Supreme Court of India
INDIAN OIL CORPORATION LIMITEDversusNCC LIMITED
- Citation
- 2022 INSC 735
- Decided
- 20 July 2022
- Disposal
- Disposed off
- Bench
- M R SHAH
Holding
The Court held that while questions of accord and satisfaction and the status of Notified Claims are debatable and should be left to the arbitral tribunal, the Court may still consider them at the Section 11 stage if the facts are clear, and therefore the High Court did not err in referring the disputes to arbitration, but misinterpreted the scope of excluded matters.
Summary
The dispute arose from a contract between Indian Oil Corporation Limited (IOCL) and NCC Limited (NCCL) for civil and structural works at Paradip Refinery, where NCCL submitted a final bill including "Notified Claims" and sought an extension of time. IOCL released a payment of Rs.4,53,04,021/- and returned NCCL's bank guarantee, after which NCCL alleged that the payment was made under duress and that its Notified Claims were not settled. The parties invoked the arbitration clause in the General Conditions of Contract (GCC), but the clause excluded matters such as whether a claim is a Notified Claim or whether there is accord and satisfaction. The Delhi High Court, exercising powers under Section 11(6) of the Arbitration and Conciliation Act, appointed a sole arbitrator for several petitions, a decision challenged by IOCL. The Supreme Court held that issues of accord and satisfaction and the status of Notified Claims are debatable and should be decided by the arbitral tribunal, but the Court may still consider them at the Section 11 stage if facts are clear. Consequently, the Court dismissed the appeal concerning one petition, allowed the others, and partially modified one, directing the arbitrator to first decide jurisdiction and arbitrability under Section 16.
Issues considered
- Whether the acceptance of payment by NCCL amounts to an accord and satisfaction, thereby extinguishing the arbitration agreement.
- Whether disputes concerning the classification of claims as 'Notified Claims' fall within the excluded matters under Clause 9.0.2.0 of the GCC and are therefore non‑arbitrable.
- Whether the Court, at the stage of a Section 11 application, may examine issues of accord and satisfaction and arbitrability despite the insertion of Section 11(6‑A).
- Whether the High Court erred in appointing an arbitrator for disputes that are arguably excluded from arbitration.
Legislation cited
- Arbitration and Conciliation Act, 1996s. 11(6), s. 11(6-A), s. 16
Subjects
ArbitrationAccord and satisfactionNotified ClaimExcepted mattersSection 11Section 16Non‑arbitrabilityContract interpretationArbitral jurisdiction
Judgment
660 [2022]
SUPREME COURT 13 S.C.R. 660
REPORTS [2022] 13 S.C.R.
A INDIAN OIL CORPORATION LIMITED
v.
NCC LIMITED
(Civil Appeal No. 341 of 2022)
B JULY 20, 2022
[M. R. SHAH AND B. V. NAGARATHNA, JJ.]
Arbitration and Conciliation Act, 1996 – ss.11(6), 11(6-A),
16 – High Court in exercise of powers u/s.11(6) appointed the
Arbitrators to adjudicate and resolve the disputes between the
C
parties arising out of the respective contracts – Correctness of –
Held: The issue w.r.t ‘accord and satisfaction’ of claims is seriously
disputed and is debatable – Whether, in view of the acceptance of
Rs.4,53,04,021/- by the respondent which was released by petitioner
on the offer/letter made by the respondent there is an instance of
D ‘accord and satisfaction’ of the claims is a good and reasonably
arguable case – It cannot be said to be an open and shut case –
Therefore, even when it is observed and held that such an aspect
with regard to ‘accord and satisfaction’ of the claims may/can be
considered by the Court at the stage of deciding s.11 application, it
is always advisable and appropriate that in cases of debatable and
E
disputable facts, good reasonably arguable case, the same should
be left to the Arbitral Tribunal – Therefore, High Court committed
no error in observing that aspects with regard to ‘accord and
satisfaction’ of the claims or where there is a serious dispute will
have to be left to the Arbitral Tribunal – However, at the same time,
F the conclusion arrived at by the High Court that after the insertion
of Sub-Section (6-A) in s.11 scope of inquiry by the Court in petition
is confined only to ascertain as to whether or not a binding
arbitration agreement exists qua the parties before it, which is
relatable to the disputes at hand is not agreed with – Though, the
Arbitral Tribunal may have jurisdiction and authority to decide the
G
disputes including the question of jurisdiction and non-arbitrability,
the same can also be considered by the Court at the stage of deciding
s.11 application, if the facts are very clear and glaring and in view
of the specific clauses in the agreement binding between the parties,
whether the dispute is non--arbitrable and/or it falls within the
H excepted clause – Even at the stage of deciding s.11 application,
660
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 661
the Court may prima facie consider even the aspect with regard to A
‘accord and satisfaction’ of the claims – In Civil Appeal No.341/
2022, the Arbitrator shall first decide the aspect with regard to
‘accord and satisfaction’ of the claims and arbitrability of the
disputes with regard to such claims by deciding an application u/
s.16 which is reportedly pending – Arbitrator shall first decide the
B
jurisdiction of the Arbitral Tribunal and the arbitrability of the claims
– In Civil Appeal No.342/2022, impugned judgment and order
passed by the High Court referring the dispute between the parties
to arbitration and appointing the Arbitrator is set aside – Similarly,
in Civil Appeal No.343/2022, , the impugned judgments and orders
are set aside – Further, in Civil Appeal No.344/2022, impugned C
judgment and order passed by the High Court is modified – Only
one claim of the respondent which is declared by the General
Manager as a Notified Claim shall have to be referred to arbitration
and the Arbitrator shall adjudicate only that claim which is declared
by the General Manager as a Notified Claim and the Arbitral
D
Tribunal shall not have any jurisdiction to adjudicate on any other
claims which as such are not declared as Notified Claims.
Disposing of the appeals, the Court
HELD: 1.1 It is the case on behalf of the petitioner IOCL
that the IOCL had settled the claim of respondent – NCCL E
accepting NCCL’s offer to grant extension of time; not to give
price adjustment of over 4% of the total contract value and
consequently IOCL condoned the delay of 1493 days and granted
extension of time without applying any price discount. Further
for the delay of 65 days, IOCL applied the price discount of
Rs.6,44,40,021/- i.e. 4% of the total value of contract and F
thereafter IOCL released the payment of Rs.4,53,04,021/- against
NCCL’s final bill (adjusting price discount of Rs.6.4 Crores as
against Rs.14.8 Crores) and also returned NCCL’s Bank
Guarantee which came to be fully accepted by the respondent
NCCL. It is the case of IOCL that thereafter, it was not open for G
the respondent to raise any further claim. Therefore, it is the
case on behalf of the petitioner that, there being ‘accord and
satisfaction’ for the claim, being an ‘excepted claim’, it was not
open for the respondent to invoke the arbitration agreement and
request for appointment of an Arbitrator. It is also the case on
H
662 SUPREME COURT REPORTS [2022] 13 S.C.R.
A behalf of the petitioner IOCL that in view of the specific decisions
by the General Manager, on “Notified Claims”, in view of Clause
9.0.2.0, for the same claims which are not held to be ‘Notified
Claims’ by the General Manager, the matter cannot be referred
to the Arbitrator in view of the clause pertaining to excluded
matters. On the other hand, it is the case on behalf of the
B
respondent that acceptance of the amount of Rs.4,53,04,021/-
was under duress and coercion. It is also the case on behalf of
the respondent that earlier offer dated 02.11.2016 was a
conditional one and was in the nature of an offer and subsequently
when the offer was partially allowed, the respondent without any
C delay communicated that the decision to partially allow its
application for EOT is unacceptable as the same is not in
accordance with the conditional offer given by the respondent.
[Para 12][703-E-H; 704-A-C]
1.2 Having heard learned Counsel appearing for the
D respective parties and in the facts and circumstances of the case,
the issue / aspect with regard to ‘accord and satisfaction’ of claims
is seriously disputed and is debatable. Whether, in view of the
acceptance of Rs.4,53,04,021/- by the respondent NCCL which
was released by IOCL on the offer / letter made by the respondent
NCCL dated 02.11.2016 there is an instance of ‘accord and
E satisfaction’ of the claims is a good and reasonably arguable case.
It cannot be said to be an open and shut case. Therefore, even
when it is observed and held that such an aspect with regard to
‘accord and satisfaction’ of the claims may/can be considered by
the Court at the stage of deciding Section 11 application, it is
F always advisable and appropriate that in cases of debatable and
disputable facts, good reasonably arguable case, the same should
be left to the Arbitral Tribunal. Similar view is expressed by this
Court in the case of Vidya Drolia (supra). Therefore, in the facts
and circumstances of the case, though it is specifically observed
and held that aspects with regard to ‘accord and satisfaction’ of
G the claims can be considered by the Court at the stage of deciding
Section 11(6) application, in the facts and circumstances of the
case, the High Court has not committed any error in observing
that aspects with regard to ‘accord and satisfaction’ of the claims
or where there is a serious dispute will have to be left to the
H
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 663
Arbitral Tribunal. However, at the same time, we do not agree A
with the conclusion arrived at by the High Court that after the
insertion of Sub-Section (6-A) in Section 11 of the Arbitration
Act, scope of inquiry by the Court in Section 11 petition is confined
only to ascertain as to whether or not a binding arbitration
agreement exists qua the parties before it, which is relatable to
B
the disputes at hand. We are of the opinion that though the Arbitral
Tribunal may have jurisdiction and authority to decide the disputes
including the question of jurisdiction and non-arbitrability, the
same can also be considered by the Court at the stage of deciding
Section 11 application if the facts are very clear and glaring and
in view of the specific clauses in the agreement binding between C
the parties, whether the dispute is non-arbitrable and/or it falls
within the excepted clause. Even at the stage of deciding Section
11 application, the Court may prima facie consider even the aspect
with regard to ‘accord and satisfaction’ of the claims. [Para
13][705-C-H; 706-A-C]
D
1.3 Now, so far as the submission on behalf of the respective
parties on the decision of the General Manager on Notified Claims
in Civil Appeal No.341/2022 arising out of SLP (C) No.13161/
2019 is concerned, the General Manager has decided / declared
that the claims are not arbitrable since they had been settled and
the arbitration agreement has been discharged under Clause E
6.7.2.0 of the GCC and no longer existed / subsisted. As observed
hereinabove, the claims had been settled or not is a debatable
and disputable question, which is to be left to be decided by the
Arbitral Tribunal. Therefore, matters related to the Notified
Claims in the facts and circumstances of the case also shall have F
to be left to be decided by the Arbitral Tribunal as in the fact
situation the aspect of ‘accord and satisfaction’ and ‘Notified
Claims’ both are interconnected and interlinked. Now, so far as
the Civil Appeal No.342/2022 arising out of SLP (C) No.13816/
2019 is concerned, the General Manager in exercise of powers
under Clause 9.0.2.0 had declared that none of the claims of the G
respondent is a Notified Claim. From the communication dated
22.06.2018, it appears that the General Manager, after elaborately
dealing with all the alleged Notified Claims of the respondent
has thereafter found that none of the claims made by the
respondent is a Notified Claim. On a conjoint reading of the H
664 SUPREME COURT REPORTS [2022] 13 S.C.R.
A relevant clauses of the GCC viz. Clauses 9.0.1.0 and 9.0.2.0, the
dispute arising out of Notified Claims only, which is included in
the Final Bill of the contractor can be referred to arbitration.
