IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION APPEAL APPEAL APPEAL NO. 81 OF 2008 NO. 81 OF 2008 NO. 81 OF 2008 IN IN IN ARBITRATION ARBITRATION ARBITRATION PETITION NO.341 OF 2006 PETITION NO.341 OF 2006 PETITION NO.341 OF 2006 Union of India ) Represented by Department of ) Atomic Energy, through ) The Director, Directorate of Const. ) Services & Estate Management ) V.S. Bhavan, Anushakti Nagar, ) Mumbai - 400 094. )..Appellants/ (Orig.Petitioners) V/s. M/s. Thakkar & Associates, ) Near Union Bank of India, ) Netaji Subhash Road, Mulund (W) ) Mumbai - 400 080 )..Respondents (Orig. Respondents) ...... Ms. Jyotsna Pandhi i/by Rutuja Ambekar for Appellants Mr. P.K. Dhakephalkar, Sr. Counsel i/by S.Y. Dhakephalkar for Respondents ...... CORAM CORAM CORAM : SMT RANJANA DESAI & : SMT RANJANA DESAI & : SMT RANJANA DESAI & SHRI SHRI SHRI K.K.TATED, JJ. K.K.TATED, JJ. K.K.TATED, JJ. DATE DATE DATE ON WHICH THE JUDGMENT IS RESERVED : 22/10/2008 ON WHICH THE JUDGMENT IS RESERVED : 22/10/2008 ON WHICH THE JUDGMENT IS RESERVED : 22/10/2008 DATE DATE DATE ON WHICH THE JUDGMENT IS PRONOUNCED: __/12/2008 ON WHICH THE JUDGMENT IS PRONOUNCED: __/12/2008 ON WHICH THE JUDGMENT IS PRONOUNCED: __/12/2008 JUDGMENT JUDGMENT JUDGMENT : (PER K.K. TATED, J) : (PER K.K. TATED, J) : (PER K.K. TATED, J) 1. Rule. By consent taken on board for final hearing. : 2 : 2. The present appeal is against the Judgment passed by the learned Single Judge on 7th December, 2006 in Arbitration Petition No.341 of 2006 dismissing the petition challenging the award passed by the Arbitrator directing the petitioner to pay Rs.19,41,679/- with interest to the respondents No.1. 3. The facts giving rise to this appeal briefly stated are that the contract for construction was awarded by the appellant to the respondent No.1. In that contract, there was an Arbitration clause. 4. As per the said Arbitration clause, the Arbitrator was appointed. The Arbitrator on 20th April, 2006 passed an award, mentioned above. The appellants had opposed the claim of the respondent No.1 on the ground that as the respondent No.1 had given "No Claim Certificate" to the final bill dated 12th June, 2001 he could not make any further claim before the Arbitrator, secondly, clause 25 of the contract and work order dated 29th October, 1988, provided that the claim, if any, must be submitted by the contractor within 90 days of the submission of the final bill, but the respondent No.1 preferred claim for which the reference was made to : 3 : the Arbitrator much beyond 90 days and, therefore, the claim was not within limitation and in view of Section 43(2) of the Arbitration and Conciliation Act, was not tenable thirdly, the claim for the water charges for the water secured for work by hiring water tankers was not tenable as per the terms of the contract entered into between the parties. All those objections of the appellants were over-ruled by the Arbitrator. Those contentions were pressed by the appellant in the Arbitration Petition before the learned Single Judge but without success and the petition was dismissed by the learned Single Judge. 5. Being aggrieved by the Judgment dated 7th December, 2006 dismissing the Arbitration Petition, the Appellant has preferred this Appeal. The learned Counsel for the Appellants assailed the Judgment of the learned Single Judge on the following grounds. The learned Counsel submitted that the Arbitrator and the learned Single Judge erred in coming to the conclusion that inspite of the No Claim Certificate granted by the respondent No.1 to the final bill and even accepting the bill amount, they could maintain the claim preferred by them in the Arbitration reference. According to the learned Counsel the conduct of the respondent No.1 in : 4 : submitting No Claim Certificate to the final bill and receiving the amount of the final bill operates as an estoppel, prohibiting them from making any claim subsequent thereto. In support of her submission, the learned Counsel appearing on behalf of the Appellant relied on the decision in the matter of Ambica Ambica Ambica Construction Construction Construction V/s. Union of India, 2006 (8), SCJ V/s. Union of India, 2006 (8), SCJ V/s. Union of India, 2006 (8), SCJ page-855, page-855, page-855, Chairman and M.D., N.T.P.C. Ld. V/s. Reshmi Chairman and M.D., N.T.P.C. Ld. V/s. Reshmi Chairman and M.D., N.T.P.C. Ld. V/s. Reshmi Constructions Constructions Constructions Builders and Contractors, AIR 2004 SC Builders and Contractors, AIR 2004 SC Builders and Contractors, AIR 2004 SC P-1330 P-1330 P-1330 and Pawan Hans Helicopter Ltd. V/s. M/s. and Pawan Hans Helicopter Ltd. V/s. M/s. and Pawan Hans Helicopter Ltd. V/s. M/s. Associated Associated Associated Construction, 2007(6) Mah.LJ,255. Construction, 2007(6) Mah.LJ,255. Construction, 2007(6) Mah.LJ,255. 