Allahabad High Court
Oil And Natural Gas Commission vs M/S. Em And Em Associates on 17 January, 1996
Equivalent citations: AIR1996ALL318, AIR 1996 ALLAHABAD 318, 1996 ALL. L. J. 1278, 1996 (2) ARBI LR 587, (1997) 1 CURCC 43
Author: R.K. Singh
Bench: R.K. Singh
ORDER R.B. MEHROTRA, J.
1. EM and EM Associates, a partnership firm filed a Suit No. 762/87 under Sections 8 and 20 of the Arbitration Act impleading Oil and Natural Gas Commission, Dehradun as opposite patty in the suit and claimed relief that the dispute arising out of an agreement entered into between the plaintiff and opposite party be referred to the Arbitrator as per Clause 25 of the agreement. In the application, which has been termed as a suit before the Court, the plaintiff-petitioner contended that in response to a tender enquiry floated by the respondent for interior work in Management Block in IDT, Kaulagarh Road, Dehradun, the petitioner submitted its tender, which was accepted by the respondent vide their letter dated 24-6-1985. In pursuance of the acceptance of tender a formal agreement bearing No. 11/85-86/IDT dated 2-7-1985 was entered into between the parties. It was contended that the dispute has arisen out of the aforesaid agreement regarding payment of bills of the plaintiff-opposite party and the additional claims which the plaintiff was making has been negatived by the opposite party giving rise to the aforesaid dispute. The relief quoted above was claimed in the suit.
2. Likewise another suit application being Application No. 768 of 1987 was filed in the same Court between the same party for the same relief. In this suit it was stated that in response to the tender enquiry floated by the defendant for partitioning and pending work in the new Administrative Block Building Tel Bhawan, Dehradun. The plaintiff submitted its tender which was after negotiations and discussions accepted by the defendant vide its letter dated 15-11-1985. In pursuance thereto, the formal agreement was entered into between the parties on 7-12-1985. In relation to the aforesaid contract also it was con-tended by the plaintiff in the grounds stated in the plaint that the dispute has arisen regarding payment of bills of the plaintiff, and additional claim made by the plaintiff in performance of the contract.
3. Both the aforesaid suits were contested by Oil and Natural Gas Commission and a detailed written statement was filed in both me cases. Both the aforesaid suit applications were allowed by the IInd Additional Civil Judge, Dehradun vide his order dated 27-3-1991 and it was held that the dispute has arisen between the parties in regard to the agreement entered into between the parties and the matter may be referred to the Arbitrator as mentioned in Clause 25 of the agreement.
4. Aggrieved by the aforesaid judgment M/s. Oil and Natural Gas Commission has filed two first Appeals From Order, being one F.A.F.O. No. 560 of 1991 arising out of Suit No. 762/87 mid FA.F.O. No.561 of 1991 arising out of Suit No. 768/87.
5. Counsel for both the parties have agreed that the question arises for consideration in both the aforesaid F.A.F.Os. is exactly similar and have also agreed that both the matters be heard together. In view of the aforesaid statement, both the matters have been heard together and are being disposed of by a common judgment.
6. We have heard Sri L. P. Naithani, learned Senior Advocate, appearing for the appellant in both the aforesaid matters and Sri K. K. Arora, learned counsel appearing for the respondent.
7. Sri Arora has also filed written submission, copy of which has been served on Sri Naithani on 18-10-95 The aforesaid submission is itself in record. In F.A.F.O.No. 560/1991, which has been heard as a leading case, learned counsel for the appellant, has at the outset challenged the order appealed against, mainly on two grounds:
(1) The Arbitrator has been appointed without there being any dispute pending between the parties.
