Manmohan Singh, J.
R.P. No.154/2016 (review of order dated 18th February, 2016), I.A. No.3624/2016 (for directions) and I.A. No.8936/2016 (for taking settlement agreement on record), by respondent and O.M.P. No.431/2015
1. The petitioner has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act ) for seeking setting aside of the Award dated 23rd March, 2015 passed by the sole Arbitrator wherein a sum of Rs.19,02,47,938/- plus Rs.2,35,14,645/- as service tax with simple interest @ 10% w.e.f. 13th April, 2012 to 23rd March, 2015 towards claims No.1, 2 and 3 to the respondent was awarded.
2. The said petition was filed first time in the Registry on 29th June, 2015 when the Registry raised certain objections. Thereafter, the petition was re-filed on 20th July, 2015. Along with the petition, the petitioner also filed an application being I.A. No.16149/2015 for condonation of delay of 5 days in re-filing the same. The said application was allowed by order dated 18th February, 2016.
3. Subsequently, the respondent filed an application being I.A. No.3624/2016 seeking prayer for issuance of directions to the Registry to provide the details of the filing and re-filing of the petition from time to time on behalf of the petitioner. By order dated 18th March, 2016, notice of the said application was issued to the respondent and simultaneously, report of the Registry in a sealed cover was also called. The respondent filed the review petition being R.P. No.154/2016 under Section 114 read with Order XLVII Rule 1 and Section 151 CPC for review of the order dated 18th February, 2016. The report from the Registry was received in a sealed cover by the Joint Registrar. The parties were allowed to inspect the same and an order in this regard was passed on 23rd May, 2016.
4. Thereafter, the respondent filed an application being I.A. No.8936/2016 for taking on record the Settlement Agreement entered into between the parties as well as for dismissal of the petition in view of the settlement.
5. In case the prayer made in the application being I.A. No. 8936/2016 is allowed, the other two applications, i.e. R.P. No.154/2016 and I.A. No.3624/2016 would become infructuous and there would be no need to pass any further orders in those applications.
6. It is contended by the respondent in the application being I.A. No.8936/2016 that prior to filing of the objections, i.e. on 29th June, O.M.P. No.431/2015 Page 3 of 14 2015, negotiations were going on between the parties to amicably settle the matter in respect of the subject matter of the impugned Award and after due deliberations and discussions, the petitioner called upon the respondent to write a letter to the petitioner that the terms of the settlement were acceptable to the respondent. The respondent accordingly wrote a letter dated 29th June, 2015 to the petitioner setting out the terms of the settlement which were acceptable to the respondent.
7. The contents of the said letter have been reproduced herein below:-
29th June, 2015
Shri A.K. Pathak,
Executive Director (Planning)
Airports Authority of India,
Room No.143, Block-C,
Rajiv Gandhi Bhawan,
New Delhi - 110029
Sub:- Negotiation for Arbitration Award with Consultant (Claimant) Regarding Consultancy Work of Construction of New Domestic Terminal Building at the NSCBI Airport, Kolkata.
Your Ref:- Plg./523/1.6/15/738 Dated 16.06.2015
Please refer to our discussions today, when undersigned explained to the Committee that this project is being done by us in association with an International firm of architects with whom we have commitments as per the agreement signed with MI, and that there is no scope for any further reduction. Yet in deference to wishes of the Committee, we have agreed for further reduction as under:-
1) The earlier reduction of Rs.1,25,00,000/- stands revised to Rs.1,50,00,000/- (Rs. One Crore, Fifty Lakhs Only)
2) We also agree to reduction of approx. Rs.50.25 lakhs in the interestamount (now calculated upto- date of award i.e. 23rd March 2015 only)
Total Reduction Rs.1,50,00,000/-+Rs.50.25 Lakhs = Rs.2,00,25,000/-
We give below the revised calculation of our dues :-
|The Award||Claim No.1||Award Amount||Rs.19,02,47,938/-|
|Claim No.2 and 3||Interest @ 10% w.e.f. 13th April, 2012 till 23rd March, 2015 (i.e. 35 1/3 months) 35.33x10x19,02,47,938/- 12x100||Rs.(+)5,60,12,164/-|
|Less Lump sum Rebate :-||Rs.(-)1,50,00,000/-|
|Balance Payable :-||Rs.23,12,60,102/-|
|Add Service Tax @ 14% :-||Rs.(+)3,23,76,414/-|
|Total Payable :-||Rs.26,36,36,516/-|
Looking forward to hear from you.
