Case Note & Summary
The applicant, a sole proprietor carrying on business as a turnkey contractor, was awarded a contract by the respondent Slum Rehabilitation Authority for refurbishment of the SRA administrative building. The work was completed, but disputes arose regarding the final bill. The applicant alleged that the architect appointed by the respondent made incorrect deductions not acceptable to the applicant, and that the applicant was forced to sign the corrected bill under economic duress and coercion. Despite submitting a no dues certificate and an undertaking dated 7 January 2014, the applicant immediately protested by letter dated 16 January 2014, stating that the undertaking was given under duress and that disputes remained. The applicant invoked the arbitration clause (Clause 96 of the General Conditions of Contract) and sent a notice to the respondent, but the respondent failed to appoint an arbitrator. Consequently, the applicant filed the present application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator. The respondent opposed the application, contending that the applicant had accepted the amounts in full and final settlement and that the undertaking barred any further disputes. The respondent relied on the decision in New India Assurance Company Ltd. v. Genus Power Infrastructure Ltd. The main legal issues were whether an arbitration agreement existed and whether the alleged settlement precluded the appointment of an arbitrator. The Court observed that under Section 11(6A) of the Act, the scope of inquiry in an application under Section 11(6) is confined to the existence of an arbitration agreement. It found that Clause 96 undisputedly constituted a valid arbitration agreement. On the plea of full and final settlement, the Court held that prima facie the undertaking did not show a conclusive settlement, especially since the applicant had immediately protested alleging economic duress. The Court distinguished the case cited by the respondent, noting that in that case there was no protest around the time of signing. Relying on Chairman and M.D., NTPC Ltd. v. Reshmi Constructions, Builders and Contractors and National Insurance Company Ltd. v. Boghara Polyfab Pvt. Ltd., the Court reiterated that issues relating to discharge of contract by accord and satisfaction are for the arbitrator to decide. Consequently, the Court allowed the application and appointed Mr. Justice P.D. Kode (Retired) as the sole arbitrator to adjudicate the disputes. The parties were directed to appear before the arbitrator, and the arbitration application was disposed of with no order as to costs.
Headnote
A) Arbitration - Appointment of Arbitrator - Section 11(6) & 11(6A), Arbitration and Conciliation Act, 1996 - Existence of Arbitration Agreement - The Court noted that under Section 11(6A), its examination is limited to the existence of an arbitration agreement. Since Clause 96 of the General Conditions of Contract undisputedly constituted an arbitration agreement, the applicant was entitled to appointment of an arbitrator. Held that the application must be allowed as the existence of an arbitration agreement was not disputed. (Paras 6-9) B) Contract - Full and Final Settlement - Effect of Undertaking - The respondent argued that the applicant had furnished an undertaking dated 7 January 2014 accepting payment in full and final settlement, but the applicant immediately protested by letter dated 16 January 2014 claiming economic duress and coercion. The Court held that prima facie the undertaking did not indicate a conclusive settlement and that such disputes about whether settlement was final should be decided by the arbitrator. (Paras 8-10) C) Arbitration - Section 11(6) Scope - Plea of Accord and Satisfaction - Following NTPC Ltd. v. Reshmi Constructions and National Insurance Co. v. Boghara Polyfab, the Court held that issues of discharge of contract by accord and satisfaction are for the arbitrator, not for the court at the appointment stage. Held that the respondent's objection cannot be sustained. (Paras 3, 8) D) Practice and Procedure - Section 11(6A) introduced by 2015 Amendment - Court's power limited to examining existence of arbitration agreement, disregarding any prior judgments. Therefore, the respondent's objection based on full and final settlement cannot be entertained at this stage. Held that the parties must be left to agitate their respective pleas before the arbitrator. (Paras 7, 9)
Issue of Consideration
Whether an arbitrator should be appointed under Section 11(6) of the Arbitration and Conciliation Act, 1996, when the respondent contends that the applicant had received amounts in full and final settlement and furnished an undertaking.
Final Decision
Application allowed. Mr. Justice P.D. Kode (Retired) appointed as sole arbitrator. Parties directed to appear before arbitrator for adjudication of disputes. Arbitration application disposed of with no order as to costs.
Law Points
- existence of arbitration agreement
- Section 11(6A) Arbitration and Conciliation Act
- 1996
- full and final settlement dispute
- economic duress
- coercion
- arbitration clause interpretation
