Calcutta High Court
Rakesh Kumar Chaudhary vs Steel Authority Of India And Anr on 30 June, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
2025:CHC-OS:98
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
Present:-
Hon'ble Justice Shampa Sarkar
AP-COM 169 OF 2025
RAKESH KUMAR CHAUDHARY
VS
STEEL AUTHORITY OF INDIA AND ANR.
For the petitioner : Mr. Soumik Chakraborty, Adv.
Mr. Ratul Das, Adv.
Mr. Sitikantha Mitra, Adv.
For the respondents : Mr. Lakshmi Kumar Gupta, Sr. Adv.
Mr. Lakshmi Kanta Pal, Adv.
Hearing concluded on : 10.06.2025 Judgment on : 30.06.2025 SHAMPA SARKAR J.
1. This is an application under Section 11 of the Arbitration and
Conciliation Act, 1966 (hereinafter referred to as the said act), seeking
appointment of an arbitrator for settlement of disputes between the parties,
arising out of the agreement dated June 29, 2010. The petitioner prays for
appointment of an arbitrator.
2. The petitioner’s case was that, the respondent No.2 issued a notice
inviting tender. The petitioner participated. By a Letter of Acceptance dated
May 21, 2010, the respondent accepted the petitioner’s bid. The bid was
filed in response to the notice inviting tender floated by the respondent No.
2, dated August 24, 2009. Thereafter, the parties entered into a contract on
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June 29, 2010. The same was signed by the parties and the consultant M/s
MECON Ltd. The contract was awarded for the purpose of “Structural Work
of New Slag Yard of SMS” at Durgapur Steel Plant. The initial contract price
was Rs. 5,65,26,645. The project was required to be completed within 20
months from the date of signing of the contract. The petitioner claimed to
have completed the work within the extended time and at the request of the
respondents.
3. According to the petitioner, resources were mobilized in respect of
manpower, machinery, generators, truck etc. The respondent failed to hand
over the proposed site. The entire area was covered under various running
operational projects of the respondents. Most of the work was suspended.
Thus, the resources which were deployed at the site remained idle. The
petitioner also alleged breach of the terms and conditions of the contract
and made the respondent solely liable for the delay in timely execution.
4. The petitioner alleged to have incurred huge losses on various
grounds. Thereafter, on July 20, 2013, the contract value was amended to
Rs. 8,61,93,499. The petitioner did not accept the unilateral amendment
and requested incorporation of the rates as per the petitioner’s opinion. A
writ petition was filed before this Hon’ble Court with a prayer for release of
legitimate dues. The writ petition was disposed of by an order dated March
02, 2015, with liberty to the petitioner to approach the authorities for
settlement of the dispute, by appointing an arbitrator. Allegedly, the
petitioner moved the MSME Council which was subsequently withdrawn.
The work was completed sometime in September, 2016 and the project was
commissioned on September 16, 2016. The petitioner submitted the R.A.
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bills and prayed for release of payment of Rs. 28,92,71,763. By a letter
dated January 7, 2017, the petitioner submitted a final bill amounting to
Rs. 21,34,58,606. The respondent did not pay.
