ARBITRATION CANNOT BE DENIED ON PROCEDURAL ISSUES, RULES SUPREME COURT

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THE Supreme Court has ruled that an arbitrator can be appointed to resolve disputes between two parties even though the arbitration agreement between them does not mention the procedure for such an appointment. The apex court was hearing a plea of Om Construction against a decision of the Gujarat High Court in a case involving the Ahmedabad Municipal Corporation.

The high court had said that as the agreement between the parties, and more particularly the arbitration agreement, did not lay down any procedure for appointing an arbitrator, the court could not invoke its jurisdiction under sub-section (6) of section 11 of the Arbitration and Conciliation Act, 1996. It contemplates a situation where the appointment procedure as agreed to between the parties under sub-section (2) of section 11 of the Act is not followed.

An SC bench comprising Justice Altamas Kabir and Justice Markandey Katju accepted the plea of the construction company, which had said that simply because the procedure for arbitration, as required under section 11(6) of the 1996 Act, had not been agreed upon between the parties, the appointment of arbitrator cannot be denied.

When there was a specific arbitration agreement between the parties, the remedy under the provision of the Act could not be denied on a mere technicality. If no procedure is mentioned in the arbitration agreement, it cannot be said that on such ground alone the provision of subsection (6) of section 11 of the Act could not be invoked, the company had argued.

Allowing the appeal, the bench appointed Justice CK Thakker, a former judge of the apex court, to settle the dispute between the parties.

Om Construction’s tender was accepted by the civic body for providing and fixing nibhada stone for paving and footpath in Kalupur and Dariapur wards in central zone within Ahmedabad. The work order was issued on June 6, 2006, and as per the company’s claim the work was completed by the end of October, 2006.

According to the company, after giving credit for payments that were made by the Corporation, a sum of Rs 68.46 lakh was still due towards the work performed in Dariapur ward. A sum of Rs 8.61 lakh was also due for the work carried out in Kalupur ward.

On June 6, 2007, the company issued a notice to the Corporation claiming a sum of Rs 77.08 lakh together with interest at a rate of 18% per annum, from the due date till the date of realisation. Otherwise, it had sought an arbitrator to settle the row.

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