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Himachal Pradesh High Court · body

2012 DIGILAW 437 (HP)

Negi Builders Pvt. Ltd. v. Fozal Power Pvt. Ltd.

2012-08-17

KULDIP SINGH

body2012
JUDGMENT Kuldip Singh , Judge. Arbitration and Conciliation Act, 1996, (for short ‘Act’) for appointment of an Arbitrator. 2. The pleaded case of the petitioner is that Letter of Intent dated 09.12.2009 was issued by respondent to petitioner for execution and construction of package-II ( HRT & Surge Tank) Fozal ( 9MW) Hydro Electric Project at Kullu. The agreement between the parties was executed on 28.01.2010. The Clause 3.2.5.0 (GCC Clause 3.1.25.3) of the agreement provides for arbitration. It has been pleaded that petitioner had suggested the name of the person nominated as Arbitrator but respondent has failed to nominate any Arbitrator or to agree to the name so suggested by petitioner. The Arbitral Tribunal has not been constituted or appointed to adjudicate upon the dispute between the parties. 3. The Clause 3.2.5.1 of the arbitration agreement provides that in the event of Contractor or FPPL dis -satisfied with the decision of the Chairman in case of any dispute or difference arising between FPPL and Contractor relating to any matter arising out of or connected with the agreement, the same shall be settled in accordance with the Act including any statutory amendment, modification or replacement thereof. The Arbitral Tribunal shall consist of three Arbitrators whereby one Arbitrator shall be appointed by FPPL, one by Contractor and third Presiding Arbitrator shall be appointed by two Arbitrators. 4. It has been alleged that on 05.07.2010 respondent asked the petitioner to suspend the work. The respondent forced the petitioner to sign letter dated 12.07.2010 which was drafted by the official of the respondent. The respondent on 15.07.2010 forced the petitioner to sign another letter expressing inability to execute the work and further making demand for the amount legally payable. The respondent vide letter dated 16.07.2010 acknowledged acceptance of resignation and to pay the amount. The petitioner made a demand through letter dated 27.07.20 10. The respondent through mutual release agreement dated 22.12.2010 forced the petitioner to encash the bank guarantee for an amount of ‘ 25lacs and made him to sign the document dated 22.12.2010 giving full discharge for the acceptance of ‘5 lacs and return of bank guarantee despite the legitimate claim of petitioner which was much more than what was offered by the respondent. The respondent by practicing fraud, coercion, undue influence forced the petitioner to sign certain letters, documents. The respondent by practicing fraud, coercion, undue influence forced the petitioner to sign certain letters, documents. The agreement dated 22.12.2010 is the result of fraud, coercion, undue influence exerted by respondent over petitioner. 5. It has been stated that as per Letter of Intent it was obligatory on the part of the respondent to provide cement and steel for execution of work. In the absence of steel and cement the petitioner had to purchase these items from local market which is fundamental breach on the part of the respondent by not providing required quantity of steel and cement required for the execution of the work. 6. The electricity connection was not provided to the petitioner by respondent. The petitioner in order to avoid loss continued with the execution of the work by deploying diesel generator which was expensive and caused delay in the execution of the work which is attributable to respondent. 7. The respondent for boring the tunnel did not provide required gelatin candles which resulted in prolongation of work and thereby required target could not be achieved. This breach is also attributable to respondent. 8. The respondent did not provide access to the site from the road as a result of which machinery had to be carried manually in pieces by dismantling the same at the road-head and assembling the same at the site for execution of the work. The access to the site was to be provided by the respondent which was not provided. 9. The petitioner has claimed ‘9,65,955/- for creating space by executing extra items by providing and installing wall of wire crates for protection of dumping area. The petitioner had paid for dumping the excavated muck as no site was provided for dumping the excavated muck. The local people and forest officials raised serious objections. The petitioner had to pay ‘1,45,000/- to local people for dumping excavated muck. 10.The petitioner has claimed ‘ 10,00,000/- for prolongation of work for not providing steel, cement and gelatin by respondent as a result of which labour of the petitioner remained idle. The petitioner has claimed ‘1,71,95,120/- at the rate of 15% anticipated profit, ‘29,85,392/- balance amount due on account of final bill, ‘98,073/- for installation of magazine for storage of gelatin, ‘3,62,315/- on account of carriage of machinery and land payment at Adit-II, ‘1,90,000/- on account of use of compressor . The petitioner has claimed ‘1,71,95,120/- at the rate of 15% anticipated profit, ‘29,85,392/- balance amount due on account of final bill, ‘98,073/- for installation of magazine for storage of gelatin, ‘3,62,315/- on account of carriage of machinery and land payment at Adit-II, ‘1,90,000/- on account of use of compressor . The petitioner has claimed ‘ 77,00,000/- for using generator due to non availability of electricity. 