M/S ILFS ENGINEERING AND CONSTRUCTION COMPANY LIMITED v. M/S INDIAN STRATEGIC PETROLEUM RESERVES LIMITED

12. It is in these circumstances that the petitioner has moved this Court by the present petition under Section 11(6) of the 1996 Act, praying that this Court appoint a nominee arbitrator for the respondent, so that the two learned arbitrators could proceed to appoint the third arbitrator and the arbitral proceedings could take off. The respondent has filed reply to the petition and the petitioner has filed his rejoinder thereto.

13. Mr. Hrishikesh Baruah, learned counsel for the petitioner, and Mr. Dinesh Pardasani, learned counsel for the respondent, have been heard at length.

14. Mr. Baruah submits that the claims had been notified by the ARB.P. 578/2020 petitioner in accordance with Clause 6.6.1.0 and that there is no dispute regarding the fact that this notification had taken place within the period of 14 days stipulated in the said clause. He also invited my attention to the days entered in the “Remarks” column in the list of notified claims attached to the letter dated 16th July, 2018, which also bear out the fact that the claims were notified within the aforesaid 14 days period. Though Mr. Pardasani, learned counsel for the respondent, sought to submit that he was disputing the contention of Mr. Baruah that the invocation of the claims was within the 14 day period contemplated by Clause 6.6.3.0, he acknowledges that no such specific challenge has been raised in the reply filed by the respondent in response to the present petition. To a query from the court as to when, according to him, the 14 day period stipulated in Clause 6.6.1.0 had expired, Mr. Pardasani submits that the claims related to delay and that, therefore, the said period of 14 days was required to be reckoned from the date of delay. To my mind, prima facie, such an argument would amount to re-writing Clause 6.6.1.0 which specifically states that the period of 14 days has to be from the “date of the issue of orders or instructions relative to the work for which the contractor claims additional payment or compensation”. This being a statutory prescription, it would bind the parties to the contract. Inasmuch as the disputes are being referred to arbitration, I do not see to state anything further in this regard. It would be open to the parties to agitate the point before the learned Arbitral Tribunal, which is eminently competent to adjudicate thereon.

15. The objection of Mr. Pardasani essentially revolves around the Clause 6.6.3.0, 6.6.3.1, 6.2.3.0 and 6.2.5.0 of the GCC. He submits that Clause 6.6.1.0 cannot be read in isolation. Clause 6.6.3.0, he points out, is in clear continuation of Clause 6.6.1.0, and requires claims, notified under Clause 6.6.1.0, remaining unpaid at the time of preparation of the final bill to be separately included in the final bill prepared by the contractor, i.e. by the petitioner in the form of statement of form attached thereto, giving particulars of such claims, the grounds on which it was based, the amount claimed and supported by copies of notices sent in respect thereof to the EIC and the respondent. In the event of variance with the claims notified in Clause 6.6.1.0, Mr. Pardasani points out that Clause 6.6.3.0 deems the claims to be different from the notified claims. Mr. Pardasani also emphasises the effect of Clause 6.6.3.1, as deeming claims not specifically reflected and included in the final bill in accordance with Clause 6.6.3.0 to be deemed to have been waived and relinquished. Such disputes, therefore, points out Mr. Pardasani, cannot be referred to arbitration and are, ex-facie, not arbitrable in nature.

16. Mr. Pardasani also draws my attention to Clause 6.2.3.0 to submit that the final bill drawn in accordance with Clause 6.2.1.0 was required to be submitted along with the completion certification to EIL for certification, and that EIL was required to certify the final bill. Mr. Pardasani submits that the “final bill” submitted with the letter dated 16th July, 2018 was only a draft final bill, as it was not accompanied by any completion certificate. He points out that the only final bill submitted by the petitioner was the bill attached to the letter dated 20th September, 2018, after the completion certificate had been issued. It ARB.P. 578/2020 was precisely for this reason, submits Mr. Pardasani, that though the bill attached to the letter dated 16th July, 2018 was submitted to EIL, EIL did not certify it or forward it to the respondent. (Significantly, however, Mr Pardasani does not seek to contend that EIL returned the bill dated 16th July, 2018 to the petitioner as not having been submitted in accordance with the provisions of the GCC.)

17. In these circumstances, Mr. Pardasani submits that the only final bill submitted by the petitioner, in accordance with the contract, was the bill attached to the communication dated 20th September,

2018. No statement of notified claims was attached to that bill. As such, submits Mr. Pardasani, the list of notified claims submitted with the bill of 16th July, 2018 could not come to the help of the petitioner and ought to be treated as having been waived by the petitioner. There being no list of notified claims attached to the final bill submitted with the letter dated 20th September, 2018, as was required by Clause 6.6.1.0, Mr. Pardasani submits that the claims of the petitioner cannot be referred to arbitration, in view of the strict protocol prescribed in Clause 9.1.0.0 of the GCC.