5. The petitioner contended that, by a letter dated November 19, 2019,
the respondents agreed to settle the claim at Rs. 1,44,52,080, and denied
the claim of the petitioner. The petitioner found the said figure to be
arbitrary and fanciful. The petitioner replied to the said letter by reiterating
it claims and prayed for mutual settlement. The respondents refused to
entertain the claim of the petitioner and asked the petitioner to take
recourse to the dispute resolution clause, by a letter dated February 18,
2020. In furtherance to such letter, the petitioner invoked the arbitration
clause by a letter dated December 24, 2020. As per Clause 46 of the
General Condition of Contract, a request was made for appointment of an
arbitrator to adjudicate the dispute between the parties. Instead of
appointing an arbitrator and referring the dispute, the respondent kept
silent. By a letter dated January 20, 2023, the petitioner again asked for
amicable settlement. By a letter dated March 3, 2023, the respondent
rejected all the claims of the petitioners and specifically stated that the case
could not be treated as closed. Thus, it was the specific contention of the
petitioner that the respondents had failed and neglected to resolve the
dispute amicably. Thereafter, the respondents, out of their own accord by a
letter dated March 4, 2024, amended the contract and increased the
contract value to Rs. 11,94,58,249. This was not acceptable to the
petitioner. On March 26, 2024, the respondent transferred an ad-hoc
amount of Rs. 5,66,60,310.46 to the bank account of the petitioner, which
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according to the petitioner, was an ad-hoc payment and not full and final
settlement. The petitioner alleged that some blank papers were signed by
the petitioner under force and coercion, for which the petitioner was
constrained to file a formal complaint before the Deputy Commissioner of
Police (East) Asansol Durgapur. As the dispute continued and the
respondent failed and neglected to pay the final bill, the petitioner filed this
application for appointment of a learned arbitrator, under Clause 46 of the
General Conditions of Contract.
6. Mr. Das, learned Advocate for the petitioner, submitted that the
application was well within time. The claim was subsisting and not barred
by limitation. The dispute was alive. After the final bill was raised, the first
refusal came on November 19, 2019. The notice invoking arbitration was
issued on December 24, 2020. By a letter dated March 4, 2024, the
petitioner was informed about the amendment of the contract value. In view
of the decision of the Hon’ble Supreme Court, the period of limitation in
filing this application should be computed from March 31, 2022, that is,
after expiry of 30 days from the receipt of the notice and upon excluding the
time between March 15, 2020 to February 28, 2022. This application was
filed on February 27, 2025. Before that, an application was filed in the
Delhi High Court for appointment of an Arbitrator, which was dismissed as
withdrawn, with liberty to move the appropriate forum.
7. It was further submitted that the petitioner was also entitled to the
exclusion of the period when the application was pending before the Delhi
High Court. According to Mr. Das, by a letter dated March 3, 2023, the
respondent recommended amicable settlement. The respondents also made
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an ad-hoc payment on March 26, 2024. Mr. Das prayed for reference of the
dispute to arbitration, with a further contention that the Memorandum of
payment was issued under force and coercion.
8. Mr. Gupta, learned senior advocate for the respondents, submitted
that this Court did not have the jurisdiction to entertain the application.
Mr. Gupta further submitted that, even assuming that the issue of
limitation in this case was a mixed question of law and fact, the jurisdiction
of this Court had been ousted by Clause 46.2.5 of the general terms and
conditions, which provided that the venue shall be New Delhi. The contract
value was above Rs. 5 Crores. The rules of the Indian Council of Arbitration
(ICA)/ Scope forum of Conciliation and Arbitration (SCFA), as agreed by the
parties, would be applicable. Thus, under no circumstances, the application
should be entertained by this court. Mr. Gupta further relied on Clause
46.2.4, and submitted that the exclusive jurisdiction clause would not be
applicable in view of Clause 46.2.5. Clause 46.2.5 would supersede Clause
46.2.4. The expression “unless otherwise mentioned” in the opening
sentence of Clause 46.2.4 clarified such position. Clause 46.2.5 mentioned
the venue to be New Delhi. Clause 46.2.4 would not come into operation, in
view of the venue being agreed as New Delhi. Mr. Gupta prayed for
dismissal of the application. On the facts, Mr. Gupta submitted that the
claim of the petitioner was inadmissible. There was no arbitrable dispute.
The respondents had paid up all the dues. The petitioner could not raise any
further dispute by filing this frivolous application and dragging the
respondents to an unnecessarily expensive adjudicatory process.
