Sarup Lal Singhla vs National Fertilizers Ltd.
1998 Latest Caselaw 156 Del

JUDGMENT

J.B. Goel, J.

1. This petition under Section 20 of the Arbitration Act, 1940 (for short 'the Act') was formerly presented in the Court of Senior Sub-judge, Bhatinda. However, on being returned due to lack of territorial jurisdiction this has been presented in this Court. The plaintiff wants that the disputes be referred to an Arbitrator.

2. Briefly the facts are that the work of construction of external services in Phase-III at NFL Township (Civil) Bhatinda was awarded to the plaintiff on the terms and conditions of the tender notice and a formal agreement was also entered into between the parties. The work was to start on 3rd September, 1981, and was to be completed in 15 months on 3rd December, 1982 but it was actually completed on 31st December, 1983. The plaintiff used to submit his running bills from time to time; payments against these bills were made and final bill was submitted on 6.2.84 against that payment was made on 11.6.1984. The plaintiff had furnished a "No Claim Certificate" at the time of payment of the final bill in full and final settlement of his claims.

3. The plaintiff has alleged that during the execution of the work on the verbal orders of the officers of the defendant he had executed extra items of work over and above the agreed works for which he was orally assured that payment for these extra items of work would be made after the completion of the work; payments 'on account' were made and the payment against the final bill was made after making deductions arbitrarily and illegally and the receipt for full and final payment was obtained by putting pressure and coercion. As payment for the extra items of work has not been made in the final bill, he vide his letter dated 16.1.1985 made claim in respect of those extra items of work as per details given in Annexure-A but the respondent repudiated this claim in their letter dated 18.3.1985. His demand for reference of the disputes for arbitration was also refused. Hence this petition.

4. Defendant in their written statement have denied the claim of the petitioner. It is denied that the defendant has got done extra items of work from the plaintiff or any promise as alleged was made for making payments for any extra items of work. Payments against running bills were made in accordance with the contract and payment against final bill dated 6.2.1984 was made on 11.6.84 when the plaintiff has given a receipt with "No Claim Certificate" in token of full and final payment received by him. As there is no outstanding claims of the plaintiff against the defendant the arbitration clause does not survive. It is also alleged that only 'Notified Claim' could be referred for arbitration and the claims in question are not such 'Notified Claims' as demand in respect thereof was not made in accordance with the terms of the contract. As such the disputes in question are not covered by the arbitration clause. It is thus denied that any claim subsists or that the disputes in question are referable for arbitration.

5. On the pleadings of the parties the following issues were framed on May 3, 1993:

1. Does the arbitration agreement between the parties not survive? OPD

2. Whether disputes and differences are not within the ambit of the arbitration agreement between the parties?

3. Whether the petitioner is estopped from seeking reference of alleged disputes to arbitration on the grounds as alleged by the respondent?

4. Relief.

Both the parties have led evidence by way of affidavit. The plaintiff has filed his own affidavit whereas on behalf of the defendant affidavit of Shri R.S. Sandhu, its Manager was filed.

6. Learned Counsel for the plaintiff has contended that the disputed claim relates to extra items of work done by the petitioner for which the payment has not been made inspite of demand and thus disputes have arisen which are to be decided by arbitration in accordance with arbitration clause; and the question whether the disputes/claims are barred by limitation or otherwise are not to be gone into by this Court but to be decided by the Arbitrator. He has inter alia relied on Jai Chand Bhasin Vs. Union of India, Ved Prakash Mittal Vs. Union of India & Ors., and Navbharat Dal Mills Vs. Food Corporation of India and Anr., 1993 (1) Arb. Law Reporter 298 (DB) (Delhi).

