Arbitration Proceedings Before Improperly Constituted Arbitral Tribunal Are Non-Est: Delhi High Court

The Delhi High Court Bench of Justice Sachin Datta has held where the appointment procedure is invalid, any proceedings before an improperly constituted arbitral tribunal are non-est. Also, this would not prevent the Court from exercising jurisdiction under Section 11 of the act.

Additionally, the court held that whether a particular claim is precluded from arbitration on account of being an excepted matter should be decided by a duly constituted arbitral tribunal.

Brief Facts:

The petitioner filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 with respect to the constitution of an Arbitral Tribunal. The parties enter into a Contract Agreement dated 16.06.2016 for earthwork and railway construction between Phaphamau and Allahabad. The dispute arises when the petitioner faced hindrances while doing the work such as delayed execution of LHS Bridges, delayed Ganga Bridge work, delayed relocation of cable junction boxes, additional tax burden due to implementation of GST and eventually arbitrary termination of the contract by the respondent.

Thereafter, the petitioner invoked the dispute resolution clause present in the contract. The petitioner contended that the appointment procedure suggested by the respondent was not in accordance with the judgment of Supreme Court in TRF Limited v. Energo Engineering Projects Ltd. Also, the petitioner argued that while constituting the arbitral tribunal, the respondent did not refer all of the claims raised by the petitioner to arbitration, some of them were excluded. This was ostensibly on the basis that the claims fell within the “scope of excepted matters”.

Aggrieved by this, the petitioner filed the petition under Section 11(6) for constitution of an independent arbitral tribunal. Additionally, the petitioner has persistently contended that the procedure envisaged under Clause 63 and Clause 64 of GCC is not a valid appointment procedure. Therefore an independent arbitral tribunal is required to be constituted to adjudicate the disputes between the parties.

Observation of the court:

The court referred to the judgment in Margo Networks Pvt. Ltd. &Anr. v. Railtel Corporation of India Ltd., 2023:DHC:4596, wherein it was held that appointment procedure from the panel of arbitrators maintained by one of the contracting parties, it is mandatory that the panel should be sufficiently broad-based, failing which the appointment procedure does not meet with the requirements of law. In such a situation an independent arbitral tribunal is required to be appointed by the court. Also, a valid appointment procedure must be balanced and not confer excessive authority on one of the parties.

Moving further, the court held that the present petition is maintainable. And, the court held that where the appointment procedure is invalid, any proceedings before an improperly constituted arbitral tribunal are non-est. Also, this would not prevent the Court from exercising jurisdiction under Section 11 of the act.

Additionally, the court rejected the contention of the respondent that certain claims are not liable to be referred to arbitration because they fall within the scope of excepted matters. The court held that whether a particular claim is precluded from arbitration on account of being an excepted matter should be decided by a duly constituted arbitral tribunal.

Finally, the court appointed a sole arbitrator to adjudicate the disputes, and the petition was disposed of.

Case Title: M/S. M.V. OMNI PROJECTS (INDIA) LTD. v. UNION OF INDIA

Case Number: ARB.P. 703/2023

Counsel for the Petitioner: Mr. Subodh Kr. Pathak and Mr. Akash Swami, Advocates.

Counsel for the Respondent: Mr. Ruchir Mishra, Mr. Sanjiv Kumar Saxena, Mr. Mukesh Kumar Tiwari and Ms. Poonam Shukla, Advocates.

Date of Judgment: 04.10.2024

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