Andhra HC (Pre-Telangana)
Kwality Construction Engineers vs University Engineer, Central ... on 25 November, 1997
Equivalent citations: 1998(2)ALD3, 1998(1)ALT791, 1998 A I H C 3371, (1997) 30 ARBILR 468, (1998) 2 ANDHLD 3, (1998) 1 ANDH LT 791
ORDER
1. This is an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short, 'the Arbitration Act') for appointment of sole Arbitrator to decide various disputes arising out of the agreement dated 22-8-1990.
2. The admitted facts of the case, in brief, are that the petitioner-contractor had submitted its tender in answer to the notice inviting tenders issued by the first Respondent for construction of indoor and outdoor stadiums at the University Campus in the year 1990. The petitioner-contractor's tender was accepted by the 1st Respondent and an agreement was executed. A Work Order bearing No.UH/Engg./308/90-91/162 was issued. The total value of the work was Rs.32,74,899.00 and the work was required to be completed by 6-9-1991. However, the assigned work was completed by the petitioner-contractor in the month of November, 1992. Final bill of Rs.15,042/- was paid to the petitioner-contractor on 16-10-95 through cheque dated 28-9-1995. There was an arbitration clause in the agreement which is reproduced below:
Arbitration Clause 40:
Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions, hereinbefore mentioned and as to the quality of workmanship or materials used on the work or as to any other questions, claim, right or thing whatsoever, in any way ansing out of or relating to the contract, design, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works, 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 the person appointed by the Vice-Chancellor, University of Hyderabad. There will be no objection to any such appointment if the Arbitrator so appointed is a Government Servant or University Employee and that he had to deal with the matters to which the contract relates and that in the course of his duties as Government or University Employee, he had expressed views on all or any of the matters in dispute or difference. The Arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason the Vice-Chancellor shall appoint another person to act as Arbitrator in accordance with the terms of the contract. Any such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by the Vice-Chancellor as aforesaid should act as Arbitrator and if for any reason, that is not possible the matter is not to be referred to arbitration at all. In all cases where the amount of the claim in dispute is Rs.50,000/- (Fifty thousand only) and above, the Arbitrator shall give reasons for the award.
Subject as aforesaid, the provisions of the Arbitration Act. 1940 or any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceedings under this clause. The Arbitrator may, from time to time with the consent of the parties enlarge the time for making and publishing the award.
It is also a term of the contract that if the contractor does not make and demand for arbitration in respect of any claim(s) in writing within 90 days of receiving the intimation from the Engineer-in-charge, that the bill if ready for payment, the claim of the contractor will be deemed to have been waived and absolutely barred and the employer be discharged and released of all liabilities under the contract in respect of these claims, It is a term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amounts claimed in respect of each dispute.
3. On 25-3-1996 the petitioner-contractor intimated the second Respondent that there were certain disputes arising out of the said contract dated 22-8-1990 and they should be referred to be settled by the Arbitrator in accordance with Clause No-40 of the agreement. The Registrar of the 1st Respondent through letter dated 17-5-1996 refused to refer the alleged dispute to the Arbitrator, inter alia, on the ground that the claim is barred by limitation.
4. The petitioner-contractor, valuing its claim at Rs 20,01,0007-, has sought the relief of a direction to the first Respondent for filing the agreement, dated 22-8-1990, in the Court and to appoint an Arbitrator to adjudicate the disputes arising out of the said contract between the petitioner-contractor and the respondents in relation to the construction of indoor and outdoor stadiums as per the aforementioned work order, dated 22-8-1990.
