Delhi High Court - Orders
Sb Protech Private Limited vs Dlf Limited on 31 October, 2022
Author: Neena Bansal Krishna
Bench: Neena Bansal Krishna
$~2
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB.P. 868/2022, I.A.11559/2022
SB PROTECH PRIVATE LIMITED
..... Petitioner
Through: Mr. Vikas Sethi and Mr. Altanish,
Advocates.
versus
DLF LIMITED
..... Respondent
Through: Mr. Pravin Bahadur, Ms. Simran
Brar, Mr. Srisatya Mohanty, Mr.
Karan Sharma, Ms. Kanika comber
and Mr. Amit Agarwal, Advocates.
CORAM:
HON'BLE MS. JUSTICE NEENA BANSAL KRISHNA
ORDER
% 31.10.2022
1. A petition under Section 11(6) of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as "the Act") has been filed for appointment of the Arbitrator.
2. The facts in brief are that the petitioner is a Private Limited Company involved in the business of construction contracts. The petitioner Company was awarded this contract vide Letter of Intent dated 30th October, 2015 and had entered into a Contract Agreement dated 01st June, 2016 with Respondent DLF Limited for the Construction of Belaire (06 lane) Underpass at Junction of Sector 43/44 & Sector 53/54 and Allied Works on EPC basis on HUDA Sector Road for use by General Public. The work was Signature Not Verified Digitally Signed ARB.P. 868/2022 page 1 of 10 By:PRIYANKA ANEJA Signing Date:17.11.2022 16:58:48 to be completed within six months i.e. by 29th April, 2016, but due to various reasons attributable to the respondent, the work could not be completed on time.
3. The time of the Contract was extended by the respondent from time to time without levy of penalty. The work was finally completed on 30 th April, 2019. The petitioner after completion of work raised the dispute before the respondent vide letter dated 26th May, 2022 for settlement of claims in accordance with Clause 101 of the Contract Agreement. The claims were rejected by the respondent vide its letter dated 24th June, 2022. The Contract Agreement contains Clause 101 which provides for unilateral appointment of Sole Arbitrator by the respondent which is not permissible in law, in view of the judgment of the Hon‟ble Supreme Court of India in Perkins Eastman Architects DPC & Anr. vs HSCC India Ltd. (2019 SCC Online SC 1517). The petitioner also made reference to the judgment of this Court in Proddatur Cable TV Digi Services vs. SITI Cable Network Limited (2020 SCC Online Del 350). The petitioner was, therefore, left with no option but to file the present petition for appointment of the Arbitrator for adjudication of the disputes between the parties.
4. The respondent in its reply has taken an objection that the work that was awarded to the petitioner was fully worked out. There is no dispute which can be referred to arbitration. It is asserted that the Completion Certificate dated 01st May, 2019 was issued by the respondent. The Final Bill dated 25th May, 2020 has been submitted after completion of defect liability period. The petitioner by way of three separate "No Claim Certificate" has specifically certified in respect of the entire period of final bill i.e. 01st February, 2019 to 30th April, 2019, that he does not have any Signature Not Verified Digitally Signed ARB.P. 868/2022 page 2 of 10 By:PRIYANKA ANEJA Signing Date:17.11.2022 16:58:48 claims towards any issue other than the amount claimed in the Bill. Since, the Final Bill amount has been duly paid by the respondent, the claim of the petitioner for further amount reflects its malafide intent. It is further asserted that after the receipt of the payment towards the Final Bill from the respondent, the petitioner has submitted a specific "No Dues Certificate/ Letter" expressly stating that he does not have any further claims in respect of the Agreement under any account whatsoever. The Completion Certificate has been issued by the respondent on 21 st July, 2020, which reflects that the mutual obligations under the Contract have been discharged followed by express written certification and discharge. It is asserted that since the Agreement stands completely discharged, nothing more survives and the present petition is malafide.
5. It is further claimed that the Work Order was completed on 29th December, 2017 and the Completion Letter was submitted on 05 th January, 2018. The Completion Certificate was issued by the respondent in favour of the petitioner on 01st May, 2019. The alleged claims now raised by the petitioner is barred by limitation. The Notice of Invocation of Arbitration was sent on 26th May, 2022 which is hopelessly barred by time.
