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TMI Blog2019 (2) TMI 2027X X X X Extracts X X X X X X X X Extracts X X X X ..... will also have to be left to the Arbitral Tribunal. The position in law in this regard remains the same both pre and post amendment brought about in the 1996 Act after 23.10.2015. III) After the insertion of Subsection (6A) in 11 of the 1996 Act the scope of inquiry by the Court in a Section 11 petition, (once it is satisfied that it has jurisdiction in the matter) is confined to ascertaining as to whether or not a binding arbitration agreement exists qua the parties before it which is relatable to the disputes at hand. IV) The space for correlating the dispute at hand with the arbitration 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... ssuance of the FOA, i.e. 3.3.2010, and that the scheduled date of completion would be 2.10.2011. 15. The record shows that the execution of the Project was delayed as a result of which the Project got completed only on 28.12.2015. 15.1 NCCL was issued a completion certificate by IOCL indicating the date of completion of the Project as 28.12.2015. 16. In view of the delay in the completion of the Project beyond the scheduled date, NCCL made a request for Extension of Time (for short "EOT") vide communication dated 23.5.2016. 17. Via this communication, NCCL requested IOCL to issue a consolidated EOT. 17.1 The reason why this was done, it appears, was that while IOCL, during the execution of the project, had been issuing work permits from time to time which allowed NCCL to continue performing its obligations under the contract, there was no formal EOT communication issued which would regularize the time taken in executing the Project beyond the scheduled date of completion. 18. Thus, while the EOT requests were pending with IOCL, NCCL submitted its final bill dated 5.8.2016 to the Engineer-in-Charge appointed under the contract obtaining between the parties i.e. Thyssenkr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CL via an email dated 8.5.2017 that it had released Rs.4,53,04,021.10, albeit, after making due adjustment towards taxes etc. 24. Being dissatisfied, NCCL, on 16.5.2017, put it on record, for the first time, that it had withdrawn its Notified Claims as TKIS vide its communication dated 1.11.2016, had indicated in no uncertain terms that the review of its final bill and request for EOT would be considered only if it gave up its insistence that its Notified Claims should be considered. 25. IOCL, on its part, sent a response vide communication dated 6.6.2017, wherein, it stated that none of the claims mentioned in the final bill were Notified Claims. 25.1 The suggestion was that arbitration in terms of Clause 9.0.1.0[3] of the GCC could take place only with respect to Notified Claims. 25.2 Furthermore, IOCL also made a reference to the fact that NCCL's request for grant of EOT till the date of completion without adjustment towards the price discount was untenable. 25.3 Emphasis was laid by IOCL on the fact that it had paid the final bill amount after making the following deductions: 4 per cent towards liquidated damages; amounts payable to sub-contractors which NCCL was required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessary information and submitted the same along with its letter dated 7.8.2017. 31.1 Importantly, NCCL laid emphasis on the fact that during the course of execution of the project it had submitted its claims within the time frame envisaged under Clause 6.6.1.0[12] of the GCC. 31.2 The list of such communications, albeit, claim-wise, was enclosed in Appendix-I for IOCL's ready reference. 31.3 Furthermore, copies of letters were also enclosed. NCCL further brought to the notice of the Chief General Manager that all claims as notified in terms of Clause 6.6.1.0[13] had been included in the final bill as required under Clause 6.6.3.0[14] of the GCC. 31.4 Lastly, NCCL also brought to the notice of the Chief General Manager that it was not opting for an ADR mechanism and, instead, was seeking resolution of its disputes via arbitration. 32. The Chief General Manager, however, was not impressed with the material furnished by NCCL and, thus, vide communication dated 10.11.2017 communicated to NCCL that there was no scope for arbitration between parties and that none of its putative claims could be referred to arbitration in terms of Clause 9.0.0.0[15] of the GCC. 32.1 A perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matters". ii) Secondly, Section 16 of the 1996 Act recognizes the doctrine of Kompetenz Kompetenz, which, in a nutshell, requires the Arbitral Tribunal to rule on objections, if any, with respect to its jurisdiction in the matter. Thus, if IOCL's stand was to be accepted, it would usurp the statutory power conferred on the Arbitral Tribunal under Section 