Rama Kishan Ashok Kumar (JV) v. Union Of India, Through General Manager, North Western Railway, Near Jawahar Circle, Jaipur
2023-01-12
PANKAJ MITHAL
body2023
DigiLaw.ai
JUDGMENT : 1. Heard Mr. Jatin Agarwal, learned counsel for the applicant and Mr. P.C. Sharma, learned counsel appearing for the respondents. 2. The petitioner is a contractor running its business as a joint venture firm. It has applied for appointment of an Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’) alleging that the contract agreement contains an arbitration clause and that despite invoking the same vide letter dated 01.07.2020, the disputes were not referred to the Arbitrator. 3. The facts, as revealed, disclose that the respondent-Railways issued a Notice Inviting Tender (NIT), inviting applications from the contractors for the construction of roads and under-bridges in lieu of level crossings, and for providing approach road retaining walls and adequate drainage arrangements etc. The petitioner was one of the applicants and his application for the aforesaid works was accepted by the Railways vide letter dated 07.04.2017 for a total cost of Rs.22,41,33,163.47. The petitioner was required to complete the work within a period of 18 months from the date of letter of acceptance. In other words, the work was to be completed on or before 06.10.2018. The petitioner in furtherance of the aforesaid acceptance, submitted earnest money of Rs.13,45,640/- and deposited a performance bank guarantee of Rs.1,12,06,660/-. 4. Upon completion of the formalities in terms of the acceptance letter, an agreement dated 19.07.2017 was executed between the petitioner and the Railways. The aforesaid agreement read with General Conditions of the Contract and Special Conditions of the Contract provides for dispute resolution through arbitration. The petitioner having completed the entire work on 15.07.2019 was expecting preparation of the final bill, but the Railways never took heed to the request of the petitioner for preparing the final bill, with the result, not only the petitioner’s earnest money, performance bank guarantee, but the dues for rendering the above work approximately to the tune of Rs.2 crores got held up. In the above circumstances, the petitioner invoked the Arbitration Clause 84 of the Special Conditions of the Contract vide letter dated 01.07.2020, which in-fact reiterates Clause 63 and 64 of the General Conditions of the Contract.
In the above circumstances, the petitioner invoked the Arbitration Clause 84 of the Special Conditions of the Contract vide letter dated 01.07.2020, which in-fact reiterates Clause 63 and 64 of the General Conditions of the Contract. The Railways in response to the above letter of the petitioner, vide letter dated 28.07.2020 requested the petitioner to give its consent for waiver of applicability of Section 12(5) and 31(5) of the Act, meaning thereby that the Railways were ready and willing to refer the dispute to an Arbitrator, subject to consent of waiver of the above provisions, but surprisingly they insisted and prevailed upon the petitioner to give a No Claim Certificate so that its due amount may be cleared after making statutory deductions. The petitioner not being in a position to prevail over the Railways, under compelling circumstances, so as to have the facility of the immediate funds to enable it to carry on its further business, submitted a No Claim Certificate dated 01.08.2020. It may be pertinent to note that the petitioners submitted the No Claim Certificate subsequent to invocation of the arbitration clause. On the submission of the No Claim Certificate, as aforesaid, the Railways released the final bill after making statutory deductions and made the payment of Rs.1,48,10,535/- to the petitioner. 5. Later on, the Railways vide letter dated 09.09.2020 rejected the demand of the petitioner for appointment of an Arbitrator on the premise that it has signed a No Claim Certificate and as such, has waived its right for appointment of the Arbitrator. 6. It is in the above background that the petitioner has preferred this Arbitration Application contending that the petitioner had not waived its right to claim arbitration on or before invoking the arbitration clause, therefore, once a notice of demand has been issued, the arbitration proceedings have commenced, whereupon it was not open for the Railways to reject the claim for arbitration on any ground much less on the ground that it had signed the No Claim Certificate. The No Claim Certificate was signed by the petitioner much after the invocation of the arbitration clause, that too not with its free will but under some compulsion or coercion as the Railways was in a dominating position and the petitioner had no option but to succumb to its pressure. The disputes, as raised by the petitioner, do not fall within the “excepted matters”. 7.
The disputes, as raised by the petitioner, do not fall within the “excepted matters”. 7. In defence, the Railways through their reply have resisted the claim for the appointment of an Arbitrator alleging that once the petitioner had signed a No Claim Certificate in view of Clause 43(2), it stands debarred from disputing any amount and to seek arbitration. It is submitted that No Claim Certificate has to be read along with Clause 63 and 64 of the General Conditions of the Contract and as such, there is no arbitral claim which needs to be referred. 8. There is no dispute to the fact that the contract agreement vide Clause 84 of the Special Conditions of the Contract provides for resolution of disputes through arbitration. The only aspect which requires consideration is whether in view of Clause 43(2) of the General Conditions of the Contract read with Clause 63 and 64 as the petitioner had signed a No Claim Certificate, is he entitled to still seek resolution of disputes through arbitration? 9. Clause 43(2) of the General Conditions of Contract is reproduced herein below:- “43.(2). Signing of “No Claim” Certificate: The Contractor shall not be entitled to make any claim whatsoever against the Railway under or by virtue of or arising out of this Contract, nor shall the Railway entertain or consider any such claim, if made by the Contractor, after he shall have signed a “No Claim” Certificate in favour of the Railway in such form as shall be required by the Railway after the works are finally measured up. The Contractor shall be debarred from disputing the correctness of the items covered by “No Claim” Certificate or demanding a clearance to arbitration in respect thereof.” 10. Clause 63 of the General Conditions of the Contract which provides for the “excepted matters”, reads as under:- “63.
