Party Invoked Arbitration Clause By Referring To Work Orders: Delhi High Court Appoints Justice Mukta Gupta As Arbitrator

Brief Facts:

Hfcl Limited (“Petitioner”) contended that Bharat Broadband Network Limited (“Respondent”) issued a tender for BharatNet Phase-II/PB & BHl004. The tender included details of a survey, project planning, supply, installation, and maintenance of network infrastructure. The Petitioner participated and won two contracts. It started performing its obligations under these contracts, invoicing the respondent accordingly.

Subsequently, the Respondent issued two Award of Contracts (APOs) and corresponding work orders to the Petitioner for the mentioned tenders. The first tranche was released. However, the payment for the second tranche was denied without justification, leading to outstanding dues totalling Rs. 10,64,10,294/-. Consequently, the Petitioner invoked arbitration as per Clause 31 of the tender. The Petitioner approached the Delhi High Court (“High Court”) and filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) for the appointment of the arbitrator.

However, the Respondent argued against the validity of the arbitration notice. It asserted that arbitration should have been invoked separately under the specific work orders, citing Clauses 228 and 214. Additionally, it contended that Clause 31 of the tender, invoked by the Petitioner, was overridden by Clause 29.7 of the work orders, which state the primacy of the latter over the tender document in case of inconsistency.

Observations by the High Court:

The High Court noted that the Petitioner had referred to both the work orders in its arbitration notice, indicating a clear invocation of the arbitration clause. Furthermore, the High Court observed that the arbitration clause present in the tender document and that in the work orders were identical in content.

Referring to Clause 31.1 of the tender, which stipulated the procedure for arbitration, the High Court emphasized that it was comprehensive, covering any disputes arising under the agreement. It noted that the clause allowed for the appointment of a sole arbitrator by the Chairman-cum-Managing Director (CMD), BBNL, and provided a framework for arbitration proceedings.

In analyzing the relationship between the arbitration clauses in the tender document and the work orders, the High Court referred to Clause 29.6 of the Work Orders. It stated that in case of any conflict between the Work Orders and the tender document, the tender document shall prevail.

The High Court held that the arbitration invocation made by the Petitioner was valid and in accordance with the terms laid out in both the tender document and the work orders. The petition was allowed. Consequently, the High Court appointed Justice Mukta Gupta (Retd.) as the Sole Arbitrator to adjudicate the disputes between the parties.

Case Title: Hfcl Limited Vs Bharat Broadband Network Limited

Citation: 2024 LiveLaw (Del) 390

Case Number: ARB.P. 1314/2023

Advocate for the Petitioner: Mr Zeeshan Hashmi and Mr Ankit P.

Advocate for the Respondent: Mr Chandan Kumar

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