Delhi High Court
Cse Infra vs Union Of India & Anr. on 26 September, 2017
$~OS-2
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 26.09.2017
+ ARB.P. 186/2017
CSE INFRA ..... Petitioner
Through Mr.Vivekanand, Adv.
versus
UNION OF INDIA & ANR. ..... Respondent
Through Mr.N.Prashana Kumar Nair, Adv. for
UOI
CORAM:
HON'BLE MR. JUSTICE JAYANT NATH
JAYANT NATH, J. (ORAL)
1. This is a petition under section 11(6) of the Arbitration and
Conciliation Act, 1996 seeking appointment of an Arbitrator to adjudicate
the dispute between the parties. The case of the petitioner is that respondent
No.2 on behalf of respondent No.1 invited tenders for execution of work
named and styled as "Construction of Two Lane Road overbridge in lieu of
an existing level crossing No.-524-C AT Km 1570/18-20 near Chodiala
Station alongwith other allied works on Laksar-Sharanpur Section". The
tender of the petitioner was accepted and the work was awarded to the
petitioner vide letter dated 18.4.2013 by respondent No.2. A formal
agreement was executed on 19.9.2013.
ARB.P.186/2017 Page 1
2. The respondent sent a notice dated 23.3.2015 terminating the contract
and encashing the FDR by way of security and performance guarantee
received. On 25.3.2015 the petitioner filed a petition seeking interim orders
from this court. Vide order dated 26.3.2015 the respondents were directed
not to encash the two FDRs during pendency of the arbitration proceedings.
The petitioner invoked the arbitration clause No.64 on 13.5.2015. The
petitioner had sought to raise 34 claims against the respondent. On
6.10.2015 the respondents have appointed the arbitral tribunal to adjudicate
17 out of 34 claims raised by the petitioner. Grievance of the petitioner is
that entire claims had to be referred to the arbitrator and not by pick and
choose policy of the petitioner.
3. Learned counsel for the respondent submits that he has filed his reply.
He submits that the balance claims which were not referred to Arbitrator are
excepted matters under clause 63 of the GCC and hence, not referable to
arbitration.
4. Learned counsel for the Petitioner in response submits that the
respondents cannot take a decision on their own as to which matters are
accepted matters and not covered by the arbitration clause. He relies upon
judgment of the Division Bench of the Allahabad High Court in Agarwal
Company vs.Union of India through General Manager, Northern Railway
2015 (3) R.A.J. 468 (All.). The case pertains to the respondent where a
Division Bench of the Allahabad High Court relying upon the judgment of
the Supreme Court in National Insurance Company Ltd. vs. M/s.Boghara
Polyfab Pvt.Ltd., AIR 2009 SC 170 held that in such an eventuality where
the respondents feel that a particular matter is an accepted matter it should
refer the same to the arbitral tribunal subject to their objection who would
ARB.P.186/2017 Page 2
adjudicate the same on an application under section 16 of the Act as to
whether the Tribunal has jurisdiction to decide the same or not.
5. Learned counsel for the petitioner further states that this Court may
appoint an independent Arbitrator/Arbitral Tribunal keeping in view the fact
that the respondents have not taken steps for appointment of an Arbitrator in
terms of the arbitration clause despite receipt by appropriate notice invoking
the arbitration clause. He further submits that even if for some reason this
court were to refer the balance disputes to the same arbitral tribunal, a
direction should be passed to the arbitral tribunal to continue to adjudicate
the disputes despite any retirement or transfer of any of the members of the
Tribunal. He submits that his experience in arbitration against the
respondent shows that the proceedings linger on for years on account of the
fact that vacancies arise due to transfer of Members of the Tribunal or
retirement of the Tribunal who thereafter cease to be on the arbitral tribunal.