18. Mr. Pardasani relies on the judgment of this Court in Brilltech Engineers Pvt. Ltd. v Darrameks Hotels and Developers Pvt. Ltd[1].

19. In rejoinder, Mr. Baruah invites my attention to a communication, dated 21st MANU/DE/2093/2020 June, 2018, from the respondent to the petitioner, which reads thus: “Dear Sir, As discussed with Planning engineer M/s ILFS is advised to submit the final bill by 22.06.2018. This is for your information & necessary action please. Regards, Dharuman Meyyazhagan For Vijay Shahri Resident Construction Manager Engineers India Limited Strategic Storage of Crude Oil Project-Padur Mob: 9008071836”

20. Mr. Baruah also relies on the judgment of the Supreme Court in Vidya Drolia v. Durga Trading Corporation[2], and a coordinate Single Bench of this Court in NCC Ltd. v. IOCL[3].

21. The scope of examination by this Court, exercising jurisdiction under Section 11(6), is extremely limited and stands authoritatively delineated by the Supreme Court in its decision in Vidya Drolia Analysis.

22. There is no dispute, by the respondent, in the present case, of the existence of an arbitration agreement between the parties. The contest is only regarding the arbitrability of the dispute raised by the petitioner. Mr. Pardasani’s contention is that no arbitrable dispute, within the meaning of Clause 9.1.0.0 of the GCC, exists. This Court

2019 SCC OnLine Del 6964 2021:DHC:1358 ARB.P. 578/2020 has, in its recent judgment in Mahindra Susten Pvt. Ltd. v NHPC Ltd.[4] had occasion to study, in detail, the principles relating to the scope of examination by the court exercise jurisdiction under Section 11(6) of the 1996 act, into the aspect of arbitrability of the dispute, visa-vis the jurisdiction statutorily vested by Section 16 on the arbitral tribunal in that regard, as enunciated by the Supreme Court in Vidya Drolia[2]. After extracting, in extenso, the relevant passages from Vidya Drolia[2], this Court arrived at the following conclusions:

24. Clause 9.1.0.0 of the GCC in the present case stipulates, at best, the following three pre-requisites, for a dispute to be arbitrable thereunder:

(i) that the dispute must arise out of a notified claim of the contractor,

(ii) that the notified claim must be included in the final bill of the contractor and

(iii) that such inclusion must be in accordance with the provisions of Clause 6.6.3.0 of the GCC. If these three conditions are satisfied, the dispute is arbitrable under Clause 9.1.0.0.

25. The extent to which this Court can wade into the morass of facts, while exercising jurisdiction in a case such as the present, can only be such as would enable it to arrive at a prima facie view regarding the arbitrability of the dispute, and no more.

26. Viewed thus, I fail to see how it can be contended that the dispute raised by the petitioner is not arbitrable in nature.

27. The disputes were notified by the petitioner, firstly in its letter dated 9th February, 2018, and, later, in the list of notified claims attached to the letter dated 16th July, 2018, alongwith the final bill, annexed with the said letter (though Mr. Pardasani disputes that the bill could be treated as “final” at all).

28. These claims were, undisputedly, notified within the period of 14 days stipulated in Clause 6.6.1.0 of the GCC. The letter dated 16th July, 2018 expressly attached, therewith, the final bill. In this context, I find substance in the reliance, by Mr. Baruah, on the communication dated 21st June, 2018 from the respondent to the petitioner, requiring the petitioner to submit the final bill by 22nd June, 2018. It cannot lie in the mouth of the respondent to state that no final bill was submitted by the petitioner with the letter dated 16th July, 2018, though the petitioner was always well within its right to contest the payability of ARB.P. 578/2020 the final bill, or of the notified claims attached to the said final bill in the arbitral proceedings.

29. The third requirement in Clause 9.1.0.0, for the dispute to be arbitrable in nature, was that the inclusion of the notified claims with the final bill was required to be in accordance with Clause 6.6.3.0. All that Clause 6.6.3.0 states is that notified claims, remaining unpaid at the time of preparation of final bill, were to be “separately included in the final bill....... in the form of a statement of claim attached thereto, giving particulars of nature of such claims, grounds on which it is based and the amount claimed”, supported by copies of notices sent in respect thereof. Mr. Baruah has pointed out that the list of notified claims set out the details of the claims, the documents claiming the amounts, the amounts claimed and the dates when these claims were first submitted to the respondent, were duly attached to the communication dated 16th July, 2018. It cannot, therefore, be said that the notified claims were not included in the final bill in accordance with the provisions of Clause 6.6.3.0.

