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Calcutta High Court
Rajpath Contractors And Engineers Ltd vs The Union Of India on 19 August, 2025
Author: Ravi Krishan Kapur
Bench: Ravi Krishan Kapur
IN THE HIGH COURT AT CALCUTTA
ORIGINAL SIDE
(Intellectual Property Rights Division)
BEFORE:
The Hon'ble Justice Ravi Krishan Kapur
AO-COM/14/2024
IA NO: GA-COM/1/2024
RAJPATH CONTRACTORS AND ENGINEERS LTD.
VS
THE UNION OF INDIA
For the petitioner : Mr. Sakya Sen, Sr. Adv.
Mr. Priyankar Saha, Adv.
Ms. Srijani Mukherjee, Adv.
For the respondent : Mr. Dhiraj Kr. Trivedi, Sr. Adv., DI, S.G.
Mr. Shailendra Kumar Mishra, Adv.
Judgment on : 19.08.2024
Ravi Krishan Kapur, J.:
1. This appeal under section 37 of the Arbitration and Conciliation Act,
1996 is directed against an order dated 13 May, 2024 passed under
section 16 of the Act dismissing the claim of the petitioner.
2. In or about, 2007-08, a tender was issued by the respondent Railways
for “construction of New Major Bridge No. 172 over river Brahamani with
pile foundation in 1980 station of the Eastern Railways.” Pursuant to the
above tender, the petitioner participated in the same and emerged as the
successful bidder. By a letter of acceptance, the petitioner was awarded
the entire works which was to be completed within a period of 16
2
months. The parties also entered into a contract dated 5 January, 2009.
Subsequently, the petitioner commenced the works and duly completed
the same after extensions were granted under the contract.
3. Disputes and differences having arisen between the parties, the
petitioner was compelled to issue a notice of demand on 3 May, 2023,
inter alia, raising claims pertaining to the above contract. The petitioner
also filed an application under section 11 of the Act. By an order dated 6
October, 2023, it was recorded that there were existing disputes between
the parties and an Arbitral Tribunal was constituted. A preliminary
hearing was held by the Arbitral Tribunal on 17 November, 2023 when
the parties were directed to file their pleadings. The first hearing was
held on 22 January, 2024 when the time for filing of the Statement of
Defence was extended. The Statement of Defence was ultimately filed on
3 February, 2024.
4. Upon completion of the pleadings, the Arbitral Tribunal suo moto took a
point under section 16 of the Act and held that the petitioner having
furnished a No Claim Certificate, the entire claim was barred on the
ground that the same was an excepted matter and fell within the scope of
clause 43(2) read with clause 63 of the General Conditions of the
Contract.
5. For convenience, clauses 43(2), 63 and the relevant portion of clause 64
of the General Conditions of Contract are set out hereinbelow:
“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 Railway, in such form as
3shall be required by the Railway, after the works are finally measured up.
The Contractor shall be debarred from disputing the correctness of the
items covered by “No claim” certificate or demanding a clearance to
arbitration in respect thereof.
63. Matters finally determined by the Railway :- All disputes and
differences of any kind whatsoever arising out of or in connection with the
contract, whether during the progress of the work or after its completion
and whether before or after the determination of the contract shall be
referred by the contractor to the Railway and the Railway shall within 120
days after receipt of the contractor’s representation make and notily
decisions on all matters referred to by the contractor in writing provided
that matters for which provision has been made in clauses 8, 18, 22 (5),
39, 43 (2), 45 (a), 55, 55-A (5), 57, 57A, 61(1), 61(2), and 6211) to (xii) (B) of
General conditions of contract or in any clause of the special conditions of
the contract shall be deemed as “excepted matters” and decisions of the
Railway authority thereon shall be final and binding on the contractor
provided further that “excepted matters” shall stand specifically excluded
from the purview of the arbitration clause and not be referred to
arbitration.
64. (1) (i) Demand for Arbitration –
In the event of any dispute or difference between the parties here to as to
the construction or operation of this contract, or the respective rights and
liabilities of the parties on any matter in question, dispute or difference on
any account or as to the withholding by the Railway of any certificate to
which the contractor may claim to be entitled to, or if the Railway fails to
make a decision within 120 days, then and in any such case, but except in
any of the ‘excepted matters’ referred to in clause 63 of these conditions,
the contractor. after 120 days but within 180 days of his persenting his
final claim on disputed matters, shall demand in writing that the dispute
or difference be referred to arbitration.
