TaxTMI 
TaxTMI 
2019 (2) TMI 2027
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.... relevant to state that IOCL resists the petition, broadly, on the ground that the claims with respect to which reference to arbitration is sought by NCCL are, firstly, not "Notified Claims", and secondly, under the terms of the contract obtaining between the parties, the jurisdiction to decide as to whether or not the claims are Notified claims vests solely in its General Manager. Backdrop: 7. With this foreground, let me, broadly, indicate the backdrop in which this petition has been filed. 8. IOCL floated a tender in respect of the works described as "Civil, Structural & Associated UG piping works of VGO-HDT, DHDT & HCDS Units (EPCM-2) for Paradip Refinery Project" (hereafter referred as "Project"). 9. Against the tender floated by IOCL, NCCL preferred a bid. After due evaluation, NCCL was declared successful. 10. Resultantly, a Fax of Acceptance dated 3.3.2010 (in short "FOA") was issued in favour of NCCL. 11. The FOA was followed by a Detailed Letter of Acceptance dated 17.3.2010 (in short "DLOA") issued in favour of NCCL. 12. Consequent to the issuance of the FOA and DLOA in favour of NCCL, parties executed a formal Agreement dated 28.4.2010 (in short "Ag....
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.... (emphasis is mine) 19. NCCL, it appears, on the very next date, i.e. 02.11.2016, submitted its response to TKIS. 19.1 Briefly, NCCL conveyed to TKIS that if its requests for EOT were considered favourably and if price adjustment did not exceed 4 per cent, then, all its extra/additional claims including Notified Claims submitted by it via various communications and the final bill should be treated as withdrawn. 20. TKIS having received the aforesaid communication from NCCL made its recommendations vis-a-vis the request for EOT made by NCCL. 21. Furthermore, TKIS in its communication dated 13.1.2017, informed NCCL that it had approved EOT for the period spanning between 3.10.2011 and 3.11.2015, albeit, without price discount as per Clause 4.4.0.0[1] of the General Conditions of Contract ("GCC") and that for the period falling between 4.11.2015 and 28.12.2015, which covered a period of 55 days, it had concluded that the delay was attributable to NCCL. 21.1 Accordingly, TKIS conveyed to NCCL that for the latter period as per Clause 4.4.2.0 (viii)[2] of the GCC a price adjustment discount of 4 per cent would be applicable. 22. Being aggrieved, NCCL wrote to IOCL, on....
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....L, on its part, attempted to pay obeisance to the literal terms of the contract by intimating to NCCL that it was referring its letters dated 20.6.2017 and 1.7.2017 to its General Manager, as required under Clause 9.0.2.0[5] of the GCC, to decipher as to whether the remedy of adjudication via arbitration was at all available to NCCL. 29.1 What was sought to be emphasised in this communication of IOCL was that the remedy of arbitration provided in Clause 9.0.0.0[6] of the GCC was limited to only those claims of NCCL which were Notified and included in the Final Bill as per the provisions of Clause 6.6.3.0[7] of the GCC. 30. Resultantly, NCCL's request for appointment of an Arbitrator was examined by IOCL's General Manager. This aspect is reflected in the communication of IOCL's Chief General Manager (Projects) dated 19.7.2017. 30.1 The upshot of this communication is that the Chief General Manager in exercise of powers vested in him under Clause 9.0.2.0[8] of the GCC, called upon NCCL to file a statement in writing along with the supporting documents, if any, to demonstrate the following: (a) That the claims of NCCL were Notified Claims in terms of Clause 6.6.1.0[9....
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....de by the Chief General Manager on 10.11.2017. 34. IOCL, on its part, stuck to its stand and, accordingly, conveyed via its letter dated 06.12.2017 addressed to NCCL, its support to the decision taken by its Chief General Manager that the claims lodged could not be referred to arbitration. 34.1 In sum, it was conveyed by IOCL that in respect of matters referred to in Clause 9.0.2.0[18] of the GCC, the Chief General Manager was the competent authority whose decision as to whether or not reference to arbitration should be made was final. 34.2 In other words, as to whether or not the claims raised by NCCL were Notified Claims as per the provisions of Clause 6.6.3.0[19] was an aspect on which only the General Manager could rule. Submissions of Counsel: 35. It is in this background that arguments on behalf of NCCL were advanced by Dr. Amit George, while submissions on behalf of IOCL were advanced by Mr. V.N. Koura. 36. Dr. George's submissions can, broadly, be paraphrased as follows: 37.1 IOCL's stand that its General Manager's determination was final and not reviewable (qua the aspect as to whether or not the claims lodged were a Notified Claims) was flawed for the fo....
