Sri Arun Kumar Dey vs The Oil & Natural Gas Corporation ...
2024 Latest Caselaw 1457 Tri

Tripura High Court

Sri Arun Kumar Dey vs The Oil & Natural Gas Corporation ... on 5 September, 2024

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                        HIGH COURT OF TRIPURA
                              AGARTALA
                               Arb.P. No.03/2024
Sri Arun Kumar Dey, Contractor, son of Late Biraj Mohan Dey, resident of
A.D. Nagar, Police Line, P.O.-A.D. Nagar-799003, P.S.-A.D. Nagar, District-
West Tripura.
                                                       ......... Petitioner(s).
                               VERSUS
The Oil & Natural Gas Corporation Limited (ONGC), represented by its
Executive Director, Tripura Asset, Badharghat Complex, Agartala, P.O.-
ONGC-799014, P.S.-Amtali, District-West Tripura.
                                                      .........Respondent(s).

For Petitioner(s)                : Mr. A. Sengupta, Advocate.
For Respondent(s)                : Mr. Jyotirmoy Das, Advocate.

HON'BLE THE CHIEF JUSTICE MR. APARESH KUMAR SINGH

Order 05/09/2024

Heard Mr. A. Sengupta, learned counsel appearing for the

petitioner and Mr. Jyotirmoy Das, learned counsel appearing for the

respondent-ONGC.

2. In terms of Clause 25 of the agreement dated 26.06.2018 in

relation to execution of the work "Renovation of Dispensary building at

Badharghat Complex, ONGC Tripura Asset, Agartala", petitioner has invoked

Section 11(6) of the Arbitration and Conciliation Act, 1996 as amended for

appointment of an independent and impartial arbitrator by this Court

in the present application. He had approached the competent

authority vide letter dated 18.10.2023 (Annexure-4) to which the respondents

have replied through letter dated 04.01.2024 (Annexure-5). He invoked

the Arbitration clause vide Annexure-6 dated 10.04.2024. The same was

replied by the respondents on 13.05.2024 (Annexure-7). The claims

raised by the petitioner are furnished under paragraph-5(x) and are extracted

hereunder:

 Sl.No.                            Particulars                              Amount
   1.     Whether the claimant-contractor is entitled to get refund of    Rs.3,71,587/-

the amount which was levied and recovered as liquidated damage from the bill of the claimant-contractor.

2. Whether the claimant-contractor is entitled to get refund of Rs.33,554/-

the amount which was deducted by the ONGC from the bill of the claimant contractor as water charges.

3. Whether the claimant is entitled to get refund of the amount Rs.1,00,000/-

which was withheld from his bill as short payment of EPF by the claimant-contractor.

4. Whether the claimant-contractor is entitled to get interest As would be @12% per annum on the demanded sum of Rs.5,05,141/- decided by w.e.f. his demand notice dated 18.10.2023 till the date of Arbitral actual payment. Tribunal

5. Whether the claimant-contractor is entitled to get cost of As would be Arbitration proceeding and incidental thereto and if so to decided by the what extent. Arbitral Tribunal TOTAL Rs.5,05,141/-

3. Learned counsel for the petitioner submits that the respondents do

not have right to deduct EPF contribution from the pending bills of the

petitioner. This claim is, therefore, in the arena of dispute and arbitrable apart

from the other claims of refund of certain amounts recovered as liquidated

damages from the bill of the claimant contractor and towards water charges, i.e.

Rs.3,71,587/- and Rs.33,554/-. Over and above these claims, petitioner is also

entitled to interest over the admissible amount. Reference is made to Clause 25

and specifically Clause 25.1.12 which stipulates that if the parties are not able

to resolve the dispute through OEC or do not opt for conciliation through OEC,

the party may invoke arbitration clause as provided in the contract. He

submitted that the respondents are unnecessarily trying to wriggle out of the

arbitration clause by excluding the claim of Rs.1,00,000/- allegedly deducted

by them against EPF dues of the contractor. The respondents are unnecessarily

trying to harp upon Clause 25.2 by excluding the claim relating to EPF dues to

bring the disputes or claims of a value less than Rs.5,00,000/-. The above stand

of the respondents itself shows that it is a dispute between the parties and can

very well be referred for arbitration. Therefore, this dispute is arbitrable and fit

for independent adjudication by an impartial arbitrator appointed by this Court.

