'Administrative Mechanism For Resolution Of Disputes' Is Not A Substitute For Arbitration: Delhi High Court

The Delhi High Court has ruled that the Administrative Mechanism for Resolution of Disputes (AMRD) is not a substitute for arbitration in cases where there is an arbitration agreement between the parties. The Single Bench of Justice Anup Jairam Bhambhani observed that the party invoking the arbitration clause fell within the scope and ambit of the AMRD, under the Office Memorandum No. 334774/DoLA/AMRD/2019, dated 31.03.2020, issued by the Ministry of Law & Justice, Department of Legal Affairs. However, the Court held that the AMRD is only a mechanism for possible settlement of disputes between the governmental organizations and not a substitute for arbitration. After certain disputes arose between the petitioner- Prasar Bharti and the respondent- National Brain Research Centre under an agreement, the respondent invoked the arbitration clause. Subsequently, a Sole Arbitrator was appointed by the Delhi High Court under Section 11(6) of the Arbitration & Conciliation Act, 1996 (A&C Act). The petitioner filed a petition under Section 14(1)(b) of the A&C Act seeking termination of the mandate of the Sole Arbitrator. The petitioner Prasar Bharti submitted before the Court that after an Arbitrator was appointed by the High Court, the Ministry of Law & Justice, Department of Legal Affairs issued an Office Memorandum No. 334774/DoLA/AMRD/2019, dated 31.03.2020. In the said Office Memorandum, the Department of Legal Affairs, while referring to the DO letter No. 332619/338367/LS/2019, dated 28th February, 2020, had issued details regarding the Administrative Mechanism for Resolution of Disputes (AMRD). The petitioner averred that vide the DO Letter dated 28th February, 2020, the existing Administrative Mechanism for Resolution of Commercial Disputes (AMRCD), currently applicable to commercial disputes between the Central Public Sector Enterprises (CPSEs) inter se, and between the CPSEs and Government Departments/Organisations, was extended for resolution of disputes, other than taxation, between the Ministries/Departments inter se. The petitioner added that in view of the said Office Memorandum (O.M.), the petitioner and the respondent had mutually and amicably agreed, vide a Memorandum of Settlement signed between them, to terminate the mandate of the Arbitrator. Further, the parties had agreed to adopt the administrative mechanism as contained in the O.M. The petitioner argued that since the respondent fell within the purview of the entities covered by the said Office Memorandum (O.M), the petitioner is mandated to adopt and follow the institutionalized mechanism for resolution of disputes, as contained in the said O.M. The respondent National Brain Research Centre argued that an agreement was executed between the petitioner and the respondent, which contained an arbitration clause. The respondent argued that though it did sign the Memorandum of Settlement with the petitioner, however, it contended that it was an express term of the settlement that the respondent shall not be liable for any claims until and unless the disputes between the petitioner and respondent were finally resolved. Alleging that there was a breach by the petitioner of the terms of the Memorandum of Settlement, the respondent submitted that it decided not to give its consent for termination of the mandate of the Arbitrator and that the parties had failed to resolve their disputes. The High Court held that though the respondent fell within the scope and ambit of the AMRD, however, the AMRD is only a mechanism for possible settlement of disputes between the governmental organizations. The bench ruled that the AMRD is not a substitute for arbitration in cases where there is an arbitration agreement between the parties. Noting that the AMRD is a successor to the Permanent Machinery of Arbitration, which was put in place in March 1989, the Court referred to the decision of the Supreme Court in Northern Coalfields Ltd. versus Heavy Engg. Corpn. Ltd. (2016). The Apex Court in Northern Coalfields (2016) had laid down that the Permanent Machinery of Arbitration was and continues to be outside the purview of the Arbitration Act, 1940, which is now replaced by the Arbitration and Conciliation Act, 1996. "Clearly therefore, the AMRD is only a mechanism for possible settlement of disputes inter-se governmental organisations, in this case between the petitioner and respondent No. 1, in an effort to obviate need for more expensive and time-consuming adjudicatory mechanisms. The AMRD is not a substitute for arbitration in cases where there is an arbitration agreement between the parties." The Court observed that though the respondent had initially consented to the termination of the mandate of the Sole Arbitrator in the Memorandum of Settlement, and had agreed to take recourse to the AMRD, however, subsequently, it had withdrawn its consent for...

'Administrative Mechanism For Resolution Of Disputes' Is Not A Substitute For Arbitration: Delhi High Court

Parina Katyal

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