M/S Satya Prakash Builders Ltd v. Party

"6. That the contents of paragraph no. 8 as alleged are denied. The Claimant after receipt of his consideration, made further illicit demands for payments that were never owed to him. However, the Respondents made a decision upon his illicit claims for further consideration vide memo dated 02.08.2021, 07.09.2021 and 26.10.2021 which are appended to Annexure Nos. 3, 4 and 5 of the petition. wherein enforcement of full payments have been made as per work executed on site thereby marking "No dues" left on Respondent's account. It is further stated that the Claimant was being paid as per the work executed from time to time. There were never any dues kept for the work executed which is well established as each and every running bill was accepted by the applicant without any protest. It is further stated that there were never any representation from the Claimant's side regarding unpaid payments during course of execution. The Claimant also signed the Supplementary Agreement at the time of passing of Final bill in which it is clearly mentioned "that the sums mentioned above full and final satisfaction of all its dues and claims under the said principal agreement and agreed under the agreement, the said principal agreement shall stand finally discharged and rescinded all the terms and conditions sunderstood by and between the parties that the arbitration clause contained in the said principal agreement shall cease to have any effect and/or shall be deemed to be non existing for all purposes". A photostat copy of reply to claim demand vide letter dated 02.08.2021, 07.09.2021 and 26.10.2021 is being filed herewith and marked as Annexure CA-2, CA-3, CA-4. A photostat copy of the Supplementary Agreement is being filed herewith and marked as Annexure CA-5."

5. Responding to that Counter Affidavit, the applicant has filed a Rejoinder Affidavit. In paragraph no.6, it has been stated, as below: "6. That, in reply to the para 6 of the Counter, it is submitted that contentions of the Respondent are totally wrong and baseless, thus emphatically denied, since claimant has demanded only balance payments lying with the Respondent, but despite repeated request and reminders, when Respondent didn't release the same, claimant had to approach through legal channel, for recovery of their huge balance payment, "No dues" Certificate as alleged to, has been got signed by the claimant, was not at all voluntary, rather it was under duress compulsion and undue pressure "also against the Claimant's free will" and under the undue influence of the Respondent, besides financial constraints as were being faced by the claimant/applicant, since respondent were adamant, not to issue completion certificate, as also not to release any payments or for that matter, denied to release security deposit, performance guarantee etc. etc. until and unless claimant would sign on all the dotted lines of the blank forms/paper etc. being given to the claimant by the respondent, thus 3 ARCO No. 19 of 2022 respondents in the above circumstances claimant's left with no other alternative, except to sign on all those dotted lines of blank papers etc. as desired and directed by the respondent, which was totally illegal and taken as tantamount to be signed as "Under Protest" and thus contents of para 8 of the application are reiterated, which are correct and based on records, letter dated 02.08.2021, 07.09.2021 and however 26.10.2021, has been suitably replied by the applicant/ claimant vide their letter dated 22.08.2021, 20.09.2021 & 11.11.2021, which are self- explanatory, copies of all above letters are being collectively filed and marked as Annexure No. RA1 to this Rejoinder and thus Arbitration clause as are provided under the contract agreement are still valid and exist, as it is, and accordingly applicant on their part demanded for appointment of arbitrator in the matter as per the law prevailing for such type of matters."

6. Thus, the issue between the parties boils down to existence or otherwise of Supplementary Agreement executed between the parties (whereunder the applicant undeniably received payment of Rs. 39,17,375.18/-), and whether by executing the Supplementary Agreement, the applicant issued its no dues certificate, accepting that payment as full and final and dissolved the arbitration clause under the original agreement.

7. Shri Pranab Kumar Ganguli, learned counsel for the applicant would submit, there is no Supplementary Agreement. The applicant had completed the work in the year 2019. Till then, it had only received part payment Rs.7,49,89,300.86/-. The balance remained outstanding, for two years. The applicant pressed the non-applicant/Indian Railways to make the balance payment. Part payment was made the year 2022, amounting Rs.39,17,375.18/- only. The balance amount of Rs.38,73,268/- is outstanding and other claims also have remained pending. In such circumstances, the applicant has rightly invoked the arbitration clause.

