Arbitration clause limits tax reimbursement claims: Delhi HC found the dispute non-arbitrable and refused appointment of an arbitrator.

The Delhi HC held that a claim for reimbursement of service tax and GST implication cost was not covered by the contract's arbitration clause. The clause was read as limited to disputes about specifications, design, drawings, instructions, workmanship, materials, and other execution-related issues, while the payment clause separately dealt with taxes and duties, including reimbursement of service tax on an actual basis. Applying the limited prima facie scrutiny at the Section 11(6) stage, the Court found that the parties had not agreed to arbitrate this tax reimbursement dispute and that its non-arbitrability was clear. No arbitrator was appointed.

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Issues: Whether a claim for reimbursement of service tax and GST implication cost under the contract was arbitrable under the dispute resolution clause, so as to warrant appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.

Analysis: The arbitration clause was construed as confining reference to disputes relating to the specifications, design, drawings, instructions, quality of workmanship, materials, and other disputes arising in relation to the execution of the work. The payment clause separately dealt with taxes and duties, including reimbursement of service tax on actual basis, and the Court held that the present dispute concerned tax liability and reimbursement under that clause rather than a dispute of the kind contemplated by the arbitration agreement. Applying the limited prima facie scrutiny applicable at the referral stage, the Court found that the parties had not agreed to refer this category of dispute to arbitration and that the non-arbitrability was clear.

Conclusion: The tax reimbursement dispute was held not to fall within the arbitration clause and no arbitrator was appointed.

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