Delhi High Court
Corrtech Energy Ltd vs Indian Oil Corporation Ltd & Anr on 27 July, 2026
$~J-1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 07.05.2026
Judgment delivered on: 27.07.2026
+ CS(COMM) 295/2024
CORRTECH ENERGY LTD .....Plaintiff
Through: Mr. Dayan Krishnan, Sr. Adv. with
Ms. Anushree Kapadia, Mr. Sukrit
Seth, Mr. Pranay Bhardwaj and Ms.
Pragya Jaishwal, Advs.
versus
INDIAN OIL CORPORATION LTD & ANR. .....Defendants
Through: Mr. V.N. Koura, Ms. Paramjeet
Benipal and Mr. Aditya Sharma,
Advs. for D-1.
Mr. Vishal Gehrana, Ms. Megha
Dugar and Mr. Tribhuvan N. Singh,
Advs. for D-2.
+ CS(COMM) 1083/2024
CORRTECH ENERGY LIMITED .....Plaintiff
Through: Mr. Dayan Krishnan, Sr. Adv. with
Ms. Anushree Kapadia, Mr. Sukrit
Seth, Mr. Pranay Bhardwaj and Ms.
Pragya Jaishwal, Advs.
versus
INDIAN OIL CORPORATION LTD .....Defendant
Through: Mr. V.N. Koura, Ms. Paramjeet
Benipal and Mr. Aditya Sharma,
Advs. for D-1.
CORAM:
HON'BLE MR. JUSTICE VIKAS MAHAJAN
Signature Not Verified
Digitally Signed
By:DEEPAK SINGH CS(COMM) 295/2024 & CS(COMM) 1083/2024 Page 1 of 44
Signing Date:28.07.2026
20:30:36
JUDGMENT
VIKAS MAHAJAN, J
I.A. 32759/2024 (under Section 8(1) of Arbitration and Conciliation Act,
1996) in CS(COMM) 295/2024
I.A. 8561/2025 (under Section 8(1) of Arbitration and Conciliation Act,
1996) in CS(COMM) 1083/2024
FACTS IN CS(COMM) 295/2024
1. The case set up by the plaintiff in CS(COMM) 295/2024 is that he
was awarded the contract to carry out composite work for the Catalytic
Reforming Unit work at the Guwahati refinery of the defendant no. 1 for a
total contract value of Rs. 32,60,33,744/. Pursuant thereto, Contract No.:
213102-00123-C-004/AGT/2022-2023 (WO No.: 28127311 dated
06.09.2022) (hereinafter ‘the contract’) was signed between the plaintiff
and the defendant no.1/Indian Oil Corporation Ltd. (hereinafter ‘IOCL’).
Defendant no. 2 was retained as the Engineering, Procurement and
Construction Management Consultant (hereinafter ‘EPCM Consultant’)
and the personnel thereof were appointed as the engineer-in-charge of the
said project.
2. It is stated that the prescribed period of 12 months for mechanical
completion of the work concluded on 25.08.2023 and there has been no
extension of time despite several requests by the plaintiff. Defendants have
been illegally coercing the plaintiff to mobilize heavy resources for a very
small portion of work by issuing permits to work with conditions prejudicial
to the plaintiff.
Signature Not Verified
Digitally Signed
By:DEEPAK SINGH CS(COMM) 295/2024 & CS(COMM) 1083/2024 Page 2 of 44
Signing Date:28.07.2026
20:30:36
3. It is stated that the defendant no. 2, vide letter dt. 07.03.2024,
admitted that 100% of the work front had not been made available and the
delay for the same was not attributable to the plaintiff. The plaintiff states
that such failure on the part of the defendants to provide the complete work
front, relevant drawings and a schedule of work within the contract period
has led to the plaintiff being able to invoice only around 3% of the total
contract value.
4. It is the case of the plaintiff that after 24.02.2024, the defendants have
been pressuring it to again mobilize resources under the pretext of false and
frivolous show cause notices, withholding of payments in other projects and
threats of encashment of his initial security deposit bank guarantee.
5. Pursuant to the aforesaid, the plaintiff instituted CS(COMM)
295/2024 titled M/s Corrtech Energy Ltd. v. Indian Oil Corporation
Limited & Anr. seeking the following reliefs:
“(a) Permanent injunction against the defendant/s, and/or their
servants, agents, successors, employees, etc. restraining them
from adjusting or making any claims of any nature whatsoever,
raised by defendant/s against the Plaintiff, from the account of
the Plaintiff in any project other than COMPOSITE WORKS
FOR CATALYTIC REFORMING UNIT (CRU) AT GUWAHATI
REFINERY, ASSAM, CONTRACT NO.: 213102-00123-C-
004/AGT/2022-2023 (WO No. – 28127311 dated 06.09.2022);
(b) Permanent injunction against the defendant/s and/or their
servants, agents, successors, employees, etc. from undertaking
any coercive and/or penal measures against the Plaintiff in
respect of or in connection with the works awarded to the
Plaintiff under the tender for COMPOSITE WORKS FOR
CATALYTIC REFORMING UNIT (CRU) AT GUWAHATI
REFINERY, ASSAM, CONTRACT NO.: 213102-00123-C-
004/AGT/2022-2023 (WO No. – 28127311 dt. 06.09.2022);
Signature Not Verified
Digitally Signed
By:DEEPAK SINGH CS(COMM) 295/2024 & CS(COMM) 1083/2024 Page 3 of 44
Signing Date:28.07.2026
20:30:36
(c) Mandatory injunction directing the defendant/s and/or their
servants, agents, successors, employees, etc. to deliver up the
Bank Guarantee bearing no. 0810IGP22029940, dated 28 Nov
2022, issued by Kotak Mahindra Bank Ltd. in favor of the
Defendant No. 1 so as to discharge the same;
(d) Declaration that the show-cause notices issued by the
defendant/s and/or their servants, agents, successors,
employees, etc. to the Plaintiff in connection with COMPOSITE
WORKS FOR CATALYTIC REFORMING UNIT (CRU) AT
GUWAHATI REFINERY, ASSAM, CONTRACT NO.: 213102-
00123-C-004/AGT/2022-2023 (WO No. – 28127311 dated
06.09.2022), are bad in law and null and void;
(e) Declaration that any offloading or re-tendering of the works
under the Tender COMPOSITE WORKS FOR CATALYTIC
REFORMING UNIT (CRU) AT GUWAHATI REFINERY,
ASSAM, CONTRACT NO.: 213102-00123-C-004/AGT/2022-
2023 (WO No. – 28127311 dated 06.09.2022), by the
defendant/s and/ or and their servants, agents, successors,
employees, etc. shall not be at the risk and cost of the Plaintiff;
(f) Recovery of a total sum of Rs. 9,56,71,682/- (Rupees Nine
Crores Fifty-six Seventy-one Lakhs Six Hundred Eighty-Two
only) along with applicable taxes, towards claims of the
Plaintiff narrated in detail hereinabove, along with interest at
the rate of 24% p.a. till date of payment”
FACTS IN CS(COMM) 1083/2024
6. The plaintiff has also instituted CS(COMM) 1083/2024 titled M/s
Corrtech Energy Ltd. v. Indian Oil Corporation Limited in respect of the
project “BR-9 RFCC Revamp Project at Barauni Refinery” which arises out
of substantially similar facts, albeit with the following distinguishing
factors:
(i) The erstwhile defendant no.2, who was retained as the
EPCM Consultant in the contract pertaining to BarauniSignature Not Verified
Digitally Signed
By:DEEPAK SINGH CS(COMM) 295/2024 & CS(COMM) 1083/2024 Page 4 of 44
Signing Date:28.07.2026
20:30:36
Refinery, was deleted from the array of defendants vide order
dated 19.12.2024 passed in CS(COMM) 1083/2024, therefore,
IOCL is the sole defendant in this suit.
(ii) Defendant introduced a sub-contractor and a condition of
requirement of a “No-Objection Certificate” from the said sub-
contractor before their Running Account Bills (hereinafter ‘RA
Bills’) would be cleared by the defendant, was imposed.
(iii) Defendant re-tendered the project at the plaintiff’s risk
and cost while explicitly barring the plaintiff from participating
in the re-tendering process.
