Pre-Arbitration Reference To Adjudicator Is Only Directory, Not A Bar To The Appointment of The Arbitrator - Himachal Pradesh High Court

02/07/2022, 17:12 Pre-Arbitration Reference To Adjudicator Is Only Directory, Not A Bar To The Appointment Of The Arbitrator: Himachal Pradesh
Pradesh High C…
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NEWS UPDATES
Pre-Arbitration Reference To Adjudicator Is

Only Directory, Not A Bar To The Appointment
Of The Arbitrator: Himachal Pradesh High
Court
Ausaf Ayyub 27 June 2022 10:00 AM
https://www.livelaw.in/news-updates/himachal-pradesh-high-court-section-11-of-the-ac-act-appointment-of-the-arbitrator-termination-of-the-agreement-202379 1/17
02/07/2022, 17:12 Pre-Arbitration Reference To Adjudicator Is Only Directory, Not A Bar To The Appointment Of The Arbitrator: Himachal Pradesh High C…
The High Court of Himachal Pradesh has held that pre-arbitration reference to the
adjudicator in terms of arbitration clause is only directory and cannot be held to be a
bar to the appointment of an arbitrator by the Court.
The Single Bench of Chief Justice Mohammed Rafiq held that the respondent could
not object to the maintainability of the petition, merely on the ground that the pre-
condition of reference to adjudicator was not met if it also did not make efforts to
settle the dispute but proceeded to terminate the agreement.
Also Read - Sale Of Corporate Debtor As A 'Going Concern' Includes Both Assets
And Liabilities: NCLT Mumbai
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Facts
The parties entered into an agreement in the year 2018 wherein the petitioner was to
develop the management software for the respondent. A dispute arose between the
parties regarding the non-payment and non-completion of the work. Accordingly, the
respondent terminated the agreement.
Aggrieved by the termination of the agreement and encashment of the performance
bank guarantee, the petitioner invoked the dispute resolution clause and issued a
notice of arbitration on the respondent. The respondent replied to the notice and did
not concur with the name proposed by the petitioner, it further contended that the
reference to arbitration is pre-mature as the agreement provides for pre-arbitration
reference to adjudicator.
Also Read - Does Police's Failure To Communicate Full Criminal Antecedents Of
Accused Amounts To Misconduct, Interference With Justice? MP High Court Seeks
DGP's...
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Thereafter, the petitioner filed a petition under Section 11 of the A&C Act for the
appointment of the arbitrator.
The Contention Of The Parties
The petitioner sought the appointment of the arbitrator on the following grounds:
• The respondent failed to make the payment as provided under the agreement,
therefore, a dispute has arisen.
• The respondent illegally terminated the agreement and encashed the bank
guarantee.
• The unilateral appointment of the adjudicator as proposed by the respondent

would be bad in law for want of impartiality and independence of the adjudicator.
• The reference to adjudicator is only a directory provision and the same cannot
be a bar to the appointment of arbitrator.
Also Read - Karnataka High Court Monthly Digest: June 2022 [Citations 180 - 239]
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The respondent objected to the maintainability of the petition on the following
grounds:
• The petition is pre-mature as the petitioner has not complied with the
requirement of making a reference to the adjudicator before invoking arbitration.
• The adjudicator if appointed, his appointment cannot be termed as unilateral

as the petitioner had signed the contract containing the name of the adjudicator.
• The pre-arbitration reference is a mandatory requirement, non-compliance

