Case Note & Summary
The Miscellaneous Civil Application (Arbitration) No. 920/2012 was filed by The Akola Pravasi Va Malvahtuk Sahakari Sanstah Maryadit, Akola, a cooperative society, under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator based on an arbitration clause in an agreement with the Municipal Corporation of City of Amravati and another cooperative society. The dispute arose from the agreement's Clause 21, which provided a two-tier mechanism: first, a five-member committee comprising the Municipal Commissioner or his representative, the Divisional Controller of MSRTC, the agent's representative, the RTO, and the Incharge Engineer (Automobile) would decide the dispute; if the agent was dissatisfied, within 30 days it could indicate its intention to refer the dispute to arbitration, after which the Municipal Commissioner would send a list of three officers for selection as sole arbitrator. The applicant, having a dispute pending since August 2011, directly approached the High Court without the committee having rendered a decision. On 28.06.2013, the Court noted that the committee was under process and that certain interim prayers were not pressed. At the final hearing on 05.07.2013, the Court found that the applicant had not exhausted the first tier of the agreed procedure. It also observed that the applicant contributed to the delay by not timely nominating its representative for the committee. Relying on the principle from Deep Trading Company v. Indian Oil Corporation, (2013) 4 SCC 35, that a party may forfeit the right to appoint an arbitrator if it fails to do so upon request, the Court distinguished the present case because the applicant had not yet crossed the pre-arbitral stage. The Court held that the application for appointment of an arbitrator was premature and rejected it while granting liberty to pursue remedies. However, directing that the committee should adjudicate the claim within six months and the applicant should cooperate, the Court disposed of the matter with no order as to costs. The decision favored the respondents, as the application was dismissed, emphasizing strict adherence to contractual dispute resolution mechanisms.
Headnote
A) Arbitration - Appointment of Arbitrator - Section 11, Arbitration and Conciliation Act, 1996 - The Court held that where an arbitration clause mandates a pre-arbitral committee decision before arbitration, a party must exhaust that step before seeking appointment of an arbitrator. The applicant's failure to wait for the committee's decision rendered the application premature. (Paras 7-8) B) Contract - Interpretation of Arbitration Clause - Clause 21 of Agreement - The clause required constitution of a five-member committee. The applicant's delay in nominating a representative contributed to the delay in constitution, thereby disentitling the applicant to immediate appointment of an arbitrator. (Paras 6-7) C) Civil Procedure - Interim Relief under Section 11 - Section 11, Arbitration Act - The designated court under Section 11 lacks jurisdiction to grant interim relief or stay; the applicant accordingly did not press such prayers. (Order dated 28.06.2013, Para 3)
Issue of Consideration
Whether the application under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator was maintainable given the two-tier dispute resolution clause and the fact that the pre-arbitral committee had not yet rendered a decision.
Final Decision
The application under Section 11 was rejected as premature, with liberty to initiate appropriate proceedings. The Court directed that the five-member committee should adjudicate the claim within six months, subject to confirmation of its constitution, and the applicant was to cooperate. No costs were awarded.
Law Points
- Arbitration clause must be strictly construed
- Pre-arbitral mechanism must be exhausted before invoking Section 11
- Delay by applicant in appointing representative under agreed procedure precludes appointment of arbitrator at that stage
- Designated court under Section 11 has no jurisdiction to grant interim relief
