WAPCOS Ltd. V/S Salma Dam Joint Venture & Anr.
It is not unknown  in commercial world  that  the  parties amend original contract and even give up their claims under the subsisting agreement.   the Ministry of External Affairs (for short,“MEA”) and the appellant in the leading appeal, Water and Power Consultancy Services (India) Limited (for short, “WAPCOSL”),  a Public   Sector   Undertaking,   entered   into   an   agreement,   dated 29.11.2004,   for   the   implementation   of   the   work completion   of   Salma   Dam Project   (3×14   MW),   AfghanistanThe respondent No.1 in both the appeals, Salma Dam Joint Venture (for short, “SDJV”) was formed by the M/s SSJV Projects Private   Limited   (for   short,   “SSPPL”)   and   M/s   Angelique International   Ltd.   (for   short,   “AIL”)     under   a   Joint   Venture Agreement (for short,  “JVA”) dated 09.09.2005 to submit its bid for the said project. SSPPL was nominated to be the ‘Lead Partner’ of SDJV with ninety-five percent (95%) share as compared to five percent (5%)   share   of   AIL.   SSPPL   was   also   authorized   to   invoke arbitration by appointing an arbitrator, make claims, et cetera, on behalf of AIL, by executing a Power of Attorney (for short, “PoA”)WAPCOSL and SDJV signed certain documents to be read with the Contract Agreement and to form part and parcel thereof. Out of several such documents, Conditions of Particular Applications (for short “CoPA”) is the relevant one for the purpose of this case.A letter was sent by WAPCOSL, informing about the acceptance of revised rates of eight items and raising the total consideration to Rs. 872.67 Crores. Subsequent to this, SDJV and WAPCOSL signed a revised agreement for the rates, referred to as the Amendment of Agreement (for short, “AoA”), dated 09.06.2015.Despite signing of AoA, SDJV raised certain claims before the Engineer of WAPCOSL. After rejection of said representation, SDJV   preferred   six   appeals   to   the   Technical   Committee constituted in terms of clause 2.1 of Section – 02 of AoA. Five of these   appeals   were   rejected/disposed   of   vide   report   of   the Technical Committee dated 28.10.2016. Subsequent to the execution of AoA, dispute arose between the JV partners which resulted in AIL filing a petition (bearing number O.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, directed WAPCOSL to deposit the amount payable to SDJV with the Registrar of the High Court in order to secure the interests of both the JV entitiesOn 21.09.2016, the Board of Directors of AIL resolved to revoke the PoA executed in favour of SSPPL and in furtherance of the same, AIL, vide letters dated 19.10.2016 and 11.11.2016, wrote to the respective Banks and also to WAPCOSL informing them about the revocation of the authority of SSPPLupon rejection of the claims of SDJV by the Technical Committee, on 28.10.2016, SSPPL, unilaterally, espousing claims of SDJV proceeded to invoke the arbitration process, under clause 20.6 of CoPA and also appointed a nominee arbitrator, vide letter dated 12.11.2016.WAPCOSL vide   letter   dated 05.12.2016, recorded that since SDJV is a joint venture entity and the authority of SSPPL to represent AIL has been revoked, the appointment of arbitrator by SSPPL, unilaterally, is illegal in terms of clause 4.2 of the Contract Agreement and clause 3.2 of the JVA.Resultantly,   SSPPL   filed   a   petition   on   behalf   of   SDJV against   WAPCOSL   under   Section   11(6)   of   the   Arbitration   Act (bearing number Arb. P. 810/2016) before the High Court of Delhi,   wherein   it   has   been   asserted   that   the   PoA   dated 15.07.2005 given by AIL in its favour is still in force and forms part of the Contract Agreement dated 09.03.2006.Resultantly,   SSPPL   filed   a   petition   on   behalf   of   SDJV against   WAPCOSL   under   Section   11(6)   of   the   Arbitration   Act (bearing number Arb. P. 810/2016) before the High Court of Delhi,   wherein   it   has   been   asserted   that   the   PoA   dated 15.07.2005 given by AIL in its favour is still in force and forms part of the Contract Agreement dated 09.03.2006.WAPCOSL   preferred   a   Special   Leave Petition   (bearing   number   SLP   (Civil)   26555/2017)   before   this Court.   This   Court,   vide   order   dated   03.11.2017,   directed impleadment   of   AIL   as   a   party   and   also   stayed   the   arbitral proceedings.This Court, vide order dated 11.12.2017, deemed it proper to set aside the order Page 7 of 27 passed  by   the  High   Court  of   Delhi   dated  15.03.2017  and   to relegate the parties before the High Court for reconsideration of all aspects.The High Court of Delhi, vide judgment dated 25.01.2019 (for short, “impugned judgment”), once again allowed the said arbitration petition and appointed a sole arbitrator, instead of three arbitrators envisaged in CoPA.  