Indian Oil Corporation Ltd v. Institute of Geo Informatics Pvt Ltd

1. The parties to this proceeding entered into a contract on 14.07.2010 for execution of work of "Detailed Engineering survey, Soil survey, Cadastral survey & Providing services for establishing ROU in ROW of “Paradip-Haldia-Durgapur LPG Pipeline Project" by the respondent (hereafter “the Institute”) within 28 months from the date of issuance of letter of acceptance, issued by the appellant (hereafter “IOL”). The present appeal challenges an order of the learned single judge, rejecting IOL’s petition, under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter “the Act”).

2. The facts are that disputes arose between the parties, and the Institute filed a petition under Section 11(6) of the Act seeking appointment of an Arbitrator. On 18.10.2011 in Arb. Pet. 42/2011, this court noted the submissions of the IOC that the Institute had to first apply to the General Manager of IOC in terms of the arbitration clause. The parties agreed the General Manager would consider the application and pass an appropriate order in accordance with law. The petition was withdrawn in view of this direction; the Institute approached the General Manager of the petitioner and made the following claims: - “(1) Claim of Rs.51,19,898/- for work done plus the service tax; (2) Claim for refund of Rs.4,20,0001/- deposited by IGPL towards security deposit; (3) Claim of Rs.18,22,493 /- towards loss of profit suffered by IGPL; (4) Claim for Rs.8,00,000/- for de-mobilization of equipment, machinery and man force from the work site; and (5) Interest@ 16% per annum on the total sum of Rs.81,62,391/claimed under 1to 4 above with effect from 01.01.2011.”

3. The General Manager by order dated 12.03.2012 held that claim Nos. 1, 3, 4 and 5 are not notified claims and are not arbitrable. Claim No. 2 for refund of security deposit and interest thereon was held to be arbitrable under Clause 9.0.1.0 of GCC. Steps were taken for the appointment of an arbitrator from a panel of three persons from whom the Institute was to select an arbitrator. This led to the Institute filing a petition under Section 11(6) of the Act before this court (Arb. Pet. No. 175/2012). This court disposed of the petition with a direction that the petitioner shall forward a panel of three names to the respondent within four weeks. The respondent was on the panel to select a name to be appointed as a sole arbitrator. The Arbitrator so selected would be within his/her right to arbitrate upon claim No.2 and interest, if any, thereon along with the counter claim, if any, of the petitioner. The Tribunal passed an award in favour of the Institute, allowing its claims. IOC’s objections to the award under Section 34 were rejected, together with the contention that excluded claims had been considered on merits and were part of the award.

4. It is urged by Mr. Abhinav Vashisht (in FAO (Comm) 189/2017) that in spite of Claims No.1, 3, 4 and 5 being expressly “excepted matters” in terms of clause 9 of the Agreement between the parties, and were not specifically referred to the tribunal by the court in its judgment dated 19.05.2015, the Arbitrator proceeded and passed the Award on those claims. He argues that the learned Tribunal mis-read the judgment of this court and held that it could decide upon the arbitrability of those claims. Learned senior counsel has relied upon the judgment of the Supreme Court in the case of SBP & Co. vs. Patel Engineering Ltd. and Anr., (2005) 8 SCC 618 to contend that the learned Arbitrator could not have ignored the order of this court as there was finality to the conclusions of this court. It was argued that if the award with respect to excluded matters were set aside, there is no finding, except that the IOC is liable to pay the Institute `420,000/- on which the tribunal, for no rhyme or reason, directed payment of an enormous amount as costs (i.e. `32,89,924/-) which is entirely unjustified.

5. Mr. Jay Salva, learned counsel for the Institute submitted that this court in its judgment dated 19.05.2015 had left the issue as to whether the matters in question were excepted subject matter or not, open. It was submitted that the tribunal discussed the pleadings and evidence led by the parties to the dispute and based on its conclusions, made the award. In these circumstances, it could not be said that the award is vitiated. Learned counsel submitted that the tribunal gave good and valid reasons why the so called excepted matters were arbitrable and consequently, the learned Single Judge erred in holding otherwise. He urged that the Institute’s appeal (FAO (Comm) 197/2017) should be allowed and the award of the tribunal be allowed to stand.

6. This court finds that the Single Judge, by the impugned order, observed that the dispute inter se between the parties was with respect to interpretation of its previous order. The learned Single Judge discussed this aspect as follows: “….basic controversy is that as to whether this court by its order dated 19.05.2015 had withheld reference of claims No. 1, 3, 4 to 5 from arbitration. Reference may be had to paras 7, 12, 16, 17 and 18 of the said judgment which read as follows:-

11. A perusal of the judgment of this court dated 19.05.2015 would clearly show that the court has noted the submissions of the respondent that the General Manager should have notified all the claims raised by the respondent and that his reasoning is untenable. The court records that the respondent has been unable to show how in view of the clauses of the contract, the respondent can seek reference of all the claims to arbitration. It records that it would be beyond the jurisdiction of the court to adjudicate about the act of the General Manager in not notifying the claims No. 1, 3, 4 and 5. It concludes that the said claims No. 1, 3, 4 and 5 are not arbitrable.

15. It is quite clear that the disputes which are subject matter of claims No. 1, 3, 4 and 5 were not arbitrable. This court while disposing of the arbitration petition under Section 11(6) of the Act on 19.05.2015 had specifically held so. In the light of this, there was no reason for the learned Arbitrator to have gone ahead and adjudicated upon those disputes. The impugned Award to the extent that it deals with claims No. 1, 3, 4 and 5 is held to be entirely illegal. The same has been passed contrary to the provisions of the Act. The Award to the extent it deals with claims No.1, 3, 4 & 5 is set aside. Rest of the Award is upheld.