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TMI Blog2018 (2) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... not, therefore, justified in exercising power under Section 11 of the Act. Appeal allowed - decided in favor of appellant. - Mr. R.K. Agrawal And Mr. Amitava Roy JJ. For the Appellant(s) : Mr. Shanth Kumar V. Mahale, Adv., Mr. S.R. Kamalacharan, Adv., Mr. Rajesh Mahale, AOR And Mr. Amith J., Adv. For the Respondent(s) : Mr. P. Vinay Kumar, AOR JUDGMENT R.K. Agrawal, J. 1) Leave granted. 2) This appeal is directed against the final judgment and order dated 12.01.2015 passed by the High Court of Karnataka at Bengaluru in C.M.P. No. 35 of 2014 whereby learned single Judge of the High Court allowed the petition filed by the respondent No. 1- Company for appointment of an arbitrator for resolution of the dispute between the appellant-Company and respondent No. 1-Company. 3) Brief facts: (a) Respondent No. 1-the Contractee Company was awarded a Contract for Site Grading, Construction of Roads, Water Drains and Compound Wall for Aromatic Complex at Mangalore in Mangalore SEZ by the appellant-Contractor on 17.03.2008. The total contract value as per the Letter of Acceptance (LOA) was ₹ 163,25,68,576/- which was subsequently revised to ₹ 195,68,24,399.02/- vide letter dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar for the Respondents. Point for consideration: 5) The only point for consideration before this Court is whether the respondent-Contractee Company has made out a case for referring the dispute to Arbitration? Rival Submissions: 6) Learned senior counsel for the Contractor-the appellant Company strenuously contended that the High Court erred in holding that the contractee-Company established a case to show that there was a genuine and serious dispute regarding the claim and that the claim that No Dues Certificate/No Claim Certificate was issued under duress/coercion is erroneous and unsustainable. Learned senior counsel further contended that there was no withholding of payment and the extension was granted subject to the contractee-Company s request and the contract does not provide for escalation of costs. 7) Learned senior counsel further contended that the delay in payment does not arise at all because as per Clause 6.4.0.0, there was no obligation cast upon the Contractor to pay the RA Bills in full but it was to be done merely on the assessment of the Engineer-in charge. The High Court erred in referring to few letters exchanged much prior to the Final Bill. In fact, the alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in the eyes of law. 11) Learned counsel further submitted that it is prima facie evident that there is a genuine and serious dispute between the parties which requires the appointment of an Arbitrator under the clauses of the Contract to adjudicate upon the claims made by the contractee and it will cause grave injustice to the party if the claims are not adjudicated in terms of the Contract. Learned counsel further submitted that under these circumstances, the withdrawal of No Dues/No Claim Certificate, which was given under duress, is not an afterthought and in a number of decisions of this Court it has been held that if a party who has executed the discharge agreement or discharge voucher alleges that execution of such document was on account of fraud/coercion/undue influence practiced by the other party then such discharge of the contract by such agreement would be rendered void and cannot be acted upon. 12) Learned counsel further submitted that the contractee-Company 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany withdrew the No Dues/No Claim Certificate stating that the letter dated 21.09.2012 was pre-requisite condition for release of their long due legitimate payment against the works executed under the Contract and the same was furnished under duress and coercion of the appellant-Contractor. Further, on 12.01.2013, the contractee-Company submitted a claim for ₹ 96,88,48,642.00 for the losses incurred during execution of the contract at Mangalore. 16) The appellant-Contractor, vide letter dated 25.07.2013, rejected the claim of the contractee-Company on the ground that the Contractee has submitted No Dues/No Claim Certificate and withdrawal of the same on the ground that it was obtained under duress and coercion is wrong, incorrect and not tenable in law. Being aggrieved by the rejection of their claim, the contractee-Company invoked the Arbitration clause under the Contract and appointed its Arbitrator. The appellant-Contractor, vide letter dated 18.10.2013, declined to nominate its Arbitrator. The contractee-Company filed a Civil Miscellaneous Petition under Section 11 of the Arbitration and Conciliation Act, 1996 (in short the Act ) for the appointment of an Arbitrator in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided by the Arbitral Tribunal. On the other hand, if such plea is found to be an afterthought, make-believe or lacking in credibility, the matter must be set at rest then and there. 