M/S. SSPPL AND M/S. AIL WAS versus SALMA DAM JOINT VENTURE & ANR. on 14 November 2019

[2019] 17 S.C.R. 193

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. SSPPLand M/s. AIL was formed – SSPPL was nominated as a ‘LeadPartner’ of SDJV with 95% share as compared to 5% of AIL – SDJVwas the successful bidder and that was followed by a ContractAgreement dated 09.03.2006 between the WAPCOSL and SDJV forthe implementation of the work on “The Reconstruction,Rehabilitation and completion of Salma Dam Project” inAfghanistan – Several documents were signed including Conditionsof Particular Applications (CoPA) – Cl.20.1 thereof dealt withContractor’s claim and Cl.20.6 dealt with Arbitration – Subsequentto this, the rates of some of the items were revised, which raisedthe total consideration of the agreement – Thereafter, SDJV andWAPCOSL signed a revised agreement for the rates, referred to asthe Amendment of Agreement (AOA) dated 09.06.2015 – Despitesigning of AOA, SDJV raised certain claims before the Engineerof WAPCOSL – Subsequent to execution of AOA, dispute arosebetween the JV partners – On 21.09.2016, AIL revoked Power-of- Attorney executed in favour of SSPPL, which authorized it toappoint arbitrator on behalf of AIL – However, SSPPL filed petitionon behalf of SDJV against WAPCOSL u/s. 11(6) of the Act, 1996– The said petition was allowed by the High Court and thearbitrator was appointed – Aggrieved, WAPCOSL filed specialleave petition before the Supreme Court – AIL asserted before theCourt that it did not give consent to SSPPL for appointment ofarbitrator or to file petition u/s. 11(6) of the Act, 1996 – Consequentto which, the order of the High Court was set aside and partieswere relegated before the High Court for reconsideration of allthe aspects – The High Court once again allowed the saidarbitration petition and appointed a sole arbitrator and held thatSSPPL had authority under the JV as well as Contract Agreement

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Ato represent SDJV, as a leading partner to take recourse toarbitration – On appeal, held: The Cls 1.2 and 1.3 of Section-01of the AOA made it clear that no claims will be raised by theContractor on any of the pending/settled claims/other claimsresulting out of correspondences made and there will be “noarbitration” for the settlement of claims – Neither SDJV nor SSPPLBhave disputed the execution of AOA – The terms and conditionsspecified in AOA leave no manner of doubt that the arbitrationagreement was done away with – Having chosen to adopt that path,it is not open to the contractor to now take recourse to arbitrationprocess or to resurrect the claim which has been resolved in termsCof the amended agreement, after availing of steep revision of ratesbeing condition precedent – Resultantly, the impugned judgmentof the High Court set aside.

Allowing the appeals, the Court

Conclusion

Allowing the appeals, the Court

HELD: 1. As regards the first reason weighed with theDHigh Court that the Technical Committee entertained the fiveappeals filed on behalf of the Salma Dam Joint Venture (SDJV),that in view of this Court cannot undo the effect of terms andconditions of Amendment of Agreement (AoA) which hadannulled the arbitration clause in the Contract Agreement. Thereare at least two other tangible reasons to overturn the statedEopinion of the High Court. First, the Technical Committee was,as a matter of fact, constituted under clause 2.1 of Section – 02of AoA by the CMD of WAPCOSL, as is evident from thecommunication 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 inFterms 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 theappeals instituted by SDJV does not mean that WAPCOSL hadwaived the terms and conditions of AoA, in particular ClausesG1.2 and 1.3 of Section-01 thereof. No averment is found in theArbitration Petition to even remotely suggest that it was a caseof waiver express or tacit, by WAPCOSL qua the stipulationspecified in Clauses 1.2 and 1.3 of Section-01 of AoA. Hence,this reason weighed with the High Court is manifestly wrong andcannot stand the test of judicial scrutiny. [Para 30] [208-F-H; 209-HA-C]