7. CS(COMM) 1083/2024 has been instituted seeking the following
reliefs:
“(a) A decree of permanent injunction restraining the
Defendant(s), their agents, representatives, successors, or any
other persons acting on their behalf, from adjusting,
appropriating, or recovering any amount claimed by the
Defendant(s) from the Plaintiff under any project of IOCL (from
List at Document 38), where the Plaintiff is engaged as a
“Contractor,” against / out of any dues or payments payable by
IOCL to the Plaintiff in any other project of IOCL, or in any
other manner whatsoever, unless:
a. Such adjustment or recovery is expressly agreed to in
writing by the Plaintiff, or
b. The claim or adjustment is adjudicated and determined in
accordance with law by a Court of competent jurisdiction;
(b) A decree for a Permanent Injunction restraining the
Defendant(s), their agents, employees, representatives, or any
other person(s) acting on their behalf from undertaking any
coercive and/or penal measures against the Plaintiff in
connection with or arising out of the works awarded to the
Plaintiff under the tender for BR-9 RFCC REVAMP PROJECTSignature Not Verified
Digitally Signed
By:DEEPAK SINGH CS(COMM) 295/2024 & CS(COMM) 1083/2024 Page 5 of 44
Signing Date:28.07.2026
20:30:36
AT BARAUNI REFINERY OF M/S IOCL, CONTRACT NO.:
TP/08175757C001/T/BR-9/03/AGT/2022-2023 (WO No.-
27663535 dated 17.03.2022);
(c) A decree for a Mandatory Injunction directing the
Defendant(s), their agents, employees, representatives, or any
other person(s) acting on their behalf to discharge the Plaintiff
from all obligations under and to deliver up the ISD Bank
Guarantee bearing No. 0064NDDG00007223 dated
16.06.2022, as amended on 28.10.2024, valid up to 07.08.2025,
issued by ICICI Bank Ltd. in favour of Defendant No. 1;
(d) A decree declaring that the show-cause notice dated
17.07.2024 issued by the Defendant(s) to the Plaintiff in
connection with the BR-9 RFCC Revamp Project at Barauni
Refinery of M/s IOCL, Contract No.: TP/08175757C001/T/BR-
9/03/AGT/2022-2023 (WO No. 27663535 dated 17.03.2022),
for holiday listing, and any subsequent or consequential actions
arising therefrom, is bad in law, null, and void;
(e) A decree declaring that any offloading or re-tendering of
the works under the Tender BR-9 RFCC Revamp Project at
Barauni Refinery of M/s IOCL, Contract No.:
TP/08175757C001/T/BR-9/03/AGT/2022-2023 (WO No.
27663535 dated 17.03.2022), by the Defendant(s), their agents,
or representatives, shall not be at the risk and cost of the
Plaintiff;
(f) A decree for a Mandatory Injunction directing the
Defendant(s), their agents, employees, representatives, or any
other person(s) acting on their behalf to extend the tenure of
projects other than the BR-9 RFCC Revamp Project at Barauni
Refinery of M/s IOCL, Contract No.: TP/08175757C001/T/BR-
9/03/AGT/2022-2023 (WO No. 27663535 dated 17.03.2022),
where the tenure has expired on any date after the debit
declared by IOCL on 24.10.2024;
(g) Pass a decree in favor of the Plaintiff and against the
Defendant(s) for the recovery of a total sum of ₹
17,87,96,569.14 (Rupees Seventeen Crores Eighty-seven Lakhs
Ninety-six Thousand Five Hundred Sixty-nine and paise
Signature Not Verified
Digitally Signed
By:DEEPAK SINGH CS(COMM) 295/2024 & CS(COMM) 1083/2024 Page 6 of 44
Signing Date:28.07.2026
20:30:36
Fourteen) along with applicable taxes, as detailed in the
statement of claims submitted herein, pertaining to various
claims arising on account of works carried out by the Plaintiff
towards BR-9 RFCC Revamp Project at Barauni Refinery of
M/s IOCL, Contract No.: TP/08175757C001/T/BR-
9/03/AGT/2022-2023 (WO No. 27663535 dated 17.03.2022);
(h) Pass a decree awarding interest on the amounts due as per
Document 38 from the date of accrual till the date of payment at
the rate of 24% p.a.”
APPLICATIONS UNDER SECTION 8(1) OF THE ARBITRATION
AND CONCILIATION ACT, 1996
8. The IOCL filed the captioned applications under Section 8(1) of the
Arbitration and Conciliation Act, 1996 (hereinafter ‘Act’) in both the suits
for referring the matter to arbitration in view of the arbitration agreement
incorporated in clauses 9.0.1.0 and 9.0.1.1 of the General Conditions of
Contract (hereinafter ‘GCC’).
9. Insofar as I.A. 32759/2024 in CS(COMM) 295/2024 is concerned, the
defendant no.1/IOCL has prayed for referring the disputes raised in prayer
(a) to (e) of the suit to the arbitration, while leaving out the disputes arising
out of prayer (f). The prayer in I.A. 8561/2025 in CS(COMM) 1083/2024
shows that the defendant is essentially seeking reference of the disputes
arising out of and in respect of all the prayers to the arbitration.
I.A. 32759/2024 IN CS(COMM) 295/2024
10. Since the submissions by both sides were advanced in I.A.
32759/2024 in CS(COMM) 295/2024 and adopted for the I.A. 8561/2025 in
CS(COMM) 1083/2024, therefore, the former application is first taken up
for consideration.
Signature Not Verified
Digitally Signed
By:DEEPAK SINGH CS(COMM) 295/2024 & CS(COMM) 1083/2024 Page 7 of 44
Signing Date:28.07.2026
20:30:36
11. It is stated in the application that the plaintiff, anticipating that the
defendant no.1/IOCL will exercise its contractual remedies for the recovery
of amounts claimed by it, has filed the suit incorporating prayers (a) to (e) to
prevent the defendant no.1 from recovering from the plaintiff any amount
under the contract.
12. It is further stated that since the amount to be claimed by the
defendant no.1 from the plaintiff under or in respect of the contract is the
subject matter of the arbitration agreement, the suit cannot proceed against
the defendant no.1 insofar as prayers (a) to (e) thereof are concerned, which
entirely arises out of the claims of the defendant no.1.
13. The plaintiff has resisted the aforesaid application by filing a reply. It
is stated in the reply that the defendant no.1 has admittedly filed the
application only in respect of the reliefs (a) to (e) in the suit and not in
respect of prayer (f). It has been further elaborated that once the suit is filed
for the reliefs all of which are not arbitrable under the arbitration agreement,
the application is not maintainable.
14. It is further stated that defendant no.2 who is non-signatory to the
arbitration agreement has not pressed for referring the suit to the arbitration.
In that view of the matter also, the application is liable to be dismissed.
15. Mr. V.N. Koura, learned counsel for the applicant submits that the
contract undisputedly contains an arbitration clause in Clauses 9.0.1.0 and
9.0.1.1 of the GCC.
16. He submits that at the stage of Section 8, this Court only has to satisfy
itself as to prima facie existence of a valid arbitration agreement in relation
to the contract in question and nothing else. In case the Court comes to a
Signature Not Verified
Digitally Signed
By:DEEPAK SINGH CS(COMM) 295/2024 & CS(COMM) 1083/2024 Page 8 of 44
Signing Date:28.07.2026
20:30:36
positive finding with respect to the existence of a valid arbitration agreement
then the Court is bound to refer the disputes to arbitration under Section 8 of
the Act, leaving it to the arbitrator to decide every other issue including that
of non-arbitrability.
17. In support of his above contention, he places reliance on the decisions
of the Hon’ble Supreme Court in – (i) Emaar MGF Land Ltd. v. Aftab
Singh, (2019) 12 SCC 751, (ii) Vidya Drolia v. Durga Trading
Corporation, (2021) 2 SCC 1 and (iii) In Re: Interplay Between
Arbitration Agreements Under the Arbitration and Conciliation Act 1996
and the Indian Stamp Act 1899, (2024) 6 SCC 1.
18. Mr. Koura also relies on the decisions of this Court in Hero Electric
Vehicles Pvt. Ltd. v. Lectro E-Mobility Pvt. Ltd., 279 (2021) DLT 99 and
Knowledge Podium Systems Pvt. Ltd. v. S.M. Professional Services Pvt.
Ltd., 278 (2021) DLT 348 to contend that the role of the court at this stage
of an application under Section 8 is highly restricted and the referral court is
not the appropriate forum to conduct a mini-trial as to the validity of the
arbitration agreement and such determination ought to be left to the Arbitral
Tribunal.
19. Per contra, Mr. Dayan Krishnan, learned Senior Counsel for the
plaintiff submits that all the claims in prayer (a) to (f) are the claims of the
plaintiff and the same are not notified claims, therefore, the same are non-
arbitrable. He contends that in Indian Oil Corporation Limited v. NCC
Limited, (2023) 2 SCC 539, in which same clauses were interpreted, it was
held that the claims which are not notified claims cannot be referred to
arbitration.
Signature Not Verified
Digitally Signed
By:DEEPAK SINGH CS(COMM) 295/2024 & CS(COMM) 1083/2024 Page 9 of 44
Signing Date:28.07.2026
20:30:36
20. He further contends that in the event present application is allowed,
the defendant no.1 will raise the issue of non-arbitrability based on the
aforesaid judgment and will get the claims dismissed, which in turn, will
render the plaintiff remediless.
21. He further submits that the disputes in prayer (a) to (e) do not arise
from any claim of the defendant no. l and such prayers have been sought on
account of illegal threats of coercive measures by both the defendants,
whereas prayer (f) pertains to the plaintiff’s claim for recovery of monies.