7. Whereas learned Counsel for the defendant has contended that under the arbitration clause only disputes in respect of "notified claims" as defined under and raised in accordance with Clauses 6.6.1.0 and 6.6.3.0 are referable for arbitration as these provisions have not been complied, the dispute raised now is not referable for arbitration; also that full and final payment against final bill has been accepted with "No Claim Certificate" and for this reason also no dispute subsists and the arbitration agreement also does not survive. According to him, the case law relied on behalf of the plaintiff is not applicable. Reliance has been placed on M/s. Uttam Singh Duggal & Co. (P) Ltd. Vs. Indian Oil Corpn. Ltd. and Anr., ILR (1985) II, Delhi 131; Bansal Construction Co. Vs. Indian Oil Corpn. Ltd. & Anr., 1991 (2) Arb. Law Reporter 409 (Delhi); International Building and Furnishing Co. (Cal.) Pvt. Ltd. Vs. Indian Oil Corpn. Ltd., and Gas Authority of India Ltd. Vs. SPIE CAPIIG SA. & Qrs., .

8. In order to be a valid claim for reference under Section 20 of the Act, it is necessary that firstly, there should be an arbitration agreement; 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. For a dispute to arise or exist there must be an entitlement to money and a difference oil dispute in respect of the same. Union of India & Aur. Vs. M/s. L.K. Ahuja & Co., .

9. Thus existence of a dispute contemplated by the arbitration agreement/clause is essential for appointment of an Arbitrator for a reference under section 20 of the Act. The jurisdiction of the Arbitrators is only that which is conferred on them, by the consent of the parties as represented in the agreement and the claim for arbitration must be made in accordance with the provisions of the agreement and within the time limit prescribed there under. Where a dispute does not fall within arbitration clause, reference as well as award will be without jurisdiction and null and void.

10. The dispute in question was raised by the plaintiff in his letter dated 16.1.85 (Ex. P-1), after his final bill was settled, raising, 12 items of claims of the value of Rs.6,15,700/-. This was repudiated by the respondent in their letter dated 18.3.1985 (Ex. P-2) in the following terms:

"We do not find any genuinely in the claims and you have been paid full payment for the value of work done as per terms and conditions of the contract. You have never brought any such discrepancy to the notice of the Engineer-in-charge or the Competent Authority at any stage for such short payment and Clause No. 6.6.1.0 is very much clear on this subject. This is also to make it clear to you that you have submitted no claim certificate towards settlement of all claims and payments while accepting final payment for the subject work.

In view of the above we hereby repudiate all your claims put up as referred above. This is issued without prejudice on either side."

11. The claim was obviously repudiated on two grounds: (i) that the claim was not raised under Clause 6.6.1.0, and (ii) final payment was accepted in full and final payment/settlement and 'No Claim Certificate' was given.

12. It is not disputed that the claims now raised by the plaintiff pertain to alleged extra items of work done beyond the work specifically agreed to be done under the contract. To appreciate the controversy involved it will be proper to refer to relevant clauses of the contract between the parties. These are as follows:

1.0.23.0. "Notified Claim" shall mean a claim of the Contractor notified in accordance with the provisions of Clause 6.6.1.0 hereof.

6.6.1.0. Should the Contractor consider that he is entitled to any extra payment or compensation in respect of the works over and above the amounts due in terms of the Contract as specified in Clause 6.3.1.0 hereof or should the Contractor dispute the validity of any deductions made or threatened by the owner from any Running Account Bills or any payments due to him in the terms of the Contract the Contractor shall forthwith give notice in writing of his claim in this behalf to the Engineer-in-Charge and the Site Engineer within 10 (ten) days from the date of the issue of orders or instructions relative to any works for which the contractor claims such additional payment or compensation or on the happening of other event upon which the Contractor basis such claim, and such notice shall give full particulars of the nature of such claim grounds on which it is based, and the amount claimed. The Contractor shall not be entitled to raise any claim, nor shall the owner anywise be liable in respect of any claim by the Contractor unless notice of such claim shall have been given by the Contractor to the Engineer-in-Charge and the Site Engineer in the manner and within the time aforesaid and the Contractor shall be deemed to have waived any or all claims and all his rights in respect of any claim not notified to the Engineer-in- Charge and the Site Engineer in writing in the manner and within the time aforesaid.