16 of the 1996 Act. iii) Thirdly, as to whether a particular matter falls in the "excepted matters" category can be mutually decided by the parties by incorporating a particular benchmark in that behalf in the agreement obtaining between them. This, however, would not confer power on one party to unilaterally apply the benchmark and that too in a self-serving manner and, thereupon, declare a particular claim as one which falls in the category of "excepted matters". iv) Fourthly, a perusal of the Notified Claims raised by NCCL would show that in order to come to the conclusion one way or another as to whether they fall within the ambit of Clause 6.6.1.0[20] of the GCC, a determination would have to be made as to when the cause of action arose for issuance of a notice qua a particular claim. In this behalf, it was sought to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) In the same vein, it was argued that Clause 6.6.1.0 of the GCC prescribed the procedure to be followed by the contractor to notify a claim for the purposes of having it referred to arbitration. (v) Thus, unless a contractor's claims fall within the ambit of Clause 6.6.1.0, that is, they are notified in accordance with the provisions of the said clause, they cannot be referred to arbitration. (vi) Furthermore, even if the claims are notified (provided they are not settled or withdrawn prior to preparation of the final bill) they should, in accordance with Clause 6.6.3.0, be included in the final bill. In other words, unless the two conditions prescribed in Clause 6.6.1.0 and Clause 6.6.3.0 of the GCC are fulfilled, the claims lodged would not fall within the ambit of the arbitration agreement. (vii) Besides this, the third condition has to be fulfilled by the contractor to have its claims referred to arbitration even if the first two conditions are fulfilled by him, which is, that the General Manger should issue a declaration or a certification with regard to the first two conditions, adverted to above, as per the power vested in him under Clause 9.0.2.0[27] of the GCC. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surance Co. Ltd. & Anr. v. Hyundai Engineering and Construction Co. Ltd. & Ors., (2018) SCC OnLine SC 1045. (iii) International Building and Furnishing Co. v. Indian Oil Corporation Ltd., (1995) II Delhi 293. (iv) Uttam Singh Duggal & Co. v. IOCL, (1985) II Delhi 131. (v) Gail v. SPIE CAPAG, S.A., (1993) 27 DLT 562. (vi) Sarup Lal Singhla v. National Fertilizers Ltd., 72 (1998) DLT 23. (vii) Dr. Vijay Laxmi Sadho v. Jagdish, (2001) 2 SCC 247. (viii) U.P. Gram Panchayat Adhikari Sangh v. Daya Ram Saroj, (2007) 2 SCC 138. Reasons: 40. Having perused the material placed before me and heard the submissions advanced by the learned counsel for the parties, what has emerged is that, according to IOCL, if NCCL is to be given a pass-through for having its claims referred for adjudication by an Arbitral Tribunal it would have to satisfy the Court that it complied with the three conditions adverted to herein above. Conditions stipulated in the Contract 40.1 To recapitulate, firstly, the claim or claims lodged are Notified Claims. 40.2 Secondly, the claims lodged if not settled or withdrawn by the contractor (in this case NCCL), are included in the final bill. 40.3 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th these clauses are more or less similar, the distinguishing feature between the two is that the clause 6.7.1.0[34] speaks about acceptance of final dues by the contractor, which are adverted to in his final bill based on the condition that the payment made is full and final settlement of all dues of the contractor. 44.1 This clause emphasizes the fact that once payment is received by the contractor in such like circumstances, then, notwithstanding any qualifying remarks, protest or condition imposed or purported to be imposed by a contractor the owner would stand discharged of its liability. 44.2 The only exception is the contractor's entitlement to receive unadjusted portion of the security deposit in accordance with the provisions of clause 6.8.3.0[35] upon successful completion of the defect liability period. 45. Insofar as the final bills, in which, Notified Claims are included- the provision for discharge and/or extinguishment owner's liability (i.e. IOCL liability) upon receipt of payment against such final bill (with a condition that it involves full and final settlement of all dues) is made in clause 6.7.2.0[36]. 