Pecon Software Limited vs. West Bengal State Electricity Distribution Company Limited

Facts

The petitioner, Peccon Software Limited, and the respondent, West Bengal State Electricity Distribution Company Limited (WBSEDCL), had a contractual relationship since May 29, 2015, for manpower deployment. The agreement contained an arbitration clause. The petitioner's sole claim was for reimbursement of GST. The parties attempted to resolve the dispute through a High-Powered Committee (HPC) of WBSEDCL, as per Clause 5.1 of their agreement. The HPC considered the matter and, by a decision dated October 13, 2020, rejected the petitioner's GST claim. The petitioner had previously raised demands for this claim on November 27, 2017, and June 25, 2018. The petitioner invoked the arbitration clause via a notice under Section 21 of the Arbitration and Conciliation Act, 1996, on May 26, 2019. The respondent opposed the appointment of an arbitrator on grounds that the HPC's rejection was based on a Government of West Bengal Finance Department notification dated August 16, 2017, and that the dispute involved a policy decision.

Held

The Court held that the grounds for resisting the appointment of an Arbitrator were not acceptable because there was an admitted agreement between the parties containing an arbitration clause. The Court found that the parties had given effect to Clause 5.1 of the agreement by going before the HPC, thereby exhausting the first requirement of the dispute resolution mechanism. The remaining part of the clause pertains to arbitration, which the petitioner had invoked. The Court stated that the question of whether the State Government's Notification dated August 16, 2017, applies to the facts of the case is a matter of interpretation, which falls entirely within the domain of the Arbitrator. The Court further opined that the ground of a policy decision, even if accepted, would take a backseat in a Section 11 application where an agreement and a dispute exist between the parties. Accordingly, the application was allowed, and an Arbitrator was appointed.

Key Issues

1. Whether the Court should appoint an Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, when the respondent opposes appointment on the grounds that the dispute relates to a Government notification and a policy decision, despite the existence of an arbitration agreement and an invoked arbitration clause. Petitioner's arguments: The petitioner contended that there is an admitted agreement between the parties containing an arbitration clause, and that they have exhausted the initial dispute resolution mechanism stipulated in Clause 5.0 of the agreement by going before the HPC. They argued that the respondent's grounds for opposing arbitration are not acceptable as the existence of an agreement and a dispute are sufficient for arbitration under Section 11(6)(a). Respondent's arguments: The respondent argued that the rejection of the petitioner's claim by the HPC was based on a notification of the Finance Department of the Government of West Bengal dated August 16, 2017, and that the dispute pertains to a policy decision taken by the Government of West Bengal.