Case Note & Summary
The applicant, Shri Sai Trading Company, a partnership firm, entered into an agreement dated 27th April 2006 with the respondent, Sangli Miraj & Kupwad City Municipal Corporation, for collection of octroi for the period 1st May 2006 to 30th April 2007. The applicant was to pay Rs. 43,06,66,666 during the contract period. The agreement contained two dispute resolution clauses: Clause 15 provided that disputes shall be referred to the Commissioner of the Corporation with an appeal to the Government of Maharashtra (Urban Development), and Clause 16 stated that the agreement would be governed by the Arbitration and Conciliation Act, 1996. The applicant claimed losses of about Rs. 11 crores due to a traders' strike, natural calamities including flooding of the Krishna river, and the respondent allegedly granting a 50% octroi concession to industrial units. The respondent invoked a bank guarantee furnished by the applicant. The general body of the respondent passed a resolution on 15th February 2007 noting that as per Clause 16, the Arbitration and Conciliation Act, 1996 applies, and decided to appoint an arbitrator. An arbitral tribunal was constituted with the consent of the parties, but the respondent made allegations against the tribunal, leading to its withdrawal. The applicant then filed this petition under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator. The court examined whether an arbitration agreement existed despite Clause 15. It held that Clause 16 clearly indicated the parties' intention to be governed by the Arbitration Act, and the earlier clause did not exclude arbitration. The court noted that the respondent's own resolution recognized the applicability of the Act. Since the previously constituted tribunal withdrew due to allegations, the court appointed a sole arbitrator to adjudicate the disputes.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11 of the Arbitration and Conciliation Act, 1996 - Existence of Arbitration Agreement - The court considered whether an arbitration agreement existed despite a clause providing for disputes to be referred to the Commissioner with an appeal to the Government. The court held that Clause 16 of the agreement, which stated the agreement would be governed by the Arbitration and Conciliation Act, 1996, constituted an arbitration agreement, and the earlier clause did not exclude arbitration. The court appointed an arbitrator as the previously constituted tribunal withdrew due to allegations of bias. (Paras 1-6) B) Arbitration Law - Withdrawal of Arbitrator - Section 11 of the Arbitration and Conciliation Act, 1996 - Effect of Allegations - The court noted that the arbitral tribunal constituted with consent withdrew after the respondent made allegations against them. The court held that this necessitated a fresh appointment under Section 11, as the parties could not agree on a substitute. (Paras 2, 6)
Issue of Consideration
Whether the court can appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 when the arbitration agreement provides for a dispute resolution mechanism involving the Commissioner and Government appeal, and the previously constituted arbitral tribunal withdrew due to allegations by the respondent.
Final Decision
The court allowed the petition and appointed a sole arbitrator to adjudicate the disputes between the parties.
Law Points
- Section 11 of the Arbitration and Conciliation Act
- 1996
- existence of arbitration agreement
- appointment of arbitrator
- withdrawal of arbitrator due to allegations
- interpretation of arbitration clause
