M/S Sequin Real Estate And Anr vs Ramesh Chand Dangaich And Ors on 7 August, 2013

[Cites 18, Cited by 0]

Rajasthan High Court - Jaipur

M/S Sequin Real Estate And Anr vs Ramesh Chand Dangaich And Ors on 7 August, 2013

Bench: Prem Shanker Asopa

    

 
 
 

 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JAIPUR BENCH JAIPUR

ORDER

(1) S.B. ARBITRATION APPLICATION NO.33/2010
Ramesh Dangayach
Versus 
M/s.Sequin Real Estate and others

(2) S.B. CIVIL WRIT PETITION NO.666/2011
M/s.Sequin Real Estate and another 
Versus 
Ramesh Chand Dangaich and others

  DATE OF ORDER    ---   August  7,2013

PRESENT 

HONBLE MR.JUSTICE PREM SHANKER ASOPA

Mr.G.K.Garg,Sr.Advocate with 
Mr.Yash Sharma, for the Applicant 
Mr. N.K.Maloo, Sr.Advocate with Mr.Vishnu Sharma,
for the  Non-applicants No.1,2 and 4
Mr.Rajeev Surana with Mr.Pooran Mal Sharma, 
for the  Non-applicants No.3 and 5
Mr.L.L.Gupta, for the Non-applicants No.6 and 7

BY THE COURT

(1) S.B. Arbitration Application No.33/2010 Ramesh Dangayach V. M/s.Sequin Real Estate and others has been filed for appointment of the Arbitrator under Clause 37 of the re-constituted partnership deed dated 15.3.2007 and further re-constituted partnership deed dated 7.7.2009 containing the arbitration Clause 29 for resolving the dispute by an Arbitrator in case the same is not resolved by amicable settlement. S.B.Civil Writ Petition No.666/2011 M/s.Sequin Real Estate and another V. Ramesh Chand Dangaich and others has been filed against the order dated 2.11.2010 passed under section 8 of the Arbitration and Conciliation Act, 1996 (in short 'the Act') by the Addl. Distt. Judge No.4, Jaipur City in Civil Suit No.29/2010 titled M/s.Sequin Real Estate V. Ramesh Chand Dangaich, for permanent injunction, for referring the dispute to the Arbitrator and the matter has been returned back to the plaintiff for resolution of the dispute by arbitration, wherein apart from the aforesaid Arbitration Clauses of the reconstituted partnership deeds dated 15.3.2007 and 7.7.2009 and further, memorandum of understanding dated 7.7.2009 has also been considered. The Firm was seeking the relief of permanent injunction and declaration that the MOU dated 7.7.2009 is forged and fabricated in the said civil suit, therefore, both the cases have been clubbed together and are being decided together.

S.B. ARBITRATION APPLICATION NO.33/2010 (2) The aforesaid arbitration application was filed on 17.5.2010 wherein on 6.10.2012, it was recorded by the Court on the submission of counsel for both the parties, as follows:

Counsel for both the parties submit that they are not referring nor placing reliance on the MOU dated 7.7.2009 (Anx.4) and will also not refer or rely on the said document in any proceeding arising out of the Arbitration and Conciliation Act, 1996, without prejudice to their rights to refer or rely the same in any other proceeding.

In view of the above, Application No.30262 dated 28.9.2012 and Application No.12945 dated 20.4.2012 are disposed of.

(emphasis supplied) (3) Thereafter, Mr.L.L.Gupta, counsel for the Non-applicants No.6 and 7 filed two applications (i) Application No.33863/2012 and (ii) Application No.33727/2012. Application No.33863/2012 was filed for amendment of the original arbitration application by striking out / deleting / omitting the paragraphs with regard to the averment relating to the alleged MOU dated 7.7.2009. Application No.33727/2012 was filed by Mr.V.K.Tamolia, counsel for the Non-applicants No.1,2 and 4 for correction of the words counsel for both the parties submit as counsel for the Applicant submits, which was not pressed by Mr.V.K.Tamolia on 7.12.2012 and on the other Application filed by Mr.L.L.Gupta, counsel for the Non-applicants No.6 and 7, consequential order of striking out the reference of the MOU dated 7.7.2009 was passed by this Court with the further direction for filing of the amended arbitration application and the time was also granted to the counsel for the Non-applicants to file reply to the amended arbitration application. Thereafter, amended arbitration application has been filed on 31.1.2013 to which reply / rejoinder have been filed by the respective parties, therefore, it would be appropriate to take the facts and issues raised in the amended arbitration application.

(4) Briefly stated, the facts of the case, as stated in the amended arbitration application, are that the Applicant, Non-applicant No.1 M/s.Sequin Real Estate is a partnership firm, originally constituted vide partnership deed dated 8.6.2006 (Anx.1) consisting of Non-applicants No.2 to 7 and Smt.Jadav Devi as partners. On 15.3.2007, Smt.Jadav Devi retired and the aforesaid original partnership deed dated 8.6.2006 (Anx.1) was reconstituted first time on 15.3.2007. Smt.Jadav Devi, on her retirement, was paid a sum of Rs.7.56 lacs which were remaining in her account (in lieu of capital amount) as per Clause 8 of the re-constituted partnership deed dated 15.3.2007 and further, a sum of Rs.2,44,44,000/- for leaving of her rights and profit as per Clause 9 of the said deed. As per Clause 16 of the re-constituted partnership deed dated 15.3.2007, the Applicant invested the capital amount of Rs.30,00,000/- in the firm, which was increased subsequently. As per Clause 21 of the re-constituted partnership deed dated 15.3.2007, all other partners, except Jadav Devi, invested Rs.1,26,000/- for the share of 2520 Sq.Yards. The Applicant has deposited Rs.30 lacs along with Suresh Kumar Golya and the Applicant had the maximum share in the profit @ 27.50% whereas other Applicants were given profit in the share of 12.00% and Suresh Kumar Golya was given the profit of 12.50%. He and Suresh Kumar were the working partners. Clause 34 of the re-constituted partnership deed dated 15.3.2007 provided for the determination of money on retirement of the partner in the form of capital amount as well as profit and loss of the firm. Clause 37 of the re-constituted partnership deed dated 15.3.2007 is the arbitration clause.

(5) After the retirement of the Applicant, immediately the partnership deed was further reconstituted on 7.7.2009. Out of the amount of Rs.78,71,000/-, a sum of Rs.46,000/- has been received in cash by the Applicant and further, a cheque of Rs.12 lacs dated 7.1.2010 was received by the Applicant but the cheque has not been encashed and other two post dated cheques of Rs.12 lacs have not been received by the Applicant. Further, as per Clause 4(b), the remaining amount of Rs.41,21,000/- was to be paid after eighteen months of the execution of the reconstituted partnership deed to the retiring partner with mutual consent. The Applicant stated in the amended arbitration application that the said amount of Rs.78,71,000/- is not inclusive of profit, which has not been calculated as per the balance sheet of the firm from 15.3.2007 to 7.7.2009 as per his share @ 27.50%. The compliance of Clause 26 has also not been made while working out the aforesaid amount which is in lieu of capital amount. The other relevant Clauses of the last reconstituted partnership deed dated 7.7.2009 4(?),(?),(?) 5, 6, 26 and the arbitration Clause 29 are also given just below the opening relevant para and the relevant clauses 4, 8, 9,16, 21, 34 and 37 of the first reconstituted partnership deed dated 15.3.2007 .

(6) The relevant clauses contained in the first reconstituted partnership deed dated 15.3.2007 (Anx.2) and 7.7.2009 (Anx.3) are as under:

Relevant Clauses 4,8,9,16, 21, 34 and 37 of the reconstituted partnership deed dated 15.3.2007 Relevant portion of the opening para ".....?? ?? ????? ???? ????? ???? ?????? ???? ???? ??? ??? ????? ?? ????????? ?????? ?? ?? ???????? ???? ?? ??????? ?? ??? ??? ?? ???? ???? ????? ?? ? ???? ????????? ?? ???? ?? ????? ?? ???????? ?? ?? ?? ? ????? ???? ?????? ?? ???? ????????? ?????? ???? ?? ??? ??? ? ????? ?? ??? ???? ???? ??? ??? ?????? ???? ?? ?"

??: --------- ???? ?? ??? ?? 1,2,3

4. ?? ?? ????? ???? ?????? ?????? ????? ?? ??? ??? ?????? ?? ?? ???? ?? ??????? ??? ???? ?? ??? ?? ???? ?? ??? ?? ????????? ?? ???????? ?? ???????? ??? ?? ????? ???? ?????? ??? ???? ????? ?? ??? ?? ???????? ?? ??? ????? ???????

8.?? ?? ???? ???? ?????? ?? ????? ???? ?? ??????? ??? ??? ??? ????? ???? ????? ?? ?????? ??? ?????? 109430 ?????? 15.03.2007 ??.??.??.??. ???? ????? ?? ?????? ?????? ???? ?? ??? ?? ?

9.?? ?? ???? ???? ?????? ?????? ???? ??? ???? ?? ??????? ??? ?????? ?? ?????? ?????, ???? ??? ???? ???? ????? ??? ???? ?????? ?? ?????, ???? ?? ????? ?? ???????????? ? ???? ??? ???? ???????? ???? ?? ?????? ?? ?????? ??? ?? ???? ????? ???? ?? ????????????? ?? ????? ???? ?? ???? ??????? ??? ???????? ???? ???? ?? ??? ?????? 109429 ?????? 15.3.2007 ??.??.??.??. ???? ????? ?? ?????? ?????? ???? ?? ??? ?? ?

