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12 July 2021, Monday

3 years ago

7. Jyoti Sarup Mittal (Delhi High Court)

12 July 2021| Jyoti Sarup Mittal v. Executive Engineer, South Delhi Municipal Corporation | Arb. Petition No. 2725 of 2021 | Vibhu Bakhru J | 2021 SCC OnLine Del 3674

SDMC had executed with the petitioner an infrastructure contract. The General Conditions of Contract (“GCC”) had an elaborate dispute resolution clause, including a pre-arbitral mechanism and then arbitration if necessary. The clause on the appointment mechanism provided that the arbitrator was to be appointed by the “Commissioner, MCD” (Commissioner, SDMC). However, “if for any reason it was not possible”, the clause stated, “the matter should not be referred to arbitration at all.”

When the petitioner applied under Section 11 ACA, it was common ground that the unilateral appointment clause had perished because of the expansive reading of Section 12 (5) ACA by the Supreme Court in Perkins and TRF. SDMC argued that the appointment had to be made by the Commissioner or not at all!

The “key question” was whether the entire arbitration clause must fail if the appointment mechanism was impermissible? Bakhru J “answered in the negative” and also relied on the TK Engineering case he had decided in March 2021 (see Highlight here). He reasoned that:-

  1. The essence of the arbitration agreement was to resolve the dispute by referring it to an independent and impartial arbitrator.
  2. This agreement would not perish even if it were not possible to follow the mechanism of appointment set out in the contract. Therefore, the clause is, at best ancillary and may be considered severable.
  3. (c) The provision that the matter should not be referred to arbitration is premised on the assumption that the Commissioner, MCD, is empowered to make the appointment. This clause cannot be read restrictively. The effect of the legislative amendments (interpreted by the Supreme Court in Perkins) that requires an independent and impartial tribunal cannot be read to mean that the arbitration agreement itself becomes ineffective.
  4. (d) The court must endeavour to hold parties to their bargain.

As to SDMC’s other contentions, Bakhru J said: (a) the argument that the GCC was not signed “feebly” made, and it was not disputed that the GCC was an integral part of the agreement, (b) it was contentious if the claims were time-barred and, therefore, a matter for the tribunal, (c) the argument that the petitioner did not follow the pre-arbitral mechanism was factually incorrect.

An arbitrator was appointed.

Read the judgement here.

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Categories: Appointment of Arbitrators | Competence Competence | Competence of Arbitral Tribunal to Rule on its Jurisdiction | Doctrine of Severability | Independence and Impartiality of Arbitrator | Inoperative | Invalidity of Agreement | Invalidity of Arbitration Agreement | Kompetenz Kompetenz | Perkins | Pre Arbitral Mechanism | Pre Arbitral Procedure | Section 11 ACA | Section 12 (5) ACA | Section 12 ACA | Severability | Time Barred Claim | TRF | Vidya Drolia

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