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WAPCOS Ltd. v. Salma Dam Joint Venture & Anr.

Civil Appeal · 2019 INSC 1249Decided 14 Nov 2019
Civil Appeal arising out of SLP (Civil) No. 7979 of 2019
Justice A.M. Khanwilkar · Justice Dinesh Maheshwari

Background

WAPCOS Ltd., a public sector undertaking, contracted Salma Dam Joint Venture (SDJV), a consortium of two companies, to build the Salma Dam project in Afghanistan. After the project cost was revised upward several times, the parties signed a formal Amendment of Agreement (AoA) in 2015 under which SDJV agreed that all its pending and future claims "stood buried" and that there would be no arbitration over them. Despite this, one of SDJV's constituent partners later tried to unilaterally invoke arbitration and get an arbitrator appointed, even though its authority to act for the joint venture had meanwhile been revoked by the other partner; the Delhi High Court nonetheless allowed the arbitration petition and appointed a sole arbitrator, prompting WAPCOS and the other partner to appeal to the Supreme Court.

Decision Breakdown

The Supreme Court held that the 2015 Amendment of Agreement had the clear effect of extinguishing the arbitration clause in the original contract: its express terms stated that pending claims stood buried and there would be no arbitration for settling claims, and SDJV had never disputed executing the AoA or claimed it was signed under duress. The Court found the Delhi High Court had rested its contrary view on factual errors (including a wrong date for the AoA) and had wrongly treated the Technical Committee's consideration of post-AoA appeals as reviving the arbitration remedy. Since there was no subsisting arbitration agreement on the date the Section 11(6) petition was filed, that petition was not maintainable at all. The Court set aside the High Court's order, dismissed the arbitration petition, but left open other legal remedies the parties might separately pursue.

Lesson Learnt

When contracting parties execute a written settlement or amendment agreement expressly giving up future claims and ruling out arbitration, that agreement overrides the arbitration clause in the original contract: a party cannot later resurrect arbitration over claims it already agreed to abandon.

Official source (sci.gov.in)View Judgment (PDF)

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