Whether A Claim Is A 'Notified Claim' Under The Contract, Falls Outside The Scope Of Arbitration: Delhi High Court

The Single Bench of Justice Vibhu Bakhru observed that as per the arbitration clause contained in the General Conditions of Contract (GCC), only disputes arising out of 'Notified Claims', as included in the Final Bill issued by the claimant, could be referred to arbitration.

While noting that the Final Bill was not yet issued by the claimant, the Court held that the dispute whether the claims raised by the claimant were 'Notified Claims', falling within the scope of arbitration clause, could not be referred to arbitration.

The respondent no.1- Indian Oil Foundation, appointed respondent no.2 as the Engineering Project Construction Management (EPCM) for completion of a construction project. The respondent no. 2 issued a tender notice inviting e-bids for execution of the project.

The petitioner- M/s Janta Associates and Co. Ltd. submitted its bid, which was accepted and a Letter of Acceptance (LoA) was awarded to the petitioner. Thereafter, the parties entered into an agreement for construction of the project.

Alleging delay in the completion of the construction project by the petitioner, the respondents issued a show cause notice to the petitioner initiating proceedings for terminating the Contract between the parties. The petitioner, in its reply to the show cause notice, raised claims regarding the non-payment of its dues under the Contract by the respondents.

Thereafter, the petitioner issued a notice invoking arbitration and filed a petition under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act) before the Delhi High Court, seeking appointment of a sole arbitrator.

The respondent- Indian Oil Foundation, submitted before the High Court that as per the relevant clause contained in the General Conditions of Contract (GCC), only disputes arising out of the 'Notified Claims', which are noted in the Final Bill raised by the petitioner, could be referred to arbitration. Hence, the respondent argued that since the petitioner had not submitted the Final Bill yet, the arbitration notice issued by the petitioner was pre-mature.

The Court noted that after the petition under Section 11 for appointment of arbitrator was filed by the petitioner, the respondent/Indian Oil Foundation issued a letter terminating the Contract between the parties. Further, the bench observed that the respondent had called upon the petitioner to join the respondent in carrying out a final survey for measurement of the work performed, for the purpose of determining the final amount due to the petitioner under the Contract.

While holding that the petitioner, in its reply to the said letter, had merely set out the summary of its claims and had refused to carry out the final survey, the Court ruled that a Final Bill was yet to be prepared by the petitioner.

Perusing the arbitration clause contained in the GCC, the bench noted that only disputes arising out of a 'Notified Claim', as included in the Final Bill, could be referred to an arbitral tribunal.

Hence, the Court upheld the contention made by the respondent that since the Final Bill relating to the dues owed to the petitioner was not finalised, the issue whether the claims made by the petitioner were 'Notified Claims' or not had to be determined.

The bench referred to the decision of the Apex Court in Indian Oil Corporation Limited versus NCC Limited (2022), where the Supreme Court had ruled that certain matters as specified in the relevant clause of the GCC are specifically excluded from the scope of arbitration and that the dispute whether a claim is a 'Notified Claim' or not falls outside the scope of arbitration.

"In view of the above, the petitioner's request to refer the disputes to arbitration cannot be acceded to at this stage. IOF is bound down to the statement made by the learned counsel on its behalf that the General Manager or the concerned authority shall consider the question including the petitioner's claim as Notified Claims, in accordance with the Contract between the parties, within a period of two weeks. It is so directed", the Court ruled.

While granting the petitioner liberty to invoke arbitration in respect of claims that are subsequently included as 'Notified Claims' in the Final Bill, in accordance with the Contract between the parties, the Court disposed of the petition.

Case Title: M/s Janta Associates and Co. Ltd. versus Indian Oil Foundation & Anr.

Citation: 2022 LiveLaw (Del) 965

Counsel for the Petitioner: Mr. Vineet Bhagat, Mr. Mohit Gulati & Mr. Tejas Singh, Advocates

Counsel for the Respondents: Ms. Priya Puri & Mr. Rishabh Sharma, Advocates

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