Rajasthan High Court - Jaipur
Ms Rajendra Prasad Bansal vs Union Of India Thr Gen Manager Nwr on 14 August, 2019
Author: Alok Sharma
Bench: Alok Sharma
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
S.B. Arbitration Application No. 36/2018
M/s Rajendra Prasad Bansal, New Sabji Mandi, Bayana, Distt.
Bharatpur Rajasthan Through Its Partner Ajay Agarwal, Plot No.
521, Barkat Nagar, Tonk Phatak, Jaipur.
----Petitioner
Versus
Union Of India Through General Manager, North Western
Railway, Head Office, Jaipur Rajasthan
----Respondent
For Petitioner(s) : Mr. Jatin Agarwal
For Respondent(s) : Mr. SN Meena
HON'BLE MR. JUSTICE ALOK SHARMA
Order
Date of Order :: 14/08/2019
This application under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (hereafter 'the Act of 1996') has been filed for appointment of an arbitrator in terms of Clause 64 of the Conditions of Contract incorporated in the Agreement dated 11.1.2010.
Clause 64 (1) of the Special Conditions of the Contract relating to the arbitration clause to the extent relevant reads as under:
"64. (1) (i) Demand for Arbitration:
In the event of any dispute or difference between the parties hereto as to the construction or operation of this contract, or the respective rights and liabilities of the (Downloaded on 29/08/2019 at 11:52:24 PM) (2 of 20) [ARBAP-36/2018] parties on any matter in question, dispute or difference on any account or as the withholding by the Railway of any certificate to which the contractor may claim to be entitled to, or if the Railway fails to make a decision within 120 days, then and in any such case, but except in any of the excepted matters' referred to in clause 63 of these conditions, the contractor, after 120 days but within 180 days of presenting his final claim on disputed matters, shall demand in writing that the dispute or difference to be referred to arbitration.
(ii) The demand for arbitration shall specify the matters, which are in question, or subject of the dispute or difference as also the amount of claim item wise. Only such dispute/s or difference/s in respect of which the demand has been made, together with counter claims or set off Given by the Railway shall be referred to arbitration and other matters shall not be included in the reference.
64(1)(ii)(a) The arbitration proceedings shall be assumed to have commended from the day, a written and valid demand for arbitration is received by the Railway."
Admittedly in terms of work order dated 11.9.2009 leading to the agreement dated 11.1.2010, the work i.e. construction of boundary wall & improvements to road surface of Level Crossing between Dausa - Jaipur section in connection with Dausa - Jaipur doubling project for a contract price of Rs. 1,00,28,920.63/- was to be completed in seven months i.e. by 10.4.2010. It was however completed on 5.2.2011.
The case of the applicant is that as sought the date of completion of work was extended by the non applicant from time to time. The delay and the resultant extension is stated to be wholly attributable to the non applicant. The applicant states that the work having been completed on 5.2.2011, vide letter dated (Downloaded on 29/08/2019 at 11:52:24 PM) (3 of 20) [ARBAP-36/2018] 8.4.2011 alongwith a 'No Claim Certificate' it required the non applicant to release the Performance Guarantee amounting to Rs. 5,01,500/- which was released on 21.4.2011. The applicant again submitted a No Claim Certificate on 24.2.2012, apparently as required by the non applicant for seeking return of the Security Deposit amounting to Rs. 5,01,450/-. The said Security Deposit was released on 6.3.2012. The applicant also admits that it signed the final bill as well as the measurement book relating to the works executed both carrying a pre-printed format of a no claim certificate, on 6.2.2012. Payment of final bill amounting to Rs. 12,79,840/- followed to the applicant on 20.2.2012.
