Translate
Text Highlighter

Bookmark

PDF

Share

Report a problem
AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • For Petitioner : Mr. Khet Singh, Advocate, for the Applicant; Mr. C.S. Bissa, Advocate, for the Respondents
Judges
  • Arun Bhansali
Acts
  • section11(6) of the Arbitration and Conciliation Act, 1996 (''''the Act'''')
  • contract, provision of clause 63 & 64
  • Arbitration Act 1996. 35.2
Are you a practicing lawyer?
Enhance your digital presence and reach by creating a Casemine profile.
Upload pleading to use the new AI search
Click here to upload
Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • For Petitioner : Mr. Khet Singh, Advocate, for the Applicant; Mr. C.S. Bissa, Advocate, for the Respondents
Judges
  • Arun Bhansali
Acts
  • section11(6) of the Arbitration and Conciliation Act, 1996 (''''the Act'''')
  • contract, provision of clause 63 & 64
  • Arbitration Act 1996. 35.2
See more information ...
Smart Summary

Factual and Procedural Background

The applicant entered into a contract with the respondent-Railways which included a dispute resolution clause specifying arbitration under the Arbitration and Conciliation Act, 1996. The contract contained specific provisions limiting the applicability of Clauses 63 and 64 of the General Conditions of Contract (GCC) to disputes or claims valued at 20% or less of the contract value, excluding these clauses for claims exceeding that threshold. The applicant raised claims and sought arbitration under Clauses 63 and 64, but the respondent-Railways rejected this request on the ground that the claims exceeded 20% of the contract value, referring to Clause 35.3 of the contract. The applicant then filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of an independent arbitrator, proposing to restrict the claim to 20% of the contract value to comply with the contract conditions.

Legal Issues Presented

  1. Whether the applicant is entitled to the appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, when the respondent has rejected arbitration on the ground that the claims exceed 20% of the contract value as per contract clause 35.3.
  2. Whether the applicant can restrict the claim to 20% of the contract value and thereby invoke arbitration under Clauses 63 and 64 of the General Conditions of Contract.
  3. Whether the procedure agreed upon by the parties for appointment of arbitrator has failed so as to empower the Court to intervene under Section 11(6) of the Act.

Arguments of the Parties

Applicant's Arguments

  • The applicant contended that although the respondent admitted existence of claims exceeding 20% of the contract value, the refusal to appoint an arbitrator was solely on the basis of this excess, which was not justified.
  • The applicant submitted that the respondent could have restricted the claim to 20% and referred it to arbitration accordingly but failed to do so, thereby denying a lawful request for arbitration.
  • The applicant offered to limit the claim to 20% of the contract value and prayed for appointment of an arbitrator to adjudicate the dispute within this limit.
  • The applicant relied on the judgment in Mbl Infrastructures Limited v. North Western Railway to support the contention that appointment of an arbitrator should be allowed once the claim is restricted to 20% of the contract value.

Respondent's Arguments

  • The respondent opposed the application, maintaining that as per Clause 35.3 of the contract, Clauses 63 and 64 of the GCC do not apply to claims exceeding 20% of the contract value, and therefore arbitration could not be invoked for such claims.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Mbl Infrastructures Limited v. North Western Railway : 2016 (1) WLC (Raj.) 596 Appointment of arbitrator when claim is restricted to 20% of contract value The applicant relied on this precedent to argue for appointment of arbitrator upon limiting the claim to 20%; the court considered this submission in the context of the contract terms and procedural requirements.

Court's Reasoning and Analysis

The Court examined the provisions of Section 11(6)(a) of the Arbitration and Conciliation Act, 1996, which permits court intervention in appointment of arbitrators only if the agreed appointment procedure fails. The Court noted that the contract's dispute resolution clause restricts arbitration under Clauses 63 and 64 of the GCC to claims not exceeding 20% of the contract value. The respondent rejected the arbitration request because the claim exceeded this threshold. The applicant's attempt to unilaterally restrict the claim to 20% was found vague and unsupported by any formal reduction or prayer before the respondent-Railways. Since the applicant had not followed the agreed procedure by formally limiting the claim and seeking arbitration accordingly, the Court held that the appointment procedure had not failed. Therefore, the jurisdiction of the Court under Section 11(6) could not be invoked. The Court dismissed the application as not maintainable but left the applicant free to proceed in accordance with the contract and the Act.

Holding and Implications

The application filed by the applicant under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of an independent arbitrator, is dismissed as not maintainable.

The direct consequence is that the applicant cannot bypass the contractually stipulated dispute resolution mechanism by unilaterally restricting the claim to 20% without formally invoking the procedure before the respondent. The Court did not set any new precedent but clarified that court intervention under Section 11(6) is contingent on the failure of the agreed appointment procedure, which was not established here.

Show full summary ...

    M/S Har Har Company v. Union Of India

    Arun Bhansali, J.- This application under section11(6) of the Arbitration and Conciliation Act, 1996 (''''the Act'''') has been filed by the applicant seeking appointment of an independent Arbitrator.

    2. The applicant entered into an agreement with the respondent-Railways vide Ex.- A/2. The agreement, inter alia contained the following clause for settlement of disputes:-

    "35.0 Settlement of disputes.

