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        REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 1659 OF 2018  

(Arising out of Special Leave Petition (C) NO. 12939 OF 2015)  

M/s ONGC Mangalore Petrochemicals Ltd.   .... Appellant(s)

Versus

M/s ANS Constructions Ltd. & Anr.               .... Respondent(s)

J U D G M E N T

R.K. Agrawal, J.

1) Leave granted.  

2) This appeal is directed against the final judgment and order

dated 12.01.2015 passed by the High Court of Karnataka at

Bengaluru in C.M.P. No. 35 of 2014 whereby learned single

Judge  of  the  High  Court  allowed  the  petition  filed  by  the

respondent No. 1- Company for appointment of an arbitrator

for resolution of the dispute between the appellant-Company

and respondent No. 1-Company.   

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3) Brief facts:

(a) Respondent No. 1-the Contractee Company was awarded

a Contract  for  “Site  Grading,  Construction of  Roads,  Water

Drains  and  Compound  Wall  for  Aromatic  Complex  at

Mangalore” in Mangalore SEZ by the appellant-Contractor on

17.03.2008.   The  total  contract  value  as  per  the  Letter  of

Acceptance  (LOA)  was  Rs.  163,25,68,576/-  which  was

subsequently  revised  to  Rs.  195,68,24,399.02/-  vide  letter

dated  20.09.2010  and  the  completion  period  was  also

extended upto 30.11.2010.  

(b) On 21.09.2012, the Contractee Company submitted a No

Dues/No Claim Certificate  certifying  the  payment  of  all  the

bills  and  in  total  settlement  of  all  the  claims  whatsoever

against the Contract.  Thereafter, on 10.10.2012, the appellant

herein-the Contractor Company made a payment of the final

bill of Rs. 20.34 crores to the Contractee Company.

(c) Subsequently, on 24.10.2012, the Contractee Company

withdrew  letter  dated  21.09.2012  for  “No  Dues/No  Claim

Certificate”  stating  that  it  was  a  pre-requisite  condition  for

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release of their long due legitimate payment against the works

executed under the Contract and the same was furnished by

the  Contractee  Company  under  duress  and coercion  of  the

appellant-Contractor.

(d) The Contractee-Company, vide letter dated 12.01.2013 to

the  appellant-Contractor,  submitted  a  claim  of  Rs.

96,88,48,642.00 for  the  losses incurred during execution of

the  contract  at  Mangalore.   On  19.06.2013,  the

appellant-Contractor  issued  a  Completion  Certificate  stating

that  the  works  awarded  under  the  Contract  have  been

executed and completed in all respects and no claim certificate

has  also  been submitted  by  the  Contractee-Company.  After

several  communication  in  writing,  the  appellant-Contractor,

vide  letter  dated  25.07.2013,  denied  the  claim  of  the

contractee-Company.

(e) Vide  letter  dated  14.09.2013,  the  contractee-Company

sent  a  notice  to  the  appellant-Contractor  for  resolving  the

dispute between the parties through Arbitration as envisaged

under  Article  9.0.2.0 to  the  Contract  and appointed Mr.  K.

Mohandas,  Former  General  Manager  (Law)-  SBI  as  its

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Arbitrator.   The  appellant-Contractor,  vide  letter  dated

18.10.2013 denied the request of the contractee-Company as

not tenable in law.

(f) Being  aggrieved  by  the  decision  of  the

appellant-Contractor  in  not  referring  the  dispute  to

Arbitration, the contractee-Company preferred a C.M.P. No. 35

of 2014 before the High Court of Karnataka at Bangalore.

(g) Learned single Judge of the High Court, vide judgment

and order dated 12.01.2015, allowed the petition filed by the

contractee-Company.

(h) Being  aggrieved  by  the  order  dated  12.01.2015,  the

appellant-Contactor  has  filed  this  appeal  by  way  of  special

leave before this Court.       

4) Heard Mr. P.S. Narasimha, learned senior counsel for the

appellant-Company  and  Mr.  P.  Vinay  Kumar  for  the

Respondents.

Point for consideration:

5) The  only  point  for  consideration  before  this  Court  is

whether the respondent-Contractee Company has made out a

case for referring the dispute to Arbitration?

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Rival Submissions:

6) Learned senior counsel for the Contractor-the appellant

Company strenuously contended that the High Court erred in

holding  that  the  contractee-Company  established  a  case  to

show that there was a genuine and serious dispute regarding

the  claim  and  that  the  claim  that  No  Dues  Certificate/No

Claim  Certificate  was  issued  under  duress/coercion  is

erroneous and unsustainable.  Learned senior counsel further

contended that there was no withholding of payment and the

extension  was  granted  subject  to  the  contractee-Company’s

request  and the  contract  does  not  provide  for  escalation of

costs.   

