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M/S. Sam India Built Well (P) Ltd. Petitioner v. Union Of India & Anr. S
Factual and Procedural Background
The petitioner was awarded the contract for construction of the Punjab National Bank Head Quarter building, Sector 10, Dwarka, New Delhi on 16.06.2012, with a stipulated completion date of 26.02.2013. The work was completed on 04.11.2013. A dispute arose between the parties, prompting the petitioner to request arbitration on 23.09.2014. Subsequently, a sole arbitrator was appointed on 22.10.2014 who passed an award on 24.08.2015. The respondents accepted the award and made payment accordingly, after which the petitioner issued a No Objection Certificate (NOC) on 24.10.2015.
The petitioner later sought arbitration again based on a circular dated 08.05.2015 issued by the respondents, which introduced new rates for monthly cost indices relevant to the contract, allegedly entitling the petitioner to additional benefits. The petitioner contended that this dispute arose after the initial arbitration award and therefore warranted a fresh reference to arbitration.
Legal Issues Presented
- Whether the petitioner is entitled to refer a new dispute to arbitration arising from a circular issued post the original arbitration award.
- Whether the claim is barred under Order 2 Rule 2 of the Code of Civil Procedure (CPC) since all claims were raised in the first arbitration invocation.
- Whether the arbitration agreement stands merged in the award after issuance of the NOC by the petitioner, thus precluding further arbitration.
- The extent of judicial scrutiny permissible under Section 11(6A) of the Arbitration and Conciliation Act, 1996, as amended, in relation to the existence of an arbitration agreement.
Arguments of the Parties
Respondents' Arguments
- The respondents contended that the petitioner’s claim is barred under Order 2 Rule 2 CPC because all claims were raised during the initial arbitration invocation, relying on the Division Bench judgment of Delhi Development Authority & Ors. v. M/S. Alkarma, AIR 1985 Delhi 132.
- They further argued that after payment pursuant to the award dated 24.08.2015 and issuance of the NOC by the petitioner on 24.10.2015, the arbitration agreement merged into the award and no further arbitration proceedings could survive. They cited the Calcutta High Court judgment in Sudhir Kumar Saha v. J.N Chemicals Private Ltd., AIR 1985 Cal. 454, in support.
Petitioner’s Arguments
- The petitioner argued that the dispute arises from a circular dated 08.05.2015 issued by the respondents after the original arbitration award, entitling him to additional benefits under clause 10(C)(A) of the contract.
- The petitioner submitted that this new dispute was not known at the time of the original arbitration and thus justifies a fresh reference to arbitration.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Delhi Development Authority & Ors. v. M/S. Alkarma, AIR 1985 Delhi 132 | Claims barred under Order 2 Rule 2 CPC if raised previously in arbitration. | Respondents relied on it to argue that the petitioner’s claim was barred as it was not raised during the first arbitration. |
| Sudhir Kumar Saha v. J.N Chemicals Private Ltd., AIR 1985 Cal. 454 | Arbitration agreement merges into the award after final payment and issuance of NOC. | Respondents cited it to contend that no further arbitration could survive post issuance of NOC. |
| Dolphin Drilling Ltd. v. ONGC, (2010) 3 SCC 267 | Successive references under the same arbitration agreement are permissible if separate causes of action arise at different times. | The court relied on this precedent to hold that a new arbitration reference can be made for disputes arising after the original award. |
| Jumbo Bags Ltd. v. The New India Assurance Co. Ltd., 2016 (3) CTC 769 | Scope of judicial scrutiny under Section 11(6A) of the Arbitration and Conciliation Act, 1996 (Amendment 2015). | The court referred to this to emphasize that the court’s role under Section 11(6A) is limited to examining existence of an arbitration agreement, leaving other issues to the arbitrator. |
Court's Reasoning and Analysis
The court noted that the dispute sought to be referred to arbitration originated from a circular dated 08.05.2015 issued after the original arbitration award. Since this circular post-dated the initial arbitration proceedings, the petitioner could not have raised this claim earlier. The court recognized the settled legal principle that successive arbitration references are permissible if distinct causes of action arise at different times, citing Dolphin Drilling Ltd. v. ONGC.
The court further considered the amended Section 11(6A) of the Arbitration and Conciliation Act, 1996, which restricts the court's scrutiny at the stage of appointing an arbitrator to only the existence of an arbitration agreement. Issues such as claims being barred by Order 2 Rule 2 CPC or merger of arbitration agreement into an award after issuance of an NOC were held to be matters for the arbitrator to decide.
Accordingly, the court declined to delve into the merits of the respondents’ objections and directed the appointment of an arbitrator to adjudicate the new dispute.
Holding and Implications
The court directed the respondents to appoint an arbitrator within four weeks to adjudicate the dispute arising from the circular dated 08.05.2015.
This decision allows the petitioner to pursue arbitration for the new claims despite the earlier award and payment, emphasizing the limited judicial role under the amended Arbitration and Conciliation Act. It leaves substantive objections raised by the respondents to be decided by the arbitrator, without setting a new precedent beyond the application of Section 11(6A).
Jayant Nath, J. (ORAL):— This petition is filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’) seeking appointment of an arbitrator to adjudicate the disputes between the parties.
2. Some of the relevant facts are that the work for construction of Head Quarter building of Punjab National Bank, Sector 10, Dwarka, New Delhi was awarded to the petitioner on 16.06.2012 The work is said to have been completed on 04.11.2013 against the stipulated date of completion of 26.02.2013 On 23.09.2014, the petitioner requested for arbitration to adjudicate the disputes that had arisen between the parties. On 22.10.2014, the concerned authority appointed the sole arbitrator to adjudicate the dispute/claim of the petitioner. The learned arbitrator entered into reference and passed the award on 24.08.2015 The respondents had accepted the award and made payment to the petitioner in terms of the award dated 24.08.2015 Pursuant to this payment, the petitioner had also on 24.10.2015 issued an NOC to the respondents.