22. He further submits that the present application under Section 8(1) has
been filed seeking to have the disputes arising out of prayers (a) to (e)
referred to arbitration, leaving out the plaintiff’s claim in prayer (f). Placing
reliance on the decision of the Hon’ble Supreme Court in Sukanya Holdings
Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531, he contends that bifurcation
of cause of action or the subject matter of dispute of the suit in two parts,
one to be decided by the Arbitral Tribunal and the other to be decided by the
court, is not permissible.
23. He further submits that Sukanya Holdings (supra) is still good law
and continues to have binding effect over disputes including the present one.
He contends that Sukanya Holdings (supra) has also been referred in latest
decisions of the Hon’ble Supreme Court in Ameet Lal Chand Shah & Ors.
v. Rishabh Enterprises, (2018) 15 SCC 678 and Gujarat Composite
Limited v. A Infrastructure Limited and Ors., (2023) 7 SCC 193, as well as
the decision of Division Bench of this Court in Canara Bank v. Sanjeev
Sharma, 2025 SCC Online Del 4959.
Signature Not Verified
Digitally Signed
By:DEEPAK SINGH CS(COMM) 295/2024 & CS(COMM) 1083/2024 Page 10 of 44
Signing Date:28.07.2026
20:30:36
24. Mr. Krishnan further submits that the present application deserves to
be rejected also on the ground that the suit seeks relief against both the
defendants including defendant no.2, who has issued show cause notices
proposing to take action against the plaintiff, whereas the defendant no. 2 is
not a signatory to the arbitration agreement, therefore, the disputes cannot be
referred to arbitration insofar as defendant no.2 is concerned.
25. He invites attention of the Court to order dated 15.05.2025 in CS
(COMM) 1083/2024 to contend that a submission was made by the plaintiff
in the said suit that the relief/claims sought in the suit were not notified to
the General Manager of Indian Oil Corporation Limited, accordingly, an
apprehension was expressed that the defendant will non-suit the plaintiff in
the arbitral proceedings relying upon the clauses of GCC which makes the
unnotified claims of the contractor as non-arbitrable, leaving the plaintiff as
remediless. In light of the said submission, the Court had directed the IOCL
to get written instructions in that behalf, but no such instructions were
submitted.
26. Mr. Vishal Gehrana, learned counsel for the defendant no. 2 submits
that the defendant no.2 is a non-signatory to the arbitration agreement and is
a stranger to the contract between the plaintiff and defendant no. 1,
therefore, no reference to arbitration can be made insofar as defendant no.2
is concerned.
27. He submits that defendant no. 2 is neither necessary nor a proper
party to the suit on account of non-disclosure of any cause of action against
it. Further, the defendant no. 2 was deleted from the array of defendants in
CS(COMM) 1083/2024 vide this Court’s Order dated 19.12.2024.
Signature Not Verified
Digitally Signed
By:DEEPAK SINGH CS(COMM) 295/2024 & CS(COMM) 1083/2024 Page 11 of 44
Signing Date:28.07.2026
20:30:36
28. In rejoinder, Mr. Koura submits that the dictum in Sukanya Holdings
(supra) has been overruled by the statutory amendment to Section 8 of the
Act brought about by the Arbitration and Conciliation (Amendment) Act,
2015 i.e. Act 3 of 2016 (hereinafter, ‘amendment of 2015’), which restricts
the referral court’s role only to examine the prima facie existence of a valid
arbitration agreement. He places reliance on Vidya Drolia (supra).
29. As far as bifurcation of the claims is concerned, Mr. Koura argues that
in (i) Taru Meghani and Ors. v. Shree Tirupati Greenfield and Ors., 2020
SCC OnLine Bom 110; (ii) Lindsay International Private Limited and Ors.
v. Laxmi Niwas Mittal, MANU/WB/0487/2022, and (iii) Marine
Infrastructure (Goa) Pvt. Ltd. v. Chowgule Lavgan Shiprepair Pvt. Ltd.
and Ors., MANU/MH/2001/2023, the High Courts of Bombay and Calcutta
have split the subject matter of the suits to give effect to the arbitration
agreement with respect to matters which are prima facie capable of being
covered by the arbitration agreement, therefore, bifurcation of arbitrable and
non-arbitrable subject matter is legally permissible and this Court has the
power to do so.
30. I have given anxious considerations to the rival submissions and have
perused the relevant record.
31. For examining the question raised in the present application with
regard to the reference to arbitration under Section 8 of the Act, appropriate
it would be to take note of the relevant clauses of the GCC with regard to the
notified claims as well as the clauses providing for arbitration, which read
thus:
“1.21.0.0
Signature Not Verified
Digitally Signed
By:DEEPAK SINGH CS(COMM) 295/2024 & CS(COMM) 1083/2024 Page 12 of 44
Signing Date:28.07.2026
20:30:36
“Notified Claim” shall mean a claim of the CONTRACTOR
notified in accordance with the provisions of Clause 6.6.1.0
hereof.
xxxxx xxxxx xxxxx
6.6.1.0
Should the CONTRACTOR consider that he is entitled to any
extra payment or compensation in respect of the works over
and above the amounts due in terms of the Contract as
specified in Clause 6.3.1.0 hereof or should the CONTRCTOR
dispute the validity of any deductions made or threatened by
the OWNER from any Running Account Bills, the
CONTRACTOR shall forthwith give notice in writing of his
claim in this behalf to the Engineer-in-Charge and the Site
Engineer within 10 (ten) days from the date of issue of orders
or instructions relative to any works for which the
CONTRACTOR claims such additional payment or
compensation or of the happening of other event upon which
the CONTRACTOR bases such claim, and such notice shall
give full particulars of the nature of such claim, grounds on
which it is based, and the amount claimed. The OWNER shall
not anywise be liable in respect of any claim by the
CONTRACTOR unless notice of such claim shall have been
given by the CONTRACTOR to the Engineer-in-charge and
the Site-Engineer in the manner and within the time aforesaid
and the CONTRACTOR shall be deemed to have waived any
and all claims and all his rights in respect of any claim not
notified to the Engineer-in-Charge and the Site Engineer in
writing in the manner and within the time aforesaid.
xxxxx xxxxx xxxxx
6.6.3.0
Any claims of the CONTRACTOR notified in accordance with
the provision of Clause 6.6.1.0 hereof as shall remain at the
time of preparation of Final Bill by the contractor shall be
separately included in the Final Bill prepared by the
CONTACTOR in the form of a Statement of Claims attachedSignature Not Verified
Digitally Signed
By:DEEPAK SINGH CS(COMM) 295/2024 & CS(COMM) 1083/2024 Page 13 of 44
Signing Date:28.07.2026
20:30:36
thereto, giving particulars of the nature of the claim, grounds
on which it is based, and the amount claimed and shall be
supported by copy (ies) of the notice (s) sent in respect thereof
by the CONTRACTOR to the Engineer-in-Charge and Site
Engineer under Clause 6.6.1.0 hereof. In so far as such claim
shall in any manner or particular be at variance with the claim
notified by the CONTRACTOR within the provision of Clause
6.6..0 hereof, it shall be deemed to be a claim different from the
notified claim with consequence in respect thereof indicated in
Clause in 6.6.1.0 hereof, and with consequences in respect of
the notified claim as indicated in Clause 6.6.3.1 hereof.
6.6.3.1
The OWNER shall not anywise be liable in respect of any
notified claim not specifically reflected in the Final Bill in
accordance with the provisions of Clause 6.6.3.0 hereof and
any and all notified claims not specifically reflected and
included in the Final Bill in accordance with the provisions of
Clause 6.6.3.0 hereof shall be deemed to have been waived by
the CONTRACTOR. Further the OWNER shall have no
liability in respect thereof and the CONTRACTOR shall not be
entitled to raise or include in the Final Bill any claim(s) other
than a notified claim conforming in all respects and in
accordance with the provisions of Clause 6.6.3.0 hereof.
xxxxx xxxxx xxxxx
9.0.1.0
Subject to the provisions of Clauses 6.7.1.0, 6.7.2.0 and 9.0.2.0
hereof, any dispute arising out of a Notified Claim of the
CONTRACTOR included in the Final Bill of the
CONTRACTOR in accordance with the provisions of Clause
6.6.3.0 hereof, and any dispute arising out of any claim(s) of
the OWNER against the CONTRACTOR shall be referred to
the arbitration of a Sole Arbitrator selected in accordance
with the provisions of Clause 9.0.1.1 hereof. It is specifically
agreed that the OWNER may prefer its claim(s) against theSignature Not Verified
Digitally Signed
By:DEEPAK SINGH CS(COMM) 295/2024 & CS(COMM) 1083/2024 Page 14 of 44
Signing Date:28.07.2026
20:30:36
CONTRACTOR as counter-claim(s) if a Notified Claim of the
CONTRACTOR has been referred to arbitration. The
CONTRACTOR shall not, however, be entitled to raise as a set-
off, defence or counter-claim any claim which is not a Notified
Claim included in the CONTRACTOR’s Final Bill in
accordance with the provisions of Clause 6.6.3.0 hereof.
