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In arbitration, according to clause 38A of the GCC, LOA shall have precedence over the Special Conditions of Contract: High Court of Delhi

Clause 38A of the General Conditions of Contract (GCC) clearly states that the LOA will have precedence over the Special Conditions of Contract (SCC), which in turn, has precedence over the GCC. If there is an arbitration clause in the LOA, there is no question of resorting to the arbitration clause in the SCC. Where there are different agreements executed between the parties containing different arbitration clauses, the court has to examine the nature of the disputes between the parties to ascertain which arbitration clause would apply and the same was upheld by High Court of Delhi through the learned bench led by Justice C. Hari Shankar in the case of JOHNSON CONTROLS-HITACHI AIR CONDITIONING INDIA LTD vs. MAHAMAYA INFRASTRUCTURE PRIVATE LIMITED [ARB.P. 498/2021] on 02.02.2022.

The facts of the case are that the respondent owns the “Taj Gateway Resort” situated at Shimla, licensed to the Taj Group. The respondent desired to install heating, ventilation, and air conditioning in the said property for which it approached the petitioner. The petitioner was awarded the contract for providing the said services. The contract between the parties included GCC and SCC.

After the LOA was issued, the parties entered into a contract. Though the contract agreement was placed on record as reply filed by the respondent to the present petition, it was unsigned and undated.

The petitioner’s counsel submitted that in any event, prima facie, the contract agreement annexed as the reply of the respondent cannot be admitted by this Court in view of the limited jurisdiction that it exercises in the present proceedings. It was further submitted that even as per the priority sequence envisaged by Clause 38A of the GCC, the “Agreement” would have priority over the LOA and once Clause 1 of the SCC accorded precedence to the SCC over the GCC, the arbitration clause in the SCC would have to prevail over the arbitration clause in the LOA. It was lastly submitted that as the disputes involves issues which would be within the skill area of an Engineer or an Architect, it would be appropriate that the arbitration abide by the arbitration clause in the SCC rather than that of the LOA.

According to the facts and circumstances of the case, the Court was of opinion that the present dispute was technical in nature and the arbitrator should be someone with engineering or architectural knowledge but that cannot be a basis to decide which arbitration clause, therefore, the arbitration Clause in the LOA would prevail.

The Court observed that, “Clause 38A of the GCC clearly states that the LOA would have precedence over the SCC, which, in turn, would have precedence over the GCC. Once, therefore, there is an arbitration clause in the LOA, there is no question of resorting to the arbitration clause in the SCC. Where there are different agreements executed between the parties containing different arbitration clauses, the court has to examine the nature of the disputes between the parties to ascertain which arbitration clause would apply.”

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Judgment reviewed by – Shristi Suman

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