16.?? ?? ????? ???? ?? ????? ???? ?? ?? ??????? ????? ?? ?? ???? ???? ?? ???? ??? ????? ?? ??? ??? ?????? ??????????? ?? ???? ???-

??? ???????

??????

?????

???? ?????? ??????

2520

126000 ???? ???????? ??????

2520

126000 ??????? ?????? ???? ??????

2520

126000 ??????? ????? ???? ??????

2520

126000 ??????? ????? ???? ??????

2520

126000 ???? ????? ????? ??????

2520

126000 ??????? ???? ???? ?????? ???? ????????? ?? ???? ????????? ??????

15120 756000 ????? ???? ?? ????? ???? ?? ?? ????????? ?? ???? ??? ????? ???? ??? ?? ???? ?? ????? ??? ???? ?????? ??? ???? ???? ?? ???? ??? ?? ?????? ?? ???? ???? ????????? ?????? ???? ?? ??????????? ??? ????? ?? ?? ??? ?? ? ???? ????? ???? ???? 6 ????? ????? ? ???? ???? 8 ???? ?????? ???????? ???-??? ??? ???? ???? ??? ???? ????? ?? ??? ??? ?????????

21.?? ?? ?????? ???? ?? ????? ????? ?? ???? ?? ??? ?? ?? ??? ?? ?????? ????, ?? ???? ???? ?????? ??????? ???? ??????:-

???.??.

??? ???????

???????

???? ?????? ??????

12.00% 2 ???? ???????? ??????

12.00% 3 ??????? ?????? ???? ??????

12.00% 4 ??????? ????? ???? ??????

12.00% 5 ??????? ????? ???? ??????

12.00% 6 ???? ????? ????? ??????

12.50% 7 ???? ???? ??????

27.50%

34. ?? ?? ?????? ???? ?? ???? ??????? ?? ?????? ???? ?? ??? ??? ??? ??? ??????? ???? ?? ???? ?? ?????? ? ?? ??? ??? ?? ???? ???? ??????? ?? ?????????? ?? ??? ?? ????? ?? ??? ??????? ?? ??? ??? ????? ?? ?????? ? ?????? ???? ???? ??????? ?? ????? ???? ?????? ???? ?? ????? ?? ?? ???????? ?? ?????? ?????? ??? ??? ?????? ?? ??????? ?? ?? ??? ??? ???? ???? ??? ?? ???? ???? ?????? ?? ???? ?????? ?

37. ?? ?? ?????? ???? ??? ??? ??? ????? ??????? ?? ???? ?? ??? ??????? ????????? ????? ?????? ?? ?? ?? ?????? ?? ?????? ?? ? ????? ???? ?? ??? ??? ?? ????? ??? ?????? ?? ??? ????? ?? ????? ?"

(emphasis supplied) Relevant Clauses 4(?),(?),(?) 5, 6, 26 and the arbitration Clause 29.paras of the last reconstituted partnership deed dated 7.7.2009

4.(?) ?? ?? ???? ???? ???? ??????? ?? ????? ???? ?? ??????? ??? ???? 78,71,000/- ??? ?? ????? 46,000/- (??????? ????) ?? ?? ??? ??? ?? ??????? ?? ???????? ?? ??? ???? ???? ?????? ?? ?????? ?? ???? ??? ?? ? ??? ????? 37,00,000/- ?? ?????? ???? ?????? ???? ???? ?????? ?? ?? ??????? ?? ???????? ?? ??? ??? ?: ???? ??????? ??? ????? ??????? ??? ???? ?????? ?

????? 12,00,000/-

????? ??? ????? 788088 ?????? 07.01.2010 HDFC ???? ?? ???? ???? ?? ???? ???? ???? ??????? ?? ?? ???? ?? ????? ?????? ???? ???? ???? ??????? ?? ???? ??? ???? ?? ?????? ?? ???? ???????

??.???? 12,50,000/-

????? ??? ????? 788089 ?????? 07.07.2010 HDFC ???? ?? ???? ???? ?? ???? ???? ???? ??????? ?? ?? ???? ?? ????? ?????? ???? ???? ???? ??????? ?? ???? ??? ???? ?? ?????? ?? ???? ???????

??.???? 12,50,000/-

????? ??? ????? 788090 ?????? 07.01.2011 HDFC ???? ?? ???? ???? ?? ???? ???? ???? ??????? ?? ?? ???? ?? ????? ?????? ???? ???? ???? ??????? ?? ???? ??? ???? ?? ?????? ?? ???? ???????

(?) ?? ?? ??? ????? 41,25,000/- ?? ?????? ?? ??????? ?? ???????? ?? 18 ????? ??? ???? ??? ???? ???? ???? ??????? ?? ???? ????? ?? ???? ????? ?? ???? ???????

(?) ?? ?? ????? ???? ?? ??????? ????? ??? ???? ?? ??? ???? ???? ?????? ?? ?? ?? ??? ??? ??? ????? ?? ??? ??? ?? ??? ????? ??? ???? ?????

5. ?? ?? ???? ???? ?????? ?? ??????? ???????? ???? ????? ???????? ??? ????? ?? ??? ??? ??????? ?? ?? ?? ?

6. ?? ?? ???? ???? ?????? ?? ??? ???? ?? ?? ?? ???? ?? ??????? ?? ????????,????????? ?? ???? ???? ?? ??????? ???? ???? ?? ???? ?? ??? ?? ??? ?? ????? ?? ????? ??????, ??????? ?? ??? ??? ???? ??? ????? ?????? ? ??????? ???? ???? ?????? ?????? ???? ?? ???? ?? ?? ?? ?? ?? ??????? ??? ??????? ?? ??? ??? ?????????? ??? ???? ???? ?? ?? ?? ??????? ?? ??? ???? ???? ?????? ????? ????????? ?????? ??? ???? ?? ??????? ?? ???? ?????? ?????? ??? ???? ?? 15 ????? ?????? ??? ???? ???? ?????? ???? ?? ?????? ???????? ???? ??? ???? ???? ?????? ?? ??? ??? ??? ?? ???? ??????? ???? ?? ?????? ???? ?? ???? ?

26.?? ?? ?????? ???? ?? ???? ??????? ?? ??????(????) ???? ?? ??? ??? ??? ??? ??????? ???? ?? ???? ?? ??????? ?? ??? ??? ?? ???? ???? ??????? ?? ?????????? ?? ??? ?? ????? ?? ??? ??????? ?? ??? ??? ????? ?? ??????? ?????? ???? ???? ??????? ?? ????? ???? ?????? ???? ?? ????? ?? ?? ???????? ?? ?????? ?????? ??? ??? ?????? ?? ??????? ?? ?? ??? ??? ???? ????? ??? ?? ???? ???? ?????? ?? ???? ?????? ?

29.?? ?? ?????? ???? ??? ??? ??? ????? ??????? ?? ???? ?? ??? ??????? ????????? ????? ?????? ?? ?? ?? ?????? ?? ?????? ?? ? ????? ???? ?? ??? ??? ?? ????? ??? ?????? ?? ??? ????? ?? ????? ?" (emphasis supplied) (7) A search was conducted by the Income Tax Department in the month of November, 2009 in regard to the business of the firm and consequent thereto, the firm surrendered an amount of Rs.5 to 6 Crores approximately. The Applicant learnt that most of the profit amount has been concealed by not disclosing the same in the account books which has resulted in the surrender of the aforesaid amount to the Income Tax Department. The fact of concealment of income by not disclosing the same in the balance sheet of the firm for the period 15.3.2007 to 7.7.2009 resulted in misleading the Applicant in order to take undue advantage of non payment of profit to the Applicant by the Firm and other partners with regard to the non-payment of profit and loss after working out the same from the balance sheet came to his notice in the month of November, 2009, therefore, the Applicant is entitled to get appointment of an Arbitrator for production of accounts of the firm and their scrutiny as well as his entitlement in the share of the profit as per the first reconstituted partnership deed dated 15.3.2007 and the last reconstituted partnership deed dated 7.7.2009.

(8) A dispute arose between the Applicant and other partners of the reconstituted partnership firm when they did not honour the terms of the first and last reconstituted partnership deed dated 15.3.2007 and 7.7.2009 and did not pay to the Applicant the amount of Rs.78,71,000/-, except Rs.46,000/- in cash which was in lieu of capital and further no amount was paid to the Applicant in lieu of profit of the firm as per Clause 34 of the earlier reconstituted partnership deed dated 15.3.2007 which came to his notice in the month of November, 2009, as stated above. The Applicant sent a legal notice on 13.4.2010 (Anx.4) for invoking the arbitration clause of the reconstituted partnership deed dated 15.3.2007 and 7.7.2009 as the settlement has not been arrived at between the parties.

