Bangalore District Court
M/S.Hindustan Aeronautics Limited vs ) M/S.Urc Construction Pvt.Ltd on 15 October, 2020
IN THE COURT OF THE VI ADDL.CITY CIVIL & SESSIONS JUDGE
BENGALURU CITY
CCCH. 11
Dated this the 15th day of October, 2020
PRESENT: Sri.Rama Naik, B.Com., LL.B.,
VI Addl.City Civil & Sessions Judge,
Bengaluru City.
A.S.NO:100/2013
PLAINTIFF M/S.HINDUSTAN AERONAUTICS LIMITED
Facilities Management Division,
Bengaluru - 560 017.
Reptd.by its General Manager.
[By Pleader Sri.S.V.Shastri]
/Vs/
DEFENDANTS 1) M/S.URC CONSTRUCTION PVT.LTD.
H-102, Periyar Nagar,
Erode - 638 001.
Reptd.by its Managing Director
[By Pleader Sri.P.B.Appiah]
2) SRI.N.NAGABUSHANAM
Sole Arbitrator,
Chief of Project (CH-CK),
Helicopter Division, HAL,
Bengaluru -560 017.
[ Arbitrator ]
AS.100/2013
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J U D G M E NT
This suit is filed by Plaintiff under Section 34
of the Arbitration and Conciliation Act, 1996, for
setting aside the arbitral award, dated 17.09.2013
passed by sole Arbitrator/2nd Defendant in the
matter of contract for construction of Periodical
Service Hanger and Alpha Helipad.
2) Plaintiff's case, in brief, is that, in response
to offer made by 1st Defendant vide letter dated
24.02.2007, two contracts dated 03.08.2007 were
entered into between Plaintiff and Defendant No.1
for construction of Periodical Service Hanger and
Alpha Helipad. 1st Defendant could not complete
the work as per schedule time. Work was
completed within the extended time. After
completion of the work, final bill was submitted and
same was paid to 1st Defendant, which came to be
accepted by 1st Defendant by producing 'No Claim
Certificate'.
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3) It is stated that, after acceptance of final bill,
1st Defendant raised dispute and requested to refer
the dispute to sole Arbitrator, which came to be
referred to sole Arbitrator, who passed the
impugned award.
4) Being aggrieved by the award, Plaintiff has
challenged the same on the following grounds :
(1) Learned Arbitrator, without referring
the documents produced by the parties has
passed the impugned award.
(2) Award passed is in contravention of
Section 31 of the Arbitration and Conciliation
Act, 1996.
(3) Award is passed disregarding the
terms of Clause-33(a) of General and Special
Conditions of Contract.
(4) Learned Arbitrator has failed to
consider Clause-18.2 of Special Conditions
of Contract.
(5) In view of 'No Claim Certificate'
submitted by 1st Defendant, dispute raised
by 1st Defendant is not maintainable. In spite
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of specific plea taken by Plaintiff, 2 nd
Defendant has failed to exercise the power
vested in him while passing the impugned
award.
For these grounds, Plaintiff prays for setting
aside the award.
5) Defendant No.1 marked appearance through
its Counsel and filed its written statement, stating
that, Plaintiff failed to hand over the entire site
immediately after entering into contract, hence, it
had become impossible to complete the work within
the contract period. Plaintiff breached the contract.
This aspect of the matter has not been considered,
while passing the award. Suit filed under Section 34
of the Arbitration and Conciliation Act, 1996, for
setting aside the award is wholly misconceived. It
lacks grounds and same is not maintainable. Hence,
prays for dismissal of the suit.
6) Heard learned Counsels for Plaintiff and
Defendant No.1. Perused the written arguments
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filed by Plaintiff and Defendant No.1. Also perused
the records.
7) Point that arises for consideration is that :
" Whether Plaintiff has made out
any of the grounds as
enumerated in Section 34 of the
Arbitration and Conciliation Act,
1996 to set aside the award?"
