Dharmendra Kumar Srivastava And Another Vs Union of India (Allahabad High Court)
Summary: The Allahabad High Court allowed the application under Section 11(6) of the Arbitration and Conciliation Act, 1996 and appointed a former Judge of the High Court as Sole Arbitrator to adjudicate disputes arising from a railway construction contract, including the applicant’s claim for reimbursement of GST of Rs. 50,27,115/-. The Court held that the disputed circumstances surrounding withdrawal of the earlier arbitration demand and issuance of the No Claim Certificate could not be conclusively adjudicated at the Section 11 stage.
The applicant had been awarded the work pursuant to Tender No. NEF/LJN/2016/21 Item-06 dated 06.10.2016. The Letter of Acceptance dated 20.03.2017 recorded a contract value of Rs. 9,45,15,300/-, following which Contract Agreement No. DRM/LJN/11/2018 dated 31.01.2018 was executed for construction of Limited Height Subways in lieu of five level crossings in the Gonda-Anandnagar (BG) Section. According to the applicant, the work was delayed because the Railway failed to hand over the site free from encumbrances and eight extensions of time were granted. The applicant claimed price variation of Rs. 93,30,289.53/- and GST reimbursement of Rs. 50,27,115/-.
The applicant contended that the GST reimbursement was required in view of the Railway Board letter dated 27.10.2017 and that the respondents relied upon an unsigned and uncommunicated Joint Procedural Order (JPO). The applicant further alleged that when a consolidated claim of Rs. 2,25,36,000.53/- was pursued, the Senior Divisional Engineer represented that dues would be released only if the arbitration reference was withdrawn. The applicant stated that, being in financial distress, he withdrew the reference on 03.11.2023 on that assurance. Thereafter, the Earnest Money, Security Deposit, Performance Bank Guarantee and PVC amount were released, but the GST claim remained unpaid.
The respondents disputed the alleged assurance and maintained that the applicant voluntarily withdrew his earlier arbitration demand. They relied upon the No Claim Certificate, the release of the contractual securities and the JPO, contending that the applicant was barred from making further claims after the final bill and No Claim Certificate. They also submitted that the applicant had not complied with Paragraph 3.4 of the Railway Board letter dated 27.10.2017 and that the Supplementary Agreement had never become operative because it had not been signed by the Railway authority. Reliance was also placed on the Supreme Court decision in HPCL Bio-Fuels Ltd. v. Shahji Bhanudas Bhad to contend that a fresh Section 11 application after unconditional withdrawal of an earlier application without liberty was not maintainable.
The Court examined the limited scope of scrutiny under Section 11 of the Arbitration and Conciliation Act, 1996. Referring to National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., the Court noted that issues concerning discharge, accord and satisfaction and the circumstances in which a discharge voucher or similar document was executed may require determination by the arbitral tribunal where disputed questions of fact arise.
The Court also relied upon Vidya Drolia v. Durga Trading Corporation, observing that where referral-stage scrutiny is inconclusive or requires detailed examination, the matter should ordinarily be left to the arbitral tribunal. The Court held that the dispute regarding the nature of the applicant’s withdrawal was seriously contested and therefore could not be conclusively determined in the Section 11 proceedings.
The Court considered the respondents’ reliance on HPCL Bio-Fuels Ltd. v. Shahji Bhanudas Bhad. It accepted the principle that an unconditional withdrawal of an earlier Section 11 application without reservation of liberty ordinarily operates against a subsequent application. However, it held that the principle could not be mechanically applied where the withdrawal itself was alleged to have been procured through coercion or economic duress as a condition for release of admitted and undisputed dues. Whether the withdrawal was voluntary or vitiated by coercion was a factual issue requiring evidence and findings by the arbitral tribunal.
The Court similarly referred to Indian Oil Corporation Limited v. SPS Engineering Limited and held that questions such as res judicata and the maintainability of a claim based on matters arising from an earlier arbitration are ordinarily for the arbitral tribunal to determine, rather than for threshold rejection in a Section 11 proceeding.
The Court further relied upon M/S Mayavati Trading Pvt. Ltd. v. Pradyuat Deb Burman and Duro Felguera, S.A. v. Gangavaram Port Ltd. in emphasising the narrow scope of examination at the appointment stage. The Court also noted that this position had been reiterated by the Supreme Court in GOQII Technologies Pvt. Ltd. v. Sokrati Technologies Pvt. Ltd..
On the facts, the Court found prima facie existence of the arbitration clause and noted that the parties had not been able to appoint a consensual arbitrator. The dispute concerning entitlement to and quantum of GST reimbursement, including the applicability and binding effect of the unsigned JPO, was held to constitute a substantive dispute arising out of the Contract Agreement and to fall within the arbitration clause.