6. The learned Counsel appearing on behalf of the appellant submitted that the decision in the matter of Chairman and M.D. NTPC V/s. Reshmi Construction is distinguishable on the facts. In that case, the final bill was accepted by the contractor without prejudice to his rights and on the same day No Claim Certificate was signed by the contractor. On the same day the contractor wrote a letter that final bill was signed under coercion, undue influence and he protested, whereas in the present case No Claim Certificate was signed without any protest on 19th February, 2001 and arbitration was invoked after lapse of 2 years and 7 months on 17th September, 2003. Therefore, the : 5 : respondents are not entitled to invoke arbitration in view of No Claim Certificate issued by them. Whereas the learned Senior Counsel appearing on behalf of the respondents also relied on the Apex Court Judgment in the matter of Ambica Construction V/s. Union of India, Ambica Construction V/s. Union of India, Ambica Construction V/s. Union of India, 2006(8) 2006(8) 2006(8) SCJ, p-855. SCJ, p-855. SCJ, p-855. In that case, the Apex Court specifically held that if No Claim Certificate has been given under coercion and duress, claimant can invoke arbitration clause. The learned Senior Counsel relied on paras 16, 17 and 18 of the Judgement which reads as under:- "16. Since we are called upon to consider the efficacy of Clause 43(2) of the General Conditions of Contract with reference to the subject matter of the present appeals, the same is set out hereinbelow: "43(2) Signing of "No claim" Certificate : The Contractor shall not be entitled to make any claim whatsoever against the Railways under or by virtue of or arising out of this contract, nor shall the Railways entertain or consider any such claim, if made by the contractor, after he shall have signed a "No Claim" certificate in favour of the Railways, in such form as shall be required by the Railways, after the works are finally measured up. The contractor shall be debarred from disputing the correctness of the items covered by "No Claim Certificate" or demanding a reference to arbitration in respect thereof." 17. A glance at the said clause will immediately indicate that a No Claim Certificate is required to be submitted by a contractor once : 6 : the works are finally measured up. In the instant case, the work was yet to be completed and there is nothing to indicate that the works, as undertaken by the contractor, had been finally measured and on the basis of the same a No Objection Certificate had been issued by the appellant. On the other hand, even the first Arbitrator, who had been appointed, had come to a finding that No Claim Certificate had been given under coercion and duress. It is the Division Bench of the Calcutta High Court which, for the first time, came to a conclusion that such No Claim Certificate had not been submitted under coercion and duress. 18. From the submissions made on behalf of the respective parties and in particular from the submissions made on behalf of the appellant, it is apparent that unless a discharge certificate is given in advance, payment of bills are generally delayed. Although, Clause 43(2) has been included in the General Conditions of Contract, the same is meant to be a safeguard as against frivolous claims after final measurement. Having regard to the decision in the case of Reshmi Constructions (2 supra), it can no longer be said that such a clause in the contractor would be an absolute bar to a contractor raising claims which are genuine, even after the submission of such No Claim Certificate. 7. The decisions relied on by the learned Counsel for the appellant are distinguishable on the facts. In the present case, a large amount of Rs.19,41,679/- was withheld for a pretty long period even after completion of the work. The final bill could not be passed unless the respondent No.1 submitted "No Claim Certificate". Therefore, in order to secure the large amount due to the respondent No.1 for a very long period, the : 7 : respondent No.1 perforce had to issue No Claim Certificate. It is pertinent to note that on 28th April, 2001, the respondent No.1 addressed a letter to the appellant wherein he made claim for the items which had escaped from the final bill. The appellant fully knowing