2. The second reason weighed with the High Court is againfounded on incorrect assumption about the date of AoA. TheHigh Court proceeds on the basis that AoA was executed asback as on 09.06.2005 and having noted that date, the HighCourt then observed that the project was inaugurated only in2016. On this erroneous assumption, the High Court rejectedthe claim of the appellant(s) herein. As a matter of fact, the AoAwas executed on 09.06.2015, at which point of time, 97 per centof the project was completed and the same was rolled out byfilling of the Dam from 26.07.2015 in less than one month, byclosing diversion tunnel gate. Not only that, the project wasdedicated to the people of Afghanistan soon thereafter on04.06.2016. Thus understood, it becomes clear that the partieshad agreed to give quietus to all the claims and adopt revisedrates recommended by High Power Committee, as recorded inAoA executed on 09.06.2015. Suffice it to note that the basisfor rejecting the argument of the appellant(s) is founded onerroneous 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 thatClause 20.6 of CoPA, providing for resolution of disputes byarbitration has not been modified by AoA. Indeed, clause 4 ofthe Contract Agreement makes reference to clause 20 of CoPA.However, on a fair reading of clause 4 of the Contract Agreementand in particular 4.1 as reproduced hitherto, it would be crystalclear that the substance of the provision is to provide forprocess of settlement of disputes and arbitration. Reference toClause 20 of CoPA is only to indicate that the procedurespecified therein may have to be followed whilst taking recourseto that process. However, as the substantive provision regardingremedy of arbitration itself has been done away with in terms ofClauses 1.2 and 1.3 of Section-01 of AoA, there was no need tomodify Clause 20 in CoPA dealing with machinery provision.Thus, the remedy of arbitration cannot be resurrected merelybecause Clause 20 of CoPA has not been expressly modified inthe AoA. Hence, even this reason does not commend this Court.[Para 32] [209-F-H; 210-A-B]

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[2019] 17 S.C.R.

A4. As these are the only reasons which had weighed withthe High Court to reject the argument of the appellant(s)regarding non-existence of arbitration agreement and the samebeing untenable in law, it must necessarily follow that theArbitration Petition filed for and on behalf of SDJV throughBSSPPL was not maintainable. In other words, the ArbitrationPetition should have been rejected for lack of subsisting orexisting arbitration agreement between the parties on the dateof filing of Arbitration Petition. [Para 33] [210-B-D]

5. It is not unknown in commercial world that the partiesCamend original contract and even give up their claims under thesubsisting agreement. The case on hand is one such case wherethe parties consciously and with full understanding executed AoAwhereby the contractor gave up all his claims and consented tothe new arrangement specified in AoA including that there will Dbe no arbitration for the settlement of any claims by thecontractor in future. Having chosen to adopt that path, it is notopen to the contractor to now take recourse to arbitrationprocess or to resurrect the claim which has been resolved interms of the amended agreement, after availing of steep revisionof rates being condition precedent. [Para 34] [210-D-F]EDamodar Valley Corporation v. K. K. Kar [1974] 2SCR 240 ; National Insurance Company Limited v.Boghara Polyfab Private Limited (2009) 1 SCC 267 :[2008] 13 SCR 638 ; Nathani Steels Ltd. v. AssociatedConstructions (1995) Suppl. 3 SCC 324 – relied on.F

Case Law Reference

From the Judgment and Order dated 25.01.2019 of the HighHCourt of Delhi at New Delhi in Arb. P. No. 810 of 2016.

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, SatyendraKumar, Anugrah Niraj Ekka, Rajeev Singh, Ms. Prity Sharma, SwetankShantanu, 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 dated25.01.2019 passed by the High Court of Delhi at New Delhi inArbitration Petition No.810 of 2016, whereby the High Court allowedthe Arbitration Petition purportedly filed by respondent No. 1 - SalmaDam Joint Venture, under Section 11(6) of the Arbitration andConciliation Act, 1996 (for short, “the Act”) and appointed a soleArbitrator.

2. Briefly stated, the Ministry of External Affairs (for short,“MEA”) and the appellant in the leading appeal, Water and PowerConsultancy Services (India) Limited (for short, “WAPCOSL”), a PublicSector Undertaking, entered into an agreement, dated 29.11.2004, forthe implementation of the work on “the Reconstruction, Rehabilitationand 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 toprovide financial, administrative and contractual management servicesfor the MEA. Even though MEA was to provide the finances, the samewas to be channeled through WAPCOSL to the successful awardeeof the tender.

3. The respondent No.1 in both the appeals, Salma Dam JointVenture (for short, “SDJV”) was formed by the M/s SSJV ProjectsPrivate Limited (for short, “SSPPL”) and M/s Angelique InternationalLtd. (for short, “AIL”) under a Joint Venture Agreement (for short,“JVA”) dated 09.09.2005 to submit its bid for the said project. Inaccordance with the terms and clauses of the JVA, SSPPL wasnominated to be the ‘Lead Partner’ of SDJV with ninety-five percent B

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A(95%) share as compared to five percent (5%) share of AIL. SSPPLwas also authorized to invoke arbitration by appointing an arbitrator,make claims, et cetera, on behalf of AIL, by executing a Power ofAttorney (for short, “PoA”) dated 09.09.2005 in favour of SSPPL, inaccordance with Clause 3.3 of the JVA.

