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Delhi High Court extends arbitrator’s mandate despite expired deadline.

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CASE TITLE – National Skill Development Corp. V. Best First Step Education Pvt Limited &Ors

CASE NUMBER – O.M.P. (MISC.) (COMM.) 608/2023

DATED ON – 29th February, 2024

QUORUM – HON’BLE MR. JUSTICE PRATEEK JALAN

 

FACTS OF THE CASE

The petitioner has filed this petition under Section 29A of the Arbitration and Conciliation Act, 1996 for extension of the mandate of the Arbitral Tribunal constituted to adjudicate disputes between the parties under a Loan Agreement dated 19.12.2013. According to the agreement, respondent No. 1 was the significant borrower, respondent Nos. 2 through 5 were guarantors, and respondent No. 6 is alleged to have made further undertakings in support of the petitioner. The petitioner was the lender. The parties to the arbitration procedures were the petitioner and respondent Nos. 1 through 6. Under the Indian Council of Arbitration (ICA) Rules, the arbitration was started. The petitioner filed a request for arbitration on March 21, 2022, and the respondents filed a counterstatement on April 8, 2022, after receiving the petitioner’s statement of claim on June 13, 2022. On January 27, 2023, an arbitrator was appointed, and on March 10, 2023, Respondent No. 6 was heard ex parte. The attorneys representing Respondent Nos. 1 through 5 withdrew on April 4, 2023, and no replacement attorneys showed up for them. The last hearing was place on July 14, 2023. On 16.11.2023, the petitioner filed a Section 29A petition, believing that the arbitrator’s authority would expire one year after the pleadings on 04.08. 2022. The arbitrator published the award on November 12, 2023, and the petitioner got it on December 20, 2023, despite the notification being sent on November 24, 2023.

 

ISSUES

Whether the mandate of the Tribunal can be extended, even after the award has been made?

 

COURT ANALYSIS AND JUDGEMENT

In the present case, the court learned that the petition was filed prior to the award, although after the mandate of the learned Arbitrator had already expired and that the factual petition is thus closer to the facts of the case in Harkirat Singh Sodh.

“If an award is delivered while the petition is pending and the petition was filed before the award was made, the case would still be maintainable. On the other hand, a petition that is submitted after the award is made and the setting aside process has begun cannot be maintained”

This distinction is also justified in principle, as a party cannot decide whether to request an extension of the mandate after learning of its outcome in the arbitration proceedings and being confronted with an award challenge based on this basis. The court determined that the petition should be granted after considering the case’s facts. Therefore, the arbitrator’s mandate, which was supposed to end on April 8, 2022, the day the pleadings concluded, is legally extended until November 12, 2023, the date the award was made. This ruling upholds the arbitrator’s decisions and the 11.12.2023 award. With this extension, the petition is therefore ended, and the issue is resolved as a result.

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Judgement Reviewed by – Gnaneswarran Beemarao

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Delhi HC declines settlement agreement stating lack of intent to avoid Arbitration; Sends dispute to Arbitration.

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CASE TITLE – M/S DHAWAN BOX SHEET CONTAINERS PVT. LTD v. M/S SHREYANSH HEALTHCARE PVT. LTD.

CASE NUMBER – ARB.P. 1196/2023

DATED ON – 20.05.2024

QUORUM – Justice Dinesh Kumar Sharma

FACTS OF THE CASE

The petitioner is engaged in the business of manufacturing corrugated boxes and cartons. The respondent placed various orders upon the petitioner for the supply of corrugated boxes. The petitioner having been supplied the same issued various invoices from time to time. The petitioner’s plea is that there was outstanding due of Rs. 36,40,006/- for which the petitioner issued a legal demand notice dated 01.06.2023. The petitioner has filed the present petition stating therein that there is an outstanding of Rs. 36,40,006/-. The petitioner also stated that the respondent issued an email dated 22.05.2023 and requested the petitioner to settle the matter at the lesser rate on the coercive ground that the management and control of the company would soon be taken over by the Insolvency Resolution Professional as appointed by the Hon’ble National Company Law Tribunal. The petitioner also claimed to have sent legal demand notice dated 01.06.2023. The petitioner stated that the respondent had informed that the insolvency proceedings had been initiated against him by M/s Synergy Group and further shared a screenshot of the filing details. Therefore, to bring a quietus to the matter, the petitioner accepted the offer of the respondent vide consent letter dated 12.06.2023. However, later on it was revealed that no insolvency petition had been filed. The respondent submitted that the petitioner had been supplying bad quality of the goods and the respondent was forced to return the good to the tune of Rs. 10,23,117/-. It has been submitted that thereafter the parties entered into a settlement agreement dated 12.06.2023 thereby deciding the terms of the payments to be to the petitioner after mutual discussion between the parties.

