Disputed questions of facts cannot be adjudicated under Section 11(6) of A&C Act

The Hon’ble Allahabad High Court vide its judgment dated 19.01.2024 in the matter of “M/s. Neelkanth Construction vs. Union of India & Ors.” had the occasion to deal with whether disputed or debatable questions of facts can be decided in proceedings under Section 11(6) of the Arbitration & Conciliation Act, 1996.

Facts:

The Petitioner and the Respondent entered into an agreement dated 07.08.2017 vide which the Petitioner had to carry out work for the Respondent i.e. Indian Railways. Upon executing the above-mentioned agreement, the Respondent issued a letter to the Petitioner dated 30.09.2020 vide which the Petitioner was directed to stop working on the project. However, the Respondent thereafter issued further letters dated 09.06.2022 and 14.06.2022 vide which the Petitioner was again asked to complete work as per the said agreement.

Subsequently, while carrying out the said work, certain disputes arose between the Petitioner and the Respondent which led to the Petitioner filing a petition under Section 11(6) of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as ‘the Act’) for appointment of an arbitrator.

Clause 64 of the said agreement dealt with appointment of an arbitrator whereas Clause 63 of the said agreement dealt with “excepted matters” which were not arbitrable. As per Clause 61, the Respondent i.e. the Indian Railways had a right to determine the contract with the Petitioner and the said issue of determination was a non-arbitrable dispute as per Clause 63 of the said agreement. So, in effect, upon the determination of the said agreement by the Respondent, the Petitioner could not have challenged the said determination by seeking appointment of an arbitrator under Clause 64 of the said agreement.

Analysis:

The Hon’ble Allahabad High Court vide its judgment dated 19.01.2024 allowed the Petition and appointed an arbitrator in the present case.

The Respondent had objected to the said petition on the ground that the Respondent had terminated the agreement between the parties vide its letter dated 30.09.2020. Hence, owing to Clause 63 of the agreement, the dispute between the parties had become non-arbitrable and thus, an arbitrator could not have been appointed in the present case.

The Hon’ble Allahabad High Court rejected the above-mentioned objection of the Respondent. The Hon’ble Court observed that while the letter dated 30.09.2020 issued by the Respondent could be perceived as determining the contract, there were further letters dated 01.04.2021 and 31.12.2021 sent to the Petitioner vide which the Respondent had enhanced the time for completion of work and letters dated 09.06.2022 and 14.06.2022 issued by the Respondent to the Petitioner vide which the Petitioner was informed and directed to continue work at the site.

Hence, the Hon’ble Allahabad High Court while relying on the principles established in “Vidya Drolia & Ors. vs. Gujarat Informatics Ltd., (2021) 2 SCC 1” held that whether the present dispute was arbitrable or not was a disputed question of fact which would require appreciation of evidence and thus, the same could not be adjudicated by the Courts under Section 11(6) of the Act.

VM-03-2023