Question: My firm is doing business of gravel supply to the government. I want to know whether the appointment of an arbitrator under the agreement is possible? Our firm got a tender from the public works department of Uttar Pradesh. According to the tender agreement any dispute arises in respect of tender shall be decided by the Chief Engineer. But the government wants to decide our dispute through the retired judge of the High Court. Actually the government wants to rescind our agreement and appoint an arbitrator under the Arbitration and Conciliation Act 1996.
Whether the clause of 1996 will apply in our case? Chief engineer is competent to decide any dispute regarding the public works. Retired Judge of the High Court will act under pressure of the government and also have little knowledge about the technicality of tender. Therefore, please advise how to get appointment of an arbitrator through the court and according to the tender agreement?
Question from: Uttar Pradesh
It seems from your question that the tender agreement has a separate arbitration clause. The government wants to supersede or deny this clause and appoint an arbitrator under the Arbitration and Conciliation Act 1996.
Application of Arbitration and Conciliation Act 1996 is not mandatory
It is not mandatory that each dispute must be decided under the provisions of the Arbitration and Conciliation Act 1996. Parties to the contract can agree to refer their dispute to a particular person or authority. The appointment of an arbitrator may also be fixed under the agreement.
They can also set a procedure for the determination of dispute. However, they can accept the provisions of Arbitration and Conciliation Act 1996 but it is not mandatory. Parties to the contract are free to settle their dispute out of the court. They are free to devise their own procedure for the determination of dispute.
That procedure must be just, fair and reasonable. The Act of 1996 is a model code for the determination of dispute through the arbitration, conciliation or mediation. Strict rules of Evidence Act and Code of Civil Procedure do not apply to that Act. Therefore, out of court settlement becomes easier and swifter under the Act of 1996.
Appointment of arbitrator under the agreement
If you want appointment of an arbitrator under the agreement, the said agreement must have the arbitration clause. In existence of that clause you can seek appointment from the court if any dispute arises between the parties.
In your case, the government wants to overlook or rescind the provisions of agreement and appoint a distinct arbitrator under the Act of 1996. This step of the government is illegal, therefore, unsustainable. You can approach the High Court for the appointment of an arbitrator under the tender agreement.
In BHEL vs State of Uttar Pradesh 2014 (4) All LJ 52, the Allahabad High Court has held that there may be an arbitration clause in the agreement between the parties. Provisions of Section 15 to 23 of Arbitration and Conciliation Act 1996 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Therefore, provisions of Arbitration and Conciliation Act 1996 are not mandatory. There could be a different mechanism for the redressal of dispute.
The tender agreement has an exclusive clause for the determination of dispute. Hence, you should avail that provision instead of Arbitration and Conciliation Act 1996. The High Court may quash the appointment of arbitrator by the government because it is illegal. Government cannot overlook the provisions of the tender agreement.
Unless the new tender agreement comes into force, the existing agreement will apply on every dispute regarding the tender. This is a special provision adopted by the parties for redressal of their dispute. This mechanism will supersede the provisions of Arbitration and Conciliation Act 1996. You should file a petition in the High Court as soon as possible for the appointment of arbitrator under the tender agreement.