Case: UNION OF INDIA Vs. PRADEEP VINOD CONSTRUCTION CO

2. Brief facts which led to filing of these appeals are as under:Facts in CA No.6400/2016:On 14.07.2010, Northern Railways awarded the contract for misc. civil engineering works such as construction of duty huts at L-xings, water supply arrangements, provision of station name boards etc. in connection with Rewari-Rohtak New Line to the respondent. The total cost of the work at accepted rate came to Rs.5,30,31,369.30. The work was finally completed on 31.03.2012. According to the appellant, final payments were made by the appellant to the respondent vide bill bearing Vr.No.00356/104/C/TKJ dated 06.05.2014. On the same day i.e. on 06.05.2014, parties also entered into a supplementary agreement which recorded full accord and satisfaction as on 06.05.2014. In the meanwhile, on 05.05.2014, respondent sent a letter to the appellant alleging that under the compulsion of circumstances, it had to sign the so-called final bill without protest as desired by the administration, otherwise heavy financial loss would have been caused to respondent and it may not be in a position to tender and execute further works. The respondent averred that a sum of over Rs.1.50 crores still remains to be paid to the respondent and calling upon the appellant to make the payment within 90 days. The respondent vide its letter dated 05.05.2014 invoked arbitration clause as contained under Clause 64 of General Conditions of Contract3. The appellant issued a reply dated 25.07.2014 rejecting the arbitration claim of the respondent, taking the stand that the respondent had signed the final bill and also signed the supplementary agreement which clearly stipulates that it was agreed between the parties that the respondent has accepted the said sums mentioned therein in full and final satisfaction of all dues and claims under the principal agreement4. The respondent thereafter filed Arbitration Petition No.168 of 2015 under Section 11 of the Arbitration and Conciliation Act, 1996 before the High Court for appointment of an arbitrator. Upon consideration of contention of the parties, the learned Single Judge held that the question whether the discharge certificate and supplementary agreement were signed by the respondent under duress, would require evidence to be led and is therefore, required to be examined by the arbitrator. So far as the appointment of arbitrator is concerned, the High Court held that since the Railways failed to appoint an arbitrator despite invocation of the arbitration clause by the respondent on 05.05.2014, the Railways forfeited its right under the arbitration clause and the learned Judge appointed Mr. Ram Prakash(Retd.), District and Sessions Judge as the sole arbitrator instead of directing the appointment of arbitrator as per Clause 64 of the General Conditions of ContractFacts in CA No.6420/2016:5. An agreement dated 17.01.2012 was entered into between the Northern Railways and the respondent for construction of two lane road over bridge in lieu of L-xing near Muradnagar Railway Station at a cost of Rs.4,21,69,176.25/-. The work was completed on 03.08.2013. According to the Railways, the respondent received full and final payment vide final bill bearing Vr.No.280 dated 29.01.2014 and also signed a supplementary agreement dated 01.03.2014 acknowledging full and final settlement of all claims. It was also provided in this supplementary agreement that the principal agreement shall stand finally discharged and the arbitration clause contained therein shall cease to exist. The respondent vide letter dated 15.01.2014 raised two claims and requested for appointment of arbitrator. The Railways informed the respondent that the claims of the respondent are not referable to arbitration as the same are covered under ?excepted matter?. The respondent- contractor on 28.08.2014 also sent a ?No Claim? letter to the Railway stating that it has no claim towards the Railways and requested for release of security deposit made by it6. The respondent thereafter filed Arbitration Petition No.531/2014 under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator. The High Court held that though the appellant claims that the disputes raised by the respondent are in the nature of ?excepted matters? but that the issue can be examined by the arbitrator. With those findings, the court appointed Mr. H.K. Chaturvedi, advocate as Sole Arbitrator and directed that arbitration shall take place under the aegis of the Delhi International Arbitration Centre.

Court's reasoning:
10. The respondent(s) are registered contractors with the Railways and they are claiming certain payments on account of the work entrusted to them. The request of the respondent(s) for appointment of arbitrator invoking Clause 64 of the contract was declined by the Railways stating that their claims have been settled and the respondent(s) have issued ?No Claim? certificate and executed supplementary agreement recording ?accord and satisfaction? and hence, the matter is not referable to arbitration. Admittedly, the request for referring the dispute was made much prior to the Amendment Act, 2015 which came into force w.e.f. 23.10.2015. Since the request for appointment of arbitrator was made much prior to the Amendment Act, 2015 (w.e.f. 23.10.2015), the provision of the Amended Act, 2015 shall not apply to the arbitral proceedings in terms of Section 21 of the Act unless the parties otherwise agree. As rightlypointed out by the learned counsel for the appellant, the request by the respondent(s)- contractors is to be examined in accordance with the Principal Act, 1996 without taking resort to the Amendment Act, 2015.The ratio of the above decision squarely applies to the case in hand. When the agreement specifically provides for appointment of named arbitrators, the appointment should be in terms of the agreement. The High Court, in our view, was not right in appointing an independent arbitrator ignoring Clause 64 of the General Conditions of ContractWe are not inclined to go into the merits of the contention of the parties. It is for the arbitrator to consider the claim of the respondent(s) and the stand of the appellant-railways. This contention raised by the parties are left open to be raised before the arbitrator.