(9) Further case, as stated in the amended arbitration application, is that the Non-applicants have withheld Annexure A-1, as referred in Clause 2 of the amended arbitration application with regard to the balance sheet of the firm from 15.3.2007 to 7.7.2009 which has been said to be part of the reconstituted partnership deed dated 7.7.2009 at the time of filing the said reconstituted partnership deed before the Registrar of Firms and the same has also not been made available to the Applicant. It is further stated in the arbitration application that the earlier retiring partner Smt.Jadav Devi was paid a sum of Rs.7,56,000/- towards the capital amount taking into account the value of the land as Rs.7,42,000/- therefore, it cannot be said that a sum of Rs.2,42,44,000/- was paid as profit since she gave her land to the firm, although subsequent facts of income tax raid and assessment of the income tax wherein surrender of Rs.5-6 Crores by the firm and the Applicant and reply of the Non-applicants that the assessment has been made on 12.3.2013 with regard to the assessment year 2009-2010 and assessment period 2010-2011 on the basis of the return filed on 15.10.2012. The issue of non payment of the profit from 15.3.2007 to 7.7.2009 to the Applicant has been raised by the Applicant which has been disputed by the Non-applicants on the basis of the aforesaid clauses and the affidavit. Otherwise also, the same is not for me to decide. It only depends upon the decision of the existence of arbitration clause and the arbitration application.

(10) Separate reply has been filed by the Non-applicants No.1,2 and 4, Non-applicants No.6 and 7 as well as Non-applicants No.3 & 5 to which rejoinder has also been filed.

(11) During the course of arguments on 22.5.2013, the Applicant has not pressed the facts and submissions based on manipulation, misapplication of funds, fake and fabricated accounts,therefore, the same have not been included in the facts of the amended arbitration application and are also not being dealt with herein while deciding this arbitration application. However, the Applicant has pressed the averments and circumstances of concealment of the profit amount, taken by him in para 13 and subsequent paras,which was learnt by him in the month of November, 2009 when a search was conducted by the Income Tax Department and a sum of Rs.5-6 Crores was surrendered by the Firm and further submissions based thereon. The order sheet dated 22.5.2013 is as follows:

In the amended arbitration application, 'counsel for the Applicant does not press the allegation of manipulation, mis-application of funds taken in para 8 of the arbitration application, although he has not raised the issue of fake and fabricated accounts in the amended arbitration application and even if there is some reference by inadvertence, then also he does not press the same. He pressed the averments and circumstances mentioned in para 13 that most of the profit amount has been concealed in the accounts of the Firm and the consequences thereof referred in subsequent paras and further submissions based thereon.' Arguments heard. Order reserved.

(12) Mr.N.K.Maloo, Sr.Advocate appearing for the Non-applicants No.1,2 and 4, Mr.Rajeev Surana, counsel for the Non-applicants No.3 & 5, and Mr.L.L.Gupta, counsel for the Non-applicants No.6 and 7 have raised the following preliminary objections regarding maintainability of the arbitration application:

(i) Neither Clause 37 of the reconstituted partnership deed dated 15.3.2007 nor Clause 29 of the reconstituted partnership deed dated 7.7.2009, which are couched in the same language, are arbitration clauses.

(ii) Clause 29 of the reconstituted partnership deed dated 7.7.2009 (Anx.3) is not available to the Applicant who was the retiring partner as mentioned in the said reconstituted partnership deed dated 7.7.2009 in view of Clause 31 of the dissolution deed which is applicable only on the partners of the reconstituted firm.

(iii) The accounts have been settled, therefore, there is no arbitral dispute for making the reference.

(iv) The amicable settlement cannot be reopened.

(13) In addition to the aforesaid preliminary objections, Mr.Surana, counsel for the respondents No. 3 and 5, submitted that the Applicant has not come with clean hands wherein he has referred the MOU dated 7.7.2009 without realizing the effect of the order of this Court on the un-amended arbitration application on 6.10.2012 and the order dated 22.5.2013 on the amendment application and further reference of the criminal case has no relevance for the purpose of deciding the present arbitration application. Counsel placed reliance on the Supreme Court judgment in N.Radhakrishan V.Maestro Engineering & others (2000) 1 SCC 72.

(14) Reply of Mr.Garg, to the aforesaid preliminary objection is that the aforesaid proposition of law laid down by the Supreme Court has been considered on 22.5.2013 after hearing counsel for both the parties which has not been objected to by the other counsel. Thereafter, counsel for the Applicant has not pressed certain allegations of manipulation, mis-application of funds taken in para 8 of the arbitration application, although he has raised the issue of fake and fabricated accounts in the amended arbitration application and even if there is some reference of inadvertence, then also he does not press the same. He pressed the averments that most of the profit amount has been concealed in the accounts of the Firm which has resulted into surrender of approximately Rs.5-6 Crores to the Income Tax Department in the month of November, 2009 as taken in para 13 and consequences thereof which the Applicant came to know after signing the last reconstituted partnership deed dated 7.7.2009. Therefore, the aforesaid additional objection raised by Mr.Surana does not survive.

(15) I have gone through the arbitration application and further considered the preliminary objections taken in the replies filed by the Non-applicants and further rejoinder filed by the Applicant to the aforesaid replies along with rival submissions of the counsel for the parties with the judgments cited by counsel for both the parties.

(i) Neither Clause 37 of the reconstituted partnership deed dated 15.3.2007 nor Clause 29 of the reconstituted partnership deed dated 7.7.2009, which are couched in the same language, are arbitration clauses.

(16) Regarding the Preliminary Objection No.(i), Mr.Maloo has placed reliance on Jagdish Chander V. Ramesh Chander and others (2007) 5 SCC 719, Principles (i) and (iv) in para 8; State of Orissa and others V. Bhagyadhar Dash (2011) 7 SCC 406 Para 20-25, wherein Jagdish Chander V. Ramesh Chander and others (supra) has been followed and Powertech World Wide Limited V. Delvin International General Trading LLC(2012) 1 SCC 361 Para 19. The same are as under:

Jagdish Chander V. Ramesh Chander and others (2007) 5 SCC 719, Principles (i) and (iv) in para 8

8. This Court .... an arbitration agreement:

(i) The intention of the parties to enter into an arbitration agreement shall have to be gathered from the terms of the agreement. If the terms of the agreement clearly indicate an intention on the part of the parties to the agreement to refer their disputes to a private tribunal for adjudication and a willingness to be bound by the decision of such tribunal on such disputes, it is arbitration agreement. While there is no specific form of an arbitration agreement, the words used should disclose a determination and obligation to go to arbitration and not merely contemplate the possibility of going for arbitration. Where there is merely a possibility of the parties agreeing to arbitration in future, as contrasted from an obligation to refer disputes to arbitration, there is no valid and binding arbitration agreement. (emphasis supplied)

(iv) But mere use of the word arbitration in a clause will not make it an arbitration agreement, if it requires or contemplates a further or fresh consent of the parties for reference to arbitration. For example, use of words such as parties can, if they so desire, refer their disputes to arbitration. (emphasis supplied) (17) In para 4 of State of Orissa and others V. Bhagyadhar Dash (2011) 7 SCC 406, the aforesaid principle of Jagdish Chander V. Ramesh Chander and others (supra) has been followed and further in Paras No.20, 21, 22, 23, 24 and 25, Clause 10 of the said contract relating to the finality of the decision of the Superintending Engineer of the Circle in the matter of determination of rates has not been held to be an arbitration clause. The Court has taken note of Clause 23 of the conditions of contract for reference of the dispute to the Sole Arbitration of the Chief Engineer under the arbitration clause and the same has been deleted.

State of Orissa and others V. Bhagyadhar Dash (2011) 7 SCC 406 Paras 20, 21, 22, 23, 24 and 25

20. Clause 10 of the Conditions of Contract which is the subject of controversy reads thus:

"Clause 10: The Engineer-in-Charge shall have power to make any alterations in or additions to the original specifications, drawings, designs and instructions that may appear to him necessary and advisable during the progress of work, and the contractor shall be bound to carry out the work in accordance with any instructions which may be given to him in writing signed by the Engineer-in-Charge and such alterations shall not invalidate the contract, and any additional work which the contractor may be directed to do in the manner above specified as part of the work shall be carried out by the contractor on the same conditions in all respects on which he agreed to do the main work, and at the same rates as are specified in the tender for the main work. The time for the completion of the work shall be extended in the proportion that the additional work bears to the original contract work and the certificate of the Engineer-in-Charge shall be conclusive as to such proportion. And if the additional work includes any class of work for which no rate is specified in this contract, then such class of work shall be carried out at the rates entered in the sanctioned schedule of rates of the locality during the period when the work is being carried on and if such last mentioned class of work is not entered in the schedule of rates of the district then the contractor shall within seven days of the date of the rate which it is his intention to charge for such class of work, and if the Engineer-in-Charge does not agree to this rate he shall be noticed in writing be at liberty to cancel his order to carry out such class of work and arrange to carry it out in such manner as he may consider advisable.

