Delhi High Court
Aroon Aviation Services Pvt Ltd vs Union Of India on 10 October, 2022
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision : 10th October, 2022
+ CS(COMM) 71/2021 & I.A. 2196/2021 (O-XXXIX R-1 & 2 of CPC)
AROON AVIATION SERVICES PVT LTD ..... Plaintiff
Through: Mr.Ashish Mohan, Mr.Samarth
Chowdhary and Ms.Sagrika Tanwar,
Advocates.
versus
UNION OF INDIA ..... Defendant
Through: Mr.Jagjit Singh, Sr.Standing Counsel
for Railways.
CORAM:
HON'BLE MR. JUSTICE AMIT BANSAL
AMIT BANSAL, J. (ORAL)
I.A. 14088/2021 (u/S 8 of A&C Act.)
1. The present application has been filed on behalf of the
applicant/defendant under Section 8 of the Arbitration and Conciliation Act,
1996 seeking to refer the present dispute for arbitration in terms of the
arbitration clause contained in the agreement between the parties.
2. Notice was issued on the application on 28th October, 2021. Reply has
been filed on behalf of the plaintiff.
3. Submissions on the counsel for the plaintiff were heard on 29th July,
2022 and the matter was posted for hearing on 22nd September, 2022, when
the parties were asked to take instructions with regard to the matter being
referred to a sole arbitrator. Pursuant to the said order, counsel for the
defendant submits that the defendant is agreeable to all disputes between the
Signature Not Verified
Digitally Signed By:AMIT
BANSAL
CS(COMM) 71/2021 Page
Signing 1 of 6
Date:11.10.2022 18:22:06
parties being referred to a sole arbitrator to be appointed by this Court.
However, counsel for the plaintiff submits that he has instructions to the
contrary and submits that the matter may be decided by the Court on merits.
4. It is the case of the plaintiff that the reliefs sought qua prayers A, B, C
and D are in respect of 'excepted matters' in the contract and therefore, the
same are not arbitrable. In respect of prayer E and F, which are claims for
recovery and damages, he submits that though the same may not be
'excepted matters,' the plaintiff would have to combine all of its claims and
the present suit could not be filed only in respect of prayers E and F.
Reliance in this regard is placed on the judgment of the Supreme Court in
Sukanya Holdings (P) LTD. v. Jayesh H. Pandya and Anr., (2003) 5 SCC
531.
5. Per contra, counsel for the defendant places reliance on Clause 8.1 of
the General Conditions of Contract for Services (GCC) to submit that the
present dispute is not covered under the 'excepted matters' and therefore,
the matter should be referred for arbitration.
6. I have heard the counsels for the parties.
7. At the outset, it may be relevant to refer to the relevant clauses of the
GCC with regard to settlement of disputes.
"8.1 Matters Finally Determined by the Railways
All disputes and differences of any kind whatsoever arising out of or
in connection with the contract, whether during the progress of the
work or after its completion and whether before or after the
determination of the contract, shall be referred by the contractor to
the GM and the GM shall, within 120 days after receipt of the
contractor's representation, make and notify decisions on all matters
referred to by the contractor in writing provided that maters for
which provision has been made in Clauses 3.5, 4.13, 4.22.4, 4.41.1,
Signature Not Verified
Digitally Signed By:AMIT
BANSAL
CS(COMM) 71/2021 Page
Signing 2 of 6
Date:11.10.2022 18:22:06
5.4.2, 5.5.2(c), 6.5, 6.6, 6.7, 7.1, 7.2 and 7.4 and sub clauses thereof
of General Conditions of Contract for Services or in any Clause of
the Special Conditions of the Contract shall be deemed as 'excepted
matters' (matters not arbitrable) and decisions of the Railway
authority, thereon shall be final and binding on the contractor
provided further that 'excepted matters' shall stand specifically
excluded from the purview of the Arbitration Clause.
8.2 Demand for Arbitration
8.2.1. In the event of any dispute or difference between the parties
hereto as to the construction or operation of this contract, or the
respective rights and liabilities of the parties on any matter in
question, dispute or difference on any account or as to the
withholding by the Railway falls to make a decision within 120 days,
then and in any such case, but except in any of the "excepted
matters" referred to in Clause 63 of these conditions the contractor,
after 120 days but within 180 days of his presenting his final claim
on disputed matters shall demand in writing that the dispute or
difference be referred to arbitration."
8. A perusal of the clause 8.1 above shows that disputes between the
parties pertaining to clause 7.4 of the agreement as well as Special
Conditions of Contract (SCC) would be deemed to be 'excepted matters' not
subject to arbitration. The clause further provides that all disputes shall be
referred by the contractor to the General Manager and the General Manager
shall take a decision thereon within 120 days, which shall be final and
binding. Pursuant to clause 8.1, the plaintiff sent a representation dated 24th
August, 2022 against the Termination Notice dated 18th August, 2020 to the
General Manager, Northern Railway, New Delhi. In the said representation,
specific reference has been made to clause 8.1 of the GCC and the General
Manager was called upon to set aside the Termination Notice. The aforesaid
representation made on behalf of the plaintiff was rejected by the Assistant
Commercial Manager of the defendant vide letter dated 28th January, 2021.
