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1993 DIGILAW 328 (ORI)

UNIT CONSTRUCTION COMPANY PVT. LTD. v. NATIONAL ALUMINIUM COMPANY LTD.

1993-12-03

G.B.PATNAIK

body1993
JUDGMENT : G.B. Pattnaik, J. - The decision of the Subordinate Judge, Bbubaneswar, dated 3-12-1990 passed on an application being filed under Sec 38 of the Arbitration Act by opp. party No. 1 is under challenge in this revision. 2. The brief facts leading to the impugned order of the Sub-ordinate Judge are stated hereundar. Opp. party No. 1, the National Aluminium Company Limited, is an Undertaking of the Government of India dealing with manufacture of aluminium. The said opp. party No. 1 invited tenders in February, 1983, for the work "Construction of Residential Quarters at Angul in the district of Dhenkanal" and the petitioner was one of the tenderers. The tender of the petitioner was ultimately accepted by opposite party No 1 after negotiation and the petitioner was communicated the order accepting his tender and allotting the work to him. A formal agreement between the parties was also entered into and pursuant to the agreement, the petitioner commenced work. The work was completed some time in July, 1986. During the continuance of the work, petitioner was submitting running bills and was receiving on account payments. After the completion of the work, the petitioner submitted the final bill and along with the final bill he also submitted a "no-claim certificate" which is required to be submitted under the terms of the agreement immediately after submitting the aforesaid final bill together with no-claim certificate, the petitioner also submitted another bill on account of escalation on 12th of September, 1988, The claim of the petitioner as given in the final bill was accepted and the petitioner was paid a sum of Rs. 4,92,372/-. But so far as the bill submitted by the petitioner on account of escalation, the same was not accepted. The petitioner then requested opp. party No. 1 for re-consideration of the order. But since he did not receive any communication, the petitioner wrote a letter on 27th of April, 1983, calling upon the opp. party No. 1 to refer the dispute for arbitration in terms of Clause 87 of the General Conditions of Contract. Clause 87 of the General Conditions of Contract provides: 87. party No. 1 for re-consideration of the order. But since he did not receive any communication, the petitioner wrote a letter on 27th of April, 1983, calling upon the opp. party No. 1 to refer the dispute for arbitration in terms of Clause 87 of the General Conditions of Contract. Clause 87 of the General Conditions of Contract provides: 87. ARBITRATION : AH disputes of differences whatsoever which shall at any time arise between the parties hereto touching or concerning the works or the execution or maintenance thereof of this Contract or the rights touching or concerning the works or the execution or maintenance thereof of this Contract or the construction meaning, operation or effect thereof or to the rights and/or liabilities of the parties or arising out of or in relation thereto whether during or after completion of the contract or whether before or after determination, for closure or breach of the Contract (other than those in respect of which the decision of any person is by the Contract expressed to be final and binding) shall after written notice by either party to the Contract to the other of them and to the Appointing Authority hereinafter mentioned/referred for adjudication to a sola arbitrator to be appointed as hereinafter provided. For the purpose of appointing the sole Arbitrator referred to above, the Appointing Authority will send within thirty days of receipt of the notice, to the Contractor a panel of three names of persons who shall all be presently unconnected with the organisation for which the work is executed. The Contractor shall on receipt of the names as aforesaid select any one of the persons named to be appointed as a sole Arbitrator and communicate his name to the Appointing Authority within thirty days of receipt of the names. The Appointing Authority shall thereupon without any delay appoint the said person as the sole Arbitrator. If the Contractor fails to communicate such selection as provided above within the period specified, the Appointing Authority shall make the selection and appoint the selected person as the sole Arbitrator. The Appointing Authority shall thereupon without any delay appoint the said person as the sole Arbitrator. If the Contractor fails to communicate such selection as provided above within the period specified, the Appointing Authority shall make the selection and appoint the selected person as the sole Arbitrator. If the Appointing Authority fails to send to the Contractor the panel of three names as aforesaid within the period specified, the Contractor shall send to the Appointing Authority a panel of three names of persons who shall all be unconnected with either party, The Appointing Authority shall on receipt of the names as aforesaid select any one of the person* named and appoint him as the sole Arbitrator. If the appointing authority fails to select the person and appoint him as the sole arbitrator within 30days of receipt of the panel and inform the Contractor accordingly, the Contractor shall be entitled to appoint one of the persons from the panel as the sole Arbitrator and communicate his name to the Appointing Authority. If the Arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever sole Arbitrator shall be appointed as afore- said. The work under the Contract shall, however continue during the arbitration proceedings and no payment due or payable to the Contractor shall be withheld on account of such proceedings. The Arbitrator shall be deemed to have entered on the reference on the date he issues notices to both the parties fixing the date of the first hearing. The Arbitrator may, from time to time, with the consent of the parties, enlarge the time for making and publishing the award. The Arbitrator shall give a separate award in respect of each