Punjab and Haryana HC Deprecates State Instrumentalities' Practice of Undermining Dispute Resolution Goals

In a recent development on February 6, 2024, the Punjab and Haryana High Court has expressed disapproval of the tactics employed by state instrumentalities that hinder the swift resolution of disputes outlined in the Arbitration and Conciliation Act.

The bench of  Justice Suvir Sehgal was hearing  the matter titled  Knight Frank (India) Pvt. Ltd. versus Punjab Heritage and Tourism Promotion Board (ARB - 294 of 2021), wherein the  petitioner, represented by counsels Abhinav Sood and Anmol Gupta urged the court for the appointment of an independent and sole arbitrator in accordance with clause 2 (v) of the agreement dated August 29, 2018.

The case emanates from an agreement between the petitioner ( an International Property Consultant) and the respondent, which  aimed at optimizing underutilized properties under the Tourism Department's control through public-private partnership mode. Despite completing the initial two stages of the project and submitting detailed reports, the respondent unilaterally terminated the agreement after deciding to curtail the project's scope. This led to a dispute regarding payment, ultimately invoking the arbitration clause outlined in the agreement.

Counsels for the petitioner argued against the appointment of sole arbitrator by the Principal Secretary, Tourism, Govt. of Punjab citing the Supreme Court judgment in Perkins Eastman Architect DPC and another versus HSCC (India) Ltd. (2020 AIR SC 59), which deemed such an appointment ineligible. However, the respondent objected  to the arguments addressed by the counsel for the Petitioner on the ground that in terms of the arbitration clause, the Principal Secretary, Tourism has appointed an arbitrator to adjudicate the dispute and further Arbitrator has to be appointed under Section 55 of the Punjab Cooperative Societies Act of 1961.

The court, after considering the arguments presented, overruled all objections raised by the respondent and emphasized the detrimental impact of contesting arbitrator appointments, particularly by state instrumentalities, on the expeditious resolution of disputes as envisioned by the Arbitration and Conciliation Act.

The Court's statement read, "Such an approach would defeat the intent and objective behind the incorporation of the Act of 1996, which provides for a speedy and efficacious resolution of disputes."

Consequently, the Court appointed Hon’ble Mr. Justice Tejinder Singh Dhindsa, a former Judge of the Punjab and Haryana High Court, as the sole arbitrator to adjudicate the dispute.

This ruling by the Punjab and Haryana High Court underscores the imperative of upholding the principles of efficient dispute resolution outlined in the Arbitration and Conciliation Act, urging stakeholders, especially state instrumentalities, to refrain from obstructive practices that undermine its objectives.