Full Judgment
.* IN THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: April 21, 2014 + ARB.P. No.424/2012 ESSAR PROJECTS (INDIA) LTD & ORS ..... Petitioners Through Mr.Sandeep Sethi, Sr. Adv. with Mr.Umang Gupta, Adv. versus GAIL (INDIA) LTD Through ..... Respondent Mr.Ramji Srinivasan, Sr. Adv. with Ms.Ranjana Gawai and Mr.Shailesh Suman, Advs. CORAM: HON'BLE MR.JUSTICE MANMOHAN SINGH MANMOHAN SINGH, J.
1. By this order I propose to decide the present petition filed by the petitioners under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of Arbitral Tribunal to adjudicate all disputes between the parties in terms of Clause 59 of the Contract dated 24 th December, 2008 (hereinafter referred to as “the Contract”). Petitioners’ Case 2. The case of the petitioners is that the petitioners Consortium (the Contractor) and respondent (the Employer) entered into the Contract for laying, testing and commissioning of Vijaipur-Dadri Pipeline Section and Associated Facilities (Section-C) for Vijaipur-Dadri-Bawana Pipeline Project of the respondent that was awarded to the consortium on 12 th September, 2008.
3. It is submitted by the petitioners that while the petitioners consortium has duly fulfilled its obligations under the contract, the respondent and its consultant Engineers India Ltd. (EIL) failed to duly fulfil its obligations. As a result, there was delay in completion of the project for reasons wholly attributable to the respondent and its consultant, due to which the petitioners have suffered a huge loss for which they have unjustly not been compensated by the respondent despite several requests, representations and reminders. As a result, disputes have arisen between the petitioners/contractor and the respondent/employer that can be resolved only through arbitration as agreed by the parties in the said contract dated 24th December, 2008. 3.1 There were numerous reasons for the inordinate delay in completion of the contract including but not limited to Release of Right of Use (ROU) by the respondent being discontinuous and beyond grace period; frequent interferences and work stoppages by land owners for various reasons attributable to the employer/respondent and its consultant. 3.2 The petitioners had to maintain resources beyond the contractual completion date to complete the works in all respects and for doing the same the petitioners had to incur additional costs. 3.3 While asking for extension of time for completion of the said contract, the petitioners also sought for extended stay compensation vide letter dated 14.07.2010 wherein it clearly highlighted that due to the delay in RoU release for which the employer/consultant were solely responsible, the petitioners were entitled to invoke Clause 42.0 of the Special Conditions of the Contract (SCC). 3.4 Vide letter dated 12th April, 2011, the petitioners again raised its legitimate claim for extended stay compensation under clause 42 of the SCC wherein it clearly demonstrated its eligibility for extended stay compensation by highlighting the non-fulfilment of numerous contractual obligations on part of the respondent and its consultant resulting in delay of completion of the said contract.
4. It is alleged that the petitioners’ legitimate claim for compensation by letter dated 12th April, 2011 was not considered favourably by the Engineerin-Charge (EIC), who by letter dated 23rd April, 2011 unjustifiably alleged contributory delay on part of both parties whereas it was amply clear that the delay in completion of the contract dated 24th December, 2008 was caused due to reasons that were wholly attributable to the respondent and its consultant. The rejection by the EIC by letter dated 23 rd April, 2011 is wholly illegal, contrary to the terms of the contract, unsustainable and unjustified.
5. It is averred that the respondent misused its dominant position and along with its consultant threatened to withhold payment of the undisputed amount of Rs.11,08,83,385/- for work done by the petitioners under the said contract along with retention money for a sum of Rs.19,69,72,667/- whilst further threatening to withhold the release of the performance bank guarantees furnished by the petitioners under the contract unless the petitioners agreed in writing that there was concurrent delay on its part and issue No-Claim Certificate and a No-Dues Certificate.