7) Learned senior counsel further contended that the delay

in payment does not arise at all because as per Clause 6.4.0.0,

there was no obligation cast upon the Contractor to pay the

RA Bills in full but it was to be done merely on the assessment

of the Engineer-in charge.  The High Court erred in referring to

few letters exchanged much prior to the Final Bill.  In fact, the

alleged claims were never brought up at the time of issuance

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of Final Bill or No Dues Certificate on 21.09.2012 and now at

this stage it is not open for the contractee-Company to raise

the  issue  of  losses  incurred  during  the  execution  of  the

Contract.   

8) Learned senior counsel finally contended that when both

the parties to a contract confirm in writing that the contract

has been fully  and finally  discharged by performance of  all

obligations and there are no outstanding claims or disputes,

court  will  not  refer  the  subsequent  claim  or  dispute  to

arbitration.  There was complete accord and satisfaction of the

contract between the parties and nothing further was left to be

done  by  either  parties.   The  High  Court  was  not  right  in

allowing the petition filed by the contractee-Company and no

case is made out for referring the dispute to Arbitration and

also  for  the  payment  of  the  alleged  amount  to  the

contractee-Company.    

9) Per contra, learned counsel for the contractee-Respondent

No. 1 herein submitted that during the execution of Contract,

the  contractee  Company  raised  Running  Account  Bills  (RA

Bills)  to  the  Contractor-Company  for  the  expenses  incurred

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towards carrying out the construction work but the same were

cleared with inordinate delay and even the final bill to the tune

of Rs. 20.34 crores was released by the appellant- Contractor

only  when the  contractee  Company furnished “No Dues/No

Claim  Certificate”  dated  21.09.2012.   Upon  submitting  the

above  Certificate,  the  appellant-Contractor  issued  a

Completion Certificate approving the work carried out by the

contractee under the Contract.  

10) Learned  counsel  for  the  contractee-Company  further

submitted that since the appellant-Contractor was not clearing

the legitimate and genuine dues payable under the RA Bills

and was always at the mercy of the appellant-Contractor for

the  release  of  payment  from  the  very  beginning  of  the

Contract, the last payment of Rs. 20.34 crores and the release

of performance bank guarantee was deliberately withheld by

the  appellant-Contractor.   The  work  got  completed  on

30.06.2011 and it was only after the submission of No-Dues

Certificate  on  21.09.2012,  the  final  payment  was  released.

Due  to  non-payment  of  RA  Bills  on  time,  the

contractee-Company was under severe financial  crunch and

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could  not  have  refused  to  issue  the  “No  Dues  Certificate”

which was issued under duress and has no meaning in the

eyes of law.   

11) Learned counsel further submitted that it is  prima facie

evident that there is a genuine and serious dispute between

the parties which requires the appointment of  an Arbitrator

under  the  clauses  of  the  Contract  to  adjudicate  upon  the

claims made by the contractee and it will cause grave injustice

to the party if the claims are not adjudicated in terms of the

Contract.  Learned counsel further submitted that under these

circumstances,  the  withdrawal  of  No  Dues/No  Claim

Certificate,  which  was  given  under  duress,  is  not  an

afterthought and in a number of decisions of this Court it has

been  held  that  if  a  party  who  has  executed  the  discharge

agreement or discharge voucher alleges that execution of such

document was on account of fraud/coercion/undue influence

practiced  by  the  other  party  then  such  discharge  of  the

contract  by  such  agreement  would  be  rendered  void  and

cannot be acted upon.     

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12) Learned  counsel  further  submitted  that  the

contractee-Company could not continue with the work due to

various reasons like pooja, shifting of idols, non-availability of

free  encumbrance  of  site,  obstruction in  the  blasting  work,

stoppage of hard rock blasting, issues with respect to work to

be given to local contractors, non-vacation of project displaced

families,  permission  for  forest  clearance,  permission  for

shifting  of  wooden  logs  etc.  and  the  huge  expenditure  as

disclosed  in  the  claim  was  incurred  by  the

contractee-Company  due  to  the  factors  attributable  to  the

appellant-Contractor.

13) Learned  counsel  finally  contended  that  the  “No  Dues

Certificate” was filed by the contractee-Company under duress

owing  to  their  huge  payment  pending  towards  the

appellant-Contractor  which  was  rightly  withdrawn  for  the

losses  incurred  due  to  the  appellant-Contractor.  Further,

when  there  is  an  Arbitration  clause  in  the  agreement,  the

contractee  Company has the  right  to  invoke the  same.  The

High  Court  was  right  in  allowing  the  petition  filed  by  the

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contractee-Company and no interference is sought for by this

Court in this regard.   