8. At this stage, Shri Ganguly, learned counsel has relied on the decision of the Supreme Court in Arabian Exports Private Ltd vs National Insurance Co. Ltd, 2025 INSC 630. Heavy reliance has been placed on paragraph Nos. 51 and 52, which reads as under: "51. It is now well-settled law that, at the stage of Section 11 application, the referral courts need only to examine whether the arbitration agreement exists - nothing more, nothing less. This approach upholds the intention of the parties, at the time of entering into the agreement, to refer 4 ARCO No. 19 of 2022 all disputes arising between themselves to arbitration. However, some parties might take undue advantage of such a limited scope of judicial interference of the referral courts and force other parties to the agreement into participating in a time-consuming and costly arbitration process. This is especially possible in instances, including but not limited to, where the claimant canvasses either ex facie time-barred claims or claims which have been discharged through “accord and satisfaction”, or cases where the impleadment of a non-signatory to the arbitration agreement is sought, etc. (2025) 1 SCC 502.

52. In order to balance such a limited scope of judicial interference with the interests of the parties who might be constrained to participate in the arbitration proceedings, the arbitral tribunal may direct that the costs of the arbitration shall be borne by the party which the tribunal ultimately finds to have abused the process of law and caused unnecessary harassment to the other party to the arbitration."

9. Submission of Shri Ganguly is, the said Supplementary Agreement being fictitious document, it may not be seen at this stage, in face of specific pleadings exchanged between the parties.

10. On the other hand, Ms. Tanisha, learned counsel for the non-applicant would submit, though an arbitration clause existed of the original agreement, no arbitrable disputes exists inasmuch as the Supplementary Agreement executed on 27.02.2021 clearly provided that full and final payment had been made to the applicant and the arbitration clause contained in the original agreement stood rescinded.

11. Having heard learned counsel for the parties and having perused the record, in the present case, Clause 43(2) of the original agreement dated

14.02.2015, reads as below: "43.(2) Signing Of "No Claim" Certificate: The Contractor shall not be entitled to make any claim whatsoever against the Railway under or by virtue of or arising out of this contract, nor shall the Railway entertain or consider any such claim, if made by the Contractor, after he shall have signed a "No Claim" Certificate in favour of the Rallway in such form as shall be required by the Railway after the works are finally measured up. The Contactor shall be debarred from disputing the correctness of the items covered by "No Claim" Certificate or demanding a dearance to arbitration in respect thereof." 5 ARCO No. 19 of 2022

12. Further, the Supplementary Agreement, which the applicant claims to have signed under duress provides as below: "It is further agreed and understood by and between the parties that in consideration of the payment already made under the agreement, the said principal agreement, shall stand finally discharged and rescinded all the terms and conditions including the arbitration clause. It is further agreed and understood by and between the parties that in consideration of the payment already made, under the agreement, the said principal agreement shall stand finally discharged and rescinded all the terms and conditions, including the arbitration clauses. It is further agreed and understood by and between the parties that the arbitration clause contained in the said principal agreement shall cease to have any effect and/or shall be deemed to be non-existant for all purposes."

13. It would be another thing if the applicant contended he never executed the document described as Supplementary Agreement but it is a completely different fact that the applicant claims, he was forced to execute that document. Pleadings made in paragraph no.6 of the Rejoinder Affidavit clearly disclose that a payment dispute had arisen between the parties. In that the applicant was pursuing the Indian Railways to make the balance payment. In that context, it has been stated, the applicant was left with no other alternative but to sign on those the dotted line that too on blank papers, as desired by the non-applicant.

14. In compliance to the earlier orders, Ms. Tanisha has produced the original record including the Supplementary Agreement dated 14.02.2015. It is not a document that may be described as a document that may have been signed on a blank sheet of paper, as suggested by Shri Ganguly. First, it is a document that is a printed proforma of a Supplementary Agreement, interspersed with blank spaces, ostensibly meant to be filled by hand. Second, all blanks are filled by hand. It also bears the signatures of the executing parties, including the applicant. Existence of that writing and the signatures of the applicant, are undisputed.

