Rajasthan High Court

M/S. S.R. Goyal And Co vs Union Of India Through The General ... on 24 August, 2022

Bench: Pankaj Bhandari

       HIGH COURT OF JUDICATURE FOR RAJASTHAN
                   BENCH AT JAIPUR

             S.B. Arbitration Application No. 56/2021

M/s. S.R. Goyal & Co., 381, Naya Bazar, Ajmer-305001 Through
Proprietor Shri Sita Ram Goyal
                                                                  ----Applicant
                                   Versus
1.     Union Of India Through The General Manager, North
       Western Railway, Head Quarter Office, Jawahar Circle,
       Jaipur.
2.     The Divisional Railway Manager, North Western Railway,
       DRM Office, Ajmer.
3.     The Senior Divisional Engineer (East), North Western
       Railway, DRM Office, Ajmer.
                                                                ----Respondents

For Applicant(s) : Mr. Devi Dutt Sharma with Mr. Sanjog Kamal Sharma For Respondent(s) : Mr. Intjar Ali

HON'BLE MR. JUSTICE PANKAJ BHANDARI

Order

RESERVED ON :: 27/07/2022 PRONOUNCED ON :: 24/08/2022

1. The applicant has filed this arbitration application under

Sections 10 & 11 of the Arbitration and Conciliation Act, 1996

(Amended Act, 2015)(hereinafter referred to as 'the Arbitration

Act') for appointment of an independent arbitrator.

2. It is pleaded in the arbitration application that a work order

was issued to the applicant on 28.11.2003 and a formal

agreement was executed on 13.01.2004. The completion period of

the work was 18 months and scheduled date of completion was

27.05.2002. It is also pleaded in the arbitration application that

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the work was completed on 15.03.2009, but the respondent did

not prepare the final bill and did not pay the dues to the applicant.

The applicant wrote various letters to the respondent for payment

of the work executed and also for the balance work. The

respondent neither made payment of the final bill nor released the

security deposit/earnest money of the applicant and also did not

agree for extra cost due to delay in work and substantial rejection

in execution of the work. The applicant-claimant claimed a sum of

Rs.20,00,000/- and has prayed that a Retired High Court Judge be

appointed as an independent arbitrator.

3. The respondent has submitted the reply to the arbitration

application. It is pleaded in the reply that as per Clause 64(1)(v)

of the General Conditions of the Contract, if the Contractor(s)

does/do not prefer his/their specific and final claims in writing,

within a period of 90 days of receiving the intimation from the

Railways that the final bill is ready for payment, he/they will be

deemed to have waived his/their claim(s) and the Railway shall be

discharged and released of all liabilities under the contract in

respect of these claims. It is also pleaded in the reply that as per

Clauses 63.1 and 64(1)(i) of the General Conditions of the

Contract, the matter falls under the 'excepted matters' and is not

arbitrable. It is stated in the reply that the applicant has signed

the No Claim Certificate, which came under Clause 43(2) of the

General Conditions of the Contract and is not arbitrable. It is also

stated that the Railways vide their letter dated 28.01.2021 in reply

to the applicant's demand of arbitration specifically mentioned that

the No Claim Certificate was submitted on 31.01.2014, the final

bill was passed on 16.06.2014 and security deposit was released

on 18.12.2018 whereas demand of arbitration was made on

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05.06.2019. The Railways rejected the demand as the claim falls

under 'excepted matters' and the claim was not made within the

specified time frame as per Clause 64(1)(v) of the General

Conditions of the Contract.

4. It is contended by the counsel for the applicant that the

claim was not settled by the respondent and merely because a No

Claim Certificate has been given, that does not debar the applicant

from moving an application for appointment of an arbitrator.

Counsel for the applicant has placed reliance on The Union of

India Versus Parmar Construction Company: 2019(2) Arb.LR

328 (SC).

