Delhi High Court
Ircon International Limited vs Shri Krishna Trading Co. And Anr. on 22 November, 2007
Equivalent citations: 2007(4)ARBLR479(DELHI)
Author: Sanjay Kishan Kaul
Bench: Sanjay Kishan Kaul
JUDGMENT Sanjay Kishan Kaul, J.
1. The petitioner, a Government of India Undertaking, was desirous of supplying stone boulders to Bangladesh and elicited offers for the same. A tender was floated dated 6th/8th September, 1999 and the respondent submitted a tender which was opened on 24.9.1999. There were apparently some subsequent discussions between the parties for renegotiation of terms which resulted in a letter from the petitioner dated 6.10.1999 and a revised offer from the respondent dated 12.10.1999. This revised offer was accepted vide a letter of the petitioner dated 6.11.1999.
2. A formal contract was also executed on 7.12.2000. The respondent made the supplies but, according to the petitioner, there were deficiency in both quantity and quality. The result of the same was that against the payment sought for by the respondent of Rs.25,22,772.48 the petitioner paid only an amount of Rs.16,82,037.48 and deducted an amount of Rs.8,40,735/-. This gave rise to disputes between the parties. Clause 31.0 of the General Conditions of Contracts provided for settlement of disputes through the mode of arbitration and the arbitrator was to be appointed by the Managing Director of IRCON. Mr. Rajendra Nath, a retired Engineer of the Railways was appointed as the sole arbitrator.
3. The petitioner filed an application under Section 16 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the said Act) but the same was decided against the petitioner on 28.4.2005 and ultimately the award was passed on 21.7.2006 awarding the disputed amount along with interest to the respondent. The petitioner has now filed the present petition under Section 34 of the said Act challenging both the order under Section 16 of the said Act and the award dated 21.7.2006.
4. A perusal of the grounds raised in the petition show that the challenge has really been laid only to the order passed on 28.4.2005 on the application of the petitioner under Section 16 of the said Act. There is no challenge to the merits of the award dated 21.7.2006. Learned Counsel for the petitioner, thus, fairly states that the petitioner would fail or succeed depending on the fate of the challenge laid to the order passed on 28.4.2005.
5. In order to appreciate the aforesaid controversy, some of the communications exchanged between the parties would have to be averted to. This is so since the substratum of the case of the petitioner is that there was really no dispute pending between the parties and there had been full accord and satisfaction of the claim of the respondent and the arbitration was only an afterthought.
6. Learned Counsel for the respondent has drawn the attention of this Court to what is alleged by the petitioner to be minutes of what transpired on 6.3.2003, as recorded by Mr. Harjinder Singh, General Manager of the petitioner on 24.3.2003. The document is not signed by the representative of the respondent. It is stated in this document that the deduction of Rs.8,40,735.00 is required to be made.
7. In respect of the rights and obligations of the parties governed by the contract, learned Counsel for the respondent has referred to the revised offer dated 12.10.1999 of the respondent where under the category of other terms and conditions, the following provision was proposed:
(ii) That the quality and quantity of the material should be inspected and conformed at the loading point in writing before the material is loaded into railway wagons. Our responsibility seizes in all respects after the material is loaded into wagons.
8. Learned Counsel has also referred to the confirmation of the said revised offer vide a letter dated 6.11.1999 by the petitioner where Clause 1.4 reads as under:
1.4 The quality and quantity of the material shall be inspected and confirmed at the loading point in writing before the material is loaded into railway wagons.
9. A reading of the aforesaid clauses, thus, makes it clear that what was proposed and accepted was that the quality and quantity of the material should be inspected and conformed at the loading point in writing before the material is loaded into the railway wagons and the responsibility of the respondent would seize in all respects after the material was loaded into the wagons. The documentary evidence placed on record and considered by the arbitrator on merits substantiates that such a verification was carried out by the officers of the petitioner but despite that, the disputes arose on account of the fact that the deficiencies were alleged to have been found when the goods arrived at Bangladesh. Learned Counsel for the respondent, in fact, emphasized that the supplies were made from more than one source and they were mixed up with the result that the deficiencies could never have been laid at the door of the respondent specially taking into consideration the terms of the contract and that is what weighed with the arbitrator.