6. Further objection is taken that the entire procedure has been detailed in the Arbitration Clause of the Contract which provides for amicable settlement by way of mutual discussions, co-operation and consultation in the first place. It is only when the amicable settlement fails that the arbitration could be initiated. The petitioner has never bothered to initiate any talks for amicable settlement. It is only out of the blue after two years that this petition has been filed. It is submitted that the same is liable to be dismissed.
Signature Not VerifiedDigitally Signed ARB.P. 868/2022 page 3 of 10 By:PRIYANKA ANEJA Signing Date:17.11.2022 16:58:48
7. The petitioner in its rejoinder, filed in the Court, has asserted that the issue of limitation goes to the maintainability or admissibility of the claim which is to be decided by the Arbitral Tribunal. The "jurisdictional issue"
include objections to the competence of Arbitrator, lack of consent or dispute falling outside the scope of Arbitration Agreement and validity of the Arbitration Agreement. The "admissibility" issue, however, relates to procedural requirement such as breach of pre-arbitration requirement for mediation or the claim being time barred or prohibited or until some pre- condition is fulfilled. The admissibility issue is not a challenge to the jurisdiction of the Arbitrator to decide the claim. In Swisbourgh Diamond Mines (Pty) Ltd. & Ors. Vs. Kingdom of Lesotho, [2018] SGCA 81, the Singapore Court of Appeal distinguished between "jurisdiction" and "admissibility". In Mayavati Trading Company Private Ltd. Vs. Pradyut Dev Burman, (2019) 8 SCC 714, the Hon‟ble Supreme Court of India observed that Limitation law is procedural and being factual, it should be left to the arbitrator to decide guided by the facts and law applicable. The court at the referral stage can interfere only when it is manifest that the claims are ex facie time-barred and dead and there is no subsisting dispute.
8. It is further submitted that the issue with regard to whether the Contract was discharged and the satisfaction was recorded can only be decided by the Arbitral Tribunal and this Court cannot consider this issue while deciding the application under Section 11(6) of the Act.
9. It is also submitted that the relationship between the Contractor and the Employer is always skewed since the Employer is in a dominant position. The petitioner‟s claim is largely due to (a) prolongation of contract; (b) claims arising in respect of unjustified deductions; and (c) Signature Not Verified Digitally Signed ARB.P. 868/2022 page 4 of 10 By:PRIYANKA ANEJA Signing Date:17.11.2022 16:58:48 claims on account of extra works, etc. The petitioner had communicated its grievances and highlighted the issues on various occasions and had even attempted to discuss and settle the issues amicably, but the respondent failed to consider the grievances of the petitioner. It is asserted that the petitioner was under economic duress throughout the Contract period as it was apprehensive that if any claim is raised by the petitioner during the tenure of the Contract, the respondent might cancel the Contract on some trivial ground and forfeit the Bank Guarantees of the petitioner.
10. It is further asserted that the petitioner vide letter dated 13 th July, 2019 and 05th October, 2019 had demanded underproductivity pending claims from the respondent. In response thereto, the respondent wrote the letters dated 21st November, 2019 and 09th June, 2020 to the Bank to encash the Bank Guarantee furnished by the petitioner at the time of signing of the Contract. The encashment letters did not mention any reason for encashment as the petitioner had not committed any breach of the Contract. On both the occasions, the petitioner had to plead for mercy for withdrawal of the Bank Guarantee encashment letters which were thereafter withdrawn. It is asserted that the "No Objection Certificate" had not been issued by the petitioner voluntarily but under tremendous economic pressure, coercion and duress. Furthermore, it is the prevalent practice in the industry to insist for a NCC Certificate from the Contract before clearing the final bill/ payment. In most cases, Contractors approached the Courts/ Tribunals after the settlement of Final Bill claiming either damages or compensation for the additional work carried out. Judicial Notice of this practice of demand of NCC from the Contractors was taken and strongly deprecated by the Supreme Court in Chairman & M.D., N.T.P.C Ltd. Vs. M/s Reshmi Signature Not Verified Digitally Signed ARB.P. 868/2022 page 5 of 10 By:PRIYANKA ANEJA Signing Date:17.11.2022 16:58:48 Constructions , (2004) 2 SCC 663, and also in National Insurance Co. Ltd. Vs. Boghara Polyfab (P) Ltd, (2009) 1 SCC 267.