8) My answer to above point is in the negative
for the following :
REASONS
9) By this suit, Plaintiff [Respondent before the
learned Arbitrator] has sought for setting aside the
arbitral award dated 17.09.2013 made by sole
Arbitrator/2nd Defendant, whereby, learned
Arbitrator was pleased to make an award for
Rs.45,73,775/- in favour of 1st Defendant and
against Plaintiff by allowing Claims No.1 and 2 in full
and in the award, claim with respect to interest
under Claim No.3 and Counter Claim of Plaintiff
were disallowed by learned Arbitrator.
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10) 1st Defendant made 3 Claims before the
learned Arbitrator, in which, Claims No.1 and 2 were
allowed in full and Claim No.3 was disallowed.
Claims No.1 to 3 are as follows :
" The Claimant submitted their Claim
Statement dated 29.05.2012 praying the
arbitrator to pass an award for balance in
price adjustment bill for periodic service
hangar of Rs.37,75,725.23 and for a sum of
Rs.7,98,050.00 for the work of Alpha Helipad
and also for interest @ 18% p.a. from
01.01.2011 on Rs.37,75,725.23 in respect of
periodical service hangar and to pay interest
at 18% p.a. from 21.07.2009 on
Rs.7,98,050.00 in respect of Alpha Helipad.
In their statement of claim submitted to the
Arbitrator, M/s.URC Construction (P) Ltd.
Submitted 2 claims amounting to
Rs.45,73,775.23 and interest thereon at 18%
p.a."
11) Learned Arbitrator made an award of
Rs.37,75,725.23 towards Claim No.1 and
Rs.7,98,050/- towards Claim No.2.
12) Facts, which are not in dispute, are that, work
was fully completed by 1st Defendant and on
completion of the work, final bill was submitted by
1st Defendant, which was paid to 1st Defendant.
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13) Plaintiff's contention is that, contracts dated
03.08.2007 were executed between Plaintiff and
Defendant No.1 for construction of Periodical
Service Hangar and Alpha Helipad. Work for
construction of Periodical Service Hangar was to be
completed by 1st Defendant within 19.04.2008 and
work for construction of Alpha Helipad to be
completed on 19.02.2008. It is contended that, 1 st
Defendant failed to complete the work as agreed
and as per the request of 1st Defendant, time was
extended till 31.08.2008. It is contended that in
view of Clause-33(a) of General Conditions of
Contract, price variation up to 20% should be borne
by 1st Defendant.
14) On the other hand, Defendant No.1 contends
that, site was handed over to 1 st Defendant in
piecemeal, hence, extension was granted to
complete the work without levying any penalty. It is
contended that, the delay of handing over the site
by Plaintiff made the Defendant No.1 not only to
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unable to keep up the requisite rate of progress, but
also pushed it to face escalation in the rate of
materials in the open market. It is contended that,
plea that has been taken by Plaintiff that no price
variation is allowed for the extended period of
contract will be legitimately applicable to cases
where extension of period of contract is allowed for
reasons attributable to the contractor.
15) In the award, learned Arbitrator has come to
the specific conclusion that, there was delay in
handing over the site to 1st Defendant and 1st
Defendant is entitled to claim for price adjustment
for the works done during the extended period of
contract. It is relevant to mention the findings of
learned Arbitrator regarding Claims No.1 and 2.
They read thus :
" CLAIM NO. -1
Whether the claimant is entitled to a
sum of Rs.37,75,725.23 being the
balance in escalation bill for Periodical
Service Hangar.
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The Clause No.33 (a) of General and
Special Conditions of the Contract provides
that all contracts up to 24 months shall be on
fixed prices and are not subject for payment
of any variation of prices whatsoever.
However, if there is any abnormal variation in
the basic prices of major construction
materials like, cement, reinforcement steel,
structural steel & Bitumen and the variation
exceeds 20% of the basic prices of the
materials, then the price variation shall be
applicable during the currency of the
contract. No price variation is allowed for the
extended period of contract.
The Claimant claimed for payment of a sum
of Rs.37,75,725.23 being the balance in
escalation bill for Periodical Service Hanger.
