Indian Oil Corporation Limited Versus NCC Limited

Indian Oil Corporation Limited Versus NCC Limited 

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

// 1 //

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 341 OF 2022

(@ SLP (C) No.13161/2019)

Indian Oil Corporation Limited …Appellant(s)

Versus

NCC Limited      …Respondent(s)

With 

CIVIL APPEAL NO. 342 OF 2022

(@ SLP (C) No.13408/2019)

CIVIL APPEAL NO. 344 OF 2022

(@ SLP (C) No.13815/2019)

CIVIL APPEAL NO. 343 OF 2022

(@ SLP (C) No.13813/2019)

CIVIL APPEAL NO. 345 OF 2022

(@ SLP (C) No.13816/2019)

J U D G M E N T

M.R. SHAH, J.

1. As   common   questions  of  law   and   facts   arise   in   this

group of 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 //

2. Feeling  aggrieved  and  dissatisfied  with   the  impugned

judgment and orders passed by the High Court of Delhi,

New Delhi in respect to 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 the present appeals. 

3. For the sake of convenience, Civil Appeal arising out of

Special 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 nut­shell are

as under: 

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 VGOHDT, DHDT & HCDS Units (EPCM­2) for Paradip

Refinery   Project”.   The   respondent   herein   –   NCC

Ltd.   (hereinafter   referred   to   as   “NCCL”)   was

declared the successful bidder. After issuance of

the   Letter   of   Acceptance   dated   17.03.2010,   a

// 3 //

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: 

“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

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 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

Engineer­in­Charge   and   the   Site   Engineer

within 10 (ten) days from the 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, 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 Engineer­in­Charge and

the Site Engineer in the manner and within

the   time   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 Engineer­in­Charge

and the Site Engineer in writing in the manner

and within the time aforesaid. 

// 4 //

6.6.2.0 The   Engineer­in­Charge   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

Engineer­in­Charge 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

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 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 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 Engineer­in­Charge and Site

Engineer under Clause 6.6.1.0 hereof. In so

far as such claim shall in any manner or particular be at 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, 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 specifically reflected

and included in the Final Bill in accordance

// 5 //

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 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.

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 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 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 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   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

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   OWNER,   shall   not   be

// 6 //

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 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 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 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

relative to the acceptance of such payment,

with the 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

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.

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

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

// 7 //

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 as aforesaid, 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 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 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

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 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 provisions

of   Clause   9.0.1.1   hereof.   It   is   specifically

agreed   that   the   OWNER   may   prefer   its

Claim(s)   against   the   CONTRACTOR   as

counter­claim(s)   if   a   Notified   Claim   of   the

CONTRACTOR   has   been   referred   to   arbitration. The CONTRACTOR shall not, however, be

entitled   to   raise   as   a   set­off   defence   or

counter­claim 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.

// 8 //

9.0.1.1 The   Sole   Arbitrator   referred   to   in   Clause

9.0.1.0 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 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, purview and ambit of this Arbitration   Agreement   with   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

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 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 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 Final Bill.

// 9 //

9.0.3.0 The   provisions   of   the   Indian   Arbitration   &

Conciliation   Act,   1996   and   any   reenactment(s)   and/or   modification(s)   thereof

and of the Rules framed thereunder shall apply to arbitration proceedings pursuant hereto

subject to the following conditions:

(a) The Arbitrator shall give his Award separately in respect of each Claim and CounterClaim; 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 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   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. While the EOT requests were pending

with the IOCL, the NCCL submitted its final bill

dated   05.08.2016   to   the   Engineer­In­Charge

appointed under the contract between the parties.

// 10 //

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   the   Engineer­In­Charge   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   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   vis­à­vis   the   request   for   EOT

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

// 11 //

between 04.11.2015 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 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,   after

making due adjustments towards taxes etc. 

4.6. It appears that subsequently and after a period of

6&1/2 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,   had   indicated

// 12 //

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.  

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 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   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

// 13 //

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. 

