M/S. SSPPL AND M/S. AIL WAS versus SALMA DAM JOINT VENTURE & ANR.
[2019] 17 S.C.R. 193, Supreme Court of India, 2019
Outcome: Appeal(s) allowed (Granted)
Segment: Body
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WAPCOS LTD.
v.
SALMA DAM JOINT VENTURE & ANR.
(Civil Appeal No. 8595 of 2019)
NOVEMBER 14, 2019
[A. M. KHANWILKAR AND DINESH MAHESHWARI, JJ.]
Arbitration and Conciliation Act, 1996 – s.11(6) –
Appointment of Arbitrators – SDJV, a joint venture of M/s. SSPPL
and M/s. AIL was formed – SSPPL was nominated as a ‘Lead
Partner’ of SDJV with 95% share as compared to 5% of AIL – SDJV
was the successful bidder and that was followed by a Contract
Agreement dated 09.03.2006 between the WAPCOSL and SDJV for
the implementation of the work on “The Reconstruction,
Rehabilitation and completion of Salma Dam Project” in
Afghanistan – Several documents were signed including Conditions
of Particular Applications (CoPA) – Cl.20.1 thereof dealt with
Contractor’s claim and Cl.20.6 dealt with Arbitration – Subsequent
to this, the rates of some of the items were revised, which raised
the total consideration of the agreement – Thereafter, SDJV and
WAPCOSL signed a revised agreement for the rates, referred to as
the Amendment of Agreement (AOA) dated 09.06.2015 – Despite
signing of AOA, SDJV raised certain claims before the Engineer
of WAPCOSL – Subsequent to execution of AOA, dispute arose
between the JV partners – On 21.09.2016, AIL revoked Power-
of- Attorney executed in favour of SSPPL, which authorized it to
appoint arbitrator on behalf of AIL – However, SSPPL filed petition
on behalf of SDJV against WAPCOSL u/s. 11(6) of the Act, 1996
– The said petition was allowed by the
High Court and the
arbitrator was appointed – Aggrieved, WAPCOSL filed special
leave petition before the Supreme Court – AIL asserted before the
Court that it did not give consent to SSPPL for appointment of
arbitrator or to file petition u/s. 11(6) of the Act, 1996 – Consequent
to which, the order of the High Court was set aside and parties
were relegated before the High Court for reconsideration of all
the aspects – The High Court once again allowed the said
arbitration petition and appointed a sole arbitrator and held that
SSPPL had authority under the JV as well as Contract Agreement
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to represent SDJV, as a leading partner to take recourse to
arbitration – On appeal, held: The Cls 1.2 and 1.3 of Section-01
of the AOA made it clear that no claims will be raised by the
Contractor on any of the pending/settled claims/other claims
resulting out of correspondences made and there will be “no
arbitration” for the settlement of claims – Neither SDJV nor SSPPL
have disputed the execution of AOA – The terms and conditions
specified in AOA leave no manner of doubt that the arbitration
agreement was done away with – 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 – Resultantly, the impugned judgment
of the High Court set aside.
Allowing the appeals, the Court
HELD: 1. As regards the first reason weighed with the
High Court that the Technical Committee entertained the five
appeals filed on behalf of the Salma Dam Joint Venture (SDJV),
that in view of this Court cannot undo the effect of terms and
conditions of Amendment of Agreement (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 Conditions of Particular Applications
(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 scrutiny. [Para 30] [208-F-H; 209-
A-C]
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2. The second reason weighed with the High Court is again
founded on incorrect assumption about the date of AoA. The
High Court 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 record. [Para 31]
[209-C-G]
3. 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 this Court.
[Para 32] [209-F-H; 210-A-B]
WAPCOS LTD. v. SALMA DAM JOINT VENTURE & ANR.
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4. 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. [Para 33] [210-B-D]
5. 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. [Para 34] [210-D-F]
Damodar Valley Corporation v. K. K. Kar [1974] 2
SCR 240 ; National Insurance Company Limited v.