Discussion:

14) The  appellant  Contractor-ONGC  Mangalore

Petrochemicals Ltd. invited tender for “Award of Work for Site

Grading,  Construction  of  Roads,  Storm  Water  Drains  &

Compound Wall for Aromatic Complex at Mangalore”.  The bid

document was issued by M/s Toyo Engineering India Limited

(TEIL)-Respondent No.  2 herein on behalf  of  the  OMPL (the

contractor) being their Project Management Consultant.  M/s

ANS  Constructions  Limited-Respondent  No.  1  herein

submitted its bid on 15.11.2007.  Respondent No. 1 herein

was  awarded  the  Contract  vide  Letter  of  Acceptance  (LOA)

dated 17.03.2008.  The total Contract Value was estimated at

Rs.  163,25,68,576/-  which  was  later  on  revised  to  Rs.

195,68,24,399.02,  pursuant  thereto,  the  completion  period

was also extended upto 30.11.2010.   

15) During  the  subsistence  of  the  contract,  the

contractee-Company raised RA Bills for the expenses incurred

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towards carrying out the construction work.  It is evident on

record that the contractee-Company made several requests to

the appellant-Contractor to clear their legitimate and genuine

dues payable under the Bills  which was paid to them after

inordinate  delay.   It  is  also  the  claim  of  the

contractee-Company that the contractee was compelled to file

No Dues Certificate/No Claim Certificate dated 21.09.2012 in

order to get the release of the Final Bill under the Contract.

On 10.10.2012, the contractor-Company made the payment of

the final bill of Rs. 20.34 crores to the contractee-Company.

After  the  release  of  the  Final  Bill,  the  contractee-Company

withdrew the “No Dues/No Claim Certificate” stating that the

letter dated 21.09.2012 was pre-requisite condition for release

of  their  long  due  legitimate  payment  against  the  works

executed  under  the  Contract  and  the  same  was  furnished

under  duress  and  coercion  of  the  appellant-Contractor.

Further, on 12.01.2013, the contractee-Company submitted a

claim for Rs. 96,88,48,642.00 for the losses incurred during

execution of the contract at Mangalore.

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16) The appellant-Contractor,  vide letter  dated 25.07.2013,

rejected the claim of the contractee-Company on the ground

that  the  Contractee  has  submitted  No  Dues/No  Claim

Certificate and withdrawal of the same on the ground that it

was obtained under duress and coercion is wrong, incorrect

and not tenable in law.  Being aggrieved by the rejection of

their claim, the contractee-Company invoked the Arbitration

clause under the Contract and appointed its Arbitrator.  The

appellant-Contractor, vide letter dated 18.10.2013, declined to

nominate its Arbitrator.  The contractee-Company filed a Civil

Miscellaneous Petition under Section 11 of the Arbitration and

Conciliation Act, 1996 (in short ‘the Act’) for the appointment

of  an  Arbitrator  in  lieu  of  the  nominee  arbitrator  of  the

appellant-Contractor so that the said arbitrator along with the

nominee  arbitrator  already  appointed  by  the

contractee-Company  agree  upon  the  appointment  of  the

third/presiding arbitrator for constitution of a three member

Arbitral Tribunal as per the agreed terms of the Contract for

adjudicating upon the dispute arising out of execution of the

Contract.  

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17) Learned senior counsel for the appellant-Contractor, after

taking us through the material on record, submitted that the

contract has come to an end and the obligations therein have

been discharged  and there  is  no  point  of  raising  a  belated

claim in the form of losses incurred during the execution of

the Contract that too after submitting the Final Bills as well as

the  No  Dues  Certificate.   In  support  of  his  claim,  learned

senior counsel relied upon a decision of this Court in Union of

India and Others vs.  Master  Construction Co. (2011)  12

SCC 349 wherein it was held as under:-

“18. In our opinion, there is no rule of the absolute kind. In a case where the claimant contends that a discharge voucher or no-claim  certificate  has  been  obtained  by  fraud,  coercion, duress  or  undue  influence  and  the  other  side  contests  the correctness thereof, the Chief Justice/his designate must look into this aspect to find out at least, prima facie, whether or not the dispute is bona fide and genuine. Where the dispute raised by the claimant with regard to validity of the discharge voucher or  no-claim  certificate  or  settlement  agreement,  prima  facie, appears  to  be  lacking  in  credibility,  there  may  not  be  a necessity to refer the dispute for arbitration at all.

