Facts of the Case

Ram Kripal Singh Construction Private Limited entered into an agreement with the State of Jharkhand for widening and improvement of National Highway NH-114(A). The project was awarded for approximately ₹69.70 crore with a stipulated completion period of eighteen months.

Due to certain circumstances, the work could not be completed within the original period, and an extension of time was granted. After completion of the project, the petitioner received the completion certificate and submitted the final bill along with claims for delayed payment interest, royalty difference and GST reimbursement.

According to the petitioner, despite invoking the contractual arbitration clause and requesting appointment of a sole arbitrator, the respondents failed to act upon the request. Consequently, the petitioner approached the Jharkhand High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator.

Issues Involved

  1. Whether the High Court should appoint an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.
  2. Whether the existence of disputes relating to delayed payment, GST reimbursement, royalty and interest could be examined by the Court at the stage of appointment of an arbitrator.
  3. Whether objections raised by the State regarding absence of dispute prevented appointment of an arbitrator.

Petitioner's Arguments

  • The petitioner submitted that genuine disputes existed regarding delayed payment of the final bill, GST reimbursement, royalty adjustment and interest.
  • The contractual arbitration mechanism had already been invoked under Clause 25 of the agreement.
  • Despite the request, the respondents failed to appoint an arbitrator within the prescribed period.
  • Since the arbitration agreement existed and disputes had arisen between the parties, appointment of an arbitrator under Section 11(6) became necessary.
  • The merits of the disputes were required to be decided by the arbitral tribunal and not by the Court while considering an application under Section 11(6).

Respondent's Arguments

The State opposed the application by contending that:

  • No arbitrable dispute actually existed.
  • The contractor had delayed completion of the work.
  • Extension of time had already been granted.
  • The final bill had been paid.
  • Claims relating to interest, royalty difference and GST reimbursement were not payable.
  • Since there were no outstanding dues, appointment of an arbitrator was unnecessary.

Court Order / Findings

The Jharkhand High Court observed that the State had not disputed the existence of the arbitration clause contained in Clause 25 of the agreement. The Court held that while exercising jurisdiction under Section 11(6), it is not required to examine the merits of the disputes or determine whether the claims are ultimately sustainable.

The Court clarified that issues regarding delayed payment, entitlement to GST reimbursement, royalty difference, interest or alleged absence of liability are matters to be adjudicated by the arbitrator.

Since the arbitration agreement existed and the respondents had failed to appoint an arbitrator after invocation of the arbitration clause, the statutory requirements under Section 11(6) stood satisfied.

Accordingly, the Court appointed Hon'ble Mr. Justice (Retd.) Tapen Sen, Former Judge of the Jharkhand High Court, as the Sole Arbitrator to adjudicate the disputes between the parties. The arbitrator was directed to furnish the disclosure required under Section 12 of the Arbitration and Conciliation Act, 1996 and conduct the proceedings in accordance with law.

Important Clarification

This judgment reiterates the settled principle that while exercising powers under Section 11(6) of the Arbitration and Conciliation Act, 1996, the Court primarily examines the existence of a valid arbitration agreement and whether the appointment procedure has failed.

The Court does not decide disputed questions relating to entitlement, liability, delayed payments, GST reimbursement, royalty adjustments or interest claims at the stage of appointment of an arbitrator. Such issues fall exclusively within the jurisdiction of the arbitral tribunal.

Link to Download the Order

https://mytaxexpert.co.in/uploads/1785561347_2452compressed.pdf   

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