Pre-Arbitral steps are mandatory in nature: Delhi High Court

The Delhi High Court has passed a judgment on 01-10-2021 in the case of M/S Sanjay Iron And Steel Ltd. Vs Steel Authority Of India ARB.P. 408/2021. Justice Suresh Kumar Kait disposed of the petition.


Petitioner – M/s Sanjay Iron & Steel Ltd. claims to be doing business of trading of iron and steel. According to petitioner, respondent – Steel Authority of India Limited is a Government Company, who had invited online tenders for operating as Distributor involving purchasing, transportation, handling and storage, processing and sales to dealers of TMT/ TMT Coils/ at Panchkula Cluster in the State of Haryana. The petitioner claims to have submitted its tender on 08.08.2019, which was accepted by respondent vide letter of intent/acceptance bearing No. Tender No. SAIL/ NR/ Distributor/ 19-20/01A, dated 25.06.2019. Petitioner further claims to have deposited full security amount of Rs.5,00,000/- and bank guarantees to the tune of Rs.1,28,00,000/-, prepared by Union Bank of India in favour of respondent vide letter dated 23.10.2019 and complied with all the terms as per online tender terms vide reference No. CMO/ REC/ BS/CHA/Distributor- Panchkula/ 19-20 dated 30.09.2019. Petitioner had entered into an agreement dated 7.11.2019 with respondent for operating as Distributor.

According to petitioner, respondent in clear breach of terms of the agreement started executing the orders directly below 50 tones to the small consumers/ dealers whereas, it had agreed not to entertain the direct orders from small consumers / dealers below 50 tones and therefore, vide its email dated 26.10.2020, petitioner communicated its unwillingness to extend the bank guarantees and continue with the distributorship. Thereafter, petitioner requested the respondent to release the bank guarantee and credit the balance lying in their account in the form of commission, credit note, discount, EMD and excess amount lying in their account by cancelling petitioner’s orders on 22.10.2020. Besides, petitioner also raised grievance by showing difference in the rates supplied to petitioner and other dealer.

Petitioner has averred that it had invested huge amount of capital in terms of land, building development, purchase of machine as infrastructure for SAIL, employee the area sales officer as distributor and also took loan for the said purpose, consequently it had become difficult to survive, as respondent was directly feeding the customers of small quantities below the prices of petitioner. Further averred that the said respondent did not pay attention to petitioner’s request vide letter dated 03.12.2020 to rectify the breaches and also vide letter dated 19.05.2020 to give relaxation in distribution policy due to covid pandemic but to no avail.


In the case in hand, Clause-10 of the Agreement in question makes it manifestly clear that at the first instance parties shall endeavour to resolve such dispute through the SCOPE Forum of Conciliation & Arbitration and if the dispute is not settled by conciliation within 30 days of the conciliation, then the aggrieved party may refer to arbitration, which again shall be governed in accordance with the Rules of Arbitration of the “SCOPE”. In fact, respondent vide its letter dated 08.12.2020 also tendered its consent to invocation of conciliation proceedings through SCOPE. However, despite invocation of conciliation, the proceedings before the Conciliator did not commence due to non-payment of fees.

In view of afore-noted narration, this Court is of the opinion that the very purpose of keeping a conciliation clause in any Agreement is to shorten the path for settlement of disputes between the parties. Therefore, parties in the present petition are directed to first explore possibility of resolution of disputes through Conciliation in terms spelt out in Clause- 10 of the Agreement. Further directed that parties shall strictly adhere to the time line and shall conclude the conciliation proceedings within 30 days of initiation of conciliation proceedings, as agreed in Clause 10.1 of the Agreement and thereafter only disputes, if any, shall be referred to arbitration.

“PRIME LEGAL is a full service law firm that has won a national award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”


Click here to view full judgment

Leave a Reply

Your email address will not be published. Required fields are marked *