(2) Some disputes have been referred which are outside the arbitration agreement,
8. Submissions on both the points are being examined separately.
9. It may also be stated herein that at the time of filing the present F.A.F.O. the Division Bench issued notice to the opposite party even without admitting the F.A.F.O. on 9-7-1991 and it was made clear by the said order that the appeal itself may be finally disposed of on 5-8-91 for which the respondents were issued notice. In the context of the aforesaid order it was clear that the record of the Court below was not to be summoned and F.A.F.Os. were to be disposed of on the basis of the record made available to the Court by means of filing documents on which they want to place their reliance. However, despite the anxiety shown by the Bench while issuing notice, the matter could not be heard for almost four years and ultimately the matter was heard on 17-10-95 by us and the judgment was reserved after hearing the parties.
10. At the outset it may also be stated that in F.A.F.O. No. 561/91 along with application for interim relief the appellants have filed several documents on which they want to place reliance including copy of the plaint filed by the plaintiff and the copy of the written statement filed by the opposite party-appellants arising out of Suit No. 768 of 1987. However, in F.A.F.O. No. 560/91, arising out of Suit No. 762/87, the appellants have not filed any document along with the interim application but along with rejoinder affidavit filed in reply to the counter affidavit of the respondent-plaintiff, the only document filed by the appellant is an extract from the agreement entered into between the parties, however, the plaintiff-respondent along with their counter affidavit have filed the copy of the plaint of Suit No. 762/87 along with counter affidavit.
11. In Suit No. 768/87 the appellants have given details of the dispute arising out between the parties wherein it has been stated that as per the acceptance letter dated 15-11-1985, the parties had to enter into a formal agreement within 7 days and the work was to commence 15 days after the issuance of the work order. The defendant delayed the signing and execution of the formal agreement inspite of repeated requests made by the plaintiff.
12. In para-4 it has been stated that as per the conditions of contract the defendant had to make available to the plaintiff the complete sites to start the work, which the defendant failed to do within the time schedule fixed, thus causing delay for starting and completing the work. In fact the site was handed over in part.
13. In para-5 it has been staled that according to the conditions of contract as contained in letter dated 7th December, 1986, the plaintiff was entitled to mobilisation advance and secured advance on material, which could only be got after the formal agreement was signed and executed. Since the defendant did not start the work due to non-availability of advances from the defendant which resulted in delay in the start of work. Even the proper drawing and specifications were not handed over on time. The defendant even changed most of the specifications resulting in further delay.
14. In para-6 it is stated that one of the major conditions of contract was that the plaintiff shall be paid at market rate plus 10% profit with overheads added to it for any change in specifications in the contracted work due to site conditions. The same condition was to apply to extra items as well,
15. In para-8 it is stated that in terms of the conditions of contract the defendant was also liable to pay price increase. Since the defendant made in ordinate delay in getting the work started, the defendant is liable to pay the price increase which has been caused due to delay in starting the work.
16. In para-9 it is stated that during the progress of the work the defendant changed the specification of almost entire contracted items and also got done some extra work. Thus, they are liable to pay as per condition No. 4 incorporated in letter dated 7th December, 1985.
17. In para-10 it has been mentioned that on various dates vide its letters dated 22-1-86, 4- 12-86 and 1-2-86 informed the defendant about the change in specifications of the contract work and the extra items as well with the respective market rate analysis and asked the defendant to pay accordingly. Copies of the aforesaid letters are annexed herewith and marked as Annexure-D collectively.
18. In para-11 it is stated that the subject contract is governed by conditions of contract and Clause 25 of the said conditions contained in arbitration clause, which is reproduced below :
"Clause 25 -- Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawing and instructions hereinbefore mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right matter or a thing whatsoever, in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, order, 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 Chief Engineer (C)/D.G.M. (C) at the time of dispute."
19. Thereafter it was stated in the plaint that the plaintiff filed its claim to the defendant and asked them to pay the same. It was further requested that in case the defendant disputes the claim, the same may be referred to arbitration in terms of Clause 25 of the conditions of contract. It was further contended that the defendants have neither made the payment nor have referred the dispute.
