The main issue which fell for consideration before the Hon’ble Supreme Court, in the attached judgment, was whether the following clause would amount to an arbitration clause:
“16. DISPUTE RESOLUTION
16.1 Except where otherwise provided in the Agreement, all questions and disputes in any way arising out of or relating to the Agreement shall be dealt with as mentioned below.
16.2 In the event the Contractor considers any work demanded of it as being outside the requirements of the Agreement, or disputes any record or decision given in writing by the Competent Officer in any matter in connection with or arising out of the Agreement, to be unacceptable, it shall promptly within [15] days request the Competent Officer in writing to give his instructions or decision in respect of the same. Thereupon, the Competent Officer shall give his written instructions or decision within a period of [30] days from the receipt of the Contractor’s letter.
16.3 If the Competent Officer fails to give his instructions or decision in writing within the aforesaid period or if the Contractor is dissatisfied with the instructions or decision of the Competent Officer, the Contractor may, within [15] days of receipt of the Competent Officer’s instructions or decision, appeal to the Commissioner who shall afford an opportunity to the Contractor to be heard, if the latter so desires, and to offer evidence in support of its appeal. The Commissioner shall give his decision in writing within [30] days of receipt of Contractor’s appeal which shall be acceptable to the Contractor.”
Facts in brief:
The dispute chiefly pertains to an agreement, clause 16 of the agreement in specific, entered into between the appellants and the respondents. Pursuant to the agreement the respondents were to collect toll tax from all border entry points within the NCT of Delhi.
The clause 16 in question provided for resolution of disputes in two stages. First, if a case arises wherein a Contractor finds that the work demanded is outside the scope of the agreement or feels the need to dispute any decision of the Competent Officer or if any record created by him is unacceptable, he may request the Competent Officer to decide its representation or give instructions. The Competent Officer is obliged to decide within 30 days from the receipt of such a letter from the Contractor.
Second, If the Competent Officer fails to decide within 30 days or if the Contractor is dissatisfied with his decision, the Contractor may, within 15 days from receipt of the decision by the Competent Officer, file an appeal to the Commissioner, SDMC. The Commissioner is obliged to afford an opportunity to the Contractor to be heard and the Contractor is entitled to produce evidence in support of this case. At this stage, the Commissioner may give his decision in writing within 30 days. The clause makes the decision compulsorily ‘acceptable’ to the Contractor presumably meaning that it shall be binding on him.
Delhi High Court
The respondents had filed an application under section 11(6) of the Arbitration and Conciliation Act, 1996 before the Hon’ble Delhi High Court and the same was allowed and an arbitrator was appointed.
Judgment and analysis:
The appeal was rejected by the Supreme Court after noting the clause was not an arbitration clause. Following observations may be relevant:
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