However, as per Clause 9.0.2.0, any dispute or difference on
whether or not a claim sought to be referred to arbitration by the
contractor is a Notified Claim falls within the excluded matters
B
and the Arbitrator or Arbitral Tribunal shall have no jurisdiction
and/or authority with respect thereto. The dispute or difference
whether or not a claim sought to be referred to arbitration by the
contractor is a Notified Claim shall not and cannot form the subject
matter of any reference or submission to arbitration. Therefore,
C on a fair and conjoint reading of Clause 9.0.1.0 and 9.0.2.0, it can
safely be concluded that (i) only the Notified Claims of the
contractor included in the Final Bill of the contractor in
accordance with the provisions of Clause 6.6.3.0 shall have to be
referred to arbitration; (ii) whether or not a claim sought to be
referred to arbitration by the contractor is a Notified Claim or
D
not, the Arbitrator or Arbitral Tribunal shall have no jurisdiction
at all; (iii) whether or not a claim is a Notified Claim or not shall
have to be decided by the General Manager and that too, prior to
arbitration proceeding with or proceeding further with the
reference. Therefore, once the General Manager, on the basis of
E the material on record takes a conscious decision that a particular
claim sought to be referred to arbitration is not a Notified Claim,
such a claim thereafter cannot be referred to arbitration. The
language used in Clauses 9.0.1.0 and 9.0.2.0 is very clear and
unambiguous. As observed hereinabove, parties to the contract
are free to agree on applicability of (1) proper law of contract, (2)
F
proper law of arbitration agreement and (3) proper law of the
conduct of arbitration. Parties to the contract also may agree for
matters excluded from the purview of arbitration. As observed
by this Court in a catena of decisions, unless the effect of
agreement results in performance of an unlawful act, an
G agreement, which is otherwise legal, cannot be held to be void
and is binding between the parties. At this stage, the decision of
this Court in the case of Sreekanth Transport (supra) is required
to be referred to. In the case before this Court, the contract
provided for exclusion of some matters from the purview of
arbitration. A senior officer of the department was given the
H
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 665
authority and power to adjudicate the same. One of the clauses A
provided that the decision of the Senior Officer, being the
Adjudicator, shall be final and binding between the parties. This
Court considered the same as ‘excepted matters’. [Para 13.1-
13.3][706-C-H; 707-A-G]
1.4 In that view of the matter, the High Court has misread B
and misinterpreted the clauses 9.0.1.0 and 9.0.2.0 and has
seriously erred in holding that where there is contestation or the
decision rendered by the General Manager leaves scope for
argument as to whether the claims alleged by the contractor can
be categorized as Notified Claim is best left to the Arbitral
Tribunal. The dispute whether the claim is a Notified Claim or C
not is specifically excluded from the scope, purview and ambit of
the arbitration agreement. Therefore, once such a dispute falls
within the ‘excepted matters’, any decision by the General
Manager on the issue of Notified Claims cannot be the subject
matter of arbitration proceeding. Therefore, the High Court has D
erred in referring the dispute to arbitration and appointing a sole
Arbitrator to adjudicate on the dispute with respect to the claims
which as such are held to be not Notified Claims by the General
Manager. Therefore, the Civil Appeal No.342/2022 arising out
of SLP (C) No.13408/2019 as well as Civil Appeal Nos.343/2022
and 345/2022 arising out of SLP (C) Nos.13813/2019 and 13816/ E
2019 respectively deserve to be allowed and the impugned
judgment and orders passed by the High Court in respective
arbitration petitions deserve to be quashed and set aside. [Paras
13.4, 13.5][708-C-G]
1.5 In view of the above and for the reasons stated above, F
following order is passed.
(1) Civil Appeal No.341/2022 arising out of the impugned
judgment and order passed by the High Court in Arbitration
Petition No.115/2018 is hereby dismissed. However, it is observed
that the learned Arbitrator shall first decide the aspect with regard G
to ‘accord and satisfaction’ of the claims and arbitrability of the
disputes with regard to such claims by deciding an application
under Section 16 of the Arbitration Act, which is reported to be
pending. The learned Arbitrator shall first decide the jurisdiction
of the Arbitral Tribunal and the arbitrability of the claims within a H
666 SUPREME COURT REPORTS [2022] 13 S.C.R.
A period of three months from the date of first sitting which shall
be within a period of one month from today. All the contentions
and/or defences which may be available to the respective parties
are kept open to be considered by the learned Arbitrator in
accordance with law and on its own merits and considering the
relevant clauses of the contract and the material on record.
B
(2) Civil Appeal No.342/2022 arising out of the impugned
judgment and order passed by the High Court in Arbitration
Petition No.356/2018 is hereby allowed. Impugned judgment and
order passed by the High Court in Arbitration Petition No.356/
2018 referring the dispute between the parties to arbitration and
C appointing the Arbitrator is hereby quashed and set aside.
(3) Similarly, Civil Appeal No.343/2022 arising out of the
impugned judgment and order passed by the High Court in
Arbitration Petition No.116/2018 and Civil Appeal No.345/2022
arising out of the impugned judgment and order passed by the
D High Court in Arbitration Petition No.406/2018 are allowed and
consequently, the impugned judgments and orders passed by the
High Court in Arbitration Petition Nos.116/2018 & 406/2018 are
hereby quashed and set aside.
(4) So far as Civil Appeal No.344/2022 arising out of the
E impugned judgment and order passed by the High Court in
Arbitration Petition No.407/2018 is concerned, the same is partly
allowed. The impugned judgment and order passed by the High
Court in Arbitration Petition No.407/2018 is hereby modified to
the extent and it is directed that only one claim of the respondent
F which is declared by the General Manager as a Notified Claim
shall have to be referred to arbitration and the learned Arbitrator
shall adjudicate only that claim which is declared by the General
Manager as a Notified Claim and the learned Arbitral Tribunal
shall not have any jurisdiction to adjudicate on any other claims
which as such are not declared as Notified Claims. [Para 14][709-
G B-H; 710-A-D]
Centrotrade Minerals & Metal Inc. v. Hindustan Copper
Ltd. (2017) 2 SCC 228 : [2016] 9 SCR 83; United
India Insurance Co. Ltd. v. Hyundai Engg. &
Construction Co. Ltd. (2018) 17 SCC 607 : [2018] 12
H SCR 1085; Duro Felguera S.A. v. Gangavaram Port
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 667
Limited (2017) 9 SCC 729 : [2017] 10 SCR 285; United A
India Insurance Co. Ltd. v. Antique Art Exports (P) Ltd.
(2019) 5 SCC 362 : [2019] 5 SCR 521; Mayavati
Trading Private Limited v. Pradyuat Deb Burman (2019)
8 SCC 714 : [2019] 12 SCR 123; Vidya Drolia vs Durga
Trading Corporation (2021) 2 SCC 1; Swiss Timing
B
Limited v. Commonwealth Games 2010 Organizing
Committee (2014) 6 SCC 677 : [2014] 6 SCR 514;
Ambica Construction v. Union of India (2006) 13 SCC
475 : [2006] 9 Suppl. SCR 188; R.L. Kalathia & Co. v.
State of Gujarat (2011) 2 SCC 400 : [2011] 1 SCR 391;
BSNL v. Motorola India (P) Ltd. (2009) 2 SCC 337 : C
[2008] 13 SCR 445; National Insurance Co. Ltd. v.
Boghara Polyfab Pvt. Ltd. (2009) 1 SCC 267 :[2008]
13 SCR 638; Zostel Hospitality (P) Ltd. v. Oravel Stays
(P) Ltd. (2021) 9 SCC 765; Datar Switchgears Ltd. v.
Tata Finance Ltd. (2000) 8 SCC 151; DLF Universal
D
Ltd. & Anr. v. Director, Town and Country Planning
Department, Haryana & Ors. (2010) 14 SCC 1 : [2010]
15 SCR 85; Rajasthan State Industrial Development
and Investment Corporation & Anr. v. Diamond and Gem
Development Corporation Ltd. & Anr. (2013) 5 SCC
470 : [2013] 4 SCR 331 ; Booz Allen & Hamiltan Inc. E
v. SBI Home Finance Ltd. (2011) 5 SCC 532 : [2011] 7
SCR 310; DLF Home Developers Limited v. Rajapura
Homes Private Limited and Another 2021 SCC Online
SC 781 – referred to.
Case Law Reference F
[2016] 9 SCR 83 referred to Para 8.1
[2018] 12 SCR 1085 referred to Para 8.4
[2017] 10 SCR 285 referred to Para 9.8
[2019] 5 SCR 521 referred to Para 9.9 G
[2019] 12 SCR 123 referred to Para 9.10
[2014] 6 SCR 514 referred to Para 9.13
[2006] 9 Suppl. SCR 188 referred to Para 9.15
H
668 SUPREME COURT REPORTS [2022] 13 S.C.R.
A [2011] 1 SCR 391 referred to Para 9.15
[2008] 13 SCR 445 referred to Para 9.16
[2008] 13 SCR 638 referred to Para 9.16
(2021) 9 SCC 765 referred to Para 9.16
B (2000) 8 SCC 151 referred to Para 9.18
[2010] 15 SCR 85 referred to Para 10.5
[2013] 4 SCR 331 referred to Para 10.6
[2011] 7 SCR 310 referred to Para 10.9
C
CIVIL APPELLATE JURISDICTION : Civil Appeal No.341 of
2022.
From the Judgment and Order dated 08.02.2019 of the High Court
of Delhi at New Delhi in Arbitration Petition No.115 of 2018.
D With
Civil Appeal Nos.342, 344, 343 and 345 of 2022.
K. K. Venugopal, AG, V. N. Koura, S. Sirish Kumar, Avneesh
Arputham for M/s Arputham Aruna and Co., Advs. for the Appellant.
Ranjit Kumar, Sr. Adv., K. Parameshwar, Amit George, A.
E
Sregurupriya, Prasad Hegde, Advs. for the Respondent.
The Judgment of the Court was delivered by
M. R. SHAH, J.
1. As common questions of law and facts arise in this group of
F appeals and as such between the same parties and with respect to similar
contracts / agreements, all these appeals are decided and disposed of
together by this common judgment and order.
2. Feeling aggrieved and dissatisfied with the impugned judgment
and orders passed by the High Court of Delhi, New Delhi in respect to
G Arbitration Petitions by which, in exercise of powers under Section 11(6)
of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as
“Arbitration Act”), the High Court has allowed the said petitions and has
appointed the learned Arbitrator by referring the dispute between the
parties for arbitration, the Indian Oil Corporation Limited has preferred
H the present appeals.
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 669
[M. R. SHAH, J.]
3. For the sake of convenience, Civil Appeal arising out of Special A
Leave Petition No.13161/2019 arising out of the order passed by the
High Court in Arbitration Petition No.115/2018 is treated as the lead
matter.
4. The facts leading to the present appeal in a nut-shell are as
under: B
4.1. That, the appellant, Indian Oil Corporation Limited (hereinafter
referred to as “IOCL”) floated a tender in respect of the works described
as “Civil, Structural & Associated UG piping works of VGO-HDT,
DHDT & HCDS Units (EPCM-2) for Paradip Refinery Project”. The
respondent herein – NCC Ltd. (hereinafter referred to as “NCCL”) C
was declared the successful bidder. After issuance of the Letter of
Acceptance dated 17.03.2010, a formal agreement was executed
between the parties dated 28.04.2010. The relevant clauses of the
Agreement which may have a bearing on the issues involved in the
present appeals are as under:
D
“1.21.0.0 “Notified Claim” shall mean a claim of the
CONTRACTOR notified in accordance with the
provisions of Clause 6.6.1.0 hereof.
xxx xxx xxx
CLAIMS BY THE CONTRACTOR E
6.6.1.0 Should the CONTRACTOR consider that he is
entitled to any extra payment or compensation in
respect of the works over and above the amounts
due in terms of the Contract as specified in Clause
6.3.1.0 hereof or should the CONTRACTOR dispute F
the validity of any deductions made or threatened by
the OWNER from any Running Account Bills, the
CONTRACTOR shall forthwith give notice in writing
of his claim in this behalf to the Engineer-in-Charge
and the Site Engineer within 10 (ten) days from the
G
date of the issue of orders or instructions relative to
any works for which the CONTRACTOR claims
such additional payment or compensation or of the
happening of other event upon which the
CONTRACTOR bases such claim, and such notice
shall give full particulars of the nature of such claim, H
670 SUPREME COURT REPORTS [2022] 13 S.C.R.
A grounds on which it is based, and the amount claimed.
The OWNER shall not anywise be liable in respect
of any claim by the CONTRACTOR unless notice
of such claim shall have been given by the
CONTRACTOR to the Engineer-in-Charge and the
Site Engineer in the manner and within the time
B
aforesaid and the CONTRACTOR SHALL be
deemed to have waived any and all claims and all his
rights in respect of any claim not notified to the
Engineer-in-Charge and the Site Engineer in writing
in the manner and within the time aforesaid.
C 6.6.2.0 The Engineer-in-Charge and/or the Site Engineer shall
be under no obligation to reply to any notice of claim
given or claim made by the CONTRACTOR within
the provisions aforesaid or otherwise or to reject the
same and no omission or failure on the part of the
D Engineer-in-Charge or Site Engineer to reject any
claim made or notified by the CONTRACTOR or
delay in dealing therewith shall be deemed to be an
admission by the OWNER of the validity of such
claim or waiver by the OWNER of any of its rights
in respect thereof, with the intent that all such claims
E otherwise valid within the provisions of Clause 6.6.1.0
read with Clauses 6.6.3.0 and 6.6.3.1 shall be dealt
with/considered by the OWNER at the time of
submission of the Final Bill.
6.6.3.0 Any claims of the CONTRACTOR notified in
F accordance with the provision of Clause 6.6.1.0
hereof as shall remain at the time of preparation of
Final Bill by the CONTRACTOR shall be separately
included in the Final Bill prepared by the
CONTRACTOR in the form of a Statement of
G Claims attached thereto, giving particulars of the
nature of the claim, grounds on which it is based, and
the amount claimed and shall be supported by a
copy(ies) of the notice(s) sent in respect thereof by
the CONTRACTOR to the Engineer-in-Charge and
Site Engineer under Clause 6.6.1.0 hereof. In so far
H
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 671
[M. R. SHAH, J.]
as such claim shall in any manner or particular be at A
variance with the claim notified by the
CONTRACTOR within the provision of Clause
6.6.1.0 hereof, it shall be deemed to be a claim
different from the notified claim with consequence
in respect thereof indicated in Clause 6.6.1.0 hereof,
B
and with consequences in respect of the notified claim
as indicated in Clause 6.6.3.1 hereof.
