Mr Gajendra Mishra vs. Pokhrama Foundation & Anr.

Facts

The Petitioner, Mr. Gajendra Mishra (M/s. DM Construction), filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator. The dispute arose from an agreement dated November 13, 2021, between the Petitioner and Respondent No. 1, Pokhrama Foundation, for setting up a school. The Petitioner alleged that the Respondent failed to clear bills and subsequently terminated the contract on November 13, 2022. The Petitioner refuted the termination's contentions in a reply dated November 23, 2022, claiming the release of GST value for amounts from which TDS was deducted and deposited, along with late fees and interest. The Petitioner invoked arbitration on April 3, 2023. The Respondent's primary contention was that the Petitioner had not followed the procedure stipulated in Clause 52 of the agreement.

Held

The Court held that the Respondent, by issuing the termination notice dated November 13, 2022, had itself bypassed the conciliation mechanism stipulated in Clause 52.1 of the agreement. The Court found it hypocritical for the Respondent to argue that the Petitioner should have approached the Project Manager when the contract was terminated and no Project Manager was in place, making amicable resolution through that channel impossible. The Court noted that the termination letter itself indicated an intention to pay outstanding amounts after risk and costs, implying the existence of claims requiring adjudication. Consequently, the Court found that arbitration was necessary. Regarding Respondent No. 2, the Court held that the agreement was between two entities, Pokhrama Foundation and M/s DM Construction, and no individual could be made a party to arbitral proceedings if they were not a party to the agreement in their personal capacity. The Petitioner was permitted to summon individuals like the Managing Trustee as witnesses, but Respondent No. 2 would not be a party to the arbitration. The Court appointed Mr. Shashank Garg, Advocate, as the Sole Arbitrator to adjudicate the disputes and directed the parties to appear before him at DIAC on February 15, 2024. The application for deletion of Respondent No. 2 was allowed.

Key Issues

1. Whether the Petitioner has followed the mandatory pre-arbitration conciliation procedure as stipulated in Clause 52.1 of the agreement, thereby making the invocation of arbitration valid? 2. Whether Respondent No. 2, Dr. Anil Seth, should be deleted from the array of parties in the arbitral proceedings? Petitioner's arguments: The Petitioner contended that the Respondent, by issuing a termination notice on November 13, 2022, had itself bypassed the conciliation mechanism outlined in Clause 52.1. Therefore, it was hypocritical for the Respondent to argue that the Petitioner should have approached the Project Manager, especially since the contract was terminated and no Project Manager was in place. The Petitioner argued that given the termination and the existence of outstanding claims, arbitration was necessary. Respondent's arguments: The Respondent argued that the Petitioner had failed to adhere to the procedural requirements of Clause 52 of the agreement, specifically the requirement to refer disputes to the Project Manager for conciliation before invoking arbitration.