2018 (2) TMI 411 - SC - Indian Laws

Appointment of an arbitrator for resolution of the dispute between the appellant-Company and respondent No. 1-Company - works contract - whether the respondent-Contractee Company has made out a case for referring the dispute to Arbitration? Held that - 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. There was full and final settlement of the claim and there was really accord and satisfaction and in our view no arbitrable dispute existed so as to exercise power under Section 11 of the Act. The High Court was not, therefore, justified in exercising power under Section 11 of the Act. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Whether the dispute between the appellant-Contractor and the respondent-Contractee Company should be referred to arbitration.
2. Whether the No Dues/No Claim Certificate was issued under duress and coercion.
3. Whether the High Court was correct in allowing the petition for the appointment of an arbitrator.

Detailed Analysis:

1. Referral to Arbitration:
The primary issue before the Supreme Court was whether the dispute between the appellant-Contractor and the respondent-Contractee Company should be referred to arbitration. The Contractee Company argued that the No Dues/No Claim Certificate was issued under duress and coercion, thus invalidating the discharge of the contract and making the dispute arbitrable.

2. No Dues/No Claim Certificate:
The Contractee Company was awarded a contract for construction work, and after the completion of the project, it issued a No Dues/No Claim Certificate on 21.09.2012, which was a prerequisite for the release of the final payment of ?20.34 crores. However, on 24.10.2012, the Contractee Company withdrew the certificate, claiming it was issued under duress and coercion. The Contractee Company subsequently submitted a claim for ?96,88,48,642.00 on 12.01.2013 for losses incurred during the execution of the contract.

The appellant-Contractor contended that the High Court erred in holding that the Contractee Company established a genuine and serious dispute. They argued that the No Dues Certificate was voluntarily issued, and there was no withholding of payment or escalation of costs as per the contract terms.

3. High Court's Decision:
The High Court allowed the petition filed by the Contractee Company, appointing an arbitrator to resolve the dispute. The appellant-Contractor challenged this decision, arguing that the contract had been fully and finally discharged, and no further claims or disputes existed.

Discussion:

Arguments by Appellant-Contractor:
The appellant-Contractor argued that the No Dues Certificate was issued voluntarily, and the contract was fully discharged with no outstanding claims. They relied on previous judgments, including Union of India vs. Master Construction Co. and New India Assurance Co. Ltd. vs. Genus Power Infrastructure Ltd., which held that a discharge voucher or no-claim certificate obtained voluntarily bars subsequent claims or disputes from being referred to arbitration.

Arguments by Respondent-Contractee:
The Contractee Company argued that the No Dues Certificate was issued under duress due to financial constraints and delayed payments by the appellant-Contractor. They cited decisions such as National Insurance Company Limited vs. Boghara Polyfab Private Limited, which held that if a discharge agreement is obtained by fraud, coercion, or undue influence, it is void and the dispute is arbitrable.

Supreme Court's Analysis:
The Supreme Court examined the circumstances under which the No Dues Certificate was issued and the subsequent withdrawal by the Contractee Company. The Court found no evidence of duress or coercion and noted that the final bill and No Dues Certificate were mutually agreed upon and signed by both parties. The Court concluded that the contract was fully discharged, and the claim of duress was an afterthought.

Conclusion:
The Supreme Court set aside the High Court's judgment, holding that there was no arbitrable dispute as the contract had been fully and finally discharged. The appeal was allowed, and the petition for the appointment of an arbitrator was dismissed. The Court emphasized that mere allegations of duress without substantive evidence do not warrant referring the dispute to arbitration.

← Previous Next →