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9. Heard the learned advocates for the respective parties. With regard to
the issue of limitation, this court, upon a prima facie, assessment of the
sequence of events indicated above holds that the dispute is alive. The facts
as narrated, would indicate that the petitioner’s claim cannot be treated as
“dead wood”. Here, limitation is a mixed question of law and fact. However,
the questions arise as to whether this Court has the jurisdiction to refer the
dispute and whether the application is pre mature. Further, whether Clause
46.2.5 will oust the jurisdiction of this Court by having an overriding effect
over clause 46.2.4, also falls for consideration. For convenience, the
Arbitration clause is quoted below:-
46.2 Arbitration
46.2.1 Conciliation shall be resorted to prior to invoking Arbitration.
The applicable rules for Conciliation proceedings shall be that of
“SCOPE forum of Conciliation and Arbitration” (SCFA). The
Arbitration Clause is to be invoked by the parties to the Contract
only on failure of conciliation proceedings to amicably settle the
disputes.
46.2.2 The arbitration shall be governed in accordance with The
Arbitration and Conciliation Act 1996 (hereinafter referred to as the
“Act”) of India. The language of Arbitration shall be English.
46.2.3 Subject to the stipulations made hereinabove, Arbitration
shall be conducted as per forum specified below:
All Contracts, whose value is Indian Rs 5 Crores (for both Indian and
Foreign Contractors) and below, shall go for Adhoc Arbitration, where
an impartial Arbitrator would be appointed by the Managing Director
of Durgapur Steel Plant, and the arbitration proceedings shall be
governed by the Arbitration and Conciliation Act of 1996 of India.
46.2.4 Unless otherwise mentioned, the Arbitration shall be held at
SAIL- DSP, Durgapur. The court of Durgapur India (with exclusion of
all other courts) shall have exclusive jurisdiction over all matter of
dispute.
46.2.5 Arbitration of contracts, with Indian parties, where contract
value is more than Indian Rs. 5 Crores and the contracts with foreign
parties for value of more than Indian Rs. 5 Crores and up to Indian
Rs. 20 Crores shall be governed by the Rules of Indian Council of
Arbitration (ICA/”SCOPE Forum of Conciliation and Arbitration”
(SCFA) as agreed by the party. The venue shall be New Delhi.
46.2.6 Arbitration with foreign contractor, if any or in Consortium
contracts (including foreign contractor), where the contract value is
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more than Indian Rs. 20 crores shall be governed by the Rules of
Arbitration of International Chamber of Commerce (ICC), Paris. The
venue of the arbitral proceedings shall be New Delhi.
46.2.7 During the pendency of the Conciliation or Arbitration
proceedings both the parties (i.e. the Contractor and the Employer)
shall continue to perform their contractual obligations. The arbitral
tribunal shall give reasons for its award. The tribunal shall apportion
the cost of arbitration between the parties, the award rendered in any
arbitration hereunder shall be final and binding upon the parties. the
parties agree that neither party shall have any right to commence or
maintain any suit or legal proceeding concerning any dispute under
this agreement until the dispute has been determined in accordance
with the arbitration proceeding provided for herein and then only to
enforce or facilitate the execution of an award rendered in such
arbitration.
46.2.8 Arbitration between a Central Public Sector Undertaking of
the Government of India (not under the Ministry of Steel) and the
Employer shall be as per the guidelines of Ministry of Heavy
Industries and Public Enterprises, Government of India.
Arbitration between a Central Public Sector Undertaking of the
Government of India under the Ministry of Steel, Government of
India and the Employer, shall be as per the guidelines of the Ministry
of Steel.”
10. Clause 46.2.1 deals with settlement of dispute by conciliation. The
Court finds that numerous correspondences had been exchanged between
the parties. Meetings had been held and the respondents also amended the
contract value, twice. The respondents paid a portion of the claim of the
petitioner as full and final settlement and denied the veracity of the balance
claim. A memorandum of payment was signed, which the petitioner claims
to have been done. There are allegations against the respondents of having
forced the petitioner to sign blank papers and the petitioner complained to
the police authorities. Thus, this Court is of the view that further direction
for amicable settlement by relegating the parties to explore the possibility of
conciliation, will be an empty formality. In my opinion, amicable settlement
by a conciliation process, is an impossibility. Reference is made to the
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decision of Visa International Limited vs. Continental Resources (USA)
Limited reported in (2009) 2 SCC 55 and Demerara Distilleries Private
Limited and Anr. vs. Demerara Distillers Limited reported in (2015) 13
SCC 610.
