Arbitration and Conciliation Act, 1996 – s.11 – Exercise of power under – When not justified – Appellant awarded contract to respondent no.1 – On 21.09.2012, respondent no.1 submitted No Dues/No Claim Certificate – On 10.10.2012, appellant made payment of final bill to respondent no.1 – On 24.10.2012, respondent no.1 withdrew the No Dues Certificate stating that it was furnished under duress and coercion – Vide letter dtd. 12.01.2013 to appellant, respondent no.1 submitted claim of Rs. 96,88,48,642/- as losses incurred during execution of the contract, denied by appellant – Respondent no.1 sent notice to the appellant for resolving the dispute through Arbitration, request denied by appellant – Petition u/s.11 filed by respondent no.1 before High Court, allowed – Held: Admittedly, No-Dues Certificate was submitted by respondent no.1 on 21.09.2012 and on their request Completion Certificate was issued by appellant – There is nothing on record to prove that the said Certificate was given under duress or coercion– After a gap of one month, i.e. on 24.10.2012, respondent no.1 withdrew the No Dues Certificate on grounds of coercion and duress – Claim for losses incurred during execution of the contract was made on 12.01.2013, i.e., after a gap of 3½ months, whereas the Final Bill was settled on 10.10.2012 which was mutually signed by both the parties – When respondent no.1 accepted the final payment in full and final satisfaction of all its claims, there was no point in raising the claim for losses incurred during the execution of the Contract at a belated stage which creates an iota of doubt as to why such claim was not settled at the time of submitting Final Bills – The story about duress was an afterthought in the background that the losses incurred during the execution of the Contract were not visualised earlier by respondent No.1 – Mere allegation that no-claim certificate was obtained under financial duress and coercion does not lead to an arbitrable dispute – No arbitrable dispute existed so as to exercise power u/s.11 – High Court was not justified in exercising power u/s.11 – Contract.
Allowing the appeal, the Court
HELD: 1.1 When one refers to discharge of a contract by an agreement signed by both the parties or by execution of a full and final discharge voucher/receipt by one of the parties, one refers to an agreement or discharge voucher which is validly and voluntarily executed. If the party which has executed the discharge agreement or discharge voucher, alleges that the execution of such discharge agreement or voucher was on account of fraud/coercion/undue influence practised by the other party and is able to establish the same, then obviously the discharge of the contract by such agreement/voucher is rendered void and cannot be acted upon. Consequently, any dispute raised by such party would be arbitrable. But in case the party is not able to establish such a claim or appears to be lacking in credibility, then it is not open to the courts to refer the dispute to arbitration at all. [Para 19][612-E-G]
1.2 In the case at hand, the High Court allowed the appeal filed by the contractee-respondent no.1 on the assertion that the No Dues Certificate was given on account of coercion/undue influence practiced by the appellant-Contractor. The contractee, while basing its claim, relied upon the letters issued to the appellant for releasing the payment of Running Accounts (RA) Bills. Whether there was duress and coercion exerted against the contractee-Company by the appellant has to be examined keeping in mind the background in which the said letters were exchanged between the parties. [Para 22][616-E-G]
1.3 Pursuant to taking a false claim of duress and coercion while filing the No Dues Certificate, the contractee-Company, vide letter dated 12.01.2013 to the appellant, submitted a claim for Rs.96,88,48,642/- for the losses incurred during execution of the contract at Mangalore. It was claimed that the contracteeCompany could not continue with the work due to various reasons like pooja, shifting of Idols, non-availability of free encumbrance of site, obstruction in the blasting work, stoppage of hard rock blasting, issues with respect to work to be given to local contractors, non-vacation of project displaced families, permission for forest clearance, permission for shifting of wooden logs etc. and the huge expenditure as disclosed in the claim was incurred by the contractee-Company due to the factors attributable to the appellant. Clause 6.6.0 of the General Conditions of Contract deals with “Claims by the Contractor” (contractee in the case at hand). Clause 6.6.1.0. of the Contract states that in case of a claim of extra compensation or remuneration, the Contractee shall give notice in writing of its claim within 10 days from the date of issue of orders or instructions related to any works