3. It is the case of the petitioner that on 08.05.2015, i.e just three months prior to the award, the respondent took out a circular pointing out the rates for the monthly cost indices under clause 10(C)(A) issued for Delhi including NOIDA, Gurgaon, Faridabad and Ghaziabad by the CPWD Directorate for TMT 500 bars issued upto May, 2013, which were all based on the rates of SAIL only. Thereafter from June, 2013 onwards these were on the basis of the minimum of the rates of JSPL, JSW and SAIL. The circular further states that some of the officers have not taken action due to which some ambiguity has arisen in the payment of variation under clause 10(C)(A) in the contracts under their charge, which were entered into before May, 2013. Relevant provisions of the circular read as follows.
“2. Prior to issue of abovesaid O.M, the rates for the monthly cost indices of 10 CA issued for Delhi including NOIDA, Gurgaon, Faridabad and Ghaziabad by the CPWD Directorate for TMT 500 bars were issued up to May, 2013, which were all based on the rates of SAIL only. Thereafter from June, 2013 onwards these were on the basis of the minimum of the rates of JSPL, JSW and SAIL.
4. It has come to the notice of this Directorate that above said action has not been taken by many of the SDGs/ADGs/CEs due to which some ambiguity has arisen in the payment of variation under clause 10 CA in contracts under their charge, which were entered into before May, 2013. In such cases respective SDGs/ADGs/CEs may take the necessary appropriate corrective action for 10 CA indices on case to case basis if already demanded by contractors.
5. The rates of SAIL for TMT 500 steel reinforcement as considered by this office far 10CA for the period from May, 2013 to Feb., 1015 for Delhi NCR Region are given in Annexure-A to take appropriate necessary action.”
4. Based on this circular, it is the contention of the petitioner that as the contract was completed on 04.11.2013 i.e after May, 2013, the petitioner is entitled to the benefits as stated in the circular dated 08.05.2015 He submits that the circular has come to his knowledge recently after passing of the award and hence, the new bills based on this circular have been raised on the respondents. He further submits that this particular dispute may be referred for arbitration.
5. The learned counsel appearing for the respondents has opposed the present petition on the following grounds:
i) He submits that the claim of the petitioner is barred under Order 2 Rule 2 CPC inasmuch as the petitioner has raised all the claims at the time of first invocation of the arbitration clause. He relies upon judgment of the Division Bench of this court in the case of Delhi Development Authority & Ors.… v. M/S. Alkarma…, AIR 1985 Delhi 132 to support his contention.
ii) He further submits that after receipt of the payment pursuant to the award dated 24.082015, the petitioner has given an NOC on 24.10.2015 based on the entire claims raised by him. He submits that the arbitration agreement stands merged in the award and nothing survives to adjudicate. To this effect, he relied upon the judgment of the Calcutta High Court in the case of Sudhir Kumar Saha v. J.N Chemicals Private Ltd., AIR 1985 Cal. 454.
6. The fact of the matter is that the dispute which is sought to be referred to arbitration has its genesis in the office memorandum dated 08.05.2015 issued by the respondents themselves. The petitioner is seeking reference of the dispute which arise out of and relates to the said office memorandum dated 08.05.2015 When the original claim petition was filed, there was no occasion for the petitioner to seek adjudication of the disputes which relate to or arise out of the said Office Memorandum dated 08.05.2015 as this has been issued subsequently.
7. Even otherwise, it is settled legal position that successive reference under the same arbitration agreement is permissible if two separate cause of action arise at different stages of the arbitration agreement (Ref: Dolphin Drilling Ltd. v. ONGC, (2010) 3 SCC 267).
8. Under amended Arbitration and Conciliation Act, 1996, Section 11(6A) has been added, which reads as follows:
“The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement.”
9. In the above context reference may be had to the judgment of the Division Bench of the Madras High Court in the case of Jumbo Bags Ltd. v. The New India Assurance Co. Ltd., 2016 (3) CTC 769, wherein the court in para 20 held as follows:
“20. The relevant submissions of the learned counsel for the parties have been examined.
I. Whether the amended provisions as per the Arbitration and Conciliation (Amendment) Act, 2015 will apply?
There can be little doubt, in the context of the pleas advanced on the issue of reference of disputes to arbitration as to whether the issue proceeds under the unamended Act or the amended Act does have an impact. The introduction of Section 11(6-A) of the Arbitration and Conciliation (Amendment) Act, 2015 thus seeks to restrict the scope of scrutiny by the court only in the case of existence of an arbitral agreement. Thus, in a sense, whether the particular aspect would fall within the scope of the arbitration clause or not, or whether arbitration would be the appropriate remedy itself would be issues to be placed before the arbitrator. However, while introducing this amendment, Section 26 makes it quite clear that unless the parties agree, the provisions of the principal Act would continue to apply and those provisions would be applicable only to the arbitral proceedings commenced on or after 23.10.2015”
10. Under the aforesaid newly added provision, the court has to confine itself while considering any application under Section 11(6) to the examination of the existence of an arbitration agreement. The issues which have been raised by the respondents, namely, about the claim being barred under Order 2 Rule 2 CPC or in terms of the earlier award an NOC is issued by the petitioner are left open to be adjudicated upon by the learned arbitrator.
11. Accordingly, leaving all the issues raised by the respondent open, a direction is issued to the respondents to appoint an arbitrator in terms of the arbitration clause within four weeks from today. The petition is disposed of.
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