10. Be that as it may, in my considered view, the real controversy is on account of the plea of full accord and satisfaction canvassed by the learned Counsel for the petitioner.
11. The first communication, relevant in this behalf, is addressed by the petitioner on 30.4.2003, which is in the following terms:
30.04.2003 M/s Krishna Trading Co.
P.O. Sahibganj Jharkhand Fax No. 06436-222190 Sub: Supply of Boulders for JBRLP-II, Bangladesh Ref: Our Order No. IRCON/CO/CIVIL-BD/Boulder/99000/ PKG-I/ 70 dated 06.11.1999 In the meeting held with you on 06.03.2003 at IRCON's Corporate office, it was agreed that an amount of Rs 16,82,037.00 (Rupees Sixteen Lacs Eighty Two Thousand Thirty Seven only) is payable to you as full and final settlement against above referred order as per the following details:
Amount Payable:
1. Security Deposit - 11,77,499.63
2. Performance Guarantee - 5,88,750.00
3. Deduction from 1st RA bill - 47,100.00
4. Deduction from 4th RA bill - 53,738.87
5. Deduction from 6th RA bill - 2,14,927.00
6. Deduction from 8th RA bill - 3,41,102.60
7. Deduction from 0.5% rebate - 99,654.38 Total amount payable - 25,22,772.00(A) Deductions:
1785 Cum @ Rs.471.00 Cum (On account of less measurement\ in Bangladesh and supply of some quoted materials) - 8,40,735.00(B) Net Payable amount (A) - (B) Rs. 16,82,037.00 You are requested to send your consent for the above in addition to a No-claim Certificate so that final payment is processed.
Thanking you Sd/-
(Harjinder Singh) General Manager/JB (emphasis supplied)
12. A reading of the aforesaid fax message, thus, shows that it is the case of the petitioner that in the meeting held on 6.3.2003 an agreement was reached that the amount to be paid by the petitioner to the respondent of Rs.16,82,037.00 would be in full and final satisfaction of the claim of the respondent and, thus, the respondent was requested to send its consent for the same "in addition to a No-claim Certificate so that final payment is processed."
13. In response to the said letter, the respondent claims to have sent a fax dated 12.5.2003 in the following terms:
12.05.03 Shri Harjinder Singh General Manager/JB Ircon International Ltd.
New Delhi Fax No. 011-26885165/011-26873913 Sub: Supply of Boulders for JBRLP-II, Bangladesh under LOA No. IRCON/CO/CIVIL-
BD/Boulder/99000/PKG-I/70 dated 06.11.1999 Ref: Your Telefax Massage date 30.04.2003 Dear Sir, With reference to above, we are enclosing herewith "No claim certificate" under protest. You are requested to please send the amount by Demand Draft at the earliest.
Yours faithfully, For Krishna Trading Company Sd/-
(M.P. Chirania) Proprietor
14. Along with the fax message a no demand certificate was also sent dated 7th/12th May, 2003, which is as under:
NO DEMAND CERTIFICATE Received the sum of Rs.16,82,037.00 (Rupees Sixteen Lacs Eighty Two Thousand and Thirty Seven only) in full and final settlement of all payments due for "Supply of stone boulders loaded in Railway Wagons at Maharajpur for JBRLP-II, Bangladesh" executed by us under the contract agreement No. IRCON/CO/CIVIL-BD/99009 between IRCON and us vide supply order No. IRCON/CO/CIVIL-BD/99009/PKG-I/79 dated 6.11.99 and all other previous orders including all amounts payable to us as per the agreement. We hereby unconditionally and without any reservations whatsoever certify that with this payment, we shall have no claim of whatsoever description on any account whatsoever from IRCON against the aforesaid job executed by us. We further declare unequivocally that with this payment, we have received all the amount payable to us and have no dispute of any description whatsoever regarding the amount due as calculated/paid to us and we shall be continued to be bound by the terms and conditions of the contract.
