TaxTMI 
TaxTMI 
2019 (3) TMI 1946
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....L NO. 3313 OF 2019 (ARISING OUT OF SLP (C) NO. 8598 OF 2018), CIVIL APPEAL NO. 3315 OF 2019 (ARISING OUT OF SLP (C) NO. 9559 OF 2018), CIVIL APPEAL NO. 3317 OF 2019 (ARISING OUT OF SLP (C) NO. 11417 OF 2018), CIVIL APPEAL NO. 3318 OF 2019 (ARISING OUT OF SLP NO. 11862 OF 2018) AND CIVIL APPEAL NO. 3316 OF 2019 (ARISING OUT OF SLP (C) NO. 22263 OF 2018) For the Petitioner : Mrs. Anil Katiyar, AOR For the Respondent : Mr. Sameer Jain, Adv., Mr. Abhinav Shrivastava, AOR, Mr. Suvigya Awasthy, Adv., Mr. Karan Valecha, Adv., Mr. Rahul Gupta, Adv., Ms. Sana Kamra, Adv., Mr. Ronak Karanpuria, Adv., Mr. Vishwa Pal Singh, AOR, Mr. S. K. Bhattacharya, AOR, Mr. L.K. Paonam, Adv., Mr. Niraj Bobby Paonam, Adv., Mrs. Tomthinnganbi Koijam, Adv., Mr. Ranjay Dubey, Adv., Mr. Nitin Kumar Thakur, AOR, Miss Geetanjali Mohan, AOR, Mr. Subash Chandra Sagar, Adv., Mr. E. C. Vidya Sagar, AOR JUDGMENT Ajay Rastogi, J. 1. Leave granted. 2. The question that arises for consideration in the batch of appeals by special leave is as to whether (1) the High Court was justified in invoking amended provision which has been introduced by Arbitration and Conciliation (Amendment Act), 2015 with effect....
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....works for its execution and the agreement executed between the parties includes a separate chapter for settlement of disputes leaving any dispute or difference between the parties to be resolved through the process of arbitration by appointing an arbitrator invoking Clause 64(3) of the contract. As per terms of the agreement, date of completion of the project was delayed as alleged due to breach of obligations by the Appellants and the scheduled date of completion had to be extended. Meanwhile, due to rise in the prices of raw material, the project was impossible to be completed by the Respondent contractors and hence correspondence was made to either pay the escalated price or in the absence, the Respondents would not be in a position to conclude the contract. It was alleged that the Appellants accepted the terms and conditions for escalated prices and asked the Respondents to complete the work and handover the project. 6. But when the Respondents raised the final bills in the predetermined format (which also included the no dues certificate) on the newly agreed prices, dispute has arisen in context of payment of escalated prices or withholding of security deposits, taking note....
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....request has been sent to refer the dispute to arbitration and received by the other side before the amendment Act, 2015 has come into force, the proceedings will commence in accordance with the pre-amended provisions of the Act, 1996 and in the given circumstances, apparent error has been committed by invoking Section 12(5) of the Amendment Act, 2015 for appointment of an independent arbitrator without resorting to the Clause 64(3) of GCC as agreed by the parties and in support of submission, learned Counsel has placed reliance on the decision of this Court in the case of M/s. Aravali Power Co. Private Limited v. Era Infrastructure Engineering Limited 2017(15) SCC 32 and S.P. Singla Constructions Pvt. Ltd. v. State of Himachal Pradesh and Ors. 2018 (15) Scale 421. 9. Learned Counsel further submits that once the no claim certificate has been signed by each of the Respondent and after settlement of the final bills, no arbitral dispute subsists and the contract stands discharged and they cannot be permitted to urge that they gave the no claim certificate under any kind of financial duress/undue influence and even in support thereof, no prima facie evidence has been placed on recor....