20. In para-14 of the plaint details of the claim made by the plaintiff were furnished which are not necessary to reproduce herein.
21. In reply to the aforesaid plaint, the defendant-appellants filed written statement, some portions whereof arc being mentioned herein.
22. In reply to para-4 of the plaint it was contended that the allegations are entirely vague and irrelevant. The plaintiff defaulted to work in accordance with the letter of acceptance-cum-work order. Other contents of the said paragraph arc not relevant for the present purpose.
23. In reply to para-5 of the plaint, it was only ad mined that mobilisation advance was to be given by and secured advance on material as per rules and conditions were to be given. Rest of the para was not admitted. Detailed reply was given on merit that the claim of the plaintiff is incorrect.' The same need not be reproduced for the present purpose.
24. In reply to para-6 of the plaint it is stated that the same is wrong and not admitted. The allegation is pertaining to the matter provided:--
"Any change in specifications and drawings shall be worked out by market rate and 10% profit with over heads shall be paid. This shall apply to extra items also."
25. Para-8 of the plaint was replied on merit and it was contended that the fault was on the part of the plaintiff and the defended cannot be blamed for the same.
26. Para-9 of the plaint was also replied on merit and it was contended that the defendant had under the terms of agreements right to make change in the specifications of the items and plaintiff was paid at the market rate the then prevailing plus 10% profit over the changes made in the specifications. The plaintiff is trying to bring up the dispute with ulterior motive, mala fidely, particularly when under the terms of the contract, the dispute regarding the current market rate and the quantum of the labour and materials involved per unit of measurement for such items was final and binding. The plaintiff was paid running payments for the items regarding which specifications were changed and extra items without any objection or demmurage and he has no right to agitate the same which became final.
27. Para-10 of the plaint allegations were denied on merits.
28. Para-12 of the written statements is important for the controversy involved herein. The same is being reproduced below :
"That para 12 of the plaint is wrong and nol admitted. There was no tangible dispute between the parties and the payments were made to the plaintiff according to the rates as per agreement and in terms of the agreed terms which were accepted by the plaintiff."
29. In para-13 of the written statement it was stated that there was nothing due to the plaintiff against the defendant and in any case the plaintiff was not entitled to unilateral reference to arbitration about the alleged dispute which do not arise out of agreement neither could be referred.
30. Para-14 of the written statement is also important for the present controversy. The same is being reproduced for convenient reference :
"Para-14 of the plaint is wrong and not admitted. The item Nos. I to 8 as stated in the plaint are also wrong and not admitted. The plaintiff has not stated as how he has arrived to the amounts mentioned against each item number. In any case the plaint is entirely ambiguous, irrational, cancelled for the without any basis. Plaintiff could not claim any profit and overheads more than 10% on extra items as agreed nor any such claim against the terms of the agreement could be referred. The vague particulars given by the plaintiff are irrelevant and inadmissible. The items are entered in the measurement book, the current market rates were assessed and finalised by the department openly and within the knowledge and approval of the plaintiff.
The claim of idle labour to the amount of Rs. Five lacs is entirely vague, imaginary, misconceived, ill motivated and does not arise out of the agreement and cannot be referred at all.
Similarly, the matter relating to pending payment for which final bill is under scrutiny cannot be referred to arbitration as the same is not in dispute under the terms of the agreement, and the same is under consideration of the department and unless the bill is finalised, there cannot be any dispute regarding the probabilities.
The claim of interest at 24% for Rs. 10,57,726/-
is grossly untenable and is not a dispute under the terms of the agreement as the agreement does not provide the defendant is to be liable for any interest by way of damages, as claimed. The claim for idle labour, pending payment, interest is not all the dispute under the agreement and the claims in para 14 are also untenable and do not form part as dispute."
