FROM THE AFORESAID QUESTIONS IT BOILS DOWN TO THREE FACTORS TO PROVE GROUNDS OF ECONOMIC DURESS:

• Pressure which is illegitimate
• It’s effect on the victim i.e., the pressure was such that there is compulsion or lack of practical choice for the victim
• Lack of reasonable alternative

Therefore, the question which now remains is the factor of economic duress which needs to be proved. Duress, whatever form it takes, is a coercion of the will so as to vitiate consent. This analysis has been discussed in details in Sara International Limited vs. Rizhao Steel Holding Group Company Limited (2013) 201 DLT 262.

In the celebrated judgement of Gayatri Project Limited cited in (2013) 4 ArbLR 470 (SC), the Supreme Court laid down that even after submission of no claim certificate, a party is not barred from raising a genuine claim or seeking reference to arbitration in respect thereof, since there is no acceptance of full and final settlement by the contractor which is being relied upon by the authorities and this issue clearly has to be left to the Arbitrator to be adjudicated.

It gives rise to the second question: After execution of the settlement agreement can the disputes under the original agreement still be arbitrable in view of the fact that the settlement agreement entered into by the parties does not itself contain an arbitration clause?

This question can only arise in the second scenario where there is an allegation of coercion and under influence on one of the parties. Because this question will only come into force when there is a challenge to the very basic of the settlement agreement itself.

It is a settled law that arbitration agreement in itself is an independent agreement and remains alive even if the original contract is determined by any means. Therefore, an apparent answer to our question would be that as arbitration agreement is a separate agreement therefore even if the original contract is determined by execution of another settlement agreement between the parties even then the arbitration clause will remain valid and consequently the disputes also remain arbitrable.

But a counter argument can be raised, that once a settlement agreement was entered into, the said settlement agreement supersedes the Original Contract agreement, and since the settlement agreement does not contain an arbitration clause, therefore the disputes including a challenge to the very basis of the settlement agreement, cannot be referred to arbitration. In other words, after execution of the settlement agreement the issue that whether such settlement agreement is valid or not can only be determined by an arbitration tribunal consists in terms of the settlement agreement and the tribunal consisting out of the original contract agreement cannot does not have powers of such determination. And in absence of arbitration clause in the settlement agreement, its validity cannot be challenged before an arbitration tribunal constituted out of the main agreement. Further all other claims under the original contract also remains non arbitrable as the original contract is determined by the parties in terms of the settlement agreement, thereby rendering the arbitration clause in the original contract infructuous.

There are two aspects to this situation; firstly, scope of appointment of an arbitration tribunal by a court in such a scenario and the secondly whether in such a scenario every issue can be dealt by the arbitrator and every claim remains arbitrable.

Before discussing this in detail it is relevant to point out that prior to the Amendment Act, 2015, the scope under Section 11 of the said Act was considerably wide in view of the decisions in SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618 and National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267: (2009) 1 SCC (Civ) 117.

The scope of judicial interference at the reference stage has been substantially curtailed by way of insertion of sub section (6A) in section 11. Under the amended provision, the court only needs to form a prima facie opinion on the existence of a valid arbitration agreement.

However, after introduction of subsection (6A) the Hon’bele Supreme Court in United India Insurance Co. Ltd. v. Antique Art Exports (P) Ltd.: (2019) 5 SCC 362, has held that the party who alleges fraud and coercion is under obligation to prima facie establish the same by placing satisfactory material on record. This decision was expressly overruled by the Supreme Court in Mayavati Trading Pvt. Ltd. v. Pradyuat Deb Burman: (2019) 8 SCC 714 by concluding that the High Court while considering any application under Section 11(4) to 11(6) of the said Act is required to confine itself to the examination of the existence of the Arbitration Agreement and leave all other issues to be decided by the arbitrator. Furthermore, in Mayavati Trading Pvt. Ltd. (supra), the Supreme Court also concluded that Patel Engg. Ltd., (supra) and Boghara Polyfab Private Limited (supra) stood legislatively overruled by the introduction of subsection (6A) in its later decision.

Furthermore, the Court had held that the existence of the Arbitration Agreement would require to be understood in the narrow sense as laid down in its decision in Duro Felguera, S.A. v. Gangavaram Port Ltd.: (2017) 9 SCC 729, wherein it had observed that in reading of Section 11(6A), the court should see whether the agreement provides for an arbitration clause. Furthermore, it was held that issues relating to contract formation, existence, validity and non-arbitrability would be connected and intertwined with the issues underlying the merits of the respective disputes/claims would be left to arbitration.

Therefore, it is ample clear that the courts can refer the all the disputes including the validity of the settlement agreement to the arbitration panel and scope of judicial intervention in this is very narrow. New coming to the second aspect, it will be left to the arbitration tribunal to decide on basis of the facts that whether the settlement agreement is a valid one or not. But the very fact that the tribunal is entitle to test the facts of the case makes the disputes arbitrable.

This whole aspect has been dealt by the Hon’ble Delhi High Court in the matter of SPML Infra Ltd. Vs. NTPC Ltd. (reported in 2020 SCC Online Del 2653). Therefore, from the above discussion it is amply clear that if a settlement agreement is entered into between parties, which does not contain an arbitration clause, the parties would still be entitled to refer the disputes to arbitration in terms of the original contract agreement including the disputes relating to the validity of such settlement agreement.