Case Note & Summary
The Applicant, Tatva Global Environment (Deonar) Ltd., entered into a Concession Agreement with the Respondent, Municipal Corporation of Greater Mumbai, on 31 October 2011, for the construction and operation of a garbage processing plant on the Deonar dumping ground. The Respondent was obligated to lease the land to the Applicant at a nominal rent. Disputes arose as the Respondent allegedly failed to execute the lease and withheld payments. The Applicant invoked Clause 21 of the Agreement, which provides for a dispute resolution mechanism: first, a committee of three officers of the Respondent is to decide the dispute within 60 days, and an appeal lies to another committee of three Additional Municipal Commissioners, whose decision is final and binding. The Applicant referred the dispute to the Additional Municipal Commissioner, but no committee was constituted. The Applicant then filed an application under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator. The Respondent opposed, arguing that Clause 21 is a complete dispute resolution mechanism and does not provide for arbitration. The court examined Clause 21 and held that it does not constitute an arbitration agreement under Section 7 of the Act because it provides for a decision by a committee of officers of one party, not an independent arbitral tribunal. The clause is a departmental mechanism, not arbitration. However, Clause 23 of the Agreement states that disputes are subject to the jurisdiction of courts in Mumbai 'after reference to Arbitration', indicating an intention to arbitrate. The court found that the multi-tiered mechanism under Clause 21 failed as no committee was constituted, and the Applicant was entitled to seek appointment of an arbitrator. The court appointed a sole arbitrator to adjudicate the disputes.
Headnote
A) Arbitration Law - Existence of Arbitration Agreement - Section 7, Arbitration and Conciliation Act, 1996 - Clause 21 of Concession Agreement providing for dispute resolution by a committee of officers, with appeal to another committee whose decision is final and binding, does not constitute an arbitration agreement as it lacks the essential elements of an arbitration clause, namely, reference to a tribunal of arbitrators and not to a committee of officers of one party. The clause provides for a departmental dispute resolution mechanism, not arbitration. (Paras 5-10) B) Arbitration Law - Appointment of Arbitrator - Section 11, Arbitration and Conciliation Act, 1996 - Where the agreement contains a clause (Clause 23) stating that disputes shall be subject to the jurisdiction of courts in Mumbai 'after reference to Arbitration', it indicates an intention to refer disputes to arbitration. The failure of the multi-tiered dispute resolution mechanism under Clause 21 does not preclude the Applicant from seeking appointment of an arbitrator under Section 11. The court has the power to appoint an arbitrator when the mechanism fails. (Paras 11-15) C) Arbitration Law - Multi-tiered Dispute Resolution - Clause 21 of Concession Agreement - The clause provides for a committee of officers of the Respondent to decide disputes, with an appeal to another committee. Such a mechanism is not arbitration as the committee members are employees of one party and the decision is not an arbitral award. The clause is a condition precedent to arbitration, but its failure does not extinguish the right to arbitration. (Paras 5-10)
Issue of Consideration
Whether the dispute resolution mechanism provided in Clause 21 of the Concession Agreement constitutes an arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996, and whether the Applicant is entitled to appointment of an arbitrator under Section 11 of the said Act.
Final Decision
The court allowed the application and appointed a sole arbitrator to adjudicate the disputes between the parties arising out of the Concession Agreement dated 31 October 2011.
Law Points
- Arbitration agreement
- existence of
- Section 7 of the Arbitration and Conciliation Act
- 1996
- dispute resolution clause
- multi-tiered dispute resolution
- appointment of arbitrator
- Section 11 of the Arbitration and Conciliation Act
- jurisdiction of court
- clause 21 of concession agreement
- clause 23 of concession agreement
- reference to arbitration
- final and binding decision
- committee decision not arbitration award
