Prakash Roadlines Corporation LTD., Through Its Authorized Signatory, Binod Prasad Singh vs. Ntpc Limited, Through Its Chairman-Cum-Managing Director

Facts

Prakash Roadlines Corporation Ltd. (Petitioner) filed an arbitration application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator to resolve disputes arising from a purchase order dated April 27, 2022, with NTPC Limited (Respondent). The dispute stemmed from the termination of a contract for loading, transportation, and unloading of coal. The Petitioner commenced work on May 10, 2022, but faced hindrances from local people, leading to a police complaint. Despite this, the Petitioner continued until May 12, 2022. The Respondent issued a termination letter on May 12, 2022, citing non-mobilization and failure to start work. The Petitioner had previously filed an application under Section 9 of the Act before the Calcutta High Court, which was pending. The Petitioner subsequently raised claims totaling Rs. 18,74,74,313.00 (excluding GST) for unpaid consideration and losses, invoking arbitration. The Respondent contended that the Petitioner's performance was inadequate and that they suffered significant financial losses.

Held

The Court held that conciliation, as a dispute resolution mechanism, is an option and not mandatory before invoking arbitration. Adverting to Article 26.2 of the GCC, the Court opined that while conciliation should be encouraged, it is a voluntary process that can be terminated by the parties at any time. The Court relied on the Supreme Court's pronouncements in VISA International Limited and Demerara Distilleries Private Limited, which established that if attempts at amicable settlement have failed or are rendered futile due to the rigid stands of the parties, invoking arbitration directly is permissible. The Court further clarified that the pendency of a Section 9 application before the Calcutta High Court does not impede the appointment of an arbitrator under Section 11 of the Act, as Section 9 does not grant the power to appoint an arbitrator. Consequently, the Court found the arbitration application to be maintainable and allowed it, appointing Hon’ble Mr. Justice Virender Singh as the Sole Arbitrator. All other contentions were left open to be raised before the Arbitrator.

Key Issues

1. Whether the arbitration application is maintainable when the Petitioner has not exhausted the remedy of conciliation as stipulated in Article 26.2 of the General Conditions of Contract (GCC)? Petitioner's arguments: The Petitioner contended that conciliation is an optional process and not mandatory before invoking arbitration. They relied on the Supreme Court's judgments in VISA International Limited v. Continental Resources (USA) Limited and Demerara Distilleries Private Limited and Another v. Demerara Distillers Limited, which held that if amicable settlement attempts have failed or are futile, arbitration can be invoked directly. Respondent's arguments: The Respondent argued that the Petitioner failed to exhaust the remedy of conciliation as laid down under Clause 8 of the GCC and that the application was premature. They also pointed to the pending Section 9 application before the Calcutta High Court as an impediment.