6. In view of the aforesaid threat, the petitioners in order to get the undisputed amount of Rs.11,08,83,385/- for work done under the contract and to secure the release of the bank guarantees and the retention money was coerced to take the following steps: (i) Issue letter dated 18th May, 2011 seeking extension of the contract at least till 17th January, 2011 without any penalties and reductions and without any financial implications. The petitioners were forced to aver in the said letter that there were concurrent delays on either side for completion of the project work. (ii) To issue a No-Claim Certificate and a No-Dues Certificate dated 18th May, 2011 even though it had further claims in the form of Extended Stay Compensation and retention money. (iii) Submit Bill No.STG-ECIL/VDPL/SECTION-C/FINAL BILL dated 30th March, 2011 for Rs.11,08,83,385/- under the cover of letter dated 20th May, 2011 on 26th May, 2011 that only included payment for the work done by the petitioners under the contract and not claim for extended stay compensation of Rs.33,53,15,996/- and retention money for a sum of Rs.19,69,72,667/-.
7. It is submitted by the petitioners that under duress forwarded the above mentioned final bill to the consultant for the work completed by it under the contract. The said bill as raised by the petitioners did not include the sum of Rs.19,69,72,667/- towards retention money and the legitimate claims of the petitioners.
8. The petitioners submit that the aforesaid certificate were issued as a result of the undue influence and relentless pressure exercised by the respondent and its consultant by misusing their dominant position under the said contract as alleged by the petitioners. 8.1 By e-mail dated 8th July, 2011, the respondent through the consultant again coerced the petitioners to specifically withdraw its claims for extended stay compensation raised vide the letter dated 12th April, 2011 in order to secure its other legitimate dues arising from fulfilment of the terms and conditions of the contract including release of the performance bank guarantees furnished by the petitioners. 8.2 The petitioners, under duress, was left with no option but to withdraw its legitimate and genuine claims for extended stay compensation vide letter dated 8th July, 2011 in order to secure atleast the undisputed amount due and payable by the respondent along with the retention money and to further secure release of its bank guarantees. 8.3 Pursuant to coercing the petitioners to withdraw its legitimate claim for extended stay compensation, the respondent upon completion of the contract paid only Rs.27,21,46,148/- to the petitioners in two parts i.e. the above-mentioned ADHOC payment of Rs.8,43,06,716/- on 16th June, 2011 and balance of Rs.18,78,39,422/- on 8th August, 2011 whilst further retaining a sum of Rs.3,57,09,904/-. In light of the illegal conduct of the respondent, the petitioners had no option but to wait for the respondent to make the payment for a sum of Rs.3,57,09,904/- as retained by the respondent while making the inadequate payment of Rs.18,78,39,422/- on 8th May, 2011 and to further wait for release of the petitioners’ bank guarantee, before reiterating its claim for extended stay compensation. After numerous efforts made by the petitioners, the respondent finally released the bank guarantees furnished by the petitioners under the contract on 26th March, 2012. Once the bank guarantees were released on 26th March, 2012 and the retention money was paid, the petitioners reiterated the demand for payment of extended stay compensation. 8.4 The respondent refused to even consider payment of extended stay compensation. Therefore, in order to legitimately claim the amount for extended stay compensation and to settle other disputes between the parties, the petitioners was left with no option but to issue notice dated 25 th May, 2012, inter alia, invoking the arbitration clause at Clause 59 of the Special Conditions of the Contract which form part of the contract.
9. It is alleged in the petition filed before this Court that the petitioners are legally entitled to an amount of Rs.33,53,15,996/- towards extended stay compensation but the respondent had misused its dominant position to coerce the petitioners to give No Claim and No Dues Certificates under duress along with the withdrawal letter dated 8th July, 2011. Respondent’s Case 10. The respondent has filed its reply. The main contention of the respondent is that the contract dated 24th December, 2008 entered into between the parties stood completely discharged by the performance of respective obligations by the parties. between the parties. There are no arbitrable disputes The present petition filed by the petitioners is misconceived, frivolous and baseless.
11. It is submitted by the respondent that there was full and final settlement of all claims with respect to contract dated 24 th December, 2008 resulting in discharge by accord and satisfaction which is also evident from (i) issuance of ‘No Claim & No Dues Certificates’ dated 18th May, 2012 by the petitioners/contractor, (ii) issuance of Completion Certificate by respondent/GAIL, (iii) receipt of part payment of Rs.8,43,06,716/- under Final Bill dated 30th March, 2011 (revised on 26th May, 2011) made on 16th June, 2011, (iv) voluntarily and unconditionally withdrawal of claim for the extended stay compensation by the petitioners/contractor vide its letter dated 8th July, 2011 and (v) receipt of balance payment of Rs.18,78,39,422/- as per final bill (revised on 26th May, 2011). As such upon 8th August, 2011, the contract dated 24th December, 2008 stood closed and all claims and issues between the parties came to an end. Arb.A. No.424/2012 intention to extort money from the respondent is now falsely alleging that the said voluntarily and unconditional withdrawal of ESC was under coercion and duress and maliciously seeking to reopen the contract dated 24th December, 2008 which is impermissible. As such the present application is liable to be dismissed.