4. Respondents have filed a counter affidavit. A specific stand has

been taken at paragraph-5 to the effect that the first two disputes mentioned at

Sl. No.(i) and (ii) of the claim raised by the petitioner are admitted as

deductions made by the respondents from the bill of the contractor which may

be considered as dispute totalling Rs.(3,71,587/- + 33,554/-) = Rs.4,05,141/-.

However, respondents contend that the third dispute at Sl. No.(iii) of the claim

which relates to withholding of Rs.1,00,000/- from the bill due to non-

submission of documentary proof regarding statutory deposit of EPF amount

by the contractor to the Employee's Provident Fund Organization (EPFO)

against the employees appointed by the contractor during execution of the

contract is a non-arbitrable dispute. They have also referred to Clause

19B(ii)(i) and 19B(ix) of the General Conditions of Contract (GCC), extracts

of which have been enclosed to the counter affidavit. It is their contention that

the contractor is supposed to submit the original invoice along with

documentary evidence of deposit of EPF, like copy of challans etc. for release

of payment as per Clause 8 of the GCC which he has failed to do. As such, the

respondent had no other alternative but to withhold the amount for non-

compliance of Clause 8 of GCC with necessary intimation sent through

Payment Advice which is at page-20 of the petition (Annexure-3). If the

amount of Rs.1,00,000/- claimed as EPF dues is reduced from the total claim,

the dispute relating to Clause (i) and (ii) goes out of the purview of Arbitration

Clause 25.2 as the value of the claim is less than Rs.5,00,000/-. Learned

counsel for the respondent, therefore, submits that the present petition raising

dispute for reference to an arbitration cannot be allowed as the terms and

conditions of the agreement do not permit reference of dispute less than

Rs.5,00,000/- to an independent arbitrator and moreover, disputes relating to

EPF claims are non-arbitrable.

5. Learned counsel for the petitioner in reply submits that the

respondent has no authority to deduct any amount in lieu of EPF dues payable

by the contractor and withhold it on the ground that relevant documentary

proof has not been submitted by him. As such, this dispute is in the arena of

arbitrable disputes. Therefore, reference may be made to an independent

arbitrator for adjudication of the claims raised by the petitioner.

6. I have considered the submissions of learned counsel for the

parties and taken note of the relevant materials placed on record. I have also

taken note of the nature of disputes raised by the petitioner in the light of the

rival contentions of the parties that certain disputes accepted by the respondent

are arbitrable but disputes relating to EPF claims are non-arbitrable.

7. Relevant Arbitration and Conciliation Clauses of the agreement

dated 26.06.2018 are quoted hereunder which are relevant for the purposes of

consideration of the case:

CLAUSE 25: ARBITRATION & CONCILIATION

25.1 Resolution of disputes through conciliation by OEC (Not applicable in cases valuing less than Rs. 5 lakhs):

If any dispute, difference, question or disagreement arises between the parties hereto or their respective representatives or assignees, in connection with construction, meaning, operation, effect, interpretation of the contract or breach thereof which parties are unable to settle mutually, the same may first be referred to conciliation through Outside Expert Committee ("OEC") to be constituted by CMD, ONGC as provided hereunder.

25.1.12 If the parties are not able to resolve the dispute through OEC or do not opt for conciliation through OEC, the party may invoke arbitration clause as provided in the contract.

25.2 Arbitration (Applicable in case of supply order/contracts with firms, other than Public Sector Enterprises) (Not applicable in cases valuing less than Rs.5 lakhs).

25.2.1 A party wishing to commence arbitration proceeding shall invoke Arbitration Clause by giving 60 days notice to the other party. The notice invoking arbitration shall specify all the points of disputes with details of the amount claimed to be referred to arbitration at the time of invocation of arbitration and not thereafter. If the claim is in foreign currency, the claimant shall indicate its value in Indian Rupee for the purpose of constitution of the arbitral tribunal.

25.2.2 The number of the arbitrators and the appointing authority will be as under:

Claim amount (excluding Number of arbitrators Appointing authority claim for interest and counter claim, if any) Upto Rs. 50 lakhs Sole Arbitrator to be ONGC(Note:- ONGC will appointed from a panel of forward a list containing retired officers from names of five retired ONGC/other PSU/Non- PSU officers from ONGC/other organisations PSU/Non-PSU organizations for selecting one from the list who will be appointed as sole arbitrator by ONGC) Above Rs.50 lakhs to Rs. 5 Sole Arbitrator to be ONGC (Note:- ONGC will Crores appointed from a panel of forward a list containing retired Jurists names of five jurists to the other party for selecting one from the list who will be appointed as sole arbitrator by ONGC) Above Rs. 5 Crores 3 Arbitrators One arbitrator by each party and the 3rd arbitrator, who shall be the presiding arbitrator, by the two arbitrators. ONGC will appoint its arbitrator from the panel of jurists.