64. (1) (ii) The denand for arbitration shall specify the matters which are in
question or subject of the dispute or difference as also the amount of claim
itemwise. Only such dis-pute (s) or difference (s) in respect of which the
demand has been made, together with counter claims or set off shall be
referred to arbitration and other matters shall not be included in the
reference.
6. On behalf of the petitioner, it is contended that the impugned order is
unsustainable inasmuch as the same has been passed contrary to the
decision of the Hon’ble Supreme Court in Union of India vs. Parmar
Construction Company (2019) 15 SCC 682. In particular, it is submitted
that the question of arbitrability vis-a-vis excepted matters should have
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been examined at the stage of trial. This was not an open and shut case
where the Arbitral Tribunal ought to have suo motu taken the point of
jurisdiction and rejected the claim of the petitioner on the ground that
the same fell with the category of an excepted matter. This point had not
been raised at the stage of hearing of the application under section 11 of
the Act. In addition, no point of jurisdiction nor arbitrability had been
raised by the respondent Railways before the Arbitral Tribunal. The
decision in Harsha Constructions vs. Union of India and Others (2014) 9
SCC 246 relied on by the Arbitral Tribunal is distinguishable and
inapposite. The case did not deal with a No-Claim Certificate. In support
of such contention, the petitioner also relied on the decision in SBI
General Insurance Co. Ltd. vs. Krish Spinning (2024) SCC Online SC 1754.
7. On behalf of the respondent Railways, it is submitted that in view of the
No-Claim Certificate filed by the petitioner, there was no question of any
of the disputes raised being adjudicated by the Arbitral Tribunal. On the
contrary, such disputes fell within the ambit of excepted matters and the
Arbitral Tribunal could not have adjudicated upon the same. The failure
to take this point either at the stage of the section 21 notice or the
section 11 stage or the pleadings was irrelevant and did not prevent the
Arbitral Tribunal from adjudicating upon the same.
8. Admittedly, the question of jurisdiction under section 16 of the Act had
not been raised by the respondent before the Arbitral Tribunal. No
application of any kind had been filed under section 16 of the Act. This
issue had neither been raised in the Statement of Defence. The
proceedings were at a nascent stage before the Arbitral Tribunal. It is
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true that there is no embargo in the Arbitral Tribunal raising the
question of jurisdiction suo moto. Nevertheless, in the absence of an
application and there being no pleadings in support of such contention,
it was prudent to have an application on record or at least take this point
in the pleadings. This would also have afford an opportunity to the
petitioner to specifically address the issue of jurisdiction i.e. whether the
claims raised by the petitioner fell within the category of excepted claims
or not.
9. “Excepted matters” go to the root of any contract. There are different
stages when this question may arise for consideration i.e. under sections
8, 11, 16 or 34 of the Act. Matters which have been excepted by the
parties from the scope of arbitration cannot be adjudicated upon by an
Arbitrator. Any such adjudication would be in excess of jurisdiction and
is liable to be set aside. It is relevant to note that such ‘excepted matters’
must be specifically excluded by the contract. Ultimately, it is essentially
a question of construction in each case whether a clause operates to
except certain matters from the consideration of the Arbitrator. This
primarily involves a question of fact and is ascertained from the contract
or the contractual documents. [General Manager, Northern Railway and
Anr. vs. Sarvesh Chopra (2002) 4 SCC 45]. An award adjudicating claims
which are excepted matters is excluded from the scope of arbitration and
violative of sections 34 (2) (a) (iv) and 34 (2) (b) of the Act. [J.G. Engineers
(P) Ltd. v. Union of India, (2011) 5 SCC 758].
10. A reading of the Statement of Claim would suggest that the claims which
the petitioner had raised were in relation to price escalation (Claim No.
6
1), wrongful and arbitrary/unilateral deduction (Claim No. 2), non-
payment for extra works (Claim No. 3), loss of anticipated profit (claim
No. 4), financial loss (Claim No. 5), reimbursement of GST (Claim No. 6),
loss of interest (Claim No. 7). Significantly, none of these claims were in
relation to the final claim of the measured work which had been carried
out by the petitioner in terms of the contract. As a consequence, whether
the claims raised were covered or not within the items covered by the “No
Claim Certificate” required consideration of the pleadings, construction
of the terms of the contract and evidence of the parties to decide whether
such claims actually were “excepted matters” or not.
