Full Text
ARB.P. 985/2025
Date of Decision: 20.08.2025 IN THE MATTER OF:
RUDRA DEVELOPERS AND CONTRACTORS 203, SRI VARI ENCLAVE, HORAMAVU AGARA, BANGALORE, BENGALURU, KAMATAKA - 560043 ..... PETITIONER
Through: Mr.Kunal Kumar, Advocate.
Through: Mr.Yugansh Mittal, Mr.Pawan Mittal, Mr.Keshav Poonia and Mr.Mridur
Gupta, Advocates.
HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV
JUDGEMENT
PURUSHAINDRA KUMAR KAURAV, J. (ORAL)
JUDGMENT
1. The present petition has been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (the 1996 Act) by the petitioner, seeking appointment of an Arbitrator, to adjudicate upon the disputes that have arisen between the parties under the Work Order dated 14.04.2023.
KUMAR KAURAV
2. The facts of the case indicate that the petitioner was engaged as an Interior Designer for the Tiruchirappalli International Airport, pursuant to a main contract between the respondent (contractor) and the Airports Authority of India (AAI). A Work Order amounting to INR 3,04,03,922 (Indian Rupees Three Crores Four Lakhs Three Thousand Nine Hundred and Twenty-Two only), exclusive of GST ("Work Order"), was issued to the petitioner in April 2023 on a back-to-back payment basis, wherein the petitioner’s payment was contingent upon disbursement by AAI.
3. As per the case set up by the petitioner, despite the petitioner’s prompt commencement of work, execution was hindered due to incomplete site handover (with certain portions held by another contractor), delayed payments (despite AAI having released funds), and unprofessional conduct by the respondent (including verbal abuse and threats). It is further submitted that the respondent arbitrarily and illegally terminated the contract in July 2023, falsely attributing the delay to the petitioner. Post-termination, the respondent allegedly withheld payments, unlawfully retained the petitioner’s materials, and subsequently raised baseless counterclaims amounting to INR 3,12,212 (Indian Rupees Three Lakhs Twelve Thousand Two Hundred and Twelve only), along with a demand for interest at the rate of 24%. The petitioner refuted the respondent’s claims and issued legal notices dated 05 July 2024 and 02 September 2024. Although meetings were held between the parties in an attempt to reach an amicable settlement, no resolution was achieved. Accordingly, the petitioner was constrained to issue a notice invoking arbitration on 07 February 2025. However, the respondent has failed to respond to the said notice to date. It is submitted that despite the aforementioned efforts, the dispute remains unresolved, and hence, the petitioner has filed the present petition.
4. On notice being issued, learned counsel, who appears on behalf of the respondent without admitting to the contents of the petition submits that the matter can be sent for mediation, however, the same is not agreeable to the learned counsel for the petitioner and he contends that earlier efforts were made but the dispute remained unresolved.
5. Under the aforesaid circumstances, the Court has looked into Clause 27 of the Work Order dated 14.04.2023 which provides for arbitration. The said Clause is extracted as under:-
6. The law with respect to the scope and standard of judicial scrutiny under Section 11(6) of the 1996 Act has been fairly well settled. This Court as well in the order dated 24.04.2025 in the case of ARB.P. 145/2025 titled as Pradhaan Air Express Pvt Ltd v. Air Works India Engineering Pvt Ltd has extensively dealt with the scope of interference at the stage of Section
11. The Court held as under:-
2024 SCC OnLine SC 1754 2 2023 SCC OnLine SC 1666.
11. Ex-facie frivolity and dishonesty are the issues, which have been held to be within the scope of the Arbitral Tribunal which is equally capable of deciding upon the appreciation of evidence adduced by the parties. While considering the aforesaid pronouncements of the Supreme Court, the Supreme Court in the case of Goqii Technologies (P) Ltd. v. Sokrati Technologies (P) Ltd.5, however, has held that the referral Courts under Section 11 must not be misused by one party in order to force other parties to the arbitration agreement to participate in a timeconsuming and costly arbitration process. Few instances have been delineated such as, the adjudication of a non-existent and malafide claim through arbitration. The Court, however, in order to balance the limited scope of judicial interference of the referral Court with the interest of the parties who might be constrained to participate in the arbitration proceedings, has held that the Arbitral Tribunal eventually may direct that the costs of the arbitration shall be borne by the party which the Arbitral Tribunal finds to have abused the process of law and caused unnecessary harassment to the other parties to the arbitration.
12. It is thus seen that the Supreme Court has deferred the adjudication of aspects relating to frivolous, non-existent and malafide claims from the referral stage till the arbitration proceedings eventually come to an end. The relevant extracts of Goqii Technologies (P) Ltd. reads as under:-
22. With a view to balance the limited scope of judicial interference of the referral courts with the interests of the parties who might be constrained to participate in the arbitration proceedings, the Arbitral Tribunal may direct that the costs of the arbitration shall be borne by the party which the Tribunal ultimately finds to have abused the process of law and caused unnecessary harassment to the other party to the arbitration. Having said that, it is clarified that the aforesaid is not to be construed as a determination of the merits of the matter before us, which the Arbitral Tribunal will rightfully be equipped to determine.”
13. In view of the aforesaid, the scope at the stage of Section 11 proceedings is akin to the eye of the needle test and is limited to the extent of finding a prima facie existence of the arbitration agreement and nothing beyond it. The jurisdictional contours of the referral Court, as meticulously delineated under the 1996 Act and further crystallised through a consistent line of authoritative pronouncements by the Supreme Court, are unequivocally confined to a prima facie examination of the existence of an arbitration agreement. These boundaries are not merely procedural safeguards but fundamental to upholding the autonomy of the arbitral process. Any transgression beyond this limited judicial threshold would not only contravene the legislative intent enshrined in Section 8 and Section 11 of the 1996 Act but also risk undermining the sanctity and efficiency of arbitration as a preferred mode of dispute resolution. The referral Court must, therefore, exercise restraint and refrain from venturing into the merits of the dispute or adjudicating issues that fall squarely within the jurisdictional domain of the arbitral tribunal. It is thus seen that the scope of enquiry at the referral stage is conservative in nature. A similar view has also been expressed by the Supreme Court in the case of Ajay Madhusudan Patel v. Jyotrindra S. Patel”6.
9. In view of the fact that disputes have arisen between the parties and there is an arbitration clause in the contract, this Court is inclined to appoint an Arbitrator to adjudicate upon the disputes between the same.
10. Accordingly, Ms. Narayani Sepaha, Advocate (Mobile No.+91 8827949336, e-mail id:- narayanisepaha.legal@gmail.com ) is appointed as the sole Arbitrator.
11. The Sole Arbitrator may proceed with the arbitration proceedings, subject to furnishing to the parties the requisite disclosures as required under Section 12 of the Arbitration and Conciliation Act.
12. The Sole Arbitrator shall be entitled to fee in accordance with the IVth Schedule of the Arbitration and Conciliation Act or as may otherwise be agreed to between the parties and the learned Sole Arbitrator.
13. The parties shall share the arbitrator's fee and arbitral cost, equally.
14. All rights and contentions of the parties in relation to the claims/counter claims are kept open, to be decided by the Sole Arbitrator on their merits, in accordance with law.
15. Needless to state, nothing in this order shall be construed as an expression of opinion of this Court on the merits of the controversy. All rights and contentions of the parties in this regard are reserved. Let the copy of the said order be sent to the newly appointed Arbitrator through the electronic mode as well.
16. Accordingly, the instant petition stands disposed of.
PURUSHAINDRA KUMAR KAURAV, J AUGUST 20, 2025 Nc/sph