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S.C. Konda Reddy Vs. Union of India and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKarnataka High Court
Decided On
Case NumberMisc. First Appeal No. 192 of 1980
Judge
Reported inAIR1982Kant50; 1981(2)KarLJ276
ActsEvidence Act, 1872 - Sections 115; Arbitration Act, 1940 - Sections 2 and 33
AppellantS.C. Konda Reddy
RespondentUnion of India and anr.
Appellant AdvocateV. Krishnamurthv, Adv. for ;V. Tarakaram, Adv.
Respondent AdvocateB.S. Keshava Iyengar, Adv. for ;J. Nagaraj, Adv.
Excerpt:
.....v. although it may be said that the first condition was satisfied, it can never be stated that the second and third conditions were satisfied. the accord and satisfaction has always been understood as a method of discharge of a contract and may be a good defence to an action for breach of a contract, but it will have no effect to put an end to the contract itself sarkar, j. the contract is not annihilated but the obligations under it cease to be enforceable, therefore it is that when an action is brought for the appropriate remedy for nonperformance of these obligations that an accord and satisfaction furnishes a good defense. the defence is not that the contract has come to append but that its breach has been satisfied by accord and satisfaction......not even reply to that notice. the appellant then called upon the respondents to refer the said claim to arbitration under clause 63 (1) of the general conditions of the agreement. the respondents, as usual, turned down that demand. so, the appellant moved the court below with an application u/s. 20 of the arbitration act for a reference to arbitration. the respondents opposed that application.6. upon the rival contentions raised in the pleadings, the lower court framed the following issues for consideration:1. whether the plaintiff has made out a case for making a reference to the arbitrators as per the provisions of the arbtn. act?2. if so, whether the plaintiff is entitled to the said reference?on the first question the court held that the dispute arising out of the appellant's.....
Judgment:

Jagannatha Shetty, J.

1. This appeal concerns with the right of the appellant to have his claim referred to arbitration for adjudication. The I Additional Civil Judge Civil Station, Bangalore who tried the matter as O. S. No. 173 of 1977 dismissed the appellant's application filed u/s 20 of the Arbitration Act. This appeal is preferred against that order.

2. The parties rested their case only on their pleadings and the terms of the agreement they did not produce any oral evidence.

3. We will give a brief summary of the facts avoiding as far as possible the controversial matters.

The appellant was a railway contractor. He entered into an agreement with the respondents for execution of certain works including the work of doubling of track between Renigunta and Balapalle earth work forming Bank and cutting etc, earmarked between chainage O and 10.600 Reach I. As per the terms of the agreement the respondents were to point out the lands and places where work had to be carried out and supplies were required to be made. The respondents were further required to give the details of the materials required with the specifications and the quantities. They were also required to give the drawings of the works to be executed. It was only thereafter the appellant was required to commence the works entrusted to him.

The respondents did not attend to those preliminary requirements in time and there was a considerable delay on their Dart in performing their obligations. Consequently, the appellant had to wait for his turn to commence the execution of the works.

4. The period prescribed under the agreement for completion of the works was, however, extended and the appellant completed all the prescribed works on June 27. 1975. On July 1. 1975, he made a claim for additional payments at higher rates on various items of works executed by him on Sept. 10, 1975 he restricted the additional claim to Rupees four lakhs and odd. He did not, however, pursue that claim. He had a second thought over the matter. On Oct. 31. 1975, he wrote a short letter informing the respondent's th4t in order to develop good relationship with the administration; he was withdrawing the said additional claim.

5. On Nov. 14, 1975, the respondents paid the final bill at the rates agreed upon in the agreement. They also refunded the security deposit.

The appellant, notwithstanding his desire to maintain the good relationship with the administration could not, perhaps resist the temptation to claim something more. On May 24, 1977, he asked the respondents to pay him Rs. 5.7 lakhs as compensation for the loss suffered by him due to the delay in performing the contractual Obligations by the respondents. But the respondents did not even reply to that notice. The appellant then called upon the respondents to refer the said claim to arbitration under clause 63 (1) of the general conditions of the agreement. The respondents, as usual, turned down that demand. So, the appellant moved the court below with an application u/s. 20 of the Arbitration Act for a reference to arbitration. The respondents opposed that application.

6. Upon the rival contentions raised in the pleadings, the lower court framed the following issues for consideration:

1. Whether the plaintiff has made out a case for making a reference to the arbitrators as per the provisions of the Arbtn. Act?

2. If so, whether the plaintiff is entitled to the said reference?

On the first question the Court held that the dispute arising out of the appellant's claim falls within the said arbitration clause. But while coming to the second question it declined to make a reference. The Court held that the appellant was estopped from raising the dispute since he had earlier made such a claim and unconditionally withdrawn it. The Court based its conclusion solely on the appellant's letter dated October, 31, 1975.

