M/S B.L. Mehta Constructions Pvt. Ltd v. Union of India

1. The present petitions have been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 “herein referred to as the A&C Act” seeking the appointment of an arbitrator to adjudicate upon the disputes between the parties.

2. The plea of the petitioner is that the Respondent had awarded letters of allotment work to the Petitioner for the construction of the family quarter including electrical works for the Group Centre at CRPF, Gwalior, (M.P) pursuant to which agreement nos. 9/EE/GPD/2016-17, 10/EE/GPD/2016-17, 11/EE/GPD/2016-17 were signed between the parties. Thereafter, certain disputes arose between the parties with respect to certain outstanding claims of the Petitioner which led to the formation of a Dispute Review Committee (DRC) in terms of the agreements wherein various claims were referred. Dissatisfied by the decision of the DRC, the Petitioner invoked the arbitration clause 25(ii) of the agreements and thereby served a notice of arbitration upon the Respondent on 30.06.2021. The Respondent appointed Mr. R.N. Dandekar (Retd. ADG, CPWD) as the Arbitrator.

3. It has further been submitted that subsequent to reference to arbitration, the petitioner revised its claims and submitted certain additional claims vide letter dated 28.07.2021 to the office of the ADG and requested for DRC. The Respondents vide letter dated 09.08.2021 referred additional claims to the DRC for adjudication. The DRC had adjudicated the additional claims of the Petitioner and communicated its decision vide order dated 02.09.2021. The issues with respect to the additional claims could not be resolved through the second DRC. Accordingly, the Petitioner requested the Respondent to refer the additional claims to the already appointed Arbitrator. The Additional Director General, CPWD Bhopal vide order dated 22.09.2021 accepted the request of the Petitioner and referred additional claims in addition to previous claims to existing Arbitrator Sh. RN Dandekar. The existing arbitrator vide letter dated 06.10.2021 refused to adjudicate additional claims as referred to him by Respondents under the previous reference and further requested that a separate reference be made to him or the other arbitrator by Additional Director General, Bhopal.

4. Subsequently an order was passed on 10.12.2021 in the ongoing arbitration with respect to the initial claims. The Petitioner sought clarity with respect to the adjudication of additional claims from both the Respondents. However, the Respondents failed to resolve the issue. Thereafter, the Petitioner served another notice of arbitration upon the Respondents vide their notice dated 08.03.2022 to either refer the additional claims to the Ld. Arbitrator adjudicating the initial claims or appoint a fresh arbitrator. However, the Respondents failed to either give a fresh reference to the Ld. Arbitrator to adjudicate on the additional claims or appoint another arbitrator to do so.

5. The Petitioner sent reminders on 18.04.2022 and on 16.05.2022. However, the Respondent failed to appoint an Arbitrator for adjudication of additional claims.

6. Learned counsel for the petitioner submitted that since the office of Respondents No. 1, 2 & 5 are located in New Delhi and existing arbitrator had entered upon the reference and passed the refusal order to entertain additional claims at Delhi and that the seat of the Arbitration is also located in New Delhi and hence this Court has the territorial jurisdiction to entertain the present application.

7. Per contra, learned counsel for the respondent has submitted that this Court has no jurisdiction to appoint an arbitrator in this matter as the letter of allotment for the construction of quarters at CRPF, Gwalior, is itself enough to show that the property is out of the jurisdiction of this Court. Further, the principal office of the Respondent no. 4, is also situated outside of the jurisdiction of this Court. Hence, the present petition is not maintainable before this Court.

8. It has further been submitted that since the petitioner is seeking the appointment of a new arbitrator for adjudication of additional claims which are the outcome of the dispute that arose in Gwalior shows that the petitioner has failed to clarify as to how the High Court of Delhi has the jurisdiction to decide the present petition. Learned counsel has also submitted that merely because the previous arbitrator i.e., respondent no 5 was conducting the proceedings in Delhi would not be sufficient to prove that this court has the territorial jurisdiction to act upon the present petition.

9. Learned counsel further submitted that neither of the parties to the agreement construed the arbitration clause to designate Delhi as the seat of arbitration and also as per arbitration clause 25 of this agreement the venue of arbitration can be only decided by the Arbitrator not the seat of the arbitration. Therefore, only the seat of the arbitration can decide which High Court will have jurisdiction to decide the petition filed under Section 11(6) of the A&C Act.

10. Learned counsel for the respondent further submits that the seat should be determined from other clauses in the agreement and the fact that the construction work done by the petitioner in Gwalior, Madhya Pradesh which is out of the jurisdiction of this Court makes it clear that this court has no jurisdiction. Further, the additional Claims that arose out of the dispute happened in Madhya Pradesh, and all the transactions that took place between Petitioner and Respondent No.2 to 4 happened in Madhya Pradesh. So, the cause of action, place of property, and place of execution of this agreement all of them have happened in the state of Madhya Pradesh which does not come within the jurisdiction of this Court.

11. Learned counsel for the respondent submits that the Petitioner and Respondent no.4, have signed the integrity agreement as a part of the Contract Agreement and Article 7(1) of the integrity agreement is reproduced as under: “Article 7- Other Provisions (1) This Pact is subject to Indian Law, place of Performance and jurisdiction is the Head Quarters of the Division of the Principal/Owner, who has floated the Tender.”

12. Therefore, it is very much clear that since the Head Quarters of the Division of the Principal/Owner is situated at Gwalior hence the contents of the agreement between the parties further clarifies that the jurisdiction to decide the dispute between the concerned parties shall be at Gwalior or State of Madhya Pradesh and the seat of Arbitration shall also be at Gwalior.

13. In the present case, without going into the merits of the case, the primary contention of the respondent is that this court has no jurisdiction to appoint an arbitrator. The law with regard to the jurisdiction of the court at the stage of reference is very well settled. The court has to see (i) whether an arbitrable dispute is there between the parties, (ii) whether a clause of arbitration is there in the agreement, and (iii) the place of arbitration. In the present case, the parties have expressly not agreed to the seat of arbitration.

14. In a case where two parties have entered into an agreement that contains an arbitration clause, such clause should contain the jurisdiction of the courts as agreed upon by the parties. In the present case wherein the arbitration clause is silent, the integrity pact may be seen to ascertain the place of work and the place of cause of action. Merely because in the earlier arbitration proceedings the venue chosen by the arbitrator was Delhi is not sufficient ground to confer jurisdiction to this court. Section 2(1)(e) of the A&C Act is reproduced herein below for a better understanding: “2(1)(e) “Court” means—

(i) in the case of an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subjectmatter of the arbitration if the same had been the subjectmatter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes;