B.S.Sangwan v. Union of India

MANMOHAN SINGH, J.

¶1By way of this order, I propose to decide the abovementioned two petitions filed by the petitioners under Section 11 of the Arbitration and Conciliation Act, 1996 read with Section 151 CPC for appointment of the independent Arbitrator. Arb.P. Nos.368/2015 & 369/2015 f

¶2The brief facts are that the petitioners are engaged in the business of construction and railway contracts.

¶3In arbitration petition No.369/2015, the work pertaining to Linking of New Track (BG), laying of turn outs with PSC layout, traps, SEJs, Glued joints, leading to P Way material, handling, leading, lifting and putting of stone ballast and other connected works related to PNI & NI period between Sanehwal (including) and Ludhiana (excluding) on Ambala-Ludhiana section in connection with 3*^*^ .^Une^fcopi Sanehwal to .Ludhiana on Chandigarh-Ludhiana h^\!^*B,,G^|R££|^I|riki^^^ to the petitioner-firm vide Agreem9H^^o!=i9-W/Dy*jpEyG-II/CD^d^ei^^ July, 2008 amounting to Ablated dte bf completion of #

i.. j ^ 1 .,rd work was 11 mo^iths^ffom the dagMm%e of acceptance letter dated 3 January, 2008 i.l., the work awarftlfAyafMexpire on 3'"'^ December, 2008. I

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¶4In ArbiMon petition the work pertaining to constraction of dfeous of 24 Coach train at Chandigarh (iM^M^waShkhle apronp%d^Stpra|e room etc.) & balance earthwork & olher^b|k|4^c/w^to Terminal was 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 completion of 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.

¶5It is contended by the petitioners that the petitioners had made all the arrangements for execution of the work in right earnest, but work could not be completed due to failings on the part of the respondent and consequently the work was twicp-extended in both the matters. During the course .of the Arb.P.Nos.368/2015& 369/2015 j© exe.cution of the aforesaid work, various claims, clarifications and disputes arose between the parties which the petitioners brought to the notice of the concerned authority and upon which the petitioners were advised to provide full attention on the progress of the work instead of making correspondence and were assured that the dues of the petitioners would be paid along with the final bills.

¶6However, on account of some technical difficulty faced by the respondent, the aforesaid work awarded^to-the petitioner M/s S.K. Contractor was closed on administratifi'grouridiSlt jis t|re|case%fihe said petitioner that ■rf-''' « -Ik B il tj C I ^ for execution of complete work, theii3.etitioner had .Mobilized all resources, deployed machiheiy, #bputed tb&ftilffe^ttarramged labbummaterial etc. at site for construchbp,^ iM&ysh-»^rm a The petitioners kept onfi ifplld'vyihg the respondent about the preparation/payment of the final Jbffibut It ^kept on evading onipne pretext or the other. Finally, the petiti©neiliippn%htp%hiwj^ told that unless they sign the final bill S^v^^^up^lftfen^ Agie^j^lnFinyadvance without protest, they would\^t;^|eCtemfig|C^m^ the aforesaid Circumstances as well as urfdersjm^^^^gerdion/pressure, the petitioners signed the final bills and Supplementary Agreements under protest. The element of coercion/ duress as suffered by the petitioners were, in fact, placed on record vide their letters dated 17^^ March, 2014 and 15^ October, 2014 respectively, issued to the respondent, wherein they had duly intimated the respondent about its grievances and the possibility of raising further claims. Arb.P.Nos.368/2015& 369/2015 d , Page 3 of9

¶7The petitioner M/s S.K.Contractor in Arb.P. No.368/2015 submits that as anticipated by the said petitioner, the final bill prepared by the concerned department of the respondent did not include many of its claims against various items executed by the petitioner. Upon this, the petitioner having no option left but to invoke the arbitration clause as contained under clause 64 of the General Conditions of the Contract as applicable to the parties, calling upon the respondent to make the payment of the claims of the petitioner. However, now, after a considerable lapse of time, the respondent issued a reply dated June, 2Ol5.#me,r^by5t0|?thej|fter^shock and surprise of the petitioner, the respondent @jfec'te1d ft^o genuihe a^^ of the petitioner taking ithe^^Mand |haW;s4nc6®M petitioner ftad signed the Supplementary ^^^re^ment dated|3it^CM^g^^6l4, the dl^astas such cannot f.x ^ tkmM be referred to aiftjitration. i if . . I« M tWi i 'tf. i - . ffi lipiitf - y

