Sap Electro Contracts (PVT) LTD vs. The Reiyukai

Held

The Court held that the disputes between the parties are arbitrable. This finding was based on the mutual consent of both the petitioner and the respondent's counsel, who agreed that the disputes were arbitrable and that an independent arbitrator should be appointed by the Court. The Court reasoned that since both parties consented to arbitration and the appointment of an arbitrator, the petition filed under Section 11 of the Arbitration and Conciliation Act, 1996, was maintainable. The ratio decidendi is that mutual consent of parties to refer disputes to arbitration, even in the presence of disputed claims, is sufficient ground for the High Court to appoint an arbitrator under Section 11 of the Act. Accordingly, the Court allowed the petition and appointed Mr. R.K. Dhawan, Advocate, as the sole Arbitrator to adjudicate the disputes. The fee of the Arbitrator was to be governed by the Fourth Schedule of the Arbitration and Conciliation Act, 1996, and compliance with Section 12 of the Act was mandated before commencing arbitration.

Facts

The petitioner, SAP Electro Contracts (Pvt) Ltd, filed a petition under Section 11 of the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator. The petitioner was awarded two work orders by the respondent, The Reiyukai, for electrical works totaling Rs. 82,60,000/- and Rs. 44,25,000/-. The petitioner claims to have executed the work satisfactorily, with payments made including GST. However, the respondent terminated the contracts on May 20, 2021, leading to disputes over outstanding payments against certified invoices. The petitioner attempted amicable settlement and sent a legal notice invoking arbitration as per clause 52.1 of the General Conditions of Contract (GCC). The respondent did not respond to the notice or the arbitration invocation.

Key Issues

1. Whether the disputes between the petitioner and the respondent are arbitrable under the Arbitration and Conciliation Act, 1996, and the contract terms? Petitioner's Contention: The petitioner argued that disputes have arisen due to the illegal termination of the contract/work orders and non-payment of outstanding amounts against certified invoices. They invoked arbitration as per clause 52.1 of the GCC, and since the respondent failed to respond, a petition under Section 11 of the Arbitration and Conciliation Act, 1996, was necessitated for the appointment of a sole arbitrator. Respondent's Contention: The respondent's counsel did not oppose the petition. While acknowledging that the claims raised were disputed, the respondent fairly conceded that the disputes between the parties were arbitrable and had no objection to the appointment of an independent arbitrator by the Court.