Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2019
(Arising out of SLP (C) No. 7979 of 2019)
WAPCOS Ltd. ...Appellant(s)
Versus
Salma Dam Joint Venture & Anr. …Respondent(s)
WITH
CIVIL APPEAL NO. OF 2019
(Arising out of SLP (C) No……….. of 2019)
(Diary No. 6975 of 2019)
J U D G M E N T
A.M. Khanwilkar, J.
Leave granted.
These appeals take exception to the judgment and order
1.
dated 25.01.2019 passed by the High Court of Delhi at New Delhi
in Arbitration Petition No.810 of 2016, whereby the High Court
allowed the Arbitration Petition purportedly filed by respondent
Signature Not Verified
Digitally signed by
DEEPAK SINGH
Date: 2019.11.14
13:06:12 IST
Reason:
No. 1 Salma Dam Joint Venture, under Section 11(6) of the
Page 1 of 27
Arbitration and Conciliation Act, 1996 (for short, “the Act”) and
appointed a sole Arbitrator.
2. Briefly stated, the Ministry of External Affairs (for short,
“MEA”) and the appellant in the leading appeal, Water and Power
Consultancy Services (India) Limited (for short, “WAPCOSL”), a
Public Sector Undertaking, entered into an agreement, dated
29.11.2004, for the implementation of the work on “the
Reconstruction, Rehabilitation and completion of Salma Dam
Project (3x14 MW), Afghanistan, Package III: Main Civil and
HydroMechanical Works” (for short, “project”). The appellant
(WAPCOSL), was given the responsibility to provide financial,
administrative and contractual management services for the
MEA. Even though MEA was to provide the finances, the same
was to be channeled through WAPCOSL to the successful
awardee of the tender.
3. The respondent No.1 in both the appeals, Salma Dam Joint
Venture (for short, “SDJV”) was formed by the M/s SSJV Projects
Private Limited (for short, “SSPPL”) and M/s Angelique
International Ltd. (for short, “AIL”) under a Joint Venture
Agreement (for short, “JVA”) dated 09.09.2005 to submit its bid
for the said project. In accordance with the terms and clauses of
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the JVA, SSPPL was nominated to be the ‘Lead Partner’ of SDJV
with ninetyfive percent (95%) share as compared to five percent
(5%) share of AIL. SSPPL was also authorized to invoke
arbitration by appointing an arbitrator, make claims, et cetera,
on behalf of AIL, by executing a Power of Attorney (for short,
“PoA”) dated 09.09.2005 in favour of SSPPL, in accordance with
Clause 3.3 of the JVA.
4. SDJV was successful being the highest bidder and was
awarded tender for the said project on 17.01.2006. That was
followed by a Contract Agreement dated 09.03.2006 (for short,
“Contract Agreement”) for executing the stated contract between
the WAPCOSL and SDJV. Along with the said agreement,
WAPCOSL and SDJV signed certain documents to be read with
the Contract Agreement and to form part and parcel thereof. Out
of several such documents, Conditions of Particular Applications
(for short “CoPA”) is the relevant one for the purpose of this case.
Clause 20.1 thereof deals with Contractor’s claim and Clause
20.6 deals with Arbitration and it is under these clauses, the
respondent No. 1 has rested its case, that is, arbitrability and the
power to invoke arbitration.
5. Be that as it may, the consideration of the Contract
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Agreement was Rs. 253.84 Crores. However, the same was raised
to Rs. 470.40 Crores, on a representation made by SDJV. Once
again, there was further change by way of revised rates, after a
meeting between SDJV and a HighPower Committee (for short,
“HPC”). In the said meeting, SDJV cited reasons which were
beyond its control for initiating timely construction of the project.
That justification found favour with the HPC for which it had
recommended revised rates with regard to eight items. A letter
was sent by WAPCOSL, informing about the acceptance of revised
rates of eight items and raising the total consideration to Rs.
872.67 Crores. Subsequent to this, SDJV and WAPCOSL signed a
revised agreement for the rates, referred to as the Amendment of
Agreement (for short, “AoA”), dated 09.06.2015.