46. Clause 9.0.1.0[37] says that subject to the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reading of the aforementioned clauses would show that: (i) For a claim to be categorized as a Notified Claim, a notice should be served by the contractor on the Engineer-in-Charge and the Site Engineer within ten (10) days of the cause of action arising for lodging a claim whether it is with regard to additional payment(s) or compensation or on happening of the event upon which the contractor bases such claim. (ii) In case the claim qua which notice is sent, is neither settled nor withdrawn prior to preparation of the final bill, it is required to be included by the contractor in the final bill. (iii) With regard to matters as to whether or not the claim sought to be referred is a Notified Claim or whether or not such claim is included in the contractor's final bill (in cases where it is neither settled nor withdrawn prior to the preparation of the final bill) - are matters qua which the General Manager has to take a decision. 50.1 Apart from what is noticed hereinabove, Clause 9.0.2.0 classifies the following two aspects as "excluded matters'. These are matters concerning the scope or existence or otherwise of the arbitration agreement and whether or not the contractor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .0[52] confers on the General Manager the power to decide as to whether or not a particular claim is a Notified Claim it attaches no finality to the General Manager's decision. 50.8. The word "final' does not find mention in clause 9.0.2.0[53], though it refers to the fact that decision with respect to whether or not the claim(s) are Notified Claims will be that of General Manager. Besides this, the other difficulty in accepting such a construction is that if this construction as put forth by Mr. Koura, is accepted, it would literally amount to conferring power in one of the disputants to efface a mechanism consciously put in place by the parties for quick-resolution of disputes, albeit, outside the pale of formal Court proceedings. Conferment of unbridled power in any area is problematic: whether judicial, quasi judicial or administrative it is, however, fraught with even greater danger when it directly impinges upon the right of a contesting party. Fixing by a mutually agreed benchmark by the parties is one thing applying a benchmark unilaterally based on provisions which are not negotiated is a troubling proposition. 50.9 The fact that such a decision is more often than not ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in respect of final dues which are incorporated in the final bill or Notified Claims which are included in the final bill against which payments are received by the contractor are not within the ambit of the General Manager. 56. The fact that the arbitration clause is made, inter alia, subject to the provisions of Clauses 6.7.1.0[58], 6.7.2.0[59] and 9.0.2.0[60] cannot, in my view, bring the aspect of discharge of liability within the scope and ambit of the power of the General Manger. 57. As to whether in the given facts and circumstances of the case there is accord and satisfaction is a matter which even prior to the amendment of the 1996 Act could be left by the Court to the discretion of the Arbitral Tribunal. (See: National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267[61]) 57.1 I may only indicate here that the judgment in the case of National Insurance Company Limited versus Boghara Polyfab (P) Limited, (2009) 1 SCC 267, was further refined in the decision rendered by the Supreme Court in Union of India versus Master Construction Company, (2011) 12 SCC 349. In this case, the Court held that if the claimant's contention that the discharge voucher or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... need not examine whether the conclusion reached by IOCL's General Manager is sustainable. 59.1 In my view, the scope of examination as to whether or not the claims lodged are Notified Claims has narrowed down considerably in view of the language of Section 11(6A) of the 1996 Act. To my mind, once the Court is persuaded that it has jurisdiction to entertain a Section 11 petition all that it is required to examine, is, as to whether or not an arbitration agreement exists between the parties which is relatable to the dispute at hand. The latter part of the exercise adverted to above, which, involves correlating the dispute with the arbitration agreement obtaining between the parties, is an aspect which is implicitly embedded in Subsection (6A) of Section 11 of the 1996 Act, which, otherwise, requires the Court to confine its examination only to the existence of the arbitration agreement. Therefore, if on a bare perusal of the agreement, it is found that a particular dispute is not relatable to the arbitration agreement, then, perhaps, the Court may decline the relief sought for by a party in a Section 11 petition. However, if there is a contestation with regard to the issue as to whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in view of the decisions in SBP and Co. [SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] and Boghara Polyfab [National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117] . This position continued till the amendment brought about in 2015. After the amendment, all that the courts need to see is whether an arbitration agreement exists-nothing more, nothing less. The legislative policy and purpose is essentially to minimise the Court's intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected." (emphasis is mine) 60. The record in this case demonstrates that there is contestation with regard to purported determination made by the General Manager that the claims lodged by NCCL are not notified claims. 