ISSUE BEFORE THE COURT: whether   on   the   date   of   presentation   of   Arbitration   Petition, purportedly   by   SDJV   through   SSPPL   on   15.12.2016,   the arbitration   agreement   posited   in   Contract   Agreement   dated 09.03.2006 was in existence or subsisting and in force? whether   the   Arbitration   Petition   filed   in   the   name   of   SDJV through SSPPL, in law can be considered as having been properly and validly presented despite the express revocation of authority of SSPPL vide resolution passed by the Board of Directors of AIL on   21.09.2016   and   duly   communicated   to   SSPPL   as   well   as WAPCOSL before 15.12.2016, as was granted to SSPPL in terms Page 10 of 27 of JVA read with PoA including the Contract Agreement?  RATIO OF THE COURT: The court observed that Going by the Contract Agreement read with relevant clauses of CoPA and FIDIC, it is obvious that the parties had agreed for resolution of all their differences or disputes arising from the Contract Agreement by process of settlement of disputes and arbitration. It was later added that the execution of stated AoA has not been disputed by SDJV or for that matter by SSPPL. More so, these entities have not even challenged the implementation of AoA.  the asseveration in the Arbitration Petition is that the claim set up by SDJV is in reference to items and bills raised subsequent to the execution of AoA.The court pointed out that neither SDJV nor SSPPL have   disputed   the   execution   of   AoA   nor   it   is   even   remotely suggested in the Arbitration Petition that the AoA was executed by   them   under   duress   or   coercion and thus, opined that the terms and conditions specified in AoA leave no manner of doubt that the arbitration agreement has been done away with – as is manifest from the unambiguous declaration   that   balance   pending   claims   of   Contractor   stand buried and that there will be no arbitration for the settlement of claimsThe court observed that  that the purport of the terms and conditions   incorporated   in   the   AoA   dated   09.06.2015   are unambiguous expression of intent to supersede the arbitration agreement incorporated in Contract Agreement dated 09.03.2006 and to resolve all the contentious issues regarding the claims of SDJV, in the manner specified therein.  The court observed that the Arbitration Petition filed for and on behalf of SDJV through SSPPL was not maintainable.   In   other   words,   the   Arbitration   Petition   should have been rejected for lack of subsisting or existing arbitration agreement between the parties on the date of filing of Arbitration Petition. the court pointed out that the parties consciously and with full understanding executed AoA whereby the contractor gave up all his claims and consented to the new arrangement specified in AoA including that there will be no arbitration for the settlement of any claims by the contractor in future.  The court reffered to:  Damodar   Valley Corporation   vs.   K.   K.   Kar, National   Insurance   Company Limited  vs.  Boghara  Polyfab  Private  Limited and observed that it is not open to the contractor   to   now   take   recourse   to   arbitration   process   or   to resurrect the claim which has been resolved in terms of the amended agreement, after availing of steep revision of rates being condition precedent.  DECISION HELD BY COURT: the impugned judgment of the High Court was set aside and the  Arbitration Petition No. 810 of 2016 filed by the respondent No. 1 was dismissed.option available to the parties to take recourse to other remedies, inter se, which they are free to adopt in accordance with law; and the rejection of Arbitration Petition   will   be   no   impediment   for   them   to   pursue   those remedies.The appeals were allowed in the above terms with no order as to costs.
These appeals take exception to the judgment and order No. 1 ­ Salma Dam Joint Venture under Section 11(6) of the Arbitration and Conciliation Act 1996and Briefly stated the Ministry of External Affairs Limiteda Public Sector Undertaking entered into an agreement dated 29.11.2004 for the implementation of the work on “the Reconstruction Rehabilitation and completion of Salma Dam Project Afghanistan Package III: Main Civil and Hydro­Mechanical Works” was given the responsibility to provide financial administrative and contractual management services for the was to be channeled through WAPCOSL to the successful Private Limited and M s Angelique International Ltd. under a Joint Venture the JVA SSPPL was nominated to be the ‘Lead Partner’ of SDJV 5%) share of AIL. SSPPL was also authorized to invoke arbitration by appointing an arbitrator