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Delhi High Court: Parties Bound After Tribunal Agreement Pre-Arbitral Steps Not Grounds for Refusal

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Published on: December 03, 2023 at 12:37 IST

The Delhi High Court has ruled that once a party agrees to establish an arbitral tribunal, it cannot subsequently oppose the appointment of an arbitrator on the basis of unmet pre-arbitral steps.

Justice Sachin Datta’s bench emphasized that issues termed ‘excepted matters’ necessitate an extensive review of factual circumstances, a task falling within the purview of the arbitral tribunal and beyond the scope of examination allowed under Section 11 of the Arbitration and Conciliation Act.

The dispute emerged from a contract concerning the “Replacement of Old Washing cum pit line nos. 20 and 21 & building of sewerage disposal arrangement.” The contract included an arbitration clause stipulating the involvement of a panel of three retired Railway Officers as arbitrators.

Allegations arose from the petitioner, claiming obstacles in project completion due to the respondent’s failure to fulfill obligations.

Following a termination notice issued by the petitioner due to slow progress, the respondent received an arbitration invocation from the petitioner, presenting specific claims.

In response, the respondent terminated the contract and intended to complete the remaining work independently.

Arbitration commenced with the respondent proposing a panel of retired Railway Officers, but a disagreement surfaced when the petitioner declined to waive a specific section of the Arbitration and Conciliation Act. Consequently, the petitioner sought the court’s intervention for arbitrator appointment.

The petitioner argued for the appointment of an impartial Sole Arbitrator, citing violations based on precedents. However, the respondent objected, asserting that the petition was premature and contending the mandatory referral of disputes to the General Manager before invoking the arbitration clause under Clause 63 of the GCC.

The Court dismissed the respondent’s objection regarding the prematurity of the petition. It maintained that once a party agrees to the establishment of an arbitral tribunal, it cannot subsequently resist arbitration based on unmet pre-arbitral steps. Furthermore, it emphasized that issues termed ‘excepted matters’ need detailed examination by the arbitral tribunal, not under Section 11 of the A&C Act.

Consequently, the Court granted the petition and appointed the arbitrator in the case titled N.K. Sharma v. The General Manager Northern Railways, ARB.P. 893 of 2022.