Balmer Lawrie and Co. Ltd. vs Oil and Natural Gas Corporation Ltd.

S. Ravindra Bhat, J.

Heard Counsel for the parties.

The petitioner, in these proceedings u/s 11 (6) of the Arbitration and Conciliation Act, seeks appointment of an independent Arbitrator in terms of clause 42(1.3) of the Agreement dated 4.2.2003. The said dispute resolution mechanism, was part of the Agreement entered into with the respondent by the petitioner, who was awarded a Contract for Composite Interior work of Civil, Interior/partitioning, Electrical, Air-Conditioning Services etc., at Scope Minar Building Laxmi Nagar, Delhi The Agreement is dated 4.2.2003. The petitioner avers to the respondent having been paid Rs. 24,37,81,835.08 (Rupees Twenty Four Crores Thirty Seven Lacs, Eighty One Thousand Eight Hundred Thirty Five and paise Eight only) on 18.5.2007. The petitioner contends that further amounts are payable and that despite repeated demands, respondents have not complied with them and paid the amounts due. It, therefore, seeks appointment of an Arbitrator.

Learned counsel for the petitioner relied upon the rulings of the Supreme Court in National Highways Authority of India and Another Vs. Bumihiway DDB Ltd. (JV) and Others, Ace Pipeline Contracts Private Limited Vs. Bharat Petroleum Corporation Limited, It was contended, on the strength of these authorities, that when parties consciously enter into a bargain which includes an arbitration clause, the Court should lean in favour of such an agreement and appoint an Arbitrator, instead of referring the contracting parties to resolve their disputes through other mechanisms. Learned counsel submitted that this declaration of law is of significance because the previous Supreme Court Judgments requiring to public sector bodies to first explore the possibility of resolving their disputes though a Permanent Machinery of Arbitration (PMA), comprising of high reveled Secretary ranking Officers, is inapplicable. It was also contended that the said mechanism, cannot be resorted to in this case since the terms of the contract are clear enough and that the arbitration clause did not contemplate reference to the PMA.

Mr. Subhash Oberoi, learned counsel for the respondent, submitted that the petition should not be allowed. He relied upon the decision of the Supreme Court reported as Oil and Natural Gas Commission Vs. Collector of Central Excise, It was submitted that in this case the petitioner as well as the respondent are Public Sector Units and consistent with judgments of the Supreme Court, neither of such disputing parties should be allowed to approach the Court without exhausting the reference to Permanent Machinery of Arbitration, established for such purpose.

The above narrative would show that there is no dispute about existence of the arbitration clause. However, the respondent in this case appears to be contesting the feasibility of an order u/s 11(6) by pointing out that the Court should not, without enabling the parties to approach the PMA, appoint an Arbitrator in exercise of statutory powers under the Act.

The respondent has relied upon the decision in ONGC''s case (supra). Subsequently, the Supreme Court in the judgment reported as Mahanagar Telephone Nigam Ltd. Vs. Chairman, Central Board, Direct Taxes and Another, reiterated its previous rulings. Though rendered, in proceedings under Article 226, the observations of the Court are valid and apt in relation to other proceedings. The Court overruled the contention that even in matters such as tax proceedings, the concerned Public Sector Undertakings would have the liberty to approach the statutorily ordained forums, without first attempting settlement through PMA. The Court was of the view that recourse to PMA, in the first instance, is essential to weed out unnecessary and prolonged litigation between two arms of the government. This Court is of the view that the same logic would apply, in the present instance, notwithstanding that the parties entered into an arbitration agreement. The jurisdiction of Court u/s 11 (6) is no doubt statutory; yet so is the case with jurisdiction under fax and fiscal statutes, where exclusive forums are created. The jurisdiction under Article 226 (of the Constitution) is plenary and entrenched. Yet, it is obligatory, where the disputing parties are PSU''s, to refer them to the PMA, to avoid litigation in Courts, between two limbs or instrumentalities of the same Government. In view of the above circumstances, the Court is of the opinion that the petitioner''s request for appointment of an Arbitrator should not be acceded to at present, without its first seeking recourse to PMA. Accordingly, liberty is granted to the petitioner to approach the PMA with the disputes sought to be agitated in the present proceedings. In case the same are not resolved and in accordance with the directions of the PMA, the petitioner is at liberty to seek its remedies in accordance with law, including approaching this Court on such later date u/s 11 (6) of the Arbitration and Conciliation Act, 1996.

The petition is disposed of in the above terms.