 

ISSUES

Whether the letter dated 12.06.2023 can be taken as a novation of agreement or settlement of dispute between the parties?

Whether the arbitration clause in the invoices is still enforceable given the settlement agreement?

 

LEGAL PROVISIONS

Section 8 of the Arbitration and Conciliation Act, 1996, prescribes the power of a judicial authority to refer parties to arbitration.

Section 11 of the Arbitration and Conciliation Act, 1996, prescribes the appointment of arbitrators in an arbitration proceeding.

CONTENTIONS BY THE PETITIONER

The Learned counsel for the petitioner submitted that the respondent coerced the petitioner into settling the matter by accepting part consideration and agreeing to receive the balance consideration proportionately on recovery of dues against whom the respondent has stated to have initiated recovery proceedings. Learned counsel for the petitioner also stated that the respondent falsely informed the petitioner that proceedings under IBC had been initiated against him which was found to be false. The petitioner in these circumstances accepted the offer of the respondent vide consent letter dated 12.06.2023. The Learned counsel for the petitioner submitted that there is an arbitration clause in the invoices within the jurisdiction of the Delhi Courts. He also submitted that it is a settled proposition that an arbitration clause on the invoices can be taken into account for appointing an Arbitrator. It had further been stated that the plea taken by the respondent that the arbitration clause as contained in the invoices of the petitioner stood novated under the settlement as recorded in the document dated 12.06.2023 is liable to be rejected. It had been submitted that the document dated 12.06.2023 cannot obviate the arbitration clause in the invoice. The Learned counsel further submitted that it is a settled proposition that if an original contract remains in existence, for disputes in connection with issues of repudiation, frustration, breach, etc., the Arbitration Clause therein continues to operate for these purposes.

CONTENTIONS BY THE RESPONDENT

The Learned counsel for the respondent submitted that the petitioner had been supplying bad quality of the goods and the respondent was forced to return the goods to the tune of Rs. 10,23,117/-. It had been submitted that thereafter the parties entered into a settlement agreement dated 12.06.2023 thereby deciding the terms of the payments to be to the petitioner after mutual discussion between the parties. He also submitted that the petitioner upon realizing the defects and quality issues in the goods sold by the Petitioner to the Respondent of its own volition agreed to settle the accounts amicably after discussions and deliberations with the Respondent. The Learned counsel for the respondent submitted that after the settlement as recorded in the letter dated 12.06.2023, there was no live lis between the parties and therefore in the absence of any dispute, the matter cannot be referred to the arbitration. He further submitted that once the parties to any arbitration agreement enter into a settlement thereby discharging the original agreement, the jurisdiction under Section 11 of the Arbitration and Conciliation Act cannot be invoked. After placing reliance on multiple precedents, The Learned Counsel came up with the arguments that a) an arbitration clause contained in an agreement which is void ab initio cannot be enforced as the contract itself never legally came into existence. b) A validly executed contract can also be extinguished by a subsequent agreement between the parties. c) If the original contract remains in existence, for the purposes of disputes in connection with issues of repudiation, frustration, breach, etc., the arbitration clause contained therein continues to operate for those purposes. d)Where the new contract constitutes a wholesale novation of the original contract, the arbitration clause would also stand extinguished by virtue of the new agreement. The Learned counsel argued that though the scope of judicial intervention at the stage of exercising jurisdiction under Sections 8 and 11 of the Arbitration and Conciliation Act is limited, yet, the matter can be referred only if there is a dispute between the parties. He further submitted that the petitioner having settled the dispute with the respondent, the matter cannot be referred to the learned Arbitrator.