Thanks and Regards
For SIKKA ASSOCIATES
8. The petitioner after having considered the said letter of the respondent accepted the said offer which was also approved by the Board of Directors of the petitioner. It was only thereafter that the O.M.P. No.431/2015 Page 5 of 14 Settlement Agreement dated 28th September, 2015 was entered into and executed between the parties by accepting the Award and modifying it to the extent as set out in the said agreement. The respondent has placed on record the correspondence exchanged between the parties as well as the Settlement Agreement dated 28th September, 2015.
9. In para 4 of the application, the Settlement Agreement dated 28th September, 2015 records, inter-alia, as under:-
"Whereas the consultant after negotiations with the AAI committee held on 29.06.2015 agreed, vide letter No. SA/301/2015 dated 29.06.2015, to reduce a lump sum amount of Rs.1,50,00,000/- (Rupees One Crore Fifty Lakhs only) and waive off the interest beyond date of award (Annexure II)."
"Whereas the Authority has agreed to accept the award on the negotiated terms above which works out to Rs.23,12,60,102/- (Rupees Twenty Three Crores Twelve Lakhs Sixty Thousand One Hundred and Two only) plus service tax as applicable as full and final settlement in relation to the aforesaid contract. "
x x x x x
"It is hereby agreed upon by both the parties to the abovementioned agreement that the said award in its entirety on the negotiated terms is final and binding as regards to all the disputes referred to the Arbitrator and an amount of Rs.23,12,60,102/- (Rupees Twenty Three Crores Twelve Lakhs Sixty Thousand One Hundred and Two only) plus service tax as applicable as per the negotiated terms will be paid by the Authority in full and final settlement of the amounts due to the consultant under the said agreements."
10. Prior to the above settlement, on 24th September, 2015 a letter was issued by the petitioner to the respondent; the contents of the said letter have been reproduced herein below:-
No.Plg/523/1.6/15/1420 Dated 24.09.2015
M/s Sikka Associates Architects,
A2/1, Africa Avenue,
New Delhi 110029
Sub: Negotiation for Arbitration award with Consultant (Claimant) regarding Consultancy work of Construction of New Domestic Terminal Building at the NSCBI Airport, Kolkata.
This is to inform you that the offer of lump-sum rebate of Rs.1,50,00,000/- (Rupees One Crore Fifty Lakh only) in the award amount and the waiver of interest for the period beyond date of award forwarded vide letter dated 29.06.2015 has been accepted by AAI Board.
It is therefore requested to attend the office of GM (Arch), AAI, CBlock, Rajiv Gandhi Bhawan, New Delhi -110003 on 28.09.2015 to sign the settlement agreement (copy enclosed herewith). The agreement shall be executed on a non-judicial stamp paper of value Rs, 100/- and the cost of the same shall be borne by you.
11. After execution of the settlement, the respondent sent a letter to the petitioner on 27th October, 2015 reminding the petitioner about the Settlement Agreement executed between the parties on 28th September, 2015. The contents of the said letter have been reproduced herein below:-
27th October, 2015
Shri A.K. Pathak,
Executive Director (Planning)
Airports Authority of India,
Room No.143 Block-C,
Rajiv Gandhi Bhawan,
New Delhi 110029
Sub:- Payment of Award Amount in R/o Consultancy Work of Construction of New Domestic Terminal Building at the NSCBI Airport, Kolkata.
We wish to invite your attention to the "Settlement Agreement executed between AAI and ourselves on 28th Sept' 2015.
We note with regret that even though one month has passed, the dues have yet not been settled. This is despite that matter has the prior approval of highest authority i.e. AAI Board. We will appreciate if an, early firm date, by which we should expect payment, is communicated to us.
The next court-hearing is scheduled for 2nd Nov' 2015. Settlement of dues before above date would enable closure of the case.
Please appreciate, that undue delay on the part of AAI is causing us considerable financial loss.
For SIKKA ASSOCIATES
12. When the matter was taken up on 2nd November, 2015, the fact regarding the Settlement Agreement dated 28th September, 2015 was brought to the notice of this Court and the copy of the said Settlement Agreement produced by the respondent was taken on record. On the next date i.e. 16th November, 2015 certain objections to Settlement Agreement were raised on behalf of the petitioner. The Court at that time directed the petitioner to file an affidavit in response to the settlement.
