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2023 DIGILAW 1493 (AP)

Ghanta Satya Sudheer, S/o. Babu Rajendra Prasad v. State of AP Rep by its Secretary

2023-12-04

DHIRAJ SINGH THAKUR

body2023
JUDGMENT : 1. The present petition has been filed under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) for appointment of an Arbitrator for adjudication of the disputes arising out of and in connection with Agreements dated 07.01.2017. 2. Briefly stated, the material facts are that the petitioner was allotted a contract for construction of a hundred bedded girls hostel and a hundred bedded boys hostel at Mulakaluru Village in Narasaropet. Two Agreements bearing numbers 211of 2017 and 210 of 2017 came to be executed between the petitioner and the official respondents on 07.01.2017. 3. The case of the petitioner is that the projects allotted as per the Agreements were completed, the possession was delivered and the buildings occupied by the requisitioning authority. The respondents prepared the final bills for an amount of Rs.94,14,888/- and Rs.86,04,654/- respectively and that there was delay even in the preparation of the said bills. The grievance of the petitioner was that even when the bills were finally prepared, the amounts as per the bills were not paid. A representation in that regard was made to the Executive Engineer on 09.12.2019, with a request for release of the final amount. Similar representations were submitted to the District Collector on 27.07.2019 as also the Secretary, Finance Department, Government of Andhra Pradesh on 12.08.2019 and 26.08.2020 and finally on 16.12.2020, requesting for the release of the amounts payable to the petitioner. 4. Having failed to get any favourable response, the petitioner claims that a writ petition was filed bearing W.P.No.5180 of 2021, before this Court seeking release of the amount due to the petitioner. During the pendency of the writ petition, the amount was finally paid but without any interest on the delayed payments. The petitioner claims that there was delay in handing over the site to the petitioner for about a year, after the parties entered into the agreement, during which material costs, including labour costs had increased and therefore, the respondents were required to pay escalation charges as per SSR rates in terms of G.O.Ms.No.35, dated 30.01.2009, as also the adjustment of the price in terms of G.O.Ms.No.94. 5. The petitioner states that a request was made for revision in the final bills as per revised SSR rates by giving price adjustment, due to increase in material, oil, essential commodities, transport and labour rates, etc. 5. The petitioner states that a request was made for revision in the final bills as per revised SSR rates by giving price adjustment, due to increase in material, oil, essential commodities, transport and labour rates, etc. It is further stated that the Earnest Money Deposit amount was also not released after completion of the works and the same was released finally, in the year, 2022, and thereby the respondents enriched themselves unduly. 6. It is stated that since disputes had arisen between the parties, a notice dated 15.02.2022, was issued requesting the release of the amounts failing which the claim raised by the petitioner was required to be treated as dispute and as request for arbitration under Clause 22 of the Agreement. In the said notice, the petitioner suggested the name of a retired District Judge as his arbitrator to resolve the dispute through the mechanism of arbitration. 7. It is stated that having failed to elicit the desired response, the disputes are required to be referred for adjudication through a Court appointed Arbitrator. 8. Response has been filed by the official respondents in which the stand taken is that the petitioner, having executed a release and discharge certificates dated 10.07.2019 and 14.10.2019, was not entitled to claim any amount beyond the final bills, according to which payment was required to be made, the same having been accepted by the petitioner as payable to him. In view of the release and discharge certificates, it was further stated that the petitioner would not be entitled to maintain the present petition and to seek reference of the disputes in terms of the arbitration Clause 22, the existence of which is not denied by the counsel for the respondents. 9. Apart from this, it is stated that the interest being claimed by the petitioner on delayed payments as a basis for raising the present dispute, is also not referable for adjudication to an arbitral tribunal, in view of the specific Clause 43 and 43.1. of the Agreement, which envisages as under: “43. 9. Apart from this, it is stated that the interest being claimed by the petitioner on delayed payments as a basis for raising the present dispute, is also not referable for adjudication to an arbitral tribunal, in view of the specific Clause 43 and 43.1. of the Agreement, which envisages as under: “43. Interest on Money due to the Contractor: 43.1 Any omission by the Engineer-in-Charge or the sub-divisional officer to pay the amount due upon certificates shall vitiate or make void the contract, nor shall the contractor be entitled to interest upon any guarantee fund or payments in arrear, nor upon any balance which may, on the final settlement of his accounts, found to be due to him.” 10. Heard learned counsel for the parties. 11. The fact that the petitioner has had executed the release and discharge certificates dated 10.07.2019 and 14.10.2019, is not denied by the petitioner, even in the rejoinder affidavit filed by him. It is not the case of the petitioner that the release and discharge certificates were executed by the petitioner under any fraud, coercion, duress or undue influence by the respondents and following the principles laid down by the Apex Court in the case of National Insurance Company Limited vs. Boghara Polyfab Private Limited, (2009) 1 SCC 267 (hereinafter referred to as “Boghara Polyfab (supra)”), there being accord and satisfaction, which becomes binding and valid, any subsequent application for reference to arbitration would not be maintainable. The Apex Court in Boghara Polyfab (supra) held as under: “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 himself, refer the matter to the Arbitral Tribunal with a specific direction that the said question should be decided in the first instance.” 12. In view of the settled position of law, on this ground, the petitioner would not succeed in seeking reference of the dispute for adjudication through an arbitral tribunal on that ground, as the petitioner had accepted the payments as per the final bills, as the only amounts which were due and payable to him. 13. There is however a second limb of the claim made by the petitioner in the present petition, on which a reference is sought that assuming that the petitioner had executed the discharge and release certificates and may not be entitled to claim an amount other than the amount which was in the final bill, yet such discharge and release certificate would not prevent the petitioner from seeking the interest which had accrued upon the amount, which was arbitrarily withheld for as long as 29 months after the execution of the release and discharge certificates. 