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....n the judgment of this Court in S.P. Singla Constructions Pvt. Ltd's case (supra). 12. Per contra, Mr. Sameer Jain, learned Counsel for the Respondents submits that Respondents are the registered contractors undertaking various nature of works contracts with the railway establishment and are not in a bargaining position and it is a ground reality that final bills are not being released without a no claim certificate being furnished in advance by them. In all the cases, unilateral deductions have been made from the final bills furnished by each of the Respondent and they are very small and petty contractors and the payments are not released unless the no claim certificate is being furnished, it is nothing more than a financial duress and undue influence by the authorities and is open for the arbitrator to adjudicate by examining the bills which was furnished for payment. 13. Learned Counsel further submits that the effect of no claim certificate has been examined by this Court in National Insurance Company Limited v. Boghara Polyfab Private Limited 2009(1) SCC 267 and there are series of decisions of this Court where no claim certificate in itself has never been considered....
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.... neutrality of the arbitrator is of utmost importance and that has been noticed by the Parliament in amending Section 12(5) of the Act, 1996 which came into force on 23rd October, 2015 and when the matters have been taken up for hearing by the High Court after the amendment has come into force, the effect of the amended provisions would certainly be taken note of and in the given circumstances, if an independent arbitrator has been appointed which is indisputedly an impartial and neutral person fulfilling the mandate of the object of the proceedings of arbitration, the amended provision has been rightly invoked by the High Court in the appointment of an independent arbitrator invoking Section 11(6) of the Act, 1996. 17. We have heard learned Counsel for the parties and with their assistance perused the material on record. 18. The facts which manifest from the batch of appeals are that the Respondents are the registered contractors with the railway establishment and undertaking work contracts (construction) of various kinds. They raised a demand for escalation cost and the interest accrued thereon because the date of the completion of the project was delayed as alleged due to ....
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....ade by the Contractor, after he shall have signed a "No Claim" Certificate in favour of the Railway in such form as shall be required by the Railway after the works are finally measured up. The Contactor shall be debarred from disputing the correctness of the items covered by "No Claim" Certificate or demanding a clearance to arbitration in respect thereof. 64. (1) Demand for Arbitration: 64. (1) (i) 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 such case, but except in any of the "excepted matters" referred to in 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) The demand for arb....
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....tration proceedings. 64. (3) Appointment of Arbitrator: 64. (3) (a)(i) In cases where the total value of all claims in question added together does not exceed Rs. 25,00,000 (Rupees twenty five lakh only), the Arbitral Tribunal shall consist of a Sole Arbitrator who shall be a Gazetted Officer of Railway not below JA Grade, nominated by the General Manager. The sole arbitrator shall be appointed within 60 days from the day when a written and valid demand for arbitration is received by GM. {Authority: Railway Board's letter No. 2012/CE-I/CT/ARB./24, Dated 22.10./05.11.2013} 64. (3) (a)(ii) In cases not covered by the Clause 64(3)(a) (i), the Arbitral Tribunal shall consist of a Panel of three Gazetted Railway Officers not below JA Grade or 2 Railway Gazetted Officers not below JA Grade and a retired Railway Officer, retired not below the rank of SAG Officer, as the arbitrators. For this purpose, the Railway will send a panel of more than 3 names of Gazetted Railway Officers of one or more departments of the Railway which may also include the name(s) of retired Railway Officer(s) empanelled to work as Railway Arbitrator to the contracto....
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....lities of the parties on any matter in question or any other ancillary disputes arising from the terms of the contract or if the railway establishment fails to take a decision within the stipulated period and the dispute could not be amicably settled, such dispute or difference is to be referred to arbitration and who shall arbitrate such disputes/differences between the parties, the General Manager may nominate the officer by designation as referred to under Clause 64(3)(a)(i) and a(ii) respectively with further procedure being prescribed for the sole arbitrator or the Arbitral Tribunal to adjudicate the disputes/differences arising under the terms of contract between the parties. 22. It is also not disputed that when the request of the Respondent contractors was rejected by the Appellants on the premise of the no claim certificate being furnished, arbitral dispute does not survive which is to be sent to arbitration, each of the Respondent contractor approached the High Court by filing an application Under Section 11(6) of the Act for appointment of an arbitrator for settling their disputes/differences arising from the terms of contract as agreed between the parties. 23. It ....
