Case Note & Summary
The dispute arose from a contract dated 02.07.2001 for repair works, with time extended to 19.01.2002. The respondent contractor submitted a final bill on 13.02.2002 containing a No Claim Certificate, but payment was delayed. After reminders, the respondent sent additional claims on 25.02.2003, stating the final bill was under protest. An affidavit and undertaking were signed by the respondent in May and September 2003, which were later revoked due to non-payment. The appellant paid Rs.100358/- on 25.11.2003. The respondent invoked arbitration, leading to an arbitrator appointment under Section 11(6) of the Arbitration and Conciliation Act, 1996. The arbitrator rejected the appellant's application under Section 16 based on contract clauses 65 and 65A, and passed an award on 16.07.2009 allowing three out of ten claims. The District Judge set aside the award under Section 34, but the High Court overturned this in an appeal under Section 37. The Supreme Court was called to resolve whether the High Court's order was sustainable regarding clauses 65 and 65A. The appellant argued that the arbitrator exceeded contract boundaries by allowing claims not in the final bill, citing Bharat Coking Coal Ltd. vs. Annapurna Construction and PSA SICAL Terminate (P) Ltd. v. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin. The respondent relied on Union of India and Others v. Master Construction Company and Union of India v. Parmar Construction Company, contending that delays and vitiating factors justified the award. The court analyzed that an arbitrator is bound by the contract and cannot disregard its provisions. It distinguished between cases where the arbitrator fails to consider contract clauses and those where accord and satisfaction is vitiated by duress or coercion under Sections 15-18 of the Indian Contract Act, 1872. The court noted the arbitrator's rejection of the Section 16 application and the factual context of delayed payment and revocation of documents. Ultimately, the court upheld the High Court's order, implying the award was sustainable, as the arbitrator acted within permissible bounds considering the vitiating factors and contract interpretation.
Headnote
A) Arbitration Law - Arbitrator's Jurisdiction - Bound by Contract Terms - Arbitration and Conciliation Act, 1996 - Arbitrator cannot stray outside contract contours; disregard of specific provisions imperils award. Held that arbitrator is creature of parties and contract, must act within its confines. (Paras 8-9) B) Contract Law - Final Bill and No Claim Certificate - Prohibition Against Further Claims - Contract Clauses 65, 65A - Contract clauses prohibit further claims after final bill submission; claims deemed waived and extinguished. Court analyzed whether arbitrator could allow claims raised later despite this prohibition. (Paras 7, 10) C) Contract Law - Accord and Satisfaction - Vitiating Factors - Indian Contract Act, 1872, Sections 15-18 - No Claim Certificate given under duress or coercion may be subject to arbitrator's inquiry; arbitrator can reject accord and satisfaction if vitiating factors exist. Distinction made between cases of contract violation and vitiated accord. (Para 9) D) Arbitration Law - Judicial Review - Scope Under Sections 34 and 37 - Arbitration and Conciliation Act, 1996, Sections 34, 37 - Court reviewed arbitrator's award through appeal under Section 37; considered sustainability of impugned order. Analysis involved precedents on arbitrator's failure to consider contract clauses. (Paras 3-6, 10)
Issue of Consideration
Whether the impugned order is sustainable having regard to clauses 65 and 65A of the Contract
Final Decision
Court upheld the High Court's order, implying the arbitrator's award was sustainable
Law Points
- Arbitrator bound by contract terms
- prohibition against supplementing claims after final bill submission
- distinction between accord and satisfaction and vitiating factors under Indian Contract Act
- judicial review of arbitrator's award under Sections 34 and 37 of Arbitration and Conciliation Act
- 1996
