Disputes arising from a full and final settlement of a claim under a contract can be referred to arbitration, and the principle of 'necessitas non habet legem' (necessity knows no law) may apply in certain situations.

1. This petition has been filed under Section 11(6) of the J&K Arbitration and Conciliation Act, 1997 for reference of the disputes mentioned therein to an independent arbitrator.

2. Respondents have filed their objections, in which a stand is taken that the petitioner is estopped from claiming reference of the disputes to an arbitrator in view of the fact that he had voluntarily issued a ‘no demand certificate’ dated 16th September, 2012 and has also received an amount of Rs.4,37,286/- as per the final bill after deduction of Rs.1,01,153/- on account of labour cess.

3. Counsel for the petitioner urged that the signatures of the petitioner on the final bill as also on the ‘no demand certificate’ was obtained under coercion as no payment is ordinarily made unless the contractor signs the blank final bill forms.

4. It was further urged that the final bill is prepared on the printed format of which ‘no demand certificate’ is a part and parcel.

5. It was stated that the petitioner was made to sign the ‘no demand certificate’, as is borne out from the final bill, on 16th September, 2012 whereas, the actual date of receipt of the final payment was October, 2012.

6. It was further stated that the petitioner had continued raising his demands and requests before 16th September, 2012 and that the claim of the petitioner to claim damages could not be rejected by refusing to refer the matter to arbitration. Reliance was placed upon Chairman and MD, NTPC Ltd. V. Reshmi Constructions, Builders and Contractors : (2004) 2 SCC 663, R.L.Kalathia & Co. v. State of Gujarat : 2011 (2) SCC 400, Gayatri Project Ltd. v. Sai Krishna Construction : 2014 (13) SCC 638 and National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd. : 2009 (1) SCC 267.

7. In Damodar Valley Corpn. v. K. K. Kar : (1974) 1 SCC 141, the Apex Court held:

“6. It appears to us that the question whether there has been a full and final settlement of a claim under the contract is itself a dispute arising „upon? or „in relation to? or „in connection with? the contract. These words are wide enough to cover the dispute sought to be referred.”

8. In P. K. Ramaiah and Co. v. Chairman & MD : 1994 Suppl (3) SCC 126, after receiving the amount unconditionally which was acknowledged by a separate receipt in writing, reference to arbitration was sought. In that fact situation, the Apex Court in paragraph 8, held as under:

“Thus there is accord and satisfaction by final settlement of the claims. The subsequent allegation of coercion is an afterthought and a device to get over the settlement of the dispute, acceptance of the payment and receipt voluntarily given.”

9. In Chairman and MD, NTPC Ltd. v. Reshmi Constructions, Builders & Contractors (supra), the Apex Court held:

“25. Yet again in Nathani Steels Ltd. (supra) the disputes and differences were amicably settled by and between the parties and in that view of the matter it was held that unless and until the statement is set aside, the arbitration clause cannot be invoked. Such is not the position here.

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 the cases 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.”

10. The Apex Court recognized the age old maxim ‘necessitas non habet legem’ meaning necessity knows no law and held that sometimes t