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Thursday, February 8, 2018

corporate law - sec.11 Arbitration and conciliation Act - for appointment of an arbitrator for resolution of the dispute between the appellant-Company and respondent No. 1-Company. - no arbitrable dispute existed so as to exercise power under Section 11 of the Act. as there was full and final settlement of the claim = When the contractee accepted the final payment in full and final satisfaction of all its claims, there is no point in raising the claim for losses incurred during the execution of the Contract at a belated stage which creates an iota of doubt as to why such claim was not settled at the time of submitting Final Bills that too in the absence of exercising duress or coercion on the Contractee by the appellant-Contractor. In our considered view, the plea raised by the contractee-Company is bereft of any details and particulars, and cannot be anything but a bald assertion. In the circumstances, there was full and final settlement of the claim and there was really accord and satisfaction and 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.

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 REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1659 OF 2018
(Arising out of Special Leave Petition (C) NO. 12939 OF 2015)
M/s ONGC Mangalore Petrochemicals Ltd. .... Appellant(s)
Versus
M/s ANS Constructions Ltd. & Anr. .... Respondent(s)
J U D G M E N T
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. 
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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 Rs. 163,25,68,576/- which was
subsequently revised to Rs. 195,68,24,399.02/- vide letter
dated 20.09.2010 and the completion period was also
extended upto 30.11.2010.
(b) On 21.09.2012, the Contractee Company submitted a No
Dues/No Claim Certificate certifying the payment of all the
bills and in total settlement of all the claims whatsoever
against the Contract. Thereafter, on 10.10.2012, the appellant
herein-the Contractor Company made a payment of the final
bill of Rs. 20.34 crores to the Contractee Company.
(c) Subsequently, on 24.10.2012, the Contractee Company
withdrew letter dated 21.09.2012 for “No Dues/No Claim
Certificate” stating that it was a pre-requisite condition for
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release of their long due legitimate payment against the works
executed under the Contract and the same was furnished by
the Contractee Company under duress and coercion of the
appellant-Contractor.
(d) The Contractee-Company, vide letter dated 12.01.2013 to
the appellant-Contractor, submitted a claim of Rs.
96,88,48,642.00 for the losses incurred during execution of
the contract at Mangalore. On 19.06.2013, the
appellant-Contractor issued a Completion Certificate stating
that the works awarded under the Contract have been
executed and completed in all respects and no claim certificate
has also been submitted by the Contractee-Company. After
several communication in writing, the appellant-Contractor,
vide letter dated 25.07.2013, denied the claim of the
contractee-Company.
(e) Vide letter dated 14.09.2013, the contractee-Company
sent a notice to the appellant-Contractor for resolving the
dispute between the parties through Arbitration as envisaged
under Article 9.0.2.0 to the Contract and appointed Mr. K.
Mohandas, Former General Manager (Law)- SBI as its
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Arbitrator. The appellant-Contractor, vide letter dated
18.10.2013 denied the request of the contractee-Company as
not tenable in law.
(f) Being aggrieved by the decision of the
appellant-Contractor in not referring the dispute to
Arbitration, the contractee-Company preferred a C.M.P. No. 35
of 2014 before the High Court of Karnataka at Bangalore.
(g) Learned single Judge of the High Court, vide judgment
and order dated 12.01.2015, allowed the petition filed by the
contractee-Company.
(h) Being aggrieved by the order dated 12.01.2015, the
appellant-Contactor has filed this appeal by way of special
leave before this Court.
4) Heard Mr. P.S. Narasimha, learned senior counsel for the
appellant-Company and Mr. P. Vinay Kumar 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?
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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
alleged claims were never brought up at the time of issuance
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of Final Bill or No Dues Certificate on 21.09.2012 and now at
this stage it is not open for the contractee-Company to raise
the issue of losses incurred during the execution of the
Contract.
8) Learned senior counsel finally contended that when both
the 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,
court will not refer the subsequent claim or dispute to
arbitration. There was complete accord and satisfaction of the
contract between the parties and nothing further was left to be
done by either parties. The High Court was not right in
allowing the petition filed by the contractee-Company and no
case is made out for referring the dispute to Arbitration and
also for the payment of the alleged amount to the
contractee-Company.
