Union Of India & Ors vs M/S Onkar Nath Bhalla & Sons

Union of India & Ors. ..........Appellants

Versus

M/s. Onkar Nath Bhalla & Sons ........Respondent

JUDGMENT

H.L.Dattu, J.

Leave granted.

2) This appeal is directed against the judgment and the order passed by the

Punjab and Haryana High Court at Chandigarh in A.A. No. 193/2006

dated 26.4.2007. By the impugned judgment, the High Court has

appointed Justice G. C. Mittal (retired Chief Justice) as the sole

Arbitrator.

1

3) The facts in brief are: - the appellant, Engineer-in-Chief, had entered into

a contract agreement with respondent/contractor. The contract was

completed on 20.9.2002. A final bill was prepared, settling all claims, by

the respondent and was forwarded to the appellants. Respondent after

receiving payment of final bill signed the same, without any protest or

reservation on 27.3.2001. Again after two years, respondent submitted a

list of 20 claims to the appellants. Appellants in their reply stated that as

per condition 65 of IAFW 2249 (General Conditions of Contracts)

forming part of CA, no further claim shall be made by the contractor

after submission of final bill and the claim now submitted are deemed to

have been waived and extinguished. Respondent then approached E-in-C

for appointment of arbitrator on 17.8.2003. Appellants did not appoint an

Arbitrator as no dispute existed. Respondent went before the Civil Judge

(Senior Division) Amritsar on 19.9.2003. Civil Judge transferred the

same to the Distt. Judge, which was further transferred to Punjab &

Haryana High Court.

4) High Court allowing the application of the respondent, stated, that, as per

the arbitration clause, as no affidavit has been filed with in the stipulated

period of the notice invoking the arbitration clause, the appellants have

2 forfeited their right to appoint the Arbitrator. Aggrieved by the said

order, appellants are before us by this special leave petition.

5) The Learned counsel for the appellants would contend, that, the final bill

of the work was signed by the applicant on 21.12.2000 and the payment

for the same was made to the applicant on 27.3.2001. The applicant

signed the final bill and no further claim certificate was also signed

without any reservation and also got the payment of final bill by signing

the same without any protest. It is further contended that when the

agreement provided for arbitration by serving officer having degree in

Engineering or equivalent, then a Retired High Court Judge cannot be

appointed as an Arbitrator. To support his contentions he would rely on

the decision of this court in P. K. Ramaiah & Co. v. N.T.P.C., 1994 (3)

SCC 126, wherein this Court has held that:

".........Admittedly the full and final satisfaction was acknowledged by a receipt in writing and the amount was received unconditionally. Thus there is accord and satisfaction by final settlement of the claims. The subsequent allegation of coercion is an afterthought and a devise to get over the settlement of the dispute, acceptance of the payment and receipt voluntarily given. In Russell on Arbitration, 19th Edn., p. 396 it is stated that "an accord and satisfaction may be pleaded in an action on award and will constitute a good defence.

Accordingly, we hold that the appellant having acknowledged the settlement and also accepted measurements and having received the amount in full and final settlement of the claim, there is accord and satisfaction."

3 6) Learned Counsel would also invite our attention to the case of SBP &

Co. v. Patel Engg. Ltd., (2005) 8 SCC 618, wherein this Court has

observed that:

a) The function performed by the Chief Justice of the High Court or the Chief Justice of India under sub-section (6) of Section 11 of the Act (i.e. the Arbitration and Conciliation Act, 1996) is administrative, pure and simple, and neither judicial nor quasi-

judicial.

b) The function to be performed by the Chief Justice under sub-section (6) of Section 11 of the Act may be performed by him or by "any person or institution designated by him".

c) While performing the function under sub-section (6) of Section 11 of the Act, the Chief Justice should be prima facie satisfied that the conditions laid down in Section 11 are satisfied.

7) In the present case, appellants made the full and final payment of the

final bill and to which respondent certified by signing the bill without

any protest or reservation. Respondent with the intention of receiving

further payments, after two years, raised yet another claim and tried to

bring up a dispute. And when the claim was denied by the appellants,

respondent requested to appoint an Arbitrator.

8) The condition 65 of General conditions of contract IAFW-2249 states

that no further claim shall be made by the contractor after submission of

final bill and these shall be deemed to have been waived and

4 extinguished. Also condition 70 states that, all dispute between the

parties to the contract shall after written notice by either party to the

contract, be referred to the sole arbitration of a serving officer having

degree in Engineering or equivalent.

9) While appointing an Arbitrator under Section 11 of the Arbitration and

Conciliation Act, 1996, two things must be kept in mind:

i. That there exists a dispute between the parties to the agreement

and that the dispute is alive.

ii. Secondly, an Arbitrator must be appointed as per the terms and

conditions of the agreement and as per the need of the dispute.

10)It is the specific case of the appellants, respondent could not have raised

yet another claim, as the respondent after signing on the final bill without

any protest or reservation has waived his right as per the conditions of

the contract. The Court without considering that whether any dispute

exists between the parties, could not have appointed an Arbitrator.

11) Therefore, the Court was not justified in appointing a Retired High Court

Judge as the sole Arbitrator in the present case.

12)In view of the above discussion, the appeal is allowed. The impugned

order passed by the High Court is set aside. No order as to costs.

.......................................J.

5 [TARUN CHATTERJEE]

.......................................J. [ H.L. DATTU ] New Delhi, April 17, 2009.

6