the subsequent claim, which was later on referred to arbitration, paid the amount of the final bill to the respondent No.1. Those facts loudly proclaim that the No Claim Certificate was given under duress and this fact was made clear by the respondent No.1 by submitting his claim after the signing the final bill and before payment of the final bill amount. Had the appellant wanted to stick to their contention that the respondent No.1 after submitting No Claim Certificate before signing the final bill could not prefer any subsequent bill, the appellant would not have paid the amount of the final bill unless the respondent No.1 withdrew the subsequent claim made by the respondent No.1 by his letter dated 18th April, 2001. When from the undisputed facts stated above, the undue influence and coercion can be legitimately inferred, there is no necessity for the respondent No.1 to adduce any further evidence in support of his case that the No Claim Certificate was issued under coercion. : 8 : 8. On the other hand, the learned Senior Counsel appearing on behalf of the respondent pointed out that where the No Claim Certificate is given under threat or coercion resulting in economic duress and compulsion, such No Claim Certificate is neither valid nor binding on the Respondent and the dispute relating to the claim survives for consideration and is arbitrable. According to the Respondent where the persons on whom the claim is made, withhold the large amount and insist to accept smaller payment as full and final settlement and insist for giving No Claim Certificate, there is no accord and satisfaction in the eye of law and the No Claim Certificate will not come in the way of settling the bonafide dispute regarding the balance claim and seeking reference of such dispute to Arbitration. It is further submitted by the learned Senior Counsel appearing on behalf of the respondent that if the party who has executed the No Claim Certificate alleges that the execution of such No Claim Certificate was on account of fraud / coercion / undue influence practised by the other party and is able to establish the same, the discharge of the contract by such agreement / voucher is rendered void and cannot be acted upon. In support, the learned Counsel relied in the matter of Ambica Ambica Ambica Construction Construction Construction V/s. Union of India, reported in 2006 (13) V/s. Union of India, reported in 2006 (13) V/s. Union of India, reported in 2006 (13) : 9 : SCC SCC SCC p-475 and in the matter of Chairman and M.D., p-475 and in the matter of Chairman and M.D., p-475 and in the matter of Chairman and M.D., N.T.P.C. N.T.P.C. N.T.P.C. Ltd. V/s. Reshmi Constructions, Builders & Ltd. V/s. Reshmi Constructions, Builders & Ltd. V/s. Reshmi Constructions, Builders & Contractors, Contractors, Contractors, 2004(1) Arb.L.R.156 2004(1) Arb.L.R.156 2004(1) Arb.L.R.156. 9. The learned Senior Counsel appearing on behalf of the respondent No.1 pointed out that the Apex Court in the matter of Chairman and M.D. NTPC V/s. Reshmi Chairman and M.D. NTPC V/s. Reshmi Chairman and M.D. NTPC V/s. Reshmi Construction, Construction, Construction, reported in AIR 2004 SC, p-1330 reported in AIR 2004 SC, p-1330 reported in AIR 2004 SC, p-1330 held that if the No demand Certificate is obtained under coercion, the parties can invoke the arbitration clause though the final bills are prepared. He relied on para 26 and 27 of the said Judgement, which read as under:- "26. Even when rights and obligations of the parties are worked out the contract does not come to an end inter alia for the purpose of determination of the disputes arising thereunder, and, thus, the arbitration agreement can be invoked. Although it may not be strictly in place but we cannot shut our eyes to the ground reality that in the cases where a contractor has made huge investment, he cannot afford not to take from the employer the amount under the bills for various reasons which may include discharge of his liability towards the banks, financial institutions and other persons. In such a situation, the public sector under-takings would have an upper hand. They would not ordinarily release the money unless a "No Demand Certificate" is signed. Each case, therefore, is required to be considered on its own facts. 27. Further, necessitas non-habet legem is an old age maxim which means necessity knows no law. A person may sometimes have to succumb to the pressure of other party to the bargain who : 10 : is on a stronger position." 