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..... Indian Oil Foundation, MANU/DE/0050/2017. (v) Indian Oil Corporation Limited & Ors. v. Raja Transport Private Limited, (2009) 8 SCC 520. (vi) J.G. Engineers Private Limited v. Union of India & Anr., (2011) 5 SCC 758. (vii) Obrascon Huarte Lain SA v. Her Majesty's Attorney General for Gibraltar, (2014) EWHC 1028 (TCC). (viii) United India Insurance Co. Ltd. & Anr. v. Hyundai Engineering and Construction Co. Ltd. & Ors., (Civil Appeal No.8146 of 2018), dated 21.8.2018. (ix) Grasim Industries Limited vs. State of Kerala, (2017) 6 SCALE 443. (x) Datar Switchgears Ltd. v. TATA Finance Ltd. and Anr., (2000) 8 SCC 151. 39. On the other hand, Mr. Koura made the following submissions: (i) Parties are entitled to determine as to what matters are to be referred to arbitration. In this behalf, one would have to pay obeisance to the terms of the contract which would include the procedure and the methodology incorporated therein to identify arbitral disputes. (ii) The provision for arbitration incorporated in Clause 9.0.1.0[22] of the GCC was subject to and subordinate to the following clauses i.e. Clauses 9.0.2.0[23], ....
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....e disputes are not arbitrable. Besides, mere disability of the contractor (i.e. NCCL) in having the matters referred to arbitration does not leave it remedy less as it can always take recourse to a civil suit to agitate its claims. (ix) The Court cannot while exercising its jurisdiction under Section 11(6) of the 1996 Act determine the validity and the legality of the arbitration agreement. (x) If the arbitration agreement is illegal or invalid, as sought to be contended on behalf of NCCL, then the Court, in any case, cannot make a reference to arbitration under such an agreement. (xi) While exercising power under Section 11(6) of the 1996 Act, the Court is neither exercising appellate nor revisionary jurisdiction qua a certificate issued or declaration made by the General Manager. (xii) If this Court were to disagree with the interpretation articulated, on behalf of IOCL vis-à-vis the arbitration agreement which, incidentally, finds resonance in the following decisions rendered by coordinate benches of this Court, it should refer the matter to a larger Bench: (I) IOT Infrastructure and Energy Service vs. Indian Oil Corporation Lt....
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....e 6.6.1.0 of the GCC, in sum, provides that where a contractor considers that he is entitled to extra payment or compensation in respect of works executed by him which are sums over and above the amounts due in terms of Clause 6.3.1.0[29] or is aggrieved by deductions made or threatened by the owner/IOCL from the Running Account Bills, he is required to give a notice in writing of such claims to the Engineer-in-Charge and the site Engineer within ten (10) days of issuance of orders or instructions relative to any works qua which such additional compensation is claimed or on happening of such other event which forms the basis of the contractor's claim. 42.1 The Clause, further obliges the contractor to give full particulars of the nature of the claims, the grounds on which they are based and the amount for which the claims are lodged. 42.2 The Clause goes on to state that if any of the aforesaid conditions are not fulfilled the claim(s) shall be deemed to have been waived. 43. Clause 6.6.3.0[30] provides for the second condition, to which, Mr. Koura had referred to in his reply. This clause provides that where a contractor has notified his claims in accordance with the prov....
