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CASE NO.: Appeal (civil)  2754 of 2002

PETITIONER: Chairman & M.D., N.T.P.C. Ltd.                   

RESPONDENT: M/s. Reshmi Constructions, Builders & Contractors        

DATE OF JUDGMENT: 05/01/2004

BENCH: CJI & S.B. Sinha.

JUDGMENT: J U D G M E N T

V.N. KHARE, CJI.

       This appeal which arises out of a judgment and order dated  23-11-2001 passed by the High Court of Kerala at Ernakulam revolves  round the question as to whether an arbitration clause in a  contract agreement survives despite purported satisfaction thereof.   

       The parties to this appeal entered into an agreement for a  project at Kayamkulam.  Upon completion of the work the respondent  herein submitted final bill which was allegedly not accepted by the  appellant, whereafter  they themselves prepared the final bill and  forwarded the same along with a printed format being a "No Demand  Certificate".  The said "No Demand Certificate" was signed by  the respondent herein which is in the following terms:  

NO DEMAND CERTIFICATE

Name of package                 :       Earth filling in Temporary  Township Part \026 II Letter of award                         :       LOA No. KYM/CS/89/022/NIT- 005/LOA-065 dated 19.3.90

Name of the Contractor          :       Reshmi Construction, T.C. 4/1298,  Keston Road, Kowdiar, P.O. Trivandrum \026 3

1.      This is to certify that we have received all payment in  full and final settlement of the supplied and services  rendered and/ or all work performed by us in respect of  the above referred LOA/ Contract and we have no other  claims whatsoever final or otherwise outstanding against  NTPC.  We further confirm that we shall have no claim/  demands in future in respect of this contract of  whatsoever nature, final or otherwise."

2.      We would now request you to please release our security  deposit/ contract performance Guarantee."

       However, on the same day a letter dated 20-12-1990 was  written by the respondent to the appellant stating:

"We have completed the aforementioned work  in the Kayamkulam Super Thermal Power  Project’s temporary township area at  Nangiarkulangara by the end of November 1990  itself.  We had submitted a pre-final bill

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in November itself but the authorities  denied the bill and insisted final bill.   But when the alleged final bill was prepared  the authorities insisted that a "No Demand  Certificate" should be executed by us in  favour of the Corporation.  They served us  with a printed specimen of the document and  insisted that it should be typed in our own  letterhead and submitted to the N.T.P.C.  We  refused to submit such a document.

But the authorities of N.T.P.C. threatened  that unless and until we execute the said  document in favour of the Corporation, the  N.T.P.C. would not effect payment of our  bill.  More than six lakhs of Rupees is  pending for payment vide the alleged final  bill.  We have incurred huge losses in the  execution of the work purely due to the  latches and lapses of the corporation.  More  over lakhs and lakhs of rupees has to be  paid to our Bankers, creditors suppliers,  workers, truck owners etc. etc.  Under such  a situation we have no other way other than  budging to the coercion of the authorities  of N.T.P.C. ltd. to get whatever they give  merely for the necessity of our survival.   We have to comply with the instructions of  authorities of N.T.P.C. Ltd. out of our  helplessness in order to receive payment.   Hence this letter.

The certificates, undertakings, etc. as  aforesaid have been executed without  prejudice to our rights and claims  whatsoever on account of the alleged final  bill.

The money invested in the work comprises  loans from the Federal Bank Ltd., private  financiers, etc. as well the Firm’s own  funds.  Those additional sums raised by  loans have to be paid to the Bank,  financiers, etc. hence under duress,  coerction and under undue influence we are  signing the bill and execute such documents  as aforesaid to receive payment.  Under such  coercive circumstances the alleged final  bill cannot be constructed as final bill.   We are signing the alleged final bill under  coerction, under undue influence and under  protest only without prejudice to our rights  and claims whatsoever.  There is no accord  and satisfaction between the contracting  parties.