The Court expressly declined to render any final conclusion affecting the merits of the GST claim or the respondents’ objections. It left open all objections available to the parties under the Arbitration and Conciliation Act, 1996. In view of the peculiar facts and the Delhi High Court decision in Pradeep Dass Vs. Splendor Landbase Limited & Others, the requirement of a separate notice under Section 21 was dispensed with.
With the consent of the parties, the Court proposed Hon’ble Mr. Justice Ravindra Nath Kakkar, Former Judge of the High Court, Allahabad, as Arbitrator. The Arbitrator was held entitled to fee and expenses in accordance with the Fourth Schedule of the Arbitration & Conciliation Act, 1996. The application was accordingly allowed.
Cases Discussed
- National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267
- Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1
- HPCL Bio-Fuels Ltd. v. Shahji Bhanudas Bhad, decided on 07.11.2024
- Indian Oil Corporation Limited v. SPS Engineering Limited, (2011) 3 SCC 507
- M/S Mayavati Trading Pvt. Ltd. v. Pradyuat Deb Burman, Civil Appeal No. 7023 of 2019, decided on 05.09.2019
- Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729
- GOQII Technologies Pvt. Ltd. v. Sokrati Technologies Pvt. Ltd., (2025) 2 SCC 192
- Pradeep Dass Vs. Splendor Landbase Limited & Others, 2026 SCC OnLine Del 3544
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard learned counsel for the applicant and learned counsel for the opposite party(s).
2. The present application has been filed seeking appointment of a Sole Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, for adjudication of disputes arising out of Contract Agreement No. DRM/LJN/11/2018 dated 31.01.2018, executed for construction of Limited Height Subways in lieu of five level crossings (LC Nos. 90/C, 93/C, 124/C, 129/C and 135/C) in the Gonda-Anandnagar (BG), more particularly with reference to the applicant’s claim for reimbursement of GST amounting to Rs. 50,27,115/-, which claim, having been pursued through the applicant’s letters dated 28.08.2022 and 15.10.2025 and met with the respondents’ letters dated 03.11.2023 and 27.05.2024, culminated in the order dated 22.01.2026 passed by Respondent No. 1 rejecting the applicant’s demand for re-arbitration.
3. The counsel for the applicant submits that the applicant, being the lowest bidder in Tender No. NEF/LJN/2016/21 Item-06 dated 06.10.2016, was awarded the work vide Letter of Acceptance dated 20.03.2017 for a contract value of Rs. 9,45,15,300/-, pursuant to which Contract Agreement No. DRM/LJN/11/2018 dated 31.01.2018 was executed for construction of Limited Height Subways in lieu of five level crossings in the Gonda-Anandnagar (BG) Section, and the work after being granted eight extensions of time on account of the Railway’s failure to hand over the site free from encumbrances, stood physically completed on 09.08.2021. He further submits that under para 22(d) of the Standard General Conditions of Contract, Price Variation was payable for every such extended period, of which the applicant was wrongly deprived to the extent of Rs. 93,30,289.53/-, and that, in addition, the competent authority failed to release the applicable GST of Rs. 50,27,115/- despite Railway Board letter dated 27.10.2017 mandating reimbursement of the GST impact on contracts awarded prior to the GST regime, and despite the Joint Procedural Order relied upon by the respondents having never been communicated to the applicant in writing, contrary to the General Conditions of Contract, 2014.
4. The counsel for the applicant further submits that the applicant pressed his consolidated claim of Rs. 2,25,36,000.53/- vide reference dated 26.08.2022, in regard to which the Senior Divisional Engineer categorically informed the applicant that the Department was ready to pay his dues only if he first withdrew the said reference, failing which not a single penny would be paid after which the applicant, being in great financial distress withdrew the reference on 03.11.2023 solely upon this assurance, pursuant to which the Earnest Money, Security Deposit, Performance Bank Guarantee and PVC amount were duly released, but the GST claim alone was withheld on the strength of an unsigned and uncommunicated JPO. Не further submits that GST being a statutory levy, its reimbursement is restitution and not compensation, and therefore falls outside any embargo created by the No Claim Certificate. Hence, the present application.