5. It is contended by the counsel for the respondent that the

claim is clearly barred as the applicant has given the No Claim

Certificate and has not raised any dispute with regard to the final

bill within 90 days as prescribed in the Contract. Counsel for the

respondent has placed reliance on G.M., Northern Railways Versus

Sarvesh Chopra: 2002 LawSuit(SC) 274.

6. I have considered the contentions and have carefully perused

the material on record.

7. For properly appreciating the controversy, it is appropriate to

reproduce Clauses 43(2), 63.1 and 64(1)(v) of the General

Conditions of Contract:-

"43(2). Signing of "No Claim" Certificate: The Contractor shall not be entitled to make any claim whatsoever against the Railway under or by virtue of or arising out of this contract, nor shall the Railway entertain or consider any such claim, if made by the Contractor, after he shall have signed a "No Claim" Certificate in favour of the Railway in such form as shall be required of the Railway in such form as shall be required by the Railway after the works are finally measured up. The Contractor shall be debarred from

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disputing the correctness of the items covered by "No Claim" Certificate or demanding a clearance to arbitration in respect thereof.

63.1 Matters Finally Determined by The Railway: All disputes and differences of any kind whatsoever arising out of or in connection with the contract, whether during the process 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 matters for which provision has been made in Clauses 8, 18, 22(5), 39, 43(2), 45(a), 55, 55-A(5), 57, 57A, 61(1), 61(2) and 62(1) to (xiii)(B) of Standard General Conditions of Contract or in any Clause of the Special Conditions of the Contract shall be deemed as 'excepted matters' (matters nor 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.

64(1)(v): If the Contractor(s) does/do not prefer his/their specific and final claims in writing, within a period of 90 days of receiving the intimation from the Railways that the final bill is ready for payment, he/they will be deemed to have waived his/their claim(s) and the Railway shall be discharged and released of all liabilities under the contract in respect of these claims."

8. The moot question before the Court is whether the dispute is

non-arbitrable in view of the General Conditions of the Contract.

From bare perusal of Annexure-R/1, it is evident that No Claim

Certificate was given by the applicant on 31.01.2014. It is also

evident from the reply given by the Railways that they have

rejected the prayer for arbitration as the same falls under

'excepted matters' and the claim was not made within the

specified time as per Clause 64(1)(v) of the General Conditions of

the Contract.

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9. In Indian Oil Corporation Limited Versus NCC Limited: Civil

Appeal No.342 of 2022, the Apex Court was dealing with the

'exception clauses' in the arbitration agreement as well as with the

question of non-arbitrability and held as under:

"10.2 It cannot be disputed that both the parties are governed by the GCC. The GCC are the part of the Agreements / Contracts between the parties. Under the GCC, the parties have agreed to resolve the dispute between them only in terms of the relevant clauses of the GCC referred to hereinabove. The parties have agreed that certain specified disputes alone will be the subject of arbitration. 10.3 In the case of Narbheram Power & Steel (P) Ltd. (supra), it is observed and held that the parties are bound by the Clauses enumerated in the policy and the Court does not transplant any equity to the same by re writing a clause. It is further observed and held that an arbitration clause is required to be strictly construed. Any expression in the clause must unequivocally express the intent of arbitration. It can also lay the postulate in which situations the arbitration clause cannot be given effect to. It is further observed that if a clause stipulates that under certain circumstances there can be no arbitration and they are demonstrably clear then the controversy pertaining to appointment of Arbitrator has to be put to rest (Paras 1023). 10.9 At this stage, a recent decision of this Court in the case of Vidya Drolia (supra), which, as such, is postinsertion of Section 11(6A) of the Arbitration Act, is required to be referred to. In the said decision it is observed and held that the issue of nonarbitrability of a dispute is basic for arbitration as it relates to the very jurisdiction of the Arbitral Tribunal. An Arbitral Tribunal may lack jurisdiction for several reasons and nonarbitrability has multiple meanings. After referring to another decision of this Court in the case of Booz Allen & Hamiltan Inc. v. SBI Home Finance Ltd. [(2011) 5 SCC 532 (Para 34)], it is observed and held that there are facets of non arbitrability, namely "(i) Whether the disputes are capable of adjudication and settlement by arbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties (the Arbitral Tribunal) or whether they would exclusively fall within the domain of public fora (courts).

