Full Judgment Text
$~4
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 13.09.2022
+ FAO(OS) (COMM) 11/2019 & CM APPL. 2246/2019
K R ANAND ..... Petitioner
Through: Mr. Harish Malhotra, Sr. Adv. with
Mr. Rajender Agarwal & Mr. Anoop
Kumar, Advs.
Versus
NAVAYUGA ENGINEERING CO LTD ..... Respondents
Through: Mr. Pranay Agrawala, Adv.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
HON'BLE MR. JUSTICE AMIT MAHAJAN
VIBHU BAKHRU, J.
1. The appellant has filed the present appeal under Section 37(1)(c)
of the Arbitration & Conciliation Act, 1996 (hereafter ‘ the A&C Act’ )
impugning an order dated 27.11.2018 (hereafter ‘ the impugned
order’ ) passed by the learned Single Judge rejecting the appellant’s
petition [being OMP(COMM) No.27/2018 captioned Shri K.R. Anand
v. Navayuga Engineering Co. Ltd .]. The appellant had filed the said
petition under Section 34 of the A&C Act seeking to set aside an arbitral
award dated 16.11.2017 (hereafter ‘ the impugned award’ ).
2. The impugned award was rendered in the context of disputes that
have arisen between the parties in connection with the Sub Contract
Agreement dated 10.12.2004.
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
Signing Date:16.09.2022
FAO(OS) (COMM) 11/2019 Page 1 of 18
Factual Context:
3. In the year 2004-05, the respondent was awarded a contract
bearing no. 10/EE-I/PF P/2004-05 relating to construction of a bridge
across river Yamuna near Geeta Colony, Delhi by the Public Works
Department, Delhi (hereafter the ‘PWD’ ).
4. Thereafter, on 10.12.2004, the respondent sub-contracted a part
of the works, as contained in Section II of the Bill of Quantities, to the
appellant in terms of the Sub Contract Agreement (hereafter ‘ the
Agreement’ ). The contract between the parties was on a back-to-back
basis, as is evident from Clause 13 of the Agreement. The stipulated
date for commencement of the works was 30.01.2005 and the entire
works were to be completed within a period of thirty-six months, that
is, on or before 29.01.2008.
5. The appellant claims that it was to be paid in accordance with the
rates paid by the PWD plus escalation in terms of Clause 9 of the
Agreement.
6. Admittedly, the works were completed by the appellant on
22.12.2008. The appellant claims that the delay in execution of the
works was due to breaches committed by the PWD and thus, it was
entitled to an additional payment on account of the increase in rates of
material, labour and other items etc.
7. Certain disputes had also arisen between the respondent and
PWD in relation to the contract executed between them. Accordingly,
by a communication dated 04.06.2008, the respondent invoked the
agreement to refer those disputes to arbitration. The appellant states
Signature Not Verified
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By:Dushyant Rawal
Signing Date:16.09.2022
FAO(OS) (COMM) 11/2019 Page 2 of 18
that since it was not a party to the contract subsisting between the
respondent and PWD, it could neither join the arbitral proceedings nor
seek any relief in this proceeding. The appellant claims that there was
an understanding between the parties, whereby the respondent had also
agreed to pursue the claims in respect of the works executed by the
appellant.
8. The appellant raised bills on the respondent for the works
executed. Admittedly, the respondent paid the said bills. The appellant
had also issued certificates evidencing the receipt of the amount of the
bills.
9. The arbitral proceedings initiated by the respondent against the
PWD culminated in an arbitral award dated 26.12.2011, in favour of the
respondent. Thereafter, PWD, by way of an application under Section
34 of the A&C Act [being OMP No 420/2012], challenged the said
arbitral award before this Court. By an order dated 31.03.2014, the said
application was allowed by a Single Bench of this Court and the said
award was set aside in respect of certain claims.
10. Thereafter, the respondent filed an appeal against the order dated
31.03.2014 under Section 37 of the A&C Act [being FAO OS No
264/2014]. On 15.03.2016, a Coordinate Bench of this Court allowed
the said appeal and partially modified the judgment passed by the
learned Single Judge, thereby reinstating the award in respect of certain
claims preferred by the respondent against PWD. Thereafter, both the
respondent and PWD challenged the said order by filing their respective
Special Leave Petitions before the Supreme Court.