You are therefore requested to kindly pass  the final bill incorporating all the  measurements of the items such as sinkage,  in and under water execution of works,  compensation for suspension of works,  reimbursement of cost escalation due to  price hike of petroleum products, cost of  idling, enhanced rates for quantities  executed beyond the contractual period,

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market rate for excess quantities, extra  additional items etc. besides the losses and  damages by way of idling of tools and  plants, workmen, staff, establishment costs,  capital outlay, interest etc. as per  actuals.  We hope and request that your  goodself may do the needful in the matter."                                                          [Emphasis supplied]                                       The respondent thereafter invoked the arbitration clause by  reason of a letter through his advocate dated 21.12.91 wherein the  claims under several heads as enumerated in clause (a) to (p)  thereof.  Therein a request was made to refer all the disputes and  differences to a sole arbitrator for adjudication with a direction  to make and publish the award within the statutory period.          The appellant herein thereafter discussed the matter at the  company level and in its proceedings it was recorded:

"4.0    In case of M/s. Reshmi Constructions,  Trivandrum Kerala (1(c) above) and M/s. C.S.  Prakash, (1(d) above) of Perumbavoor,  Kerala, the total payment for the works done  were effected, the final bills have been  settled without protest and the no-dues  certificate in the standard proforma have  been submitted by the contractors. 5.0     To seek legal opinion in the matter, we  have approached Mr. B.S. Krishnan, a leading  advocate from Cochin.  On detailed study of  the claims of the agencies and considering  legal conditions, the advocate has advised  us to appoint arbitrator/s nominated by CMD  of NTPC, immediately.  Accordingly our  advocate has written suitable replies to the  contractor’s advocate Shri NT John, of  Trivandrum, informing them that they will  hear from NTPC regarding appointment of an  arbitrator in terms of the contract  conditions.

6.0     Submitted to appoint arbitrator/s for  the four contract packages at para 1.0  above, please."

                The appellant thereafter by its letter dated 13th February,  1992 replied thereto stating: "My client acting upon the notice, though  defective, takes it that all your claims are  disputed ones and hence are to be resolved  by Arbitration.  Please note that the  reference to arbitration does not mean that  there is admission that the disputes are  arbitrable.  Many of the claims raised are  beyond the terms of the contract and the  Arbitrator will have not jurisidiction to  deal with them.  This is a matter which has  to be taken up later and not at the stage of  appointment of an Arbitrator.

       As appointing authority, my client  refrains from commenting upon in any manner,  on the merits or otherwise of the disputes

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which your notice has set out.

       It may be noticed that your client has  already taken the final bill and has issued  ’no dues’ certificate.  This is not merely  accord and satisfaction, but bringing the  contract to an end.

       Your client will hear from my client as  regards the appointment of the Arbitrator in  terms of the contract conditions shortly."                                                                                                  [Emphasis supplied]                                                          A purported correction in the said notice was issued by the  advocate of the appellant stating:

"Sub: Correction in the notice is issued by  way of Reply notice is signed on behalf of  M/s. Rashmi Constructions, Trivandrum \026 reg.

Ref: My Regd. Notice No. P3-G1/92/582 dt.  13.2.92.

       Under instructions from my clients, the  Chairman & Managing Director, National  Thermal Power Corporation Ltd. NTPC Bhavan,  New Delhi \026 110 003, I issue the following  notice:

       In the reply notice issued by me under  reference number cited above, it was stated  that the notice issued by you on behalf of  your clients M/s. Rashmi Constructions,  Trivandrum was returned since it was not  signed by you and that the notice is sent  back as the same was signed on your behalf  by your client.  On scrutiny I find that the  notice is returned by you after the same is  signed by you and not by your client on your  behalf.  In paragraph 2 of the reply notice,  I stated that the notice is defective.  It  was so stated because of the mistaken  impression that the notice is signed by your  client and not by you.  I stated that the  mistake is in advert at and the same is  regretted.  I would like to bring to your  notice one more fact which was omitted to be  stated in the reply notice sent earlier.  I  have already stated that your client has  issued ’no dues’ certificate.  The final  bill is accepted by your client without any  protest.  This is further followed up by  your client receiving the security deposit  released on 21.1.92; that is after the  expiry of the stipulated period reckoned  from the date when the contract came to an  end.

       In all other respects the reply notice  earlier sent stands."

