Agency Executing Or Allotting Work Is Necessary Party To S. 11, A&C Act Petition, Beneficiary Department Isn't Necessary Party: Punjab And Haryana High Court

Brief Facts:

M/s A.G. Construction Co. (“Petitioner”) was issued an allotment letter dated 24.11.2021 by the Punjab State Government and its concerned departments (“Respondents”) for the construction of an Indoor System Hall in Government ITI. The Petitioner commenced work but encountered a dispute with the Respondents. The Respondents informed the petitioner via a memo dated 15.06.2022 that the administrative approval for the work had been cancelled by the Department of Technical Education and Industrial Training.

Despite the cancellation, the Petitioner continued to seek payment for the work done. Upon not receiving the outstanding payment amount, the Petitioner filed a writ petition, which was disposed of by an order dated 27.07.2022. Subsequently, the Respondents admitted that some payment was due in a speaking order dated 02.09.2022 but failed to release the payment. After exhausting pre-reference mechanisms, the Petitioner invoked arbitration clause 25 by a letter dated 13.10.2022. To refer the dispute to arbitration, the Petitioner filed a Section 11 application in the Punjab and Haryana High Court (“High Court”).

The Respondents contested the petition, claiming that the entire amount due to the Petitioner had been disbursed. They also cited Clause 56 of the General Conditions of the Contract to argue that the Petitioner is not entitled to compensation upon termination of the contract. Additionally, the Respondents asserted that the Department of Technical Education and Industrial Training is a necessary party to the petition.

Observations by the High Court:

The High Court held that the objections raised by the respondents were invalid. The allotment letter was executed between the Petitioner and the Respondent. Although the work was intended for the Department of Technical Education and Industrial Training, this department neither issued the allotment nor is it the executing agency. Therefore, it was not considered a necessary party to the petition for the appointment of an arbitrator.

The High Court further held that the determination of whether the Petitioner is entitled to the claimed amount will be left to the Arbitrator. Consequently, the Petition was allowed.

Ms Justice Jaishree Thakur was requested to act as the sole arbitrator to adjudicate the dispute between the parties. This appointment was subject to a declaration under Section 12 of the Act regarding her independence and impartiality in adjudicating the dispute.

Case Title: M/s A.G. Construction Co. vs The State of Punjab and Others

Case No.: ARB-483-2022

Advocate for the Petitioner: Mr RK Girdhar

Advocate for the Respondent: Mr AnilBansal

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