When Parties Cannot Agree Upon Rules Governing Arbitration, Independent Clause Conferring Exclusive Jurisdiction Prevails: Calcutta High Court

The Calcutta High Court bench of Justice Shampa Sarkar, while hearing a section 11 petition, observed that Courts at Durgapur would have the exclusive jurisdiction over the arbitral proceeding vide Clause 46.2.4 of the GCC, as the parties could not agree upon the rules of arbitration governing the proceedings as provided under Clause 46.2.5. Factual Matrix: The Respondent No. 2 floated a tender and issued a notice inviting bids dated 24/08/2009, in which the Petitioner participated. The same was accepted by Respondent No. 2 vide Letter of Acceptance dated 21/05/2010, and subsequently, the parties and consultant M/s MECON Ltd. entered into a contract. The contract was awarded for "Structural Work of New Slag Yard of SMS" at Durgapur Steel Plant, and the initial contract price was ₹5.65 crores along with the stipulated deadline of 20 months, due to several laches on the part of the Respondent, which resulted in delay in timely execution. The Respondent No. 2 on 20/07/2013, unilaterally amended the contract value to ₹8.61 crores, and the same was not accepted by the Petitioner. The work was completed in September 2016, and the Petitioner submitted the R.A. bills amounting to ₹ 28.92 crores. The Petitioner, vide letter dated 07/01/2017, submitted a final bill amounting to ₹21.34 crores, which was not paid by the Respondent. The Respondent agreed to settle the claim at ₹1.44 crores, upon reiteration of the original claims by the Petitioner, the Respondent refused to entertain the claim of the Petitioner. The Petitioner invoked the arbitral proceedings and, by virtue of Clause 46 of the GCC, requested the arbitrator's appointment, to which the Respondent remained silent. Vide letter dated 20/01/2023, the Petitioner again asked for amicable settlement, and the Respondent vide letter dated 03/03/2023 rejected all the Petitioner's claims and specifically stated that the case could not be treated as closed. The contract was further unilaterally amended to a value of ₹11.94 crores, which was unacceptable to the Petitioner. The Respondent transferred an ad-hoc amount of ₹ 5.66 crores to the Petitioner's bank account. The Petitioner alleged that this was not the full and final settlement, and in subsistence of the Respondent's failure to pay the final bill, the Petitioner has filed this petition u/s 11 of the A&C Act. Submissions: The counsel for the applicant made the following submissions: The application is within the limitation period as the first refusal was received on 19/11/2019, and the notice invoking arbitration was issued on 24/12/2020. An application was filed in the High Court of Delhi before this application was filed on 27/02/2025.The period during which the application was pending before the High Court of Delhi should be excluded while calculating the limitation period. The counsel for the Respondent made the following submissions: The High Court of Calcutta does not have the jurisdiction to entertain the petition. Despite the limitation being a mixed question of law and facts, the Court's jurisdiction has been curtailed by Clause 46.2.5 of the GCC, which specifies Delhi as the venue. The exclusive jurisdiction clause would not be applicable in view of Clause 46.2.5, as it supersedes Clause 46.2.4. By virtue of Delhi being the agreed venue, Clause 46.2.4 cannot come into action. Analysis of the Court: The bench observed that in light of the various correspondences exchanged between the parties relating to Respondents unilaterally amending the contract value, paying a portion of the Petitioner's claim as full and final settlement and denying the quantum of the balance claim, allegations of coercing the Petitioner to sign blank papers and subsequent complaint to the police authorities clearly portrays that the parties cannot amicably settle the dispute. Any direction for amicable settlement in light of Clause 46.2.1 would be a mere formality. The bench relied upon Visa International Limited v. Continental Resources (USA) Limited (2009), where the Supreme Court observed: "…The exchange of letters between the parties undoubtedly discloses that attempts were made for an amicable settlement, but without any result, leaving no option but to invoke the arbitration clause." The bench noted that Clause 46.2.4, being an independent clause, provides that unless otherwise mentioned in the contract, the arbitration shall be held at SAIL DSP Durgapur, and the Courts of Durgapur shall have exclusive jurisdiction. It observed that Clause 46.2.5 would apply if the parties had agreed to follow the ICA Rules or the Rules of SCFA. The parties not agreeing with respect to the implementation of Clause 46.2.5, the choice of New Delhi as the venue of the arbitration cannot be treated as the venue. On the contrary, Clause 46.2.4, an independent clause, specifying the seat of the arbitration at Durgapur, and...

When Parties Cannot Agree Upon Rules Governing Arbitration, Independent Clause Conferring Exclusive Jurisdiction Prevails: Calcutta High Court

Mohd Talha Hasan

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