Punjab National Bank vs M/S M.L.Anand & Co.
2009 Latest Caselaw 3774 Del

*           IN THE HIGH COURT OF DELHI AT NEW DELHI


                                            Date of Reserve: September 07, 2009
                                              Date of Order: September 15, 2009
+OMP 64/1996
%                                                                  15.09.2009
    Punjab National Bank                                    ...Petitioner
    Through: Mr. Jagdeep Kishore, Advocate

       Versus

       M/s ML Anand & Co.                                ...Respondent
       Through: Respondent in person

       JUSTICE SHIV NARAYAN DHINGRA

1.     Whether reporters of local papers may be allowed to see the judgment?

2.     To be referred to the reporter or not?

3.     Whether judgment should be reported in Digest?



       JUDGMENT

1. By this petition under Section 33 read with Sections 8, 11 and 12 of the

Indian Arbitration Act, 1940 ("the Act", for short) the petitioner has made a

prayer that this Court should decide the existence, validity and effect of the

arbitration agreement between the parties and declare that no arbitral

dispute exits inter se parties which could be referred to the arbitrator in view

of accord and satisfaction confirmed by respondents no.1 and 2.

2. Brief facts relevant for the purpose of deciding this petition are that the

petitioner Punjab National Bank (PNB) entered into a contract with

respondents for construction of a building at Sri Ganga Nagar, Rajasthan. The

contract between the parties contained an arbitration clause being Clause No.

5.44 which provided that the disputes between the parties should be referred

to and would be adjudicated through the means of arbitration and the

OMP 64 of 1996 PNB vs. M/s ML Anand & Co. Page 1 Of 7 procedure for appointment of the arbitrator was provided in the clause itself.

The respondent invoked the arbitration clause vide letter dated 14 th April,

1995 alleging that respondent was short-paid its final bill and had not been

paid the amount for deviated quantities. The amounts were wrongly deducted

from the final bill under defect liability and liquidated damages. The

respondent asked the bank for appointment of an arbitrator and for referring

the disputes for adjudication. In response to this letter, the bank informed the

respondent that respondent had already given a receipt in lieu of full and final

payment of all claims in respect of Sri Ganga Nagar Project and no dispute

existed for referring to the arbitrator. When the bank did not refer the dispute

to the arbitrator on above ground, respondent in terms of clause 5.44 sent a

panel of three names to the petitioner viz. Mr. V.D. Tiwari, Mr. B.G. Kora,

Justice Avadh Bihari Rohtagi (retired) and asked the petitioner to choose one

of the arbitrators. The petitioner still stuck to its stand that there was no

dispute to be referred to the arbitrator and did not choose out of the names

suggested by respondent. In terms of arbitration clause, in case of failure on

the part of petitioner to choose one of the arbitrators out of the penal

suggested by respondent, the respondents was at liberty to chose one of the

arbitrators, so the respondent appointed Mr. V.D. Tiwari, retired Chief

Engineer CPWD as the arbitrator and referred the disputes to him. It is after

appointment of Mr. V.D. Tiwari that the petitioner filed this petition with the

aforesaid prayer.

3. A perusal of petition filed by the petitioner would show that the only

stand of the petitioner is that the respondent had executed full and final

receipt on 24th January, 1995.

OMP 64 of 1996 PNB vs. M/s ML Anand & Co. Page 2 Of 7

4. It is submitted that the architect of the petitioner bank had issued a

certificate regarding final bill of respondent approving it for Rs.81,56,784.42,

after making certain deductions etc. The petitioner paid the remaining

outstanding amount of Rs.16,53,521.74 to the respondents on 23rd January,

1995. This payment was accepted by the respondent against the final bill as

full and final payment and as settlement of all his claims against petitioner in

respect of the contract. The respondent also confirmed this vide a receipt

dated 24th January, 1995 that no amount in respect of the work executed by

him was due from the bank. The copy of receipt executed by respondent is

placed on record.

5. The respondent in his reply took the stand that the total value of the

work executed by him was Rs.88 lac. The architect did not give a proper

certificate and did not reflect the true and correct picture. Respondent was

not bound by the certificate issued by the architect. The architect had earlier

given a certificate in favour of respondent certifying work of Rs.84 lac

approximately, however, later on, at the behest of the petitioner bank, he

reduced the same to about Rs.81 lac, making wholly unjustified deductions.

The petitioner had committed default in payment of the final bill of

respondent. The lumpsum payment made by petitioner bank was accepted by

respondent under protest and the respondent lodged his claim with the

petitioner bank about the loss of interest for delayed period also alongwith

other claims soon after the payment of Rs.16,53,521.74 on 24th January 1995.

It is stated that the respondents were forced to sign a pre-typed receipt while

handing over a cheque of Rs.16,53,523.74 and was told that the cheque

would be released only subject to signing of the said receipt. When

respondents refused to sign the said receipt, the petitioner refused to release

OMP 64 of 1996 PNB vs. M/s ML Anand & Co. Page 3 Of 7 the payment. Finding no alternative, respondent was made to sign the

receipt. However, after signing the receipts, respondents wrote a letter dated

27th January 1995 to the petitioner that the receipt was got signed from him

under duress and coercion and he challenged the action of the petitioner.