Boghara Polyfab Private Limited (2009) 1 SCC 267 :
[2008] 13 SCR
638 ; Nathani Steels Ltd. v. Associated
Constructions (1995) Suppl. 3 SCC 324 – relied on.
Case Law Reference
[1974] 2 SCR 240
relied on
Para 34
[2008] 13 SCR 638
relied on
Para 34
(1995) Suppl. 3 SCC 324
relied on
Para 34
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8595
of 2019.
From the Judgment and Order dated 25.01.2019 of the High
Court of Delhi at New Delhi in Arb. P. No. 810 of 2016.
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With
Civil Appeal No. 8596 of 2019.
Sachin Datta, Sr.Adv., Milanka Chaudhury, Ms. Naira Dubey,
Sanket Tiwari, M. R. Shamshad, R.K. Sanghi, Ishan Sanghi, Satyendra
Kumar, Anugrah Niraj Ekka, Rajeev Singh, Ms. Prity Sharma, Swetank
Shantanu, Ms. Naira Dubey, Sanket Tiwari, M. R. Shamshad, Advs.
for the appearing parties.
The Judgment of the Court was delivered by
A. M. KHANWILKAR, J.
Leave granted.
1. These appeals take exception to the judgment and order dated
25.01.2019 passed by the High Court of Delhi at New Delhi in
Arbitration Petition No.810 of 2016, whereby the High Court allowed
the Arbitration Petition purportedly filed by respondent No. 1 - Salma
Dam Joint Venture, under Section 11(6) of the Arbitration and
Conciliation Act, 1996 (for short, “the Act”) and appointed a sole
Arbitrator.
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 Hydro-Mechanical 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 the JVA, SSPPL was
nominated to be the ‘Lead Partner’ of SDJV with ninety-five percent
WAPCOS LTD. v. SALMA DAM JOINT VENTURE & ANR.
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(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.
4. SDJV was successful being the highest bidder and was
awarded tender for the said project on 17.01.2006. That was followed
by a Contract Agreement dated 09.03.2006 (for short, “Contract
Agreement”) for executing the stated contract between the WAPCOSL
and SDJV. Along with the said agreement, WAPCOSL and SDJV
signed certain documents to be read with the Contract Agreement and
to form part and parcel thereof. Out of several such documents,
Conditions of Particular Applications (for short “CoPA”) is the relevant
one for the purpose of this case. Clause 20.1 thereof deals with
Contractor’s claim and Clause 20.6 deals with Arbitration and it is under
these clauses, the respondent No. 1 has rested its case, that is,
arbitrability and the power to invoke arbitration.
5. Be that as it may, the consideration of the Contract 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 High-Power 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.
6. Despite signing of AoA, SDJV raised certain claims before
the Engineer of WAPCOSL. After rejection of said representation,
SDJV preferred six appeals to the Technical Committee constituted in
terms of clause 2.1 of Section – 02 of AoA. Five of these appeals were
rejected/disposed of vide report of the Technical Committee dated
28.10.2016.
7. In the meantime, on 04.06.2016, the Dam was inaugurated by
the Hon’ble Prime Minister of India and Hon’ble President of
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Afghanistan. Subsequent to which, a letter dated 02.08.2016 was issued
by AIL addressed to WAPCOSL, informing that SDJV has started the
process of dismantling the machinery and the work force from the
project site with full awareness of WAPCOSL.
8. Subsequent to the execution of AoA, dispute arose between
the JV partners which resulted in AIL filing a petition (bearing number
O.M.P. (I) (COMM.) 70/2016) under Section 9 of the Arbitration Act,
wherein the High Court of Delhi, vide order dated 05.09.2016, directed
WAPCOSL to deposit the amount payable to SDJV with the Registrar
of the High Court in order to secure the interests of both the JV entities.
The High Court in a separate petition (bearing number Arb. P. 442/
2016), filed by AIL against SSPPL, also appointed a sole arbitrator for
their (AIL and SSPPL) inter se disputes.
