ARB.P./369/2015 of B.S.SANGWAN Vs UNION OF INDIA

IN THE HIGH COURT OF DELHI AT NEW DELHI

Judgment Reserved on: 2" March. 2016Judgment Pronounced on: 8^^ March 2016

ARB. P. No.368/2015

S.K.CONTRACTOR Through Mr.S.W. Haider, Adv.

Petitioner

versus

. UNION OF INDIA„^5=^'^ i O T #=%

Respondent

'B.S.SAN@%# iII I

•4Mi8rf»F . . i|«i (i -i?43|

. '5^ -i-Haider, Adv. |

• versus

UNION o\lNDIA^,», %F

. jRespondentTAlK^cnc^.-AHv

CORAM: ^HON'BLE MRJUSTICE^MMMO^M

MANMOHAN SINGH, J.

1. By way of this order, I propose to decide the abovementioned twopetitions filed by the petitioners under Section 11 of the Arbitration andConciliation Act, 1996 read with Section 151 CPC for appointment of theindependent Arbitrator.

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2. The brief facts are that the petitioners are engaged in the business ofconstruction and railway contracts.

3. In arbitration petition No.369/2015, the work pertaining to Linking ofNew Track (BG), laying of turn outs with PSC layout, traps, SEJs, Gluedjoints, leading to P Way material, handling, leading, lifting and putting ofstone ballast and other connected works related to PNI & NI period betweenSanehwal (including) and Ludhiana (excluding) on Ambala-Ludhianasection in connection with 3*^*^ .^Une^fcopi Sanehwal to .Ludhiana onChandigarh-Ludhiana h^\!^*B,,G^|R££|^I|riki^^^ to the petitioner-firm vide Agreem9H^^o!=i9-W/Dy*jpEyG-II/CD^d^ei^^ July, 2008amounting to 45Ablated dte bf completion of#i.. j ^ 1 .,rdwork was 11 mo^iths^ffom the dagMm%e of acceptance letter dated 3January, 2008 i.l., the work awarftlfAyafMexpire on 3'"'^ December, 2008.IMilil- . I I I4. In ArbiMon petition the work pertaining toconstraction of dfeous of 24 Coachtrain at Chandigarh (iM^M^waShkhle apronp%d^Stpra|e room etc.) &balance earthwork & Terminal wasolher^b|k|4^c/w^to awarded to the petitioner vMe^^^^ff^£jf6?H0-W/C/CDG dated 12^^February, 2013 for Rs.5,23,54,020.14/- and the stipulated date of completionof work was 9 months fi-om the date of issuance of acceptance letter on 19*November, 2012, i.e., the work awarded was to expire on 18* August, 2013.

5. It is contended by the petitioners that the petitioners had made all thearrangements for execution of the work in right earnest, but work could notbe completed due to failings on the part of the respondent and consequentlythe work was twicp-extended in both the matters. During the course .of the

Arb.P.Nos.368/2015& 369/2015

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exe.cution of the aforesaid work, various claims, clarifications and disputesarose between the parties which the petitioners brought to the notice of theconcerned authority and upon which the petitioners were advised to providefull attention on the progress of the work instead of making correspondenceand were assured that the dues of the petitioners would be paid along withthe final bills.

6. However, on account of some technical difficulty faced by therespondent, the aforesaid work awarded^to-the petitioner M/s S.K. Contractorwas closed on administratifi'grouridiSlt ■rf-''' « -Ik il jis tj t|re|case%fihe I said ^petitioner thatfor execution of complete work, theii3.etitioner had .Mobilized all resources,deployed machiheiy, #bputed tb&ftilffe^ttarramged labbummaterial etc. atsite for aconstruchbp,^ iM&ysh-»^rm The petitioners kept onfi ifplld'vyihg the respondent about thepreparation/payment of the final Jbffibut It ^kept on evading onipne pretext orthe other. Finally, the petiti©neiliippn%htp%hiwj^ told that unless theysign the final bill S^v^^^up^lftfen^ Agie^j^lnFinyadvance withoutprotest, they would\^t;^|eCtemfig|C^m^ the aforesaidCircumstances as well as urfdersjm^^^^gerdion/pressure, the petitionerssigned the final bills and Supplementary Agreements under protest.

The element of coercion/ duress as suffered by the petitioners were, infact, placed on record vide their letters dated 17^^ March, 2014 and 15^October, 2014 respectively, issued to the respondent, wherein they had dulyintimated the respondent about its grievances and the possibility of raisingfurther claims.

Arb.P.Nos.368/2015& 369/2015

7. The petitioner M/s S.K.Contractor in Arb.P. No.368/2015 submits thatas anticipated by the said petitioner, the final bill prepared by the concerneddepartment of the respondent did not include many of its claims againstvarious items executed by the petitioner. Upon this, the petitioner having nooption left but to invoke the arbitration clause as contained under clause 64of the General Conditions of the Contract as applicable to the parties, callingupon the respondent to make the payment of the claims of the petitioner.However, now, after considerable lapse of time, the respondent issued areply dated June, 2Ol5.#me,r^by5t0|?thej|fter^shock and surprise of thepetitioner, the respondent @jfec'te1d ft^o genuihe a^^ of thepetitioner taking ithe^^Mand |haW;s4nc6®M petitioner ftad signed theSupplementary ^^^re^ment dated|3it^CM^g^^6l4, the dl^astas such cannotf.x ^ tkmMbe referred to aiftjitration. iif . . I« M tWi i 'tf.i- . ffi lipiitf - y8. Similarlylthe petitioner M/s B;.,i.l^^wan in Arb.P. No.l69/2015 alsovide its letter dated 12^^ wn^ked.4he arbitration clause as..Marc|fvJl)#5 contained under ^&haitipis^J)f the Contract.However,.the respondfenTj^M thl*datecO/«Ti-lmftthe%etitidh, failed to respondto the aforesaid invocation'fro^^tof=|l^p@Mti^

9. In the replies filed in both the matters, it is submitted that thearbitration petitions are liable to be hit by the doctrine of promissoryestoppel(s) since the petitioners have been paid all their legitimate duespayable under the contract including payment of final bills and signed theSupplementary Agreements under clear signatures and without any protest.The Supplementary Agreement dated 3 U' March, 2014 would show that itcategorically stipulates that:-

Arb.P.Nos.368/2015& 369/2015 „ Page 4 ^of9

"It is further agreed by and between the parties that theparty hereto of the second part (Contractor) has accepted thesaid sums mentioned above in full and final satisfaction of allits dues and claims under the said Principal Agreement.

It is further agreed and understood by and between the partiesthat the arbitration clause contained in the said principalagreement shall cease to have any effect and /or shall bedeemed to be non-existent for all purposes."

10. Lastly, it is submitted by the respondent that in view of the finalsettlement and .signing & of the<*>Supplemerifaiy^.Agreements tiftTbetween theparties, the question of invokilglthl lfbhration|llhuse of the agreement does"I gpiia, . - -' .. j ,1not arise at all. The, petitioners hav0||y|hps|; niisconceived petitions on theground that inspite of:having §5®|gijp^ents, theJMnot bound bythe terms of th^f agreements ent^rp^^i^^jiJfey them. The petitioners cannotresile from this losition until the s^^ttMary agreements exist.i '/I I fifi II Ij-t||4 |ll|« , . s-11. Learned dounsel for the. fesbonShf has referred decision of theSupreme Court ifrthe cdM^^ihUnionhd^India &'Ors. v. Hart Singh, (2010)15 see 201. Relevant Paras,^H4qf the sajpe read.as under;-

"9. This Court in Nathani Steels Ltd. v. AssociatedConstructions [1995 Supp (3) SCC 324] also had an occasion toexamine similar case. The Court observed that after settlingthe entire matter and receiving the payment, it was not open tothe respondent to treat the settlement as non est and proceed toinvoke the arbitration clause.

10. This Court in relatively recent case has examined thelegal position once again in National Insurance Co.Ltd. V. Boghara Polyfab (P) Ltd. [(2009) 1 SCC 267 : (2009) 1SCC (Civ) 117] In para 25 of the said judgment, the Courtobserved as under: (SCC p. 284)

'T , t . ; •.

"25., Wheire both the parties to contract confirm inwriting that the contract has been fully and finallydischarged by performance of all obligations and there areno outstanding claims or disputes, courts will not refer anysubsequent claim or dispute to arbitration. Similarly, whereone r of the parties to the contract issues full and finaldischarge voucher (or no-dues certificate, as the case maybe) confirming that he has received the payment in full andfinal satisfaction of all claims, and he has no outstandingclaim, that amounts to discharge of the contract byacceptance of performance and the party issuing thedischarge voucher/certificate cannot thereafter make anyfresh claim or revive any settled claim nor can it seekreference to arbitration in respect of any claim.'

JWi €11. The Court further observed in para 29 as under: {BogharaPolyfab case [(2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117],see pp. 285-86)

,"2P. It is thus clear that the arbitration agreement containedin contract cannot be invoked to seek reference of any.dispute to arbitration, in the following circumstances, whenthe contract is discharged on account of performance, or^accord and satisfaction, or mutual agreement, and the sameis reduced to writing (and signed by both the parties or bythe party seeking arbitration): " > , • \

{a) where the obligations under c6ntract 'are fullyperformed and discharge of the contract; By pbrform&ce isacknowledged by full and final discharge vqubher/receipt,nothing survives in regard to such discharged contract;{b) where the parties to the con,tract,;fiy mutuhl^ agreementaccept performance of altered^; .mMif||;,q^^obligations and confirm in writing the discharge'of contractby performance of the altered^mbdi&d t or-, substitutedobligations; - '

Arb.P. Nos.368/2015 & 369/2015|age 6 of 9

(c) where the parties to contract, by mutual agreement,absolve each other from performance of their respectiveobligations (either on account of frustration or otherwise)and consequently cancel the agreement and confirm thatthere are no outstanding claims or disputes."