11.The petitioner has claimed ‘62,500/- paid to Mandir Committee, Fozal, on account of providing ingress and egress to the site. The petitioner has claimed security deducted through running bills at the rate of 5% on the final bill which is yet to be finalized and ‘ 1,18,000/- on account of insurance policy. In addition to above, the petitioner has claimed interest at the rate of 18% per annum and cost of arbitration. 12.The petitioner through counsel on 31.08.2010 notified dispute through various documents to the Chairman of respondent to take decision within 28 days. The Chairman of respondent vide letter dated 29.09.2010 rejected the claims of the petitioner. The petitioner through notice dated 09.10.2010 concurred the appointment of Mr.R.K.Sharma as an Arbitrator. In the alternative the petitioner also suggested the names of alternative Arbitrators. The petitioner also requested for referring the dispute to the Arbitrator. It was also notified that in case decision is not taken by respondent within 30 days then the petitioner shall resort to legal course available under the Act for appointment of Arbitrator. It has been stated that petitioner again vide notice dated 01.12.2010 requested for appointment of Arbitrator. The petitioner vide letter dated 03.01.2011 disputed the agreement dated 22.12.2010. 13.The respondent contested the petition by filing reply. The respondent has taken preliminary objections that the petition is pre-mature. The petitioner on 22.12.2010 has settled all accounts arising under the contract dated 28.01.2010 through mutual release and settlement agreement. The Clause-1 of the settlement agreement is very clear to this effect. The petitioner has acted on the settlement agreement and has taken benefit. The petition is not maintainable. The agreement dated 28.01.2010 stands terminated. The objection of territorial jurisdiction has also been taken by the respondent. The agreement dated 28.01.2010 had superseded all previous communications either oral or written and, therefore, petitioner cannot take any benefit of Letter of Intent dated 09.12.2009. The petitioner has not invoked the arbitration in terms of the agreement dated 28.01.2010. The petition is pre-mature. The objection of territorial jurisdiction has also been taken by the respondent. The agreement dated 28.01.2010 had superseded all previous communications either oral or written and, therefore, petitioner cannot take any benefit of Letter of Intent dated 09.12.2009. The petitioner has not invoked the arbitration in terms of the agreement dated 28.01.2010. The petition is pre-mature. The petitioner has concealed material facts. 14.The petitioner vide letter dated 12.07.2010 requested the respondent for financial assistance. The petitioner vide letter dated 15.07.2010 had shown inability to execute the work and as such he resigned from the work. The resignation of the petitioner was accepted by respondent vide letter dated 16.07.20 10. The petitioner was requested to submit final bill on or before 22.07.20 10 towards the work executed by the petitioner till 15.07.2010. The petitioner vide letter dated 27.07.2010 asked the respondent to settle final bill. 15.The respondent received notices dated 28.08.2010 and 31.08.2010 of petitioner through his Advocate for redressal of his disputes within 28 days. The respondent replied vide letter dated 29.09.2010. The petitioner vide notice dated 09.10.2010 conveyed concurrence to respondent to the name of Mr.R.K.Sharma as sole Arbitrator as per Letter of Intent, in the alternative other persons within 30 days or to suggest the names for the appointment of Arbitrator. The respondent on 13.11.2010 replied notice dated 09.10.2010. The petitioner was asked to send the name of one Arbitrator and thereafter the respondent would appoint the Arbitrator. 16.The contention of petitioner that Mr.R.K.Sharma may be appointed as sole Arbitrator was misplaced in view of the agreement dated 28.01.2010. Mr.R.K.Sharma could not be appointed as sole Arbitrator in view of agreement dated 28.01.2010. 17.The petitioner thereafter entered into mutual release and settlement agreement dated 22.12.2010. The respondent returned bank guarantee of ‘25 lacs drawn on Punjab National Bank, Kullu. In addition, the respondent had paid ‘ 5 lacs vide cheque dated 22.12.2010 and the entire dispute was settled between the parties. The petitioner with malafide intention and to harass the respondent has filed the present petition without placing true facts on record. It has been denied that respondent got signed letters, documents from petitioner by exercising undue influence, coercion. The petitioner has thus received ‘30 lacs from the respondent and thereafter these allegations have been made. 18.The petition is not maintainable. The petitioner with malafide intention and to harass the respondent has filed the present petition without placing true facts on record. It has been denied that respondent got signed letters, documents from petitioner by exercising undue influence, coercion. The petitioner has thus received ‘30 lacs from the respondent and thereafter these allegations have been made. 18.The petition is not maintainable. The petitioner has not issued any notice after entering into mutual release and settlement agreement for appointment of Arbitrator and, therefore, the petition is pre-mature. 