5. The respondents through their counter denied that there had ever existed a dispute between the petitioner-contractor and the respondents. It is alleged that the petitioner had completed the assigned work on 30-11-1992 and had received an amount of Rs.29,51,605.00 in parts by 18-1-1993 out of the value of the work done amounting to Rs.30,30,187.00 and the outstanding balance of small amount of Rs. 15,0427- had been paid through cheque dated 28-9-1995 on 16-10-95 as final payment without any protest by the petitioner-contractor. It is further alleged that in the meeting of the building committee held on 18-7-1992, the petitioner had accepted the rates at which the payments were made without raising any dispute and had also communicated its acceptance of rates in writing on 19-7-1992. It is also alleged that the receipt of final payment without protest amounted to according satisfaction and, therefore, there is no dispute at all which can be referable to arbitration and, therefore, the application is not maintainable. It further alleged that the claims are based on after thought, therefore, baseless and untenable. The claims are also barred by limitation and, therefore, the petition is liable to be dismissed.
6. The petitioner-contractor then filed a reply affidavit on 12-4-1997 denying that the final payment was accepted without any protest or it amounted to accord and satisfaction. It reiterated that the claim is well within the limitation and the copy of the final bill was not made available to it inspite of remission of Rs.100/- by demand draft dated 8-9-1996. ft further alleged that another cheque for Rs.l5,0007- being the cost of shed was sent on 6-1-1997 towards amounts due on account of the contract work in question and the application is within limitation.
7. Again on 15-9-1997, the petitioner-contractor filed further affidavit that the final bill was paid in the month of October, 1995 after two reminders sent in 1994 and two in 1995 and it was alleged in these reminders that considerable amount had been held up and also claimed release of bank guarantee and refund of security deposit with interest at the rate of 15 per cent per annum. It is also alleged that in the letter dated 22-5-1996, it has been stated that the final bill was accepted by the petitioner under duress.
8. Shri Y. Vasudevarcto, learned Counsel of the petitioner-contractor has argued that unless a No-Claim Certificate is issued by the petitioner, payment of final bill is never made by the concerned authorities. Actually the contractors have to furnish no-claim certificate under compulsion and duress. When the final bill is submitted under coercion, mistake, misrepresentation, without prejudice and protest etc., the full and final settlement of the claim is no bar for invoking the arbitration clause, because, this allegation itself becomes a dispute arbitrable under the relevant arbitration clause. The question of the validity of the No-Claim Certificate is, therefore, itself a dispute within the scope of the arbitration clause and the Arbitrator has jurisdiction to decide Jt. Reliance has been placed on the cases of Damodar Valley Corporation v. K.K. Kar, AIR 1974 SC 178, Jiwani Engineering Works (P) Ltd. v. Union of India, , Union of India and another v. M/s. L.K. Ahuja and Co., , Union of India v. M/s. Ajit Mehta and Associates, , Union of India and another v, Sohun Constructions, 1990 (1) Arb. LR 12, Calcutta Metropolitan Development Authority v. Gouranga Lal Chatterjee, , Unreported Judgment of this Court in M/s. Hindustan Shipyard Ltd. v. Teenmurthy Enterprises, CRPNo.2202/94, Dt. 5-2-96 and Ravindra Anant Deshmukh v. City and Industrial Development Corporation of Maharashtra Ltd., . It has been lastly urged that under Section 11(5) of the Arbitration Act, appointment of a Arbitrator is mandatory and, therefore, this Court should refer the dispute to the Arbitrator for adjudication.
9. On the other hand, Shri V. Rajagopala Reddy, learned Standing Counsel of the respondents, relying on the cases of P.K. Ramaiah and Company v. Chairman and Managing Director, National Thermal Power Corpn., 1994 Supp. (3) SCC 126, State of Maharashtrav. Nav Bharat Builders, 1994 Supp. (3)SCC 83 andNathani Steels Ltd. v. Associated Constructions, 1995 Supp. (3) SCC 324, has contended that, after completion of the work in the month of November, 1992, the petitioner had accepted the final bill on the measurement book maintained by the 1st respondent-University wherein the details of actual measurements had been mentioned and thereafter had also accepted the final amount of Rs.15,0427- through cheque dated 28-9-1995 on 16-10-1995. As the petitioner-contractor had accepted that amount in full and final settlement in respect of the work done in relation to the matter covered under the arbitration clause in the contract in question, the alleged dispute or the alleged difference, if any, was finally settled by and between the parties and, therefore, no dispute worth the name remained to be a dispute to be referred to the Arbitrator and, therefore, the arbitration clause cannot be invoked in any manner. It has been further contended on behalf of the respondents that out of the value of the work amounting to Rs.30,30,187/- an amount of Rs. 29,51,6057-had been paid in various parts by 18-1-1993, leaving a small amount of Rs.15,042/- and under these circumstances, it cannot be said, by any stretch of imagination, that under duress or misrepresentation or coercion, the petitioner-contractor had accepted the final bill. After verifying the correctness of the measurement of work as mentioned in the measurement book of the lst Respondent-University, the petitioner had accepted the final bill, which is indicative of the fact that the claim is an after-thought and bogus and, therefore, the petition should be dismissed.