9) Per contra, learned counsel for the contractee-Respondent
No. 1 herein submitted that during the execution of Contract,
the contractee Company raised Running Account Bills (RA
Bills) to the Contractor-Company for the expenses incurred
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towards carrying out the construction work but the same were
cleared with inordinate delay and even the final bill to the tune
of Rs. 20.34 crores was released by the appellant- Contractor
only when the contractee Company furnished “No Dues/No
Claim Certificate” dated 21.09.2012. Upon submitting the
above Certificate, the appellant-Contractor issued a
Completion Certificate approving the work carried out by the
contractee under the Contract.
10) Learned counsel for the contractee-Company further
submitted that since the appellant-Contractor was not clearing
the legitimate and genuine dues payable under the RA Bills
and was always at the mercy of the appellant-Contractor for
the release of payment from the very beginning of the
Contract, the last payment of Rs. 20.34 crores and the release
of performance bank guarantee was deliberately withheld by
the appellant-Contractor. The work got completed on
30.06.2011 and it was only after the submission of No-Dues
Certificate on 21.09.2012, the final payment was released.
Due to non-payment of RA Bills on time, the
contractee-Company was under severe financial crunch and
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could not have refused to issue the “No Dues Certificate”
which was issued under duress and has no meaning 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.
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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 respect to work to
be given to local contractors, non-vacation of project displaced
families, permission for forest clearance, permission for
shifting of wooden logs etc. and the huge expenditure as
disclosed in the claim was incurred by the
contractee-Company due to the factors attributable to the
appellant-Contractor.
13) Learned counsel finally contended that the “No Dues
Certificate” was filed by the contractee-Company under duress
owing to their huge payment pending towards the
appellant-Contractor which was rightly withdrawn for the
losses incurred due to the appellant-Contractor. Further,
when there is an Arbitration clause in the agreement, the
contractee Company has the right to invoke the same. The
High Court was right in allowing the petition filed by the
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contractee-Company and no interference is sought for by this
Court in this regard.
Discussion:
14) The appellant Contractor-ONGC Mangalore
Petrochemicals Ltd. invited tender for “Award of Work for Site
Grading, Construction of Roads, Storm Water Drains &
Compound Wall for Aromatic Complex at Mangalore”. The bid
document was issued by M/s Toyo Engineering India Limited
(TEIL)-Respondent No. 2 herein on behalf of the OMPL (the
contractor) being their Project Management Consultant. M/s
ANS Constructions Limited-Respondent No. 1 herein
submitted its bid on 15.11.2007. Respondent No. 1 herein
was awarded the Contract vide Letter of Acceptance (LOA)
dated 17.03.2008. The total Contract Value was estimated at
Rs. 163,25,68,576/- which was later on revised to Rs.
195,68,24,399.02, pursuant thereto, the completion period
was also extended upto 30.11.2010.
15) During the subsistence of the contract, the
contractee-Company raised RA Bills for the expenses incurred
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towards carrying out the construction work. It is evident on
record that the contractee-Company made several requests to
the appellant-Contractor to clear their legitimate and genuine
dues payable under the Bills which was paid to them after
inordinate delay. It is also the claim of the
contractee-Company that the contractee was compelled to file
No Dues Certificate/No Claim Certificate dated 21.09.2012 in
order to get the release of the Final Bill under the Contract.
On 10.10.2012, the contractor-Company made the payment of
the final bill of Rs. 20.34 crores to the contractee-Company.
After the release of the Final Bill, the contractee-Company
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 Rs. 96,88,48,642.00 for the losses incurred during
execution of the contract at Mangalore.
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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 lieu of the nominee arbitrator of the
appellant-Contractor so that the said arbitrator along with the
nominee arbitrator already appointed by the
contractee-Company agree upon the appointment of the
third/presiding arbitrator for constitution of a three member
Arbitral Tribunal as per the agreed terms of the Contract for
adjudicating upon the dispute arising out of execution of the
Contract.
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17) Learned senior counsel for the appellant-Contractor, after
taking us through the material on record, submitted that the
contract has come to an end and the obligations therein have
been discharged and there is no point of raising a belated
claim in the form of losses incurred during the execution of
the Contract that too after submitting the Final Bills as well as
the No Dues Certificate. In support of his claim, learned
senior counsel relied upon a decision of this Court in Union of
India and Others vs. Master Construction Co. (2011) 12
SCC 349 wherein it was held as under:-
“18. In our opinion, there is no rule of the absolute kind. In
a case where the claimant contends that a discharge voucher or
no-claim certificate has been obtained by fraud, coercion,
duress or undue influence and the other side contests the
correctness thereof, the Chief Justice/his designate must look
into this aspect to find out at least, prima facie, whether or not
the dispute is bona fide and genuine. Where the dispute raised
by the claimant with regard to validity of the discharge voucher
or no-claim certificate or settlement agreement, prima facie,
appears to be lacking in credibility, there may not be a
necessity to refer the dispute for arbitration at all.