No deviations from the specifications stipulated in the contract nor additional items of work shall ordinarily be carried out by the contractor, nor shall any altered, additional or substituted work be carried out by him, unless the rates of the substituted, altered or additional items have been approved and fixed in writing by the Engineer-in-Charge, the contractor shall be bound to submit his claim for any additional work done during any month on or before the 15th days of the following month accompanied by a copy of the order in writing of the Engineer-in-Charge for the additional work and that the contractor shall not be entitled of any payment in respect of such additional work if he fails to submit his claim within the aforesaid period:

Provided always that if the contractor shall commence work or incur any expenditure in respect thereof before the rates shall have been determined as lastly hereinbefore mentioned, in such case he shall only be entitled to be paid in respect of the work carried out or expenditure incurred by him prior to the date of the determination of the rates as aforesaid according to such rate or rates as shall be fixed by the Engineer-in-Charge. In the event of a dispute, the decision of the Superintending Engineer of the Circle will be final." (emphasis supplied in the original judgment)

21. A reading of the said clause shows that it is a clause relating to power of the Engineer-in-Chief to make additions and alterations in the drawings and specifications and execution of non-tendered additional items of work (that is items of work which are not found in the bill of quantities or schedule of work). It provides for the following:

(a) that the Engineer-in-charge could make additions and alterations in the drawings / specifications; and that such alterations and additions will not invalidate the contract, but will entitle the contractor to extension of time for completion of work proportionately;

(b) that if the additional work be executed is an item for which the rate is not specified in the contract (or in the schedule of rates for the district), the contractor shall specify the rate and the Engineer-in-charge may either accept the rate or cancel the order to execute that particular work;

(c) that if the contractor commences the work with reference to an item for which there is no rate in the contract and there is no agreement in regard to the rate for execution of such work, he shall be paid at the rates fixed by the Engineer-in -Charge; and

(d) that if the contractor disputes the rate fixed by the Engineer-in-Charge, the decision of the Superintending Engineer in regard to rate for such non-scheduled item shall be final.

22. We may next examine whether the last sentence of the proviso to clause 10 could be considered to be an arbitration agreement. It does not refer to arbitration as the mode of settlement of disputes. It does not provide for reference of disputes between the parties to arbitration. It does not make the decision of the Superintending Engineer binding on either party. It does not provide or refer to any procedure which would show that the Superintending Engineer is to act judicially after considering the submissions of both parties. It does not disclose any intention to make the Superintending Engineer an arbitrator in respect of disputes that may arise between the Engineer-in-Charge and the contractor. It does not make the decision of the Superintending Engineer final on any dispute, other than the claim for increase in rates for non-tendered items. It operates in a limited sphere, that is, where in regard to a non-tendered additional work executed by the contractor, if the contractor is not satisfied with the unilateral determination of the rate therefor by the Engineer-in-Charge the rate for such work will be finally determined by the Superintending Engineer. It is a provision made with the intention to avoid future disputes regarding rates for non-tendered item. It is not a provision for reference of future disputes or settlement of future disputes. The decision of superintending Engineer is not a judicial determination, but decision of one party which is open to challenge by the other party in a court of law. The said clause can by no stretch of imagination be considered to be an arbitration agreement. The said clause is not, and was never intended to be, a provision relating to settlement of disputes.

23. That clause 10 was never intended to be an arbitration agreement is evident from the contract itself. It is relevant to note the Standard Conditions of Contract of the state government, as originally formulated consisted a provision (Clause 23) relating to settlement of disputes by arbitration, which is extracted below:

"Except where otherwise provided in the contract, all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions herein before mentioned and as to the quality of workmanship, or materials used on the work, or as to any other question, claim, right, matter or thing whatsoever, in any way arising out of or relating to the contract, designs, drawing, specifications, estimates, instructions, orders or these conditions, or otherwise concerning the work, or the execution, or failure to execute the same, whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of a Superintending Engineer of the State Public Works Department unconnected with the work at any stage nominated by the Chief Engineer concerned. If there be no such Superintending Engineer, it should be referred to the sole arbitration of Chief Engineer concerned. It will be no objection to any such appointment that the arbitrator so appointed is a government servant. The award of the arbitrator so appointed shall be final, conclusive and binding on all parties to this Contract."

(emphasis supplied in original)

24. The abovesaid clause was deleted by the State Government from the Standard Conditions of Contract by official Memorandum dated 24.12.1981. Contracts entered by the State Government thereafter did not have the said arbitration clause, though the other Conditions of Contract remained the same. The contracts in all these cases are of a period subsequent to 24.12.1981 and the Conditions of Contract forming part of these contracts do not contain the arbitration clause. When the State Government has consciously and intentionally deleted the provision for arbitration from its contracts, it will be a travesty of justice to read another clause in the contract providing for execution of non-tendered items and the method of determination of the rates therefor, as a provision for arbitration. (emphasis supplied)

25. In fact, in Executive Engineer RCO vs. Suresh Chandra Panda [1999 (9) SCC 92], this Court considered the effect of the said clause relating to execution of non-tendered items, vis-`-vis clause 23 in a pre-1981 contract. This court held that the said clause (then numbered as clause 11, numbered as clause 10 in subsequent contracts) was a provision which excluded the issue relating to finality of rates, from the scope of arbitration agreement contained in clause 23 on the following reasoning: (SCC p.94,para 4) "4.Under Clause 11 of the contract, there is an elaborate provision dealing with the power of the Engineer-in Charge to make any alterations or additions to the original specifications, drawings, designs and instructions. It, inter alia, provides that if for such alterations or additions no rate is specified in the contract, then the rates which are entered in the sanctioned schedule of rates of the locality during the period when the work is being carried out, would be paid. However, if this class of work, not provided for in the sanctioned schedule of rates then the contractor has the right, in the manner specified in that clause, to inform the Engineer-in-Charge of the rate at which he intends to carry out that work. If the Engineer-in-Charge does not agree to this rate he is given the liberty to cancel his order and arrange to carry out such class of work in such manner as he may consider advisable. The clause further provides that if the contractor commences such additional work or incurs any expenditure in respect of it before the rate are determined as specified in that clause, then the rate or rates shall be as fixed by the Engineer-in-Charge. In the event of a dispute, the decision of the Superintendent Engineer of the circle will be final. Under Clause 23, except as otherwise provided in the contract, all disputes are arbitrable as set out in that clause. The finality of rates, therefore, under Clause 11 is a provision to the contrary in the contract which is excluded from Clause 23."

Powertech World Wide Limited V. Delvin International General Trading LLC(2012) 1 SCC 361 Para 19

19. This Court, in Bihar State Mineral Development Corpn. V. Encon Builders (I) (P) Ltd. has also taken the view that the parties must agree in writing to be bound by the decision of such tribunal and they must be ad idem. (emphasis supplied) (18) In reply to the aforesaid preliminary objection No.(i), the submission of Mr.G.K.Garg, Sr.Advocate appearing for the Applicant is that Clause 37 and 29 of the reconstituted partnership deeds dated 15.3.2007 and 7.7.2009 are arbitration clauses and by reading of the same, it would be clear that in case the dispute is not amicably settled, then the dispute will be referred for arbitration award, therefore, the element of amicable settlement and further, in case of failure of amicable settlement, the same shall be referred for arbitration award implies the right of reference as well as binding effect and in support of the above, Mr.Garg has placed reliance on Para 9 of Jagdish Chander V.Ramesh Chander and others (supra) wherein it is held that 'If the clause had merely said that in the event of disputes arising between the parties, they shall be referred to arbitration, it would have been an arbitration agreement, and further that in the instant case, there is no further consent required to be taken for making the reference or any determination is required for the same and the arbitration award u/s 35 of the Act is binding. Para 9 of the aforesaid judgment in Jagdish Chander V. Ramesh Chander and others (2007) 5 SCC 719 cited by Mr.G.K.Garg, is as under:

9. Para 16 of the partnership deed provides that if there is any dispute touching the partnership arising between the partners, the same shall be mutually decided by the parties or shall be referred to arbitration if the parties so determine. If the clause had merely said that in the event of disputes arising between the parties, they shall be referred to arbitration, it would have been an arbitration agreement. But the use of the words shall be referred for arbitration if the parties so determine completely changes the complexion of the provision. The expression determine indicates that the parties are required to reach a decision by application of mind. Therefore, when clause 16 uses the words the dispute shall be referred for arbitration if the parties so determine, it means that it is not an arbitration agreement but a provision which enables arbitration only if the parties mutually decide after due consideration as to whether the disputes should be referred to arbitration or not. In effect, the clause requires the consent of parties before the disputes can be referred to arbitration. The main attribute of an arbitration agreement, namely, consensus ad idem to refer the disputes to arbitration is missing in clause 16 relating to settlement of disputes. Therefore it is not an arbitration agreement, as defined under Section 7 of theAct. In the absence of an arbitration agreement, the question of exercising power under Section 11 of the Act to appoint an arbitrator does not arise.

(emphasis supplied) (19) The clause 37 of the partnership deed dated 15.3.2007 (Anx.2) and Clause 29 of the partnership deed dated 7.7.2009 (Anx.3) are arbitration clauses which are applicable in the present case for the reason that the alleged amicable settlement is not amicable settlement of the profit and loss of the Applicant after working out the profit and loss of the firm as per the various clauses of the first reconstituted partnership deed dated 15.3.2007 and lastly reconstituted partnership deed dated 7.7.2009, as stated above. The said amicable settlement of capital amount will not debar the Applicant to raise the dispute of profit and loss which came to his notice after the execution of the second reconstituted partnership dated 7.7.2009 when in November, 2009, a search was conducted by the Income Tax Department and an amount of Rs.5-6 Crores was surrendered which revealed that most of the profit amount has been concealed by the Firm and further the Applicant was misled by the Non-applicants in order to take undue advantage by not producing the entire balance sheet / correct balance sheet of the Firm, either before the Registrar of Firms or before this Court, after working out the profit of the Firm and he has disputed the fact that Annexure R-6/4 is not the notarised / true copy of Annexure A-1, reference of which has been made in the reconstituted partnership deed 7.7.2009 which was not produced either before the Registrar of Firms or this Court. The resolution of the dispute through arbitration award referred in Clause 37 of the partnership deed dated 15.3.2007 and Clause 29 of the last reconstituted partnership deed dated 7.7.2009 required no further consent of the parties or any determination before making the reference and further, the said Clauses pre-supposes the right of reference and further the same would be binding also being an arbitration award, therefore, my finding is that the said Clauses are arbitration clauses.

