2022 Supreme(SC) 620

SUPREME COURT OF INDIA
M.R. Shah, B.V. Nagarathna, JJ.
Indian Oil Corporation Limited – Appellant
Versus
NCC Limited – Respondent
Civil Appeal No. 341 of 2022 (@ SLP (C) No. 13161 of 2019) with Civil Appeal No. 342 of 2022 (@ SLP (C) No. 13408 of 2019); Civil Appeal No. 344 of 2022 (@ SLP (C) No. 13815 of 2019); Civil Appeal No. 343 of 2022 (@ SLP (C) No. 13813 of 2019) and Civil Appeal No. 345 of 2022 (@ SLP (C) No. 13816 of 2019)
Decided on : 20-07-2022

IMPORTANT POINTS
(1) Arbitration – Parties to arbitration agreement have autonomy to decide not only on procedural law to be followed but also substantive law – A party cannot claim anything more than what is covered by terms of contract.
(2) Void agreement – Unless effect of agreement results in performance of an unlawful act, an agreement, which is otherwise legal, cannot be held to be void and is binding between parties.

Headnote:

(A) Arbitration and Conciliation Act, 1996 – Section 11 – Arbitration – Arbitration clause is required to be strictly construed – Any expression in the clause must unequivocally express intent of arbitration – Parties to arbitration agreement have autonomy to decide not only on procedural law to be followed but also substantive law – Choice of jurisdiction is also left to contracting parties – A party cannot claim anything more than what is covered by terms of contract – Issue of non-arbitrability of a dispute is basic for arbitration as it relates to very jurisdiction of Arbitral Tribunal – An Arbitral Tribunal may lack jurisdiction for several reasons and non-arbitrability has multiple meanings. (Paras 10.3, 10.4, 10.6 and 10.9)

(B) Arbitration and Conciliation Act, 1996 – Section 11(6) – Appointment of Arbitrator – Bill dispute emanating from work contract – Parties have agreed that certain specified disputes alone will be subject of arbitration – Only those claims which are Notified shall be considered as “Notified Claim” and in respect of any claim other than Notified Claim, owner is not liable to pay and as such is absolved – Dispute or difference whether or not a claim sought to be referred to arbitration by contractor is a Notified Claim shall not and cannot form subject matter of any reference or submission to arbitration – Unless there is a decision by General Manager on whether or not a claim sought to be referred to arbitration by contractor is a Notified Claim or not, Arbitrator or Arbitral Tribunal shall have no jurisdiction to entertain such a dispute – Issue / aspect with regard to ‘accord and satisfaction’ of claims is seriously disputed and is debatable – Though Arbitral Tribunal may have jurisdiction and authority to decide disputes including question of jurisdiction and non-arbitrability, same can also be considered by Court at stage of deciding Section 11 application if facts are very clear and glaring – Matters related to Notified Claims also shall have to be left to be decided by Arbitral Tribunal as in fact situation aspect of ‘accord and satisfaction’ and ‘Notified Claims’ both are interconnected and interlinked. (Paras 10.2, 11.4, 11.8, 13, 13.1 and 13.2)

(C) Contract Act, 1872 – Section 24 – Void agreement – Parties to contract are free to agree on applicability of (1) proper law of contract, (2) proper law of arbitration agreement and (3) proper law of conduct of arbitration – Parties to contract also may agree for matters excluded from purview of arbitration – Unless effect of agreement results in performance of an unlawful act, an agreement, which is otherwise legal, cannot be held to be void and is binding between parties. (Para 13.3)

Facts of the case:

Feeling aggrieved and dissatisfied with the impugned judgment and orders passed by the High Court of Delhi, New Delhi in respect to Arbitration Petitions by which, in exercise of powers under Section 11(6) of Arbitration and Conciliation Act, 1996, High Court has allowed the said petitions and has appointed Arbitrator by referring the dispute between the parties for arbitration, Indian Oil Corporation Limited has preferred the present appeals.

Findings of Court:

Whether or not a claim sought for arbitration by Contractor is a Notified Claim or any such matter /dispute is specifically excluded from the scope, purview and ambit of arbitration agreement, such matter / dispute shall have to be first decided by the General Manager prior to the arbitral proceeding with or proceeding further with the reference.

Result : Appeals Partly allowed.