18) Further, learned senior counsel relied upon a judgment of this Court in New India Assurance Co. Ltd. vs. Genus Power Infrastructure Ltd. (2015) 2 SCC 424 wherein this Court has held as under:- 7. The question that arises is whether the discharge in the present case upon acceptance of compensation and signing of subrogation letter was not voluntary and whether the claimant was subjected to compulsion or coercion and as such could validly invoke the jurisdiction under Section 11 of the Act. The law on the point is clear from following decisions of this Court. In National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd in paras 26 and 51 it was stated as under: 26 . When we refer to a discharge of 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, we refer 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , with huge cost of arbitration merely because plea of fraud, coercion, duress or undue influence has been taken by the claimant. A bald plea of fraud, coercion, duress or undue influence is not enough and the party who sets up such a plea must prima facie establish the same by placing material before the Chief Justice/his designate. If the Chief Justice/his designate finds some merit in the allegation of fraud, coercion, duress or undue influence, he may decide the same or leave it to be decided by the Arbitral Tribunal. On the other hand, if such plea is found to be an afterthought, make-believe or lacking in credibility, the matter must be set at rest then and there. * * * 22 . The above certificates leave no manner of doubt that upon receipt of the payment, there has been full and final settlement of the contractor s claim under the contract. That the payment of final bill was made to the contractor on 19-6-2000 is not in dispute. After receipt of the payment on 19-6-2000, no grievance was raised or lodged by the contractor immediately. The authority concerned, thereafter, released the bank guarantee in the sum of ₹ 21,00,000 on 12-7-2000. It was then that on that day its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the letter of subrogation was signed, that the notice dated 31-3-2011 itself was nearly after three weeks and that the financial condition of the respondent was not so precarious that it was left with no alternative but to accept the terms as suggested, we are of the firm view that the discharge in the present case and signing of letter of subrogation were not because of exercise of any undue influence. Such discharge and signing of letter of subrogation was voluntary and free from any coercion or undue influence. In the circumstances, we hold that upon execution of the letter of subrogation, there was full and final settlement of the claim. Since our answer to the question, whether there was really accord and satisfaction, is in the affirmative, 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. 19) When we refer 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, we refer to an agreement or discharge voucher which is validly and voluntarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecide the matter accordingly. The position will be the same even when there is a provision for arbitration. 51. The Chief Justice/his designate exercising jurisdiction under Section 11 of the Act will consider whether there was really accord and satisfaction or discharge of contract by performance. If the answer is in the affirmative, he will refuse to refer the dispute to arbitration. On the other hand, if the Chief Justice/his designate comes to the conclusion that the full and final settlement receipt or discharge voucher was the result of any fraud/coercion/undue influence, he will have to hold that there was no discharge of the contract and consequently, refer the dispute to arbitration. Alternatively, where the Chief Justice/his designate is satisfied prima facie that the discharge voucher was not issued voluntarily and the claimant was under some compulsion or coercion, and that the matter deserved detailed consideration, he may instead of deciding the issue himself, refer the matter to the Arbitral Tribunal with a specific direction that the said question should be decided in the first instance. 52. Some illustrations (not exhaustive) as to when claims are arbitrable and wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and and issues an undated discharge voucher in full and final settlement. Only a few days thereafter, the admitted amount mentioned in the voucher is paid. The accord and satisfaction in such a case is not voluntary but under duress, compulsion and coercion. The coercion is subtle, but very much real. The accord is not by free consent. The arbitration agreement can thus be invoked to refer the disputes to arbitration. ( v ) A claimant makes a claim for a huge sum, by way of damages. The respondent disputes the claim. The claimant who is keen to have a 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. 21) Learned counsel further relied upon a decision of this Court in R.L. Kalathia Co. vs. State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our perusal to show that RA Bills were raised on various dates for making payments to suppliers and others but were advertently delayed causing grave financial crisis to the contractee-Company to carry out the works and losses on account of delay in settling the claims of the contractee-Company periodically. However, it is contended from the side of the appellant-Contractor that the High Court was not right in considering it a genuine and serious dispute regarding the claim made and the conduct of the parties as reflected in the correspondence exchanged between the parties disclosing that the contractee-Company encountered several financial constraints. 23) 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-Contractor, submitted a claim for ₹ 96,88,48,642.00 for the losses incurred during execution of the contract at Mangalore. It has been claimed that the contractee-Company 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 blas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces, 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 remains to be done. Further, the appellant-Contractor issued the Completion Certificate dated 19.06.2013 pursuant to which the appellant-Contractor has been discharged of all the liabilities. With regard to the issue that the No-Dues Certificate had been given under duress and coercion, we are of the opinion that 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 any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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