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TMI Blog2023 (4) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... KS INDIA PVT. LTD. [ 2021 (3) TMI 447 - SUPREME COURT ] and Secunderabad Cantonment Board v. B. Ramachandraiah Sons [ 2021 (3) TMI 612 - SUPREME COURT] , arbitration was refused as the claims of the parties were demonstrably time-barred. The allegations of coercion and economic duress are not bona fide, and that there were no pending claims between the parties for submission to arbitration. The Respondent s claim fits in the description of an attempt to initiate ex facie meritless, frivolous and dishonest litigation - There were no allegations of coercion or economic duress compelling SPML to withdraw any pending claims under the subject contract as a condition for the return of the Bank Guarantees. On the contrary, the only allegation by SPML was with respect to NTPC s illegal action of interlinking the release of the Bank Guarantees with some other contracts. This was precisely the argument before the High Court, and, in fact, this submission is recorded by the High Court while issuing notice and injuncting NTPC. This fact clearly indicates that the plea of coercion and economic duress leading to the Settlement Agreement is an afterthought. This is a case where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e however withheld. 5. On 14.05.2019, NTPC informed SPML that the Bank Guarantees were withheld on account of pending liabilities and disputes between the parties with respect to other projects at Bongaigon, Barh, and Korba. SPML naturally protested. By its letter dated 15.05.2019, SPML informed NTPC that the retention of Bank Guarantees, despite issuance of the Completion Certificate and the No-Demand Certificate, by linking them to some other projects, was unjustified. Following the protest, SPML raised a demand of Rs. 72,01,53,899/- from NTPC as liabilities recoverable for actions attributable to NTPC under this very contract. 6. By its letter dated 12.06.2019, SPML called upon NTPC to appoint an Adjudicator for resolving pending disputes in terms of the General and Special Conditions of Contract. As no action was taken by NTPC, SPML moved the Delhi High Court by filing Writ Petition No. 7213 of 2019 under Article 226 of the Constitution, for the release of the Bank Guarantees. The prayer in the Writ Petition is to: (a) Pass an appropriate Writ, Order or Direction quashing the e-mail dated 14.05.2019 issued by the Respondent insofar as it pertains to the release of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. 11. In its reply to the Arbitration Petition, NTPC raised two-fold objections. Firstly, that SPML failed to follow the mandatory pre-arbitration procedure of first referring the disputes to an Adjudicator as per the terms of the Dispute Resolution Clause. Dispute resolution was provided under clause 6.1 of the General Conditions of Contract and clause 3 of Special Conditions of Contract; hereinafter the Dispute Resolution Clause ; Clause 6.1 of the General Conditions of Contract is as under: 6. Settlement of Disputes 6.1 Adjudicator 6.1.1 If any dispute of any kind whatsoever shall arise between the Employer and the Contractor in connection with or arising out of the Contract, including without prejudice to the generality of the foregoing, any question regarding its existence, validity or termination, or the execution of the Facilities- whether during the progress of the Facilities or after their completion and whether before or after the termination, abandonment or breach of the Contract- the parties shall seek to resolve any such dispute or difference by mutual consultation. If the parties fail to resolve such a dispute or difference by mutual con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed the Arbitration Petition. It appointed a former Judge of the Delhi High Court as the Arbitrator on behalf of NTPC, and directed the respective arbitrators to appoint the presiding Arbitrator. 14. Submissions by the Parties: Shri Adarsh Tripathi, Advocate appearing with and on behalf of the Solicitor General, for NTPC, submitted that the Settlement Agreement dated 27.05.2020 was arrived at during the pendency of the Writ Petition before the High Court. The allegations of coercion and economic duress were, therefore, false and unbelievable. He also submitted that SPML never raised claims during the subsistence of the contract, before the Completion Certificate was issued, or even before the final payment was made. Further, the conduct of SPML, in waiting for the release of the Bank Guarantees as per the Settlement Agreement before withdrawing the Writ Petition, and thereafter instituting the Arbitration Petition, clearly demonstrated that the allegation of coercion was not bona fide. Finally, he submitted that the High Court was under an obligation to undertake a limited scrutiny to examine whether a matter is prima facie arbitrable. For this purpose, he relied on a recent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olute kind. In a case where the claimant contends that a discharge voucher or no-claim certificate has been obtained by fraud, coercion, duress or undue influence and the other side contests the correctness thereof, the Chief Justice/his designate must look into this aspect to find out at least, prima facie, whether or not the dispute is bona fide and genuine. Where the dispute raised by the claimant with regard to validity of the discharge voucher or no-claim certificate or settlement agreement, prima facie, appears to be lacking in credibility, there may not be a necessity to refer the dispute for arbitration at all. observed that when the validity of a discharge voucher, no-claim certificate or a settlement agreement is in dispute, the court must prima facie examine the credibility of the allegations before referring the parties to arbitration. Yet again in New India Assurance Co. Ltd. v. Genus Power Infrastructure Ltd. (2015) 2 SCC 424: 10. In our considered view, the plea raised by the respondent is bereft of any details and particulars, and cannot be anything but a bald assertion. Given the fact that there was no protest or demur raised around the time or soon after the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rotest and claim being finally settled with accord and satisfaction and after 11 weeks of the settlement of claim a letter was sent on 27-7-2016 for the first time raising a voice in the form of protest that the discharge voucher was signed under undue influence and coercion with no supportive prima facie evidence being placed on record in absence thereof, it must follow that the claim had been settled with accord and satisfaction leaving no arbitral dispute subsisting under the agreement to be referred to the arbitrator for adjudication. 22. In our considered view, the High Court has committed a manifest error in passing the impugned order and adopting a mechanical process in appointing the arbitrator without any supportive evidence on record to prima facie substantiate that an arbitral dispute subsisted under the agreement which needed to be referred to the arbitrator for adjudication. , this Court had nevertheless accepted an objection of accord and satisfaction in opposition to an application for reference to arbitration. 