If Party Fails does not set up and inform about the Disputes Resolution Board, the only way to resolve the dispute is through arbitration, according to the J&K&L High Court.
The Jammu and Kashmir and Ladakh High Court stated that if a party does not set up and notify the Dispute Resolution Board (DRB), the only way to resolve the dispute is through Arbitration. This decision was made in an Arbitration Petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, which requested the appointment of an independent Sole Arbitrator. Chief Justice Tashi Rabstan noted that by the time the petition was filed, the DRB had been communicated to the claimant/applicant, but this was also too late according to clause (iii) of the Special Conditions effective from 26.09.2018. Therefore, the Court would consider the petition under Section 11(6) of the Act. The Court concluded that since the respondents did not set up and notify the DRB, the only option for resolving the dispute is through arbitration.
The Petitioner is a private company involved in construction and related services such as roads, electrification, water supply, central heating, and air conditioning. It has gained experience and revenue from similar projects and is registered as an SS CLASS Contractor with Index no SS-70. The Respondents issued a tender, and the Petitioner was selected as the successful bidder, receiving an order to execute the work for a total amount of Rs. 42,73,55,375.01. A contract was signed between the parties, and the Petitioner was responsible for building 63 structures. However, only 19 buildings were completed, and the Respondents could not finish the rest on time, causing delays in the contract work. The Petitioner managed to complete 34 buildings overall, which led to disputes between the parties. The Petitioner sent a notice to resolve the dispute through the Dispute Resolution Board (DRB), but the adjudication did not occur. Consequently, the Petitioner halted work and filed a Petition.
The High Court needed to consider three main issues:
- Is a petition under Section 11(6) of the A&C Act for appointing an arbitrator valid given condition 71 of the DRB?
- Can the arbitration clause 70 be used if the contract is incomplete, terminated, or ended according to conditions 55, 56, and 57?
- Is a petition under Section 11(6) of the A&C Act valid if the notice to invoke the arbitration clause was not served as required by Section 11(4)(a)?
Regarding the first issue, the Court stated, “According to the relevant clause of the Special Conditions of the Dispute Resolution Board (DRB), the respondents were required to set up a DRB and inform the petitioner-contractor within a specific timeframe of one month. Since this timeframe was included in the contract through an amendment in 2018, it was the respondents’ duty to notify the petitioner within one month from the amendment date, which was 26.09.2018.”
The Court stated that the Respondents were required to form a Dispute Resolution Board (DRB) within 30 days. However, they neither established the DRB nor informed the claimant-contractor within the required timeframe, leading to a failure in their obligations. As a result, the dispute could not be referred to the DRB. When the current petition was filed on 06.10.2023, the respondents submitted their objections. It was only then that the claimant-contractor learned about the DRB’s formation through a letter dated 30.09.2023. Regarding the second issue, the Court noted that there is an alternative way to resolve disputes through arbitration as outlined in the contract. This dispute stems from the agreement between the parties, which includes an arbitration clause.
On the third issue, the Court found that the Respondents’ claim of not receiving proper notice to invoke arbitration was not supported by the records and was actually incorrect. The petitioner had already asked the respondents to refer the matter to the DRB, thus exhausting the required remedy before coming to this Court. Therefore, the petitioner should not be sent back to the DRB at this point. The records show that work was stalled due to the respondents’ inaction, which created a dispute between the parties and warranted arbitration. Consequently, the High Court resolved the Arbitration Petition and appointed a Sole Arbitrator.
Cause Title: M/s Pardeep Electricals and Building Pvt. Ltd. v. Union of India & Anr.
Appearance:
Petitioner: Senior Advocate Pranav Kohli, Advocates Arun Dev Singh, and Vastav Sharma.
Respondents: CGSC Sandeep Gupta
