2016 (1) TMI 1512 - HC - Indian Laws

Appointment of arbitrator/arbitrators - application is filed by the defendant under Section 8 of the Arbitration and Conciliation Act, 1996 to refer the disputes as stated in the present plaint to arbitration - basic contention of the plaintiff is that there is no subsisting dispute between the parties in view of the admissions made by the defendant and also in view of the No Objection Certificate from the sales tax authorities now produced by the plaintiff - HELD THAT - The case of CAPTAIN AMAR BHATIA VERSUS THE KINGFISHER AIRLINES LIMITED 2014 (4) TMI 1312 - DELHI HIGH COURT pertained to a case where a former employee of the defendant had filed for recovery of the dues. A plea of Section 8 of the Arbitration Act was raised in the leave to defend application claiming that this is sufficient to refer the parties to arbitration. In that background, this court held 'There is thus really no dispute for adjudication by arbitration. I see no reason to deny to the plaintiff in this suit the relief of recovery of money which admittedly is due to the plaintiff and the chances of recovery whereof, even if a decree were to be passed in favour of the plaintiff, are remote and to compel the plaintiff to spend more monies in invoking the arbitration clause when there is really nothing for arbitration. Without thus intending this to be precedent, in the facts and circumstances of the present case, I reject said argument also of the defendant.' Similarly, in Maruti Udyog Ltd. vs. Mahalaxmi Motors Ltd. and Anr., 2001 (12) TMI 907 - DELHI HIGH COURT , the learned Single Judge of this Court on an application under Section 8 of the Arbitration Act held that where a liability is admitted, there are no disputes or differences with regard to the admitted liability. In the absence of any dispute or differences, the application under Section 8 of the Arbitration Act cannot be allowed. In the light of the pronouncements of the Hon'ble Supreme Court and of this High Court, it is clear that when no disputes exist between the parties, namely, what is claimed by the plaintiff is admitted by the defendant or impliedly admitted by the defendant, the same cannot be a subject matter of arbitration proceedings. The reasons for this are quite obvious. Courts would normally frown upon frivolous and meaningless litigation between the parties when the facts on the face of it shows that there is no scope for any adjudication left. On mere technicalities and technical objections, it would be futile to let the present dispute between the parties continue. The defendant which is a public sector undertaking under the control of Union of India cannot be permitted to continue to prolong the agony of the plaintiff on highly technical grounds. The purchase order and work order are of 08.05.2002. Final acceptance certificate has been issued on 23.10.2007. 8 years have thereafter gone by and final instalment payable to the plaintiff is being withheld on meaningless technical issues. There are now no pending disputes between the parties. No dispute exists to refer the parties to Arbitration. The present application of the defendant is dismissed.

Summary

Issues Involved:

1. Application of Section 8 of the Arbitration and Conciliation Act, 1996.
2. Existence of disputes warranting arbitration.
3. Admission of liability by the defendant.
4. Compliance with contractual obligations, specifically Clause 7.1 of the Special Conditions of Contract.

Issue-wise Detailed Analysis:

1. Application of Section 8 of the Arbitration and Conciliation Act, 1996:

The defendant filed an application under Section 8 of the Arbitration and Conciliation Act, 1996, seeking to refer the disputes to arbitration. Section 8 mandates that if an action is brought before a judicial authority in a matter covered by an arbitration agreement, the court must refer the parties to arbitration. The court examined precedents, including Hindustan Petroleum Corpn. Ltd. vs. Pinkcity Midway Petroleums, which emphasize that the language of Section 8 is peremptory, requiring courts to refer disputes to arbitration if an arbitration clause exists. However, the court also considered Booz Allen and Hamilton Inc. vs. SBI Homes Finance Ltd., which clarified that courts must ascertain the arbitrability of disputes before referring them to arbitration.

2. Existence of Disputes Warranting Arbitration:

The plaintiff contended that no disputes existed, as the defendant had issued a Final Acceptance Certificate and discharged performance bank guarantees, indicating acceptance of the work. The plaintiff argued that the defendant's admissions and the No Objection Certificate (NOC) from the sales tax authority further confirmed the absence of disputes. The court noted that where there is no denial or dispute, as in Captain Amar Bhatia vs. The Kingfisher Airlines Ltd., arbitration is unnecessary. The court concluded that no meaningful dispute existed between the parties, rendering arbitration inappropriate.

3. Admission of Liability by the Defendant:

The plaintiff claimed that the defendant had admitted liability for the dues through letters dated 01.11.2011 and 09.01.2012. The defendant refuted these admissions, arguing that the officials who issued the letters lacked authority. The court, however, found that the defendant's objections did not negate the admissions on record, especially in light of the NOC provided by the plaintiff. The court held that the admissions, coupled with the absence of a substantive dispute, negated the need for arbitration.

4. Compliance with Contractual Obligations, Specifically Clause 7.1 of the Special Conditions of Contract:

The defendant argued that the plaintiff failed to comply with Clause 7.1, which required a no dues certificate from the sales tax authority before final payment. The plaintiff submitted an NOC dated 30.03.2015, certifying no sales tax arrears. The court accepted this NOC as fulfilling the contractual requirement, noting that the defendant did not provide substantial objections to its validity. Consequently, the court determined that the plaintiff had complied with its contractual obligations, and the defendant's withholding of payment was unjustified.

Conclusion:

The court dismissed the defendant's application under Section 8, finding no arbitrable disputes. It exercised powers under Order 12 Rule 6 CPC to pass a decree in favor of the plaintiff for Rs. 2,60,19,069, with 12% simple interest per annum from the date of filing until recovery. The court disallowed the plaintiff's claim for interest on delayed payment due to lack of submissions. The judgment emphasized the court's role in preventing frivolous litigation when no substantive disputes exist.