M/S Ilfs Engineering And Construction Company Limited vs. M/S Indian Strategic Petroleum Reserves Limited

Held

The Court held that the Petitioner's claims were arbitrable. It distinguished the present case from the precedent of Brilltech Engineers, noting that in Brilltech, the petitioner had conceded to not following the protocol for notifying claims and including them in the final bill. In contrast, the Petitioner in the present case had notified its claims within the stipulated period and submitted them along with the final bill in accordance with Clause 6.6.3.0 of the GCC. The Court found that the Respondent had not made out a prima facie case of non-arbitrability. Citing Vidya Drolia, the Court reiterated that it would only interfere at the Section 11 stage if it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid, or the disputes are non-arbitrable. The Court found the Respondent's resistance to arbitration unfortunate and contrary to the objective of upholding the efficacy of arbitration. Accordingly, the Court allowed the petition, appointed an arbitrator, and directed the parties to proceed with the arbitration.

Facts

M/s ILFS Engineering and Construction Company Limited (Petitioner) entered into a contract with M/s Indian Strategic Petroleum Reserves Limited (Respondent) on September 9, 2014, for laying a pipeline. The Petitioner raised claims for compensation towards cost escalation on February 9, 2018, which were rejected by the Respondent on February 16, 2018. The Petitioner subsequently sent a communication to M/s Engineers India Limited (EIL), the Engineer-in-Charge, on February 9, 2018, notifying several claims totaling Rs. 1,22,59,14,088. The Respondent contended that these claims were not arbitrable as they were not notified in accordance with Clause 6.6.1.0 of the General Conditions of Contract (GCC) and were not included in the Final Bill as per Clause 6.6.3.0 of the GCC. The Petitioner filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking reference of its dispute to arbitration.

Key Issues

1. Whether the disputes raised by the Petitioner are arbitrable under Section 11(6) of the Arbitration and Conciliation Act, 1996, considering the Respondent's contention that the claims were not notified and included in the Final Bill as per the contract (GCC Clauses 6.6.1.0 and 6.6.3.0)? The Petitioner argued that its claims were notified within the stipulated period and submitted along with the final bill in accordance with Clause 6.6.3.0 of the GCC. It contended that the Respondent's resistance to arbitration was a disservice to the objective of promoting arbitration. The Petitioner relied on the principle that courts should refer matters to arbitration when contentions relating to non-arbitrability are plainly arguable, and summary proceedings would be insufficient. The Respondent argued that the claims were not arbitrable because they were not notified in accordance with the appropriate contractual provision (Clause 6.6.1.0) and no statement of claim was attached to the final bill, as required by Clause 52.1.1 and 52.1.2 (which were referred to in the context of Clause 6.6.3.0). The Respondent cited the case of Brilltech Engineers, where claims were held non-arbitrable due to similar procedural infirmities.