2015 (2) TMI 688 - SC - Indian Laws

Section 11(6) of the Arbitration and Conciliation Act, 1996- Appointment of sole arbitrator- Compensation for extended stay & additional works- A reading of the affidavits filed by the respondent indicate that insofar as the claim for extended stay compensation is concerned, the respondent contend that the said claim does not give rise to any arbitrable issue inasmuch as under clause 42.1.1 the bidder is required to mention the rate for extended stay compensation per month in the Priced Part . Under Clause 42.1.2 in case the bidder did not indicate such rate it is to be presumed that no extended stay compensation is required to be paid. Under clause 42.1.4 it was expressly mentioned that Bidder to note that in case they don't indicate the rate for extended stay compensation as per proforma, provisions of clause No.42.0 will not be applicable to them . According to the respondent in the relevant proforma relating to Compensation for Extended Stay , the petitioner had mentioned/quoted NIL . Insofar as the claim of payments for additional works is concerned, according to the respondent, clause 91.0 of the GCC deals with such claims. Clauses 91.1 and 91.2 contemplate that such claims will be verified by the Engineer-in-charge whose decision will be final. The respondent further states that the claims made by the petitioner for additional costs had been rejected by the Engineer-in-charge and in terms of clause 91.2 of the GCC such a decision(s) must be construed to be final and binding between the parties and therefore would stand excluded from arbitration. In the present case, admittedly, the petitioner had quoted NIL against compensation for extended stay in its bid. If that is so, it must be understood that the petitioner had agreed to forego its claim to extended stay compensation in the event the period of performance of the contract is to be extended as had happened in the present case. This position was conveyed to the petitioner by the letter of acceptance dated 13th December, 2010. The petitioner did not raise any objection on the aforesaid score. If the petitioner had voluntarily and consciously agreed to the above situation, it will be difficult to accept the contrary position that has sought to be now adopted by seeking to claim extended stay compensation which was earlier agreed to be foregone. - The second issue i.e. claim for payment of additional works however would stand on a different footing. Clause 91.1 and 91.2 contemplate the making/raising of claims by the contractor for additional works and consideration thereof by the Engineer-in-chief. The decision of the Engineer-in-chief is final and binding. The finality attached to such a decision cannot be an unilateral act beyond the pale of further scrutiny. Such a view would negate the arbitration clause in the agreement. Justifiability of such a decision though stated to be final, must, be subject to a process of enquiry/adjudication which the parties in the present case have agreed would be by way of arbitration. Accordingly, the claims made by the petitioner for payment of additional works under both the contracts are referred to arbitration by Shri Justice M.M. Kumar, Chief Justice (Retd.), Jammu & Kashmir High Court, who is hereby appointed as the sole arbitrator. Arbitration petition partly allowed.

Summary

Issues:
1. Appointment of a sole arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 for disputes arising from two separate contract agreements.
2. Disputes regarding extended stay compensation and payment for additional works under the contracts.

Analysis:
1. The petitioner, a consortium of two companies, entered into agreements with the respondent for a pipeline project. The petitioner claimed that delays and hindrances caused by the respondent led to entitlement for extended stay compensation and payment for additional works. The respondent contested these claims, arguing that the petitioner had waived its right to extended stay compensation by quoting "NIL" in the bid. The Court held that the claim for extended stay compensation did not give rise to an arbitrable dispute as the petitioner had agreed to forego this claim. However, the claim for payment for additional works was deemed arbitrable and referred to arbitration.

2. Regarding the claim for payment for additional works, the respondent contended that the Engineer-in-charge's decision to reject the claims was final and binding, thus excluding them from arbitration. The Court disagreed, stating that such decisions should be subject to further scrutiny through arbitration as agreed upon by the parties. Consequently, the Court allowed the arbitration petitions to the extent that the claim for payment for additional works was referred to arbitration, appointing a retired Chief Justice as the sole arbitrator to adjudicate the matter promptly.

In conclusion, while the claim for extended stay compensation was deemed non-arbitrable due to the petitioner's prior agreement to forego the claim, the claim for payment for additional works was considered arbitrable and referred to arbitration for resolution.