6.6.3.0. Any or all claims of the Contractor notified in accordance with provisions of Clause 6.6.1.0 hereof as shall remain/persist at the time of preparation of Final Bill by the Contractor shall be separately included in the Final Bill prepared by the Contractor in the form of a Statement of claims attached thereto, giving particulars of the nature of such claim, grounds on which it is based, and the amount claimed, and shall be supported by a copy (copies) of the notice(s) sent in respect thereof to the Engineer-in-Charge and Site Engineer under Clause 6.6.1.0 hereof. Insofar as such claim shall in any material particular be at variance with the claim notified by the Contractor within the provision of Clauses 6.6.1.0 hereof, it shall be deemed to be a claim different from the notified claim with consequence in respect thereof indicated in Clause 6.6.1.0 hereof and with consequences in respect of the notified claim as indicated in Clause 6.6.3.1 hereof.

6.6.3.1. Any and all notified claims not specifically reflected and included in the final bill in accordance with the provisions of Clause 6.6.3.0 hereof shall be deemed to have been waived by the Contractor, and the owner shall have no liability in respect thereof and the Contractor shall not be entitled to raise or include in the Final Bill any claim(s) other than a notified claim conforming in all respects in accordance with the provisions of Clause 6.6.3.0 hereof.

Arbitration Clause:

9.1.0.0. Subject to the provisions of Clauses 6.7.1.0 and 6.7.2.0 hereof any dispute or difference between the parties hereto arising out of any notified claim of the Contractor included in his final bill in accordance with the provisions of Clause 6.6.3.0 hereof and/or arising out of any amount claimed by the owner (whether or not the amount claimed by the owner or any part thereof shall have been deducted from the Final Bill of the Contractor or any amount paid by the owner to the Contractor in respect of the Work) shall be referred to arbitration by a Sole Arbitrator selected by the Contractor from a panel of three persons nominated by the Engineer-in-Charge.

13. In this case the dispute is not that the defendant (meaning the owner under the agreement) has raised any claim, for recovery of excess amount paid to, or for making any deduction from the final bill of the plaintiff. As such the only other dispute that would fall under the arbitration clause is any dispute or difference between the parties hereto arising out of any "Notified Claim" of the contractor included in his final bill in accordance with the provisions of Clause 6.6.3.0." of the contract.

14. "Notified Claim" as defined in Clause 1.0.23.0 reproduced earlier, is that claim of the contractor which is notified under Clause 6.6.1.0. Under Clause 6.6.1.0 where a contractor feels entitled to any extra payment for compensation in respect of the works over and above the amounts due in terms of the contract he is required: (i) forthwith to give notice in writing of his claim in this behalf to the Engineer-in-Charge and the Site Engineer; (ii) within 10 days from the issue of orders or instructions related to such works and (iii) with full particulars of: (a) the nature of such claims, (b) grounds on which it was based, and (c) the amount claimed". The observance of these formalities are mandatory as otherwise the consequence of non-compliance of this procedure/conditions are also given in this clause itself as "the contractor shall not be entitled to raise any claim nor shall the owner any wise be liable in respect of any claims by the contractor" and further "the contractor shall be deemed to have waived any or all the claims and all his rights in respect of any claim not so notified".

15. In case this procedure of Clause 6.6.1.0 is observed and any such notified claims remain outstanding or unsatisfied at the time of the preparation of the final bill, the same shall be separately included in the final bill prepared by the contractor in the form of a statement of claims and attached thereto, giving particulars and details as are required to be given in the earlier notice, supported by a copy (copies) of the notice (s) sent in respect thereof under Clause 6.6.1.0.

16. In case of any variance in such claim with the claim notified under Clause 6.6.1.0 it shall be deemed to be a claim different from the notified claim with the consequences as given in Clauses 6.6.1.0 and 6.6.3.1.

17. It is not the case of the plaintiff pleaded in the plaint that the claims now sought to be raised were so notified within ten days with the details, particulars, dates and the amounts as required under Clause 6.6.1.0 nor that these were included in a separate statement with the said details and particulars and submitted alongwith the final bill as required under Clause 6.6.3.0. alongwith requisite notice(s) Non-fulfillment of the conditions of Clauses 6.6.1.0 and 6.6.3.0 will take the claim outside the category of "Notified Claim'. Under Clause 9.1.0.0 only the notified claim could be referred to arbitration. The dispute has to be raised in accordance with the provision of the agreement to attract the applicability of the arbitration clause. If no such dispute exists, the arbitration clause is not applicable and in fact there would be no arbitration agreement. This position is well established, in view of the following decisions of this Court.

