Calcutta High Court Refers ₹38 Crore Railway Contract Dispute To Arbitration, Says No Claim Certificate No Bar

The Calcutta High Court has recently referred a ₹38.07 crore dispute arising out of an Eastern Railway bridge construction contract to arbitration, reiterating that the existence of a No Claim Certificate does not, by itself, render disputes non-arbitrable.

Justice Gaurang Kanth constituted a three-member arbitral tribunal headed by former Supreme Court judge Justice Pinaki Chandra Ghose, with Senior Advocates Ritzu Ghosal and Saptangshu Basu as co-arbitrators.

"It is well settled that the existence of a No Claim Certificate, by itself, does not oust the jurisdiction of the Arbitral Tribunal or render the disputes non-arbitrable," the court observed.

Rajpath Contractors and Engineers Ltd. was awarded a contract by Eastern Railway for construction of Bridge No. 172 over river Brahmani in the Rampurhat-Barharwah section.

The agreement was signed in 2009. Rajpath completed the bridge work in May 2015, while the final escalation bill and security deposit were released in October 2020.

Nearly three years later, the contractor raised claims of ₹38.07 crore and sought arbitration.

An arbitral tribunal constituted by the High Court subsequently terminated the proceedings, holding that the claims could not be arbitrated because Rajpath had issued a No Claim Certificate.

Rajpath challenged that decision before the High Court. In August 2024, the court set aside the tribunal's order, observing that the issue required examination of evidence. The contractor then moved the present plea seeking appointment of a fresh tribunal.

Rajpath argued that issuance of a No Claim Certificate does not extinguish disputes or prevent invocation of arbitration, particularly where allegations of coercion, duress or economic compulsion are raised.

The Union of India opposed the plea, contending that the certificate had been issued after receipt of final payment and therefore barred any subsequent claims under the General Conditions of Contract.

Rejecting the objection, the court held that at the stage of appointment of arbitrators, its enquiry is confined to examining whether a valid arbitration agreement exists between the parties.

"The question as to whether the No Claim Certificate bars the claims of the contractor is a matter to be examined by the Arbitral Tribunal on merits, and not a ground available to this Court, at the stage of a petition under Section 11 of the Act, to decline reference of the disputes to arbitration," the court held.

The court relied on Union of India v. Parmar Construction Company and SBI General Insurance Co. Ltd. v. Krish Spinning while reiterating that issues concerning the effect of a No Claim Certificate fall within the domain of the arbitral tribunal and not the referral court.

Holding that the disputes were arbitrable, the court left all questions relating to the effect and validity of the No Claim Certificate open for determination by the arbitral tribunal.

"Having regard to the above, this Court is of the view that the disputes raised by the Petitioner are arbitrable, and the question relating to the effect and validity of the No Claim Certificate, including the rival contentions urged by learned counsel for the parties on facts and law, is left open to be agitated before and adjudicated by the Arbitral Tribunal," the court observed.

For Petitioner (Rajpath Contractors and Engineers Ltd.): Advocates Priyankar Saha, Srijani Mukherjee.

For Respondent (Union of India and Anr.): Advocates Dhiraj Kr. Trivedi, Shailendra Kr. Mishra, Divyanshi Shaw.