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....les as under: 22. The principles which emerge from the decisions referred to above are: 22.1. In cases governed by 1996 Act as it stood before the Amendment Act came into force: 22.1.1. The fact that the named arbitrator is an employee of one of the parties is not ipso facto a ground to raise a presumption of bias or partiality or lack of independence on his part. There can however be a justifiable apprehension about the independence or impartiality of an employee arbitrator, if such person was the controlling or dealing authority in regard to the subject contract or if he is a direct subordinate to the officer whose decision is the subject-matter of the dispute. 22.1.2. Unless the cause of action for invoking jurisdiction under Clauses (a), (b) or (c) of Sub-section (6) of Section 11 of the 1996 Act arises, there is no question of the Chief Justice or his designate exercising power Under Sub-section (6) of Section 11. 22.1.3. The Chief Justice or his designate while exercising power Under Sub-section (6) of Section 11 shall endeavour to give effect to the appointment procedure prescribed in the arbitration ....
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....ovisions of Section 21 of the Principal Act, 1996 before the coming into force of Amendment Act, 2015, unless the parties otherwise agree. 27. In the instant case, the request was made and received by the Appellants in the concerned appeal much before the Amendment Act, 2015 came into force. Whether the application was pending for appointment of an arbitrator or in the case of rejection because of no claim as in the instant case for appointment of an arbitrator including change/substitution of arbitrator, would not be of any legal effect for invoking the provisions of Amendment Act, 2015, in terms of Section 21 of the principal Act, 1996. In our considered view, the applications/requests made by the Respondent contractors deserves to be examined in accordance with the principal Act, 1996 without taking resort to the Amendment Act, 2015 which came into force from 23rd October, 2015. 28. The thrust of the learned Counsel for the Appellants that submission of a no claim certificate furnished by each of the Respondent/contractor takes away the right for settlement of dispute/difference arising in terms of the agreement to be examined by the arbitrator invoking Clause 64(3) of the....
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....genuine or legal, the claims cannot be referred to arbitration. In all the three cases, the Court examined the facts and satisfied itself that there was accord and satisfaction or complete discharge of the contract and that there was no evidence to support the allegation of coercion/undue influence. 31. Further, taking note of the jurisdiction of the Chief Justice/his Designate in the proceedings Under Section 11(6) of Act 1996, this Court culled out the legal proposition in paragraph 51 as follows: 51. The Chief Justice/his designate exercising jurisdiction Under Section 11 of the Act will consider whether there was really accord and satisfaction or discharge of contract by performance. If the answer is in the affirmative, he will refuse to refer the dispute to arbitration. On the other hand, if the Chief Justice/his designate comes to the conclusion that the full and final settlement receipt or discharge voucher was the result of any fraud/coercion/undue influence, he will have to hold that there was no discharge of the contract and consequently, refer the dispute to arbitration. Alternatively, where the Chief Justice/his designate is satisfied prima facie that ....
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....dging receipt of rupees six lakhs in full and final satisfaction of the contract, payment of the admitted amount will not be released. The contractor who is hard-pressed for funds and keen to get the admitted amount released, signs on the dotted line either in a printed form or otherwise, stating that the amount is received in full and final settlement. In such a case, the discharge is under economic duress on account of coercion employed by the employer. Obviously, the discharge voucher cannot be considered to be voluntary or as having resulted in discharge of the contract by accord and satisfaction. It will not be a bar to arbitration. (iv) An insured makes a claim for loss suffered. The claim is neither admitted nor rejected. But the insured is informed during discussions that unless the claimant gives a full and final voucher for a specified amount (far lesser than the amount claimed by the insured), the entire claim will be rejected. Being in financial difficulties, the claimant agrees to the demand and issues an undated discharge voucher in full and final settlement. Only a few days thereafter, the admitted amount mentioned in the voucher is paid. The accord an....
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....lude discharge of his liability towards the bank, financial institutions and other persons, indeed the railway establishment has a upper hand. A rebuttable presumption could be drawn that when a no claim has been furnished in the prescribed format at the time of final bills being raised with unilateral deductions made even that acceptable amount will not be released, unless no claim certificate is being attached to the final bills. On the stated facts, para 52(iii) referred to by this Court in National Insurance Company Limited v. Boghara Polyfab Private Limited (supra) indeed covers the cases of the present contractors with whom no option has been left and being in financial duress to accept the amount tendered in reference to the final bills furnished and from the discharge voucher which has been taken to be a defence by the Appellants prima facie cannot be said to be voluntary and has resulted in the discharge of the contract by accord and satisfaction as claimed by the Appellants. In our considered view, the arbitral dispute subsists and the contract has not been discharged as being claimed by the Appellants employer(s) and all the contentions in this regard are open to be exam....