6. Despite signing of AoA, SDJV raised certain claims before
the Engineer of WAPCOSL. After rejection of said representation,
SDJV preferred six appeals to the Technical Committee
constituted in terms of clause 2.1 of Section – 02 of AoA. Five of
these appeals were rejected/disposed of vide report of the
Technical Committee dated 28.10.2016.
7. In the meantime, on 04.06.2016, the Dam was inaugurated
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by the Hon’ble Prime Minister of India and Hon’ble President of
Afghanistan. Subsequent to which, a letter dated 02.08.2016 was
issued by AIL addressed to WAPCOSL, informing that SDJV has
started the process of dismantling the machinery and the work
force from the project site with full awareness of WAPCOSL.
Subsequent to the execution of AoA, dispute arose between
8.
the JV partners which resulted in AIL filing a petition (bearing
number O.M.P. (I) (COMM.) 70/2016) under Section 9 of the
Arbitration Act, wherein the High Court of Delhi, vide order dated
05.09.2016, directed WAPCOSL to deposit the amount payable to
SDJV with the Registrar of the High Court in order to secure the
interests of both the JV entities. The High Court in a separate
petition (bearing number Arb. P. 442/2016), filed by AIL against
SSPPL, also appointed a sole arbitrator for their (AIL and SSPPL)
inter se disputes.
9. On 21.09.2016, the Board of Directors of AIL resolved to
revoke the PoA executed in favour of SSPPL and in furtherance of
the same, AIL, vide letters dated 19.10.2016 and 11.11.2016,
wrote to the respective Banks and also to WAPCOSL informing
them about the revocation of the authority of SSPPL. Thus, it was
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duly notified through these letters that in future, only those
letters or communications which are signed or acknowledged by
both the parties (AIL and SSPPL) shall be valid and be
entertained by WAPCOSL.
Notwithstanding the abovementioned letters sent by AIL,
10.
upon rejection of the claims of SDJV by the Technical Committee,
on 28.10.2016, SSPPL, unilaterally, espousing claims of SDJV
proceeded to invoke the arbitration process, under clause 20.6 of
CoPA and also appointed a nominee arbitrator, vide letter dated
12.11.2016. WAPCOSL, in response, vide letter dated
05.12.2016, recorded that since SDJV is a joint venture entity
and the authority of SSPPL to represent AIL has been revoked,
the appointment of arbitrator by SSPPL, unilaterally, is illegal in
terms of clause 4.2 of the Contract Agreement and clause 3.2 of
the JVA.
Resultantly, SSPPL filed a petition on behalf of SDJV
11.
against WAPCOSL under Section 11(6) of the Arbitration Act
(bearing number Arb. P. 810/2016) before the High Court of
Delhi, wherein it has been asserted that the PoA dated
15.07.2005 given by AIL in its favour is still in force and forms
part of the Contract Agreement dated 09.03.2006. This assertion
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is factually incorrect. In that, the PoA was executed as a follow
up document alongwith JVA on 09.09.2005 itself. Whereas, the
Board of Directors of AIL vide resolution dated 15.07.2005 had
authorised its officer to execute the JVA and PoA, which were so
executed on 09.09.2005.
12. The said arbitration petition was contested by the appellant
(WAPCOSL). However, the High Court allowed the same vide
order dated 15.03.2017 and appointed an arbitrator for
WAPCOSL.
Feeling aggrieved, WAPCOSL preferred a Special Leave
13.
Petition (bearing number SLP (Civil) 26555/2017) before this
Court. This Court, vide order dated 03.11.2017, directed
impleadment of AIL as a party and also stayed the arbitral
proceedings. AIL appeared before this Court and asserted that it
did not give consent to SSPPL for appointment of an arbitrator or
for filing petition under Section 11(6) of the Arbitration Act. Thus,
it had urged that SSPPL had no authority to unilaterally appoint
an arbitrator for SDJV or to file the subject petition on behalf of
SDJV. Further, the petition filed in the name of SDJV through
SSPPL was not as per Delhi High Court Rules. This Court, vide
order dated 11.12.2017, deemed it proper to set aside the order
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passed by the High Court of Delhi dated 15.03.2017 and to
relegate the parties before the High Court for reconsideration of
all aspects, as would be raised by the parties including regarding
the locus and competence of SSPPL to unilaterally appoint an
arbitrator or file arbitration petition under Section 11 of the Act.
