Avnish Kumar & Associates vs Northern Railway Thr. Its General ...
2017 Latest Caselaw 196 Del

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*      IN THE HIGH COURT OF DELHI AT NEW DELHI
+      ARB.P. 219/2016
       AVNISH KUMAR & ASSOCIATES                         ..... Petitioner
                          Through:    Mr. M.K.Ghosh and Ms. Tina Garg,
                                      Advocates.
                          versus

       NORTHERN RAILWAY THR. ITS GENERAL
       MANAGER & ORS                           ..... Respondents
                   Through: Mr. Jagjit Singh and Mr. Preet Singh,
                            Advocates.

    CORAM:
    HON'BLE MR. JUSTICE VIBHU BAKHRU
                 ORDER

    %            12.01.2017
VIBHU BAKHRU, J

1. The petitioner has filed the present petition under Section 11 of the Arbitration and Conciliation Act, 1996 (hereafter 'the Act'), inter alia, praying that an Arbitrator be appointed to adjudicate the disputes that have arisen between the parties.

2. The respondent no. 1, Northern Railway, had invited tenders for execution of interior and exterior walls finish and floor finishing works in station building including Construction of 90-bed dormitory accommodation at first floor and construction of 20-bed running room complex including related ancillary works at the proposed Katra Station on UHP-Katra section.

3. The petitioner submitted a bid pursuant to the said tender, which was opened on 12.09.2006. The petitioner's bid was accepted and this was

communicated to the petitioner by a letter dated 06.12.2006 (LOA). Thereafter, Northern Railways and the petitioner entered into the Contract Agreement dated 09.03.2007 (hereafter 'the Agreement'). The works were completed on 13.12.2010.

4. The petitioner's grievance is that although some interim payments were made, the petitioner was not paid the balance amount despite following up with the respondents. The final bill was sent on 26.11.2011 but according to the petitioner, it did not include several of its claims, which were being pursued by the petitioner. Thereafter, the completion certificate was issued on 28.07.2012.

5. The learned counsel for the petitioner has drawn the attention of this Court to several communications that were sent by the petitioner raising several claims including for price variation. However, it is alleged that the same were not addressed by the respondents. Consequently, the petitioner invoked the arbitration clause by its letter dated 12.11.2014.

6. The respondents responded to the said letter of invocation on 28.10.2015; the only objection taken by the respondents was that since the petitioner had not preferred its specific and final claim in writing within a period of 90 days from receiving the intimation from the Railway that the final bill is ready for payment, the petitioner is deemed to have waived its claims and the Railway was discharged and released of all liabilities under the Agreement in respect of those claims.

7. In view of the refusal on the part of the respondents to appoint an Arbitrator, the petitioner was constrained to file the present petition. The

present petition was moved on 19.04.2016 on which date, notice was accepted by the learned counsel for the respondents and he sought time to file a reply. On his request, four weeks time was granted for the said purpose. However, no reply was filed by the respondents during the said period. The matter was again taken up on 14.07.2016. On that date also, the only objection taken on behalf of the respondents was that the invocation of the arbitration clause was beyond the period of limitation and it was specifically stated that that is the only ground that the respondents wish to urge. The learned counsel, nonetheless, requested that time be granted to file a short reply on the said issue and a further time of two weeks was granted on the said date.

8. The respondents did not file a reply during this extended period as well and sought further time on 31.08.2016. On that date, the learned counsel for the respondents raised an altogether new controversy. He submitted that the petitioner had signed a supplementary agreement agreeing to accept a sum of `40,08,048/- as a full and final settlement of its claims under the Agreement and, therefore, the Agreement stood discharged. Subsequently, a reply was also filed to this effect enclosing therewith a copy of the supplementary agreement dated 26.11.2011.

9. The learned counsel for the petitioner has seriously contended that the copy of the supplementary agreement was never provided to the petitioner. It is further stated that the petitioner was forced to sign the supplementary agreement; the respondents had declined to release payment of the admitted amount due to the petitioner until the said agreement was signed.