30. Thus, all three ingredients, envisaged as pre-requisites for the dispute to be arbitrable, by Clause 9.1.0.0 stand, therefore, prima facie, satisfied in the present case.

31. The reliance, by Mr. Pardasani, on Clause 6.2.3.0 of the GCC cannot, in my view, militate against this factual position. Clause 6.2.3.0 requires the final bill drawn in accordance with Clause 6.2.1.0 to be submitted to the Engineer-in-Charge together with the ARB.P. 578/2020 completion certificate for certification. The issue, so far as Section 11(6) of the Act, juxtaposed with Clause 9.1.0.0 of the GCC, is concerned, is not whether the final bill was submitted in accordance with Clause 6.2.3.0 or not, but whether the notified claims were submitted in accordance with Clause 9.1.0.0. On this issue, I have already recorded a prima facie finding in favour of the petitioner.

32. Within the limited extent of my jurisdiction under Section 11(6) of the 1996 Act, I seriously doubt whether I can enter into the intricacies of whether the final bill was in accordance with clause 6.2.3.0 or not.

33. There is another aspect of the matter. Mr. Pardasani himself admits the fact that, on 20th September, 2018, a final bill was submitted by the petitioner. He contends, therefore, that the final bill which was earlier submitted on 16th July, 2018 was a “draft final bill”. With the letter dated 20th September, 2018, with which, according to him, the final bill was actually submitted by the petitioner, Mr Pardasani points out that there were no notified claims attached.

34. This argument would throw up the issue of whether, merely because, with the letter dated 20th September, 2018, the list of notified claims, attached to the earlier letter dated 16th July, 2018, was not reattached, the petitioner could be treated as having given up the said claims. It is relevant to note, in this context, that the letter dated 20th September, 2018 only withdrew the earlier letter dated 8th September, 2018, and that there is no communication from the petitioner to the ARB.P. 578/2020 respondent withdrawing the earlier letter dated 16th July, 2018. It merits reiteration, in this context, that the EIL, too, never deemed it appropriate to return the letter dated 16th July, 2018 to the petitioner, stating that it was irregular in any respect. More importantly, the petitioner has never, expressly or by necessary implication, withdrawn its Notified Claims, as attached to the letter dated 16th July, 2018.

35. It may, therefore, be also open to the petitioner to contend that the notified claims attached with the letter dated 16th July, 2018 continue to remain arbitrable, as they were never withdrawn by the petitioner by any letter or subsequent communication.

36. All these issues, clearly, would require a detailed factual analysis, which a court exercising jurisdiction under Section 11 of the 1996 Act can hardly be expected to undertake. No doubt, Vidya Drolia[2] specifically cautions courts, exercising jurisdiction under Section 11 from wading into these thickets. It cannot be said, at any rate, that a prima facie case of non-arbitrability of the dispute raised by the petitioner exists, as would justify rejection of the present petition.

37. Before concluding this judgment, I may also refer to the decision of this Court in Brilltech Engineers Pvt. Ltd.1, on which Mr. Pardasani placed reliance. A bare reading of the said decision reveals that the facts of that case are completely distinct from those of the present case. In that case, this Court found, on facts, as under: “11. There is no doubt that there has been a series of 2021:DHC:1358 ARB.P. 578/2020 communications, between the petitioner and the respondent, in connection with the claims of the petitioner. At the same time, I am not able to convince myself that these communications can suffice to constitute notification of the said claims, in accordance with the protocol set out in the various sub-clauses of Clause 52.[1] of the GCC. It is seen that Clause 52.1.[1] and Clause 52.1.[2] prescribed a rigorous discipline, to be followed, in the matter of notification of claims. The contractor is required to give notice in writing of his claim within 10 days from the date of issue of orders or instructions relating to the works for which additional payment of compensation is sought. This notice is required to contain full particulars of the nature of claim, the grounds on which it is based and the amount claimed. The notice is required to be addressed to the Project Manager and the owner of the respondent. Clause 52.1.[2] requires any such notified claims, which remain unpaid at the time of preparation of the final bill by the contractor, to be separately included in the final bill in the form of a statement of claim attached thereto, giving particulars of the nature of the claim, grounds on which it is based and the amount claimed, supported by copies of the notices sent in respect thereof by the contractor to the Project Manager and owner under Clause 52.1.1. Clause 52.2.[1] provides for arbitration only of notified claims, included in the final bill in accordance with the provisions of Clause 52.1.2.