make claims et cetera on behalf of AIL by executing a Power of Attorney dated 09.06.2015 6. Despite signing of AoA SDJV raised certain claims before SDJV preferred six appeals to the Technical Committee these appeals were rejected disposed of vide report of the In the meantime on 04.06.2016 the Dam was inaugurated number O.M.P. (COMM.) 70 2016) under Section 9 of the Arbitration Act wherein the High Court of Delhi vide order dated 9. On 21.09.2016 the Board of Directors of AIL resolved to the same AIL vide letters dated 19.10.2016 and 11.11.2016 duly notified through these letters that in future only those both the parties shall be valid and be 10. Notwithstanding the abovementioned letters sent by AIL on 28.10.2016 SSPPL unilaterally espousing claims of SDJV 12.11.2016. WAPCOSL in response vide letter dated 05.12.2016 recorded that since SDJV is a joint venture entity the appointment of arbitrator by SSPPL unilaterally is illegal in 11. Resultantly SSPPL filed a petition on behalf of SDJV against WAPCOSL under Section 11(6) of the Arbitration Act bearing number Arb. P. 810 2016) before the High Court of Delhi wherein it has been asserted that the PoA dated is factually incorrect. In that the PoA was executed as a follow WAPCOSL). However the High Court allowed the same vide order dated 15.03.2017 and appointed an arbitrator for 13. Feeling aggrieved WAPCOSL preferred a Special Leave Petition 26555 2017) before this Court. This Court vide order dated 03.11.2017 directed impleadment of AIL as a party and also stayed the arbitral SDJV. Further the petition filed in the name of SDJV through passed by the High Court of Delhi dated 15.03.2017 and to the locus and competence of SSPPL to unilaterally appoint an 14. The High Court of Delhi vide judgment dated 25.01.2019 for short “impugned judgment”) once again allowed the said arbitration petition and appointed a sole arbitrator instead of 15. The High Court opined that the arbitration agreement between SDJV and WAPCOSL was still in force on the date of filing of the arbitration petition and the same would operate AoA having been executed between the parties on 09.06.2015 leading partner thereof. It held that SSPPL derived authority short ‘FIDIC’). The High Court was also impressed by the fact that SSPPL had 95 per cent shareholding in SDJV as against reason it went on to observe that AIL cannot be permitted to derail the arbitration process commenced for and on behalf of of SDJV could be pursued and the arrangement arrived under AoA between the parties cannot be treated as full and final settlement. Resultantly SDJV was well within its rights to take recourse to arbitration for resolution of the disputes in that relief regarding the claims raised was a matter within the exclusive domain of the Arbitral Tribunal. The High Court therefore allowed the Arbitration Petition and appointed a sole 16. Feeling aggrieved WAPCOSL as well as AIL have assailed 17. We have heard learned Senior Counsel Mr. Gaurav AILand Mr. Sachin Datta learned Senior Counsel for 18. After cogitating over the erudite arguments of the counsel appearing for the respective parties and perusing the relevant records including Arbitration Petition and the written submissions filed by the learned counsel in our opinion two principal issues need be answered in this judgment. First whether on the date of presentation of Arbitration Petition purportedly by SDJV through SSPPL on 15.12.2016 the arbitration agreement posited in Contract Agreement dated 09.03.2006 was in existence or subsisting and in force Second whether the Arbitration Petition filed in the name of SDJV on 21.09.2016 and duly communicated to SSPPL as well as of JVA read with PoA including the Contract Agreement 19. Reverting to the first question we must immediately advert to the Arbitration Agreement incorporated in the Contract Agreement. That can be discerned from clause 4 which reads 4.1 It is specifically agreed by and between the parties that all the differences or disputes arising out of the Agreement shall be decided by process of settlement of and M s Angelique International Limited shall also be CoPA and FIDIC it is obvious that the parties had agreed for resolution of all their differences or disputes arising from the Contract Agreement by process of settlement of disputes and In the present case however in due course because of fortuitous situation the parties had to agree to amend certain the recitals of the AoA itself. Finally the parties executed a formal Amendment of Agreement on 09.06.2015. The same records the new Consequent upon the modification of rates of certain Items of works in January 2013 which is subject to special terms and conditions the Amendment to the Original Agreement between WAPCOS and SDJV of the Dam and Spillway was completed by 31 st for proper implementation and records therefore in actual site conditions practical difficulties and of works and the balance work to be completed in the revised clauses 1.2 to 1.6 of the preamble are of some relevance. The The balance work has to be completed in the Note: If due to site conditions the balance quantities Original Agreement no. WAPCOS SDP AFG Pkg.