13. The petitioner thereafter filed an affidavit dated 11th December, 2015 wherein the fact regarding the Settlement Agreement having been arrived at between the parties was accepted and admitted by the petitioner, however, in paras 8, 9 and 10 of the affidavit, the petitioner gave its reasons for not honouring the said settlement.
14. The said paras of the affidavit have been reproduced here as under:-
8. That disputes also arose between the Petitioner and M/s Virender Khanna and Associates pursuant to which the matter was referred to Shri P.K. Gupta, Sole Arbitrator to adjudicate upon the claims and counter claims of the Petitioner and M/s Virender Khanna and Associates.
9. That the Learned Sole Arbitrator in the proceedings between the Petitioner and M/s Virender Khanna and Associates passed an interim award dated 16.10.2015 on the issue of non-executing the subject Consultancy Agreement as per 110th Board meeting of the Petitioner i.e. Airports Authority of India. It is pertinent to state here that the Claim No.1 raised by the Respondent in the present Petition also involves the same issue. Hence, the Learned Sole Arbitrator in the arbitration proceedings between M/s Virender Khanna and Associates and Airports Authority of India has given a contrary finding to that given by the Learned Sole Arbitrator Sh. H.S. Dogra in the arbitration proceedings between the Petitioner and the Respondent herein. Copy of the interim award dated 16.10.2015 is annexed herewith and marked as Annexure S-1.
10. That after receipt of the interim award dated 16.10.2015, the Competent Authority considered both the awards and has taken a decision not to implement the said Settlement Agreement entered into between the parties herein.
15. Mr.Rajiv Virmani, learned Senior counsel appearing on behalf of the respondent submits that the respondent is not a party to the arbitration proceedings between the petitioner and the third party who was awarded the work for International Airport at Calcutta. It is also submitted by Mr.Virmani that the stand now taken by the petitioner had already been argued before the Arbitral Tribunal and the said plea of the petitioner was rejected. He submits that despite of having the full knowledge of all the facts and circumstances from the year 2007, the Settlement Agreement between the parties is arrived at after passing the proper resolution and the same is duly signed by the parties after filing the objections under Section 34 of the Act. Therefore, there is no impediment of any nature not to honour the Settlement Agreement by the petitioner. As the petitioner is not honouring the same, the present objection petition is liable to be dismissed and in case, the petitioner is ready to honour the same, the said terms are binding upon the parties.
16. Learned counsel for the respondent submits that the statement made in the said paras 8 to 10 of the affidavit for not honouring the settlement is totally untenable and the petitioner is bound to honour the Settlement Agreement dated 28th September, 2015.
17. Learned Senior counsel appearing on behalf of the petitioner submits that the settlement agreement arrived can be implemented however, he does not dispute the validity of execution of the Settlement Agreement as well as the Resolution passed by the petitioner for the purpose of settlement. He also admitted the fact that correspondences were exchanged between the parties prior to execution of settlement. He also does not deny the terms and conditions mentioned in the Settlement Agreement. His line of filed by the petitioner. The learned Senior counsel for the petitioner admits that the respondent is not a party in the said pending proceedings wherein M/s Virender Khanna and Associates have filed the objections under Section 34 of the Act challenging the Award published against them. However, he submits that once the Arbitral Tribunal had passed the Award in favour of the petitioner, the petitioner took a decision not to implement the said Settlement Agreement executed between the parties. Under these circumstances, he submits that the petitioner is not inclined to honour the said Settlement Agreement dated 28th September, 2015.
18. After having heard the learned counsel for the parties and having considered the correspondences exchanged between the parties, prior and after the settlement arrived at between them, coupled with the Settlement Agreement itself, I am of the considered view that the prayer made in the application being I.A. No.8936/2016 is liable to be allowed, for the following reasons:-
(i) Admittedly, the objections under Section 34 of the Act were filed by the petitioner in the Registry on 29th June, 2015. There were negotiations between the parties for settlement. Undisputedly, the correspondences were exchanged between the parties in this regard. It is not denied by the petitioner that before the settlement, the Resolution was also passed by the petitioner. The Settlement Agreement was duly signed by the parties. The factum of the same has not been denied.
(ii) Section 19 of the Indian Contract Act reads as under:-
19. Voidability of agreements without free consent. When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.
A party to contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.
Exception. If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.
Explanation. A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such misrepresentation was made, does not render a contract voidable.
