Pre-Requirement Of Conciliation Before Invoking Arbitration Can't Prevent Filing Of Application U/S 11 Of Arbitration Act: Delhi High Court

Brief Facts

The present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 („A&C Act') has been filed by the Petitioner seeking appointment of an independent sole arbitrator to adjudicate the disputes between the parties.

The Petitioner submitted that the Petitioner herein entered into a Power Purchase Agreement dated 14.10.2017 with the Respondent herein for Design, Manufacturing, Supply, Erection, Testing and Commissioning Including Operation and Maintenance of 1000KW Rooftop solar Photovoltaic Power System for 25 years in PDM University, Sector 3A, Bahadurgarh, Haryana.

That disputes have arisen between the parties regarding payment of dues.,the Petitioner herein invoked Clause 17.7(c) of the Power Purchase Agreement dated 14.10.2017 which provides for arbitration for adjudication of the disputes between the parties.

That the Petitioner herein sent a notice dated 12.07.2023 to the Respondent invoking the Arbitration Clause. Since no reply has been given by the Respondent to the letter of the Petitioner, the Petitioner has approached this Court by filing the present Petition.

The Respondent raises objection to the present Petition. He states that Clause 17.7.(c)(i) of the Power Purchase Agreement clearly specify that for any disputes, claims etc. arising out of the Agreement, these disputes shall first be attempted to be resolved through conciliation. The Petitioner has not requested any such conciliation proceedings nor has it made any effort to resolve the so-called disputes/claims. He, therefore, states that the present Petition is not maintainable.

Court's Analysis

The court, at the outset, referred to the Delhi High Court judgment in Ravindra Kumar Verma v. BPTP Ltd., 2014 wherein the same question was posed for consideration before the court.

The court in the above case while noting the observations of the learned single judge in Saraswati Construction Co. v. Cooperative Group Housing Society Ltd. 1995 held that existence of conciliation or mutual discussion procedure or similar other procedure though should not be held as a bar for dismissing of a petition which is filed under Sections 11 or 8 of the Act or for any legal proceeding required to be filed for preserving rights of the parties, however before formally starting effective arbitration proceedings parties should be directed to take up the agreed procedure for conciliation as provided in the agreed clause for mutual discussion/conciliation in a time bound reasonable period, and which if they fail the parties can thereafter be held entitled to proceed with the arbitration proceedings to determine their claims/rights etc.

Based on the above, the court in the present case observed that it is open for the parties to conciliate before the Arbitration Proceedings commence.

The second objection is that the Arbitration Clause is ambiguous. The Court noted that there is no ambiguity in the Arbitration Clause. In any event, even if there is any ambiguity, a co-ordinate Bench of this Court in SK Engineering and Construction Company India v. Bharat Heavy Electricals Ltd., 2023 has held that while construing an arbitration agreement, the Court must lean in favour of giving effect to the arbitration agreement between the parties as the legislative object and intent of the framers of the Statute is to encourage arbitration.

The court further referred to the Supreme Court judgment in Intercontinental Hotels Group (India) (P) Ltd. v. Waterline Hotels (P) Ltd., (2022) wherein the court has held that the Court, under Sections 8 and 11, has to refer a matter to arbitration or to appoint an arbitrator, as the case may be, unless a party has established a prima facie (summary findings) case of non-existence of valid arbitration agreement, by summarily portraying a strong case that he is entitled to such a finding.

Accordingly, the court allowed the application and appointed the arbitrator.

Case Title:CENTAURUS GREEN ENERGY PRIVATE LIMITED versus RAJSHREE EDUCATIONAL TRUST

Case Reference: ARB.P. 311/2024

Judgment Date: 5/11/2024

Click Here To  Read/Download The Order