10. The learned Counsel appearing on behalf of appellant stated that the Apex Court Judgement in the matter of M/s. Ambica Construction V/s. Union of India can be distinguished on the point that in the case of Ambica Construction, the final measurement was not done when No Claim Certificate was granted, whereas in the present case, No Claim Certificate was granted when the entire work was over and the final bill was prepared on 19th February, 2001. Therefore, the respondent is not entitled to enforce the arbitration clause. It is admitted position that if the party who has executed No Claim Certificate allege that the execution of such Certificate was on account of fraud, coercion, undue influence practised by the other party and is able to establish the same, then obviously the party who issued No Claim Certificate, can invoke the arbitration clause. Usually in the Government contract unless and until No Claim Certificate is issued by the contractor, they are not releasing the payment. For releasing the payment contractor has to sign the No Claim Certificate even against his wishes. Thus, the decisions relied upon by the learned counsel for the appellant are distinguishable on the facts and cannot be used to : 11 : defeat the claim of respondent No.1 on the ground that the respondent No.1 had submitted No Claim Certificate while signing the final bill. Therefore, the submission made by the Appellants in respect of No Claim Certificate, cannot be accepted. 11. The second submission made by Counsel for the appellants that in view of clause 25 in the contract entered into by the parties, the respondent No.1 should have preferred the claim within 90 days from the submission of the final bill, which he failed to prefer and hence in view of Section 43(2) of the Arbitration and Conciliation Act, 1996, the claim of the respondent No.1 was barred by limitation. In support of her submission, Counsel appearing on behalf of the appellants relied on Apex Court Judgment in the matter of Oil and Natural Gas Corporation v/s. Saw Pipes Ltd. Oil and Natural Gas Corporation v/s. Saw Pipes Ltd. Oil and Natural Gas Corporation v/s. Saw Pipes Ltd. reported reported reported in 2003(5) SCC-705. in 2003(5) SCC-705. in 2003(5) SCC-705. It is the case of the appellants that in view of the contract between parties for fixing the limitation period, they cannot take advantage of Section 28 of the Contract Act. 12. In reply to the submission of appellant’s advocate about clause 25 in the contract, the learned Senior Counsel further submitted that right of the : 12 : respondent to claim the amount which was due to them subsists irrespective of the clause 25 of the agreement in view provisions of the Arbitration and Conciliation Act, 1996. For the purpose, the learned Senior Counsel for respondent No.1 relied on the decision in Union of Union of Union of India India India V/s. Moti Enterprises & Anr.2003(2) Arb.L.R.229 V/s. Moti Enterprises & Anr.2003(2) Arb.L.R.229 V/s. Moti Enterprises & Anr.2003(2) Arb.L.R.229 (Bombay), (Bombay), (Bombay), J.K. Anand V/s. Delhi Development Authority J.K. Anand V/s. Delhi Development Authority J.K. Anand V/s. Delhi Development Authority and and and Anr. 2001(2) Arb. L.R.663(Delhi) and Union of Anr. 2001(2) Arb. L.R.663(Delhi) and Union of Anr. 2001(2) Arb. L.R.663(Delhi) and Union of India India India V/s. Simplex Concrete Piles India(P) Ltd., V/s. Simplex Concrete Piles India(P) Ltd., V/s. Simplex Concrete Piles India(P) Ltd., 2003(3) 2003(3) 2003(3) Arb.LR 536 (Delhi). Arb.LR 536 (Delhi). Arb.LR 536 (Delhi). It is the contention of the Senior Counsel appearing on behalf of respondent No.1 that any provision in a contract contrary to the Limitation Act is not binding on the parties. In the present case, though the clause 25 of the agreement says that claim has to be preferred within 90 days from the date of final bill, same is hit by Section 28 of the Contract Act, 1872. He relied on the judgment of J.K. J.K. J.K. Anand Anand Anand V/s. Delhi Development Authority & Anr. reported V/s. Delhi Development Authority & Anr. reported V/s. Delhi Development Authority & Anr. reported in in in 2001(2) Arb.LR, 663 (Delhi) 2001(2) Arb.LR, 663 (Delhi) 2001(2) Arb.LR, 663 (Delhi), in which it is held that right of the contractor to claim the amount which was due to him subsists irrespective of clause 25 of the agreement where the limitation of 90 days from the date of final bill is mentioned. The learned Counsel relied on para 3 and 4 of the said Judgment which reads as under:- : 13 : "3. The validity of the above clause of the agreement cropped up for consideration in