¶8Similarlylthe petitioner M/s B;.,i.l^^wan in Arb.P. No.l69/2015 also vide its letter dated 12^^ ..Marc|fvJl)#5 wn^ked.4he arbitration clause as contained under ^&haitipis^J)f the Contract. However,.the respondfenTj^M thl*datecO/«Ti-lmftthe%etitidh, failed to respond to the aforesaid invocation'fro^^tof=|l^p@Mti^ ^

¶9In the replies filed in both the matters, it is submitted that the arbitration petitions are liable to be hit by the doctrine of promissory estoppel(s) since the petitioners have been paid all their legitimate dues payable under the contract including payment of final bills and signed the Supplementary Agreements under clear signatures and without any protest. The Supplementary Agreement dated 3 U' March, 2014 would show that it categorically stipulates that:- Arb.P.Nos.368/2015& 369/2015 " ^ Page 4 of9 " It is further agreed by and between the parties that the party hereto of the second part (Contractor) has accepted the said sums mentioned above in full and final satisfaction of all its dues and claims under the said Principal Agreement. It is further agreed and understood by and between the parties that the arbitration clause contained in the said principal agreement shall cease to have any effect and /or shall be deemed to be non-existent for all purposes."

¶10Lastly, it is submitted by the respondent that in view of the final settlement and signing of the<*>Supplemerifaiy^.Agreements between the . a & tiftT -parties, the question of invokilglthl lfbhration|llhuse of the agreement does " I gpiia, . --' .. j ,1 not arise at all. The, petitioners hav0||y|hps|; niisconceived petitions on the ground that inspite of:having §5®|gijp^ents, theJMnot bound by the terms of th^f agreements ent^rp^^i^^jiJfey them. The petitioners cannot resile from this losition until the s^^ttMary agreements exist. i '/I I fifi II I j -t||4 |ll|« , . s-

¶11Learned dounsel for the. fesbonShf has referred a decision of the Supreme 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. Associated .

Constructions [1995 Supp (3) SCC 324] also had an occasion to V examine a similar case. The Court observed that after settling the entire matter and receiving the payment, it was not open to the respondent to treat the settlement as non est and proceed to invoke the arbitration clause.

¶10This Court in a relatively recent case has examined the legal position once again in National Insurance Co. Ltd. V. Boghara Polyfab (P) Ltd. [(2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117] In para 25 of the said judgment, the Court observed as under: (SCC p. 284) Arb.P.Nos.368/2015& 369/2015 ( ^ "25., Wheire both the parties to a contract confirm in writing that the contract has been fully and finally discharged by performance of all obligations and there are no outstanding claims or disputes, courts will not refer any subsequent claim or dispute to arbitration. Similarly, where one r of the parties to the contract issues a full and final discharge voucher (or no-dues certificate, as the case may be) confirming that he has received the payment in full and final satisfaction of all claims, and he has no outstanding claim, that amounts to discharge of the contract by acceptance of performance and the party issuing the discharge voucher/certificate cannot thereafter make any fresh claim or revive any settled claim nor can it seek reference to arbitration in respect of any claim.' JW i €

¶11The Court further observed in para 29 as under: {Boghara Polyfab case [(2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117], see pp. 285-86) 'T , t . ; •. ,"2P. It is thus clear that the arbitration agreement contained in a contract cannot be invoked to seek reference of any. dispute to arbitration, in the following circumstances, when the contract is discharged on account of performance, or^ accord and satisfaction, or mutual agreement, and the same is reduced to writing (and signed by both the parties or by the party seeking arbitration): " > , • \ {a) where the obligations under a c6ntract 'are fully performed and discharge of the contract; By pbrform&ce is acknowledged by a full and final discharge vqubher/receipt, nothing survives in regard to such discharged contract; {b) where the parties to the con,tract,;fiy mutuhl^ agreement accept performance of altered^; .mMif||;,q^^ obligations and confirm in writing the discharge'of contract by performance of the altered^mbdi&d t or-, substituted obligations; - ' f Arb.P. Nos.368/2015 & 369/2015 |age 6 of 9 rr u

(c) where the parties to a contract, by mutual agreement, absolve each other from performance of their respective obligations (either on account of frustration or otherwise) and consequently cancel the agreement and confirm that there are no outstanding claims or disputes." In this case the Court relied on earlier judgments of this Court and reiterated the legal position which has been crystallised by a series of judgments where both the parties to a contract confirmed in writing that the contract has been fully and finally discharged by the parties and there was no ^ outstanding claim or dispute and thereafter the matter could not have been referred to arbitration.