B4. SDJV was successful being the highest bidder and wasawarded tender for the said project on 17.01.2006. That was followedby a Contract Agreement dated 09.03.2006 (for short, “ContractAgreement”) for executing the stated contract between the WAPCOSLand SDJV. Along with the said agreement, WAPCOSL and SDJVsigned certain documents to be read with the Contract Agreement andCto form part and parcel thereof. Out of several such documents,Conditions of Particular Applications (for short “CoPA”) is the relevantone for the purpose of this case. Clause 20.1 thereof deals withContractor’s claim and Clause 20.6 deals with Arbitration and it is underthese clauses, the respondent No. 1 has rested its case, that is,Darbitrability and the power to invoke arbitration.

5. Be that as it may, the consideration of the Contract Agreementwas Rs. 253.84 Crores. However, the same was raised to Rs. 470.40Crores, on a representation made by SDJV. Once again, there wasfurther change by way of revised rates, after a meeting between SDJVEand a High-Power Committee (for short, “HPC”). In the said meeting,SDJV cited reasons which were beyond its control for initiating timelyconstruction of the project. That justification found favour with the HPCfor which it had recommended revised rates with regard to eight items.A letter was sent by WAPCOSL, informing about the acceptance ofrevised rates of eight items and raising the total consideration to Rs.F872.67 Crores. Subsequent to this, SDJV and WAPCOSL signed arevised agreement for the rates, referred to as the Amendment ofAgreement (for short, “AoA”), dated 09.06.2015.

6. Despite signing of AoA, SDJV raised certain claims beforethe Engineer of WAPCOSL. After rejection of said representation,GSDJV preferred six appeals to the Technical Committee constituted interms of clause 2.1 of Section – 02 of AoA. Five of these appeals wererejected/disposed of vide report of the Technical Committee dated28.10.2016.

7. In the meantime, on 04.06.2016, the Dam was inaugurated byHthe Hon’ble Prime Minister of India and Hon’ble President of Afghanistan. Subsequent to which, a letter dated 02.08.2016 was issuedby AIL addressed to WAPCOSL, informing that SDJV has started theprocess of dismantling the machinery and the work force from theproject site with full awareness of WAPCOSL.

8. Subsequent to the execution of AoA, dispute arose betweenthe JV partners which resulted in AIL filing a petition (bearing numberO.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, directedWAPCOSL to deposit the amount payable to SDJV with the Registrarof 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 fortheir (AIL and SSPPL) inter se disputes.

9. On 21.09.2016, the Board of Directors of AIL resolved torevoke the PoA executed in favour of SSPPL and in furtherance ofthe same, AIL, vide letters dated 19.10.2016 and 11.11.2016, wrote tothe respective Banks and also to WAPCOSL informing them about therevocation of the authority of SSPPL. Thus, it was duly notified throughthese letters that in future, only those letters or communications whichare signed or acknowledged by both the parties (AIL and SSPPL) shallbe 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, on28.10.2016, SSPPL, unilaterally, espousing claims of SDJV proceededto invoke the arbitration process, under clause 20.6 of CoPA and alsoappointed a nominee arbitrator, vide letter dated 12.11.2016. WAPCOSL,in response, vide letter dated 05.12.2016, recorded that since SDJV isa joint venture entity and the authority of SSPPL to represent AIL hasbeen revoked, the appointment of arbitrator by SSPPL, unilaterally, isillegal in terms of clause 4.2 of the Contract Agreement and clause3.2 of the JVA.

11. Resultantly, SSPPL filed a petition on behalf of SDJV againstWAPCOSL under Section 11(6) of the Arbitration Act (bearing numberArb. P. 810/2016) before the High Court of Delhi, wherein it has beenasserted that the PoA dated 15.07.2005 given by AIL in its favour isstill in force and forms part of the Contract Agreement dated 09.03.2006.This assertion is factually incorrect. In that, the PoA was executed asa follow up document alongwith JVA on 09.09.2005 itself. Whereas, A

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Athe Board of Directors of AIL vide resolution dated 15.07.2005 hadauthorised its officer to execute the JVA and PoA, which were soexecuted on 09.09.2005.

12. The said arbitration petition was contested by the appellant(WAPCOSL). However, the High Court allowed the same vide orderBdated 15.03.2017 and appointed an arbitrator for WAPCOSL.

