2002 (3) TMI 938 - SC - Companies Law

Summary

Issues Involved:
1. Interpretation of Clause 63 of the General Conditions of Contract.
2. Applicability of Section 20 of the Arbitration Act, 1940.
3. Determination of whether claims fall under 'excepted matters'.

Summary:

1. Interpretation of Clause 63 of the General Conditions of Contract:
Clause 63 of the General Conditions of Contract provides that all disputes arising out of or in connection with the contract shall be referred to arbitration, except for 'excepted matters'. 'Excepted matters' are divided into two categories: (i) matters specified in certain clauses of the General Conditions, and (ii) matters covered by any clauses of the Special Conditions of the Contract. The clause further states that 'excepted matters' shall be excluded from arbitration.

2. Applicability of Section 20 of the Arbitration Act, 1940:
The respondent moved a petition u/s 20 of the Arbitration Act, 1940, seeking to refer six claims to arbitration. The Single Judge of the High Court directed two claims to be referred to arbitration but held that claims 3 to 6 were 'excepted matters' and not arbitrable. The Division Bench, however, directed all claims to be referred to arbitration. The Supreme Court held that while dealing with a petition u/s 20, the Court must determine whether the difference is one to which the arbitration agreement applies. If it is an 'excepted matter', the Court should not refer it to arbitration.

3. Determination of whether claims fall under 'excepted matters':
Claims 3 to 6 were examined to determine if they fell under 'excepted matters'. The Supreme Court found that:
- Claim 3: Pertained to increased costs of building materials, covered by Clause 9.2 of Special Conditions, which states that no material price variation shall be payable.
- Claim 4: Related to idle machinery, covered by Clause 21.5 of Special Conditions, which states that no claim for idle machinery will be entertained.
- Claim 5: Concerned delays in site availability, covered by Clause 11.3 of Special Conditions, which states that no claim for delays will be entertained.
- Claim 6: Related to losses due to less output, also covered by Clause 11.3.

The Court concluded that these claims were 'excepted matters' as they were explicitly excluded from arbitration by the contract terms. The Court emphasized that an 'excepted matter' does not require a departmental remedy to be non-arbitrable. The interpretation of whether a claim is an 'excepted matter' can be determined by the Court while disposing of a petition u/s 20.

Conclusion:
The Supreme Court allowed the appeal, set aside the Division Bench's decision, and restored the Single Judge's decision, holding that the claims in question were 'excepted matters' and not arbitrable. The Court reiterated that the determination of 'excepted matters' is within the Court's purview and not solely for the arbitrator to decide.