M/S. H.P.Singh vs G.M. Northern Railways And Others

Heard Sh. Ajay Gandotra, learned for the petitioner and Sh. P.S.Chandel, learned counsel appearing for the respondents.

The petitioner has applied under Section 6 (11) of the Jammu and Kashmir Arbitration and Conciliation Act, 1997 which is parimateria with Section

11 (6) of the Arbitration and Conciliation Act., 1996 for the appointment of an arbitrator to resolve the disputes inter se the parties arising out of a

work contract agreement dated 14.03.2011 executed in between them.

In pursuance to the Tender Notice dated 19.04.2010, the work of unloading of cement from Railway Wagons/Trucks in Jammu Yard of the

Railway Godown and then transporting, loading, unloading and staking in connection with Udhampur-Katra of USBRL Project was allotted to the

petitioner which was followed by an agreement executed on 14.03.2011. The total cost of the work was Rs. 2,32,21,000/- for which the petitioner

deposited security amount of Rs. 2,84,000/- and furnished a bank guarantee of Rs. 11,61,000/- along with counter guarantee of Rs.3,00,000/-. The

contract period was of two years commencing from 25.08.2010 but no work was given to the petitioner from 25.08.2010 till 14.03.2011.

It is alleged by the petitioner that a part of the above contract, i.e., about 40% was allotted by the respondents in favour of a third party in breach of

the contract agreement. Only about 25% of the contract work was taken from the petitioner.

The aforesaid contract agreement is governed by the Northern Railway General Conditions of Contract Regulations and Instructions for tenders, as

per clause 6.0 and 6.1 of the Special Tender Conditions and Instructions, which formed part of the tender notice.

The conditions of the contract agreement provide a complete mechanism for adjudication of the disputes arising out of and in relation to the said

contract. Clause 64 of the said work contract agreement provides for an arbitration for resolving the disputes thereto.

The petitioner, on account of the disputes that have arisen in relation to the aforesaid agreement, vide application dated 14.11.2011, invoked the

arbitration clause and requested for the appointment of an Arbitral Tribunal to resolve the said disputes. It was contended that none of the claims

raised by the petitioner fell within the exempted matters as provided in clause 63 of the arbitration clause. The Deputy Chief Engineer, Survey and

Construction-1, Northern Railway, respondent No. 3, vide letter dated 18.05.2015, rejected the demand of the petitioner for appointment of an arbitral

tribunal on the ground of limitation and that no claim was raised within 90 days of the final bill.

The petition for appointment of an arbitrator is being contested by the respondents by filing objections to the effect that in view of clause 43.2 of the

General Conditions of Contract, the contractor is not entitled to raise any claim against the Railway after he had signed „No Objection Certificate‟.

The petitioner had signed the „No Objection Certificate‟ on 24.07.2014 and has preferred the claims on 14.11.2014. It is also alleged that in view of

clause 64.1 (iv), the contractor was supposed to prefer claims within 90 days of receiving intimation from the Railways that the final bill is ready for

payment.

In the light of the above facts and circumstances and the respective stand of the parties, it is clear that the parties entered into a work contract

agreement on 14.03.2011 which provides for the resolution of disputes through arbitration and that the petitioner has duly invoked the arbitration clause

vide application dated 14.11.2011. The only thing which is being canvassed to deny arbitration is that the petitioner has not preferred any claims within

90 days of intimation that the final bill is ready for payment and that he is not entitled to raise any claim after signing of the „No Objection

Certificate‟.

Both the above issues are the issues to be adjudicated upon on the basis of evidence and may not necessarily be considered, commented and

decided by this Court while dealing with the petition for appointment of the arbitrator and, if necessary, may be left for decision by the Arbitral

Tribunal if the dispute is otherwise referable.