       The respondent herein filed an application under Section 20  of the Arbitration Act, 1940 before the Hon’ble Subordinate Judge’s  Court Mavelikkara and in terms of a judgment and order dated

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30.6.1994 the said application was dismissed.  Aggrieved, the  respondent herein preferred an appeal before the High Court of  Kerala which was allowed by reason of the impugned order.           Mr. Bhatt, the learned counsel appearing on behalf of the  appellant urged that as the contract itself came to an end upon  execution of the "No Demand Certificate" and together with the  same the arbitration clause also perished.  In support of the said  contention, reliance has been placed on M/s. P.K. Ramaiah and  Company Vs. Chairman & Managing Director, National Thermal Power  Corpn. [1994 Supp (3) SCC 126] and Nathani Steels Ltd. Vs.  Associated Constructions [1995 Supp (3) SCC 324].                                          Mr. Bhatt further urged that as in its application under  Section 20 of the Arbitration Act, the respondent did not raise a  plea that they had been coerced to submit the "No Demand  Certificate", the High Court committed a manifest error in passing  the impugned judgment.   

       The learned counsel appearing on behalf of the respondent, on  the other hand, submitted that in the facts and circumstances of  the case neither any new contract has come into being nor there was  any accord and satisfaction of the contract agreement.

       The learned counsel appearing on behalf of the respondent  also contended that despite coming to an end of the contract, the  arbitration clause survives and all questions arising out of or in  relation to the execution of the contract  are referable to  arbitration.   Reliance in this connection has been placed on  Damodar Valley Vs. K.K. Kar [(1974) 1 SCC 141], M/s. Bharat Heavy  Electricals Limited Vs. M/s. Amar Nath Bhan Prakash [(1982) 1 SCC  625], Union of India and Another Vs. M/s. L.K. Ahuja and Co.  [(1988) 3 SCC 76] and Jayesh Engineering Works Vs. New India  Assurance Co. Ltd. [(2000) 10 SCC 178].   

       On the arguments of learned counsel for the parties, the  questions that arise for our consideration are:   

(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? (ii)    Whether in view of letter dated 20.12.1990 sent by the  respondent contractor the arbitration clause contained in  the agreement can be invoked ? (iii)    Whether the arbitration clause in the agreement has  perished with the contract?

In this context it is relevant to refer the arbitration clause  contained  in the agreement which runs as under:

"56. Except where otherwise provided for in  the contract all questions and disputes  relating to the meaning of the  specifications, designs, drawing and  instructions herein before mentioned and as  to the quality of workmanship or materials  used on the work or as to any other  question, claim, right, matter or thing  whatsoever in any way arising out of or  relating to the contract, designs drawing,  specifications, estimates, instructions,  orders or these conditions or otherwise  concerning the works; or the execution or

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failure to execute the same whether arising  during the progress of the work or after the  completion or abandonment thereof shall be  referred to the sole arbitration of the  General Manager of National Thermal Power  Corporation Ltd.; and if the General Manager  is unable or unwilling to act: to the sole  arbitration of some other person appointed  by the Chairman and Managing Director;  National Thermal Power Corporation Ltd.  willing to act as such arbitrator.  There  will be no objection if the arbitrator so  appointed is an employee of National Thermal  Power Corporation Ltd. and that he had to  deal with the matters to which the contract  relates and that in the course his duties as  such he had expressed views on all or any of  the matters in dispute or difference.  The  arbitrator to whom the matter is originally  referred being transferred or vacating his  office or being unable to act for any reason  as aforesaid should act as arbitrator and if  for any reason, that is not possible; the  matter is not to be referred to arbitration  at all.

Subject as aforesaid the provision of the  Arbitration Act, 1940 or any statutory  modification or reenactment thereof and the  rules made thereunder and for the time being  in force shall apply to the arbitration  proceeding under this clause.

It is a term of the contract that the party  invoking arbitration shall specify the  disputes or disputes to be referred to  arbitration under this clause together with  the amount or amounts claimed in respect of  each such dispute.

The arbitrator(s) may from time to time with  consent of the parties enlarge the time, for  making and publishing the award.

The work under the Contract shall, if  reasonable possible, continue during the  arbitration proceedings and no payment due  or payable to the Contractor shall be  withheld on account of such proceedings.

The Arbitrator shall be deemed to have  entered on the reference on the date he  issues notice to both the parties fixing the  date of the first hearing.

The Arbitrator shall give a separate award  in respect of each dispute or difference  referred to him.

The venue of arbitration shall be such place  as may be fixed by the Arbitrator in his  sole discretion.

