TaxTMI 
TaxTMI 
2019 (2) TMI 2027
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...., 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 "Agreement"). 13. As per the Agreement, the value of the ....
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....016, 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claims including Notified Claims submitted by it via various communications and the final bill should be treated as withdrawn. 20.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 23.1.2017, to reconsider its decision and accord EOT up to the date of completion, i.e. ....
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....hat 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] of the GCC. (b) That the Notified Claims had been included in the final bill in accordance with the provisions ....
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....017 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 following reasons: i) Firstly, after the amendment of the 1996 Act and the consequent insertion of Sub-section (6A) in Section 11 the Court's ambit was....
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....1) 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], 6.7.1.0[24] and 6.7.2.0[25]. A composite reading of the aforesaid clauses would show that only Notified Claims which were included in the contractor's (in this case NCCL's) final bill could form the subject matter of reference to arbitration. (iii) As to what....
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....tion 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 Ltd., dated 10.3.2015, passed in ARB.P. 334/2014. (II) Institute of Geoinformatics Pvt. Ltd. vs. Indian Oil Corporation Ltd., (2015) SCC Online Del 9562. (III) Srico Projects Pvt. Ltd. vs. Indian Oil Corporation Ltd., 2017 SCC OnLine Del 6446. 39.1 Notably, apart from the three judgments referred to hereinabove, during the ....
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....ngineer-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 provisions of clause 6.6.1.0[31] and these claims remain outstanding at the time of preparation of final bill they would have to be separately included in the final bill by the contractor in the form of statement of claims attached thereto, giving particulars of the nature of the claim, grounds on which they are based, and the amounts claimed, which in turn, are required to be supported by copies of notices s....
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....ays 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 category of excluded matters, the following matters are referred to in Clause 9.0.2.0: "(i) With respect to or concerning the scope or existence or otherwise of the Arbitration Agreement; (ii) Whether or not a Claim sought to be referred to arbitration by the CONTRACTOR is a Notified Claim; (iii) Whether or not a Notified Claim is included in the CONTRACTOR's Final Bill in accordance with the provisions of Clause 6.6.3.0 ....
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....8] 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 contractor's final bill, then, it would be amenable to adjudication by a duly constituted Arbitral Tribunal. 50.5 This is also, how, Mr. Koura has placed his interpretation on the two clauses referred to above. 50.6 The problem, however, in accepting Mr. Koura's submission is that, he contends that the General Manager's decision taken with regard to whether or not a claim is a Notified Claim (which necessarily is required to be taken prior to the Arbitral Tri....
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....d 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 upshot of this decision was that since the claims referred to in NCCL's letter dated 7.8.2017 stood settled, there existed no dispute between the parties which could be referred to arbitration in accordance with the Clause 9.0.0.0 of the GCC. 53.3 Therefore, apart from anything else, the Chief General Manager in this case chose not to deal with the aspect as to whether or not the claims lodged by the petitioner were Notified Claims as envisaged in Clause 6.6.1.0[55]. 54. The a....
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....l 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 Mr. Koura that the decision of the General Manager in respect of excluded matters referred to in clause 9.0.2.0[63] is final as it requires ascertainment of whether or not there has been discharge of liability by receipt of final payment, albeit, without coercion. Effect of insertion of Subsection (6A) in Section 11: 59. This brings me to the other aspect of the matter, which is as to whether, given the fact that Section 11 has been amended with the insertion of Subsection (6A), the tenabili....
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....endering 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, decree or order of any court, confine to the examination of the existence of an arbitration agreement." (emphasis supplied) From a reading of Section 11(6-A), the intention of the legislature is crystal clear i.e. the court should and need only look into one aspect-the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple-it needs to be seen if the agreement contains a clause which provides fo....
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....f 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 To my mind, the ratio of the aforementioned judgments cannot be applied to the facts obtaining in the instant case. 62.4 The other judgments cited are: a judgment rendered by a Division Bench of this Court in the matter of International Building and Furnishing Co. vs. Indian Oil Corporation Ltd., ILR (1995) II Delhi 293; preceded by two judgments passed by two Single Judges of this Court in the matter of Uttam Singh Duggal and Co. vs. IOCL, ILR (1985) II Delhi 131 and Gas Authority of India Limited vs. SPIE CAPAG, S.A., 1993 (27) DLT 562. 62....