9.0.2.0
Any dispute (s) or difference (s) with respect to or concerning
or relating to any of the following matters are hereby
specifically excluded from the scope, purview and ambit of the
Arbitration Agreement embodied in Clause 9.0.1.0 with the
intention that any dispute or difference with respect to any of
the said following matters and/or relating to the Arbitrator’s or
Arbitral Tribunal’s jurisdiction with respect thereto shall not
and cannot form the subject-matter of any reference or
submission to arbitration under Clause 9.0.1.0 and the
Arbitrator or the Arbitral Tribunal shall have no jurisdiction to
entertain the same or to render any decision with respect
thereto, and such matter shall be referred to the General
Manager for decision by the nominee, as the case may be
(whose decision shall be final and binding on the OWNER and
the CONTRACTO) prior to the Arbitrator appointed under
Clause 9.0.1.0 proceeding with or proceeding further with the
reference, as the case may be. The said excluded matters are:
(i) With respect to or concerning the scope or existence or
otherwise of the Arbitration Agreement.
(ii) Whether or not to a Claim sought to be referred to
arbitration by the Contractor under clause 9.0.1.0 is a
Notified Claim;
(iii) Whether or not a Notified claim is included in the
CONTRACTOR’s Final Bill in accordance with the
provisions of clause 6.6.3.0 hereof.”
32. As can be seen from above Clause 1.21.0.0 defines “notified claims”
to mean a claim of the contractor notified in accordance with the provisions
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of Clause 6.6.1.0. Clause 6.6.1.0. provides that the contractor shall have to
give notice with respect to his claim of the nature mentioned therein to the
Engineer-in-Charge and the Site Engineer within the specified period of 10
days failing which the contractor shall be deemed to have waived any and all
claims and all his rights in respect of any claim not so notified.
33. Clauses 9.0.1.0 and 9.0.2.0 were also subject matter of consideration
before the Hon’ble Supreme Court in Indian Oil Corporation Limited
(supra) wherein the Court, with reference to the said clauses, observed that
only the notified claims of the contractor which have been included in the
final bill of the contractor can be referred to arbitration. Further, for deciding
the question as to whether or not a claim sought to be referred to arbitration
by the contractor is a notified claim, the arbitrator or Arbitral Tribunal shall
have no jurisdiction at all, and the same shall have to be decided by the
General Manager and that too prior to arbitral proceedings. The relevant
extract from the said decision reads thus:
“95. Now, so far as Civil Appeal No. 342 of 2022 arising out of
SLP (C) No. 13816 of 2019 is concerned, the General Manager
in exercise of powers under Clause 9.0.2.0 had declared that
none of the claims of the respondent is a notified claim. From
the communication dated 22-6-2018, it appears that the
General Manager, after elaborately dealing with all the alleged
notified claims of the respondent has thereafter found that none
of the claims made by the respondent is a notified claim. On a
conjoint reading of the relevant clauses of GCC viz. Clauses
9.0.1.0 and 9.0.2.0, the dispute arising out of notified claims
only, which is included in the final bill of the contractor can
be referred to arbitration. However, as per Clause 9.0.2.0, any
dispute or difference on whether or not a claim sought to be
referred to arbitration by the contractor is a notified claim
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Tribunal shall have no jurisdiction and/or authority with
respect thereto. The dispute or difference whether or not a
claim sought to be referred to arbitration by the contractor is a
notified claim shall not and cannot form the subject-matter of
any reference or submission to arbitration.
96. Therefore, on a fair and conjoint reading of Clauses 9.0.1.0
and 9.0.2.0, it can safely be concluded that:
(i) only the notified claims of the contractor included in
the final bill of the contractor in accordance with the
provisions of Clause 6.6.3.0 shall have to be referred to
arbitration;
(ii) whether or not a claim sought to be referred to
arbitration by the contractor is a notified claim or not, the
arbitrator or Arbitral Tribunal shall have no jurisdiction
at all;
(iii) whether or not a claim is a notified claim or not shall
have to be decided by the General Manager and that too,
prior to arbitration proceeding with or proceeding further
with the reference.”
Therefore, once the General Manager, on the basis of the
material on record takes a conscious decision that a particular
claim sought to be referred to arbitration is not a notified claim,
such a claim thereafter cannot be referred to arbitration. The
language used in Clauses 9.0.1.0 and 9.0.2.0 is very clear and
unambiguous.”
34. The submission put forth on behalf of the plaintiff is that the disputes
raised in the prayer (a) to (f) of CS(COMM) 295/2024 are the claims of the
plaintiff and the same not notified claims, therefore, they are not arbitrable.
As it is an admitted case of the plaintiff that the disputes raised in the prayer
(a) to (f) of CS(COMM) 295/2024 are not notified claims, therefore, as per
the Clauses 9.0.1.0 and 9.0.2.0 of the GCC as well as the dictum in Indian
Oil Corporation Limited (supra) such disputes cannot be referred to
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arbitration, if the same are found to be the claims of the plaintiff i.e. the
Contractor.
35. However, in the event this Court prima facie finds that the prayer (a)
to (f) involves the disputes arising out of the claim(s) of the defendant no.1
i.e. the Owner, the same will have to be referred to the arbitration, as there is
no pre-condition under clause 9.0.1.0 for notifying the claims of the Owner
(defendant no.1), for referring the same to arbitration.
36. Therefore, the question that whether the claims in the prayer (a) to (f)
are the claims of the plaintiff or of the defendant no.1 assumes relevance.
37. Upon reading of the prayer clause of the suit, this Court prima facie
finds that –
(i) The plaintiff in prayer (a) of the suit seeks to restrain the
defendants from adjusting or making any claim of any
nature, whatsoever, raised by the defendants against the
plaintiff, from the account of the plaintiff in any project
other than the project of the subject contract. This prayer
itself refers to the claim of the defendants against the
plaintiff. In para C (viii) of the plaint, it has been
elaborated that the defendants have unlawfully threatened
the plaintiff to withhold money from their other projects
with IOCL, in order to recover the dues of the workers
who are required to be allegedly compensated by IOCL
as the principal employer. This prayer apparently gives
rise to a dispute as to whether the defendant no.1 is
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entitled to recover the dues paid to workers, from the
money payable to the plaintiff under other projects.
(ii) In prayer (b), the plaintiff prays for permanent injunction
to restrain defendants from undertaking any coercive
and/or penal measures against the plaintiff in respect of
or in connection with the works awarded under the
subject contract. Likewise, this prayer also raises a
dispute as to whether the defendants are entitled to take
any proposed coercive or penal measures against the
plaintiff under the contract.
(iii) In prayer (c), the plaintiff seeks mandatory injunction
directing the defendants to deliver up the bank guarantee
so as to discharge the same. This prayer raises a dispute
as to the entitlement of the defendants to invoke bank
guarantee in terms of the contract.
(iv) Prayer (d) is for declaration that show cause notices
issued by defendants are bad in law and null and void.
Likewise, in prayer (e), declaration is sought that any
offloading or re-tendering of the works under the subject
contract/tender by the defendants shall not be at the risk
and cost of the Plaintiff. These two prayer clauses relate
to the proposed action of the defendants to offload or re-
tender the incomplete work at the risk and cost to the
plaintiff as per clause no. 4.7.3.0 of GCC for which
defendant no.2 also issued show cause notices. Thus,
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these two prayer clauses also raise the disputes
concerning the defendant no.1’s contractual authority or
competence to offload or re-tender the work at the risk
and cost of the Plaintiff.
(v) Prayer in clause (f) is for recovery of a total sum of
Rs.9,56,71,682/-, which is possibly the aggregate amount
of the nine claims made by the plaintiff in paras 6 to 14
of the plaint.
38. As can be seen, in the prayers (a) to (e) the plaintiff is only seeking to
prevent defendant no.1 from recovering any amount or taking any other
action proposed by the defendants under the contract. The said prayers do
not pertain to the substantive claims of the plaintiff, rather they are the
disputes arising out of the claims of, or action proposed to be taken by the
defendant no.1 (owner) against the plaintiff (contractor) under the contract
and are thus, arbitrable in the prima facie opinion of this Court.
39. Insofar as the payer (f) is concerned, the same pertains to disputes
arising out of non-notified claims of the plaintiff, and are thus, non-
arbitrable. The defendant no.1 has rightly not prayed in the application for
having the dispute qua the said claims referred to the arbitration.
40. The next question which arises for consideration of this Court is that
whether the defendant no.1/applicant could seek reference to arbitration only
in respect of the disputes arising out of the prayers (a) to (e), leaving out the
disputes arising out of prayer (f). The submission on behalf of the plaintiff
premised on the dictum laid down in Sukanya Holdings (supra), is that
bifurcation of cause of action/subject matter of dispute of the suit in two
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parts, one to be decided by the Arbitral Tribunal and the other to be decided
by the court, is not permissible, and that the law laid down in Sukanya
Holdings (supra) is still holding the field.
41. To appreciate the above submission, apposite would it be to advert to
the provisions contained in Section 8 prior to the amendment of 2015; the
amendments as proposed; and the provisions of Section 8 after its
amendment.
