Arbitration Cannot be Compelled for Disputes Not Specifically Covered Under the Agreed Arbitration Clause

The Petitioner and Respondent No. 1 entered into an Agreement dated 06.10.2016 for the construction of student accommodation at IIT Kharagpur

The Petitioner completed the work and handed it over in December 2019

While most payments were cleared, disputes arose regarding the reimbursement of Service Tax and additional GST burdens (amounting to approximately ₹41.82 lakhs) incurred due to the transition to the GST regime in 2017

The Respondent refused payment, citing a "No Claim Certificate" signed by the Petitioner

The Petitioner invoked arbitration under Clause 27 of the Agreement and subsequently approached the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator

1. Whether a dispute involving the reimbursement of taxes (Service Tax and GST) falls within the scope of the specific arbitration clause provided in the Agreement

2. Whether the court should refer a matter to arbitration when the parties have specifically limited the types of disputes referable to such adjudication

The Court applied Section 11 of the Arbitration and Conciliation Act, 1996, which governs the appointment of arbitrators

It relied on the principle of Kompetenz-Kompetenz, noting that while the Arbitral Tribunal generally decides its own jurisdiction, the referral court must perform a prima facie scrutiny to ensure the dispute is contractually arbitrable

The court emphasized that if non-arbitrability is conclusive or if parties explicitly excluded certain issues from the arbitration agreement, the court should decline the referral to save costs

The Court scrutinized Clause 27 (Arbitration Clause) against Clause 31 (Taxes and Duties). It observed that Clause 27 was restrictive, covering only disputes relating to "specifications, design, drawings, instructions... quality of workmanship or materials" or matters concerning the "execution or failure to execute" the works

The Petitioner argued that the phrase "any other question, claim, right, matter or thing whatsoever" should encompass tax reimbursement

However, the Court rejected this broad interpretation, holding that the clause contextually limited arbitration to technical and execution-related aspects of the construction

Since Clause 31 (governing taxes) was distinct and not specifically incorporated into the scope of Clause 27, the Court determined that the parties did not intend for tax disputes to be settled via arbitration

The court concluded that when it is "manifestly clear" that parties decided not to refer a particular issue to arbitration, the court must not appoint an arbitrator

No relief was granted to the Petitioner