7. In this appeal, there was no argument before us with regard to the legality of the finding recorded by the lower court on the first question. We therefore proceed on the basis that the dispute raised by the appellant falls squarely within the arbitration clause in the agreement between the parties. The only point that we have to decide is whether the appellant in the context and in the situation, was estopped from raising the dispute and demanding a reference to arbitration.

8. The decision on this point turns mainly on the appellant's letter dated Oct. 31. 1975 (Annexure 57) which. for immediate reference is set out hereunder:

'Sir.

Name of work: Doubling of track between Renigunta and Balapalle Earth work in forming Bank and cutting etc and supply of materials for the construction of bridges service roads etc. between Ch. O. Metre and Ch. 10.600 Metres - Reach-I. Agreement No. 107/ CL/BNC/73 of 20-10-1973.

After consideration of my claims and to develop good relationship with the Administration, I here by withdraw the conditions which I have raised in my letter dt. 10-9-1975 addressed to XEN and 1-7-1975 to GM/CN/BNC,

Thanking you.

Yours faithfully,

Sd/-

x x x

Signature of the Contractor.

P. A. H. of Y. S. C. Konda Reddy.'

It may be recalled from the pre-natal history of the case that the appellant first wanted an additional payment of Rs. Four lakhs and odd to make good the alleged loss suffered due to the escalation of the costs of construction. He made that claim no doubt, but thought it later to withdraw it for the purpose of what he described as to develop good relation ship with the administration. It was his unilateral action with no problem to others. The short question is whether the withdrawal of that claim precluded the -appellant from demanding more payment for the works executed by him and asking for its adjudication by arbitration.

9. Mr. Krishnamurthy, Senior Advocate for the appellant in his characteristic style of submission marked with precision and grasp, urged that on the material on record we must put out of the wav both the doctrines of estoppel and waiver. According to him, these doctrines with different considerations have no part to play on the right of the appellant to seek a reference under the arbitration clause. On the other hand, learned Advocate General who appeared for the respondents sought to justify the order under appeal not only on the question of estoppel, but also on the Principle of 'accord and satisfaction' by which the contract between the parties was fully and finally discharged thereby putting an end to the arbitration clause there under. He urged that the appellant after withdrawing his claim by his letter dated October 31, 1975, received the full Payment under the final bill without any reservation of his further or future claim. He also said that that Payment would not have been made and security deposits would not have been refunded but for the said letter which under the circumstances, amounted to and was treated as No Claim Certificate.

10. We may first clear the ground on the last contention urged by learned Advocate General. If, as contended by him that the appellant had given a 'No Claim Certificate then the matter ends there certainly he was not entitled to claim further payment in view of Clause 43 (2) of the agreement which provides:

'The Contractor shall not be entitled to make any claim whatsoever against the Railway under or by virtue of or arising out of this contract, nor shall the Railway entertain or consider any such claim, if made by the Contractor, after he shall have signed a 'No Claim' certificate in favour of the Railway, in such form as shall be required by the Railway, after the works are finally measured up.'

'No Claim Certificate' has to be given in favour of the respondents in the required form as stated above. But we do not find any such certificate insisted upon by the respondents or given by the appellant. The appellant by his letter dated October 31, 1975, did not just press the claim then made for extra payment. Neither on fact nor under law that letter could be construed as a 'No Claim Certificate'. After the said letter, the respondents paid the final bill. Even while receiving that payment, the appellant has not committed himself not to claim anything more. The respondents, in our opinion, therefore, have misconstrued the contents of the said letter.

11. We also do not find any substance in the contention that the said letter operated as estoppel or waiver against the appellant. The doctrine of estoppel is embodied in Section 115 of the Evidence Act. To call into aid that doctrine, three conditions must necessarily be satisfied as observed by the Supreme Court in Gyarsi Bai v. Dhansukh Lal : [1965]2SCR154 . They are:

1. Representation by a person to another;

2. The other shall have acted upon the said representation; and

3. Such action shall have been detrimental to the interests of the person to whom the representation has been made.

In the instant case. Although it may be said that the first condition was satisfied, it can never be stated that the second and third conditions were satisfied. The respondents did not in any manner act on the representation of the appellant and that too to the detriment to their interests. It was, however, urged that the respondents would not have paid the final bill but for the withdrawal of the additional claim by the appellant. We may point out that the final bill was prepared on the basis of the final measurements the works actually executed by the appellant He was legitimately entitled to that payment. The respondents by making that payment, had only discharged their contractual liability and did not act in any manner prejudicial to their interests.

