REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.                         OF 2019 (Arising out of SLP (C) No. 7979 of 2019)

WAPCOS Ltd.       ...Appellant(s)

Versus

Salma Dam Joint Venture & Anr.     …Respondent(s)

WITH

CIVIL APPEAL  NO.            OF  2019

(Arising out of SLP (C) No……….. of 2019) (Diary No. 6975 of 2019)

J U D G M E N T

A.M. Khanwilkar, J.

Leave granted.  

1. These  appeals take exception to the judgment  and  order

dated 25.01.2019 passed by the High Court of Delhi at New Delhi

in Arbitration Petition No.810 of 2016, whereby the High Court

allowed the Arbitration Petition purportedly filed by respondent

No. 1  ­  Salma Dam Joint  Venture,  under Section 11(6)  of the

Page 1 of 27

Arbitration and Conciliation Act, 1996 (for short, “the Act”) and

appointed a sole Arbitrator. 2. Briefly stated, the  Ministry  of  External  Affairs (for short,

“MEA”) and the appellant in the leading appeal, Water and Power

Consultancy Services (India) Limited (for short, “WAPCOSL”),   a

Public Sector Undertaking, entered into an agreement, dated

29.11.2004, for the implementation of the work on “the

Reconstruction, Rehabilitation and completion of Salma Dam

Project (3x14 MW), Afghanistan, Package III: Main Civil and

Hydro­Mechanical Works” (for short, “project”). The appellant

(WAPCOSL), was given the responsibility to provide financial,

administrative and contractual management services for the

MEA. Even though MEA was to provide the finances, the same

was to be channeled through WAPCOSL to the successful

awardee of the tender.

3. The respondent No.1 in both the appeals, Salma Dam Joint

Venture (for short, “SDJV”) was formed by the M/s SSJV Projects

Private Limited (for short, “SSPPL”) and M/s Angelique

International Ltd. (for short, “AIL”)   under a Joint Venture

Agreement (for short,  “JVA”) dated 09.09.2005 to submit its bid

for the said project. In accordance with the terms and clauses of

Page 2 of 27

the JVA, SSPPL was nominated to be the ‘Lead Partner’ of SDJV

with ninety­five percent (95%) share as compared to five percent

(5%) share of AIL. SSPPL was also authorized to invoke

arbitration by appointing an arbitrator, make claims, et cetera,

on behalf  of  AIL,  by executing  a Power  of  Attorney (for  short,

“PoA”) dated 09.09.2005 in favour of SSPPL, in accordance with

Clause 3.3 of the JVA.

4. SDJV was successful being the highest bidder and was

awarded tender for the said  project on  17.01.2006.  That  was

followed by a Contract Agreement dated 09.03.2006 (for short,

“Contract Agreement”) for executing the stated contract between

the WAPCOSL and SDJV. Along with the said agreement,

WAPCOSL and SDJV signed certain documents to be read with

the Contract Agreement and to form part and parcel thereof. Out

of several such documents, Conditions of Particular Applications

(for short “CoPA”) is the relevant one for the purpose of this case.

Clause  20.1 thereof  deals  with  Contractor’s claim and  Clause

20.6 deals  with Arbitration and  it is  under these clauses, the

respondent No. 1 has rested its case, that is, arbitrability and the

power to invoke arbitration.   5. Be that as it may, the consideration of the Contract

Page 3 of 27

Agreement was Rs. 253.84 Crores. However, the same was raised

to Rs. 470.40 Crores, on a representation made by SDJV.  Once

again, there was further change by way of revised rates, after a

meeting between SDJV and a High­Power Committee (for short,

“HPC”).   In the  said  meeting,  SDJV cited reasons which were

beyond its control for initiating timely construction of the project.

That justification  found  favour with the HPC for  which  it  had

recommended revised rates with regard to eight items. A letter

was sent by WAPCOSL, informing about the acceptance of revised

rates  of  eight items and raising the total  consideration  to  Rs.

872.67 Crores. Subsequent to this, SDJV and WAPCOSL signed a

revised agreement for the rates, referred to as the Amendment of

Agreement (for short, “AoA”), dated 09.06.2015.