15. Once it is an established fact that the applicant had thus executed the Supplementary Agreement, it may not allow the applicant to now turn around and claim that that document is not valid. It may be noted, it bears the date of execution as 14.02.2015. That is the date of the original agreement. For whatever reason that error may have been caused, this much 6 ARCO No. 19 of 2022 is admitted that the said Supplementary Agreement was drawn well after that date. In fact on the own saying of the applicant, that agreement was drawn after 2019 when the payment dispute arose. It is also the case of the applicant that he was forced to sign that Supplementary Agreement (on blank document), yet, it received the payment without any objection. Payment was made between the months of February-March, 2021 amounting to Rs.39,17,375.18/-. Therefore, there is clear evidence available both in terms of document relied by the non-applicant as also the fact pleadings made by the applicant that Supplementary Agreement relied by the applicant, was drawn in February, 2021 and not on 14.02.2015 which date appears at the beginning of the agreement (by way of recital as the date of execution of that agreement). That is a clear typographical error.

16. The signatures of the applicant appended to the Supplementary Agreement are also admitted. What the applicant states is, he had been forced to affix that signature. At the same time, he maintained, he was in dire need of money for which reason, he accepted the payment on the terms forced on it by the non-applicant.

17. The above pleading itself clearly indicates existence of negotiations and receipt of payment. Once, by way of result of such negotiations, an agreement had been drawn and payment had been made, the fact that the applicant or one party may later feel dissatisfied with the payment, may itself not give rise to an arbitral dispute. Existence and completion of negotiations and payment made as a result thereof against written document executed is prima facie evidence of settlement of the dispute between the parties, to their satisfaction.

18. Neither there is any protest recorded on the Supplementary Agreement nor there is any letter of protest issued by the applicant immediately after executing the Supplementary Agreement and before encasing the payment. It is after receiving that payment, the applicant issued the letter of protest on

02.03.2021.

19. Once the Supplementary Agreement recites that upon execution of the same, the arbitration clause under the original agreement shall stand "finally discharged and rescinded" and that clause shall "cease to have any effect and/or shall be deemed to be non-existent for all purposes", it is 7 ARCO No. 19 of 2022 not possible to refer the dispute claimed to exist (by the applicant), to arbitration under a declaration is first made that the Supplementary Agreement is question, is a nullity. That it not-on the face of it, as it admittedly because the signature of the applicant. To say, the execution, existence and enforcebility of that Supplementary Agreement may examine by the arbitration is also not permissible, in absence of any arbitration clause, in that Supplementary Agreement.

20. In National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267, it has been reasoned, where parties to the contract (original) by mutual agreement except performance of altered, modified and substantive obligation and consequently may cancel the agreement (original) and also confirm that there are no outstanding claims or disputes, the arbitration agreement (in the earlier agreement), cannot be invoked to seek reference of any dispute to arbitration. In that regard, it was observed as below: "29.It is thus clear that the arbitration agreement contained in a contract cannot be invoked to seek reference of any dispute to arbitration, in the following circumstances, when the contract is discharged on account of performance, or accord and satisfaction, or mutual agreement, and the same is reduced to writing (and signed by both parties or by the party seeking arbitration) : (a) Where the obligations under a contract are fully performed and discharge of the contract by performance is acknowledged by a full and final discharge voucher/receipt. Nothing survives in regard to such discharged contract. (b) Where the parties to the contract, by mutual agreement, accept performance of altered, modified and substituted obligations and confirm in writing the discharge of contract by performance of the altered, modified or substituted obligations. (c) Where the parties to a contract, by mutual agreement, absolve each other from performance of their respective obligations (either on account of frustration or otherwise) and consequently cancel the agreement and confirm that there is no outstanding claims or disputes." (emphasis supplied)

21. Seen in that light, no protest exists on the Supplementary Agreement or on the payment voucher in lieu of payment received by the applicant. Thus, it is not established that any dispute survived as may require reference to 8 ARCO No. 19 of 2022 appoint arbitrator, after the parties executed the Supplementary Agreement and after the applicant received full and final payment, thereunder.

22. In view of the arbitration clause itself having eclipsed in terms, no reliance may be passed in the case of Arabian Exports Private Ltd (Supra).