(20) Apart from the above, the Applicant is seeking compliance of the terms and conditions of the contract dated 15.3.2007 and 7.7.2009 and has not challenged any part of the agreement, the Arbitration Clause 29 of the reconstituted partnership deed dated 15.3.2007 survives and further, the capital amount settled in view of the arbitration agreement dated 7.7.2009 has not been paid and further, profit and loss of the firm has not been determined and worked out separately for the Applicant, therefore, the Applicant is entitled to invoke the arbitration Clause 37 of the reconstituted partnership deed dated 15.3.2007 and further reconstituted partnership deed dated 7.7.2009, are available to the Applicant for the purpose of appointment of the Arbitrator, hence, the present arbitration application is maintainable.

Regarding the Preliminary Objection No.(ii) Clause 29 of Annexure-3 dated 7.7.2009 is not available to the Applicant in view of Clause 31 of the dissolution deed Anx.3. - Arbitration Clause 37 of the earlier first reconstituted partnership deed dated 15.3.2007 will not survive after the last reconstituted partnership deed dated 7.7.2009.

(21) Submission of Mr.Maloo, Sr.Advocate is that the reconstituted partnership deed dated 7.7.2009 containing arbitration clause 29 is applicable between the partners referred to therein in view of Clause 31 and not the retiring partner i.e. the Applicant.

(22) Reply of Mr.Garg to the preliminary objection No.(ii) is that Clause 29 of Annexure-3 is available to the Applicant since the Applicant is one of the signatories to the last reconstituted partnership deed dated 7.7.2009 wherein the capital amount of investment has been worked out as Rs.78,71,000/- and no profit amount has been shown and the submission of the Non-applicants is that the disputes have been settled as per the last reconstituted partnership deed dated 7.7.2009, therefore, the same is applicable to the Applicant and the Non-applicants as per the provisions of Sec.11(6) of the Act of 1996 for appointment of the Arbitrator.

(23) Submission of Mr.G.K.Garg, Sr.Advocate is that the dispute arising out of the reconstituted partnership deed dated 15.3.2007 still survives, therefore, Clause 37 of the same will not perish and the same continues to remain in operation and further, the accounts are said to have been settled under the reconstituted partnership deed dated 7.7.2009 therefore, the Arbitration Clause 37 of the reconstituted partnership deed dated 15.3.2007 and Clause 29 of the further reconstituted partnership deed dated 7.7.2009 are applicable for invoking the jurisdiction of this Court under section 11 of the Act of 1996 for appointment of Arbitrator.

(24) In support of his reply to the aforesaid preliminary objections, Mr.G.K.Garg, Sr.Advocate has cited the following judgments:

(i) N.Srinivasa V.Kuttukaran Machine Tools Ltd. (2009) 5 SCC 182

37. It is well settled that even if an agreement ceases to exist, the arbitration clause remains in force and any dispute pertaining to the agreement ought to be resolved according to the conditions mentioned in the arbitration clause. Therefore, in our view, the High Court was not justified in setting aside the order of the trial court directing the parties to maintain status quo in the matter aof transferring, alienating or creating any third party interest in the same till the award is passed by the sole arbitrator. (emphasis supplied)

(ii) Branch Manager, Magma Leasing and Finance Limited and another V. Potluri Madhavilata and another (2009) 10 SCC 103

14. The statement of law expounded by Viscount Simon, L.C. In Heyman as noticed above, in our view, equally applies to the situation where the contract is terminated by one party on account of the breach committed by the other particularly in a case where the clause is framed in wide and general terms. Merely because the contract has come to an end by its termination due to breach, the arbitration clause does not get perished nor is rendered inoperative; rather it survives for resolution of disputes arising in respect of or with regard to or under the contract. This is in line with the earlier decisions of this Court, particularly as laid down in Kishorilal Gupta. (emphasis supplied) (25) My conclusion to the Preliminary Objection No.(ii) is that the dispute is arising out of the reconstituted partnership deed dated 15.3.2007 wherein the Applicant was a partner and further made entitled for capital amount as per his share and profit amount, which was to be determined as per Clause 26 of the last reconstituted partnership deed dated 7.7.2009, therefore, arbitration clause 37 of the partnership deed dated 15.3.2007 remains operative and Clause 29 of the reconstituted partnership deed dated 7.7.2009 will apply.

(26) My prima facie conclusion with regard to the dispute of non payment of profit amount is that most of the profit amount has been concealed in the accounts of the Firm which has resulted in the surrender of Rs.5-6 Crores to the Income Tax Department in the month of November, 2009 which also reveal that the disputed amount of profit has also not been correctly worked out in order to mislead the Applicant and further to take undue advantage by the Non-applicants, is disputed question of fact and law made applicable thereon which is touching the merit of the case. Since the said issue is a disputed question of fact and law and cannot be decided without the pleadings of the parties and evidence in support thereof, I am recording only my prima facie satisfaction under Clause 22.2(b) of National Insurance Co. Ltd. V. Boghara Polyfab (P) Ltd. (supra), that there exists a dispute with regard to the payment of profit from 15.3.2007 to 7.7.2009 which is to be finalised by the Arbitrator after recording the evidence. I would also like to make it clear with regard to the documents available on record and the dispute between the parties. Apart from the above, the parties have disputed about the balance sheet attached as Annexure A-1 to the last reconstituted partnership deed dated 7.7.2009 and the same was made available to the Applicant nor to the Registrar of Firms nor the correct copy of the same has been placed on record of this Court, is also one part of the aforesaid dispute.

Regarding the Preliminary Objection No.(iii) -The accounts have been settled, therefore, there is no arbitral dispute for making the reference.

(27) The accounts have already been amicably settled, therefore, there is no arbitral dispute and the said amicable settlement cannot be re-opened under Clause 5 of the reconstituted partnership deed dated 7.7.2009 as the Applicant himself admitted the settlement of the accounts and further, filed an affidavit dated 8.7.2009 before the Bank and the Registrar of Firms, at the time of retirement to the effect that he retired and accounts have been settled.

(28) In support of the aforesaid preliminary objection No.(iii), Mr.Maloo, Sr.Advocate has placed reliance Grasim Industries Limited and another V. Agarwal Steel (2010) 1 SCC 83, Para 6, Bihar State Electricity Board V. Green Rubber Industries (1990) 1 SCC 731, relevant portion of para 23, Nathani Steels Ltd. V. Associated Constructions (1995) Supp (3) SCC 324, Para 3, National Insurance Co. Ltd. V. Boghara Polyfab (P) Ltd. (2009) 1 SCC 267, para 26 and a judgment of this Court in SB Arbitration Application No.22/2009 M/s.Electro Steel Casting Ltd. V. RUIDP, decided on 8.12.2012.

Relevant portion of Grasim Industries Limited and another V. Agarwal Steel (2010) 1 SCC 83, Para 6

6. In our opinion, when a person signs a document, there is a presumption, unless there is proof of force or fraud, that he has read the document properly and understood it and only then he has affixed his signatures thereon, otherwise no signature on a document can ever be accepted. In particular, businessmen, being careful people (since their money is involved) would have ordinarily read and understood a document before signing it. Hence the presumption would be even stronger in their case. There is no allegation of force or fraud in this case. Hence it is difficult to accept the contention of the respondent while admitting that the document, Ext.D-8 bears his signatures that it was signed under some mistake. We cannot agree with the view of the High Court on this question. On this ground alone, we allow this appeal, set aside the impugned judgment of the High Court and remand the matter to the High Court for expeditious disposal in accordance with law. (emphasis supplied) Bihar State Electricity Board V. Green Rubber Industries (1990) 1 SCC 731, relevant portion of para 23 It is settled law that a person who signs a document which contains contractual terms is normally bound by them even though he has not read them and is ignorant of the precise legal effect. In view of the clause providing for liability of consumer to pay minimum guaranteed charges irrespective of whether any energy is used or not, forming part of the contract, it cannot be said to be nudum pactum and the maxim nudum pactum ex quo non oritur actio does not apply. (emphasis supplied) Nathani Steels Ltd. V. Associated Constructions (1995) Supp (3) SCC 324, Relevant portion of Para 3

3. The appellant has invited ....distinguished on facts. Even otherwise we feel that once the parties have arrived at a settlement in respect of any dispute or difference arising under a contract and that dispute or the difference is amicably settled by way of a final settlement by and between the parties, unless that settlement is set aside in proper proceedings, it cannot lie in the mouth of one of the parties to the settlement to spurn it on the ground that it was a mistake and proceed to invoke the Arbitration clause. If this is permitted the sanctity of contract, the settlement also being a contract, would be wholly lost and it would be open to one party to take the benefit under the settlement and then to question the same on the ground of mistake without having the settlement set aside. Ins the circumstances, we think that in the instant case since the dispute or difference was finally settled and payments were made as per the settlement, it was not open to the respondent unilaterally to treat the settlement as non est and proceed to invoke the Arbitration clause. We are, therefore, of the opinion that the High Court was wrong in the view that it took. (emphasis supplied) (29) Submission of Mr.Garg is that the profit amount has been concealed in the accounts of the Firm, which has resulted in surrender of approximately Rs.5-6 Crores to the Income Tax Department in the month of November, 2009 and further Annexure A-1, which is part of the last reconstituted partnership deed dated 7.7.2009 has been withheld by the Non-applicants and Annexure R-6/4 is not the true Annexure A-1, which has misled the Applicant and the Non-applicants have taken undue advantage of the same. A perusal of Annexure R-6/4 shows that while working out the amount to be paid, the profit amount has not been made clear after working out of the same from the accounts of the Firm from 15.3.2007 to 7.7.2009.

