2019 (11) TMI 717 - SC - Indian Laws

Arbitration Petition - appointment as a sole arbitrator - Section 11(6) of the Arbitration and Conciliation Act, 1996 - whether on the date of presentation of Arbitration Petition, purportedly by SDJV through SSPPL on 15.12.2016, the arbitration agreement posited in Contract Agreement dated 09.03.2006 was in existence or subsisting and in force? - HELD THAT - In the present case, however, in due course, because of fortuitous situation, the parties had to agree to amend certain terms and conditions of the Contract Agreement and to provide for revised contract rates. That was done after due negotiations, as is evinced from the correspondence exchanged between SDJV and WAPCOSL vide letters dated 15.09.2011 and 17.09.2012 and the recitals of the AoA itself. Finally, the parties (SDJV and WAPCOSL in particular) executed a formal Amendment of Agreement (AoA) on 09.06.2015. It is pertinent to note that the execution of stated AoA has not been disputed by SDJV or for that matter by SSPPL. More so, these entities have not even challenged the implementation of AoA. On the other hand, it has come on record that all concerned gave effect to the terms set out in AoA by offering revised rates to SDJV in conformity with the agreed rates referred to in AoA and which payment was received and availed of by SDJV/SSPPL without any demur. Whether the AoA has the effect of undoing and abrogating the arbitration clause predicated in the Contract Agreement? - HELD THAT - It is not unknown in commercial world that the parties amend original contract and even give up their claims under the subsisting agreement. The case on hand is one such case where the parties consciously and with full understanding executed AoA whereby the contractor gave up all his claims and consented to the new arrangement specified in AoA including that there will be no arbitration for the settlement of any claims by the contractor in future. Having chosen to adopt that path, it is not open to the contractor to now take recourse to arbitration process or to resurrect the claim which has been resolved in terms of the amended agreement, after availing of steep revision of rates being condition precedent. The impugned judgment of the High Court is set aside - Appeal allowed.

Summary

Issues Involved:
1. Existence and subsistence of the arbitration agreement.
2. Validity of the arbitration petition filed by SSPPL on behalf of SDJV.

Detailed Analysis:

1. Existence and Subsistence of the Arbitration Agreement:

The Supreme Court examined whether the arbitration agreement in the Contract Agreement dated 09.03.2006 was still in force when the arbitration petition was filed on 15.12.2016. The court noted that the parties had executed an Amendment of Agreement (AoA) on 09.06.2015, which included revised rates and terms. The AoA explicitly stated that all pending claims of the contractor "stand buried" and there would be "no arbitration" for the settlement of claims. This was a critical point as it indicated that the arbitration clause in the original Contract Agreement had been overridden by the AoA.

The court emphasized that the AoA was executed after substantial completion of the project and included a steep revision of rates, which was a condition precedent. The court concluded that the terms of the AoA were unambiguous and intended to supersede the arbitration agreement in the original Contract Agreement. Thus, the arbitration agreement was no longer in existence or force when the arbitration petition was filed.

2. Validity of the Arbitration Petition Filed by SSPPL on Behalf of SDJV:

The court also examined whether the arbitration petition filed by SSPPL on behalf of SDJV was valid, given that AIL had revoked the Power of Attorney (PoA) granted to SSPPL. The court noted that AIL had informed WAPCOSL and the respective banks about the revocation of SSPPL's authority before the arbitration petition was filed. Despite this, SSPPL unilaterally appointed an arbitrator and filed the arbitration petition.

The court found that the High Court had incorrectly assumed that the AoA was executed in 2005 instead of 2015, leading to an erroneous conclusion. The court clarified that the AoA was executed in 2015, by which time 97% of the project was completed, and the project was inaugurated in 2016. The court held that the arbitration petition was not maintainable as the arbitration agreement had been annulled by the AoA, and SSPPL had no authority to file the petition on behalf of SDJV after the revocation of the PoA by AIL.

Conclusion:

The Supreme Court set aside the judgment of the High Court, which had allowed the arbitration petition and appointed a sole arbitrator. The court dismissed the arbitration petition filed by SSPPL on behalf of SDJV, stating that the arbitration agreement was no longer in existence or force, and SSPPL had no authority to file the petition. The court allowed the parties to pursue other remedies in accordance with the law. The appeals were allowed with no order as to costs, and all pending applications were disposed of.