9. On 21.09.2016, the Board of Directors of AIL resolved to
revoke the PoA executed in favour of SSPPL and in furtherance of
the same, AIL, vide letters dated 19.10.2016 and 11.11.2016, wrote to
the respective Banks and also to WAPCOSL informing them about the
revocation of the authority of SSPPL. Thus, it was duly notified through
these letters that in future, only those letters or communications which
are signed or acknowledged by both the parties (AIL and SSPPL) shall
be valid and be entertained by WAPCOSL.
10. Notwithstanding the abovementioned letters sent by AIL,
upon rejection of the claims of SDJV by the Technical Committee,
on
28.10.2016, SSPPL, unilaterally, espousing claims of SDJV proceeded
to invoke the arbitration process, under clause 20.6 of CoPA and also
appointed a nominee arbitrator, vide letter dated 12.11.2016. WAPCOSL,
in response, vide letter dated 05.12.2016, recorded that since SDJV is
a joint venture entity and the authority of SSPPL to represent AIL has
been revoked, the appointment of arbitrator by SSPPL, unilaterally, is
illegal in terms of clause 4.2 of the Contract Agreement and clause
3.2 of the JVA.
11. Resultantly, SSPPL filed a petition on behalf of SDJV against
WAPCOSL under Section 11(6) of the Arbitration Act (bearing number
Arb. P. 810/2016) before the High Court of Delhi, wherein it has been
asserted that the PoA dated 15.07.2005 given by AIL in its favour is
still in force and forms part of the Contract Agreement dated 09.03.2006.
This assertion is factually incorrect.  In that, the PoA was executed as
a follow up document alongwith JVA on 09.09.2005 itself. Whereas,
WAPCOS LTD. v. SALMA DAM JOINT VENTURE & ANR.
[A. M. KHANWILKAR, J.]
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the Board of Directors of AIL vide resolution dated 15.07.2005 had
authorised its officer to execute the JVA and PoA, which were so
executed on 09.09.2005.
12. The said arbitration petition was contested by the appellant
(WAPCOSL). However, the High Court allowed the same vide order
dated 15.03.2017 and appointed an arbitrator for WAPCOSL.
13. Feeling aggrieved, WAPCOSL preferred a Special Leave
Petition (bearing number SLP (Civil) 26555/2017) before this Court. This
Court, vide order dated 03.11.2017, directed impleadment of AIL as a
party and also stayed the arbitral proceedings. AIL appeared before
this Court and asserted that it did not give consent to SSPPL for
appointment of an arbitrator or for filing petition under Section 11(6) of
the Arbitration Act. Thus, it had urged that SSPPL had no authority to
unilaterally appoint an arbitrator for SDJV or to file the subject petition
on behalf of SDJV. Further, the petition filed in the name of SDJV
through SSPPL was not as per Delhi High Court Rules. This Court,
vide order dated 11.12.2017, deemed it proper to set aside the order
passed by the High Court of Delhi dated 15.03.2017 and to relegate
the parties before the High Court for reconsideration of all aspects, as
would be raised by the parties including regarding the locus and
competence of SSPPL to unilaterally appoint an arbitrator or file
arbitration petition under Section 11 of the Act.
14. The High Court of
Delhi, vide judgment dated 25.01.2019 (for
short, “impugned judgment”), once again allowed the said arbitration
petition and appointed a sole arbitrator, instead of three arbitrators
envisaged in CoPA.
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 that SSPPL had 95 per cent shareholding in SDJV as against
only 5 per cent shareholding of AIL, the other partner. For that reason,
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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.
16. Feeling aggrieved, WAPCOSL as well as AIL have assailed
the decision of the High Court by filing separate Special Leave
Petition(s).
17. We have heard learned Senior Counsel Mr. Gaurav
Panchnanda for WAPCOSL (appellant) and Mr. Shyam Divan for AIL
(appellant), and Mr. Sachin Datta, learned Senior Counsel for SDJV
(respondent No.1 in both the appeals).