13. Feeling aggrieved, WAPCOSL preferred a Special LeavePetition (bearing number SLP (Civil) 26555/2017) before this Court. ThisCourt, vide order dated 03.11.2017, directed impleadment of AIL as aparty and also stayed the arbitral proceedings. AIL appeared beforeCthis Court and asserted that it did not give consent to SSPPL forappointment of an arbitrator or for filing petition under Section 11(6) ofthe Arbitration Act. Thus, it had urged that SSPPL had no authority tounilaterally appoint an arbitrator for SDJV or to file the subject petitionon behalf of SDJV. Further, the petition filed in the name of SDJVthrough SSPPL was not as per Delhi High Court Rules. This Court,Dvide order dated 11.12.2017, deemed it proper to set aside the orderpassed by the High Court of Delhi dated 15.03.2017 and to relegatethe parties before the High Court for reconsideration of all aspects, aswould be raised by the parties including regarding the locus andcompetence of SSPPL to unilaterally appoint an arbitrator or fileEarbitration petition under Section 11 of the Act.

14. The High Court of Delhi, vide judgment dated 25.01.2019 (forshort, “impugned judgment”), once again allowed the said arbitrationpetition and appointed a sole arbitrator, instead of three arbitratorsenvisaged in CoPA.

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15. The High Court opined that the arbitration agreement betweenSDJV and WAPCOSL was still in force on the date of filing of thearbitration petition and the same would operate between the parties.That finding has been reached despite the AoA having been executedbetween the parties on 09.06.2015. The High Court also opined thatGSSPPL had authority under the JVA as well as the Contract Agreementto represent SDJV, as a leading partner thereof. It held that SSPPLderived authority from clause 20.6 of CoPA read with the otherenabling terms in the JVA and FIDIC Conditions of Contract forConstruction (for short, ‘FIDIC’). The High Court was also impressedby the fact that SSPPL had 95 per cent shareholding in SDJV as againstHonly 5 per cent shareholding of AIL, the other partner. For that reason,

it went on to observe that AIL cannot be permitted to derail thearbitration process commenced for and on behalf of SDJV throughSSPPL. The High Court was also impressed by the fact that despitethe execution of AoA, the Technical Committee entertained the appealsfiled by SDJV in respect of certain items. That goes to show that eventhe Technical Committee was of the view that the dispensation regardingsettlement of further claims of SDJV could be pursued and thearrangement arrived under AoA between the parties cannot be treatedas full and final settlement. Resultantly, SDJV was well within its rightsto take recourse to arbitration for resolution of the disputes in thatregard. Further, the fact as to whether SDJV was entitled for the relief,regarding the claims raised, was a matter within the exclusive domainof the Arbitral Tribunal. The High Court, therefore, allowed theArbitration Petition and appointed a sole Arbitrator for resolution of thedisputes between the parties.

16. Feeling aggrieved, WAPCOSL as well as AIL have assailedthe decision of the High Court by filing separate Special LeavePetition(s).

17. We have heard learned Senior Counsel Mr. GauravPanchnanda 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 counselappearing for the respective parties and perusing the relevant records,including Arbitration Petition and the written submissions filed by thelearned counsel, in our opinion, two principal issues need be answeredin this judgment. First, whether on the date of presentation of ArbitrationPetition, purportedly by SDJV through SSPPL on 15.12.2016, thearbitration agreement posited in Contract Agreement dated 09.03.2006was in existence or subsisting and in force? Second, whether theArbitration Petition filed in the name of SDJV through SSPPL, in lawcan be considered as having been properly and validly presented despitethe express revocation of authority of SSPPL vide resolution passedby the Board of Directors of AIL on 21.09.2016 and duly communicatedto SSPPL as well as WAPCOSL before 15.12.2016, as was grantedto SSPPL in terms of JVA read with PoA including the ContractAgreement?

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A19. Reverting to the first question, we must immediately advertto 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 allthe differences or disputes arising out of the Agreement shall bedecided by process of settlement of disputes and arbitration asspecified in Clause 20 of the Conditions of the Contract.

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4.2 It is also agreed that the Salma Dam Joint Venture agreementdated 9th September 2005 shall be treated as part of thisCagreement and both the parties to the said joint venture namelyM/s SSJV Projects Private Limited and M/s AngeliqueInternational Limited shall also be jointly and severally liable inthe process of settlement of disputes in arbitration betweenWAPCOS and Salma Dam Joint Venture.”

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This clause must be read alongwith the terms specified in CoPAin particular clause 20 and clauses 1.14, 4.3 and 20.6 of FIDIC. Goingby the Contract Agreement read with relevant clauses of CoPA andFIDIC, it is obvious that the parties had agreed for resolution of all theirdifferences or disputes arising from the Contract Agreement by processEof settlement of disputes and arbitration.

