Case: WAPCOS LTD Vs. SALMA DAM JOINT VENTURE

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 us. 33. 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. 34. 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. We may usefully rely on the underlying principle expounded by this Court in Damodar Valley Corporation vs. K. K. Kar (1974) 2 SCR 240 @ 243-244 , wherein the Court observed as follows:- …..As the contract is an outcome of the agreement between the parties it is equally open to the parties thereto to agree, to bring it to an end or to treat it as if it never existed. It may also be open to the parties to terminate the previous contract and substitute in its place a new contract or alter the original contract in such a way that it cannot subsist. In all these cases, since the entire contract is put an end to, the arbitration clause, which is a part of it, also perishes along with it. Section 62 of the Contract Act incorporates this principle when it provides that if the parties to a contract agree to substitute a new contract or to rescind or alter it, the original contract need not be performed. Where, therefore, the dispute between the parties is that the contract itself does not subsist either as a result of its being substituted by a new contract or by rescission or alteration, that dispute cannot be referred to the arbitration as the arbitration clause itself would perish if the averment is found to be valid. As the very jurisdiction of the arbitrator is dependent upon the existence of the arbitration clause under which he is appointed, the parties have no right to invoke a clause which perishes with the contract. In a subsequent decision in National Insurance Company Limited vs. Boghara Polyfab Private Limited (2009) 1 SCC 267 , in paragraph 52 this Court held as follows: 52. Some illustrations (not exhaustive) as to when claims are arbitrable and when they are not, when discharge of contract by accord and satisfaction are disputed, to round up the discussion on this subject are: (i) …. …. …. (ii) A claimant makes several claims. The admitted or undisputed claims are paid. Thereafter negotiations are held for settlement of the disputed claims resulting in an agreement in writing settling all the pending claims and disputes. On such settlement, the amount agreed is paid and the contractor also issues a discharge voucher/no- claim certificate/full and final receipt. After the contract is discharged by such accord and satisfaction, neither the contract nor any dispute survives for consideration. There cannot be any reference of any dispute to arbitration thereafter. (iii) …. …. …. (iv) …. …. …. (v) A claimant makes a claim for a huge sum, by way of damages. The respondent disputes the claim. The claimant who is keen to have a settlement and avoid litigation, voluntarily reduces the claim and requests for settlement. The respondent agrees and settles the claim and obtains a full and final discharge voucher. Here even if the claimant might have agreed for settlement due to financial compulsions and commercial pressure or economic duress, the decision was his free choice. There was no threat, coercion or compulsion by the respondent. Therefore, the accord and satisfaction is binding and valid and there cannot be any subsequent claim or reference to arbitration. Further, in Nathani Steels Ltd. v. Associated Constructions 1995 Supp (3) SCC 324 , this Court observed as follows:- 3......Even otherwise we feel that once the parties have arrived at a settlement in respect of any dispute or difference arising under a contract and that dispute or the difference is amicably settled by way of a final settlement by and between the parties, unless that settlement is set aside in proper proceedings, it cannot lie in the mouth of one of the parties to the settlement to spurn it on the ground that it was a mistake and proceed to invoke the Arbitration clause. If this is permitted the sanctity of contract, the settlement also being a contract, would be wholly lost and it would be open to one party to take the benefit under the settlement and then to question the same on the ground of mistake without having the settlement set aside. In the circumstances, we think that in the instant case since the dispute or difference was finally settled and payments were made as per the settlement, it was not open to the respondent unilaterally to treat the settlement as non est and proceed to invoke the Arbitration clause. We are, therefore, of the opinion that the High Court was wrong in the view that it took. 35. Having said this, no other issue need be addressed in these appeals. As a result, these appeals must succeed.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]Going by the Contract Agreement read with relevant clauses of CoPA and FIDIC, it is obvious that the parties had agreed for resolution of all their differences or disputes arising from the Contract Agreement by process of settlement of disputes and arbitration23. It is pertinent to note that the execution of stated AoA has not been disputed by SDJV or for that matter by SSPPL. More so, these entities have not even challenged the implementation of AoA. On the other hand, it has come on record that all concerned gave effect to the terms set out in AoA by offering revised rates to SDJV in conformity with the agreed rates referred to in AoA and which payment was received and availed of by SDJV/SSPPL without any demur. We may hasten to add that even the subject Arbitration Petition does not question the execution of AoA or the applicability thereof. Indeed, the asseveration in the Arbitration Petition is that the claim set up by SDJV is in reference to items and bills raised subsequent to the execution of AoA26. Despite such peremptory agreement and declaration by the parties, SDJV proceeded on an erroneous basis that the arbitration agreement in Contract Agreement still subsists and can be enforced by it. As aforesaid, neither SDJV nor SSPPL have disputed the execution of AoA nor it is even remotely suggested in the Arbitration Petition that the AoA was executed by them under duress or coercion. From the indisputable circumstances, it becomes amply clear that the stated terms and conditions set out in the AoA were agreed upon by all concerned primarily due to revision of cost of the project upto Rs. 872.67 crores which is 3.44 times the original project cost, (i.e. Rs. 253.84 crores) as the same was subject to clauses 1.2 and 1.3 of Section-01 See – Clause 1.0 of Section-01 of AoA (in paragraph 22 above) . Notably, this AoA was executed at a stage when substantial part of the works (around 97%) had already been completed. In our opinion, the terms and conditions specified in AoA leave no manner of doubt that the arbitration agreement has been done away with – as is manifest from the unambiguous declaration that balance pending claims of Contractor stand buried and that there will be no arbitration for the settlement of claimsThat may be so, however, in our view, it will be of no avail. We will deal with this aspect a little later. Suffice it to observe that the terms and conditions of AoA make it amply clear that the arbitration agreement stands overridden in view of the express declaration in AoA in that regard referred to earlier28. As noticed earlier, AoA was executed on 09.06.2015 by which date, substantial part of the works (around 97 per cent) of the Dam and Spillway had been completed. The water filling in dam commenced on 26.07.2015 by closing diversion tunnel gate. That presupposes that the Dam and Spillway work was fully completed before that date. It is also not disputed that the project was inaugurated by the Prime Minister of India and the President of Afghanistan on 04.06.2016. The terms agreed upon between the parties and as recorded in AoA dated 09.06.2015 was the outcome of steep revision of rates. These circumstances are germane whilst answering the question under consideration. We have no manner of doubt that the purport of the terms and conditions incorporated in the AoA dated 09.06.2015 are unambiguous expression of intent to supersede the arbitration agreement incorporated in Contract Agreement dated 09.03.2006 and to resolve all the contentious issues regarding the claims of SDJV, in the manner specified therein30. As regards the first reason weighed with the High Court that the Technical Committee entertained the five appeals filed on behalf of the SDJV, that in our view cannot undo the effect of terms and conditions of 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 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 scrutiny31. The second reason weighed with the High Court is again founded on incorrect assumption about the date of AoA. The High Court in paragraph 10.7 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 record32. 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 us33. 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 Petition34. 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 precedent35. Having said this, no other issue need be addressed in these appeals. As a result, these appeals must succeed.