42. Section 8 prior to its amendment read as under:
“8. Power to refer parties to arbitration where there is an
arbitration agreement.–(1) A judicial authority before which
an action is brought in a matter which is the subject of an
arbitration agreement shall, if a party so applies not later than
when submitting his first statement on the substance of the
dispute, refer the parties to arbitration.
(2) The application referred to in sub-section (1) shall not be
entertained unless it is accompanied by the original arbitration
agreement or a duly certified copy thereof:
(3) Notwithstanding that an application has been made under
sub-section (1) and that the issue is pending before the judicial
authority, an arbitration may be commenced or continued and
an arbitral award made.”
43. The proposed amendment of Section 8(1) of the Act as well as a Note
referring to the decision in Sukanya Holdings (supra) as mentioned in
Report no. 246 of the Law Commission of India dated 05.08.2014, reads as
under:
“5. In section 8 of the Act,
(i) In sub-section (1), after the words “substance of the dispute,
refer” add “to arbitration, such of” and after the words “the
parties to” add “the action who are parties to the” and after
the word “arbitration” add the word “agreement”.
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(ii) after sub-section (1), add “Provided that no such reference
shall be made only in cases where –
(i) the parties to the action who are not parties to the
arbitration agreement, are necessary parties to the action;
(ii) the judicial authority finds that the arbitration
agreement does not exist or is null and void.
Explanation 1: If the judicial authority is prima facie
satisfied about the existence of an arbitration agreement, it
shall refer the parties to arbitration and leave the final
determination of the existence of the arbitration agreement
to the arbitral tribunal in accordance with section 16, which
shall decide the same as a preliminary issue;
Explanation 2: Any pleading filed in relation to any interim
application which has been filed before the judicial
authority shall not be treated to be a statement on the
substance of the dispute for the purpose of this section.”
[NOTE: The words “such of the parties… to the
arbitration agreement” and proviso (i) of the amendment
have been proposed in the context of the decision of the
Supreme Court in Sukanya Holdings Pvt. Ltd. v. Jayesh
H. Pandya and Anr., (2003) 5 SCC 531, – in cases where
all the parties to the dispute are not parties to the
arbitration agreement, the reference is to be rejected only
where such parties are necessary parties to the action –
and not if they are only proper parties, or are otherwise
legal strangers to the action and have been added only to
circumvent the arbitration agreement. Proviso (ii) of the
amendment contemplates a two-step process to be adopted
by a judicial authority when considering an application
seeking the reference of a pending action to arbitration. The
amendment envisages that the judicial authority shall not
refer the parties to arbitration only if it finds that there does
not exist an arbitration agreement or that it is null and void.
If the judicial authority is of the opinion that prima facie the
arbitration agreement exists, then it shall refer the dispute
to arbitration, and leave the existence of the arbitration
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agreement to be finally determined by the arbitral tribunal.
However, if the judicial authority concludes that the
agreement does not exist, then the conclusion will be 44
final and not prima facie. The amendment also envisages
that there shall be a conclusive determination as to whether
the arbitration agreement is null and void.]”
(emphasis supplied)
44. However, Section 8 was amended by the amendment of 2015 i.e.
Amendment Act 3 of 2016, and post amendment Section 8 reads as under:
“8. Power to refer parties to arbitration where there is an
arbitration agreement.–(1) A judicial authority, before which
an action is brought in a matter which is the subject of an
arbitration agreement shall, if a party to the arbitration
agreement or any person claiming through or under him, so
applies not later than the date of submitting his first statement
on the substance of the dispute, then, notwithstanding any
judgment, decree or order of the Supreme Court or any Court,
refer the parties to arbitration unless it finds that prima facie no
valid arbitration agreement exists.
(2) The application referred to in sub-section (1) shall not be
entertained unless it is accompanied by the original arbitration
agreement or a duly certified copy thereof:
Provided that where the original arbitration agreement or a
certified copy thereof is not available with the party
applying for reference to arbitration under sub-section (1),
and the said agreement or certified copy is retained by the
other party to that agreement, then, the party so applying
shall file such application along with a copy of the
arbitration agreement and a petition praying the Court to
call upon the other party to produce the original arbitration
agreement or its duly certified copy before that Court.
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authority, an arbitration may be commenced or continued and
an arbitral award made.”
\
(emphasis supplied)
45. Since the submission of the plaintiff that there cannot be splitting of
cause of action and the subject matter of the suit is essentially predicated on
the decision of the Supreme Court in Sukanya Holdings (supra), therefore,
the relevant paragraphs of the said decision are set out below for the ease of
reference:
“15. The relevant language used in Section 8 is: “in a matter
which is the subject of an arbitration agreement”. The court is
required to refer the parties to arbitration. Therefore, the suit
should be in respect of “a matter” which the parties have
agreed to refer and which comes within the ambit of arbitration
agreement. Where, however, a suit is commenced — “as to a
matter” which lies outside the arbitration agreement and is
also between some of the parties who are not parties to the
arbitration agreement, there is no question of application of
Section 8. The words “a matter” indicate that the entire
subject-matter of the suit should be subject to arbitration
agreement.
16. The next question which requires consideration is — even
if there is no provision for partly referring the dispute to
arbitration, whether such a course is possible under Section 8
of the Act. In our view, it would be difficult to give an
interpretation to Section 8 under which bifurcation of the
cause of action, that is to say, the subject-matter of the suit or
in some cases bifurcation of the suit between parties who are
parties to the arbitration agreement and others is possible.
This would be laying down a totally new procedure not
contemplated under the Act. If bifurcation of the subject-matter
of a suit was contemplated, the legislature would have used
appropriate language to permit such a course. Since there is no
such indication in the language, it follows that bifurcation ofSignature Not Verified
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the subject-matter of an action brought before a judicial
authority is not allowed.
17. Secondly, such bifurcation of suit in two parts, one to be
decided by the Arbitral Tribunal and the other to be decided
by the civil court would inevitably delay the proceedings. The
whole purpose of speedy disposal of dispute and decreasing the
cost of litigation would be frustrated by such procedure. It
would also increase the cost of litigation and harassment to the
parties and on occasions there is possibility of conflicting
judgments and orders by two different forums.”
(emphasis supplied)
46. Notably, the decision in Sukanya Holdings (supra) was rendered
prior to the amendment of Section 8 by the amendment of 2015. As borne
out from the Note appended to the proposed amendment, a proviso was
proposed to be incorporated in Section 8(1) with reference to Sukanya
Holding (supra) to the effect that no reference shall be made where the
parties to the action who are not parties to the arbitration agreement, are
necessary parties to the action. However, this proviso did not find place in
the amendment that was finally carried out. Rather, amended Section 8(1) is
broader in terms having non-obstante clause which, in effect, provides that a
judicial authority shall notwithstanding any judgment, decree or order of the
Supreme Court or any Court, refer the parties to arbitration unless it finds
that prima facie no valid arbitration agreement exists.
47. After the amendment of Section 8(1), though reference was made by
the Supreme Court to Sukanya Holdings (supra) in the subsequent decision
in Ameet Lal Chand Shah (supra), but no observation was made therein that
the law laid down in Sukanya Holding (supra) continues to hold the field
even after the amendment.
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48. However, in Emaar MGF (supra) the Supreme Court noted the
decision in Sukanya Holdings (supra) in light of the 246th Report of the Law
Commission as well as the consequent amendment carried out in Section 8
of the Act and observed that the insertion of words “notwithstanding any
judgment, decree or order of the Supreme Court or any Court” were with
intent to minimize the intervention of judicial authority in the context of
arbitration agreement. Further, emphasizing on the pro-arbitration approach
post amendment of Section 8(1) of the Act, it was observed that amended
provision limits the intervention of the judicial authority only on one aspect
i.e. when it finds that prima facie no valid arbitration agreement exists. The
Court also opined that several conditions which were noticed by the
Supreme Court in various pronouncements made prior to amendment were
not to be adhered to and the intention of the Legislature as borne out from
the amended provisions shows clear departure from adherence to the
conditions as noticed in earlier two decisions of the Supreme Court
including Sukanya Holdings (supra). The relevant extract from the said
decision reads thus:
“52. The law as declared by this Court in the above cases was
in existence when the Law Commission submitted its 246th
Report and Parliament considered the Bill, 2015 for the
Amendment Act, 2016. The Law Commission itself in its
Report has referred to amendment in Section 8 in the context
of decision of this Court in Sukanya Holdings (P)
Ltd. [Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya, (2003)
5 SCC 531], which was clearly noticed in the Note to Section 8
as extracted above. The words “notwithstanding any
judgment, decree or order of the Supreme Court or any court”
added by amendment in Section 8 were with intent to
minimise the intervention of judicial authority in the context
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of arbitration agreement. As per the amended Section 8(1),
the judicial authority has only to consider the question
“whether the parties have a valid arbitration agreement?”
