The arbitration clause in any agreement gives specific procedure for initiation of arbitral proceedings including the mode and manner of appointment of arbitrator/arbitrators. However, if there is no specific mention of arbitration as a mode of dispute resolution in the Agreement itself, implying a ‘Designated Officer’ to act as an Arbitrator is invalid as such officer lacks the necessary jurisdiction to act as an Arbitrator.

In the appeal filed by the Appellant challenging the order of the Delhi High Court admitting the petition of the Respondent for appointment of an arbitrator, the Bench of Justice SA Bobde and Justice L Nageswara Rao held that parties to a dispute cannot invoke jurisdiction of a designated officer under an agreement if such officer is not designated to act as an arbitrator in itself. In the matter of South Delhi Municipal Corporation v. SMS AAMW Tollways Private Ltd., the Apex Court observed that there was no specific reference of any dispute to arbitration and was merely a procedure similar to a departmental procedure to address any relevant issue arising with respect to the Agreement. In an Agreement between the Appellant and Respondent dated 14.05.2011, the Dispute Resolution clause stated as follows:


16.1 Except where otherwise provided in the Agreement, all questions and disputes in any way arising out of or relating to the Agreement shall be dealt with as mentioned below.

16.2 In the event the Contractor considers any work demanded of it as being outside the requirements of the Agreement, or disputes any record or decision given in writing by the Competent Officer in any matter in connection with or arising out of the Agreement, to be unacceptable, it shall promptly within [15] days request the Competent Officer in writing to give his instructions or decision in respect of the same. Thereupon, the Competent Officer shall give his written instructions or decision within a period of [30] days from the receipt of the Contractor’s letter.

16.3 If the Competent Officer fails to give his instructions or decision in writing within the aforesaid period or if the Contractor is dissatisfied with the instructions or decision of the Competent Officer, the Contractor may, within [15] days of receipt of the Competent Officer’s instructions or decision, appeal to the Commissioner who shall afford an opportunity to the Contractor to be heard, if the latter so desires, and to offer evidence in support of its appeal. The Commissioner shall give his decision in writing within [30] days of receipt of Contractor’s appeal which shall be acceptable to the Contractor.”

The Court referred to the judgments in State of Orissa v. Damodar Das 1996 (2) SCC 216, KK Modi v. KN Modi 1998 (3) SCC 573 and State of UP v. Tipper Chand 1980 (2) SCC 341 and allowed the appeal thereby setting aside the order of the Delhi High Court on the following decision:

“24. We find that the present Clause 16 and in particular Clause 16.3 does not provide for the reference of any dispute that may arise between the parties to an Arbitrator. The purpose of this Clause is to vest the Competent Officer and the Commissioner with supervisory control over the execution of work and administrative control over it from time to time and thus to prevent disputes. The intention is not to provide for a forum for resolving disputes………”


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Judgment: South Delhi Municipal Corporation Versus SMS AAMW Tollways Private Ltd