6.6.3.1 The OWNER shall not anywise be liable in respect
of any notified claim not specifically reflected in the
Final Bill in accordance with the provisions of Clause
6.6.3.0 hereof and any and all notified claims not C
specifically reflected and included in the Final Bill in
accordance with the provisions of Clause 6.6.3.0
hereof shall be deemed to have been waived by the
CONTRACTOR. Further the OWNER shall have
no liability in respect thereof and the D
CONTRACTOR shall not be entitled to raise or
include in the Final Bill any claim(s) other than a
notified claim conforming in all respects and in
accordance with the provisions of Clause 6.6.3.0
hereof.
E
6.6.4.0 No claim(s) shall on any account be made by the
CONTRACTOR after the Final Bill, with the intent
the Final Bill prepared by the CONTRACTOR shall
reflect any and all notified claims whatsoever of the
CONTRACTOR against the OWNER arising out
of or in connection with the Contract or work F
performed by the CONTRACTOR thereunder or in
relation thereto, and the CONTRACTOR shall
notwithstanding any enabling provision under any law
or Contract and notwithstanding any right of claim in
quantum meruit that the CONTRACTOR could have G
in respect thereof, be deemed to have waived any
and all such claims not included in the Final Bill and
to have absolved and discharged the OWNER from
and against the same, even if in not including the
same as aforesaid, the CONTRACTOR shall have
H
672 SUPREME COURT REPORTS [2022] 13 S.C.R.
A acted under a mistake of law or fact.
6.6.5.0 Notwithstanding the existence of any claim by the
CONTRACTOR in terms hereof or otherwise, the
CONTRACTOR shall continue and be bound to
continue and perform the works to completion in all
B respects according to the Contract (unless the
Contract or works be priorly determined by the
OWNER in terms hereof) and shall remain liable and
bound in all respects under the Contract.
6.6.6.0 The payment of any sum on account to the
C CONTRACTOR during the performance of any
work or item of work in respect of which a claim has
been notified by the CONTRACTOR in terms of
Clause 6.6.1.0 hereof or the making or negotiation
of any interim arrangements in respect of the
performance of such work or item of work by the
D OWNER, shall not be deemed to be an acceptance
of the related claim by the OWNER, or any part or
portion thereof with the intent that any such payment
shall constitute merely an interim facility or interim
assistance to the CONTRACTOR, and not an
E obligation upon the OWNER.
6.7.0.0 DISCHARGE OF OWNER’S LIABILITY
6.7.1.0 The acceptance by the CONTRACTOR of any
amount paid by the OWNER to the CONTRACTOR
in respect of the final dues of the CONTRACTOR
F under the Final Bill upon condition that the said
payment is being made in full and final settlement of
all said dues to the CONTRACTOR shall, without
prejudice to the notified claims of the
CONTRACTOR included in the Final Bill in
G accordance with the provisions under Clause 6.6.3.0
hereof and associated provisions thereunder, be
deemed to be in full and final satisfaction of all such
dues to the CONTRACTOR notwithstanding any
qualifying remarks, protest or condition imposed or
purported to be imposed by the CONTRACTOR
H
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 673
[M. R. SHAH, J.]
relative to the acceptance of such payment, with the A
intent that upon acceptance by the CONTRACTOR
of any payment made as aforesaid, the Contract
(including the arbitration clause) shall, subject to the
provisions of Clause 6.8.2.0 hereof, stand discharged
and extinguished except in respect of the notified
B
claims of the CONTRACTOR included in the Final
Bill and except in respect of the CONTRACTOR’s
entitlement to receive the unadjusted portion of the
Security Deposit in accordance with the provisions
of Clause 6.8.3.0 hereof on successful completion
of the defect liability period. C
6.7.2.0 The acceptance by the CONTRACTOR of any
amount paid by the OWNER to the CONTRACTOR
in respect of the notified claims of the
CONTRACTOR included in the Final Bill in
accordance with the provisions of Clause 6.6.3.0 D
hereof and associated provisions thereunder, upon
the condition that such payment is being made in full
and final settlement of all the claims of the
CONTRACTOR shall, subject to the provisions of
Clause 6.7.3.0 hereof, be deemed to be in full and
final satisfaction of all claims of the CONTRACTOR E
notwithstanding any qualifying remarks, protest or
condition imposed or purported to be imposed by the
CONTRACTOR relative to the acceptance of such
payment with the intent that upon acceptance by the
CONTRACTOR of any payment made as aforesaid, F
the Contract (including the arbitration clause) shall
stand discharged and extinguished insofar as relates
to and/or concerns the claims of the
CONTRACTOR.
6.7.3.0 Notwithstanding anything provided in Clause 6.7.1.0 G
and/or Clause 6.7.2.0 hereof the CONTRACTOR
shall be and remain liable for defects in terms of
Clause 5.6.0.0 hereof and for the indemnity to the
OWNER in terms of Clause 6.8.2.0, and shall be
and remain entitled to receive the unadjusted balance
H
674 SUPREME COURT REPORTS [2022] 13 S.C.R.
A of the Security Deposit remaining in the hands of the
OWNER in terms of Clause 6.8.3.0 hereof.
xxx xxx xxx
9.0.0.0 ARBITRATION
B 9.0.1.0 Subject to the provisions of Clauses 6.7.1.0, 6.7.2.0
and 9.0.2.0 hereof, any dispute arising out of a Notified
Claim of the CONTRACTOR included in the Final
Bill of the CONTRACTOR in accordance with the
provisions of Clause 6.6.3.0 hereof, if the
CONTRACTOR has not opted for the Alternative
C Dispute Resolution Machinery referred to in Clause
9.1.1.0 hereof, and any dispute arising out of any
Claim(s) of the OWNER against the
CONTRACTOR shall be referred to the arbitration
of a Sole Arbitrator selected in accordance with the
D provisions of Clause 9.0.1.1 hereof. It is specifically
agreed that the OWNER may prefer its Claim(s)
against the CONTRACTOR as counter-claim(s) if
a Notified Claim of the CONTRACTOR has been
referred to arbitration. The CONTRACTOR shall
not, however, be entitled to raise as a set-off defence
E or counter-claim any claim which is not a Notified
Claim included in the CONTRACTOR’s Final Bill in
accordance with the provisions of Clause 6.6.3.0
hereof.
9.0.1.1 The Sole Arbitrator referred to in Clause 9.0.1.0
F hereof shall be selected by the CONTRACTOR out
of a panel of 3 (three) persons nominated by the
OWNER for the purpose of such selection, and should
the CONTRACTOR fail to select an arbitrator within
30 (thirty) days of the panel of names of such
G nominees being furnished by the OWNER for the
purpose, the Sole Arbitrator shall be selected by the
OWNER out of the said panel.
9.0.2.0 Any dispute(s) or difference(s) with respect to or
concerning or relating to any of the following matters
are hereby specifically excluded from the scope,
H
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 675
[M. R. SHAH, J.]
purview and ambit of this Arbitration Agreement with A
the intention that any dispute or difference with
respect to any of the said following matters and/or
relating to the Arbitrator’s or Arbitral Tribunal’s
jurisdiction with respect thereto shall not and cannot
form the subject- matter of any reference or
B
submission to arbitration, and the Arbitrator or the
Arbitral Tribunal shall have no jurisdiction to entertain
the same or to render any decision with respect
thereto, and such matter shall be decided by the
General Manager prior to the Arbitrator proceeding
with or proceeding further with the reference. The C
said excluded matters are:(i) With respect to or
concerning the scope or existence or otherwise of
the Arbitration Agreement;(ii) Whether or not a Claim
sought to be referred to arbitration by the
CONTRACTOR is a Notified Claim;(iii) Whether
D
or not a Notified Claim is included in the
CONTRACTOR’s Final Bill in accordance with the
provisions of Clause 6.6.3.0 hereof.(iv) Whether or
not the CONTRACTOR has opted for the Alternative
Dispute Resolution Machinery with respect to any
Notified Claim included in the CONTRACTOR’s E
Final Bill.
9.0.3.0 The provisions of the Indian Arbitration & Conciliation
Act, 1996 and any re-enactment(s) and/or
modification(s) thereof and of the Rules framed
thereunder shall apply to arbitration proceedings F
pursuant hereto subject to the following conditions:(a)
The Arbitrator shall give his Award separately in
respect of each Claim and Counter-Claim; and(b)
The Arbitrator shall not be entitled to review any
decision, opinion or determination (howsoever
expressed) which is stated to be final and/or binding G
on the CONTRACTOR in terms of the Contract
Documents.”
4.2. As per the contract entered into between the parties, the
designated date for commencement of the project was the date of
issuance of FOA i.e. 03.03.2010, and that the scheduled date of completion H
676 SUPREME COURT REPORTS [2022] 13 S.C.R.
A was 02.10.2011. It appears that the execution of the project was delayed,
as a result of which the project was completed only on 28.12.2015. The
NCCL was issued a completion certificate by the IOCL indicating the
date of completion of the project as 28.12.2015. In view of the delay in
completion of the project beyond the scheduled date, the NCCL made a
request for extension of time vide the communication dated 23.05.2016.
B
While the EOT requests were pending with the IOCL, the NCCL
submitted its final bill dated 05.08.2016 to the Engineer-In-Charge
appointed under the contract between the parties. According to the
NCCL, the NCCL in its final bill dated 05.08.2016 made a specific
reference to the Notified Claims. There were correspondences between
C the Engineer-In-Charge and Thyssenkrupp Industrial Solutions India (P)
Ltd. (hereinafter referred to as “TKIS”) pending settlement of the final
bill and the request for Extension of Time (EOT). The NCCL responded
to the communication dated 01.11.2016 by the TKIS, vide its response
dated 02.11.2016. It appears that the NCCL conveyed to TKIS that if its
request for EOT were considered favorably and if price adjustment does
D
not exceed 4%, then, all its extra/additional claims including Notified
Claims submitted by it through various communications and the final bill
should be treated as withdrawn.
4.3. The TKIS having received the aforesaid communication from
the NCCL, made its recommendations vis-à-vis the request for EOT
E made by the NCCL. It appears that thereafter, TKIS in its communication
dated 13.01.2017, informed NCCL that it had approved EOT for the
period between 03.10.2011 to 03.11.2015, however, without price discount
as per Clause 4.4.0.0 of the General Conditions of Contract (hereinafter
referred to as “GCC”) and that for the period falling between 04.11.2015
F to 28.12.2015 which covered the period of 55 days, it had concluded that
the delay was attributable to NCCL. Accordingly, TKIS conveyed to
NCCL that for the later period, as per Clause 4.4.2.0 of the GCC, a
price adjustment discount of 4% would be applicable.
4.4. It is the case on behalf of NCCL that being aggrieved, it
wrote to the IOCL on 23.01.2017 to reconsider its decision and accord
G EOT upto the date of completion i.e. 28.12.2015 without making any
adjustment towards price as indicated in the communication dated
13.01.2017.
4.5. That, thereafter, the IOCL released a sum of Rs.4,53,04,021/
-, the amount calculated as per the communication dated 13.01.2017,
H after making due adjustments towards taxes etc.
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 677
[M. R. SHAH, J.]
4.6. It appears that subsequently and after a period of 6&1/2 A
months (after the settlement of the claim) and after receiving the final
bill payment 8 days earlier, on 08.05.2017, vide communication dated
16.05.2017, NCCL reneged on the letter of 02.11.2016 and alleged that
it was made to withdraw its claim under coercion and it had withdrawn
its Notified Claims as TKIS vide its communication dated 01.11.2016,
B
had indicated that the review of the final bill and request for EOT would
be considered only if it gave up its insistence on its Notified Claims being
considered.
4.7. That IOCL sent its response vide communication dated
06.06.2017, wherein it stated that none of the claims mentioned in the
final bill were Notified Claims. C
4.8. In the above backdrop, NCCL invoked the arbitration clause
contained in the Agreement on 01.07.2017. That, the IOCL, in
accordance with Clause 9.0.2.0 referred the matter regarding arbitrability
of NCCL’s claims to the General Manager on 12.07.2017.
4.9. Vide the communication / letter dated 10.11.2017, the General D
Manager held that the claims cannot be referred to arbitration and that
the Arbitration Agreement itself does not survive on account of NCCL
withdrawing its Notified Claims. The General Manager held that
therefore there exist no dispute to be referred to arbitration.
4.10. Thereafter the respondent – NCCL approached the Delhi E
High Court by filing Arbitration Petition No.115/2018 under Section 11(6)
of the Arbitration Act for appointment of sole Arbitrator. The said petition
was opposed by the IOCL on a number of grounds. However, by overruling
all the objections raised on behalf of the appellant – IOCL, by the
impugned judgment and order, the High Court has allowed the said
arbitration petition and appointed the sole Arbitrator. F
4.11. Impugned judgment and order passed by the High Court
dated 08.02.2019 in Arbitration Petition No.115/2018 is the subject matter
of present Civil Appeal No.341/2022 (arising out of Special Leave Petition
No.13161/2019).