61. Given the facts obtaining in the instant case and the amendments brought about after 23.10.2015 in the 1996 Act which, inter alia, led to the insertion of Subsection (6A) in Section 11, the arguments advanced to the contrary by Mr. Koura cannot be accepted. Cases cited by IOCL: 62. Before I conclude, let me deal with the judgments cited by Mr. Koura. Insofa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 What is pertinent to note is that these cases were decided when the old Act i.e., Arbitration Act, 1940, was in force. Besides this, insofar as the judgment in International Building and Furnishing Co. case is concerned a perusal of paragraph 8 of the judgment would show that when the Court queried the appellant's counsel he was unable to demonstrate that the subject claims had been notified to the Engineer-in-Charge and the Site Engineer within the stipulated period of ten days, as required under Clause 6.6.1.0[64] of the GCC. The Court, in fact, observed that the notices handed over across the bar did not show that they had been served on IOCL's General Manager. 62.7 In the instant case, apart from the fact that the parties are governed by the 1996 Act, it did throw up facts that NCCL had, in fact, lodged claims with IOCL's Chief General Manager; though liability of the same is questioned by IOCL. 63.8 In Gas Authority of India Limited case (see paragraph 14), the Court drew, in my view, quite correctly a distinction between a claim being barred, an aspect which falls within the domain of the Arbitrator and the bar on referring the parties to arbitration, once the period pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the General Manager, which is an aspect that was, perhaps, not brought to the notice of the Court, the distinguishing factor is that the petitioner's claims were examined and thereafter a ruling was rendered that the claims had not been notified. 70.4 In the instant case, as noticed above, no such ruling has been rendered by the General Manager. 70.5 This apart, the judgment was rendered prior to the insertion of sub-section (6A) in Section 11 of the 1996 Act. The judgment is dated 10.3.2015, whereas the aforementioned sub-section was inserted and brought into force by the Amendment Act of 2015, on 23.10.2015. 70.6 Likewise, the judgment rendered in Institute of Geoinformatics Pvt. Ltd. Vs. Indian Oil Corporation Ltd., 2005 SCC OnLine Del 9562 is also distinguishable. This judgment was also rendered on 19.5.2015, that is, much before the Amendment Act of 2015 was brought into force. 70.7 Insofar as the judgment in Srico Projects Pvt. Ltd. vs. Indian Oil Corporation Ltd., 2017 SCC OnLine Del 6446 is concerned, the facts obtaining in the said case would show that the petitioner had not approached IOCL's General Manger. It was the IOCL's stand before the Court, as reflected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsurance Company Limited vs. Boghara Polyfab Private Limited, (2009) 1 SCC 267 even prior to insertion of Sub section (6A) in Section 11 of the 1996 Act. Conclusions 81. Having regard to the foregoing discussion hereinabove my conclusions can be summed up as follows: - I) Where there is contestation or the decision rendered by the General Manager leaves scope for argument as to whether the claims lodged by a Contractor can be categorized as Notified Claims is best left to the Arbitral Tribunal. In other words, except for the situation where there is no doubt that the claims were not lodged with the Engineer and the Site Engineer as required under Clause 6.6.1.0[67] read with 6.6.3.0[68], the matter would have to be left for resolution by Arbitral Tribunal. II) Aspects with regard to accord and satisfaction of the claims or where there is a dispute will also have to be left to the Arbitral Tribunal. The position in law in this regard remains the same both pre and post amendment brought about in the 1996 Act after 23.10.2015. III) After the insertion of Subsection (6A) in 11 of the 1996 Act the scope of inquiry by the Court in a Section 11 petition, (once it is satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hieved within 8 (eight) weeks of the starting date for discount calculation - 4 % of the total contract value…. 