The award of the arbitrator shall be final,  conclusive and binding on the all parties to

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this contract.

The cost of arbitration shall be borne by  the parties to the dispute, as may be  decided by the arbitrator (s).

In the event of disputes or differences  arising between one public sector enterprise  and a Govt. Department or between two public  sector enterprises the above stipulations  shall not apply, the provisions of B.P.E.  Office Memorandum No. BPE/GL-001/76/MAN/2  (110-75-BPE(GM-1) dated 1st January 1976 or  its amendments for arbitration shall be  applicable."

       Clause 52 of the agreement reads as follows:

"52. The final bill shall be submitted by  the contractor within three months of  physical completion of the works.  No  further claims shall be made by the  contractor after submission of the final  bill and these shall be deemed to have been  waived and extinguished.  Payment of those  items of the bill in respect of which there  is no dispute and of items in dispute, for  quantities and at rates as approved by  Engineer-in-Charge, shall be made within the  period specified hereunder, the period being  reckoned from the date of receipt of the  bill by the Engineer-in-Charge:

(a)     Contract amount not exceeding Rs. 5  lakhs \026Four months. (b)     Contract Amount exceeding Rs. 5  lakhs \026 Six months.

After payment of the amount of the final  bills payable as aforesaid has been made,  the Contractor may if he so desires,  reconsider his position in respect of the  disputed portion of the final bill and if he  fails to do so within 90 days, his disputed  claim shall be dealt with as provided in  contract."                                                 [Emphasis supplied]

       The issues are required to be determined having regard to the  facts as  which arise for consideration whether by reason of the  act of the parties the old contract was substituted by a new  contract.  Only in the event a new contract came into being, the  arbitration agreement cannot be invoked.

       In Damodar Valley Corporation vs. K.K. Kar [(1974) 1 SCC  141],this Court held: "It appears to us that the question whether  there has been a full and final settlement  of a claim under the contract is itself a  dispute arising ’upon’ or ’in relation to’  or ’in connection with’ the contract.  These  words are wide enough to cover the dispute

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sought to be referred."

       Normally, an accord and satisfaction by itself would not  affect the arbitration clause but if the dispute is that the  contract itself does not subsist, the question of invoking the  arbitration clause may not arise.  But in the event it be held that  the contract survives, recourse to the arbitration clause may be  taken. [See Union of India Vs. Kishorilal Gupta (AIR 1959 SC 1362)  and Majhati Jute Mills Vs. Khvalirsa (AIR 1968 SC 522).

       In Bharat Heavy Electricals Limited (supra) this Court  observed that whether there was discharge of the contract by accord  and satisfaction or not is a dispute arising out of a contract and  is liable to be referred to arbitration.

       Yet again in L.K. Ahuja (supra) Sabyasachi Mukharji, J., as  the learned Chief Justice then was, laid down the ingredients of  Section 20 of the Arbitration Act stating: 6. It appears that these questions were  discussed in the decision of the Calcutta  High Court in Jiwnani Engineering Works Pvt.  Ltd. v. Union of India [AIR 1978 Cal 228]  where one of us (Sabyasachi Mukharji, J.)  was a party and which held after discussing  all these authorities that the question  whether the claim sought to be raised was  barred by limitation or not, was not  relevant for an order under Section 20 of  the Act. Therefore, there are to aspects.  One is whether the claim made in the  arbitration is barred by limitation under  the relevant provisions of the Limitation  Act and secondly, whether the claim made for  application under Section 20 is barred. In  order to be a valid claim for reference  under Section 20 of the Arbitration Act,  1940, it is necessary that there should be  an arbitration agreement and secondly  differences must arise to which the  agreement in question applied and, thirdly,  that must be within time as stipulated in  Section 20 of the Act.          It was held that having regard to the fact that the existence  of an arbitration agreement was not denied and there had been an  assertion of claim and denial thereof, the matter would be  arbitrable.  It was observed: In order to be entitled to ask for a  reference under Section 20 of the Act, there  must be an entitlement to money and a  difference or dispute in respect of the  same. It is true that on completion of the  work, right to get payment would normally  arise and it is also true that on settlement  of the final bill, the right to get further  payment get weakened but the claim subsists  and whether it does subsist, is a matter  which is arbitrable.