COURT ANALYSIS AND JUDGEMENT

The Hon’ble High Court of Delhi was of the firm view that by no stretch of imagination the letter dated 12.06.2023 can be taken as the novation of an agreement or the settlement of the dispute between the parties as the document does not reveal at all that vide this document the dispute between the parties have been settled and there is no Live Lis between the parties. They further stated that while deciding such issues, the court has only to look at the prima facie view and the intention of the parties. In order to deny the arbitration, if the same is the preferred mode of resolution of dispute, there has to be clear intent of the parties, and stated that they do not consider that there is clear intent of the parties as reflected in the document dated 12.06.2023. The Hon’ble High Court disposed of the petition, with a few directions, stating that the disputes between the parties under the said agreement were now referred to the arbitral tribunal, and had also appointed an Arbitrator. It was also made clear that all the rights and contentions of the parties, including as to the arbitrability of any of the claim, any other preliminary objection, as well as claims on merits of the dispute of either of the parties, are left open for adjudication by the learned arbitrator.

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Judgement Reviewed by – Gnaneswarran Beemarao

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Central Registrar of Cooperative Societies may choose an arbitrator in accordance with Section 84 of the Multi State Cooperative Societies Act, 2002: Delhi High Court

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Case Name: Appolo Handloom Manufacturing Co-Op Society Ltd v. All India Handloom Fabrics Society and Ors 

Case No.: ARB.P. 1261/2023 

Dated: April 8, 2024 

Quorum: Justice Pratibha M Singh 

 

FACTS OF THE CASE: 

For more than thirty years, Apollo Handloom Manufacturing Co-Op. Society Limited, the petitioner, has been a member of the All-India Handloom Fabric Society. The Petitioner filed a petition seeking the appointment of an arbitrator by the Central Registrar of Co-operative Societies, Ministry of Cooperation. 

In order to have an arbitrator appointed by the Ministry of Cooperation’s Central Registrar of Cooperative Societies, the petitioner submitted a petition. Among the disagreements the petitioner brought up are issues, including but not limited to monetary dues, unlawful election of office bearers, and other issues brought up by the respondents. 

Section 84 of the Multi State Cooperative Societies Act, 2002 was cited by the petitioner as the basis for the Arbitration Clause. On May 26, 2023, the petitioner requested the appointment of an arbitrator; however, the Central Registrar did not do so as required by Section 84 of the Act. 

Disappointed by this, the petitioner filed an application under Section 11(6) of the Arbitration and Conciliation Act (A&C Act) requesting the appointment of an arbitrator through the intervention of the court. According to the Court’s ruling, the Central Registrar may be directed to nominate the arbitrator even though it is not permitted to do so itself. 

Apollo Handloom Manufacturing Co-op. Society Limited, the petitioner, complained that the Central Registrar had not appointed an arbitrator in spite of their request. The petitioner was dissatisfied with this inaction and looked for another way to settle the problem. 

The Central Registrar is required by Section 84(4) to designate the arbitrator; but, in the event that the Registrar is unable to do so, the aggrieved party may petition the High Court for guidance. This was clarified by the Court. 

 

CONTENTIONS OF THE PETITIONER: 

The petitioner’s position is that, as a member of respondent, it has a number of disagreements with how respondent operates, including the unpaid balance of certain of the petitioner’s financial obligations. Furthermore, the Attorney maintains that Respondent No. 1’s office bearers were elected in a way that was illegitimate and forbidden.  

A request for the appointment of an arbitrator with another respondent, in the form of a representation, was filed on May 26, 2023. This request pertained to other disputes pertaining to the constituent of Respondent No. 1, for which it had invoked the Arbitration Clause in terms of Section 84 of the Multi State Cooperative Societies Act, 2002 (hereinafter, “the Act”). Moreover, the Petitioner asserts that it has additionally submitted a request for the appointment of an arbitrator on Respondent No. 6-Central Registrar’s website.  

