2024 (8) TMI 193 - HC - Indian Laws

Arbitration application granted under Section 11(6) with sole arbitrator appointed for dispute resolution

Triveni Constructions Versus Military Engineer Services

Triveni Constructions Versus Military Engineer Services - TMI Issues Involved:1. Appointment of a sole Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.2. Dispute regarding deduction of GST and labour welfare cess.3. Validity of claims post submission of the Final Bill.4. Limitation period for filing the arbitration application.Issue-wise Detailed Analysis:1. Appointment of a Sole Arbitrator:The applicant sought the appointment of a sole Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, to adjudicate the claims and disputes with the respondents. The court noted that the existence of an arbitration agreement and the presence of disputes are prerequisites for appointing an arbitrator. As per Condition No. 70 of IAFW-2249, disputes between the parties should be referred to a sole arbitrator, an Engineer officer appointed by the authority mentioned in the tender documents. The court emphasized that while deciding on the appointment of an arbitrator, it should not delve into the merits of the case to avoid prejudicing the parties.2. Dispute Regarding Deduction of GST and Labour Welfare Cess:The applicant contended that the bid amounts were exclusive of GST (12%) and labour welfare cess (1%), and the respondents were supposed to pay these taxes over and above the bid amount. However, the respondents deducted these amounts from the principal bid amount. The applicant raised this issue during an internal financial audit and requested the respondents to release the deducted amounts. The respondents maintained that the applicable GST and labour welfare cess were credited to the public fund account as per Government of India norms. The court recognized that there were serious disputes regarding the deduction of amounts contrary to the terms of the agreement, which required determination by an arbitrator.3. Validity of Claims Post Submission of the Final Bill:The respondents argued that as per Condition No. 65 of IAFW-2249, no further claims shall be made by the contractor after submission of the Final Bill, and such claims are deemed to have been waived and extinguished. The applicant, however, relied on the decision in Inder Singh Rekhi vs Delhi Development Authority, asserting that a valid claim for reference under Section 20 of the Arbitration and Conciliation Act, 1996, survives even after the Final Bill is passed. The court noted that the applicant raised the dispute soon after the Final Bill settlement, thus invoking the arbitration clause.4. Limitation Period for Filing the Arbitration Application:The respondents contended that the application under Section 11(6) of the Act was barred by limitation. The court clarified that mere negotiations do not postpone the cause of action for limitation purposes. The limitation period of three years for filing such an application commences from the date when the cause of action arises. The court observed that the applicant raised the dispute and sought arbitration before the expiry of the three-year limitation period prescribed under Article 137 of the Limitation Act, 1963. Therefore, the dispute was not barred by limitation, and whether the claim is barred by lapse of time is a matter for the arbitrator to decide.Conclusion:The court appointed Sri Tariq Khan, Advocate, as the Arbitrator to adjudicate the disputes between the parties. The Arbitrator was requested to enter upon reference and take further steps as per the Arbitration and Conciliation Act, 1996, with a preference to complete the proceedings and pass an award within six months. The parties were directed to appear before the Arbitrator on 27.01.2024 for further proceedings. The Arbitration Application was allowed, and any pending miscellaneous applications were closed.