Sd/-
(M.P. Chirania) Prop.
15. The said communication was followed up by a fax message dated 15.5.2003 by the respondent in the following terms:
15.05.03 To Shri Harjinder Singh General Manager/JB Ircon International Ltd.
New Delhi Fax No. 011-26885165/011-26873913 Sub: Payment of final bill against supply of Boulders for JBRLP-II, Bangladesh under LOA No. IRCON/CO/CIVIL-BD/Boulder/99000/PKG-I/70 dated 06.11.1999 Ref: Our telephonic talk dt. 15-05-2003.
Sir, With reference to above we have to state as under:
1. That we are ready to accept a sum of Rs.16,82,037/- (Rs.Sixteen lacs eighty two thousand thirty seven only) against our outstanding amount of Rs.25,22,722/-.
2. That we shall have no claim from IRCON in connection to the above captioned work in future.
Please send the payment through Demand Draft on State Bank of India payable at Sahibganj (Branch Code-0173) Branch at the earliest by speed post and not by courier service.
16. It is the case of the petitioner that the fax message dated 12.5.2003 was never received by it and the No Demand Certificate, in fact, has been received under the cover of fax dated 15.5.2003. In response to the same, the petitioner sent a letter dated 9.6.2003 enclosing a draft for an amount of Rs.16,78,671, which reads as under:
IRCON/CO/CIVIL-BD/Bounder/99009/1176 09.06.03 M/s Krishna Trading Co. P.O. Sahibganj Jharkhand-816109 Sub: Supply of Boulders for JBRLP-II, Bangladesh Ref:
i) Our supply order No. IRCON/CO/CIVIL-BD/Boulder/99000/ PKG-I/ 79 dated 06.11.1999
ii) Your Letter No. nil dated 15.5.2003 Dear Sir, Consequent upon the submission of "No demand Certificate" along with your letter dated 15.5.2003, a demand draft No. 113625 dated 9.6.2003 for Rs.16,78,671.00 (Rupees Sixteen Lacs Seventy Eight Thousand Six Hundred Seventy One only) drawn on State Bank of India, Sahibganj is enclosed along with as full and final payment of all your dues against our supply order referred above.
Kindly acknowledge the receipt.
17. The respondent only on 27.10.2003 sought to raise the issue about the balance amount payable and sought reference of disputes to arbitration.
18. It is the case of the petitioner that the fax message dated 15.5.2003 in unequivocal terms records the full accord and satisfaction of the claim of the respondent and, thus, it was not open to the respondent to make any further claim. Learned Counsel for the petitioner has also emphasized that the findings arrived at by the arbitrator who found that the fax message dated 12.5.2003 must be accepted as genuine are perverse and are liable to be set aside.
19. In order to appreciate the aforesaid contention, the reasoning of the arbitrator in this behalf has to be averted to. The fax message dated 12.5.2003 was produced before the arbitrator along with the fax transmission report. In order to confirm whether such a fax message had been received by the petitioner, the petitioner was asked to produce its register of fax receipts. The petitioner produced the said register and there was an entry of the fax received vide entry No. 4669 from Ranchi. However, the register recorded that the same was addressed by the AGM to Sahib, an Officer in the Corporate Office. Since the fax transmission report had been produced by the respondent, the arbitrator directed the petitioner to produce the original fax which is alleged to have been received as recorded in the said register. The petitioner failed to produce this stating that the fax message was no more available on account of the shifting of the premises. The arbitrator drew an adverse inference and came to the conclusion that the fax message dated 12.5.2003 was a genuine document.