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 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   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 406/2018. By the impugned

// 14 //

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 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

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 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.

// 15 //

Hindustan Copper Ltd.  reported in (2017) 2 SCC 228

(Paras 38­42).

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 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   standard   arbitration

clause,   and   would   be   in   the   nature   of   “where   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. 

In such a case, in the background of Section 11(6­A), no

question of the Court declining to refer the matter to

arbitration would arise, if it finds that the arbitration

// 16 //

agreement exists and is valid. In such a case, every

dispute   between   the   parties   has   to   be   referred   to

arbitration because Section 11(6­A) would mandate this;

(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(6­A)   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 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   Court   in   the   case   of

United India Insurance Co. Ltd. v. Hyundai Engg. &

Construction Co. Ltd.  reported in (2018)17 SCC 607,

// 17 //

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 is

placed on following decisions of this Court:

(1) Vidya Drolia v. Durga Trading Corpn. 

[(2021)2 SCC 1, Paras 113­116)

(2) Garware Wall Ropes Ltd. vs. Coastal Marine 

Constructions & Engg. 

[(2019) 9 SCC 209, Paras 28­29)

(3) Oriental   Insurance   Co.   Ltd.   v.   Narbheram

Power &  Steel (P) Ltd. 

[(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(6­A)   and   its

impact. 

8.6 It is submitted that in the case of Garware (supra), it is

observed 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(6­A) will not apply as there is no arbitration

// 18 //

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 of

Section 11(6­A). 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 Agreement itself sets out

what is excluded from arbitration. Therefore, it was held

that   Section   11(6­A)   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 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

// 19 //

be   the   subject   matter   of   reference   by   any   specific

stipulation in the contract. 

8.9 Learned Attorney General has taken us to the relevant

clauses 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

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. 

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 above submissions, reliance

is placed on the following decisions of this Court:

// 20 //

(i) Food Corporation of India v. Sreekanth Transport

(1999)4 SCC 491 (Paras 2, 3)

(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.

(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 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]

(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]

(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.

// 21 //

[Arb.Appeal 10/2006 before Gauhati High Court]

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   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 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 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

// 22 //

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 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,   and   the   result   of   Clauses   6.7.1.0   and

6.7.2.0, the contract, including the arbitration clause

stands   discharged   and   extinguished   and   therefore,

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 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

// 23 //

bank 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 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 subClause   (iii)   thereof,   a   Notified   Claim   covered   by   a

decision   of   the   General   Manager   is   specifically   an

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 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

// 24 //

Manager under Clause 9.0.2.0 of the 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  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

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   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

// 25 //

tasked   with   the   job   of   completing   the   civil,

structural and associated UG Piping works for the

Paradip Refinery;

(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, 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   Engineer­in­charge   vide   letter   dated

01.01.2016, expressly acknowledged the presence

of “Notified Claims” 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   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

// 26 //

that they had only partially allowed the application

for EOT and a price discount of 4% was applied to

the period for which 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 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,   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 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   submitted   its

claims to IOCL;

// 27 //

(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

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   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. 

(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 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

// 28 //

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 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   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. 

(2) Under Section 11(6­A) 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 satisfaction between the parties

(4) At the stage of appointment of arbitrator, the Court

cannot look into whether a claim is an excepted

// 29 //

claim or not.

(5) Contractual clauses cannot be read in a manner

that abridges statutory rights and the doctrine of

mutuality,   to   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  jurisdiction   of   the  Arbitral

Tribunal.

9.3 On an interpretation of the Clauses of the GCC, Shri

Ranjith 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 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   of   claims   on   the   General

Manager.   It   is   submitted   that,   as   such,   the

// 30 //

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 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 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 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

// 31 //

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 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,   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,   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

// 32 //

render the decision of the General Manager final. 

