Once Party Fails To Constitute & Intimate Disputes Resolution Board, There Is No Alternative Remedy For Adjudication Of Dispute Except Arbitration: J&K&L HC

The Jammu and Kashmir and Ladakh High Court held that once the party fails to adhere to constitute and intimate the Dispute Resolution Board (DRB), there is no alternative remedy for adjudication of the dispute, except the Arbitration.

The Court held thus in an Arbitration Petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (A&C Act), seeking for appointment of an independent Sole Arbitrator.

A Single Bench of Chief Justice Tashi Rabstan observed, “By the time, the petition was filed and pending, constitution of DRB was intimated to the claimant/applicant which otherwise was also time barred in terms of clause (iii) of the Special Conditions made applicable w.e.f. 26.09.2018 and thus the petition is to be considered by this Court in terms of the provisions of Section 11(6) of the Act. … it is held that once the respondents have failed to adhere to constitute and intimate the DRB, there is no alternative remedy for adjudication of the dispute, but, for the arbitration.”

Senior Advocate Pranav Kohli represented the Petitioner while CGSC Sandeep Gupta represented the Respondents.

Factual Background -

The Petitioner was a private company being engaged in the business of construction of buildings and all connected services like roads, electrification, water supply, central heating, air conditioning, etc. It had acquired work experience and turn over from the execution of the works similar nature and was registered as SS CLASS Contractor with Index no SS-70. The Respondents had floated a tender and the Petitioner was declared as a successful bidder and the Order for execution of the work was issued in its favour for a lumpsum amount of Rs. 42,73,55,375.01/-.

Resultantly, a contract was executed between the parties and the Petitioner was to execute the construction of 63 buildings. However, only 19 buildings were made available and rest could not be finalized by the Respondents within time, thus, leading to delay in progress of the contract work. The Petitioner could complete 34 buildings in all respects and pursuantly, disputes arose between the parties. The Petitioner issued notice seeking resolution of dispute through DRB but the adjudication could not take place. The Petitioner stopped the work and filed a Petition.

The following three issues were to be considered by the High Court –

• Whether Petition under Section 11(6) of the A&C Act for appointment of arbitrator is maintainable in view of condition 71 of DRB?

• Whether invoking of arbitration clause 70 is permissible in view of the contract is incomplete, terminated or determined in view of the condition Nos. 55, 56 and 57?

• Whether a Petition under section 11(6) of the A&C Act is maintainable, if the notice invoking arbitration clause is not served in terms of Section 11(4)(a)?

With regard to the first issue, the Court noted, “As per the relevant clause of Special Conditions of Dispute Resolution Board (DRB), the respondents were under an obligation to constitute a DRB and intimate the same to the petitioner-contractor within a spepcified period of time, i.e., one month. Since time period for constitution and intimation of DRB was incorporated in the contract by way of amendment of 2018, therefore, it was an obligation upon the respondents to intimate the same within a period of one month from the date of incorporation of amendment, i.e., 26.09.2018.”

The Court added that the Respondents had to constitute a DRB within 30 days but neither the DRB was constituted nor the same was intimated to the claimant-contractor within stipulated period under the relevant clause and therefore, they failed to fulfill their obligations, resultantly, reference of dispute to the DRB did not arise.

“When the present petition came to be filed on 06.10.2023, the respondents filed their objections. It was for the first time that the claimant-contractor was informed with regard to constitution of DRB by virtue of letter dated 30.09.2023”, it said.

While dealing with the second issue, the Court observed that there is an alternative dispute resolution mechanism, that is, by way of an arbitration between the parties under the contract – agreement, and this dispute has arisen out of the agreement between the parties to the Petition which is also subject to the arbitration agreement.

In respect of the third issue, the Court said that the contention of Respondents that there is non-compliance of the service of notice of invoking arbitration is not borne out of the record, rather it is contrary to the same.

“It is pertinent to mention here that the petitioner had already approached the respondents for referring the matter to the Dispute Resolution Board (DRB) and therefore, has exhausted the statutory remedy well before approaching this Court. Thus, the petitioner cannot be relegated back to approach the DRB at this stage. The record clearly indicates that the work could not be progressed due to the inaction on the part of the respondents and the said inaction on the part of the respondents itself creates a dispute inter alia parties to the agreement and the same is liable to be referred to the arbitration”, it added.

Accordingly, the High Court disposed of the Arbitration Petition and appointed the Sole Arbitrator.

Cause Title- M/s Pardeep Electricals and Building Pvt. Ltd. v. Union of India & Anr.

Appearance:

Petitioner: Senior Advocate Pranav Kohli, Advocates Arun Dev Singh, and Vastav Sharma.

Respondents: CGSC Sandeep Gupta

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