20. I am unable to persuade myself to agree with the submission of learned Counsel for the petitioner that this Court should once again re-appraise the material to come to a conclusion that this document is not genuine one. That is the jurisdiction of the arbitrator and it is not for this Court to sit as a Court of appeal despite the submission of learned Counsel for the petitioner that the jurisdiction being exercised by this Court is more akin to an appellate jurisdiction since it is the order under Section 16 of the said Act which is sought to be challenged. A reference to the provisions of Section 16 of the said Act would show that only if a conclusion is reached that the arbitrator has no jurisdiction, would an appeal lie under Section 37 of the said Act while in case such an application is rejected, the remedy is only at the stage when objections are filed to the award under Section 34 of the said Act in view of Sub-section (6) of Section 16 of the said Act. I am, thus, of the view that the matter has to be scrutinized within the parameters of Section 34 of the said Act.
21. Even for the sake of argument if it is presumed that a more deeper analysis is necessary, I see no reason to come to a different conclusion than that which was arrived at by the arbitrator. The fax message dated 12.5.2003 coupled with the fax transmission report itself would have been sufficient. The arbitrator took due care to ask the petitioner to produce the records of the fax message received in which there was a fax received from the same destination but it is the case of the petitioner that the said fax was an inter-departmental fax of the petitioner. The petitioner, however, failed to produce that fax. All this material would only lead to one conclusion that the fax sent by the respondent had to be relied upon.
22. The most important document, in my considered view, is the subsequent fax message dated 15.5.2003. This is so as the same succeeds the fax message dated 12.5.2003 and records that the respondent was ready to accept a sum of Rs.16,82,037/- against the outstanding of the respondent of Rs.25,22,732/- and that the respondent would have no claim from the petitioner in connection to the captioned work in future. It, thus, has to be analyzed whether this fax message would amount to full accord and satisfaction of the claim of the respondent.
23. Learned Counsel for the respondent sought to explain the said document by pointing out that the letter dated 30.4.2003 of the petitioner called upon the respondent to send "consent for the above" ,i.e., Rs.16,82,037/- which was to be "in addition to a No-claim Certificate so that the final payment is processed". It is, thus, pleaded that the letter dated 30.4.2003 made a dual demand; the first to send a consent to the said letter for the payment of the amount mentioned therein and second a No-claim Certificate. The fax dated 12.5.2003 clearly mentioned that it is in response to the letter dated 30.4.2003 and enclosing a No-claim Certificate. The fax message dated 15.5.2003 makes a reference to the telephonic conversation between the representative of the parties on 15.5.2003. It is, thus, submitted that despite the No-claim Certificate being sent, since the same was under the cover of the fax message dated 12.5.2003 which stipulated that No-claim Certificate was "under protest", a demand was made upon the respondent to send the consent as demanded vide letter dated 30.4.2003 apart from the No-claim Certificate. It is in pursuance to the said demand that the fax dated 15.5.2003 is stated to have been sent.
24. The legal position in respect of as to how such a No-claim Certificate has to be appreciated has been discussed in Pandit Construction Company v. Delhi Development Authority and Anr. 2007 (3) ALR 205 (Delhi), a judgment of this Court. It was found that often endorsements are made on the final bill as "accepted in full and final". The judgment of the Apex Court in Bharat Coking Coal Ltd. v. Annapurna Construction 2003 (3) R.A.J. 44 (SC) was averted to where the Supreme Court had observed that merely because a party had accepted the final bill, the same would not mean that it was not entitled to any claim. In order for the claim to be presumed to be fully settled, it should unequivocally be stated that no further claim would be raised and, thus, the Supreme Court held that in the absence of such a declaration, the contractor must be held to be estopped and precluded from raising any claims. It is in view thereof that this Court came to the conclusion in Pandit Construction Company v. Delhi Development Authority and Anr. (supra) that the settlement must be recorded in clear and unambiguous terms.