The Claimant submitted that the reading of
whole clause as extracted hereinbefore does
not support even implicitly the restriction of
escalation bill to the quantum of variation
only between 20% and above, thereby
denying a flat 20% benefit of escalation to
the claimant. The words, I.e, the variation
exceeds 20% of the basic price of
materials mentioned below, the price
variation shall be applicable during the
currency of contract ..., contained under
the price escalation clause of the contract
connotes that the Claimant is entitled to the
full benefit of price variation up to the market
rate and not merely an amount over and
above 20% of the basic prices of materials.
The Claimant is, therefor,e entitled to the full
benefit of price variation up to the market
rate as against the action of the Respondent
in having excluded a flat rate of 20% of the
benefits of escalation for the materials for
which price materials exceeds 20% of the
basic prices.
Moreover, the contract No.HAL-C/289A/05-06
regarding construction of Periodical
Servicing/Inspection Hangar at Helicopter
Division, HAL (DC) was scheduled to
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terminate on 13th April, 2008. The Claimant,
however, actually finished the work on 31 st
March, 2009. It was found that there were
delay on the part of the Respondent in
handing over of sites to the Claimant and
consequently, the Respondent extended the
contract period up to 31st March, 2009, i.e.,
date of actual completion of work under the
contract, without levy of penalty. The
Claimant, therefore, is entitled to claim for
price adjustment for the works done during
the extended period of contract.
Hence, I hereby award a sum of
Rs.37,75,725.23 being the balance in
escalation bill for Periodical Service
Hangar to be paid to the Claimant on
this account.
CLAIM NO. - 2
Whether the Claimant is entitled to a
sum of Rs.7,98,050.00 being the
balance in escalation bill for Alpha
Helipad Work.
The Claimant demanded for payment of a
sum of Rs.7,98,050.00 being the balance in
escalation bill for Alpha Helipad Work. The
Claimant submitted that price variation shall
be applicable during the currency of the
contract without limiting the payment to the
quantum of excess percentage variation over
and above 20%.
The plain reading of price escalation clause
of the contract unambiguously connotes that
the Claimant is entitled to the full benefit of
price variation up to the market rate
containing an amount to the extent of 20% of
the basic prices of materials and also an
amount over and above 20% of the basic
prices of materials.
For the aforesaid reasons, the Claimant is
entitled to the full benefit of price variation
up to the market rate as against the action of
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the respondent in having excluded a flat rate
of 20% of the benefits of escalation for the
materials for which price materials exceeds
20% of the basic prices.
Furthermore, contract no.HAL-C/199A/05-06
of Construction of Alpha Helipad at Helicopter
Division (HC) was due to finish 19th February,
2008. The Claimant, however, actually
completed the contractual task on 31st
August, 2008. It was found that there were
delay on the part of the Respondent in
handing over of sites to the Claimant and
consequently, the Respondent extended the
contract period up to 31st August, 2008, i.e.,
date of actual completion of work under the
contract, without levy of penalty. The
Claimant, therefore, is entitled to claim for
price adjustment for the works done during
the extended period of contract.
Hence, I hereby award a sum of
Rs.7,98,050.00 being the balance in
escalation bill for Periodical Service
Hangar to be paid to the Claimant on
this account."
16) From the above findings, it has been clear
that, having regard to the delay in handing over the
site by Plaintiff, learned Arbitrator made an award
for balance escalation bill. Award is required to be
looked into in that context. Plaintiff never denied
that there was no delay on its part in handing over
the site and it is not the contention of the Plaintiff
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that, learned Arbitrator's conclusion regarding delay
is wrong.
17) At this stage, it is relevant to take notice of
Clauses-18.2 and 33(a) of General and Special
Conditions of Contract. Clauses-18(2) and 33(a)
read thus :
"18.2. IF THE WORKS BE DELAYED
a) by force majeure, or
b) by reasons of abnormally bad
weather, or
c) by reasons of civil commotion, local
combinations of workmen strike or lockout,
affecting any of the tradesmen employed
on the work, or
d) by reasons of delay on the part of
nominated suppliers which the Contractors
has in the opinion of Engineer-in-Charge
taken all practical steps to avoid or reduce,
or
e) by reasons of delay on the part of
the Contractors or tradesmen engaged by
HAL in executing works not forming the
part of contract, or
f) by reason if any other cause, which
in the absolute discretion of Accepting
Officer is beyond the control.
