On 31st August, a bench of Delhi High Court consisting of Justice Vibhu Bakhru, held that in terms of Section 11(6A) of the Arbitration and Conciliation Act, the scope of examination is confined to examining the existence of an agreement to refer the disputes to arbitration.

The bench further stated that there is merit in Ms Narula’s contention that the question as to existence of an arbitration agreement also needs to be addressed in reference to the disputes in respect of which an Arbitral Tribunal is sought to be constituted.

Facts of the case:

The petitioner had filed the present petition under Section 11(6) of the Arbitration & Conciliation Act, 1996 praying for the appointment of the Arbitrator named in the request for arbitration or any other suitable person, as Arbitrator to adjudicate the disputes between the Petitioner and the Respondent. 

Contention of the petitioner:

The following contention has been submitted by Mr Tyagi, learned counsel for the petitioner:

  1. The petitioner submitted its bid pursuant to the aforesaid NIT quoting an amount of ₹1810.57 crores for the execution of the works and was declared the lowest bidder (L1) for Package-A in the State of Jammu & Kashmir.
  2. The petitioner claimed that in case of rocky soil, the depth of the trench, to be dug for laying the cables, was stipulated to be lower as compared to the depth that was required to be dug in case of non-rocky soil.
  3. The petitioner claimed that a substantial amount has been withheld by BSNL from the payments due to the petitioner, as BSNL has levied the ‘death penalty’ on account of the alleged default on the part of the petitioner in laying trenches of lower depth which was lower than as purportedly agreed in terms of the contract between the parties.
  4. The petitioner also claimed that it had specifically requested for relaxation of the depth requirement in certain areas where it had encountered hard rock strata, however, no written decision in this regard has been rendered by BSNL.
  5. He stated that the disputes between the parties do not fall within the scope of the excepted matters. He states that the principal disputes relate to the ‘depth penalty’ levied by BSNL.

Contention of respondent:

The following contention has been submitted by Ms Narula, learned counsel appearing for BSNL:

  1. It was submitted that there is no dispute as to the existence of an agreement to refer the disputes to arbitration in terms of Clause 71 of the GCC. She, however, submits that the said clause does not cover the disputes sought to be raised by the petitioner.
  2. It was also submitted that the said clause carves out an exception in respect of certain matters. Such matters, in respect of which a decision is specifically contemplated under the Agreement up to the installation and commissioning stage are not arbitrable.
  3. She submitted that the disputes between the parties essentially relate to the measurement of the depths of the trenches dug by the petitioner. The trenches laid by the petitioner were of a depth lower than as agreed, resulting in the levy of “depth penalty”

Observation and judgement of the court:

The hon’ble bench of the court observed that the controversy raised by the petitioner with regard to the arbitrability of disputes falls within the standards of examination under Section 11 of the A&C Act.

Accordingly, the Court proposed to appoint Justice (Retd.) Badar Durrez Ahmed, former Chief Justice of Jammu & Kashmir High Court as the Sole Arbitrator to adjudicate the disputes between the parties.

Read Judgment @Latestlaws.com

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