M/S Shree Krishna Construction vs. Union Of INDIA

Facts

M/s Shree Krishna Construction (the applicant) filed arbitration applications under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator. The applicant was awarded a work contract by the Northern Western Railway (the respondents) on 25.05.2016, with an agreement executed on 29.07.2016. The applicant contended that due to the respondents' non-fulfillment of contractual obligations, they suffered financial loss, including additional burden due to the introduction of GST, which delayed project execution. The applicant requested redressal, payment, and refund of earnest money and performance guarantee. A legal notice dated 27.08.2019 was sent, referencing Clause 64 of the General Conditions of Contract. The respondents, by letter dated 23.03.2021, rejected the arbitration request, stating the claimed amount exceeded 20% of the contract value and fell under "excepted matters" as per Clause 63 of the General Conditions of Contract.

Held

The Court held that the objections raised by the respondents, including those concerning "excepted matters" and time-barred claims, are matters that can be considered and adjudicated by the arbitrator at an appropriate stage. The Court found no substance in the respondents' submissions, relying on previous judgments from a co-ordinate Bench of the same High Court in M/s. Rama Kishan Ashok Kumar (JV) Vs. Union of India & Anr. and Dilbag Singh Contractor Vs. North Western Railway & Ors. These precedents indicated that such objections are typically for the arbitrator to decide. The Court explicitly stated it did not intend to hold that the respondents' objections could not be taken up before the arbitrator. Consequently, the Court allowed the arbitration applications and appointed Hon’ble Mr. Justice Manoj Kumar Vyas (Retired Judge) as the sole Arbitrator to adjudicate the dispute. The cost of arbitration proceedings and fees are to be as per the 4th Schedule of the Arbitration and Conciliation Act, 1996. No issue was expressly left undecided.

Key Issues

1. Whether the Court should appoint an arbitrator when the respondents contend that the claims fall under "excepted matters" as per Clause 63 of the General Conditions of Contract and the claimed amount exceeds 20% of the contract value? 2. Whether the Court should appoint an arbitrator when the respondents argue that the claims are time-barred and thus cannot be entertained by any authority, including an arbitrator? Petitioner's Arguments: The applicant argued that objections regarding "excepted matters," time-barred claims, or the volume of claims should be considered and adjudicated by the arbitrator at an appropriate stage. They relied on two judgments from a co-ordinate Bench of the same High Court: M/s. Rama Kishan Ashok Kumar (JV) Vs. Union of India & Anr. and Dilbag Singh Contractor Vs. North Western Railway & Ors. Respondents' Arguments: The respondents argued that the applicant's prayer for arbitrator appointment should not be accepted. They reiterated that the claimed amount exceeded 20% of the contract value and fell under "excepted matters" as per Clause 63. Furthermore, they contended that the claims were time-barred, and therefore, no direction could be given to entertain them, asserting that such claims could not be entertained by any authority, including an arbitrator.