Wapcos Ltd. vs Salma Dam Joint Venture

2. Briefly stated, the Ministry of External Affairs (for short, “MEA”) and the appellant in the leading appeal, Water and Power Consultancy Services (India) Limited (for short, “WAPCOSL”), a Public Sector Undertaking, entered into an agreement, dated 29.11.2004, for the implementation of the work on “the Reconstruction, Rehabilitation and completion of Salma Dam Project (3x14 MW), Afghanistan, Package III: Main Civil and Hydro­Mechanical Works” (for short, “project”). The appellant (WAPCOSL), was given the responsibility to provide financial, administrative and contractual management services for the MEA. Even though MEA was to provide the finances, the same was to be channeled through WAPCOSL to the successful awardee of the tender.

3. The respondent No.1 in both the appeals, Salma Dam Joint Venture (for short, “SDJV”) was formed by the M/s SSJV Projects Private Limited (for short, “SSPPL”) and M/s Angelique International Ltd. (for short, “AIL”) under a Joint Venture Agreement (for short, “JVA”) dated 09.09.2005 to submit its bid for the said project. In accordance with the terms and clauses of Page 2 of 27 the JVA, SSPPL was nominated to be the ‘Lead Partner’ of SDJV with ninety­five percent (95%) share as compared to five percent (5%) share of AIL. SSPPL was also authorized to invoke arbitration by appointing an arbitrator, make claims, et cetera, on behalf of AIL, by executing a Power of Attorney (for short, “PoA”) dated 09.09.2005 in favour of SSPPL, in accordance with Clause 3.3 of the JVA.

5. Be that as it may, the consideration of the Contract Page 3 of 27 Agreement was Rs. 253.84 Crores. However, the same was raised to Rs. 470.40 Crores, on a representation made by SDJV. Once again, there was further change by way of revised rates, after a meeting between SDJV and a High­Power Committee (for short, “HPC”). In the said meeting, SDJV cited reasons which were beyond its control for initiating timely construction of the project. That justification found favour with the HPC for which it had recommended revised rates with regard to eight items. A letter was sent by WAPCOSL, informing about the acceptance of revised rates of eight items and raising the total consideration to Rs. 872.67 Crores. Subsequent to this, SDJV and WAPCOSL signed a revised agreement for the rates, referred to as the Amendment of Agreement (for short, “AoA”), dated 09.06.2015.

15. The High Court opined that the arbitration agreement between SDJV and WAPCOSL was still in force on the date of filing of the arbitration petition and the same would operate between the parties. That finding has been reached despite the AoA having been executed between the parties on 09.06.2015. The High Court also opined that SSPPL had authority under the JVA as well as the Contract Agreement to represent SDJV, as a leading partner thereof. It held that SSPPL derived authority from clause 20.6 of CoPA read with the other enabling terms in the JVA and FIDIC Conditions of Contract for Construction (for short, ‘FIDIC’). The High Court was also impressed by the fact Page 8 of 27 that SSPPL had 95 per cent shareholding in SDJV as against only 5 per cent shareholding of AIL, the other partner. For that reason, it went on to observe that AIL cannot be permitted to derail the arbitration process commenced for and on behalf of SDJV through SSPPL. The High Court was also impressed by the fact that despite the execution of AoA, the Technical Committee entertained the appeals filed by SDJV in respect of certain items. That goes to show that even the Technical Committee was of the view that the dispensation regarding settlement of further claims of SDJV could be pursued and the arrangement arrived under AoA between the parties cannot be treated as full and final settlement. Resultantly, SDJV was well within its rights to take recourse to arbitration for resolution of the disputes in that regard. Further, the fact as to whether SDJV was entitled for the relief, regarding the claims raised, was a matter within the exclusive domain of the Arbitral Tribunal. The High Court, therefore, allowed the Arbitration Petition and appointed a sole Arbitrator for resolution of the disputes between the parties.

33. As these are the only reasons which had weighed with the High Court to reject the argument of the appellant(s) regarding non­existence 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 Page 23 of 27 agreement between the parties on the date of filing of Arbitration Petition.

There cannot be any reference of any dispute to arbitration thereafter.

(iii) …. …. ….

(iv) …. …. ….

35. Having said this, no other issue need be addressed in these appeals. As a result, these appeals must succeed. Resultantly, the impugned judgment of the High Court is set aside and the 5 1995 Supp (3) SCC 324 Page 26 of 27 Arbitration Petition No. 810 of 2016 filed by the respondent No. 1 herein stands dismissed.

36. However, we must keep the option available to the parties to take recourse to other remedies, inter se, which they are free to adopt in accordance with law; and the rejection of Arbitration Petition will be no impediment for them to pursue those remedies. We, accordingly, keep all other issues and contentions available to the parties open, to be determined in appropriate proceedings as and when occasion arises.

37. The appeals are allowed in the above terms with no order as to costs. All pending applications are also disposed of.

November 14, 2019.

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