13.1. With reference to Section 11(6A) of the Act, learned counsel for the petitioner would submit that notwithstanding the presence of Clause 43.1 of the Agreement executed between the parties, this Court was not required to go into the question as to whether the interest on payments due were at all payable to the petitioner at this stage and all that was required to be considered by this Court under Section 11(6A) was to confine itself to the examination of the existence of an arbitration Agreement, which is not denied by the respondents. 14. 14. In my opinion, even this issue is no longer res integra, as the same has very succinctly been dealt with by the Apex Court in the case of Vidya Drolia vs. Durga Trading Corporation, (2021) 2 SCC 1 , wherein it was held that a referral Court, while exercising powers under Section 11(6), may reject claims which are manifestly and ex-facie non-arbitrable. The Apex Court held as under: “154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny. The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably “non-arbitrable” and to cut off the deadwood. The court by default would refer the matter when contentions relating to non-arbitrability are plainly arguable; when consideration in summary proceedings would be insufficient and inconclusive; when facts are contested; when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitration proceedings. This is not the stage for the court to enter into a mini trial or elaborate review so as to usurp the jurisdiction of the Arbitral Tribunal but to affirm and uphold integrity and efficacy of arbitration as an alternative dispute resolution mechanism.” 15. This principle of law was subsequently followed in Nortel Networks India Pvt. Ltd. vs. Nortel Networks (India) Pvt. Ltd., (2021) 5 SCC 738 , wherein it was held: “45. In a recent judgment delivered by a three-Judge Bench in Vidya Drolia v. Durga Trading Corpn., on the scope of power under Sections 8 and 11, it has been held that the Court must undertake a primary first review to weed out “manifestly ex facie non-existent and invalid arbitration agreements, or non-arbitrable disputes”. The prima facie review at the reference stage is to cut the deadwood, where dismissal is barefaced and pellucid, and when on the facts and law, the litigation must stop at the first stage. Only when the Court is certain that no valid arbitration agreement exists, or that the subject-matter is not arbitrable, that reference may be refused. 45.1. The prima facie review at the reference stage is to cut the deadwood, where dismissal is barefaced and pellucid, and when on the facts and law, the litigation must stop at the first stage. Only when the Court is certain that no valid arbitration agreement exists, or that the subject-matter is not arbitrable, that reference may be refused. 45.1. …While exercising jurisdiction under Section 11 as the judicial forum, the court may exercise the prima facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation. Limited jurisdiction of the courts would ensure expeditious and efficient disposal at the referral stage. At the referral stage, the Court can interfere “only” when it is “manifest” that the claims are ex facie time-barred and dead, or there is no subsisting dispute. …” 16. This principle was reiterated in DLF Home Developers Ltd. v. Rajapura Homes (P) Ltd., (2021) 16 SCC 743 , wherein, the Apex Court held as under: “21. The jurisdiction of this Court under Section 11 is primarily to find out whether there exists a written agreement between the parties for resolution of disputes through arbitration and whether the aggrieved party has made out a prima facie arbitrable case. The limited jurisdiction, however, does not denude this Court of its judicial function to look beyond the bare existence of an arbitration clause to cut the deadwood. A three-Judge Bench in Vidya Drolia, has eloquently clarified that this Court, with a view to prevent wastage of public and private resources, may conduct “prima facie review” at the stage of reference to weed out any frivolous or vexatious claims. … 24. To say it differently, this Court or a High Court, as the case may be, are not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen arbitrator. On the contrary, the Court(s) are obliged to apply their mind to the core preliminary issues, albeit, within the framework of Section 11(6-A) of the Act. Such a review, as already clarified by this Court, is not intended to usurp the jurisdiction of the Arbitral Tribunal but is aimed at streamlining the process of arbitration. Therefore, even when an arbitration agreement exists, it would not prevent the Court to decline a prayer for reference if the dispute in question does not correlate to the said agreement.” 17. Therefore, even when an arbitration agreement exists, it would not prevent the Court to decline a prayer for reference if the dispute in question does not correlate to the said agreement.” 17. Finally, in NTPC Limited vs. SPML Infra Limited, (2023) 9 SCC 385 , the Apex Court held that the referral Court ought to examine whether a claim is nonarbitrable, with a view to protect the parties from being forced to arbitrate when the matter was demonstrably non-arbitrable. The Apex Court held: “28. The limited scrutiny, through the eye of the needle, is necessary and compelling. It is intertwined with the duty of the Referral Court to protect the parties from being forced to arbitrate when the matter is demonstrably non-arbitrable. It has been termed as a legitimate interference by Courts to refuse reference in order to prevent wastage of public and private resources. Further, as noted in Vidya Drolia, if this duty within the limited compass is not exercised, and the Court becomes too reluctant to intervene, it may undermine the effectiveness of both, arbitration and the Court. Therefore, this Court or a High Court, as the case may be, while exercising jurisdiction under Section 11(6) of the Act, is not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen arbitrator, as explained in DLF Home Developers Ltd. v. Rajapura Homes (P) Ltd.” 18. Testing the facts of the present case on the touchstone of the ratio of the judgments supra, it can be seen that the claim of the petitioner with regard to interest on delayed payments, is clearly a claim which is not maintainable in terms of Clause 43.1 of the Agreement which was executed between the parties and therefore, in my opinion, is nonarbitrable. 19. Be that as it may, the present arbitration application is found to be without merit and is accordingly dismissed. No costs. Pending miscellaneous applications, if any, shall stand closed.