18. After cogitating over the erudite arguments of the counsel
appearing for the respective parties and perusing the
relevant records,
including Arbitration Petition and the written submissions filed by the
learned counsel, in our opinion, two principal issues need be answered
in this judgment. First, whether on the date of presentation of Arbitration
Petition, purportedly by SDJV through SSPPL on 15.12.2016, the
arbitration agreement posited in Contract Agreement dated 09.03.2006
was in existence or subsisting and in force? Second, whether the
Arbitration Petition filed in the name of SDJV through SSPPL, in law
can be considered as having been properly and validly presented despite
the express revocation of authority of SSPPL vide resolution passed
by the Board of Directors of AIL on 21.09.2016 and duly communicated
to SSPPL as well as WAPCOSL before 15.12.2016, as was granted
to SSPPL in terms of JVA read with PoA including the Contract
Agreement?
WAPCOS LTD. v. SALMA DAM JOINT VENTURE & ANR.
[A. M. KHANWILKAR, J.]
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19. Reverting to the first question, we must immediately advert
to the Arbitration Agreement incorporated in the Contract Agreement.
That can be discerned from clause 4, which reads thus:-
“4. Settlement of Disputes
4.1 It is specifically agreed by and between the parties that all
the differences or disputes arising out of the Agreement shall be
decided by process of settlement of disputes and arbitration as
specified in Clause 20 of the Conditions of the Contract.
4.2 It is also agreed that the Salma Dam Joint Venture agreement
dated 9th September 2005 shall be treated as part of this
agreement and both the parties to the said joint venture namely
M/s SSJV Projects Private Limited and M/s Angelique
International Limited shall also be jointly and severally liable in
the process of settlement of disputes in arbitration between
WAPCOS and Salma Dam Joint Venture.”
This clause must be read alongwith the terms specified in CoPA
in particular clause 20 and clauses 1.14, 4.3 and 20.6 of FIDIC.  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 arbitration.
20. In the present case, however, in due course, because of
fortuitous situation, the parties had to agree to amend certain terms and
conditions of the Contract Agreement and
to provide for revised contract
rates. That was done after due negotiations, as is evinced from the
correspondence exchanged between SDJV and WAPCOSL vide letters
dated 15.09.2011 and 17.09.2012 and the recitals of the AoA itself.
Finally, the parties (SDJV and WAPCOSL in particular) executed a
formal Amendment of Agreement (AoA) on 09.06.2015.  The same
records the new arrangement eventually agreed upon between the
parties. It will be useful to first refer to the preamble of the AoA which
reads thus:
“1.0 Preamble
Consequent upon the modification of rates of certain Items of
works in January 2013 which is subject to special terms and
conditions, the Amendment to the Original Agreement between
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WAPCOS and SDJV (the Parties) was required to be entered
upon thereafter.
Nevertheless the work at site continued at very fast pace and in
good faith and trust as per the revised rates agreed between the
Parties. Despite several constraints the project completion
progressed well during the years 2013 and 2014 and substantial
part of the works (around 97%) of the Dam and Spillway was
completed by 31st December 2014. Remaining works are
continuing at the project site.
Now, as the Amendment to Agreement is to be formalized for
proper implementation and records, therefore, in continued good
faith and trust the Parties have agreed to sign this Amendment
of Agreement by incorporating the actual site conditions, practical
difficulties and subsequent developments that have taken place
at site.
……. .”
21. In clause 1.1 of AoA, reference is made to the estimated
cost of works and the balance work to be completed in the revised
estimated cost.  The note below the chart given in clause 1.1 and
clauses 1.2 to 1.6 of the preamble are of some relevance. The same
read thus:
“1.1 The balance work has to be completed in the revised
estimated cost as given below.
