News: Can't refer government dispute with builder to arbitration: Madras HC-29-01-2022
Justice N Anand Venkatesh rejected the plea in view of an archaic arbitration clause added in agreements between the government and private contractors that arbitration will be resorted to only if the value of the dispute was less than ₹50,000.
CHENNAI: The Madras high court on Friday dismissed a plea moved by the Tamil Nadu Urban Habitat Development Board (TNUHDB) to refer a dispute between it and PST Engineering Construction, accused of poor quality construction of tenements, for arbitration.
Justice N Anand Venkatesh rejected the plea in view of an archaic arbitration clause added in agreements between the government and private contractors that arbitration will be resorted to only if the value of the dispute was less than ₹50,000.
“If the arbitration clause had not restricted the value of the claims, without any
hesitation, this court would have allowed this application and referred the parties for arbitration,” the judge said
However, the arbitration clause itself stipulates that for claims above ₹50,000 it is only the jurisdictional civil court at Chennai, which will have the jurisdiction to decide the dispute, the court pointed out.
While dealing with this issue, it was held by the Supreme Court that the existence of an arbitration agreement must be decided on the basis of the terms of the agreement and on a plain reading of the clause, the court said.
The judge added that if the arbitration clause restricts the value of the claim which can be referred to the arbitrator, only those claims which fall within the value can be referred for adjudication by the arbitrator, the judge added.
“Before drawing the curtains, this court wants to impress upon the authorities to revamp the entire arbitration clause. Obviously, there is a total non-application of mind on the part of the authorities…” the court said.
If the authorities had applied their mind and had not acted in a mechanical fashion, they would not have fixed the value as ridiculous as ₹50,000 and this dispute would not have landed in this court, the court said while marking a copy of the order to the chief secretary for necessary action.
