Delhi High Court applies the doctrine of kompetenz-kompetenz to refer the dispute to an Arbitral Tribunal

Delhi High Court

Delhi High Court: In a petition filed seeking the appointment of an independent Arbitral Tribunal under Section 11(6) of the Arbitration & Conciliation Act, 1996 to adjudicate disputes between the Petitioner and Respondent, Chandra Dhari Singh, J., held that if there is an arbitration agreement between the parties, which is sought to be negated by a party by citing other provisions of a contract, which requires interpretation of the contract, then the Court, in line with the letter and spirit of the Act as well as the doctrine of kompetenz-kompetenz, must lean towards referring the matter to arbitration.

The Petitioner is a firm engaged in civil contracting, land & property development, and real estate sectors. The Respondent is a Centre-State Joint Venture responsible for operating the Delhi Metro and the scope of its work involves planning and implementation of metro rail, monorail, and high-speed rail projects in India and abroad.

The grievance of the petitioner is that the Respondent had added extra work and had changed the scope of work provided for by the contract, and the same was undertaken by them on the Respondent’s assurance that due payments will be made for the extra work. While it had duly executed all the work and raised timely bills, the same was not honoured by the Respondents, despite their prior understanding of the same.

The Petitioner invoked the arbitration clause which was rejected by the respondent on the ground that the Petitioner’s notice had exceeded the prescribed time limit under Clause 17.4 of the GCC. The respondent submitted that the Petitioner had submitted the No Claims Declaration as per which once the final payment under the contract is released, then the contractual agreement including the arbitration clause would be instantly discharged and rescinded.

The issue under consideration is whether the instant dispute can be referred to arbitration notwithstanding the No Claim Declaration given by the petitioner.

The Court noted that the governing mechanism for any dispute arising between the parties herein would be the Contract CC-95 along with all the relevant clauses that have been laid out in the GCC since the Petitioner has sought the invocation of the arbitration clause which has been provided within the same.

The Court further noted that an arbitration clause pertains to the resolution of disputes arising out of the contract, and thus, in accordance with the Doctrine of Severability, the arbitration clause would be deemed as a separate and severable clause. Consequently, the arbitration agreement would subsist even after the contract between the parties had extinguished and the same has been statutorily recognized under Section 16(1) of the Act.

Placing reliance on Shrishti Infrastructure Development Corporation Ltd. v. Ircon International Limited, 2022 SCC OnLine Del 2383, the Court observed that the issues pertaining to the quantum of money for the extra work that has been done by the Petitioner and whether the Petitioner’s claims would be maintainable on account of the No Claims Declaration are to be decided by the Arbitral Tribunal under the kompetenz-kompetenz principle.

The Court recorded that the issue regarding the Petitioner’s claims being maintainable on account of the No Claim Declaration must be adjudicated by the Arbitral Tribunal, in accordance with the judicial mandate of the Amendments to the Act which purports to minimise judicial intervention in arbitration proceedings in accordance with the kompetenz kompetenz principle.

The Court further recorded that the issue of limitation with regards to the claim being time-barred must be adjudicated by the Arbitral Tribunal either as a preliminary issue or at the final stage after the parties have led the evidence. Thus, the issue of limitation which concerns the “admissibility” of the claim must be decided by the Arbitral Tribunal as a preliminary issue.

The Court concluded that there is an arbitrable dispute between the parties and the same must be adjudicated by the Arbitral tribunal which would be the competent authority as per the kompetenz-kompetenz principle.

Thus, the Court appointed Justice (Retd.) T.S. Thakur, former Chief Justice of India as the Chairperson of the Arbitral Tribunal to adjudicate the disputes between the parties which have arisen under the GCC qua the payment for extra works along with Justice (Retd.) Manmohan Singh and Justice (Retd.) Sudershan Misra as other members of the Tribunal.

[Metcon India Realty and Infrastructure Pvt Ltd. v. Delhi Metro Rail Corporation, 2023 SCC OnLine Del 576, decided on 02-02-2023]

Judgment By: Justice Chandra Dhari Singh

Advocates who appeared in this case:

Mr. Ankur Sood, Advocate for the Petitioner;

Mr. V. S. R. Krishna and Mr. V. Shashank Kumar, Advocates for Respondent.

*Arunima Bose, Editorial Assistant has reported this brief.

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