Estimated Cost of Works
    ….   …..   ……
Note: If due to site conditions, the balance quantities increases,
the contractor will carry out the construction and complete the
work
1.2 This Amendment of Agreement will form part of the Original
Agreement no. WAPCOS/SDP/AFG/Pkg.-III-05 dated 9th
March 2006.
1.3 This
Amendment of Agreement includes revised Bill of
Quantity (BoQ) (containing executed & balance quantum of
works, New Items of work, etc) with the modified approved rates
for eight major item of Civil works and modified cost of Hydro-
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Mechanical works along with additional terms and Conditions of
Contract.
1.4 Any Clauses/items other than the Amendment of Agreement
will be governed by Original Agreement and in case of any
dispute the decision of CMD, WAPCOS will be final and binding
to the Contractor.
1.5 In case of any inconsistency between Original Agreement
and Amendment of Agreement, the content of Amendment of
Agreement will succeed.
1.6 In case of any dispute on Technical Specification and
interpretation of any contract clauses the decision of CMD,
WAPCOS will be final and binding to the Contractor.
……… .”
22. It may be useful to now advert to clauses 1.2 and 1.3 of
Section -01 of the AoA, which read thus:
“REVISED COST AND RELATED TERMS AND
CONDITIONS
Clause 1.0
….  …..  …..
The revision of cost/modified rates of above item are subject to
the following:
1.1
….   ….   ….
1.2 The balance pending claims of Contractor stands buried and
it was agreed by the Contractor that, no claims will be raised by
Contractor on any of the pending/settled claims/other claims
resulting out of the correspondences made so far and there will
be no arbitration for the settlement of claims. It is agreed that
the Contractor shall not be paid any further amount on claim/
additional rate for new item of work settled or pending over and
above the payments already released to the contractor.
1.3 In future, no claim of Contractor on any account shall be
entertained.
However any claim arising out of force majeure shall
be examined.”
Here, we may also take note of Section-02 of AoA concerning
the amendment in general conditions of CoPA. Clause 2.1 of this section
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predicates that sub-clause 1.1.2.16 of CoPA stands modified as
Technical Committee means committee constituted by CMD,
WAPCOSL.
23. 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
AoA.
24. The moot question is: whether the AoA has the effect of
undoing and abrogating the arbitration clause predicated in the Contract
Agreement? According to SDJV and SSPPL, the arbitration clause in
the Contract Agreement remains intact and undisturbed. The parties
continue to be bound by the same.
25. For considering this plea we must appreciate the backdrop
in which the AoA has been executed, to understand the true import of
the terms and conditions set out therein. From the correspondence
exchanged between the parties preceding the execution of AoA, being
letters dated 15.09.2011
and 17.09.2012, it is amply clear that the parties
were ad idem that substantial part of the works (around 97 per cent)
of the “Dam and Spillway” was completed by 31.12.2014. This fact
has been plainly restated in the preamble of the AoA. The AoA also
records that if due to site conditions, the balance quantities increase,
the contractor will carry out the construction and complete the work.
Further, the AoA would form part of the Contract Agreement dated
09.03.2006 and it includes revised Bill of Quantities (BoQ) (containing
executed and balance quantum of works, new items of works, etc.)
with the modified approved rates for eight major items of civil works
and modified cost of Hydro-Mechanical works along with additional
terms and conditions of Contract. Clause 1.4 of the AoA makes it amply
clear that any other clauses/items other than the AoA will be governed
by Original Agreement (Contract Agreement) and in case of any
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dispute, the decision of CMD, WAPCOSL will be final and binding on
the contractor.  Clause 1.5 of the AoA makes it further clear that in
case of any inconsistency between the Contract Agreement and AoA,
the terms specified in AoA will prevail. Clause 1.6 of the preamble
postulates that in case of any dispute on technical specifications and
interpretation of any contract clauses, the decision of CMD, WAPCOSL
will be final and binding on the contractor. Section-01 of AoA then deals
with revised cost and related terms and conditions. Clause 1.0 thereof
provides that the revision of cost/modified rates of the items referred
to therein will be subject to clauses 1.2 and 1.3, amongst others.  Clause
1.2 of Section-01 envisages that the balance pending claims of
contractor “stands buried” and it has been agreed by the contractor,
that no claims will be raised by the contractor on any of the pending/
settled claims/other claims resulting out of correspondences made so
far and there will be “no arbitration” for the settlement of claims.  Clause
1.3 of Section-01 also makes it clear that in future no claim of
contractor on any count shall be entertained except the claim arising
out of force majeure.
