M/S Fresh & Honest Caf?? Limited vs M/S Hewitt Associates (India) ...
2009 Latest Caselaw 3852 Del

     *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

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

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

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.

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

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

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.

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

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