The petitioner claims that because the Central Registrar did not appoint an arbitrator, this court’s jurisdiction is invoked under Section 11(6) of the Arbitration and Conciliation Act, 1996, and a petition has been filed seeking the appointment of an arbitrator in accordance with Section 84 of the Act.  

By way of representation, the petitioner claims that on May 26, 2023, a request was made for the appointment of an arbitrator alongside another respondent. In accordance with Section 84 of the Multi State Cooperative Societies Act, 2002 (hereinafter, “the Act”), Respondent No. 1 had invoked the Arbitration Clause in relation to various conflicts involving its constituent under consideration. In addition, Petitioner also states that it has also filed a request on Respondent No. 6-Central Registrar’s website for the appointment of an arbitrator. 

Under Section 84 of the Act of 2002, the disputes were addressed. Section 84(5) requires the appointment of an arbitrator, which the Central Registrar, as the appointing authority, failed to accomplish. In the absence of an arbitrator, the petitioner was left with no option except to request the appointment through the court. 

 

CONTENTIONS OF THE RESPONDENTS: 

First, the argument is made that the claims and conflicts that need to be sent to arbitration are unclear. The Counsel for Respondent No. 1 further argues that the Petitioner did not provide the Respondent with any notice pursuant to Section 21 of the Arbitration and Conciliation Act, 1996. 

In support of Respondent Nos. 2 through 4, it is argued that an office bearer’s election may only be contested within 30 days and not after that. A petition under Section 11 of the Arbitration Act may also be contested as unmaintainable in light of Section 84(5) of the Act. Respondent Nos. 2 to 4’s legal counsel argues that the petition itself cannot be maintained in light of the Supreme Court’s decision in a precedent-setting ruling that is currently before the highest court. 

The petition’s maintainability was contested by the respondent for the following reasons: It is purported that the petitioner did not supply enough information on the parties’ disagreement. Prior to submitting the application, no notification under Section 21 of the A&C Act was given. The petition under Section 11(6), according to the respondent, could not be maintained because the Central Registrar alone had the authority to appoint.  

 

LEGAL PROVISIONS: 

  • Section 84 of the Multi State Cooperative Societies Act, 2002: This provision, which addresses arbitration in cooperative groups, was cited by the petitioner. It offers a way for conflicts in these kinds of communities to be settled through arbitration. 
  • Section 11(6) of the Arbitration and Conciliation Act (A&C Act): An application under this section was filed by the petitioner. It gives the court the ability to step in and appoint an arbitrator in the event that the authorised authority—in this example, the Central Registrar—fails to act. 

 

COURT’S ANALYSIS AND JUDGMENT: 

Counsels representing each party were present, and the court reviewed the documentation. The provisions of the Arbitration Act would only be applicable in the absence of any additional provisions enacted under the Act, as far as maintainability under Section 84(5) of the Act is concerned.  

The Central Registrar of Co-operative Societies, Ministry of Cooperation, is required by Section 84(4) of the Act to designate an arbitrator; the court noted that this need cannot be questioned. On the other hand, if the Central Registrar is unable to choose an arbitrator, the Petitioner may be left without recourse. It cannot be maintained that the Court lacks the authority to refer the case to the Central Registrar for the appointment of an arbitrator in such circumstances.  

According to Section 84(5) of the Act, the court ruled that there was a clear arbitration clause. As a result, the claim that a petition under Section 11(6) of the Arbitration Act could not be maintained was dismissed. The High Court is authorised under Section 11(6) of the Arbitration Act to take the required actions to ensure the appointment of an arbitrator, particularly in cases where a person or organisation, in this instance, the Central Registrar, has neglected to take the necessary actions n accordance with the protocol outlined in Section 84 of the Act. 

Regarding Respondent Nos. 2 through 4, this Court believes that they are individual office bearers of Respondent No. 1, which is a society. Thus, the primary legal relationship is that of the Petitioner and Respondent No. 6. The Central Registrar, the aforementioned respondent, has only informed the court that it will choose an arbitrator in two weeks without contesting the maintainability of the current case.  

 

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Judgment reviewed by Riddhi S Bhora. 

