M S S Kumar Company v. Union of India & Ors.

1. This is a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996[1] for reference of the disputes between the parties to arbitration.

2. The dispute arises in the context of a Contract Agreement (CA) dated 18 October 2022 governed by the General Conditions of Contract (GCC), executed between the petitioner and the respondents. The GCC envisages resolution of the disputes by arbitration and the relevant clause in that regard reads thus:

70. Arbitration.- All disputes, between the parties to the “the 1996 Act” hereinafter AN HARI SHANKAR 22:20 Signing Date:25.08.2024 22:22 Contract(other than those for which the decision of the C.W.E. or any other person is by the Contract expressed to be final and binding) shall, after written notice by either party to the Contract to the other of them, be referred to the sale arbitration of an Engineer officer to be appointed by the authority mentioned in the tender documents. Unless both parties agree in writing such reference shall not take place until after the completion or alleged completion of the Work or termination or determination of the Contract under Condition Nos. 55, 56 and 57 hereof. Provided that in the event of abandonment of the Works or cancellation of the Contract under Condition Nos. 52, 53 or 54 hereof, such reference shall not take place until alternative arrangements have been finalized by the Government to get the Works completed by or through any other Contractor or Contractors or Agency or Agencies. Provided always that commencement or continuance of any arbitration proceeding hereunder or otherwise shall not in any manner militate against the Government"s right of recovery from the contractor as provided in Condition 67 hereof. If the Arbitrator so appointed resigns his appointment or vacates his office or is unable or unwilling to act due to any reason whatsoever, the authority appointing him may appoint a new Arbitrator to act in his place. The Arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties, asking them to submit to him their statement of the case and pleadings in defence. The Arbitrator may proceed with the arbitration, exparte, if either party, inspite of a notice from the Arbitrator fails to take part in the proceedings. The Arbitrator may, from time to time with the consent of the parties, enlarge, the time upto but not exceeding one year from the date of his entering on the reference, for making and publishing the award. The Arbitrator shall give his award within a period of six months from the date of his entering on the reference or within the extended time as the case may be on all matters referred to him and shall indicate his findings, along with sums awarded, separately on each individual item of dispute. The venue of Arbitration shall be such place or places as may be fixed by the Arbitrator in his sale discretion. The award of the Arbitrator shall be final and binding on both parties to the Contract."

3. The petitioner addressed a notice to the respondents under Section 21 of the 1996 Act on 5 April 2024, seeking reference of the disputes between the parties to a sole arbitrator.

4. The respondents, in its reply dated 10 June 2024, were not agreeable to any averments made by the petitioner in their Section 21 22:20 Signing notice. However, the respondents proposed to appoint a sole arbitrator as per the Ministry of Defence (MoD) Panel to adjudicate the disputes.

5. The petitioner has approached the Court.

6. Ms. Meghna Rao has sought time to enable her to appoint an arbitrator.

7. That prayer cannot be acceded to, as there is a specific protocol envisaged in Section 11 of the 1996 Act.

8. The chance of the respondent to appoint an arbitrator, or to cooperate with the petitioner in appointing an arbitrator, is at the time when the petitioner addresses a Section 21 notice to the respondent.

9. If at that time the respondent does not respond or the parties are not able to arrive at a consensus regarding appointment of an arbitrator, the chance is allowed to go abegging. The court has then to step in under Section 11(6). The ball, so to speak, is no longer in the court of either of the parties, but is in the Court’s court.

10. As such, the request of Ms. Rao for the respondents to be given time to appoint the arbitrator is not acceptable. It is now for the Court to do so.

11. It is seen that Clause 70 read with Clause 6 of the tender documents envisage appointment of arbitrator by the Chief Engineer, Air Force, Western Air Command, Palam, Delhi Cantt -110010 or in 22:20 Signing his absence the officer officiating as Chief Engineer, Air Force, Western Air Command, Palam, Delhi.

12. This would amount to the arbitrator being appointed by the respondents which is not permissible as per law laid down in Bharat Broadband Network Ltd v United Telecoms Ltd[2], Perkins Eastman Architects DPC v HSCC (India) Ltd[3] and Haryana Space Application Centre (HARSAC) v Pan India Consultants Pvt Ltd[4].

13. Ms. Rao further submitted that the respondents were ready to provide a panel of arbitrators from which the petitioner could be given an opportunity to choose an arbitrator.

14. This submission is also not acceptable, as the arbitration clause between the parties does not envisage providing of a panel by the respondents to the petitioner, but rather envisages the respondents appointing a sole arbitrator which, as already noted, is not legally permissible.