The Contractor shall be debarred from disputing the correctness of the items covered by “No Claim” Certificate or demanding a clearance to arbitration in respect thereof.” 10. Clause 63 of the General Conditions of the Contract which provides for the “excepted matters”, reads as under:- “63. Matters Finally Determined By The Railway : All disputes and difference of any kind whatsoever arising out of or in connection with the Contract, whether during the progress of the work or after its completion and whether before or after the determination of the Contract, shall be referred by the Contractor to the GM and the GM shall, within 120 days after receipt of the Contractor’s representation, make and notify decisions on all matters referred to by the Contractor in writing provided that matters for which provision has been made in Clauses 8, 18, 22(5), 39, 43(2), 45(a), 55, 55-A(5), 57, 57A, 61(1), 61(2), 62(1) to (xiii)(B) of Standard General Conditions of the Contract or in any clause of the Special Conditions of the Contract shall be deemed as “excepted matters” (matters not arbitrable) and decisions of the Railway authority, thereon shall be final and binding on the Contractor; provided further that ‘excepted matters’ shall stand specifically excluded from the purview of the Arbitration Clause.” 11. At the same time, Clause 64(1)(iv) of the General Conditions of the Contract provides as under:- “64(1)(iv). If the Contractor(s) does/do not prefer his/their specific and final claims in writing, within a period of 90 days of receiving the intimation from the Railways that the final bill is ready for payment, he/they will be deemed to have waived his/their claim(s) and the Railway shall be discharged and released of all liabilities under the Contract in respect of these claims.” 12. On the conjoint reading of the aforesaid clauses, it would be evident that the contractor is not entitled to make any claim if he has signed a No Claim Certificate. He is also debarred from raising any claim once he fails to object to the measurement calculation and preparation of the final bill within the time provided and any claim in respect thereof would fall within the “excepted matters”. 13.
He is also debarred from raising any claim once he fails to object to the measurement calculation and preparation of the final bill within the time provided and any claim in respect thereof would fall within the “excepted matters”. 13. In dealing with the above aspect of the matter, as to whether the petitioner is debarred from seeking any arbitration or raising any dispute, or that the disputes as raised by it fall within the “excepted matters”, it would be relevant to refer to certain decisions. 14. A similar controversy regarding signing and issuing a No Claim Certificate by the contractor and simultaneously demanding arbitration came up for consideration before the Apex Court in the case of Union of India Vs. Parmar Construction Company, reported in (2019) 15 SCC 682 . The Court held that furnishing of a No Claim Certificate in respect of the payment under final bills cannot be inferred to mean that an arbitral dispute had ceased to subsist or the contract stands discharged. There may be cases where such discharge may be under economic duress on account of coercion at the hand of the employer. Therefore, there cannot be an absolute rule debarring the contractor for raising disputes despite No Claim Certificate or acceptance of payment under the final bills and each case has to be looked into on its own facts and circumstances. The Court also observed that one cannot be oblivious of the ground realities that petty/small contractor cannot withstand the pressure of the mighty employer like Railways and thus, where even No Claim Certificate has been issued, it cannot be said that arbitral dispute had come to an end and all these aspects as to whether the arbitral disputes subsist and the contract stands discharged, are matters which should be left to be examined in the arbitral proceedings. 15. In Mayavati Trading Private Limited Vs. Pradyuat Deb Burman, reported in (2019) 8 SCC 714 , the three Judges Bench of the Supreme Court observed that the position of law that prevails is that the Supreme Court or, as the case may be, High Court while considering an application under Section 11(4) and 11(6) has to confine itself to the examination of existence of an arbitration agreement, nothing more nothing less, and leave all other preliminary issues to be decided by the Arbitrator.