5. Per Contra, learned counsel for the respondents submits that as per Note 6 of the Letter of Acceptance, the stipulated completion period was 12 months, i.e., up to 19.03.2018 however, the work was physically completed on 15.08.2021 with the final bill paid on 23.03.2022. Further, the applicant voluntarily sought withdrawal of the arbitration demand raised on 23.08.2022, which was accordingly treated as withdrawn vide office letter dated 27.05.2024, whereafter, upon the applicant’s own submission of a No Claim Certificate, the EMD, Security Deposit, Performance Bank Guarantee and PVC amount of Rs. 79,57,761.64/- were duly released, and it is specifically denied that any assurance regarding future payment of GST was ever given by Respondent No. 2. He further submits that the applicant never complied with Paragraph 3.4 of the Railway Board letter dated 27.10.2017, which requires a Chartered-Accountant-certified worksheet of pre- and post-GST tax liability, and that under Paragraph 12 of the JPO, implemented from 21.08.2018, a contractor is barred from claiming any compensation after submission of a No Claim Certificate and passing of the final bill, which the applicant admittedly did. Also, the Supplementary Agreement, though signed by the applicant was never signed by the Railway authority and therefore, never came into force as required by Paragraph 8.3 of the JPO. He further submits that in the event, since the applicant withdrew his earlier Section 11(6) demand on 03.11.2023 without reserving any liberty to revive it, the fresh arbitration demand dated 15.10.2025 confined to the GST claim is squarely barred by the ratio of the Hon’ble Supreme Court in HPCL Bio-Fuels Ltd. v. Shahji Bhanudas Bhad, decided on 07.11.2024, and Respondent No. 1 therefore, rightly rejected the claim for re-arbitration rendering the present application not maintainable and liable to be dismissed.
6. After hearing learned counsel for the parties, the Court has perused the record.
7. The record shows that the parties entered into Contract Agreement containing an arbitration clause providing for reference of disputes to arbitration in terms of the Arbitration and Conciliation Act, 1996. It is not in dispute that the applicant raised a claim for reimbursement of GST amounting to Rs. 50,27,115/-, and that the applicant’s earlier reference/arbitration demand was withdrawn by the applicant himself vide letter dated 03.11.2023, without any liberty being reserved to revive the same. It is further not in dispute that, consequent upon such withdrawal and the applicant’s submission of a No Claim Certificate, the EMD, Security Deposit, Performance Bank Guarantee and the PVC amount were paid to the applicant, but the GST claim of Rs. 50,27,115/- was never satisfied. It is also not in dispute that the applicant, on 15.10.2025, raised a fresh demand for arbitration confined to the GST claim, which was declined by the respondents.
8. It is settled in law that the scope of examination by a court while exercising power under Section 11(6) of the Arbitration and Conciliation Act, 1996 is confined to the prima facie existence of a valid arbitration agreement, and that all other contentious issues including issues of accord and satisfaction, discharge of contract, and limitation are, save in the clearest of cases, to be left for determination by the Arbitral Tribunal.
9. The Hon’ble Supreme Court in National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267, while classifying the categories of cases that may arise at the referral stage, held as under:
“21. It is thus clear that when a contract contains an arbitration clause and any dispute in respect of the said contract is referred to arbitration without the intervention of the court, the Arbitral Tribunal can decide the following questions affecting its jurisdiction: (a) whether there is an arbitration agreement; (b) whether the arbitration agreement is valid; (c) whether the contract in which the arbitration clause is found is null and void and if so whether the invalidity extends to the Arbitration clause also. It follows therefore that if the respondent before the Arbitral Tribunal contends that the contract has been discharged by reason of the claimant accepting payment made by the respondent in full and final settlement, and if the claimant counters it by contending that the discharge voucher was extracted from him by practicing fraud, undue influence, or coercion, the arbitral tribunal will have to decide whether the discharge of contract was vitiated by any circumstance which rendered the discharge voidable at the instance of the claimant. If the arbitral tribunal comes to the conclusion that there was a valid discharge by voluntary execution of a discharge voucher, it will refuse to examine the claim on merits, and reject the claim as not maintainable. On the other hand, if the arbitral tribunal comes to the conclusion that such discharge of contract was vitiated by any circumstance which rendered it void, it will ignore the same and proceed to decide the claim on merits.”
10. Similary, Hon’ble the Supreme Court in Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 has held that, at the referral stage, the court’s scrutiny is limited and, applying the maxim “when in doubt, do refer” any doubt as to the arbitrability or maintainability of a dispute should ordinarily be resolved in favour of reference, leaving the issue to be authoritatively determined by the Arbitral Tribunal in exercise of its competence under Section 16 of the Act.
11. The judgment relied upon by the respondents, in HPCL Bio-Fuels (supra), lays down the salutary principle that a fresh application under Section 11(6), filed after unconditional withdrawal of an earlier such application without reservation of liberty, is ordinarily not maintainable. However, that principle pre-supposes a withdrawal that is itself unimpeachable, and does not address a situation where the withdrawal is alleged to have been procured by coercion or economic duress exercised by the counter-party as a precondition to release of the applicant’s admitted and undisputed dues.