25. Learned Counsel for the respondent has referred to the judgment of the Supreme Court in Chairman and M.D., NTPC Ltd v. Reshmi Constructions, Builders and Contractors; where in paragraphs 27 and 28 it has been observed as under:
27. Even when rights and obligations of the parties are worked out the contract does not come to an end inter alia for the purpose of determination of the disputes arising there under, and, thus, the arbitration agreement can be invoked. Although it may not be strictly in place but we cannot shut our eyes to the ground reality that in the cases where a contractor has made huge investment, he cannot afford not to take from the employer the amount under the bills, for various reasons which may include discharge of his liability towards the banks, financial institutions and other persons. In such a situation, the public sector undertakings would have an upper hand. They would not ordinarily release the money unless a 'No Demand Certificate' is signed. Each case, therefore, is required to be considered on its own facts.
28. Further, necessitas non habet lagem is an age-old maxim which means necessity knows no law. A person may sometimes have to succumb to the pressure of the other party to the bargain who is in a stronger position.
26. Learned Counsel for the respondent, thus, submits that the fax dated 15.5.2003 cannot be read in isolation and merely because the phraseology used therein is that no claim would be made in future, the same cannot be treated as an accord in full and final satisfaction.
27. Learned Counsel for the petitioner, on the other hand, contends that a bare perusal of the fax dated 15.5.2003, taking into consideration the wordings of the same, would amount to full accord and satisfaction even if the fax dated 12.5.2003 is presumed to have been served on the petitioner.
28. If the aforesaid parameters are applied to the facts of the present case, it will be seen that the demand made vide the letter dated 30.4.2003 by the petitioner for release of payment to the respondent was two-fold. The petitioner wanted a No-claim Certificate which was to be in addition to consent for the amount stipulated in the said letter as the final amount. Thus, both, the No-claim Certificate and the fax dated 15.5.2003, were really in pursuance to the said letter. It was a condition precedent for the release of the amount and it is only thereafter that the amounts were released. It is trite to say that there is an element of unequal bargaining position when a contractor has carried out work and dues are pending for a considerable period of time. If a party awarding the contract insists on a letter in the form of a no due or no claim as a pre-condition for release of the payment, it cannot be said that the contractor is deprived of the opportunity to make an appropriate claim before the Arbitral Tribunal.
29. A Division Bench of the Bombay High Court in Ravindra Anant Deshmukh v. City and Industrial Development Corporation of Maharashtra Ltd. held that a no demand certificate obtained as a condition precedent for scrutiny of bill cannot constitute accord and satisfaction and a cause for refusing to refer dispute to arbitration.
30. In Jiwani Engineering Works (P) Ltd v. Union of India , the learned single Judge has recognized the well known and notorious fact that unless a no claim certificate is issued by the contractor, the payment of final bill would not be made.
31. In the given facts discussed aforesaid, I am, thus, of the considered view that it cannot be said that the respondent had surrendered the right to make claim for the balance amount deducted out of the contract amount.
32. The objections filed by the petitioner have also sought to make a grievance that the arbitrator did not record any evidence by way of affidavits or oral testimony but sought various documents. I do not find any force in this plea for the reason that the arbitrator can lay down his own procedure especially when the communications exchanged between the parties is through letters / faxes. In this behalf, learned Counsel for the respondent has also drawn the attention of this Court to two letters dated 13.4.2005 and 8.4.2005 addressed to the arbitrator by the petitioner and the respondent respectively. These letters are in the form of a certificate that the parties having been given full opportunity to present their case under Section 16 of the said Act and had nothing more to add to the same. It is only thereafter on consideration of the matter, the arbitrator found in favor of the respondent.
33. It also cannot be lost sight of that the arbitrator is a technical person and has considered the respective pleas of the parties in depth. The evidence has also been examined and a finding has been reached on the basis of the appraisal of the evidence. The scope of scrutiny by this Court within the expanded definition of Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. does not permit this Court to sit as a Court of appeal or seek to derive different conclusions than that arrived at by the arbitrator on the basis of the material on record. That is not the scope of scrutiny of objections under Section 34(2) of the said Act.
34. In view of the fact that there is no other plea raised, the petition is dismissed, leaving the parties to bear their own costs.