Revamp entire arbitration clause, madras HC tells authorities.

The madras high court on 28th January 2022 Friday asked authorities to revamp the entire arbitration clause while dismissing an application from the Tamilnadu urban habitual development board to refer to arbitration a dispute over construction of tenements. The case related to a Namakkal-based engineering firm getting a show cause notice from the Tamil Nadu urban habitual development board over damages to the building.

The applicants, various officials of Tamil Nadu urban habitual development board including its chairmen, had contended the respondent was trying to avoid the process of arbitration by taking a stand as if the claim is of a value above Rs 50,000. Dismissing the application, Justice N.Anand Venkatesh said the court has no hesitation to hold that the dispute involved in the present case cannot be referred to arbitration since it has a value of more than Rs 50,000.

“Before drawing the curtains, this court wants to impress upon the authorities to revamp the entire arbitration clause. Obviously, there is a total non- application of mind on the part of the authorities which is apparent from the general conditions of contract which forms part of the agreement and it continues to make reference to the provisions of Arbitration act 1940. This Act has been replaced by Arbitration and Conciliation Act 1996 which came into effect on august 22, 1996. In spite of the same, for an agreement entered into in the year 2017, the reference is made to the 1940 Act”.

“The fixation of the value of the claims up to Rs 50,000 to refer the dispute to arbitration has absolutely no meaning in the present day scenario and such a clause has become archaic,” the judge said. The judge expressed hope the authorities will wake up to the reality and immediately take steps to revamp the entire arbitration clause in all their agreements. In order to take effective steps, there shall be directions to make a copy of this order to the state chief secretary, who will instruct all the departments to act upon the directions issued in the order, the court added.

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