19. It  cannot be overlooked that the cost of arbitration is quite huge—most of the time, it runs into six and seven figures. It may not be proper to burden a party, who contends that the dispute is not arbitrable on account of discharge of contract, with  huge  cost  of  arbitration  merely  because  plea  of  fraud, coercion,  duress  or  undue  influence  has  been  taken  by  the claimant.  A  bald  plea  of  fraud,  coercion,  duress  or  undue influence is not enough and the party who sets up such a plea must prima facie establish the same by placing material before the  Chief  Justice/his  designate.  If  the  Chief  Justice/his designate finds some merit in the allegation of fraud, coercion,

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duress or undue influence, he may decide the same or leave it to be decided by the Arbitral Tribunal. On the other hand, if such  plea  is  found  to  be  an  afterthought,  make-believe  or lacking in credibility, the matter must be set at rest then and there.”

18) Further, learned senior counsel relied upon a judgment

of  this Court in  New India Assurance Co. Ltd. vs.  Genus

Power Infrastructure Ltd. (2015)  2 SCC 424 wherein this

Court has held as under:-

7. The question that arises is whether the discharge in the present case upon acceptance of compensation and signing of subrogation letter was not voluntary and whether the claimant was subjected to  compulsion or  coercion and as such could validly invoke the jurisdiction under Section 11 of the Act. The law on the point is clear from following decisions of this Court. In National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd in paras 26 and 51 it was stated as under:  

“26.  When  we  refer  to  a  discharge  of  contract  by  an agreement signed by both the parties or by execution of a full  and  final  discharge  voucher/receipt  by  one  of  the parties, we refer to an agreement or discharge voucher which is validly and voluntarily executed. If  the party which has executed  the  discharge  agreement  or  discharge  voucher, alleges that the execution of  such discharge agreement or voucher was on account of fraud/coercion/undue influence practised  by  the  other  party  and  is  able  to  establish  the same, then obviously the discharge of the contract by such agreement/voucher  is  rendered  void  and  cannot  be  acted upon. Consequently, any dispute raised by such party would be arbitrable.

* * * 51.  The  Chief  Justice/his  designate  exercising

jurisdiction  under  Section  11  of  the  Act  will  consider whether  there  was  really  accord  and  satisfaction  or discharge of contract by performance. If the answer is in the affirmative, he will refuse to refer the dispute to arbitration. On the other hand, if the Chief Justice/his designate comes

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to the conclusion that the full and final settlement receipt or discharge  voucher  was  the  result  of  any fraud/coercion/undue influence,  he will  have to hold that there  was no  discharge  of  the  contract  and consequently, refer the dispute to arbitration. Alternatively, where the Chief Justice/his  designate  is  satisfied  prima  facie  that  the discharge  voucher  was  not  issued  voluntarily  and  the claimant was under some compulsion or coercion, and that the matter deserved detailed consideration, he may instead of deciding the issue himself, refer the matter to the Arbitral Tribunal  with  a  specific  direction  that  the  said  question should be decided in the first instance.” 8. In  the  decision  rendered  in  Union  of  India v.  Master Construction Co this Court observed as under:  

“18. In our opinion, there is no rule of the absolute kind. In a case where the claimant contends that a discharge voucher  or  no-claim  certificate  has  been  obtained  by fraud, coercion, duress or undue influence and the other side  contests  the  correctness  thereof,  the  Chief Justice/his designate must look into this aspect to find out at least, prima facie, whether or not the dispute is bona fide and genuine. Where the dispute raised by the claimant with regard to validity of the discharge voucher or  no-claim  certificate  or  settlement  agreement,  prima facie, appears to be lacking in credibility, there may not be a necessity to refer the dispute for arbitration at all. 19. It cannot be overlooked that the cost of arbitration is quite huge—most of the time, it runs into six and seven figures.  It  may  not  be  proper  to  burden  a  party,  who contends that the dispute is not arbitrable on account of discharge of contract, with huge cost of arbitration merely because  plea  of  fraud,  coercion,  duress  or  undue influence has been taken by the claimant. A bald plea of fraud, coercion, duress or undue influence is not enough and the party who sets up such a plea must prima facie establish the same by placing material before the Chief Justice/his designate. If the Chief Justice/his designate finds  some  merit  in  the  allegation  of  fraud,  coercion, duress or undue influence, he may decide the same or leave it  to be decided by the Arbitral  Tribunal.  On the other hand, if such plea is found to be an afterthought, make-believe or lacking in credibility, the matter must be set at rest then and there. * * *

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22. The above certificates leave no manner of doubt that upon receipt of the payment, there has been full and final settlement of the contractor’s claim under the contract. That the payment of final bill was made to the contractor on  19-6-2000  is  not  in  dispute.  After  receipt  of  the payment on 19-6-2000, no grievance was raised or lodged by the contractor immediately. The authority concerned, thereafter, released the bank guarantee in the sum of Rs 21,00,000 on 12-7-2000.  It  was then that  on that  day itself, the contractor lodged further claims.”