­III­05 of works New Items of work etc) with the modified approved rates for eight major item of Civil works and modified cost of Hydro­Mechanical works along with 1.4 Any Clauses items other than the Amendment of 1.5 In case of any inconsistency between Original interpretation of any contract clauses the decision of CMD WAPCOS will be final and binding to the It may be useful to now advert to clauses 1.2 and 1.3 of Section ­01 of the AoA which read thus “REVISED COST AND RELATED TERMS AND The revision of cost modified rates of above item are buried and it was agreed by the Contractor that no claims will be raised by Contractor on any of the correspondences made so far and there will be no claim additional rate for new item of work settled or shall be entertained. However any claim arising out of amendment in general conditions of CoPA. Clause 2.1 of this section predicates that sub­clause 1.1.2.16 of CoPA stands modified as Technical Committee means committee constituted these entities have not even challenged the implementation of AoA. On the other hand it has come on record that all concerned which payment was received and availed of by SDJV SSPPL applicability thereof. Indeed the asseveration in the Arbitration 24. The moot question is: whether the AoA has the effect of Contract Agreement According to SDJV and SSPPL the in which the AoA has been executed to understand the true import of the terms and conditions set out therein. From the correspondence exchanged between the parties preceding the execution of AoA being letters dated 15.09.2011 and 17.09.2012 it is amply clear that the parties were ad idem that substantial was completed by 31.12.2014. This fact has been plainly due to site conditions the balance quantities increase the Further the AoA would form part of the Contract Agreement other than the AoA will be governed by Original Agreement CMD WAPCOSL will be final and binding on the contractor inconsistency between the Contract Agreement and AoA the and interpretation of any contract clauses the decision of CMD of AoA then deals with revised cost and related terms and conditions. Clause 1.0 thereof provides that the revision of will be raised by the contractor on any of the pending settled and there will be “no arbitration” for the settlement of claims Clause 1.3 of Section­01 also makes it clear that in future no parties SDJV proceeded on an erroneous basis that the arbitration agreement in Contract Agreement still subsists and can be enforced by it. As aforesaid neither SDJV nor SSPPL have disputed the execution of AoA nor it is even remotely by them under duress or coercion. From the indisputable crores which is 3.44 times the original project cost had already been been done away with as is manifest from the unambiguous declaration that balance pending claims of Contractor stand To get over this position SDJV would contend that Section­02 of AoA specifically deals with the amendments in general conditions of CoPA but it makes no reference to amendment of clause 20 of CoPA. That may be so however in our view it will be of no avail. We will deal with this aspect a overridden in view of the express declaration in AoA in that 28. As noticed earlier AoA was executed on 09.06.2015 by which date substantial part of the worksof That presupposes that the “Dam and Spillway” work was fully the parties and as recorded in AoA dated 09.06.2015 was the outcome of steep revision of rates. These circumstances are have no manner of doubt that the purport of the terms and conditions incorporated in the AoA dated 09.06.2015 are unambiguous expression of intent to supersede the arbitration 29. The High Court however rejected the argument of the “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 appointed under the C.A. and upon the of a common order dated 28.10.2016. A perusal of the order of the Technical Committee would show that the merits and also from the perspective of the plea raised 10.6 Therefore if as contended on behalf of WAPCOS Clauses 1.2 and 1.3 of the AOA barred the J.V. entity from pressing any pending or future claims then to my the J.V. entity that all the claims lodged by it with WAPCOS pertain to a period post the execution of the 10.7 The record shows that the AOA was executed on 09.06.2005 while the subject project was inaugurated hydro mechanical works. Therefore if at all the bar would apply to claims which were referable