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Agreement where only one party can call for arbitrator is not an arbitration clause

In South Delhi Municipal Corporation vs SMS AAMW Tollways Private Ltd., the Appellant-South Delhi Municipal Corporation challenged before the Supreme Court, the order passed by the learned Single Judge of the Hon’ble Delhi High Court allowing the Petition filed by the Respondent-SMS AAMW Tollway Private Ltd.  under Section 11(6) of the ArbitrationAct after the initial appeal for arbitration had been rejected by the Appellant on the ground that no arbitration clause existed in the agreement between the parties. The Respondent had relied on Clause 16.3 of the agreement while filling the arbitration petition.

The Supreme Court found that the clause 16 provided for the resolution of disputes at two stages. If a case arises wherein a contractor finds that if the work demanded is outside the scope of the agreement or feels the need to dispute any decision of the competent officer or if any record created by him is unacceptable, he may request the competent officer to decide its representation or give instructions. If the competent officer fails to decide within 30 days or if the contractor is dissatisfied with his decision, the contractor may, within 15 days from receipt of the decision by the competent officer, file an appeal to the Commissioner, SDMC.

The Supreme Court allowing the appeal and referring to K.K. Modi v. K.N. Modi held that arbitration has always been understood to mean the process by which a dispute is resolved by an arbitrator chosen or acceptable to both sides under an arbitration agreement between the two parties. In the present case, under Clause 16 of the Agreement only the party dissatisfied by the order of the Competent Officer can approach the Commissioner. It is, therefore, not possible to hold that the proceedings before the Commissioner constitutes as an arbitration.

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