M/S. Bhrundha Infra PVT. LTD vs. Union Of INDIA

Facts

M/s. Bhrundha Infra Pvt. Ltd. (Petitioner) sought payment of pending dues and compensation for additional costs incurred on a project. Engineer Projects (India) Ltd. (Respondent) responded that the work was completed and payments, except for GST related to anti-profiteering, were cleared. The Petitioner requested reconsideration of claims, but received no response. Subsequently, the Petitioner invoked the dispute resolution clause under the contract, seeking amicable settlement. After further correspondence and an unsuccessful attempt by the Respondent to suggest conciliation post-arbitration invocation, the Petitioner filed an application under Section 11(5) & (6) of the Arbitration and Conciliation Act, 1996, seeking appointment of a sole arbitrator.

Held

The Court held that the Arbitration Application was not premature. It found that the Petitioner had indeed initiated steps for amicable settlement and conciliation, but these attempts failed. The Court reasoned that the Respondent's counter-affidavit, which stated that the Petitioner's claims were not tenable, indicated that attempts at amicable settlement were made but were unsuccessful, leaving no option but to invoke the arbitration process. Therefore, the plea of prematurity raised by Respondent No. 3 was rejected. Regarding the appointment of an Arbitrator, the Court found that there had been no mutual satisfaction reached between the parties regarding their claims. The conciliation proceedings, though initiated, could not be conducted or concluded. Consequently, the pre-condition for amicable settlement had not materialized. The Court concluded that there was no illegality in the Petitioner invoking arbitration, as there was a live dispute between the parties. Applying Section 62(4) of the Arbitration and Conciliation Act, 1996, and relying on a previous judgment, the Court allowed the application and appointed Sri Justice L. Narasimha Reddy (retired) as the Sole Arbitrator.

Key Issues

1. Whether the Arbitration Application is premature, considering the Respondent's contention that conciliation efforts were not fully complied with by the Petitioner as a mandatory pre-condition to arbitration, as argued by Respondent No. 3. 2. Whether a case is made for the appointment of an Arbitrator to decide the disputes between the parties, given the Petitioner's claims and the Respondent's stance that the claims are not tenable and that the Petitioner is estopped from making claims after executing a no-dues certificate. Petitioner's Arguments: The Petitioner argued that they had initiated steps for amicable settlement and conciliation, but these attempts failed, making the arbitration application not premature. They contended that the Respondent's refusal to engage in amicable settlement and their subsequent insistence on pre-arbitration steps were attempts to take advantage of their own failure. The Petitioner relied on their letters dated 08.01.2021, 10.02.2021, 25.05.2021, and 30.09.2021, and the invocation of arbitration on 08.11.2021. Respondent's Arguments: Respondent No. 3 argued that the Petitioner failed to properly explain their entitlement to the reliefs sought, that the application was premature due to non-compliance with conciliation efforts, and that the claims were fictitious. They also contended that the Petitioner was estopped from making claims after executing a no-dues certificate and that the sanctity of the undertaking was negated.