In a significant development, the Supreme Court of India has appointed former apex court judge Indu Malhotra as the sole arbitrator to resolve disputes arising from a tender floated by the Ministry of Home Affairs in 2011. The tender was for the supply of over 31,000 Glock pistols, and the appointment of Justice Malhotra comes after an application by M/s Glock Asia-Pacific Ltd. under section 11(6) of the Arbitration and Conciliation Act, 1996.
The Chief Justice of India, D Y Chandrachud, along with Justices PS Narasimha and JB Pardiwala, formed the bench that rejected the Centre’s counsel’s submissions regarding immunity from conflict of interest provisions. The bench held that contracts entered into by the Union of India in the name of the President are not immune to statutory prescriptions that impose conditions on the parties involved.
The Ministry of Home Affairs had issued a single-party tender in February 2011 for the supply of 31,756 Glock pistols, with the bid being awarded to M/s Glock Asia-Pacific Ltd. The company fulfilled its contractual obligations by delivering the entire supply by August 2012, and the ministry accepted the consignment and made the payment in November 2012.
However, a dispute arose when the company informed the ministry in May 2021 that it would not extend the performance bank guarantee (PBG) any further. Subsequently, the ministry invoked the PBG for Rs 9.64 crore, citing guarantee and warranty clauses.
In response, the company issued a notice invoking arbitration in July 2022 and nominated a retired judge of the Delhi High Court as the sole arbitrator. The ministry objected to this nomination, stating that the conditions of tender require disputes to be referred to arbitration by an officer in the Ministry of Law appointed by the Secretary of the Ministry of Home Affairs.
The Supreme Court, in its verdict, clarified that the contract entered into in the name of the President of India does not grant immunity against the application of statutory prescriptions. It emphasized that Article 299 of the Constitution, which deals with contracts, merely lays down the formalities necessary to bind the government with contractual liability.
The appointment of Justice Indu Malhotra as the sole arbitrator in this dispute will now provide a legal mechanism for resolving the conflicts that have arisen from the tender conditions. With her vast experience and expertise, Justice Malhotra’s role as the arbitrator is expected to ensure a fair and impartial adjudication process.
This development highlights the significance of arbitration in resolving disputes related to government contracts and upholds the principle that the government is not exempt from statutory obligations. It also demonstrates the judiciary’s commitment to maintaining transparency and fairness in contract-related matters, contributing to a more robust and accountable governance system.