14. The High Court of Delhi, vide judgment dated 25.01.2019
(for short, “impugned judgment”), once again allowed the said
arbitration petition and appointed a sole arbitrator, instead of
three arbitrators envisaged in CoPA.
15. The High Court opined that the arbitration agreement
between SDJV and WAPCOSL was still in force on the date of
filing of the arbitration petition and the same would operate
between the parties. That finding has been reached despite the
AoA having been executed between the parties on 09.06.2015.
The High Court also opined that SSPPL had authority under the
JVA as well as the Contract Agreement to represent SDJV, as a
leading partner thereof. It held that SSPPL derived authority
from clause 20.6 of CoPA read with the other enabling terms in
the JVA and FIDIC Conditions of Contract for Construction (for
short, ‘FIDIC’). The High Court was also impressed by the fact
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that SSPPL had 95 per cent shareholding in SDJV as against
only 5 per cent shareholding of AIL, the other partner. For that
reason, it went on to observe that AIL cannot be permitted to
derail the arbitration process commenced for and on behalf of
SDJV through SSPPL. The High Court was also impressed by the
fact that despite the execution of AoA, the Technical Committee
entertained the appeals filed by SDJV in respect of certain items.
That goes to show that even the Technical Committee was of the
view that the dispensation regarding settlement of further claims
of SDJV could be pursued and the arrangement arrived under
AoA between the parties cannot be treated as full and final
settlement. Resultantly, SDJV was well within its rights to take
recourse to arbitration for resolution of the disputes in that
regard. Further, the fact as to whether SDJV was entitled for the
relief, regarding the claims raised, was a matter within the
exclusive domain of the Arbitral Tribunal. The High Court,
therefore, allowed the Arbitration Petition and appointed a sole
Arbitrator for resolution of the disputes between the parties.
16. Feeling aggrieved, WAPCOSL as well as AIL have assailed
the decision of the High Court by filing separate Special Leave
Petition(s).
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17. We have heard learned Senior Counsel Mr. Gaurav
Panchnanda for WAPCOSL (appellant) and Mr. Shyam Divan for
AIL (appellant), and Mr. Sachin Datta, learned Senior Counsel for
SDJV (respondent No.1 in both the appeals).
After cogitating over the erudite arguments of the counsel
18.
appearing for the respective parties and perusing the relevant
records, including Arbitration Petition and the written
submissions filed by the learned counsel, in our opinion, two
principal issues need be answered in this judgment. First,
whether on the date of presentation of Arbitration Petition,
purportedly by SDJV through SSPPL on 15.12.2016, the
arbitration agreement posited in Contract Agreement dated
09.03.2006 was in existence or subsisting and in force? Second,
whether the Arbitration Petition filed in the name of SDJV
through SSPPL, in law can be considered as having been properly
and validly presented despite the express revocation of authority
of SSPPL vide resolution passed by the Board of Directors of AIL
on 21.09.2016 and duly communicated to SSPPL as well as
WAPCOSL before 15.12.2016, as was granted to SSPPL in terms
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of JVA read with PoA including the Contract Agreement?
19. Reverting to the first question, we must immediately advert
to the Arbitration Agreement incorporated in the Contract
Agreement. That can be discerned from clause 4, which reads
thus:
“4. Settlement of Disputes
4.1 It is specifically agreed by and between the parties
that all the differences or disputes arising out of the
Agreement shall be decided by process of settlement of
disputes and arbitration as specified in Clause 20 of the
Conditions of the Contract.
4.2 It is also agreed that the Salma Dam Joint Venture
agreement dated 9th September 2005 shall be treated as
part of this agreement and both the parties to the said
joint venture namely M/s SSJV Projects Private Limited
and M/s Angelique International Limited shall also be
jointly and severally liable in the process of settlement of
disputes in arbitration between WAPCOS and Salma Dam
Joint Venture.”
This clause must be read alongwith the terms specified in CoPA
in particular clause 20 and clauses 1.14, 4.3 and 20.6 of FIDIC.
