Calcutta High Court
Ilead Foundation vs State Of West Bengal on 5 March, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
OCD-4
AP-COM/152/2025
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL DIVISON
ILEAD FOUNDATION
VS
STATE OF WEST BENGAL
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date : 5th March, 2025.
Appearance:
Mr. Chayan Gupta, Adv.
Mr. Rittick Chowdhury, Adv.
Mr. Dwip Raj Basu, Adv.
. . .for the petitioner.
Mr. Noelle Banerje, Adv.
Mr. Ritoban Sarkar, Adv.
Mr. Paritosh Sinha, AoR.
Mr. Arindam Mondal, Adv.
Ms. Swagata Ghosh, Adv,
. . .for the respondent.
The Court:
1.This is an application for appointment of a learned Arbitrator to
adjudicate the disputes arising out of a Memorandum of Understanding (in short
MoU) entered by and between the petitioner and the respondent for execution of
a project floated by the Ministry of Rural Development, Government of India. The
petitioner claims to be a registered project implementation agency. The MoU was
executed on August 30, 2017. Clause 9.1, contains the arbitration clause. The
petitioner raised a dispute with regard to non-payment of dues. It is submitted
that, upon completion of the first phase, payment was made. When the
petitioner claimed the payment for the second phase, the same was denied on the
ground that the petitioner had failed to execute the project in terms of the MoU,
2thereby committing breach of the MoU. To such denial, the petitioner filed its
response. Challenging the refusal on the part of the respondent to make the
payment, the petitioner approached the High Court under Article 226 of the
Constitution of India. The writ petition was registered as WPA No.25102 of 2022.
By a judgment dated November 17, 2023, the writ petition was dismissed as not
maintainable. It was held that, the very nature of the allegations, the defences
and counter allegations by the parties, required adjudication upon weighing
materials and evidence. Scanning of evidence being entirely beyond the domain
of the Writ Court, His Lordship refused to entertain the writ petition upon
recording the nature of the dispute and the disputed questions of facts involved.
His Lordship, however, held that nothing in the order would prevent the parties
from approaching the appropriate arbitral tribunal or any other forum, if they
were otherwise entitled to in law, for adjudication of the disputes between the
parties. Upon dismissal of the writ petition, the petitioner invoked the arbitration
clause, by a notice dated January 8, 2025. Despite receipt of the said notice, the
respondent did not take any steps, and as such, this application has been filed
for appointment of an Arbitrator.
2. Ms. Banerjee, learned advocate for the respondent, submits that Clause
9.1 is not an arbitration clause. The same is vague. The applicable law has not
been mentioned. The seat and venue has not been mentioned. Thus, the mere
use of the expression ‘Arbitrator’ would not make the said clause an arbitration
agreement between the parties. Further reliance has been placed on a
notification dated September 12, 2023, by which the project director PBSSD
clarified that the use of the expression ‘Arbitrator’ would not cover the definition
3
of arbitrator, under the Arbitration and Conciliation Act, 1996 and the expression
should be read as ‘adjudicator’.
3. Clause 9 of the MoU is set out hereinbelow for convenience.
“9. Arbitration and Applicable Laws:-
9.1 The parties hereby agree that any dispute arising in connection
with this MoU shall nest be addressed mutually by the Parties. If the
said Parties are unable to resolve the dispute morally, the dispute
shall be referred to the Vice- Chairman, PBSSD & Principal Secretary,
TET & SD Department, Government of West Bengal, who will act as
arbitrator for this purpose and whose decision shall be final and
binding on all parties.
9.2 In case an aggrieved party seeks judicial remedy, and where
PBSSD is the First Deponent, the petition shall be filed in jurisdiction of
Calcutta High Court.”