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....-à-vis the counter claim of the owner/IOCL which is not a Notified Claim included in the contractor's final bill. 47. Clause 9.0.1.1[42] provides for the manner in which the Sole Arbitrator has to be selected. The contractor as per this clause is required to choose a Sole Arbitrator out of a panel of three persons nominated by the owner i.e. IOCL. For this purpose, the contractor has been given thirty (30) days time frame. In case the contractor fails to select a Sole Arbitrator, the owner is given the authority to appoint a Sole Arbitrator out of the very same panel. 48. The other important clause to which reference is made on behalf of the IOCL is Clause 9.0.2.0[43]. This is a clause which adverts to matters qua which reference or submission to arbitration cannot be made and, consequently, the Arbitral Tribunal will have no jurisdiction to render a decision qua such matters. 49. The icing on the cake, so to speak, is, that the decision with regard to whether or not a particular claim falls within the category of "Excluded matters" is to be decided by owner's/IOCL's the General Manager, albeit, prior to the arbitrator proceeding with the reference. Under the catego....
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....gst the excluded matters is a category referred to in Sub-clause (ii) and (iii) of Clause 9.0.2.0[46], which gives the power to the General Manager to determine whether or not a particular claim made by the contractor is a Notified Claim and whether or not the Notified Claim is included by Contractor in his Final Bill in accordance with provisions of Clause 6.6.3.0[47]. Therefore, if the determination made under Sub-clause (ii) and (iii) of Clause 9.0.2.0[48] is excluded, then, even if the General Manager were to say that a particular claim is a Notified Claim and the same is included in the final bill, the same on a literal reading of the clause would fall outside the purview of arbitration. However, that interpretation cannot hold as Clause 9.0.1.0[49] clearly provides that only claims which are Notified Claims and are included in the final bill shall be referred to arbitration by a Sole Arbitrator unless the Contractor has opted for an ADR Mechanism. 50.4 In other words, a harmonious reading of Clause 9.0.1.0[50] with Clause 9.0.2.0[51] would lead to the conclusion that if the General Manager were to hold that a claim was a Notified Claim and that claim was included in the co....
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....to Mr. Koura would be final, with no scope for second guessing; leaving the contractor bereft of his chosen remedy to have his disputes adjudicated by an Arbitral Tribunal. 52. In the instant case, the General Manager had in fact on 19.7.2007 written to NCCL to file supporting documents to demonstrate, inter alia, that the claims lodged by it were Notified Claim; that the purported Notified Claims had, in fact, been included in the final bill; and lastly, that the Notified Claims fell within the scope of the arbitration agreement. 53. Despite the fact that via a written communication dated 7.8.2017, NCCL submitted the requisite particulars along with copies of supporting documents, the General Manager in his decision rendered on 10.11.2017, chose not to deal with the most crucial aspect as to why the claims lodged by NCCL were not Notified Claims. 53.1 In his decision dated 10.11.2017 the General Manager adverts to only one aspect of the matter which was that NCCL had given a "No Claim Certificate" on 29.7.2016, and had, thereafter, proceeded to withdraw its Notified Claims which were included in its final bill via its subsequent communication dated 2.11.2016. 53.2 The ....
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....ation. NCCL's claim is that given this situation, it had no choice but to withdraw its Notified Claims, which, otherwise, had already been included in its final bill. 57.3 To my mind, prima facie, NCCL does make out a case of duress as it was made clear to it that its request for EOT till 28th December, 2015, would not be considered, till such time it withdrew its Notified Claims. In my view, this is a matter which would require trial and, therefore, would have to be referred to an Arbitral Tribunal. 57.4 "No Claim Certificate' or withdrawal of Notified Claims by NCCL would not have me hold in this case that no dispute survived and hence parties need not be referred to an Arbitral Tribunal. The scope for rejection of a request made for the appointment of an Arbitral Tribunal, on this score, has become even narrower post the insertion of Subsection (6A) in Section 11 of the 1996 Act; an aspect which I have discussed in greater detail hereafter. Also see, observations made in paragraph 13 of the judgment of the Supreme Court in R.L. Kalathia and Company versus State of Gujarat, (2011) 2 SCC 400[62]. 58. Thus, for the foregoing reasons, I am unable to accept the submission of....