Sh. Gandotra has drawn the attention of the court to the pleadings to submit that the petitioner had submitted the final bill in duress and that it

would not come in the way of the petitioner in getting the disputes referred to the arbitral tribunal. The respondents were wrongly withholding the

payment and even the security deposit and the bank guarantee. Thus, the petitioner was under a great mental stress and was suffering from serious

financial constraints. He was forced to submit the final bill and to sign the „No Objection Certificate‟ as 19th October 2014 was the date of

marriage of his only daughter and he needed money for it. Therefore, the submission of final bill and signing of the „No Objection Certificate‟ would

not come to the disadvantage of the petitioner. The factum of marriage was sought to be established by furnishing the marriage invitation card of the

daughter and other documents. The petitioner was economically coerced to sign the „No Objection Certificate‟ and the final bill and had succumbed

to the pressure primarily to seek the release of the security deposit and the bank guarantee.

For the sake of convenience, it is useful to reproduce Clause 43 (2) of the General Conditions of Contract herein below:-

“43.(2) Signing of „No Claim Certificateâ€:- The contractor shall not be entitled to make any claim whatsoever against the Railway

under or by virtue of or arising out of this contract, nor shall the Railway entertain or consider any such claim. If made by the Contractor,

after he shall have signed a “No claim Certificate†in favour of the Railway to such form as shall required by the Railway after the

work are finally measured up. The Contractor shall be debarred from disputing the correctness of the items covered by “No Claimâ€

Certificate or demanding a clearance to arbitration in respect thereof.â€​

At the same time, the relevant portion of the Classes 63 and 64 of the Contract Agreement reads as under :-

“63. Matters finally determined by the Railway â€" All disputes and differences of any kind whatsoever arising out of or in connection

with the contract, whether during the progress of the work or after its completion and whether before or after the determination of the

contract, shall be referred by the contractor to the GM and the GM shall within 120 days after receipt of the con tractor‟s representation

make and notify decisions on all matters referred to by the contractor in writing provided that matters for which provision has been made in

clauses 8, 18, 22 (5), 39, 43 (2), 45 (a), 55, 55-A (5), 57, 57A, 61 (1) , 61 (2), 61 (2) and 62 (2) and 62 (1) to (xiii)(B) of General Conditions

of contract or in any clause of the special conditions of the contract shall be deemed as excepted matters (matters not arbitrable) and

decisions of the Railway authority, thereon shall be final and binding on the contractor; provided further that „expected matters‟ shall

stand specifically excluded from the purview of the arbitration clause.

64(1) (i) â€" Demand of Arbitration â€" In the event of any dispute or difference between the parties hereto as to the construction or

operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any

account or as to the withholding by the Railway of any certificate to which the contractor may claim to be entitled to , or if the Railway fails

to make a decision within 120 days, then and in any case, but except in any of the “expected matters†referred to the Clause 63 of these

conditions, the contractor, after 120 days but within 180 days of his presenting his final claim on disputed matters shall demand in writing

that the dispute or difference be referred to arbitration.

64 (1) (ii) â€" the demand for arbitration shall specify the matters which are in question, or subject of the dispute or difference as also the

amount claim item wise. Only such dispute (s) or difference(s) in respect of which the demand has been made, together with counter claims

or set off,given by the Railway, shall be referred to arbitration and other matters shall not be included in the reference.

64 (1) (ii) (a) The arbitration proceedings shall be assumed to have commenced from the day, a written and valid demand for arbitration is

received by the Railway.

(b) The claimant shall submit his claim stating the facts supporting the claims along with all the relevant documents and the relief or remedy

sought against each claim within a period of 30 days from the date of appointment of the Arbitral Tribunal.

(c) The Railway shall submit its defence statement and counter claim(s), if any, within a period of 60 days of receipt of copy of claims from

Tribunal thereafter, unless otherwise extension has been granted by Tribunal.

(d) The place of arbitration would be within the geographical limits of the Division of the Railway where the cause of action arose or the

Headquarters of the concerned Railway or any other place with the written consent of both the parties.

64 (1) (iii) â€" No new claim shall be added during proceedings by either party. However, a party may amend or supplement theb original

claim or defence thereof during the course of arbitration proceedings subject to acceptance by Tribunal having due regard to the delay in

making it.