4. The Clause provides that disputes should be first attempted to be
addressed mutually. If the parties were unable to resolve the disputes, the
disputes shall be referred to the Vice Chairman, PBSSD & Principal Secretary,
TET & SD Department, Government of West Bengal, who will act as an Arbitrator
for the purpose and whose decision shall be binding. In my understanding of the
above clause, the intention of the parties to refer disputes not settled mutually,
to an Arbitrator, is available. It is a different matter altogether that the Vice
Chairman, PBSSD & Principal Secretary, TET & SD Department, Government of
West Bengal, was the named Arbitrator. It was a common practice that in the
dispute resolution clause, the party/owner of the project, named the Arbitrator.
4
Having a named arbitrator does not make the clause invalid insofar as, the
meeting of minds to refer a dispute to arbitration is concerned. It only results in
failure of the mechanism provided by application of Section 12 (5) read with the
Vth and VIIth schedules of the 1996 Act. It is a different question altogether that
unilateral appointment of a named arbitrator by a party interested in the
outcome of an arbitral proceeding, is no more permissible in law. The Vice
Chairman, PBSSD & Principal Secretary, TET & SD Department, Government of
West Bengal, who was named in the said clause to be an Arbitrator is incapable
to function as such under the law, but the clause does lose its character of an
arbitration agreement.
5. Reference is made to the decision of Perkins Eastman Architects DPC
and Another vs. HSCC (India) Ltd. reported in 2019 SCC OnLine SC 1517
and Central Organisation for Railway Electrification vs. ECI SPIC SMO
MCML (JV) A Joint Venture Company reported in2024 SCC OnLine SC 3219.
6. Ms. Banerjee’s contention that the applicable law guiding the
arbitration, the seat and other ingredients of an arbitration agreement should
have been mentioned, for the clause to be treated as an arbitration clause, is not
acceptable.
7. In the matter of Jagdish Chander vs Ramesh Chander & Ors reported
in AIR 2007 SC 107, the Hon’ble Apex Court held as follows:-
“8. This Court had occasion to refer to the attributes or essential elements
of an arbitration agreement in K K Modi v. K N Modi [1998 (3) SCC 573],
Bharat Bhushan Bansal vs. U.P. Small Industries Corporation Ltd. [1999
(2) SCC 166] and Bihar State Mineral Development Corporation v. Encon
Builders (I)(P) Ltd. [2003 (7) SCC 418]. In State of Orissa v. Damodar Das
[1996 (2) SCC 216], this Court held that a clause in a contract can be
construed as an ‘arbitration agreement’ only if an agreement to refer
disputes or differences to arbitration is expressly or impliedly spelt out
5
from the clause. We may at this juncture set out the well settled principles
in regard to what constitutes an arbitration agreement :
(i) The intention of the parties to enter into an arbitration agreement shall
have to be gathered from the terms of the agreement. If the terms of the
agreement clearly indicate an intention on the part of the parties to the
agreement to refer their disputes to a private tribunal for adjudication and
an willingness to be bound by the decision of such tribunal on such
disputes, it is arbitration agreement. While there is no specific form of an
arbitration agreement, the words used should disclose a determination and
obligation to go to arbitration and not merely contemplate the possibility of
going for arbitration. Where there is merely a possibility of the parties
agreeing to arbitration in future, as contrasted from an obligation to refer
disputes to arbitration, there is no valid and binding arbitration agreement.
(ii) Even if the words ‘arbitration’ and ‘arbitral tribunal (or arbitrator)’ are
not used with reference to the process of settlement or with reference to the
private tribunal which has to adjudicate upon the disputes, in a clause
relating to settlement of disputes, it does not detract from the clause being
an arbitration agreement if it has the attributes or elements of an
arbitration agreement. They are : (a) The agreement should be in writing.
(b) The parties should have agreed to refer any disputes (present or future)
between them to the decision of a private tribunal. (c) The private tribunal
should be empowered to adjudicate upon the disputes 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.
