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TMI Blog2025 (4) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said respondent was an associate of the respondent No. 1. When this application came up for hearing, the petitioner did not seek to proceed against the respondent No. 2, hence, leave was granted to expunge the respondent No. 2. 3. The case of the petitioner, as run in this application was that, by the agreement dated February 19, 2019, it was, inter alia, agreed that the respondent No. 1 would provide mining services to the petitioner, including extraction of chromite ore. The agreement provided the timelines and techniques for such mining activity, which, according to the petitioner, formed the essence thereof. The petitioner complained that the respondent No. 1 acted in breach of the terms and conducted mining activity in a manner, that led to acute shortfall of the quantity of ore extracted. The tunnels which had been carved out had collapsed and ultimately the respondent No. 1 abandoned the work. The initial agreement term was for 37 months, for the eastern side of the mines, that is, two months for the purpose of mobilization and 35 months for operational purposes from the effective date, that is, February 19, 2019 (the date of execution of the agreement), and a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys, consultants, financial advisors and other experts), whether or not arising out of any third4 party Claim (collectively, "Loss"), to which any Indemnified Party may become subject, in so far as such Loss arise directly or indirectly out of, in any way relate to the following (each referred to as the "Indemnity Event"): a) any inaccuracy in or any misrepresentation or breach of any of the representations and warranties by the Service Provider under this Agreement; b) any breach or failure by the Service Provider to fulfil or perform any of its obligations, undertakings, representations, covenants or agreements contained in this Agreement; c) any and all costs and expenses incurred by any Indemnified Party in respect of a claim under this Cause. The indemnification rights of the Indemnified Parties under this Agreement are Independent of, and in addition to, such other rights and remedies they may have at the Applicable Laws or in equity or otherwise, including the right to seek specific performance, recession or restitution or other injunctive relief, none of which rights or remedies shall be affected or diminished thereby, and It is agreed herein that Indemnified Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valid arbitration clause. It provided the mechanism for resolution of the dispute by arbitration, the governing laws and a forum. Under the clause, all parties were to endeavour to settle the dispute amicably within 30 days, failing which the dispute was agreed to be referred jointly to the managing director of the petitioner and the designated partner of the service provider, whose decision would be binding on all the parties. 9. Mr. Banerjee submitted that, all the ingredients of a valid arbitration agreement were present in the said clause. The agreement was in writing. The parties agreed to refer the dispute to be settled by the Managing Director, of the petitioner and designated partner of the service provider. The parties agreed that the decision would be final. The Tribunal was impartial, as each of the parties had a representative. 10. Reference was made to the decision of Jagdish Chander vs. Ramesh Chander and ors., reported in (2007) 5 SCC 719, in support of the contention that the words 'arbitration' and "arbitral tribunal" were not required to be incorporated in a valid arbitration clause. As long as the other features or elements of an arbitration agreement were pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding in rem. The same would not operate as a bar in invoking the provisions of the said Act. The arbitration clause was invoked within the period of limitation. The advantage of the decision of the Hon'ble Apex Court in suo moto WP(C) No.3 of 2020, In Re: Cognizance for Extension of Limitation, which excluded the period from March 15, 2020 to February 28, 2022, for the purpose of computing the period of limitation, would be applicable in this case. 15. Mr. Sourojit Dasgupta, learned Advocate for the respondent, opposed the prayer for appointment of an arbitrator by this Court. He submitted that clause 16 of the agreement did not satisfy the pre-requisites of an arbitration agreement as contemplated under the Arbitration and Conciliation Act, 1996. This Court did not have the jurisdiction to receive, try and determine the application. The respondent No. 1 had filed an application under Section 9 of the IBC 2016, NCLT, Cuttack. The petitioner participated in the proceedings. When the petitioner replied to the demand notice issued by the respondent No. 1 dated November 5, 2022, the petitioner had not made any demand with regard to the alleged loss suffered on account of the breach al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the said clause indicated that there had been meeting of the minds of the parties to refer any dispute to a private tribunal, which was supposed to decide the dispute in an impartial manner, upon giving adequate opportunity to the parties to place their case and the parties had agreed to be bound by the decision of the said tribunal. 20. In the decision of Jagdish Chander (supra), the Hon'ble Apex Court held that intention of the parties to enter into an arbitration agreement will have to be gathered from the terms of the agreement. If the terms of the agreement clearly indicated an intention on the part of the parties to refer the dispute to a private tribunal for adjudication and a willingness to be bound by the decision of such tribunal on such disputes, it would constitute as an arbitration agreement. While there was no specific form of an agreement, the words used should disclose a determination and an obligation to refer to arbitration, but not merely a possibility of going for arbitration. 21. In the present case, the Managing Director of BAL, represented the company and signed the contract. The designated partner of the respondent No. 1 also represented the partnershi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act as arbitrators as they have represented their respective entities in the contract. This is opposed to the fundamental principle of the arbitrator's impartiality and independence. The dispute resolution clause, as framed in the said agreement, does not uphold impartiality and independence of the arbitrators. Parties could not have knowingly decided to refer the dispute to a tribunal consisting of their representative signatories, by ignoring that there would be conflict of interest and the decision making ability would be compromised. The procedure prescribed is contrary to the principles of natural justice. Also, under the Indian law, the arbitrators were required to disclose potential conflict of interest. This was not possible in the instant case. Moreover, an arbitral tribunal could not be constituted by even member of persons. Thus, in my view, the parties did not intend the clause to be an arbitration agreement under Section 7 of the said Act. 26. Another important point is that, in case of railway contracts or contracts relating to Public Sector Undertakings, the arbitration clause were provided in the General Conditions of Contracts which were made applicable to work or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which may arise between them in respect of a defined legal relationship, whether contractual or not. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in- (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication 1 [including communication through electronic means] which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract." 33. By signing the contract, the Managing Director of BAL and the designated partner committed that the respective parties would be bound by the obligations and responsibilities outlined in the contract. Both parties have alleged breach. Thus, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in an impartial manner, giving due opportunity to the parties to put forth their case before it. (d) The parties should have agreed that the decision of the private tribunal in respect of the disputes will be binding on them. 35. In this report also, the impartiality of the private tribunal has been emphasized. 36. In the decision of Mahanadi Coalfields Ltd. and Anr. Vs M/s IVRCL AMR Joint Venture decided in Civil Appeal No. 4914 of 20222 (Arising out of SLP(C) No 1098 of 2020, the Hon'ble Apex Court held as follows:- "13. The above extract makes it abundantly clear that clause 15 of the Contract Agreement is a dispute resolution mechanism at the company level, rather than an arbitration agreement. Consequently, in case of a dispute, the respondent was supposed to write to the Engineer-in-charge for resolving the dispute. Clause 15 does not comport with the essential attributes of an arbitration agreement in terms of section 7 of the 1996 Act as well as the principles laid down under Jagdish Chander (supra). A plain reading of the above clause leaves no manner of doubt about its import. There is no written agreement to refer either present or future disputes to arbitrati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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