Sri Arun Kumar Dey, Contractor vs. The Oil And Natural Gas Corporation Limited (Ongc)

Facts

The petitioner, Sri Arun Kumar Dey, a contractor, filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator. This application stemmed from a dispute with the respondent, Oil & Natural Gas Corporation Limited (ONGC), concerning an agreement dated June 26, 2018, for the renovation of a dispensary building. The petitioner's claims included refunds for liquidated damages (Rs. 3,71,587/-), water charges (Rs. 33,554/-), and EPF dues (Rs. 1,00,000/-), totaling Rs. 5,05,141/-, along with interest and costs. The petitioner invoked the arbitration clause after attempts to resolve the dispute through ONGC's internal mechanisms failed. ONGC admitted the claims for liquidated damages and water charges but contended that the EPF claim was non-arbitrable and that the total value of arbitrable disputes fell below the Rs. 5,00,000/- threshold stipulated in the contract for arbitration.

Held

The Court held that the claim for refund of Rs. 1,00,000/- deducted towards EPF contributions is non-arbitrable. This is because the deduction and deposit of EPF contributions are statutory obligations and fall under the adjudicatory functions of statutory authorities under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The Court cited the Apex Court's decision in Vidya Drolia & others vrs. Durga Trading Corporation, which delineates sovereign functions of the State as non-arbitrable. The Court found that the legislative intention is to exclude arbitration in such matters, as the statute provides for determination by specified courts or tribunals. Consequently, with the exclusion of the EPF claim, the remaining claims amounted to Rs. 4,05,141/-, which is below the Rs. 5,00,000/- threshold for arbitration as per Clause 25.2 of the agreement. Therefore, the Court concluded that not only the EPF claim but also the remaining claims are excepted from arbitration under the agreement. The application seeking reference to an independent arbitrator was dismissed.

Key Issues

1. Whether the dispute concerning the refund of Rs. 1,00,000/- deducted towards EPF contributions is arbitrable, considering the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, and the General Conditions of Contract (GCC) Clause 8 and 19B(ii)(i) & (ix)? 2. Whether the remaining disputes, after excluding the EPF claim, are arbitrable under Clause 25.2 of the agreement, given that their total value (Rs. 4,05,141/-) is less than Rs. 5,00,000/-, as stipulated in Clause 25.2 of the agreement? Petitioner's arguments: The petitioner argued that the deduction of EPF contributions by ONGC was unauthorized and constituted an arbitrable dispute. They contended that ONGC was unnecessarily trying to exclude the EPF claim to reduce the dispute value below the arbitration threshold, and that the contract's arbitration clause should be invoked for independent adjudication. Respondent's arguments: ONGC argued that the EPF claim was non-arbitrable as it involved statutory compliance and the adjudicatory functions of statutory authorities. They also contended that if the EPF claim was excluded, the remaining claims (Rs. 4,05,141/-) fell below the Rs. 5,00,000/- minimum for arbitration as per Clause 25.2 of the agreement, making the entire petition unsustainable.