31. In para-15 of the written statement again it was stated that there was no tangible dispute which could be referred to the arbitrator. In any case, the plaintiff is not entitled to gel the dispute referred by way of unilateral reference,
32. In the same continuation two more annexures which have been filed along with the interim application need be mentioned. Anuexure-8 has been filed which is the copy of the letter written by EM Associates plaintiff-respondent dated 11-5-88 to the Chief Engineer of the defendant-appellants, which is being reproduced for convenient reference :
"Sub : Arbitration cases for IDT & Administrative building.
With reference to above and as discussed, we are with drawing the Court cases in the interest of better relationship with ONGC, as we have been doing a lot of work with the Commission and would like to continuing doing so.
However, it is requested, that our points may kindly be reconsidered more sympathetically and the amounts due should be paid to us.
We sincerely hope that our goodwill gesture shall be appreciated."
33. The another document, which needs reference is Annexure-7, which is a copy of the running account bill in the letter head of Oil & Natural Gas Commission. The photostat copy of the said document is in white paper. In the beginning it is mentioned in bracket final payment must invariably be made on forms printed on yellow paper which should be used for intermediate payments. For contractors this form provides (1) Advance payment and (2) Payment for measured works. The form of account secured advances, which has been printed separately should be attached, where necessary. The name of the plaintiff is mentioned in the column, name of contractor, then in sl. number of bill it is mentioned 12th and final bill and next item was number and date of the previous bill for this work, it is mentioned. 11th bill. Then reference to agreement is mentioned as 108/Tel/85-86 dated 7-12-85. At page 2 of this photostat copy there is an endorsement in writing which is not so clearly readable. However, it can be read as 'Received full final'. The endorsement is signed by some Mehajab Singh. Next page of this photos tat document shows that a sum of Rs. 1,34,862 has been received. Again the signatures are not readable.
34. On the basis of the aforesaid two documents the learned counsel for the appellants have vehemently contended that the plaintiff respondent has accepted the final payment during the pendency of the arbitration application under Section 20 of the Arbitration Act and having agreed in withdraw the aforesaid proceedings it is evident therefrom, whatsoever disputed was there was settled by the said final payment and the Court below committed a patent error of law in not noticing the aforesaid submission of the defendant-appellants which was specifically urged in the written statement filed by the defendant-appellants. Learned counsel for the appellants contended that in view of the fact that the plaintiff-respondent having accepted final payment, there was no tangible dispute left between the parties and the Court below committed patent error of law in referring the disputes to the arbitrator without even examining the aforesaid contention of the defendant-appellants.
35. Learned counsel for the appellants has placed reliance on following decisions in support of his contention :
(1) Union of India v. M/s Ajit Mehta and Associates, Pune, AIR 1990 Bombay 45 paras 16 and 17.
(2) K. Ramachandra Rao v. Union of India, 1994 Supp (2) SCC 545 (2).
36. In reply to the aforesaid submission, learned counsel for the respondent has submitted that the defendant having admitted in para 14 of the written statement that the payment for final bill is pending, they cannot be permitted to take stand contrary to the written statement. The documents on which the defendants are placing reliance were never placed before the Court below nor the plaintiff was ever confronted with the aforesaid documents. The documents referred to and relied upon by the learned counsel for the appellants does not show that the plaintiff accepted payment towards final settlement. The payment itself was made as running payment and in connection with it the defendants accepted it to be the final payment. That was only for the purpose of running payment. Explaining Annexure 8 it was contended that the defendants agreed to with-draw on an assurance given by the defendant that the payment will be made. The defendants having not honoured the assurance, the plaintiff cannot be shut out from getting the matter referred to the arbitration.
37. Learned counsel for the plaintiff-respondent also contended that in any case the document is available to the appellantsonly in respect of suit No. 768/87, no document having been brought on record in respect of suit No. 762/87 and no infirmity having been pointed out therein, the reference made in the said case, cannot be dislodged on the basis of the argument made in F.A.F.O. No. 561 of 1991 arising out of suit No. 768/91.
