Case Note & Summary
The case arises from a construction contract between Vilayati Ram Mittal (P) Ltd. (the claimant/appellant) and the Reserve Bank of India (RBI/respondent) for building quarters and a community hall at Kharghar, Navi Mumbai. The contract was signed on 14 September 1993, with a completion period of 18 months. Disputes arose regarding delays and extra work, leading the claimant to invoke arbitration. The arbitrator passed an award in favor of the claimant for certain amounts. RBI challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before a Single Judge of the Bombay High Court, who set aside the award on two grounds: (1) that there was accord and satisfaction as the claimant had accepted payment towards full and final settlement, and (2) that Clause 18 of the Agreement barred any claim for damages. The claimant appealed. The Division Bench reversed the Single Judge's order, holding that the acceptance of payment under protest did not constitute accord and satisfaction, and that Clause 18 could not be invoked to deny damages caused by the employer's own breach. The Court emphasized the limited scope of interference with arbitral awards under Section 34 and restored the award.
Headnote
A) Arbitration - Accord and Satisfaction - Payment under protest - The issue was whether acceptance of a payment under protest amounts to accord and satisfaction. The Court held that where a party accepts payment under protest or without prejudice, it does not constitute a full and final settlement of the claim. The arbitrator's finding that there was no accord and satisfaction was plausible and not perverse. (Paras 10-15) B) Contract Law - Exclusion Clause - Clause 18 of Agreement - The issue was whether Clause 18, which disentitles the contractor from claiming compensation for loss suffered, bars claims for damages caused by the employer's breach. The Court held that such a clause cannot be interpreted to exclude liability for the employer's own breach, as it would be against public policy and the principle that a party cannot take advantage of its own wrong. (Paras 16-20) C) Arbitration - Scope of Interference - Section 34 of the Arbitration and Conciliation Act, 1996 - The issue was the extent to which a court can interfere with an arbitral award. The Court held that interference is limited to grounds specified in Section 34, and the court cannot reappreciate evidence or substitute its own view if the arbitrator's view is plausible. (Paras 21-25)
Issue of Consideration
Whether the learned Single Judge was justified in setting aside the arbitral award on the grounds of accord and satisfaction and the applicability of Clause 18 of the Agreement to bar the claim for damages.
Final Decision
The appeal is allowed. The judgment of the learned Single Judge dated 30th August, 2004 is set aside. The arbitral award is restored.
Law Points
- Accord and satisfaction requires clear and unequivocal acceptance of payment in full settlement
- Payment under protest does not constitute accord and satisfaction
- Clause 18 of a contract cannot be invoked to deny damages caused by the employer's own breach
- Arbitral award can be set aside only on grounds under Section 34 of the Arbitration and Conciliation Act
- 1996
- Interference with arbitral award is limited when the view of the arbitrator is plausible