11. The petitioner has asserted that it had to succumb to the pressure of the respondent to issue No Dues Certificate in favour of the respondent before clearing of its Final Bill payment by the respondent. The Coordinate Bench of this Court in a similar situation had referred the parties to the Arbitral Tribunal which was held to be competent to deal with the objections in respect of the maintainability of the claims or the jurisdiction. Similar observations have been made by the Telangana High Court in BPR Infrastructure Limited vs. Rites Ltd, Arb. Appl. No. 22 of 2019, decided on 8th July, 2022. A prayer is, therefore, made that the present petition discloses arbitrable disputes and the same may be referred to Arbitration.
12. Submissions heard.
13. It is an admitted case that the Contract was awarded to the petitioner which was completed on 01st May, 2019 and the defect liability period got over on 30th April, 2020. It is further not in dispute that the Final Bill dated 05th May, 2020 was submitted and the payments were duly made against the Final Bill. A "No Claim Certificate" was duly issued by the petitioner and a "No Dues Certificate" was issued by the respondent. The basic issue which arises before this Court is whether there is any arbitrable dispute raised by the petitioner especially when a „No Claim Certificate‟ and a "Completion Certificate" has already been issued by the petitioner and the respondent respectively.
14. The scope of the intervention at the stage of appointment of Arbitrator has been narrowed down considerably after the insertion of Section 11(6)(A) of A&C Act, 1996 and essentially, the inquiry is limited to examining the Signature Not Verified Digitally Signed ARB.P. 868/2022 page 6 of 10 By:PRIYANKA ANEJA Signing Date:17.11.2022 16:58:48 existence of a valid Arbitration Agreement.
15. In the case of Vidya Drolia vs. Durga Trading Corporation (2021) 2 SCC 1, it was observed that the legislative purpose is essential to minimise the Court‟s intervention at the stage of the appointment of the Arbitrator. It was further explained that the issue of non-arbitrability of a dispute is basic for arbitration as it relates to the very jurisdiction of the Arbitral Tribunal. An Arbitral Tribunal may lack jurisdiction for several reasons and non- arbitrability has multiple meanings. It was observed that non-arbitrable disputes may be those which may not be amenable to adjudication and settlement by arbitration, or may not be covered by the Arbitration Agreement and may be termed as excepted matters and come in the category of excepted matters. The inquiry whether the dispute is governed by the Arbitration Clause can be examined by the court at reference stage itself and may not be left unanswered to be examined by the Arbitral Tribunal. In cases of debatable and disputable facts, the court would may direct the parties to abide by the Arbitration Agreement as the Arbitral Tribunal has the primary jurisdiction and authority to decide the disputes, including the question of jurisdiction and non-arbitrability. Rarely as a demurrer, the court may interfere at the stage of Section 11 of the Act only when it is manifestly and ex facie certain that the Arbitation Agreement is non-existent, invalid or 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 to protect the parties from being forced to arbitrate when a matter is demonstrably „non-arbitrable‟ and to weed out the deadwood. It 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 Signature Not Verified Digitally Signed ARB.P. 868/2022 page 7 of 10 By:PRIYANKA ANEJA Signing Date:17.11.2022 16:58:48 Tribunal but to affirm and uphold integrity and efficacy of arbitration as an alternative dispute resolution mechanism. It was further observed that it is only in very limited category of cases, where there is not even a vestige of doubt that the claim is ex facie time barred or that the dispute is non- arbitrable that the court may decline to make a reference. If there is a slightest doubt, the rule is to refer the disputes to arbitration otherwise, it would encroach upon what is essentially a matter to be determined by the Arbitral Tribunal.