20. In the present case, however, in due course, because offortuitous situation, the parties had to agree to amend certain terms andconditions of the Contract Agreement and to provide for revised contractrates. That was done after due negotiations, as is evinced from theFcorrespondence exchanged between SDJV and WAPCOSL vide lettersdated 15.09.2011 and 17.09.2012 and the recitals of the AoA itself.Finally, the parties (SDJV and WAPCOSL in particular) executed aformal Amendment of Agreement (AoA) on 09.06.2015. The samerecords the new arrangement eventually agreed upon between theGparties. It will be useful to first refer to the preamble of the AoA whichreads thus:

“1.0 Preamble

Consequent upon the modification of rates of certain Items ofworks in January 2013 which is subject to special terms andHconditions, the Amendment to the Original Agreement between WAPCOS and SDJV (the Parties) was required to be enteredupon thereafter.

Nevertheless the work at site continued at very fast pace and ingood faith and trust as per the revised rates agreed between theParties. Despite several constraints the project completionprogressed well during the years 2013 and 2014 and substantialpart of the works (around 97%) of the Dam and Spillway wascompleted by 31[st] December 2014. Remaining works arecontinuing at the project site.

Now, as the Amendment to Agreement is to be formalized forproper implementation and records, therefore, in continued goodfaith and trust the Parties have agreed to sign this Amendmentof Agreement by incorporating the actual site conditions, practicaldifficulties and subsequent developments that have taken placeat site.

……. .”

21. In clause 1.1 of AoA, reference is made to the estimatedcost of works and the balance work to be completed in the revisedestimated cost. The note below the chart given in clause 1.1 andclauses 1.2 to 1.6 of the preamble are of some relevance. The sameread thus:

“1.1 The balance work has to be completed in the revisedestimated cost as given below.

Estimated Cost of Works

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Note: If due to site conditions, the balance quantities increases,the contractor will carry out the construction and complete thework 1.2 This Amendment of Agreement will form part of the OriginalAgreement no. WAPCOS/SDP/AFG/Pkg.-III-05 dated 9thMarch 2006.

1.3 This Amendment of Agreement includes revised Bill ofQuantity (BoQ) (containing executed & balance quantum ofworks, New Items of work, etc) with the modified approved ratesfor eight major item of Civil works and modified cost of Hydro- A

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AMechanical works along with additional terms and Conditions ofContract.

1.4 Any Clauses/items other than the Amendment of Agreementwill be governed by Original Agreement and in case of anydispute the decision of CMD, WAPCOS will be final and bindingBto the Contractor.

1.5 In case of any inconsistency between Original Agreementand Amendment of Agreement, the content of Amendment ofAgreement will succeed.

1.6 In case of any dispute on Technical Specification andCinterpretation 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 ofSection -01 of the AoA, which read thus:D“REVISED COST AND RELATED TERMS ANDCONDITIONS

Clause 1.0

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The revision of cost/modified rates of above item are subject tothe following:

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1.2 The balance pending claims of Contractor stands buried andit was agreed by the Contractor that, no claims will be raised byFContractor on any of the pending/settled claims/other claimsresulting out of the correspondences made so far and there willbe no arbitration for the settlement of claims. It is agreed thatthe Contractor shall not be paid any further amount on claim/additional rate for new item of work settled or pending over andGabove the payments already released to the contractor.

1.3 In future, no claim of Contractor on any account shall beentertained. However any claim arising out of force majeure shallbe examined.”

Here, we may also take note of Section-02 of AoA concerningHthe amendment in general conditions of CoPA. Clause 2.1 of this section predicates that sub-clause 1.1.2.16 of CoPA stands modified asTechnical Committee means committee constituted by CMD,WAPCOSL.

23. It is pertinent to note that the execution of stated AoA hasnot been disputed by SDJV or for that matter by SSPPL. More so,these entities have not even challenged the implementation of AoA. Onthe other hand, it has come on record that all concerned gave effect tothe terms set out in AoA by offering revised rates to SDJV in conformitywith the agreed rates referred to in AoA and which payment wasreceived and availed of by SDJV/SSPPL without any demur. We mayhasten to add that even the subject Arbitration Petition does not questionthe execution of AoA or the applicability thereof. Indeed, theasseveration in the Arbitration Petition is that the claim set up by SDJVis in reference to items and bills raised subsequent to the execution ofAoA.

24. The moot question is: whether the AoA has the effect ofundoing and abrogating the arbitration clause predicated in the ContractAgreement? According to SDJV and SSPPL, the arbitration clause inthe Contract Agreement remains intact and undisturbed. The partiescontinue to be bound by the same.