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Signing Date:16.09.2022
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11. The appellant claims that the arbitral award secured by the
respondent also includes claims in respect of escalation pertaining to
the work executed by the appellant.
12. On 27.04.2016, the appellant states that it issued a notice calling
upon the respondent to pay a sum of ₹10,44,35,551.37/- along with
interest at the rate of 9% per annum, in terms of the arbitral award dated
26.12.2011, however, it did not receive any response regarding the
same.
13. Thereafter, the appellant, by way of a petition under Section 9 of
the A&C Act, sought an interim injunction, inter alia¸ restraining the
respondent from appropriating the amount recoverable from the PWD
on account of the arbitral award dated 26.12.2011. The appellant also
apprehended that the respondent would enter into a settlement with
PWD and give up the claim for escalation in respect of the work
executed by the appellant.
14. By an order dated 21.12.2016, this Court restrained the
respondent from entering into any settlement with the PWD for a period
of four weeks from the date of the said order and, at the request of the
parties, appointed the learned Sole Arbitrator (the Arbitral Tribunal) to
adjudicate the disputes between the parties.
Arbitration:
15. Before the Arbitral Tribunal, the appellant raised certain claims
including a claim for additional amount relating to escalation in the rates
at which the works were executed under the Agreement.
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By:Dushyant Rawal
Signing Date:16.09.2022
FAO(OS) (COMM) 11/2019 Page 4 of 18
16. The respondent raised two preliminary objections to the claims
raised by the appellant. First, that the claims are barred by limitation;
and second, that the Agreement stood discharged by accord and
satisfaction as the appellant had accepted payments in full and final
settlement of its bills.
17. The respondent filed an application under Section 16 of the A&C
Act contending that the appellant did not have cause of action as the
arbitral award against the PWD had not attained finality.
18. By the impugned award, the Arbitral Tribunal accepted the
respondent’s contention and rejected the claims preferred by the
appellant on the ground of limitation as well on the ground that the
appellant had accepted the payments in full and final settlement of the
amount due for the work done. The relevant extract of the impugned
award is set out below: -
“21. The aforesaid facts clearly show as the Claimant has
issued a certificate that it has received lull and final
payment towards settlement of final bill, labour contract,
staging and shuttering and for earth work of excavation in
the year 2010 itself. Having done so, it is not open for the
Claimant in the year 2015- 2016 turn around and claim
that it is entitled to increase labour and material charges.
Even if it is assumed that Claimant was entitled to raise a
dispute regarding payment of enhanced rates or escalation
because it has erroneously issued the certificate (which is
not its case), it ought to have done within 3 years from the
date when the last payment was received or when the
certificate of final settlement was issued. Even this period
would end in 2013. This clearly indicates that the
Claimant was not entitled to any amount due or payable.
Even for the sake of argument if it is assumed that the said
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By:Dushyant Rawal
Signing Date:16.09.2022
FAO(OS) (COMM) 11/2019 Page 5 of 18
certificate was issued by the Claimant to the Respondent
under erroneous impression, still at best, the cause of
action is deemed to have been accrued to the Claimant in
the 3'^ear 2010 and the suit for recovery of the amount
which according to the Claimant was due and payable
ought to have been initiated either in a civil court by way
of Arbitral Tribunal within a period of three years from
the date of such an accrual. This has not been done and
therefore, ex-facie the claim of the Claimant is not
sustainable in the eyes of law and even if it is contended
and evidence taken, arguments heard, it has ultimately
failed because of the aforesaid reason. The contention of
the Ld. Senior Counsel for the Claimant that the
arbitration was invoked by the Respondent with the PWD
before the final payment to the Claimant, therefore the
question of limitation will not apply to it is untenable in
law. The question is not when the Respondent invoked the
arbitration but the question is whether the claim of the
Claimant was within limitation from the date of accrual
of cause of action. Similarly, the contention of the Ld.
Senior Counsel that whatever escalated amount is
received by the Respondent cannot be appropriated by it
alone. It was to be given to the Claimant in respect of the
work executed by it. This is absolutely correct proposition
on ground of morality but not in law. Law of limitation
only bars remedy but does extinguish the right of the
respondent wants to pay any money to the Claimant of its
own freewill as and when it gets, it may do so but the
Claimant cannot force the Respondent to pay the same by
restoring processes to law which includes present
arbitration proceedings.
