Modern Suppliers vs Union of India (UOI) and Another

Rajiv Sahai Endlaw, J.—The disputes between the parties are stated to be arising out of a works contract dated 22nd November, 1996 placed by the respondent Railways on the petitioner. The date of completion thereof was on 21st May, 1999. The work is stated to have been completed by 31st March, 2002. It is the plea of the petitioner that the respondent however delayed the preparation of the final bill, even after the maintenance period of six months expired on 30th September, 2002. It is, further the case of the petitioner that the petitioner was informed that unless the petitioner was ready and willing to sign the addendum and corrigendum and also on supplementary agreement appended with the main agreement, the final payment would not be released to the petitioner. The petitioner further claims to have been informed that to be able to receive the final payment it will have to relinquish its claims for escalation, extra expenses, refund of recoveries etc. The petitioner claims to have written a letter dated 16th January, 2003 to the respondent in this regard. Though the receipt of the said letter is not denied, no reply is stated to have been given to the same. The respondent is stated to have prepared a payment of Rs. 3,86,062/- under the final bill. The same was released to the petitioner on 24th January, 2003, according to the petitioner after the petitioner had signed the supplementary agreement, addendum etc. It is further the case of the petitioner that it wanted to sign the final bill under protest but was not permitted to do so.

The petitioner after receiving payment on 24th January, 2003, for the first time, wrote a letter dated 10th April, 2003 stating that it was compelled to sign the final bill and other documents. The petitioner by the said letter also invoked the arbitration clause.

The petitioner followed up with its letter dated 2nd December, 2003. The respondent Railways vide its letter dated 13th January, 2004 informed the petitioner that the petitioner having signed the No Claim Certificate on its final bill and having also singed the supplementary agreement, the arbitration clause contained in the principal agreement had ceased to have any effect and was deemed to be non-existent for all purposes.

The petitioner made representations dated 11th February, 2004, 3rd March, 2004 & 20th July, 2004. Finally, a letter dated 21st September, 2004 was sent by the respondent stating that the matter had been re-examined and the claims found not referable to arbitration being excepted matter under Clause of 63 of GCC1999 applicable to the contract. Reference was also made to the earlier letter dated 13th January, 2004 which was stated to be holding good.

The petitioner sent another letter dated 10th November, 2004 stating that GCC1989 and not GCC1999 was applicable to the contract and again asking the respondent to re-consider the matter.

The respondent vide its letter dated 3rd December, 2004 wrote that there was a typographical error in the earlier letter dated 21st September, 2004 and accepting that GCC 1989 was applicable. It was further conveyed that the office letter dated 13th January, 2004 held good.

There is no communication on record after 3rd December, 2004. Ultimately this application u/s 11(6) of the Act came to be filed on 10th September, 2007. The respondent Railways filed a reply contending inter-alia that the claims made by the petitioner for Rs. 4,00,000/- for balance amount of escalation and Rs. 1,50,000/- as increased cost after expiry of original completion date and till execution and completion of works are excepted matters covered by Clauses 21.5 and 9.2 of the special conditions of contract. Reliance in this regard is placed on General Manager Northern Railways and Another Vs. Sarvesh Chopra,

It is further pleaded that as many as nine extensions for completion of work were granted to the petitioner with frozen indices PVC as of 15th September, 2001. It is further pleaded that the petitioner after signing the supplementary agreement and in which it is recorded that the arbitration clause contained in the principal agreement shall cease to have any effect and shall be non existence for all purposes is not entitled to invoke the arbitration clause. The other claims of the petitioners are also disputed but we are in this application not concerned with the said disputes between the parties.

I have recently in S.K. Sharma Vs. Union of India (UOI) and Others, dealt with the plea of maintainability of arbitration after signing such an agreement. Relying upon National Insurance Co. Ltd. Vs. Boghara Polyfab Pvt. Ltd., it was concluded that depending upon the facts of each case and conduct of the parties it has to be determined whether the full and final settlement discharges the arbitration agreement in the original contract or not.

As far as the present case is concerned, admittedly the petitioner, prior to signing the agreement rescinding the arbitration clause, had vide letter dated 16th January, 2003 written that it was being coerced to sign the said documents to be able to receive the amounts due according to the respondent also to the petitioner under the final bill. The petitioner had in the said letter also informed the respondent that it will be entitled to invoke the arbitration clause even after signing such documents. It is not disputed that the final payment was released to the petitioner only after it signed the said documents. The petitioner within a month of receiving the final payment invoked the arbitration clause on 10th April, 2003. All these factors show that the full and final settlement and/or recession of contract was not consensual and there was an element of coercion in the same, which has been deprecated by the Apex Court in Boghra Polyfab (supra).

The respondent Railways, however, vide letter dated 13th January, 2004 rightly or wrongly refused the request of the petitioner for arbitration. What is of significance is that the petition has been filed after more than three years thereof, on 10th September, 2007. Of course, the respondent even after 13th January, 2004, on 21st September, 2004 and 3rd December, 2004 both within three years prior to the institution of the petition again refused the request of the petitioner for arbitration, however, relying upon the earlier letter dated 13th January, 2004 and also stating therein that two of the claims fell within excepted matters. The petitioner even after the last letter waited for two years and nine months to file the petition.

In my view, the petitioner is not entitled to succeed on this ground alone. The petitioner has allowed the matter to become stale. The Apex court in S.B.P. and Co. Vs. Patel Engineering Ltd. and Another, has held that while exercising the power u/s 11(6) the question whether the claim was a dead one or a long barred claim that was sought to be resurrected and whether the parties had concluded the transaction by recording satisfaction of their mutual rights and applications or by receiving the final payment without objection has to be adjudicated. I find the claim in the present case in the entirety of the facts and circumstances to be such.

There was an element of finality to the letter dated 13th January, 2004 of the respondent. The petitioner merely by making repeated representations cannot revive a claim which has become time barred. The record does not show that there was anything in the conduct of the respondent to lead the petitioner to believe that his claims were being considered. Merely because the respondent Railways wrote letters dated 21st September, 2004 and 3rd December, 2004 reiterating the stand taken in the letter dated 13th January, 2004 and also adding thereto would not revive a claim which had become time barred.

The nature of the claim of the petitioner is also relevant in this regard. For the petitioner to succeed on the plea of coercion, there has to be an element of urgency. The petitioner could have invoked the arbitration clause at the time of writing the letter dated 16th January, 2003 i.e., before signing full and final settlement; but the petitioner did not do so because it had the urgency to receive the monies due and which according to the petitioner were being denied to it. If that be the position, then the petitioner ought to have acted in right earnest after receiving the payments. The conduct of the petitioner of having slept over its rights, if any, for a period over three years disentitles the petitioner from after such long lapse of time approaching this Hon�ble court for u/s 11(6) of the Act. The petitioner by such long lapse of time has lost the right to agitate coercion in the matter of signing of the supplementary agreement, rescinding the arbitration agreement and full and final settlement and has allowed the said documents to attain finality.

This Court in Sh. Rajesh Kumar Garg Vs. MCD and Another, held the limitation for applying u/s 11(6) to be three years from the accrual of cause of action. I find the cause of action to have accrued to the petitioner in the present case, in any case on 13th January, 2004. The petition is barred by time.

Having held so, there is no need to adjudicate the plea of the respondent of two of the claims falling in excepted matter.

The petition/application is dismissed. No costs.