Justice Manoj Kumar Ohri, in his March 10, 2025 ruling, held that the settlement reached during conciliation proceedings is final and enforceable as an arbitral award, thereby rendering arbitration unnecessary.
Dispute Details
ARSS Infrastructure was awarded an Engineering, Procurement, and Construction (EPC) contract by NHIDCL on December 9, 2020, for a road improvement project in Meghalaya. However, due to alleged delays and contractual breaches, NHIDCL terminated the contract on May 25, 2023.
The dispute centered around payment reconciliation, with ARSS claiming that it was owed Rs.176.58 crore, including damages due to delayed land acquisition and encashed performance bank guarantees (PBG & APBG). NHIDCL, on the other hand, claimed Rs.48.92 crore in recoveries from ARSS, citing contract violations.
Following multiple conciliation meetings between October and December 2023, NHIDCL released Rs.10.52 crore to ARSS. However, ARSS later contested the amount, arguing that the conciliation process did not constitute a final settlement and sought arbitration under Clause 26.3 of the contract.
#Legal Arguments: Arbitration vs. Conciliation Settlement
-ARSS Infrastructure’s Stand:
- ARSS argued that the conciliation process was incomplete, as it had signed the Minutes of Meeting (MoM) under financial duress.
- The company insisted that since a Conciliator was not formally appointed, the process did not qualify as a conciliation settlement under Section 73 of the Arbitration and Conciliation Act, 1996.
- It sought arbitration as per Clause 26.3, claiming that the dispute remained unresolved.
-NHIDCL’s Counterargument:
- NHIDCL maintained that the conciliation meetings were valid and binding, as both parties agreed on the procedure.
- The settlement agreement was enforceable under Section 74 of the Arbitration Act, which treats such agreements as final arbitral awards.
- NHIDCL cited precedents such as Anuradha SA Investments LLC v. Parsvnath Developers Ltd. (2017 SCC OnLine Del 7970) and Haresh Dayaram Thakur v. State of Maharashtra (2000) 6 SCC 179, which
- affirmed that conciliation settlements hold the same weight as arbitration awards.
Court’s Verdict: No Grounds for Arbitration
After reviewing the contract’s Clause 26.2 (Conciliation) and Clause 26.3 (Arbitration), the court ruled that:
- The conciliation meetings constituted a final settlement agreement, barring ARSS from seeking arbitration.
- The contract explicitly stated that unresolved disputes would proceed to arbitration only if conciliation failed, which was not the case here.
- ARSS's claim that it signed the MoM under financial duress could not be examined under Section 11 of the Arbitration Act and would require a separate challenge under Section 34.
Justice Ohri concluded:
"As per Clause 26.3, only those disputes which could not be resolved through conciliation can proceed to arbitration. Since a settlement agreement was signed, arbitration is not an option. The petitioner is at liberty to challenge the settlement in appropriate proceedings, subject to limitation."
Key Takeaways from the Ruling
- Conciliation settlements hold the same legal weight as arbitral awards under Section 74 of the Arbitration Act.
- A contract’s dispute resolution mechanism must be followed, and arbitration cannot be invoked if conciliation results in a signed agreement.
- Financial duress claims do not invalidate a settlement unless challenged separately under Section 34 of the Arbitration Act.
- Government contracts must explicitly define dispute resolution steps to avoid ambiguity in arbitration clauses.
Final Decision
The petition for arbitration was dismissed, affirming NHIDCL’s position that the conciliation process was final and binding. ARSS Infrastructure may now seek redress through alternate legal channels if it wishes to contest the conciliation agreement.
Read The Judgment Here
keywords: delhi high court ruling, nhidcl contract dispute, arbitration vs. conciliation, epc contract termination, rs.176 crore dispute settlement, legal enforcement of settlement agreements
