Union of India &
Ors. Vs. Hari Singh [2010] INSC 734 (10 September 2010)
Judgment
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 7970 OF 2010 (Arising
out of SLP(C) No.8306/2008) UNION OF INDIA AND ORS. Appellant(s) :VERSUS:
HARI SINGH
Respondent(s)
Dalveer Bhandari, J.
1.
Delay
condoned.
2.
Leave
granted.
3.
This
appeal is directed against the judgment and order dated 12.01.2007 passed by
the High Court of Punjab and Haryana at Chandigarh in Arbitration Case No.34 of
2004.
4.
Brief
facts which are necessary to dispose of this appeal are recapitulated as under:
The respondent
contractor was awarded a contract by the Northern Railway vide Contract
Agreement No.74- W/1/1/307/WA/CDG dated 01.05.2002, for execution of
"Earthwork in formation in filling Construction of all minor bridges
within the Zone, including retaining wall, 2 side drains and other protection
works and allied works in Zone No.8 from Km.25 to Km.42 in Punjab area in
connection with new BG Rail Link from Chandigarh to Ludhiana". The
Contract Agreement also provided for execution of Supplementary Agreement. The
contract was executed by the respondent and the entire amount due and payable
to the contractor - respondent was paid to him by a Supplementary Agreement
dated 27.04.2004, which reads as under:
"SUPPLEMENTARY
AGREEMENT Article of agreement made this day 27th April in the year two
thousand four between the President of India, acting through the Northern
Railway administration having his office at Dy CE/C-II/CD hereinafter called
the Railway of the one part and nil of the second part.
Whereas the party
hereto of the other part executed on agreement with the party hereto of the
first part being agreement number 740/1/1/207 dated 13.2.2001 for the performance
nil hereinafter called the 'Principal Agreement'.
And whereas it was
agreed by and between the parties hereto that the works would be completed by
the party hereto the second part on 31.10.2003 dated last extended' and whereas
the party hereto of the second part has executed the work to the entire
satisfaction of the party hereto of the first part already made payment of the
party hereto of the second part diverse sums from time to time aggregating to
Rs.19891584.07 including the final bill bearing voucher No.362-C/C-II/CDG dated
27.3.2004 the receipt of which is hereby acknowledged by the party hereto of
the second part in full and final settlement of all his/its claims under the
principal agreement.
1.
2.
3.
4.
5.
And
whereas the party hereto of the second part have received further sum of
26849531 through the final bill bearing voucher NO.362-C/0-II CDG dt. 27.3.2004
(the receipt of which is hereby acknowledge by the party thereto of the second
part) from the party hereto the first part in full and final settlement of all
his/its disputed claims under principal agreement.
Now it is hereby
agreed by and between the parties in the consideration of sums already paid (by
the party hereto of the first part to the party hereto of the second part
against all outstanding dues and claims for, all works done under the aforesaid
principal agreement including/excluding the security deposit the party hereto
of the second part have no further dues of claims against the party hereto the
first part under the said Principal Agreement. It is further agreed by and
between the parties that the party hereto of the second part has accepted the
said sums mentioned above in full and final satisfaction of all its dues and
claims under the said Principal Agreement.
It is further agreed
and understood by and between the parties that in consideration of the payment
already made, under the agreement, the said Principal Agreement shall stand
finally discharged and rescinded all the terms and conditions including the
arbitration clause.
It is further agreed
and understood by and between the parties that in consideration of the payment
already made, under the agreement, the said Principal Agreement shall stand
finally discharged and rescinded on the terms and conditions including the
arbitration clauses.
It is further agreed
and understood by and between the parties that the arbitration clause contained
in the said principal agreement shall cease to have any effect and/or shall be
deemed to be non-existent for all purposes."
6.
The
respondent Contractor had sent a legal notice 4 to the General Manager,
Northern Railways, Baroda House, New Delhi immediately after receiving the
entire amount in pursuance to the settlement of his full and final claim with
the appellant. The legal notice sent by the respondent did not even mention the
fact of entering into the supplementary agreement with the appellant and
receiving the entire amount of Rs.2,07,49,099/-. The respondent deliberately
suppressed the material facts and thereafter filed an Arbitration Case
No.34/2004 before the High Court of Punjab and Haryana. The court without
appreciating these facts, by an impugned judgment, referred the claim of the
respondent-Contractor to the two arbitrators.
7.
The
appellant-Union of India is seriously aggrieved by the impugned judgment of the
High Court and submitted that after receiving the entire amount, the respondent
also signed the supplementary agreement and thereafter the respondent was not
justified in invoking the arbitration.
8.
