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2002 DIGILAW 1548 (MAD)

B. Nadamuni Reddy & Sons v. The Superintending Engineer

2002-12-10

K.GOVINDARAJAN, S.JAGADEESAN

body2002
Judgment :- S.Jagadeesan,J The appellant has filed this appeal against the judgment of the learned Judge dated 19.8.1996 in O.P.164 of 1995. The said O.P was filed by the respondent herein for setting aside the award of the Arbitrator, wherein the relief was granted in favour of the appellant. 2.The short facts necessary for the disposal of the appeal are: The appellant entered into a contract with the respondent Board on 30.3.1989 for the construction of an office-cum-shopping complex at Thirumangalam, Chenai – 40 at a cost of Rs.1,05,84,106/-. As per the terms of the contract, the work was to be completed in 15 months i.e., on or before 19.6.1990. Admittedly the appellant did not complete the work within the stipulated time and the construction was completed only on 31.10.1991. On 24.3.1992 the appellant received a sum of Rs.5,48,916-15 in full settlement of all demands on account of the contract. 3.Subsequent to the receipt of the amount, the petitioner moved this court for the appointment of an Arbitrator to go into the enhanced claim made by the appellant. This court appointed an Arbitrator by order dated 7.1.1994 in Application No.4329 of 1993. 4.Subsequently the respondent herein filed Application No.1955 of 1994 to set aside the order dated 7.1.1994, appointing the Arbitrator on the ground that the appellant received the entire amount due under the contract and consequently there is no arbitral issue pending between the parties. 5.By order dated 6.4.1994 the learned Judge modified the order dated 7.1.1994 to the effect that the respondent herein can raise any other relevant point also before the Arbitrator and if the Arbitrator does not allow, it is open to the respondent to come to this court for clarification. 6.Impliedly the order dated 6.4.1994 gave liberty to the respondent to raise the issue of the full settlement accepted by the appellant herein, before the Arbitrator. However, the Arbitrator, without going into that question in detail, has passed an award, granting a sum of Rs.27,03,412/- in favour of the appellant. 7.The respondent filed the O.P for setting aside the said Award on the ground that the Arbitrator has failed to give a finding with regard to the issue of full settlement accepted by the appellant. However, the Arbitrator, without going into that question in detail, has passed an award, granting a sum of Rs.27,03,412/- in favour of the appellant. 7.The respondent filed the O.P for setting aside the said Award on the ground that the Arbitrator has failed to give a finding with regard to the issue of full settlement accepted by the appellant. 8.The learned Judge found that impliedly the Arbitrator gone into that question and decided the issue and found that the final bill signed by the appellant will not constitute a barrier to raise the enhanced claim. The learned Judge then proceeded to discuss the issue on merits and found that by virtue of the final bill signed by the appellant in full settlement of the claim a quietus had been given to the contract between the parties and as such it is not open to the appellant to raise any arbitral issue, much less with regard to the enhanced compensation and consequently set aside the award of the Arbitrator. Hence the present appeal. 9.It is the contention of the learned counsel for the appellant that the learned Judge modified the order of reference to the Arbitrator by giving liberty to the respondent to raise the issue of the full settlement before the Arbitrator. The respondent also raised the issue. The learned Judge, having found that there is no specific finding by the Arbitrator with regard to this particular issue, ought to have set aside the award and remanded the matter to the Arbitrator. The learned Judge in deciding the issue of the full settlement, had virtually assumed the role of the Arbitrator and as such the finding of the learned Judge is liable to be set aside. It is further contended that the failure on the part of the Arbitrator to decide the question raised before him would make the award invalid on the ground of non application of mind by the Arbitrator in respect of the vital issue. 10.On behalf of the respondent it is contended that though the Arbitrator has failed to consider the issue of full settlement raised by the respondent, the learned Judge had discussed the same in detail and found that by virtue of the full settlement signed by the appellant without any protest and the receipt of the amount mentioned therein had given a quietus to the contract. When the entire claim of the appellant was agreed to have been settled, then it is not open to the appellant to raise any fresh claim and sought for the appointment of the Arbitrator. When the entire claim is settled, the contract itself comes to an end and thereafter there is no subsisting dispute to raise any arbitral issue between the parties. The learned counsel for the respondent further represented that in case if this court finds that there is a failure on the part of the Arbitrator to give a specific finding with regard to the issue of final settlement, then the matter may be referred to the Arbitrator afresh. 