M/S Third Wave Services vs. M/S Selene Constructions Limited & Anr.

Held

The Court held that the unilateral appointment of an Arbitrator by Respondent No. 1 was impermissible. The Court reasoned that such an appointment would defeat the purpose of unbiased adjudication between the parties, citing the Supreme Court's decision in Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Ltd. This decision was followed by a Coordinate Bench in Proddatur Cable TV Digi Services Vs. Citi Cable Network Limited. The Court found that disputes between the parties were indeed required to be adjudicated by an Arbitrator in terms of Clause 37(b) of the amended post-GST Work Order. Since the Petitioner had invoked arbitration and the Respondent had appointed an Arbitrator of its choice, which the Court deemed impermissible, the petition was allowed. The Court appointed Ms. Madhrima Panwar Mridul as the sole Arbitrator to adjudicate the dispute, with her fee governed by the Fourth Schedule of the Arbitration and Conciliation Act, 1996, and directed her to ensure compliance with Section 12 of the Act before commencing arbitration.

Facts

M/s Third Wave Services (Petitioner) filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a Sole Arbitrator. The Petitioner, a registered MSME, had a work order from M/s Selene Constructions Limited (Respondent No. 1) and Respondent No. 2 for internal electrical works. The contractual amount was initially Rs. 8,76,05,494.61, later enhanced. Due to site handover delays and the implementation of GST, the contract terms were revised, with Respondent No. 1 becoming the employer. The Petitioner claims to have executed work worth Rs. 2,96,52,939.32 out of an awarded value of Rs. 9,18,72,965.59. Despite Respondent No. 1 admitting claims and issuing a completion certificate for 'good' work, only partial payment was released, leaving a balance of Rs. 37,40,974.07. The Petitioner invoked arbitration, but Respondent No. 1 unilaterally appointed its own Arbitrator.

Key Issues

1. Whether the unilateral appointment of an Arbitrator by Respondent No. 1, in response to the Petitioner's arbitration invocation notice, is permissible under the law and the arbitration agreement? (Question of law, concerning Section 11(6) of the Arbitration and Conciliation Act, 1996 and Clause 37(b) of the amended work order). Petitioner's Arguments: - The unilateral appointment of an Arbitrator by Respondent No. 1 is impermissible and defeats the purpose of unbiased adjudication. - The disputes between the parties are required to be adjudicated by an Arbitrator as per Clause 37(b) of the amended post-GST Work Order No. 330110049. - Relied on the Supreme Court decision in Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Ltd. and a Coordinate Bench decision in Proddatur Cable TV Digi Services Vs. Citi Cable Network Limited. Respondents' Arguments: - The claims raised by the Petitioner are frivolous and the petition deserves to be dismissed. - Did not dispute the invocation of arbitration or that disputes should be resolved per Clause 37(b) of the amended work order.