ARBITRATION AND CONCILIATION ACT, 1996

Section 37

Appealable orders - Appeal against non-maintainability of arbitral proceeding - State neither responded to letter regarding appointment of member of DAB nor appointed a new member of DAB - No scope for strictly complying with Condition of Particular Applications

State provided a work of improvement of highway to Joint venture (ALS). However, dispute arose between them regarding completion of the work and payment of amount. Therefore, the joint venture referred the dispute to Arbitral Tribunal. The State raised objection regarding maintainability of arbitration proceedings on the ground that disputes between the parties could not be decided in arbitration without the dispute being first referred to Dispute Adjudication Board (DAB) as per sub-clause 67.1(d) of Condition of Particular Applications (COPA), which was allowed by the Tribunal. Therefore, the joint venture filed an appeal under section 37 against the order on the ground that the State did not make any proposal for appointment of a new member of the DAB. Therefore, decision of the Arbitral Tribunal in the order was vitiated by patent illegality and perversity, but the State raised objection regarding maintainability of the appeal. Held: The joint venture was awarded the contract by the State. The State had also invoked the arbitration agreement against the joint venture who had executed the contract. The joint venture was the claimant in the arbitral proceeding. Therefore, the joint venture was entitled to maintain this appeal. By a letter, the joint venture informed member of DAB that it was agreeable in continuation of his service as a member of the DAB for adjudication of the disputes and differences in relation to the subject works. A copy of the said letter was also forwarded to the State, but the State neither responded to the same nor appointed a new member of the DAB. The joint venture was justified in its contention that the State was not entitled to challenge the jurisdiction of the Arbitral Tribunal to proceed with the arbitration proceeding to adjudicate the disputes and differences arisen between the parties herein. There was no scope for either of the parties to strictly comply with sub-clause 67.1(d) of the COPA and the State consciously invoked the arbitration clause. Therefore, the joint venture was also justified to contend that the majority decision of the Arbitral Tribunal in the impugned order was vitiated by patent illegality and perversity. Thus, the order was set aside and the Arbitral Tribunal was directed to adjudicate the dispute between the parties.

REFERRED :

FAVOUR : In favour of appellant

A.Y. :

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