11.From the above contentions and the extracted facts, the only point arises for consideration is whether the award of the Arbitrator is invalid in view of his failure to give a specific finding with regard to the full settlement entered into between the parties? 12.There is no dispute that the respondent filed Application 1955 of 1994 to set aside the order, appointing the Arbitrator on the ground that there is no arbitral dispute pending between the parties, in view of the final bill signed by the appellant herein as early as 24.3.1992. However, the learned Judge, while disposing of the application, gave liberty to the respondent herein to raise that issue also before the Arbitrator. Now it is admitted by both the counsel that the Arbitrator has not given a specific finding with regard to this issue. 13.The learned Judge has come to the conclusion that the Arbitrator had impliedly given a finding that the final bill signed by the appellant is not a bar for them to make the enhanced claim, on the basis that the Arbitrator had proceeded to enquire with regard to the enhanced claim made by the appellant. Further the learned Judge held that in view of the final bill signed by the appellant and the receipt of the amount mentioned therein would terminate the contract and as such there is no arbitral issue to be referred to the arbitrator subsequent to the final settlement. 14.We carefully considered the contentions of the respective counsels. The learned Judge took much pains to construe the terms of the final bill signed by the appellant. 14.We carefully considered the contentions of the respective counsels. The learned Judge took much pains to construe the terms of the final bill signed by the appellant. The learned Judge further considered the various contentions on behalf of the appellant in construing the final bill signed by them and ultimately found that by virtue of the signing of the final bill, it is not open to the appellant to make any fresh claim and on that ground the learned Judge held that the award is invalid. 15.It may be pertinent to note that prior to the arriving of the final settlement the appellant addressed to the respondent on 25.11.1991 and 23.3.1992 , detailing the loss suffered by the appellant on the work and also claiming the enhanced compensation amount. Subsequent to that the appellant has signed the bill of full settlement on 24.3.1992. When that be so, the earlier claim made by the appellant for the enhanced amount is of no avail to the appellant. 16.However, subsequent to the receipt of the amount of Rs.5,48,916-15/- in full settlement of the claim arising out of the contract, the appellant sent a representation on 8.5.1992 once again reiterating the enhanced claim. In the said representation the appellant did not make any reference to the receipt of the amount on 24.3.1992 in full settlement of the claim. When this representation being subsequent to the signing of the full settlement bill, it is for the appellant to explain the same and re-enforce the claim. Since that has not been done, the appellant sought the appointment of the Arbitrator in respect of the enhanced claim. 17.The learned Judge proceeded on the basis that there is no arbitral issue to be referred to the Arbitrator in view of the signing of the final bill by the appellant. Now the question is even assuming that the appellant has signed the final bill, whether the earlier order of this court, giving liberty to the respondent to raise that issue before the Arbitrator, thereby permitting the Arbitrator to go into the question of the final settlement has become futile especially when the appellant signed the bill earlier to the order. Now the question is even assuming that the appellant has signed the final bill, whether the earlier order of this court, giving liberty to the respondent to raise that issue before the Arbitrator, thereby permitting the Arbitrator to go into the question of the final settlement has become futile especially when the appellant signed the bill earlier to the order. 18.When this court permitted the respondent to raise the issue as to whether it is open to the appellant to claim enhanced amount in view of the final settlement bill signed already, then it is for the Arbitrator to decide the same. There cannot be any dispute that any dispute arising out of the agreement or the contract between the parties has to be decided by the Arbitrator. In this case, the appellant, before ever signing the final bill, has made a claim for the enhanced amount. In such circumstance, it is open to the parties to agree to refer the issue of the entitlement of the enhanced claim by the appellant to the Arbitration. 