6. Despite signing of AoA, SDJV raised certain claims before

the Engineer of WAPCOSL. After rejection of said representation,

SDJV preferred six appeals to the Technical Committee

constituted in terms of clause 2.1 of Section – 02 of AoA. Five of

these appeals were rejected/disposed of vide report of the

Technical Committee dated 28.10.2016.  

7. In the meantime, on 04.06.2016, the Dam was inaugurated

Page 4 of 27

by the Hon’ble Prime Minister of India and Hon’ble President of

Afghanistan. Subsequent to which, a letter dated 02.08.2016 was

issued by AIL addressed to WAPCOSL, informing that SDJV has

started the process of dismantling the machinery and the work

force from the project site with full awareness of WAPCOSL.

8. Subsequent to the execution of AoA, dispute arose between

the JV partners which resulted in AIL filing a petition (bearing

number  O.M.P. (I) (COMM.)  70/2016)  under  Section  9 of the

Arbitration Act, wherein the High Court of Delhi, vide order dated

05.09.2016, directed WAPCOSL to deposit the amount payable to

SDJV with the Registrar of the High Court in order to secure the

interests of both the JV entities. The High Court in a separate

petition (bearing number Arb. P. 442/2016), filed by AIL against

SSPPL, also appointed a sole arbitrator for their (AIL and SSPPL)

inter se disputes.  

9. On 21.09.2016,  the Board of  Directors of  AIL resolved to

revoke the PoA executed in favour of SSPPL and in furtherance of

the  same,  AIL, vide letters  dated  19.10.2016 and 11.11.2016,

wrote to the respective Banks and also to WAPCOSL informing

them about the revocation of the authority of SSPPL. Thus, it was

Page 5 of 27

duly notified through these letters that in future, only those

letters or communications which are signed or acknowledged by

both the parties (AIL and SSPPL) shall be valid and be

entertained by WAPCOSL.

10. Notwithstanding the abovementioned letters sent by AIL,

upon rejection of the claims of SDJV by the Technical Committee,

on 28.10.2016,  SSPPL,  unilaterally,  espousing claims of  SDJV

proceeded to invoke the arbitration process, under clause 20.6 of

CoPA and also appointed a nominee arbitrator, vide letter dated

12.11.2016. WAPCOSL, in response, vide letter dated

05.12.2016, recorded that since SDJV is a joint venture entity

and the authority of SSPPL to represent AIL has been revoked,

the appointment of arbitrator by SSPPL, unilaterally, is illegal in

terms of clause 4.2 of the Contract Agreement and clause 3.2 of

the JVA.

11. Resultantly, SSPPL filed a petition on behalf of SDJV

against WAPCOSL under Section 11(6) of the Arbitration Act

(bearing  number  Arb. P. 810/2016)  before the  High  Court of

Delhi, wherein it has been asserted that the PoA dated

15.07.2005 given by AIL in its favour is still in force and forms

part of the Contract Agreement dated 09.03.2006. This assertion

Page 6 of 27

is factually incorrect.   In that, the PoA was executed as a follow

up document alongwith JVA on 09.09.2005 itself. Whereas, the

Board of Directors of AIL vide resolution dated 15.07.2005 had

authorised its officer to execute the JVA and PoA, which were so

executed on 09.09.2005.

12. The said arbitration petition was contested by the appellant

(WAPCOSL). However, the High Court allowed the same vide

order dated 15.03.2017 and appointed an arbitrator for

WAPCOSL.