(30) Mr.Garg cited the following judgments on the Preliminary Objection No.(iii):

National Insurance Co. Ltd. V. Boghara Polyfab (P) Ltd. (2009) 1 SCC 267, paras 22, 24, 25 and 26

22.Where the intervention of the court is sought for appointment of an Arbitral Tribunal under Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate is bound to decide; (ii) issues which he can also decide, that is, issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide. (emphasis supplied) 22.1 The issues (first category) which the Chief Justice/his designate will have to decide are;

(a) Whether the party making the application has approached the appropriate High Court.

(b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement.

22.2 The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are:

(a) Whether the claim is a dead (long-barred) claim or a live claim.

(b)Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection.

22.3 The issues (third) category which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are:

(i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration)

(ii) Merits or any claim involved in the arbitration.

(emphasis supplied)

24. What is however clear is when a respondent contends that the dispute is not arbitrable on account of discharge of the contract under a settlement agreement or discharge voucher or no claim certificate, and the claimant contends that it was obtained by fraud, coercion or undue influence, the issue will have to be decided either by the Chief Justice / his designate in the proceedings under Section 11 of the Act or by the Arbitral Tribunal as directed by the order under Section 11 of the Act. A claim for arbitration cannot be rejected merely or solely on the ground that a settlement agreement or discharge voucher had been executed by the claimant, if its validity is disputed by the claimant.

(emphasis supplied)

25. We may next examine some related and incidental issues. Firstly, we may refer to the consequences of discharge of a contract. When a contract has been fully performed, there is a discharge of the contract by performance, and the contract comes to an end. In regard to such a discharged contract, nothing remains neither any right to seek performance nor any obligation to perform. In short, there cannot be any dispute. Consequently, there cannot obviously be reference to arbitration of any dispute arising from a discharged contract. Whether the contract has been discharged by performance or not is a mixed question of fact and law, and if there is a dispute in regard to that question, that is arbitrable. But there is an exception. Where both the parties to a contract confirm in writing that the contract has been fully and finally discharged by performance of all obligations and there are no outstanding claims or disputes, courts will not refer any subsequent claim or dispute to arbitration. Similarly, where one of the parties to the contract issues a full and final discharge voucher (or no dues certificate, as the case may be) confirming that he has received the payment in full and final satisfaction of all claims, and he has no outstanding claim, that amounts to discharge of the contract by acceptance of performance and the party issuing the discharge voucher / certificate cannot thereafter make any fresh claim or revive any settled claim nor can it seek reference to arbitration in respect of any claim. (emphasis supplied)

26. When we refer to a discharge of contract by an agreement signed by both the parties or by execution of a full and final discharge voucher / receipt by one of the parties, we refer to an agreement or discharge voucher which is validly and voluntarily executed. If the party which has executed the discharge agreement or discharge voucher, alleges that the execution of such discharge agreement or voucher was on account of fraud / coercion / undue influence practised by the other party and is able to establish the same, then obviously the discharge of the contract by such agreement / voucher is rendered void and cannot be acted upon. Consequently, any dispute raised by such party would be arbitrable. (emphasis supplied) (31) In Union of India and others V. Master Construction Company (2011) 12 SCC 349, after considering the entire law on the subject, more particularly National Insurance Co. Ltd. V. Boghara Polyfab (P) Ltd. (2009) 1 SCC 267, in paras 14, 15, 16, 17 and 18, which has been clarified and explained by the Supreme Court, it has been held by the Supreme Court that there is no rule of the absolute kind. In a case where the claimant contends that a discharge voucher or no-claim certificate has been obtained by fraud, coercion, duress or undue influence and the other side contests the correctness thereof, the Chief Justice / his designate must look into this aspect to find out at least, prima facie, whether or not the dispute is bona fide and genuine. Where the dispute raised by the claimant with regard to validity of the discharge voucher or no-claim certificate or settlement agreement, prima facie, appears to be lacking in credibility, there may not be a necessity to refer the dispute for arbitration at all.

(32) Paras 14, 15, 16, 17 and 18 of Union of India and others V. Master Construction Company (supra) are as under:

14. In Boghara Polyfab (P) Ltd. the consequences of discharge of the contract were also considered. In SCC para 25 (p.284), it was explained that when a contract has been fully performed, then there is a discharge of the contract by performance and the contract comes to an end and in regard to such a discharged contract, nothing remains and there cannot be any dispute and, consequently, there cannot be reference to arbitration of any dispute arising from a discharged contract. It was held that the question whether the contract has been discharged by performance or not is a mixed question of fact and law, and if there is a dispute in regard to that question, such question is arbitrable.

15. The Court in Boghara Polyfab case, however, noted an exception to this proposition. The exception noticed is that where both the parties to a contract confirm in writing that the contract has been fully and finally discharged by performance of all obligations and there are no outstanding claims or disputes, courts will not refer any subsequent claim or dispute to arbitration. Yet another exception noted therein is with regard to those cases where one of the parties to the contract issues a full and final discharge voucher (or no-dues certificate, as the case may be) confirming that he has received the payment in full and final satisfaction of all claims, and he has o outstanding claim. It was observed that issuance of full and final discharge voucher or no-dues certificate of that kind amounts to discharge of the contract by acceptance or performance and the party issuing the discharge voucher / certificate cannot thereafter make any fresh claim or revive any settled claim nor can it seek reference to arbitration in respect of any claim.

16. In SCC para 26 (p.284-85), this Court in Boghara Polyfab (P) Ltd. held that if a party which has executed the discharge agreement or discharge voucher, alleges that the execution of such document was on account of fraud / coercion / undue influence practised by the other party, and if that party establishes the same, then such discharge voucher or agreement is rendered void and cannot be acted upon and consequently, any dispute raised by such party would be arbitrable.

17. In SCC para 24 (p.284) in Boghara Polyfab (P) Ltd., this Court held that a claim for arbitration cannot be rejected merely or soley on the ground that a settlement agreement or discharge voucher has been executed by the claimant. The Court stated that such dispute will have to be decided by the Chief Justice / his designate in the proceedings under Section 11 of the 1996 Act or by the Arbitral Tribunal.

18. In our opinion, there is no rule of the absolute kind. In a case where the claimant contends that a discharge voucher or no-claim certificate has been obtained by fraud, coercion, duress or undue influence and the other side contests the correctness thereof, the Chief Justice / his designate must look into this aspect to find out at least, prima facie, whether or not the dispute is bona fide and genuine. Where the dispute raised by the claimant with regard to validity of the discharge voucher or no-claim certificate or settlement agreement, prima facie, appears to be lacking in credibility, there may not be a necessity to refer the dispute for arbitration at all.

(emphasis supplied) (33) After discussing the judgment in National Insurance Co. V. Boghara Polyfab (P) Ltd. (supra) in the aforesaid judgment, the Supreme Court explained and applied the same by giving the opinion that there is no rule of the absolute kind. In a case where the claimant contends that a discharge voucher or no-claim certificate has been obtained by fraud, coercion, duress or undue influence and the other side contests the correctness thereof, the Chief Justice / his designate must look into this aspect to find out at least, prima facie, whether or not the dispute is bona fide and genuine, for which prima facie, it appears that the no-claim certificate or settlement agreement lacks in credibility, then there will be no arbitral dispute and if it is not so, then the dispute raised by such party would be arbitrable.

(34) The aforesaid judgment in National Insurance Co. Ltd. V. Boghara Polyfab (P) Ltd. has been held to be in conformity with the judgment of the Constitution Bench in SBP & Co. V. Patel Engineering. Paras 123 and 126 of Chloro Controls India Private Limited V. Severn Trent Water Purification Inc. and others (2013) 1 SCC 641 (Three Judges' bench) are as under:

123. As far as the classification carved out by the Court in the case of National Insurance Co. Ltd. (supra) are concerned, it draws its origin from paragraph 39 of the judgment in the case of SBP & Co. (supra) wherein the Constitution Bench of the Court had observed that

39............it may not be possible at that stage to decide whether a live claim made is one which comes within the purview of the arbitration clause. It will be more appropriate to leave the seriously disputed questions to be decided by the Arbitral Tribunal on taking evidence along with the merits of the claim, subject matter of the arbitration.

