DELHI HIGH COURT HOLDS SETTLEMENT AGREEMENT INCONCLUSIVE AS PARTIES EXCHANGED SUBSEQUENT CORRESPONDENCES REGARDING CONTRACTUAL DISPUTES
INTRODUCTION
A Single Judge Bench of the Hon’ble Delhi High Court comprising of Hon’ble Justice Neena Bansal Krishna in the case of GAE Projects (P) Ltd. v. GE T&D India Ltd. (in two matters ARB. A. (COMM) NO.38/2019, I.A. 17 854-17855/2019; ARB. A. (COMM.) 39/2019, I.A. 17857-17858/2019), vide judgment dated 15.07.2024, observed that if a settlement agreement visualizes works to be completed in the future under a particular contract and subsequent correspondences are exchanged between the parties about future work and payments etc arising out of such contract, it would imply that such settlement agreement is not final and that it has not conclusively resolved the disputes between the Parties.
FACTS
The Appellant – GAE Projects (P) Ltd. is a construction Company engaged in the business of carrying out civil, mechanical and electrical works, etc. The Respondent – GE T&D INDIA LTD. (Formerly Alstom T&D India Ltd.) published a Tender for carrying out services related to civil and electrical works at the facility of the Respondent’s client (not a party to this dispute). The Appellant’s bid was successful and the Parties executed two Purchase Orders for civil and electrical works in 2013 and 2014.
The Appellant successfully performed the work to the satisfaction of the Respondent. However, disputes arose between the Parties with respect to the two Purchase Orders, and the Appellant filed an Arbitration Petition before the Hon’ble Delhi High Court seeking the appointment of an arbitrator to settle their disputes. This Petition was further split into two (ARB. A. (COMM) NO.38/2019 and ARB. A. (COMM.) 39/2019), according to the Purchase Orders, and a common Arbitrator was appointed.
In its Statement of Claim, the Appellant was seeking payment from the Responded under several heads for the Purchase Orders concerned with Civil and Electrical works. Further, the Appellant sought a Mandatory Injunction to direct the Respondent to issue the Completion Certificate to the Appellant irrespective of the completed works.
The Respondent filed a Statement of Defense along with an Application under Section 16 of the Arbitration and Conciliation Act, 1996 (“Competence of arbitral tribunal to rule on its jurisdiction.”). The Respondent contended that the Arbitrator had no jurisdiction to entertain the proceedings. The Respondent further alleged that all the disputes between the Parties had already been settled under a Settlement Agreement, dated 23.01.2015, which did not contain any clause for resolution of disputes through arbitration.
The Applicant countered this claim and alleged that they had subsequently resiled from the Settlement Agreement, as it was originally forced upon them. Further, the Application under Section 16 of the Act was also contested by the Appellant, who reiterated that the disputes raised under the original Petition were covered by the two Purchase Orders, which were not superseded by the Settlement Agreement.
The Arbitrator took into consideration the Settlement Agreement and held that all the disputes between the Parties had been settled through the said Agreement and, therefore, there were no issues left to be adjudicated by the Arbitrator. The Arbitrator further opined that the Appellant had failed to establish coercion in arriving at the Settlement Agreement. Thus, the Application under Section 16 of the Arbitration and Conciliation Act, 1996 (“Act”) filed by the Respondent challenging the jurisdiction of the Arbitrator was allowed by the Arbitrator, vide Orders dated 26.09.2019.
ISSUES
The Hon’ble High Court adjudicated upon the following issues:
1) Can the High Court interfere with the Impugned Orders passed by the Arbitrator?
2) Was the Settlement Agreement able to conclude all the disputes between the Parties and leave no arbitrable dispute?
3) Is the Arbitration Petition maintainable under the Purchase Orders if the Settlement Agreement has resolved all the disputes?
JUDGMENT AND ANALYSIS
The Hon’ble Court extensively heard the submissions of both Parties and arrived at the following final key points after great deliberation –
1) The Hon’ble Court thought it was imperative to establish the contours within which the High Court can interfere with the Impugned Orders. It referred to previous judgments of the Hon’ble Apex Court. It observed that the scope of appeal under Section 37 of the Act (“Appealable orders.”) is statutorily minimal and limited to the grounds laid down in Section 34 of the Act (“Application for setting aside arbitral awards.”).
2) The Hon’ble Court looked at the Settlement Terms and the Minutes of the Meeting, where the Parties had discussed about the said Agreement. The first three clauses of the Agreement mentioned about the payment terms and quantity, whereas the rest of the clauses visualized other works to be done by the Parties to meet their partnership’s objectives.
3) The Hon’ble Court observed that as the Agreement mostly provided about the completion of several tasks in the future, hence, it would imply that the said Settlement Agreement did not settle all the disputes arising from the two Purchase Orders.
4) Therefore, it would be an incorrect interpretation that the Settlement Agreement concluded all the disputes between the Parties and that nothing was left to be arbitrated by the learned Arbitrator.
5) Further, in the case at hand, there were multiple references to the Purchase Orders in the subsequent communications between the Parties, even after they had entered into the Settlement Agreement. Further, there were even talks of a fresh settlement by the Respondent after the Appellant had repudiated the previous Agreement via letters and mails.
6) The Hon’ble Apex Court, in its previous judgments, has clearly stated that the intentions of the parties are to be gathered only from the expressions used in the parties’ correspondence, and there must be an unequivocal and clear meeting of minds to establish a valid and binding contract. The Hon’ble High Court maintained the same view and held that there was no meeting of minds of the Parties in the present case.
7) The Hon’ble Court referred to the various proposals, counter-proposals, and the letters exchanged between the Parties. It held that it is prima facie established that the Parties arrived at one Settlement Agreement. However, it was not a culmination of all the disputes arising from the said Purchase Orders.
CONCLUSION
In conclusion, the Hon’ble Delhi High Court allowed the Appeals and held that the Settlement Agreement between the Appellant and the Respondent did not resolve all disputes arising from the pre-existing Purchase Orders between the Parties. The Court observed that the Agreement included terms for future work and payments, indicating that it did not fully settle the business relations and disputes. The extensive post-agreement correspondence and unresolved issues further proved that the Settlement Agreement was not comprehensive. As a result, the Court held that the arbitration claims in the present Arbitration Petitions were valid and required adjudication.
Additionally, the Court emphasized the importance of the Parties’ intentions, noting that multiple references to the Purchase Orders in subsequent communications suggested ongoing disputes. The absence of an unequivocal meeting of minds implied that the Settlement Agreement did not conclusively settle all matters. Thus, by upholding the Appeals, the Court allowed the arbitration proceedings to continue, reinforcing the fact that a Settlement Agreement must explicitly and fully resolve disputes to preclude further arbitration.
Himangi Nagar
5th year
Symbiosis Law School, Hyderabad
Intern
The Indian Lawyer & Allied Services
Leave a Reply