The Chhattisgarh High Court has held that a claimant must exhaust any contractually specified dispute resolution mechanism leading up to arbitration before seeking a reference to arbitration.
Brief Facts
Devanshi Construction and the Central Public Works Department ("CPWD") entered into an agreement for the construction of a boundary wall around the CRPF Battalion Camp in Chhattisgarh. A dispute arose between the parties relating to the non-payment of various amounts for work done under the agreement.
Devanshi referred the matter to arbitration but the CPWD refused to agree to a nominee and Devanshi approached the High Court for the appointment of an arbitrator.
Arguments before the Chhattisgarh High Court
The CPWD argued that the reference to arbitration was premature as Devanshi had not followed the contractual requirement to first refer the matter to a Dispute Resolution Committee ("DRC").
Devanshi contended that the dispute concerned non-payment of amounts for work done and non-refund of a performance guarantee amount, where there was no requirement to approach the DRC. Devanshi argued that only disputes relating to the meaning of specifications, designs, drawings and instructions were required to be referred to the DRC prior to invoking arbitration.
Findings of the Chhattisgarh High Court
The Court observed that the contractual dispute resolution mechanism was an all embracing clause that covered within its ambit any claim arising out of or in relation to the agreement. The parties were therefore required to exhaust the contractual dispute resolution mechanism, including through the DRC, before referring the dispute to arbitration and accordingly the application under §11 of the Arbitration Act to appoint an arbitrator was both premature and misconceived.
Footnote
1 ARBR No 28 of 2020 decided on 14 January 2022
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