    35.1 The dispute will be settled under the Arbitration Act 1996.

    35.2 The successful tender/s shall put-up his/their claim as per clause 43 of the General Conditions of the contract during the progress of work and not after completion of the work. All such claims and disputes shall be settled promptly during the progress of the work. The final authority for giving the decision on claims and disputes put up by the tenderer/s contractor/s shall be the Chief Administrative Officer/Chief Engineer (Construction), North Western Railway, Jaipur.

    35.3 The provision of the clause - 63 & 64 of the General condition of contract will be applicable only for settlement of claims or disputes between the parties for value less than or equal to 20% of the value of the contract & when claims or disputes are of the value more than 20% of the value of contract, provision of clause 63 & 64 and other relevant clauses of the General Conditions of Contract will not be remedy for settlement of such disputes.

    35.4 The contractor/s shall not be entitled to ask for reference to arbitration, before the completion of the work assigned to him/them under this contract. The contractor/s shall seek reference to arbitration to settle the disputes only once within the ambit of condition 35.3 above."

    3. The applicant raised claim with the respondent-Railways and sought reference to arbitration in terms of Clauses 63 and 64 of the General conditions of Contract. The said prayer of the applicant was rejected by the respondent-Railways by their order dated 30.11.2015, inter alia, with the following observations:-

    "General Manager, North-Western Railway, Jaipur has not agreed for appointment of arbitration in existing case being the claims are more than 20% of total agreement value. As per clause No. 35.3 of contract agreement, provision of clause 63 & 64 and other relevant clause of General Conditions of Contract will not be remedy for settlement of disputes when claims or disputes are of value more than 20% of the value of contract, as requested by you vide your letter cited above."

    Where after, the present application has been filed by the applicant, inter alia with the following submissions:-

    "17. That from a bare perusal of An.15, it would be clear that respondents although have admitted the existence of claims/disputes, but the appointment of arbitrator has been denied solely on the ground that the claims are more than 20% of total agreement value and therefore, as per clause No. 35.3 of contract agreement the provisions of clause 63 and 64 and other relevant clauses of GCC will not be remedy for settlement thereof as it exceed the value more than 20% of the value of contract. It is submitted that once the respondents are of the opinion that there does exist a rightful/legal claim (though found to exceed 20% of the value of contract), then they could have restricted the same up to 20% of the value of contract and could have referred the claim to the said extent to arbitration for its adjudication by way of appointing an arbitrator. Having not done so the respondents have denied a very lawful request of the applicant for referring the dispute to arbitral tribunal.

    18. That in the circumstances, the applicant respectfully submits before this Hon''''ble Court that it readily restricts its claim/s so made before the respondents only to the extent of 20% of the value of contract and prays this Hon''''ble Court to kindly consider this application while confining the claim to the said extent only and to be further pleased to order for referring the claim/dispute to adjudicate the same by way of arbitration by ordering appointment of an arbitrator."

    4. A prayer has also been made that Arbitrator be appointed while confining the claim only to the extent of 20% value of the Contract.

    5. Learned counsel for the applicant relying on judgment in the case ofMBL Mbl Infrastructures Limited v. North Western Railway : 2016 (1) WLC (Raj.) 596, submitted that as now the applicant has reduced his claim to the extent of 20% of the value of Contract, the Arbitrator may be appointed.

    6. Learned counsel for the respondent opposed the application filed by the applicant.

    7. I have considered the submissions made by learned counsel for the parties and have perused the material available on record.

    8. Provisions of Section 11(6)(a) of the Act, inter alia, reads as under:-

    "11. Appointment of arbitrators:-

    .......................................

    ..........................................

    ...........................................

    (6) Where, under an appointment procedure agreed upon by the parties,-

    (a) a party fails to act as required under that procedure;

    ...................................

    ....................................

    a party may request the Supreme Court or, as the case may be, the High Court or any person or institution designated by such court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment."

    9. A perusal of the said provision indicates that it is only in a case where a procedure agreed between the parties fails, that an application may be filed before this court seeking appointment of Arbitrator.

    10. Admittedly, the applicant made application for appointment of Arbitrator in terms of the Contract, which was rejected by the respondent-Railways on account of the same being beyond 20% of the Contract value.

    11. Submissions made in the application restricting the claim to 20% is apparently vague as to how that claim has been reduced to 20% has not been indicated and besides the above, the applicant has so far not raised the claim and/or made prayer for appointment of Arbitrator in terms of Clauses 63 and 64 before the respondent-Railways restricting/reducing the same to the extent of 20% and in those circumstances, it cannot be said that the procedure as agreed between the parties has failed so as to invoke the jurisdiction of this Court under Section 11(6) of the Act.

    12. In view of the above, the application filed by the applicant is not maintainable, the same is, therefore, dismissed leaving it open for the applicant to act in accordance with provisions of the Contract/Act as observed hereinbefore.

    Use AI to get other relevant cases.
    Try AI Pro free for 7 days Upgrade to AI Pro

    Comments

    M/S Har Har Company v. Union Of India
    (Jan 19, 2018)