19. It cannot be overlooked that the cost of arbitration is
quite huge—most of the time, it runs into six and seven figures.
It may not be proper to burden a party, who contends that the
dispute is not arbitrable on account of discharge of contract,
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,
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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.”
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 that the execution of such discharge agreement or
voucher was on account of fraud/coercion/undue influence
practised by the other party and is able to establish the
same, then obviously the discharge of the contract by such
agreement/voucher is rendered void and cannot be acted
upon. Consequently, any dispute raised by such party would
be arbitrable.
* * *
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
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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.”
8. In the decision rendered in Union of India v. Master
Construction Co this Court observed as under:
“18. In our opinion, there is no rule of the absolute kind.
In a case where the claimant contends that a discharge
voucher or no-claim certificate has been obtained by
fraud, coercion, duress or undue influence and the other
side contests the correctness thereof, the Chief
Justice/his designate must look into this aspect to find
out at least, prima facie, whether or not the dispute is
bona fide and genuine. Where the dispute raised by the
claimant with regard to validity of the discharge voucher
or no-claim certificate or settlement agreement, prima
facie, appears to be lacking in credibility, there may not
be a necessity to refer the dispute for arbitration at all.
19. It cannot be overlooked that the cost of arbitration is
quite huge—most of the time, it runs into six and seven
figures. It may not be proper to burden a party, who
contends that the dispute is not arbitrable on account of
discharge of contract, 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.
* * *
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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 Rs
21,00,000 on 12-7-2000. It was then that on that day
itself, the contractor lodged further claims.”
9. It is therefore clear that a bald plea of fraud, coercion,
duress or undue influence is not enough and the party who
sets up a plea, must prima facie establish the same by
placing material before the Chief Justice/his designate.
Viewed thus, the relevant averments in the petition filed by
the respondent need to be considered, which were to the
following effect:
“(g) That the said surveyor, in connivance with the
respondent Company, in order to make the respondent
Company escape its full liability of compensating the
petitioner of such huge loss, acted in a biased manner,
adopted coercion, undue influence and duress methods
of assessing the loss and forced the petitioner to sign
certain documents including the claim form. The
respondent Company also denied the just claim of the
petitioner by their acts of omission and commission and
by exercising coercion and undue influence and made
the petitioner Company sign certain documents,
including a pre-prepared discharge voucher for the said
amount in advance, which the petitioner Company were
forced to do so in the period of extreme financial
difficulty which prevailed during the said period. As
stated aforesaid, the petitioner Company was forced to
sign several documents including a letter accepting the
loss amounting to Rs 6,09,55,406 and settle the claim of
Rs 5,96,08,179 as against the actual loss amount of Rs
28,79,08,116 against the interest of the petitioner
Company. The said letter and the aforesaid pre-prepared
discharge voucher stated that the petitioner had
accepted the claim amount in full and final settlement
and thus, forced the petitioner Company to unilateral
acceptance of the same. The petitioner Company was
forced to sign the said document under duress and
coercion by the respondent Company. The respondent
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Company further threatened the petitioner Company to
accept the said amount in full and final or the
respondent Company will not pay any amount towards
the fire policy. It was under such compelling
circumstances that the petitioner Company was forced
and under duress was made to sign the acceptance
letter.”
10. In our considered view, the plea raised by the
respondent is bereft of any details and particulars, and cannot
be anything but a bald assertion. Given the fact that there was
no protest or demur raised around the time or soon after 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 executed. If the party which has executed the
discharge agreement or discharge voucher, alleges that the
execution of such discharge agreement or voucher was on
account of fraud/coercion/undue influence practised by the
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other party and is able to establish the same, then obviously
the discharge of the contract by such agreement/voucher is
rendered void and cannot be acted upon. Consequently, any
dispute raised by such party would be arbitrable. But in case
the party is not able to establish such a claim or appears to be
lacking in credibility, then it is not open to the courts to refer
the dispute to arbitration at all.
