The Bombay High Court has held that the ‘Finality of Decision and Non – Arbitrability’ clause in the General Conditions of Contract (“GCC”) does not imply an arbitration agreement.
Kalpataru Projects International Ltd, the applicant filed this Application under the provisions of Section 11 of the Arbitration and Conciliation Act, 1996 (“the said Act”). The respondent No.1 issued an E-Tender Notice inviting bids for the construction of the Ghatkopar- Mankhurd Link Road Flyover ( “GMLR flyover” ) for the tender amount of Rs.313,85,05,635.80/-. The scope of work as described in the Tender Documents included the construction of (a) the GMLR flyover (b) three-foot over bridges at Indian Oil Nagar, Rising City and Baiganwadi junction respectively and (c) a vehicular underpass at Mohite Patil Nagar Junction.
The Applicant submitted its bid in response to the said Tender, which was accepted by Respondent No.1, passed by Respondent No.1’s Standing Committee. Respondent No.1 awarded the contract to the Applicant by a Letter of Acceptance dated 26th December 2016. The Respondent No.1 issued a Work Order. Since the Tender Documents prescribed 30 months for the completion of the works, the project was slated to be completed by 3rd July 2019.
Although the Applicant commenced work immediately post the issuance of the work order, the parties formally signed the Contract only on 14th May 2018. The applicant stated that the planned progress of work was disrupted by various delay events caused by the Respondents or unforeseen circumstances, and additional works instructed by the Respondents which constituted a change in the scope of work envisaged under the Tender Documents. The Applicant was, therefore, constrained to seek extensions of time of the contract period, which were granted on various occasions.
During the works, and post the completion of the project, the Applicant raised various claims by the Contract. Disputes about the Contract arose and the Applicant initiated the pre-arbitral steps as provided in Clause 96 of the General Conditions of Contract ( “GCC” ) to ensure strict compliance with the provisions of the Contract.
The Applicant addressed a letter dated 24th September 2021 to the Additional Municipal Commissioner, placing on record all its objections to the Chief Engineer’s decisions in respect of the claims and reiterating its entitlement thereto. The Applicant, further, notified the Additional Municipal Commissioner to proceed with the constitution of a committee comprising three officers of Respondent No.1 as envisaged in the first paragraph of Clause 96 of the GCC to settle the disputes.
It was also not possible to accept the submissions of the Applicant that, just because modified Clause 96 of the GCC states that the decision given by the Committee shall be final and binding upon the parties, the modified clause 96 constitutes the Arbitration Agreement between the parties.
Justice Firdosh P. Pooniwalla observed that a clause in a contract does not show that the parties intended to have their disputes resolved through Arbitration merely because a particular decision is made final and binding by that clause. The Court held that the modified Clause 96 of the GCC does not constitute an Arbitration Agreement between the parties. It was viewed that the parties have not agreed to have their disputes resolved by arbitration and, therefore, the present Application, seeking the appointment of an Arbitrator, is liable to be dismissed.
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