19.On merits, the respondent has reiterated the stand taken in preliminary submissions. The plea has been taken that request for appointment of Arbitrator is not maintainable as the Court has no territorial jurisdiction. The petitioner has not given notice under Section 11(6) of the Act after agreement dated 22.12.2010. 20.The Letter of Intent dated 09.12.2009 was superseded by agreement dated 28.01.2010 and parties were to be governed by the agreement dated 28.01.2010. The respondent has denied various claims of the petitioner. The petitioner has filed rejoinder and reiterated the stand taken in the petition after denying the defence projected by the respondent. 21.Heard. It has been contended on behalf of the respondent that petitioner was not in a position to execute the work, therefore, on 22.12.2010 mutual release and settlement agreement was executed between the parties and both parties were relieved off from their liability arising under the agreement dated 28.01.2010 and no dispute remains between the parties. It has also been contended that after agreement dated 28.01.2010 ‘30 lacs were paid by respondent to petitioner. The learned counsel for the respondent has relied M/s P.K. Ramaiah and Company Versus Chairman & Managing Director, National Thermal Power Corpn. 1994 Supp (3) SCC 126, Nathani Steels Ltd. Versus Associated Constructions 1995 Supp (3) SCC 324, and Union of India Versus M/s Popular Builders, Calcutta, AIR 2000 SC 3185 . The Court has no jurisdiction to refer the dispute to arbitration in view of Clause 3.2.5.1 (b) of the agreement. On behalf of the petitioner, it has been submitted that agreement dated 22.12.2010 was procured by respondent by playing fraud, exerting coercion and undue influence, similarly letters were also obtained from petitioner by respondent prior to agreement dated 22.12.2010 by playing fraud, exerting coercion and undue influence. The contention has been raised that petitioner is not bound by the agreement dated 22.12.2010. The contention has been raised that petitioner is not bound by the agreement dated 22.12.2010. The learned counsel for the petitioner has relied National Insurance Company Limited Versus Boghara Polyfab Private Limited (2009) 1 SCC 267 . 22. The Clause-ix of Letter of Intent dated 09.12.2009 provides that in an event of any dispute arising between petitioner and respondent, the same shall be referred to sole arbitrator Mr.R.K.Sharma. In the Letter of Intent, it has also been provided that parties shall execute a contract for execution of the project within 30 days of the Letter of Intent. The contract documents shall stand the only document which shall be interpretedand executed in accordance with the terms contained therein. The Clause-4 of the agreement provides the documents which shall be deemed to form and be read and construed as part of this agreement. The Letter of Intent dated 09.12.2009 has not been made part of the agreement dated 28.01.2010. The contract document governs the terms and conditions between the parties for execution of the works. 23.The Clause 3.1.25.1 of the agreement dated 28.01.2010 provides that the Chairman shall give decision in writing within 28 days of receipt of a notification of dispute along with all desired information and documents in this regard. The Clause 3.1.25.2 provides that either party may refer a decision of the Chairman to an Arbitrator within 28 days of the Chairman’s written decision. If neither party refers the dispute to arbitration within 28 days, the Chairman’s decision shall be final and binding on the parties. The arbitration shall be conducted in accordance with the arbitration procedure stated in the special conditions of contract as per Clause 3.1.25.3 of the agreement. The Clause 3.2.5.1 (a) (b) of the agreement is as follows:- “The procedure for arbitration will be as follows: (a) In the event the Contractor or FPPL is dissatisfied with the decision of the Chairman in case of any Dispute or difference arising between FPPL and the Contractor relating to any matter arising out of or connected with this Agreement, the same shall be settled in accordance with the Arbitration and Conciliation Act, 1996 including any statutory amendment, modification or replacement thereof. The arbitral tribunal shall consist of three arbitrators, whereby one arbitrator shall be appointed by FPPL, one by the Contractor and the third/presiding arbitrator shall be appointed by the two arbitrators so appointed. The arbitral tribunal shall consist of three arbitrators, whereby one arbitrator shall be appointed by FPPL, one by the Contractor and the third/presiding arbitrator shall be appointed by the two arbitrators so appointed. (b) Arbitration proceedings shall be held at Delhi and the language of the arbitration proceedings and that of all documents and communications between the parties shall be English.” 