Case: Union Of India  Vs. Hari Singh

4. Brief facts which are necessary to dispose of this appeal are recapitulated asrespondent contractor was awarded a contract by the Northern Railway vide Contract Agreement No.74-W/1/1/307/WA/CDG dated 01.05.2002, for execution of "Earthwork in formation in filling Construction of all minor bridges within the Zone, including retaining wall, side drains and other protection works and allied works in Zone No.8 from Km.25 to Km.42 in Punjab area in connection with new BG Rail Link from Chandigarh to Ludhiana". The Contract Agreement also provided for execution of Supplementary Agreement. The contract was executed by the respondent and the entire amount due and payable to the contractor - respondent was paid to him by a Supplementary Agreement dated 27.04.2004, which reads ase of agreement made this day 27th April in the year two thousand four between the President of India, acting through the Northern Railway administration having his office at Dy CE/C-II/CD hereinafter called the Railway of the one part and nil of the second part. Whereas the party hereto of the other part executed on agreement with the party hereto of the first part being agreement number 740/1/1/207 dated 13.2.2001 for the performance nil hereinafter called the Principalwhereas it was agreed by and between the parties hereto that the works would be completed by the party hereto the second part on 31.10.2003 dated last extended and whereas the party hereto of the second part has executed the work to the entire satisfaction of the party hereto of the first part already made payment of the party hereto of the second part diverse sums from time to time aggregating to Rs.19891584.07 including the final bill bearing voucher No.362-C/C-II/CDG dated 27.3.2004 the receipt of which is hereby acknowledged by the party hereto of the second part in full and final settlement of all his/its claims under the principalwhereas the party hereto of the second part have received further sum of 26849531 through the final bill bearing voucher NO.362-C/0-II CDG dt. 27.3.2004 (the receipt of which is hereby acknowledge by the party thereto of the second part) from the party hereto the first part in full and final settlement of all his/its disputed claims under principalit is hereby agreed by and between the parties in the consideration of sums already paid (by theparty hereto of the first part to the party hereto of the second part against all outstanding dues and claims for, all works done under the aforesaid principal agreement including/excluding the security deposit the party hereto of the second part have no further dues of claims against the party hereto the first part under the said Principal Agreement. It is further agreed by and between the parties that the party hereto of the second part has accepted the said sums mentioned above in full and final satisfaction of all its dues and claims under the said Principalis further agreed and understood by and between the parties that in consideration of the payment already made, under the agreement, the said Principal Agreement shall stand finally discharged and rescinded all the terms and conditions including the arbitrationis further agreed and understood by and between the parties that in consideration of the payment already made, under the agreement, the said Principal Agreement shall stand finally discharged and rescinded on the terms and conditions including the arbitrationis further agreed and understood by and between the parties that the arbitration clause contained in the said principal agreement shall cease to have any effect and/or shall be deemed to be non-existent for all purposes.The respondent Contractor had sent a legal notice to the General Manager, Northern Railways, Baroda House, New Delhi immediately after receiving the entire amount in pursuance to the settlement of his full and final claim with the appellant. The legal notice sent by the respondent did not even mention the fact of entering into the supplementary agreement with the appellant and receiving the entire amount of Rs.2,07,49,099/-. The respondent deliberately suppressed the material facts and thereafter filed an Arbitration Case No.34/2004 before the High Court of Punjab and Haryana. The court without appreciating these facts, by an impugned judgment, referred the claim of the respondent-Contractor to the two arbitrators.The appellant-Union of India is seriously aggrieved by the impugned judgment of the High Court and submitted that after receiving the entire amount, the respondent also signed the supplementary agreement and thereafter the respondent was not justified in invoking the arbitration.

Court's reasoning:
15. In this case the court relied on earlier judgments of this court and reiterated the legal position which has been crystallized by a series of judgments where both the parties to a contract confirmed in writing that the contract has been fully and finally discharged by the parties and there was no outstanding claim or dispute and thereafter the matter could not have been referred to the arbitration.In our considered view, on the basis of the above settled legal position that when the parties by a supplementary agreement obtained a full and final discharge after paying the entire amount, which was due and payable to the contractor, thereafter the contractor would not be justified in invoking arbitration because there was no arbitral dispute for reference to the arbitration.