22. In addition to this, the respondent is also estopped
now to change his stand after having chosen to issue the
certificate to the respondent towards the satisfaction of
full and final settlement of claim. This cannot be
permitted to be done. The Claimant has frequently
referred to the word 'assurance' was given by the
respondent, it would give the increased or enhanced rate
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By:Dushyant Rawal
Signing Date:16.09.2022
FAO(OS) (COMM) 11/2019 Page 6 of 18
proportionally once it succeeds in the arbitration
proceedings with the PWD. Assurance cannot put the law
of limitation in abeyance. What is barred by law of
limitation to be recovered in civil court cannot be received
in an arbitration proceedings. Only the forum changes but
the law remains the same. This is despite the fact I have
not referred to cause of action having accrued to the
Claimant in the year 2008, when the work was completed.
Even if it is given a liberal meaning to assume that cause
of action arose in the year 2010, even then it is barred by
limitation because proceedings for arbitration having
been started in the year 2015 or 2016. The purpose of the
arbitration proceedings is to have expeditious resolution
of disputes and not to subject one of the parties to undue
harrasment.
23. In view of the aforesaid reasons, I feel that this arbitral
tribunal does not have the jurisdiction to entertain a claim
which is barred by time and is hit by section 43 of the
Arbitration and Conciliation Act, 1996. Accordingly, I
feel the arbitration deserves to be terminated. If this is not
done, it would only subject the Respondents to
harassment which can not be permitted to be done
because such a prolonged action can become jumping
board for extracting settlement at a later date. The
application under Section 16 for adjournment of
proceedings sine die is rejected. On the contrary, the
objection of the Respondent that the claim is barred by
limitation is accepted. There cannot be any enlargement
of time for limitation. Accordingly, the arbitration
proceedings for recovery of any amount is barred.
Therefore, the arbitration proceedings are terminated.
Ordered accordingly.”
The Impugned Order:
19. The appellant challenged the impugned award by filing an
application under Section 34 of the A&C Act [being OMP(COMM)
No.27/2018 captioned Shri K.R. Anand v. Navayuga Engineering Co.
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
Signing Date:16.09.2022
FAO(OS) (COMM) 11/2019 Page 7 of 18
Ltd .]. The appellant contended that the decision of the Arbitral Tribunal
to reject the claims preferred by the appellant on the ground of
limitation, was erroneous and thus, the impugned award is liable to be
set aside.
20. The learned Single Judge examined the contentions advanced on
behalf of the appellant and found the same to be unmerited. The learned
Single Judge found that the Statement of Claims filed by the appellant
neither mentioned the final bills raised by it on 15.03.2010 nor the
certificates of full and final payment received by it from the respondent.
The learned Single Judge further found that no correspondence or claim
for amount of escalation had been raised by the appellant between the
period 2010 to 27.04.2016.
21. The learned Single Judge referred to Clauses 9, 13 and 14 of the
Agreement and found that in terms of the said clauses, the appellant was
required to raise the bills for the works done by it and the same were to
be verified and consolidated with the bills raised by the respondent to
the PWD; and admittedly, the appellant had not raised any such bills for
the amount that was claimed by it before the Arbitral Tribunal.
22. The learned Single Judge also held that even if the respondent
had raised certain claims before PWD for the items executed by the
petitioner, however, the same would not entitle the appellant to extend
the period of limitation.
23. Aggrieved by the impugned order, the appellant filed the present
appeal.
Submissions:
Signature Not Verified
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By:Dushyant Rawal
Signing Date:16.09.2022
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24. Mr Harish Malhotra, learned senior counsel appearing for the
appellant, has assailed the impugned order and the impugned award on
the following grounds:
24.1. First, he submitted that the Arbitral Tribunal had erred in
concluding that the claims raised by the appellant were barred by
limitation. He referred to Clause 9 of the Agreement and submitted that
in terms of the said clause, the parties had agreed that escalation would
be shared in proportion of the quantities executed by the appellant and
the total quantity. The appellant’s cause for sharing the escalation
amount would arise only on the respondent receiving the same. Thus,
the period of limitation would commence only after the respondent had
received the escalation payment for the entire work. He also referred to
Clause 13 of the Agreement and submitted that in terms of the said
clause, the appellant was to submit the bills to the respondent and the
respondent was required to submit the same to the employer.