13. Feeling aggrieved, WAPCOSL preferred a Special Leave

Petition (bearing number SLP (Civil) 26555/2017) before this

Court. This Court, vide order dated 03.11.2017, directed

impleadment of AIL as a party and also stayed the arbitral

proceedings. AIL appeared before this Court and asserted that it

did not give consent to SSPPL for appointment of an arbitrator or

for filing petition under Section 11(6) of the Arbitration Act. Thus,

it had urged that SSPPL had no authority to unilaterally appoint

an arbitrator for SDJV or to file the subject petition on behalf of

SDJV.   Further, the petition filed in the name of SDJV through

SSPPL was not as per Delhi High Court Rules. This Court, vide

order dated 11.12.2017, deemed it proper to set aside the order

Page 7 of 27

passed by the  High Court of Delhi dated  15.03.2017 and to

relegate the parties before the High Court for reconsideration of

all aspects, as would be raised by the parties including regarding

the  locus and competence of  SSPPL to unilaterally  appoint  an

arbitrator or file arbitration petition under Section 11 of the Act.

14. The High Court of Delhi, vide judgment dated 25.01.2019

(for  short, “impugned  judgment”),  once  again allowed  the  said

arbitration petition and appointed a  sole  arbitrator, instead of

three arbitrators envisaged in CoPA.  

15. The High Court opined that the arbitration agreement

between SDJV and WAPCOSL was still in force on the date of

filing of the arbitration petition and the same would operate

between the parties. That finding has been reached despite the

AoA having been executed between the parties on 09.06.2015.

The High Court also opined that SSPPL had authority under the

JVA as well as the Contract Agreement to represent SDJV, as a

leading  partner thereof.   It  held that  SSPPL derived  authority

from clause 20.6 of CoPA read with the other enabling terms in

the JVA and FIDIC Conditions of Contract for Construction (for

short,  ‘FIDIC’). The High Court was also impressed by the fact

Page 8 of 27

that  SSPPL had 95 per  cent shareholding  in SDJV as against

only 5 per cent shareholding of AIL, the other partner. For that

reason,  it  went on to observe that AIL cannot be permitted to

derail the arbitration process commenced for and on behalf  of

SDJV through SSPPL. The High Court was also impressed by the

fact that despite the execution of AoA, the Technical Committee

entertained the appeals filed by SDJV in respect of certain items.

That goes to show that even the Technical Committee was of the

view that the dispensation regarding settlement of further claims

of SDJV could be pursued and the arrangement arrived under

AoA between the parties cannot be treated as full and final

settlement.  Resultantly, SDJV was well within its rights to take

recourse to arbitration for resolution of the disputes in that

regard. Further, the fact as to whether SDJV was entitled for the

relief, regarding the claims raised, was a matter within the

exclusive domain of the Arbitral Tribunal.   The High Court,

therefore, allowed the Arbitration Petition and appointed a sole

Arbitrator for resolution of the disputes between the parties.   16. Feeling aggrieved, WAPCOSL as well  as AIL have assailed

the decision of the High Court by filing separate Special Leave

Petition(s).

Page 9 of 27

17. We have heard learned Senior Counsel Mr. Gaurav

Panchnanda for WAPCOSL (appellant) and Mr. Shyam Divan for

AIL (appellant), and Mr. Sachin Datta, learned Senior Counsel for

SDJV (respondent No.1 in both the appeals).

18. After cogitating over the erudite arguments of the counsel

appearing for the  respective  parties  and perusing the relevant

records, including Arbitration Petition and the written

submissions  filed  by the learned counsel, in  our  opinion, two

principal issues need be answered in this judgment. First,

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? Second,

whether the Arbitration Petition filed in the name of SDJV

through SSPPL, in law can be considered as having been properly

and validly presented despite the express revocation of authority

of SSPPL vide resolution passed by the Board of Directors of AIL

on 21.09.2016 and duly communicated to SSPPL as well as

WAPCOSL before 15.12.2016, as was granted to SSPPL in terms

Page 10 of 27

of JVA read with PoA including the Contract Agreement?

19. Reverting to the first question, we must immediately advert

to the Arbitration Agreement incorporated in the Contract

Agreement.   That can be discerned from clause 4, which reads

thus:­

“4. Settlement of Disputes 4.1 It  is specifically agreed by and between the parties that all the differences or disputes arising out of the Agreement shall be decided by process of settlement of disputes and arbitration as specified in Clause 20 of the Conditions of the Contract.  4.2 It is also agreed that the Salma Dam Joint Venture agreement dated 9th September 2005 shall be treated as part of this agreement and both the parties to the said joint venture namely M/s SSJV Projects Private Limited and M/s  Angelique International  Limited shall also  be jointly and severally liable in the process of settlement of disputes in arbitration between WAPCOS and Salma Dam Joint Venture.”

