M/S A.K. Shivhare Infrastructure PVT. LTD. A Limited Company Incorporated Under Companies Act 1956 H vs. Union Of INDIA Through The Director General

Held

The Court held that the application under Section 11(6) of the Arbitration and Conciliation Act, 1996, is not maintainable at this stage. The arbitration clause (Clause 26.3) clearly stipulates that any dispute not resolved amicably by conciliation (as per Clause 26.2) shall be finally settled by arbitration in accordance with the rules of the Society for Affordable Redressal of Disputes (SAROD). The SAROD Rules, specifically Rule 4, outline the procedure for commencing arbitration, including filing a written Notice of Arbitration with the Secretary and serving it on the other party. The Court found that the applicant had not followed this prescribed procedure by directly approaching the High Court without first initiating the arbitration process as per the SAROD Rules. Therefore, the applicant was required to exhaust the remedies available under the SAROD Arbitration Rules before approaching the Court. The Court dismissed the petition, granting the applicant liberty to approach SAROD for seeking the appointment of an arbitrator. Additionally, the Court noted that MPRDC was unnecessarily made a party and directed the applicant to bear MPRDC's litigation costs.

Facts

M/s A.K. Shivhare Infrastructure Pvt. Ltd. (the applicant) filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator. The dispute arose from an agreement dated 26.02.2018 with the Ministry of Road Transport and Highways (MoRTH) for a road upgrade project. The applicant claims that Rs. 7,51,99,414/- was wrongly deducted under the head of GST. After a demand for refund was not accepted, the applicant invoked arbitration. The respondents argued that the arbitration clause could not be invoked directly without following conciliation steps and that the applicant had accepted the final bill as full and final settlement. They also contended that the GST refund issue should be raised before GST authorities. Respondent No. 3 (MPRDC) stated that no relief was claimed against it and the work supervision had been transferred.

Key Issues

1. Whether the present application under Section 11(6) of the Arbitration and Conciliation Act, 1996, is maintainable when the applicant has not exhausted the pre-arbitration steps stipulated in Clause 26.3 of the agreement, specifically conciliation and adherence to the SAROD Arbitration Rules, as argued by Respondents No. 1 and 2. 2. Whether the dispute regarding the alleged wrongful deduction of GST is a matter that can be referred to arbitration or should be adjudicated by the authorities under the CGST/SGST Act, as contended by Respondents No. 1 and 2. Contentions: Petitioner/Applicant: Any dispute of any nature is liable to be referred to the Arbitrator, and all issues raised by the respondents are to be decided by the Arbitrator. The applicant relies on judgments in Ravindra Kumar Verma v/s M/s BPTP Ltd., Demerara Distilleries Private Limited v/s Demarara Distillers Limited, and M.K. Shah Engineers and Contractors v/s State of M.P. Respondents No. 1 and 2: The arbitration clause cannot be invoked directly without prior conciliation steps. The application is premature. The applicant received the final bill as full and final settlement, thus no dispute exists. The GST refund issue can be raised before GST authorities. They rely on Cauvery Coffee Traders, Mangalore v/s Hornor Resources (International) Company. Respondent No. 3: No relief is claimed from MPRDC, and the work supervision was transferred. MPRDC should be deleted from the petition.