8. From the claims raised by the petitioner, it is apparent that one of

the claims relates to refund of the amount deducted from the contractor's bill as

short payment of EPF by the claimant-contractor. In this regard, it is relevant to

refer to Clause 19 which relates to compliance of Labour Laws by the

contractor and in particular, Clause 19B, 19B(i), 19B(ii), 19B(ix)(a) and

19B(xi) which are extracted hereunder:

"CLAUSE 19B: PAYMENT OF WAGES:

(i) The Contractor shall pay to his workmen, employed by him not less than minimum wages fixed by the appropriate labour authority from time to time.

(ii) The Contractor shall comply with the provision of all applicable laws including labour laws, regulations and notifications, including:

a) The Minimum Wages Act, 1948 Rules, Orders, and Notifications issued thereunder from time to time, from the office of Regional Labour Commissioner/Asstt. Labour Commissioner, Govt. of India.

b) The Contract Labour (Regulation & Abolition) Act, 1970 with Rules, orders and notifications issued thereunder from time to time.

c) The Industrial Disputes Act, 1947 with Rules, Orders and Notifications issued thereunder from time to time.

d) The Workmen's Compensation Act, 1923 with Rules, Orders and Notifications issued thereunder from time to time.

e) The Mines Act, 1952 (if applicable), Factories Act, 1948 or Shops and Establishment Act, whichever applicable with Rules, Orders and Notifications issued thereunder from time to time.

f) The Payment of Gratuity Act, 1972 with Rules, Orders and Notifications issued thereunder from time to time.

g) The Payment of Bonus Act, 1965 with Rules, Orders and Notifications issued thereunder from time to time.

h) Payment of Wages Act, 1936 with Rules, Orders and Notifications issued thereunder from time to time.

i) The Employees Provident Fund & Misc. Provisions Act, 1952 with Rules, Orders and Notifications issued thereunder from time to time.

j) ESI act 1948 (if applicable).

k) The Maternity Benefit Act, 1961.

1) Inter State Migrant Workmen Act, 1979.

m) All other Acts/Rules/regulations, Bye-Laws, Orders, Notifications etc. present or future, applicable to the CONTRACTOR from time to time, for executing the work.

19B(ix)(a).

The Project Manager/Engineer-in-charge shall have the right to deduct from the moneys due to the contractor any sum required or expected to be required for making good the loss suffered by a worker or workers by reason for non-fulfilment of the conditions of the contract for the benefit of the workers, non-payment of wages or of deductions made from his or their wages which are not justified by their terms of the contract or non-observance of the Regulations.

19B(xi).

The laws aforesaid shall be deemed to be part of his contract and any breach thereof shall be deemed to be a breach of this contract."

9. Clause 8 which relates to Invoice submission is also extracted

hereunder:

"Clause 8: Invoice Submission 8.1 The contractor shall submit invoices(s) once in each month along with four copies, with all required supporting documents and details of the said work to ONGC Representative for certification of the said invoice, for approval of the amount payable and payment thereafter.

The payment to the agency will be made once in a month, on the basis of actual days for which supervisor services were provided for both type of categories. Work is to be performed for about 8 hours daily during execution of work at various sites of ONGC, Tripura Asset Agartala, (excluding the journey time up to that site of execution) however the activity may prolong even after evening depending upon the nature of activity and/the requirement at site). However, in certain cases, the site supervision engineer may have to work for a longer period, in case of the execution of any critical activity like concreting of main foundation etc. The Original invoice should also accompany the following documents/details:

(i) Along with first invoice:

Following documents/details should be invariably furnished along with the first invoice:

a) Copy of valid registration under the GST rules.

b) Particulars required for making payments through 'Electronic Payment Mechanism', in accordance with clause 8.7 below.

c) Mobile No. (Optional).

d) E-mail ID.