11. Visa International (supra) is referred to. The relevant paragraph is
quoted below:-
“38. It was contended that the pre-condition for amicable
settlement of the dispute between the parties has not been
exhausted and therefore the application seeking appointment of
arbitrator is premature. From the correspondence exchanged
between the parties at pp. 54-77 of the paper book, it is clear that
there was no scope for amicable settlement, for both the parties
have taken rigid stand making allegations against each other. In
this regard a reference may be made to the letter dated 15-9-2006
from the respondent herein in which it is inter alia stated “… since
February 2005 after the execution of the agreements, various
meetings/discussions have taken place between both the parties
for furtherance of the objective and purpose with which the
agreement and the MoU were signed between the parties. Several
correspondences have been made by CRL to VISA to help and
support its endeavour for achieving the goal for which the
abovementioned agreements were executed”. In the same letter it
is alleged that in spite of repeated requests the petitioner has not
provided any funding schedules for their portion of equity along
with supporting documents to help in convincing OMC of financial
capabilities of the parties and ultimately to obtain financial closure
of the project. 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.”
12. Demerara Distilleries (supra) is referred to. The relevant paragraph
is quoted below:-
“5. Of the various contentions advanced by the respondent
Company to resist the prayer for appointment of an arbitrator under
Section 11(6) of the Act, the objections with regard the application
being premature; the disputes not being arbitrable, and the
proceedings pending before the Company Law Board, would not
merit any serious consideration. The elaborate correspondence by
and between the parties, as brought on record of the present
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proceeding, would indicate that any attempt, at this stage, to
resolve the disputes by mutual discussions and mediation would be
an empty formality. The proceedings before the Company Law
Board at the instance of the present respondent and the prayer of
the petitioners therein for reference to arbitration cannot logically
and reasonably be construed to be a bar to the entertainment of the
present application. Admittedly, a dispute has occurred with regard
to the commitments of the respondent Company as regards equity
participation and dissemination of technology as visualised under
the Agreement. It would, therefore, be difficult to hold that the same
would not be arbitrable, if otherwise, the arbitration clause can be
legitimately invoked.”
13. Clause 46.2.2 provides that arbitration shall be in accordance with
the Arbitration and Conciliation Act, 1996. The language shall be in
English. This is a separate clause which was agreed to by the parties.
Clause 46.2.3 provides that arbitration should be conducted as per the
forum specified after the said clause. All contracts whose value in Indian
Rupee was 5 crores and below, would be referred to the ad-hoc arbitration
and an impartial arbitrator would be appointed by the managing director of
Durgapur Steel Plant. The arbitration proceedings would be governed by the
Arbitration and Conciliation Act, 1996. This Clause is not relevant for the
purpose of determination of the issue in this case as admittedly, the
contract value is above Rs. 5 crores.
14. Clause 46.2.4 provides that unless otherwise mentioned in the
contract, the arbitration shall be held at SAIL DSP Durgapur, The Courts of
Durgapur, India (with the exclusion of all the courts), shall have exclusive
jurisdiction over all matters of disputes. This is an independent clause,
which provides that the arbitration shall be held at DSP, Durgapur and the
seat had been agreed by the parties to be at Durgapur. The overall
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jurisdiction governing clause also conferred exclusive jurisdiction to the
Courts at Durgapur.