12. It is alleged that after voluntarily issuing ‘No Claim & No Dues Certificates” dated 18th May, 2011, the petitioners is falsely alleging that the same were issued under undue influence and pressure by the respondent and its consultant. The inference sought to be drawn by the respondent that since the said ‘No Claim & No Dues Certificates dated 18 th May, 2011 and also Completion Certificate dated 25th May, 2011 were issued before final bill dated 30th March, 2011 (revised on 25th May, 2011) were raised, the said ‘No Claim & No Dues Certificates dated 18th May, 2011 was issued under undue influence and pressure is false and incorrect. There remains no arbitrable dispute between the parties once ‘No Claim & No Cues Certificates dated 18th May, 2011 was issued voluntarily by the contractor and by merely alleging duress and coercion the contractor seeks to reopen a contract which already stood discharged. It is submitted that whether the issuance of ‘No Claim & No Dues Certificates dated 18 th May, 2011 and withdrawal of ESC were voluntary or under coercion as alleged by the petitioners are not arbitrable disputes under the contract and as such the present application is liable to be dismissed.
13. The learned counsel appearing on behalf of the respondent has not disputed the law that after issuance of No Claim Certificate or No Due Certificate by a contractor and completion of the contract work, the contractor cannot be barred from raising its claims. However, is contention is that while pressing the prayer for referring the disputes to the Arbitrator, the petitioners prima facie has to establish before Court that the disputes raised by the petitioners are bonafide and genuine. Mere the bald plea of fraud, coercion, duress or undue influence is not enough to a party for seeking prayer of appointment of arbitrator. The said party has to prima facie establish the same by placing the material before the Court. His submission is that in case the conduct of the petitioners is seen in a meaningful manner, it is apparent on the face of it that the dispute raised by the petitioners is not bonafide and genuine and there is no material placed on record by the petitioners before this Court to show that the plea of fraud, coercion, duress and undue influence is genuine. It is merely a bald plea. Therefore, despite of settled law on this aspect, the dispute raised by the petitioners cannot be referred for arbitration.
14. Let me now consider the rival submissions of the parties.
15. The petitioners have not disputed the fact that in the present case the petitioner had issued No Claim and No Due Certificates to the respondent who issued the completion Certificate. The petitioners in its letter and claim dated 12th April, 2011 raised contentions for Extended Stay Compensation (hereinafter referred to as “ESC”). The same was replied by the respondent by letter dated 23rd April, 2011 wherein it was clarified by the respondent that the petitioners ESC was not tenable in terms of the contract dated 24 th December, 2008. The said claim is only entertainable under Clause 42 when the reasons for the delay are “solely attributable to Employer/Consultant”.
16. It is not disputed by the learned counsel for the petitioners that at the time of sending the final bill, the claim of ESC was not included. The relevant extracts of the said letter dated 23rd April, 2011 is reproduced as under:
“The above reaffirms the fact that M/s STG-ECIL on their part had delayed all the back and activities, completion of which were vital for completing the restoration and in this respect please refer to earlier EIL letter no.EIN/6921/303/03/164 Dated 31.08.2010 vide which M/s STG ECIL were informed about non completion of restoration even five months beyond ACHIEVING COMMISSIONG between IP3 to IP4 As per the clause no.42.0 of SCC, Extended stay claim IS TENABLE ONLY for the delay solely attributable to the owner and from the above fact it is evident that the date from which M/s STG-ECIL have put forward the claim, there were many deliverable delayed mainly on account of delayed/inadequate mobilisation by M/s STG-ECIL. Further, M/s STG-ECIL had progressively demobilised the manpower and machinery without any prior permission from GAIL/EIL except for the auto welding unit. As regards to the station works, not barring the initial delay of plot handing over for IP4 the delay in procurement of the piping materials in scope of M/s STG ECIL were also delayed and the work could commence from second week of August 2009 and delay is recorded in the overall completion of all the station works including civil, electrical and instrumentation. Summarising the above, there are major contributing factors in terms of delayed/inadequate mobilisation of machinery and manpower by M/s STG-ECIL which had a cascading effect on the overall completion of the project and had also posed major hindrances for opening new ROU. As explained above, the claim for extended stay compensation put forth by M/s STG-ECIL is not tenable and under the above circumstances M/s STG-ECIL is also advised to explain the Non Tenability of the PRS requested by M/s STG-ECIL vide letter no STG-ECIL/VDPL/Section-A/EIL/046 dated 12th April, 2011, MCEDS recovery on account of the already demobilised machinery during the course of pipeline construction from Ch 478 to 497 and reasons to exempt back charging of the additional financial burden incurred by client on account of additional crop compensation.”