12. The ratio of HPCL Bio-Fuels Ltd. (supra), relied upon by the respondents to non-suit the applicant, cannot be applied mechanically so as to shut out the claim without first determining whether the underlying withdrawal was voluntary or vitiated by coercion. Such determination must be left to the Arbitral Tribunal, which alone is competent to record evidence and return findings on such disputed questions of fact.
12.1 In the present application, the contentions of both the parties regarding the nature of withdrawal is disputed, thus the same is to be determined by the arbitral tribunal.
13. Hon’ble Supreme Court in the case of Indian Oil Corporation Limited versus SPS Engineering Limited, reported in (2011) 3 SCC 507, has held as under:
“16. The question whether a claim is barred by res judicata, does not arise for consideration in a proceeding under Section 11 of the Act. Such an issue will have to be examined by the Arbitral Tribunal. A decision on res judicata requires consideration of the pleadings as also the claims/issues/points and the award in the first round of arbitration, in juxtaposition with the pleadings and the issues/points/claims in the second arbitration. The limited scope of Section 11 of the Act does not permit such examination of the maintainability or tenability of a claim either on facts or in law. It is for the Arbitral Tribunal to examine and decide whether the claim was barred by res judicata. There can be no threshold consideration and rejection of a claim on the ground of res judicata, while considering an application under Section 11 of the Act.”
13.1 The Apex Court in the aforesaid judgment of Indian Oil Corporation (supra) has specifically held that the claim whether barred by res judicata does not arise for considering in proceedings under Section 11 of the Arbitration and Conciliation Act, 1996.
14. As per the above discussion, the court is of the view that the applicant’s allegation that the withdrawal of the reference dated 03.11.2023 and the consequent No Claim Certificate were procured by the respondents on the condition of release of the applicant’s admitted dues upon such withdrawal, though specifically denied by the respondents, discloses a seriously disputed question of fact touching upon the voluntariness of the withdrawal and the discharge, which this Court, exercising the limited jurisdiction under Section 11(6) is neither equipped nor entitled to conclusively adjudicate at this stage. The dispute regarding entitlement to, and quantum of, reimbursement of GST including the applicability and binding effect of the unsigned JPO constitutes a substantive dispute arising out of Contract Agreement falls squarely within the scope of the arbitration clause and is consequently arbitrable.
15. Having heard learned counsel for the parties, the scope of the present proceedings under Section 11 of the Act does not require any elaboration in view of that position in law having been made crystal clear by a recent three judge decision of the Supreme Court in the case of M/S Mayavati Trading Pvt. Ltd. Vs. Pradyuat Deb Burman, Civil Appeal No. 7023 of 2019, decided on 05.09.2019 in which it has been held as below:
“This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgment as Section 11(6A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment Duro Felguera, S.A. (supra) — see paras 48 & 59.”
16. While laying down that law, the Supreme Court had itself referred to paragraph nos. 48 & 59 of its earlier decision in the case of Duro Felguera, S.A. Vs. Gangavaram Port Ltd., (2017) 9 SCC 729.
17. That position in law has been reiterated in a recent decision of the Supreme Court in GOQII Technologies Pvt. Ltd. Vs. Sokrati Technologies Pvt. Ltd., (2025) 2 SCC 192.
18. In the facts of the present case, on prima facie basis, it has to be accepted that there exists an arbitration clause, between the parties. Also, it is clear that the parties have not been able to appoint consented arbitrator and therefore, the appointing authority has to be assumed by this Court upon the present application.
19. At the same time, no final conclusion is being drawn as may affect the merits of the claim. That matter would remain to be considered by the appropriate forum at the appropriate stage, upon claim, objection, challenge or appeal being filed. Thus, amongst others it would remain open to the opposite party to raise all objections as the Act permits.
20. Leaving that course completely open to the respective parties, at present, only a forum is being provided for adjudication of a claim proposed to be raised and resisted, in accordance with the law.
21. Accordingly, in view of the peculiar facts of the present case as well as the judgement of the Delhi High Court in Pradeep Dass Vs. Splendor Landbase Limited & Others [2026 SCC OnLine Del 3544], the requirement of a separate notice under Section 21 of the Act is dispensed with.
22. With the consent of the parties, this Court proposes the name of Hon’ble Mr. Justice Ravindra Nath Kakkar, Former Judge of High Court, Allahabad, R/o H.No. 10/13/1, Hastings Road, Prayagraj (Mobile No. 7310434417), to act as an Arbitrator for resolving the disputes between the parties.
23. The learned Arbitrator shall be entitled to the fee and expenses in accordance with the Fourth Schedule of the Arbitration & Conciliation Act, 1996.
24. The present arbitration application stands allowed.
25. The Registry is directed to forward a copy of this order to the learned Arbitrator through all permissible modes, including the electronic modes.