9. It  is therefore clear that a bald plea of fraud, coercion, duress or undue influence is not enough and the party who sets  up  a  plea,  must  prima  facie  establish  the  same  by placing  material  before  the  Chief  Justice/his  designate. Viewed thus, the relevant averments in the petition filed by the  respondent  need to  be  considered,  which were  to  the following effect:

“(g)  That  the  said  surveyor,  in  connivance  with  the respondent Company, in order to make the respondent Company  escape  its  full  liability  of  compensating  the petitioner of such huge loss, acted in a biased manner, adopted coercion, undue influence and duress methods of  assessing the  loss and forced the  petitioner to  sign certain  documents  including  the  claim  form.  The respondent Company also denied the just claim of  the petitioner by their acts of omission and commission and by exercising  coercion and undue influence  and made the  petitioner  Company  sign  certain  documents, including a pre-prepared discharge voucher for the said amount in advance, which the petitioner Company were forced  to  do  so  in  the  period  of  extreme  financial difficulty  which  prevailed  during  the  said  period.  As stated aforesaid, the petitioner Company was forced to sign several documents including a letter accepting the loss amounting to Rs 6,09,55,406 and settle the claim of Rs 5,96,08,179 as against the actual loss amount of Rs 28,79,08,116  against  the  interest  of  the  petitioner Company. The said letter and the aforesaid pre-prepared discharge  voucher  stated  that  the  petitioner  had accepted the claim amount in full and final settlement and thus,  forced  the  petitioner  Company  to  unilateral acceptance  of  the  same.  The  petitioner  Company  was forced  to  sign  the  said  document  under  duress  and coercion  by  the  respondent  Company.  The  respondent

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Company further threatened the petitioner Company to accept  the  said  amount  in  full  and  final  or  the respondent Company will not pay any amount towards the  fire  policy.  It  was  under  such  compelling circumstances that  the petitioner Company was forced and  under  duress  was  made  to  sign  the  acceptance letter.”

10. In  our  considered  view,  the  plea  raised  by  the respondent is bereft of any details and particulars, and cannot be anything but a bald assertion. Given the fact that there was no protest or demur raised around the time or soon after the letter  of  subrogation  was  signed,  that  the  notice  dated 31-3-2011  itself  was  nearly  after  three  weeks  and  that  the financial condition of the respondent was not so precarious that it  was  left  with  no  alternative  but  to  accept  the  terms  as suggested,  we are of  the firm view that  the discharge in the present  case  and  signing  of  letter  of  subrogation  were  not because of exercise of any undue influence. Such discharge and signing of letter of subrogation was voluntary and free from any coercion or undue influence. In the circumstances, we hold that upon execution of the letter of subrogation, there was full and final settlement of the claim. Since our answer to the question, whether  there  was  really  accord  and  satisfaction,  is  in  the affirmative, in our view no arbitrable dispute existed so as to exercise power under Section 11 of the Act. The High Court was not therefore justified in exercising power under Section 11 of the Act.”

19) When we refer to discharge of a contract by an agreement

signed by both the parties or by execution of a full and final

discharge voucher/receipt by one of the parties, we refer to an

agreement  or  discharge  voucher  which  is  validly  and

voluntarily  executed.  If  the  party  which  has  executed  the

discharge  agreement  or  discharge  voucher,  alleges  that  the

execution  of  such  discharge  agreement  or  voucher  was  on

account of  fraud/coercion/undue influence practised by the

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other party and is able to establish the same, then obviously

the discharge of  the contract by such agreement/voucher is

rendered void and cannot be acted upon. Consequently, any

dispute raised by such party would be arbitrable.  But in case

the party is not able to establish such a claim or appears to be

lacking in credibility, then it is not open to the courts to refer

the dispute to arbitration at all.   