20) In support of the claim of duress and coercion while
issuing the said Certificate, learned counsel for the
contractee-Company has taken us through a decision of this
Court in National Insurance Company Limited vs. Boghara
Polyfab Private Limited (2009) 1 SCC 267 wherein it was
held as under:-
“24. What is however clear is when a respondent contends
that the dispute is not arbitrable on account of discharge of the
contract under a settlement agreement or discharge voucher or
no-claim certificate, and the claimant contends that it was
obtained by fraud, coercion or undue influence, the issue will
have to be decided either by the Chief Justice/his designate in
the proceedings under Section 11 of the Act or by the Arbitral
Tribunal as directed by the order under Section 11 of the Act. A
claim for arbitration cannot be rejected merely or solely on the
ground that a settlement agreement or discharge voucher had
been executed by the claimant, if its validity is disputed by the
claimant.
50. Let us consider what a civil court would have done in a
case where the defendant puts forth the defence of accord and
satisfaction on the basis of a full and final discharge voucher
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issued by the plaintiff, and the plaintiff alleges that it was
obtained by fraud/coercion/undue influence and therefore not
valid. It would consider the evidence as to whether there was
any fraud, coercion or undue influence. If it found that there
was none, it will accept the voucher as being in discharge of the
contract and reject the claim without examining the claim on
merits. On the other hand, if it found that the discharge
voucher had been obtained by fraud/undue influence/coercion,
it will ignore the same, examine whether the plaintiff had made
out the claim on merits and decide 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 when they are not, when discharge of contract by
accord and satisfaction are disputed, to round up the
discussion on this subject are:
(i) A claim is referred to a conciliation or a pre-litigation
Lok Adalat. The parties negotiate and arrive at a settlement.
The terms of settlement are drawn up and signed by both
the parties and attested by the conciliator or the members of
the Lok Adalat. After settlement by way of accord and
satisfaction, there can be no reference to arbitration.
(ii) A claimant makes several claims. The admitted or
undisputed claims are paid. Thereafter negotiations are held
for settlement of the disputed claims resulting in an
agreement in writing settling all the pending claims and
disputes. On such settlement, the amount agreed is paid
and the contractor also issues a discharge voucher/no-claim
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certificate/full and final receipt. After the contract is
discharged by such accord and satisfaction, neither the
contract nor any dispute survives for consideration. There
cannot be any reference of any dispute to arbitration
thereafter.
(iii) A contractor executes the work and claims payment of
say rupees ten lakhs as due in terms of the contract. The
employer admits the claim only for rupees six lakhs and
informs the contractor either in writing or orally that unless
the contractor gives a discharge voucher in the prescribed
format acknowledging receipt of rupees six lakhs in full and
final satisfaction of the contract, payment of the admitted
amount will not be released. The contractor who is
hard-pressed for funds and keen to get the admitted amount
released, signs on the dotted line either in a printed form or
otherwise, stating that the amount is received in full and
final settlement. In such a case, the discharge is under
economic duress on account of coercion employed by the
employer. Obviously, the discharge voucher cannot be
considered to be voluntary or as having resulted in discharge
of the contract by accord and satisfaction. It will not be a bar
to arbitration.
(iv) An insured makes a claim for loss suffered. The claim
is neither admitted nor rejected. But the insured is informed
during discussions that unless the claimant gives a full and
final voucher for a specified amount (far lesser than the
amount claimed by the insured), the entire claim will be
rejected. Being in financial difficulties, the claimant agrees to
the demand 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,
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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 Gujarat (2011) 2
SCC 400 wherein it was held as under:-
“10. Before going into the factual matrix on this aspect, it is
useful to refer the decisions of this Court relied on by Mr Altaf
Ahmed. In NTPC Ltd. v. Reshmi Constructions, Builders &
Contractors1 which relates to termination of a contract, one of
the questions that arose for consideration was:
“(i) Whether after the contract comes to an end by
completion of the contract work and acceptance of the final
bill in full and final satisfaction and after issuing a
‘no-demand certificate’ by the contractor, can any party to
the contract raise any dispute for reference to arbitration?”
While answering the said issue this Court held:
“27. Even when rights and obligations of the parties are
worked out, the contract does not come to an end inter alia
for the purpose of determination of the disputes arising
thereunder, and, thus, the arbitration agreement can be
invoked. Although it may not be strictly in place but we
cannot shut our eyes to the ground reality that in a case
where a contractor has made huge investment, he cannot
afford not to take from the employer the amount under the
bills, for various reasons which may include discharge of his
liability towards the banks, financial institutions and other
persons. In such a situation, the public sector undertakings
would have an upper hand. They would not ordinarily
release the money unless a ‘no-demand certificate’ is signed.
Each case, therefore, is required to be considered on its own
facts.