In this case the Court relied on earlier judgments of thisCourt and reiterated the legal position which has beencrystallised by series of judgments where both the partiesto contract confirmed in writing that the contract has beenfully and finally discharged by the parties and there was nooutstanding claim or dispute and thereafter the matter couldnot have been referred to arbitration.

12. In celebrated book, Russell on Arbitration, 19th Edn., p.396, it is stated that "an accord and satisfaction may be pleadedin an action on award and will constitute good defence".

13. In our considered view, on the basis of the above settledlegal position that when the parties by supplementaryagreement obtained full and final discharge after paying theentire amount, which was due and payable to the contractor,thereafter the contractor would not be justified in invokingarbitration because there was no arbitral dispute for reference toarbitration."

12. However, it is pertinent to mention here that as per pleadings of therespondent in both the matters, it was admitted that the documents weresigned under protest and thereafter supplementary agreements wereexecuted. Record would also show that in one of the matters, as thepetitioner apprehended to stop the payment, sent the letter in advance to therespondent to put the pressure for the purpose of receiving the payment. Thesaid facts have not been denied by the counsel for the respondent. Hence,

Arb.P. Nos.368/2015 & 369/2015

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there is force in the submission of the learned counsel for the petitioner thatthe earlier agreement which contained the arbitration clause would continueat this stage and the objections now raised by the respondent can beconsidered by the Arbitral Tribunal as per merits.

13. The other important factor in these cases is that under similarcircumstances, in Arb. P,168/2015 between Pradeep Vinod ConstructionCo. V. Union ofIndia, Mr. Justice S.Muralidhar on 15^*^ May, 2015 has, interalia, passed the following orders:

"1- One of learnedcounsel for thelJlesiibpaent, is4hat the PetitioneBhas acceptedthe full and ^fiij:al pa^enMa^>|ias aim, signed thesupplementary \agreement|feSbGQfnil^5he submits \that theRespondeijt |iould be pe^^®^pomt an°^^bi|ator interms of t' ie i agreement bet^eeWlH^pPties. .'lAJSi-;-aI2. Counsel 11 for the Petiti|)|fe| "PfII l^fpts /? the above subrriission.ft!He points|put that specijfe^||l|^^en taken in thejpetitionthat the supplimentaiyagreement under^urfes^antes^Efidttit*' J-

3. The Courts-is whetherthe weredischarge certi!fea||^arid|^^pp^ml^^ signed by the Petitioner undMures'sfWould require evidence tobe led and is therefore required to be examined by the learnedArbitrator. As far as the appointment of an Arbitrator isconcerned, it is seen that the Respondent forfeited its rightunder the arbitration clause since it failed to appoint anArbitrator despite invocation of the arbitration clause by the

Petitioner on 5^^ May 2014, followed by another letter dated 12'*"January 2015."

14. The findings arrived in the above referred order are binding in natureas the facts are identical. Therefore, the prayers in these petitions are liableto be allowed.

15. Thus, Justice S.K. Aggarwal, Retd. Judge of this Court is appointed assole Arbitrator to adjudicate the disputes between the parties as mentioned inthe present petitions, including „Jheir-,^claims and counter-claims. TheArbitrator shall ensure tiie>%bmpMan^ '^f tjre^pr^frsipns of Arbitration andff^ ti' ' "" AConciliation (Amendfnent)^>Act, 20jl;5TKbefore confmencing the arbitration.The arbitration shtll iakb plac^^uhdefcitheM^is of th€ Delhi Internationalft \\Arbitration Centre ^fDAC). ThiM6e'stoffith^ learned Arbitrator will be inIf ^ ' Iterms of the Delhi International Arbltfatioh^ Centre Arbitration ProceedingsliIPP1| (Arbitrators' Fees) Rules. ^ 'A Mi 0.16. Both petitions %are ^•^©rdiL^]}fMi%p^sdd|)f./i^Copies 01 this. ordeCbe^given dash tQ^sftheSdarned counsel for the4lS ^ 1 ' j#' r;^parties and copy thereo^f;-be •delivered tpatKerlearned Arbitrator as well asAdditional Coordinator, DAC foPthwith^ji

(MANMOHAf^MGH^JUDGE

MARCH 08, 2016

Arb.P. Nos.368/2015 & 369/2015