(iii) Where the clause provides that in the event of disputes arising between
the parties, the disputes shall be referred to Arbitration, it is an arbitration
agreement. Where there is a specific and direct expression of intent to have
the disputes settled by arbitration, it is not necessary to set out the
attributes of an arbitration agreement to make it an arbitration
agreement.”
8. In the matter of Solaris Chem Tech Industries Ltd Vs Assistant
Executive Engineer Karnataka Urban Water Supply and Drainage Board &
Anr. reported in 2023 INSC 916, the Hon’ble Apex Court held as follows:-
“18. Sub-section (1) of Section 7 indicates that an arbitration agreement is
an agreement by parties to submit to arbitration “all or certain disputes
which have arisen or which may arise between them in respect of a defined
legal relationship, whether contractual or not”. It is well settled that in
determining whether there is an arbitration agreement, the terms of the
contract between the parties must be read as a whole. The 1996 Act does
not prescribe a certain form of an arbitration agreement. The use or the
absence of the word ‘arbitration’ is not conclusive and the intention of the
parties to resolve the disputes through arbitration should be clear from the
terms of the clause. In Jagdish Chander vs Ramesh Chander, the Court
6summarised the relevant factors for determining whether an agreement is
an arbitration agreement within the meaning of S. 7 of the 1996 Act. The
Court held:
“(ii) Even if the words “arbitration” and “Arbitral Tribunal (or
arbitrator)” are not used with reference to the process of settlement
or with reference to the private tribunal which has to adjudicate
upon the disputes, in a clause relating to settlement of disputes, it
does not detract from the clause being an arbitration agreement if it
has the attributes or elements of an arbitration agreement. They are:
(a) The agreement should be in writing. (b) The parties should have
agreed to refer any disputes (present or future) between them to the
decision of a private tribunal. (c) The private tribunal should be
empowered to adjudicate upon the disputes 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.”
(emphasis added).”
9. The Hon’ble Apex Court has held that for an arbitration agreement to be
a binding clause, neither the law nor the seat or venue has to be mentioned. As
long as the clause indicated that the parties had agreed and there was a meeting
of minds to refer any dispute to a private tribunal for adjudication of the
disputes, the said clause would constitute an arbitration clause. In this
particular case, the clause provides that the parties should first try to settle any
disputes mutually and in case of failure of an amicable settlement, the dispute
shall be referred to the Vice Chairman, PBSSD & Principal Secretary, TET & SD
Department, Government of West Bengal, who will act as an Arbitrator for the
purpose and whose decision shall be final and binding on all parties. Thus, the
parties agreed to refer all disputes which remain unresolved, for adjudication by
the Vice Chairman, PBSSD & Principal Secretary, TET & SD Department,
Government of West Bengal, who would act as an Arbitrator and whose decision
shall be final and binding upon them.
7
10. With regard to the notification issued on September 12, 2023 clarifying
the interpretation of the expression ‘Arbitrator’ in Clause 9.1 of the MoU as
adjudicator, this Court is of the view that the subsequent notification will not
change the terms and conditions of the contract entered into between the parties
for a period of three years, which ended on 2020. The notification cannot be
applied retrospectively and unilaterally.
11. Under such Circumstances, this Court is of the view that an Arbitrator
should be appointed by the Court as the mechanism has failed and the Vice
Chairman, PBSSD & Principal Secretary, TET & SD Department, Government of
West Bengal, being the named and chosen Arbitrator of the respondent who is
also a party interested in the outcome of the arbitration proceeding cannot act as
the Arbitrator being de jure unable to perform.
12. Under such circumstances, the Court appoints Mr. Sayantan Bose
(9830775264), learned Advocate as the Arbitrator, to arbitrate the dispute. This
order is subject to compliance of Section 12 of the Arbitration and Conciliation
Act, 1996.
13. The learned Arbitrator shall fix his own remuneration as per the
provisions of the Arbitration and Conciliation Act.
14. AP-COM/152/2025 is, accordingly, disposed of.
(SHAMPA SARKAR, J.)
sp/
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