                                               [Emphasis supplied]

       This aspect of the matter has also been considered in Jayesh  Engineerng Works (supra) wherein following L.K. Ahuja (supra) it  was held: "Whether any amount is due to be paid and  how far the claim made by the appellant is

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tenable are matters to be considered by the  arbitrator.  In fact, whether the contract  has been fully worked out and whether the  payments have been made in full and final  settlement are questions to be considered by  the arbitrator when there is a dispute  regarding the same."

       In M/s. P.K. Ramaiah and Company (supra) the amount was  received unconditionally.  The full and final satisfaction was  acknowledged by a separate receipt in writing.  In that situation  the following finding was recorded :

"Thus there is accord and satisfaction by  final settlement of the claims.  The  subsequent allegation of coercion is an  afterthought and a devise to get over the  settlement of the dispute, acceptance of the  payment and receipt voluntarily given."

       We, however, may observe that the quotation from Russell on  Arbitration may not be apt inasmuch as at the stage of reference  what would be a good defence is not a matter to be taken into  consideration.

       Yet again in Nathani Steels Ltd. (supra) the disputes and  differences were amicably settled by and between the parties and in  that view of the matter it was held that unless and until the  statement is set aside, the arbitration clause cannot be invoked.   Such is not the position here.

       The appellant herein did not raise a question that there has  been a novation of contract.  The conduct of the parties as  evidenced in their letters, as noticed hereinbefore, clearly go to  show that not only the final bill submitted by the respondent was  rejected but another final bill was prepared with a printed format  that a "No Demand Certificate" has been executed as other final  bill would not be paid.  The respondent herein, as noticed  hereinbefore, categorically stated in its letter dated 20.12.1990  that as to under what circumstances they were compelled to sign the  said printed letter.  It  appeares from the appendix appended to  the judgment of the learned Trial Judge that the said letter was  filed even before the trial court.  It is, therefore, not a case  whether the respondent’s assertion of "under influence or coercion"  can be said to have been taken by way of an afterthought.  

       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 the cases 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.

       Further, necessitas non habet legem is an old age maxim which  means necessity knows no law.  A person may sometimes have to  succumb to the pressure of other party to the bargain who is on a  stronger position.

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       We may, however, hasten to add that such a case has to be  made out and proved before the Arbitrator for obtaining an award.

       At this stage, the Court, however, will only be concerned  with the question whether triable issues have been raised which are  required to be determined by the Arbitrators.

       Circumstances leading to passing an order by the courts of  law directing the parties to get their disputes determined by  domestic tribunal selected by them having regard to the  correspondences exchanged between the solicitors came up for  consideration in Goodman Vs. Winchester and Alton Rly [(1984) 3 All  ER 594] wherein it was held:

"As I have already recounted, the  plaintiff’s solicitor may have had in mind  that if there were an arbitration clause  various matters could be sorted out cheaply  and quickly under it.  There is no evidence,  in my judgment, that when he drafted the  terms of the arbitration clause he had in  mind that it would not apply to a  repudiation of the contract by the  defendants.  He is a solicitor; he is  clearly an experienced solicitor; and he  should have appreciated (and I feel certain  he did) that the arbitration clause which he  drafted, and which was accepted by the  defendants, would cover every aspect of the  contract, including repudiation.  But, apart  altogether from what the plaintiff’s  solicitor had in mind, there is no evidence  at all as to what the defendant company had  in mind when it agreed to accept the  arbitration clause, and it was wrong, in my  judgment, for the Judge to say that neither  party had in mind that it would apply to the  summary dismissal of the plaintiff.  It  follows, therefore, that at the very  beginning of his judgment the judge  misdirected himself as to the construction  of the arbitration clause and what it was  mended to deal with."

       Even correspondences marked as without prejudice may have to  be interpreted differently in different situations.

       What would be the effect of without prejudice offer has been  considered in Cutts Vs. Head and Another [(1984) 2 WLR 349] wherein  Oliver L.J. speaking for the Court of Appeals held:

"In the end, I think that the question of  what meaning is given to the words "without  prejudice" is a matter of interpretation  which is capable of variation according to  usage in the profession.  It seems to be  that, no issue of public policy being  involved, it would be wrong to say that the  words were given a meaning in 1889 which  isimmutable ever after, bearing in mind that  the precise question with which we are  concerned in this case did not arise in  Walker v. Wilsher, 23 Q.B.D. 335, and the

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court did not deal with it.  I think that  the wide body of practice which undoubtedly  exists must be treated as indicating that  the meaning to be given to the words is  altered if the offer contains the  reservation relating to the use of the offer  in relation to costs."