20) In  support  of  the  claim  of  duress  and  coercion  while

issuing  the  said  Certificate,  learned  counsel  for  the

contractee-Company has taken us through a decision of this

Court in National Insurance Company Limited vs. Boghara

Polyfab Private Limited (2009) 1 SCC 267 wherein it  was

held as under:-

“24. What is however clear is when a respondent contends that the dispute is not arbitrable on account of discharge of the contract under a settlement agreement or discharge voucher or no-claim  certificate,  and  the  claimant  contends  that  it  was obtained by fraud, coercion or undue influence, the issue will have to be decided either by the Chief Justice/his designate in the proceedings under Section 11 of the Act or by the Arbitral Tribunal as directed by the order under Section 11 of the Act. A claim for arbitration cannot be rejected merely or solely on the ground that a settlement agreement or discharge voucher had been executed by the claimant, if its validity is disputed by the claimant.

50. Let us consider what a civil court would have done in a case where the defendant puts forth the defence of accord and satisfaction on the basis of a full and final discharge voucher

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issued  by  the  plaintiff,  and  the  plaintiff  alleges  that  it  was obtained by fraud/coercion/undue influence and therefore not valid. It would consider the evidence as to whether there was any fraud, coercion or undue influence. If it found that there was none, it will accept the voucher as being in discharge of the contract and reject the claim without examining the claim on merits.  On  the  other  hand,  if  it  found  that  the  discharge voucher had been obtained by fraud/undue influence/coercion, it will ignore the same, examine whether the plaintiff had made out the claim on merits and decide the matter accordingly. The position will  be the same even when there is a provision for arbitration.

51. The Chief  Justice/his designate exercising jurisdiction under Section 11 of  the Act  will  consider whether there was really  accord  and  satisfaction  or  discharge  of  contract  by performance. If the answer is in the affirmative, he will refuse to refer the dispute to arbitration. On the other hand, if the Chief Justice/his designate comes to the conclusion that the full and final settlement receipt or discharge voucher was the result of any fraud/coercion/undue influence, he will have to hold that there was no discharge of the contract and consequently, refer the  dispute  to  arbitration.  Alternatively,  where  the  Chief Justice/his designate is satisfied prima facie that the discharge voucher was not issued voluntarily and the claimant was under some  compulsion  or  coercion,  and  that  the  matter  deserved detailed  consideration,  he  may  instead  of  deciding  the  issue himself, refer the matter to the Arbitral Tribunal with a specific direction that the said question should be decided in the first instance.

52. Some illustrations (not exhaustive) as to when claims are arbitrable and when they are not, when discharge of contract by accord  and  satisfaction  are  disputed,  to  round  up  the discussion on this subject are:

(i) A claim is referred to a conciliation or a pre-litigation Lok Adalat. The parties negotiate and arrive at a settlement. The terms of settlement are drawn up and signed by both the parties and attested by the conciliator or the members of the  Lok  Adalat.  After  settlement  by  way  of  accord  and satisfaction, there can be no reference to arbitration.

(ii)  A  claimant  makes  several  claims.  The  admitted  or undisputed claims are paid. Thereafter negotiations are held for  settlement  of  the  disputed  claims  resulting  in  an agreement  in  writing  settling  all  the  pending  claims  and disputes.  On such  settlement,  the  amount  agreed is  paid and the contractor also issues a discharge voucher/no-claim

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certificate/full  and  final  receipt.  After  the  contract  is discharged  by  such  accord  and  satisfaction,  neither  the contract  nor any dispute survives for consideration. There cannot  be  any  reference  of  any  dispute  to  arbitration thereafter.

(iii) A contractor executes the work and claims payment of say rupees ten lakhs as due in terms of the contract. The employer  admits  the  claim only  for  rupees  six  lakhs  and informs the contractor either in writing or orally that unless the contractor gives a discharge voucher in the prescribed format acknowledging receipt of rupees six lakhs in full and final  satisfaction of  the contract,  payment of  the admitted amount  will  not  be  released.  The  contractor  who  is hard-pressed for funds and keen to get the admitted amount released, signs on the dotted line either in a printed form or otherwise,  stating that  the  amount is  received in full  and final  settlement.  In  such  a  case,  the  discharge  is  under economic  duress  on account  of  coercion  employed  by  the employer.  Obviously,  the  discharge  voucher  cannot  be considered to be voluntary or as having resulted in discharge of the contract by accord and satisfaction. It will not be a bar to arbitration.

(iv) An insured makes a claim for loss suffered. The claim is neither admitted nor rejected. But the insured is informed during discussions that unless the claimant gives a full and final  voucher  for  a  specified  amount  (far  lesser  than  the amount  claimed by  the  insured),  the  entire  claim will  be rejected. Being in financial difficulties, the claimant agrees to the demand and issues an undated discharge voucher in full and  final  settlement.  Only  a  few  days  thereafter,  the admitted  amount  mentioned  in  the  voucher  is  paid.  The accord and satisfaction in such a case is not voluntary but under  duress,  compulsion  and  coercion.  The  coercion  is subtle,  but  very  much  real.  The  “accord”  is  not  by  free consent. The arbitration agreement can thus be invoked to refer the disputes to arbitration.