5. With respect to other four contracts between the same parties G
and with same arbitration clauses, the NCCL’s claims were sent to the
General Manager under Clause 9.0.2.0 of the GCC. So far as the Civil
Appeal arising out of SLP No.13408/2019 is concerned, the NCCL did
not approach the General Manager but the Arbitration Petition filed before
the High Court was forwarded by the IOCL to the General Manager for H
678 SUPREME COURT REPORTS [2022] 13 S.C.R.
A its determination under Clause 9.0.2.0 of the GCC. That, in all the
remaining four cases (Civil Appeal Nos.342/2022 to 345/2022), the
General Manager declared that none of the claims were Notified Claims.
6. Thereafter the NCCL approached the High Court by way of
Arbitration Petition Nos.115/2018, 356/2018, 116/2018, 407/2018 and 406/
B 2018. By the impugned judgment and orders, the High Court has allowed
all the respective applications under Section 11(6) of the Arbitration Act
and by different impugned judgment and orders, has appointed the sole
Arbitrator. Impugned judgment and orders passed by the High Court is
the subject matter of Civil Appeal Nos.341/2022 to 345/2022.
7. Shri K.K. Venugopal, learned Attorney General has appeared
C
on behalf of the appellant – IOCL and Shri Ranjith Kumar, learned Senior
Advocate has appeared on behalf of the respondent – NCCL.
8. Shri K.K. Venugopal, learned Attorney General appearing on
behalf of the IOCL has vehemently submitted that in the present case
both the parties are governed by the terms of the contract entered into
D between the parties viz. the GCC. That in fact, both the parties are
governed by the procedure to be followed in case of dispute between
the parties, more particularly contained in the GCC and the arbitration
clause.
8.1 It is further submitted by the learned Attorney General that
E party autonomy is the backbone of arbitration and the terms of the contract
have to be interpreted in the way the parties wanted and intended them
to be. In this regard reliance is placed upon the decision of this Court in
the case of Centrotrade Minerals & Metal Inc. v. Hindustan
Copper Ltd. reported in (2017) 2 SCC 228 (Paras 38-42).
F 8.2 It is submitted by the learned Attorney General that there are
three categories of contracts which could arise for consideration, which
can be summarized as under:
(i) Where no arbitration agreement exists at all. As the arbitration
agreement itself is an independent contract and is consensual in
G nature, it is left to the parties to include an arbitration agreement
in the underlying contract, or not to include it. If no arbitration
agreement exists in a contract, the only option if a dispute arises
for either party is to go by way of a suit;
(ii) An arbitration agreement can exist in the underlying contract
or outside the contract, which is absolute in terms. This is the
H
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 679
[M. R. SHAH, J.]
standard arbitration clause, and would be in the nature of “where A
any dispute arises between the parties in relation to the
interpretation or implementation of this contract, it shall be referred
to arbitration under the Arbitration and Conciliation Act, 1996...”
This would be an UNRESTRICTED or ABSOLUTE arbitration
clause.
B
In such a case, in the background of Section 11(6-A), no question
of the Court declining to refer the matter to arbitration would
arise, if it finds that the arbitration agreement exists and is valid.
In such a case, every dispute between the parties has to be referred
to arbitration because Section 11(6-A) would mandate this;
C
(iii) The third category would be where the parties agree to have
an arbitration clause but also consensually agree that certain
specified disputes alone will be the subject of arbitration. This
would mean that no arbitration clause exists in regard to all other
disputes, and no arbitration clause would exist in regard to the
‘excepted’ or ‘excluded’ disputes. In such a case, Section 11(6- D
A) itself cannot be invoked as no arbitration clause exists in regard
to these other disputes. This would be a RESTRICTED arbitration
clause.
8.3 It is further submitted by the learned Attorney General that
when all the conditions mentioned in the GCC are satisfied and the E
procedure is followed and only with respect to the restricted arbitration
clauses and with respect to the Notified Claims only the dispute between
the parties can be referred to the arbitration.
8.4 It is submitted that there are umpteen number of examples of
restricted arbitration clauses. Reliance is placed on the decision of this F
Court in the case of United India Insurance Co. Ltd. v. Hyundai
Engg. & Construction Co. Ltd. reported in (2018)17 SCC 607,
where the arbitration clause expressly stated that where a claim is made
against the insurer and the insurer denies its liability, no reference to
arbitration can take place. In support of the above submission, reliance G
is placed on following decisions of this Court:
(1) Vidya Drolia v. Durga Trading Corpn.
[(2021)2 SCC 1, Paras 113-116)
(2) Garware Wall Ropes Ltd. vs. Coastal Marine
H
680 SUPREME COURT REPORTS [2022] 13 S.C.R.
A Constructions & Engg.
[(2019) 9 SCC 209, Paras 28-29)
(3) Oriental Insurance Co. Ltd. v. Narbheram Power &
Steel (P) Ltd.
B [(2018) 6 SCC 534, Paras 10, 23]
8.5 It is submitted by the learned Attorney General that in the
aforesaid decisions, this Court had occasion to consider the applicability
of Section 11(6-A) and its impact.
8.6 It is submitted that in the case of Garware (supra), it is observed
C and held that where the underlying contract including the arbitration clause
is not stamped, in such a case, the arbitration clause exists in fact but
DOES NOT EXIST IN LAW. That in other words, Section 11(6-A) will
not be a Bar for the Court holding that as the arbitration clause does not
cover the particular dispute, Section 11(6-A) will not apply as there is no
D arbitration clause in that regard and therefore, no reference to arbitration
can be made.
8.7 It is submitted that in the case of Vidya Drolia (supra), this
Court had considered various aspects with respect to the restricted
arbitration clause. But in the case of unrestricted clauses, all issues raised
by the contracting parties will have to be referred to arbitration, because
E
of Section 11(6-A). However, the instant case is a case of a restricted
arbitration clause that specifically excludes certain issues from arbitration,
as a result of which, no arbitration clause exists for those ‘other’ or
‘excepted’ disputes and hence, the question of referring those disputes
would not arise. That in the case of Vidya Drolia (supra), the Arbitration
F Agreement itself sets out what is excluded from arbitration. Therefore,
it was held that Section 11(6-A) would not stand in the way of making a
reference.
8.8 It is further submitted by learned Attorney General that in the
present case the respondent NCCL received the amount of final bill in
G full settlement of their claims. That in the present case the arbitration
clause itself states that where the final bill amount has been received by
the party, or where a sum has been received on account of Notified
Claims, the arbitration clause itself stands extinguished. Therefore, the
fact that amount of final bill having been received in full settlement cannot
be the subject matter of reference by any specific stipulation in the
H contract.
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 681
[M. R. SHAH, J.]
8.9 Learned Attorney General has taken us to the relevant clauses A
of the GCC more particularly Clauses 1.21.0.0, 6.6.0.0, 6.6.1.0, 6.6.2.0,
6.6.3.0, 6.6.3.1, 6.6.4.0, 6.6.5.0, 6.6.6.0, 6.7.0.0, 6.7.1.0, 6.7.2.0, 6.7.3.0,
9.0.0.0, 9.0.1.0, 9.0.1.1, 9.0.2.0 and 9.0.3.0. It is contended that as per
Clause 9.0.1.0, the only matter to which a reference to arbitration can
be sought is a “Notified Claim” included in the final bill and to no other
B
dispute. That all disputes other than Notified Claims included in the final
bill, have to be pursued by way of a suit. The expression, “Notified
Claim” is defined in Clause 1.21.0.0 of the GCC.
8.10 It is urged that only those Notified Claims which are notified
in accordance with provisions of Clause 6.6.1.0, can be referred to
arbitration. C
8.11 It is submitted that the parties are at liberty to provide within
the contract a departmental machinery for resolution of certain matters,
the determination of which will be outside the scope of arbitration. That
such departmental machinery, being the will of the parties as embodied
in the contract, must be respected and given effect to. In support of the D
above submissions, reliance is placed on the following decisions of this
Court:
(i) Food Corporation of India v. Sreekanth Transport
(1999) 4 SCC 491 (Paras 2, 3) E
(ii) Harsha Constructions v. Union of India
(2014) 9 SCC 246 (Paras 14, 18, 19)
(iii) Mitra Guha Builders (India) Company v. Oil and Natural
Gas Corporation Ltd.
F
(2020) 3 SCC 222 (Paras 23, 24, 26, 30)
8.12 The learned Attorney General has also relied upon the
following decisions of the Delhi High Court and Gauhati High Courts
dealing with identical clause in cases where the IOCL was a party and
in which the Delhi High Court and Gauhati High Court have expressly G
interpreted the very Clause 9.0.1.0 and 9.0.2.0.
(i) China Petroleum Pipeline Bureau v. Indian Oil Corporation
Ltd. [ARB.A. (COMM.) 35/2019, decision dated
10.01.2020]
H
682 SUPREME COURT REPORTS [2022] 13 S.C.R.
A (ii) Srico Projects Pvt. Ltd. v. Indian Oil Foundation [ARB.
PET. 276/2016 decided on 09.01.2017 along with order dated
03.07.2017]
(iii) Institute of Geoinformatics (P) Ltd. v. Indian Oil Corporation
Ltd. [ARB. PET. 175/2012 decided on 19.05.2015]
B (iv) IOT Infrastructure and Energy Service v. Indian Oil
Corporation Ltd. [ARB. PET. 334/2014 decided on
12.02.2015]
(v) Bongaigaon Refinery v. M/s. Buildworth Pvt. Ltd.
[Arb.Appeal 10/2006 before Gauhati High Court]
C
8.13 It is submitted that the Special Leave Petitions against the
decision in the case of China Petroleum Pipeline Bureau (supra) and
Srico Projects Pvt. Ltd. (supra) have been dismissed by this Court.
8.14 It is further submitted by learned Attorney General that in
D the present case the final bill payment had been made to the respondent
and accepted by it pursuant to an understanding between the parties by
which the respondent expressly waived its Notified Claims. It is submitted
that the arbitration clause itself is subject to Clauses 6.7.1.0 and 6.7.2.0.
It is submitted that Clause 6.7.2.0 dealing with “Notified Claims” expressly
declares that the acceptance of any amount by the contractor in respect
E of the Notified Claims shall result in full and final satisfaction of the
claims by the contractor in respect of the Notified Claims and hence, the
contract, including the arbitration clause, shall stand discharged and
extinguished. This is as per Clause 6.7.2.0 itself, notwithstanding any
qualifying remarks, protest or condition imposed or purported to be
F imposed by the contractor relative to the acceptance of such payment.
8.15 It is submitted that applying these principles to the present
case, NCCL’s express statement dated 02.11.2016 is required to be
appreciated and/or considered. That pursuant to the said statement by
the NCCL, the IOCL (petitioner) levied a price adjustment of only 4%
as opposed to 10%; and the respondent expressly withdrew its Notified
G
Claims. It is submitted that the IOCL also paid the dues as per the final
bill. The Notified Claims, having been withdrawn, therefore, could not
more be the subject matter of any reference to arbitration. It is submitted
that as a result of the acceptance by the NCCL of the amount paid
pursuant to its final bill, and the Notified Claims having been withdrawn,
H and the result of Clauses 6.7.1.0 and 6.7.2.0, the contract, including the
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 683
[M. R. SHAH, J.]
arbitration clause stands discharged and extinguished and therefore, A
subsequently, no reference to arbitration could be made.
8.16 It is submitted that it is only 6½ months later, on 16.05.2017
and after receiving the final bill payment 8 days earlier on 08.05.2017,
that the NCCL reneged on its letter withdrawing its demand in regard to
Notified Claims. It is submitted that the reason why the NCCL withdrew B
their demand for payment of the full amount of final bill including Notified
Claims is that if 10% has been deducted due to the delay, an amount of
Rs.14.8 Crores would have been deducted from the payment of NCCL.
It is submitted that having received Rs.151 Crores against the contract
of Rs.148 Crores, the NCCL was well aware that in such an eventuality,
it would have received no amount against the final bill and its bank C
guarantee would also have been invoked. That in fact by withdrawing
the demand, the respondent was now able to get Rs.4.53 Crores as well
as the return of the bank guarantee of Rs.14.8 Crores.
8.17 It is further submitted that Clause 9.0.2.0 of the GCC
specifically excludes certain matters, such as disputes concerning the D
scope of the arbitration agreement, viz., (i) whether or not a claim is a
Notified Claim; (ii) whether or not a Notified Claim is included in the
contractor’s bill etc.; from the scope, purview and ambit of the Arbitration
Agreement. It is submitted that under sub-Clause (iii) thereof, a Notified
Claim covered by a decision of the General Manager is specifically an E
excluded matter. It is submitted that in the present case the General
Manager rejected the demand of the NCCL in regard to the Notified
Claims, particularly as the demand in regard to ‘Notified Claims’ had
been specifically withdrawn by the NCCL. It is submitted therefore that
viewed from any angle, as no arbitration clause existed so far as the
NCCL is concerned, the High Court has committed a serious error in F
referring the dispute between the parties to Arbitrator and appointing
the Arbitrator.
8.18 Now, so far as the other four cases are concerned, the learned
Attorney General has submitted that in those four cases the claims were
referred / sent to the General Manager under Clause 9.0.2.0 of the G
GCC. That in all the remaining cases the General Manager declared
that none of the claims of the NCCL was a Notified Claim. Therefore,
the claims which are found by the General Manager not to be Notified
Claims are not arbitrable and are outside the scope and purview of the
Arbitration Agreement. It is submitted that in that view of the matter, the
H
684 SUPREME COURT REPORTS [2022] 13 S.C.R.
A High Court ought to have dismissed the applications / petitions filed by
the NCCL under Section 11 of the Arbitration Act.
