M/S Tata Projects LTD vs. Chhattisgarh Infotech Promotion Society

Facts

M/s Tata Projects Ltd. (Applicant) filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a second arbitrator to constitute an arbitration tribunal. The dispute arose from a Master Services Agreement (MSA) dated July 18, 2018, executed between the Applicant and Chhattisgarh Infotech Promotion Society (Respondent No. 1) for the Bharat-Net Project. The project, funded by the Union of India (Respondent No. 3) and implemented by Respondent No. 1 with the State of Chhattisgarh (Respondent No. 2) as beneficiary, aimed to provide broadband connectivity to Gram Panchayats. The Applicant, the lead bidder, alleged material breaches by Respondent No. 1, including non-payment, unilateral imposition of penalties, and abandonment of the MSA, leading to the Applicant's termination of the MSA. The Applicant invoked the dispute resolution mechanism, but amicable settlement failed, prompting this application.

Held

The Court held that the scope of inquiry at the stage of appointing an arbitrator is limited to the prima facie existence of an arbitration agreement. It reiterated that courts must refrain from conducting a mini-trial or entering into disputed factual questions that fall within the arbitral domain, citing SBI General Insurance Co. Ltd. and Aslam Ismail Khan Deshmukh. The Court found that whether the dispute pertains to a 'works contract' or involves allegations of fraud and cheating are issues that can be adjudicated by the arbitral tribunal. The objection regarding the Applicant not obtaining consent from other consortium members was also deemed an issue for the arbitrator. Consequently, the Court appointed Hon’ble Mr. Justice S. Ravindra Bhat, a retired Judge of the Hon’ble Supreme Court of India, as the Sole Arbitrator to resolve the dispute, with the venue fixed at Raipur, Chhattisgarh, as per the agreement. The arbitration application was disposed of.

Key Issues

1. Whether the Court has the power to appoint an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, when the Respondent No. 1 has raised objections regarding the existence of a valid arbitration agreement and the Applicant's locus standi due to non-consent from consortium members and allegations of fraud and cheating against the Applicant? Petitioner's Arguments: The Applicant argued that the scope of inquiry at the Section 11 stage is limited to the prima facie existence of an arbitration agreement. They contended that disputed factual questions, including allegations of fraud, are within the arbitral tribunal's domain, citing precedents like SBI General Insurance Co. Ltd. and Aslam Ismail Khan Deshmukh. The Applicant also argued that the issue of consent from consortium members is a matter for the arbitrator to decide. Respondent's Arguments: The Respondent No. 1 argued that the Applicant has not obtained consent from other consortium members, and that allegations of fraud, forgery, and cheating against the Applicant cannot be decided in arbitration proceedings. They sought to prevent the appointment of an arbitrator on these grounds.