15. Clause 46.2.5 provides that all arbitrations arising out of the contract,
where the contract value was more than Rs. 5 crores, shall be governed by
the Rules of Indian Council of Arbitration (ICA)/ Scope forum of Conciliation
and Arbitration (SCFA) as agreed by the parties. The venue shall be New
Delhi. In my view, this clause would have been applicable, had the parties
agreed either to follow the ICA Rules or the Rules of SCFA. There is no such
agreement amongst the parties with regard to implementation of Clause
46.2.5. Neither has the respondents taken a stand in their communications
that the parties had agreed that either of the rules would be followed. The
choice was between SCFA or ICA. New Delhi, as the venue, would be
applicable in the event the parties had chosen either ICA or SCFA Rules. In
the absence of seat, venue may be read as seat. Here, New Delhi as the
venue has been incorporated in Clause 46.2.5, which means that if the
parties agreed to either follow SCFA Rules or ICA Rules, in such event the
venue for such arbitration would be New Delhi. However, Clause 46.2.4 is
an independent clause. It mentions the seat. The clause provides that the
arbitration shall be held at SAIL DSP, Durgapur and the Courts of Durgapur
would have exclusive jurisdiction. When seat is mentioned, the said clause
shall prevail.
16. Under such circumstances, Mr. Gupta’s contention that Clause 46.2.4
would not be applicable as New Delhi was chosen to be the venue, is not
accepted. The venue selection is specific to Clause 46.2.5. In my opinion
Clause 46.2.5 is not applicable, as the parties did not select either ICA or
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SCFA. They had an option to select either. The respondents has also not
chosen any of the forum/rules, for institutionalized arbitration. The
mechanism provided under Clause 46.2.5 had failed. Clause 46.2.2
provides that arbitration shall be governed by the provisions of the said Act.
Under such circumstances the provisions of Section 11 will apply. In view of
the fact that seat had been decided as Durgapur and in the view of the fact
that Courts at Durgapur were selected to have exclusive jurisdiction, this
Court can entertain this application as the referral court.
17. The referral Court is not required to hold a mini trial in order to come
to a specific finding on arbitrability and/or admissibility of the claim. The
respondent can also raise a question with regard to the jurisdiction of the
learned Arbitrator. Party autonomy is the spirit of arbitration. The parties
themselves had framed the above clauses. The clause must be
harmoniously construed. Learned Arbitrator has the power to rule on his
own jurisdiction. All objections raised by Mr. Gupta, can be decided by the
learned Arbitrator.
18. In the affidavit in reply filed by the respondents in arbitration petition
no. 1523 of 2024, which was pending for appointment of a Learned
Arbitrator before the High Court at New Delhi, specific contentions of the
respondents were that the seat of arbitration was Durgapur and the cause of
action arose at Durgapur. The High Court at Delhi lacked the territorial
jurisdiction, to appoint an arbitrator and the arbitration petition should
have been filed before the High Court at Calcutta and not before the High
Court at Delhi. The relevant portions of the said reply are quoted below for
reference:-
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“2. At the outset, the Respondent denies each and every averment,
allegation and submission made by the petitioner in the present
petition to the extent the same may be contrary to records and, as
such, nothing contained in the present petition may be deemed to be
admitted by the Answering Respondent unless specifically admitted
hereinafter. Further, the Respondent reserves its right to make
detailed submission on merit of the matter during the arbitration
proceedings, in case arbitration proceedings commence.
PRELIMINARY SUBMISSIONS/OBJECTIONS:
3. The Respondent submits that the present petition is liable to be
dismissed as this Hon’ble Court lacks territorial jurisdiction under
Section 11 to appoint an Arbitrator, and the Arbitration Petition
could have been filed only before the Hon’ble Calcutta High Court
and not the Hon’ble Delhi High Court, as submitted hereunder: –
a) The contract was signed and executed at Durgapur Steel Plant,
Durgapur; addresses of both parties for all contractual purposes
were specified at Durgapur vide Clauses A. 1.0 to 4.0 in Special
Conditions of Contract (SCC) at Pages 63 to 64 in Annexure P-1 of
the above Petition, all the contractual obligations of both parties were
performed at Durgapur, and all the facts and circumstances pleaded
by the Petitioner in support of its alleged claims and cause of
arbitration occurred at Durgapur. As such, cause of action for
arbitration could accrue only at Durgapur prior to the invocation of
arbitration.
b) Further, Clause 46.2,4 of the General Conditions of Contract
(GCC) forming part of the contractual terms and conditions explicitly
provides for the exclusive jurisdiction of the courts at Durgapur.