38. We have given a thoughtful consideration of the submission made by the learned counsel for the parties.
39. The photostat copies of annexures 7 and 8 which have been filed along with the affidavit filed in support of the interim application, does not bear any exhibit nor it has been stated in the aforesaid affidavit that the aforesaid two documents were brought on record before the Court below and were proved. A reading of the written statement also shows that no specific statement was made in the written statement that the plaintiff has finally accepted the payment and there is no dispute left. Even otherwise it is clear that the payment alleged to have been made was in the year 1988 during the pendency of the suit. The form on which the payment was alleged amply demonstrates that it was towards running payment on the basis of the said documents, which were not filed before the Court below, nor were proved before the Court below, nor any reliance was placed in regard to the aforesaid documents in the written statement, nor it was stated in the written statement that final payment has been made at any stage. On the contrary, in the written statement, the defendants having specifically stated that the final bill is pending payment, such a plea cannot be allowed to be agitated for the first time in First Appeal From Order.
40. We are of the considered view that if an appeal is filed against an order under Order 43 Rule 1 then the issue arising out from the judgment can only be agitated in the appeal. Even otherwise, if the defendants wanted to place on record any additional evidence to be taken into consideration, it was obligatory on the defendants to have filed an application under Order 41 Rule 27 praying therein that such additional evidence be brought on record. Nothing of the sort has been done nor we have permitted any additional evidence to be brought on record, In this view of the matter, we are of the considered opinion that the documents submitted by the defendant-appellants regarding final payment of the bills cannot be looked into in the present appeal.
41. We are also of the considered view that if during the pendency of the suit any development has taken place between the parties, it was obligation on the part of the party which wants to place reliance on such development, to have brought it on the record of the suit and would have invited the attention of the Court towards that development and would have obtained an order on such development. Admittedly in the present matter the alleged payment is during the pendency of the suit, the defendants have not brought to our notice any such application on the basis of which they have tried to place the aforesaid documents before the Court below or they have asked for a decision on the said aspect of the mailer in the Court below. There was no issue before the Court below, as to whether any final payment has been made in respect of the dispute being raised by the plaintiff-respondent.
42. In this view of the mailer, the argument advanced by the learned counsel for the appellants has no legs to stand and deserves to be rejected in the fads of the case.
43. In view of this factual position, the citation given by the learned counsel for the parties have lost relevance.
44. In Union of India v. M/s. L. K. Ahuja & Co., AIR 1988 SC 1172 in the facts of the case it has been noticed that between 29-5-72 to 19-6-72 the respondent accepted the four final bills and gave no claim declaration in respect of the four contracts, the Apex Court held (at p. 1175 of AIR) :
"In view of the well settled principles we are of the view that it will be entirely wrong to mix-up the two aspects, namely, whether there was any valid claim for reference under S. 20 of the Act, and, secondly, whether the claim to be adjudicated by the arbitrator, was barred by lapse of lime. The second is a matter which the arbitrator would decide unless, however, if on-admitted facts a claim is found at the time of making an Order under S. 20 of the Arbitration Act, to be barred by limitation. In order to be entitled to ask for a reference underS.20of the Act, there must be an entitlement to money and a difference or dispute in respect of the same. It is true that on completion of the work, right to get payment would normally arise and it is also true that or settlement of the final bill, the right to get further payment gets weakened but the claim subsists and whether it docs subsist, is a matter which is arbitrable. In this case, the claim for reference was made within three years commencing from April 16, 1976 and the application was filed on December 18, 1976. We are, therefore, of the view that the High Court was right in this case. See in this connection the observations of this Court in Major (Retd.) lnder Singh Rekhi v. D.D.A. (1988 2JT6: AIR 1988 SC 1007)".