18. In M/s. Uttam Singh Duggal And Co. (P) Ltd. Vs. Indian Oil Corpn, Ltd. & Anr. (supra) where identical terms of the contract fell for consideration, it was held that unless the claim was a "notified claim" there could be no reference to arbitration. That decision has been followed later on in M/s. Associated Hybilds Pvt. Ltd. Vs. Indian Oil Corpn. Ltd. (Suit No. 2399-A of 1985 decided on 15.10.87), in M/s. Bansal Construction Co. Vs. Indian Oil Corpn. Ltd. and Anr. (supra) and again by a Division Bench of this Court in International Building and Furnishing Vs. Indian Oil Corpit. Ltd. (supra) and in Gas Authority of India Ltd. Vs. SPIE CAPAG, S.A. & Ors. (supra). In the last mentioned case after referring to the relevant case law both Indian and English such a clause like Clauses 6.6.1.0 and 6.6.3.0 has been held to be valid and binding between the parties. And it has further been held in that case that it is for the Court to determine whether the matter is an "Excepted Matter" or not.

19. In Ved Prakash Mittal's case (supra) relied on behalf of the plaintiff it was a term of the contract that a demand for reference for arbitration should be made within 90 days of receiving the intimation from the Government that the bill is ready for payment, otherwise the claim of the contractor will be deemed to have been waived and absolutely barred and the Government shall be discharged and released of all liabilities under the contract in respect of these claims. The contractor had made request for appointment of Arbitrator after the expiry of 90 days. The arbitration clause provided that "all questions and disputes shall be referred to the sole arbitration of.....". It was held that at the stage of reference, the Court has only to see whether there were disputes and whether all those disputes were to be referred to arbitration and as to whether the claims were waived or not was for the Arbitrator to decide and the Court was not concerned with the question whether any claim was barred by. time. The Full Bench judgment in the case of Ved Prakash Mittal had approved and followed another earlier. Division Bench judgment in Jai Chand Bhasin's Vs. Union of India (supra) where similar clause was under consideration. These two cases were considered but distinguished in M/s. Uttam Singh Duggal's case (supra) where it was held that the question involved in that case was whether the claim was a notified claim which alone could be referred to arbitration and not whether the arbitration was barred by time as was the case in Ved Prakash Mittal's case and Jai Chand Bkasin's case. The case of Navbharat Dal Mills Vs. Food Corporation of India (supra) has simply followed Jai Chand Bhasin's case (supra) and Ved Prakash Mittal's case (supra) in similar circumstances. In Union of India Vs. L.K. Ahuja & Co, , such a distinction has been noticed where it was observed that 'it will be entirely wrong to mix up the two aspects, namely, whether there was any valid claim for reference under Section 20 of the Act and secondly whether the claim to be adjudicated by the Arbitrator was barred by lapse of time. The second is a matter which the arbitrator would decide unless however, if on admitted facts, a claim is found at the time of making an order under Section 20 of the Act to be barred by limitation". This distinction has also been pointed out in Gas Authority of India Ltd. Vs. SPIE CAPAG S.A. & Ors. .

20. The question in the present case is not whether,the claim is barred but whether the claim is a notified claim' and, if not, whether it was referable to arbitration.

21. As noticed above, the claim/dispute raised in the present case is not "notified claim" under Clause 1.0.23.0 read with Clauses 6.6.1.0, 6.6.3.0 and 6.6.3.1 and as such is not referable to arbitration under arbitration Clause 9.1.0.0.

22. Issue No. 2 is thus decided in the negative against the plaintiff and in favour of the defendant.

23. In that view of the matter, it is unnecessary to go into the question whether the claim is barred or whether there was a discharge of the contract by accord and satisfaction or not because of acceptance of payment in full and final satisfaction of the final bill and the plaintiff having issued 'No Claim Certificate'. Issue Nos. 1 and 3 are unnecessary to be decided.

This petition, thus, has no merit and the same is hereby dismissed with costs. Costs Rs. 4,000/-.