On 15.12.2012 i.e. about 10 months subsequent to the receipt of the amounts under the final bill and prior thereto the security amount as also the return of Performance Guarantee, the applicant sent notice to the non applicant claiming certain amounts due to it resulting from losses occasioned by the failure of the non applicant to discharge its obligations under the agreement dated 11.1.2010. No response to the said recovery (Downloaded on 29/08/2019 at 11:52:24 PM) (4 of 20) [ARBAP-36/2018] notice dated 15.12.2012 emanating the applicant moved an application under Section 11 of the Act of 1996 before this Court, which was registered as S.B. Civil Arbitration Application No.23/2013. The said application however was dismissed on 14.7.2017 as the Court refused to entertain it on the ground that requisite action as per the required procedure for appointment of an arbitrator had not been taken. In so doing the Court negated the applicant's claim that the recovery notice dated 15.12.2012 was the requisite notice to the non applicant to appoint an arbitrator as per procedure prescribed under clause 64 of the Special Conditions of Contract. When the application was dismissed on 14.7.2017, the applicant sought and the Court granted liberty to it to serve a new notice upon the non applicant demanding reference of disputes relating to its claim to arbitration.
The applicant's case is that subsequently in terms of the liberty granted by the Court under its order dated 14.7.2017, on 18.9.2017 a notice was sent to the non applicant demanding that a reference to arbitration for resolution of disputes between (Downloaded on 29/08/2019 at 11:52:24 PM) (5 of 20) [ARBAP-36/2018] the parties as per clause 64 of the Special Conditions of Contract be made. Following certain correspondences between the applicant and the non applicant, on 8.1.2018 the non applicant rejected the demand of the applicant for arbitration inter-alia stating that no arbitral dispute in respect of the agreement dated 11.1.2010 obtained, and it was fully discharged with accord and satisfaction having been reached and as such no claim of the applicant would survive to entail a dispute referable to arbitration.
Reply to the application has been filed by the non applicant - Railways. It has been submitted that from the admitted chronology of the case, the application under Section 11 (6) of the Act of 1996 deserves dismissal at the out-set. The applicant signed a No Claim Certificates in respect of the works under agreement dated 11.1.2010 and then raised claims / disputes subsequent to about 10 months after receiving full and final payment. In the circumstances, no dispute pertaining to and / or arising out of the agreement dated 11.1.2010 can even remotely be found. No case of coercion in the signing of the No Claim (Downloaded on 29/08/2019 at 11:52:24 PM) (6 of 20) [ARBAP-36/2018] Certificates can be made out from the chronology of events. It has been further submitted that Clause 64 (1)(iv) of the Special Conditions of Contract appended to the agreement dated 11.1.2010 provides that where the contractor does not prefer any specific claim in writing within a period of 90 days of receiving the intimation from the Railway that the final bill was ready for payment, he would be deemed to have waived his claim, if any, and the Railway would stand resultantly discharged and released from all of its liabilities under the contract in respect of such claims. It has been submitted that in the instant case, the final measurement of the works at the instance of the applicant was done on 16.8.2011, final bill prepared and the applicant's signatures obtained on 6.2.2012. All payments due pursuant to the final bill was released to the applicant on 20.2.2012. Subsequently the applicant then ill-advisedly as an after-thought despite discharge of all obligations of the parties under the agreement dated 11.1.2010 following its accord and satisfaction issued a recovery notice dated 15.12.2012. The said recovery (Downloaded on 29/08/2019 at 11:52:24 PM) (7 of 20) [ARBAP-36/2018] notice was absolutely unsustainable and based on false facts. In- fact during the currency of the contract, the applicant did not even seek to raise any money claim on any count against the non applicant. It has been submitted that the applicant therefore in the circumstances is estopped by clause 64 (i)(iv) of the Special Conditions of Contract, which it had signed with eyes open. No claim now can be allowed to be set up belatedly as an evident after thought. Reference has also been made to clause 43 (2) of the General Conditions of Contract which provided that the contractor would not be entitled to make any claim whatsoever against the Railway under or by virtue of or arising out of the contract, nor shall the Railway entertain or consider any such claim, if made by the Contractor, after it has signed a "No Claim"
Certificate in favour of the Railway. It has been submitted that clause 43 (2) of the General Conditions of Contract is not under challenge before this Court and therefore binds the applicant. The applicant cannot be allowed to set up non existent claims contrary thereto and seek arbitration thereof. (Downloaded on 29/08/2019 at 11:52:24 PM)
(8 of 20) [ARBAP-36/2018] It has been submitted that even otherwise the claim of the applicant for appointment of an arbitrator under notice for the purpose first issued on 18.9.2017 is barred by limitation under Article 137 of the Limitation Act, 1963 (for short 'the Act of 1963') as it has ex facie been issued more than 6 years subsequent to the completion of the works under the agreement dated 11.1.2010 on 5.2.2011. It has been submitted that the liberty granted by the Court under its order dated 14.7.2017 in S.B. Civil Arbitration Application No. 23/2013 is of no event for computing limitation. Computation of limitation for taking legal remedies as the one under Section 11 (6) of the Act of 1996 has necessarily to be with reference to the cause of action which in the instant case arose on or before 5.2.2011. No application for condonation of delay has been moved with the application under Section 11(6) of the Act of 1996 under consideration.
