Union of India &
Ors. Vs. M/S Onkar Nath Bhalla & Sons  INSC 798 (17 April 2009)
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.2622 OF 2009 (Arising out
of SLP(C) No. 7221 of 2008) Union of India & Ors. ..........Appellants
Versus M/s. Onkar Nath Bhalla & Sons ........Respondent
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.
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
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 forfeited
their right to appoint the Arbitrator. Aggrieved by the said order, appellants
are before us by this special leave petition.
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:
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."
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
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
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
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 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.
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.
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.
the Court was not justified in appointing a Retired High Court Judge as the
sole Arbitrator in the present case.
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.
[ H.L. DATTU ]