Full Judgment Text
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CASE NO.:
Appeal (civil) 5093 of 2006
PETITIONER:
M/s. Ambica Construction
RESPONDENT:
Union of India
DATE OF JUDGMENT: 20/11/2006
BENCH:
Dr. AR. Lakshmanan & Altamas Kabir
JUDGMENT:
J U D G M E N T
(Arising out of SLP ) No.2753/2005)
WITH
CIVIL APPEAL NO. 5097 OF 2006
(Arising out of SLP ) No.19237 of 2005)
M/s.Ambica Construction ... Appellant
Versus
Union of India ... Respondent
ALTAMAS KABIR, J.
Delay condoned in S.L.P.(c) No.19237/2005.
Leave granted in both the Special Leave Petitions which
have been taken up together for disposal, since SLP (c)
No.19237 of 2005 is directed against the main judgment and
Order dated 16th March, 2004, passed by the Calcutta High
Court allowing the appeal of the Union of India and SLP (C)
No.2753 of 2005 arises out of the order dated 23rd September,
2004 passed by the said High Court on a Review Petition in
respect of the main judgment.
Pursuant to a Tender Notice, issued by the respondent
for certain new works, additions, alterations, repair and
maintenance works in the Mancheswar Complex, the
appellant submitted its tender on 2nd September, 1992. The
appellant’s tender was duly accepted by a letter dated 14th
September, 1992 with the stipulation that the work was to be
completed in all respects by 30th June, 1993. It was also
indicated that the work orders were to be issued within 7 days
from the date of receipt of the acceptance letter. A formal
contract was executed between the parties on 4th March, 1993
and the said agreement provided that the General Conditions
of Contract and Standard Specifications of the South Eastern
Railways shall be applicable to the contract. Clause 63 of the
General Conditions of Contract provides for settlement of
disputes by Arbitration.
As would appear from the materials on record, the
appellant herein was unable to complete the work within the
stipulated time frame and accordingly it applied for extension
of time by three months upto 30th September, 1993. It is the
appellant’s case that since it was not informed about the
decision on the said application, the appellant suffered huge
losses on account of idle labour and surplus staff. It appears
that ultimately the appellant’s request was turned down and
certain deductions were made from the Running Bills
submitted by the appellant and in fact payment was not even
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made for the works already done by the appellant. According
to the appellant, the respondent refused to refund even the
appellant’s security deposit unless the appellant submitted a
No-Claim Certificate in terms of Clause 43(2) of the General
Conditions of Contract. Having no other alternative and
having incurred huge losses on account of idle labour and
surplus staff and the establishment expenses, the appellant
submitted a No Claim Certificate in order to at least get refund
of its security deposit.
By a letter dated 17th January, 1996, the appellant called
upon the respondent to make payment of a sum of
Rs.8,73,168/- and Rs.1,31,642/- which, according to the
appellant, was due from the respondent to the appellant under
the contract, failing which the respondent was requested to
appoint an Arbitrator for adjudication of the disputes which
had arisen between the parties. In view of the failure of the
respondent either to pay the dues, as demanded, or to appoint
an Arbitrator, the appellant filed an application under Section
11 of the Arbitration and Conciliation Act, 1996 (hereinafter
called "the 1996 Act") before the Calcutta High Court for
reference of its claims in terms of its letter dated 17th January,
1996 to arbitration and for appointment of an Arbitrator. No
reply was filed by the respondent to the said application but
during the pendency thereof, the respondent refunded to the
appellant, the security deposit of Rs.79,000/-. The same was
received by the appellant under protest.
As no objection was taken by the respondent to the
appellant’s application under Section 11 of the 1996 Act or
with regard to the submission of the No Claim Certificate by
the appellant at the time of receiving the security deposit, the
learned Single Judge of the Calcutta High Court, by his order
dated 20th February, 1998, directed the matter to be placed
before Hon’ble the Chief Justice for naming an Arbitrator for
adjudication of the disputes. On 12th March, 1998, the Chief
Justice appointed one Shri Subrata Bagchi as Sole Arbitrator
to go into the disputes between the parties. The Arbitrator
came to a finding that the No Claim Certificate had been
signed by the appellant under duress and coercion but
disallowed the various claims of the appellant amounting to
Rs.10 lakhs. However, the Arbitrator awarded a sum of
Rs.1,03,000/- as costs to the appellant.