This clause must be read alongwith the terms specified in CoPA

in particular clause 20 and clauses 1.14, 4.3 and 20.6 of FIDIC.

Going by the Contract Agreement read with relevant clauses of

CoPA and FIDIC,  it is  obvious that the parties had agreed  for

resolution of  all their  differences  or  disputes  arising from  the

Contract  Agreement  by  process of settlement of disputes and

arbitration.  

20. In the  present case,  however, in  due  course, because  of

fortuitous situation, the parties had to agree to amend certain

Page 11 of 27

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.   The same records the new

arrangement eventually agreed upon between the parties. It will

be useful to first refer to the preamble of the AoA which reads

thus: “1.0    Preamble

    Consequent upon the modification of rates of certain Items of works in January 2013 which is subject to special terms and conditions, the Amendment to the Original Agreement between WAPCOS and SDJV (the Parties) was required to be entered upon thereafter.

Nevertheless the work at site continued at very fast pace and in good faith and trust as per the revised rates agreed between the Parties.  Despite several constraints the project completion progressed well during the years 2013 and 2014 and substantial part of the works (around 97%)  of the  Dam and Spillway  was  completed  by  31st

December 2014. Remaining works are continuing at the project site.  

Now, as the Amendment to Agreement is to be formalized for proper implementation and records, therefore, in continued good faith and trust the Parties have agreed to sign this Amendment of Agreement by incorporating the actual site conditions, practical difficulties and subsequent developments that have taken place at site. ……. .”  

21. In clause 1.1 of AoA, reference is made to the estimated cost

Page 12 of 27

of works and the balance work to be completed in the revised

estimated cost.  The note below the chart given in clause 1.1 and

clauses 1.2 to 1.6 of the preamble are of some relevance. The

same read thus:

 “1.1 The  balance  work  has to  be completed in the revised estimated cost as given below.  

Estimated Cost of Works ….   …..   ……

Note: If due to site conditions, the  balance quantities increases, the contractor will carry out the construction and complete the work

1.2 This Amendment of Agreement will form part of the Original Agreement no. WAPCOS/SDP/AFG/Pkg.­III­05 dated 9th March 2006.

1.3 This Amendment of Agreement includes revised Bill of Quantity (BoQ) (containing executed & balance quantum of works, New Items of work, etc) with the modified approved rates  for  eight  major  item of  Civil  works and modified cost of Hydro­Mechanical works along with additional terms and Conditions of Contract.  

1.4 Any Clauses/items other than the Amendment of Agreement will be governed by Original Agreement and in case of any dispute the decision of CMD, WAPCOS will be final and binding to the Contractor.

1.5 In case of any inconsistency between Original Agreement and Amendment of Agreement, the content of Amendment of Agreement will succeed.

1.6 In case of any dispute on Technical Specification and interpretation of any contract clauses the decision of CMD, WAPCOS will be final and binding to the Contractor. ……… .”

22. It may be useful to now advert to clauses 1.2 and 1.3 of

Page 13 of 27

Section ­01 of the AoA, which read thus:

“REVISED COST AND RELATED TERMS AND CONDITIONS

Clause 1.0  ….  …..  …..  

The revision of cost/modified rates of above item are subject to the following:  1.1 ….   ….   ….

1.2 The balance pending claims of Contractor stands buried and it was agreed by the Contractor that, no claims will be raised by Contractor on any of the pending/settled claims/other claims resulting out of the correspondences made so far and there will be no arbitration for the settlement of claims. It is agreed that the Contractor shall not be paid any further amount on claim/additional rate for new item of work settled or pending over and above the payments already released to the contractor.  

1.3 In future, no claim of Contractor on any account shall  be entertained.  However any claim arising out  of force majeure shall be examined.”  

