INDIAN OIL CORPORATION LTD. versus M/S. SPS ENGINEERING LTD.

INDIAN OIL CORPORATION LTD. versus M/S. SPS ENGINEERING LTD.

The Chief Justice or his designate, while considering an application for appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, cannot examine issues of res judicata and limitation regarding the tenability or merits of the claim. Examination of such issues falls within the jurisdiction of the arbitral tribunal; if the cause of action for extra cost arises after the pleadings and hearing in the first arbitration, a fresh claim may be raised in a subsequent arbitration. The Designate's order dismissing the application was a jurisdictional error and must be set aside.

Parties
Appellant: Indian Oil Corporation Ltd.; Respondent: M/s. SPS Engineering Ltd.
Jurisdiction
India
Judgment Date
03 February 2011
Procedural Posture
Civil Appeal / Appeal From Order of Delhi High Court (a.a. No. 288 of 2009) on Petition Under Section 11, Arbitration and Conciliation Act, 1996
Outcome
Appeal allowed; order of the Designate set aside; application under Section 11 of the Act allowed; arbitrator appointed to decide appellant's claim for extra cost.
Legal Topics
Appointment of Arbitrator, Res Judicata, Limitation, Counter Claims, Termination of Contract, Damages, Jurisdiction of Chief Justice or Designate Under S. 11
Arbitration Appointment of Arbitrator Res Judicata Limitation Counter Claims Termination of Contract Damages Jurisdiction of Chief Justice or Designate Under S. 11

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Parties

Indian Oil Corporation Ltd.

Appellant

M/s. SPS Engineering Ltd.

Respondent

Procedural Posture

Civil Appeal / Appeal From Order of Delhi High Court (a.a. No. 288 of 2009) on Petition Under Section 11, Arbitration and Conciliation Act, 1996

Legal Issues

  1. 1 Whether Chief Justice/designate under Section 11 of Arbitration and Conciliation Act, 1996 can decide issues of res judicata and limitation on a claim for extra cost incurred by company
  2. 2 Whether claim for damages for extra cost after completion of work by alternative agency can be initiated as separate arbitration

Ratio Decidendi

The Chief Justice or his designate, while considering an application for appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, cannot examine issues of res judicata and limitation regarding the tenability or merits of the claim. Examination of such issues falls within the jurisdiction of the arbitral tribunal; if the cause of action for extra cost arises after the pleadings and hearing in the first arbitration, a fresh claim may be raised in a subsequent arbitration. The Designate's order dismissing the application was a jurisdictional error and must be set aside.

Court Disposition

Appeal allowed; order of the Designate set aside; application under Section 11 of the Act allowed; arbitrator appointed to decide appellant's claim for extra cost.

Orders

  • Order of Designate of Delhi High Court set aside.
  • Application under Section 11 allowed.