23. The application fails and is, accordingly, dismissed.

24. No order as to costs. September 19, 2025 Anurag/- (Saumitra Dayal Singh,J.) ANURAG JAISWAL High Court of Judicature at Allahabad

"6. That the contents of paragraph no. 8 as alleged are denied. The Claimant after receipt of his consideration, made further illicit demands for payments that were never owed to him. However, the Respondents made a decision upon his illicit claims for further consideration vide memo dated 02.08.2021, 07.09.2021 and 26.10.2021 which are appended to Annexure Nos. 3, 4 and 5 of the petition. wherein enforcement of full payments have been made as per work executed on site thereby marking "No dues" left on Respondent's account. It is further stated that the Claimant was being paid as per the work executed from time to time. There were never any dues kept for the work executed which is well established as each and every running bill was accepted by the applicant without any protest. It is further stated that there were never any representation from the Claimant's side regarding unpaid payments during course of execution. The Claimant also signed the Supplementary Agreement at the time of passing of Final bill in which it is clearly mentioned "that the sums mentioned above full and final satisfaction of all its dues and claims under the said principal agreement and agreed under the agreement, the said principal agreement shall stand finally discharged and rescinded all the terms and conditions sunderstood by and between the parties that the arbitration clause contained in the said principal agreement shall cease to have any effect and/or shall be deemed to be non existing for all purposes". A photostat copy of reply to claim demand vide letter dated 02.08.2021, 07.09.2021 and 26.10.2021 is being filed herewith and marked as Annexure CA-2, CA-3, CA-4. A photostat copy of the Supplementary Agreement is being filed herewith and marked as Annexure CA-5."

5. Responding to that Counter Affidavit, the applicant has filed a Rejoinder Affidavit. In paragraph no.6, it has been stated, as below: "6. That, in reply to the para 6 of the Counter, it is submitted that contentions of the Respondent are totally wrong and baseless, thus emphatically denied, since claimant has demanded only balance payments lying with the Respondent, but despite repeated request and reminders, when Respondent didn't release the same, claimant had to approach through legal channel, for recovery of their huge balance payment, "No dues" Certificate as alleged to, has been got signed by the claimant, was not at all voluntary, rather it was under duress compulsion and undue pressure "also against the Claimant's free will" and under the undue influence of the Respondent, besides financial constraints as were being faced by the claimant/applicant, since respondent were adamant, not to issue completion certificate, as also not to release any payments or for that matter, denied to release security deposit, performance guarantee etc. etc. until and unless claimant would sign on all the dotted lines of the blank forms/paper etc. being given to the claimant by the respondent, thus 3 ARCO No. 19 of 2022 respondents in the above circumstances claimant's left with no other alternative, except to sign on all those dotted lines of blank papers etc. as desired and directed by the respondent, which was totally illegal and taken as tantamount to be signed as "Under Protest" and thus contents of para 8 of the application are reiterated, which are correct and based on records, letter dated 02.08.2021, 07.09.2021 and however 26.10.2021, has been suitably replied by the applicant/ claimant vide their letter dated 22.08.2021, 20.09.2021 & 11.11.2021, which are self- explanatory, copies of all above letters are being collectively filed and marked as Annexure No. RA1 to this Rejoinder and thus Arbitration clause as are provided under the contract agreement are still valid and exist, as it is, and accordingly applicant on their part demanded for appointment of arbitrator in the matter as per the law prevailing for such type of matters."

6. Thus, the issue between the parties boils down to existence or otherwise of Supplementary Agreement executed between the parties (whereunder the applicant undeniably received payment of Rs. 39,17,375.18/-), and whether by executing the Supplementary Agreement, the applicant issued its no dues certificate, accepting that payment as full and final and dissolved the arbitration clause under the original agreement.

7. Shri Pranab Kumar Ganguli, learned counsel for the applicant would submit, there is no Supplementary Agreement. The applicant had completed the work in the year 2019. Till then, it had only received part payment Rs.7,49,89,300.86/-. The balance remained outstanding, for two years. The applicant pressed the non-applicant/Indian Railways to make the balance payment. Part payment was made the year 2022, amounting Rs.39,17,375.18/- only. The balance amount of Rs.38,73,268/- is outstanding and other claims also have remained pending. In such circumstances, the applicant has rightly invoked the arbitration clause.