Here, we may also take note of Section­02 of AoA concerning the

amendment in  general conditions  of  CoPA.  Clause  2.1  of this

section predicates that sub­clause 1.1.2.16 of CoPA stands

modified as Technical Committee means committee constituted

by CMD, WAPCOSL.  

23. 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

Page 14 of 27

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. We may hasten to add that even the subject

Arbitration Petition does not question the execution of AoA or the

applicability thereof.   Indeed, the asseveration in the Arbitration

Petition is that the claim set up by SDJV is in reference to items

and bills raised subsequent to the execution of AoA.

24. The moot  question  is:  whether the  AoA has the  effect  of

undoing and abrogating the arbitration clause predicated in the

Contract Agreement? According to SDJV and SSPPL, the

arbitration clause in the Contract Agreement remains intact and

undisturbed.  The parties continue to be bound by the same.  

25. For considering this plea we must appreciate the backdrop

in  which the  AoA has  been  executed, to  understand  the true

import  of the terms and conditions  set  out therein.  From the

correspondence exchanged between the parties preceding the

execution of AoA, being letters dated 15.09.2011 and 17.09.2012,

it is amply clear that the parties were  ad idem  that substantial

part of the works (around 97 per cent) of the “Dam and Spillway”

Page 15 of 27

was completed by 31.12.2014.   This fact has been plainly

restated in the preamble of the AoA. The AoA also records that if

due to site conditions, the balance quantities increase, the

contractor will carry out the construction and complete the work.

Further, the  AoA  would form part of the  Contract  Agreement

dated 09.03.2006 and it includes revised Bill of Quantities (BoQ)

(containing executed and balance quantum of works, new items

of works, etc.) with the modified approved rates for eight major

items of civil works and modified cost of Hydro­Mechanical works

along with additional terms and conditions of Contract. Clause

1.4 of the AoA makes it amply clear that any other clauses/items

other than the AoA will be governed by Original Agreement

(Contract Agreement) and in case of any dispute, the decision of

CMD,  WAPCOSL  will be final and  binding on the contractor.

Clause 1.5 of the AoA makes it further clear that in case of any

inconsistency between the Contract Agreement and AoA, the

terms specified in AoA will prevail. Clause 1.6 of the preamble

postulates that in case of any dispute on technical specifications

and interpretation of any contract clauses, the decision of CMD,

WAPCOSL will be final and binding on the contractor. Section­01

of AoA then deals with revised cost and related terms and

Page 16 of 27

conditions. Clause 1.0 thereof provides that the revision of

cost/modified rates of the items referred to therein will be subject

to clauses 1.2 and 1.3, amongst others.  Clause 1.2 of Section­01

envisages that the balance pending claims of contractor “stands

buried” and it has been agreed by the contractor, that no claims

will  be raised by the contractor on any of the pending/settled

claims/other claims resulting out of correspondences made so far

and there will  be “no arbitration”  for the settlement of  claims.

Clause 1.3 of Section­01 also makes it  clear that in future no

claim of contractor on any count shall be entertained except the

claim arising out of force majeure.  

26.  Despite such peremptory agreement and declaration by the

parties, SDJV proceeded on an erroneous basis that the

arbitration agreement in Contract Agreement still  subsists and

can be enforced by  it.  As aforesaid, neither SDJV nor SSPPL

have disputed the execution of AoA nor it is even remotely

suggested in the Arbitration Petition that the AoA was executed

by them under duress or coercion. From the indisputable

circumstances, it becomes amply clear that the stated terms and

conditions set out in the AoA were agreed upon by all concerned

primarily due to revision of cost of the project upto Rs. 872.67

Page 17 of 27

crores which is 3.44 times the original project cost, (i.e. Rs.

253.84 crores) as the same was subject to clauses 1.2 and 1.3 of

Section­011.  Notably, this  AoA  was executed  at a stage  when

substantial  part  of the  works  (around 97%)  had already been

completed. In our opinion, the terms and conditions specified in

AoA leave no manner of doubt that the arbitration agreement has

been done away with –  as is  manifest from the  unambiguous

declaration that balance pending claims of Contractor stand

buried and that there will be no arbitration for the settlement of

claims2.  

