*IN THE HIGH COURT OF DELHI, AT NEW DELHI
+ A.A.No.55/2009
% Date of decision: 18th September, 2009
M/S FRESH & HONEST CAFÉ LIMITED ....Petitioner
Through: Mr. Uttam Datt & Mr. Brijesh Saini,
Advocates
Versus
M/S HEWITT ASSOCIATES (INDIA)
PRIVATE LIMITED ... Respondent
Through: Rajneesh Sharma, Advocate.
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. Whether reporters of Local papers may
be allowed to see the judgment? No
2. To be referred to the reporter or not? No
3. Whether the judgment should be reported No
in the Digest?
RAJIV SAHAI ENDLAW, J.
1. The petition is preferred under Section 11 of the Arbitration Act, 1996. The petitioner claims to have under an agreement dated 1st January, 2006, containing a clause for arbitration, installed coffee vending machines in the premises of the respondent for the benefit and use of the employees, visitors and representatives of the respondent. It is pleaded in the petition, that the respondent in the end of the year 2006 informed the petitioner that the respondent was not interested in continuing with the contract with the petitioner and refused to make the payment of outstanding bills including the payments alleged to be due to the petitioner; that the respondent had also committed defaults in making payments for the bills raised by the petitioner throughout the agreement period i.e., between 1st January, 2006 to 31st December, 2006; that the petitioner resultantly A.A.No.55/2009 Page 1 of 9 vide its notice dated 28th August, 2008 invoked the arbitration clause in the agreement and proposed the name of the sole arbitrator; that the respondent in reply to the said notice did not agree to the name proposed by the petitioner but suggested some other name as the proposed arbitrator which was not acceptable to the petitioner; consequently, the petition was filed. It is averred that the claims are within the period of limitation; that besides the claims under the said agreement, some other amounts are also due from the respondent to the petitioner under the agreement of prior to 1st January, 2006 and for which a suit has been instituted by the petitioner against the respondent.
2. Upon notice of petition being issued to the respondent, the respondent has filed a reply stating inter alia that the petition had been preferred as an afterthought to set up a non-existent claim which has been settled by the petitioner company at the time of issuance of No Dues Certificate dated 1st February, 2007; that the respondent company in pursuance to the said settlement had already remitted the entire dues in accordance with the terms and conditions of the agreement dated 1st January, 2006 and the petitioner has duly acknowledged the payments made by the respondent and thereafter also issued a No Dues Certificate to the effect that no dues / outstanding are pending against the respondent company and no further claims of whatsoever nature shall be raised against the respondent in future; that the matter having been finally settled between the parties, the petitioner is estopped from making any claims; that once a discharge voucher and full and final receipt of settlement agreement is signed, the same is novation, rescission or alteration of the original contract containing the arbitration agreement and the petitioner thereafter cannot invoke the A.A.No.55/2009 Page 2 of 9 arbitration clause. The claims of the petitioner are also denied on merits.
3. The petitioner has filed a rejoinder to the aforesaid reply. The petitioner has admitted therein the execution of No Dues Certificate. It is, however, pleaded that valuable machines of the petitioner were installed in the premises of the respondent and which the respondent refused to allow the petitioner to remove unless No Dues Certificate was given; that since the machines were lying idle, the officials of the petitioner were under tremendous pressure to redeploy the said machines so as to generate income and the petitioner was thus coerced to sign the No Dues Certificate. It is further pleaded that the dues of the petitioner at the time of signing of the No Dues Certificate were in excess of Rs.32,00,000/- (the claim of the petitioner in the petition disclosed are now to be of Rs.25,40,928/-). It is further pleaded that it could not be expected that the petitioner would have logically given a No Dues Certificate without coercion and pressure.
4. Needless to state that the respondent has had no opportunity to meet the pleas taken for the first time in the rejoinder.
5. Upon enquiry from the counsel for the petitioner as to how the petition is maintainable in the face of the admission of the petitioner of having signed the documents of full and final settlement, and having issued a No Dues Certificate, the counsel for the petitioner draws attention to National Insurance Company Ltd. Vs. Boghara Ployfab Private Limited (2009) 1 SCC 267. Undoubtedly, the Supreme Court in the said judgment has held that when a respondent contends that the dispute is not arbitrable on A.A.No.55/2009 Page 3 of 9 account of discharge of the contract under 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 account of the respondent's stand of a settlement agreement or discharge voucher having been executed by the claimant, if it's validity is disputed by the claimant.
6. However, in the same judgment, in para 51, it has been further held that the Chief Justice / his designate while exercising jurisdiction under Section 11 of the Act, will consider whether there was really accord and satisfaction or discharge of contract by performance and if the answer is in 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 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 the matter deserves 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 instant.
A.A.No.55/2009 Page 4 of 9
7. The same judgment in para 52 give illustrations as to when claims are arbitrable and when they are not, when discharge of contract by an accord and satisfaction are disputed - illustration (ii) is of a case where several claims are preferred, the admitted or undisputed claim are paid, thereafter negotiations are held for settlement of disputed claims resulting in an agreement in writing settling of the pending claims and dispute - on such settlement, the amount agreed is paid and the contractor issues a discharge voucher/no claim certificate / full and final receipt - in such case it has been held that contract containing arbitration clause did not survive and there cannot be any reference of any dispute to arbitration.
8. Thus, it is not as if whenever coercion against a full and final settlement / discharge voucher is pleaded, either a detailed enquiry is to be made in the proceeding under Section 11 of the Act or the matter has to be referred to arbitrator. If in the facts and circumstances of the case, it is found that the case set up of coercion is false, the petition under Section 11 will not be maintainable.