8. At this stage, Shri Ganguly, learned counsel has relied on the decision of the Supreme Court in Arabian Exports Private Ltd vs National Insurance Co. Ltd, 2025 INSC 630. Heavy reliance has been placed on paragraph Nos. 51 and 52, which reads as under: "51. It is now well-settled law that, at the stage of Section 11 application, the referral courts need only to examine whether the arbitration agreement exists - nothing more, nothing less. This approach upholds the intention of the parties, at the time of entering into the agreement, to refer 4 ARCO No. 19 of 2022 all disputes arising between themselves to arbitration. However, some parties might take undue advantage of such a limited scope of judicial interference of the referral courts and force other parties to the agreement into participating in a time-consuming and costly arbitration process. This is especially possible in instances, including but not limited to, where the claimant canvasses either ex facie time-barred claims or claims which have been discharged through “accord and satisfaction”, or cases where the impleadment of a non-signatory to the arbitration agreement is sought, etc. (2025) 1 SCC 502.

52. In order to balance such a limited scope of judicial interference with the interests of the parties who might be constrained to participate in the arbitration proceedings, the arbitral tribunal may direct that the costs of the arbitration shall be borne by the party which the tribunal ultimately finds to have abused the process of law and caused unnecessary harassment to the other party to the arbitration."

9. Submission of Shri Ganguly is, the said Supplementary Agreement being fictitious document, it may not be seen at this stage, in face of specific pleadings exchanged between the parties.

10. On the other hand, Ms. Tanisha, learned counsel for the non-applicant would submit, though an arbitration clause existed of the original agreement, no arbitrable disputes exists inasmuch as the Supplementary Agreement executed on 27.02.2021 clearly provided that full and final payment had been made to the applicant and the arbitration clause contained in the original agreement stood rescinded.

11. Having heard learned counsel for the parties and having perused the record, in the present case, Clause 43(2) of the original agreement dated

14.02.2015, reads as below: "43.(2) Signing Of "No Claim" Certificate: The Contractor shall not be entitled to make any claim whatsoever against the Railway under or by virtue of or arising out of this contract, nor shall the Railway entertain or consider any such claim, if made by the Contractor, after he shall have signed a "No Claim" Certificate in favour of the Rallway in such form as shall be required by the Railway after the works are finally measured up. The Contactor shall be debarred from disputing the correctness of the items covered by "No Claim" Certificate or demanding a dearance to arbitration in respect thereof." 5 ARCO No. 19 of 2022

12. Further, the Supplementary Agreement, which the applicant claims to have signed under duress provides as below: "It is further agreed and understood by and between the parties that in consideration of the payment already made under the agreement, the said principal agreement, shall stand finally discharged and rescinded all the terms and conditions including the arbitration clause. It is further agreed and understood by and between the parties that in consideration of the payment already made, under the agreement, the said principal agreement shall stand finally discharged and rescinded all the terms and conditions, including the arbitration clauses. It is further agreed and understood by and between the parties that the arbitration clause contained in the said principal agreement shall cease to have any effect and/or shall be deemed to be non-existant for all purposes."

13. It would be another thing if the applicant contended he never executed the document described as Supplementary Agreement but it is a completely different fact that the applicant claims, he was forced to execute that document. Pleadings made in paragraph no.6 of the Rejoinder Affidavit clearly disclose that a payment dispute had arisen between the parties. In that the applicant was pursuing the Indian Railways to make the balance payment. In that context, it has been stated, the applicant was left with no other alternative but to sign on those the dotted line that too on blank papers, as desired by the non-applicant.

14. In compliance to the earlier orders, Ms. Tanisha has produced the original record including the Supplementary Agreement dated 14.02.2015. It is not a document that may be described as a document that may have been signed on a blank sheet of paper, as suggested by Shri Ganguly. First, it is a document that is a printed proforma of a Supplementary Agreement, interspersed with blank spaces, ostensibly meant to be filled by hand. Second, all blanks are filled by hand. It also bears the signatures of the executing parties, including the applicant. Existence of that writing and the signatures of the applicant, are undisputed.

