Case Note & Summary
The applicant, a proprietary concern, entered into a tender contract with the Vidarbha Irrigation Development Corporation, a government body. The contract contained clauses 30.1, 30.2 and 30.3, which prescribed a multi-tier mechanism for resolving disputes: the Superintending Engineer's decision was final, with an appeal to the Chief Engineer and then to the Executive Director, and potential referral to an Executive Committee or Claim Committee for a substantial decision. No clause expressly provided for arbitration. Disputes arose between the parties, and the applicant filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 before the Bombay High Court, seeking appointment of an arbitrator, contending that these clauses constituted an arbitration agreement. The non-applicant corporation opposed the application, arguing that the clauses only created an internal departmental mechanism for decisions by officers and did not amount to an arbitration agreement under Section 7 of the Act; it also declined to consent to the appointment of an arbitrator. The court examined the clauses and found that they merely established an in-house arrangement for hierarchical decision-making, with no reference to arbitration or an arbitral tribunal. Observing that an arbitration agreement under Section 7 requires a clear agreement to submit disputes to arbitration, the court held that the absence of any such reference rendered the clauses insufficient. The court further noted that the provisions of Section 89 or Section 151 of the Code of Civil Procedure could not be invoked to appoint an arbitrator in a Section 11 petition. Accordingly, the application was dismissed as not maintainable for want of an arbitration clause. However, the parties were granted liberty to settle the matter by consent through arbitration or mediation, and no costs were awarded.
Headnote
A) Arbitration Law - Arbitration Agreement - Section 7, Arbitration and Conciliation Act, 1996 - Existence of arbitration agreement - Clauses in tender contract providing for hierarchical decision-making by Superintending Engineer, Chief Engineer, and Executive Committee do not constitute an arbitration agreement as they lack any reference to arbitration or an arbitral tribunal - Held application under Section 11 of the Act is not maintainable and is dismissed, with liberty to parties to settle by consent (Paras 2-7).
Issue of Consideration
Whether clauses 30.1, 30.2, and 30.3 of the tender contract constitute an arbitration agreement within the meaning of Section 7 of the Arbitration and Conciliation Act, 1996, warranting appointment of an arbitrator under Section 11
Final Decision
Application under Section 11 of the Arbitration and Conciliation Act, 1996 is dismissed as not maintainable for lack of arbitration agreement. Parties are at liberty to settle the matter by consent either through arbitration proceedings or mediation. No order as to costs.
Law Points
- In-house dispute resolution clause without reference to arbitration does not constitute arbitration agreement under Section 7 of Arbitration and Conciliation Act
- 1996
- For appointment under Section 11
- there must be an arbitration agreement
- Section 89 and 151 CPC cannot be invoked to appoint arbitrator in Section 11 petition
