Parties to a dispute cannot invoke arbitration jurisdiction of a designated officer for Dispute Resolution under an Agreement if such officer is not designated to act as an Arbitrator in itself.

The Apex Court in a recent matter held that if there is no specific mention of arbitration as a mode of dispute resolution in the Agreement itself, then implying a ‘Designated Officer’ to act as an Arbitrator is invalid as such officer lacks the necessary jurisdiction to act as an Arbitrator.

The said ruling was held in the matter of South Delhi Municipal Corporation Vs. SMS AAMW Tollways Pvt. Ltd. {Civil Appeal No. 11249/2018 [Arising out of SLP (Civil) No. 23139 of 2016]}, decided on 22.11.2018.

Challenge

The instant appeal was filed by the Appellant challenging the order of the Delhi High Court admitting the petition of the Respondent for appointment of an arbitrator. The Respondent-SMS AAMW being the successful bidder was awarded the work for collection of toll tax fora period of 3 years and a Bilateral Agreement dated 14.05.2011 (hereinafter referred to as ‘the Agreement’) was entered into between the Appellant-SDMC and the Respondent-SMS AAMW.

Held

The Apex Court while relying on the judgments in the matters of 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 34 observed that Clause 16 and particularly 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 dispute.

Hence, the Apex Court held 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.