25. For considering this plea we must appreciate the backdropin which the AoA has been executed, to understand the true import ofthe terms and conditions set out therein. From the correspondenceexchanged between the parties preceding the execution of AoA, beingletters dated 15.09.2011 and 17.09.2012, it is amply clear that the partieswere ad idem that substantial part of the works (around 97 per cent)of the “Dam and Spillway” was completed by 31.12.2014. This facthas been plainly restated in the preamble of the AoA. The AoA alsorecords 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 dated09.03.2006 and it includes revised Bill of Quantities (BoQ) (containingexecuted and balance quantum of works, new items of works, etc.)with the modified approved rates for eight major items of civil worksand modified cost of Hydro-Mechanical works along with additionalterms and conditions of Contract. Clause 1.4 of the AoA makes it amplyclear that any other clauses/items other than the AoA will be governedby Original Agreement (Contract Agreement) and in case of any A

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Adispute, the decision of CMD, WAPCOSL will be final and binding onthe contractor. Clause 1.5 of the AoA makes it further clear that incase of any inconsistency between the Contract Agreement and AoA,the terms specified in AoA will prevail. Clause 1.6 of the preamblepostulates that in case of any dispute on technical specifications andinterpretation of any contract clauses, the decision of CMD, WAPCOSLBwill be final and binding on the contractor. Section-01 of AoA then dealswith revised cost and related terms and conditions. Clause 1.0 thereofprovides that the revision of cost/modified rates of the items referredto therein will be subject to clauses 1.2 and 1.3, amongst others. Clause1.2 of Section-01 envisages that the balance pending claims ofCcontractor “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 sofar and there will be “no arbitration” for the settlement of claims. Clause1.3 of Section-01 also makes it clear that in future no claim ofcontractor on any count shall be entertained except the claim arisingDout of force majeure.

26. Despite such peremptory agreement and declaration by theparties, SDJV proceeded on an erroneous basis that the arbitrationagreement in Contract Agreement still subsists and can be enforcedby it. As aforesaid, neither SDJV nor SSPPL have disputed theEexecution of AoA nor it is even remotely suggested in the ArbitrationPetition that the AoA was executed by them under duress or coercion.From the indisputable circumstances, it becomes amply clear that thestated terms and conditions set out in the AoA were agreed upon byall concerned primarily due to revision of cost of the project upto Rs.F872.67 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 ofSection-01[1]. Notably, this AoA was executed at a stage when substantialpart of the works (around 97%) had already been completed. In ouropinion, the terms and conditions specified in AoA leave no manner ofdoubt that the arbitration agreement has been done away with – as isGmanifest from the unambiguous declaration that balance pending claimsof Contractor stand buried and that there will be no arbitration for thesettlement of claims[2].

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 1.3Hof Section -01 of AoA (in paragraph 22 above).

27. To get over this position, SDJV would contend that Section-02 of AoA specifically deals with the amendments in general conditionsof CoPA but it makes no reference to amendment of clause 20 ofCoPA. 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 theterms and conditions of AoA make it amply clear that the arbitrationagreement stands overridden in view of the express declaration in AoAin that regard referred to earlier.

28. As noticed earlier, AoA was executed on 09.06.2015 by whichdate, substantial part of the works (around 97 per cent) of the “Damand Spillway” had been completed. The water filling in dam commencedon 26.07.2015 by closing diversion tunnel gate. That presupposes thatthe “Dam and Spillway” work was fully completed before that date. Itis also not disputed that the project was inaugurated by the PrimeMinister of India and the President of Afghanistan on 04.06.2016. Theterms agreed upon between the parties and as recorded in AoA dated09.06.2015 was the outcome of steep revision of rates. Thesecircumstances are germane whilst answering the question underconsideration. We have no manner of doubt that the purport of the termsand conditions incorporated in the AoA dated 09.06.2015 areunambiguous expression of intent to supersede the arbitration agreementincorporated in Contract Agreement dated 09.03.2006 and to resolveall the contentious issues regarding the claims of SDJV, in the mannerspecified therein.

29. The High Court, however, rejected the argument of theappellant(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 appointedunder the C.A. and upon the Engineer repelling its claim, fiveappeals were lodged with the Technical Committee whichrejected the same by way of a common order dated 28.10.2016.A perusal of the order of the Technical Committee would showthat the claims lodged by the J.V. entity have been examined onmerits and also from the perspective of the plea raised before itwith regard to their admissibility in view of the provisions ofClauses 1.2 and 1.3 of the AOA.

10.6 Therefore, if, as contended on behalf of WAPCOS, Clauses1.2 and 1.3 of the AOA barred the J.V. entity from pressing any A

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pending or future claims, then, to my mind, there was no needfor the Technical Committee to deliberate upon the claims onmerits. It is the stand of the J.V. entity that all the claims lodgedby it with WAPCOS pertain to a period post the execution ofthe AOA.

