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.

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