Delhi High Court
Masyc Projects Private Limited vs Jaiprakash Associates Limited on 16 October, 2017
$~-1 to 12
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 16.10.2017
+ ARB. A. (COMM.) 29/2017
MASYC PROJECTS PRIVATE LIMITED ..... Petitioner
versus
JAIPRAKASH ASSOCIATES LIMITED ..... Respondent
+ ARB. A. (COMM.) 30/2017
MASYC PROJECTS PRIVATE LIMITED ..... Petitioner
versus
JAIPRAKASH ASSOCIATES LIMITED ..... Respondent
+ ARB. A. (COMM.) 31/2017
MASYC PROJECTS PRIVATE LIMITED ..... Petitioner
versus
JAIPRAKASH ASSOCIATES LIMITED ..... Respondent
+ ARB. A. (COMM.) 32/2017
MASYC PROJECTS PRIVATE LIMITED ..... Petitioner
versus
JAIPRAKASH ASSOCIATES LIMITED ..... Respondent
+ ARB. A. (COMM.) 33/2017
MASYC PROJECTS PRIVATE LIMITED ..... Petitioner
ARB. A. (Comm). No. 29, 30, 31, 32, 33, 34, 35,36,37,38,39 & 40 /2017 Page 1 of 18
versus
JAIPRAKASH ASSOCIATES LIMITED ..... Respondent
+ ARB. A. (COMM.) 34/2017
MASYC PROJECTS PRIVATE LIMITED ..... Petitioner
versus
JAIPRAKASH ASSOCIATES LIMITED ..... Respondent
+ ARB. A. (COMM.) 35/2017
MASYC PROJECTS PRIVATE LIMITED ..... Petitioner
versus
JAIPRAKASH ASSOCIATES LIMITED ..... Respondent
+ ARB. A. (COMM.) 36/2017
MASYC PROJECTS PRIVATE LIMITED ..... Petitioner
versus
JAIPRAKASH ASSOCIATES LIMITED ..... Respondent
+ ARB. A. (COMM.) 37/2017
MASYC PROJECTS PRIVATE LIMITED ..... Petitioner
versus
JAIPRAKASH ASSOCIATES LIMITED ..... Respondent
+ ARB. A. (COMM.) 38/2017
MASYC PROJECTS PRIVATE LIMITED ..... Petitioner
versus
ARB. A. (Comm). No. 29, 30, 31, 32, 33, 34, 35,36,37,38,39 & 40 /2017 Page 2 of 18
JAIPRAKASH ASSOCIATES LIMITED ..... Respondent
+ ARB. A. (COMM.) 39/2017
MASYC PROJECTS PRIVATE LIMITED ..... Petitioner
versus
JAIPRAKASH ASSOCIATES LIMITED ..... Respondent
+ ARB. A. (COMM.) 40/2017
MASYC PROJECTS PRIVATE LIMITED ..... Petitioner
versus
JAIPRAKASH ASSOCIATES LIMITED ..... Respondent
Advocates who appeared in this case:
For the Petitioner(s) : Mr. Tarun Sharma with Ms. Akanksha Kapoor and
Mr. Rahul Gupta, Advs.
Respondent(s) : Mr. K. Datta, Mr. Manish Srivastava and Mr.
Shagun Trisala, Advs.
CORAM:-
HON'BLE MR JUSTICE SANJEEV SACHDEVA
JUDGMENT
16.10.2017
SANJEEV SACHDEVA, J. (ORAL)
1. By these appeals under Section 37 of the Arbitration &
Conciliation Act, 1996 (hereinafter referred to as the Act), the
appellants impugns order dated 18.08.2017 passed by the Arbitrator
thereby holding that there is no arbitral dispute which could be
adjudicated upon by the tribunal.
2. The respondents had placed 12 separate purchase orders on the
appellant for the Design, Engineering, Manufacture, Supply and
Supervision of the Erection & Commissioning pertaining to the
Material Handling Belt Conveyors for different projects.
3. As per the appellant, the disputes arose with regard to the
payments to be made towards the said purchase orders. Appellant
invoked arbitration and Arbitrator was appointed to adjudicate the
claims of the appellant with regard to the said purchase orders.
4. Pending the arbitral proceedings, the parties attempted to
resolve their disputes and accordingly a meeting took place on
30.03.2015 and a settlement agreement was executed.
5. Pursuant to the said settlement agreement, respondents issued a
cheque on 31.03.2015 for Rs. 58,53,356/-. The said cheque was
accepted and encashed by the petitioner.