Mr. Jatin Agarwal appearing for the applicant submitted that clause 64(1)(iv) of the Special Conditions of Contract incorporates an illegal condition, ultra-vires Section 28 (b) of the (Downloaded on 29/08/2019 at 11:52:24 PM) (9 of 20) [ARBAP-36/2018] Indian Contract Act, 1872 (Act of 1872). He admitted that Section 28 (b) of the Act of 1872 provides that every agreement which extinguishes the rights of any party thereto or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of specified period so as to restrict any party from enforcing his rights, is void to that extent. Reliance has been placed on the judgment of this Court in the case of M/s. Jil-Aquafil (JV) Vs. RUIDP - 2016 (4) WLC (Raj.) 474 [para 24 & 25]. Mr. Jatin Agarwal further submitted that execution / signing of No Claim Certificates by the applicant in respect of works under the agreement dated 11.1.2010 on pre-printed formats on the final bill or otherwise mandatorily required under the special condition of the contract on pain of payment of due amounts being denied cannot denude the applicant of its legal rights as they were not signed with a free consent. The no claim certificates were signed under economic coercion for reason of the non applicant's misuse of its dominant position. The No Claim Certificates are thus non-binding on the applicant's right to agitate its claims and seek (Downloaded on 29/08/2019 at 11:52:24 PM) (10 of 20) [ARBAP-36/2018] adjudication thereof through the arbitration clause as the said claims have been denied by the non applicant. Mr. Jatin Agarwal further submitted that the aforesaid two clauses i.e. 64 (1)(iv) and 43 (2) of the Conditions of Contract make it evident that the applicant was denuded of all its bargaining power and had perforce to execute the No Claim Certificates to obtain the release of Security Deposit, return of the Bank Guarantee and payment of final bills. He submitted that in this view of the matter, as settled by the Apex Court, such No Claim Certificates absent free consent cannot entail the foreclosure of the rights of the aggrieved party from agitating its disputes and seeking resolution thereof through an arbitration where such arbitration is provided for in the underlying agreement. Reliance by Mr. Jatin Agarwal in support of above contention has been placed on the judgments of the Apex Court in the cases of:
(i) National Insurance Co. Versus M/s. Boghara Polyfab Pvt. Ltd. - (2009) 1 SCC 267 (Downloaded on 29/08/2019 at 11:52:24 PM) (11 of 20) [ARBAP-36/2018]
(ii) Chairman & MD, NTPC Versus Reshmi Constructions, Builders & Contractors - (2004) 2 SCC 663 [para 17-
28]
(iii) Ambica Construction Versus Union of India - (2006) 13 SCC 475 [para 14, 15, 16 & 17]
(iv) Dilbag Singh Contractor Versus North Western Railways
- 2017 (4) WLC (Raj.) 289
(v) M/s. Rajendra Prasad Bansal Versus Union of India & Anr. - 2017 (2) WLC (Raj.) 41 [pages 16, 17, 18 & 19] Mr. Jatin Agarwal submitted that in this view of the matter, the application for appointment of an independent arbitrator in terms of clause 64(1) of the Special Conditions of Contract be allowed and a reference made to him to adjudicate disputes between the parties arising out of and/or relating to the agreement dated 11.1.2010.
