Facts of the Case

The petitioner, Sanjeev Kumar, filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking appointment of an Arbitrator in terms of Clause 27 of the Agreement executed in April 2018.

The agreement related to a licence to occupy land for the purpose of a Comprehensive Parking Contract at Ludhiana Railway Station. Open tenders had been floated by respondent No. 2 on 27 December 2017 for comprehensive parking arrangements for a period of three years at Ludhiana Railway Station, covering the Main Side and the Civil Lines Side.

For the Ludhiana Main Side, the reserve price was ₹66,72,840 for one year and ₹2,00,18,520 for three years. The designated area was 4745.90 square metres for private vehicles, together with the existing area earmarked in the circulating area for commercial vehicles. The tender cost was ₹10,000 plus 18% GST, and the earnest money deposit was ₹20,01,852.

For the Ludhiana Civil Lines Side, the reserve price was ₹20,72,712 for one year and ₹62,18,136 for three years. The designated area was 1516.15 square metres for private vehicles. The tender cost was ₹5,000 plus 18% GST, and the earnest money deposit was ₹6,21,814.

The petitioner emerged as the successful bidder and was allotted the comprehensive parking contract at Railway Station Main for three years on 19 March 2018. He was also allotted the comprehensive parking contract at the Railway Station Civil Lines Side for three years.

The petitioner was required to deposit ₹27,06,000 towards quarterly licence fee plus 18% GST with the Station Superintendent, Ludhiana, for the Railway Station Main Side and ₹9,90,000 plus 18% GST for the Railway Station Civil Lines Side.

According to the petitioner, all necessary formalities were completed. After execution of the agreement, respondent No. 2 was required to hand over the work site free from all obstructions. The site was stated to be required to be handed over within one week from 25 March 2018, but it was allegedly not handed over until 19 June 2018.

The petitioner asserted that the non-availability of the work site caused financial loss. Numerous representations were submitted to respondent No. 2 seeking handover of the work site in accordance with the agreement, but without success. The petitioner relied upon representations dated 21 June 2018, 28 June 2018, 30 June 2018, 2 July 2018, 7 August 2018, and 20 August 2018.

The petitioner also invoked the arbitration clause seeking appointment of an Arbitrator, but according to him, the respondents did not reply. Instead, respondent No. 2 terminated the comprehensive parking contract on 10 September 2018 on the ground that the petitioner had failed to deposit the licence fee for the second quarter. The competent authority consequently decided to terminate the contract with forfeiture of the security amount and performance guarantee.

The petitioner thereafter issued a notice dated 15 January 2019 to respondent No. 2 seeking appointment of an Arbitrator. It was also asserted that a sum of approximately ₹1.03 crore had already been deposited with respondent No. 2 and had not been refunded along with interest.

Issues Involved

  1. Whether a bona fide and arbitrable dispute existed between the petitioner and the respondents warranting appointment of an Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.
  2. Whether the petitioner’s notice invoking arbitration satisfied the requirements of Clause 27.1(c) of the contract agreement.
  3. Whether specification of the “subject of dispute” in the invocation notice was sufficient for compliance with the contractual arbitration mechanism.
  4. Whether the respondents’ objection concerning waiver under Section 12(5) of the Arbitration and Conciliation Act, 1996 could defeat the request for appointment of an Arbitrator.
  5. Whether the alleged waiver document relied upon by the respondents could be accepted when its material columns were blank and its execution remained debatable.
  6. Whether the respondent could rely upon Clause 15 of the agreement regarding suo motu termination when such a ground had not been pleaded in the written reply and the reply was silent regarding compliance with the contractual notice requirement.

Petitioner’s Arguments

The petitioner contended that he had completed all necessary contractual formalities after being declared the successful bidder.

It was argued that respondent No. 2 was contractually required to hand over the work site free from all obstructions within the stipulated period, but the site was not handed over until 19 June 2018. This delay allegedly caused substantial financial loss.

The petitioner relied upon several representations made to the respondent authorities seeking proper handover of the work site in accordance with the agreement.

It was further contended that the arbitration clause had been duly invoked, but the respondents failed to respond and did not appoint an Arbitrator.

The petitioner challenged the termination of the parking contract dated 10 September 2018, which was based on the alleged non-payment of the second-quarter licence fee and resulted in forfeiture of the security amount and performance guarantee.

The petitioner further relied upon the notice dated 15 January 2019 seeking appointment of an Arbitrator and asserted that approximately ₹1.03 crore deposited with respondent No. 2 remained unrefunded along with interest.

Respondents’ Arguments

The respondents raised two principal objections in their reply.