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....to come to this conclusion is two-fold: first, it is often found that evidence may have to be led to show as to whether or not a particular dispute falls within the ambit of the arbitration agreement; and second, it is not as if the party opposing reference to arbitration cannot agitate its point of view before the learned Arbitrator even at a preliminary stage by taking recourse to Section 16 of the 1996 Act. 59.4 This provision allows the Arbitral Tribunal to rule on its own jurisdiction including rendering a decision on objections with regard to the existence or validity of the arbitration agreement. This aspect of the matter, to my mind, is no longer res integra in view of the decision of the Supreme Court in Duro Felguera case. 59.5 The observations made in this behalf are found in paragraphs 48 & 56 of Mr. Justice Kurian Joseph judgment (as he then was). Paragraphs 48 and 56 read as under: "48. Section 11(6-A) added by the 2015 Amendment, reads as follows: "11. (6-A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment....
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....cability, as in these cases the Supreme Court had ruled on the interpretation to be given to the arbitration clause appearing in the insurance policy, which, according to the Court, excluded recourse to arbitration in the circumstance where the insurer disputed or did not accept the liability. 62.1 More specifically, in Oriental Insurance Company Limited case, the clause which was under consideration was Clause 13 of the Insurance Policy, while in United India Insurance Co. Ltd. case, the clause which was under consideration was Clause 7 of the Insurance Policy. Both clauses being similar, led to the same conclusion was reached by the Court. In fact, in United India Insurance Co. Ltd. case, the Supreme Court relied upon its earlier decision in Oriental Insurance Company Limited. 62.2 What is of significance is that even though in the latter case i.e. United India Insurance Co. Ltd., the decision rendered by the Court in Duro Felguera S.A. v. Gangavaram Port Limited, (2017) 9 SCC 729 was cited, it was distinguished and not overruled. The principal ground on which Duro Felguera, S.A. case was distinguished was the language obtaining in Clause 7 of the Insurance Policy. 62.3 ....
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....ified Claims because they were not lodged within the stipulated period of ten days with the Engineer-in-Charge and the Site Engineer. Thus, on facts, even this case is clearly distinguishable. 70. In Sarup Lal Singhla vs. National Fertilizers Ltd., 72 (1998) DLT 23, which is also a judgment rendered by a Single Judge of this Court based on the facts obtaining in that case, came to the conclusion that since claims lodged by the plaintiff in a suit filed under Section 20 of the Arbitration Act, 1940 were not Notified Claims, they could not be referred to an Arbitrator. The learned Single Judge in paragraph 17 of the judgment has recorded that there was no averment in the plaint, which would demonstrate that the claims made qua additional work were notified within the period of 10 days as required in Clause 6.6.1.0[65] of the GCC. The line of judgments which the Division Bench noticed in International Building and Furnishing Co. case were also, largely, noticed by the learned Single Judge in this case as well. 70.1 For the reasons given above, to my mind, this case will also have no applicability to the facts obtaining in the instant case. 70.2 The facts in IOT Infrastructure....
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....hough, an argument was raised on behalf of the petitioner with reference to Section 11(6A) of the 1996 Act, no observation or determination was made by the Court in that behalf. 70.8 Thus, to my mind, the aforementioned judgments cannot be applied to the facts of this case, as the judgment is the precedent of what it decides and not what may, perhaps, according to a party logically flow from the judgment. Therefore, the judgments rendered in the matter of Dr. Vijay Laxmi Sadho vs. Jagdish, (2001) 2 SCC 247 and U.P. Gram Panchayat Adhikari Sangh vs. Daya Ram Saroj, (2007) 2 SCC 138 which were cited to emphasize that the view of Coordinate Bench on similar issue should be adhered to would not apply as before a judgment can be taken as a binding precedent, one would have to take into account the ratio decidendi of the judgments. 70.9 As discussed above, all the judgments except Srico Projects Pvt. Ltd. case, were rendered when sub-section (6A) had not been inserted in Section 11 of the 1996 Act. What is important to notice is that the learned Judge, based on the conclusion reached in earlier decision i.e. in the matter of IOT Infrastructure and Energy Service case, in which the ....