Signature Not Verified
Digitally Signed By:AMIT
BANSAL
CS(COMM) 71/2021 Page
Signing 3 of 6
Date:11.10.2022 18:22:06
9. In view thereof, the plaintiff has filed the present suit seeking the
following reliefs:
A. Pass a decree of declaration declaring the Termination Notice dated
18.08.2020 along with the order dated 01.02.2021 rejecting the Appeal
of the Plaintiff and upholding the Termination Notice as arbitrary,
illegal, mala fide and contrary to the terms of the Contract,
B. Pass a decree of permanent injunction restraining the Defendant from
acting in pursuance of the Orders dated 18.08.2020 and 01.02 2021;
C. Pass a decree of prohibitory and permanent injunction restraining the
Defendant from encashing or forfeiting the Performance Guarantee
furnished by the Plaintiff,
D. Pass a decree of prohibitory and permanent injunction restraining the
Defendant from debarring the Plaintiff from all future tenders of the
Moradabad Division for a period of 2 years;
E. Pass a decree for recovery of an amount of Rs.78,13,657/(Rupees
Seventy Eight Lakhs Thirteen Thousand Six Hundred Fifty Seven Only)
along with pie-suit, pendente lite and future interest @ 18 % p.a.;
F. Pass a decree of damages on account of future loss of profits
amounting to Rs 28,33,333/- along with pie-suit, pendent lite and
future interest @ 18 % p.a.;
10. Clearly, reliefs A and B above are related to clause 7.4 of the contract
and therefore, fall within the 'excepted matters' under the contract which
cannot be referred for arbitration. Similarly, reliefs C and D relate to clause
68 of the SCC and once again, form part of the 'excepted matters' which
cannot be referred for arbitration. As regards reliefs E and F above, prayer E
is towards the recovery for payments due to the plaintiff under the contract
Signature Not Verified
Digitally Signed By:AMIT
BANSAL
CS(COMM) 71/2021 Page
Signing 4 of 6
Date:11.10.2022 18:22:06
and prayer F is for damages sought on account of wrongful termination of
the contract.
11. The Supreme Court in Sukanya Holdings (P) LTD. (supra), while
dealing with an application under Section 8 of the Arbitration and
Conciliation Act, 1996, observed that if some of the disputes in a contract
are arbitrable and others are not arbitrable, under Section 8 there cannot be
any bifurcation of the subject matter/cause of action in respect of a suit filed
before the Court. Relevant observations of the Supreme Court in paragraphs
16 and 17 of the said judgment are set out below:
"16. The next question which requires consideration is -- even if
there is no provision for partly referring the dispute to arbitration,
whether such a course is possible under Section 8 of the Act. In our
view, it would be difficult to give an interpretation to Section 8
under which bifurcation of the cause of action, that is to say, the
subject-matter of the suit or in some cases bifurcation of the suit
between parties who are parties to the arbitration agreement and
others is possible. This would be laying down a totally new
procedure not contemplated under the Act. If bifurcation of the
subject-matter of a suit was contemplated, the legislature would
have used appropriate language to permit such a course. Since there
is no such indication in the language, it follows that bifurcation of
the subject-matter of an action brought before a judicial authority is
not allowed.
17. Secondly, such bifurcation of suit in two parts, one to be
decided by the Arbitral Tribunal and the other to be decided by the
civil court would inevitably delay the proceedings. The whole
purpose of speedy disposal of dispute and decreasing the cost of
litigation would be frustrated by such procedure. It would also
increase the cost of litigation and harassment to the parties and on
occasions there is possibility of conflicting judgments and orders by
two different forums."
Signature Not Verified
Digitally Signed By:AMIT
BANSAL
CS(COMM) 71/2021 Page
Signing 5 of 6
Date:11.10.2022 18:22:06
12. The dicta of the aforesaid judgment is squarely applicable to the facts
of the present case.
13. In view of the fact that the disputes raised in the plaint contain both
'excepted matters' that are not arbitrable as well as matters covered under
the arbitration clause, it would not be appropriate for the Court to refer part
of the dispute for arbitration under Section 8 of the Arbitration and
Conciliation Act, 1996. Such a scenario would delay the proceedings as well
as add to the cost of litigation. In the facts of the present case, there would
also be a distinct possibility of two different forums delivering conflicting
judgments.
14. In view of the discussion above, the present application is dismissed.
CS(COMM) 71/2021
15. Counsel for the plaintiff submits that in view of the fact that the
written statement has not been filed on behalf of the defendant and the
maximum permissible period for filing written statement is already over, the
present suit being a commercial suit, no further time may be given to the
defendant to file a written statement.
16. On the other hand, counsel for the defendant submits that the date for
filing of the written statement commences from the dismissal of the
application under Section 8 of the Arbitration and Conciliation Act, 1996.
17. Both the counsels to place judgments in support of their contentions.
18. List for hearing on 2nd February, 2023.
AMIT BANSAL, J.
OCTOBER 10, 2022/sr
Signature Not Verified
Digitally Signed By:AMIT
BANSAL
CS(COMM) 71/2021 Page
Signing 6 of 6
Date:11.10.2022 18:22:06