dispute or difference referred to him. The venue of arbitration shall be such place as may be fixed by the Arbitrator in his sole discretion. The fees, if any, of the Arbitrator shall, if required to be paid before the award is made and published, be paid half and half by each of the parties. The venue of arbitration shall be such place as may be fixed by the Arbitrator in his sole discretion. The fees, if any, of the Arbitrator shall, if required to be paid before the award is made and published, be paid half and half by each of the parties. The costs of the inference and of the award including the fees, if any of the Arbitrator shall be in the discretion of the Arbitrator who may direct to and by whom and in what manner, such costs or any part thereof shall be paid and may fix or settle the amount of costs to be so paid. The award of the arbitrator shall be final and binding on bath the parties. Subject to aforesaid, the provisions of the Arbitration Act 1940, or any statutory modification or re-enactment thereof and the rules made thereunder, and for the time being in force, shall apply to the arbitration proceeding under this clause." On receipt of the aforesaid letter of the petitioner, opp party No. 1 appointed Shri A. C. Padhi, former Secretary to Government of Orissa. Works Department, as the sole Arbitrator for adjudicating upon the dispute between the petitioner and opp, party No. 1, but it was mentioned in the letter of . appointment that the appointment of the arbitrator is without prejudices to the arbitrability and the maintainability of the claim of the petitioner. The arbitrator then entered into reference and directed the parties to file their respective statements of claim and counter statement. Opp. party No. 1 on 26th of April, 1989, filed an application before the Arbitrator for deciding the arbitrability and maintainability of the claim, as a preliminary issue. The petitioner also filed an objection to the said application. The learned Arbitrator heard the matter on 26th of August, 1989, and the matter was adjourned to 30th of September, 1989. On 30th of September, 1989, opp. party No. 1 filed an application before the arbitrator requiring the arbitrator to make a reference u/s 13 of the Arbitration Act for the opinion of the Court on the question of law involved as to whether in the facts and circumstances of the case, the agreement between the parties has come to an end and, therefore, the arbitration clause parishes with the conclusion of the agreement and consequently, the reference to the arbitrator is not maintainable. The learned Arbitrator accordingly further heard on the question of maintainability as well as on the question of making a reference to the Court of the question of law raised and passed an order on 11th of October, 1989. holding that the contract as well as the arbitration clause in the Contract has not perished and the arbitration clause is very much alive to settle the dispute between the parties. He accordingly directed opp. party No. 1 to file his written statement on merits within three weeks from the date of receipt of the notice. The said opp. party No. 1 thereupon filed an application in the Court of the Subordinate Judge, Bhubaneswar, u/s 33 of the Arbitration Act challenging the existence of the arbitration agreement and praying to have the same determined, which was registered as Misc. Case No. 316 of 1989. In the said miscellaneous case, the petitioner appeared and filed his objection and under the orders of the Subordinate Judge, the Arbitrator also submitted the original records of the arbitration proceedings along with the order-sheet maintained by the arbitrator. After hearing the parties at length, the learned Subordinate Judge by the impugned order dated 3rd of December, 1990, came to the conclusion that the contract between the parties had come to an end and consequently, the arbitration clause in the contract does not survive and, therefore, the reference of the so-called dispute to the arbitrator was incompetent and the arbitrator had no jurisdiction to decide the dispute on merits. It is this order of the learned Subordinate Judge which is being assailed in the present revision application by the petitioner. 3. Mr. P. K. Misra, the learned counsel for the petitioner raises the following contentions in assailing the order of the Subordinate Judge: (i) Notwithstanding submission of final bill by the petitioner and appending a no claim certificate to the said final bill, even after payment made by opp. party No, 1 is received by the petitioner, the further claim of the petitioner does subsist and whether such a claim subsists or not itself is a matter which is arbitrable and consequently, the Subordinate Judge committed an error in holding that the contract has come to an end and along with it the arbitration clause perishes. party No, 1 is received by the petitioner, the further claim of the petitioner does subsist and whether such a claim subsists or not itself is a matter which is arbitrable and consequently, the Subordinate Judge committed an error in holding that the contract has come to an end and along with it the arbitration clause perishes. (ii) Accord and satisfaction of the amount paid under the final bill does not put an end to the arbitration clause in the contract and the question whether there has been a settle- ment of all the claims arising in connection with the contract postulates the existence of the contract and, therefore, it cannot be said that the arbitration clause has perished merely because the petitioner has given the no-claim certificate which is the normal requirement along with the submission of the final bill. (iii) The claim of the petitioner is in relation to the escalation bill which was being separately furnished throughout the continuance of the work in question and, therefore, the no- claim certificate cannot have any relation to the aforesaid claim of the petitioner. (iv) In any view of the matter, an application u/s 33 of the Arbitration Act is not entertainable in the facts and circumstances of the present