9. I may also refer to the judgment of the Division Bench of this Court in The Oriental Insurance Company Ltd. Vs. Mercury Rubber Mills MANU/DE/1669/2008. This Court held that a prima facie opinion on the allegations is to be formed by the Court on the pleas of coercion.
10. In the present case, on the facts and circumstances, I do not find any case of coercion to have been made out by the petitioner for this court to hold that the full and final settlement / No Dues Certificate admittedly issued by the petitioner was under any A.A.No.55/2009 Page 5 of 9 coercion. Firstly, no pleas whatsoever in this regard were taken in the petition. When a party has signed such a settlement / No Dues Certificate, it ought to, in the petition itself, plead such coercion. There is not a whisper thereto in the petition. Upon the counsel for the petitioner being quizzed in this regard, he contends that no such plea was taken by the respondent in the reply to the legal notice preceding the petition and on the contrary respondent had agreed to arbitration, though having proposed its own names. The counsel for the respondent has orally argued that at the time of issuing the said reply to legal notice, the documents of full and final settlement and No Dues Certificate were not in the knowledge of the counsel and as such, upon arbitration clause being cited in legal notice and to avoid any default, in a hurry the name proposed by petitioner as arbitrator was controverted and alternative name proposed.
11. In my view, even though the respondent had in the reply to the legal notice not pleaded full and final settlement, it was incumbent upon the petitioner to plead that the no dues certificate / full and final settlement had been executed under coercion. The petitioner is found to have concealed the said facts from this court and attempted to have an arbitrator appointed by practicing such concealment. The parties approaching the court are required to place all the material in their power and possession relevant to the dispute for consideration of the court, to enable the court to arrive at just finding. Parties approaching the court cannot be permitted to indulge in such hide and seek.
12. The time when the disputes are stated to have arisen is end of December, 2006. The settlement agreement is stated to have been arrived at on 1st February, 2007. The payments were received by the A.A.No.55/2009 Page 6 of 9 petitioner from the respondent in accordance with the said settlement, thereafter. The present petition was instituted on 31st January, 2009 i.e., nearly two years after the execution of the full and final settlement. No reason whatsoever is given for the petition to have been instituted after such a long lapse of time. In fact, the only correspondence pleaded after the full and final settlement of 1st February, 2007 is the legal notice dated 28th August, 2008 invoking the arbitration clause. The petitioner from 1st February, 2007 to 28th August, 2008 i.e., for one and a half years maintained a quietus.
13. In the normal course of human conduct; party who is compelled /coerced to execute the document would immediately thereafter place on record that he had been so coerced / compelled. There is nothing of the nature over here. It is not as if the petitioner was prevented for any reason from taking up the cudgels. The petitioner is admitted to have in between instituted a suit for recovery of its claims under prior agreements against the respondent. The petitioner has in its rejoinder, though not argued, also stated that in the plaint in the said suit petitioner has pleaded that it was coerced to sign the no dues certificate. Copy of the plaint in the said suit is filed before this Court. The petitioner has in para 12 of the plaint while pleading coercion also stated that a debit note for Rs.32,38,207/- had been raised by it on the respondent. However, the date of the said debit note is stated to be 15th January, 2007 i.e., of prior to settlement of 1st February, 2007. The plaint itself is dated 3rd June, 2008. The rejoinder pleading coercion is accompanied with an affidavit of the "authorized representative" of the petitioner who has not stated that any coercion / compulsion was imposed by the respondent upon him.
A.A.No.55/2009 Page 7 of 9
14. The petitioner has along with rejoinder also not filed any documents whatsoever to show that any of the machines of the petitioner were in the custody of the respondent or that the respondent was refusing to release the same or showing the date when the delivery thereof was given by the respondent to the petitioner. Thus, except for a mere plea of coercion / compulsion there is no plea to prima facie even satisfy this Court that there was any such compulsion. On the contrary, the reference to a debit note dated 15th January, 2007 i.e. of 15 days prior to the settlement shows that the present case falls within the illustrations referred to herein above in Boghara Polyfab Pvt. Ltd. (supra). The petitioner has not given any particulars of its financial standing. The claims of the petitioner against the respondent are stated to be approximately Rs.32,00,000/-. The respondent has stated Rs 25 lacs odd to be still due. The amount of which payment must have been recovered in full and final settlement, in proportion to amount of claim is not found such for which the petitioner could be said to have signed the no dues certificate / full and final settlement. The respondent is a juristic person; no names of any officials who may have yielded pressure on the petitioner or its officials have also been given.
15. The parties involved and the transaction was a commercial one. It is not a case of a governmental authority requiring signature on a dotted line. Such commercial persons ought to be bound by their written agreement and the written agreements ought not to be permitted to be given a go by so easily. The Supreme Court in S.B.P. & Co. Vs. Patel Engineering Ltd. AIR 2006 SC 450 has held that the parties ought not to be unnecessarily referred to costly arbitration machinery. In the present case, the likelihood of the petitioner establishing any coercion appears to be remote. In the A.A.No.55/2009 Page 8 of 9 absence of any coercion being established, there is no challenge to the full and final settlement / No Dues Certificate; consequently there is no arbitration agreement between the parties and the arbitration agreement in the agreement dated 1st January, 2006 between the parties has been novated / rescinded by full and final settlement / no dues certificate. The petition is thus dismissed. However, no order as to costs.
RAJIV SAHAI ENDLAW (JUDGE) September 18, 2009.
GSR A.A.No.55/2009 Page 9 of 9