 of 2022

Citation: 2023 LiveLaw (Del) 1207

Date: 01.12.2023

Counsel for the Petitioner: Mr. Avinash Trivedi, Mr. Anurag Kaushik and Mr. Jatin Arora, Advs.

Counsel for the Respondent: Mr. Bhagvan Swarup Shukla, CGSC (through v/c), Mr. Sarvan Kumar, G.P. and Mr. Arun Kumar, Sr. DenIII, Mr. Shiv Raj Meena, CLA and Mr. Pankaj, OS/W-III.

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