       Yet again in Rush & Tompkins Ltd. Vs. Greater London Council  and Another [(1988) 1 All ER 549]:

"The rule which gives the protection of  privilege to ’without prejudice’  correspondence ’depends partly on public  policy, namely the need to facilitate  compromise, and partly on ’implied  agreement’ as Parker LJ stated in South  Shropshire DC v Amos [1987] 1 All ER 340 at  343, [1986] 1 WLR 1271 at 1277.  The nature  of the implied agreement must depend on the  meaning which is conventionally attached to  the phrase ’without prejudice’.  The classic  definition of the phrase is contained in the  judgment of Lindley LJ in Walker v. Wilsher  (1889) 23 QBD 335 at 337:

’What is the meaning of the words "without  prejudice"? I think they mean without  prejudice to the position of the writer of  the letter if the terms he proposes are not  accepted.  If the terms proposed in the  letter are accepted a complete contract is  established, and the letter, although  written without prejudice, operates to alter  the old state of things and to establish a  new one.’

Although this definition was not necessary  for the facts of that particular case and  was therefore strictly obiter, it was  expressly approved by this court in Tomlin v  Standard Telephones and Cables Ltd. [1969] 3  All ER 201 at 204, 205, [1969] 1 WLR 1378 at  1383, 1385 per Danckwerts LJ and Ormrod J.  (Although he dissented in the result, on  this point Ormrod J agreed with the  majority.)  The definition was further cited  with approval by both Oliver and Fox LJJ in  this court in Cutts v. Head [1984] 1 All ER  597 at 603, 610, [1984] Ch. 290 at 303, 313.   In our judgment, it may be taken as an  accurate statement of the meaning of  ’without prejudice’, if that phrase be used  without more.  It is open to the parties to  the correspondence to give the phrase a  somewhat different meaning, e.g. where they  reserve the right to bring an offer made  ’without prejudice’ to the attention of the  court on the question of costs if the offer  be not accepted (See Cutts v. Head) but  subject to any such modification as may be  agreed between the parties, that is the  meaning of the phrase.  In particular,  subject to any such modification, the  parties must be taken to have intended and

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agreed that the privilege will cease if and  when the negotiations ’without prejudice’  come to fruition in a concluded agreement."

       Meaning the words "without prejudice" come up for  consideration before this Court in Superintendent (Tech. I) Central  Excise, I.D.D. Jabalpur and Others Vs. Pratap Rai [(1978) 3 SCC  113] wherein it has been held:

"The Appellate Collector has clearly used  the words "without prejudice" which also  indicate that the order of the Collector was  not final and irrevocable.  The term  "without prejduce" has been defined in  Black’s Law Dictionary as follows:

Where an offer or admission is made ’without  prejduce’, or a motion is defined or a bill  in equity dismissed ’without prejudice’, it  is meant as a declaration that no rights or  privileges of the party concerned are to be  considered as thereby waived or lost, except  in so far as may be expressly conceded or  decided.  See, also Dismissal Without  Prejudice.

Similarly, in Wharton’s Law Lexicon the  author while interpreting the term ’without  prejudice’ observed as follows:

The words import an understanding that if  the negotiation fails, nothing that has  passed shall be taken advantage of  thereafter; so, if a defendant offers,  ’without prejudice’, to pay half the claim,  the plaintiff must not only rely on the  offer as an admission of his having a right  to some payment.

The rule is that nothing written or said  ’without prejudice’ can be considered at the  trial without the consent of both parties \026  not even by a Judge in determining whether  or not there is good cause for depriving a  successful litigant of costs \005.  The word is  also frequently used without the foregoing  implications in statutes and inter partes to  exclude or save transactions, acts and  rights from the consequences of a stated  proposition and so as to mean ’not  affecting’, ’saving’ or ’excepting’.

       In short, therefore, the implication of  the term ’without prejudice’ means (1) that  the cause or the matter has not been decided  on merits, (2) that fresh proceedings  according to law were not barred."