The Court cannot refuse to refer the parties to arbitration
“unless it finds that prima facie no valid arbitration
agreement exists”. The amended provision, thus, limits the
intervention by judicial authority to only one aspect i.e.
refusal by judicial authority to refer is confined to only one
aspect, when it finds that prima facie no valid arbitration
agreement exists. Other several conditions, which were
noticed by this Court in various pronouncements made prior
to amendment were not to be adhered to and the legislative
intendment was a clear departure from fulfilling various
conditions as noticed in the judgment of P. Anand Gajapathi
Raju [P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC
539] and Sukanya Holdings (P) Ltd. [Sukanya Holdings (P)
Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531]
xxx xxx xxx
56. This Court, thus, in the above cases has noticed that
amendments are expressed to apply notwithstanding any prior
judicial precedents, but the scope of amendment under Section
8(1) was confined to three categories as has been noted in para
28 of Ameet Lalchand Shah v. Rishabh Enterprises [Ameet
Lalchand Shah v. Rishabh Enterprises, (2018) 15 SCC 678 :
(2019) 1 SCC (Civ) 308 : AIR 2018 SC 3041]. Amendments
under Section 8, thus, were aimed to minimise the scope of
judicial authority to refuse reference to arbitration and only
ground on which reference could have been refused was that
it prima facie finds that no valid arbitration agreement exists.
Notwithstanding any prior judicial precedents referred to
under Section 8(1) relates to those judicial precedents, which
explained the discretion and power of judicial authority to
examine various aspects while exercising power under
Section 8.”
(emphasis supplied)
49. Further, post amendment of 2015 a clear shift can be seen in the legal
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position insofar as judicial interference at the stage of reference is
concerned. A three Judges Bench of the Supreme Court in Vidya Drolia
(supra) with reference to the legislative mandate of the Act 3 of 2016 and
Act 33 of 2019, the principle of severability and competence-competence,
emphasized that the arbitral tribunal is the first preferred authority to
determine and decide all questions of non-arbitrability whereas the power
conferred on the Court on the said aspect is of “second look” and that too
post passing of the award. The Apex Court also held that the Court by
default would refer the matter when contentions relating to non-arbitrability
are arguable and the Court would not enter into a mini-trial or elaborate
review. It was also observed that post amendment of 2015, the judicial
interference at the reference stage has been substantially curtailed. The pro-
arbitration approach is also evident from the conclusion of the Hon’ble
Supreme Court that “when in doubt, do refer”. The relevant extracts from
Vidya Drolia (supra) read thus:
“154.3. The general rule and principle, in view of the
legislative mandate clear from Act 3 of 2016 and Act 33 of
2019, and the principle of severability and competence-
competence, is that the Arbitral Tribunal is the preferred first
authority to determine and decide all questions of non-
arbitrability. The court has been conferred power of “second
look” on aspects of non-arbitrability post the award in terms
of sub-clauses (i), (ii) or (iv) of Section 34(2)(a) or sub-clause
(i) of Section 34(2)(b) of the Arbitration Act.
154.4. Rarely as a demurrer the court may interfere at Section 8
or 11 stage when it is manifestly and ex facie certain that the
arbitration agreement is non-existent, invalid or the disputes
are non-arbitrable, though the nature and facet of non-
arbitrability would, to some extent, determine the level and
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nature of judicial scrutiny. The restricted and limited review is
to check and protect parties from being forced to arbitrate when
the matter is demonstrably “non-arbitrable” and to cut off the
deadwood. The court by default would refer the matter when
contentions relating to non-arbitrability are plainly arguable;
when consideration in summary proceedings would be
insufficient and inconclusive; when facts are contested; when
the party opposing arbitration adopts delaying tactics or
impairs conduct of arbitration proceedings. This is not the
stage for the court to enter into a mini trial or elaborate review
so as to usurp the jurisdiction of the Arbitral Tribunal but to
affirm and uphold integrity and efficacy of arbitration as an
alternative dispute resolution mechanism.
xxx xxx xxx
225.2. Post the 2015 Amendment, judicial interference at the
reference stage has been substantially curtailed.
xxx xxx xxx
244.4. The court should refer a matter if the validity of the
arbitration agreement cannot be determined on a prima facie
basis, as laid down above i.e. “when in doubt, do refer”.”
(emphasis supplied)
50. The Seven Judges Bench of the Hon’ble Supreme Court in In Re:
Interplay (supra) while examining the scope of Sections 8 and 11 of the Act
again made following pertinent observations which also shows tilt in favour
of greater arbitral autonomy and extremely limited judicial interference:
“164. The 2015 Amendment Act has laid down different
parameters for judicial review under Section 8 and Section 11.
Where Section 8 requires the Referral Court to look into
the prima facie existence of a valid arbitration agreement,
Section 11 confines the Court’s jurisdiction to the
examination of the existence of an arbitration agreement.
Although the object and purpose behind both Sections 8 andSignature Not Verified
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11 is to compel parties to abide by their contractual
understanding, the scope of power of the Referral Courts
under the said provisions is intended to be different. The same
is also evident from the fact that Section 37 of the Arbitration
Act allows an appeal from the order of an Arbitral Tribunal
refusing to refer the parties to arbitration under Section 8, but
not from Section 11. Thus, the 2015 Amendment Act has
legislatively overruled the dictum of Patel Engg. [SBP &
Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] where it was held
that Section 8 and Section 11 are complementary in nature.
Accordingly, the two provisions cannot be read as laying down
a similar standard.
xxx xxx xxx
166. The burden of proving the existence of arbitration
agreement generally lies on the party seeking to rely on such
agreement. In jurisdictions such as India, which accept the
doctrine of competence-competence, only prima facie proof of
the existence of an arbitration agreement must be adduced
before the Referral Court. The Referral Court is not the
appropriate forum to conduct a mini-trial by allowing the
parties to adduce the evidence in regard to the existence or
validity of an arbitration agreement. The determination of the
existence and validity of an arbitration agreement on the basis
of evidence ought to be left to the Arbitral Tribunal. This
position of law can also be gauged from the plain language of
the statute.
(emphasis supplied)
51. Again, in SBI General Insurance Co. Ltd. v. Krish Spinning, 2024
SCC OnLine SC 1754, the Hon’ble Supreme Court observed that Section 16
of the Act recognized the Doctrine of competence-competence and
empowers the arbitral tribunal to rule on its own jurisdiction. Elaborating on
the said doctrine, the Hon’ble Supreme Court made following significant
observations:
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“101. What follows from the negative facet of arbitral
autonomy when applied in the context of Section 16 is that the
national courts are prohibited from interfering in matters
pertaining to the jurisdiction of the Arbitral Tribunal, as
exclusive jurisdiction on those aspects vests with the Arbitral
Tribunal. The legislative mandate of prima facie determination
at the stage of Sections 8 and 11, respectively, ensures that the
Referral Courts do not end up venturing into what is intended
by the legislature to be the exclusive domain of the Arbitral
Tribunal.
xxx xxx xxx
104. Section 16 of the 1996 Act recognises the doctrine of
competence-competence and empowers the Arbitral Tribunal
to rule on its own jurisdiction. The policy consideration for the
same is, firstly, to recognise the intention of the parties in
choosing arbitration as the method for resolving the disputes
arising out of the contract and secondly, to prevent the parties
from initiating parallel proceedings before courts and delaying
the arbitral process.
105. The negative aspect of competence-competence is aimed
at restricting the interference of the courts at the referral stage
by preventing the courts from examining the issues pertaining
to the jurisdiction of the Arbitral Tribunal before the Arbitral
Tribunal itself has had the opportunity to entertain them. The
courts are allowed to review the decision of the Arbitral
Tribunal at a later stage.”
(emphasis supplied)
52. A learned Single Judge of the Bombay High Court in Taru Meghani
(supra) also had an occasion to consider the effect and import of Sukanya
Holdings (supra). In the said decision the Court was confronted with the
question as to whether by claiming additional relief not covered by the
arbitration agreement, does the object of the Act which enjoins the Court to
refer the disputes to arbitration in terms of the arbitration agreement, get
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diluted? The plaintiffs therein had relied upon Sukanya Holdings (supra) to
contend that bifurcation of subject matter of the suit is impermissible. The
Court endeavoured to find an answer to the above question in light of the
legislative mandate of Section 8 of the Act, and the provisions contained in
Rule 3 and 6 of Order II of the CPC, and observed that if such a submission
is accepted, it has the propensity to give a long leash to the plaintiff to
circumvent the arbitration agreement by uniting a cause of action which is
beyond the purview of the arbitration agreement and by adding a party who
is not a party to the arbitration agreement. The pertinent observations made
in the said decision reads thus:
“18. The question posed by the facts of the instant case,
however, is required to be considered from the perspective of
the legislative object contained in section 8 of the Act. It is trite
that the language of section 8 is peremptory in nature. In the
cases where there is an arbitration clause in the agreement,
the Court is enjoined to refer the dispute to arbitration in
terms of the arbitration agreement and the Court would have
no jurisdiction to adjudicate the dispute after such an
application seeking a reference under section 8 of the Act.