10. From a perusal of the correspondent, it appears that the petitioner-contractor has offered to sell its temporary office and store room for a consideration of Rs. 15,000/- which was accepted by the first respondent-University and the amount of Rs.15,000/- was paid accordingly being the cost of the shed in the month of January, 1997, and, therefore, it appears that this transaction was wholly outside the aforementioned agreement, dated 22-8-1990.
11. In the case of Jiwani Engineering Works (supra), it has been observed that it is so well known and a notorious fact that unless a no claim is issued by the contractor, payment of the final bill will not be made. This appears to be only an obiter of the learned single Judge of the Calcutta High Court and it appears to be no authority for the proposition that a submission of No-Claim Certificate is a condition precedent for preparation of the final bill. The cases of Union qf lndia v. Ajit Mehta (supra) and Calcutta Metropolitan Development Authority (supra) are of no help to the petitioner-contractor for the simple reason that the petitioner has not alleged in any one of its three affidavits that the signatures on the final payment had been obtained under coercion, mistake or misrepresentation, or it had received the payment under protest or without prejudice. True that in the third affidavit swom on 15-9-1997, it is alleged for the first time, that in its letter dated 22-5-1996, it was stated that the final bill was accepted under duress, but this allegation does not inspire confidence for the simple reason that no such allegation had been made in the original affidavit as also in the first reply affidavit and also because by merely mentioning the words 'duress' without narrating the facts which may indicate that the payment was accepted under duress, it cannot be said that the final payment was accepted under duress.
12. In the case of Damodar Valley Corporation (supra), K.K. Kar, though asked to submit his receipt that he has received full and final settlement of all payments, did not submit the demanded receipt while submitting the bill and even so, the amount of the bill was paid. Referring these facts, the Apex Court, in the case of P.K. Ramaiah and Co. (supra), has observed that although there was alleged payment as final satisfaction of the contract, yet as the respondent did not give any receipt accepting the settlement of the claim, the payment was unilateral, so the dispute still subsisted and, therefore, it was arbitrable dispute and the reference was valid. In this case, it has also been observed that in the case of Union of India and another v. L.K. Ahuja (supra), the plea of bar of limitation had been taken without prior rejection of the claim and that was not a case of accord and satisfaction and, therefore, this Court while laying the general law in that case has held that if the bill was prepared by the Department, the claim gets weakened. It has been held in this case that in the case of voluntary and, unconditional written acceptance as full and final satisfaction of the contract, the subsequent claim for further amount in respect of the same work is not an arbitrable dispute. In this case, the contractor had made an endorsement in his own hand "final measurement accepted in full and final settlement of the claim". P.K, Ramaiah's case (supra) has been quoted with approval in the case of State of Maharashtra (supra). In Nathani Steels Ltd. (supra), a full Bench consisting of three learned Judges of the Supreme Court, has approved the law laid down in the case of P.K. Ramaiah (supra) and State of Maharashtra (supra) and distinguished the case of Damodar Valley Corpn. (supra), observing that the contractor, K.KKar, had not given any receipt accepting the settlement of claim and the payment made by M/s. Damodar Valley Corporation was only unilateral act and hence the dispute had subsisted and the arbitration clause in the contract could be invoked. Under these circumstances, the contrary views expressed and referred to above as also the views expressed by our High Court in the case of Union of lndia v. Sohun Constructions (supra) and in the unreportcd judgment above referred to, cannot be accepted as representing correct law.