with which would result in the dismissal of an application for appointment of
arbitrator.
• The petitioner did not fulfill its obligation under the contract, therefore, the
termination was legal.
Also Read - Extended Period Of Limitation Can Be Invoked Only When 'Suppression
Of Facts' Is Wilful To Evade Tax :CESTAT
Analysis By The Court
The Court held rejected the argument of the petitioner that the appointment of the
named adjudicator would be bad in law because the agreement clearly provided the
name of the adjudicator.
However, the Court held that the requirement of pre-arbitration reference cannot be
held to be a mandatory condition for the invocation of arbitration. The Court held that
such a stipulation in a contract is only directory.
The Court further held that the respondent could object to the maintainability of the
petition merely on the ground that pre-condition of reference to adjudicator was not
complied with, if it also did not make efforts to settle the dispute but proceeded to
terminate the agreement.
The Court further held that the petition is pending for more than 1.5 years, therefore,
no useful purpose would be served by relegating the parties to adjudication.
Accordingly, the Court allowed the petition and appointed a sole arbitrator.
Case Title: Backend Bangalore Pvt. Ltd. v. Chief-Engineer-Cum-Project Director,
HPRIDC, Arbitration Case No. 61 of 2022
Date: 01.04.2022
Citation: 2022 LiveLaw (HP) 14
Counsel for the Petitioner: Mr. Diwan Singh Negi
Counsel for the Respondent: Mr. J.S. Bhogal, Senior Advocate with Mr. Tarunjeet
Singh Bhogal
Click Here To Read/Download Order
TAGS HIMACHAL PRADESH HIGH COURT SECTION 11 OF THE A&C ACT
APPOINTMENT OF THE ARBITRATOR TERMINATION OF THE AGREEMENT
PRE-ARBITRATION REFERENCE
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02/07/2022, 17:12 Pre-Arbitration Reference To Adjudicator Is Only Directory, Not A Bar To The Appointment Of The Arbitrator: Himachal Pradesh

TOP STORIES NEWS UPDATES COLUMNS INTERVIEWS FOREIGN/INTERNATIONAL

ENVIRONMENT RTI KNOW THE LAW VIDEOS SPONSORED ROUND UPS

Home / News Updates / Pre-Arbitration...

Pre-Arbitration Reference To Adjudicator Is

adjudicator in terms of arbitration clause is only directory and cannot be held to be a

bar to the appointment of an arbitrator by the Court.

settle the dispute but proceeded to terminate the agreement.

And Liabilities: NCLT Mumbai

respondent terminated the agreement.

Aggrieved by the termination of the agreement and encashment of the performance

reference to arbitration is pre-mature as the agreement provides for pre-arbitration

Also Read - Does Police's Failure To Communicate Full Criminal Antecedents Of

Accused Amounts To Misconduct, Interference With Justice? MP High Court Seeks

appointment of the arbitrator.

The Contention Of The Parties

• The unilateral appointment of the adjudicator as proposed by the respondent

The respondent objected to the maintainability of the petition on the following

• The adjudicator if appointed, his appointment cannot be termed as unilateral

• The pre-arbitration reference is a mandatory requirement, non-compliance

Of Facts' Is Wilful To Evade Tax :CESTAT

Analysis By The Court

name of the adjudicator.

such a stipulation in a contract is only directory.

terminate the agreement.

no useful purpose would be served by relegating the parties to adjudication.

Case Title: Backend Bangalore Pvt. Ltd. v. Chief-Engineer-Cum-Project Director,

HPRIDC, Arbitration Case No. 61 of 2022

Citation: 2022 LiveLaw (HP) 14

Counsel for the Petitioner: Mr. Diwan Singh Negi

Click Here To Read/Download Order

TAGS HIMACHAL PRADESH HIGH COURT SECTION 11 OF THE A&C ACT

APPOINTMENT OF THE ARBITRATOR TERMINATION OF THE AGREEMENT

SIMILAR POSTS + VIEW MORE

Sale Of Corporate Karnataka High Court

Debtor As A 'Going Monthly Digest: June

Concern' Includes Both 2022 [Citations 180 -

Fee Paid For Client

JUST ENTER YOUR EMAIL FOR THE

Enter Your Email

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LATEST NEWS + MORE

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3 Does Police's Failure To Communicate Full Criminal Antecedents Of Accused

6 Extended Period Of Limitation Can Be Invoked Only When "Suppression Of

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5. Multiple Vacancies At Rajiv Gandhi National University Of Law, Punjab (RGNUL)

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