Gujarat High Court halts ₹100 crore arbitration against Vapi Municipal Corporation over lake development leases

The Gujarat High Court on June 2 halted arbitral proceedings against the Vapi Municipal Corporation (VMC), formerly the Vapi Nagarpalika, in a dispute arising from lake development lease agreements [Vapi Municipal Corporation v Shashijit Infra Projects Ltd. & Anr.]. .Justice LS Pirzada passed the order in a batch of petitions filed by the VMC challenging arbitration initiated by Shashijit Infra Projects Ltd. in connection with lease agreements relating to Lakhamdev, Dungra and Chala lakes. The proceedings, reportedly involving claims worth around ₹100 crore, were being conducted before a sole arbitrator, former Bombay High Court Chief Justice KR Vyas.The Court indicated that the petitions raised issues requiring closer examination. “Considering the above submissions made by the learned advocate for the petitioner (VMC) and the averments made in the petition, the present petition requires consideration,” the Court observed..VMC contended that the arbitrator had been appointed unilaterally by the respondent company without its consent, rendering the process legally untenable. It also told the Court that similar issues are already pending before it, with the next hearing due on June 18. Meanwhile, the arbitrator had fixed a hearing on June 2 and had warned that if VMC did not file its reply, its right to defend the case could be shut. VMC argued that this raised the possibility of an ex parte ruling..The civic body further relied on a prior ruling of the High Court to argue that disputes involving notified public undertakings ought to be adjudicated by the Public Works Tribunal rather than through private arbitration. It warned that allowing the arbitration to continue alongside pending court proceedings could unfairly harm its case and lead to conflicting outcomes..Taking note of these submissions and the pendency of related matters, the Court restrained the arbitrator from proceeding further for the time being. “The respondent no. 2 (arbitrator) may not proceed with the arbitration proceedings and not pass any order till the next date of hearing,” directed the Court..The Court issued notice in the matter and posted it for further hearing after the summer vacations, on June 18. .Government Pleader GH Virk along with advocates Jagrat Shah, Chinmay M Gandhi and Nikita C Gandhi appeared for Vapi Municipal Corporation (VMC)..[Read Order]