Case Note & Summary
The petitioner, M/S Glock Asia-Pacific Ltd., filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of a sole arbitrator to resolve a dispute with the respondent, Union of India. The dispute arose from a contract for supply of 31,756 Glock pistols, awarded via a single party tender on 02.02.2011. The petitioner furnished a performance bank guarantee (PBG) of USD 13,29,093 on 24.08.2011, completed delivery by 06.08.2012, and received full payment by 11.11.2012. Despite full performance, the respondent repeatedly extended the PBG until 2021, and on 31.05.2021, the petitioner informed the respondent that the PBG would not be further extended. The respondent then encashed the PBG on 07.06.2021. The petitioner invoked the arbitration clause on 22.06.2021, but the respondent did not appoint an arbitrator, leading to the present petition. The respondent opposed the petition, arguing that the dispute was not arbitrable as the contract was fully performed and the claim was barred by limitation. The Supreme Court, relying on the arbitration clause in the contract, held that the dispute regarding the encashment of the PBG fell within the scope of the arbitration agreement. The court rejected the respondent's limitation argument, stating that it is a mixed question of fact and law to be decided by the arbitrator. The court appointed a former judge of the Supreme Court as the sole arbitrator to adjudicate the dispute.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11(6) of the Arbitration and Conciliation Act, 1996 - Existence of Arbitration Agreement - The petitioner sought appointment of a sole arbitrator after the respondent encashed the performance bank guarantee despite full delivery and payment. The court held that the arbitration clause existed and the dispute fell within its ambit, warranting appointment of an arbitrator. (Paras 1-10) B) Contract Law - Performance Bank Guarantee - Encashment After Full Performance - The respondent encashed the performance bank guarantee nine years after completion of the contract. The court noted that the dispute regarding the validity of such encashment is arbitrable. (Paras 2-5) C) Limitation - Invocation of Arbitration - Delay - The respondent argued that the claim was barred by limitation. The court held that the issue of limitation is a mixed question of fact and law to be decided by the arbitrator, not in a Section 11 petition. (Paras 6-8)
Issue of Consideration
Whether an arbitrator should be appointed under Section 11(6) of the Arbitration and Conciliation Act, 1996, when the respondent encashed the performance bank guarantee after full performance and payment, and whether the dispute is arbitrable.
Final Decision
The Supreme Court allowed the petition and appointed a former judge of the Supreme Court as the sole arbitrator to adjudicate the dispute.
Law Points
- Section 11(6) of the Arbitration and Conciliation Act
- 1996
- Appointment of arbitrator
- Existence of arbitration agreement
- Dispute arising out of contract
- Performance bank guarantee encashment
- Limitation for invoking arbitration