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“Standardizing International boundaries: Navigating International Commercial Disputes Through Arbitration.”

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Businesses that expand into international markets are susceptible to legal disputes brought on by differences in laws, rules, and corporate procedures as well as errors of thought, language, and cultural hurdles. Companies that deal with cross-border disputes may require the assistance of legal specialists to address such challenges. 

Arbitration has become a widely accepted form of dispute settlement on a global scale in the last several decades. It is becoming the main technique for resolving business conflicts. The combination of global economic expansion and technological advancements has made arbitration a successful dispute resolution process. 

This article examines at the notion of international business arbitration, how it functions, and how it sets itself apart from other means of settling disputes. 

OVERVIEW: 

The process of resolving disputes between parties in various countries by an arbitrator or panel of arbitrators is known as international commercial arbitration. It entails bringing the disagreement before arbitration rather than a court of law. A ruling on the dispute will be binding and made by the arbitrator or panel of arbitrators. 

To further break it down, it is comparable to a worldwide courtroom where corporations battle it out is international commercial arbitration. We have arbitrators who decide conflicts in secret rather than gavels and powdered wigs. You don’t have to reveal your cards to everyone, much like in a refined game of poker 

The swift advancement of international commercial arbitration has compelled national legal systems to accommodate it and establish supportive legislative frameworks that enable it to thrive. It has been correctly stated that there was a competitive phase between the legislature and judiciary in the 1980s and 1990s as they all attempted to draw in more international arbitration. The two primary outcomes of this competition were the modernization and liberalisation of arbitration systems and the transfer of international arbitration’s advantageous status to domestic courts.  

HISTORICAL DEVELOPMENT: 

The Jay Treaty (1794) between Great Britain and the United States, which established three arbitral commissions to settle disputes and questions coming out of the American Revolution, is credited with helping to shape modern international arbitration.  

 Ad hoc arbitration courts were created in the 19th century as a result of several arbitral agreements that were reached, allowing them to handle a large volume of claims or particular instances. The most important was the arbitration of Alabama claims under the terms of the Treaty of Washington (1871), wherein the United States and Great Britain agreed to resolve disputes resulting from Great Britain’s failure to uphold its neutrality during the American Civil War.  

Established in The Hague in 1899, the Permanent Court of Arbitration is made up of a panel of jurists nominated by the member nations, from which the claimant governments choose the arbitrators. 

PROCESS FOR INTERNATIONAL COMMERCIAL ARBITRATION: 

International Commercial Arbitration is like a global courtroom where businesses duke it out. Instead of powdered wigs and gavels, we’ve got arbitrators who settle disputes privately. Here’s how it works- 

  1. AGREEMENT: An arbitration agreement is normally signed by the parties to the dispute at the start of the international commercial arbitration process. The rules of procedure, the selection of the arbitrator or arbitrators, and the arbitration location are all outlined in this agreement, detailing the terms and conditions of the arbitration process.   
  2.  ARBITRATORS: The arbitration procedure might start after the agreement is signed. Once the arbitrator or panel of arbitrators has heard all of the arguments and supporting documentation, they will decide how to resolve the disagreement. The only situations in which this decision can be contested are those in which there was a significant irregularity in the arbitration procedure or in which the conclusion is against public policy. Otherwise, this decision is final and binding.   
  3.  GOVERNANCE: The United Nations Committee on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration is one of the international conventions and national legislation that govern international commercial arbitration. A thorough framework for the management of international business arbitration procedures is provided by this model law. 
  4.  HEARING, DECISION AND AWARDS: During the arbitration hearing, both parties submit their witnesses, evidence, and arguments. Final Decision: Based on the facts submitted, the arbitrator or panel renders a legally binding judgement. Award: An arbitral award, which serves as documentation for the ruling, is enforceable in national courts.  