28. Further, necessitas non habet legem is an age-old
maxim which means necessity knows no law. A person may
sometimes have to succumb to the pressure of the other
party to the bargain who is in a stronger position.”
22
22) In the case at hand, the High Court allowed the appeal
filed by the contractee on the assertion that the No Dues
Certificate was given on account of coercion/undue influence
practiced by the appellant-Contractor. The contractee, while
basing its claim, relied upon the letters issued to the
appellant-Contractor for releasing the payment of RA Bills.
Whether there has been duress and coercion exerted against
the contractee-Company by the appellant-Contractor has to be
examined keeping in mind the background in which the said
letters have been exchanged between the parties. Learned
counsel for the contractee-Company categorically submitted
the relevant dates for 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
23
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 Rs. 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 blasting, issues
with respect to work to be given to local contractors,
non-vacation of project displaced families, permission for
forest clearance, permission for shifting of wooden logs etc.
and the huge expenditure as disclosed in the claim was
incurred by the contractee-Company due to the factors
attributable to the appellant-Contractor. Clause 6.6.0 of the
General Conditions of Contract deals with “Claims by the
Contractor” (contractee in the case at hand). Clause 6.6.1.0.
24
of the Contract states that in case of a claim of extra
compensation or remuneration, the Contractee shall give
notice in writing of its claim within 10 days from the date of
issue of orders or instructions related to any works for which
the Contractee claims such additional payment. The notice
shall give full particulars of the nature of such claim, grounds
on which it is based and the amount claimed. Unless and
until notice is given, the Contractor shall not be liable to pay
extra compensation to the Contractee. Clause 6.6.3.0 states
that any claim of the Contractee in accordance with Clause
6.6.1.0 shall be separately included in the Final Bill prepared
by it in the form of Statement of Claims, giving particulars of
the nature of claims, ground on which it is based and the
amount claimed and shall be supported by a copy of the notice
and the Contractor shall not be liable in respect of any notified
claim not specifically reflected in the Final Bill in accordance
with the provisions of Clause 6.6.3.0 which shall be deemed to
have been waived by the Contractee.
24) From the materials on record, we find that the
contractee-Company had issued the “No Dues/No Claim
25
Certificate” on 21.09.2012, it had received the full amount of
the final bill being Rs. 20.34 crores on 10.10.2012 and after
12 days thereafter, i.e., only on 24.10.2012, the
contractee-Company withdrew letter dated 21.09.2012 issuing
“No Dues/No Claim Certificate”. Apart from it, we also find
that the Final Bill has been mutually signed by both the
parties to the Contract accepting the quantum of work done,
conducting final measurements as per the Contract, arriving
at final value of work, the payments made and the final
payment that was required to be made. The
contractee-Company accepted the final payment in full and
final satisfaction of all its claims. We are of the considered
opinion that in the presents facts and circumstances, 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
26
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 anything
more to suggest that, does not lead to an arbitrable dispute.
The conduct of the contractee clearly shows that “no-claim
certificate” was given by it voluntarily; the contractee accepted
the amount voluntarily and the contract was discharged
voluntarily.
Conclusion:
27
25) Admittedly, No-Dues Certificate was submitted by the
contractee-Company on 21.09.2012 and on their request
Completion Certificate was issued by the appellantContractor.
The contractee, after a gap of one month, that is,
on 24.10.2012, withdrew the No Dues Certificate on the
grounds of coercion and duress and the claim for losses
incurred during execution of the Contract site was made vide
letter dated 12.01.2013, i.e., after a gap of 3 ½ (three and a
half) months whereas the Final Bill was settled on 10.10.2012.
When the contractee accepted the final payment in full and
final satisfaction of all its claims, there is no point in raising
the claim for losses incurred during the execution of the
Contract at a belated stage which creates an iota of doubt as
to why such claim was not settled at the time of submitting
Final Bills that too in the absence of exercising duress or
coercion on the Contractee by the appellant-Contractor. In
our considered view, the plea raised by the
contractee-Company is bereft of any details and particulars,
and cannot be anything but a bald assertion. In the
circumstances, there was full and final settlement of the claim
28
and there was really accord and satisfaction and 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.
26) In view of the foregoing discussion, we set aside the
judgment and order dated 12.01.2015 passed by the High
Court. The appeal is allowed.
...…………….………………………J.
 (R.K. AGRAWAL)
.…....…………………………………J.
 (AMITAVA ROY)
NEW DELHI;
FEBRUARY 7, 2018.

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