6. As per the respondents in terms of the settlement agreement, the
appellant was to withdraw all proceedings pending before the
Arbitrator.
7. The respondents took an objection before the Arbitrator that the
disputes between the parties had been settled by virtue of the
settlement agreement dated 30.03.2015 and there was no dispute left
to be arbitrated upon by the Arbitrator.
8. The Arbitrator accepted the contention of the respondent and
has held that the terms recorded in the minutes of meeting dated
30.03.2015 amounted to a settlement agreement between the parties
and accordingly there was no arbitral disputes, which could be
adjudicated upon by the Arbitrator.
9. Learned counsel for appellant contends that the claim of the
appellant was much more than what was recorded in the settlement
meeting dated 30.03.2015.
10. It is contended that the said terms were agreed to solely on the
ground that the entire payment would be made in terms of the
settlement agreement.
11. It is further contended that the minutes of meeting dated
30.03.2015 specifically provided that all the cheques were to be issued
by the respondents in the sum of Rs. 203.77 by 31.03.2017 though
payable till 20.04.2015.
12. It is contended that the settlement terms dated 30.03.2015
recorded that a draft letter would be issued by the appellant, which
would be vetted by the respondent, and thereafter parties were to
execute a settlement agreement and submit to the Sole Arbitrator..
13. Learned counsel further submits that since the respondents
failed to issue the post dated cheques in terms of the settlement
agreement and also failed to settle the terms of the settlement and no
settlement agreement was entered into between the parties, the same
did not constitute a full and final settlement of all the claims of the
petitioner.
14. Learned counsel for the respondent contends that the minutes of
the meeting dated 30.03.2015 was full and final settlement of all
claims of the appellant and since the appellant has accepted the
minutes of meeting and also accepted part payment under the same
and the appellant can now be permitted to resile from the same and
pursue the arbitration proceedings.
15. Learned counsel further submits that the cheques in terms of the
settlement agreement were ready to be handed over but were not
handed over because the appellant sought an amendment in the
settlement agreement.
16. It is conceded that no settlement agreement was drawn up or
signed by the parties.
17. It is contended that no settlement agreement was necessary as
the minutes of meeting dated 30.03.2015 constituted a complete
settlement and recorded that all the terms and conditions agreed
between the parties.
18. By the impugned order dated 18.08.2017, the Arbitrator relying
on the decision of the Supreme Court in 'NATHANI STEELS LTD. VS.
ASSOCIATED CONSTRUCTIONS, 1995 Supp (3) SCC 324‟ has held that
once there is a full and final settlement in respect of a particular
dispute or difference in relation to a matter covered under the
arbitration clause such dispute does not remain to be an arbitral
dispute and the arbitration clause cannot be invoked.
19. The Arbitrator has held that once a settlement agreement was
reached on 30.03.2015 and was signed by both the parties, what
remained to be done was only to issue a letter draft agreement to be
vetted by the Respondent's Legal Department.
20. The Arbitrator has held that it is not open to the appellant to
contend that the settlement agreement was not final. The view of the
Arbitrator is that if the parties had intended the agreement to be only a
draft they would have provided final agreement to be executed later.
21. The Arbitrator has held that the agreement between the parties
reached on 30.03.2015 was final and unless the same was set aside in
appropriate proceedings, no arbitral dispute would arise for being
adjudicated upon by the Arbitral Tribunal.
22. The said settlement agreement reached during reconciliation
meeting on 30.03.2015 reads as under:-
"Settlement Agreement Reached during the reconciliation
meeting on 30.03.15
Masyc has requested for clearance of clues of Rs. 203.77
lacs pertaining to our various projects. They had also
taken a legal recourse. Accordingly, they were called for
a meeting on 30th March, 2015 and the following were
agreed.
A. Release of Dues:
The details of pending payment against supply and
retention are summarized hereunder:
S. No. Description Dues Release Date
(Rs/Lacs)
1. JGCP-Bhuj 58.53 1st April, 2015
2. Sidhi 2.70 10th April, 2015
3. Super 97.92 20th April, 2015
12.15
4. Chunar 16.09 18th April, 2015
8.37
5. Baga 0.42 15th April, 2015
0.86
6.73
Total 203.77 203.77
B. Adjustment of advance paid against Bagheri Order.
For Bagheri CCP - Order of Rs. 360.00 Lacs was given
to Masyc with advance payment of Rs. 72.00 Lacs (10%
advance & 10% against GAD), which was cancelled
later.
Masyc has now accepted that the above advance of Rs.
