A Party Cannot Directly Seek The Appointment Of The Arbitrator If The Agreement Provides For Pre-Arbitration Reference To A Competent Authority: Madhya Pradesh High Court

The Single Bench of Justice Vivek Rusia has held the pre-arbitral steps to be mandatory, the non-compliance of which will result in the rejection of the application for the appointment of the arbitrator.

Facts

The parties entered into an agreement dated 16.12.1996 for the construction of 60 T 3 quarters for GPRA at Bilore Compound, Indore. Clause 25 of the agreement provided for the resolution of disputes.

The project was to be completed within 18 months. There was a delay in the execution of the project work. Consequently, a dispute arose between the parties related to the payment for the work done.

Hence, the petitioner vide letter dated 18.12.2000 invoked Clause 25 of the agreement and requested the respondent to appoint the arbitrator to resolve the dispute. The respondent rejected the request of the petitioner due to non-fulfilling the condition precedent seeking arbitration and delay in raising the dispute. Accordingly, the petitioner approached the Court for the appointment of the arbitrator.

The Contention Of Parties

The respondent objected to the maintainability of the petition on the following grounds:

• In terms of Clause 25, the petitioner was bound to raise the dispute firstly, before the Superintending Engineer and then file an appeal before the Chief Engineer. It is only when it was not satisfied with the decision of the Chief Engineer, that it could request for the appointment of the arbitrator.
• However, the petitioner directly requested the appointment of the arbitrator without complying with the pre-arbitral conditions.
• The petitioner also failed to raise the dispute within 120 days from the date of the final bill, therefore, the claim of the contractor shall be deemed to have been waived and treated as time-barred.

The Petitioner Countered the aforesaid objections on the following grounds:

• It was mandatory on part of respondents to refer the dispute for adjudication by way of arbitration
• The issue of limitation is a matter of evidence and same liable to be decided by the arbitrator.

Analysis By The Court

The Court observed that in terms of Clause 25 of the agreement, it was incumbent upon the petitioner to raise the dispute before the Superintending Engineer and if it is dissatisfied with the decision, it may file an appeal before the Chief Engineer. It is only when it is not satisfied with the decision of the Chief Engineer that it may give notice to the Chief Engineer for the appointment of an arbitrator.

The Court held that a party cannot directly seek the appointment of the arbitrator when the agreement provides for pre-arbitration reference to some authority.

The Court observed that it is clear that the petitioner directly invoked the arbitration clause without submitting a claim before the Superintending Engineer within 15 days from the settlement of the bill and thereafter it could file an appeal before the Chief Engineer. Therefore, the respondent was correct in rejecting the request of the petitioner for the appointment of the arbitrator.

Accordingly, the Court dismissed the petition.

Case Title: Dharmadas Tirthdas Construction Pvt. Ltd. v. Government of India and Ors., MISC. CIVIL CASE No. 1043 of 2003.

Citation: 2022 LiveLaw (MP) 149

Counsel for the Petitioner: SHRI VIVEK DALAL, ADVOCATE

Counsel for the Respondent: SHRI HIMANSHU JOSHI, ADVOCATE

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