On application under Section 11(6), the Court is obliged only to consider the existence of the arbitration agreement and if there exists one and the same has been duly invoked, the Court has no option but to refer the dispute to the Arbitral Tribunal leaving rest of the contentions raised by either of the parties to be dealt with and considered by the Arbitral Tribunal itself. 16. Another three Judges Bench of the Supreme Court in the case of Vidya Drolia and Others Vs. Durga Trading Corporation, reported in (2021) 2 SCC 1 , categorically laid down that the general rule and principle is that the Arbitral Tribunal is a preferred first authority to determine and decide all questions of non-arbitrability. The Court has been conferred power of “second look” on aspects of non-arbitrability, post the award in terms of Section 34 of the Act. The Court, at the same time, in considering the application for appointment of an Arbitrator is not supposed to enter into the mini trial or elaborate review so as to usurp the jurisdiction of the Arbitral Tribunal, but to affirm and uphold the integrity and efficacy of the arbitration as an Alternative Dispute Resolution Mechanism. 17. Another three Judges Bench of the Supreme Court in Pravin Electricals Private Limited Vs. Galaxy Infra and Engineering Private Limited, (2021) 5 SCC 671 , went further ahead in holding that if dispute regarding existence of an arbitration agreement itself on prima facie review appears to be inconclusive and inadequate and requires detailed examination of documentary evidence and cross-examination of the witnesses, the matter/issue should be left to be examined by the Arbitrator and the Court need not enter into the realm of adjudicating the same. 18. In Mohammed Masroor Shaikh Vs. Bharat Bhushan Gupta and Others, reported in (2022) 4 SCC 156 , the Supreme Court observed that the issue of non-arbitrability ought to be left open to be decided by the Arbitral Tribunal. 19.
18. In Mohammed Masroor Shaikh Vs. Bharat Bhushan Gupta and Others, reported in (2022) 4 SCC 156 , the Supreme Court observed that the issue of non-arbitrability ought to be left open to be decided by the Arbitral Tribunal. 19. In light of the legal position as enumerated above, it is crystal clear that the issue of arbitrability or non-arbitrability or any other preliminary issue of the like nature is to be left open to be considered and decided by the Arbitral Tribunal and it is not for the Court to enter into those aspects while considering the application for appointment of an Arbitrator, though in certain cases where ex-facie the matters are not arbitrable or are patently beyond limitation or jurisdiction, the Court can decline to appoint an Arbitrator. In the matters of appointment of an Arbitrator, the Court is only required to examine the existence of the arbitration agreement and that it has been duly invoked but even in cases where such examination or existence of arbitration agreement/arbitration clause requires evidence, the Court may leave it to be adjudicated upon by the Arbitral Tribunal. 20. On the same analogy, the issues whether a particular dispute falls within the “excepted matters” or the contractor is debarred from raising any demand for arbitration upon signing of the No Claim Certificate, are also matters of evidence, which ordinarily should be left open to be decided by the Arbitral Tribunal. 21. In view of the legal position that has been culled out above and the facts and circumstances of the present case, the various decisions cited by Mr. P.C. Sharma, learned counsel for the respondents including that of Union of India & Ors. Vs. Onkar Nath Bhalla & Sons, reported in 2009 DNJ (SC) 482, wherein it has been held that the signing of the full and final bill without any protest or reservation amounts to waiver of right for any further claim, are of no help to him and as such, the Court need not refer and deal with each one of them. 22. In the case at hand, the resistance to the appointment of an Arbitrator is basically on the ground that the petitioner had signed a No Claim Certificate and as such, has waived its right for claiming arbitration and that the matter falls within the “excepted matters”.
22. In the case at hand, the resistance to the appointment of an Arbitrator is basically on the ground that the petitioner had signed a No Claim Certificate and as such, has waived its right for claiming arbitration and that the matter falls within the “excepted matters”. First of all, there is no dispute to the fact that there exists an arbitration agreement and the petitioner had invoked it vide letter dated 01.07.2020. The petitioner has not waived its right for seeking arbitration prior to the invocation of the arbitration clause. Once the petitioner has invoked the arbitration clause, the arbitration proceedings are deemed to have commenced by virtue of Section 21 of the Act, which provides that the arbitral proceeding commences on the date on which a request for that dispute to be referred to arbitration is received by the respondents. The respondent-Railways has certainly received the letter invoking arbitration clause on or before 28.07.2020 as the Railways vide letter dated 28.07.2020, required the petitioner to give consent for waiver of Section 12(5) and 31(5) of the Act for the purposes of reference to the Arbitrator. The No Claim Certificate was signed by the petitioner on 01.08.2020 i.e. subsequent thereto, therefore once the arbitral proceedings have commenced, the signing of the No Claim Certificate would not be material to affect the progress of the proceedings and it is also not open for the Railways to reject the demand for appointment of an Arbitrator by a subsequent order. 23. Thus, in the facts and circumstances, prima facie there is no waiver of the right of the petitioner to claim arbitration under the contract agreement and that if any issues arise in that regard to the arbitrability of the disputes or that matter falls under the “excepted matters”, they are all left to be considered and decided by the Arbitral Tribunal. 24. In view of the aforesaid facts and circumstances, the objections raised to the claim for appointment of an Arbitrator stand overruled and Hon’ble Mr. Justice Prakash Chandra Tatia (former Chief Justice), R/o 201, Ashapurna Enclave, DPS, Sangariya Bypass Road, Jodhpur-342003, is appointed as the Sole Arbitrator, who shall proceed in the matter in accordance with the provisions of the Act to make the award within the time provided under the Act itself after charging the prescribed fee along with incidental expenses to be shared by the parties. 25.
25. Registry is directed to intimate Hon’ble Mr. Justice Prakash Chandra Tatia (former Chief Justice) of his appointment as the Sole Arbitrator. 26. The application stands disposed of accordingly.