(ii) Periodical/Monthly Payment:

a) Invoice (i.e., Tax invoice as per relevant GST rules, in original and duplicate, clearly indicating GST registration number, Service Classification, Rate and amount of GST shown separately).

b) Insurance policies and proof of payment of premium (As applicable).

c) Details of statutory payments like EPF and ESI (as per clause below), etc., (As applicable).

d) Undertaking by the contractor regarding compliance of all statutes.

e) Any other document specifically mentioned in the Contract, or supporting documents in respect of other claims (if any), permissible under the contract.

f) Agency shall submit invoice for actual technical supervisor working days each site wise separately in consultation with Engineer in- charge/ Project manager for financial accounting.

g) Attendance signed by EIC."

10. On a close scrutiny of the relevant clauses of the agreement, the

first inference which can be drawn is that if the value of the case is less than

Rs.5 lakhs, arbitration is not applicable in case of supply orders/contracts with

firms, other than Public Sector Enterprises under Clause 25.2. A reading of

Clause 19B and its sub-clauses extracted above shows the liability of the

contractor to comply with provisions of applicable Labour Laws, regulations

and notifications which include other Labour Acts such as, Minimum Wages

Act, 1948, Contract Labour (Regulation & Abolition) Act, 1970, Industrial

Disputes Act, 1947, the Workmen's Compensation Act, 1923, the Mines Act,

1952 (if applicable), Factories Act, 1948 (if applicable), the Payment of

Gratuity Act, 1972, the Payment of Bonus Act, 1965, the Payment of Wages

Act, 1936 and the Employees Provident Fund and Misc. Provisions Act, 1952

also with Rules, Orders and Notifications issued thereunder from time to time.

Sub-clause (ix)(a) of Clause 19B provides that the Project

Manager/Engineer-in-charge shall have the right to deduct from the moneys

due to the contractor any sum required or expected to be required for making

good the loss suffered by a worker or workers by reason for non-fulfilment of

the conditions of the contract for the benefit of the workers, non-payment of

wages or of deductions made from his or their wages which are not justified by

their terms of the contract or non-observance of the Regulations.

Sub-clause (xi) of Clause 19B provides that the aforesaid laws are

deemed to be part of the contract and any breach thereof shall be deemed to be

a breach of the contract.

Under Clause 8, it is the obligation of the contractor to submit

invoices including details of statutory payments like EPF and ESI as

applicable.

There are no pleadings to the effect that petitioner has duly

deposited the EPF contributions with the EPFO as per the Act of 1952.

Petitioner has also not enclosed documentary proof as regards payment of such

dues in lieu of which petitioner claims refund as deductions have been made by

the respondent from his bills in the capacity of "employer" as per Section 2(e)

of the Act.

11. Learned counsel for the petitioner has raised a question that the

respondents are not entitled to deduct any contribution towards Employees

Provident Fund in terms of the Employees' Provident Funds and Miscellaneous

Provisions Act, 1952 and as such, withholding of the said amount is illegal.

The terms and conditions of the agreement/ contract between the parties

stipulate deduction on the part of the employer, i.e. the respondent of sums

which are for the benefit of workers from the dues of the contractor due to non-

payment of wages or of deductions made from his or their wages. The scheme

of the Act of 1952 provides a complete mechanism on the determination of the

liability of the employer or the contractor of making such contributions and the

applicability of the Act. Such a dispute relating to either the applicability of the

Act of 1952 upon the parties herein or the liability of the employer or the

contractor to make deductions and deposit the contributions to the EPF

authorities fall in the adjudicatory functions of the statutory authorities under

the relevant statute like the Act of 1952 by express and necessary implication.

As such, the legislative intention is to exclude arbitration in such matters is

apparent since the statute provides for determination of the rights and liabilities

to be dealt with by the specified Courts or Tribunals or authorities duly

constituted in that behalf under the said legislation.

12. The Apex Court in the case of Vidya Drolia & others vrs. Durga

Trading Corporation reported in (2021) 2 SCC 1 has clearly delineated

sovereign functions of the State which are inalienable and non-delegable and as

such, non-arbitrable in comparison to arbitrable disputes involving commercial

activities, economic adventures etc. The opinion of the Apex Court is extracted

hereunder:

"50. Sovereign functions of the State being inalienable and non- delegable are non-arbitrable as the State alone has the exclusive right and duty to perform such functions. [Ajar Raib, "Defining Contours of the Public Policy Exception -- A New Test for Arbitrability", Indian Journal for Arbitration Law, Vol. 7 (2018) p. 161.] For example, it is generally accepted that monopoly rights can only be granted by the State. Correctness and validity of the State or sovereign functions cannot be made a direct subject-matter of a private adjudicatory process. Sovereign functions for the purpose of Arbitration Act would extend to exercise of executive power in different fields including commerce and economic, legislation in all forms, taxation, eminent domain and police powers which includes maintenance of law and order, internal security, grant of pardon, etc. as distinguished from commercial activities, economic adventures and welfare activities. [Common Cause v. Union of India, (1999) 6 SCC 667 : 1999 SCC (Cri) 119 and Agricultural Produce Market Committee v. Ashok Harikuni, (2000) 8 SCC 61.] Similarly, decisions and adjudicatory functions of the State that have public interest element like the legitimacy of marriage, citizenship, winding up of companies, grant of patents, etc. are non-arbitrable, unless the statute in relation to a regulatory or adjudicatory mechanism either expressly or by clear implication permits arbitration. In these matters the State enjoys monopoly in dispute resolution.

XXXXXXXXXXXXXXXXXXXXXX

58. Consistent with the above, observations in Transcore [Transcore v. Union of India, (2008) 1 SCC 125 : (2008) 1 SCC (Civ) 116] on the power of the DRT conferred by the DRT Act and the principle enunciated in the present judgment, we must overrule the judgment of the Full Bench of the Delhi High Court in HDFC Bank Ltd. v. Satpal Singh Bakshi [HDFC Bank Ltd. v. Satpal Singh Bakshi, 2012 SCC OnLine Del 4815 : (2013) 134 DRJ 566] , which holds that matters covered under the DRT Act are arbitrable. It is necessary to overrule this decision and clarify the legal position as the decision in HDFC Bank Ltd. [HDFC Bank Ltd. v. Satpal Singh Bakshi, 2012 SCC OnLine Del 4815 : (2013) 134 DRJ 566] has been referred to in M.D. Frozen Foods Exports (P) Ltd. [M.D. Frozen Foods Exports (P) Ltd. v. Hero Fincorp Ltd., (2017) 16 SCC 741 : (2018) 2 SCC (Civ) 805] , but not examined in light of the legal principles relating to non- arbitrability. The decision in HDFC Bank Ltd. [HDFC Bank Ltd. v. Satpal Singh Bakshi, 2012 SCC OnLine Del 4815 : (2013) 134 DRJ 566] holds that only actions in rem are non-arbitrable, which as elucidated above is the correct legal position. However, non- arbitrability may arise in case of the implicit prohibition in the statute, conferring and creating special rights to be adjudicated by the courts/public fora, which right including enforcement of order/provisions cannot be enforced and applied in case of arbitration. To hold that the claims of banks and financial institutions covered under the DRT Act are arbitrable would deprive and deny these institutions of the specific rights including the modes of recovery specified in the DRT Act. Therefore, the claims covered by the DRT Act are non-arbitrable as there is a prohibition against waiver of

jurisdiction of the DRT by necessary implication. The legislation has overwritten the contractual right to arbitration."

13. Therefore, the contention of the respondent that the claim for

refund of Rs.1 lakh deducted towards EPF contributions is non-arbitrable and

not fit to be referred to for arbitration is correct and justified. In such

circumstances, subtraction of claim of Rs.1 lakh under Clause (iii) would bring

the value of the dispute below Rs.5 lakhs, in more specific terms Rs.4,05,141/-,

apart from the last claim of interest on refund on such amount if adjudicated in

favour of the claimant, which cannot be referred to arbitration in view of

Clause 25.2 of the agreement between the parties noticed above since the value

of such claims are less than 5 lakhs."

14. In such circumstances, this Court is of the considered view that

not only the claim relating to refund of EPF contributions is in the arena of

non-arbitrable disputes but the remaining claims are excepted from arbitration

under Clause 25.2 of the agreement dated 26.06.2018 entered into between the

parties.

15. As such, this Court does not find any merit in the instant

application seeking reference of the claims to an independent arbitrator in

exercise of the powers under Section 11(6) of the Arbitration and Conciliation

Act, 1996 (as amended). Petition is accordingly dismissed.

Pending application(s), if any, shall also stand disposed of.

                                            (APARESH KUMAR SINGH), CJ



Pulak


SIDDHARTHA                      Digitally signed by SIDDHARTHA
                                LODH
LODH                            Date: 2024.09.12 17:06:11 +05'30'