Mr. SN Meena appearing for the non applicant submitted that the applicant having been released the amounts due to it under the final bill on or about 20.2.2012 subsequent to (Downloaded on 29/08/2019 at 11:52:24 PM) (12 of 20) [ARBAP-36/2018] the works under the agreement dated 11.1.2010 having been completed on 5.2.2011 and prior thereto signed no claim certificates, there was full accord and satisfaction between the parties to the agreement. Each stood discharged from its obligations thereunder. Mr. SN Meena submitted that the applicant cannot thereafter seek to renege on the accord and satisfaction under the agreement dated 11.1.2010 and propagate any claim or dispute in regard thereto after about 10 months. Mr. SN Meena submitted that indeed in a given situation, as held by the Apex Court, the issue of No Claim Certificate/s by a contractor may in the background facts not be construed as a discharge of the parties to the agreement of the obligations thereunder and an accord and satisfaction - end of any potential line dispute and a clog on the invocation of an obtaining arbitration clause. Yet for such a conclusion the credible attended circumstances have to unequivocally establish that the No Claim Certification earlier issued by a party was under economic coercion for reason of the dominant position of the other party to the agreement. Mr. SN (Downloaded on 29/08/2019 at 11:52:24 PM) (13 of 20) [ARBAP-36/2018] Meena submitted that the facts of the instant case do not even remotely warrant any such conclusion that the No Claim Certificates dated 8.4.2011 and 24.2.2012 (only 2) issued by the applicant were not reflective of its free consent but a result of economic coercion. Mr. S.N. Meena pointed out that admittedly the payments under the final bill were made on 20.2.2012, and prior thereto performance bank guarantee returned on 21.4.2011 and payment towards refund of security deposit made on 6.3.2012. The applicant's notice of recovery for alleged outstanding claims under the agreement dated 11.1.2010 was thereafter for the first time issued to the non applicant on 15.12.2012 i.e. after a delay of over two years - evidently an after thought.
Mr. SN Meena submitted that the Apex Court in the case of M/s. ONGC Manglore Petro Chemical Ltd. Versus ANS Construction Ltd. & Ors. AIR 2018 SC 796 held that a mere one month delay in withdrawing the no dues / no claim certificate was fatal to the plea of coercion in issuing such certificate. And on the basis of such withdrawal subsequent to mutual signing of the final (Downloaded on 29/08/2019 at 11:52:24 PM) (14 of 20) [ARBAP-36/2018] bill, no dispute qua such concluded matter to warrant reference to an arbitration was held to be made out. Mr. SN Meena then referred to the judgment of the Apex Court in the case of Union of India & Ors. Versus Onkar Nath Bhalla - 2009 DNJ (SC) 482 where it was held that as the respondent signed the full and final bill without any protest or reservation, he had waived his right to raise further claim. It was also held that without considering the fact as to whether any dispute exists between the parties, an arbitrator could not have been appointed. Reliance was also placed by Mr. S.N. Meena on the judgment of the Apex Court in the case of M/s Sohan Lal Pugalia Versus UOI SLP No. 8256/2007; decided on 27.11.2007 where it was held that once the petitioner had accepted the money in full and final satisfaction of his claim without protest it shall be deemed that he had no further claim.
Mr. SN Meena next submitted that in any event the applicant's notice for arbitration with regard to his purported claims and resultant disputes relating to and arising out of the agreement dated 11.1.2010, all work in respect whereto was (Downloaded on 29/08/2019 at 11:52:24 PM) (15 of 20) [ARBAP-36/2018] admittedly completed on 5.2.2011, sent on 18.9.2017 - after about 6 years. It was thus wholly beyond limitation which under Article 137 of the Limitation Act, 1963 was three years and expired on 11.1.2013. Hence, this application for arbitration filed on 12.4.2018 be dismissed.
Heard. Considered.
The Apex Court in the case of State of Orissa and Anr. Versus Damodar Das reported in AIR 1996 SC 942 on the issue of limitation on an application under Section 20 of the Act of the Arbitration Act, 1940 has held that "just as in the case of actions, the claim is not to be brought after the expiration of a specified number of years from the date when the cause of action accrues, so in the case of arbitrations the claim is not to be put forward after the expiration of a specified number of years from the date when the claim accrues." The Apex Court further held that the cause of action for seeking arbitration arises when the claimant becomes entitled to raise disputes following the claim/s and denial thereof. It was held albeit in the context of an application under Section 20 of the Arbitration Act, 1940 that the right to file an (Downloaded on 29/08/2019 at 11:52:24 PM) (16 of 20) [ARBAP-36/2018] application for arbitration of disputes would be governed by Article 137 of the Schedule to the Limitation Act, 1963 and an application for arbitration therefore has to be filed within 3 years from the date when the right to apply first accrued.
