The agreement clause that seeks to extinguish the contractor's rights is void as it is contrary to Section 28 of the Contract Act.

1. This petition under Section 11(6) of the Arbitration & Conciliation Act, 1996 (‘Act’) seeks reference to arbitration of the disputes arising between the parties out of an agreement dated 19th May, 2011 executed pursuant to an award of contract in favour of the Petitioner by the Respondent for the construction of ‘New Expandable Modular Integrated Terminal Building at Vadodara Airport’ for the value of Rs. 76,32,12,042.

2. The request for appointment of an Arbitrator is opposed by the Respondent on the ground that under the terms of the agreement, the Petitioner was obliged to first seek reference of the dispute before the Dispute Resolution Committee (‘DRC’) within a period of 90 days of the settlement of the final bill. It is stated that, in the present case, the request for reference of the dispute to the DRC was not received within 90 days but only on 16th September, 2015 i.e., beyond the period of 90 days after final payment received by the contractor on 6th December, 2014. It is, therefore, stated that in terms of Clause 25 of the agreement, the Petitioner has lost its right to seek appointment of the Arbitrator and its claims should be “deemed to be waived and absolutely barred and the Respondent has been discharged and released of all liabilities under the contract in respect of the claims of the in respect of the claims of the Petitioner”.

3. It is further pointed out by the Respondent that the question of referring the dispute for arbitration does not arise since under Clause 25(v) only such disputes which have not attained finality can be referred for adjudication. Whereas, in the present case since the Petitioner did not seek reference of the dispute to the DRC in the first place within 90 days of receiving the intimation from the Respondent i.e., final bill was ready for payment, there is no surviving dispute for reference to arbitration. Learned counsel for the Respondent has sought to place reliance on the decision of the Supreme Court in Wild Life Institute of India, Dehradun v. Vijay Kumar Garg (1997) 10 SCC 528.

4. Learned counsel for the Petitioner, on the other hand, placed reliance on the decision of this Court in Union of India v. Pt.Munshi Ram & Associates Pvt. Ltd. 2013 1 AD (Delhi) 801, Silicon Graphics Systems (India) P. Ltd. v. Sterling & Wilson Electricals P. Ltd. 2015(5) RAJ 409 (Delhi) and the decision of the Division Bench of this Court in Delhi Development Authority v. Bhardwaj Brothers 2014 (3) Arb LR 333(Delhi).

5. In Union of India v. Pt. Munshi Ram (supra) the Court was dealing with a clause similar to Clause 25 of the contract in the present case which stated that if no claim was made within 90 days of settlement of the final bill, then the contractor would be precluded from raising any claim. The Court explained the legal position that existed prior to the amendment of Section 28 of the Contract Act, 1872 (CA) which was governed by the decision in The Vulcan Insurance Co. Ltd. v. Maharaj Singh (1976) 1 SCC 943. It was held that the agreement that did not limit the period within which the party might enforce its right but provided for the forfeiture or waiver of the right if no suit was brought within the period stipulated in the agreement was outside the scope of Section 28 of the Contract Act and was binding on the parties. This was reiterated in National Insurance Co. Ltd. v. Sujir Ganesh Nayar (1997) 4 SCC 366. It was this legal position that was reiterated in Wild Life Institute of India, Dehradun v. Vijay Kumar Garg (supra). However, with effect from 8th January 1997, Section 28 of the CA was amended and read as under:

“28. Agreements in restraint of legal proceedings void.- Every agreement-

(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or

(b) which extinguishes the rights of any party