case. 4. Mr. R. K. Rath, appearing for opp. party No. 1, on the other hand, contends that in the absence of any allegation of fraud or coercion in the matter of submission of final bill or in the matter of giving the certificate of no-claim and the amount under the final bill having been received by the petitioner without any protest, the conclusion is irresistible that the contract itself had come to an end and with it the arbitration clause, which is a part and parcel of the contract and, therefore, the learned Subordinate Judge rightly came to the conclusion that the arbitration clause could not have been invoked and the arbitrator was incompetent to entertain the claim. Mr. Rath further urges that in view of the contention raised by opp. Mr. Rath further urges that in view of the contention raised by opp. party No. 1 with regard to the fact that the agreement between the parties has come to an end and consequently the arbitration clause has perished, it is only u/s 33 of the Arbitration Act, the Subordinate Judge has the power to determine the effect of the agreement and, therefore, there is no illegality committed by the Subordinate Judge in entertaining the application and deciding the same. Mr. Rath lastly urges that in view of the submission of no-claim certificate by the petitioner and receipt of the amount covered under the final bill without protest, the contract must be held to have come to an end by mutual agreement between the parties and since the arbitration clause was a part of the contract itself, it could not be invoked with the extinction of the contract and consequently, the impugned order is unassailable. 5. In view of the rival submissions at the Bar, the moot question that arises for consideration is whether in the facts and circumstances of the present case, the conclusion of the Subordinate Judge that the contract between the parties came to an end and, therefore, the arbitration clause in the contract perishes, is in accordance with law or the same can be interfered with by this Court on a conclusion that the same is erroneous. But before embarking upon an enquiry into the aforesaid point in issue, it would be appropriate to notice some admitted facts. The petitioner and opp. party No. 1 entered into a contract for construction work and on completion of the same, it is the petitioner who him- self prepared and submitted the final bill. The final bill was submitted in the year 1986. Along with the final bill, the petitioner also gave a no- claim certificate. The said final bill was checked and cleared by opp party No. 1 after making some deduction and the amount in question was received by the petitioner without any protest nor any protest had been raised immediately after the receipt of the payment in question. The no-claim certificate clearly indicated that the petitioner has no claim outstanding against the NALCO (opp. party No. 1). The no-claim certificate clearly indicated that the petitioner has no claim outstanding against the NALCO (opp. party No. 1). The petitioner either in his objection filed before the arbitrator or in his objection filed before the Subordinate Judge nowhere pleaded of any coercion or fraud or threat by opp. party No. 1 under which he was forced to give the no-claim certificate or he could not raise any protest at the time of receiving the final payments made under the final bill, it is to be noticed that for the first time in this Civil Revision, a document was annexed as Annexure-4, which is dated 2nd of July, 1986, which speaks of a separate final escalation bill, but that document was neither produced before the arbitrator nor before the Subordinate Judge and, therefore, the same cannot be considered in adjudicating the point in issue. 6. Mr. Misra, the learned counsel for the petitioner, relying upon the observations of Justice Mukharji (as he then was) in the case of Union of India (UOI) and Another Vs. L.K. Ahuja and Co. contended with force that the learned Trial Judge committed gross error of law in holding that the contract has come to an end and thereby the arbitration clause has perished, since in the aforesaid case it has been unequivocally held that notwithstanding acceptance of payment and giving a no-claim declaration by the contractor, when an application is made for arbitration whether claim subsists or not itself is arbitrable. The said case arose out of an application filed u/s 20 of the Arbitration Act and the application was dismissed by the learned Trial Judge on the ground that it is barred by limitation. On an appeal being carried, the High Court allowed the appeal and against the decision of the High Court, the matter was carried to the Supreme Court. The question which arose before the apex Court for consideration was whether the application filed u/s 20 was within time or not and the Supreme Court ultimately held that the application was within limitation. Their Lordships held that it will be entirely wrong to mix up the question whether there was any valid claim for reference u/s 20 of the Act and secondly, whether the claim to be adjudicated by the arbitrator was barred by lapse of time. Their Lordships held that it will be entirely wrong to mix up the question whether there was any valid claim for reference u/s 20 of the Act and secondly, whether the claim to be adjudicated by the arbitrator was barred by lapse of time. The second was a matter which the arbitrator would decide and so far as the first question is concerned, if on admitted facts the claim is found at the time of making of an order u/s 20 of the Arbitration Act to be barred by limitation, then the Court may reject the application. In that connection, the learned Judge had observed : "...It is true that on completion of the work, right to get payment would normally arise and it is also true that on settlement of the final bill, the right to get further payment gets weakened but the claim subsists and whether it does subsist, is a matter which is arbitrable ..." But the aforesaid observation was not in answer to any pointed question raised before the Court as