11. In Union of India versus Parmar Construction Company (2019) 15 SCC
682, the Hon’ble Supreme Court held as follows:
36. The respondents are the contractors and attached with the railway
establishment in the instant batch of appeals are claiming either refund of
security deposits/bank guarantee, which has been forfeited or the
escalation cost has been reduced from final invoices unilaterally without
tendering any justification. It is manifest from the pleadings on record that
the respondent contractors who entered into contract for construction
works with the railway establishment cannot afford to take any
displeasure from the employer, the amount under the bills for various
reasons which may include discharge of his liability towards the bank,
financial institutions and other persons, indeed the railway establishment
has a upper hand. A rebutable presumption could be drawn that when a
no claim has been furnished in the prescribed format at the time of final
bills being raised with unilateral deductions made even that acceptable
amount will not be released, unless no claim certificate is being attached to
the final bills. On the stated facts, para 52(iii) referred to by this Court
in National Insurance Company Limited Vs. Boghara Polyfab Private
Limited(supra) indeed covers the cases of the present contractors with
whom no option has been left and being in financial duress to accept the
amount tendered in reference to the final bills furnished and from the
discharge voucher which has been taken to be a defence by the appellants
prima facie cannot be said to be voluntary and has resulted in the
discharge of the contract by accord and satisfaction as claimed by the
appellants. In our considered view, the arbitral dispute subsists and
7the contract has not been discharged as being claimed by the
appellants employer(s) and all the contentions in this regard are
open to be examined in the arbitral proceedings. (emphasis added)
12. One of the questions raised before the Hon’ble Supreme Court in the
above decision was whether the arbitration agreement stood discharged
on acceptance of the amount and signing of a no claim/ discharge
certificate. It was on such facts, that the Hon’ble Supreme Court after
considering the relevant facts held that the demand for escalation costs
and interest due to breach of obligation and beyond the schedule date of
completion were the basis of the claim raised by the petitioner. Clause
43 in that decision was also similar to the clause in this case. In this
background, the Hon’ble Supreme Court held as follows:
21. As per clause 43(2), the contractor signs a “No claim” certificate in
favour of the railway in the prescribed format after the work is finally
measured up and the contractor shall be debarred from disputing the
correctness of the items covered under the “No Claim” certificate or
demanding a clearance to arbitration in respect thereof. Each of the
respondent has to attach no claim certificate with final bills in the
prescribed format to be furnished in advance before the final bills are
being examined and measured by the railway authorities. Although it has
been seriously disputed by the appellants but that is the reason for which
even after furnishing no claim certificate with the final bills being raised, it
came to be questioned by the respondent(contractor) by filing an
application to refer the matter to arbitration invoking clause 64(3) of the
conditions of contract as agreed by the parties.
23. It is also not disputed that when the request of the respondent
contractors was rejected by the appellants on the premise of the no claim
certificate being furnished, arbitral dispute does not survive which is to be
sent to arbitration, each of the respondent contractor approached the High
Court by filing an application under Section 11(6) of the Act for
appointment of an arbitrator for settling their disputes/differences arising
from the terms of contract as agreed between the parties.
29. The thrust of the learned counsel for the appellants that submission of
a no claim certificate furnished by each of the respondent/contractor takes
8away the right for settlement of dispute/difference arising in terms of the
agreement to be examined by the arbitrator invoking Clause 64(3) of the
conditions of the contract. The controversy presented before us is that
whether after furnishing of no claim certificate and the receipt of payment
of final bills as submitted by the contractor, still any arbitral dispute
subsists between the parties or the contract stands discharged.
13. On the contrary, the decision relied on by the Arbitral Tribunal in Harsha
Constructions vs. Union of India and Others (2014) 9 SCC 246, dealt with
“rate of an extra work not in the schedule to contract”. (Clause 39). The
point being that a clear case must be made out for excepting or
excluding the claim within the four corners of “excepted matters”.
14. In SBI General Insurance Co. Ltd. vs. Krish Spinning 2024 SCC Online SC
1754, while adjudicating whether the execution of a discharge voucher
towards the full and final settlement between the parties would operate
as a bar to invoke arbitration it was held as follows:
“40. A contract between parties can come to an end by the
performance thereof by both the parties, that is, by the fulfilment of
all the obligations in terms of the original contract. This is referred to
as discharge by performance. Alternatively, the contract may also
be discharged by substitution of certain new obligations in place of
the obligations contained in the original contract, and subsequent
performance of the substituted obligations. The substituted
obligations are referred to as ‘accord’ and the discharge of the
substituted obligations is referred to as ‘satisfaction’. It is referred to
as discharge by “accord and satisfaction” or by “full and final
settlement” in common parlance.