M/s. Hindustan Construction Corporation V/s. Delhi Development Authority. In the aforesaid case also, the arbitration was not demanded within 90 days and the claims of the petitioner were dismissed on that short ground alone and not on merits. It was held that Clause 25 is hit by an amendment which has been made to Section 28 of the Contract Act (vide Amendment 1 of 1997) whereby Clause (b) has been incorporated therein. Section 28 of the Contract Act provides as under: "Every Agreement : (a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary Tribunals, or which limits the time within which he may thus enforce his rights; or (b) which extinguishes the rights of any party thereto, or discharges any party thereby, from any liability under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights." 4. Perusal of the aforesaid provisions shows that these are applicable to the facts and circumstances of the case in hand. It was observed that Clause 25 of the agreement that the contractor’s right to claim arbitration comes to an end after the expiry of 90 days from the date of intimation of the final bill being ready for payment deprives the contractor of a very valuable right to claim the amount which was due to him from the respondent. 13. In view of the decisions referred to above, the limitation period provided in the Limitation Act cannot be curtailed by the agreement of the parties in view of : 14 : the amended provisions of Section 28 of the Indian Contract Act. Therefore, the learned Single Judge is right in holding that Section 43(2) read with Clause 25 of the Contract between the parties cannot defeat the claim of the respondent No.1 on the ground of limitation. Hence, we are unable to accept the contention of the learned Counsel for the appellants that the claim of the respondent No.1 was barred by limitation in view of Clause 25 of the Contract read with Section 43(2) of the Arbitration and Conciliation Act, 1996. 14. The Advocate appearing on behalf of the Appellants submitted that the Arbitrator as well as the learned Single Judge erred in coming to the conclusion that respondent No.1 is entitled to a sum of Rs.5,47,463/- against claim No.1 i.e. charges for the water, which was brought by the respondent No.1 for the work by hiring water tankers. It is the contention of appellants that Respondent No.1 are not liable to pay the water charges, if same is procured by hiring water tankers. It is the contention of appellants that it is specifically stated in terms and condition of contract that respondent No.1 have to apply to the Bombay Municipal Corporation for water supply and to those : 15 : charges only if paid to the Bombay Municipal Corporation, the respondent No.1 is entitled to claim. In reply to the said contention of the appellants, the learned Senior Counsel appearing on behalf of the respondent No.1 stated that actually they deposited the security amount with Bombay Municipal Corporation for water supply but because of lack of adequate pressure, they were constrained to procure the water by hiring tankers. Actually, the respondent No.1 by getting the water supply by tankers incurred less expenses. Therefore, the learned Single Judge in para 9 of Judgment observed that :- "If the Corporation was paid an amount of Rs.13,05,520/- by the Petitioner for getting water supply from the Corporation and no water supply was secured from the Corporation for any technical reason, normally the Petitioner should be entitled to refund of that amount from Corporation. Whereas, the Petitioner was prepared to spend Rs.13.05,520/- for the water supply, the contractor got the same water supply for an amount of Rs.5,47,463/- and the arbitrator has directed the Petitioner to pay that amount. If one looks at the award, it becomes clear that taking water supply for hiring tankers turned out to be cheaper than taking water supply from the BMC." 15. The learned Single Judge on the above reasoning upheld the award of the Arbitrator for the water charges in procuring the water by hiring tankers and we see no reason to differ with the learned Single Judge. As : 16 : such, it is not possible to accept the submission of the learned Counsel for the appellant in respect of the claim of Respondent No.1 for water charges. 16. Considering the submissions made by both the parties and for the reasons aforesaid mentioned, we are of the opinion that there is no infirmity in the impugned Judgment passed by Single Judge. This appeal, therefore, dismissed with no order as to costs, through out. JUDGE JUDGE JUDGE JUDGE JUDGE JUDGE