Facts of the Case

The applicant, Bhupinder Pal Mahajan, was awarded a road construction contract ("Construction of Pungh-Kapahi via Patsal road") worth Rs. 1,40,99,836/- under NABARD RIDF-XIX by the State of Himachal Pradesh in May 2014, with a 12-month completion timeline. Execution was delayed till 30.04.2018, and the applicant contended this delay was aggravated by the transition from the erstwhile tax regime to GST from 01.07.2017, which allegedly disrupted his cash flows. He sought release of the final bill along with GST and royalty amounts, but the final bill remained unprepared. After a legal notice dated 09.12.2021 invoking the arbitration clause (Clause 25 of the agreement), some claims were settled amicably, but the department rejected his GST-related claim on 14.06.2023, prompting this application under Section 11(6) of the Arbitration and Conciliation Act, 1996, for appointment of an arbitrator.

Issues Involved

  1. Whether an arbitrator should be appointed under Section 11(6) of the Arbitration and Conciliation Act, 1996, to adjudicate the contractor's claim for GST reimbursement under the works contract.

Petitioner's Arguments

  • There exists a valid arbitration clause (Clause 25) in the agreement, and the dispute over entitlement to GST reimbursement remains unresolved after the department rejected the claim.

Respondent's Arguments

  • The State opposed the applicant's entitlement to GST reimbursement on merits in its reply, but raised no objection to the appointment of an arbitrator itself.

Court Order / Findings

  • The Chief Justice found the existence of an arbitration clause and a live dispute undisputed, and noted the respondents raised no objection to appointment of an arbitrator.
  • Mr. L.N. Sharma, a retired District & Sessions Judge, was appointed as sole Arbitrator to adjudicate the dispute, including the applicant's entitlement to GST reimbursement, once he furnishes the disclosure required under Section 11(8) of the Act.

Important Clarification

Whether the contractor is actually entitled to the disputed GST reimbursement remains an open question for the arbitrator to decide — this order does not resolve or comment on that substantive issue; it only sets up the forum in which it will be decided.

Sections Involved

  • Arbitration and Conciliation Act, 1996 — Sections 11(6), 11(8)
  • Goods and Services Tax Act, 2017 — referenced only as the subject-matter of the underlying contractual dispute

Decision – In Favour of

Disposed of without any decision on the merits of the GST reimbursement claim — the application for appointment of an arbitrator was allowed, and the substantive dispute was referred to arbitration.

Case Details

Court: High Court of Himachal Pradesh, Shimla
Case No.: Arb. Case No. 650 of 2023
Coram: Hon'ble Mr. Justice M.S. Ramachandra Rao, Chief Justice
Date of Decision: 3 November 2023

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