4.4.2.1 The starting date for discount calculation shall be subject to variation upon extension of the date for Mechanical Completion of the Unit(s)/final completion of the works with a view that upon any such extension there shall be an equivalent extension in the starting date for discount calculation under Clause 4.4.2.0 hereof. 4.4.2.2 It is specifically acknowledged that the provisions of Clause 4.4.2.0 constitute purely a provision for price adjustment and/or fixation and are not to be understood or construed as a provision for liquidated damages or penalty under Section 74 of the Indian Contract Act or otherwise. 4.4.3.0 Application of price adjustment under clause 4.4.2.0 above shall be without prejudice to any other right of the OWNER, including the right of termination under Clause 7.0.1.0 and associated clauses thereunder. [2] Ibid [3] 9.0.0.0 ARBITRATION 9.0.1.0 Subject to the provisions of Clauses 6.7.1.0, 6.7.2.0 and 9.0.2.0 hereof, any dispute arising out of a Notified Claim of the CONTRACTOR included in the Final Bill of the CONTRACTOR in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included in the Final Bill prepared by the CONTRACTOR in the form of a Statement of Claims attached thereto, giving particulars of the nature of the claim, grounds on which it is based, and the amount claimed and shall be supported by a copy(ies) of the notice(s) sent in respect thereof by the CONTRACTOR to the Engineer-in-Charge and Site Engineer under Clause 6.6.1.0 hereof. In so far as such claim shall in any manner or particular be at variance with the claim notified by the CONTRACTOR within the provision of Clause 6.6.1.0 hereof, it shall be deemed to be a claim different from the notified claim with consequence in respect thereof indicated in Clause 6.6.1.0 hereof, and with consequences in respect of the notified claim as indicated in Clause 6.6.3.1 hereof. [8] Supra 5, Page 7. [9] 6.6.1.0 Should the CONTRACTOR consider that he is entitled to any extra payment or compensation in respect of the works over and above the amounts due in terms of the Contract as specified in Clause 6.3.1.0 hereof or should the CONTRACTOR dispute the validity of any deductions made or threatened by the OWNER from any Running Account Bills, the CONTRACTOR shall forthwith give notice in writing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use 6.8.2.0 hereof, stand discharged and extinguished except in respect of the notified claims of the CONTRACTOR included in the Final Bill and except in respect of the CONTRACTOR's entitlement to receive the unadjusted portion of the Security Deposit in accordance with the provisions of Clause 6.8.3.0 hereof on successful completion of the defect liability period. [25] 6.7.2.0 The acceptance by the CONTRACTOR of any amount paid by the OWNER to the CONTRACTOR in respect of the notified claims of the CONTRACTOR included in the Final Bill in accordance with the provisions of Clause 6.6.3.0 hereof and associated provisions thereunder, upon the condition that such payment is being made in full and final settlement of all the claims of the CONTRACTOR shall, subject to the provisions of Clause 6.7.3.0 hereof, be deemed to be in full and final satisfaction of all claims of the CONTRACTOR notwithstanding any qualifying remarks, protest or condition imposed or purported to be imposed by the CONTRACTOR relative to the acceptance of such payment with the intent that upon acceptance by the CONTRACTOR of any payment made as aforesaid, the Contract (including the arbitration clause) shall s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to issues falling under the second category, if raised in any application under Section 11 of the Act, the Chief Justice/his designate may decide them, if necessary, by taking evidence. Alternatively, he may leave those issues open with a direction to the Arbitral Tribunal to decide the same. If the Chief Justice or his designate chooses to examine the issue and decides it, the Arbitral Tribunal cannot re-examine the same issue. The Chief Justice/his designate will, in choosing whether he will decide such issue or leave it to the Arbitral Tribunal, be guided by the object of the Act (that is expediting the arbitration process with minimum judicial intervention). Where allegations of forgery/fabrication are made in regard to the document recording discharge of contract by full and final settlement, it would be appropriate if the Chief Justice/his designate decides the issue. [62] 13. From the above conclusions of this Court, the following principles emerge: (i) Merely because the contractor has issued "no-dues certificate", if there is an acceptable claim, the court cannot reject the same on the ground of issuance of "no-dues certificate". (ii) Inasmuch as it is common that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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