In a recent decision, the Delhi High Court held that the proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) do not exclude court jurisdiction to entertain Section 11 applications under the Arbitration and Conciliation Act, 1996 (A&C Act).
The disputes between the parties have arisen in context of a tender process initiated by the respondent for “construction of dwelling units including allied services for officers & ORS at Mumbai (Army)”. The bid submitted by the petitioner was accepted by the respondent on 15.06.2016, and accordingly a Work Order dated 27.06.2016 was issued.
It was averred in the petition that the work, for reasons not attributable to petitioner, could not be completed within the stipulated time period and was terminated by the petitioner vide letter dated 14.09.2021. Thereafter, the petitioner has submitted its final bill, but the payment has not been released to the petitioner till date. It is further averred that the respondent vide letter dated 22.01.2022 has sought to illegally terminate/cancel the contract under Clause 48 of the GCC. Consequently, disputes have arisen between the parties and a notice invoking arbitration dated 15.04.2022 has been sent by the petitioner to the respondent.
The counsel for the respondent has submitted that the work was cancelled/terminated by the respondent vide letter dated 21.01.2022 since the petitioner was in violation of its contractual obligations. It is further contended that the balance work is to be completed at the risk & cost of the petitioner; reliance placed by the petitioner on the Government of India, Office Memorandum dated 19.02.2020, to terminate the contract is flawed and that the contract could not have been terminated by the petitioner.
The counsel for the petitioner has submitted that the Office Memorandums issued by the Government of India dated 19.02.2020 and 13.05.2020, acknowledging the impact of corona virus and recognizing the restrictions and difficulties faced by the contracting parties, gave option to the parties to invoke Force Majeure Clause and also to terminate the contract without any financial repercussion on either side.
A Single Bench of Justice Sachin Datta observed that “The respondent cannot be permitted to frustrate the arbitration agreement by failing to make the alternative arrangements for inordinately long period. Almost two years have expired since the date of cancellation of the contract and the alternative arrangements are apparently not yet in place. The stipulation in the arbitration agreement in the present case, that a serving officer of the respondent shall act as the arbitrator, is an invalid stipulation which makes it incumbent on this Court to appoint an independent sole arbitrator to adjudicate the disputes between the parties, as mandated in Perkins Eastman Architects DPC v. HSCC (India) Ltd.”
“The Sole Arbitrator may proceed with the arbitration proceedings subject to furnishing to the parties requisite disclosures as required under Section 12 of the A&C Act. 20. The Sole Arbitrator shall be entitled to fee in accordance with Fourth Schedule to the A&C Act; or as may otherwise be agreed to between the parties and the learned Sole Arbitrator” the Court held.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