64 (1) (iv) â€" If the contractor(s) does/do not prefer his/their specific and final claims in writing, within a period of 90 days of receiving

the intimation from the Railways that the final bill is ready for payment, he /they will be deemed to have waived his/their claim(s) and the

Railway shall be discharged and released of all liabilities under the contract in respect of these claims.â€​

The law on the subject also appears to be somewhat settled. It has been time and again held that the question whether there has been a full and

final settlement of a claim under the contract is itself a dispute arising out of and in relation to or in connection with the contract and such a dispute is

within the ambit of the disputes referable to arbitration.

In Ambica Construction v. Union of India, (2006) 13 SCC 475, relying upon the earlier decision of M.D. N.T.P. C Ltd. V. Reshmi Construction

Builders & Contractors, AIR 2004 SC 1330, it was held that Clause 43 (2) of the General Conditions of Contract is not an absolute bar to the

contractor for raising claims which are genuine even after submission of “No Objection Certificateâ€. Accordingly, the demand for a reference

was accepted overturning the decision of the High Court.

In National Insurance Co. Ltd. V. BogharaPloyfab Pvt. Ltd., (2009 (1) SCC 267, it has been held that where a party who has executed the

discharge agreement or vouchers of full and final settlement alleges that the same was got done on account of fraud/coercion /undue influence

practiced by the other side, the discharge agreement shall be rendered void and cannot be acted upon and the dispute raised would be an arbitral

dispute. In other words, where allegation of fraud, fabrication or coercion are levelled in the execution of documents of full and final settlement or of

„No Objection Certificate‟ it would be a case which requires adjudication of such an issue before the Arbitral Tribunal itself.

In R.L.Kalathia and Co. V. State of Gujrat, AIR 2011 SC 754, it has been held that merely because the contractor had issued „No Objection

Certificate‟, the court cannot reject the claim if it is otherwise acceptable on merit and that even after execution of full and final discharge

vouchers/receipt by the contractor if he is able to establish that he is entitled to the amount claimed, he cannot be debarred from claiming such amount

on the plea of final discharge. In fact, these are all matters which are ordinarily to be dealt with by the Arbitral Tribunal and may not unnecessarily be

looked into by this Court at the time of appointing an arbitrator unless such a plea on the face of it appears to be bogus or untenable in law.

In Oriental Insurance Co. Ltd. And Another v. Dicitex Furnishing Ltd., 2019 (11) JT 158, the Supreme Court opined that at the stage of dealing

with the petition for reference of disputes to the Arbitral Tribunal, the court is required to ensure that an arbitral dispute exists and has be convinced

prima facie about the genuineness or credibility of the plea of coercion without being very particular about the nature of the plea which necessarily has

to be made and established by the parties in the arbitration proceedings. If the court undertakes the exercise of minutely examining the plea of

coercion so as to judge its credibility and reasonableness, there would be a danger of denying a forum of arbitration to the contractor.

In the recent Judgment of the Apex Court reported in 2019 (8) SCC 714, M/s. Mayawati Trading (P) Ltd. V. Pradyuat Deb Burman, it has been

held that the defence of full and final payment or settlement of claim will not be considered by the court while examining the petition under Section 11

(6) of the Act.

It is trite to mention that all issues including the issue of limitation in relation to the disputes arising between the parties to the contract are to be left

for decision by the arbitrator. It is only in very limited category of cases, where the claim is ex facie barred by time or that the dispute is not arbitral

that the court may decline to make the reference otherwise all such issues have to be left for decision by the Arbitral Tribunal. The general rule is to

refer the disputes to arbitration without encroaching upon the domain of the Arbitral Tribunal on the issues which are required to be determined by it.

In view of the aforesaid facts and circumstances, the petitioner has made out a case for an appointment of an arbitral tribunal. Accordingly I

appoint Sh. Justice Sunil Hali, a former Judge of the High Court R/o H.No. 18, Manorama Vihar, Bohri, Jammu, who shall proceed in the matter in

accordance with the provisions of the Act to make an award within the time provided in the Act itself after charging the prescribed fee along with

incidental expenses to be shared by the parties.

The petition is disposed of.