Rejection Of Claims By Writ Court Over Disputed Issues Does Not Bar Reference To Arbitration: Calcutta High Court

The Calcutta High Court bench of Justice Shampa Sarkar has held that when the claims of the petitioner are not adjudicated by writ courts and subsequently by the Supreme Court in a Special Leave Petition on the ground that they involve disputed questions of fact and law which are beyond the remit of the court, and the petitioner is directed to invoke the alternative remedy of arbitration due to the undisputed existence of an arbitration clause, the matter should be referred to arbitration and whether the time period spent in prosecuting before the writ courts should be excluded can be decided by the Arbitrator. The present application has been filed under section 11(6) of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator. The Petitioner in consortium with ION Exchange was awarded a contract by Steel Authority of India (SAIL) for constructing a Raw Water Reservoir at the IISCO Steel Plant. During execution of the work, removal of hard rock became necessary. A demand for additional work was rejected on 30.01.2015 which led to filing of a writ petition before the Single Judge alleging discriminatory treatment. The Single judge rejected the petition followed by the rejection of the Petition by the Division bench. The Matter ultimately reached to the Supreme Court. The Supreme Court while dismissing the Special Leave Petition held that since an arbitration exists, the petitioner should invoke the clause and get the matter adjudicated through arbitration. The Petitioner submitted that the writ petition was dismissed on the ground that adjudication of the writ petition would involve interpretation of the terms of the contract, which was beyond the scope of judicial review. It was further submitted that as long as the petitioner was pursuing the legal remedy, in a bona fide manner, the entire period between the filing of the writ petition and disposal of the SLP, should be excluded. It was also submitted that clause 7.1.2 read with clauses 8.2. of the contract permitted the petitioner to claim money in lieu of the additional work done. Unless removal of the hard rock was achieved, the project could not be completed. According to Ms. Chatterjee Ghosh, this was a fit case for reference of the dispute to arbitration. Per contra, the Respondent submitted that the application for reference to arbitration was barred by a period of 3554 days. Thus, the cause of action was barred by 3554 days, by the time the application for appointment of an arbitrator was filed. It was further submitted that the writ petition and the proceedings therefrom were all decided on merits, and as such, the provision of Section 14 would not apply. It was nobody's case that the petitioner was pursuing a remedy before a wrong forum, which did not have jurisdiction to entertain the proceeding. It was also contended that the writ petitioner always understood that such additional work was outside the scope of the contract, and as such, the arbitration clause would not be a deterrent for the writ court to adjudicate the issues involved in the writ petition. The court observed that the Division Bench had not adjudicated the validity or admissibility of the petitioner's claims on the ground that such adjudication required interpretation of the contractual terms. The claim was rejected due to the petitioner's failure to prove arbitrariness or unreasonableness in the decision taken by the Respondent. Both the Single Bench and the Divisions Bench held that the issue required adjudication of disputed factual issues which were beyond the remit of the writ court. The Supreme Court noted the existence of an arbitration clause and held that the petitioner could pursue an alternative remedy. It held that whether the principles of res judicata and estoppel apply, are within the domain of the arbitrator. The court held that “as soon as the liberty was granted by the Supreme Court, the arbitration clause was invoked and the application before this court was filed within time. This is not a case in which the court can come to a conclusion that the claim is inadmissible upon taking a cursory look at the pleading.” The court held that the Arbitrator is the appropriate authority to decide the admissibility of the claims and interpret the contractual terms. Since, in the present case, the arbitration clause exists and is undisputed and the claims of the petitioner have not been finally adjudicated, the matter should be referred to Arbitration. Issues like estoppel, limitation, res judicata and exclusion of time period spent in the writ courts should be decided by the Arbitrator based on evidence. The referral court should respect party autonomy. Accordingly, the present application was allowed. Case Title:P.K THAKUR AND COMPANY PRIVATE LIMITED Vs. STEEL AUTHORITY OF INDIA LIMITED Case Number:AP-COM 461 of 2024 Judgment Date: ...

Rejection Of Claims By Writ Court Over Disputed Issues Does Not Bar Reference To Arbitration: Calcutta High Court

Mohd Malik Chauhan

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