GENERAL PRINCIPLES: 

  • MUTUAL CONSENT: Mutual consent is necessary for the mutual process of arbitration. Only when the parties have decided to start arbitration can it begin. If applicable, the parties may use a submission agreement to add any arbitration clause they see fit. Additionally, the parties cannot end the arbitration agreement on their own. 
  • CONFIDENTIAL PROCESS: The confidentiality of the matter is particularly protected under the arbitration rule. The arbitration procedure protects confidentiality and prevents pointless disputes about the parties and case. Any information disclosed during the process could lead to judgements and prizes. Trade secrets and other sensitive material submitted to the arbitration tribunal may, under certain conditions, be subject to access restrictions set by the parties. 
  • CHOICE OF ARBITRATOR: The arbitrator that each party selects should be someone they believe is qualified to hear their case. Every party designates one arbitrator if a three-person arbitration panel has been selected by the parties. Next, the two arbitrators who were chosen will have to agree on the presiding arbitrator. In addition, the centre has the authority to directly select members of the arbitration tribunal or recommend a suitable arbitrator with the necessary experience. 

ADVANTAGES:  

  • Compared to typical litigation, arbitration is frequently quicker and more effective. This is due to the fact that arbitration procedures are typically more flexible and less formal than court proceedings, which may be expensive and time-consuming.  
  • By using arbitration, the disputing parties can select the arbitrator or panel of arbitrators of their choice. This entails that the parties may choose an arbitrator or arbitrators with subject-matter experience related to the issue, resulting in a better informed and equitable conclusion. 
  • Compared to typical litigation, arbitration is frequently more discreet. Since court procedures are typically open to the public, confidential information pertaining to the parties to the dispute may be disclosed. On the other hand, arbitration procedures are typically private, allowing the parties to maintain the confidentiality of the specifics of the disagreement.  

CASE LAWS:  

Enercon (India) Ltd. and Others v. Enercon GmbH and Another [1]:  

The Enercon case clarified the Indian courts’ authority to grant such a ruling, addressing the issue of impartiality in international commercial arbitrations. The judiciary issued directives regarding the situations in which it can intervene and emphasised the need for a balance between protecting the independence of arbitration proceedings and guaranteeing effective representation.  

This choice prompted parties to choose arbitration over other channels for resolving international disputes and helped to create a more arbitration-friendly environment. It is considered to be a landmark case in the ambit of international commercial arbitration.  

Bharat Aluminium Co. v. Kaiser Aluminium Technical Service, Inc. (BALCO case) [2]  

Judge intervention and party sovereignty must be delicately balanced, as highlighted by the BALCO case, a watershed moment in Indian arbitration. The principle of minimal intervention by the judiciary in arbitration proceedings was upheld by the Supreme Court in its decision. The court emphasised that arbitral decisions should be respected unless they are manifestly illegal or against public policy, and it clarified that the scope of judicial review under Section 34 of the Arbitration and Conciliation Act, 1996 is limited.  

Shri Lal Mahal Ltd. v. Progеtto Grano Spa [3]: 

The subject matter of this case is international commercial arbitration’s internal measures. The Supreme Court expounded upon the authority of Indian courts to provide interlocutory appeals in favour of foreign-sat arbitrations. 

Amееt Lalchand Shah v. Rishabh Enterprise [4]:  

The question of whether the parties might define the “seat” of arbitration through the arbitration agreement was addressed by the Bombay High Court in this particular case. The court determined the applicable criminal legislation by defining the significance of a seat carrier.  

CONCLUSION:  

Rapidly expanding economies need a reliable, stable dispute resolution process in order to draw in international investment. Economic actors in India and overseas have developed a strong preference for arbitration as a means of resolving disputes because of the enormous backlog of cases that are waiting in Indian courts. 

India has not always adhered to worldwide best practices in arbitration, even though it was one of the founding members of the New York Convention. But there has been a significant change in mindset during the past five years. Courts and lawmakers in India have updated the arbitration laws to reflect global best practices. The pro-arbitration stance of the courts and the enactment of the 2015, 2019, and 2021 Amendment Acts provide grounds for optimism that Indian arbitration law would soon adopt these global best practices. 

“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.” 

