Parnika Commercial Estates PVT LTD vs. Arshad Shah

Facts

The petitioner, Parnika Commercial Estates Pvt Ltd, filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator. The petitioner had secured a contract for the construction of Vanijya Bhavan and issued a Work Order to the respondent, Arshad Shah, for Rs. 9,58,00,000/-, inclusive of all taxes. The petitioner alleged that the respondent failed to fulfill his contractual obligations, leading to project delays, increased overhead costs, loss of profit, and other damages. The petitioner claimed a balance amount of Rs. 3,40,02,973.48/- along with interest was due. Disputes arose under the Work Order, and the petitioner invoked arbitration, but the respondent failed to respond. The respondent, however, argued that the petitioner's Notice of Demand dated 19.10.2022 did not mention the Vanijya Bhavan Project and contained discrepancies, rendering the petition untenable.

Held

The Court held that there was admittedly a valid Arbitration Clause 2.6 in the Work Order issued by the petitioner in favour of the respondent. While the respondent rightly pointed out that the Notice of Demand dated 19.10.2022 did not mention the present Project (Vanijya Bhavan), the Court noted that the Notice of Invocation of Arbitration dated 20.12.2023 clearly indicated that an amount of Rs. 3,40,02,973.48/- was claimed to be due under this specific Project. The Court found that the disputes had been clearly indicated in the Notice of Invocation. Therefore, in view of the submissions made and the existence of a valid arbitration clause, the Court found the petitioner's raised disputes to be arbitrable. The petition was allowed, and Mr. Justice Ajit Singh, Chief Justice (Retd.), Gauhati High Court, was appointed as the Sole Arbitrator to adjudicate the disputes. The parties were granted liberty to raise their respective objections before the Arbitrator, and the Arbitrator's fees were to be fixed as per Schedule-IV of the Act or by consent. The appointment was subject to the Arbitrator making necessary disclosures under Section 12(1) and not being ineligible under Section 12(5) of the Act.

Key Issues

1. Whether a valid arbitration agreement exists between the parties, as contemplated by Section 7 of the Arbitration and Conciliation Act, 1996, given the respondent's contention regarding discrepancies in the petitioner's demand notices? 2. Whether the disputes raised by the petitioner are arbitrable, considering the respondent's assertion that the Notice of Demand dated 19.10.2022 does not correspond to the facts of the present case? Petitioner's Arguments: The petitioner contended that a valid arbitration clause (Clause 2.6) existed in the Work Order. They asserted that disputes had arisen under this Work Order and that they had duly invoked the arbitration clause via a Notice of Invocation dated 20.12.2023, to which the respondent failed to reply. The petitioner also claimed a substantial amount due from the respondent. Respondent's Arguments: The respondent argued that the petitioner's Notice of Demand dated 19.10.2022, which listed dues for various projects, did not include the Vanijya Bhavan Project. Therefore, the respondent contended that this notice did not align with the facts of the present case, making the petition not tenable. The respondent also pointed out discrepancies in the petition.