to pre­ relatable to eight major items of civil works and hydro taken by the J.V. entity is correct or not is a matter which can only be examined by the Arbitral Tribunal once the matter is tried as based on mere pleas and that there was accord and satisfaction upon the my mind much merit in the submission advanced on behalf of the J.V. entity that the AOA cannot impede their genesis in the AOA. If that was the intent as correctly argued on behalf of the J.V. entity the AOA the Technical Committee entertained the five appeals filed on behalf of the SDJV that in our view cannot undo the effect of First the Technical Committee was as a matter of fact of WAPCOSL as is evident from the communication 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 in terms of Clause 20.1 of CoPA as has been erroneously assumed by the High the appeals instituted by SDJV does not mean that WAPCOSL had waived the terms and conditions of AoA in particular reason weighed with the High Court is manifestly wrong and 31. The second reason weighed with the High Court is again founded on incorrect assumption about the date of AoA. The High Court in paragraph 10.7 proceeds on the basis that AoA date the High Court then observed that the project was inaugurated only in 2016. On this erroneous assumption the High Court rejected the claim of the appellant(s) herein. As a matter of fact the AoA was executed on 09.06.2015 at which than one month by closing diversion tunnel gate. Not only that the project was dedicated to the people of Afghanistan soon revised rates recommended by High Power Committee as Agreement makes reference to clause 20 of CoPA. However on a fair reading of clause 4 of the Contract Agreement and in particular 4.1 as reproduced hitherto it would be crystal clear have to be followed whilst taking recourse to that process However as the substantive provision regarding remedy of non­existence of arbitration agreement and the same being maintainable. In other words the Arbitration Petition should It is not unknown in commercial world that the parties contractor to now take recourse to arbitration process or to resurrect the claim which has been resolved in terms of the condition precedent. We may usefully rely on the underlying principle expounded by this Court in Damodar Valley Corporation vs. K. K. Kar3 wherein the Court observed as “…..As the contract is an outcome of the agreement between the parties it is equally open to the parties never existed. It may also be open to the parties to terminate the previous contract and substitute in its a way that it cannot subsist. In all these cases since the entire contract is put an end to the arbitration clause provides that if the parties to a contract agree to substitute a new contract or to rescind or alter it the original contract need not be performed. Where therefore the dispute between the parties is that the contract itself does not subsist either as a result of its alteration that dispute cannot be referred to the arbitration clause under which he is appointed the In a subsequent decision in National Insurance Company Limited vs. Boghara Polyfab Private Limited4 in paragraph “52. Some illustrations as to when claims are arbitrable and when they are not when discharge of contract by accord and satisfaction are ii) A claimant makes several claims. The admitted or undisputed claims are paid. Thereafter negotiations are contract nor any dispute survives for consideration There cannot be any reference of any dispute to damages. The respondent disputes the claim. The claimant who is keen to have a settlement and avoid financial compulsions and commercial pressure or Further in Nathani Steels Ltd. v. Associated Constructions5 arrived at a settlement in respect of any dispute or difference arising under a contract and that dispute or the difference is amicably settled by way of a final settlement by and between the parties unless that sanctity of contract the settlement also being a contract take the benefit under the settlement and then to question the same on the ground of mistake without think that in the instant case since the dispute or per the settlement it was not open to the respondent unilaterally to treat the settlement as non est and proceed to invoke the Arbitration clause. We are 35. Having said this no other issue need be addressed in these appeals. As a result these appeals must succeed. Resultantly 36. However we must keep the option available to the parties to take recourse to other remedies inter se which they are free to adopt in accordance with law and the rejection of Arbitration Petition will be no impediment for them to pursue those remedies. We accordingly keep all other issues and contentions available to the parties open to be determined in appropriate Page 2