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....xpected of them under that procedure and Clause (c) relates to a person which may not be a party to the agreement but has given his consent to the agreement and what further transpires is that before any other alternative is resorted to, agreed procedure has to be given its precedence and the terms of the agreement has to be given its due effect as agreed by the parties to the extent possible. The corrective measures have to be taken first and the Court is the last resort. It is also to be noticed that by appointing an arbitrator in terms of Sub-section (8) of Section 11 of Act, 1996, due regard has to be given to the qualification required for the arbitrator by the agreement of the parties and also the other considerations such as to secure an independent and impartial arbitrator. To fulfil the object with terms and conditions which are cumulative in nature, it is advisable for the Court to ensure that the remedy provided as agreed between the parties in terms of the contract is first exhausted. 39. It has been considered by a three Judges' Bench of this Court in Union of India and Anr. v. M.P. Gupta (supra). Taking note of Clause 64 of the agreement for arbitration, the Co....
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.... Section 11 of the Act and the High Court should accept the Arbitral Tribunal appointed by the General Manager, Railways. In this connection, the learned ASG invited our attention to a decision of this Court directly bearing on the subject in Union of India v. M.P. Gupta [(2004) 10 SCC 504] wherein a similar question with regard to appointment of the Arbitral Tribunal for the Railways with reference to Clause 64 of the General Conditions of Contract came up before this Court and this Court held that where two gazetted railway officers are appointed as the Arbitral Tribunal, the High Court should not appoint a retired Judge of the High Court as a sole arbitrator and the appointment of sole arbitrator was set aside. The conditions of clauses 63 and 64 of the General Conditions of Contract are almost analogous to the one we have in our hand. In that case also relying on Clause 64 of the contract a three-Judge Bench presided over by the Chief Justice of India observed as follows: (SCC p. 505, para 4) 4. In view of the express provision contained therein that two gazetted railway officers shall be appointed as arbitrators, Justice P.K. Bahri could not be appointed by the ....
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....first ensure that the remedies provided for are exhausted. It is true as contended by Mr. Desai, that it is not mandatory for the Chief Justice or any person or institution designated by him to appoint the named arbitrator or arbitrators. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations. and further, in Union of India v. Singh Builders Syndicate (supra) it was held as under: 11. The question that arises for consideration in this appeal by special leave is whether the appointment of a retired Judge of the High Court as sole arbitrator should be set aside and an Arbitral Tribunal should again be constituted in the manner provided in terms of Clause 64. 12. Dealing with a matter arising from the old Act (the Arbitration Act, 1940), this Court, in Union of India v. M.P. Gupta [(2004) 10 SCC 504] held that appointment of a retired Judge as sole arbitrator contrary to Clause 64 (which requiring serving gazetted railway officers being appointed) was impermissible. 13. The position after the new Act came into force, is different, as explained by this Court in Northern Ra....
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....ointment within 30 days, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former makes an application Under Section 11 seeking appointment of an arbitrator. In the instant cases, the question for consideration is as to whether the Chief Justice or his Designate in exercise of power Under Section 11(6) of the Act should directly make an appointment of an independent arbitrator without, in the first instance, resorting to ensure that the remedies provided under the arbitration agreement are exhausted. 43. In the present batch of appeals, independence and impartiality of the arbitrator has never been doubted but where the impartiality of the arbitrator in terms of the arbitration agreement is in doubt or where the Arbitral Tribunal appointed in terms of the arbitration agreement has not functioned, or has failed to conclude the proceedings or to pass an award without assigning any reason and it became necessary to make a fresh appointment, Chief Justice or his designate in the given circumstances after assigning cogent reasons in appropriate cases may resort to an alternative arrangement to give effect to the appointment of ....