(iii) There is no allegation of fraud, coercion and misrepresentation made by the petitioner that the Settlement Agreement is arrived under some pressure. The mere allegation is that, in other arbitration proceedings where the Award has been passed in favour of the petitioner against the third party, the award rendered in the present case is against the petitioner. As the respondent was connected with the work given to third party also as amendment of the contract therefore, the petitioner is now ready to pay the settlement award.
(iv) With regard to the statements made in paras 8 and 9 of the affidavit filed by the petitioner as per order dated 2nd O.M.P. No.431/2015 Page 12 of 14 November, 2015, the said aspect has been dealt with in the impugned Award published in favour of the respondent. Para (iii) at page 13 and para (vi) at page 16 of the Award dated 23rd March, 2015 are reproduced here as under:-
(iii) The respondents in their document D-I have contended that there was an inadvertent mistake of fact in clause 2.2 of the agreement which upon noticing was rectified vide their office letter dated 24th January 2011 correcting the entitlement to 5% professional fee of the estimated cost or awarded cost whichever is lower. They further submitted that the inadvertent mistake of fact and correction thereof was in the light of the decision of 10th board meeting held on 17.05.2007 of AAI where in it was specifically resolved that the consultant's fee of 5% shall be of estimated costs or the awarded costs whichever is lower. The respondent further stated that it is to be noted that upto 5 th stage of work the professional fee of 5% is paid on rough estimate cost basis and for that reason the inadvertent mistake could not be detected. The Claimant is taking undue advantage of mistake of fact in getting the said term applicable as mistakenly typed in the agreement dated 21st August 2007. The Claimant has already been paid an excess fee of Rupees 3.79 crores upto stage 6 (b) (ii). Therefore the claim of the Claimant is untenable. This amount is also their counter claim.
x x x x x
(vi) After carefully going through all the documents and records produced by the parties and hearing at length both the parties, I have come to the following conclusion. It is undisputed that clause 2.2 of the agreement between the parties clearly stipulates that "In consideration of the professional O.M.P. No.431/2015 Page 13 of 14 services rendered by the consultant, he shall be paid a professional fee of 5% of the actual cost of the work or the awarded cost whichever is lower of the sub head of the works for which consultant has rendered professional services". This contract was entered into on 21st August 2007 whereas the board meeting of AAI is stated to have been held on 17 th May 2007 i.e. nearly three months prior to the signing of the agreement. Since the decision of the board was well known to the respondents as on the date of signing of this agreement, the respondents could not explain or place before me any documents or circumstances explaining as to how this clause got written differently in the contract document in the first place. Further a careful study of the contract document reveals that similar provisions (as at clause 2.2) are repeated at least at two more places in the contract. At clause 4.1, the contract states that "the fee payable to the consultant shall be computed on the actual cost of the works or the awarded cost whichever is lower". Again at sub clause 4.l(vi) relating to the payments at stage 6 and 7 it states "on awarded cost or actual cost whichever is lower of the packages specified in para 2.20 of Annexure A". It therefore appears that the contract document was framed with the clear intent and understanding that the fee is to be paid on the basis of lower of the awarded cost or the actual cost since this aspect is reflected at least at three different clauses in the contract document. This therefore cannot be accepted as an inadvertent error or a typing mistake as argued by the Respondents.
19. It is evident that despite the petitioner was aware about all these circumstances, still the petitioner willingly settled the disputes with the respondent. There was no pressure from any quarter to settle the disputes with the respondent. The intention of the petitioner was thus bonafide. It appears that after the Settlement Agreement when the award was passed in favour of the petitioner, the petitioner had changed its mind. Had the respondent was a party in the said arbitration proceedings, the position would have been different to some extent, however, now it is difficult for the petitioner to change its cards. It is always open for the petitioner to record the amount if any liabilities are fastened against the petitioner in other proceedings of Section 34, although the respondent is not a party and it is not proper to express any opinion in this regard.
20. As far as the present petition is concerned, either the petitioner should agree with the terms and conditions of the settlement within the period of four weeks, otherwise, the objections of the petitioner shall be treated as dismissed, as the award even otherwise is well considered and does not suffer from any infirmity. Had the position was otherwise, the petitioner ought not to have settled the disputes with the respondent.
21. The petition is accordingly disposed of so as the pending applications.
22. As far as the pending objections filed by M/s Virender Khanna and Associates (who is a third party in the present case) are concerned, the same would be decided as per its own merits without any influence of my judgment, as the findings are mainly arrived on the basis of settlement and such situation is not available in that case.
23. No costs.