13. The position of law that emerges from the aforementioned decisions of various High Courts and of the Supreme Court is that if a party has to give a No-Claim Certificate as a condition precedent to the preparation and payment of the final bill and later receives the payment, the said party has a right to raise the legitimate disputes and get the matter referred to the Arbitrator for adjudication. Similar is the case when the payment is received under coercion, misrepresentation, mistake, duress etc. etc., and where the full and final bill is accepted voluntarily and unconditionally, then, subsequent claim for further amounts in respect of the same work done is not an arbitrable dispute to be referred to the Arbitrator for adjudication and under these circumstances, the question relating to 'No-Claim' Certificate and the receipt evidencing full and final payment had been obtained under duress, mistake, coercion etc., etc., being itself a dispute within the scope of the arbitration clause, cannot be referred to the Arbitrator because it has no jurisdiction to decide the same. And it is only when the Court on facts decides that the dispute is an arbitrable dispute, it should be referred to the Arbitrator for adjudication.
14. Sub-section (2) of Section 11 of the Arbitration Act provides that subject to subsection (6) the parties are free to agree on procedure for appointing the Arbitrator or Arbitrators, while sub-section (5) provides that, failing any agreement referred to in sub-section (2), in an arbitration with a sole Arbitrator, if the parties fail to agree on the Arbitrator, within 30 days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon a request of a party, by the Chief Justice or any person or institution designated by him. And sub-section (6) reads as under:
"Where, under an appointment procedure agreed upon by the parties, --
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed Arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, indudingan institution, fails to perform any function entrusted to him or it under that procedure;
a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment"
15. A combined reading of subsections (2), (5) and (6) of Section 11 of the Arbitration Act provides that when a party fails to act as required under the agreement and fails to agree on the Arbitrator within 30 days from the date of request by one party to the other, that appointment shall be made by the Chief Justice or any other person or institution designated by him. Thus, it is evident that if a party establishes in the Court that he has not failed to act under the agreement to appoint an Arbitrator because there was no subsisting arbitrable dispute since the agreement itself has ceased to exist, the question of appointment of an Arbitrator so that the alleged dispute may be referred to it, would not arise and the Court would get jurisdiction only to refer the matter which is arbitrable for arbitration. It is not, thus, mandatory to appoint an Arbitrator under Section 11(5) of the Arbitration Act on the mere request of a party.
16. A bare perusal of the arbitration Clause No.40, reproduced in Para 2 of this Order, reveals that all questions and disputes relating to the meaning of the specification, designs and instructions and as to the quality of the workmanship or the materials used on the work or any other question, claim, right or the fact whatsoever in any way arising out of or relating to the contract, design, specification etc., or otherwise concerning the work or 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 Arbitrator of the person appointed by the Vice-Chancellor of the University. Therefore, it is crystal clear that if there is an arbitrable dispute, it shall be referred to the sole Arbitrator to be appointed by the Vice-Chancellor of the Respondent-University. The fact remains that there must exist a dispute.
17. As noted above, the petitioner-contractor had voluntarily accepted the final bill in the measurement book of the first Respondent-University wherein the measurements had been recorded and in pursuance thereof and had accepted on 16-10-1995 the remaining amount of Rs.15,042/- through cheque dated 18-9-1995 and this has been done on its own accord and voluntarily. The subsequent allegation of duress appears to be an after thought particularly because no such prudent man for getting a meagre amount of Rs.15,042/- would accept final bill without protest and, therefore, it deserves to be ignored.
18. For the foregoing reasons, I hold that the petitioner had accepted the correctness of the measurements and final bill as also had received the final payment of the aforesaid amount of Rs 15,042/- and, therefore, there is accord and satisfaction with the result that there are no existing arbitrable disputes for referring to Arbitrator.
19. In result, the application fails and is hereby dismissed. However, it is ordered that the parties to the application shall bear their own costs.