16 Thus, this Court while considering the application under Section 11 of the Act, may hold a limited enquiry to consider if any arbitrable dispute exist.
17. Similar fact as in the present case were considered in Ambica Construction vs. Union of India (2006) 13 SCC 475 and R.L. Kalathia & Co. vs. State of Gujarat (2011) 2 SCC 475, wherein the contractor claimed to have been coerced to issue a "No Dues Certificate" without which no amount would be released. It was held that merely because a "No Dues Certificate" has been given by the contractor, it cannot be said that there is no arbitrable claim which may be referred to arbitration.
18. The Co-ordinate Bench of this Court in M/s Thermal Engineers and Insulators Pvt. Ltd. vs. Delhi Tourism and Transportation Development Coporation Ltd. ARB.P. 1033/2021 decided on 25th February, 2022, in a similar situation observed that the circumstances under which such Undertaking was accepted and whether the same can be considered to be in complete discharge of the contractual obligations of the respondent absolving him from all liabilities, is a disputes which requires adjudication and should be agitated before the Arbitral Tribunal.
Signature Not VerifiedDigitally Signed ARB.P. 868/2022 page 8 of 10 By:PRIYANKA ANEJA Signing Date:17.11.2022 16:58:48
19. Likewise, in the case of Oriental Insurance Co. Ltd. vs. Dicitex Furnishing Ltd. (2020) 4 SCC 621, a similar plea of being coerced into signing clean discharge was taken. It was observed that the matter was required to be referred to the arbitration for determination if the said discharge was signed under economical and financial duress or tantamount to unconditional and affirmed acceptance of the payments towards Full and Final settlement.
20 In the present case as well, though NCC has been issued by the petitioner, but it has been asserted that the NCC is undated and taken before clearing of Bill, which the petitioner had to give to be able to receive the amount of Final Bill. An arbitrable dispute has thus been raised by the petitioner.
21. The second objection taken by the learned counsel for the respondent is that of the present claim being ex-facie barred by limitation. In the present case, NCC has been issued and final payment has been made on 05 th January, 2018 and the No Dues Certificate has been issued by the respondent on 01stMay, 2019. There has been supervening COVID-19 Pandemic. Whether the claim is barred by limitation cannot be determined in these proceedings as it involves mixed question of fact and law. In this context, in Vidya Drolia (supra), it has been observed that the question of limitation is a mixed question of fact and law and only in very limited category of cases, where there is no vestige of doubt the claim is ex-facie time barred or that the dispute is non-arbitrable, the Court may decline to make a reference. If there is a slightest doubt, the rule is to refer the dispute to arbitration, otherwise it would encroach upon what is essentially a matter to be determined by the Arbitral Tribunal. Therefore, this point of limitation Signature Not Verified Digitally Signed ARB.P. 868/2022 page 9 of 10 By:PRIYANKA ANEJA Signing Date:17.11.2022 16:58:48 cannot be considered under Section11 of the A&C Act,1996 and may be agitated by the parties before the learned Sole Arbitrator.
22. Considering that there is a valid Arbitration Agreement between the parties and in the light of the facts and discussions, Hon‟ble Ms. Justice Indu Malhotra, Former Judge of Supreme Court of India, Mobile No. 9810026757, is hereby appointed as the Sole Arbitrator to adjudicate the disputes between the parties.
23. The parties are at liberty to raise their respective objections before the Arbitrator.
24. This is subject to the Arbitrator making necessary disclosure as under
Section 12(1) of A&C Act, 1996 and not being ineligible under Section 12(5) of the A&C Act, 1996.
25. The fees of the learned Arbitrator would be fixed in accordance with the Fourth Schedule to A&C Act, 1996 or as consented by the parties.
26. Learned counsels for the parties are directed to contact the learned Arbitrator within one week of being communicated a copy of this Order to them by the Registry.
27. The petition is accordingly disposed of in the above terms.
NEENA BANSAL KRISHNA, J
OCTOBER 31, 2022
va
Signature Not Verified
Digitally Signed ARB.P. 868/2022 page 10 of 10
By:PRIYANKA ANEJA
Signing Date:17.11.2022
16:58:48