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MAX INFRATECH (INDIA) PVT LTD. VERSUS GUJARAT MINERAL DEVELOPMENT CORPORATION

    PETN. UNDER ARBITRATION ACT No. 62 of 2009

    Decided On, 16 July 2010

    At, High Court of Gujarat At Ahmedabad

    By, THE HONOURABLE MR. JUSTICE M.R. SHAH

    FOR THE PETITIONER: NIRAV C THAKKAR, ADVOCATE. FOR THE RESPONDENT: R1, PREMAL R JOSHI, ADVOCATE.



Judgment Text

ORAL JUDGMENT


1. Present petition has been preferred by the petitioner - MAX INFRATECH (INDIA) PVT LTD. under sec.11 of the Arbitration and Conciliation Act, 1996 for appointment of an Arbitrator to adjudicate the disputes which have arisen with respect to contract agreement dtd.12/3/3003.


2. It is the case on behalf of the petitioner that the respondent invited tender for removal of the OB (Over Burden) Soil in Rajpardi Lignite Mines and after completing the necessary procedure, the petitioner was awarded contract by agreement dtd.12/3/2003. It is the case on behalf of the petitioner that at the time of issuance of tender about 43.88 lac cu.m. of OB soil was available in Rajpardi lignite mine and that the respondent Corporation had granted extension of work to the previous agency by the name of M/s.HJP Fabricators for 10.50 cu.m. of soil vide order dtd.28/2/2003 i.e. prior to issuance of the letter of intent in favour of the petitioner and therefore, the available quantity of OB soil was actually only 33.88 cu.m. It is the case on behalf of the petitioner that despite the fact that the available quantity of OB soil was less than what was advertised in the tender, there was no revision or reduction of the target quantity despite several requests and reminders by the petitioner to the respondent. It is the case on behalf of the petitioner that final bill was prepared on 8/9/2005 considering the target quantity at 40.00 cu.m. and that liquidated damages (LD) of Rs.24.60 lacs was imposed on the petitioner considering the target quantity of 40.00 cu.m. as per the contract agreement and not on the basis of available OB quantity. It is the case on behalf of the petitioner that there were many other defaults committed by the respondent qua their obligations under the contract agreement while the contract was being executed by the petitioner and as such the petitioner suffered loss of Rs.2 Crores approximately.


3. It is the case on behalf of the petitioner that contract work was, however, completed as per the schedule and there was no additional financial burden of the respondent corporation for timely completion of the work, however because of delays at the end of the respondent corporation in releasing payments to the petitioner and other defaults in complying with their obligations under the contract, the petitioner suffered huge losses in terms of the interest on the invested amount and interest on the loan amount taken by the petitioner from the market, for which also the respondent corporation is liable.


4. It is the case on behalf of the petitioner that last payment was made by the respondent corporation to the petitioner on 25/5/2006 to the tune of Rs.23.79.17=00 and the petitioner had objected to withholding of Rs.24.60 lacs towards liquidated damages by communication dtd.27/5/2006 and requested to release the withheld amount.


5. It is the case on behalf of the petitioner that in absence of any response from the respondent corporation, there was a dispute between the petitioner and the corporation and therefore the petitioner invoked arbitration clause No.17 of the contract agreement by issuing notice dtd.14/7/2006 calling upon the respondent to appoint arbitrator. It is the case on behalf of the petitioner that as there was no response, again a reminder was sent on 4/9/2007 requesting the respondent corporation to release the withheld amount or else to refer the matter to the arbitration within 30 days. It is the case on behalf of the petitioner that neither the respondent corporation released the withheld amount nor appointed arbitrator as per the terms of the agreement and therefore, the petitioner has preferred present petition under sec.11 of the Arbitration and Conciliation Act, 1996 to refer the parties to arbitration and to appoint sole arbitrator to adjudicate the disputes between the parties.


6. In response to the notice issued by this Court, Mr.Premal Joshi, learned advocate has appeared on behalf of the respondent and has submitted that as after negotiation the corporation agreed to pay the liquidated revision amounting to Rs.23,79,174=00 and on the other hand, the petitioner also agreed to withdraw its claim of Rs.24,59,575=00 against the revision of targeted quantity and the petitioner accepted amount of Rs.23,79,174=00 towards full and final settlement of its claim against the respondent, and therefore, it is not open for the petitioner now to raise the claim with respect to Rs.24,59,575=00, the claim which has been withdrawn by the petitioner and therefore, the dispute with respect to the aforesaid claim is not required to be referred to the arbitration and for that arbitrator is not required to be appointed.


7. Mr.Joshi, learned advocate appearing on behalf of the respondent Corporation has relied upon the decision of the Hon'ble Supreme Court in the case of National Insurance Company Limited Vs. Boghara Polyfab Private Limited, reported in (2009) 1 SCC 267 (paragraph Nos.28 and 52).


8. In response to the above, Mr.Nirav Thakkar, learned advocate appearing on behalf of the petitioner has also relied upon the aforesaid decision of the Hon'ble Supreme Court in the case of National Insurance Company (supra). He has submitted that as observed and held by the Hon'ble Supreme Court in the aforesaid decision, whether the contract has been discharged by performance or by accord and satisfaction is a mixed question of facts and law and if there is dispute with regard to that question, such a dispute is arbitrable. It is submitted that as observed and held by the Hon'ble Supreme Court, if the party which has executed discharged agreement/voucher alleges fraud, coercion, undue influence practiced by the other party and is able to establish the same, then obviously the discharge of such contract by such agreement/voucher is rendered void and cannot be acted upon and therefore, consequently any dispute raised by the executor of the discharge agreement/voucher would be arbitrable. It is submitted that in the present case as the entire amount of the petitioner totalling to Rs.48.39 Lacs was withheld and the petitioner was suffering a lot, the petitioner was at the relevant time was compelled to agree to accept Rs.23,79,174 and issue voucher/receipt of full and final settlement, therefore, it is requested to appoint sole arbitrator and refer the parties to the arbitration.