26. 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-011. 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 claims2.
1 See – Clause 1.0 of Section-01 of AoA (in paragraph 22 above)
2 See – Clause 1.4 of Preamble (in paragraph 21 above) read with clauses 1.2 and 1.3
of Section -01 of AoA (in paragraph 22 above).
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27. To get over this position, SDJV would contend that Section-
02 of AoA specifically deals with the amendments in general conditions
of CoPA but it makes no reference to amendment of clause 20 of
CoPA.  That 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 earlier.
28. 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 therein.
29. The High Court, however, rejected the argument of the
appellant(s) herein on the following basis:
“10.5 What is, however, not disputed is that as a matter of fact,
the J.V. entity had lodged its claim with the Engineer appointed
under the C.A. and upon the Engineer repelling its claim, five
appeals were lodged with the Technical Committee which
rejected the same by way of a common order dated 28.10.2016.
A perusal of the order of the Technical Committee would show
that the claims lodged by the J.V. entity have been examined on
merits and also from the perspective of the plea raised before it
with regard to their admissibility in view of the provisions of
Clauses 1.2 and 1.3 of the AOA.
10.6 Therefore, if, as contended on behalf of WAPCOS, Clauses
1.2 and 1.3 of the AOA barred the J.V. entity from pressing any
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pending or future claims, then, to my mind, there was no need
for the Technical Committee to deliberate upon the claims on
merits. It is the stand of the J.V. entity that all the claims lodged
by it with WAPCOS pertain to a period post the execution of
the AOA.
10.7 The record shows that the AOA was executed on
09.06.2005, while the subject project was inaugurated post its
completion only in 2016. Furthermore, it is the case of the J.V.
entity that the AOA provided for revision of rates for eight major
items concerning civil works and hydro mechanical works.
Therefore, if at all, the bar would apply to claims, which were
referable to pre-existing claims, or claims pertaining to revision
of rates relatable to eight major items of civil works and hydro
mechanical works or those claims which overlapped with these
claims. That being said, as to whether the position taken by the
J.V. entity is correct or not is a matter which can only be
examined by the Arbitral Tribunal once the matter is tried as based
on mere pleas and counter pleas, this aspect cannot be decided
in a Section 11 petition. Particularly, given the facts obtaining in
this case, it is not possible to come to a definitive conclusion that
there was accord and satisfaction upon the execution of the
AOA.
10.8 Therefore, the ground taken on behalf of WAPCOS that
no claim could be lodged post execution of the AOA is untenable
and hence cannot be accepted. There
is, to my mind, much merit
in the submission advanced on behalf of the J.V. entity that the
AOA cannot impede adjudication of all future claims whether
or not they have their genesis in the AOA. If that was the intent,
as correctly argued on behalf of the J.V. entity, the AOA should
have done away with Clause 20.6 of COPA, which contains the
arbitration agreement.”
30. 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
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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 scrutiny.
31. 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 record.
32. 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
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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 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. Kar3, 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
3 (1974) 2 SCR 240 @ 243-244
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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 Limited4, 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) …. …. ….
4 (2009) 1 SCC 267
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(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 Constructions5,
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. Resultantly, the
impugned judgment of the High Court is set aside and the Arbitration
5 1995 Supp (3) SCC 324

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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.
Ankit Gyan
Appeals allowed.
WAPCOS LTD. v. SALMA DAM JOINT VENTURE & ANR.
[A. M. KHANWILKAR, J.]