Madhya Pradesh High Court
M/S Seth Mohanlal Hiralal Construction ... vs Union Of India on 29 February, 2016
Author: S. K. Gangele
Bench: S. K. Gangele
HIGH COURT OF MADHYA PRADESH PRINCIPAL SEAT
AT JABALPUR
Arbitration Case No. 1 of 2014
M/s Seth Mohanlal Hiralal Construction
Company Applicant
versus
Union of India & another
Non-applicants
Coram :
Honâble Shri Justice S.K. Gangele
Shri R.C. Sobhani, learned counsel for the applicant.
Shri N.S. Ruprah, learned counsel for the respondents.
d on : 23.02.2016
ORDER
(Pronounced on 29.02.2016) Per S. K. Gangele J.
Applicant has filed this application under Section 11(6) & 11(8) of the Arbitration and Conciliation Act, 1996 (hereinafter called âthe Act of 1996â) for appointment of Arbitrator.
2. The applicant was awarded a contract for work of replacement of steel girders with pre-
stressed concrete slabs (Bridge No.667/3 Up and 668/1 Up & Dn, Bridge No.717/1 Dn. & 737/1 Dn.) of KNW-ET Section of Bhopal Division vide agreement No.CBE/2009/11 dated 27.11.2009. The contract was completed on 30.06.2012.
3. The applicant submitted an application on 22.03.2013 (Annexure-3) alongwith final bill. It is mentioned by the applicant in the application that the applicant was signing the final bill subject to pending payments or any other left over claims which shall be claimed by the applicant as per Clause 64(1)(iv) of the contract agreement within 3 months from the date of signing. Thereafter, the applicant signed the final bill which contains no claim clause. Thereafter, the applicant submitted another application claiming certain amount and raised claims under Clause 64 of the contract agreement. That application was rejected by the Railway Authorities vide letter dated 18.07.2013.
4. The applicant has contended that because the dispute has not been resolved by the authorities and the prayer of the applicant to refer the matter for arbitration has been rejected, hence, this Court may appoint Arbitrator.
5. The respondents in their reply pleaded that the applicant submitted his final bill, he was not satisfied with the final bill, hence, he submitted the application and raised certain objections. The objections of the applicant were discussed and the final bill was shown to the applicant. He was satisfied and thereafter, he signed the final bill, which contains no claim certificate. In view of the aforesaid certificate, the applicant cannot raise the dispute subsequently.
6. The applicant in the rejoinder has pleaded that he made the application on 22.03.2013. He signed the final bill on 25.03.2013 and the payment of final bill was made on 27.05.2013.
7. Learned counsel appearing on behalf of the applicant has submitted that the applicant did not sign âno dues certificate.â It is a part and parcel of final bill. He was under obligation to sign the final bill. Hence, he signed the final bill. Before signing the final bill, he has raised the dispute.
Hence, this Court has jurisdiction to appoint Arbitrator. In support of his contentions learned counsel relied on the judgments of the Apex Court passed in the matters of Ambica Construction vs. Union of India reported in (2006) 13 SCC 475, Union of India and others vs. Onkar Nath Bhalla & others, reported in (2009) 7 SCC 350 and R.L. Kalathia & Co. vs. State of Gujrat reported in (2011) 2 SCC 400.
8. Contrary to this, learned counsel appearing on behalf of the respondents has contended that the applicant had accepted the final bill and he had also signed the no claim certificate.
Hence, the applicant cannot raise dispute subsequently. In support of his contentions, learned counsel relied on the judgment of the Apex Court passed in the matter of Union of India and others vs. Master Construction Company reported in (2011) 12 SCC 349.
9. The question for consideration before the Court is that whether the applicant had signed the no claim certificate and whether he can raise the dispute or not before this Court.
10. It is an admitted fact that the contract agreement contains arbitration clause. The respondents alongwith reply filed copy of the final bill.
It contains contractor certificate which reads as under
:
âCONTRACTORâS CERTIFICATE
1. Certified that labour engaged by me for this work were paid wages as per minimum wages Act.
2. Certied that I accept the measurement recorded on the page No.54 R to 66 of M.B. No.1365 is correct.
3. Certified that it is final settlement for this work and have no claim what so ever for the work done till date.
4. Certified that the work is completed in all respect as per contract agreement.â Clause 3 of the contractorâs certificate mentions that it is final settlement for this work and have no claim whatsoever for the work done till date.
This clause is part and parcel of the final bill.