Respondent then gave a notice to the petitioner bank for payment of the

remaining amount as per the final bill prepared by respondent and also asked

petitioner to pay interest for the delayed period and other claims of the

respondent. When petitioner failed to make the payment despite writing

letters, respondent had no alternative but to invoke the arbitration clause.

Respondent in terms of the arbitration clause, asked the bank to appoint an

arbitrator. It is only when the bank did not appoint an arbitrator, the

respondent had a right to name a panel of arbitrators in terms of arbitration

clause. Respondent sent names of panel of arbitrators to the petitioner but

the petitioner refused to act and that is why respondent was compelled to

choose one of the arbitrators from the panel and referred the matter to him.

6. I have heard the counsel for petitioner as well as respondent (who

appeared in person and argued the matter) and perused the documents

placed on record. A perusal of receipt of full and final settlement would show

that the receipt was a pre-typed receipt prepared on 23rd January 1995 and

signed by the respondent on that date and it was again signed by respondent

on a revenue receipt on 24th January 1995 and it is only after signing this

receipt that the cheque dated 20th January, 1994 was handed over to

respondent. In fact, the contract itself contained a clause that the final bill

would be paid subject to the contractor (respondent herein) executing a full

and final payment receipt.

OMP 64 of 1996 PNB vs. M/s ML Anand & Co. Page 4 Of 7

7. The final bill as raised by the contractor was not paid by the petitioner.

The petitioner made various deductions out of this bill on alleged approval

from the architect. Respondents obviously received this amount under protest

as is clear from the letter dated 27th January 1995 and asked the petitioner to

give details of deductions time and again. The respondent has placed on

record the documents showing that the work was complete sometime in

February 1994 and final bill in respect of the work was prepared by Mr. R.K.

Beri, an engineer of petitioner bank who forwarded it to respondent along

with his letter dated 4th May, 1994. The architect of the bank wrote a letter

dated 4th July 1994 to the petitioner's Chief Architect (BNC of PNB) wherein

details of the work done by respondents have been specified. A perusal of this

letter dated 4th July 1994 would show that the gross value of the bill as

approved by the architect was Rs.83,61,604/-. This letter specifically

mentions that the work was completed on 2nd February 1994 and the building

was handed over to the petitioner bank on that day and the defect liability

period starts from 3rd February 1994 and will continue up to 2nd February

1995. It also specifies that the measurements mentioned in the final bill were

on the basis of measurements books and the work recorded in the

measurement books have been executed at the site satisfactorily as per the

tender drawings and conditions. The architect approved the gross amount of

Rs.83,61,604.27 and directed that the remaining payment be made to

respondents. Despite this letter of the architect written on 4th July 1994, the

payment was not released to the respondent and the respondent/contractor

kept on writing letters for releasing the payment. The architect had also given

another certificate in August, 1994 certifying that the construction was

satisfactorily completed by respondent on 2nd February 1994 for total bill

amount of Rs.83,61,000/-.

OMP 64 of 1996 PNB vs. M/s ML Anand & Co. Page 5 Of 7

8. As per the contract, the payment on account of final bill was to be

made within six months from the date of completion certificate issued by the

architect/ site engineer. As per architect's letter, the completion was made on

2nd February 1994 and the building was handed over. The six months' period

for clearing final bill expired on 2nd August 1994. It is apparent that the bank

(petitioner herein) deliberately withheld the payment of the respondent

contrary to the contract and the contractor (respondent) was being put to

unnecessary harassment. A perusal of letters of the contractor would show

that the contractor had been writing of its facing severe financial constraints.

It is not understood as to how subsequently the architect varied and reduced

the amount of final bill to Rs.81,56,784.42. The correspondence also shows

that the petitioner bank had withheld the security deposit and another

amount of Rs.38,000/- on account of defect liabilities and another Rs.32,500/-

towards liquidated damages. There is no reason given by the bank as to how

the liquidated damages were imposed when no notice for defects was given

to the respondents. No reason is given why the security deposit was not

refunded to the contractor. The petitioner, however, vide another letter dated

13th July 1995 told the respondent that only a balance of Rs.1,09,916/- was

payable to him and sent a cheque to the respondent. All this shows that the

account between the parties had not been finalized and the bank was

exerting coercion and pressure on the respondents to sign the final payment

receipt without which the payment was not being released. I consider that it

cannot be said that no dispute existed between the parties or accounts had

been finally settled and there was no dispute left for arbitration.

9. In view of my foregoing discussion, I find no merits in the petition. The

OMP 64 of 1996 PNB vs. M/s ML Anand & Co. Page 6 Of 7 petition is hereby dismissed with costs, cost is quantified as Rs.1 lac, with

directions that the arbitrator appointed by respondents shall continue with

arbitral proceedings. Since considerable time has already elapsed, the

arbitrator shall give his award within a period of six months from receipt of

this order.

September 15, 2009                             SHIV NARAYAN DHINGRA J.
rd




OMP 64 of 1996    PNB vs. M/s ML Anand & Co.            Page 7 Of 7