45. To answer the aforesaid contention of the appellant, the
question that needs to be considered is whether the “full and final
settlement” of claims arising under a contract, is by itself sufficient
to preclude any future arbitration in respect of such settled claims?
47. However, whether there has been a discharge of contract or not
is a mixed question of law and fact, and if any dispute arises as to
whether a contract has been discharged or not, such a dispute is
arbitrable as per the mechanism prescribed under the arbitration
agreement contained in the underlying contract.”
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15.The decisions in Ambica Construction vs. UOI, (2006) 13 SCC 475 and SBI
General Insurance v. Krish Spinning, (2024) SCC OnLine SC 1754 hold
that if there was any scope for enquiring into whether the NCC or
discharge voucher had been furnished under duress or coercion, then
irrespective of the merits of the challenge, the dispute had to be referred
to arbitration.
16. In a recent decision, Union of India through Divisional Engineer-I Northern
Railway vs. B.S. Sangwan (2024) SCC OnLine Del 6734, the issue raised
related to the validity and effect of a ‘No Claim Certificate’. After reviewing
a number of authorities , the Court held as follows:
“80. Thus, the thread that runs through the above decisions is that
submission or tendering of a final discharge voucher, or a no claim
certificate, by the contractor to the employer, is not determinative of
the dispute between them. It is always open to the contractor to
establish that the discharge voucher or NCC was provided under
duress, coercion or economic compulsion. It is only where no such
factors exist and the discharge voucher, or NCC, is found to have
been tendered voluntarily that the contractor would not be permitted
to resile therefrom and raise a belated claim. The Court – or the
arbitrator – is required to take all factors into consideration while
arriving at a decision as to whether the discharge voucher or NCC
had, or had not, been voluntarily tendered. While examining the
aspect of economic duress, the Court, or the Arbitrator, can take into
account the fact that the bills of the contractor may have remained
unpaid, or that the payment, which was certified by the contractor
as being in full and final settlement of his claims, was actually
made after the NCC was issued. Such factors would go to indicate
that the NCC was not voluntarily tendered.”
17. In the above background, the finding of the Arbitral Tribunal that the
entire claim of the petitioner fell within the category of an excepted
matter on the ground that a No-Claim Certificate had been signed and
filed by the petitioner was a mixed question of fact and law and required
further examination. The issue being whether on the basis of the facts
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before the Arbitral Tribunal a case of duress had been made out under
which the No Claim Certificate was furnished or not? This was not an
aspect which should have been summarily rejected without an
application and without granting an opportunity to the petitioner to
controvert the specific question of jurisdiction i.e. whether its claim was
barred on the ground that the petitioner had executed a No Claim
Certificate or not. The impugned order is absolutely silent on this plea.
Admittedly, the merits of the claim had not been adverted to. The
question of duress which had been raised by the petitioner also required
examination. The validity of the No Claim Certificate was specifically
raised as an issue in the Statement of Claim. [National Insurance Co. Ltd
vs Boghara Polyfab, 2008 SCC Online SC 1422.] Consequently, regardless
of the merits or demerits of the plea of coercion, the Arbitral Tribunal
was bound to at least to consider the aspect as to whether there was any
coercion or not. [Ambica Construction vs. Union of India (2006) 13 SCC
475]. The finding that this aspect could only have been adjudicated by
the Civil Court and is not arbitrable is erroneous and unsustainable. The
fact that the claim raised was not in respect of the measured works has
also not been given any weightage at all by the Arbitral Tribunal.
Similarly, whether the claim for GST dues raised by the petitioner was
one of the items covered by the No Claim Certificate in terms of clause
43(c) of the General Conditions of Contract has not even been adverted
to.
18. In the above facts and circumstances, the mere execution of a No Claim
Certificate by the petitioner was not per se determinative of whether
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disputes raised were an excepted matter or not. With the greatest
respect, the suo motu exercise taken by the Arbitral Tribunal to
summarily decide whether the disputes involved fell within the category
of excepted matters required a judicial determination and after
consideration of the evidence. In such circumstances, the impugned
order is ex facie perverse and is set aside.
19. There shall be an order in terms of prayers (a) and (b) of the Notice of
Motion. With the above directions, AO-COM/14/2024 stands allowed.
20. The connected application being IA No. GA-COM/1/2024 also stands
disposed of as infructuous.
(RAVI KRISHAN KAPUR, J.)
Arsad, AR(CR)
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