15. Once it is an established fact that the applicant had thus executed the Supplementary Agreement, it may not allow the applicant to now turn around and claim that that document is not valid. It may be noted, it bears the date of execution as 14.02.2015. That is the date of the original agreement. For whatever reason that error may have been caused, this much 6 ARCO No. 19 of 2022 is admitted that the said Supplementary Agreement was drawn well after that date. In fact on the own saying of the applicant, that agreement was drawn after 2019 when the payment dispute arose. It is also the case of the applicant that he was forced to sign that Supplementary Agreement (on blank document), yet, it received the payment without any objection. Payment was made between the months of February-March, 2021 amounting to Rs.39,17,375.18/-. Therefore, there is clear evidence available both in terms of document relied by the non-applicant as also the fact pleadings made by the applicant that Supplementary Agreement relied by the applicant, was drawn in February, 2021 and not on 14.02.2015 which date appears at the beginning of the agreement (by way of recital as the date of execution of that agreement). That is a clear typographical error.

16. The signatures of the applicant appended to the Supplementary Agreement are also admitted. What the applicant states is, he had been forced to affix that signature. At the same time, he maintained, he was in dire need of money for which reason, he accepted the payment on the terms forced on it by the non-applicant.

17. The above pleading itself clearly indicates existence of negotiations and receipt of payment. Once, by way of result of such negotiations, an agreement had been drawn and payment had been made, the fact that the applicant or one party may later feel dissatisfied with the payment, may itself not give rise to an arbitral dispute. Existence and completion of negotiations and payment made as a result thereof against written document executed is prima facie evidence of settlement of the dispute between the parties, to their satisfaction.

18. Neither there is any protest recorded on the Supplementary Agreement nor there is any letter of protest issued by the applicant immediately after executing the Supplementary Agreement and before encasing the payment. It is after receiving that payment, the applicant issued the letter of protest on

02.03.2021.

19. Once the Supplementary Agreement recites that upon execution of the same, the arbitration clause under the original agreement shall stand "finally discharged and rescinded" and that clause shall "cease to have any effect and/or shall be deemed to be non-existent for all purposes", it is 7 ARCO No. 19 of 2022 not possible to refer the dispute claimed to exist (by the applicant), to arbitration under a declaration is first made that the Supplementary Agreement is question, is a nullity. That it not-on the face of it, as it admittedly because the signature of the applicant. To say, the execution, existence and enforcebility of that Supplementary Agreement may examine by the arbitration is also not permissible, in absence of any arbitration clause, in that Supplementary Agreement.

20. In National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267, it has been reasoned, where parties to the contract (original) by mutual agreement except performance of altered, modified and substantive obligation and consequently may cancel the agreement (original) and also confirm that there are no outstanding claims or disputes, the arbitration agreement (in the earlier agreement), cannot be invoked to seek reference of any dispute to arbitration. In that regard, it was observed as below: "29.It is thus clear that the arbitration agreement contained in a contract cannot be invoked to seek reference of any dispute to arbitration, in the following circumstances, when the contract is discharged on account of performance, or accord and satisfaction, or mutual agreement, and the same is reduced to writing (and signed by both parties or by the party seeking arbitration) : (a) Where the obligations under a contract are fully performed and discharge of the contract by performance is acknowledged by a full and final discharge voucher/receipt. Nothing survives in regard to such discharged contract. (b) Where the parties to the contract, by mutual agreement, accept performance of altered, modified and substituted obligations and confirm in writing the discharge of contract by performance of the altered, modified or substituted obligations. (c) Where the parties to a contract, by mutual agreement, absolve each other from performance of their respective obligations (either on account of frustration or otherwise) and consequently cancel the agreement and confirm that there is no outstanding claims or disputes." (emphasis supplied)

21. Seen in that light, no protest exists on the Supplementary Agreement or on the payment voucher in lieu of payment received by the applicant. Thus, it is not established that any dispute survived as may require reference to 8 ARCO No. 19 of 2022 appoint arbitrator, after the parties executed the Supplementary Agreement and after the applicant received full and final payment, thereunder.

22. In view of the arbitration clause itself having eclipsed in terms, no reliance may be passed in the case of Arabian Exports Private Ltd (Supra).

23. The application fails and is, accordingly, dismissed.

24. No order as to costs. September 19, 2025 Anurag/- (Saumitra Dayal Singh,J.) ANURAG JAISWAL High Court of Judicature at Allahabad