I am of the considered view that the limitation of 3 years under Article 137 of the Limitation Act, 1963 would apply with equal force in respect of applications under Section 11 of the Act of 1996. In the instant case, the applicant specifically pleads that the work under the agreement dated 11.1.2010 was completed on 5.2.2011 and payment under final bill thereof made on 20.2.2012. All claims which the applicant now seeks to agitate by way of an arbitration accrued prior thereto as it is the applicant's case that they were attributable to the delays of the non applicant during the execution of the contract. Yet, admittedly the notice for referring those purported claims to arbitration was sent on 18.9.2017. That was evidently beyond the period of 3 years from the date/s when the right accrued to the applicant, if at all, to apply for arbitration. That the notice to refer the purported disputes to arbitration was sent on 18.9.2017 following (Downloaded on 29/08/2019 at 11:52:24 PM) (17 of 20) [ARBAP-36/2018] the liberty granted by the Court on 14.7.2017 in S.B. Arbitration Application No. 23/2013 is of no consequences. The liberty granted by the Court while holding that the applicant's earlier application under Section 11 of the Act of 1996 was not maintainable, cannot entail condonation of delay in the applicant taking its legal remedies within the time law prescribed. In fact such a question was not even before the Court when it passed the order dated 14.7.2017 nor was in its contemplation. No inference in this regard can be drawn. No application for condonation of delay under Section 14 of the Act of 1963 has been filed. For the reason aforesaid, I am of the considered view that this application is therefore liable to be dismissed as being hit by limitation.
It is well settled that before an application under Section 11 of the Act of 1996 is acted upon and arbitrator appointed, the Court should first determine as to whether any live arbitral dispute in respect of the agreement between the parties obtains. A dispute arises where an assertion is made by a one party to a contract and denied by the other. Conversely when a No Claim Certificate is issued by a party to a contract to another in (Downloaded on 29/08/2019 at 11:52:24 PM) (18 of 20) [ARBAP-36/2018] respect of the works thereunder, it militates, absent indisputable facts indicative of coercion in issuing no claim certificates, against a finding of any live dispute/s between the parties, which may warrant arbitration. Such a converse situation obtains in the present case. No contemporaneous correspondence shows that any claims were even made by the applicant during the currency of the execution of the works under the contract in issue which were then abandoned under coercion and no claim certificates signed to avail of the due amount from the non applicant. At no time during the execution of the contract did the applicant raise any claims for compensation or otherwise. The applicant instead at the time of return of its Performance Guarantee amount on 21.4.2011 issued a No Claim Certificate in respect of works executed by it under the agreement dated 11.1.2010. So it again did on 24.2.2012 at the time of seeking release of Security Deposit. And it is on record that the applicant finally signed the final bill on 6.2.2012 without demur - as also a no claim certificate and was paid all due amounts on 20.2.2012. It did not thereafter raise any claim / dispute in respect of the execution of the works (Downloaded on 29/08/2019 at 11:52:24 PM) (19 of 20) [ARBAP-36/2018] under the agreement dated 11.1.2010 for about 10 months. No dispute thus can be found to require arbitration. It was only on 15.12.2012 that the applicant put up claims for the first time in regard to the execution of the agreement dated 11.1.2010. The claims were an after-thought. I therefore find that no arbitrable dispute/s is/are made out to warrant appointment of an arbitrator under Section 11 of Act of 1996.
The upshot of the above discussion is that the disputes sought to be referred to an Arbitrator at the instance of the applicant are thus not live disputes and that even otherwise this application under Section 11 (6) of the Act of 1996 for appointment of an Arbitrator being hit by limitation under Article 137 of the Act of 1963. It would therefore be a redundant exercise to address other issues agitated by the counsel for the applicant.
For the above reasons, I am of the considered view that this application under Section 11 of the Act of 1996 is without merit and deserving of dismissal.
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It is accordingly dismissed.
(ALOK SHARMA),J
DILIP KHANDELWAL
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