21. It did not take much time for this Court to reverse the approach in Antique Art Exports (supra). A three-judge bench in Mayavati Trading (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competence-competence, is that the Arbitral Tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. The court has been conferred power of second look on aspects of non-arbitrability post the award in terms of sub-clauses (i), (ii) or (iv) of Section 34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration Act. 154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny. The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably non-arbitrable and to cut off the deadwood. The court by default would refer the matter when contentions relating to non-arbitrability are plainly arguable; when consideration in summary proceedings would be insufficient and inconclusive; when facts are contested; when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facie review while remaining conscious that it is to assist the arbitration procedure and not usurp jurisdiction of the Arbitral Tribunal. Undertaking a detailed full review or a long-drawn review at the referral stage would obstruct and cause delay undermining the integrity and efficacy of arbitration as a dispute resolution mechanism. Conversely, if the court becomes too reluctant to intervene, it may undermine effectiveness of both the arbitration and the court. There are certain cases where the prima facie examination may require a deeper consideration. The court s challenge is to find the right amount of and the context when it would examine the prima facie case or exercise restraint. The legal order needs a right balance between avoiding arbitration obstructing tactics at referral stage and protecting parties from being forced to arbitrate when the matter is clearly non-arbitrable. 140. Accordingly, when it appears that prima facie review would be inconclusive, or on consideration inadequate as it requires detailed examination, the matter should be left for final determination by the Arbitral Tribunal selected by the parties by consent. The underlying rationale being no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the rule, and rarely as a demurrer, the referral court may reject claims which are manifestly and ex-facie non-arbitrable Vidya Drolia supra note 7, para 154.4. . Explaining this position, flowing from the principles laid down in Vidya Drolia (supra), this Court in a subsequent decision in Nortel Networks (supra) held Nortel Networks supra note 22, para 45.1. : 45.1 ...While exercising jurisdiction under Section 11 as the judicial forum, the court may exercise the prima facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation. Limited jurisdiction of the courts would ensure expeditious and efficient disposal at the referral stage. At the referral stage, the Court can interfere only when it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute... 27. The standard of scrutiny to examine the non-arbitrability of a claim is only prima facie. Referral courts must not undertake a full review of the contested facts; they must only be confined to a primary first review Vidya Drolia supra note 7, para 134 and let facts speak for themselves. This also requires the courts to examine whether the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are certain disputes between the parties with respect to other projects. 33. Objecting to the stand of NTPC by its letter dated 15.05.2019, SPML stated that linking the Bank Guarantees with claims under other projects was unjustified. In turn, SPML raised a claim of Rs. 72,01,53,899/- against NTPC. At the same time, SPML also sought the appointment of an Adjudicator to settle these claims. 34. It is in the above-referred context that SPML filed the Writ Petition before the High Court on 03.07.2019. The prayer in the Writ Petition, particularly in the context of the huge claim raised on 15.05.2019, assumes importance. The prayer is reproduced herein below for ready reference: (a) Pass an appropriate Writ, Order or Direction quashing the e-mail dated 14.05.2019 issued by the Respondent insofar as it pertains to the release of the Bank Guarantees being (a)0040ILG002609, (b) 0040ILG001109, (c)0040ILG001209, (d) 0040ILG001309 and direct the Respondent to release the aforesaid Bank Guarantees forthwith, ... 35. There is no reference to the claim of Rs.72,01,53,899/- in the body or the Prayer of the Writ Petition. Conspicuously, the Writ Petition is confined to seeking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial or quasi-judicial forum. 3. That the Agency has confirmed it has received entire payments arising out of the present contract and the same stands closed, and no further sum/money is payable to the Agency in any manner whatsoever by NTPC Ltd. under the subject contract. 5. That NTPC Ltd. has further agreed not to raise any contempt proceedings against the Agency for not keeping alive the BGs as directed by the Hon ble High Court of Delhi in pending Writ Petition. 39. In compliance with the Settlement Agreement, NTPC released the Bank Guarantees on 30.06.2020, which were the subject matter of the pending Writ Petition. 40. It is noteworthy that the Bank Guarantees expired on 19.11.2019 and 16.12.2019, despite the specific direction by the High Court to SPML to keep its Bank Guarantees alive. However, in compliance with its express undertaking in the Settlement Agreement, NTPC did not file any contempt proceedings against SPML. 41. Following the release of the Bank Guarantees as per the Settlement Agreement, SPML withdrew the Writ Petition, as recorded by the High Court in its Order dated 21.09.2020. 42. One month later, on 10.10.2020, SPML filed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m order, when SPML had complete protection of the Court, that the parties entered into the Settlement Agreement. This agreement was comprehensive. It inter alia provided for (i) the release of Bank Guarantees by NTPC, (ii) the withdrawal of SPML s Writ Petition, (iii) restraining NTPC from filing contempt proceedings against SPML for letting the Bank Guarantees expire, and finally, (iv) restraining SPML from initiating any proceedings under the subject contract, including arbitration. The Settlement Agreement also recorded that there were no subsisting issues pending between the parties. 47. The plea of coercion and economic duress must be seen in the context of the execution of the Settlement Agreement not being disputed, and its implementation leading to the release of the Bank Guarantees on 30.06.2020 also not being disputed. Almost three weeks after the release of the Bank Guarantees, a letter of repudiation was issued by SPML on 22.07.2020. This letter was issued about two months after the Settlement Agreement was executed and in fact during the subsistence of the Writ Petition. After reaping the benefits of the Settlement Agreement, the Writ Petition was withdrawn on 21.09 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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