64,07,974/- be adjusted against order of Belt Conveyors
for Deccan Rose. Out of Rs. 72 lacs, Masyc has paid
service tax of Rs. 7,92,026/- which cannot be adjusted.
C. Order for Deccan Rose
Masyc has quoted a price of Rs. 1565.24 lacs. This was
negotiated to Rs. 1200 lacs.
Masyc has requested for the following payment terms:
1. 5% advance against ABG valid till two months of
completion of supplies (BG for Rs. 64 lacs shall be
submitted --- 30.03.2015.
2. 5% against drawing approval.
3. 5% against unpriced copies of Bought outs.
4. 75% + taxes and duties on pro rata basis by way of
LC. LC to be established on approval of
drawings PBG of 10% valid till warranty shall
be part of the negotiating documents.
5. 10% against LC to be established on drawing
approval and shall be drawn on completion of
six months from the last supply date.
Warranty shall be 12 months from commissioning or 18
months from supply completion, whichever is earlier.
Delivery shall be completed within 8 months subject to
approval of drawing within two weeks of submission.
In acceptance of the above settlement, Masyc has agreed
to withdraw all legal cases. Masyc shall issue a letter
based on the draft to be vetted by our legal department.
Cheques/PDCs shall be exchanged against the above
letter to be issued by Masyc. Settlement Agreement to be
signed jointly and submitted to the Sole Arbitrator on the
next date of hearing.
Sd/-
MASYC"
23. The settlement agreement dated 30.03.2015 specifically
stipulates that a letter shall be issued by the appellant based on the
draft to be vetted by the Legal Department of the Respondent. The
minutes of meeting also records that the settlement agreement is to be
signed jointly and submitted to the Arbitrator.
24. No settlement agreement admittedly has been drawn up or
executed between the parties. Since no settlement has been drawn up
or executed by the parties, the same has also not been submitted to the
Arbitrator placing on record the settlement terms.
25. In case any settlement agreement was placed before the
Arbitrator, the Arbitrator would have passed an award based on the
same thereby giving a right to the parties to execute the same.
26. In the present case post invocation of the arbitration and
appointment of the Arbitrator, the parties sought to resolve their
disputes by entering into broad terms of the settlement. The settlement
terms provided that the respondent shall pay a sum of Rs. 203.77 lacs
in full and final settlement of all the claims of the appellant.
27. Part payment of Rs. 58.53 lacs was made by the respondent to
the appellant. The minutes also recorded terms for settlement
pertaining to two other projects. Admittedly, for the Deccan Rose
Project, further steps were not taken by the appellant, though it is
contended that a purchase order was placed on the appellant and since
the appellant did not furnish the bank guarantee as agreed to, the same
was not concluded.
28. The Supreme Court in NATHANI STEEL LTD. (Supra) has held as
under:-
" 3. The appellant has invited our attention to two
decisions of this Court. The first dated 01.10.1993 in P.K.
Ramaiah and Co. v. Chairman & Managing Director,
National Thermal Power Corpn and second dated
04.02.1994 in State of Maharashtra v. Nav Bharat
Builders. In the first mentioned case the parties had
resolved their disputes and differences by a settlement
pursuant whereto the payment was agreed and accepted
in full and final settlement of the contract. Thereafter,
brushing aside that settlement the Arbitration clause was
sought to be invoked and this Court held that under the
said clause certain matters mentioned therein could be
settled through Arbitration but once those were settled
amicably by and between the parties and there was full
and final payment as per the settlement, there existed no
arbitral dispute whatsoever and, therefore, it was not
open to invoke the Arbitration clause. In the second
mentioned case the respondent-Contractor acknowledged
the receipt of the amount paid to him and stated that
there was unconditional withdrawal of his claim in the
suit in respect of the labour escalation. There was, thus,
full and final settlement of the claim and it was contended
that no arbitrable dispute survived in relation thereto.
Other claims, if any, and which were not settled by and
between the parties could be raised and it would be open
to consider whether the arbitrable dispute arose under
the contract necessitating reference to arbitration.
Dealing with this question also this Court after referring
to the decision in P.K. Ramaiah case concluded that in
relation to the claim under the head „labour escalation‟
there did not remain any arbitrable dispute which could
be referred to arbitration. It would thus be seen that once
there is a full and final settlement in respect of any
particular dispute or difference in relation to a matter
covered under the Arbitration clause in the contract and
that dispute or difference is finally settled by and between
the parties, such a dispute or difference does not remain
to be an arbitrable dispute and the Arbitration clause
cannot be invoked even though for certain other matters,
the contract may be in subsistence. Learned counsel for
the respondent, however, placed great emphasis on an
earlier decision of this Court in Damodar Valley Corpn.
