This Arbitration Application is filed, under Section 11 of the Arbitration and Conciliation Act, 1996 (for short “the Act”), for appointment of an Arbitrator for adjudication and settlement of the disputes between the parties, by passing an award.
The case of the applicant-company is that it deals with the work of earth excavation for hydro power plants. While so, the 2nd respondent-company deals with the developing of hydro power projects and the 1st respondent-company is its ancillary unit. As such, during the course of undertaking the hydro power project work by the 2nd respondent-company in Srinagar, Pauri Garhwal, Uttarakhand, apart from certain others, the applicant was also assigned a work contract. Accordingly, a written agreement, dated 12.09.2011, was entered into between the 2nd respondent and the applicant.
However, during the course of execution of the said agreement, disputes arose in relation to payment of outstanding retention amounts by respondent Nos.1 and 2 for the works undertook by the applicant-company. Therefore, the applicant issued three legal notices dated 20.12.2018, 23.08.2019 and 01.10.2019 to respondent Nos.1 and 2 to appoint an arbitrator to resolve the disputes. As there was no response, the present Arbitration Application is filed.
Counter-affidavits are filed by the respondents denying the existence of arbitration clause in the agreement dated 12.09.2011 entered between the parties. It is also denied that the 1st respondent is a party to the so-called agreement dated 12.09.2011 and it is an ancillary unit of the 2nd respondent. The claim of the applicant on merits is also denied and, accordingly, sought for dismissal of the application.
The learned counsel for the applicant submits that Clause (16) of the agreement, dated 12.09.2011, provides for arbitration and, accordingly, the same is invoked by the applicant. He further submits that since the 1st respondent is the subsidiary company of the 2nd respondent, the same is binding on the 1st respondent. Therefore, the learned counsel prays for appointment of an Arbitrator for adjudication of the disputes between the parties.
On the other hand, the learned counsel for the respondents submits that the 1st respondent is not a party to the said agreement at all and, accordingly, the claim made against the 1st respondent is untenable. He further submits that Clause (16) of the agreement, dated 12.09.2011, only provides for disputes resolution, and there is no arbitration clause at all. Therefore, the question of reference of disputes to the arbitrator does not arise in the present case. In support of his contentions, the learned counsel relies on the judgments of the Hon’ble Supreme Court in the cases of K.K. Modi vs. K.N. Modi and others (1998) 3 SCC 573) and Karnataka Power Transmission Corporation Limited and another vs. Deepak Cables (India) Limited (2014) 11 SCC 148).
In this case, firstly, it is to be seen that, since the 1st respondent is not at all a party to the agreement, dated 12.09.2011, the claim made by the applicant against the 1st respondent is untenable.
Secondly, the very existence of the arbitration clause in the agreement dated 12.09.2011 is disputed by the respondents. Therefore, it is necessary to refer to Clause (16) of the agreement, on which reliance is placed by the applicant for reference to arbitration. It reads as follows:-
“16.0 Disputes Resolution
Attempt shall be made by both parties to resolve Disputes arising if any, by mutual discussions at the level of Engineer-in-charge at site of the contractor (GVKPTSL) and Project Manager of Contractor. If the Disputes could not be resolved at this level, then the decision of the Director of the Contractor after discussions with the Subcontractor is final and binding.”
A plain reading of the said Clause does not at all reveal that in case disputes arise and the parties fail to settle the same, they can be referred to arbitration. What all it provides is that in case disputes arise between the parties, the decision of the Director of the Contractor would be final and binding. There is no whisper about arbitration. As such, by any stretch of imagination, the parties have never intended to go for arbitration, in case disputes arise and not settled by mutual discussions.
In K.K.Modi’s case (1 supra), the Hon’ble Supreme Court held that mere reference of issues to an expert for decision does not constitute an arbitration agreement. Further, in Karnataka Power Transmission Corporation Limited’s case (2 supra), the Hon’ble Supreme Court held that unless there is an arbitration agreement which provides that parties agree to submit all or certain disputes to adjudication of arbitrator, no reference can be made to arbitration. The intention of the parties expressing consensual acceptance to refer disputes to arbitrator is mandatory.
In the present case, according to the Clause (16), extracted hereinabove, in case disputes between the parties cannot be resolved at the level of Engineer-in-charge, the decision of the Director of the Contractor is final. There is no arbitration agreement providing for reference of disputes to t
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he arbitrator, in case the parties are not able to settle the same. Therefore, in the absence of any clause in the agreement, dated 12.09.2011, expressing intention of the parties to refer the disputes to arbitrator, the question of invoking the same and referring the disputes for arbitration does not arise. In view of the facts and circumstances of the case, I do not see any reason to entertain this application. Accordingly, the Arbitration Application is dismissed, leaving it open to the applicant to avail the remedies available to it under law. No order as to costs.