126. We have no reason to differ with the classification carved out in National Insurance Co. as it is very much in conformity with the judgment of the Constitution Bench in SLP. (emphasis supplied) (35) With regard to the preliminary objection No.(iii) that the accounts have been settled and there is no arbitral dispute, my prima facie conclusion to the aforesaid preliminary objection is that admittedly, a search was conducted by the Income Tax Department with regard to the accounts of the Firm in the month of November, 2009 and the Firm had to surrender Rs.5-6 Corores and further, the Applicant has placed on record sufficient material that Annexure R-6/4 referred as Anx.A-1 in the reply filed by the Non-applicants No.6 and 7 at page 89 is not the loss and profit of the firm and relates to the period 1.4.2009 to 7.7.2009 and not 15.3.2007 to 7.7.2009 which came to his notice in the month of November, 2009 on the basis of which the profit and loss of the Applicant has been worked out and further affidavits which have been sworn to inform the Registrar of Firms and the Bank have lost their significance in view of the non payment of the remaining capital amount as well as correct profit and loss for which the Applicant is seeking compliance of the reconstituted partnership deed dated 15.3.2007 and 7.7.2009. The Applicant who had signed the reconstituted partnership deed has not filed the arbitration application for reopening the alleged amicable settlement but he has filed this arbitration application for compliance of the terms and conditions of the reconstituted partnership deed dated 15.3.2007 and 7.7.2009 so far as it relates to the non-payment of full capital amount as well as profit and loss worked out after preparing the entire account of the firm. The submission of Mr.Maloo, Sr.Advocate and other Advocates is that the dispute has been amaicably settled, therefore, no arbitral dispute is involved and further the said amicable settlement cannot be reopened and the judgments in Nathani Steels Ltd. V. Associated Constructions(supra) and Bihar State Electricity Board V.Green Rubber Industries (supra)cited in support of the said submission, are not applicable. In the facts and circumstances of this case, more particularly search by the Income Tax Department in the month of November, 2009 after the last reconstituted partnership deed dated 7.7.2009 on the basis of which the Non-applicants contended that the capital amount as well as profit amount has been paid and further, the fact of correct balance sheet has been disputed by both the parties, I am of the prima facie view that the income of the Firm has been concealed from the Income Tax Department and further the correct balance sheet of the firm has been disputed which misled the Applicant in order to take undue advantage and the same being disputed question of fact, requires evidence of both the parties to be produced before the Arbitrator.

Preliminary Objection No.(iv) - The amicable settlement cannot be reopened. (36) Submission of Mr.Maloo, Sr.Advocate is that the amicable settlement cannot be reopened whereas submission of Mr.Garg, Sr.Advocate is that the profit amount of the Applicant has not been worked out at the time of execution of the last reconstitued partnership deed dated 7.7.2009 and the profit amount been concealed in the accounts of the Firm which has resulted in the surrender of Rs.5-6 Crores to the Income Tax Department in the month of November, 2009, therefore, the Applicant was misled and undue advantage was taken by the Non-applicants while working out his profit and he is not seeking reopening of the amicable settlement but simply asking for the correct working out of his profit share i.e. 27.50%.

(37) Mr.Maloo has placed reliance on Nathani Steels Ltd. V.Associated Constructions (1995 Supp (3) SCC 324), National Insurance Co. V. Boghara Polyfab (P) Ltd. (2009) 1 SCC 267 and SB Civil Arbitration Appl. No.22/2009 M/s.Electro Steel Castings Ltd. V. RUIDP decided on 8.12.2011 and cases referred therein. Against the aforesaid order dated 8.12.2011, Special Leave Petition (Civil) No.15776/2012 was filed before the Supreme Court but the same has been rejected vide order dated 21.9.2012.

(38) In the aforesaid case - M/s.Electro Steel Castings Ltd. V. RUIDP decided by this Court, two questions were raised for consideration and the prima facie finding was given in favour of the Applicant in Para No.42 on the ground that the same requires evidence and the issues were left open for the decision of the Sole Arbitrator. Paras 32 to 43 of M/s.Electro Steel Castings Ltd. V. RUIDP (supra) are as below:

Consideration of the Questions

32. Question No.(i) framed in the preceding para is as follows:-

Whether (i) having regard to the given facts situation of this case, there has been novation of contract by signing of undertakings/amicable settlements dated 15.11.2007 voluntarily and the terms of the same have been settled mutually, which extinguished the original contract and the arbitration clause 21 perishes, therefore, it will bar reference to the Arbitrator or arbitration Clause 21 of the original contract, to which the Applicant is a party, survives;

33. The aforesaid Question No.(i) was framed after consideration of the preliminary objection raised by Dr. P.C. Jain, counsel for the Non-applicant that there has been a novation of contract by way of undertakings/amicable settlements signed by both the parties. Therefore, the earlier contract extinguished and its arbitration clause perishes with it and further both the parties settled the issue that the delay in completion of the project was attributable to causes that were beyond the control of the contractor and they undertook and guaranteed that they will not seek any further action including arbitration or civil suit under the contract for any issues of any nature whatsoever. Submission of Dr.P.C.Jain is that as the aforesaid undertakings / amicable settlements contain `bar of arbitration' no reference can be made. Counsel for the applicant further submits that the undertakings / amicable settlement dated 15.11.2007, relied upon by the Non-applicant as full and final settlement, were obtained by the Non-applicant under the influence and coercion exercised by it, using its dominant position, therefore, the said undertakings are not tenable in law and the settlement(s) cannot be termed as mutual settlement signed voluntarily. In the aforesaid facts and circumstances of the case, counsel for the Applicant submits that the present case is not of novation of contract, therefore, the original contract subsists and the arbitration clause will survive and the reference can be made to the Arbitrator.

34. In support of the aforesaid submission, Dr. P.C. Jain placed reliance on the judgments of the Supreme Court in the case of Nav Bharat Builders (supra), P.K. Ramaiah, Nathani Steels and Indian Oil Corporation whereas Mr. Mehta has placed reliance on Reshmi Construction (supra), National Insurance Co., Asian Tech and R.L. Kalathia & Co.

35. As discussed hereinabove, Nav Bharat Builders was a case where the dispute was settled by the parties in the court and the suit was withdrawn and subsequently application for arbitration was filed. In Nathani Steels, signing of the settlement by the applicant was said to be under mistake and further in P.K. Ramaiah, there was a voluntary and unconditional acceptance of the payment for full and final settlement of the contract. In Reshmi Construction, the question of novation of contract was not raised as referred to hereinabove in para 26. However, the Supreme Court in para 39(xi) has drawn a conclusion that in P.K. Ramaiah and Nathani Steels the contract agreement containing arbitration clause was substituted by another contract and such a question is to be considered and determined in each individual case having regard to the fact situation obtaining therein. Nav Bharat Builders cited by Dr. P.C. Jain was also considered along with the cases of Nathani Steels and P.K. Ramaiah in para 34 of National Insurance Co. (supra) and it was concluded that the Court was satisfied that there were negotiations and voluntary settlement of all pending disputes and therefore, there could be no arbitral issue.

(36) Adverting to the fact situation of this case, the issue of terms and conditions of the alleged voluntary undertakings / amicable settlements dated 15.11.2007 has been raised by the Non-applicant whereas the Applicant submits that the undertakings/amicable settlements, relied upon by the Non-applicant as full and final settlement were obtained by the Non-applicant under the influence and coercion exercised by it, using its dominant position, therefore, I have to find out whether in the fact situation of the present case, there has been mutual agreement with regard to the terms and conditions of the amicable settlement and further the Applicant has signed the undertakings/mutual settlements dated 15.11.2007 voluntarily by recording satisfaction of their mutual rights and obligations under the contract so that neither the contract nor the arbitration agreement survived, which bars reference to the Arbitrator. The dispute with regard to the delay in completion of the project attributable to the non-applicant was going on leading to the compensation events much prior to the undertakings dated 15.11.2007 and the payment was not released, the Applicant was left with no other alternative except to sign the undertakings/amicable settlements. However, the payment was released subsequently. Considering the ratio of the judgment cited by Dr. P.C. Jain to the fact situation of the present case, I am of the view that the same are distinguished on the present fact situation of this case, as discussed hereinabove, and the judgments cited by Mr. Mehta are applicable on the issue that there is no novation of contract. Since the payment was withheld by the Non-applicant and the Applicant was under the pressure that the same will not be released unless the undertakings / amicable settlements were signed, the Non-applicant was in a dominant position. Therefore, considering the present fact situation of this case, as discussed hereinabove, I record my preliminary satisfaction that the Non-applicant, who was in a dominant position, obtained the undertakings / amicable settlements dated 15.11.2007 under undue influence and coercion, hence, the terms of the mutual agreement cannot be said to be settled mutually and there has been no novation of contract and further, neither the original contract extinguished nor arbitration clause 21 of the original contract perishes which will bar reference to the Arbitrator and the arbitration Clause 21 of the original contract, to which the Applicant is a party, will survive.

(37) The said Question No.(i) can only be conclusively decided after taking evidence of both the parties. The said question is discretionary for me to decide as per para 22.2(b) of National Insurance Co. and para 14 of Indian Oil Corporation (supra) and in my view, evidence is required on the issue of dominant position, undue influence and coercion, as raised by the Applicant, which has been disputed by the Non-applicant by submitting that the said undertakings / amicable settlements were signed voluntarily, therefore, I am leaving the said issue to be decided by the Sole Arbitrator.