Going by the Contract Agreement read with relevant clauses of
CoPA and FIDIC, it is obvious that the parties had agreed for
resolution of all their differences or disputes arising from the
Contract Agreement by process of settlement of disputes and
arbitration.
20. In the present case, however, in due course, because of
fortuitous situation, the parties had to agree to amend certain
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terms and conditions of the Contract Agreement and to provide
for revised contract rates. That was done after due negotiations,
as is evinced from the correspondence exchanged between SDJV
and WAPCOSL vide letters dated 15.09.2011 and 17.09.2012 and
the recitals of the AoA itself. Finally, the parties (SDJV and
WAPCOSL in particular) executed a formal Amendment of
Agreement (AoA) on 09.06.2015. The same records the new
arrangement eventually agreed upon between the parties. It will
be useful to first refer to the preamble of the AoA which reads
thus:
“1.0 Preamble
Consequent upon the modification of rates of certain
Items of works in January 2013 which is subject to
special terms and conditions, the Amendment to the
Original Agreement between WAPCOS and SDJV (the
Parties) was required to be entered upon thereafter.
Nevertheless the work at site continued at very fast pace
and in good faith and trust as per the revised rates
agreed between the Parties. Despite several constraints
the project completion progressed well during the years
2013 and 2014 and substantial part of the works (around
st
97%) of the Dam and Spillway was completed by 31
December 2014. Remaining works are continuing at the
project site.
Now, as the Amendment to Agreement is to be formalized
for proper implementation and records, therefore, in
continued good faith and trust the Parties have agreed to
sign this Amendment of Agreement by incorporating the
actual site conditions, practical difficulties and
subsequent developments that have taken place at site.
……. .”
21. In clause 1.1 of AoA, reference is made to the estimated cost
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of works and the balance work to be completed in the revised
estimated cost. The note below the chart given in clause 1.1 and
clauses 1.2 to 1.6 of the preamble are of some relevance. The
same read thus:
“1.1 The balance work has to be completed in the
revised estimated cost as given below.
Estimated Cost of Works
…. ….. ……
Note: If due to site conditions, the balance quantities
increases, the contractor will carry out the construction
and complete the work
1.2 This Amendment of Agreement will form part of the
Original Agreement no. WAPCOS/SDP/AFG/Pkg.III05
dated 9th March 2006.
1.3 This Amendment of Agreement includes revised Bill of
Quantity (BoQ) (containing executed & balance quantum
of works, New Items of work, etc) with the modified
approved rates for eight major item of Civil works and
modified cost of HydroMechanical works along with
additional terms and Conditions of Contract.
1.4 Any Clauses/items other than the Amendment of
Agreement will be governed by Original Agreement and in
case of any dispute the decision of CMD, WAPCOS will be
final and binding to the Contractor.
1.5 In case of any inconsistency between Original
Agreement and Amendment of Agreement, the content of
Amendment of Agreement will succeed.
1.6 In case of any dispute on Technical Specification and
interpretation of any contract clauses the decision of
CMD, WAPCOS will be final and binding to the
Contractor.
……… .”
22. It may be useful to now advert to clauses 1.2 and 1.3 of
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Section 01 of the AoA, which read thus:
“REVISED COST AND RELATED TERMS AND
CONDITIONS
Clause 1.0
…. ….. …..
The revision of cost/modified rates of above item are
subject to the following:
1.1 …. …. ….
1.2 The balance pending claims of Contractor stands
buried and it was agreed by the Contractor that, no
claims will be raised by Contractor on any of the
pending/settled claims/other claims resulting out of the
correspondences made so far and there will be no
arbitration for the settlement of claims. It is agreed that
the Contractor shall not be paid any further amount on
claim/additional rate for new item of work settled or
pending over and above the payments already released to
the contractor.
1.3 In future, no claim of Contractor on any account
shall be entertained. However any claim arising out of
force majeure shall be examined.”
Here, we may also take note of Section02 of AoA concerning the
amendment in general conditions of CoPA. Clause 2.1 of this
section predicates that subclause 1.1.2.16 of CoPA stands
modified as Technical Committee means committee constituted
by CMD, WAPCOSL.