While the venue of arbitration is specified as New Delhi in respect of
institutional arbitration before Indian Council of Arbitration or
SCOPE Forum under Cl. 46.2.5 of GCC, the seat of arbitration
remains at Durgapur.
Consequently, the Arbitration Petition should have been filed before
the Hon’ble Calcutta High Court and not the Hon’ble Delhi High
Court. The Relevant Clause 46.2.4 of General Conditions of Contract
(GCC) forming part of the contract agreement dated 29.06.2010
(Document P-1 annexed to the Petition) is reproduced below:
“Unless, otherwise mentioned, the Arbitration shall be held at SAIL-
DSP, Durgapur. The court of Durgapur India (with exclusion of all
other courts) shall have exclusive jurisdiction over all matter of
dispute”.
c) Moreover, as admitted by the Petitioner in Para 16 of the Petition,
and as evident from the order dated 02.03.2015 (Document P-3
annexed to the Petition) passed by Hon ‘ble High Court at Calcutta,
the Petitioner had previously filed Writ Petition No. (W) 34279 of
2014 before the Hon’ble High Court at Calcutta, seeking the release
of dues along with interest and for the settlement of disputes and
praying for appointment of Arbitrator, and the said Writ Petition was
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disposed of by the Hon’ble High Court at Calcutta vide the said order
dated 02.03.2015. Thus, the Petitioner had earlier acknowledged the
territorial jurisdiction of the Hon’ble High Court at Calcutta for
appointment of Arbitral Tribunal, and the present petition for
appointment of Arbitrator in continuation of the prayer of the
Petitioner in the earlier Writ Petition would also lie before Hon’ble
Calcutta High Court.”
19. The above pleadings clearly indicate how the respondents understood
clause 46.2.4. The said clause was accepted as the exclusive jurisdiction
clause which provided the seat. The orders passed by the Delhi High Court
are quoted below:-
“1. After some arguments, learned counsel for the petitioner seeks
leave to withdraw the instant petition with liberty to file proceedings
before the appropriate Court.
2. Leave and liberty, as prayed for, are granted and the petition is
dismissed as withdrawn.
3. Needless to state that this Court has not expressed any opinion on
the merits of the case.”
20. The arbitration clause should be harmoniously construed, to give
maximum meaning to the intention of the parties, by ensuring that none of
the clauses are either redundant or rendered otiose .The parties had
inserted each clause with a purpose. Hence, as the parties failed to choose
institutional arbitration, section 11 would be applicable and the petitioner
has rightly approached this court.
21. Under such circumstances, this Court is of the view that the
application should be allowed. While venue refers to the physical location of
the hearings, the seat determines the legal jurisdiction governing the
arbitration. As the arbitration agreement designates a seat, this court has
the jurisdiction, as a referral court. The issues of arbitrability, limitation,
admissibility, consequence of the memorandum of payment etc., are not
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gone into. Justice Siddhartha Roychowdhury, former Judge of this Court is
appointed as the learned arbitrator. The appointment is subject to
compliance of Section 12 of the said Act. The learned arbitrator shall fix his
own enumeration as per the schedule of the said Act.
22. AP COM 169 of 2025 is disposed of accordingly.
23. Urgent Photostat certified copies of this judgment, if applied for, be
supplied to the parties upon fulfilment of requisite formalities.
(Shampa Sarkar, J.)