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

¶13In our considered view, on the basis of the above settled legal position that when the parties by a supplementary agreement obtained a full and final discharge after paying the entire amount, which was due and payable to the contractor, thereafter the contractor would not be justified in invoking arbitration because there was no arbitral dispute for reference to arbitration."

¶12However, it is pertinent to mention here that as per pleadings of the respondent in both the matters, it was admitted that the documents were signed under protest and thereafter supplementary agreements were executed. Record would also show that in one of the matters, as the petitioner apprehended to stop the payment, sent the letter in advance to the respondent to put the pressure for the purpose of receiving the payment. The said facts have not been denied by the counsel for the respondent. Hence, Arb.P. Nos.368/2015 & 369/2015 . p^gg 7 9 W) there is a force in the submission of the learned counsel for the petitioner that the earlier agreement which contained the arbitration clause would continue at this stage and the objections now raised by the respondent can be considered by the Arbitral Tribunal as per merits.

¶13The other important factor in these cases is that under similar circumstances, in Arb. P,168/2015 between Pradeep Vinod Construction Co. V. Union ofIndia, Mr. Justice S.Muralidhar on 15^*^ May, 2015 has, inter alia, passed the following orders: \ ' V "1-One of learned counsel for thelJlesiibpaent, is4hat the PetitioneBhas accepted the full and ^fiij:al pa^enMa^>|ias aim, signed the supplementary \agreement|feSbGQfnil^5he submits \that the r terms of t ' i .'lAJSi-;- "Pf ie agreement bet^eeWlH^pPties. a Respondeijt |iould be pe^^®^pomt an°^^bi|ator in I II /? F ft!

¶2Counsel for the Petiti|)|fe| l^fpts the above subrriission. He points|put that a specijfe^||l|^^en taken in thejpetition that the supplimentaiy agreement under^urfes^antes^Efidttit*' J-

¶3The Courts-is whether the discharge certi!fea||^arid|^^pp^ml^^ were signed by the Petitioner undMures'sfWould require evidence to be led and is therefore required to be examined by the learned Arbitrator. As far as the appointment of an Arbitrator is concerned, it is seen that the Respondent forfeited its right under the arbitration clause since it failed to appoint an Arbitrator despite invocation of the arbitration clause by the Arb.P. Nos.368/2015 & 369/2015 Petitioner on 5^^ May 2014, followed by another letter dated 12'*" January 2015."

¶14The findings arrived in the above referred order are binding in nature as the facts are identical. Therefore, the prayers in these petitions are liable to be allowed.

¶15Thus, Justice S.K. Aggarwal, Retd. Judge of this Court is appointed as sole Arbitrator to adjudicate the disputes between the parties as mentioned in the present petitions, including "Jheir-,^claims and counter-claims. The Arbitrator shall ensure tiie>%bmpMan^ '^f tjre^pr^frsipns of Arbitration and ff^ ti' ' "" A Conciliation (Amendfnent)^>Act, 20jl;5TKbefore confmencing the arbitration. The arbitration shtll iakb plac^^uhdefcitheM^is of th€ Delhi International ft \\ Arbitration Centre ^fDAC). ThiM6e'stoffith^ learned Arbitrator will be in If ^ ' I terms of the Delhi International Arbltfatioh^ Centre Arbitration Proceedings 1| liIPP (Arbitrators' Fees) Rules. ^ 'A Mi

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¶16Both petitions are ^•^©rdiL^]}fMi%p^sdd|)f./i^ % f Copies 01 this. ordeCbe^given dash tQ^sftheSdarned counsel for the 4lS ^ 1 ' j#' r;^ parties and a copy thereo^f;-be •delivered tpatKerlearned Arbitrator as well as Additional Coordinator, DAC foPthwith^ji (MANMOHAf^MGH^ JUDGE MARCH 08, 2016 Arb.P. Nos.368/2015 & 369/2015

* IN THE HIGH COURT OF DELHI AT NEW DELHI 0/^ Judgment Reserved on: 2" March. 2016 Judgment Pronounced on: 8^^ March 2016 + ARB. P. No.368/2015 S.K.CONTRACTOR Petitioner Through Mr.S.W. Haider, Adv. versus . UNION OF INDIA"^5=^'^ i O T #=% Respondent ' •4Mi8rf»F ■>" B.S.SAN@%# . i|«i . '5^ -i- i Haider, Adv. | II (i -i I ?43| • versus UNION o\lNDIA^,», . jRespondent % F TAlK^cnc^.-AHv CORAM: ^ HON'BLE MRJUSTICE^MMMO^M