It is pertinent to note that the execution of stated AoA has
23.
not been disputed by SDJV or for that matter by SSPPL. More so,
these entities have not even challenged the implementation of
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AoA. On the other hand, it has come on record that all concerned
gave effect to the terms set out in AoA by offering revised rates to
SDJV in conformity with the agreed rates referred to in AoA and
which payment was received and availed of by SDJV/SSPPL
without any demur. We may hasten to add that even the subject
Arbitration Petition does not question the execution of AoA or the
applicability thereof. Indeed, the asseveration in the Arbitration
Petition is that the claim set up by SDJV is in reference to items
and bills raised subsequent to the execution of AoA.
24. The moot question is: whether the AoA has the effect of
undoing and abrogating the arbitration clause predicated in the
Contract Agreement? According to SDJV and SSPPL, the
arbitration clause in the Contract Agreement remains intact and
undisturbed. The parties continue to be bound by the same.
25. For considering this plea we must appreciate the backdrop
in which the AoA has been executed, to understand the true
import of the terms and conditions set out therein. From the
correspondence exchanged between the parties preceding the
execution of AoA, being letters dated 15.09.2011 and 17.09.2012,
it is amply clear that the parties were ad idem that substantial
part of the works (around 97 per cent) of the “Dam and Spillway”
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was completed by 31.12.2014. This fact has been plainly
restated in the preamble of the AoA. The AoA also records that if
due to site conditions, the balance quantities increase, the
contractor will carry out the construction and complete the work.
Further, the AoA would form part of the Contract Agreement
dated 09.03.2006 and it includes revised Bill of Quantities (BoQ)
(containing executed and balance quantum of works, new items
of works, etc.) with the modified approved rates for eight major
items of civil works and modified cost of HydroMechanical works
along with additional terms and conditions of Contract. Clause
1.4 of the AoA makes it amply clear that any other clauses/items
other than the AoA will be governed by Original Agreement
(Contract Agreement) and in case of any dispute, the decision of
CMD, WAPCOSL will be final and binding on the contractor.
Clause 1.5 of the AoA makes it further clear that in case of any
inconsistency between the Contract Agreement and AoA, the
terms specified in AoA will prevail. Clause 1.6 of the preamble
postulates that in case of any dispute on technical specifications
and interpretation of any contract clauses, the decision of CMD,
WAPCOSL will be final and binding on the contractor. Section01
of AoA then deals with revised cost and related terms and
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conditions. Clause 1.0 thereof provides that the revision of
cost/modified rates of the items referred to therein will be subject
to clauses 1.2 and 1.3, amongst others. Clause 1.2 of Section01
envisages that the balance pending claims of contractor “stands
buried” and it has been agreed by the contractor, that no claims
will be raised by the contractor on any of the pending/settled
claims/other claims resulting out of correspondences made so far
and there will be “no arbitration” for the settlement of claims.
Clause 1.3 of Section01 also makes it clear that in future no
claim of contractor on any count shall be entertained except the
claim arising out of force majeure.
26. Despite such peremptory agreement and declaration by the
parties, SDJV proceeded on an erroneous basis that the
arbitration agreement in Contract Agreement still subsists and
can be enforced by it. As aforesaid, neither SDJV nor SSPPL
have disputed the execution of AoA nor it is even remotely
suggested in the Arbitration Petition that the AoA was executed
by them under duress or coercion. From the indisputable
circumstances, it becomes amply clear that the stated terms and
conditions set out in the AoA were agreed upon by all concerned
primarily due to revision of cost of the project upto Rs. 872.67
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crores which is 3.44 times the original project cost, (i.e. Rs.
253.84 crores) as the same was subject to clauses 1.2 and 1.3 of
1
Section01 . Notably, this AoA was executed at a stage when
substantial part of the works (around 97%) had already been
completed. In our opinion, the terms and conditions specified in
AoA leave no manner of doubt that the arbitration agreement has
been done away with – as is manifest from the unambiguous
declaration that balance pending claims of Contractor stand
buried and that there will be no arbitration for the settlement of
2
claims .
27. To get over this position, SDJV would contend that
Section02 of AoA specifically deals with the amendments in
general conditions of CoPA but it makes no reference to
amendment of clause 20 of CoPA. That may be so, however, in
our view, it will be of no avail. We will deal with this aspect a
little later. Suffice it to observe that the terms and conditions of
AoA make it amply clear that the arbitration agreement stands
overridden in view of the express declaration in AoA in that
regard referred to earlier.
