M/s Eralite Buildtech Private Limited And Another vs State Of Uttarakhand And Another

Ramesh Ranganathan, CJ

Heard Ms. Akansha Juyal, learned counsel for the applicants and Mr. Paresh Tripathi, learned Chief Standing Counsel for the State of Uttarakhand.

The dispute resolution mechanism, stipulated in the agreement, is in Clauses 23 and 24 which read as under:

"23. Appointment of the adjudicator.

23.1 The Adjudicator shall be appointed jointly by the Employer and the Contractor, at the time of the Employer's issuance of the Letter of Acceptance. If, in the Letter of Acceptance, the Employer does not agree on the appointment of the Adjudicator, the Employer will request the Appointing Authority designated in the PCC, to appoint the Adjudicator within 14 days of receipt of such request.

23.2 Should the Adjudicator resign or die, or should the Employer and the Contractor agree that the Adjudicator is not functioning in accordance with the provisions of the Contract, a new Adjudicator shall be jointly appointed by the Employer and the Contractor. In case of disagreement between the Employer and the Contractor, within 30 days, the Adjudicator shall be designated by the Appointing Authority at the request of either party, within 14 days of receipt of such request.

Procedure for Disputes

24.1 If the Contractor believes that a decision taken by the Engineer was either outside the authority given to the Engineer by the Contract or that the decision was wrongly taken, the decision shall be referred to the Adjudicator within 14 days of the notification of the Engineer's decision.

24.2 The Adjudicator shall give a decision in writing within 28 days of receipt of a notification of a dispute. If the Adjudicator fails to give its decision within the period of 28 days of the receipt of a notification of a dispute, either party may within 28 days of the expiration of the above mentioned period, give notice to the other party of its dissatisfaction and intention to commence arbitration.

24.3 The Adjudicator shall be paid the daily allowance at the rate specified in the PCC, together with reimbursable expenses of the types specified in the PCC, and the cost shall be divided equally between the Employer and the Contractor, whatever decision is reached by the Adjudicator. Either party may refer a decision of the Adjudicator to an Arbitrator within 28 days of the Adjudicator's written decision. Neither party shall be entitled to commence arbitration of a dispute unless a notice of dissatisfaction has been served in accordance with the GCC 24.2 above. If neither party refers the dispute to arbitration within the above 28 days, the Adjudicator's decision shall be final and binding. In the event that a party fails to comply with the decision of the adjudicator which has become final and binding, then the other party may without prejudice to any other rights it may have, refer the failure itself to arbitration.

24.4 The arbitration shall be conducted in accordance with the arbitration procedures published by the institution named and in the place specified in the PCC."

An adjudicator is required, in terms of Clause 23.1, to be appointed jointly by the Employer and the Contractor; and, under Clause 24.1 if the Contractor believes that the decision taken by the Engineer is without authority or that the decision has been wrongly taken, then the decision is required to be referred to an Adjudicator within 14 days of the notification of the Engineer's decision. While Clause 24.2 requires the Adjudicator to give his decision in writing within 28 days of receipt of a notification of a dispute, it does appear that in the present case, despite the applicants having addressed a letter and the respondents having appointed an Adjudicator by order dated 06.12.2018, the dispute has not been notified to the Adjudicator till date.

Non-compliance with the requirements of Clause 24.2 by the Adjudicator, justifying invocation of the arbitral process, would arise only in case the Adjudicator fails to give a decision within 28 days of receipt of a notification of the dispute; and since the dispute, in the present case, has not even been notified, the Adjudicator cannot be faulted for not giving his decision.

While Clause 24.2, undoubtedly, enables either party to give notice to the other party of the intention to commence Arbitration, if the decision is not given by the Adjudicator within 28 days of receipt of the notification of a dispute, in the present case failure to notify the dispute has been the cause for the Adjudicator's inability to give a decision.

It is wholly unnecessary for this Court to dwell on this aspect any further, since Mr. Paresh Tripathi, learned Chief Standing Counsel for the State Government, would submit that the dispute would be notified to the Adjudicator within ten days from today. Needless to state that, in terms of the agreement, the Adjudicator shall, within 28 days of the dispute having been notified, take a decision and communicate the same to the parties.

Since a decision of the Adjudicator, or his failure to take a decision within 28 days of the dispute being notified, is a pre-requisite for invoking the Arbitration clause, the present application is, evidently, premature and cannot be entertained.

Leaving it open to the applicant, in case they are aggrieved by the Adjudicator's decision, or in case the Adjudicator fails to take a decision within 28 days of the dispute being notified to him, to approach this Court by way of a fresh application under Section 11 of the Arbitration and Conciliation Act, 1996.

The present application is, accordingly, dismissed as pre-mature. No costs.