27.   To get over this position, SDJV would contend that

Section­02 of AoA specifically deals with the amendments in

general conditions of CoPA but it makes no reference to

amendment of clause 20 of CoPA.   That may be so, however, in

our view, it will be of no avail.   We will deal with this aspect a

little later. Suffice it to observe that the terms and conditions of

AoA make it amply clear that the arbitration agreement stands

overridden in view of the express declaration in AoA in that

regard referred to earlier.  

28. As noticed earlier, AoA was executed on 09.06.2015 by

1 See – Clause 1.0 of Section­01 of AoA (in paragraph 22 above) 2 See – Clause 1.4 of Preamble (in paragraph 21 above) read with clauses 1.2 and 1.3 of Section ­01 of AoA (in paragraph 22 above).

Page 18 of 27

which date, substantial part of the works (around 97 per cent) of

the “Dam and Spillway” had been completed. The water filling in

dam commenced on 26.07.2015 by closing diversion tunnel gate.

That presupposes that the “Dam and Spillway” work was fully

completed before that date. It is also not disputed that the project

was inaugurated by the Prime Minister of India and the President

of Afghanistan on 04.06.2016.   The terms agreed upon between

the parties and as recorded  in AoA dated 09.06.2015 was the

outcome of steep revision of rates. These circumstances are

germane whilst answering the question under consideration. We

have  no  manner  of doubt that the  purport of the terms  and

conditions incorporated in the AoA dated 09.06.2015 are

unambiguous expression of intent to supersede the arbitration

agreement incorporated in Contract Agreement dated 09.03.2006

and to resolve all the contentious issues regarding the claims of

SDJV, in the manner specified therein.   

29. The High Court, however, rejected the argument of the

appellant(s) herein on the following basis: “10.5 What is, however, not disputed is that as a matter of fact, the J.V. entity had lodged its claim with the Engineer appointed under the C.A. and upon the Engineer repelling its claim, five appeals were lodged with the Technical Committee which rejected the same by way of a common order dated 28.10.2016. A perusal of the order of  the Technical Committee would show that the

Page 19 of 27

claims lodged by the J.V. entity have been examined on merits and also from the perspective of the plea raised before it with regard to their admissibility in view of the provisions of Clauses 1.2 and 1.3 of the AOA.

10.6 Therefore,  if,  as contended on behalf of WAPCOS, Clauses 1.2 and 1.3 of  the AOA barred the J.V. entity from pressing any pending or future claims, then, to my mind, there was no need for the Technical Committee to deliberate upon the claims on merits. It is the stand of the J.V. entity that all the claims lodged by it with WAPCOS pertain  to a period post the execution of the AOA.

10.7 The record shows that the AOA was executed on 09.06.2005,  while the  subject  project  was inaugurated post its completion only in 2016. Furthermore, it is the case of the J.V. entity that the AOA provided for revision of rates for eight major items concerning civil works and hydro mechanical works. Therefore, if at all, the bar would apply to claims, which were referable to pre­ existing claims, or claims pertaining to revision of rates relatable to eight major  items of  civil  works and hydro mechanical works or those claims which overlapped with these claims. That being said, as to whether the position taken  by the  J.V. entity is correct or  not is a  matter which can only be examined by the  Arbitral Tribunal once the  matter is tried  as  based  on  mere  pleas  and counter pleas, this aspect cannot be decided in a Section 11 petition. Particularly, given the facts obtaining in this case, it is not possible to come to a definitive conclusion that there was accord and satisfaction upon the execution of the AOA.

10.8 Therefore, the ground taken on behalf of WAPCOS that no claim could be lodged post execution of the AOA is untenable and hence cannot be accepted. There is, to my mind,  much merit in the  submission advanced on behalf of the  J.V. entity that the  AOA  cannot impede adjudication of all future claims whether or not they have their genesis in the AOA. If that was the intent, as correctly  argued on  behalf  of the  J.V. entity, the  AOA should have done away with Clause 20.6 of COPA, which contains the arbitration agreement.”