As noticed earlier, AoA was executed on 09.06.2015 by
28.
1 See – Clause 1.0 of Section01 of AoA (in paragraph 22 above)
2 See – Clause 1.4 of Preamble (in paragraph 21 above) read with clauses 1.2 and 1.3 of
Section 01 of AoA (in paragraph 22 above).
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which date, substantial part of the works (around 97 per cent) of
the “Dam and Spillway” had been completed. The water filling in
dam commenced on 26.07.2015 by closing diversion tunnel gate.
That presupposes that the “Dam and Spillway” work was fully
completed before that date. It is also not disputed that the project
was inaugurated by the Prime Minister of India and the President
of Afghanistan on 04.06.2016. The terms agreed upon between
the parties and as recorded in AoA dated 09.06.2015 was the
outcome of steep revision of rates. These circumstances are
germane whilst answering the question under consideration. We
have no manner of doubt that the purport of the terms and
conditions incorporated in the AoA dated 09.06.2015 are
unambiguous expression of intent to supersede the arbitration
agreement incorporated in Contract Agreement dated 09.03.2006
and to resolve all the contentious issues regarding the claims of
SDJV, in the manner specified therein.
The High Court, however, rejected the argument of the
29.
appellant(s) herein on the following basis:
“10.5 What is, however, not disputed is that as a matter
of fact, the J.V. entity had lodged its claim with the
Engineer appointed under the C.A. and upon the
Engineer repelling its claim, five appeals were lodged with
the Technical Committee which rejected the same by way
of a common order dated 28.10.2016. A perusal of the
order of the Technical Committee would show that the
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claims lodged by the J.V. entity have been examined on
merits and also from the perspective of the plea raised
before it with regard to their admissibility in view of the
provisions of Clauses 1.2 and 1.3 of the AOA.
10.6 Therefore, if, as contended on behalf of WAPCOS,
Clauses 1.2 and 1.3 of the AOA barred the J.V. entity
from pressing any pending or future claims, then, to my
mind, there was no need for the Technical Committee to
deliberate upon the claims on merits. It is the stand of
the J.V. entity that all the claims lodged by it with
WAPCOS pertain to a period post the execution of the
AOA.
10.7 The record shows that the AOA was executed on
09.06.2005, while the subject project was inaugurated
post its completion only in 2016. Furthermore, it is the
case of the J.V. entity that the AOA provided for revision
of rates for eight major items concerning civil works and
hydro mechanical works. Therefore, if at all, the bar
would apply to claims, which were referable to pre
existing claims, or claims pertaining to revision of rates
relatable to eight major items of civil works and hydro
mechanical works or those claims which overlapped with
these claims. That being said, as to whether the position
taken by the J.V. entity is correct or not is a matter
which can only be examined by the Arbitral Tribunal
once the matter is tried as based on mere pleas and
counter pleas, this aspect cannot be decided in a Section
11 petition. Particularly, given the facts obtaining in this
case, it is not possible to come to a definitive conclusion
that there was accord and satisfaction upon the
execution of the AOA.
10.8 Therefore, the ground taken on behalf of WAPCOS
that no claim could be lodged post execution of the AOA
is untenable and hence cannot be accepted. There is, to
my mind, much merit in the submission advanced on
behalf of the J.V. entity that the AOA cannot impede
adjudication of all future claims whether or not they have
their genesis in the AOA. If that was the intent, as
correctly argued on behalf of the J.V. entity, the AOA
should have done away with Clause 20.6 of COPA, which
contains the arbitration agreement.”
30. As regards the first reason weighed with the High Court that
the Technical Committee entertained the five appeals filed on
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behalf of the SDJV, that in our view cannot undo the effect of
terms and conditions of AoA which had annulled the arbitration
clause in the Contract Agreement. There are at least two other
tangible reasons to overturn the stated opinion of the High Court.