24.The petitioner on 31.08.2010 notified the dispute to the Chairman of respondent under Clause 3.1.25.0 of the agreement dated 28.01.2010 along with letter dated 28.08.2010 with a request to take decision and convey the outcome within 28 days. The Chairman of respondent conveyed his decision to petitioner vide communication dated 29.09.2010 that reference is belated as such fundamentally the dispute raised by petitioner is outside the purview of Clause 3.1.25.0 of the agreement. 25.The petitioner vide notice dated 09.10.2010 to respondent requested that petitioner has no objection in case Mr.R.K.Sharma as per Letter of Intent is appointed as Arbitrator. It has also been stated that in case procedure of Arbitral Tribunal as per Clause 3.2.5.0 is to be followed in that case also petitioner has no objection for the appointment of Mr.R.K.Sharma as Arbitrator or in the alternative Mr.O.P.Mahajan, Retd., Chief Engineer, HPSEB, or Mr.Naresh Kumar Sood, Advocate, High Court. The notice was served to convey concurrence with respect to Mr.R.K.Sharma as per Letter of Intent or with respect to other persons named therein within 30 days of the receipt of the notice. It was also requested to suggest the names for consideration of appointment of an Arbitrator, in the alternative Arbitral Tribunal. 26.On 13.11.2010 the petitioner was informed that as per Clause 3.2.5.0 of the agreement one Arbitrator is to be nominated from one side. The petitioner was asked to give definite name of the Arbitrator which petitioner wants to nominate. The petitioner on 01.12.2010 in response to letter dated 13.11.2010 of the Advocates of respondent has stated that names of Mr.O.P.Mahajan and Mr. Naresh Kumar Sood were suggested only in case the appointment of Mr.R.K.Sharma was not acceptable to the respondent. It was repeated that petitioner is agreeable to the appointment of Mr.R.K.Sharma as sole Arbitrator to arbitrate the dispute between the parties. 27. It is clear from the correspondence between petitioner and respondent that petitioner wanted Mr.R.K.Sharma to be the sole Arbitrator to adjudicate the dispute between the parties. It was repeated that petitioner is agreeable to the appointment of Mr.R.K.Sharma as sole Arbitrator to arbitrate the dispute between the parties. 27. It is clear from the correspondence between petitioner and respondent that petitioner wanted Mr.R.K.Sharma to be the sole Arbitrator to adjudicate the dispute between the parties. But, he has also given alternative names of Mr.O.P.Mahajan or Mr.Naresh Kumar Sood to be the Arbitrator to adjudicate the dispute. The petitioner gave notice dated 09.10.2010 for referring the dispute to arbitration, but no step was taken by the respondent to appoint Arbitrator as per Clause 3.2.5.1(a) of the agreement. 28. In the case law relied by respondent, it has been held that if the dispute has been settled, subsequent claim in respect of the same claim is not maintainable. There should be living dispute between the parties, but once the dispute has been settled nothing can be referred for arbitration. In Nandan Biomatrix Limited Versus D I Oils Limited (2009) 4 SCC 495 one of the issue before the Supreme Court was whether there exists a live claim between the parties. It was the contention of the non-applicant before the Supreme Court that vide termination agreement dated 16.10.2004, the supply agreement stood terminated. The termination agreement has been signed by two of the Directors of the applicant Company. The termination agreement was signed by the parties with the express intention that such execution would void the supply agreement. The intention behind entering the R&D agreement was to put an end to the supply agreement. The contention was that in view of termination agreement, the claim of the applicant towards alleged expenditure incurred by it stood extinguished/waived/satisfied. The termination agreement indicates accord and satisfaction of all the claims of the parties under the supply agreement, under the deed of termination any claim on account of alleged expenditure stood extinguished. One of the issues involved was whether deed of termination stood forged as claimed by the applicant. There were other contentions of the applicant also. The Supreme Court held that the case involves a live claim between the parties and decided the issue of existence of valid arbitration agreement between the parties in favour of applicant and against non-applicant. 29. The Supreme Court in National Insurance Company Limited Versus Boghara Polyfab Private Limited (2009) 1 SCC 267 has held as follows:- “24. The Supreme Court held that the case involves a live claim between the parties and decided the issue of existence of valid arbitration agreement between the parties in favour of applicant and against non-applicant. 