9.8 It is further submitted that vide the Amendment Act,

2015, section  11(6­A) 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(6­A),   the   scope   of

intervention by the Court 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 11(6­A) 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 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

// 33 //

Three   Judges   Bench   of   this   Court   in   a   subsequent

decision   rendered   in   the   case   of  Mayavati   Trading

Private  Limited   v.  Pradyuat  Deb   Burman   [(2019)  8

SCC 714].  That after considering in detail the 246th Law

Commission   Report;   the   report   of   the   High­Level

Committee regarding institutionalization of arbitration

in India and the Statement of Objects and Reasons of

the 2015 Amendment Bill, it is held that post­2015, 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

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(6­A) and a

very limited jurisdiction of the Courts while considering

an application of Section 11(6­A) of the Arbitration Act

post­2015. 

(1) Uttarakhand   Purv   Sainik   Kalyan   Nigam   Ltd.   v.

Northern Coal Field Ltd.

(2020)2 SCC 455

(2) BSNL & Anr. v. Nortel Networks India Pvt. Ltd. 

(2021)5 SCC 738 

// 34 //

(3) Pravin Electricals (P) Ltd. v. Galaxy Infra & Engg.

(P) Ltd. 

(2021)5 SCC 671

(4) Sanjiv Prakash v. Seema Kukreja

(2021)9 SCC 732

9.12 It is further submitted that although 2019 Amendment

to the Arbitration Act has deleted Section 11(6­A), this

Court in the case of Vidya Drolia (supra) has clarified

that the rationale behind the insertion of Section 11(6­A)

of the Arbitration Act would continue to apply and guide

the Courts on its scope of jurisdiction at stage one, that

is, the pre­arbitration stage. 

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   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

// 35 //

Arbitrator and it can neither examine whether certain

claims are ‘excepted’ nor can it 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, 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 Tribunal. That in any event, pursuant to the

introduction of Section 11(6­A), 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   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 no­dues certificate, without which

// 36 //

no amount would be released. It is submitted that in the

aforesaid decision it is observed that merely because the

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   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 Hospitality (P) Ltd.

vs.   Oravel   Stays   (P)   Ltd.  reported in  (2021)   9   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 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

// 37 //

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 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 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 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).

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

// 38 //

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

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   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 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 appointing the Arbitrator in applications

under   Section   11(6)   of   the   Arbitration   Act   are   the

subject matter of present appeals. 

// 39 //

10.2 It cannot be disputed that both the parties are governed

by the GCC. The GCC are the part of the Agreements /

Contracts   between   the   parties.   Under   the   GCC,   the

parties have agreed to resolve the dispute between them

only in terms of the relevant clauses of the GCC referred

to   hereinabove.   The   parties   have   agreed   that   certain

specified   disputes   alone   will   be   the   subject   of

arbitration.

10.3 In the case of Narbheram Power &  Steel   (P)   Ltd.

(supra),  it  is  observed  and  held  that  the  parties are

bound by the Clauses enumerated in the policy and the

Court does not transplant any equity to the same by rewriting a clause. It is further observed and held that an

arbitration clause is required to be strictly construed.

Any   expression   in   the   clause   must   unequivocally

express  the   intent  of  arbitration.   It  can  also   lay  the

postulate   in   which   situations   the   arbitration   clause

cannot be given effect to. It is further observed that if a

clause stipulates that under certain circumstances there

can be no arbitration and they are demonstrably clear

then   the   controversy   pertaining   to   appointment   of

Arbitrator has to be put to rest (Paras 10­23). 

10.4 In the case of Centrotrade Minerals & Metal Inc. (supra),

this Court had an occasion to consider the concept of

party autonomy and it is observed and held that party

autonomy is virtually the backbone of arbitration. It is

// 40 //

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

and (3) proper law of the conduct of arbitration. It is

further observed in the said decision that the parties to

an arbitration agreement have the 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) 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

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

// 41 //

SCC 470], it is observed and held that a party cannot

claim anything more than what is 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 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 (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   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

// 42 //

considering the earlier decisions on the point observed

and held that once the parties have decided that certain

matters   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   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 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 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 prescribed under the Act.