30. As regards the first reason weighed with the High Court that

the  Technical  Committee entertained the five  appeals filed  on

Page 20 of 27

behalf of the SDJV, that in our view cannot undo the effect of

terms and conditions of AoA which had annulled the arbitration

clause in the Contract Agreement. There are at least two other

tangible reasons to overturn the stated opinion of the High Court.

First, the Technical Committee was, as a matter of fact,

constituted under clause 2.1 of Section – 02 of AoA by the CMD

of WAPCOSL, as is evident from the communication dated

21.10.2015 sent  by  WAPCOSL to  SDJV.   That fact  has  been

restated in the subsequent correspondence.   The Technical

Committee  was, therefore,  not constituted in terms  of  Clause

20.1 of  CoPA  as  has  been erroneously assumed  by the  High

Court. Second, the fact that the Technical Committee processed

the appeals instituted by SDJV does not mean that WAPCOSL

had waived the terms and conditions of AoA, in particular

clauses 1.2 and 1.3 of Section­01 thereof. No averment is found

in the Arbitration Petition to even remotely suggest that it was a

case of waiver express or tacit, by WAPCOSL qua the stipulation

specified in clauses 1.2 and 1.3 of Section­01 of AoA.  Hence, this

reason  weighed  with the  High  Court is  manifestly  wrong  and

cannot stand the test of judicial scrutiny.  

31. The second reason weighed with the High Court  is  again

Page 21 of 27

founded on  incorrect assumption about the date of  AoA.   The

High Court  in paragraph 10.7 proceeds on the basis that AoA

was executed as back as on 09.06.2005 and having noted that

date, the High Court then observed that the project was

inaugurated only in 2016.   On this erroneous assumption, the

High Court rejected the claim of the appellant(s) herein.   As a

matter of  fact, the AoA was executed on 09.06.2015, at which

point of time, 97 per cent of the project was completed and the

same was rolled out by filling of the Dam from 26.07.2015 in less

than one month, by closing diversion tunnel gate.  Not only that,

the project was dedicated to the people of Afghanistan soon

thereafter on 04.06.2016. Thus understood, it becomes clear that

the parties had agreed to give quietus to all the claims and adopt

revised rates recommended by High Power Committee, as

recorded in AoA executed on 09.06.2015.  Suffice it to note that

the basis for rejecting the argument of the appellant(s) is founded

on erroneous assumption that AoA was executed on 09.06.2005.

That is an error apparent on the face of the record.   

32. The third reason weighed with the High Court is that clause

20.6 of CoPA, providing for resolution of disputes by arbitration

has not been modified by AoA. Indeed, clause 4 of the Contract

Page 22 of 27

Agreement makes reference to clause 20 of CoPA.  However, on a

fair reading of clause 4 of the Contract Agreement and in

particular 4.1 as reproduced hitherto, it would be crystal clear

that the substance of the provision is to provide for process of

settlement of disputes and arbitration. Reference to clause 20 of

CoPA is only to indicate that the procedure specified therein may

have to be followed whilst taking recourse to that process.

However, as the substantive provision regarding remedy of

arbitration itself has been done away with in terms of clauses 1.2

and 1.3 of Section­01 of AoA, there was no need to modify clause

20 in CoPA dealing with machinery provision.  Thus, the remedy

of arbitration cannot be resurrected merely because clause 20 of

CoPA has not been expressly modified in the AoA. Hence, even

this reason does not commend us.

33. As these are the only reasons which had weighed with the

High Court to reject the argument of the appellant(s) regarding

non­existence of arbitration agreement and the same being

untenable in law, it must necessarily follow that the Arbitration

Petition filed for and on behalf of SDJV through SSPPL was not

maintainable. In other words, the Arbitration Petition should

have been rejected for lack of subsisting or existing arbitration

Page 23 of 27

agreement between the parties on the date of filing of Arbitration

Petition.  