Then in such case the Accepting Officer
may grant fair and reasonable extension in
the completion dates of individual items or
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work for which the separate period of
completion is mentioned in the contract
documents or work order as applicable.
Upon the happening of any such event
causing delay, the Contractor shall
immediately give notice thereof in writing
to Engineer-in-Charge but shall
nevertheless use constantly his best
endeavor to prevent or make good the
delay and shall do all that may reasonably
be extension of time as granted above
shall be communicated to the Contractor
by the Engineer-in-Charge in writing and
shall be final and binding.
No claims in respect of compensation or
otherwise, however, arising as a result of
extension granted shall be admitted."
"33(a) PRICE ADJUSTMENT CLAUSE :
All contracts upto 24 months shall be
on fixed prices and are not subject for
payment of any variation of Prices
whatsoever. However, if there is any
abnormal variation in the basic prices of
major construction Materials like Cement,
Reinforcement Steel, Structural Steel &
Bitumen and the variation exceeds 20% of
the basic price of materials mentioned
below, then Price Variation shall be
Applicable during the currency of the
Contract. No Price variation is allowed for
the extended period of contract. "
18) A bare reading of Clause-18.2 makes it clear
that, for the reasons mentioned in sub-clauses (a)
to (f), no claim for compensation shall be admitted
as a result of extension granted. Under sub-clause
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(e), if the work is delayed on the part of the
contractor, no claim shall be admitted as a result of
extension granted. Nowhere, it is mentioned in
Clause 18.2 that, no claim for compensation shall
be admitted as a result of extension granted on
account of delay in handing over the site by
Plaintiff. Thus, it is clear that, Clause-18.2 does not
bar the Contractor to claim compensation for the
delay in execution of the work caused by Plaintiff
due to Plaintiff's failure to hand over the site within
the contract period. In this circumstance, there is no
reason to hold that, learned Arbitrator has passed
the award in violation of the terms of contract.
19) Clause-33(a) makes it clear that, variation
exceeds 20% of the basic price of materials then
price variation shall be applicable during the
currency of the contract. In the instant case,
learned Arbitrator has come to the conclusion that,
delay in completion of the work is caused by not
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handing over site during the currency of contract
and for that reason, the currency of contract was
extended till 31.03.2009 and 31.08.2008 in respect
of Periodical Service Hangar and Alpha Helipad
works and same was completed by Defendant No.1
during the currency of extended period. In this
circumstance, Plaintiff cannot say that, no price
variation is allowed for the extended period of
contract. If the currency of contract was extended
at the instance of Defendant No.1, then, it would be
proper to contend that, no price variation clause is
allowed for the extended period of contract. Award
makes it clear that, learned Arbitrator has viewed
Clause-33(a) in a perspective manner.
20) Further, Plaintiff has failed to bring to the
notice of the Court as to what were the documents
to be relied upon by learned Arbitrator and that the
award would have been different, had the said
documents been relied upon. In the backdrop of
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Plaintiff's failure to substantiate its case, there
could be no occasion for this Court to go into the
merits of the award passed by learned Arbitrator on
facts and materials placed before him. Admittedly,
in Section 34 petition, there is no scope for re-
assessing or re-appreciating the evidence, which
learned Arbitrator had come across. In Section 34
petition, what this Court can do is that, it has to
consider whether any of the grounds mentioned in
Section 34 of the Act, are made out by Plaintiff? If it
is so, then only, this Court can set aside the award.
Even if it is found that, there exists errors of facts in
arriving at the conclusion by learned Arbitrator, this
Court has no power to correct the errors of fact. In
P.R. Shah, Shares and Stock Broker (P) Ltd.
vs. B.H.H. Securities (P) Ltd. And Ors. [AIR
2012 SC 1866], the Hon'ble Supreme Court was
pleased to hold that :
"14. A court does not sit in appeal over the
award of an arbitral tribunal by re-assessing or
re-appreciating the evidence. An award can be
challenged only under the grounds mentioned
in section 34(2) of the Act..."