24.2. Second, he submitted that the appellant had specifically reserved
its right in respect of the escalation bills by making a notation on the
original final bills, which had not been produced.
24.3. Third, he submitted that the appellant has not foreclosed its right
to claim escalation by submitting certificates acknowledging receipt of
the amounts pertaining to the bills raised. He also referred to the
decisions of the Supreme Court in Bharat Coking Coal Ltd v. M/s
Annapurna Construction: (2003) 8 SCC 154 and Durga Charan
Rautray v. State of Orissa and Anr.: AIR 2012 SC 442 , in support of
his contention.
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Signing Date:16.09.2022
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24.4. Fourth, he submitted that the Arbitral Tribunal had grossly erred
in disposing of the appellant’s claim in an application filed under
Section 16 of the A&C Act. He stated that the respondent had merely
requested for an adjournment of the proceedings since the matter
relating to the arbitral award secured against the PWD was pending
before the Supreme Court.
24.5. Lastly, he earnestly submitted that an SLP had been preferred by
the PWD against the decision of the Division Bench of this Court
reinstating the arbitral award secured by the respondent in respect of
certain claims. Consequently, the PWD had made certain payments to
the respondent, which included payment in respect of escalation
pertaining to the works executed by the appellant. He stated that the
respondent could not be permitted to unjustly enrich itself at the cost of
the appellant.
Reasons and Conclusion:
25. The controversy to be addressed is in a narrow compass. The
first question to be examined is whether the decision of the Arbitral
Tribunal to accept that the appellant’s claims were barred by limitation
is manifestly erroneous and renders the impugned award patently illegal
on the face of the record.
26. There is no dispute that the works in question were completed on
22.12.2008. The appellant had raised running bills from time to time for
execution of the works and had raised final bills in the year 2010. There
is no dispute that the bills were raised in accordance with the terms of
the Agreement. It is also not in dispute that the appellant had received
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By:Dushyant Rawal
Signing Date:16.09.2022
FAO(OS) (COMM) 11/2019 Page 10 of 18
a final payment against the said bills on 17.03.2010 and had
acknowledged the receipts.
27. The Arbitral Tribunal had set out the three certificates that were
admittedly issued by the appellant acknowledging the receipts of
payment. The three certificates as noted by the Arbitral Tribunal are set
out below:
“K.R. ANAND ENGINEERS & CONTRACTORS
A 1/175, JANAKPURI, NEW DELHI 110058
TO WHOMSOEVER IT MAY CONCERN
We have received an amount of Rs.1,58,14,768/-
(Rupees one crore fifty eight lakhs fourteen thousand
seven hundred sixty eight only) from M/s Navayuga
Engineering Company Limited through cheque
no.549687 dated 17.03.2010 of ICICI Bank Ltd against
our full & final bill of the project , namely Bridge
Across River Yamuna near Geeta Colony, Delhi
Sd/- for K R Anand”
“K R ANAND ENGINEERS & CONTRACTORS
A 1/175, JANAKPURI, NEW DELHI 110058
TO WHOMSOEVER IT MAY CONCERN
We have received an amount of Rs.9,13,954/- (Rupees
nine lakhs thirteen thousands nine hundred fifty four
only) from M/s Navayuga Engineering Company
Limited through cheque no.549682 dated 17.03.2010 of
ICICI Bank Ltd against our full & final bill of the
project , namely Bridge Across River Yamuna near
Geeta Colony (Road portion) Section II, Guide Bund
Approach & Embankment (Labour contract for staging,
shuttering & Reinforcement)
Sd/- for K R Anand”
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
Signing Date:16.09.2022
FAO(OS) (COMM) 11/2019 Page 11 of 18
“K R ANAND ENGINEERS & CONTRACTORS
A 1/175, JANAKPURI, NEW DELHI 110058
TO WHOMSOEVER IT MAY CONCERN
We have received an amount of Rs.7,79,625/- (Rupees
six lakhs seventy nine thousands six hundred twenty
five only) from M/s Navayuga Engineering Company
Limited through cheque no.549683 dated 17.03.2010 of
ICICI Bank Ltd against our full & final bill of the
project , namely Bridge Across River Yamuna near
Geeta Colony, (Road portion) section II Guide Bund,
Approach & Enbankment (work order for earthwork in
excavation for roads)
Sd/- for K R Anand”
28. In view of the above, there can be no dispute that the appellant
had received the payments, which were in full, in respect of the bills
raised by it. According to the appellant, it had not raised bills for
increase in the rates of labour, material etc. (escalation bills). It is the
appellant’s contention that notwithstanding the same, it was entitled to
claim the same as its cause for doing so would arise after the PWD had
accepted/paid the amount of escalation to the respondent.
