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Chabbras Associates vs Hscc India Limited & Anr. - (High Court of Delhi) (18 Jan 2023)

Procedure prescribed in the Agreement before invocation of the Arbitration Agreement necessarily needs to be followed



Present petition has been filed under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of an Arbitrator for adjudicating the disputes that have arisen between the parties with respect to the Contract dated 18.09.2018 for Construction of Phase-II works comprising Director's Residence, Type II, III, IV and V Residential quarters for National Institute of Animal Biotechnology (NIAB) at Hyderabad.

The learned counsel for the Respondents submits that, the present petition is premature as the Petitioner has not followed the procedure prescribed for appointment of an Arbitrator. Drawing reference to Clause 25 of the General Conditions of Contract ('GCC'), he submits that prior to invoking arbitration, the petitioner has to raise its disputes with the Reviewing Authority, and if it is dissatisfied with its decision, approach the Appealing Authority. If the Petitioner still is dissatisfied with the decision of Appealing Authority, the Petitioner has to raise its dispute with the Dispute Redressal Committee ('DRC'). It is only where the Petitioner or the Respondent is dissatisfied with the decision of the DRC, that arbitration can be invoked.

A reading of the above Clause clearly shows that, before invoking the arbitration, the parties have agreed to the dispute resolution mechanism, where the dispute is first referred to the Reviewing Authority, thereafter to the Appealing Authority and finally to the DRC. It is only where either of the parties is dissatisfied with the decision of the DRC that such party can invoke arbitration. Even the notice invoking arbitration has to give a reference to the decision of the Appealing Authority.

In Sushil Kumar Bhardwaj v. Union of India, this Court has held that the procedure prescribed in the Agreement before invocation of the Arbitration Agreement necessarily needs to be followed, as Section 11 of the Act can be invoked only where the parties have failed to act under the prescribed procedure. The petitioner itself having failed to act in accordance with the prescribed procedure, cannot invoke the remedy of Section 11 of the Act. In view of the above, the present petition is dismissed as being premature.


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