Consideration of Question No.(ii)

(ii) having accepted full and final payment, the applicant is estopped from raising the dispute under arbitration clause No.21 of the original contract, which would stand discharged, therefore, no arbitral issue is involved in the matter ?

(38) Submission of the counsel for the Non-applicant is that even if this Court comes to the conclusion that the arbitration Clause 21 of the contract survives, then also, having accepted full and final payment, the Applicant is estopped from raising the dispute under clause 21 of the original agreement which stood discharged whereas the submission of Mr. Mehta, learned Sr. Advocate is that the dispute regarding the delay on the part of the Non-applicant was raised by the Applicant for the first time on 26.7.2007 prior to the undertakings/amicable settlements dated 15.11.2007. The genuine and legitimate claims of the Applicant against the Non-applicant cannot be foreclosed by referring to the undertakings / amicable settlements dated 15.11.2007 which were neither signed voluntarily nor the terms of the same were settled mutually. Since the payment of the Applicant was to be released, the Applicant was left with no option except to accept the terms of the undertakings/amicable settlements and sign it, therefore, mere acceptance of the claim, which would not discharge the parties from all rights, obligations and remedies under the contract, will not estop the Applicant from raising genuine and legitimate claim and the same is an arbitral issue.

(39) Question No.(ii) is with regard to estoppel. In the latest case of R.L. Kalathia & Co. (supra) cited by Mr. Mehta, learned counsel for the applicant, their Lordships of the Supreme Court after considering the various judgments including Reshmi Constructions and National Insurance Co. laid down three principles according to which mere acceptance of the bill would not be an absolute bar to the contractor for raising claims which are genuine and even after submission of 'no such-claim'. In Asian Tech., National Insurance Co., Reshmi Construction Co., Port of Calcutta, Bharat Drillings have been considered and it has been held that even in the case of discharge/settlement voucher/ no dues certificate, are arbitral issues and the Court can go into the question whether the liability has been satisfied or not.

(40) Now, adverting to the fact situation of the present case, on Question No.(ii) with regard to estoppel, the contractor was raising the dispute that the delay in completion of the project is attributable to the Non-applicant and he is entitled for compensation on account of the said delay but his payment was not released unless he signed the undertakings / amicable settlements which according to him were not signed voluntarily and the terms of the same were not settled mutually. The full and final payment was received by the Applicant subject to the rights and contentions available to it under law and as such, the said payment cannot be related to the undertakings / amicable settlements dated 15.11.2007 so given under undue influence and coercion exercised by the non-applicant using its dominant position. The cases - Nathani Steels, P.K. Ramaiah and Nav Bharat Builders, cited by Dr.P.C.Jain on the issue of estoppel, are also distinguished on present fact situation of this case, as discussed hereinabove. The judgment in the case of Indian Oil Corporation cited by Dr. P.C. Jain is of res judicata and not of estoppel and in the aforesaid judgments cited by Mr. Mehta, the issue of estoppel has been held to be arbitral issue. On the Question No.(ii) relating to estoppel, considering the present fact situation of this case, as discussed hereinabove, I record my preliminary satisfaction that payment has been accepted by the Applicant subject to the rights and contentions available to it under law which would not discharge the original contract, by recording satisfaction of all rights and obligations under the contract, and the same will not foreclose the right of reference under Clause 21 of the original contract by referring to the three undertakings / amicable settlements dated 15.11.2007 and the said issue is arbitral.

(41) The said Question No.(ii) of estoppel can also be conclusively decided after taking evidence of both the parties and it is also discretionary for me to decide as per Para 22.2.(b) of National Insurance Co. (supra), therefore, I am leaving the said issue to be conclusively decided by the Sole Arbitrator.

(42) The dispute of delay in completion of the project is attributable to the non-applicant or not ?, for which the Applicant is entitled for compensation or not ? are the issues which are required to be decided by the Sole Arbitrator after recording evidence of the parties. Both the aforesaid Questions No.(i) and (ii) relate to Second Category in Para 22.2.(b) of National Insurance Co. and para 14 of the Indian Oil Corporation (supra) which requires evidence, therefore, I am leaving them to the decision of the Sole Arbitrator. (emphasis supplied) (43) As mentioned in the arbitration application, the Applicant suffered heavily during the execution of the work and incurred additional costs on account of delay in completion of the project, alleged on the part of the Non-applicant, leading to the aforesaid compensation events and therefore, the contract price was required to be adjusted as per Clause 38.3 so as to adequately compensate the Applicant for the delays on the part of the Non-applicant. The Applicant presented its claim for compensation of Rs.63,85,109/- along with the notice under Clause 21 of the Contract Agreement on 5.2.2008 to the Superintending Engineer, who was the Engineer In-charge. The Superintending Engineer summarily rejected the claim on 20th March, 2008 (Annexure-3). Having recorded dissatisfaction on the decision of the Engineer In-charge, another notice dated 11.4.2008 (Anx.4) for commencement of arbitration was given within 28 days as per clause 21.2. The reply to the notice dated 11.4.2008 (Anx.4) was received on 20.5.2008 (Anx.5) whereby the request for commencement of the arbitration was not accepted by the Non-applicant; then within 56 days a notice for appointment of Arbitrator was given as per clause no.21.3 and when no settlement was made with regard to the delay, further notice dated 10.7.2008 under clause 21.4 with the intention to commence the arbitral proceedings and suggesting the name of Mr. Justice SN Bhargava (Former Chief Justice of Sikkim High Court) was sent by the applicant. Thus, it is clear that the arbitral procedure as prescribed under Clause 21 of the Contract Data has been followed by the Applicant and, therefore, the Applicant is entitled for a reference to the Arbitrator.

(39) On consideration of the aforesaid submissions along with the judgments, I am of the prima facie view that the settlement referred to in the reconstituted partnership deed dated 7.7.2009 is not an amicable settlement, more particularly, with regard to the share of the Applicant in the profit and loss of the firm after working out the entire accounts of the firm from 15.3.2007 to 7.7.2009 (Anx.A-1) but the same refers to the Applicant without working out the profit and loss of the firm and further, the agreed amount of Rs.78,71,000/- has not been paid to the Applicant so far except Rs.46,000/- in cash, therefore, the aforesaid bona fide dispute of non-payment of profit in accordance with the balance sheet of the Firm from 15.3.2007 to 7.7.2009 still exists between the parties. Thus, the present case is not reopening the settlement referred in the last reconstituted partnership deed dated 7.7.2009 and the Applicant is also not asking to reopen the same but simply making a request for reference of the non-payment of the capital amount as well as working out of the profit and loss of the firm and further payment of his share i.e. 27.50% between 15.3.2007 and 7.7.2009, therefore, bona fide arbitral dispute survives for making payment of the profit amount as per the clause 26 of the last reconstituted partnership deed dated 7.7.2009, as discussed hereinabove, which is required to be decided after production of evidence by both the parties before the Arbitrator.

(40) On merit, Mr.Maloo submitted that the amount of Rs.78,71,000/- is inclusive of profit and they could not make compliance of the same as the Applicant has not en-cashed the first cheque. His further submission is that determination of the capital amount and profit and loss of the firm and payment thereof to the Applicant, the same are not relevant for the purpose of deciding the arbitration application as in case the same are decided, then it will touch the merit of the case.

(41) In view of the above, I deem it proper to appoint the Arbitrator in this arbitration application.

(42) Accordingly, the arbitration application is allowed and Mr.Justice Anoop Chand Goyal, Former Judge of this Court is appointed as the Arbitrator and the matter is referred to him for resolving the dispute between the parties arising out of the reconstituted partnership deeds dated 15.3.2007 and 7.7.2009. The Sole Arbitrator will fix his fee according to the Arbitration Manual. All objections, except the existence of the arbitration clauses, would be open to be raised by the Non-applicants before the Arbitrator.

(43) A copy of this order be sent to Mr.Justice Anoop Chand Goyal, Former Judge, D-19-B, Seema Sadan, Meera Marg, Bani Park, Jaipur.

S.B. CIVIL WRIT PETITION NO.666/2011 (44) The aforesaid writ petition has been filed by the Firm challenging the order dated 2.11.2010 passed under section 8 of the Arbitration and Conciliation Act, 1996 by the Addl. Distt.Judge No.4, Jaipur City in Civil Suit No.29/10 titled M/s.Sequin Real Estate V. Ramesh Chand Dangaich, for permanent injunction whereby the matter has been returned back to the plaintiff for resolution of the dispute by arbitration, wherein the memo of understanding dated 7.7.2009 has been relied. Since in this particular case, both the parties have agreed on 6.10.2012 for not placing reliance on the memo of understanding dated 7.7.2009 and further that they will also not refer or rely on the said document in any proceeding arising out of the Arbitration and Conciliation Act, 1996, without prejudice to their rights refer or rely the same in any other proceedings and further the order of appointment of the Arbitrator has been passed in SB Arbitration Application No.33/2010 filed by Radhey Shyam Dangayach, therefore, the said order dated 2.11.2010 is rendered inoperative and the writ petition is disposed of.

(Prem Shanker Asopa) J.

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6-8-2013 All corrections made in the judgment/order have been incorporated in the judgment/order being e-mailed.

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