29. The aforesaid contention is clearly erroneous. The works were
completed in the year 2008 and there is no provision in the Agreement
providing that the escalation bills could be raised subsequently or were
not required to be raised at the material time.
30. Clauses 9 and 13 of the Agreement, as referred on behalf of the
appellant, are set out below:
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Signing Date:16.09.2022
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“9. That Escalation Clause shall be as per main
contract provisions, but shall be shared in
proportion of actual quantities executed by KRA
vis-a-vis total quantity.
xxxx xxxx xxxx
13. That KRA shall raise bills at contract rates, as a
sub-contractor in accordance with contract
provisions, for their scope of work on NEC, who
after due verification and quality check, will
consolidate the same with NEC’s bill and submit
the same to the Employer.”
31. As is apparent, Clause 13 of the Agreement makes it amply clear
that the appellant was required to issue the bills for the works done on
the respondent. The respondent was required to verify the quantities and
include the works covered under the bills raised on PWD. There is no
question of the appellant withholding any bill, whether on account of
escalation or otherwise, pending any clearance from the PWD or the
respondent.
32. Clause 9 of the Agreement clearly stipulates that the Escalation
Clause was required to be as per the contract between the PWD and the
respondent. Clause 9 of the Agreement did not, in any manner, indicate
that the appellant was not required to make a claim for escalation with
the respondent for the quantities executed by it.
33. The contention that the appellant could raise the bills only on the
issue of escalation being resolved between the respondent and PWD and
the period of limitation would commence thereafter, cannot be
accepted. The appellant, having chosen to not raise any bills or pursue
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its claims regarding escalation with the respondent was, clearly, now
precluded from raising such claims after a period of over seven years of
completing the works.
34. This Court finds no infirmity with the decision of the Arbitral
Tribunal rejecting the appellant’s claim as being barred by limitation.
35. It was contended that the appellant had made an endorsement on
the final bills that the same were subject to escalation to be decided by
the court or an arbitration between the respondent and the PWD. No
such document or a copy thereof, was produced by the appellant.
Notwithstanding the same, the Arbitral Tribunal had called for the
original documents, which were produced. The Arbitral Tribunal had
examined the same and found that the same did not contain any
endorsement as claimed by the appellant. The order passed by the
Arbitral Tribunal on 08.09.2017 is reproduced below:
“Original documents produced. The Ld. Counsel
for the claimant has seen the original documents. So
far as the documents which are annexed at pages 9 to
13 of the application u/s 16 are concerned they are the
photocopies of the final bill submitted by the claimant
with the Respondent. Original bills do not bear any
endorsement by the claimant that these are being
submitted subject to any escalation to be decided by
the court or arbitration between the Respondent and
the PWD.
Pages 14 to 16 are the photocopies of the
certificates issued by the claimant to the Respondent.
Contents of these photocopies are also admitted by the
claimant. Originals are seen and returned by the Ld.
Counsel for the Claimant as well as by the Tribunal.
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By:Dushyant Rawal
Signing Date:16.09.2022
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Arguments heard on the application under
section 16. Parties are permitted to file their
submissions within one week after exchanging the
same between themselves.
Order on the application reserved.”
36. It is apparent from the above that no objection was taken on
behalf of appellant to the effect that respondent had not produced the
original bills or the relevant page thereof. However, in the written
submission filed before the Arbitral Tribunal after 08.09.2017, the
appellant contended that the respondent had only produced three sheets
of the final bill but not the main page, which records the endorsement
claimed to have been made by the appellant. It is clear that the Arbitral
Tribunal did not entertain the said contention.
