Pragati Constructions Consultants vs Union Of India & Anr on 22 October, 2021

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Delhi High Court - Orders

Pragati Constructions Consultants vs Union Of India & Anr on 22 October, 2021

1. The petitioner has filed the present petition under Section 11 of the Arbitration and Conciliation Act, 1996 (hereafter the 'A&C Act') praying that an Arbitrator be appointed to adjudicate the disputes that have arisen between the parties as set out in the petition.

2. The respondent no.1 (hereafter 'the Railways') had invited tenders for execution of the work described as "Construction of Road Over Bridge consisting of steel girder span 1 x 52410 mm &K 2 x 37845 mm I n connection with connecting NH-58 to NH-24 at Km 17/24-26 on Delhi- Ghaziabad Section near Ghaziabad Railway Station".

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3. The petitioner submitted its bid pursuant to the aforesaid invitation to tender. The said bid was accepted and the Railways issued a Letter of Acceptance (LOA) dated 23.07.2014. The work was to be completed within a period of twelve months from the date of the LOA and the value of the work was agreed at ₹23,16,84,826.04/- (Rupees Twenty-Three Crores Sixteen Lakhs Eighty-Four Thousand Eight Hundred Twenty-Six and Four Paise only). Admittedly, there were certain delays in execution of the work and according to the petitioner, the same were for reasons attributable to the Railways and otherwise for reasons beyond its control.

4. The petitioner states that the work was completed in all respects on 10.11.2016. In the first week of January 2017, the Railways also released the security deposit of ₹1.5 crores against a bank guarantee.

5. It is the petitioner's case that it continued to pursue the Railways for finalising the Final Bill and for release of the pending payments. The petitioner claims that it also sent various letters including letters dated 07.02.2017, 23.02.2017 and 04.04.2017 inter-alia stating that if any of the dues were not included in the Final Bill, the petitioner would claim the same in an arbitration. The petitioner states that the respondent declined to process the final addendum and corrigendum and/or release the dues as demanded by the petitioner. It is submitted that even the admitted dues were not released.

6. In the circumstances, the petitioner sent several communications protesting against non-release of the payment, even the admitted dues. The petitioner also alleges that the same amounted to exerting, economic duress Signature Not Verified Digitally Signed By:DUSHYANT RAWAL and coercion.

7. The defect liability period expired on 10.11.2017 and even as on that date, the Railways has not released the final payments. The petitioner claims that it had notified claims in excess of ₹6 crores during the execution of the contract as well as after its completion. However, the respondent declined to process the Final Bill unless the petitioner signed a Supplementary Agreement in the format as provided.

8. The petitioner states that it signed the Supplementary Agreement and a No Claim Certificate on 14.12.2017 under financial duress and coercion. Thereafter, the petitioner received a payment of ₹2,38,10,731/-. However, immediately thereafter, the petitioner sent letters stating that the no claim certificate and the supplementary agreement were signed under economic duress and coercion.

9. By a notice dated 17.01.2018, the petitioner invoked the agreement to refer the disputes to arbitration, however, received no response to the said letter. The petitioner again reiterated its request for appointment of the arbitrator. In response thereto, the Railways sent a letter dated 24.05.2018 declining to appoint an arbitrator and asserting that the arbitration agreement stood discharged by the Supplementary Agreement dated 14.12.2017.

10. Mr Vivekanand, learned counsel appearing for the petitioner drew the attention of this Court to the letters sent immediately after signing of the Supplementary Agreement, the No Claim Certificate as well as the communication sent during the execution of the contract in support of his contention that the petitioner had not waived any of its claims. He also Signature Not Verified Digitally Signed By:DUSHYANT RAWAL referred to an earlier decision of this Court between the same parties (Pragati Construction Consultants v. Ministry of Railways through its General Manager: Arb. P. 115/2016 decided on 19.01.2017) whereby this Court had noted the contention of the Railways that as a matter of practice, no final payment is released without execution of an No Claim Certificate. This Court had also noted that Clause 9.8 of the tender conditions required for execution of a Supplementary Agreement after full and final payment had been made by the Railways. A similar clause also exists in the tender conditions in this case. The said clause reads as under:

"9.8 SUPPLEMENTARY AGREEMENT After the work is completed and taken over by the Railway as per terms and conditions of the contract agreement or otherwise concluded by the parties with mutual consent and full and final payment is made by the Railway to the contractor for work done under the contract the parties shall execute the supplementary agreement annexed here to as Annexure-'B'."

11. The aforesaid clause requires that the parties enter into the Supplementary Agreement after full and final payment is made by the Railway. In the present case, it is admitted that the Supplementary Agreement was signed much prior to the release of the final payments.

12. The learned counsel for the respondent has opposed the appointment of an arbitrator on the ground that the contract between the parties stood discharged by accord and satisfaction in view of the Supplementary Agreement and the No Claim Certificate issued on 14.12.2017. He, however, concedes that this is a contentious issue.

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13. It is at once clear from the above that the examination of the dispute between the parties, whether the contract stood discharged by accord and satisfaction, is beyond the standards of Section 11 of the A&C Act, and is confined to the existence of an arbitration agreement (See: Mayavati Trading Private Limited v. Pradyuat Deb Burman: (2019) 8 SCC 714).

14. Mr Ashok Singh, learned counsel appearing for the Railways submits that an arbitrator may be appointed from the panel of the Railways.

15. Mr Vivekanand submits that the Railways had not taken any proactive steps for appointment of an arbitrator pursuant to the arbitration notice issued by the petitioner. Thus, it has forfeited its right, if any, to do so. He also referred to the decisions of the Supreme Court in Datar Switchgears Ltd. v. Tata Finance Ltd. And Anr.: (2000) 8 SCC 151 and Indian Oil Corporation Ltd. and Ors. v. M/s Raja Transport (P) Ltd.: (2009) 8 SCC

520. The aforesaid contentions are merited.

16. In view of the above, this Court considers it apposite to allow the present petition. Justice (Retired) Rajiv Sahai Endlaw, a former Judge of this Court (Mobile No. 9717495002) is proposed to be appointed as the Sole Arbitrator to adjudicate the disputes between the parties. The parties are at liberty to approach the learned Arbitrator for seeking his consent and the necessary declaration as required under Section 12(1) of the A&C Act. Let the same be furnished before the next date of hearing.

17. At the request of the learned counsel for the parties, it is further directed that the arbitration be conducted under the aegis of Delhi International Arbitration Centre and in accordance with its Rules.

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18. List on 12.11.2021.

VIBHU BAKHRU, J OCTOBER 22, 2021 RK Click here to check corrigendum, if any Signature Not Verified Digitally Signed By:DUSHYANT RAWAL

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Delhi High Court - Orders