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21) In Associate Builders vs. Delhi
Development Authority [(2015) 3 SCC 49], the
Hon'ble Supreme Court was pleased to hold that :
"33. When a court is applying the "public
policy" test to an arbitration award, it does
not act as a court of appeal and consequently
errors of fact cannot be corrected. A possible
view by the arbitrator on facts has
necessarily to pass muster as the arbitrator is
the ultimate master of the quantity and
quality of evidence to be relied upon when he
delivers his arbitral award. Thus an award on
little evidence or on evidence which does not
measure up in quality to a trained mind
would not be held to be invalid on this score.
Once it is found that the arbitrators approach
is not arbitrary or capricious, then he is the
last word on facts."
When such is the position, there is no reason
to interfere with the award in Plaintiff's failure to
substantiate the contention that, learned Arbitrator
failed to consider the documents relied upon by the
parties and evidence adduced by them. It is a mere
contention without any substantiation.
22) Plaintiff's main contention is that, 1 st
Defendant submitted final bill along with 'No Claim
Certificate'. Having regard to 'No Claim Certificate',
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final bill was paid. Once the 'No Claim Certificate' is
produced and final bill was accepted, there exists
no dispute between the parties to invoke the
arbitration clause and it is contended that, even
this aspect of the matter was argued before the
learned Arbitrator, but he failed to consider the
same. Both Plaintiff and Defendant No.1 have
placed reliance on the judgment in National
Insurance Company Ltd. vs. Boghara Polyfab
Private Limited, [(2009) 1 Supreme Court
Cases 267].
Principles laid down in National
Insurance Company Limited are as
follows :
"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.
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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.
23. It is clear form the scheme of the Act
as explained by this Court in SBP & Co., that
in regard to issues falling under the second
category, raised in any application under
Section 11 of the Act, the Chief Justice/his
designate may decide them, if necessary, by
taking evidence. Alternatively he may leave
those issues open with a direction to the
Arbitral Tribunal to decide the same. If the
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Chief Justice or his designate chooses to
examine the issue and decides it, the
Arbitral Tribunal cannot re-examine the
same issue. The Chief Justice/his designate
will, in choosing whether he will decide such
issue or leave it to the Arbitral Tribunal be
guided by the object of the Act (that is
expediting the arbitration process with
minimum judicial intervention). Where
allegations of forgery/fabrication are made
in regard to the document recording
discharge of contract by full and final
settlement, it would be appropriate if the
Chief Justice/his designate decides the
issue.
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.
29. It is thus clear that the arbitration
agreement contained in a contract cannot
be invoked to seek reference of any dispute
to arbitration, in the following
circumstances, when the contract is
discharged on account of performance, or
accord and satisfaction, or mutual
agreement, and the same is reduced to
writing (and signed by both the parties or by
the party seeking arbitration):
(a) where the obligations under a
contract are fully performed and discharge
of the contract by performance is
acknowledged by a full and final discharge
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voucher/receipt, nothing survives in regard
to such discharged contract;
(b) where the parties to the contract, by
mutual agreement, accept performance of
altered, modified and substituted
obligations and confirm in writing the
discharge of contract by performance of the
altered, modified or substituted obligations;
(c) where the parties to a contract,
by mutual agreement, absolve each other
from performance of their respective
obligations (either on account of frustration
or otherwise) and consequently cancel the
account of frustration or otherwise) and
consequently cancel the agreement and
confirm that there are no outstanding
claims or disputes."
52. Some illustrations (not exhaustive) as
to when claims are arbitrable and when they
are not, when discharge of contract by
accord and satisfaction are disputed, to
round up the discussion on this subject are:
(i) A claim is referred to a conciliation or a
pre-litigation Lok Adalat. The parties
negotiate and arrive at a settlement. The
terms of settlement are drawn up and
signed by both the parties and attested by
conciliator or the members of the Lok
Adalat. After settlement by way of accord
and satisfaction, there can be no reference
to arbitration.
