Ahmedabad Urban Development ... vs M C Dalal & Co
2022 Latest Caselaw 9113 Guj

      C/FA/2623/2002                             JUDGMENT DATED: 14/10/2022




              IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
                      R/FIRST APPEAL NO. 2623 of 2002

FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE A.S. SUPEHIA                                   Sd/-
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1     Whether Reporters of Local Papers may be allowed                  NO
      to see the judgment ?

2     To be referred to the Reporter or not ?                          YES

3     Whether their Lordships wish to see the fair copy
      of the judgment ?                                                 NO

4     Whether this case involves a substantial question
      of law as to the interpretation of the Constitution               NO
      of India or any order made thereunder ?

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        AHMEDABAD URBAN DEVELOPMENT AUTHORITIES (AUDA)
                            Versus
                       M C DALAL & CO.
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Appearance:
MR HS MUNSHAW(495) for the Appellant(s) No. 1
MR SHASHWAT SHUKLA FOR UNMESH D SHUKLA(856) for the
Defendant(s) No. 1
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     CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA
                       Date : 14/10/2022
                      ORAL JUDGMENT

1. The present appeal arises from the judgment and order dated 30.11.1999 passed in Civil Suit No.1121 of 1993 filed by the respondent- original plaintiff under the provisions of Section 20 of the Arbitration Act, 1940 (for short "the Act"), inter alia praying to direct the defendant to file arbitration agreement of contract containing arbitration clause in the court and to appoint an arbitrator in accordance with the aforesaid contract and to refer the claims and disputes against the defendant to arbitrate for adjudication an award on such terms and conditions as may be deemed fit by this Court.

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2. Learned advocate Mr.Munshaw appearing for the appellant- original defendant-Ahmedabad Urban Development Authority (AUDA) has submitted that in fact the plaintiff had accepted full and final payment towards various services rendered by him for the AUDA Tower Project, which is incorporated in the communication dated 10.12.1991. It is submitted that after accepting the aforesaid amount totaling Rs.6,97,763/- with an understanding that full and final settlement has been arrived at, it was not open for the plaintiff to file a suit under the provisions of Section 20 of the Act.

3. Learned advocate Mr.Munshaw has submitted that the direction issued by the court below for appointment of arbitrator could not have been issued since it is not that the plaintiff was doing some construction work, but was engaged as an Architect for the project of construction of Towers by the original defendant-AUDA. He has submitted that it was agreed upon between the plaintiff and the defendant to accept the full and final payment initially of Rs.3,11,000/- against the profession service rendered for the AUDA Tower Project and against his bill of Rs.6,30,942/-. He has submitted that after receipt of the said letter below Exh.34, the further procedure of payment of Rs.3,11,000/- was carried out by the AUDA and accordingly, the said amount was paid to the plaintiff towards the full and final settlement as earlier an amount of Rs.3,86,763/- was also deposited in his account.

4. Thus, it is submitted by the learned advocate Mr.Munshaw that since the suit itself is not maintainable because the condition as envisaged under Section 20 of the Act is not satisfied as there was no dispute in

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existence between the parties, such an order directing the appointment of arbitrator was uncalled for. Thus, it is submitted that the impugned judgment and order may be quashed and set aside.

5. Per contra, learned advocate Mr.Shukla appearing for the original plaintiff has submitted that there was an agreement between the plaintiff and the defendant and as per clauses 17 and 18 of the agreement executed on 11.04.1986, the dispute is required to be referred to an arbitrator since after the aforesaid amount was received by the plaintiff, it was realized that he would be entitled to further amount and it is specifically asserted by the plaintiff that he was compelled to accept the aforesaid amount under duress. He has submitted that the clause 18 refers to the arbitration that any dispute arising out of this agreement or to the meaning thereto shall be settled by the parties by the sole arbitrator referred to in sub- Clause (3) of Clause 17.

6. Learned advocate Mr.Shukla has submitted that thereafter the plaintiff issued a legal notice on 22.07.1998 calling upon the defendant to appoint an arbitrator in accordance with the contract and referred to the claim and dispute of the plaintiff against the defendant for adjudication to the arbitrator. He has submitted that since there was a dispute with regard to full and final settlement and the plaintiff was entitled to further amount, it cannot be said that the application under Section 20 of the Act is not maintainable and for settlement of the claims an arbitrator could have been appointed by the court. In support of his submissions, he has placed reliance on the judgment of the Supreme Court in the case of Jayesh Engineering Works vs. New India Assurance Co.Ltd., (2000) 10 SCC 178. The reference is also made to the judgment of the Supreme

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Court in the case of Damodar Vally Corporation vs. K.K.Kar, AIR 1974 SC 158. Thus, he has submitted that the order passed by the court below does not require any interference and the same is required to be sustained.