11. Prior to this, the applicant had submitted a letter dated 22.03.2013 in which it is mentioned that the final bill is submitted subject to pending payments or any other left over claims which shall be claimed in accordance with the contract agreement. The relevant portion of the letter dated 22.03.2013 reads as under :
âWe are therefore signing the Final Bill / Escalation Bill subject to our above pending payments or any other leftover claims, which we have claim as per Clause 64(1)(iv) within three months from the date of signing.â This letter was submitted prior to signing of the final bill. Thereafter, on 10.10.2013, the applicant submitted claim before the respondents. The Apex Court in the matter of Union of India and others vs. Master Construction Company reported in (2011) 12 SCC 349 has considered the principle and fact of signing no claim certificate and held as under after considering all the judgments on this point:
â11. Before we turn to the factual aspect, it is appropriate to carefully consider the decision of this Court in Boghara Polyfab Private Limited1 at some length as the learned senior counsel for the contractor placed heavy reliance on it. In Boghara Polyfab Private Limited, this Court surveyed a large number of earlier decisions of this Court, namely, The Union of India v. Kishorilal Gupta & Bros., The Naihati Jute Mills Ltd. v. Khyaliram Jagannath, Damodar Valley Corporation v. K.K. Kar, M/s. Bharat Heavy Electricals Limited, Ranipur v. M/s. Amar Nath Bhan Prakash, Union of India & Anr. v. M/s. L.K. Ahuja & Co., State of Maharashtra v. Nav Bharat Builders, M/s. P.K. Ramaiah & Company v. Chairman & Managing Director, National Thermal Power Corpn., Nathani Steels Ltd. v. Associated Constructions, Indian Drugs & Pharmaceuticals Ltd. v. Indo Swiss Synthetics Gem Mfg. Co. Ltd. & Ors., United India Insurance v. Ajmer Singh Cotton & General Mills & Ors., Jayesh Engineering Works v. New India Assurance Co. Ltd., SBP & Co. v. Patel Engineering Ltd. & Anr., National Insurance Co. Ltd. v. Nipha Exports (P) Ltd. and National Insurance Company Limited v. Sehtia Shoes.
12. With regard to the jurisdiction of the Chief Justice/his designate in the proceedings under Section 11 of the 1996 Act, this Court culled out the legal position in paragraph 51 (page 294) of the report as follows :
"51. The Chief Justice/his
designate exercising
jurisdiction under Section 11
of the Act will consider whether there was really accord and satisfaction or discharge of contract by performance. If the answer is in the affirmative, he will refuse to refer the dispute to arbitration. On the other hand, if the Chief Justice/his designate comes to the conclusion that the full and final settlement receipt or discharge voucher was the result of any fraud/coercion/ undue influence, he will have to hold that there was no discharge of the contract and consequently, refer the dispute to arbitration.
Alternatively, where the Chief Justice/his designate is satisfied prima facie that the discharge voucher was not issued voluntarily and the claimant was under some compulsion or coercion, and that the matter deserved detailed consideration, he may instead of deciding the issue himself, refer the matter to the Arbitral Tribunal with a specific direction that the said question should be decided in the first instance."
13. The Bench in Boghara Polyfab Private Limited in paragraphs 42 and 43 (page 291), with reference to the cases cited before it, inter alia, noted that there were two categories of the cited cases; (one) where the Court after considering the facts found that there was a full and final settlement resulting in accord and satisfaction, and there was no substance in the allegations of coercion/undue influence and, consequently, it was held that there could be no reference of any dispute to arbitration and (two) where the court found some substance in the contention of the claimants that `no dues/claim certificates' or `full and final settlement discharge vouchers' were insisted and taken (either in printed format or otherwise) as a condition precedent for release of the admitted dues and thereby giving rise to an arbitrable dispute.
14. In Boghara Polyfab Private Limited, the consequences of discharge of the contract were also considered. In para 25 (page 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, 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 no 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 paragraph 26 (pages 284-285), this Court in Boghara Polyfab Private Limited 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 paragraph 24 (page
284) in Boghara Polyfab Private Limited, this Court held that a claim for arbitration cannot be rejected merely or solely 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 necessity to refer the dispute for arbitration at all.â
12. The Apex Court has specifically held that designate to Chief Justice has to found out prima facie whether or not the dispute is bona fide and genuine and whether the dispute is in regard to validity of the discharge voucher or no claim certificate appear to be lacking in credibility. It is not necessary to consider other judgments of the Apex Court because in the aforesaid judgment the Apex Court has considered all the previous judgments.
13. In the present case, no claim certificate which is said be signed by the applicant is a content and part of the Clause which is mentioned in the bill.
The applicant submitted the final bill. Prior to that, the applicant had already submitted an application dated 22.03.2013 Annexure-3 mentioning the fact that he had submitted the final bill subject to the claim which may be raised by him subsequently. Hence, in my opinion, it cannot be said that by submitting no claim certificate which is a clause mentioned in the final bill, the applicant precluded to raise the dispute and he cannot demand arbitration in terms of the contract agreement.
14. In the present case, the respondents did not appoint Arbitrator within a period of 90 days from the date of submitting the application by the applicant. Hence, they have forfeited their right to appoint Arbitrator in view of the judgment passed by the Apex Court in the matter of Deep Trading Company vs. Indian Oil Corporation and others reported in (2013) 4 SCC 35. Relevant para reads as under :
â20. If we apply the legal position exposited by this Court in Datar Switchgears to the admitted facts, it will be seen that the Corporation has forfeited its right to appoint the arbitrator. It is so for the reason that on 09.08.2004, the dealer called upon the Corporation to appoint the arbitrator in accordance with terms of Clause 29 of the agreement but that was not done till the dealer had made application under Section 11(6) to the Chief Justice of the Allahabad High Court for appointment of the arbitrator. The appointment was made by the Corporation only during the pendency of the proceedings under Section 11(6).
Such appointment by the Corporation after forfeiture of its right is of no consequence and has not disentitled the dealer to seek appointment of the arbitrator by the Chief Justice under Section 11(6). We answer the above questions accordingly.â
15. Consequently, the application filed by the applicant is hereby allowed. Justice S.C. Pande (retired) is hereby appointed Arbitrator to adjudicate the claim raised by the applicant vide Annexure-7 before the authority. Learned Arbitrator shall be eligible to get remuneration in accordance with the amended provisions of the Act of 1996. A copy of the order be sent to the learned Arbitrator.
16. No orders as to costs.
(S. K.
Gangele)
Judge
Vkt.