NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.2622 OF 2009 (Arising out of SLP(C) No. 7221 of 2008)

Union of India & Ors.                                                         ……….Appellants

Versus

M/s. Onkar Nath Bhalla & Sons                                           ……..Respondent

JUDGMENT  

H.L.Dattu, J.

  Leave granted.

2) This appeal is directed against the judgment and the order passed by the

Punjab and Haryana High Court  at  Chandigarh in A.A. No. 193/2006

dated  26.4.2007.   By  the  impugned  judgment,  the  High  Court  has

appointed  Justice  G.  C.  Mittal  (retired  Chief  Justice)  as  the  sole

Arbitrator.

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3) The facts in brief are: - the appellant, Engineer-in-Chief, had entered into

a  contract  agreement  with  respondent/contractor.  The  contract  was

completed on 20.9.2002. A final bill was prepared, settling all claims, by

the respondent  and was forwarded to the  appellants.  Respondent  after

receiving payment of final bill signed the same, without any protest or

reservation on 27.3.2001. Again after two years, respondent submitted a

list of 20 claims to the appellants. Appellants in their reply stated that as

per  condition  65  of  IAFW  2249  (General  Conditions  of  Contracts)

forming part  of CA, no further  claim shall  be made by the  contractor

after submission of final bill and the claim now submitted are deemed to

have been waived and extinguished. Respondent then approached E-in-C

for appointment of arbitrator on 17.8.2003. Appellants did not appoint an

Arbitrator as no dispute existed. Respondent went before the Civil Judge

(Senior  Division)  Amritsar  on  19.9.2003.  Civil  Judge  transferred  the

same to  the  Distt.  Judge,  which  was  further  transferred  to  Punjab  &

Haryana High Court.  

4) High Court allowing the application of the respondent, stated, that, as per

the arbitration clause, as no affidavit has been filed with in the stipulated

period of the notice invoking the arbitration clause, the appellants have

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forfeited  their  right  to  appoint  the  Arbitrator.  Aggrieved  by  the  said

order, appellants are before us by this special leave petition.              

5) The Learned counsel for the appellants would contend, that, the final bill

of the work was signed by the applicant on 21.12.2000 and the payment

for  the  same was  made  to  the  applicant  on  27.3.2001.  The  applicant

signed  the  final  bill  and  no  further  claim certificate  was  also  signed

without any reservation and also got the payment of final bill by signing

the  same  without  any  protest.  It  is  further  contended  that  when  the

agreement provided for arbitration by serving officer having degree in

Engineering or equivalent,  then a Retired High Court Judge cannot be

appointed as an Arbitrator. To support his contentions he would rely on

the decision of this court in P. K. Ramaiah & Co. v. N.T.P.C., 1994 (3)

SCC 126, wherein this Court has held that:  

“………Admittedly  the  full  and  final  satisfaction  was acknowledged  by  a  receipt  in  writing  and  the  amount  was received unconditionally. 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. In Russell on Arbitration, 19th Edn., p.  396  it  is  stated  that  “an  accord  and  satisfaction  may  be pleaded  in  an  action  on  award  and  will  constitute  a  good defence.  Accordingly, we hold that the appellant having acknowledged the  settlement  and  also  accepted  measurements  and  having received the amount in full and final settlement of the claim, there is accord and satisfaction.”

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6)  Learned Counsel would also invite our attention to the case of SBP &

Co.  v.  Patel  Engg.  Ltd.,  (2005)  8  SCC  618,  wherein  this  Court  has

observed that:

a) The function performed by the Chief Justice of the High Court or the Chief Justice of India under sub-section (6) of Section 11 of the Act (i.e. the Arbitration and Conciliation Act, 1996) is administrative, pure and simple, and neither judicial nor quasi- judicial.

b) The function to be performed by the Chief Justice under sub-section (6) of Section 11 of the Act may be performed by him or by “any person or institution designated by him”.

c) While performing the function under sub-section (6) of Section 11 of the  Act,  the  Chief  Justice  should  be  prima facie  satisfied  that  the conditions laid down in Section 11 are satisfied.

7) In the present  case, appellants  made the full  and final payment of the

final bill  and to which respondent certified by signing the bill without

any protest  or  reservation.  Respondent  with the intention  of  receiving

further payments, after two years, raised yet another claim and tried to

bring up a dispute. And when the claim was denied by the appellants,

respondent requested to appoint an Arbitrator.

8) The condition 65 of General  conditions of contract  IAFW-2249 states

that no further claim shall be made by the contractor after submission of

final  bill  and  these  shall  be  deemed  to  have  been  waived  and

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extinguished.  Also  condition  70  states  that,  all  dispute  between  the

parties  to  the  contract  shall  after  written notice by either  party to  the

contract,  be referred to the sole arbitration of a serving officer having

degree in Engineering or equivalent.  

9) While appointing an Arbitrator under Section 11 of the Arbitration and

Conciliation Act, 1996, two things must be kept in mind:

i. That there exists a dispute between the parties to the agreement

and that the dispute is alive.

ii. Secondly, an Arbitrator must be appointed as per the terms and

conditions of the agreement and as per the need of the dispute.  

10)It is the specific case of the appellants, respondent could not have raised

yet another claim, as the respondent after signing on the final bill without

any protest or reservation has waived his right as per the conditions of

the  contract.  The Court  without  considering  that  whether  any dispute

exists between the parties, could not have appointed an Arbitrator.  

11) Therefore, the Court was not justified in appointing a Retired High Court

Judge as the sole Arbitrator in the present case.  

12)In view of the above discussion, the appeal is allowed.  The impugned

order passed by the High Court is set aside. No order as to costs.  

                                                                                     …………………………………J.

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                                                                                      [TARUN CHATTERJEE]

                                                                                     …………………………………J.                                                                                        [ H.L. DATTU ] New Delhi, April 17, 2009.

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