17. After the receipt of the letter dated 23rd April, 2011, the petitioners issued a letter dated 18th May, 2011. The relevant extract of the letter dated 18th May, 2011 reads as under:
“In continuation to our previous correspondences, your reply thereto, vides letters referred as above, we wish to clarify that the additional crop compensation incurred by GAIL was a result of hindrances from villagers who had issues pertaining to delayed/lesser compensations. There was inordinate delay in disbursement of compensation to villagers hence they had hindered all the activities frequently. Thus, the additional crop burden of GAIL cannot be attributed to the contractor. It is well known that GAIL had sought intervention from Local Commissioner administration to mitigate issues of villagers. Due to stiff resistance from villagers, RoU, this is a sole obligation of GAIL/EIL, from Ch.471 to Dadri receipt terminal was provided beyond the contractual completion date i.e. 11.09.2009. As asked, to explain the non tenability of PRS, we feel that the reasons provided in our earlier letter for time extension till 17 th January, 2011 are very well justified to withstand our request to grant time extension without any levy of PRS/penalties and reductions. It is observed that there was a concurrent delay on either side which has, consequently delayed the completion of project work and hence the Contractor sincerely requests for extension of Contract duration at least till January 17 th 2011 without any penalties and reductions (vide Cl 27, Cl 62 and MCEDS) and without any financial implication on either side and assist in closing out formalities of the Contract.”
18. On the same date i.e. 18th May, 2011, the petitioners issued the No Claim Certificate and No Dues Certificate. The contents of the same are reproduced as under:
“NO CLAIM CERTIFICATE …. This is to certify that we don’t have any claim of whatsoever nature except the balance dues against the final bill. We further certify that the payment certified against this bill shall be full and final settlement of work executed against the subject contract.”
NO DUES CERTIFICATE …. We do hereby certify that we have paid and satisfied all dues and claims for the work of labourers. Materials supplied equipment and all other entitlement whatever touching or affecting the contract. We undertake to indemnify and to keep indemnified the Owner from and against all claims, demands, liens, obligations and liabilities whatever arising there from and relating thereto.”
19. On issuance of No Claim Certificate and No Dues Certificate, the petitioners sent a letter dated 20th May, 2011 along with the final bill dated 30th March, 2011 with a gross amount of Rs.23,95,53,775/-. The completion certificate thereafter was issued by the respondent on 25th May, 2011. The contents of the same read as under:
“COMPLETION CERTIFICATE ….This is certify that the agency has performed all its obligations under the contract.”
20. Petitioners vide its letter dated 8th July, 2011 withdraw their claim for ESC in which it was expressly agreed for recovery against pipes/materials provided by respondent and have specifically withdrawn the claim ESC without any condition. The contents of the same read as under:
“As conveyed through email dated 08.07.2011 from M/s EIL, please find herewith our reply to your queries pertaining to the contract closure:
1. Confirmation towards withdrawal of extra claim raised vide letter STG-ECIL/VDPL/NOIDA/EIL/047 dated 12.04.2011. STG-ECIL reply. With reference to your email, in order to facilitate expeditious closure of contract, we hereby confirm withdrawal of our extra claim towards extended stay compensation for section C.M. No.2. Please refer to the retention made towards the PENDING RETURN OF48