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M/S KSS KSSIIPL Consortium (thro. its Constituted Attorney Mr. Devendra Kumar) v. M/S GAIL (India) Ltd.

Arbitration Petition · Neutral citation not assigned (Arbitration Petition No. 36 of 2014)Decided 12 Feb 2015
Arbitration Petition No. 36 of 2014
Justice Ranjan Gogoi

Background

The petitioner, a consortium formed to execute pipeline-laying contracts for GAIL's Dabhol-Bangalore Pipeline Project, claimed that GAIL's delays and failures (such as not providing construction rights/permits and necessary engineering inputs) jeopardised the work and entitled it to "extended stay compensation" as well as payment for additional works, worth tens of crores of rupees across two contracts. When GAIL rejected the claims and conciliation failed, the consortium invoked the contracts' arbitration clause and, after GAIL did not respond, approached the Supreme Court to appoint a sole arbitrator.

Decision Breakdown

On the extended-stay-compensation claim, the Court found that the petitioner itself had not filled in the contractually required rate for such compensation in the bid's "Priced Part," and had accepted this position without objection when the contract was awarded, so, per the contract's own clauses, no extended stay compensation was payable and this claim was not an arbitrable dispute at all. On the separate claim for payment for additional works, however, the Court held that even though the Engineer-in-Chief's decision was stated to be "final," such finality could not immunise the decision from scrutiny through the arbitration process the parties had agreed to, so this claim was a genuine arbitrable dispute. The Court therefore referred only the additional-works claims (from both contracts) to a named retired Chief Justice as sole arbitrator, disposing of both arbitration petitions to that extent.

Lesson Learnt

When a contract requires a party to specify a rate for a particular type of compensation and that party fails to do so, it cannot later claim that compensation is due: courts will enforce the contract's own pre-conditions, and only genuinely disputed (arbitrable) claims get referred to arbitration, not every claim a party wishes to raise.

Official source (sci.gov.in)View Judgment (PDF)

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