Tewatia Construction Pvtlltd. vs. Union Of INDIA & Anr.

Facts

The petitioner, Tewatia Construction Pvt Ltd., filed a petition under Section 11(6)(c) of the Arbitration and Conciliation Act, 1996, seeking to refer Claims 2 and 3 to arbitration, in addition to other claims already referred. The petitioner was awarded a contract for construction work, which was completed beyond the stipulated period due to alleged lapses by the respondents, including delayed drawings and decisions. Disputes arose, and the petitioner invoked the arbitration clause. The respondents appointed an arbitrator but excluded Claims 2 and 3, stating they fell under "excepted matters" as per Clause 2 of the General Conditions of Contract, which deals with compensation for delay. The petitioner sought to include these excluded claims in the arbitration.

Held

The Court held that the petition was allowed. It found that the respondents' contention that Claims 2 and 3 were "excepted matters" and thus non-arbitrable was not a clear-cut case of "deadwood" or absolute non-arbitrability at the reference stage. Citing precedents, the Court emphasized that under Section 11 of the Arbitration and Conciliation Act, 1996, judicial interference at the reference stage is substantially curtailed post the 2015 amendment. The Court's role is to prima facie determine the existence of a valid arbitration agreement and refer the matter unless a strong case for non-arbitrability is made out. The Court reasoned that the nature of Claims 2 and 3, which involved allegations of arbitrary and unlawful actions by the authorities, could potentially fall within the scope of "any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract" as per Clause 25. Therefore, the Court directed that Claims 2 and 3 be referred to the already appointed arbitrator, who would consider the respondents' objections regarding maintainability and arbitrability on merits before adjudicating them.

Key Issues

1. Whether Claims 2 and 3, concerning a "declaratory award" for alleged breach of contract and arbitrary/unlawful determination of extension of time, and a claim for refund of amounts illegally recovered under Clause 2 of the agreement, are arbitrable despite being excluded by the respondents? Petitioner's Contention: The petitioner argued that the arbitration clause was broad enough to cover all disputes arising out of or relating to the contract. They contended that the respondents' exclusion of Claims 2 and 3 was an attempt to bypass the arbitration process for matters that were clearly disputes arising from the contract. They relied on the principle that courts should refer matters to arbitration unless there is a clear case of non-arbitrability. Respondents' Contention: The respondents argued that Claims 2 and 3 were "excepted matters" and therefore not arbitrable, as they related to the respondents' right to levy compensation for delay under Clause 2 of the General Conditions of Contract. They submitted that the decision of the specified authority under Clause 2 was final and binding, implying it was not subject to arbitration.