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(ii) Whether the disputes are covered by the arbitration agreement? That is, whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the "excepted matters" excluded from the purview of the arbitration agreement.

(iii) Whether the parties have referred the disputes to arbitration? That is, whether the disputes fall under the scope of the submission to the Arbitral Tribunal, or whether they do not arise out of the statement of claim and the counterclaim filed before the Arbitral Tribunal. A dispute, even if it is capable of being decided by arbitration and falling within the scope of an arbitration agreement, will not be "arbitrable" if it is not enumerated in the joint list of disputes referred to arbitration, or in the absence of such a joint list of disputes, does not form part of the disputes raised in the pleadings before the Arbitral Tribunal."

After referring to and considering in detail the earlier decisions on the point, more particularly, with respect to non-arbitrability and the 'excepted matters', it is ultimately concluded in para 76 as under:

"76. In view of the above discussion, we would like to propound a four fold test for determining when the subject matter of a dispute in an arbitration agreement is not arbitrable:

76.1. (1) When cause of action and subject matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem.

76.2. (2) When cause of action and subject matter of the dispute affects third party rights; have erga omnes effect; require centralized adjudication, and mutual adjudication would not be appropriate and enforceable;

76.3. (3) When cause of action and subject matter of the dispute relates to inalienable sovereign and public interest functions of the State and hence mutual adjudication would be unenforceable;

76.4 (4) When the subject matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statute(s).

76.5 These tests are not watertight compartments; they dovetail and overlap, albeit when applied

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holistically and pragmatically will help and assist in determining and ascertaining with great degree of certainty when as per law in India, a dispute or subject matter is non-arbitrable. Only when the answer is affirmative that the subject matter of the dispute would be non-arbitrable."

10. The Apex Court in Bharat Sanchar Nigam Ltd. & Anr. Versus

M/s. Nortel Networks India Pvt. Ltd.: Civil Appeal Nos.843-844

of 2021 decided on 10.03.2021 had an occasion to consider the

decision in the case of Vidya Drolia & Ors. Versus Durga Trading

Corporation: (2021) 2 SCC 1 and held as under:

"46. The upshot of the judgment in Vidya Drolia [Vidya Drolia v. Durga Corpn., (2021) 2 SCC 1: (2021) 1 SCC (Civ) 549] is affirmation of the position of law expounded in Duro Felguera [Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729 : (2017) 4 SCC (Civ) 764] and Mayavati Trading [Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman, (2019) 8 SCC 714 : (2019) 4 SCC (Civ) 441], which continue to hold the field. It must be understood clearly that Vidya Drolia [Vidya Drolia v. Durga Corpn., (2021) 2 SCC 1: (2021) 1 SCC (Civ) 549] has not resurrected the pre-amendment position on the scope of power as held in SBP & Co. v. Patel Engg. Ltd. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618].

47. It is only in the very limited category of cases, where there is not even a vestige of doubt that the claim is ex facie time-barred, or that the dispute is non-arbitrable, that the court may decline to make the reference. However, if there is even the slightest doubt, the rule is to refer the disputes to arbitration, otherwise it would encroach upon what is essentially a matter to be determined by the tribunal. 53.2. In rare and exceptional cases, where the claims are ex facie time-barred, and it is manifest that there is no subsisting dispute, the Court may refuse to make the reference."

11. Coming to the facts of the present case, admittedly there is

an exception clause in the General Conditions of the Contract.

Clause 63.1 makes a proviso that Clauses 8, 18, 22(5), 39, 43(2),

45(A), 55, 55-A(5), 57, 57A, 61(1), 61(2) and 62(1) of Standard

General Conditions of Contract or in any Clause (stated as

excepted matter) of the Special Conditions of the Contract, shall

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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.