Both parties were aggrieved by the aforesaid Award and
filed separate applications for setting aside the same.
Ultimately, by consent of parties, the learned Single Judge of
the Calcutta High Court by his order dated 31st January, 2000
set aside the Award made by Shri Subrata Bagchi and by
consent appointed Shri G.C Law, Counsel appearing for the
Union of India in the case, as Sole Arbitrator.
On 25th May, 2001, Shri Law published his Award
allowing the claims made by the appellant. The said Award
was challenged by the respondent herein- Union of India
under Section 34 of the 1996 Act, being A.P. No.193 of 2001,
before the learned Single Judge of the Calcutta High Court.
On behalf of the Union of India it was urged that the Arbitrator
had not considered the General Conditions of Contract and in
particular Rules 43(2) and 16(2) thereof. The learned Single
Judge appears to have been of the view that by participating in
the proceedings under Section 11 of the 1996 Act and no
objection having been made to the appointment of an
Arbitrator despite the submission of a No Claim Certificate by
the appellant, the Award did not warrant any interference.
According to the learned Single Judge the matters had been
adjudicated upon by the Arbitrator and since the court was
not sitting in appeal over the Award, it could not enter into the
reasonableness of the reasons given by the Arbitrator. The
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learned Single Judge dismissed the application for setting
aside the Award with the aforesaid observations.
The matter was taken in appeal by the Union of India in
APO No.212 of 2004 under Section 37 of the 1996 Act. Taking
note of the No Claim Certificate, submitted by the appellant, in
the light of Clause 43(2) of the General Conditions of Contract,
the Division Bench came to a finding that apart from a mere
statement, there was no proof of the allegation that the
appellant herein had been compelled to sign such a certificate
under coercion or duress. The Division Bench observed that
no such finding had been arrived at by the Arbitrator. On
such finding, the Division Bench allowed the appeal and also
the application under Section 34 of the 1996 Act.
Consequently, the impugned order of the learned Single Judge
and the Award passed by the learned Arbitrator were both set
aside.
As indicated hereinbefore, SLP (C) No.19237 of 2005 is
directed against the said judgment and order of the Division
Bench of the Calcutta High Court.
The Union of India filed a Review Petition, being GA
No.1265 of 2005, for review of the aforesaid judgment dated
16th March, 2004 but the same was also dismissed on 23rd
September, 2004. SLP (C) No.2753 of 2005 is directed against
the order passed on the Review Petition.
Appearing in support of the two appeals, Mr.Raj Kumar
Mehta, Advocate, urged that the Division Bench of the
Calcutta High Court had been persuaded to allow the appeal
filed by the Union of India on the sole ground that by
furnishing the No Claim Certificate the appellant herein was
no longer entitled to raise any claim having regard to Clause
43(2) of the General Conditions of Contract. Mr.Mehta also
submitted that the Division Bench had wrongly held that there
was no proof in support of the allegations that such No
Objection Certificate had been furnished by the appellant
under coercion and duress. It was urged that there were
sufficient materials on record to indicate that the authorities
of the respondent were bent upon denying the appellant its
just dues, and, on the other hand, they had deducted certain
amounts which were due and payable on account of Running
Bills submitted by the appellant. It was also submitted that a
case had been made out before the learned Arbitrator as also
the learned Single Judge that the appellant had been
compelled by circumstances to submit the No Objection
Certificate without which no payment even of lawful dues are
made by the Railways. It was sought to be urged that it is
common practice for discharge receipts to be given before any
payment is made and the appellant had, under compelling
circumstances, merely followed such practice in order to
recover even its security deposit which was not being paid to
it.
Mr.Mehta also urged that wrong reliance had been placed
by the Division Bench on the decision of this Court in the case
of P.K. Ramaiah and Co. vs. Chairman & MD, National
Thermal Power Corpn., [1994 Supp (3) SCC 126]. According
to Mr.Mehta the Division Bench should have, on the other
hand, taken into consideration the age old maxim Necessitas
non habet legem which means that necessity knows no law.