29. The Supreme Court in National Insurance Company Limited Versus Boghara Polyfab Private Limited (2009) 1 SCC 267 has held as follows:- “24. What is however clear is when a respondent contends that the dispute is not arbitrable on account of discharge of the contract under a settlement agreement or discharge voucher or no-claim certificate, and the claimant contends that it was obtained by fraud, coercion or under influence, the issue will have to be decided either by the Chief Justice/his designate in the proceedings under Section 11 of the Act or by the Arbitral Tribunal as directed by the order under Section 11 of the Act. A claim for arbitration cannot be rejected merely or solely on the ground that a settlement agreement or discharge voucher had been executed by the claimant, if its validity is disputed by the claimant.” “26. When we refer to a discharge of contract by an agreement signed by both parties or by execution of a full and final discharge voucher/receipt by one of the parties, we refer to an agreement or discharge voucher which is validly and voluntarily executed. If the party which has executed the discharge agreement or discharge voucher, alleges that the execution of such discharge agreement or voucher was on account of fraud/coercion/undue influence practised by the other party and is able to establish the same, then obviously the discharge of the contract by such agreement/voucher is rendered void and cannot be acted upon. Consequently, any dispute raised by such party would be arbitrable.” “51. The Chief Justice/his designate exercising jurisdiction under Section 11 of the Act will consider whether there was really accord and satisfaction or discharge of contract by performance. If the answer is in the affirmative, he will refuse to refer the dispute to arbitration. On the other hand, if the Chief Justice/his designate comes to the conclusion that the full and final settlement receipt or discharge voucher was the result of any fraud/coercion/undue influence, he will have to hold that there was no discharge of the contract and consequently, refer the dispute to arbitration. On the other hand, if the Chief Justice/his designate comes to the conclusion that the full and final settlement receipt or discharge voucher was the result of any fraud/coercion/undue influence, he will have to hold that there was no discharge of the contract and consequently, refer the dispute to arbitration. Alternatively, where the Chief Justice/his designate is satisfied prima facie that the discharge voucher was not issued voluntarily and the claimant was under some compulsion or coercion, and that the matter deserved detailed consideration, he may instead of deciding the issue hi mself, refer the matter to the Arbitral Tribunal with a specific direction that the said question should be decided in the first instance.” The Supreme Court in Para-52 of the report has given some illustrations when claims are arbitrable or when they are not, when discharge of contract by accord and satisfaction are disputed. 30.The petitioner has taken the stand that settlement agreement dated 22.12.2010 and correspondence between the parties before 22.12.2010 are the result of coercion, undue influence and fraud. The petitioner has seriously disputed the legality of settlement agreement dated 22.12.2010. Therefore, it is not possible prima facie to record a finding that there is no living agreement to refer the dispute for arbitration. The contract document between the parties is dated 28.01.2010. The notice was required to be given for appointment of Arbitrator under agreement dated 28.01 .2010.The agreement dated 22.12.2010 has been disputed by the petitioner. The petitioner had given notice under agreement dated 28.01.2010 for appointment of Arbitrator. In these circumstances, it cannot be said that there was any necessity to issue notice for appointment of Arbitrator after agreement dated 22.12.2010. Therefore, I am of the view that it will be appropriate if the Arbitral Tribunal decides the issue of legality of settlement agreement dated 22.12.2010 in the first instance before deciding other claims/counter claims. 31. The respondent has taken the objection that this Court has no jurisdiction in view of Clause 3.2.5.1(b) of the agreement dated 28.01.2010. The submission has been noticed only to be rejected. The Clause 3.2.5.1(b) of the agreement dated 28.01.2010 provides that arbitration proceedings shall be held at Delhi. The Clause only provides the place of arbitration proceedings. It is not the case of the petitioner that in absence of Clause 3.2.5.1(b) of the agreement, this Court has no jurisdiction. The submission has been noticed only to be rejected. The Clause 3.2.5.1(b) of the agreement dated 28.01.2010 provides that arbitration proceedings shall be held at Delhi. The Clause only provides the place of arbitration proceedings. It is not the case of the petitioner that in absence of Clause 3.2.5.1(b) of the agreement, this Court has no jurisdiction. The Clause 3.2.5.1(b) of the agreement nowhere takes away the jurisdiction of this Court for appointment of Arbitrator under Section 11 of the Act. It is held that this Court has jurisdiction to entertain and decide the petition under Section 11 of the Act. 32. In view of above, the petition is allowed. The respondent is directed to nominate its Arbitrator within 30 days from the date of this judgment. Thereafter, Mr. R.K.Sharma nominated Arbitrator of petitioner and the Arbitrator to be nominated by respondent shall appoint Presiding Arbitrator within a further period of 30 days. The Arbitrators, Presiding Arbitrator shall in the first instance decide the legality of settlement agreement dated 22.12.2010 between the parties before adjudicating other claims/counter claims of the parties. The petition stands disposed of on above terms.