V. K.K. Kar and in particular to the observations made in
paras 11 to 13 of the judgment. It may, at the outset, be
pointed out that a similar argument was advanced based
on the observations made in this decision, in Ramaiah
case also but the same was rejected holding that on the
facts since the respondent did not give any receipt
accepting the settlement of the claim, the payment made
by the other side only unilateral and hence the dispute
subsisted and the Arbitration clause in the contract could
be invoked. Therefore, parties have 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 settlement is set aside in
proper proceedings, it cannot lie in the month of one of
the parties to the settlement to spurn it on the ground that
it was a mistake and proceed to invoke the Arbitration
Clause. If this is permitted the sanctity of contract, the
payment also being a contract, would be wholly lost and
it would be open to the party to take the benefit under the
settlement and then to question the same on the ground of
mistake without having the settlement set aside. In the
circumstances, we think that in the instant case since the
dispute or difference was finally settled and payments
were made as 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,
therefore, of the opinion that the High Court was wrong
in the view that it took."
(emphasis supplied)
29. For a dispute to be no longer arbitrable, not only should there
by a full and final settlement, but that dispute should also have been
finally settled.
30. There are two stages to a settlement. First the parties enter into
a settlement and agree on settling the disputes on certain terms and
conditions and thereafter the terms and conditions are acted upon
resulting in a final settlement of the agreed terms. It is only when the
parties have performed their respective obligations as agreed to, that a
final settlement of disputes occurs resulting in the extinguishment of
arbitrable disputes.
31. In the cases referred to by the Supreme Court in NATHANI
STEEL LTD. (Supra) the Supreme Court has also noticed the two
stages.
32. With regard to the case of P.K. Ramaiah and Co. v. Chairman
& Managing Director, National Thermal Power Corpn., the Supreme
Court has noticed that the parties had resolved their disputes and
differences by a settlement pursuant whereto the payment was agreed
and accepted in full and final settlement of the contract. The Supreme
Court has noticed that not only the disputes were settled amicably by
and between the parties, there was full and final payment as per the
settlement.
33. With regards the second case of State of Maharashtra v. Nav
Bharat Builders, the Supreme Court has noticed that the Contractor
acknowledged the receipt of the amount paid to him and stated that
there was unconditional withdrawal of his claim in the suit in respect
of the labour escalation. There was, thus, full and final settlement of
the claim and it was contended that no arbitrable dispute survived in
relation thereto.
34. The Supreme Court in NATHANI STEEL LTD. (Supra) has held
that once there is a full and final settlement in respect of any particular
dispute or difference in relation to a matter covered under the
Arbitration clause in the contract and that dispute or difference is
finally settled by and between the parties, such a dispute or difference
does not remain to be an arbitrable dispute and the Arbitration clause
cannot be invoked even though for certain other matters, the contract
may be in subsistence.
35. Not only is there a reference to the first stage i.e. a full and final
settlement in respect of any particular dispute or difference in relation
to a matter covered under the Arbitration clause in the contract but the
second stage is also referred to i.e. that dispute or difference is finally
settled by and between the parties.
36. Mere agreement between the parties to settle the disputes on
particular terms which not would lead to the extinguishment of the
arbitrability of disputes but the actual payment in terms of the
settlement that would put an end to the arbitrability of the disputes.
37. There may be situations where parties agree on the terms and
conditions of settlement, however the terms and conditions are not
acted upon. Said situation would not lead to extinguishment of
arbitrable disputes. To hold contrarily can lead to grave consequences.
38. For example - If Party „A‟ has a claim of „X‟ amount from
Party „B‟, a settlement is arrived between the parties at 80% of „X‟.
Merely because A has agreed to accept 80% of „X‟ amount would not
end the dispute between the parties. It is only the payment of 80% of
„X‟ that the disputes can be said to be finally settled leading to
extinguishment of arbitrability of disputes.
39. Taking the above example, if Party „B‟ after entering into
settlement at 80% of „X‟ pays only 10% of „X‟ and does not pay the
balance. Can it be then said that just because „Á‟ had agreed to accept
80% of „X‟, „A‟ cannot raise the claim for payment of even the
balance 70%.
40. In the present case also the claim of the appellant, as contended
was more than Rs. 203.77 lacs however the settlement was agreed at
Rs. 203.77 lacs, as recorded in the minutes of meeting dated
30.03.2015. Admittedly, the entire sum of Rs. 203.77 lacs has not
been paid.