10.7 The record shows that the AOA was executed on09.06.2005, while the subject project was inaugurated post itscompletion only in 2016. Furthermore, it is the case of the J.V.entity that the AOA provided for revision of rates for eight majoritems concerning civil works and hydro mechanical works.Therefore, if at all, the bar would apply to claims, which werereferable to pre-existing claims, or claims pertaining to revisionof rates relatable to eight major items of civil works and hydromechanical works or those claims which overlapped with theseclaims. That being said, as to whether the position taken by theJ.V. entity is correct or not is a matter which can only beexamined by the Arbitral Tribunal once the matter is tried as basedon mere pleas and counter pleas, this aspect cannot be decidedin a Section 11 petition. Particularly, given the facts obtaining inthis case, it is not possible to come to a definitive conclusion thatthere was accord and satisfaction upon the execution of theAOA.

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10.8 Therefore, the ground taken on behalf of WAPCOS thatno claim could be lodged post execution of the AOA is untenableand hence cannot be accepted. There is, to my mind, much meritin the submission advanced on behalf of the J.V. entity that theAOA cannot impede adjudication of all future claims whetheror 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 shouldhave done away with Clause 20.6 of COPA, which contains thearbitration agreement.”

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G30. As regards the first reason weighed with the High Court thatthe Technical Committee entertained the five appeals filed on behalfof the SDJV, that in our view cannot undo the effect of terms andconditions of AoA which had annulled the arbitration clause in theContract Agreement. There are at least two other tangible reasons tooverturn the stated opinion of the High Court. First, the TechnicalHCommittee was, as a matter of fact, constituted under clause 2.1 of Section – 02 of AoA by the CMD of WAPCOSL, as is evident fromthe communication dated 21.10.2015 sent by WAPCOSL to SDJV. Thatfact has been restated in the subsequent correspondence. TheTechnical Committee was, therefore, not constituted in terms of Clause20.1 of CoPA as has been erroneously assumed by the High Court.Second, the fact that the Technical Committee processed the appealsinstituted by SDJV does not mean that WAPCOSL had waived theterms 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 evenremotely suggest that it was a case of waiver express or tacit, byWAPCOSL qua the stipulation specified in clauses 1.2 and 1.3 ofSection-01 of AoA. Hence, this reason weighed with the High Courtis manifestly wrong and cannot stand the test of judicial scrutiny.

31. The second reason weighed with the High Court is againfounded on incorrect assumption about the date of AoA. The HighCourt in paragraph 10.7 proceeds on the basis that AoA was executedas back as on 09.06.2005 and having noted that date, the High Courtthen observed that the project was inaugurated only in 2016. On thiserroneous assumption, the High Court rejected the claim of theappellant(s) herein. As a matter of fact, the AoA was executed on09.06.2015, at which point of time, 97 per cent of the project wascompleted and the same was rolled out by filling of the Dam from26.07.2015 in less than one month, by closing diversion tunnel gate. Notonly that, the project was dedicated to the people of Afghanistan soonthereafter on 04.06.2016. Thus understood, it becomes clear that theparties had agreed to give quietus to all the claims and adopt revisedrates recommended by High Power Committee, as recorded in AoAexecuted on 09.06.2015. Suffice it to note that the basis for rejectingthe argument of the appellant(s) is founded on erroneous assumptionthat AoA was executed on 09.06.2005. That is an error apparent onthe face of the record.

32. The third reason weighed with the High Court is that clause20.6 of CoPA, providing for resolution of disputes by arbitration hasnot been modified by AoA. Indeed, clause 4 of the Contract Agreementmakes reference to clause 20 of CoPA. However, on a fair reading ofclause 4 of the Contract Agreement and in particular 4.1 as reproducedhitherto, it would be crystal clear that the substance of the provision isto provide for process of settlement of disputes and arbitration.Reference to clause 20 of CoPA is only to indicate that the procedure AB

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Aspecified therein may have to be followed whilst taking recourse to thatprocess. However, as the substantive provision regarding remedy ofarbitration itself has been done away with in terms of clauses 1.2 and1.3 of Section-01 of AoA, there was no need to modify clause 20 inCoPA dealing with machinery provision. Thus, the remedy of arbitrationcannot be resurrected merely because clause 20 of CoPA has not beenBexpressly modified in the AoA. Hence, even this reason does notcommend us.

