Arbitrability of GST and labour welfare cess deductions confirmed; final bill and limitation objections left for the arbitral tribunal.

A dispute over deduction and non-release of GST and labour welfare cess under a contract was treated as referable to arbitration because the arbitration clause covered disputes between the parties and the Section 11 court was confined to checking the existence of an arbitration agreement and a prima facie arbitral dispute. Objections based on the final bill, waiver, and limitation were not finally decided at the appointment stage; the court noted that Article 137 limitation had not expired on the facts and left any further limitation objection to the arbitral tribunal. The result was that a sole arbitrator could be appointed and the merits would be decided in arbitration.

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Issues: (i) Whether the dispute regarding deduction and non-release of GST and labour welfare cess could be referred to arbitration under the contract; (ii) Whether the application for appointment of an arbitrator was barred by the final bill and limitation.

Issue (i): Whether the dispute regarding deduction and non-release of GST and labour welfare cess could be referred to arbitration under the contract.

Analysis: The arbitration clause covered disputes between the contracting parties, and the dispute raised by the applicant related to the alleged deduction of statutory taxes from the contract consideration. In proceedings under Section 11(6), the Court was required to examine only whether an arbitration agreement existed and whether an arbitral dispute was made out, without entering upon the merits of the claim. The dispute was therefore a referable one.

Conclusion: Yes. The dispute was arbitrable and could be referred to a sole arbitrator.

Issue (ii): Whether the application for appointment of an arbitrator was barred by the final bill and limitation.

Analysis: The objection based on the final bill and waiver was not accepted at the Section 11 stage. The dispute was raised soon after settlement of the final bill, and the Court held that the question whether the claim survived or was barred by limitation was not to be finally decided while appointing an arbitrator. Limitation under Article 137 of the Limitation Act, 1963 was found not to have expired on the facts, and the arbitral tribunal was left free to decide any limitation objection under the Act.

Conclusion: No. The application was not barred by the final bill or limitation.

Final Conclusion: The request for appointment of an arbitrator succeeded, and the dispute was left to be decided in arbitration on the merits and on any permissible preliminary objections.

Ratio Decidendi: At the Section 11 stage, the Court must confine itself to the existence of an arbitration agreement and a referable dispute, while questions such as waiver, final bill effects, and limitation are ordinarily left for the arbitral tribunal.

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