(v) A claimant makes a claim for a huge sum, by way of damages. The respondent disputes the claim. The claimant who  is  keen  to  have  a  settlement  and  avoid  litigation, voluntarily  reduces the  claim and requests for  settlement. The respondent agrees and settles the claim and obtains a full and final discharge voucher. Here even if the claimant might  have  agreed  for  settlement  due  to  financial compulsions and commercial pressure or economic duress, the  decision  was  his  free  choice.  There  was  no  threat,

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coercion  or  compulsion  by  the  respondent.  Therefore,  the accord  and  satisfaction  is  binding  and  valid  and  there cannot be any subsequent claim or reference to arbitration.”

21) Learned counsel  further  relied  upon a decision of  this

Court in R.L. Kalathia & Co. vs. State of Gujarat (2011) 2

SCC 400 wherein it was held as under:-  

“10. Before going into the factual matrix on this aspect, it is useful to refer the decisions of this Court relied on by Mr Altaf Ahmed.  In  NTPC  Ltd. v.  Reshmi  Constructions,  Builders  & Contractors1 which relates to termination of a contract, one of the questions that arose for consideration was:  

“(i)  Whether  after  the  contract  comes  to  an  end  by completion of the contract work and acceptance of the final bill  in  full  and  final  satisfaction  and  after  issuing  a ‘no-demand certificate’ by the contractor, can any party to the contract raise any dispute for reference to arbitration?”

While answering the said issue this Court held:  “27. 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 a case 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 undertakings 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.

28.  Further,  necessitas  non  habet  legem is  an  age-old maxim which means necessity knows no law. A person may sometimes have  to  succumb to  the  pressure  of  the  other party to the bargain who is in a stronger position.”

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22) In the case at hand, the High Court allowed the appeal

filed  by  the  contractee  on  the  assertion  that  the  No  Dues

Certificate was given on account of coercion/undue influence

practiced by the appellant-Contractor.  The contractee, while

basing  its  claim,  relied  upon  the  letters  issued  to  the

appellant-Contractor  for  releasing  the  payment  of  RA  Bills.

Whether there has been duress and coercion exerted against

the contractee-Company by the appellant-Contractor has to be

examined keeping in mind the background in which the said

letters  have  been  exchanged  between  the  parties.   Learned

counsel  for  the  contractee-Company  categorically  submitted

the relevant dates for our perusal to show that RA Bills were

raised on various dates for making payments to suppliers and

others  but  were  advertently  delayed causing  grave  financial

crisis to the contractee-Company to carry out the works and

losses  on  account  of  delay  in  settling  the  claims  of  the

contractee-Company  periodically.   However,  it  is  contended

from the side of the appellant-Contractor that the High Court

was not right in considering it a genuine and serious dispute

regarding the claim made and the conduct of the parties as

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reflected in the correspondence exchanged between the parties

disclosing  that  the  contractee-Company encountered several

financial constraints.   

23) Pursuant to taking a false claim of duress and coercion

while filing the No Dues Certificate, the contractee-Company,

vide  letter  dated  12.01.2013  to  the  appellant-Contractor,

submitted  a  claim  for  Rs.  96,88,48,642.00  for  the  losses

incurred during execution of the contract at Mangalore.  It has

been claimed that the contractee-Company could not continue

with the work due to various reasons like pooja,  shifting of

Idols, non-availability of free encumbrance of site, obstruction

in the blasting work, stoppage of  hard rock blasting, issues

with  respect  to  work  to  be  given  to  local  contractors,

non-vacation  of  project  displaced  families,  permission  for

forest  clearance,  permission for  shifting of  wooden logs etc.

and  the  huge  expenditure  as  disclosed  in  the  claim  was

incurred  by  the  contractee-Company  due  to  the  factors

attributable to the appellant-Contractor.  Clause 6.6.0 of the

General  Conditions  of  Contract  deals  with  “Claims  by  the

Contractor” (contractee in the case at hand).  Clause 6.6.1.0.