10. The present petition was taken up on 10.11.2016 wherein it was observed that there are several cases where contractors have alleged that they have been coerced to sign supplementary agreements similar to those as the one signed by the petitioner. It is alleged that as a matter of practice, the respondents do not release even the admitted amounts due to the contractors until such agreements are signed.

11. It was also noticed that the supplementary agreement is a pre-printed standard form with blanks as to the relevant particulars. Accordingly, this Court directed the General Manager, Northern Railways to file an affidavit clearly disclosing whether it was a practice of Northern Railways to withhold the admitted dues of the contractors till execution of the supplementary agreements. In compliance with the said orders, General Manager, Northern Railways has filed an affidavit. Paragraph 13 of the said affidavit indicates a table providing the details as directed to be disclosed. The said table is set out below:

Number of contracts Number of contracts Number of cases in finalized / closed in which which disputes Supplementary raised and agreement executed arbitration is by the contractor granted.

The above affidavit clearly indicates that in no case admitted sums have been released to the contractors without signing of the supplementary agreement. It is, thus, apparent from the above, that the practice followed by

the respondents is to withhold the amounts admittedly due to the contractors unless they sign supplementary agreements and/or No Dues Certificate. Mr Jagjit Singh, learned counsel for the respondents now submits that this is a term of the contract and, therefore, has to be followed by the respondents. Clearly, the practice of withholding even the amounts admittedly due to contractors for the work performed unless they signed a No Dues Certificate, giving up their claims or recourse to arbitration is a pernicious practice and contrary to the principles of basic fairness. Surely a contractor who has performed its work and to whom payments are due and payable, is entitled to receive such sum without necessarily giving up its claims and forfeiting its right to refer the disputes for arbitration.

12. In view of the aforesaid circumstances, the contention that the petitioner had voluntarily signed the supplementary agreement without any undue influence cannot be readily accepted. This is clearly a matter of dispute, which would require to be adjudicated by the Arbitrator.

13. The objection that the petitioner had waived its claims by not preferring the claims within a period of 90 days of intimation of the final bill is also not sustainable. The controversy is no longer res integra (see: Explore Computers Pvt. ltd. v. Cals Limited and Another : 131 (2006) DLT 477; Chander Kant & Co. v The Vice Chairman, DDA and Ors: MANU/DE/2221/2009; Hindustan Construction Corporation v DDA: 77 (1999 ) DLT 165; and Pandit Construction Company v Delhi Development Authority and Anr.: 2007 (3 )Arb LR 205(Delhi)). In fairness, Mr Singh also did not press this issue.

14. In the present case, the arbitration clause is not disputed and is set out below:

"64 (1) (i) Demand for Arbitration- In the event of any dispute of (sic) 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 matter, shall demand in writing that the dispute or difference by (sic) referred to arbitration.

64 (1) (ii)- The demand for arbitration shall specify the matters which are in question or subject of the dispute or difference as also the amount of claim itemwise. Only such dispute(s) or difference(s) in respect of which the demand has been made, together with counter claims or set off shall be referred to arbitration and other matters shall not be included in the reference.

64(1) (ii) (a) -the Arbitration proceeding 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 claim along with all 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 claim from Tribunal thereafter unless otherwise extension has been granted by Tribunal.

64 (1) (iii)- No new claim shall be added during proceedings by either party. However, a party may demand or supplement the 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)- If the contractor(s) does/ do not prefer his/their specific and final claim 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 or (sic) all liabilities under the contract in respect of these claims."

15. In the circumstances, an Arbitrator is required to be appointed to adjudicate the disputes between the parties. Accordingly, Justice V. S. Aggarwal (Retired) (Mob. No. +91 9891175550), a former Judge of this Court is appointed as a Sole Arbitrator to adjudicate the disputes that have arisen between the parties. This is subject to the Arbitrator making the necessary disclosure under Section 12 of the Act and not being ineligible under Section 12(5) of the Act. The Arbitrator shall fix the fee in consultation with the parties.

16. The petition is disposed of.

17. The parties are at liberty to approach the Arbitrator for holding a preliminary hearing.

VIBHU BAKHRU, J JANUARY 12, 2017 ac