Allahbad High Court
SATISHCHANDRA,T.S.MISRA
Messrs Amar Nath Chand Prakash - Appellant
Versus
Messrs Bharat Heavy Electricals Limited - Respondent
Decided On : 11/03/1971
ARBITRATION - SECTION 20 - NO CLAIM CERTIFICATE - DISCHARGE OF CONTRACT - EFFECT OF ENDORSEMENT OF 'UNDER PROTEST' ON RECEIPT OF PAYMENT - DISPUTES ARISING OUT OF CONTRACT - REFERENCE TO ARBITRATION.
Fact of the Case:
The appellant, a contractor, completed construction work for the respondent company in March 1965. The company prepared a final bill and the appellant signed a no claim declaration and a receipt for the amount due. However, the appellant disputed some items of work and claimed short payment. After the company failed to respond to the appellant's notice to appoint an arbitrator, the appellant filed an application under Section 20 of the Arbitration Act to refer the disputes to arbitration.
Finding of the Court:
The court held that the signing of the no claim declaration and the grant of a full settlement receipt did not amount to a discharge of the contract. The endorsement of 'under protest' on the receipt indicated that the appellant was not accepting the payment without any reservation and was preserving his right to question the correctness of the bill. Therefore, the application under Section 20 was competent, and the court should have referred the disputes to arbitration.
Issues: 1. Whether the signing of a no claim declaration and the grant of a full settlement receipt amounted to a discharge of the contract? 2. Whether the endorsement of 'under protest' on the receipt affected the discharge of the contract? 3. Whether the disputes arose out of the contract between the parties? 4. Whether the application under Section 20 of the Arbitration Act was competent?
Ratio Decidendi: 1. A no claim declaration by itself does not affect a fresh agreement so as to discharge the original agreement between the parties. 2. The endorsement of 'under protest' on the receipt indicated that the appellant was not accepting the payment without any reservation and was preserving his right to question the correctness of the bill. Therefore, it did not amount to a discharge of the contract. 3. The disputes arose out of the contract between the parties, as the appellant was disputing the correctness of the calculations of the Manager of computing the amounts in the final bill. 4. The application under Section 20 of the Arbitration Act was competent, as the disputes arose out of the contract and the arbitration clause was still in force.
Final Decision: The appeals were allowed, the impugned orders were set aside, and the matter was sent back to the court below for making a reference to arbitration in accordance with law.
SATISH CHANDRA, J.:- This is a plaintiff's appeal. It is directed against an order dismissing an application under Section 20 of the Indian Arbitration Act.
2. Messrs Heavy Electricals Limited gave a contract to the appellant for making certain construction work. The work was completed by the first week of March, 1965. The Company prepared a final bill of the work done by the appellant. On 29-03-1965 the appellant signed a no claim declaration and also gave a receipt in token of accepting the amount found due to the appellant. The appellant raised disputes in regard to some of the items of work, alleging short payment. Finding no response, the appellant served a notice upon the company requiring it to appoint an arbitrator in terms of the arbitration clause contained in the contract. This also failed to evoke any response from the company. Consequently on 16th September, 1968 the appellant moved an application in court under Section 20 Arbitration Act praying that the court may require the agreement to be filed in court and refer the disputes between the parties to arbitration in accordance with the arbitration agreement.
3. The Company contested this application. It pleaded that the appellant had given a clear no claim certificate in final settlement of his claims in respect of the work done under the contract, and that he accepted payment of Rs.12,374.04 by means of a cheque dated 14-12-1965 in full and final settlement of his dues. This amounted to the discharge of the contract, along with which the arbitration agreement extinguished, as such no dispute capable of being referred to arbitration remained in existence. The application under Section 20 was not maintainable.
4. The court below accepted the plea raised in bar and dismissed the application. Hence this appeal.
5. The final bill has at the end a printed declaration to the following effect:-
"I have no other claim outstanding against the Heavy Electricals (India) Ltd. for work done or for labour or materials supplied or on any other account and the payment of this bill shall be in final settlement of all my claims in respect of the work to which Agreement/work order No.3/c-vi/64 dated 20-11-1964 with the company relates."
This declaration was signed by the appellant. Just after that there is a memorandum or payment in the final bill and thereafter column No.5 deals with the receipt of payment; and it says, "Received Rs.12,374.04 as final payment in settlement of demand as per details above on account of this work by cheque No.007805, dated 14-12-1965. This is also signed by the appellant. The signatures defacing the stamp are dated 29-03-1965 and by the side of the signature, the appellant wrote the words under protest. It appears that the appellant signed the declaration as well as the column No.5 meant for receipt of the cheque on 29-03-1965 and also made the endorsement of 'under protest' the same day, whereas the cheque was actually prepared and delivered on 14-12-1965.
6. For the appellant it was argued that the signing of the no claim declaration and the grant of a full settlement receipt was in law the discharge of the contract. The contractor could not thereafter raise any dispute as to the payment under the contract. With the discharge of the contract, the arbitration clause extinguished and no alleged dispute could validly be referred to arbitration. It was urged that the endorsement of 'under protest' made by the appellant on the bill did not change the situation. For the appellant reliance was placed upon words and phrases by Roland Burrows, Vol.V., page 361. There observation of Langdale. M.R. in Re: Massey (1845), 8 Beav. 458 at p.462 has been quoted as under,-
"It is said that the money was received by the petitioner, and the receipt given under protest. These words are often used on these occasions, but they have no distinct technical meaning, unless accompanied with a statement of circumstances, showing that they were used by way of notice or protes
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