Allowed

Saurabh Metals Pvt. Ltd. v. the Director Railway Stores (M)

Delhi HC5 Jan 2024ARB.P./2/2024

Case brief

AI extract

What is this about?

Petitioner sought appointment of an arbitrator under its Development Order with the Railways, whose clause provided for unilateral appointment by the Indian Railways. Relying on TRF and Perkins Eastman, the Court held unilateral appointment impermissible and referred the parties to arbitration under DIAC.

What did the court decide?

Parties referred to arbitration; arbitration to be held under DIAC aegis with arbitrator nominated from its panel; merits left open.

Saurabh Metals Pvt. Ltd. Vs the Director Railway Stores (M) — Arbitration | Delhi HC (2024)

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IN THE HIGH COURT OF DELHI AT NEW DELHI

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- ARB.P. 2/2024

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SAURABH METALS PVT. LTD ..... Petitioner Through: Ms. Henna George and Ms. Purti Gupta, Advocates.

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versus

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THE DIRECTOR RAILWAY STORES (M) ..... Respondent Through: Mr. Vineet Dhanda, CGSC.

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CORAM: HON'BLE MR. JUSTICE PRATEEK JALAN

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O R D E R % 05.01.2024

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By way of this petition, under Section 11 of the Arbitration and Conciliation Act, 1996, the petitioner seeks appointment of an arbitrator to adjudicate disputes between the parties under a Development Order dated 29.12.2021, for the manufacture of axles. Clause 14 of the Order provides for arbitration under Clause 2900 of Indian Railway Standard Conditions of Contract. It provides for arbitration by an officer to be appointed by the designated authority of the Indian Railways.

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Ms. Purti Gupta, learned counsel for the petitioner, submits that in view of the decisions of the Supreme Court in TRF Limited vs. Energo Engineering Projects Limited [(2017) 8 SCC 377] and Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Limited [(2020) 20 SCC 760], and other judgments following them, unilateral appointment of an arbitrator by a party to a contract is impermissible. She, therefore, seeks the appointment of an independent arbitrator.

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Page 1 of 3

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ARB.P. 2/2024

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This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 06/05/2024 at 15:41:18

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The petitioner has invoked arbitration by a letter dated 24.07.2023. However, the request has been declined by the respondent’s communication dated 24.11.2023, on the ground that the dispute has already been decided by this Court. Reference has been made to a judgment of this Court dated 12.07.2023.

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Pursuant to notice issued on 03.01.2024, Mr. Vineet Dhanda, learned Central Government Standing Counsel, enters appearance on behalf of the respondent. He submits that the only ground for denial of reference to arbitration taken in the respondent’s communication dated 24.11.2023 is the proceeding before this Court in W.P.(C) 8456/2023 [ Saurabh Metals Pvt. Ltd vs. Union of India & Ors. ] filed by the petitioner seeking an injunction against encashment of a performance bank guarantee.

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The aforesaid writ petition was dismissed by a judgment dated 12.07.2023 on the ground that the petitioner had not made out a case for grant of an injunction against encashment of an irrevocable and unconditional bank guarantee. It was specifically noted that the parties would be free to avail their contractual remedies in respect of their claims and counter claims, if any. The petitioner’s appeal against the aforesaid judgment (LPA 557/2023) was rejected by the Division Bench vide judgment dated 18.07.2023.

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Having heard the learned counsel for the parties, I am of the view that the contention taken by the respondent in its communication dated 24.11.2023 is wholly misconceived. The denial of an injunction against enforcement of a bank guarantee does not prejudice the petitioner’s contractual claims, including for restitution for any amount recovered by

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Page 2 of 3

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ARB.P. 2/2024

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This is a digitally signed order.

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The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 06/05/2024 at 15:41:18

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the respondent in terms of the bank guarantee.

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The existence of the arbitration agreement and the invocation thereof are not disputed by the respondent. Having regard to the judgements of the learned Supreme Court in TRF Limited (supra) and Perkins Eastman (supra), and other judgments following them, the contractual provision for unilateral appointment of an arbitrator is impermissible. I am, therefore, of the view that the petitioner has made out a case for appointment of an arbitrator, and all rights and contentions of the parties on merits may be left open for adjudication by the learned Arbitrator.

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The petition is, therefore, allowed and the parties are referred to arbitration. With the consent of learned counsel for the parties, it is directed that the arbitration will be held under the aegis of Delhi International Arbitration Centre, Delhi High Court, Shershah Road, New Delhi [“DIAC”], and will be governed by the Rules of DIAC, including as to remuneration of the learned Arbitrator. DIAC is requested to nominate an arbitrator from its panel. The learned Arbitrator is requested to furnish a declaration under Section 12 of the Act, prior to entering upon the reference.

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It is made clear that this Court has not adjudicated the rights and contentions of the parties on merits, which are reserved for adjudication by the learned Arbitrator.

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