Making above submissions and relying upon decisions, it is prayed
to allow the present appeals and set aside the respective orders passed
by the High Court referring the dispute between the parties to arbitration
B and appointing the sole Arbitrator.
9. Present appeals are vehemently opposed by Shri Ranjith Kumar,
learned Senior Advocate appearing on behalf of the respondent – NCCL.
9.1 Shri Ranjith Kumar, learned Senior Advocate appearing for
the respondent – NCCL has made following submissions pointing out
C the relevant facts which, according to him, are relevant for deciding the
dispute in present appeals.
(1) That, the parties herein had entered into an agreement,
whereby the respondent NCCL was tasked with the job of
completing the civil, structural and associated UG Piping
works for the Paradip Refinery;
D
(2) Due to certain reasons attributable to IOCL, there was a
delay in completion of the works;
(3) In accordance with the GCC, NCCL on 23.05.2016, applied
for extension of time and submitted its final bill on 05.08.2016;
(4) On 29.07.2016, NCCL issued the No Due Certificate,
E
however, it also made it clear that the said Certificate would
not include final bill amount, service tax amount and the
Notified Claims due from IOCL;
(5) The Engineer-in-charge vide letter dated 01.01.2016,
expressly acknowledged the presence of “Notified Claims”
F in the final bill and coerced NCCL to take back its Notified
Claims in order to process its application for EOT;
(6) Under duress, NCCL was constrained to issue a letter on
02.11.2016 withdrawing its Notified Claims on the twin
condition that the application for EOT is considered
G favorably and the price discount does not exceed 4% of
the contract value;
(7) That, the letter dated 02.11.2016 was clearly conditional
and was in the nature of an offer and not an acceptance;
(8) Vide letter dated 13.01.2017, IOCL informed NCCL that
H they had only partially allowed the application for EOT and
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 685
[M. R. SHAH, J.]
a price discount of 4% was applied to the period for which A
the application for EOT was not allowed. Therefore, it is
clear that IOCL did not positively respond to both the
conditions stated by NCCL in its letter dated 02.11.2016;
(9) That, aggrieved by the aforesaid decision, NCCL without
any delay, on 23.01.2017, communicated that the decision B
to partially allow its application for EOT is unacceptable as
the same is not in accordance with the conditional offer
given by NCCL and also since the delay was caused due to
reasons attributable to the IOCL;
(10) Disregarding the aforesaid letter, IOCL on 08.05.2017, C
unilaterally released the payment against the final bill, after
adjusting the price discount;
(11) That, NCCL on 16.05.2017 i.e. within 10 days from the
release of the amount, informed IOCL that the application
for price discount is misplaced and its ‘Notified Claims’ still D
hold good as the conditional offer of NCCL was not
accepted;
(12) Since IOCL miserably failed to provide an appropriate
response within a reasonable period of time, NCCL invoked
the arbitration clause i.e. Clause 9.0.1.0 of the GCC and E
submitted its claims to IOCL;
(13) It is submitted that as per Clause 9.0.1.0 read with Clause
9.0.2.0 of the GCC, IOCL had to refer the claims of NCCL
to its General Manager and then the General Manager was
to issue a declaration pursuant to which the arbitration could F
commence;
(14) It is submitted that in the claims concerned in four of the
petitions, the determination was made by the General
Manager in an inordinately belated manner. It is submitted
that in 3 out of 5 petitions, the determination by the General
Manager was made after NCCL filed the arbitration G
petitions before the High Court. It is submitted that in a
completely malafide and deceptive manner, IOCL claims
to have made a reference to the General Manager who
determined the nature of claims after filing of the counter
affidavit by NCCL before this Court. H
686 SUPREME COURT REPORTS [2022] 13 S.C.R.
A (15) It is submitted that therefore, as such, IOCL is attempting
to scuttle respondent’s contractual right to pursue arbitration
by bringing on record a document nearly two years after
the respondent invoked the arbitration clause.
(16) It is submitted that the General Manager’s decision which
B is relevant in SLP Nos.13161 and 13183 of 2019 was based
on the ground that there was full and final settlement between
the parties. It is submitted that as the decision of the General
Manager on “Notified Claims” was erroneous, malafide and
on technical grounds, NCCL rightly approached the High
Court of Delhi under Section 11(6) of the Arbitration Act
C seeking the relief of appointment of Arbitrator. It is submitted
that therefore the High Court is absolutely justified in
appointing the Arbitrator.
9.2 Shri Ranjith Kumar, learned Senior Advocate appearing for
NCCL has supported the impugned orders passed by the High Court by
D making the following broad submissions:
(1) As per the agreement entered into between the parties, the
General Manager is not permitted to decide if a claim is
barred by virtue of there being accord and satisfaction or a
claim being an excepted claim.
E (2) Under Section 11(6-A) of the Arbitration Act, at the stage
of appointment of an arbitrator, the scope of intervention
by the Courts is confined to the examination of the existence
of an arbitration agreement.
(3) At the stage of appointment of the arbitrator, the Court
cannot look into whether there has been accord and
F
satisfaction between the parties
(4) At the stage of appointment of arbitrator, the Court cannot
look into whether a claim is an excepted claim or not.
(5) Contractual clauses cannot be read in a manner that
abridges statutory rights and the doctrine of mutuality, to
G
confer the power to unilaterally determine arbitrability of a
dispute upon one of the parties.
(6) As per the doctrine of election, the present proceedings
ought to be dismissed since IOCL has preferred an
application under Section 16(2) and 16(5) challenging the
H jurisdiction of the Arbitral Tribunal.
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 687
[M. R. SHAH, J.]
9.3 On an interpretation of the Clauses of the GCC, Shri Ranjith A
Kumar, learned Senior Advocate appearing for the respondent NCCL
has submitted that a bare perusal of the relevant clauses of the GCC
would indicate that the General Manager of IOCL is neither entitled to
examine whether a “Notified Claim” is an ‘excepted claim’ nor can he
look into the issue whether there is accord and satisfaction between the
B
parties.
9.4 It is submitted that Clause 9.0.1.0 is subject to Clauses 6.7.1.0,
6.7.2.0 and 9.0.2.0. Further, Clause 9.0.2.0 creates a machinery whereby
IOCL has unbridled power conferred upon its General Manager to certify
if a claim is capable of being referred to arbitration. The said clause,
according to IOCL vests the sole discretion of deciding the arbitrability C
of claims on the General Manager. It is submitted that, as such, the
interpretation of the Clause as suggested by IOCL, is in derogation of
not only the arbitrator’s power to decide arbitrability, but also the Court’s
power under Section 11 of the Arbitration Act.
9.5 It is submitted that the said Clause would indicate that the D
General Manager is only supposed to see if the claim raised by the
respondent is (i) a Notified Claim as defined under Clause 1.21.0.0 r/W.
Clause 6.6.1.0; and (ii) whether the Notified Claim is included in the
final bill in accordance with Clause 6.6.3.0. That the General Manager
is not empowered under the said Clause to state that a claim is not E
arbitrable due to full and final settlement between the parties or due to a
claim being an excepted claim.
9.6 It is submitted that in the present case, the IOCL has admitted
that the claims raised by the respondent are ‘Notified Claims’ and this
fact has never been disputed by the IOCL or its General Manager. It is F
submitted that even the second condition is also fulfilled as the respondent’s
final bill includes its Notified Claims. It is submitted that thus the only
logical conclusion which follows is that the Notified Claims raised by the
respondent should have been referred to arbitration. However, the
General Manager of the IOCL, in two cases, denied referring the Notified
Claims to arbitration on the ground that there was full and final settlement G
between the parties, and in other three cases the General Manager has
denied referring the Notified Claims to arbitration on the ground that
they are ‘excepted claims’.
9.7 It is submitted that as per the GCC, the General Manager is
not entitled to resist the reference of a Notified Claim to arbitration on H
688 SUPREME COURT REPORTS [2022] 13 S.C.R.
A the ground of accord and satisfaction. That the aspect pertaining to full
and final settlement between the parties, forms part of Clauses 6.7.1.0
and 6.7.2.0 and not of Clause 9.0.2.0. That, in fact, Clause 6.7.1.0
expressly provides that upon payment of sums under the final bill, there
shall be full and final settlement, without prejudice to the Notified Claims
of the contractor included in the final bill. It is submitted that therefore,
B
even after the payment of money on 08.05.2017, Notified Claims are
neither settled nor is there full and final settlement in respect of Notified
Claims. It is submitted that insofar as ‘excepted claims’ are concerned,
as per Clause 9.0.2.0, once the General Manager comes to a decision
that a claim is a Notified Claim and the same is included in the final bill,
C he is duty bound to refer the claim to arbitration. It is submitted that
therefore the reasoning behind the decision rendered by the General
Manager that the claims are not Notified Claims is not only unsustainable,
but is also ex facie contrary to Clause 9.0.2.0. It is submitted that Clause
9.0.2.0 does not render the decision of the General Manager final.
D 9.8 It is further submitted that vide the Amendment Act, 2015,
section 11(6-A) has been inserted by virtue of which, the scope of
intervention at Section 11 stage is very narrow. Reliance is placed upon
the decision of this Court in the case of Duro Felguera S.A. v.
Gangavaram Port Limited [(2017) 9 SCC 729]. It is submitted that
after insertion of Section 11(6-A), the scope of intervention by the Court
E at the stage of appointment of Arbitrator is narrowed down and the
Courts may have to now only examine the existence of a valid arbitration
agreement. That in the aforesaid decision it is held that the legislative
purpose is essentially to minimize the Court’s intervention at the stage of
appointment of Arbitrator and that the intention as incorporated in Section
F 11(6-A) ought to be respected is the submission.
9.9 It is submitted that despite the above binding decision, in the
subsequent decision in the case of United India Insurance Co. Ltd.
v. Antique Art Exports (P) Ltd. [(2019) 5 SCC 362], a coordinate
Bench of this Court took the view that once a claim is settled, it leaves
G no arbitral dispute subsisting under the agreement to be referred to the
Arbitrator.
9.10 It is submitted that the conflicting decisions were considered
and the issue has now been settled by a Three Judges Bench of this
Court in a subsequent decision rendered in the case of Mayavati Trading
H Private Limited v. Pradyuat Deb Burman [(2019) 8 SCC 714].
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 689
[M. R. SHAH, J.]
That after considering in detail the 246th Law Commission Report; the A
report of the High-Level Committee regarding institutionalization of
arbitration in India and the Statement of Objects and Reasons of the
2015 Amendment Bill, it is held that post-2015, the scope of the Courts’
powers at the stage of appointment of Arbitrator is confined to the
examination of the existence of the arbitration agreement. It is submitted
B
that the decision of this Court in the case of Mayavati Trading Private
Limited (supra) has been subsequently followed by this Court in a recent
decision in the case of Vidya Drolia (supra).
9.11 Shri Ranjith Kumar, learned Senior Advocate appearing on
behalf of the respondent has also relied upon the following decisions of
this Court in support of his submissions of applicability of Section 11(6- C
A) and a very limited jurisdiction of the Courts while considering an
application of Section 11(6-A) of the Arbitration Act post-2015.
(1) Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern
Coal Field Ltd.
D
(2020)2 SCC 455
(2) BSNL & Anr. v. Nortel Networks India Pvt. Ltd.
(2021)5 SCC 738
(3) Pravin Electricals (P) Ltd. v. Galaxy Infra & Engg. (P)
E
Ltd.
(2021)5 SCC 671
(4) Sanjiv Prakash v. Seema Kukreja
(2021)9 SCC 732
F
9.12 It is further submitted that although 2019 Amendment to the
Arbitration Act has deleted Section 11(6-A), this Court in the case of
Vidya Drolia (supra) has clarified that the rationale behind the insertion
of Section 11(6-A) of the Arbitration Act would continue to apply and
guide the Courts on its scope of jurisdiction at stage one, that is, the pre-
arbitration stage. G
9.13 It is further submitted by learned Senior Advocate appearing
for the respondent NCCL that as held by this Court in the case of Vidya
Drolia (supra) as well as in the case of Swiss Timing Limited v.
Commonwealth Games 2010 Organizing Committee [(2014) 6
SCC 677], the role of a Court is to assist and support arbitration and H
690 SUPREME COURT REPORTS [2022] 13 S.C.R.
A leave a substantive part of the adjudication to the arbitral Tribunal. It is
submitted therefore that at the stage of an application filed under Section
11, the Court is only supposed to look as to, whether, a valid arbitration
agreement exists. It is submitted that therefore the scope of intervention
by the Court is restricted at the stage of appointment of Arbitrator and it
can neither examine whether certain claims are ‘excepted’ nor can it
B
look into the issue of whether there is “accord and satisfaction”.
