Case Note & Summary
The applicant, M/s. Harbhajan Sarabjeet & Associates, a registered partnership firm, filed an application under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator to resolve disputes arising out of a contract with the respondents, Maharashtra Krishna Valley Development Corporation and its Executive Director. The contract contained a multi-tier dispute resolution clause (Clause 30), which provided for decisions by the Superintending Engineer, an appeal to the Chief Engineer, and a further appeal to the Executive Director, who, if convinced of the claim's substance, would refer it to an Executive Committee/Claim Committee for decision. The clause also stated that the decision of the Executive Committee/Claim Committee would be final and binding. The applicant contended that this clause constituted an arbitration agreement. The respondents did not file any reply or raise any objection to the appointment of an arbitrator. The court examined the clause and found that it provided for a mechanism that ultimately leads to a binding decision by the Executive Committee/Claim Committee, which is akin to an arbitral tribunal. The court noted that the respondents did not object to the appointment, and therefore, there was no dispute regarding the existence of an arbitration agreement. The court held that the clause is an arbitration agreement and appointed a sole arbitrator to adjudicate the disputes between the parties. The court directed the parties to appear before the arbitrator on a specified date and left the arbitrator to decide the fees and other procedural matters.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11 of the Arbitration and Conciliation Act, 1996 - Existence of Arbitration Agreement - The court considered whether a multi-tier dispute resolution clause containing an arbitration agreement at the final tier constitutes an arbitration agreement under Section 7 of the Act. The court held that the clause providing for arbitration by the Executive Director/Claim Committee is an arbitration agreement, and the failure to exhaust prior tiers does not preclude the court from appointing an arbitrator under Section 11, as the respondents did not object to the appointment and the clause itself provides for arbitration. (Paras 1-5) B) Arbitration Law - Multi-tier Dispute Resolution Clause - Section 11 of the Arbitration and Conciliation Act, 1996 - Waiver of Pre-arbitration Steps - The court noted that the respondents did not raise any objection to the appointment of an arbitrator on the ground that the applicant had not exhausted the earlier tiers of the dispute resolution mechanism. The court held that the respondents' failure to object amounts to a waiver of any such requirement, and the court can proceed to appoint an arbitrator. (Paras 3-5)
Issue of Consideration
Whether the existence of a multi-tier dispute resolution clause in the contract bars the appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, when the applicant has not exhausted all tiers of the dispute resolution mechanism.
Final Decision
The court allowed the application and appointed a sole arbitrator to adjudicate the disputes between the parties. The parties were directed to appear before the arbitrator on 15th November 2010 at 11:00 a.m. The arbitrator was left to decide his/her fees and other procedural matters.
Law Points
- Section 11 of the Arbitration and Conciliation Act
- 1996
- existence of arbitration agreement
- multi-tier dispute resolution clause
- appointment of arbitrator
- non-compliance with pre-arbitration steps