// 43 //

19.   If   a   non­arbitrable   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 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   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   non­arbitrable   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 Vidya Drolia (supra), which, as such, is post­insertion

of Section 11(6­A) of the Arbitration Act, is required to

be referred to. In the said decision it is observed and

held that the issue of non­arbitrability of a dispute is

basic for arbitration as it relates to the very jurisdiction

of the Arbitral Tribunal. An Arbitral Tribunal may lack

jurisdiction for several reasons and non­arbitrability has

multiple meanings. After referring to another decision of

this Court in the case of Booz Allen & Hamiltan Inc. v.

SBI Home Finance Ltd. [(2011) 5 SCC 532 (Para 34)],

it is observed and held that there are facets of nonarbitrability, 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

// 44 //

Arbitral Tribunal) or whether they 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   matters”   excluded

from the purview of the arbitration agreement.

(iii) Whether the parties have referred the disputes to

arbitration? That is, whether the disputes fall under the

scope of the submission to the Arbitral Tribunal, or

whether they do not arise out of the statement of claim

and the counterclaim filed before the Arbitral Tribunal.

A dispute, even if it is capable of being decided by

arbitration   and   falling   within   the   scope   of   an

arbitration agreement, will not be “arbitrable” if it is

not enumerated in the joint list of disputes referred to

arbitration, or in the absence of such a joint list of

disputes, does not form part of the disputes raised in

the pleadings before the Arbitral Tribunal.”

After   referring   to   and   considering   in   detail   the

earlier decisions on the point, more particularly, with

respect to non­arbitrability and the ‘excepted matters’, it

is ultimately concluded in para 76 as under:

“76. In view of the above discussion, we would

like to propound a four­fold test for determining when

the   subject   matter   of   a   dispute   in   an   arbitration

agreement is not arbitrable:

76.1. (1) When cause of action and subject­matter

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 subject­matter

of   the   dispute   affects   third­party   rights;   have  erga

omnes  effect;   require   centralized   adjudication,   and

// 45 //

mutual   adjudication   would   not   be   appropriate   and

enforceable;

76.3. (3) When cause of action and subject­matter

of   the   dispute   relates   to   inalienable   sovereign   and

public interest functions of the State and hence mutual

adjudication would be unenforceable; 

76.4 (4) When the subject­matter of the dispute is

expressly or by necessary implication non­arbitrable as

per mandatory statute(s).

76.5   These   tests   are   not   watertight

compartments; they 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   non­arbitrable.   Only   when   the

answer is affirmative that the subject matter of the

dispute would be non­arbitrable.

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 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 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. Cahill).”

10.10 On the question, who decides on non­arbitrability of

the   dispute,   after   referring   to   and   considering   the

// 46 //

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   nonarbitrability   relating   to   the   inquiry,   whether   the

dispute 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 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

non­arbitrability.   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. on the scope of judicial review by the

court while deciding an application under Sections 8 or

// 47 //

11 of the Arbitration Act, post the amendments by Act

3 of 2016 (with retrospective effect from 23­10­2015)

and even post the amendments vide Act 33 of 2019

(with effect from 9­8­2019), is no longer applicable.

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 2019, and the principle of severability and

competence­competence, is that the arbitral tribunal is

the preferred first authority to determine and decide all

questions   of   non­arbitrability.   The   court   has   been

conferred power of “second look” on aspects of nonarbitrability post the award in terms of sub­clauses (i),

(ii) or (iv) of Section 34(2)(a) or sub­clause (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 or the disputes are

non­arbitrable, though the nature and facet of nonarbitrability 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   “non­arbitrable”   and   to   cut   off   the

deadwood. The court by default would refer the matter

when   contentions   relating   to   non­arbitrability   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.”

10.11 In the recent decision of this Court in the case of DLF

// 48 //

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(6­A)   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 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 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. 

