Questions Of Agreement Implications And Legal Provisions Need To Be Decided By Arbitral Tribunal Under Section 16 A&C Act: Allahabad High Court

Brief Facts:

Pnc Infratech Limited (“Petitioner”) had an agreement with the Public Works Department, Govt. of U.P. (“Respondent”). Disputes arose and the Petitioner filed an application under Section 11(4)(6) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) for the appointment of an arbitrator in the High Court of Allahabad (“High Court”). The High Court allowed the application and appointed Justice Krishna Murari (Retd.) to serve as the Arbitrator on behalf of the Respondent.

Dissatisfied by the order of the High Court, the Respondent filed a review application in the High Court, along with a plea for condonation of delay. The Respondent contended that certain provisions of the National Highways Act, of 1956, were overlooked. This oversight could potentially transfer rights and obligations to the National Highways Authority of India (“NHAI”), impacting the merit of claims before the tribunal. Moreover, it argued that under the NHAI Act, 1988, the highway's transfer to the Authority would entail the transfer of all associated rights and liabilities. Consequently, the Respondent would have no role, and any arbitrator appointed would represent the NHAI, not the Respondent. The Respondent further contended that the petition under Section 11(4)(6) of the Arbitration Act was flawed due to the non-joinder of necessary parties, warranting a review of the impugned order.

On the other hand, the Petitioner acknowledged no objection to the condonation of delay but emphasized the need for expeditious proceedings due to the constitution of the arbitration tribunal. The Petitioner further argued that the issues raised were already addressed and decided by the court, suggesting that the Respondent sought a re-hearing rather than a genuine review. Additionally, it noted that the arbitral tribunal had already granted the Respondent the opportunity to submit necessary documents and pleadings for consideration.

Observations by the High Court:

The High Court noted that the NHAI declined involvement in the disputes through a letter, stating that since the disputes pertained to the construction stage, they did not wish to intervene at that stage. Despite the Respondent's efforts to involve the NHAI, the letter indicated only a passive role played by the NHAI.

The High Court held that the claims raised by the Petitioner pertained to the construction stage. Additionally, it was acknowledged that the principal agreement between the parties was signed by the Respondent and the Petitioner, with a tripartite agreement signed subsequently. It held that the implications of these agreements on the merits of the case are matters for the arbitral tribunal to consider and determine, including whether the absence of the NHAI renders the claims invalid for lack of necessary parties.

The High Court held that the impact of various legal provisions and agreements, such as Section 62 of the Contract Act and the tripartite agreement, as well as whether the disputes relate to the construction stage or the effect of Section 12 of the NHAI Act, 1988, can appropriately be considered by the tribunal under Section 16 of the Arbitration Act.

It held that the jurisdiction of the Court under Section 11(4)(6) of the Arbitration Act is limited to a prima facie examination to ascertain if the parties have approached the correct court for appointing an arbitrator if the arbitration clause subsists between the parties, and if the disputes fall within the scope of said clause. Once such satisfaction is reached, the matter is to be referred to the tribunal. Consequently, the review application was dismissed by the High Court.

Case Title: The Public Works Department Thru. Chief Engineer vs Pnc Infratech Limited Thru. Authorized Signatory.

Case Number: Civil Misc. Review Application Defective No. 16 of 2024

Advocate for the Petitioner: Varun Pandey

Advocate for the Respondent: Lakshyadeep Srivastava

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