Can this salutary object of the Act be defeated by adding a
claim over and above the claim in respect of the matter which
is squarely covered by arbitration agreement?
xxx xxx xxx
20. The plaintiffs are within their rights in joining multiple
causes of action against the defendants. In fact, the provisions
contained in the Code envisage such joining of several causes
of action by the plaintiffs against the defendants. Rules 3 and 6
of Order II of the Code, read as under:
“Rule 3 Order II of the Code
“Joinder of causes of action” : (1) Save as otherwise
provided, a plaintiff may unite in the same suit several
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defendants jointly; and any plaintiffs having causes of
action in which they are jointly interested against the
same defendant or the same defendants jointly may unite
such causes of action in the same suit.
(2) Where causes of action are united, the jurisdiction of
the Court as regards the suit shall depend on the amount
or value of the aggregate subject-matters at the date of
instituting the suit.
Rule 6 Order II of the Code:
“Power of Court to order separate trials” Where it
appears to the Court that the joinder of causes of action
in one suit may embarrass or delay the trial or is
otherwise inconvenient, the Court may order separate
trials or make such other order as may be expedient in
the interests of justice.”
xxx xxx xxx
22. On the one hand, the Code permits the plaintiff to unite
multiple causes of action against the same defendants in one
suit. On the other hand, in the event of possibility of
embarrassment, delay or inconvenience, the court is
empowered to direct separate trials or pass such other order as
would advance the cause of justice. If a Court is empowered to
order separate trial when it finds that the joinder of causes of
action would embarrass or delay the trial or it is otherwise
inconvenient, a fortiori a Court cannot be said to be divested
of the authority to direct separation of causes of action when
the joinder of causes of action, in pursuance of an enabling
provision like Rule 3 has the effect of defeating the provisions
of a special law, like section 8 of the Act.
23. The aforesaid legal position is required to be considered
coupled with the approach which is expected of the Court where
an application seeking reference of the dispute to arbitration on
the strength of an arbitration clause is preferred. Such an
application, in substance, constitutes a plea of statutory
exclusion of the jurisdiction of the court. A useful reference in
this context can be made to the judgment of the Supreme Court
in the case of Sundaram Finance Limited v. T. Thankam2,Signature Not Verified
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wherein the Supreme Court delineated the approach expected of
the Civil Court in dealing with an application under section 8 of
the Act, in Paragraph 13:
“13. Once an application in due compliance of Section 8
of the Arbitration Act is filed, the approach of the civil
court should be not to see whether the court has
jurisdiction. It should be to see whether its jurisdiction
has been ousted. There is a lot of difference between the
two approaches. Once it is brought to the notice of the
court that its jurisdiction has been taken away in terms of
the procedure prescribed under a special statue, the civil
court should first see whether there is ouster of
jurisdiction in terms or compliance of the procedure
under the special statute. The general law should yield to
the special law – generalia specialibus non derogant. In
such a situation, the approach shall not be to see whether
there is still jurisdiction in the civil court under the
general law. Such approaches would only delay the
resolution of disputes and complicate the redressal of
grievance and of course unnecessarily increase the
pendency in the court.”
24. In the light of the aforesaid exposition of the legal
position, I am of the considered view that the broad
submission on behalf of the plaintiffs that the reference of the
dispute to arbitration as regards the first transaction, would
entail the bifurcation of the subject matter of the suit and,
thus, it is impermissible in law, cannot accepted in an
unqualified manner. The submission is fraught with the
danger of defeating an arbitration agreement by simply
adding a cause of action the plaintiff may have against the
defendants, which is not covered by the arbitration agreement.
If such a course is readily accepted, it has the propensity to
give a long leash to the plaintiff to circumvent the arbitration
agreement by uniting a cause of action which is beyond the
purview of the arbitration agreement. It would have the effect
of denuding section 8 of the Act of its force and vigour. Such
an interpretation would also derogate from the object which
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the Arbitration and Conciliation Act, 1996 is intended to
achieve; of minimum judicial intervention where parties have
agreed to arbitrate the dispute.
(emphasis supplied)
53. Again, in Marine Infrastructure (supra) the learned Single Judge of
Bombay High Court was confronted with a situation where the suit covered
certain matters, which were outside the subject matter amenable to the
arbitration and also against the parties, who were not parties to the
arbitration. The Court considered the controversy in the light of Sukanya
Holdings (supra) and rejected the submission that the said decision
continues to hold the field despite the legislative change brought about by
the amendment Act and in the face of the observations of the Supreme Court
in Emaar MGF (supra).
54. In Lindsay International (supra) the Calcutta High Court considered
the amendment brought about in Section 8 of the Act by the amendment Act
3 of 2016, the decisions in Emaar MGF (supra) and Vidya Drolia (supra) to
conclude that Sukanya Holdings (supra) is no longer a relevant factor for
the Court to consider at the stage of reference in an application under
Section 8 of the Act, though it may continue to be relevant for deciding
applications under Section 8 filed prior to the amendment.
55. Having regard to the above discussion, more importantly, the
amendment in Section 8 of the Act by the amendment Act of 2015; the tilt in
favour of the greater arbitral autonomy and minimal judicial intervention
post amendment as delineated in various decisions of the Supreme Court, as
noted herein above; and the observation made in Emaar MGF (supra) that
the pronouncements made prior to amendment of Section 8 were not to be
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adhered to and the legislative intent was to make clear departure from the
conditions in Sukanya Holdings (supra), this Court is not persuaded to
accept the submission of the plaintiff that Sukanya Holdings (supra) will
still govern the situation at hand and bifurcation of subject matter of the suit
is impermissible.
56. In so far as the submission of the Plaintiff that Sukanya Holdings
(supra) has been relied upon in Ameet Lal Chand Shah (supra); Gujarat
Composite Limited (supra) and Canara Bank (supra), this Court finds that
in Ameet Lal Chand Shah1 (supra) as well as in Gujarat Composite Limited
(supra), there is reference of Sukanya Holdings (supra) but none of these
decisions have specifically observed that the said decision continues to hold
the field.
57. However, in Emaar MGF2 (supra), which was rendered after Ameet
Lal Chand Shah (supra), the Apex Court, as noted above, categorically
observed that amendment in Section 8 brought about by the amendment of
Act 3 of 2016 shows the legislative intent to move away from the conditions
as noticed in Sukanya Holdings (supra). The decision in Emaar MGF
(supra) was not brought to the notice of the Supreme Court in Gujarat
Composite Limited (supra), which was a subsequent decision rendered on
01.05.2023. Likewise, Emaar MGF (supra) has also not been noticed by
the Division Bench of this Court in Canara Bank (supra).
58. Lastly, submission of Mr. Krishnan on behalf of the plaintiff was that
defendant no. 2 is not a party to the arbitration agreement; therefore, the
1
Ameet Lal Chand Shah (supra) was rendered on 03.05.2018.
2
Emaar MGF (supra) was rendered on 10.12.2018.
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dispute cannot be referred to arbitration. Likewise, on behalf of defendant
no.2 also, similar submission was advanced.
59. This issue is no more res integra. The Supreme Court in Cox and
Kings Ltd. v. SAP India P. Ltd., (2024) 4 SCC 1 has laid down that at the
stage of Section 8 of the Act, what has to be seen by the referral Court is the
prima facie validity or existence of the arbitration agreement. As regards the
referral of non-signatory to arbitration agreement, the only aspect on which
the referral Court is to prima facie rule is that whether or not the non-
signatory is a veritable party to the arbitration agreement, leaving it for the
Arbitral Tribunal to decide on the basis of the factual evidence and
application of legal doctrine that whether non-signatory is indeed bound by
the arbitration agreement. The relevant extract from the said decision reads
thus:
“123. The participation of the non-signatory in the performance
of the underlying contract is the most important factor to be
considered by the Courts and tribunals. The conduct of the non-
signatory parties is an indicator of the intention of the non-
signatory to be bound by the arbitration agreement. The
intention of the parties to be bound by an arbitration
agreement can be gauged from the circumstances that
surround the participation of the non-signatory party in the
negotiation, performance, and termination of the underlying
contract containing such agreement. The UNIDROIT Principle
of International Commercial Contract, 2016 provides that the
subjective intention of the parties could be ascertained by
having regard to the following circumstances:
(a) preliminary negotiations between the parties;
(b) practices which the parties have established between
themselves;
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(c) the conduct of the parties subsequent to the conclusion
of the contract;
(d) the nature and purpose of the contract;
(e) the meaning commonly given to terms and expressions in
the trade concerned; and
(f) usages.
xxx xxx xxx
126. Evaluating the involvement of the non-signatory party in
the negotiation, performance, or termination of a contract is
an important factor for a number of reasons. First, by being
actively involved in the performance of a contract, a non-
signatory may create an appearance that it is a veritable party
to the contract containing the arbitration agreement; second,
the conduct of the non-signatory may be in harmony with the
conduct of the other members of the group, leading the other
party to legitimately believe that the non-signatory was a
veritable party to the contract; and third, the other party has
legitimate reasons to rely on the appearance created by the
non-signatory party so as to bind it to the arbitration
agreement.
