Deen Bandhu Chotu Ram Thermal Power Plant Hpgcl Yamuna Nagar vs. M/S Green Vision Testing And Enviro Services

Facts

The petitioner, Deen Bandhu Chotu Ram Thermal Power Plant (HPGCL) Yamuna Nagar, filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator. The dispute arose from an offer made by the respondent, M/s Green Vision Testing and Enviro Services, which was accepted by the petitioner on January 25, 2022, followed by a work order issued on February 7, 2022. The work order contained an arbitration clause. The petitioner invoked this clause by issuing a notice on April 4, 2024, proposing arbitrator names, but the respondent denied the existence of an arbitration agreement. The respondent's primary objection was that a formal contract agreement, stipulated in condition No.1 of the work order, was never executed, thus violating the terms and rendering the petition non-maintainable.

Held

The Court held that the existence of an arbitration agreement is to be examined prima facie under Section 11(6-A) of the Arbitration and Conciliation Act, 1996. The Court referred to settled legal position, including pronouncements from the Supreme Court, emphasizing that the scope of examination at the reference stage under Section 11 is limited to the prima facie existence of an arbitration clause and its invocation. Any allegations of breach of contract or other conditions are matters to be adjudicated by the arbitrator. The Court found that the conditions for appointing an arbitrator under Section 11 were satisfied, as an arbitration clause was present in the work order, and the petitioner had invoked it. The respondent's objection regarding the non-execution of a formal contract agreement was deemed a substantive dispute for the arbitrator to decide. Consequently, the Court allowed the petition and nominated a retired District and Sessions Judge as the Sole Arbitrator.

Key Issues

1. Whether an arbitration agreement exists between the parties within the meaning of Section 7 of the Arbitration and Conciliation Act, 1996, despite the non-execution of a formal contract agreement as stipulated in condition No.1 of the work order? 2. Whether the petitioner is entitled to the appointment of a sole arbitrator under Section 11(6) of the Act, considering the respondent's contention of breach of contract due to the non-execution of a formal agreement? Petitioner's arguments: The petitioner contended that an arbitration agreement exists as per Section 7(4) of the Act, citing the exchange of offer and acceptance, and the presence of an arbitration clause in the work order, even without a separately signed formal contract. They argued that the non-execution of a formal agreement does not preclude the existence of an arbitration agreement. Respondent's arguments: The respondent argued that the non-execution of the contract agreement within 7 days of the work order, as required by condition No.1, constituted a breach of contract. They asserted that this violation made the petition under Section 11 of the Act unsustainable and liable for dismissal.