(ii) A claimant makes several claims. The
admitted or undisputed claims are paid.
Thereafter negotiations are held for
settlement of disputed claims resulting in an
agreement in writing settling a pending
claims and disputes. On such settlement,
the amount agreed is paid and the
contractor also issues a discharge
voucher/no claim certificate/full and final
receipt. After the contract is discharged by
accord and satisfaction, neither the contract
nor any dispute survives consideration.
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There cannot be any reference of any
dispute to arbitrate thereafter.
(iii) A contractor executes the work and
claims payment of rupees ten lakhs as due
in terms of the contract. The employer
admittedly claim only for rupees six lakhs
and informs the contractor either in writing
or orally that unless the contractor gives a
discharge voucher in the prescribed format
acknowledging receipt of rupees six lakhs in
full and final satisfaction of the contract,
payment of the admitted amount will not be
released. The contractor who is hard-
pressed for funds and keen to get the
admitted amount released, signs on the
dotted line either in a printed form or
otherwise, stating that the amount is
received in full and final settlement. In such
a case, the discharge is under economic
duress on account of coercion employed by
the employer. Obviously discharge voucher
cannot be considered to be voluntary or as
having resulted in discharge of the contract
by accord and satisfaction. It will not be a
bar to arbitration.
(iv) As insured makes a claim for loss
suffered. The claim is not admitted nor
rejected. But the insured is informed during
discussion unless the claimant gives a full
and final voucher for a specified amount
(far lesser than the amount claimed by the
insured), the entire claim will be rejected.
Being in financial difficulties, the claimant
agrees to demand and issues an undated
discharge voucher in full and final
settlement. Only a few days thereafter, the
admitted amount mention in the voucher is
paid. The accord and satisfaction in such a
case is voluntary but under duress,
compulsion and coercion. The coercion is
subtle but very much real. The "accord" is
not by free consent, arbitration agreement
can thus be invoked to refer the dispute
arbitration.
(v) A claimant makes a claim for a huge
sum, by way of damages. The respondent
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disputes the claim. The claimant who is
keen to have settlement and avoid
litigation, voluntarily reduces the claim and
requests for settlement. The respondent
agrees and settles the claim and obtains a
full and final discharge voucher. Here even
if the claimant might have agreed for
settlement due to financial compulsions and
commercial pressure or economic duress,
the decision was his free choice. There was
no threat, coercion or compulsion by the
respondent. Therefore, the accord and
satisfaction is binding and valid and there
cannot be any subsequent claim or
reference to arbitration."
23) In this case, 2nd Defendant was not appointed
by filing CMP before the Hon'ble High Court of
Karnataka. Sole Arbitrator was appointed at the
request of 1st Defendant by Plaintiff as per the
arbitration clause in contract. Admittedly, while
appointing the Arbitrator by Plaintiff, Plaintiff did
not raise any objection to the request made by 1 st
Defendant to the effect that in view of 'No Claim
Certificate' submitted by Defendant No.1, the
dispute raised by 1st Defendant is not arbitrable.
Instead, without there being any objection to the
request made by 1st Defendant, Plaintiff appointed
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2nd Defendant as sole Arbitrator to arbitrate the
dispute made in the request.
24) On perusal of objection filed by Plaintiff
before the learned Arbitrator makes it clear that,
Plaintiff has taken the plea that in view of
submission of 'No Claim Certificate', claim petition
be dismissed as not maintainable.
