The court rules that the issuance of a No Claim Certificate does not automatically bar arbitration, leaving the determination of its validity to the Arbitral Tribunal.
In a significant judgment, the Calcutta High Court has clarified the scope of arbitral proceedings concerning disputes arising from the issuance of a No Claim Certificate. The case, Rajpath Contractors and Engineers Ltd. v. Union of India, revolved around whether the issuance of a No Claim Certificate by Rajpath Contractors could preclude arbitration over disputes with the Union of India.
The petitioner, Rajpath Contractors, had participated in a tender and was subsequently awarded a contract for constructing a bridge. Despite completing the work, disputes arose regarding payments, leading the petitioner to seek arbitration for claims amounting to over Rs. 38 crore. However, the respondent, Union of India, contended that the issuance of a No Claim Certificate after the final payment negated the possibility of arbitration.
Justice Gaurang Kanth, presiding over the case, ruled that the existence of a No Claim Certificate does not automatically render disputes non-arbitrable. The judgment emphasized that whether such a certificate was executed voluntarily or under duress is a matter for the Arbitral Tribunal to decide upon reviewing evidence.
The court highlighted that its role, at the stage of a Section 11 petition under the Arbitration and Conciliation Act, 1996, is limited to verifying the existence of a valid arbitration agreement. The court is not to engage in detailed adjudication on the merits of contractual bars like No Claim Certificates, which fall under the jurisdiction of the Arbitral Tribunal.
Furthermore, the Calcutta High Court referenced a previous judgment from August 2024, which had set aside an Arbitral Tribunal's order that had terminated proceedings on the grounds that the disputes were "excepted matters" due to the No Claim Certificate. The court reiterated that the earlier ruling did not conclusively determine the validity of the No Claim Certificate, allowing the Arbitral Tribunal to assess the merits.
The court's decision aligns with the Supreme Court's judgment in Union of India v. Parmar Construction Company, which stated that claims of coercion or duress concerning No Claim Certificates require adjudication on evidence.
In conclusion, the Calcutta High Court has constituted a new Arbitral Tribunal to adjudicate the disputes, including the validity and effect of the No Claim Certificate, thereby affirming the arbitrability of the claims.
Bottom line:-
Arbitration - No Claim Certificate issued by contractor does not oust jurisdiction of Arbitral Tribunal or render disputes non-arbitrable; validity and effect of No Claim Certificate to be determined on merits by the Arbitral Tribunal.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 Sections 11, 16, 37
Rajpath Contractors and Engineers Ltd. v. Union of India, (Calcutta) : Law Finder Doc id # 2929034
