M/S. Haricons Engineers And Contractors vs. Sri. Gurijala Sudhakar Reddy

Facts

The applicant, M/s. Haricons Engineers and Contractors, filed an Arbitration Application seeking the appointment of an arbitrator. The applicant and Respondent No. 3, M/s. Shilpa Electrical Infra Tech (India) Private Limited, had entered into a joint venture. Disputes arose regarding the execution of sub-contract agreements and the operation of a bank account opened in the JV's name without the applicant's consent. To resolve these issues, the parties entered into a Settlement Deed dated June 23, 2020. Under this deed, Respondent No. 3 agreed to pay Rs. 1,12,00,000/- (including Rs. 12,00,000/- as GST) as forgoing charges for 40% of the work. The settlement also stipulated that any delay in payment would attract 24% interest per annum, and original property documents would be deposited as security. Clause 13 of the Settlement Deed provided for dispute resolution through arbitration. The applicant alleged that a cheque for Rs. 75,00,000/- was dishonoured and Respondent No. 3 failed to execute a sale deed for a property as agreed. The applicant invoked arbitration, but Respondent No. 3 denied the claims and the existence of an arbitration agreement.

Held

The Court held that there was no dispute that the parties, by incorporating Clause 13 into the Settlement Deed, had agreed to resolve their disputes through arbitration. The Court noted that the parties had raised various factual issues which could only be decided by an arbitrator. Applying the principles laid down by the Supreme Court in Vidya Drolia v. Durga Trading Corporation, particularly the test for exercising power under Section 11 of the Act, the Court found that it was appropriate to refer the dispute to arbitration. The Court concluded that the validity of the arbitration agreement could not be determined on a prima facie basis and therefore, following the 'when in doubt do refer' principle, the matter should be referred to arbitration. The Court allowed the application and appointed Sri R. Damodar, retired District Judge, as the sole arbitrator to resolve the disputes between the parties. The Court did not expressly leave any issue undecided.

Key Issues

1. Whether the Court has the power to appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, given the disputes regarding the existence and validity of the arbitration agreement? (Question of law and mixed fact and law, turning on Section 11 of the Arbitration and Conciliation Act, 1996). Contentions: Petitioner/Applicant: Argued that Clause 13 of the Settlement Deed clearly provides for arbitration to resolve disputes. The applicant relied on the Supreme Court's decision in Vidya Drolia v. Durga Trading Corporation, emphasizing the 'when in doubt do refer' principle. The applicant contended that factual issues raised by the respondent can only be decided by an arbitrator. Respondent/Revenue: Initially denied all allegations and the execution of the Settlement Deed, including the arbitration agreement. However, during the hearing, the learned counsel for Respondent No. 3 submitted that there are arbitral disputes and an arbitrator may be appointed by the Court.