9.14 It is further submitted by learned Senior Advocate appearing
for the respondent NCCL that in cases where the claims are rejected by
the General Manager on the ground that there was “accord and
satisfaction” between the parties and hence, not referable to arbitration,
C in the instant case the respondent has disputed petitioner’s contention on
“accord and satisfaction” even before the payment of final bill. It is
submitted that therefore the issue whether “accord and satisfaction”
existed between the parties is virtual in nature and examination of the
same would require detailed perusal of the evidence by the Arbitral
D Tribunal. That in any event, pursuant to the introduction of Section 11(6-
A), the Court has to restrict itself to the issue of existence of the
Arbitration Agreement at Section 11 stage and cannot delve into the
issue of “accord and satisfaction” is the submission.
9.15 Relying upon the decisions of this Court in the case of Ambica
E Construction v. Union of India reported in (2006) 13 SCC 475 and
R.L. Kalathia & Co. v. State of Gujarat reported in (2011) 2 SCC
400, it is submitted that as observed by this Court in the aforesaid two
decisions, in many instances, contractors are coerced to issue a no-dues
certificate, without which no amount would be released. It is submitted
that in the aforesaid decision it is observed that merely because the
F contractor has issued “No Dues Certificate”, if there is an acceptable
claim, the Court cannot reject the same on the ground of issuance of
“No Dues Certificate”.
9.16 It is further submitted that the question whether a Notified
Claim is an ‘excepted claim’, is within the exclusive domain of the
G Arbitrator to be answered. Reliance is placed on the decision of this
Court in the case of BSNL v. Motorola India (P) Ltd. reported in
(2009) 2 SCC 337 and National Insurance Co. Ltd. v. Boghara
Polyfab Pvt. Ltd. reported in (2009) 1 SCC 267 (even prior to 2015
Amendment to the Arbitration Act) as well as in the case of Zostel
H
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 691
[M. R. SHAH, J.]
Hospitality (P) Ltd. vs. Oravel Stays (P) Ltd. reported in (2021) 9 A
SCC 765.
9.17 It is further submitted that Section 11 of the Arbitration Act
expressly confers powers upon the Courts to determine the existence of
an Arbitration Agreement and subsequently appoint an Arbitrator. It is
submitted that Section 8 confers upon the Courts and judicial authorities B
the power to refer the parties to arbitration when there is an arbitration
Agreement. Similarly, section 16 of the Arbitration Act categorically
recognizes and empowers the Arbitral Tribunal to rule on any objection
raised as against its jurisdiction. It is submitted that therefore petitioner’s
interpretation of Clause 9.0.2.0 of the GCC qua the purported finality of
the determination of its General Manager, seeks to usurp the statutory C
powers of the Courts as enshrined under Sections 8 and 11 and the
statutory power of an arbitral Tribunal as enshrined under Section 16.
9.18 It is further submitted that insofar as the claims concerned in
other four petitions (except the lead matter), the determination was made
after an inordinate delay. That in 3 out of 5 petitions, the determination D
by the General Manager was made after the respondent filed the
Arbitration Petitions before the High Court. That in SLP No.13408/2019,
even no reference to the General Manager was made until the filing of
the Arbitration Petition before the High Court. That therefore the General
Manager’s decision in the aforesaid four SLPs is inefficacious as the E
determination has been made not only thirty days after the submission of
the claim, but also after the arbitration petitions were filed before the
High Court. Reliance is placed upon the decisions of this Court in the
case of Datar Switchgears Ltd. v. Tata Finance Ltd. reported in
(2000) 8 SCC 151 (Paras 18 and 19).
F
9.19 It is further submitted by Shri Ranjith Kumar, learned Senior
Advocate appearing for respondent - NCCL that in the present case,
the petitioner had filed an application challenging the jurisdiction of the
Arbitral Tribunal under Sections 16(2) and 16(5) of the Arbitration Act
before the Arbitral Tribunal on 10.06.2019, which is, after filing of the
present petition and before the issuance of notice by this Court on G
03.07.2019. That the petitioner has not disclosed the same and has
suppressed this factum of pursuing two remedies simultaneously. It is
submitted that therefore as the petitioner has elected to pursue the
proceeding before the Arbitral Tribunal and as per the doctrine of election
H
692 SUPREME COURT REPORTS [2022] 13 S.C.R.
A of remedies, the petitioner ought not to be permitted to continue the
present proceedings before this Court.
Making above submissions, it is prayed to dismiss the present
appeals.
10. We have heard learned Senior Advocates appearing for the
B respective parties at length.
10.1 By the impugned orders the High Court in exercise of powers
under Section 11(6) of the Arbitration Act has appointed the Arbitrators
to adjudicate and resolve the disputes between the parties arising out of
the respective contracts. The respective orders passed by the High Court
C appointing the Arbitrator in applications under Section 11(6) of the
Arbitration Act are the subject matter of present appeals.
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
D 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
E 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
F 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 10-23).
10.4 In the case of Centrotrade Minerals & Metal Inc. (supra),
this Court had an occasion to consider the concept of party autonomy
G
and it is observed and held that party autonomy is virtually the backbone
of arbitration. It is further observed and held that party autonomy being
the brooding and guiding spirit in arbitration, the parties are free to agree
on the application of three different laws governing their entire contract
– (1) proper law of contract; (2) proper law of arbitration agreement
H and (3) proper law of the conduct of arbitration. It is further observed in
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 693
[M. R. SHAH, J.]
the said decision that the parties to an arbitration agreement have the A
autonomy to decide not only on the procedural law to be followed but
also the substantive law. The choice of jurisdiction is also left to the
contracting parties.
10.5 In the case of DLF Universal Ltd. & Anr. v. Director,
Town and Country Planning Department, Haryana & Ors. [(2010) B
14 SCC 1], it is observed and held that the contract is to be interpreted
according to its purpose. The purpose of a contract is the interest,
objective, values, policy that the contract is designed to actualize. It
comprises the joint intent of the parties. It is observed that it is not an
intent of a single party; it is the joint intent of both the parties and the
joint intent of the parties is to be discovered from the entirety of the C
contract and the circumstances surrounding its formation (Para 13).
10.6 In the case of Rajasthan State Industrial Development
and Investment Corporation & Anr. v. Diamond and Gem
Development Corporation Ltd. & Anr. [(2013) 5 SCC 470], it is
observed and held that a party cannot claim anything more than what is D
covered by the terms of the contract, for the reason that the contract is
a transaction between two parties and has been entered into with open
eyes and by understanding the nature of contract. It is further observed
that thus the contract being a creature of an agreement between two or
more parties has to be interpreted giving literal meanings unless there is E
some ambiguity therein. The contract is to be interpreted giving the actual
meaning to the words contained in the contract and it is not permissible
for the Court to make a new contract, however reasonable, if the parties
have not made it themselves. It is further observed that the terms of the
contract have to be construed strictly without altering the nature of a
contract as it may affect the interest of either of the parties adversely F
(Para 23).
10.7 In the case of Mitra Guha Builders (India) Company (supra),
while interpreting the clause by which the parties agreed that the decision
of the Superintending Engineer in levying compensation is final and the
same is an ‘excepted matter’ and the determination shall be only by the G
Superintending Engineer and the correctness of his decision cannot be
called in question in the arbitration proceedings and the remedy, if any,
will arise in the ordinary course of law, the Three Judges Bench of this
Court after referring to and considering the earlier decisions on the point
observed and held that once the parties have decided that certain matters H
694 SUPREME COURT REPORTS [2022] 13 S.C.R.
A are to be decided by the Superintending Engineer and his decision would
be final, the same cannot be the subject matter of arbitration.
10.8 In the case of Harsha Construction (supra), while interpreting
the clause in the agreement by which some of the disputes were
specifically not arbitrable and in relation to the said disputes the contractor
B had to negotiate with the Engineer concerned and if the contractor was
not satisfied with the rate determined by the Engineer, the contractor
was required to follow the procedure mentioned in the said clause and in
this regard, in paras 18 and 19, it is observed and held as under:
“18. Arbitration arises from a contract and unless there is a
C specific written contract, a contract with regard to arbitration
cannot be presumed. Section 7(3) of the Act clearly specifies
that the contract with regard to arbitration must be in writing.
Thus, so far as the disputes which have been referred to in
Clause 39 of the contract are concerned, it was not open to
the Arbitrator to arbitrate upon the said disputes as there
D was a specific clause whereby the said disputes had been
“excepted”. Moreover, when the law specifically makes a
provision with regard to formation of a contract in a particular
manner, there cannot be any presumption with regard to a
contract if the contract is not entered into by the mode
E prescribed under the Act.
19. If a non-arbitrable dispute is referred to an Arbitrator
and even if an issue is framed by the Arbitrator in relation to
such a dispute, in our opinion, there cannot be a presumption
or a conclusion to the effect that the parties had agreed to
F refer the issue to the Arbitrator. In the instant case, the
respondent authorities had raised an objection relating to
the arbitrability of the aforestated issue before the Arbitrator
and yet the Arbitrator had rendered his decision on the said
“excepted” dispute. In our opinion, the Arbitrator could not
have decided the said “excepted” dispute. We, therefore, hold
G that it was not open to the Arbitrator to decide the issues
which were not arbitrable and the award, so far as it relates
to disputes regarding non-arbitrable disputes is concerned,
is bad in law and is hereby quashed.”
10.9 At this stage, a recent decision of this Court in the case of
H Vidya Drolia (supra), which, as such, is post-insertion of Section 11(6-
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 695
[M. R. SHAH, J.]
A) of the Arbitration Act, is required to be referred to. In the said decision A
it is observed and held that the issue of non-arbitrability 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 non-arbitrability has multiple meanings. After referring to another
decision of this Court in the case of Booz Allen & Hamiltan Inc. v.
B
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 C
would exclusively fall within the domain of public fora (courts).
(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 D
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 E
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, F
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 G
‘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:
H
696 SUPREME COURT REPORTS [2022] 13 S.C.R.
A 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;
B 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
C 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
D dovetail and overlap, albeit when applied 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
E would be non-arbitrable.
76.6 However, the aforesaid principles have to be applied
with care and caution as observed in Olympus Superstructures
(P) Ltd.: (SCC p. 669, para 35)
“35. ...Reference is made there to certain disputes like
F criminal offences of a public nature, disputes arising out of
illegal agreements and disputes relating to status, such as
divorce, which cannot be referred to arbitration. It has,
however, been held that if in respect of facts relating to a
criminal matter, say, physical injury, if there is a right to
damages for personal injury, then such a dispute can be
G
referred to arbitration (Keir v. Leeman). Similarly, it has
been held that a husband and a wife may refer to arbitration
the terms on which they shall separate, because they can
make a valid agreement between themselves on that matter
(Soilleux v. Herbst, Wilson v. Wilson and Cahill v.
H Cahill).”
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 697
[M. R. SHAH, J.]
10.10 On the question, who decides on non-arbitrability of the A
dispute, after referring to and considering the earlier decisions on the
point, more particularly, the decisions in the case of Garware Wall Ropes
Ltd. (supra); Hyundai Engg. & Construction Co. Ltd. (supra) and
Narbheram Power & Steel (P) Ltd. (supra), it is observed and held that
the question of non-arbitrability relating to the inquiry, whether the dispute
B
was governed by the arbitration clause, can be examined by the Courts
at the reference stage itself and may not be left unanswered, to be
examined and decided by the Arbitral Tribunal. Thereafter, in para 153,
it is observed and held that the expression, “existence of arbitration
agreement” in Section 11 of the Arbitration Act, would include aspect of
validity of an arbitration agreement, albeit the Court at the reference C
stage would apply the prima facie test. It is further observed that in
cases of debatable and disputable facts and, good reasonably arguable
case etc., the Court would force the parties to abide by the arbitration
Agreement as the Arbitral Tribunal has the primary jurisdiction and
authority to decide the disputes including the question of jurisdiction and
D
non-arbitrability. Ultimately in para 154, the proposition of law is
crystallized as under:
“154. Discussion under the heading ‘Who decides
Arbitrability?’ can be crystallized as under:
154.1. Ratio of the decision in Patel Engineering Ltd. E
on the scope of judicial review by the court while deciding an
application under Sections 8 or 11 of the Arbitration Act, post
the amendments by Act 3 of 2016 (with retrospective effect
from 23-10-2015) and even post the amendments vide Act 33
of 2019 (with effect from 9-8-2019), is no longer applicable.
F
154.2. Scope of judicial review and jurisdiction of the
court under Section 8 and 11 of the Arbitration Act is identical
but extremely limited and restricted.
154.3. The general rule and principle, in view of the
legislative mandate clear from Act 3 of 2016 and Act 33 of G
2019, and the principle of severability and competence-
competence, is that the arbitral tribunal is the preferred first
authority to determine and decide all questions of non-
arbitrability. The court has been conferred power of “second
look” on aspects of non-arbitrability post the award in terms of
H
698 SUPREME COURT REPORTS [2022] 13 S.C.R.
A sub-clauses (i), (ii) or (iv) of Section 34(2)(a) or sub-clause (i)
of Section 34(2)(b) of the Arbitration Act.