6. Relevant portion of the said judgment of the Allahabad High Court in
Aggarwal Company vs Union of India Thru General Manager, Northern
Railway (supra) reads as follows:-
"8. These observations make it abundantly clear that
whether a particular claim, which has been made by a
contractor, is arbitrable or conversely, whether it has been
excepted or excluded from the purview of arbitrability,
cannot lie in the exclusive domain of the other party to the
contract. Where a reference to arbitration is made outside
the Court, a party making the reference on a claim which
has been raised by the contractor, may do so subject to its
reservations on the arbitrability of the claim. Hence, in the
present case, it would have been open to the competent
authority, while referring the claims to arbitration, to reserve
its objections on the ground that a particular claim is an
excepted matter which is not capable of being arbitrated
ARB.P.186/2017 Page 3
upon. The arbitral tribunal would under Section 16 of the
Act have the jurisdiction to decide as to whether a particular
claim falls within an excepted matter or is within the
purview of the arbitration agreement. What the third
respondent has done by declining to even refer the claim to
arbitration, is to prevent the arbitral tribunal from inquiring
into whether the claim is arbitrable in the first place. This, in
our view, is impermissible. If a reference to arbitration were
to be made through the Court under Section 11 of the Act,
there is no ambiguity about the legal position in view of the
decision of the Supreme Court in Boghara Polyfab (supra).
The issue as to whether the claim was arbitrable or fell
within the scope of an excepted matter, must be left to the
arbitral tribunal. Neither the Chief Justice nor his designate
under Section 11 of the Act can decide an issue which
pertains to the third category enlisted in the decision in
Boghara Polyfab (supra). Similarly, where a reference to
arbitration has taken place outside the Court, a party to the
arbitral agreement cannot preclude the arbitral tribunal from
deciding as to whether the claim is arbitrable or whether it
pertains to an excepted matter. That issue has to be
determined by the arbitral tribunal.
9. This principle finds support from the decision of the
Supreme Court in J.G. Engineers Private Limited v. Union
of India and another, MANU/SC/0527/2011 : 2011 (5) SCC
758, where it was held that a contract cannot provide that
one party will be the arbiter to decide whether he committed
breach or whether the other party committed a breach and
this is a question which can only be decided by the arbitral
tribunal, where there is an arbitration agreement. Whether a
particular claim is arbitrable or not and whether an objection
that a claim falls within an excepted matter is tenable, is
within the jurisdiction of the arbitral tribunal under Section
16 of the Act."
7. Reference may also be had to the judgment of the Supreme Court in
ARB.P.186/2017 Page 4
the case of National Insurance Co.Ltd. vs. Boghara Polyfab Pvt. Ltd.
(supra) where the Supreme Court held as follows:-
"17.1) The issues (first category) which Chief Justice/his
designate will have to decide are:
(a) Whether the party making the application has approached
the appropriate High Court.
(b) Whether there is an arbitration agreement and whether the
party who has applied under section 11 of the Act, is a party to
such an agreement.
17.2) The issues (second category) which the Chief Justice/his
designate may choose to decide (or leave them to the decision
of the arbitral tribunal) are:
(a) Whether the claim is a dead (long barred) claim or a live
claim.
(b) Whether the parties have concluded the contract/
transaction by recording satisfaction of their mutual rights and
obligation or by receiving the final payment without objection.
17.3) The issues (third category) which the Chief Justice/his
designate should leave exclusively to the arbitral tribunal are :
(i) Whether a claim made falls within the arbitration clause (as
for example, a matter which is reserved for final decision of a
departmental authority and excepted or excluded from
arbitration).
(ii) Merits or any claim involved in the arbitration.
It is clear from the scheme of the Act as explained by this
Court in SBP & Co., that in regard 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 of his Designate chooses
to examine the issue and decides it, the Arbitral Tribunal
cannot re-examine the same issue. The Chief Justice/his
ARB.P.186/2017 Page 5
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."
8. Keeping in view the above, I direct the respondent to refer the balance
claims also to the same arbitral tribunal for adjudication of the disputes
subject to their objection that the said matters are excepted matters.
9. Keeping in view the submissions of learned counsel for the
respondent, it is directed that the arbitral tribunal constituted by the
respondents shall continue to function till the adjudication of the disputes
between the parties and passing of an appropriate Award, as per law. On
transfer or retirement, the member of the Tribunal shall not cease to be on
the Arbitral Tribunal.
10. Petition stands disposed of. All pending applications, if any, also
stand disposed of.
JAYANT NATH, J
SEPTEMBER 26, 2017
n
ARB.P.186/2017 Page 6