34. 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.  We  may usefully rely  on  the  underlying

principle expounded by this Court in  Damodar Valley

Corporation vs.  K.  K.  Kar3,  wherein the Court observed as

follows:­

“…..As the contract is an outcome of the agreement between the parties it is equally open to the parties thereto to agree, to bring it to an end or to treat it as if it never existed. It may also be open to the parties to terminate the previous contract and substitute in its place a new contract or alter the original contract in such

3 (1974) 2 SCR 240 @ 243­244

Page 24 of 27

a way that it cannot subsist. In all these cases, since the entire contract is put an end to, the arbitration clause, which is a part of it, also perishes along with it. Section 62 of the Contract Act incorporates this principle when it provides that if the parties to a contract agree to substitute a new contract  or  to rescind or alter it, the original contract need not be performed. Where, therefore, the dispute between the parties is that the contract itself does not subsist either as a result of  its being substituted by a new contract or by rescission or alteration, that dispute cannot be referred to the arbitration as the arbitration clause itself would perish if the averment is found to be valid. As the very jurisdiction of the arbitrator is dependent upon the existence of the arbitration clause under which he is appointed, the parties have no right to invoke a clause which perishes with the contract.”

In a subsequent decision in  National Insurance Company

Limited vs. Boghara Polyfab Private Limited4, in paragraph

52 this Court held as follows:

“52.  Some illustrations (not exhaustive) as to when claims are arbitrable and when they are not, when discharge of contract by accord and satisfaction are disputed, to round up the discussion on this subject are: (i) …. …. …. (ii) A claimant  makes several claims. The admitted or undisputed claims are paid. Thereafter negotiations are held for settlement of the disputed claims resulting in an agreement in writing settling all the pending claims and disputes. On such settlement, the amount agreed is paid and the contractor also issues a discharge voucher/no­ claim certificate/full and final receipt. After the contract is discharged by such accord and satisfaction, neither the contract nor any dispute survives for consideration. There cannot be any reference of any dispute to arbitration thereafter. (iii) …. …. …. (iv) …. …. …. (v) A claimant makes a claim for a huge sum, by way of damages. The respondent disputes the claim. The

4  (2009) 1 SCC 267

Page 25 of 27

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.”

Further, in Nathani Steels Ltd. v. Associated Constructions5,

this Court observed as follows:­

“3......Even otherwise we feel that once the parties have arrived at a settlement in respect of any dispute or difference arising under a contract and that dispute or the difference is amicably settled by way of a final settlement by and between the parties, unless that settlement is set aside in proper proceedings, it cannot lie in the mouth of one of the parties to the settlement to spurn it on the ground that it was a mistake and proceed to invoke the Arbitration clause. If this is permitted the sanctity of contract, the settlement also being a contract, would be wholly lost and it would be open to one party to take the benefit under the settlement and then to question the same on the ground of mistake without having the settlement set aside. In the circumstances, we think that in the instant case since the dispute or difference was finally settled and payments were made as per the  settlement, it  was not  open  to the  respondent unilaterally to treat the settlement as non est and proceed to invoke the Arbitration clause. We are, therefore, of the opinion that the High Court was wrong in the view that it took.”

35. Having said this, no other issue need be addressed in these

appeals. As a result, these appeals must succeed.   Resultantly,

the impugned judgment of the High Court is set aside and the

5 1995 Supp (3) SCC 324

Page 26 of 27

Arbitration Petition No. 810 of 2016 filed by the respondent No. 1

herein stands dismissed.   

36. However, we must keep the option available to the parties to

take recourse to other remedies,  inter se, which they are free to

adopt  in accordance with  law;  and the rejection of  Arbitration

Petition will be no impediment for them to pursue those

remedies.  We, accordingly, keep all other issues and contentions

available to the parties  open, to  be  determined  in appropriate

proceedings as and when occasion arises.  

37. The appeals are allowed in the above terms with no order as

to costs.  All pending applications are also disposed of.

                                                                    ….…………..................J.         (A.M. KHANWILKAR)

                        ………..……...................J.

    (DINESH MAHESHWARI)

New Delhi; November 14, 2019.

Page 27 of 27