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....o 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 and Energy Service vs. Indian Oil Corporation Ltd. (Arb. P. NO.334/2014, decided on 10.3.2015) reveal that the petitioner had approached the Court for the second time. On the first occasion, the petition for appointment of Arbitrator was disposed of after the petitioner's counsel informed the Court that it would approach IOCL's General Manager in the first instance in terms of Clause 9.0.2.0[66] of the GCC. Thereafter, the petitioner, evidently, wrote to the General Manager to fix hearing before the Executive Director. Consequent thereto, the Executive Dir....
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....j, (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 Court was not called upon to consider the impact of Section 11 (6A) of the 1996 Act, concluded that since the claims were not categorized as Notified Claims by the General Manager, they could not be referred to an Arbitrator for adjudication. 80. Pertinently, in Duro Felguera S.A. case, the Supreme Court has, in fact, considered the impact of Section 11(6A) of the 1996 Act and indicated that the Court while exercising power to appoint an arbitrator is to look to, perhaps, two aspects. First, as to whether the arbitration agreement is in existence, and second, as t....
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....6 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 Arbitrator. [1] 4.4.0.0 PRICE ADJUSTMENT FOR DELAY IN COMPLETION 4.4.1.0 The contractual price payable shall be subject to adjustment by way of discount as hereinafter specified, if the Unit(s) are mechanically completed or the contractual works are finally completed, subsequent to the date of Mechanical Completion/final completion specified in the Progress Schedule. 4.4.2.0 If Mechanical Completion of the Unit(s)/final completion of the works is not achieved by the last date of Mechanical Completion of the Unit(s)/final completion of the works specified in the Progress Schedule (hereinafter referred to....
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....ct 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 any decision with respect thereto, and such matter shall be decided by the General Manager prior to the Arbitrator proceeding with or proceeding further with the reference. The said excluded matters are: (i) With respect to or concerning the scope or existence or otherwise of the Arbitration Agreement; (ii) Whether or not a Claim sought to be referred to arbitration by the CONTRACTOR is a Notified Claim; (iii) Whether or not a Notified Claim is included in the CONTRACTOR's Final Bill in accordance with the provisions of Clause 6.6.3.0 hereof. (iv) Whether or not the CONTRACTOR has opted for the Alternative Dispute Reso....
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....g 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. [18] Supra 5, Page 7. [19] Supra 7, Page 8 [20] Supra 9, Page 8 [21] Supra 7, Page 8. [22] Supra 3, Page 6. [23] Supra 5, Page 7. [24] 6.7.1.0 The acceptance by the CONTRACTOR of any amount paid by the OWNER to the CONTRACTOR in respect of the final dues of the CONTRACTOR under the Final Bill upon condition that the said payment is being made in full and final settlement of all said dues to the CONTRACTOR shall, without prejudice to the notified claims of the CONTRACTOR included in the Final Bill in accordance with the provisions under Clause 6.6.3.0 hereof and associated provisions thereunder, be deemed to be in full and final satisfaction of all such dues to the CONTRACTOR notw....
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....e 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 3, Page 6. [38] Supra 24, Page 13. [39] Supra 25, Page 14. [40] Supra 5, Page 7. [41] Supra 7, Page 8. [42] 9.0.1.1 The Sole Arbitrator referred to in Clause 9.0.1.0 hereof shall be selected by the CONTRACTOR out of a panel of 3 (three) persons nominated by the OWNER for the purpose of such selection, and should the CONTRACTOR fail to select an arbitrator within 30 (thirty) days of the panel of names of such nominees being furnished by the OWNER for the purpose, the Sole Arbitrator shall be selected by the OWNER out of the said panel. [43] Supra 5, Page 7. [44] Supra 3, Page 6 [45] Supra 5, Page 7 [46] Supra 5, Page 7 [47] Supra 7, Page 8 [48] Supra 5, Page 7 [49] Supra 3, Page 6 [50] Ibid [51] Supra 5, Page....