7. In the present appeal, the only question of law, which requires to be examined is whether the court below has fallen in error in appointing the arbitrator under the suit filed under Section 20 of the Act in light of the settlement dated 10.12.1991 arrived at between the plaintiff and the defendant/respondent-AUDA. The fact, which is not in dispute, is that the plaintiff had received an amount of Rs.6,97,763/- towards full and final settlement with mutual understanding. The same can be borne out from the contents of the communication dated 10.12.1991. After the receipt of the aforesaid amount, the plaintiff had raised dispute that such amount was accepted by him under duress as there was no option left with him. It is specifically referred that the plaintiff was forced to accept the aforesaid amount out of sheer economic compulsion created by the defendant and the above remaining amount of Rs.3,11,000/-, which is accepted by the plaintiff and paid by the defendant, cannot constitute a full and final payment and the same would be unreasonable and arbitrary. The plaintiff by the letter dated 28.01.1992 demanded payment of Rs.3,19,930/- with interest at the rate of 18% per annum from the due date till the date of payment. On 19.02.1992, the defendant refused to make payment and insisted the payment of Rs.3,11,000/- towards the full and final settlement. Accordingly, a legal notice was also issued by the plaintiff on 22.07.1992 calling upon the defendant to appoint an arbitrator in accordance with the contract and since no reply was received, the plaintiff filed the suit seeking appointment of arbitrator in accordance with contract entered upon between the plaintiff and the defendant. The court

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below, after examining the entire controversy and clauses 17 and 18 of the agreement dated 11.04.1986 has appointed the arbitrator while appreciating the provisions of Section 18 of the Act. It was held by the court below that it cannot be said that no dispute subsists between the plaintiff and the defendant in view of the specific demand made by the plaintiff and as per the clauses of the agreement, the dispute was referred to the arbitrator.

8. Clause 18 of the agreement dated 11.04.1986 refers that any dispute arising out of this agreement or to the meaning thereto shall be settled by the parties by the sole arbitrator referred to above, subject to the provisions of the Indian Arbitration Act, 1940 for the time being in force.

9. At this stage, it would be apposite to refer to the decision of the Apex Court in the case of Jayesh Engineering Works (supra), the Supreme Court in the said case, after noticing that where the full and final settlement was accepted, the proceedings under the Act were instituted and after an arbitrator was also appointed, the Supreme Court has held that whether any amount is due to be paid and how far the claim made by the appellant is tenable are matters to be considered by the arbitrator. The Apex Court has held thus:-

"1. The appellant offered Tenders I and II to the respondents, pursuant to which certain civil works were carried out and in respect of which they made a claim for payment of money. Although several claims had been made by the appellant, ultimately on 6-2-1989, the respondents intimated the appellant to receive a cheque for a sum of Rs.2,79,600 in full and final settlement of the works relating to Tenders I and II.

The appellant acknowledged the same by endorsing on the said letter stating that he had received the

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said amount as full and final settlement and he had no further claim in that regard. Thereafter, he wrote a letter dated 24-2- 1989 stating that his statement that payment had been accepted by him on 6-2-1989 in full and final settlement is not correct and still there are outstanding dues which need to be paid otherwise the matter will have to be referred to arbitration in terms of clause 37 of the agreement. Pursuant to the said notice each of the parties nominated their respective arbitrators. At that stage, an application was filed under Section 33 of the Arbitration Act seeking a declaration that the agreement dated 7-4-1981 between the parties no longer subsists as the work has already been completed and the payment was received by Respondent 1 in full and final settlement. It was also contended that the clause providing for reference of disputes to arbitration is not attracted in such a situation. In an identical situation, this Court in Union of India v. L.K Ahuja & Co. 1988 3 SCC 76 held that on completion of work, the right to get money would normally arise thereafter on settlement of the final bill, the right to get further payment gets weakened but whether the claim subsists or not, is a matter which is arbitrable. When this direction was cited before the High Court, the same was distinguished by stating that it was a decision on its own facts and has no application to the case. We find that this view does not appear to be correct. Whether any amount is due to be paid and how far the claim made by the appellant is tenable are matters to be considered by the arbitrator. In fact, whether the contract has been fully worked out and whether the payments have been made in full and final settlement are questions to be considered by the arbitrator when there is a dispute regarding the same. We, therefore, set aside the order made by the High Court and dismiss the application filed under Section 33 of the Arbitration Act. Now proceedings before the arbitrator/s will have to be continued in accordance with law.

2. The appeal is allowed. No costs."

10. The aforenoted observations made by the Supreme Court manifest that in fact whether the contract has been fully worked out and whether the payments have been made in full and final settlement are the questions to be considered by the arbitrator when there is a dispute regarding the same.

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11. In the case of Damodar Vally Corporation (supra), in an identical issue whether there was a plea of full and final settlement taken by the parties, the Supreme Court has held thus:-

"6.It appears to us that the question whether there has been a full and &A settlement of a claim under the contract is itself a dispute arising 'upon' or 'in relation to' or 'in connection with' the contract. These words are wide enough to cover the dispute sought to be referred. The respondent's contention is that the contract has been repudiated by the appellant unilaterally as a result of which he had no option but to accept that repudiation because if the appellant was not ready to receive the goods he could not supply them to him or force him to receive them. In the circumstances, while accepting the repudiation, without conceding that the appellant had a right to repudiate the contract, he could claim damages for breach of contract. Such a claim for damages is a dispute or difference which arises between himself and the appellant and is 'upon' or 'in relation to' or.'in connection with' the contract.

The Apex Court has enunciated that whether there has been a full and final settlement of a claim under the contract is itself a dispute arising 'upon' or 'in relation to' or 'in connection with' the contract. It is further held that these words are wide enough to cover the dispute sought to be referred.

12. Thus, the issue raised in the present appeal is squarely covered by the decision of the Supreme Court and hence, this Court does not find any illegality or perversity in the judgment and order passed by the court below.

13. Thus, the present appeal fails. No order as to costs. Record and proceedings be sent back to the concerned trial court.

Sd/-

(A. S. SUPEHIA, J) ABHISHEK/2