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IN THE HIGH COURT OF DELHI AT NEW DELHI
C. Hari Shankar, J.
North East Engineering And Construction - Appellant
Versus
Brahmaputra Cracker And Polymer Limited - Respondent
Arb P No. 224 of 2020
Decided On : 02-03-2021
Arbitration - Dispute Resolution - Arbitration and Conciliation Act, 1996 - Section 11(6) - Claims I to IX - Refund of encashed Bank Guarantee, Payment of due amount, Refund of recovered amount, Refund of deducted amount, Refund of retained amount, Extended stay compensation, Compensation for reduction in contract value, Loss incurred and damages suffered due to wrongful termination of contract and illegal encashment of CPBG - Section 107.1 of the contract provided for resolution of disputes between the parties, arising in the context of the contract, and reads thus: 'Unless otherwise specified, the matters where decision of the Engineer-in-Charge is deemed to be final and binding as provided in the Agreement and the issues/disputes which cannot be mutually resolved within a reasonable time, all disputes shall be referred to arbitration by Sole Arbitrator.'
Fact of the Case:
The petitioner sought reference of certain disputes, pending between the petitioner and the respondent, to arbitration under Section 11(6) of the Arbitration and Conciliation Act, 1996. The claims included refund of encashed Bank Guarantee, payment of due amount, refund of recovered amount, refund of deducted amount, refund of retained amount, extended stay compensation, compensation for reduction in contract value, and loss incurred and damages suffered due to wrongful termination of contract and illegal encashment of CPBG.
Finding of the Court:
The Court found that the disputes were arbitrable and should be referred to arbitration. The Court held that the limited scope of examination by the Court, exercising jurisdiction under Section 11 of the 1996 Act, did not establish a prima facie case for rejection of the petitioner's request for referring the dispute to arbitration.
Issues: The issues included the arbitrability of the disputes being sought to be raised by the petitioner, the existence of an arbitration agreement between the parties, and the existence of an arbitrable dispute.
Ratio Decidendi: The Court held that all disputes which are capable of resolution by arbitration ought to be referred to the Arbitral Tribunal. The Court also emphasized that the scope of examination by the Court exercising jurisdiction under Section 11(6) is prima facie in nature and should not result in a mini-trial. The Court found that the disputes were arbitrable and should be referred to arbitration.
Final Decision: The Court referred the disputes to Hon'ble Mr. M.L.Mehta (Retd.) for arbitration and directed the learned Arbitrator to fix his fees after consultation with the parties. The respondent was also given the liberty to prefer any counterclaim before the learned Arbitrator in accordance with the law. The Court disposed of the petition with no order as to costs.
JUDGMENT
C .Hari Shankar, J. - This is a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "1996 Act"), seeking reference of certain disputes, pending between the petitioner and the respondent, to arbitration. The claims, of which the petitioner seeks reference, are nine in number and have been enumerated in the petition thus:
"I. Claim no. I- Refund of encashed Bank Guarantee amounting to Rs.2,10,00,000/- with interest @18% per annum from 06.09.2016 till realization.
II. Claim no. II- Payment of the amount of Rs. 5,95,56,611.51 due against 30th R/A and Final Bill with interest @18% per Annum from 13.04.2017 (60 days after the date of submission of 30th R/A & Final Bill on 13.02.2017) till realization.
III. Claim no. III- Refund of Rs. 1,34,79,327/- with interest @18% per annum recovered by BCPL from R/A bills towards Price Reduction Schedule (PRS).
IV. Claim no. IV- Refund of amount of Rs. 29,93,017/-with interest @18% per annum deducted towards mandatory discount against CENVATable excise duty from R/A Bills as all excise invoices against bought out items have been submitted to BCPL from time to time for availing CENVAT.
V. Claim no. V- Refund of retained amount of Rs.15,60,066/- with interest @18% per annum from R/A bills towards nonsubmission of PF Challans as the necessary challans have been submitted to BCPL from time to time.
VI. Claim no. VI- Refund of retained amount of Rs. 6,13,984/- with interest @18% per annum towards Abnormally High Rate (AHR) items as rates for such items were submitted to BCPL through EIL for approval and payment.
VII. Claim no. VII- Extended stay compensation (beyond the scheduled completion period plus a grace period of 8 weeks) amounting to Rs. 3,72,50,000/-.
VIII Claim no. VIII- Compensation for reduction in contract value (from the awarded value of Rs.33,89,22,376.38 to the final executed value of Rs.24,33,83,122.78) amounting to Rs.10,81,162.38.
IX Claim no. IX- Loss incurred and damages suffered amounting to Rs.1,00,00,000/- due to wrongful termination of contract and illegal encashment of CPBG."
Facts
2. Bids were invited by M/s. Engineers India Limited (EIL) on behalf of the respondent - Brahmaputra Cracker And Polymer Limited (BCPL), for certain works associated with Brahmaputra Petrochemical Complex at Lakwa, Assam. The petitioner bid, and was awarded the contract vide Fax of Acceptance dated 14 th February, 2013, followed by a Detailed Letter of Acceptance dated 8th March, 2013. The total value of the contract was Rs. 33,89,22,376.38.
3. Clause 107 of the contract provided for resolution of the disputes between the parties, arising in the context of the contract, and reads thus:
"107.1 Unless otherwise specified, the matters where decision of the Engineer-in-Charge is deemed to be final and binding as provided in the Agreement and the issues/disputes which cannot be mutually resolved within a reasonable time, all disputes shall be referred to arbitration by Sole Arbitrator.
The Employer [GAIL (India) Ltd.] shall suggest a panel of three independent and distinguished persons to the bidder/contractor/supplier/buyer (as the case may be) to select any one among them to act as the Sole Arbitrator.
In the event of failure of the other parties to select the Sole Arbitrator within 30 days from the receipt of the communication suggesting the panel of arbitrators, the right of selection of the sole arbitrator by the other party shall stand forfeited and the EMPLOYER (GAIL) shall have discretion to proceed will the appointment of the Sole Arbitrator. The decision of Employer on the appointment of the sole arbitrator shall be final and binding on the parties.
The award of sole arbitrator shall be final and binding on the parties and unless directed/awarded otherwise by the sole arbitrator, the cost of arbitration proceedings shall be shared equally by the parties. The Arbitration proceedings shall be in English language and venue shall be New Delhi, India.
Su
The main legal point established in the judgment is that all disputes capable of resolution by arbitration should be referred to the Arbitral Tribunal, and the scope of examination by the Court exerc....
The court held that the validity of claims and the arbitrability of related disputes must be referred to arbitration, rejecting the respondent's claims of non-compliance with contractual protocols li....
The claims were notified within the stipulated period and submitted along with the final bill in accordance with Clause 6.6.3.0 of the GCC, making the disputes arbitrable under Clause 9.1.0.0.
The Court's jurisdiction under Section 11(6) of the 1996 Act is limited to examining the existence and validity of an arbitration agreement, and the Court may reject claims that are manifestly non-ar....
The Court emphasized the importance of examining the existence and validity of an arbitration agreement at the referral stage and the rejection of manifestly non-arbitrable claims.
(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....
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