First, the Technical Committee was, as a matter of fact,
constituted under clause 2.1 of Section – 02 of AoA by the CMD
of WAPCOSL, as is evident from the communication dated
21.10.2015 sent by WAPCOSL to SDJV. That fact has been
restated in the subsequent correspondence. The Technical
Committee was, therefore, not constituted in terms of Clause
20.1 of CoPA as has been erroneously assumed by the High
Court. Second, the fact that the Technical Committee processed
the appeals instituted by SDJV does not mean that WAPCOSL
had waived the terms and conditions of AoA, in particular
clauses 1.2 and 1.3 of Section01 thereof. No averment is found
in the Arbitration Petition to even remotely suggest that it was a
case of waiver express or tacit, by WAPCOSL qua the stipulation
specified in clauses 1.2 and 1.3 of Section01 of AoA. Hence, this
reason weighed with the High Court is manifestly wrong and
cannot stand the test of judicial scrutiny.
31. The second reason weighed with the High Court is again
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founded on incorrect assumption about the date of AoA. The
High Court in paragraph 10.7 proceeds on the basis that AoA
was executed as back as on 09.06.2005 and having noted that
date, the High Court then observed that the project was
inaugurated only in 2016. On this erroneous assumption, the
High Court rejected the claim of the appellant(s) herein. As a
matter of fact, the AoA was executed on 09.06.2015, at which
point of time, 97 per cent of the project was completed and the
same was rolled out by filling of the Dam from 26.07.2015 in less
than one month, by closing diversion tunnel gate. Not only that,
the project was dedicated to the people of Afghanistan soon
thereafter on 04.06.2016. Thus understood, it becomes clear that
the parties had agreed to give quietus to all the claims and adopt
revised rates recommended by High Power Committee, as
recorded in AoA executed on 09.06.2015. Suffice it to note that
the basis for rejecting the argument of the appellant(s) is founded
on erroneous assumption that AoA was executed on 09.06.2005.
That is an error apparent on the face of the record.
32. The third reason weighed with the High Court is that clause
20.6 of CoPA, providing for resolution of disputes by arbitration
has not been modified by AoA. Indeed, clause 4 of the Contract
Page 22 of 27
Agreement makes reference to clause 20 of CoPA. However, on a
fair reading of clause 4 of the Contract Agreement and in
particular 4.1 as reproduced hitherto, it would be crystal clear
that the substance of the provision is to provide for process of
settlement of disputes and arbitration. Reference to clause 20 of
CoPA is only to indicate that the procedure specified therein may
have to be followed whilst taking recourse to that process.
However, as the substantive provision regarding remedy of
arbitration itself has been done away with in terms of clauses 1.2
and 1.3 of Section01 of AoA, there was no need to modify clause
20 in CoPA dealing with machinery provision. Thus, the remedy
of arbitration cannot be resurrected merely because clause 20 of
CoPA has not been expressly modified in the AoA. Hence, even
this reason does not commend us.
33. As these are the only reasons which had weighed with the
High Court to reject the argument of the appellant(s) regarding
nonexistence of arbitration agreement and the same being
untenable in law, it must necessarily follow that the Arbitration
Petition filed for and on behalf of SDJV through SSPPL was not
maintainable. In other words, the Arbitration Petition should
have been rejected for lack of subsisting or existing arbitration
Page 23 of 27
agreement between the parties on the date of filing of Arbitration
Petition.
34. It is not unknown in commercial world that the parties
amend original contract and even give up their claims under the
subsisting agreement. The case on hand is one such case where
the parties consciously and with full understanding executed AoA
whereby the contractor gave up all his claims and consented to
the new arrangement specified in AoA including that there will be
no arbitration for the settlement of any claims by the contractor
in future. Having chosen to adopt that path, it is not open to the
contractor to now take recourse to arbitration process or to
resurrect the claim which has been resolved in terms of the
amended agreement, after availing of steep revision of rates being
condition precedent. We may usefully rely on the underlying
principle expounded by this Court in
Damodar Valley
3
Corporation vs. K. K. Kar , wherein the Court observed as
follows:
“…..As the contract is an outcome of the agreement
between the parties it is equally open to the parties
thereto to agree, to bring it to an end or to treat it as if it
never existed. It may also be open to the parties to
terminate the previous contract and substitute in its
place a new contract or alter the original contract in such
3 (1974) 2 SCR 240 @ 243244
Page 24 of 27
a way that it cannot subsist. In all these cases, since the
entire contract is put an end to, the arbitration clause,
which is a part of it, also perishes along with it. Section
62 of the Contract Act incorporates this principle when it
provides that if the parties to a contract agree to
substitute a new contract or to rescind or alter it, the
original contract need not be performed. Where,
therefore, the dispute between the parties is that the
contract itself does not subsist either as a result of its
being substituted by a new contract or by rescission or
alteration, that dispute cannot be referred to the
arbitration as the arbitration clause itself would perish if
the averment is found to be valid. As the very jurisdiction
of the arbitrator is dependent upon the existence of the
arbitration clause under which he is appointed, the
parties have no right to invoke a clause which perishes
with the contract.”