154.3. Rarely as a demurrer the court may interfere at
the Section 8 or 11 stage when it is manifestly and ex facie
certain that the arbitration agreement is non- existent, invalid
B or the disputes are non-arbitrable, though the nature and facet
of non-arbitrability would, to some extent, determine the level
and nature of judicial scrutiny. The restricted and limited review
is to check and protect parties from being forced to arbitrate
when the matter is demonstrably “non-arbitrable” and to cut
off the deadwood. The court by default would refer the matter
C when contentions relating to non-arbitrability are plainly
arguable; when consideration in summary proceedings would
be insufficient and inconclusive; when facts are contested; when
the party opposing arbitration adopts delaying tactics or impairs
conduct of arbitration proceedings. This is not the stage for
D the court to enter into a mini trial or elaborate review so as to
usurp the jurisdiction of the arbitral tribunal but to affirm and
uphold integrity and efficacy of arbitration as an alternative
dispute resolution mechanism.”
10.11 In the recent decision of this Court in the case of DLF
E Home Developers Limited v. Rajapura Homes Private Limited
and Another [2021 SCC Online SC 781] in which this Court also
had an occasion to consider Section 11(6-A) of the Arbitration Act and
ultimately has observed, after referring to and considering the decision
of three Judges Bench of this Court in the case of Vidya Drolia (supra)
that the jurisdiction of the Court under Section 11 of the Arbitration Act
F is primarily to find out whether there existed a written agreement between
the parties for resolution of the dispute and whether the aggrieved party
has made out a prima facie arguable case, it is further observed that
limited jurisdiction, however, does not denude the Court of its judicial
function to look beyond the bare existence of an arbitration clause to cut
G the deadwood. In the said decision, this Court had taken note of the
observations made in the case of Vidya Drolia (supra) that with a view
to prevent wastage of public and private resources, the Court may conduct
‘prima facie review’ at the stage of reference to weed out any frivolous
or vexatious claims.
H
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 699
[M. R. SHAH, J.]
10.12 In the case of Nortel Networks India Pvt. Ltd. (supra), this A
Court had an occasion to consider the decision in the case of Vidya
Drolia (supra) and in paras 46, 47 and 53.2, it is observed 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 B
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 C
Drolia v. Durga Corpn., (2021) 2 SCC 1: (2021) 1 SCC (Civ) 549]
has not re-surrected 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 D
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 E
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. Applying the law laid down by this Court in the aforesaid F
decisions, let us consider the relevant clauses of the GCC governing the
parties and the procedure to be followed in case of disputes between the
parties to the contract on non-payment of alleged dues may be on account
of extra payment or compensation in respect of the works over and
above the amounts due in terms of the contract and/or the dispute on the G
validity of any deductions made or threatened by the owner.
11.1 Clause 1.21.0.0 defines “Notified Claims”. It means a claim
of the contractor notified in accordance with the provisions of Clause
6.6.1.0. As per Clause 6.6.1.0, the contractor shall have to give notice in
writing of his claim with respect to any extra payment or compensation
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700 SUPREME COURT REPORTS [2022] 13 S.C.R.
A in respect of the works over and above the amounts due in terms of the
contract or on the validity of any deductions made or threatened by the
owner from any running account bills, by giving notice in writing of his
claim in this behalf to the Engineer-in-Charge and the Site Engineer
within ten days from the date of issue of the orders or instructions relative
to any works for which the contractor claims such additional payment…
B
etc. Such notice shall give full particulars of the nature of such claim,
grounds on which it is based and the amount claimed. It also further
provides that the owner shall not in any way be liable to in respect of any
claim by the contractor unless notice of such claim shall have been given
by the contractor to the Engineer-in-Charge and the Site Engineer. It
C also further provides that a contractor shall be deemed to have waived
any and all claims and all his rights in respect of any claim not notified to
the Engineer-in-Charge and the Site Engineer in writing in the manner
and within the time (ten days from the date of issue of the orders or
instructions). It further provides that all such claims otherwise valid within
the provisions of Clause 6.6.1.0 read with Clauses 6.6.3.0 and 6.6.3.1
D
shall have to be dealt with/considered by the owner at the time of
submission of the Final Bill and that any action on the part of the owner
(Engineer-in-Charge or Site Engineer) to reject any claim made or
notified by the contractor or delay in dealing therewith shall be deemed
to be an admission by the owner of the validity of such claim or waiver
E by the owner of any of its rights in respect thereof.
11.2 As per Clause 6.6.3.0, any claims of the contractor notified
in accordance with the provision of Clause 6.6.1.0 and remain due at the
time of preparation of Final Bill by the contractor, shall have to be
separately included in the Final Bill prepared by the contractor in the
F form of a Statement of Claims attached thereto, giving particulars of the
nature of the claim, grounds on which it is based, and the amount claimed
and shall be supported by a copy of the notice sent in respect thereof by
the contractor to the Engineer-in-Charge and the Site Engineer under
Clause 6.6.1.0. It further provides that any variance with the claim notified
by the contractor within the provision of Clause 6.6.1.0 shall be deemed
G to be a claim different from the Notified Claim with consequence in
respect thereof indicated in Clauses 6.6.1.0 and 6.6.3.1.
11.3 Clause 6.6.3.1 further provides that the owner (IOCL) shall
not in any way be liable in respect of any Notified Claim not specifically
reflected in the Final Bill in accordance with the provisions of Clause
H
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 701
[M. R. SHAH, J.]
6.6.3.0. It further provides that in and all Notified Claims not specifically A
reflected and included in the Final Bill in accordance with the provisions
of Clause 6.6.3.0 shall be deemed to have been waived by the contractor
and the owner (IOCL) shall have no liability in respect thereof and the
contractor shall not be entitled to raise or include in the Final Bill any
claims other than a Notified Claim conforming in all respects and in
B
accordance with the provisions of Clause 6.6.3.0.
11.4 Clause 6.6.4.0 provides that no claim shall on any account be
made by the contractor after the Final Bill. It further provides that any
such claim shall be deemed to have been waived and with respect to all
such claims not included in the Final Bill, the owner (IOCL) is absolved
and discharged, even if not including the same, the contractor shall have C
acted under the mistake of law or fact.
Thus, on a fair reading of the aforesaid provisions, it can be seen
that only those claims which are Notified after following the procedure
as referred to hereinabove shall be considered as “Notified Claim” and
in respect of any claim other than the Notified Claim, the owner is not D
liable to pay and as such is absolved and discharged under the said
clauses.
11.5 The next important clause is 6.7.0.0 with respect to the
discharge of owner’s liability. As per Clause 6.7.1.0, the acceptance by
the contractor of any amount paid by the owner to the contractor in E
respect of the final dues of the contractor under the Final Bill upon
condition that the said payment is being made in full and final settlement
of all said dues to the contractor shall, without prejudice to the Notified
Claims of the contractor included in the Final Bill in accordance with the
provisions of Clause 6.6.3.0, be deemed to be in full and final satisfaction F
of all such dues to the contractor notwithstanding any qualifying remarks,
protest or condition imposed or purported to be imposed by the contractor
relative to the acceptance of such payment.
11.6 Clause 6.7.2.0 provides that the acceptance by the contractor
of any amount paid by the owner (IOCL) to the contractor in respect of G
the Notified Claims of the contractor included in the Final Bill in
accordance with the provisions of Clause 6.6.3.0 and associated provisions
thereunder, upon the condition that such payment is being made in full
and final settlement of all the claims of the contractor shall, subject to
the provisions of Clause 6.7.3.0, be deemed to be in full and final
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702 SUPREME COURT REPORTS [2022] 13 S.C.R.
A satisfaction of all claims of the contractor notwithstanding any qualifying
remarks, protest or condition imposed or purported to be imposed by the
contractor relative to the acceptance of such payment with the intent
that upon acceptance by the contractor of any payment made, the Contract
(including the arbitration clause) shall stand discharged and extinguished
insofar as relates to and/or concerns the claims of the contractor.
B
11.7 The next important clause to be considered would be Clause
9.0.0.0. The said clause is for Alternative Dispute Resolution Machinery.
As per Clause 9.0.1.0, subject to the earlier Clauses, namely Clauses
6.7.1.0, 6.7.2.0 and 9.0.2.0, any dispute arising out of a NOTIFIED
CLAIM of the contractor included in the Final Bill of the contractor in
C accordance with the provisions of Clause 6.6.3.0 and if the contractor
has not opted for the Alternative Dispute Resolution Machinery referred
to in Clause 9.1.1.0 and any dispute arising out of any Claim of the
owner against the contractor shall be referred to the arbitration of a Sole
Arbitrator. It also further provides that the owner may prefer its Claims
D against the contractor as counter-claims if a Notified Claim of the
contractor has been referred to arbitration. It also further provides that
the contractor shall not, however, be entitled to raise as a set-off, defence
or counter-claim any claim which is not a NOTIFIED CLAIM included
in the contractor’s Final Bill in accordance with the provisions of Clause
6.6.3.0.
E
11.8 Clause 9.0.2.0 is an exclusion clause by which, certain matters
are specifically excluded from the scope, purview and ambit of the
Arbitration Agreement. It provides that disputes or differences with
respect to or concerning or relating to any of the matters mentioned/
specified in Clause 9.0.2.0 are excluded from the scope, purview and
F ambit of the arbitration agreement. It further provides that any such
matter which is specifically excluded viz. (i) with respect to or concerning
the scope or existence or otherwise of the Arbitration Agreement; (ii)
whether or not a Claim sought to be referred to arbitration by the
contractor is a Notified Claim; (iii) whether or not a Notified Claim is
G included in the contractor’s Final Bill in accordance with the provisions
of Clause 6.6.3.0 and (iv) whether or not the contractor has opted for
the Alternative Dispute Resolution Machinery with respect to any Notified
Claim included in the contractor’s Final Bill shall have to be decided by
the General Manager prior to the arbitration proceeding with or proceeding
further with the reference and the Arbitrator or the Arbitral Tribunal
H
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 703
[M. R. SHAH, J.]
shall have no jurisdiction to entertain the same or to render any decision A
with respect to such matters.
Thus, on a fair reading of clause 9.0.0.0, only the dispute arising
out of a NOTIFIED CLAIM of the contractor included in the FINAL
BILL in accordance with the provisions of Clause 6.6.3.0 shall be referred
to arbitration, that too, subject to Clause 9.0.2.0 and any dispute / matter B
falling within Clause 9.0.2.0 shall have to be first decided by the General
Manager, including, whether or not a Claim sought to be referred to
arbitration by the contractor is a Notified Claim. Therefore, if the claim
is not a Notified Claim, as per Clause 6.6.1.0 and the same is not included
in the Final Bill, such a claim is outside the purview of the arbitration
agreement. Whether or not a claim sought for arbitration by the contractor C
is a Notified Claim or any such matter / dispute is specifically excluded
from the scope, purview and ambit of arbitration agreement, such matter
/ dispute shall have to be first decided by the General Manager prior to
the arbitral proceeding with or proceeding further with the reference.
Thus, unless there is a decision by the General Manager on whether or D
not a claim sought to be referred to arbitration by the contractor is a
Notified Claim or not, the Arbitrator or Arbitral Tribunal shall have no
jurisdiction to entertain such a dispute.
The aforesaid clauses of the GCC are part of the contract between
the parties herein and both the parties are bound by the aforesaid claims. E
12. It is the case on behalf of the petitioner IOCL that the IOCL
had settled the claim of respondent – NCCL accepting NCCL’s offer to
grant extension of time; not to give price adjustment of over 4% of the
total contract value and consequently IOCL condoned the delay of 1493
days and granted extension of time without applying any price discount. F
Further for the delay of 65 days, IOCL applied the price discount of
Rs.6,44,40,021 i.e. 4% of the total value of contract and thereafter IOCL
released the payment of Rs.4,53,04,021/- against NCCL’s final bill
(adjusting price discount of Rs.6.4 Crores as against Rs.14.8 Crores)
and also returned NCCL’s Bank Guarantee which came to be fully
accepted by the respondent NCCL. It is the case of IOCL that thereafter, G
it was not open for the respondent to raise any further claim. Therefore,
it is the case on behalf of the petitioner that, there being ‘accord and
satisfaction’ for the claim, being an ‘excepted claim’, it was not open for
the respondent to invoke the arbitration agreement and request for
appointment of an Arbitrator. It is also the case on behalf of the petitioner H
704 SUPREME COURT REPORTS [2022] 13 S.C.R.
A IOCL that in view of the specific decisions by the General Manager, on
“Notified Claims”, in view of Clause 9.0.2.0, for the same claims which
are not held to be ‘Notified Claims’ by the General Manager, the matter
cannot be referred to the Arbitrator in view of the clause pertaining to
excluded matters.
B On the other hand, it is the case on behalf of the respondent that
acceptance of the amount of Rs.4,53,04,021/- was under duress and
coercion. It is also the case on behalf of the respondent that earlier offer
dated 02.11.2016 was a conditional one and was in the nature of an
offer and subsequently when the offer was partially allowed, the
respondent without any delay communicated that the decision to partially
C allow its application for EOT is unacceptable as the same is not in
accordance with the conditional offer given by the respondent.