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of  the  Contract  states  that  in  case  of  a  claim  of  extra

compensation  or  remuneration,  the  Contractee  shall  give

notice in writing of its claim within 10 days from the date of

issue of orders or instructions related to any works for which

the Contractee claims such additional payment.  The notice

shall give full particulars of the nature of such claim, grounds

on which it  is based and the amount claimed.  Unless and

until notice is given, the Contractor shall not be liable to pay

extra compensation to the Contractee.  Clause 6.6.3.0 states

that any claim of the Contractee in accordance with Clause

6.6.1.0 shall be separately included in the Final Bill prepared

by it in the form of Statement of Claims, giving particulars of

the  nature of  claims,  ground on which it  is  based and the

amount claimed and shall be supported by a copy of the notice

and the Contractor shall not be liable in respect of any notified

claim not specifically reflected in the Final Bill in accordance

with the provisions of Clause 6.6.3.0 which shall be deemed to

have been waived by the Contractee.   

24) From  the  materials  on  record,  we  find  that  the

contractee-Company  had  issued  the  “No  Dues/No  Claim

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Certificate” on 21.09.2012, it had received the full amount of

the final bill being Rs. 20.34 crores on 10.10.2012 and after

12  days  thereafter,  i.e.,  only  on  24.10.2012,  the

contractee-Company withdrew letter dated 21.09.2012 issuing

“No Dues/No Claim Certificate”.  Apart from it, we also find

that  the  Final  Bill  has  been  mutually  signed  by  both  the

parties to the Contract accepting the quantum of work done,

conducting final measurements as per the Contract, arriving

at  final  value  of  work,  the  payments  made  and  the  final

payment  that  was  required  to  be  made.   The

contractee-Company accepted the  final  payment  in  full  and

final satisfaction of all its claims.  We are of the considered

opinion  that  in  the  presents  facts  and  circumstances,  the

raising of the Final Bill and mutual agreement of the parties in

that  regard,  all  claims,  rights  and  obligation  of  the  parties

merge with the Final Bill and nothing further remains to be

done. Further, the appellant-Contractor issued the Completion

Certificate  dated  19.06.2013  pursuant  to  which  the

appellant-Contractor has been discharged of all the liabilities.

With regard to the issue that the “No-Dues Certificate”  had

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been given under duress and coercion, we are of the opinion

that  there  is  nothing  on  record  to  prove  that  the  said

Certificate had been given under duress or coercion and as the

Certificate  itself  provided  a  clearance  of  no  dues,  the

contractee  could  not  now  turn  around  and  say  that  any

further  payment  was  still  due  on  account  of  the  losses

incurred  during  the  execution of  the  Contract.    The  story

about duress was an afterthought in the background that the

losses incurred during the execution of the Contract were not

visualised earlier by the contractee.  As to financial duress or

coercion, nothing of this kind is established prima facie. Mere

allegation that no-claim certificates have been obtained under

financial  duress and coercion,  without there being anything

more to suggest that, does not lead to an arbitrable dispute.

The  conduct  of  the  contractee  clearly  shows that  “no-claim

certificate” was given by it voluntarily; the contractee accepted

the  amount  voluntarily  and  the  contract  was  discharged

voluntarily.

Conclusion:

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25) Admittedly,  No-Dues  Certificate  was  submitted  by  the

contractee-Company  on  21.09.2012  and  on  their  request

Completion  Certificate  was  issued  by  the  appellant-

Contractor.   The contractee, after a gap of one month, that is,

on  24.10.2012,  withdrew  the  No  Dues  Certificate  on  the

grounds  of  coercion  and  duress  and  the  claim  for  losses

incurred during execution of the Contract site was made vide

letter dated 12.01.2013, i.e., after a gap of 3 ½ (three and a

half) months whereas the Final Bill was settled on 10.10.2012.

When the contractee accepted the final payment in full  and

final satisfaction of all its claims, there is no point in raising

the  claim  for  losses  incurred  during  the  execution  of  the

Contract at a belated stage which creates an iota of doubt as

to why such claim was not settled at the time of submitting

Final  Bills  that  too  in  the  absence  of  exercising  duress  or

coercion on the Contractee by the appellant-Contractor.   In

our  considered  view,  the  plea  raised  by  the

contractee-Company is bereft of  any details and particulars,

and  cannot  be  anything  but  a  bald  assertion.  In  the

circumstances, there was full and final settlement of the claim

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and there was really accord and satisfaction and in our view

no arbitrable dispute existed so as to exercise power under

Section  11  of  the  Act.  The  High  Court  was  not,  therefore,

justified in exercising power under Section 11 of the Act.

26) In  view  of  the  foregoing  discussion,  we  set  aside  the

judgment  and  order  dated  12.01.2015  passed  by  the  High

Court. The appeal is allowed.

...…………….………………………J.                (R.K. AGRAWAL)                                  

.…....…………………………………J.         (AMITAVA ROY)                          

NEW DELHI; FEBRUARY 7, 2018.