Resort To Resolve Disputes Internally Before Filing Section 11 Application Under A& C Act: Delhi High Court

The bench of Justice Navin Chawla held that when the agreement provides for a multi-tier dispute resolution process in the form of reference of dispute firstly to some internal authorities and on being dissatisfied invoke the arbitration, then the parties cannot directly approach the court for the appointment of arbitrator without exhausting the remedy given under the contract.

Facts

The parties entered into an agreement dated 18.09.2018 wherein the petitioner was to carry out certain construction works for the respondent. A dispute arose between the parties and the petitioner approached the court for the appointment of the arbitrator.

Objection to the maintainability of the petition

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

• The agreement between the parties provides for certain pre-arbitration steps that are to be followed by the parties before finally invoking the arbitration.
• In event of any dispute arising between the parties, it is to be first referred to reviewing authority and then to the appealing authority, and then to the Dispute Redressal Committee (DRC). If any party is dissatisfied with the decision of DRC it can invoke arbitration against its decision. However, the petitioner has not satisfied the above requirements and filed the application for the appointment of arbitrator without exhausting the internal dispute resolution remedies available, thus, the application is premature.

Analysis by the Court

The Court observed that the agreement provides for certain pre-arbitration steps to be taken by the parties to try and mutually resolve the dispute and only in event of failure of those methods, the recourse to arbitration can be taken.

The Court also observed that even the notice of arbitration must make a reference to the decision of the internal authorities.

The Court held that an application for the appointment of arbitrator under Section 11 of the A&C Act would be premature if it is filed without compliance with the pre-arbitration with the internal dispute resolution mechanism stipulated under the agreement.

The Court held that when the agreement provides for a multi-tier dispute resolution process in the form of reference of dispute firstly to some internal authorities and only on being dissatisfied with their decision invoke the arbitration. Then any party cannot directly approach the court for the appointment of arbitrator without exhausting the remedy given under the contract.

Accordingly, the Court dismissed the petition as premature.

Case Title: Chabbras Associates v. HSCC India Limited

Citation: 2023 LiveLaw (Del) 84

Date: 18.01.2023

Counsel for the Petitioner: MR. Vishesh Issar and Ms. Krishna Parkhani

Counsel for the Respondent: Mr. Saurabh Mishra, Ms. Aashna Bhatia and Mr. Nikhil Sharma

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