12.1 Now, so far as the General Manager’s decision on Notified
Claims is concerned, it is the case on behalf of the respondent that even
the decision of the General Manager on the Notified Claims will always
D be subject to the decision of the Arbitral Tribunal. By the impugned
judgment and order the High Court concluded and summed up as under:
“81. Having regard to the foregoing discussion hereinabove
my conclusions can be summed as follows:
E I) Where there is contestation or the decision rendered
by the General Manager leaves scope for argument as to
whether the claims lodged by a Contractor can be categorized
as Notified Claims is best left to the Arbitral Tribunal. In other
words, except for the situation where there is no doubt that the
claims were not lodged with the Engineer and the Site Engineer
F as required under Clause 6.6.1.0 68 read with 6.6.3.0 69, the
matter would have to be left for resolution by Arbitral Tribunal.
II) Aspects with regard to accord and satisfaction of
the claims or where there is a dispute will also have to be left
to the Arbitral Tribunal. The position in law in this regard remains
G the same both pre and post amendment brought about in the
1996 Act after 23.10.2015.
III) After the insertion of Subsection (6A) in 11 of the
1996 Act the scope of inquiry by the Court in a Section 11
petition, (once it is satisfied that it has jurisdiction in the matter)
H is confined to ascertaining as to whether or not a binding
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 705
[M. R. SHAH, J.]
arbitration agreement exists qua the parties before it which is A
relatable to the disputes at hand.
IV) The space for correlating the dispute at hand with
the arbitration agreement is very narrow. Thus, except for an
open and shut case which throws up a circumstance indicative
of the fact that a particular dispute does it not fall within the B
four corners of the arbitration agreement obtaining between
the parties the matter would have to be resolved by an Arbitral
Tribunal. In other words, if there is contestation on this score,
the Court will allow the Arbitral Tribunal to reach a conclusion
one way or another. This approach would be in keeping with
the doctrine of Kompetenz Kompetenz; a doctrine which has C
statutory recognition under Section 16 of the 1996 Act.”
13. Having heard learned Counsel appearing for the respective
parties and in the facts and circumstances of the case, the issue / aspect
with regard to ‘accord and satisfaction’ of claims is seriously disputed
and is debatable. Whether, in view of the acceptance of Rs.4,53,04,021/ D
- by the respondent NCCL which was released by IOCL on the offer /
letter made by the respondent NCCL dated 02.11.2016 there is an instance
of ‘accord and satisfaction’ of the claims is a good and reasonably
arguable case. It cannot be said to be an open and shut case. Therefore,
even when it is observed and held that such an aspect with regard to E
‘accord and satisfaction’ of the claims may/can be considered by the
Court at the stage of deciding Section 11 application, it is always advisable
and appropriate that in cases of debatable and disputable facts, good
reasonably arguable case, the same should be left to the Arbitral Tribunal.
Similar view is expressed by this Court in the case of Vidya Drolia (supra).
Therefore, in the facts and circumstances of the case, though it is F
specifically observed and held that aspects with regard to ‘accord and
satisfaction’ of the claims can be considered by the Court at the stage of
deciding Section 11(6) application, in the facts and circumstances of the
case, the High Court has not committed any error in observing that aspects
with regard to ‘accord and satisfaction’ of the claims or where there is G
a serious dispute will have to be left to the Arbitral Tribunal. However, at
the same time, we do not agree with the conclusion arrived at by the
High Court that after the insertion of Sub-Section (6-A) in Section 11 of
the Arbitration Act, scope of inquiry by the Court in Section 11 petition is
confined only to ascertain as to whether or not a binding arbitration
H
706 SUPREME COURT REPORTS [2022] 13 S.C.R.
A agreement exists qua the parties before it, which is relatable to the
disputes at hand. We are of the opinion that though the Arbitral Tribunal
may have jurisdiction and authority to decide the disputes including the
question of jurisdiction and non-arbitrability, the same can also be
considered by the Court at the stage of deciding Section 11 application if
the facts are very clear and glaring and in view of the specific clauses in
B
the agreement binding between the parties, whether the dispute is non-
arbitrable and/or it falls within the excepted clause. Even at the stage of
deciding Section 11 application, the Court may prima facie consider
even the aspect with regard to ‘accord and satisfaction’ of the claims.
13.1 Now, so far as the submission on behalf of the respective
C parties on the decision of the General Manager on Notified Claims in
Civil Appeal No.341/2022 arising out of SLP (C) No.13161/2019 is
concerned, the General Manager has decided / declared that the claims
are not arbitrable since they had been settled and the arbitration agreement
has been discharged under Clause 6.7.2.0 of the GCC and no longer
D existed / subsisted. As observed hereinabove, the claims had been settled
or not is a debatable and disputable question, which is to be left to be
decided by the Arbitral Tribunal. Therefore, matters related to the Notified
Claims in the facts and circumstances of the case also shall have to be
left to be decided by the Arbitral Tribunal as in the fact situation the
aspect of ‘accord and satisfaction’ and ‘Notified Claims’ both are
E interconnected and interlinked.
13.2 Now, so far as the Civil Appeal No.342/2022 arising out of
SLP (C) No.13816/2019 is concerned, the General Manager in exercise
of powers under Clause 9.0.2.0 had declared that none of the claims of
the respondent is a Notified Claim. From the communication dated
F 22.06.2018, it appears that the General Manager, after elaborately dealing
with all the alleged Notified Claims of the respondent has thereafter
found that none of the claims made by the respondent is a Notified
Claim. On a conjoint reading of the relevant clauses of the GCC viz.
Clauses 9.0.1.0 and 9.0.2.0, the dispute arising out of Notified Claims
G only, which is included in the Final Bill of the contractor can be referred
to arbitration. However, as per Clause 9.0.2.0, any dispute or difference
on whether or not a claim sought to be referred to arbitration by the
contractor is a Notified Claim falls within the excluded matters and the
Arbitrator or Arbitral Tribunal shall have no jurisdiction and/or authority
with respect thereto. The dispute or difference whether or not a claim
H
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 707
[M. R. SHAH, J.]
sought to be referred to arbitration by the contractor is a Notified Claim A
shall not and cannot form the subject matter of any reference or
submission to arbitration. Therefore, on a fair and conjoint reading of
Clause 9.0.1.0 and 9.0.2.0, it can safely be concluded that (i) only the
Notified Claims of the contractor included in the Final Bill of the contractor
in accordance with the provisions of Clause 6.6.3.0 shall have to be
B
referred to arbitration; (ii) whether or not a claim sought to be referred
to arbitration by the contractor is a Notified Claim or not, the Arbitrator
or Arbitral Tribunal shall have no jurisdiction at all; (iii) whether or not a
claim is a Notified Claim or not shall have to be decided by the General
Manager and that too, prior to arbitration proceeding with or proceeding
further with the reference. Therefore, once the General Manager, on C
the basis of the material on record takes a conscious decision that a
particular claim sought to be referred to arbitration is not a Notified
Claim, such a claim thereafter cannot be referred to arbitration. The
language used in Clauses 9.0.1.0 and 9.0.2.0 is very clear and
unambiguous.
D
13.3 As observed hereinabove, parties to the contract are free to
agree on applicability of (1) proper law of contract, (2) proper law of
arbitration agreement and (3) proper law of the conduct of arbitration.
Parties to the contract also may agree for matters excluded from the
purview of arbitration. As observed by this Court in a catena of decisions,
unless the effect of agreement results in performance of an unlawful E
act, an agreement, which is otherwise legal, cannot be held to be void
and is binding between the parties. At this stage, the decision of this
Court in the case of Sreekanth Transport (supra) is required to be referred
to. In the case before this Court, the contract provided for exclusion of
some matters from the purview of arbitration. A senior officer of the F
department was given the authority and power to adjudicate the same.
One of the clauses provided that the decision of the Senior Officer,
being the Adjudicator, shall be final and binding between the parties.
This Court considered the same as ‘excepted matters’. In the aforesaid
decision, it is observed and held in paragraph 3 as under:
G
“3. “Excepted matters” obviously, as the parties agreed, do
not require any further adjudication since the agreement itself
provides a named adjudicator - concurrence to the same
obviously is presumed by reason of the unequivocal acceptance
of the terms of the contract by the parties and this is where the
H
708 SUPREME COURT REPORTS [2022] 13 S.C.R.
A courts have found out lacking in its jurisdiction to entertain an
application for reference to arbitration as regards the disputes
arising therefrom and it has been the consistent view that in
the event the claims arising within the ambit of excepted matters,
question of assumption of jurisdiction of any arbitrator either
with or without the intervention of the court would not arise;
B
The parties themselves have decided to have the same
adjudicated by a particular officer in regard to these matters:
what are these exceptions however are questions of fact and
usually mentioned in the contract documents and forms part of
the agreement as such there is no ambiguity in the matter of
C adjudication of these specialised matters and termed in the
agreement as the excepted matters.”
13.4 In that view of the matter, the High Court has misread and
misinterpreted the clauses 9.0.1.0 and 9.0.2.0 and has seriously erred in
holding that where there is contestation or the decision rendered by the
D General Manager leaves scope for argument as to whether the claims
alleged by the contractor can be categorized as Notified Claim is best
left to the Arbitral Tribunal. The dispute whether the claim is a Notified
Claim or not is specifically excluded from the scope, purview and ambit
of the arbitration agreement. Therefore, once such a dispute falls within
the ‘excepted matters’, any decision by the General Manager on the
E issue of Notified Claims cannot be the subject matter of arbitration
proceeding.
13.5 Therefore, the High Court has erred in referring the dispute
to arbitration and appointing a sole Arbitrator to adjudicate on the dispute
with respect to the claims which as such are held to be not Notified
F Claims by the General Manager. Therefore, the Civil Appeal No.342/
2022 arising out of SLP (C) No.13408/2019 as well as Civil Appeal
Nos.343/2022 and 345/2022 arising out of SLP (C) Nos.13813/2019 and
13816/2019 respectively deserve to be allowed and the impugned
judgment and orders passed by the High Court in respective arbitration
G petitions deserve to be quashed and set aside.
13.6 So far as the Civil Appeal No.344/2022 arising out of SLP
(C) No.13815/2019 arising out of the impugned judgment and order passed
by the High Court in Arbitration Petition No.407/2018 is concerned, as
the General Manager himself has declared that only one claim of the
H respondent was / is a Notified Claim, the said appeal is to be allowed
INDIAN OIL CORPORATION LIMITED v. NCC LIMITED 709
[M. R. SHAH, J.]
partly by observing that the claim which is declared by the General A
Manager as a Notified Claim only shall have to be referred to arbitration
and the learned Arbitrator shall have no jurisdiction to adjudicate the
disputes with respect to other claims which as such are not declared as
Notified Claims by the General Manager.
14. In view of the above and for the reasons stated above, following B
order is passed.
(1) Civil Appeal No.341/2022 arising out of the impugned
judgment and order passed by the High Court in Arbitration
Petition No.115/2018 is hereby dismissed. However, it is
observed that the learned Arbitrator shall first decide the C
aspect with regard to ‘accord and satisfaction’ of the claims
and arbitrability of the disputes with regard to such claims
by deciding an application under Section 16 of the Arbitration
Act, which is reported to be pending. The learned Arbitrator
shall first decide the jurisdiction of the Arbitral Tribunal and
the arbitrability of the claims within a period of three months D
from the date of first sitting which shall be within a period
of one month from today. All the contentions and/or
defences which may be available to the respective parties
are kept open to be considered by the learned Arbitrator in
accordance with law and on its own merits and considering E
the relevant clauses of the contract and the material on
record.
(2) Civil Appeal No.342/2022 arising out of the impugned
judgment and order passed by the High Court in Arbitration
Petition No.356/2018 is hereby allowed. Impugned judgment F
and order passed by the High Court in Arbitration Petition
No.356/2018 referring the dispute between the parties to
arbitration and appointing the Arbitrator is hereby quashed
and set aside.
(3) Similarly, Civil Appeal No.343/2022 arising out of the G
impugned judgment and order passed by the High Court in
Arbitration Petition No.116/2018 and Civil Appeal No.345/
2022 arising out of the impugned judgment and order passed
by the High Court in Arbitration Petition No.406/2018 are
allowed and consequently, the impugned judgments and
H
710 SUPREME COURT REPORTS [2022] 13 S.C.R.
A orders passed by the High Court in Arbitration Petition
Nos.116/2018 & 406/2018 are hereby quashed and set
aside.
(4) So far as Civil Appeal No.344/2022 arising out of the
impugned judgment and order passed by the High Court in
B Arbitration Petition No.407/2018 is concerned, the same is
partly allowed. The impugned judgment and order passed
by the High Court in Arbitration Petition No.407/2018 is
hereby modified to the extent and it is directed that only
one claim of the respondent which is declared by the General
Manager as a Notified Claim shall have to be referred to
C arbitration and the learned Arbitrator shall adjudicate only
that claim which is declared by the General Manager as a
Notified Claim and the learned Arbitral Tribunal shall not
have any jurisdiction to adjudicate on any other claims which
as such are not declared as Notified Claims.
D In the facts and circumstances of the case, there shall
be no order as to costs.
Divya Pandey Appeals disposed of.
(Assisted by : Roopanshi Virang, LCRA)
E
F
G
H
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