33. As these are the only reasons which had weighed with theHigh Court to reject the argument of the appellant(s) regarding non-existence of arbitration agreement and the same being untenable in law,Cit must necessarily follow that the Arbitration Petition filed for and onbehalf of SDJV through SSPPL was not maintainable. In other words,the Arbitration Petition should have been rejected for lack of subsistingor existing arbitration agreement between the parties on the date offiling of Arbitration Petition.D

34. It is not unknown in commercial world that the parties amendoriginal contract and even give up their claims under the subsistingagreement. The case on hand is one such case where the partiesconsciously and with full understanding executed AoA whereby thecontractor gave up all his claims and consented to the new arrangementEspecified in AoA including that there will be no arbitration for thesettlement of any claims by the contractor in future. Having chosento adopt that path, it is not open to the contractor to now take recourseto arbitration process or to resurrect the claim which has been resolvedin terms of the amended agreement, after availing of steep revision ofrates being condition precedent. We may usefully rely on the underlyingFprinciple expounded by this Court in Damodar Valley Corporation vs.K. K. Kar[3], wherein the Court observed as follows:- “…..As the contract is an outcome of the agreement betweenthe parties it is equally open to the parties thereto to agree, tobring it to an end or to treat it as if it never existed. It may alsoGbe open to the parties to terminate the previous contract andsubstitute in its place a new contract or alter the original contractin such a way that it cannot subsist. In all these cases, since theentire contract is put an end to, the arbitration clause, which is a H3 (1974) 2 SCR 240 @ 243-244

part of it, also perishes along with it. Section 62 of the ContractAct incorporates this principle when it provides that if the partiesto a contract agree to substitute a new contract or to rescind oralter it, the original contract need not be performed. Where,therefore, the dispute between the parties is that the contractitself does not subsist either as a result of its being substitutedby a new contract or by rescission or alteration, that disputecannot be referred to the arbitration as the arbitration clause itselfwould perish if the averment is found to be valid. As the veryjurisdiction of the arbitrator is dependent upon the existence ofthe arbitration clause under which he is appointed, the partieshave no right to invoke a clause which perishes with thecontract.”

In a subsequent decision in National Insurance CompanyLimited vs. Boghara Polyfab Private Limited[4], in paragraph 52 thisCourt held as follows:

“52. Some illustrations (not exhaustive) as to when claims arearbitrable and when they are not, when discharge of contractby accord and satisfaction are disputed, to round up the discussionon this subject are:

(i) …. …. ….

(ii) A claimant makes several claims. The admitted orundisputed claims are paid. Thereafter negotiations areheld for settlement of the disputed claims resulting inan agreement in writing settling all the pending claimsand disputes. On such settlement, the amount agreed ispaid and the contractor also issues a discharge voucher/no-claim certificate/full and final receipt. After thecontract is discharged by such accord and satisfaction,neither the contract nor any dispute survives forconsideration. There cannot be any reference of anydispute 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 ofdamages. The respondent disputes the claim. Theclaimant who is keen to have a settlement and avoidlitigation, voluntarily reduces the claim and requests forsettlement. The respondent agrees and settles the claimand obtains a full and final discharge voucher. Here evenif the claimant might have agreed for settlement due tofinancial compulsions and commercial pressure oreconomic duress, the decision was his free choice.There was no threat, coercion or compulsion by therespondent. Therefore, the accord and satisfaction isbinding and valid and there cannot be any subsequentclaim or reference to arbitration.”

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Further, in Nathani Steels Ltd. v. Associated Constructions[5],this Court observed as follows:-

“3......Even otherwise we feel that once the parties have arrivedDat a settlement in respect of any dispute or difference arisingunder a contract and that dispute or the difference is amicablysettled by way of a final settlement by and between the parties,unless that settlement is set aside in proper proceedings, it cannotlie in the mouth of one of the parties to the settlement to spurnEit on the ground that it was a mistake and proceed to invoke theArbitration clause. If this is permitted the sanctity of contract,the settlement also being a contract, would be wholly lost and itwould be open to one party to take the benefit under thesettlement and then to question the same on the ground ofmistake without having the settlement set aside. In theFcircumstances, we think that in the instant case since the disputeor difference was finally settled and payments were made asper the settlement, it was not open to the respondent unilaterallyto treat the settlement as non est and proceed to invoke theArbitration clause. We are, therefore, of the opinion that the HighGCourt was wrong in the view that it took.”

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35. Having said this, no other issue need be addressed in theseappeals. As a result, these appeals must succeed. Resultantly, theimpugned judgment of the High Court is set aside and the Arbitration Petition No. 810 of 2016 filed by the respondent No. 1 herein standsdismissed.

36. However, we must keep the option available to the partiesto take recourse to other remedies, inter se, which they are free toadopt in accordance with law; and the rejection of Arbitration Petitionwill be no impediment for them to pursue those remedies. We,accordingly, keep all other issues and contentions available to the partiesopen, to be determined in appropriate proceedings as and when occasionarises.

37. The appeals are allowed in the above terms with no orderas to costs. All pending applications are also disposed of.

Ankit Gyan

Appeals allowed.

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