to whether the contract has come to an end and along with that whether the arbitration clause has perished. There- fore, the aforesaid observation on which Mr. Misra, the learned counsel for the petitioner, strongly relies was not in connection with the point in issue having been raised and answered, but on the other hand, so me casual observation while deciding the question of maintainability of an application u/s 20 of the Arbitration Act. But the question has directly come up for consideration before the Division Bench of the Bombay High Court in the case of Union of India Vs. M/s. Ajit Mehta and Associates, Pune and Others and Sawant, J. (as he then was) answered the question that in spite of a full and final settlement of the claim, the arbitration clause in the contract may subsist where the party invoking it alleges that, in fact there was no accord and satisfaction for some reasons, such as the final bill was submitted or receipt was given under coercion, mistake or misrepresentation, without prejudice, under protest et cetera and then that itself becomes a dispute arbitrable under the clause. But when there is no such allegation made When invoking the arbitration clause and the clause is invoked simplicitor, it will have to be held that the contract itself had come to an end and with it the arbitration clause which was a part and parcel of it. The learned Judges of the Bombay High Court considered the observation of Mukharji. J. (as he then was) of the Supreme Court in Lt. Colonel K.D. Gupta Vs. Union of India (UOI) and Others, and held that it is not clear from the decision as to whether in that case the contractor had alleged that there was no accord and satisfaction in spite of the full settlement because the settlement was vitiated on one or the other ground and consequently, the observation will not apply. The aforesaid decision and the enunciation of law after discussion of the several decisions of the different High Courts as well as of the Supreme Court in paragraphs 15, 16 and 17 of the judgment fully apply to the facts and circumstances of the present case, inasmuch as not only the petitioner prepared and submitted the final bill and also appended a no-claim certificate to the same, but also received the amount under the final bill and at no stage thereafter the petitioner had alleged that either the final bill was submitted or no claim certificate was given or the payment was received under coercion or protest or without prejudice. Even in the objection filed before the Subordinate Judge to the application filed by opposite party No. 1 under Sec 33 of the Arbitration Act, no such averment had been made and consequently, I am of the considered opinion that the contract had come to an end and along with it the arbitration clause and, therefore, the further claim on the alleged escalation cannot be held to be arbitrable. It is the agreement between the parties with an arbitration clause therein which makes a claim arbitrable and a reference could be made to the arbitrator. It is the agreement between the parties with an arbitration clause therein which makes a claim arbitrable and a reference could be made to the arbitrator. But if the agreement itself has come to an end, an arbitration clause of the agreement cannot survive independently and consequently, any further dispute or claim cannot become arbitrable and any reference to an arbitrator by invoking such arbitration clause which does not subsist is incompetent and, therefore, the learned Subordinate Judge rightly held the reference made in the present case to be incompetent. 7. The next question that arises for consideration is whether an application u/s 33 of the Arbitration Act was at ail entertainable. Section 33 confers a right to a party to an arbitration aggrement to challenge the existence or validity of an arbitration agreement and when such an application is made in any Court, the Court has to decide the same. The aforesaid provision has been enacted to provide a speedy remedy to a party objecting to a reference. If no arbitration agreement form one of the clauses of the contract and that contract does not exist, a party can approach the Court for determination of the same. In fact, where the question involved is whether the arbitration agreement subsists or not. Section 33 of the Arbitration Act is the proper provision under which a party may proceed. Their Lordships of the Supreme Court in the case of Jawahar Lal Burman Vs. Union of India (UOI) held that Section 33 of the Arbitration Act is not exhaustive and that since Section 32 bara a suit for decision on the existence, effect as well as validity of an arbitration agreement, the Courts will impliedly have jurisdiction to entertain an application for a decision even as to the existence of an arbitration agreement. Therefore, if there is a dispute as to the existence of an arbitration agreement, the party may take recourse to the provisions of Section 33 and approach the Court to have it declared that in fact, the arbitration agreement no longer subsists as the contract between the parties has come to an end. At whatever stage the matter comes up before the Court, the Court will have to decide the question relating to the existence of the arbitration agreement. At whatever stage the matter comes up before the Court, the Court will have to decide the question relating to the existence of the arbitration agreement. In this view of the matter, in the facts and circumstances of the present case, I have no hesitation to come to the conclusion that the Court had the jurisdiction to entertain an application u/s 33 and to decide the question as to whether the arbitration agreement still subsists or has perished along with the agreement itself which has come to an end by accord and satisfaction. 8. In the premises, as aforesaid, and for the conclusion already reached, the impugned order of the Subordinate Judge cannot be interfered with, The revision application accordingly fails and is dismissed, but in the circumstances, there will be no order as to costs. Final Result : Dismissed