In a subsequent decision in National Insurance Company
4
, in paragraph
Limited vs. Boghara Polyfab Private Limited
52 this Court held as follows:
“ 52. Some illustrations (not exhaustive) as to when
claims are arbitrable and when they are not, when
discharge of contract by accord and satisfaction are
disputed, to round up the discussion on this subject are:
(i) …. …. ….
( ii ) A claimant makes several claims. The admitted or
undisputed claims are paid. Thereafter negotiations are
held for settlement of the disputed claims resulting in an
agreement in writing settling all the pending claims and
disputes. On such settlement, the amount agreed is paid
and the contractor also issues a discharge voucher/no
claim certificate/full and final receipt. After the contract
is discharged by such accord and satisfaction, neither the
contract nor any dispute survives for consideration.
There cannot be any reference of any dispute to
arbitration thereafter.
( iii ) …. …. ….
( iv ) …. …. ….
( v ) A claimant makes a claim for a huge sum, by way of
damages. The respondent disputes the claim. The
4 (2009) 1 SCC 267
Page 25 of 27
claimant who is keen to have a settlement and avoid
litigation, voluntarily reduces the claim and requests for
settlement. The respondent agrees and settles the claim
and obtains a full and final discharge voucher. Here even
if the claimant might have agreed for settlement due to
financial compulsions and commercial pressure or
economic duress, the decision was his free choice. There
was no threat, coercion or compulsion by the respondent.
Therefore, the accord and satisfaction is binding and valid
and there cannot be any subsequent claim or reference to
arbitration.”
5
Further, in ,
Nathani Steels Ltd. v. Associated Constructions
this Court observed as follows:
“3......Even otherwise we feel that once the parties have
arrived at a settlement in respect of any dispute or
difference arising under a contract and that dispute or
the difference is amicably settled by way of a final
settlement by and between the parties, unless that
settlement is set aside in proper proceedings, it cannot lie
in the mouth of one of the parties to the settlement to
spurn it on the ground that it was a mistake and proceed
to invoke the Arbitration clause. If this is permitted the
sanctity of contract, the settlement also being a contract,
would be wholly lost and it would be open to one party to
take the benefit under the settlement and then to
question the same on the ground of mistake without
having the settlement set aside. In the circumstances, we
think that in the instant case since the dispute or
difference was finally settled and payments were made as
per the settlement, it was not open to the respondent
unilaterally to treat the settlement as non est and
proceed to invoke the Arbitration clause. We are,
therefore, of the opinion that the High Court was wrong
in the view that it took.”
35. Having said this, no other issue need be addressed in these
appeals. As a result, these appeals must succeed. Resultantly,
the impugned judgment of the High Court is set aside and the
5 1995 Supp (3) SCC 324
Page 26 of 27
Arbitration Petition No. 810 of 2016 filed by the respondent No. 1
herein stands dismissed.
36. However, we must keep the option available to the parties to
take recourse to other remedies, inter se , which they are free to
adopt in accordance with law; and the rejection of Arbitration
Petition will be no impediment for them to pursue those
remedies. We, accordingly, keep all other issues and contentions
available to the parties open, to be determined in appropriate
proceedings as and when occasion arises.
37. The appeals are allowed in the above terms with no order as
to costs. All pending applications are also disposed of.
….…………..................J.
(A.M. KHANWILKAR)
………..……...................J.
(DINESH MAHESHWARI)
New Delhi;
November 14, 2019.
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