25) 1st Defendant, in its reply to counter
statement has countered the plea contending that,
it was facing financial crisis and as it was condition
precedent to submit 'No Claim Certificate' before
accepting final bill by Plaintiff, final bill for
escalation was re-submitted for reduced amount
due to insistence of Plaintiff and hence, 1 st
Defendant is not debarred from claiming balance
escalation amount. Para-34, 35, 36 and 37 of
Rejoinder filed by 1st Defendant before the learned
Arbitrator read thus :
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"34. The other repeated objections of the
respondent that the claimant has given 'no
claim certificate' (R.26.a&b). The claimant
in the letter dt.02.04.09 (C-8) has furnished
the details for payment due, ie. For pre-
final bills (dt.21.03.09 & 15.09.08) for
Rs.106/ lakhs and Rs.27/- lakhs etc along
with escalation bills; with a request to
release payment at the earliest enabling us
to complete the Project in time. The
claimant in the letter dt.26.05.09 (R-15)
has furnished the final bill for Rs.6,78,612/-
for Alpha Helipad. The claimant in the
letter dt.03.07.09 (C-10) has indicated that
"we are under force to borrow heavily
from outside sources and bank at
exorbitant rate of interest". The claimant
in the letter dt.08.08.2009 (R-20) has
detailed severe financial crises faced.
The claimant in the letter dt. 23.11.2011
(C-15) while reminding about the total
outstanding as Rs.1,05,63,662/- has
explained the severe financial crises
faced and reminded for release of
escalation bill for Rs.45,73,775/-. The
respondent in the letter dt.23.12.11 (C-16)
has rejected the request for payment of
balance in escalation bill. The claimant in
the letter dt.28.12.2011 (C-20) has
informed specifically that clause 26 of
general conditions indicates that " Before
submission of the final bill, the contractor
should sign in a No claim certificate
indicating that the contractor has no claim
against the company under the contract in
question except as included in the final
bill" and in accordance with the above
condition, the amount of Rs.53.83 lakhs for
Periodical service hangar and Rs.6.19 lakhs
for Alpha helipad was already included in
the Final bills but it was resubmitted as per
your instructions' and explained while
insisting for balance in escalation bill, that
the bills were earlier resubmitted for
reduced amount.
AS.100/2013
26
35. Therefore, the resubmission of final
escalation bill for reduced amount is not
voluntary but due to the insistence of
respondent and the 'no claim certificate',
as the condition precedent, under the
circumstances of economic duress. It is
therefore clear that there was no mutual
settlement to agree with the amount
reduced by respondent under the
misleading plea of having scrutinized the
bills.
36. It is relevant to note that the work
of Periodical servicing/inspection hangar
was completed on 31.03.2009 (C-13)
and Alpha Helipad was completed on
31.08.08 (C-14), whereas, the
respondent, issued the completion
certificate in the letters dt. 31.01.11
(C-13 & 14) and in the letter dt.
23.12.11 (C-16) has rejected the
request for payment of balance
escalation bill. The respondent in the
letter dt. 02.03.12 (C21) has stated
that the claimant has given no claim
certificate dt. 09.11.09 and accordingly
HAL has settled the final bill and
rejected the request for appointment of
arbitrator. The respondent, at page-14
under the caption RE-Claim-17(a & b) of
counter statement, has informed that
the final bills were released on
31.12.09. The above sequences
explain the severe financial crisis,
the claimant was subjected to, in
signing the "No claim certificate"
prescribed in clause 26 of
conditions of contract referred to in
claimant's letter dt.28.12.11 (C-20)
under economic duress.
37. In the same letter dt. 28.12.2011
(C-20), the claimant gave notice to refer
the disputes relating to payment of
escalation bills to arbitration. The
respondent in the letter dt. 02.03.12 (C-
AS.100/2013
27
21) rejected the request for
reconsideration on the plea that the
claimant has given 'no claim certificate'.
The claimant in the letter dt. 10.03.12
(C-22) sent a detailed report specifying
that " If you are not appointing the sole
arbitrator to decide the above disputes
within 30 days from the date of receipt
of this letter, we are forced to take legal
course of action to safe guard our
interest."
26) There is no material to show that, by placing
'No Claim Certificate' before the learned Arbitrator,
whether Plaintiff had pressed for adjudication of the
contention that claim petition is not maintainable in
view of submission of 'No Claim Certificate' by 1 st
Defendant. Learned Arbitrator has framed three
Issues regarding the entitlement of 2 Claims and
interest as claimed by 1st Defendant and exemplary
costs claimed by Plaintiff and passed the award
allowing Claims No.1 and 2 of 1st Defendant. Till
passing the award, Plaintiff kept quite without
pursuing his plea as to maintainability of claim
petition and now sought for setting aside the award
on the ground that claim petition is not
AS.100/2013
28
maintainable in view of submission of 'No Claim
Certificate'. This preliminary objection raised by
Plaintiff ought to have been pressed by it before
arbitration of the claims on merits. However, after
making the award on merits, Plaintiff has
questioned the same on the ground which ought to
have been decided as preliminary issue.