127. … The nature or standard of involvement of the non-
signatory in the performance of the contract should be such
that the non-signatory has actively assumed obligations or
performance upon itself under the contract. In other words, the
test is to determine whether the non-signatory has a positive,
direct, and substantial involvement in the negotiation,
performance, or termination of the contract. Mere incidental
involvement in the negotiation or performance of the contract is
not sufficient to infer the consent of the non-signatory to be
bound by the underlying contract or its arbitration agreement.
The burden is on the party seeking joinder of the non-signatory
to the arbitration agreement to prove a conscious and
deliberate conduct of involvement of the non-signatory based
on objective evidence.
xxx xxx xxx
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168. In Deutsche Post Bank Home Finance Ltd. v. Taduri
Sridhar, a two-judge Bench of this Court held that when a
third party is impleaded in a petition under Section 11(6) of
the Arbitration Act, the referral court should delete or exclude
such third party from the array of parties before referring the
matter to the Tribunal. This observation was made prior to the
decision of this Court in Chloro Controls and is no longer
relevant in light of the current position of law. Thus, when a
non-signatory person or entity is arrayed as a party at Section
8 or Section 11 stage, the referral court should prima facie
determine the validity or existence of the arbitration
agreement, as the case may be, and leave it for the Arbitral
Tribunal to decide whether the non-signatory is bound by the
arbitration agreement.
169. In case of joinder of non-signatory parties to an
arbitration agreement, the following two scenarios will
prominently emerge: first, where a signatory party to an
arbitration agreement seeks joinder of a non-signatory party to
the arbitration agreement; and second, where a non-signatory
party itself seeks invocation of an arbitration agreement. In
both the scenarios, the referral court will be required to prima
facie rule on the existence of the arbitration agreement and
whether the non-signatory is a veritable party to the
arbitration agreement. In view of the complexity of such a
determination, the referral court should leave it for the
Arbitral Tribunal to decide whether the non-signatory party is
indeed a party to the arbitration agreement on the basis of the
factual evidence and application of legal doctrine. The
Tribunal can delve into the factual, circumstantial, and legal
aspects of the matter to decide whether its jurisdiction extends
to the non-signatory party. In the process, the Tribunal should
comply with the requirements of principles of natural justice
such as giving opportunity to the non-signatory to raise
objections with regard to the jurisdiction of the Arbitral
Tribunal. This interpretation also gives true effect to the
doctrine of competence-competence by leaving the issue of
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determination of true parties to an arbitration agreement to be
decided by the Arbitral Tribunal under Section 16.
xxx xxx xxx
170.12. At the referral stage, the referral court should leave it
for the Arbitral Tribunal to decide whether the non-signatory
is bound by the arbitration agreement.”
(emphasis supplied)
60. Recently, in Ajay Madhusudan Patel v. Jyotrindra S. Patel, (2025) 2
SCC 147 the Supreme Court ruled as to when it could be inferred that the
non-signatory party was a veritable party. The relevant para from the said
decision is reproduced herein below for the ease of reference:
“83. It is evident that the intention of the parties to be bound
by an arbitration agreement can be gauged from the
circumstances that surround the participation of the non-
signatory party in the negotiation, performance, and
termination of the underlying contract containing such an
agreement. Further, when the conduct of the non-signatory is
in harmony with the conduct of the others, it might lead the
other party or parties to legitimately believe that the non-
signatory was a veritable party to the contract containing the
arbitration agreement. However, in order to infer consent of
the non-signatory party, their involvement in the negotiation or
performance of the contract must be positive, direct and
substantial and not be merely incidental. Thus, the conduct of
the non-signatory party along with the other attending
circumstances may lead the referral court to draw a legitimate
inference that it is a veritable party to the arbitration
agreement.”
(emphasis supplied)
61. Now reverting to the facts of the case at hand, it is not in dispute that
the defendant no.2 is a non-signatory to the arbitration agreement.
However, in the suit the plaintiff has directed all the prayers against both
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the defendants. It was argued on behalf of the plaintiff that the defendant
no.2 has been threatening to suggest invocation of bank guarantee,
adjustment of claims against plaintiff’s other contracts with defendant no.1
and termination of the contract, without consideration of the plaintiff’s
request for extension of time [EOT]. It is to be noted that defendant no.2
has been retained as an Engineering, Procurement and Construction
Management Consultant “EPCM Consultant”. Defendant no.2’s personnel
is appointed as the Engineer-in-Charge under the contract terms between
the plaintiff and defendant no.1. The show-cause notices which are subject
matter of the controversy have been issued by the defendant no.2 whereby
the plaintiff has been called upon to show-cause as to why the remaining
work be not re-tendered at the risk and cost of the plaintiff. The
circumstances prima facie suggests that the defendant no.2 is a veritable
party to the arbitration agreement. However, in view of the above clear
expositions a final call that whether defendant no.2 can be joined as party
in the arbitration proceedings and whether the Arbitral Tribunal’s
jurisdiction extend to the defendant no.2, shall be taken by the Arbitral
Tribunal itself on the basis of the factual evidence and other attending
circumstances.
62. In the earlier part of this judgment, this Court has also prima facie
come to the conclusion that the disputes arising out of prayer (a) to (e)
relate either to the claim(s) of defendant no.1 or to the action proposed to
be taken by the defendant no.1 (owner) against the plaintiff (contractor)
under the contract, hence, the same are arbitrable. However, even if there
remains any doubt or factual controversy regarding their non-arbitrability,
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still this Court is obligated to refer the matter, regard being had to the
statuory mandate of Section 8 of the Act, which is to affirm and uphold
integrity and efficacy of arbitration as an alternative dispute resolution
mechanism, leaving it to the Arbitral Tribunal to decide the said
controversy.
63. In view of the above discussion, the present application is partly
allowed and the following order is passed:
i) The parties are referred to arbitration in accordance with
the arbitration clause contained in clause 9.0.1.0 of the
GCC insofar as disputes arising out of prayer (a) to (e)
are concerned.
ii) The Arbitrator shall be appointed by the parties in
accordance with the provisions of the Act.
iii) As regards the claim made in prayer (f), the plaintiff is at
liberty to prosecute the present suit against the
defendants, and amend the plaint accordingly.
64. The application is disposed of in the above terms.
I.A. 8561/2025 in CS(COMM) 1083/2024
65. The prayers made in clauses (a) to (c) and (e) in the present suit, in
substance, are identical to the prayers (a) to (c) and (e) made in CS (COMM)
295/2024, and applying the same reasoning as discussed for the said prayers
in CS (COMM) 295/2024, they are prima facie held to be arbitrable.
66. In clause (d), prayer has been made for a decree declaring that the
show cause notice dated 17.07.2024 issued by the defendant(s) to the
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plaintiff for holiday listing, and any subsequent or consequential actions
arising therefrom, is bad in law, null and void. This prayer relates to the
proposed action of the defendant(s) to place the plaintiff on the “holiday
list” (blacklisting), and raises a dispute involving the defendant’s
competence under the contract to take such an action, which in the prima
facie view of this Court, is an arbitrable dispute.
67. In prayer (f), the plaintiff prays for mandatory injunction seeking
direction to the defendant/IOCL to extend the tenure of the projects other
than the project at Barauni Refinery. Indubitably, such other projects are not
the subject matter of the present contract, which only concerns the project at
Barauni Refinery, therefore, the said other projects are not covered by the
arbitration contained in clause 9.0.1.0 of the GCC. In that view of the
matter, dispute referred to in the prayer (f) is held to be non-arbitrable under
the contract.
68. The prayer in clause (g) pertains to disputes arising out of non-
notified claims of the plaintiff as detailed in para 7 of the plaint, and
resultantly the same are non-arbitrable. Likewise, prayer (h), which is for
the interest on the claim made in clause (g), is also non-arbitrable.
69. Under the above circumstances, the present application is partly
allowed and following order is passed:
i) The parties are referred to arbitration in accordance with
the arbitration clause contained in clause 9.0.1.0 of the
GCC insofar as disputes arising out of prayer (a) to (e)
are concerned.
ii) The Arbitrator shall be appointed by the parties in
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accordance with the provisions of the Act.
iii) As regards the claim made in prayer (f), (g) and (h), the
plaintiff is at liberty to prosecute the present suit against
the defendant, and amend the plaint accordingly.
70. The application is disposed of in the above terms.
VIKAS MAHAJAN, J
JULY 27, 2026
N.S. ASWAL/jg
71. After the judgment was pronounced, Ms. Anushree Kapadia, learned
counsel for the plaintiff submits that in both the suits, there is an interim
protection available to the plaintiff, which may be extended for four weeks.
72. Attention of the Court has been drawn to orders dated 16.04.2024 and
20.08.2024 passed in CS(COMM) 295/2024, as well as orders dated
05.12.2024 and 19.12.2024 passed in CS(COMM) 295/2024.
73. Ms. Paramjeet Benipal, learned counsel for the defendant no.1, on
instruction, submits that the defendant/IOCL shall not take any coercive
action against the plaintiff for two weeks from today. The statement is taken
on record. No further orders are called for.
VIKAS MAHAJAN, J
JULY 27, 2026
N.S. ASWAL/jg
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