The central legal point established in the judgment is the voidness of agreements that restrict the right to enforce a claim or extinguish the rights of a party under a contract, as per the amended Section 28 of the Indian Contract Act, 1872.

PRADEEP NANDRAJOG, J.

1. Two issues are required to be reflected upon by us in the instant appeal. The first issue relates to the applicability of Section 28 of the Indian Contract Act 1872, post amendment vide Act No.1 of 1997 with effect from January 08, 1997 and the second issue relates to the plea raised by the appellant before the learned Arbitrator, which plea was accepted by the learned Arbitrator, but reversed by the learned Single Judge, on waiver of the respondent to press for the claim by accepting payment under the final bill towards full and final settlement of its claim.

2. The facts in brief are that appellant invited offers by issuing a Notice Inviting Tenders for constructing a local shopping centre at New Rajendra Nagar. Respondent’s offer was accepted and this resulted in the party binding themselves to a contract as per agreement dated November 30, 1990. The stipulated date of completion was March 09, 1992 and admittedly the work lingered on till April 28, 1998. The final bill was prepared by the appellant on July 05, 1999, but best known to the appellant was cleared/passed by its Competent Authority on March 20, 2001. Respondent received payment as per the final bill cleared on April 12, 2001 and on July 09, 2001 raised claims against the appellant, which were referred to arbitration in view of there being an arbitration clause in the agreement between the parties, and while making the reference it was made clear that the issue pertaining to the claim being barred by limitation and additionally being waived would be adjudicated by the learned Arbitrator.

3. The learned Arbitrator pronounced the award holding in favour of DDA on the two technical pleas. But, the claims were adjudicated on merits as well by the learned Arbitrator, who clarified while so doing, that he did so to prevent a reference back to him if his award, if rendered only on the two technical pleas was set aside by the Court.

4. Indeed, the prophecy of the learned Arbitrator proved correct inasmuch as the award has been reversed on the two technical findings rendered by the learned Arbitrator.

5. Clause-25 of the General Conditions of Contract, which provides of reference of disputes to arbitration, interalia, reads as under:-

“It is also a term of the contract that if the contractor(s) does/do not make any demand for arbitration in respect of any claim(s) in writing within 90 days or receiving the intimation from the Engineer-in-Charge that the Bill is ready for payment, the claim(s) of the contractor(s) will be deemed to have been waived and absolutely barred and the Delhi Development Authority shall be discharged and released of all liabilities under the contract in respect of those claims.”

6. The clause in question, bars the remedy of preferring a claim pertaining to the bill which is certified as being ready for payment by the engineer-in-charge if the contractor does not dispute the same and raises a demand for the dispute to be referred to arbitration within 90 days of receipt of information of the bill being ready for payment.

7. With effect from January 08, 1997, as amended by Act No.1 of 1997, Section 28 of The Indian Contract Act, 1872 reads as under:-

“28. Agreements in restraint of legal proceedings, void – Every agreement,–

(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or

(b) which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to that extent.”

8. Hither to fore i.e. prior to January 08, 1997, Section 28 of the Indian Contract Act, as interpreted by the Supreme Court in the decision reported as AIR 1997 SC 2049 National Insurance Co. Ltd