       The appellant has in its letter dated 20th December, 1990  has used the term ’without prejudice’.  It has explained the  situation under which the amount under the ’No Demand Certificate’  had to be signed.  The question may have to be considered from that  angle.  Furthermore, the question as to whether the respondent has  waived its contractual right to receive the amount or is otherwise

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estoppel from pleading otherwise will itself be a fact which has to  be determined by the arbitral tribunal.   

In Halsbury’s Laws of England, 4th Edition, Vol.16  (Reissue) para 957 at page 844 it is stated:

"On the principle that a person may not  approbate and reprobate a special species of  estoppel has arisen.  The principle that a  person may not approbate and reprobate  express two propositions:

(1)     That the person in question, having a choice  between two courses of conduct is to be  treated as having made an election from  which he cannot resile.

(2)     That he will be regarded, in general at any  rate, as having so elected unless he has  taken a benefit under or arising out of  the course of conduct, which he has first  pursued and with which his subsequent  conduct is inconsistent."

       In American Jurisprudence, 2nd Edition, Volume 28, 1966,  Page 677-680 it is stated: "Estoppel by the acceptance of benefits:         Estoppel is frequently based upon the  acceptance and retention, by one having  knowledge or notice of the facts, of  benefits from a transaction, contract,  instrument, regulation which he might have  rejected or contested.  This doctrine is  obviously a branch of the rule against  assuming inconsistent positions.

As a general principle, one who knowingly  accepts the benefits of a contract or  conveyance is estopped to deny the validity  or binding effect on him of such contract or  conveyance.

This rule has to be applied to do equity and  must not be applied in such a manner as to  violate the principles of right and good  conscience."

       The fact situation in the present case, would lead to the  conclusion that the arbitration agreement subsists because:

(i)     Disputes as regard final bill arose prior to its  acceptance thereof in view the fact that the same was  prepared by the respondent but was not agreed upon in its  entirety by the appellant herein; (ii)    The appellant has not pleaded that upon submission of the  final bill by the respondent herein any negotiation or  settlement took place as a result whereof the final bill,  as prepared by the appellant, was accepted by the  respondent unequivocally and without any reservation  therefor; (iii)   The respondent herein immediately after receiving the  payment of the final bill, lodged its protest and  reiterated its claims.  (iv)    Interpretation and/or application of clause 52 of the  agreement would constitute a dispute which would fall for

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consideration of the arbitrator.         (v)     The effect of the correspondences between the parties  would have to be determined by the arbitrator,  particularly as regard the claim of the respondent that  the final bill was accepted by it without prejudice.          (vi)    The appellant never made out a case that any novation of  the contract agreement took place or the the contract  agreement was substituted by a new agreement.  Only in the  event, a case of creation of new agreement is made out the  question of challenging the same by the respondent would  have arisen.   (vii)   The conduct of the appellant would show that on receipt of  the notice of the respondent through its advocate dated  21.12.1991 the same was not rejected outright but  existence of disputes was accepted and the matter was  sought to be referred to the arbitration. (viii)  Only when the clarificatory letter was issued the plea  of settlement of final bill was raised.  (ix)    The finding of the High Court that a prima facie in the  sense that there are triable issues before the Arbitrator  so as to invoke the provisions of Section 20 of the  Arbitration Act, 1940 cannot be said to be perverse or  unreasonable so as to warrant interference in exercise of  extraordinary jurisdiction under Article 136 of the  Constitution of India.   (x)     The jurisdiction of the arbitrator under the 1940 Act  although emanates from the reference, it is trite, that in  a given situation the arbitrator can determine all  questions of law and fact including the construction of  the contract agreement.  (See Pure Helium India Pvt. Ltd.  Vs. Oil and Natural Gas Commission reported in 2003 (8)  SCALE 553).

(xi)    The cases cited by the learned counsel for the appellant  [P.K. Ramaiah and Company (supra) and Nathani Steels  (supra)] would show that the decisions therein were  rendered having regard to the finding of fact that the  contract agreement containing the arbitrator clause was  substituted by another agreement.  Such a question has to  be considered and determined in each individual case  having regard to the fact situation obtaining therein.

       For the reasons aforementioned, we are of the opinion that  there is no infirmity in the impugned judgment.  This appeal is,  therefore, dismissed.  No Costs.