First, they relied upon Clause 27.1(c) of the contract agreement and contended that a demand for arbitration was required to specify the matters in question or forming the subject of the dispute or difference, as well as the amount of the claim item-wise, if any. According to the contractual clause, only those disputes or differences in respect of which a demand had been made, together with any counterclaim or set-off raised by the Railway, could be referred to arbitration.

Second, the respondents raised an objection concerning waiver under Section 12(5) of the Arbitration and Conciliation Act, 1996 and relied upon Annexure R-1.

During oral submissions, learned counsel for the respondent further referred to Clause 15 of the agreement and argued that the Railway Administration could, if required, terminate the contract suo motu by giving one month’s notice to the licensee.

Court Order / Findings

The High Court examined Clause 27.1(c) of the contract agreement and observed that the word “or” appeared in the relevant options contained in the clause.

The Court found that, through the notice of invocation dated 15 January 2019, the petitioner had elaborated the “subject of the dispute.” The respondents had not filed any reply to that invocation notice.

The Court held that recital of the “subject of dispute” in the notice invoking arbitration was sufficient to satisfy the requirement of Clause 27.1(c) of the contract agreement, which was ultimately to be treated as an arbitration clause.

Regarding the second objection based on waiver under Section 12(5) of the Act, the Court examined Annexure R-1. It observed that the vernacular proforma contained blank necessary columns and only the alleged signature of the tenderer appeared at the tail end of the paper.

The Court further noted that the document was neither signed by the respondent authority nor filled in with reference to any particulars of the petitioner, except for alleged short signatures appearing across the first three lines. The Court held that the matter relating to such a document would remain debatable.

As regards the oral submission based on Clause 15 of the agreement, the Court observed that no such ground had been taken in the respondents’ reply. The written reply was conspicuously silent regarding the requirement arising from the said termination clause.

Upon considering the pleadings of the parties, the High Court concluded that a bona fide dispute existed between them and that the matter was required to be referred to a sole Arbitrator for adjudication.

The tentative value of the claim was recorded as ₹1.03 crore plus interest till date and compensation, if any.

Accordingly, the High Court appointed Hon’ble Mr. Justice Rameshwar Singh Malik (Retd.) as the sole Arbitrator to resolve the disputes and differences between the parties.

The appointment was made subject to the declaration required under Section 12 of the Arbitration and Conciliation Act, 1996 concerning the Arbitrator’s independence and impartiality.

The Court further directed that the arbitral proceedings be completed within the specified period in terms of Section 29-A of the Act.

The Arbitrator’s fee was directed to be governed by the Fourth Schedule to the Arbitration and Conciliation Act, 1996, as amended from time to time, and was to be shared equally by the parties.

The venue of arbitration proceedings was fixed at Ludhiana, subject to the convenience of the Arbitrator.

Important Clarification

The decision provides an important clarification regarding compliance with a contractual arbitration invocation clause. Where Clause 27.1(c) required the arbitration demand to identify the relevant matters or the subject of the dispute or difference, the High Court treated a clear recital and elaboration of the “subject of dispute” in the invocation notice as sufficient compliance.

The judgment also indicates that an objection based on an alleged waiver under Section 12(5) cannot be mechanically accepted where the relied-upon document itself contains blank material particulars, lacks execution by the respondent authority, and raises a debatable issue regarding its authenticity or completeness.

Further, a party cannot effectively rely upon an additional contractual ground at the stage of oral submissions when that ground was not taken in its written reply, particularly where the pleading remains silent regarding compliance with the relevant contractual requirement.

Sections and Contractual Provisions Involved

Section 11(6), Arbitration and Conciliation Act, 1996: Governs recourse to the Court for appointment of an Arbitrator where the agreed appointment procedure fails in circumstances covered by the provision.

Section 12, Arbitration and Conciliation Act, 1996: Relates to disclosure requirements and circumstances concerning the independence and impartiality of an Arbitrator.

Section 12(5), Arbitration and Conciliation Act, 1996: Concerns statutory ineligibility for appointment as Arbitrator in specified circumstances and the legally prescribed framework concerning waiver.

Section 29-A, Arbitration and Conciliation Act, 1996: Relates to the time limit for making an arbitral award.

Fourth Schedule, Arbitration and Conciliation Act, 1996: Provides the statutory framework relevant to the fee structure of Arbitrators.

Clause 27 of the Agreement: Arbitration clause forming the contractual basis for seeking appointment of an Arbitrator.

Clause 27.1(c) of the Agreement: Concerned the contents and scope of the demand for arbitration, including specification of the matters or subject of dispute or difference and claim details, if any.

Clause 15 of the Agreement: Relied upon orally by the respondent in relation to the Railway Administration’s power to terminate the contract suo motu with one month’s notice to the licensee.

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