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....tration agreement is very narrow. Thus, except for an open and shut case which throws up a circumstance indicative of the fact that a particular dispute does it not fall within the four corners of the arbitration agreement obtaining between the parties the matter would have to be resolved by an Arbitral Tribunal. In other words, if there is contestation on this score, the Court will allow the Arbitral Tribunal to reach a conclusion on way or another. This approach would be in keeping with the doctrine of Kompetenz Kompetenz; a doctrine which has statutory recognition under Section 16 of the 1996 Act. 82. Resultantly, Hon'ble Mr. Jusitce Madan B. Lokur (Cell no: 9868219007), former Judge, Supreme Court of India is appointed as an Arbitrator in the matters. The learned Arbitrator's fees will be governed by the provisions of Fourth Schedule appended to the 1996 Act. Before entering upon reference, the learned Arbitrator will file a declaration as required under Section 12 and other attendant provisions of the 1996 Act. 83. It is, however, made clear that the parties will bear their own costs. 84. The Registry will dispatch a copy of the order to the learned Arbitrato....
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.... CONTRACTOR shall be referred to the arbitration of a Sole Arbitrator selected in accordance with the provisions of Clause 9.0.1.1 hereof. It is specifically agreed that the OWNER may prefer its Claim(s) against the CONTRACTOR as counter-claim(s) if a Notified Claim of the CONTRACTOR has been referred to arbitration. The CONTRACTOR shall not, however, be entitled to raise as a set-off defence or counter-claim any claim which is not a Notified Claim included in the CONTRACTOR's Final Bill in accordance with the provisions of Clause 6.6.3.0 hereof. [4] Supra 3, Page 6. [5] 9.0.2.0 Any dispute(s) or difference(s) with respect to or concerning or relating to any of the following matters are hereby specifically excluded from the scope, purview and ambit of this Arbitration Agreement with the intention that any dispute or difference with respect to any of the said following matters and/or relating to the Arbitrator's or Arbitral Tribunal's jurisdiction with respect thereto shall not and cannot form the subject- matter of any reference or submission to arbitration, and the Arbitrator or the Arbitral Tribunal shall have no jurisdiction to entertain the same or to render a....
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....claims such additional payment or compensation or of the happening of other event upon which the CONTRACTOR bases such claim, and such notice shall give full particulars of the nature of such claim, grounds on which it is based, and the amount claimed. The OWNER shall not anywise be liable in respect of any claim by the CONTRACTOR unless notice of such claim shall have been given by the CONTRACTOR to the Engineer-in-charge and the Site Engineer in the manner and within the time aforesaid and the CONTRACTOR shall be deemed to have waived any and all claims and all his rights in respect of any claim not notified to the Engineer-in-Charge and the Site Engineer in writing in the manner and within the time aforesaid. [10] Supra 7, Page 8. [11] Supra 3, Page 6. [12] Supra 9, Page 8. [13] Supra 9, Page 8 [14] Supra 7, Page 8. [15] Supra 3, Page 6. [16] 6.2.2.0 The Final Bill shall, in addition to the payment entitlements arrived at according to the provisions of Clause 6.2.1.0 hereof and associated clauses above, include in a separate statement annexed thereto the notified claims of the CONTRACTOR as provided for in Clause 6.6.3.0 hereof. [17] Supra 3, Page 6. [....
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....NTRACTOR notified in accordance with the provisions of Clause 6.6.1.0 hereof. [27] Supra 5, Page 7. [28] Supra 26, Page 14. [29] 6.3.1.0 The remuneration determined due to the CONTRACTOR under the provision of Clause 6.2.2.0 hereof shall constitute the entirety of the remuneration and entitlement of the CONTRACTOR in respect of the work(s) under the Contract, and no further or other payment whatsoever shall be or become due or payable to the CONTRACTOR under the Contract. [30] Supra 7, Page, 8 [31] Supra 9, Page, 8 [32] Supra 24, Page, 13 [33] Supra 25 Page, 14 [34] Supra 24, Page, 13 [35] 6.8.3.0 Within 15 (fifteen) days of Application made by the CONTRACTOR in this behalf accompanied by the Final Certificate, or within 15 (fifteen) days of the passing of the CONTRACTOR's Final Bill by the OWNER, whichever shall be later, the OWNER shall pay/refund to the CONTRACTOR the unadjusted balance (if any) of the Security Deposit for the time being remaining in the hands of the OWNER, and upon such payment/refund, the OWNER shall stand discharged of all obligations and liabilities to the CONTRACTOR under the Contract. [36] Supra 24, Page 13. [37] Supra ....