SC sets aside Orissa HC order; appoints arbitrator in Hindustan Prefab-NLU Odisha case

New Delhi [India], November 7 : The Supreme Court has overturned an order of the Orissa High Court that had rejected a plea by Hindustan Prefab Limited (HPL) seeking the appointment of an arbitrator in its contractual dispute with the National Law University, Odisha (NLUO).
A Bench of Justice Manoj Misra and Justice Ujjal Bhuyan held that once the existence of an arbitration agreement is undisputed, courts must refer the matter to arbitration without entering into questions about the maintainability or merits of the claim.
Appearing for Hindustan Prefab Limited were Advocates Gaurav Gupta, Rajesh Kumar, Vinit Tyagi, and Gaurav Goel (AOR). The respondent, National Law University Odisha, was represented by Senior Advocate Sidharth Luthra, assisted by Advocates Pankaj Singhal, Akshat Kumar, Ashima Gupta, Chandan Kashyap, Harshita, Monu Kumar, and Sougat, with Ayush Anand as AOR.
Hindustan Prefab Limited, a government enterprise, was awarded a works contract by NLU Odisha and subsequently engaged a contractor to execute the project. Disputes later arose between HPL and the contractor, leading to arbitration proceedings that ended in an award against HPL.
HPL challenged the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, and a stay is currently operating. Relying on Clause 47 of its agreement which provides that the client (NLU Odisha) must bear the cost of any arbitration award in favour of the contractor HPL raised a claim seeking reimbursement from the University.
NLU Odisha resisted the claim, stating that since the arbitral award was under challenge and stayed, its liability to pay had not yet arisen. The Orissa High Court dismissed HPL's Section 11(6) application seeking appointment of an arbitrator, reasoning that no cause of action existed as the award had not yet attained finality.
Disagreeing with the High Court's reasoning, the Supreme Court stated that at the stage of appointing an arbitrator, the court's role is limited to verifying the existence of an arbitration agreement. Once that is established, the issue of whether the claim is maintainable or arbitrable must be left to the arbitral tribunal.
The Bench cited its earlier rulings, reaffirming that "once there is an arbitration agreement, the matter must end there."
The court observed that whether NLU Odisha's liability arises upon the passing of an award or only after payment is a question of arbitrability, which should be determined by the arbitrator.
Allowing the appeal, the Supreme Court set aside the Orissa High Court's order dated September 8, 2023, and appointed Justice Bhaskar Bhattacharya, former Chief Justice of the Gujarat High Court, as the sole arbitrator.
The Court directed that Justice Bhattacharya make the required declaration under the Sixth Schedule read with Section 12 of the Arbitration and Conciliation Act within 15 days of receiving the order. His fee will be governed by the Fourth Schedule of the Act.