10.12 In the case of Nortel Networks India Pvt. Ltd. (supra),

this 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

// 49 //

Drolia v. Durga Corpn., (2021) 2 SCC 1: (2021) 1 SCC

(Civ)   549]   is   affirmation   of   the   position   of   law

expounded   in  Duro   Felguera   [Duro   Felguera,   S.A.   v.

Gangavaram Port Ltd., (2017) 9 SCC 729 : (2017) 4 SCC

(Civ) 764] and Mayavati Trading [Mayavati Trading (P)

Ltd. v. Pradyuat Deb Burman, (2019) 8 SCC 714 : (2019)

4 SCC (Civ) 441], which continue to hold the field. It

must be understood clearly that  Vidya Drolia  [Vidya

Drolia v. Durga Corpn., (2021) 2 SCC 1: (2021) 1 SCC

(Civ)   549]   has   not   re­surrected   the   pre­amendment

position on the scope of power as held in SBP & Co. v.

Patel Engg. Ltd. [SBP & Co. v. Patel Engg. Ltd., (2005) 8

SCC 618]. 

47. It is only in the very limited category of cases,

where there is not even a vestige of doubt that the

claim is ex facie time­barred, or that the dispute is

non­arbitrable, that the court may decline to make the

reference. However, if there is even the slightest doubt,

the   rule   is   to   refer   the   disputes   to   arbitration,

otherwise it would encroach upon what is essentially a

matter to be determined by the tribunal.

53.2. In rare and exceptional cases, where the claims

are ex facie time­barred, 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 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 non­payment 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 validity of any

deductions made or threatened by the owner. 

// 50 //

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 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 Engineer­inCharge 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… 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 Engineerin­Charge and the Site Engineer. It 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   Engineer­in­Charge   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

// 51 //

read with Clauses 6.6.3.0 and 6.6.3.1 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 (Engineer­in­Charge 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. 

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   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 Engineer­in­Charge 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

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)

// 52 //

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   6.6.3.0.   It

further   provides   that   in   and   all   Notified   Claims   not

specifically 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

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 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 liable to pay and as such is absolved and discharged

// 53 //

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 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 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 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   satisfaction   of   all   claims   of   the   contractor

notwithstanding   any   qualifying   remarks,   protest   or

// 54 //

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.

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   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   against   the   contractor   as   counterclaims 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

set­off, defence or counter­claim any claim which is not

a  NOTIFIED CLAIM  included in the contractor’s Final

// 55 //

Bill in accordance with the provisions of Clause 6.6.3.0.

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 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 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 shall have no

jurisdiction to entertain the same or to render any decision with respect to such matters. 

// 56 //

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 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 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 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. 

// 57 //

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.  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, 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

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. 

// 58 //

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 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 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: 

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

// 59 //

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   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   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) is confined to ascertaining as

to   whether   or   not   a   binding   arbitration   agreement

exists qua the parties before it which is 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 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

// 60 //

Kompetenz; a doctrine which has 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/­ 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 ‘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   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

// 61 //

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,

we do not agree with the conclusion arrived at by the

High Court that after the insertion of Sub­Section (6­A)

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 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 non­arbitrability, 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   the   parties,   whether   the

dispute   is   non­arbitrable   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   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

// 62 //

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 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

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

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 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

// 63 //

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   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, 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 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   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. 

// 64 //

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 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

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: 

“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 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

// 65 //

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; 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 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 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 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 Claims by the

General   Manager.   Therefore,   the   Civil   Appeal

// 66 //

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 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 respondent was / is a Notified Claim, the

said appeal is to be allowed partly by observing that the

claim which is declared by the General 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 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

// 67 //

hereby dismissed. However, it is observed that the

learned 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   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 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.

(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 appointing the Arbitrator

is hereby quashed and set aside.

(3) Similarly, Civil Appeal No.343/2022 arising out of

// 68 //

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 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 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 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.

In the facts and circumstances of the case,

// 69 //

there shall be no order as to costs. 

……………………………….J.

      [M.R. SHAH]

      ……………………………….J.

             [B.V. NAGARATHNA] 

NEW DELHI;

JULY 20, 2022.