9. In response to the above submission of Mr.Thakkar, learned advocate appearing on behalf of the petitioner, Mr.Premal Joshi, learned advocate appearing on behalf of the respondent Corporation has denied that accepting of Rs.23,79,174 was under durace or coercion and/or that there was compulsion on the part of the petitioner to accept the same as full and final settlement. It is submitted that there were series of discussions between the parties and even draft of the settlement agreement was sent to the petitioner and thereafter the petitioner signed the settlement agreement dtd.24/5/2006 voluntarily agreeing to for go Rs.24,59,575=00 and it was agreed by the respondent corporation to refund Rs.23,79,174=00 which was earlier deducted towards liquidated damages. Therefore, it is requested to dismiss the present petition.


10. Heard the learned advocates appearing on behalf of the respective parties at length.


11. It appears that while preparing final bill, liquidated damages of Rs.48,38,749=00 was proposed to be deducted, however, thereafter there were series of discussions between the parties more particularly with the D.G.M. (Mines) and the petitioner and it was agreed to refund an amount of Rs.23,79,174 deducted from the final bill dtd.8/9/2004 by way of liquidated damages and simultaneously it was agreed that the petitioner shall not claim balance withheld amount of Rs.24,59,575. It appears that after the discussions the petitioner communicated to the respondent corporation vide communication dtd.18/4/2006 that the petitioner has agreed to receive Rs.23,79,174 deducted from the final bill dtd.8/9/2004 towards the liquidated damages and not to claim the balance withheld amount of Rs.24,59,575 as proposed. It appears that thereafter by communication dtd.24/5/2006, the petitioner was sent the draft of the settlement agreement to be executed between the petitioner and the respondent corporation on a Non-judicial Indian Stamp Paper of Rs.50 and the petitioner was requested to confirm the contents of the draft agreement and/or give suggestion/modification, if any. That the petitioner accepted the said draft of settlement agreement and by communication dtd.24/5/2006, the petitioner conveyed their consent to the draft agreement and thereafter a further settlement agreement dtd.24/5/2006 came to be executed between the petitioner and the respondent by which the parties agreed as follows:-


i. The ?Corporation? will refund the amount of LD amounting to Rs.23,79,174/- levied towards target shortfall of the monsoon period to the ?Contractor?.


ii. The ?Contractor? will withdraw its claim of Rs.24,59,575=00 against the ?Corporation? with respect to the revision of targeted quantity.


iii. The ?Contractor? will provide necessary documentary evidence with a written undertaking for no further claims.


12. That thereafter, the petitioner has been released liquidated damages of Rs.23,79,174=00 as agreed and only thereafter the petitioner has raised claim with respect of Rs.24,59,575=00 which claim the petitioner has withdrawn as per the aforesaid settlement agreement which was arrived at after series of discussions.


13. In backdrop of the aforesaid facts, the decision of the Hon'ble Supreme Court in the case of National Insurance Company Limited (supra) is required to be considered. Considering the aforesaid decision of the the Hon'ble Supreme Court as a whole, more particularly para 52 and illustration No.(v), the dispute/claim in question is not an arbitrable. Illustration No.(v) in para 52 reads as under:-


?(v). A claimant makes a claim for a huge sum, by way of damages. The respondent dispute the claim. The claimant who is keen to have a settlement and avoid litigation, voluntarily reduces the claim and requests for settlement. The respondent agrees and settles the claim and obtains a full and final discharge voucher. Here even if the claimant might have agreed for settlement due to financial compulsions and commercial pressure or economic duress, the decision was his free choice. There was no threat, coercion or compulsion by the respondent. Therefore, the accord and satisfaction is binding and valid and there cannot be any subsequent claim or reference to arbitration.?


14. In the present case, as stated above, there were series of discussion between the parties and thereafter against total claim of Rs.48,38,749=00 towards liquidated damages while while preparing final bill, it was agreed that a sum of Rs.23,79,174=00 deducted towards liquidated damages, shall be refunded to the petitioner and that the petitioner shall forgo his claim and/or withdraw his claim for Rs.24,59,575=00. The petitioner confirmed the above. That thereafter, a draft settlement agreement was sent to the petiti

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oner and the petitioner was also called upon to make suggestion/modification, if any. The petitioner agreed to the said draft settlement agreement without any modification and without any objection and agreed to accept Rs.23,79,174=00 and to withdraw claim of Rs.24,59,575=00. Thus, it cannot be said that the agreement by the petitioner to accept Rs.23,79,174=00 only and to withdraw claim of Rs.24,59,575=00 was under coercion or undue influence. Under the circumstances, when the petitioner agreed to accept Rs.23,79,174=00 towards full and final settlement and agreed to withdraw/forgo claim of Rs.24,59,575=00, and issued receipt/voucher towards full and final settlement, thereafter the claim of Rs.24,59,575=00 cannot be said to be arbitrable, as observed by the Hon'ble Supreme Court in the aforesaid decision. Therefore, the present petition for appointment of arbitrator with respect to claim of Rs.24,59,575=00 is held to be not arbitrable and therefore, the same is not required to be referred to the arbitrator. 15. In view of the above and for the reasons stated above, present petition deserves to be dismissed and is accordingly dismissed. Notice is discharged. In the facts and circumstances of the case, there shall be no order as to costs.
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