Written by Riddhi S Bhora  

[1] Enercon (India) Ltd. and Others v. Enercon GmbH and Another (AIR 2014 SUPREME COURT 3152)  

[2] Bharat Aluminium Co. v. Kaiser Aluminium Technical Service, Inc. (BALCO case) (CIVIL APPEAL NO.7019 OF 2005) 

[3] Shri Lal Mahal Ltd. v. Progеtto Grano Spa ((2013) 115 CORLA 193) 

[4] Amееt Lalchand Shah v. Rishabh Enterprise (CIVIL APPEAL NO. 4690 OF 2018) 

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Madras High Court appoints Hon’ble Dr.Justice S.Muralidhar, Former Chief Justice of Orissa High Court as Sole Arbitrator in matter of tender for PAN India Solar Power Project .

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TITLE:  NACOF   Vs.  NLC India Limited.

Decided On: September 11, 2023.

Arb.O.P.(Com.Div) No.302 of 2023 and O.A. No.267 of 2023.

CORAM:  Hon’ble Mr. Justice Abdul Quddhose.

Facts:

The applicant / petitioner participated in a tender called for by the first respondent for setting up of 500 MW ISTS connected Solar Power. Project on PAN India basis with Operation and Maintenance for 3 years. One of the tender requirements was that the bidder will have to furnish a bank guarantee for a value of Rs.10,94,06,000/- for every 100 MW along with the bid. The applicant / petitioner has also invoked arbitration by issuing a notice to the first respondent dated 08.06.2023 through its counsel, nominating its arbitrator to adjudicate the dispute between the applicant / petitioner and the first respondent. Since the first respondent has not agreed for arbitration, the applicant / petitioner has filed Arb.O.P.(Com.Div) No.302 of 2023 under Section 11 of the Arbitration and Conciliation Act, 1996, seeking for appointment of an arbitrator by this Court.

Legal Analysis and Decision:

Being a huge amount, if the first respondent is allowed to invoke the bank guarantee, even before the quantification of the claim, the applicant / petitioner will certainly be put to irreparable hardship. Irretrievable injustice will also be caused to the applicant if the bank guarantee for the huge sum is allowed to be invoked by the first respondent as the applicant / petitioner has categorically pleaded that they have not submitted any fabricated document. In support of their stand, they have also produced a letter dated 15.06.2023 sent by AVVNL. The dispute, whether the applicant has submitted fabricated document or not, can be adjudicated only by the arbitral tribunal and this Court at this stage, based on the letter produced by the first respondent, cannot give a categorical finding that the applicant / petitioner had submitted a fabricated document while submitting its tender. When both parties to the dispute have produced letters in support of their respective stand and there is no conclusive evidence available on record to prove that the applicant / petitioner has submitted a fabricated document, while submitting its tender, this Court must certainly protect the interest of the applicant / petitioner by granting an order of interim injunction pending arbitration to restrain the first respondent from invoking the bank guarantee for a sum of Rs.21,88,12,000/-. Prima facie case has been made out by the applicant / petitioner for the grant of interim injunction as prayed for in this application. Irretrievable injustice will be caused to the applicant /petitioner, if the bank guarantee is invoked by the first respondent. The balance of convenience is also in favour of the applicant / petitioner for the grant of injunction as prayed for in this application. since the applicant / petitioner has satisfied that irretrievable injustice will be caused to them and has also satisfied the special equities exception of proportionality for the grant of an order of injunction from invocation of bank guarantee, this Court is inclined to allow this application by granting an order of injunction against the first respondent from invocation of the bank guarantee as prayed for in this application.    

The Finally Says that Hon’ble Dr.Justice S.Muralidhar, Former Chief Justice of Orissa High Court, is appointed as the sole Arbitrator to adjudicate the dispute between the applicant / petitioner and the first respondent arising out of the invitation to tender for setting up of 500 MW / ISTS connected Solar Power Project on PAN India basis with operation and maintenance. The Arbitrator shall be paid his remuneration / fees either as per the mutual agreement between the parties or as per the 4th schedule of the Arbitration and Conciliation Act, 1996. Both the parties shall equally share the arbitrator’s fees. The Arbitrator shall conduct the arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and shall complete the arbitration within the specified time as prescribed under the said Act.

“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.”

 JUDGEMENT REVIEWED BY JANGAM SHASHIDHAR.

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