45. In Bharat Heavy Electricals Limited v. M/s Amar Nath Bhan Prakash(1982) 1 SCC 625," the Apex Court held that the High Court has not correctly appreciated the position that the question whether there was discharge of the contract by accord and satisfaction or not, is a dispute arising out of the contract and is liable to be referred to arbitration and hence the application of the respondent under Section 20 of the Indian Arbitration Act should have been allowed and the matters in dispute between the parties, including the question whether or not there was discharge of the contract by accord and satisfaction should have been referred to arbitration.
Similar view has been taken in following decision :
(1) Government of Kerala v. M. Kunha Abdulla AIR 1990 Kerala 150.
(2) Union of India v. M/s Sohoun Constructions, AIR 1989 Andh Pra 350.
46. In Union of India v. Ajit Mehta and Associates (AIR 1990 Bombay 45) (supra) a Division Bench of the Bombay High Court held that inspite of a full and final settlement of the claim, the arbitration clause in the contract may subsist where the party invoking it alleges that in fact there was no accord and satisfaction for some reasons such as the final bill was submitted or receipt was given under coercion, mistake or mis-representation, without prejudice, under protest etc. For then that itself becomes a dispute arbitrabte under the clause, However then there is no such allegation made when invoking the arbitration clause, and it is invoked simpliciter, it will have to be held that the contract itself had come to an end and with it the arbitration clause which was a part and parcel of it.
47. We have already noticed that the said issue was never raised before the Court below nor the plaintiff-respondent was ever confronted with the same. The said decision has no application in the present matter.
48. In Ramachandra Rao v. Union of India, (1994 Supp (2) SCC 545 (2)) (supra). The High Court took the view that since the appellant had executed 'no claim certificate' the contract ceased to exist and the arbitration clause also perished. In the said case, the appellant's plea was that he has signed no objection certificates under undue influence and coercion. The issue was as to who will decide the question of undue influence and coercion. The matter was referred to the trial Court for deciding the said issue.
49. We have already noticed in the present matter no such plea was raised by the defendants appellants that any final payment has been made and for want of any such specific plea there was no occasion for the plaintiff-respondent to counter the said averments. In this view of the matter, the aforesaid decision is also of no relevance in the present matter.
50. On consideration of the aforesaid decisions, we are also of the view that in cases where it is contended that full and final payment has been made and there is no dispute surviving which can be referred in relation to the agreement and in case the plaintiff has denied the said allegation for any reason whatsoever, the matter must be referred to the arbitrator for deciding the dispute in regard to the said issue also as to whether full and final payment has been made or not.
51. With due respect we are also of the view that the decision of the Bombay High Court referred to above, is not in conformity with the decision of the Apex Court in the matter of Union of India v. L. K. Ahuja (AIR 1988 SC 1172) (supra). However, the said issue is besides the point in the present matter.
52. Since at the outset we have held that the defendant-appellants cannot be permitted to agitate the said issue, the decisions referred to above have been noticed only to notice the submissions made by the counsel for the parties.
53. A perusal of the Clause 25 of the Arbitration clause reveals that all the claims made by the answering respondent and referred in para 13 of the plaint are covered by the arbitration clause, aforesaid. The issue is as to whether the claims made by the plaintiff-respondent arising out of the agreement are ultimately to be decided by the Arbitrator.
54. Prima facie on looking to the claims detailed in para 14 of the plaint, we are of the view that the claims made therein do arise in the agreement and the second point urged by the learned counsel for the appellants has no merit.
55. On the basis of the above discussion, we are satisfied that the impugned judgment do not suffer from any error. We accordingly affirm the aforesaid judgment and dismiss the aforesaid F.A.F.Os. with costs which in the circumstances of the case, we quantify to Rs. 10,000/- in each case. We also express our anguish that the matter which should have been disposed of on 5-8-1991, has lingered on for four years for which we see no justification.
56. We accordingly direct that the reference, as directed by the Court below, be made to the arbitrator as contemplated by Clause 25 of the agreement.
57. Order accordingly.