Arbitration and Conciliation Act, 1996 – s.11(6) – Appointment of Arbitrators – SDJV, a joint venture of M/s. SSPPL and M/s. AIL was formed – SSPPL was nominated as a ‘Lead Partner’ of SDJV with 95% share as compared to 5% of AIL – SDJV was the successful bidder and that was followed by a Contract Agreement dated 09.03.2006 between the WAPCOSL and SDJV for the implementation of the work on “The Reconstruction, Rehabilitation and completion of Salma Dam Project” in Afghanistan – Several documents were signed including Conditions of Particular Applications (CoPA) – Cl.20.1 thereof dealt with Contractor’s claim and Cl.20.6 dealt with Arbitration – Subsequent to this, the rates of some of the items were revised, which raised the total consideration of the agreement – Thereafter, SDJV and WAPCOSL signed a revised agreement for the rates, referred to as the Amendment of Agreement (AOA) dated 09.06.2015 – Despite signing of AOA, SDJV raised certain claims before the Engineer of WAPCOSL – Subsequent to execution of AOA, dispute arose between the JV partners – On 21.09.2016, AIL revoked Powerof- Attorney executed in favour of SSPPL, which authorized it to appoint arbitrator on behalf of AIL – However, SSPPL filed petition on behalf of SDJV against WAPCOSL u/s. 11(6) of the Act, 1996 – The said petition was allowed by the High Court and the arbitrator was appointed – Aggrieved, WAPCOSL filed special leave petition before the Supreme Court – AIL asserted before the Court that it did not give consent to SSPPL for appointment of arbitrator or to file petition u/s. 11(6) of the Act, 1996 – Consequent to which, the order of the High Court was set aside and parties were relegated before the High Court for reconsideration of all the aspects – The High Court once again allowed the said arbitration petition and appointed a sole arbitrator and held that SSPPL had authority under the JV as well as Contract Agreement to represent SDJV, as a leading partner to take recourse to arbitration – On appeal, held: The Cls 1.2 and 1.3 of Section-01 of the AOA made it clear that no claims will be raised by the Contractor on any of the pending/settled claims/other claims resulting out of correspondences made and there will be “no arbitration” for the settlement of claims – Neither SDJV nor SSPPL have disputed the execution of AOA – The terms and conditions specified in AOA leave no manner of doubt that the arbitration agreement was done away with – 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 – Resultantly, the impugned judgment of the High Court set aside.
Allowing the appeals, the Court
HELD: 1. As regards the first reason weighed with the High Court that the Technical Committee entertained the five appeals filed on behalf of the Salma Dam Joint Venture (SDJV), that in view of this Court cannot undo the effect of terms and conditions of Amendment of Agreement (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 Conditions of Particular Applications (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 Section-01 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 Section-01 of AoA. Hence, this reason weighed with the High Court is manifestly wrong and cannot stand the test of judicial scrutiny. [Para 30] [208-F-H; 209A-C]
2. The second reason weighed with the High Court is again founded on incorrect assumption about the date of AoA. The High Court 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. [Para 31] [209-C-G]
3. 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 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 Section-01 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 this Court. [Para 32] [209-F-H; 210-A-B]
4. As these are the only reasons which had weighed with the High Court to reject the argument of the appellant(s) regarding non-existence 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 agreement between the parties on the date of filing of Arbitration Petition. [Para 33] [210-B-D]
5. 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. [Para 34] [210-D-F] Damodar Valley Corporation v. K. K. Kar [1974] 2 SCR 240 ; National Insurance Company Limited v. Boghara Polyfab Private Limited (2009) 1 SCC 267 : [2008] 13 SCR 638 ; Nathani Steels Ltd. v. Associated Constructions (1995) Suppl. 3 SCC 324 – relied on.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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