Back
1995 Supreme(AP) 506
Andhra Pradesh High Court
Judges : D.H.NASIR, P.VENKATRAMA REDDY
Hindustan Petroleum Corporation Limited, General Manager, Visakhapatnam - Appellant
Versus
V.D, Swami and Company Ltd., rep., by its Chairman and Managing Director, Sri M.Balaji - Respondent
Decided On : 08-25-95
The Court has jurisdiction to decide whether an arbitration clause exists or not while referring a dispute to arbitration under Section 20 of the Arbitration Act. However, the Court should not express any view on the merits of the dispute, including the validity and enforceability of a settlement agreement, as these matters are for the arbitrator to decide.
Headnote:
ARBITRATION - AWARD - SETTING ASIDE - GROUNDS - JURISDICTION OF COURT - SCOPE OF REVIEW - VALIDITY OF SETTLEMENT AGREEMENT - RES JUDICATA - ARBITRATOR'S AUTHORITY TO DECIDE DISPUTES - ACCORD AND SATISFACTION - CONTRACT DISCHARGE - INTERPRETATION OF ARBITRATION CLAUSE.
Fact of the Case:
The appellant and respondent entered into a contract for the modification of atmospheric and distillation units at Visakha Refinery. Disputes arose, and a settlement agreement was reached on 2-1-1989, recorded in the minutes of a meeting (Ex. C-5). The respondent claimed that the settlement was signed under pressure and that non-payment of the balance amount due under Ex. C-5 rescinded the settlement. The respondent filed a suit under Section 20 of the Arbitration Act, seeking to refer the disputes to arbitration. The Court decreed the suit and appointed a retired District Judge as the sole arbitrator. The arbitrator held that Ex. C-5 was binding and awarded the respondent a sum of Rs. 9,72,000/- with interest. Both parties filed applications under Sections 30 and 33 of the Arbitration Act to set aside the award.
Finding of the Court:
The Court held that the finding in the judgment in O. S. No. 55/89 that the settlement agreement (Ex. C-5) stood cancelled and the original agreement conferring the right to seek arbitration stood revived was binding on the arbitrator and that the arbitrator committed misconduct by ignoring this finding and giving his own reasoning to give effect to Ex. C-5. The Court set aside the award on this ground.
Issues: 1. Whether the Court had jurisdiction to make a finding on the validity and enforceability of the settlement agreement (Ex. C-5) while referring the dispute to arbitration under Section 20 of the Arbitration Act? 2. Whether the finding of the Court in O. S. No. 55/89 that the settlement agreement stood cancelled and the original agreement conferring the right to seek arbitration stood revived was binding on the arbitrator? 3. Whether the arbitrator had the authority to decide the dispute concerning the settlement agreement and accord and satisfaction, notwithstanding the finding of the Court in O. S. No. 55/89?
Ratio Decidendi: 1. The Court has jurisdiction to decide whether an arbitration clause exists or not while referring a dispute to arbitration under Section 20 of the Arbitration Act. However, the Court should not express any view on the merits of the dispute, including the validity and enforceability of a settlement agreement, as these matters are for the arbitrator to decide. 2. The finding of the Court in O. S. No. 55/89 that the settlement agreement stood cancelled and the original agreement conferring the right to seek arbitration stood revived was not binding on the arbitrator. The finding was not categorical and clear, and it was unnecessary for the Court to express any view on this issue. The arbitrator was free to decide the dispute concerning the settlement agreement and accord and satisfaction according to law. 3. The arbitrator had the authority to decide the dispute concerning the settlement agreement and accord and satisfaction, notwithstanding the finding of the Court in O. S. No. 55/89. The question of accord and satisfaction relates to the discharge of the contract and is a matter for the arbitrator to decide.
Final Decision: The Court allowed the Civil Miscellaneous Appeals, set aside the judgment of the lower Court, and upheld the award of the arbitrator. The award was made the rule of the Court, and a decree was passed in terms thereof.
( 1 ) THESE two Civil Miscellaneous Appeals under Section 39 of the Arbitration act arise out of a common order passed by the Principal Subordinate Judge, visakhapatnam in O. P. Nos. 64 and 94 of 1992. O. P. No. 64/94 was filed by the respondent-contractor under Sections 30 and 33 of the Arbitration Act to set aside the award dated 25-2-1992 made by the sole arbitrator. O. P. No. 94 of 1992 was filed by the respondent herein under the same provisions for the same relief. Thus, bom the appellant as well as the respondent objected to the award. The learned Subordinate Judge allowed both the O. Ps, set aside the award and appointed another retired District Judge as arbitrator to adjudicate the dispute between the parties. The operation of that judgment has been stayed by this court, with the result, fresh proceedings have not commenced.
( 2 ) THE relevant facts are these: pursuant to the acceptance of the tender on 26-9-1986, the work relating to "modification of Atmospheric and Distillation Units for Re-vamping of c. D. U. /v. D. U. at Visakha Refinery" was awarded to the respondent. The original value of the contract was Rs. 95. 84 lakhs. A written agreement was entered into between the parties on 12-3-1987. The work dragged on much beyond the stipulated period. On the completion of the work, a final bill was submitted for about Rs. 2 crores on 22-10-1988. The final bill was not passed by the appellant. In order to resolve the disputes and differences between the parties and to settle the amounts due to the respondent-contractor, there were discussions and deliberations. Finally, at a meeting held on 2-1-1989, an agreement was reached between the parties which was recorded in the minutes of meeting. It is not necessary to refer to the various disputed claims and the amounts agreed to be paid under each head. On the basis of settlement, a balance amount of Rs. 27. 47 lakhs was agreed to be paid to the respondent with a qualification that the said amount "may undergo minor variation subject to variation in measurement/ In the concluding part of the minutes of the meeting marked as Ex. C-5 before the arbitrator, it is stated as follows:"7. No further claims: "v. D. S. confirm that this shall be taken as full and final settlement of their claims and no further claims will be made by v. D. S. nor will be accepted by the H. P. CL. "v. D. S. is respondent and H. P. C. L. is the appellant. Pursuant to this settlement, a sum of Rs. 21 lakhs was paid by the appellant-Corporation. However, the balance amount of Rs. 6. 47 lakhs due as per Ex. C-5 was not paid on the ostensible ground that the actual measurements did not admit payment over the above Rs. 21 lakhs. The respondent, thereafter, claims to have taken up the stand that the minutes of the meeting were signed by the respondent s representatives on 2-1-1989 under the pressure exerted by the appellant. The respondent also took the stand that on account of non-payment of Rs. 6. 47 lakhs, the settlement reached at the meeting dated 2-1-1989 stood rescinded. A further meeting was held on 8-2-1989 which could not resolve the impasse. The respondent then filed O. S. No. 55 of 1989 in the Court of the Principal subordinate Judge, Visakhapatnam under Section 20 of the Arbitration Act with the prayer to direct the respondent to file the agreements dated 26-9-1986 and 3-6-1988 in the Court and to order reference of the disputes to the arbitrator appointed by both the parties or the sole arbitrator appointed by the Court.
( 3 ) IT is necessary at this stage to refer to the arbitration clause forming part of the general conditions attached to the agreement dated 12-3-1987. Para 91 which deals with arbitration, in so far as it is relevant, reads as follows:"91. Arbitration: all disputes or differences whatsoever which shall at any rime arise between the parties hereto touching or concerning the works or the execution or maintenance thereof this contract or the rights touc