37. The respondent denies that the appellant had made any notation
reserving its right to claim escalation. The appellant did not produce
any material to establish the same before the Arbitral Tribunal. This
Court finds no flaw in the decision of the Arbitral Tribunal to not accede
to the same.
38. In any view of the matter, making of any such notation would not
extend the period of limitation. The appellant had not made any claim
regarding the amount of escalation. The fact that the appellant had not
done so forecloses the remedies in that regard.
39. The Arbitral Tribunal also found that the appellant had accepted
payments in full and final settlement of the final bills and also issued
certificates to the effect that he had received full and final payments
towards settlement of final bills. The Arbitral Tribunal, accordingly,
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held that it was not open for the appellant to now raise additional claims
in respect of the said works, which were completed in the year 2008.
40. In this regard, it is relevant to note that there was no dispute that
the appellant had issued such certificates. In the written submissions
filed by the appellant before the Arbitral Tribunal, it was contended that
“ such certificates are always issued while receiving payments otherwise
the payments are not released to the contractor and it relates to the
items of work mentioned in the final bill ”. The appellant also contended
that since it was not clear as to how much amount would be awarded by
the Arbitrator, the bill was prepared “ on the basis of the Agreement rates
and not taking into considerations the claims ”.
41. There is no document on record, which would even remotely
indicate that the appellant had issued the certificates acknowledging the
payments under any compulsion or for the reason that without
furnishing such certificates, payments would have been withheld by the
respondent. No such protest was made by the appellant after receipts
of the payments were acknowledged under the certificates.
42. In the circumstances, the decision of the Arbitral Tribunal to
accept that the right of the appellant to claim the said amount stood
closed, is a plausible conclusion.
43. The decisions of the Supreme Court in Durga Charan Rautray
v. State of Orissa & Anr. ( supra ) and Bharat Coking Coal Ltd. v.
Annapurna Construction ( supra ) are of little assistance to the
appellant.
44. In Durga Charan Rautray v. State of Orissa & Anr. ( supra ), the
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respondents’ contention that the appellant was not entitled to refer any
claims to arbitration as he had accepted the final bill without raising any
objection, was accepted by the High Court. The Supreme Court referred
to the earlier decision in Bharat Coking Coal Ltd. v. Annapurna
Construction ( supra ) and held that the appellant was not precluded
from referring any disputes to arbitration on that ground. Consequently,
the appeal was allowed. It is material to note that the respondents’
objection that reference to arbitration was not sustainable was based on
interpretation of clause 23 of the agreement that was entered into
between the parties in that case.
45. In Bharat Coking Coal Ltd. v. Annapurna Construction
( supra ), the Supreme Court held as under:
“9. FINDINGS:
Only because the respondent has accepted the final
bill, the same would not mean that it was not entitled
to raise any claim. It is not the case of the appellant
that while accepting the final bill, the respondent had
unequivocally stated that he would not raise any
further claim. In absence of such a declaration, the
respondent cannot be held to be estopped or
precluded from raising any claim.”
46. There is no dispute that a person, who has accepted payments
against the bill, is not precluded from making further claims unless it is
established that he had accepted the payments in full and final
settlement of the amounts due.
47. The question whether the appellant had accepted the payments
in full and final settlement of the amounts due under the Agreement is
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a question relating to interpretation of the certificates issued by the
appellant as well as the inference that may be drawn from the
appellant’s conduct. The Arbitral Tribunal had considered both these
aspects – the language of the certificates as well as the fact that the
appellant had not even made a whisper regarding the claim for
escalation after receipts of the amounts.
48. The Arbitral Tribunal is the final adjudicator of the disputes and
its decision is final unless it falls foul of any of the grounds as set out in
Section 34 of the A&C Act. In the present case, this Court is unable to
accept that the Arbitral Tribunal’s view is unreasonable or one that no
reasonable person could have possibly taken.
49. This Court finds no ground to interfere with the impugned award
or the impugned order.
50. The appeal is unmerited and, accordingly, dismissed. Pending
application, if any, is also dismissed.
VIBHU BAKHRU, J
AMIT MAHAJAN, J
SEPTEMBER 13, 2022
RK/gsr
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Signing Date:16.09.2022
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