Gauhati High Court Appoints Arbitrator, Allows Arbitration Without Notice As Intent To Arbitrate Was Clear

The Gauhati High Court has appointed its former judge Justice Achintya Malla Bujor Barua as sole arbitrator in a dispute between Ekta Shakti Foundation and the State of Assam, holding that, in the peculiar facts of the case, an arbitration plea can be entertained even without a formal notice where a valid arbitration agreement is undisputed.

A Bench of Justice Soumitra Saikia said, "it appears that the dispute between the parties have not been resolved and on the other hand there is a method for taking recourse to resolving such disputes expressly agreed upon by the parties by way of reference to arbitration. The only hurdle that is presented before the Court by the Respondents is non issuance of a notice under section 21 and thereby the power required to be invoked by the referral Court under section 11(6) cannot be invoked until and unless such agreed terms are enforced by the parties in terms of the said agreement. "

The dispute arose from a midday meal project in Assam. Ekta Shakti Foundation was selected in 2018 to set up central kitchens and supply cooked meals in Bongaigaon, Dhubri, and Morigaon districts.

An agreement was signed in October 2018, and the NGO says it invested about Rs 3.87 crore in land, construction and infrastructure, along with incurring interest on bank borrowings. In November 2019, the State directed it to stop supply without citing reasons.

The contract, which began in January 2019 for three years, expired in December 2021. A writ petition filed by the NGO was later dismissed, though the court allowed it to invoke arbitration and pursue claims such as compensation.

Opposing the plea, the State argued that the earlier ruling had limited the NGO to seeking damages and that such claims could be pursued before a civil court. It also contended that the NGO had not followed the agreed procedure, which required issuing a formal notice calling upon the State to appoint an arbitrator before approaching the Court.

Rejecting these objections, the Court held that its role at this stage is confined to examining whether a valid arbitration agreement exists, which was not in dispute. It said an arbitral tribunal is competent to decide claims for compensation arising out of contractual disputes.

On the objection regarding notice, the court noted that the NGO's communication showed its intention to invoke arbitration and its lack of consent to a unilateral appointment by the State.

For Petitioner (Ekta Shakti Foundation): Advocate S. Sancheti.

For Respondent (State of Assam & Anr.): Advocate P. Nayak.