for which the Contractee claims such additional payment. The notice shall give full particulars of the nature of such claim, grounds on which it is based and the amount claimed. Unless and until notice is given, the Contractor shall not be liable to pay extra compensation to the Contractee. Clause 6.6.3.0 states that any claim of the Contractee in accordance with Clause 6.6.1.0 shall be separately included in the Final Bill prepared by it in the form of Statement of Claims, giving particulars of the nature of claims, ground on which it is based and the amount claimed and shall be supported by a copy of the notice and the Contractor shall not be liable in respect of any notified claim not specifically reflected in the Final Bill in accordance with the provisions of Clause 6.6.3.0 which shall be deemed to have been waived by the Contractee. [Para 23][617-B-G]
1.4 From the materials on record, it is found that the contractee-Company had issued the “No Dues/No Claim Certificate” on 21.09.2012, it had received the full amount of the final bill being Rs. 20.34 crores on 10.10.2012 and after 12 days thereafter, i.e., only on 24.10.2012, the contractee-Company withdrew letter dated 21.09.2012 issuing “No Dues/No Claim Certificate”. Apart from it, the Final Bill was mutually signed by both the parties to the Contract accepting the quantum of work done, conducting final measurements as per the Contract, arriving at final value of work, the payments made and the final payment that was required to be made. The contractee-Company accepted the final payment in full and final satisfaction of all its claims. In the present facts and circumstances, the raising of the Final Bill and mutual agreement of the parties in that regard, all claims, rights and obligation of the parties merge with the Final Bill and nothing further remained to be done. Further, the appellant issued the Completion Certificate dated 19.06.2013 pursuant to which the appellant was discharged of all the liabilities. With regard to the issue that the “No Dues Certificate” had been given under duress and coercion, there is nothing on record to prove that the said Certificate had been given under duress or coercion and as the Certificate itself provided a clearance of no dues, the contractee could not now turn around and say that any further payment was still due on account of the losses incurred during the execution of the Contract. The story about duress was an afterthought in the background that the losses incurred during the execution of the Contract were not visualised earlier by the contractee. As to financial duress or coercion, nothing of this kind is established prima facie. Mere allegation that no-claim certificates have been obtained under financial duress and coercion, without there being anything more to suggest that, does not lead to an arbitrable dispute. The conduct of the contractee clearly shows that “No Claim Certificate” was given by it voluntarily; the contractee accepted the amount voluntarily and the contract was discharged voluntarily. [Para 24][617-H; 618A-F]
1.5 Admittedly, “No Dues Certificate” was submitted by the contractee-Company on 21.09.2012 and on their request Completion Certificate was issued by the appellant-Contractor. The contractee, after a gap of one month, that is, on 24.10.2012, withdrew the “No Dues Certificate” on the grounds of coercion and duress and the claim for losses incurred during execution of the Contract site was made vide letter dated 12.01.2013, i.e., after a gap of 3 ½ (three and a half) months whereas the Final Bill was settled on 10.10.2012. When the contractee accepted the final payment in full and final satisfaction of all its claims, there is no point in raising the claim for losses incurred during the execution of the Contract at a belated stage which creates an iota of doubt as to why such claim was not settled at the time of submitting Final Bills that too in the absence of exercising duress or coercion on the Contractee by the appellant-Contractor. The plea raised by the contractee-Company is bereft of any details and particulars, and cannot be anything but a bald assertion. In the circumstances, there was full and final settlement of the claim and there was really accord and satisfaction and no arbitrable dispute existed so as to exercise power under Section 11 of the Act. [Para 25][618-G-H; 619-A-C]
Union of India and Others v. Master Construction Co. (2011) 12 SCC 349 : [2011] 5 SCR 853 ; New India Assurance Co. Ltd. v. Genus Power Infrastructure Ltd. (2015) 2 SCC 424 : [2014] 12 SCR 360 ; National Insurance Company Limited v. Boghara Polyfab Private Limited (2009) 1 SCC 267 : [2008] 13 SCR 638 ; R.L. Kalathia & Co. v. State of Gujarat (2011) 2 SCC
400 : [2011] 1 SCR 391 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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