M/S Sharma Construction Company Th Mangu Ram Sharma vs. Union Of INDIA Th Ministry Of Defence And Others.

Held

The Court held that the contract contained an arbitration clause which had been invoked by the Petitioner. Therefore, the alleged disputes were referable to arbitration. The Court reasoned that the existence of an arbitration clause and its invocation by a party are sufficient grounds to refer the matter to arbitration, subject to all objections available to the parties. The specific dispute regarding GST liability was not decided on merits but was deemed a matter that could be raised and adjudicated by the arbitrator. The Court appointed Mr. Satish Chander, Retd. Additional Director General Contracts, as the sole arbitrator, noting that he was suggested by the parties and possessed the requisite background. The arbitrator was directed to proceed with the matter in accordance with the Act, make the award within the prescribed time, and charge fees to be shared by the parties. The Arbitration Petition was disposed of.

Facts

M/s. Sharma Construction Company (Petitioner) filed an Arbitration Petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator. The dispute arose from a Work Order dated September 11, 2017, issued by the Chief Engineer, Udhampur Zone, for the construction of an RCC boundary wall. Disagreements emerged concerning the non-provision of the complete site and the liability for an additional 6% GST, allegedly due to a reduction in the GST rate from 18% to 12%. The Petitioner invoked the arbitration clause in the contract and called upon the respondents to refer the matter to a sole arbitrator. As no action was taken, the Petitioner filed the present petition. The parties agreed that the contract contained an arbitration clause, but stipulated that the arbitrator must have a civil engineering background.

Key Issues

1. Whether the disputes arising from the work order and contract are referable to arbitration, as per the arbitration clause contained therein? 2. Whether the liability for the additional 6% GST, in light of a purported reduction in the GST rate, is a matter that can be adjudicated by an arbitrator? The Petitioner argued that the contract contained a valid arbitration clause and that the disputes, including those related to site availability and GST liability, were clearly referable to arbitration. They relied on the arbitration clause within the contract. The Respondent (Union of India and others) contended that the dispute primarily concerned the liability to pay GST, which they argued is a statutory liability and therefore rests upon the Petitioner. They did not oppose the appointment of an arbitrator but raised a formal objection regarding the arbitrator's qualifications.