According to Mr.Mehta it was out of necessity, namely, to
recover its security deposit, that a No Claim Certificate had
been submitted by the appellant and the same ought not to be
held as a bar against the appellant for raising claims in
respect of its lawful duties.
In support of the aforesaid submissions, Mr.Mehta
referred to and relied upon the decision of this Court in
Chairman and MD, NTPC Ltd. vs. Reshmi Constructions,
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Builders & Contractors [2004 (2) SCC 663] wherein the
aforesaid maxim had been explained and applied to a similar
situation where a question had arisen for decision as to
whether an arbitration clause in a contract agreement
continues to survive despite the purported satisfaction thereof.
This Court while adverting to various decisions on the subject,
including the decision in P.K. Ramaiah’s case (supra), came
to the conclusion that notwithstanding the submission of a No
Demand Certificate, the arbitration agreement continued to
subsist because of the several reasons indicated in the
judgment. Having regard to the views expressed in the
aforesaid judgment, Mr.Mehta submitted that the Division
Bench of the Calcutta High Court had erred in relying solely
on Clause 43(2) of the General Conditions of Contract and the
No Claim Certificate submitted by the appellant in arriving at
a conclusion that no further dispute existed for determination
in arbitration and the judgment and orders under appeal were
liable to be set aside.
Mr.Doabia, learned Senior Advocate, appearing for the
Union of India, supported the judgment of the Division Bench
of the Calcutta High Court with particular reference to Clause
43(2) of the General Conditions of Contract. He reiterated the
findings of the Division Bench to the effect that having
submitted a No Claims Certificate, the appellant was
precluded from raising any further claims and the learned
Arbitrator had committed a gross error in allowing such claim
notwithstanding the prohibition contained in the said clause.
Since we are called upon to consider the efficacy of
Clause 43(2) of the General Conditions of Contract with
reference to the subject matter of the present appeals, the
same is set out hereinbelow:
"43(2) Signing of "No claim" Certificate. The
Contractor shall not be entitled to make any claim
whatsoever against the Railways under or by virtue
of or arising out of this contract, nor shall the
Railways entertain or consider any such claim, if
made by the contractor, after he shall have signed a
"No Claim" certificate in favour of the Railways, in
such form as shall be required by the Railways,
after the works are finally measured up. The
contractor shall be debarred from disputing the
correctness of the items covered by "No Claim
Certificate" or demanding a reference to arbitration
in respect thereof."
A glance at the said clause will immediately indicate that
a No Claim Certificate is required to be submitted by a
contractor once the works are finally measured up. In the
instant case the work was yet to be completed and there is
nothing to indicate that the works, as undertaken by the
contractor, had been finally measured and on the basis of the
same a No Objection Certificate had been issued by the
appellant. On the other hand, even the first Arbitrator, who
had been appointed, had come to a finding that No Claim
Certificate had been given under coercion and duress. It is the
Division Bench of the Calcutta High Court which, for the first
time, came to a conclusion that such No Claim Certificate had
not been submitted under coercion and duress.
From the submissions made on behalf of the respective
parties and in particular from the submissions made on
behalf of the appellant, it is apparent that unless a discharge
certificate is given in advance, payment of bills are generally
delayed. Although, Clause 43(2) has been included in the
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General Conditions of Contract, the same is meant to be a
safeguard as against frivolous claims after final measurement.
Having regard to the decision in the case of Reshmi
Constructions’s (supra), it can no longer be said that such a
clause in the contract would be an absolute bar to a
contractor raising claims which are genuine, even after the
submission of such No Claim Certificate.
We are convinced from the materials on record that in
the instant case the appellant also has a genuine claim which
was considered in great detail by the Arbitrator who was none
other than the counsel of the respondent-Railways.
In such circumstances we are inclined to hold that
notwithstanding Clause 43(2) of the General Conditions of
Contract and the submission of a No Claim Certificate by the
appellant, the appellant was entitled to claim a reference
under the contract and the Division Bench of the Calcutta
High Court was wrong in holding otherwise.
The appeals are accordingly allowed. The impugned
judgments in the two appeals are both set aside.
There will, however, be no order as to costs.