Safiya Malik

A commercial dispute concerning payments for civil and electrical infrastructure work led to an arbitration appointment application before the Calcutta High Court. The petitioner, a contractor engaged in additional infrastructure work near an oxygen plant, sought the court’s intervention after prolonged financial disagreements with the respondent, a major steel authority. The court examined claims regarding outstanding dues, contractual amendments, and whether the dispute remained valid within the framework of arbitration and limitation laws.

The matter concerns a tender for additional infrastructure work near an oxygen plant, with the petitioner being awarded the contract on November 15, 2005, valued at Rs. 4,52,98,296/-. The work was to be completed within nine months, with payments structured at 90% upon completion of work and the remaining 10% upon certification of completion.

The petitioner contended that despite fulfilling its obligations, the respondent did not provide a hindrance-free site, leading to delays and financial losses. Due to these delays, additional costs were incurred for raw materials, labour, and equipment, allegedly increasing the total invoice amount to Rs. 7,51,91,637/-. While partial payments amounting to Rs. 4,44,51,04.00/- were made, the petitioner claimed an outstanding sum of Rs. 3,07,40,597.59/-, which included unpaid service tax.

Upon completion of the work, the petitioner alleged that the respondent delayed issuing the completion certificate, leading to further financial strain. The contract period was extended without the imposition of liquidated damages. The petitioner viewed this extension as implicit acceptance of delays caused by the respondent.

The dispute escalated when, on May 17, 2010, the respondent offered a reduced settlement amount of Rs. 73,35,000/-, which was not honored. Instead, a lesser sum of Rs. 17,81,212/- was paid in November 2013. The contract value was unilaterally amended by the respondent on March 5, 2024, which the petitioner contended was done without consent and proper negotiation.

Following continued non-payment, the petitioner initiated legal action in 2015. A writ petition resulted in a court order on September 11, 2015, directing the respondent to review the claims. Despite multiple correspondences, no payments were released. The petitioner contended that certain payment vouchers were fabricated, with signatures obtained under duress.

Conciliation proceedings were initiated but failed, leading the petitioner to invoke arbitration. The respondent rejected arbitration requests, maintaining that the claims were time-barred and that the final settlement had already been reached. The petitioner alleged procedural irregularities, arguing that payments were withheld unlawfully.

The court examined communications between the parties, including letters, conciliation attempts, and amendments to the contract value. The respondent argued that the petitioner failed to invoke arbitration within the statutory limitation period, maintaining that the final rejection of dues occurred in 2017.

The petitioner countered that the contract was amended and that discussions regarding settlement continued until 2024. The court observed, "In my prima facie view, the dispute continued and the conduct of the authorised officer of the respondent does not indicate that the contract was not closed until March 5, 2024, when the second amendment of the contract value was made."

Regarding limitation, the court stated, "Whether the claim is time-barred or not or whether the petitioner failed to take steps within the period of limitation will have to be proved in evidence." The court noted that limitation is a mixed question of law and fact and required further examination. The judgment referenced multiple potential limitation dates, including November 6, 2017, June 13, 2019, March 3, 2023, and March 5, 2024, as factors in determining whether the claim was within the permissible timeframe.

The petitioner argued that discussions continued through email and formal correspondences, with the respondent acknowledging ongoing internal reviews of payment claims. An email from June 17, 2022, stated, "This case is being discussed internally by the committee and on the finalization of the same, it will be informed to you." The petitioner contended that this communication indicated that the dispute remained active.

The respondent maintained that the petitioner had not properly invoked arbitration. The arbitration clause specified resolution under the Rules of the Indian Council of Arbitration (ICA). The court noted that the judgment referenced Rule 15(1) of ICA, which states, "a party wishing to commence arbitration proceedings (claimant) is required to give a notice of request for arbitration to the Registrar of ICA and to the authorised officer of the respondent."

The court further recorded that "the petitioner issued letters to the authorised officer of the respondent requesting amendment of the clause and settlement of dispute by a sole arbitrator, but the authorised officer of the respondent did not accede to the same and continuously maintained a stand that the clause provided for resolution of dispute as per the ICA Rules. The petitioner unilaterally referred certain names of sole arbitrators as its nominee."

The respondent contended that payments made in March 2024 were accepted as full and final settlement by the petitioner. The petitioner, however, alleged that signatures on settlement documents were obtained improperly and disputed the validity of the settlement. The judgment recorded that the petitioner claimed "settlement signatures were obtained improperly", and that the alleged "memorandum of payment should be examined in arbitration." The court stated, "These disputes cannot be considered to be 'deadwood'."

The court disposed of the application, stating, "The petitioner is at liberty to approach the Registrar ICA in terms of the Rules of the Indian Council of Arbitration, thereby invoking arbitration as per the said Rules." The petitioner was directed to follow the arbitration procedure agreed upon in the contract, ensuring compliance with ICA Rules.

The judgment recorded that "the invocation was not in terms of the requirement of the agreement and the ICA Rules have not been followed." The court left open the determination of limitation and the petitioner’s claims for arbitration. It stated, "Whether the claim is time-barred or not or whether the petitioner failed to take steps within the period of limitation will have to be proved in evidence." The dispute regarding "non-payment, unilateral amendment of the contract in March 5, 2024, memorandum of payment allegedly signed by the petitioner and acceptance of the payment vouchers dated March 22, 2024" were held to be active disputes for arbitration.

Case Title: Rakesh Kumar Chaudhary vs. Steel Authority of India Limited, Durgapur Steel Plant
Case Number: AP-COM/1007/2024
Bench: Justice Shampa Sarkar

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