Learned
Additional Solicitor General appearing on behalf of the Union of India has
strenuously submitted that the matter is no longer res integra and is covered
5 by a series of judgments for almost a century. He referred to the judgment of
Privy Council in Payana Reena Saminathan v. Pana Lana Palaniappa 14 (1913-14)
41 IA 142 (reiterated in Union of India v. Kishorilal Gupta & Bros.
AIR 1959 SC 1362)
which reads as under:- ".......The `receipt' given by the appellants and
accepted by the respondent, and acted on by both parties proves conclusively
that all the parties agreed to a settlement of all their existing disputes by
the arrangement formulated in the `receipt'. It is a clear example of what used
to be well known as common law pleading as `accord and satisfaction by a substituted
agreement'. No matter what were the respective rights of the parties inter se
they are abandoned in consideration of the acceptance by all of a new
agreement. The consequence is that when such an accord and satisfaction takes
place the prior rights of the parties are extinguished. They have in fact been
exchanged for the new rights; and the new agreement becomes a new departure,
and the rights of all the parties are fully represented by it."
9.
He
submitted that this judgment has been approved and followed by this court even
in the year 2009.
10.
Learned
Additional Solicitor General also placed on record the judgment of this court
in State of Maharashtra v. Nav Bharat Builders 1994 Supp (3) SCC 83. In this
case, the court observed that the dispute between the parties were conclusive
and the respondent fully and finally accepted the claim and thereafter received
the amount.
Thus, there was
accord and satisfaction of the claim relating to labour escalation charges and
thereafter the matter could not have been referred to the arbitration.
11.
Learned
Additional Solicitor General also relied on another judgment of this court in
M/s P.K. Ramaiah and Company v. Chairman & Managing Director, National
Thermal Power Corpn. 1994 Supp (3) SCC 126. In this case also the respondent
received the amount in full and final settlement of his claim. Consequently,
there was an accord and satisfaction and thereafter no arbitrable dispute
remained for reference to the arbitration.
12.
This
court in Nathani Steels Ltd. v. Associated Constructions 1995 Supp (3) SCC 324
also had an occasion to examine the similar case. The court observed that after
settling the entire matter and receiving the payment, it was not open to the
respondent to treat the settlement as non est and proceed to invoke the
Arbitration clause.
13.
This
court in a relatively recent case has examined the legal position once again in
the case of National Insurance Company Limited v. Boghara Polyfab Private
Limited (2009) 1 SCC 267. In para 25 of the said judgment, 7 the court
observed as under:- "25.........Where both parties to a contract confirm
in writing that the contract has been fully and finally discharged by
performance of all obligations and there are no outstanding claims or disputes,
courts will not refer any subsequent claim or dispute to arbitration.
Similarly, where one
of the parties to the contract issues a full and final discharge voucher (or no
due certificate as the case may be) confirming that he has received the payment
in full and final satisfaction of all claims, and he has no outstanding claim,
that amounts to discharge of the contract by acceptance of performance and the
party issuing the discharge voucher/certificate cannot thereafter make any
fresh claim or revive any settled claim. Nor can he seek reference to
arbitration in respect of any claim."
14.
The
court further observed in para 29 as under:- "29.......It is thus clear
that the arbitration agreement contained in a contract cannot be invoked to
seek reference of any dispute to arbitration, in the following circumstances,
when the contract is discharged on account of performance, or accord and
satisfaction, or mutual agreement, and the same is reduced to writing (and
signed by both parties or by the party seeking arbitration):
(a) Where the
obligations under a contract are fully performed and discharge of the contract
by performance is acknowledged by a full and final discharge voucher/receipt.
Nothing survives in regard to such discharged contract.
(b) Where the parties
to the contract, by mutual agreement, accept performance of altered, modified
and substituted obligations 8 and confirm in writing the discharge of contract
by performance of the altered, modified or substituted obligations.
(c) Where the parties
to a contract, by mutual agreement, absolve each other from performance of
their respective obligations (either on account of frustration or otherwise)
and consequently cancel the agreement and confirm that there is no outstanding
claims or disputes."
15.
In
this case the court relied on earlier judgments of this court and reiterated
the legal position which has been crystallized by a series of judgments where
both the parties to a contract confirmed in writing that the contract has been
fully and finally discharged by the parties and there was no outstanding claim
or dispute and thereafter the matter could not have been referred to the
arbitration.
16.
In
a celebrated book, 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".
17.
In
our considered view, on the basis of the above settled legal position that when
the parties by a supplementary agreement obtained a full and final discharge 9
after paying the entire amount, which was due and payable to the contractor,
thereafter the contractor would not be justified in invoking arbitration
because there was no arbitral dispute for reference to the arbitration.
18.
In
view of the settled legal position, the impugned judgment is unsustainable and
is accordingly set aside.
The appeal is allowed
accordingly. The parties to bear their own costs.
.....................J
(DALVEER BHANDARI)
.....................J
(DEEPAK VERMA)
New
Delhi;
September
10, 2010.
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