27) From the ratio laid down in National
Insurance Company Limited (supra), it has been
clear that, what are the issues that can be
adjudicated by the Hon'ble Supreme Court/Hon'ble
High Court while appointing the Arbitrator on the
application filed under Section 11 of the Arbitration
and Conciliation Act, 1996. One of the issues that
can be considered for decision while appointing the
Arbitrator is that, "whether the parties have
concluded the contract/transactions by recording
satisfaction of their mutual rights and obligation or
by receiving the final payment without objection".
AS.100/2013
29
Or else, said issue may be left for the decision of
the Arbitrator. Nowhere in the judgment (supra), it
is held that, once the 'No Claim Certificate' is
submitted, the Arbitrator has no jurisdiction to
entertain the claim petition.
28) Be that as it may. 1st Defendant's contended
in its rejoinder, due to severe financial crisis, final
bill was resubmitted along with 'No Claim
Certificate'. As per Clause-26 of Special Conditions
of Contract [SCC], before submitting final bill, the
Contractor should sign 'No Claim Certificate'
indicating that he has no claim against the
Company under the contract in question. When it is
mandatory to submit 'No Claim Certificate' before
submitting final bill, Contractor is bound to submit
final bill for the agreed contract value only. Under
Clause-26 of SCC, there would be no option for 1 st
Defendant to submit the final bill before submitting
the 'No Claim Certificate'. Under such
circumstances, Contractor shall submit final bill for
AS.100/2013
30
the agreed contract value in order to get his
payment. He has no option to submit final bill for
escalation price. Had there been any provision to
submit 'No Claim Certificate' after submitting the
final bill and before passing the final bill, then the
matter would have been different and in that event,
the real fact would come to light in submitting the
final bill after completion of the work. Having regard
to Clause-26, in order to get the bill for the work,
the Contractor re-submitted final bill. In this
background, if the matter is viewed, in view of
submission of 'No Claim Certificate', it cannot be
said that, 1st Defendant has no right to initiate
arbitral proceedings for the revised contract value
under different heads as claimed in Claim Petition.
In that view, it can be fairly said that, 1 st
Defendant's case, certainly, comes under Clause-
(iii) of Para 52 of the judgment in National
Insurance Co. Ltd., case. When such being the
case, there is no reason to contend that 1 st
AS.100/2013
31
Defendant has no right to invoke the arbitration
clause in view of submission of 'No Claim
Certificate'.
29) For the foregoing discussion, it is, thus, clear
that, award passed by learned Arbitrator is based
on the reasons and materials placed before him.
There is no perversity or illegality in the award.
Award can be set aside only on the grounds
mentioned in Section 34 of the Arbitration and
Conciliation Act, 1996. No such grounds are made
out by Plaintiff as enumerated in Section 34 of the
Arbitration and Conciliation Act, 1996, much-less,
the grounds mentioned in plaint. There is no reason
to interfere with the reasoned award. In that view of
the matter, it can be fairly said that, Plaintiff fails in
its suit; accordingly, I answer the above point in the
negative and proceed to pass the following:
AS.100/2013
32
ORDER
(1) Suit filed by Plaintiff under Section 34 of Arbitration and Conciliation Act, 1996, for setting aside the award dated 17.09.2013 passed by sole Arbitrator/Defendant No.2; is hereby dismissed.
(2) No order as to costs.
[Dictated to the Judgment Writer directly on computer, typed matter corrected and then pronounced by me in open Court, on this the 15th day of October, 2020.] [RAMA NAIK] VI ADDL.CITY CIVIL & SESSIONS JDUGE BENGALURU CITY