41. In such a situation to hold that the appellant has no further
remedy in law or nothing further remains to be arbitrated upon would
cause grave prejudice to the appellant. That can never be the intention
of the law.
42. Learned counsel for the respondent has conceded that appellant
is yet to recover the balance amount and the appellant would have to
take remedy available in law.
43. In view of the fact, that admittedly disputes and claims of the
appellant are surviving even after the minutes of meeting dated
30.03.2015, I am unable to accept the reasoning given by the Arbitral
Tribunal that there was no arbitrable dispute left between the parties.
44. It may however be noticed that in the letter dated 31.03.2015,
whereby the said cheques of Rs. 58,53,356/- was issued and received
by the petitioner, the appellant has specifically made an endorsement
that the said amount relates to claims being covered by the Purchase
Order No. (i) JGCP/CPP-II/CHP/SUPPLY/01, (ii) JAL/JETTY/
MASYC/CHUTE/187/2011, (iii) GACL/SLR/WANAKBORI/
2008/151 & (iv) GACL/CPP/CHP/01.
45. The said purchase orders are basis of claims in Arbitration Case
No. (i) DAC/904/04-15, (ii) DAC/907/04-15, (iii) DAC/908/04-15
and (iv) DAC/916/04-15 corresponding to Arbitration Appeals No.
(i)ARB.A (Comm) No. 38/2017, (ii) ARB.A (Comm) No. 34/2017,
(iii) ARB.A (Comm) No. 30/2017 and (iv) ARB.A (Comm) No.
32/2017, respectively.
46. Since the respondents had paid the said amount of
Rs.58,53,356/- and the appellant had received the said amount in full
and final settlement qua the above referred purchase orders, the
finding of the Arbitrator that there is a full and final settlement with
regard to the said disputes and that the dispute and difference has been
finally settled does not warrant any interference.
47. Since respondents have not paid the balance amount as
recorded in the minutes of meeting dated 30.03.2015, the appeals
pertaining to Purchase Order Nos. (i) JAL/MASYC/
CHUNAR/BC/2010/01, (ii) JAL/JAYPEE SUPER/BC/2009/01,
(iii) JAL/SLR/DALLA/2007, (iv) JAL/ MASYC/BAGA/BC/2010/15,
(v) JAL/MASYC/525 & 526/ BAGA/2011, (vi) JAL/SIDHI/SLR/
2007, (vii) JAL/MASYC/BAGA/BC/2010/01 and (viii) JAL/
MASYC/JAYPEE SUPER BC/2010/01 subject matter of Arbitration
Case No. (i) DAC/905/04-15, (ii) DAC/906/04-15, (iii) DAC/915/04-
15, (iv) DAC/910/04-15, (v) DAC/911/04-15, (vi) DAC/909/04-15,
(vii) DAC/917/04-15 and (viii) DAC/918/04-15 corresponding to the
Arbitration Appeals being (i) ARB.A (Comm) No. 33/2017,
(ii) ARB.A (Comm) No. 37/2017, (iii) ARB.A (Comm) No. 35/2017,
(iv) ARB.A (Comm) No. 39/2017, (v) ARB.A (Comm) No. 36/2017,
(vi) ARB.A (Comm) No. 29/2017, (vii) ARB.A (Comm) No. 31/2017
and (viii) ARB.A (Comm) No. 40/2017, respectively are liable to be
allowed.
48. In view of the above, Arbitration Appeals being (i) ARB.A
(Comm) No. 29/2017, (ii) ARB.A (Comm) No. 31/2017, (iii)
ARB.A (Comm) No. 33/2017, (iv) ARB.A (Comm) No. 35/2017, (v)
ARB.A (Comm) No. 36/2017, (vi) ARB.A (Comm) No. 37/2017, (vii)
ARB.A (Comm) No.39/2017 and (viii) ARB.A (Comm) No. 40/2017,
are allowed.
49. The proceedings are remitted to the Arbitrator. The parties shall
appear before the Coordinator Delhi International Arbitration Centre
for directions on 30.10.2017 at 2.00 PM.
50. Arbitration Appeals being (i) ARB.A (Comm) No. 30/2017, (ii)
ARB.A (Comm) No. 32/2017, (iii) ARB.A (Comm) No. 34/2017 and
(iv) ARB.A (Comm) No. 38/2017 are dismissed.
51. Parties are left to bear their own costs.
52. Order Dasti under signatures of the Court Master.
SANJEEV SACHDEVA, J
OCTOBER 16, 2017
'rs'