12. The petitioner has filed a rejoinder, to the counter affidavit of the respondent, which raises the specific contention that the claims of the petitioner, which the petitioner seeks to be referred to arbitration, have not been notified in accordance with Clause 52.1.1, and no statement of claim, in accordance with Clause 52.1.2, has been issued in respect thereof. There is no traversal, of this contention, in the rejoinder filed by the petitioner. Even during oral arguments, Mr. Singhal, while acknowledging that the strict discipline of Clauses 52.1.[1] and 52.1.[2] may not have been followed by his client, nevertheless submits that the prayer, of his client, to refer the disputes to arbitration, ought not to be rejected on this ground, as the communications between the petitioner and the respondent indicate that the respondent had acknowledged the tenability of the petitioner's claims.

13. Reference of claims to arbitration can be made, by the Court, under Section 11, only if the claims are themselves arbitrable, in accordance with the Arbitration Agreement between the parties. The claims of the petitioner not having been notified, and no statement of claim having been submitted, in that regard, in accordance with the protocol set out in Clauses 52.1.[1] and 52.1.2, cannot be regarded as arbitrable within the meaning of Clause 52.2.[1] of the GCC.” (Emphasis supplied)

38. Brilltech Engineers[1], therefore, involved a situation in which the contention, of the respondent, in that case, that the claims being sought to be referred to arbitration were not notified in accordance with the appropriate contractual provision, and no statement of claim, in respect thereof, was attached with the final bill, remained untraversed in rejoinder. Even during oral arguments, it was conceded, by learned counsel for the petitioner in that case, that the discipline envisaged in the contractual clauses referring to notification of claims, and inclusion thereof in the final bill, had not been followed by the petitioner. Reference of the claims was, nevertheless, sought on the ground that the tenability of the claims remained undisputed by the respondent. It is in these circumstances that the court went on to hold that the protocol for notifying claims, submitting them with the bill and referring them to arbitration not having been followed, the prayer for referring of dispute could not be allowed.

39. These infirmities do not attach to the claims of the petitioner in the present case. The claims were invited within the stipulated period, and submitted along with the final bill, in accordance with Clause 6.6.3.0 of the GCC.

40. As such, it cannot be said that no prima facie case of nonarbitrability of the disputes raised by the petitioner has been made out by the respondent.

41. By way of a closing observation, para 154.[4] of the judgment in Vidya Drolia[2] may “154.[4] Rarely as a demurrer the court may interfere at the be reproduced thus: Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non- existent, invalid 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 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 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.”

42. Resistance, such as that manifested in the present case by the respondent, to arbitration of the dispute, even after admitting the existence of the arbitration agreement in the contractual executed, ad idem, with the petitioner, does complete disservice to the avowed statutory objective of “affirming and upholding the integrity and efficacy of arbitration as an alternative dispute resolution mechanism”. It is unfortunate that a public sector undertaking, such as the respondent, is adopting such a stance. At the end of the day, reference of the disputes to arbitration causes no prejudice to anyone and, if ARB.P. 578/2020 anything, aids in expeditious resolution thereof.

43. Accordingly, this Court appoints Hon’ble Mr. Justice Mukul Mudgal, former Chief Justice of Punjab and Haryana High Court, as the respondent’s arbitrator in the present case. The contact details of learned arbitrator are as under: Phone No: 9818000250 Email ID: mudgalmukul@gmail.com

44. The parties are directed to contact the learned arbitrator at the aforesaid contact details within a period of one week from today.

45. The learned arbitrator appointed by the petitioner and the aforesaid learned arbitrator appointed by this Court on behalf of the respondent would, thereafter, proceed to appoint a third arbitrator so that the arbitral proceedings could commence.

46. The fees of the learned arbitrator appointed by the present judgement would be decided by the learned arbitrator in consultation with the parties.

47. In view of the transparent attempt, of the respondent, to thwart the enforcement of the arbitration agreement with the petitioner, I was inclined to mulct the respondent with costs. However, keeping in mind the fact that the respondent is a wholly owned subsidiary of the Oil Industry Development Board, I refrain from doing so.

48. The petition is allowed in the aforesaid terms.

49. All findings contained in this judgment, needless to say, are only for determining whether the prayer for referring the disputes to arbitration was required to be allowed, under Section 11(6) of the 1996 Act. They are strictly prima facie in nature and would not inhibit the Arbitral Tribunal, in any manner, from arriving at a different finding, on facts or in law, during the course of the arbitral proceedings.

C. HARI SHANKAR, J.