19.In fact a Division Bench of the Karnataka High Court had an occasion to deal with the identical issue in the case of KONDA REDDY v. UNION OF INDIA (AIR 1982 Karnataka 50). There also it was contended on behalf of the Union of India that the accord and satisfaction reached by payment of final bill put an end to the contract and the arbitration clause thereunder. Consequently there is no arbitral dispute between the parties for reference. The learned Judges disagree with such contention in the following terms: "It is, however, open for the respondents to urge before the arbitrator that in view of the accord and satisfaction reached in the case and the settlement of all the alleged claims, the appellant has no right to raise the dispute and ask for its adjudication. If such a contention is raised, it would be proper for the arbitrator to decide that question before going into the merits of the disputed claim. A Full Bench decision of this court in M.S. RAMIAH v. STATE OF KARNATAKA M.F.A.No.353/74 – Opinion of the Full Bench rendered on 24.11.1978 to which one of us (K.Jagannatha Shetty,J.) was a party, has taken a similar view. A Full Bench decision of this court in M.S. RAMIAH v. STATE OF KARNATAKA M.F.A.No.353/74 – Opinion of the Full Bench rendered on 24.11.1978 to which one of us (K.Jagannatha Shetty,J.) was a party, has taken a similar view. It was observed: "In conceivable cases, even the existence or non existence of a dispute might itself assume the character of a dispute for adjudication by the arbitrators. The arbitrators are also competent to decide whether that dispute is excluded from arbitration clause. 'An arbitration agreement may explicitly empower the arbitrator to decide whether or not a particular dispute is within the arbitration agreement.' (See Hudson's Building and Engineering Contracts – Ninth Edition – page 658). But even if there is no such express power unless the dispute is expressly excluded from the arbitration clause "an arbitrator is always entitled to enquire whether or not he has jurisdiction." (See Russe) on Arbitration - 18th Edition – page 73." It is, therefore, open to the Arbitrator to decide the question, if raised, whether there has been a settlement of all the claims arising in connection with the contract having regard to the effect of the accord and satisfaction." From the above principle laid down by the Division Bench of the Karnataka High Court, it is clear that the Arbitrator has got jurisdiction or authority to decide the question of the entitlement of the contractor for enhanced claim, inspite of the signing of the final bill by the contractor. 20.Virtually the question to be decided by the Arbitrator is as to whether there was any final settlement between the parties by which the appellant is disentitled to claim any enhanced amount. Admittedly the Arbitrator has not given any specific finding on this issue. When the Arbitrator has got the authority to decide the issue, the Arbitrator is bound to go into the question and give a specific finding to give a quietus. Since that has not been done by the Arbitrator, we are of the view that the Arbitrator has failed to discharge his function and on that ground the award is vitiated and unenforceable. Hence we are unable to agree with the learned Judge that the Arbitrator has impliedly considered the issue and found that inspite of the final settlement the appellant is entitled for the enhanced claim. Hence we are unable to agree with the learned Judge that the Arbitrator has impliedly considered the issue and found that inspite of the final settlement the appellant is entitled for the enhanced claim. 21.Consequently we confirm the order of the learned Judge, setting aside the award of the Arbitrator for the reasons stated above, though we are not agreeable with the reason given by the learned Judge for setting aside the award. Since the award is set aside, the matter has to go back to the Arbitrator for the reference. 22.If the same Arbitrator is available, the appellant is directed to give a letter to the Arbitrator along with the copy of this judgment and the Arbitrator is directed to decide the matter afresh. If the same Arbitrator is not available, the respondent is directed to nominate an Arbitrator as per the terms of the contract within four weeks from today. In either case, the Arbitrator is directed to complete the reference and pass an Award within three months from the date of taking the arbitration on file. Accordingly the appeal is disposed of. No cost.