Summary
The contractor applied under Section 11(6) of the Arbitration and Conciliation Act, 1996, and the High Court appointed a sole arbitrator under clause 15 of the road-works contract, which was titled "Settlement of Disputes/Arbitration". The Supreme Court set the appointment aside. Despite its title, clause 15 provided only for settlement at company level, followed by Ministry of Finance guidelines for government agencies and the courts for others. It showed no obligation to refer disputes to a private tribunal whose decision would bind the parties, so it was not an arbitration agreement under Section 7. A Coal India policy letter of 07.04.2017 contemplated a further agreement before any reference, and an earlier High Court order based on a concession of counsel did not establish an arbitration agreement either. The contractor was left free to pursue its other remedies in law.
Issues
- Whether clause 15 of the Contract Agreement, titled "Settlement of Disputes/Arbitration", is an arbitration agreement within Sections 2(b) and 7 of the Arbitration and Conciliation Act, 1996.
- Whether Coal India's policy letter of 07.04.2017 on settling contract disputes through arbitration created an arbitration agreement that would support an appointment under Section 11(6).
Provisions considered
- Sections 2(b) and 7, Arbitration and Conciliation Act, 1996An arbitration agreement must be a written agreement to refer present or future disputes to arbitration. Applying the Jagdish Chander tests, clause 15 lacked the essential attributes: it made no reference to a private tribunal and no provision for a binding decision. (¶¶ 8, 9, 13, 17)
- Section 11(6), Arbitration and Conciliation Act, 1996Because there was no arbitration agreement between the parties, the High Court's jurisdiction to appoint an arbitrator was not validly invoked. (¶¶ 7, 19)
Held
- Under Jagdish Chander, the words of the clause must disclose a determination and obligation to refer disputes to a private tribunal whose decision binds the parties. A clause that only contemplates the possibility of arbitration, or that requires further consent, is not an arbitration agreement. (¶ 9)
- Clause 15 provides a dispute-resolution mechanism at company level, followed by Ministry of Finance guidelines for government agencies and the courts for others. Despite its heading, it contains no agreement to refer disputes to arbitration, appoints no arbitrator and makes no decision binding. It is not an arbitration agreement, as was held for a similar clause in IB Valley Transport, and the High Court erred in treating it as one. (¶¶ 10, 11, 12, 13)
- CIL's policy letter of 07.04.2017 records that its contracts contained no arbitration clause and requires the contractor's consent and a fresh agreement before any reference. It expresses only a desire for arbitration, so it cannot compel the appellants to appoint an arbitrator. (¶¶ 14, 16, 17)
- The High Court order of 20.07.2018 in another petition rested on a concession of counsel and is not a binding statement of law on whether an arbitration agreement exists. (¶ 18)
Result
Appeal allowed. The High Court's order of 29.11.2019 appointing an arbitrator was set aside, and the respondent is at liberty to pursue the remedies available in law.