It may be stated that the claim under dispute has nothing to do with the final bill or the final measurements recorded there under. The appellant claims additional payment by wav of damage or compensation for the loss said to have been suffered by him due to the delay in the performance of the obligations cast on the respondents under the agreement. This claim is independent of and in addition to the final bill. He cannot, therefore, be shut out either by estoppel or by waiver.

The terms 'estoppel' and 'waiver' are sometimes used interchangeably, but the two are quite distinct and different. Estoppel is a rule of evidence and is not a cause of action. On the other hand, waiver is contractual and may constitute a cause of action. In Halsbury's Laws of England, Third Edition Volume 14, page 637, it is stated:

'Waiver is the abandonment of a right, and is either express or implied from conduct .........

Where the right is a right of or an interest in property, an waiver depends upon the same considerations as a release if it is statement of an intention not to upon the right, it is not effectual made with consideration.'

The waiver is thus a voluntary and intentional abandonment or relinquishment of a known right. It must be supported by a valid consideration unless arises from conduct creating an estoppel. There is at any rate, no such thing as estoppel by waiver as observed by the Privy Council. (See Dawsons Bank Ltd. v. Nippon Menkwa Kabushini Kaish (Japan Cotton Trading Co. Ltd.)

In the instant case, the appellant has a legal remedy to have his claim adjudicated by arbitration. He did not then ask for a reference to adjudication before unilaterally withdrawing his first claim. He did not withdraw that claim for any consideration. He is now demanding a reference and cannot, therefore, be denied the same on the ground that he had waived his right by withdrawing his claim by the aforesaid letter.

12. The question next to be considered is, whether the accord and satitisfaction by payment of the final bill has put an end to the agreement and the arbitration clause there under? There cannot be any controversy on this point too and may, therefore be easily disposed of. The accord and satisfaction has always been understood as a method of discharge of a contract and may be a good defence to an action for breach of a contract, but it will have no effect to put an end to the contract itself Sarkar, J. while examining this aspect. observed in Union of India v. Kishorilal Gupta : [1960]1SCR493 :

'The effect of an accord and satisfaction is therefore to secure a release from an obligation arising under a cont act. Now it is difficult to conceive of an obligation arising from a contract unless the contract existed. An accord and satisfaction, which secures a release from such an obligation, is really based on the existence of the contract instead of treating it as non-existent. The contract is not annihilated but the obligations under it cease to be enforceable, therefore it is that when an action is brought for the appropriate remedy for nonperformance of these obligations that an accord and satisfaction furnishes a good defense. The defence is not that the contract has come to append but that its breach has been satisfied by accord and satisfaction.'

In. Damodar Valley. Corporation V. K, K. Kar : [1974]2SCR240 , the Supreme Court observed:

'Similarly the question whether there has been a settlement, of all the claims arising in connection with the contract also postulates the existence of the contract. The principle laid down by Sarkar, J. in Kishorilal Gupta Bros's case : [1960]1SCR493 that accord and satisfaction does not put an end to the arbitration clause vas not dissented from by the majority. On the other hand proposition (6) seems to lend weight to the views of Sarkar. J.'

13. It is, however, open for the respondents to urge before the arbitrator that in view of the accord and satisfaction reached in the case and the settlement of all the alleged claims, the appellant has no right to raise the dispute and ask for its adjudication. if such a contention is raised it would be per for the arbitrator to decide that question before going into the merits of the disputed claim. A Full Bench decision of this Court in M. S. Ramiah v.state of Karnataka M. F. A. No. 353/74 opinion of the Full Bench rendered on 24-11-1978 to which one of us (K.Jagannatha Shetty, J.) was a party, has taken a similar view. It was observed:

'In conceivable cases even the existence or non-existence of a dispute might itself assume the character of a dispute for adjudication by the arbitrators. The arbitrators are also competent to decide whether that dispute is excluded from the arbitration clause. An arbitration agreement may explicitly empower the arbitrator to decide whether or not a particular dispute is within the arbitration agreement. (See Hudson's Building and Engineering Contracts, Ninth Edition, page 658). But even if there is no such express power unless the dispute is expressly excluded from the arbitration clause 'an arbitrator is always entitled to enquire whether or not he h as jurisdiction.' (See Russel on Arbitration, 18th Edition, page 73).'

It is therefore open to the Arbitrator to decide the question if raised, whether there has been a settlement of all the claims arising in connection with the contract having regard to the effect of the accord and satisfaction.

14. Before parting with this case, we must make it clear that we shall not be understood to have expressed any opinion on the merits of the disputed claim. It would be for the arbitrator to adjudicate in accordance with law and in the light of the observations made.

15. In the result, the appeal is allowed; in reversing the order of the lower court, the matter stands remitted to the City Civil Court, Bangalore with a direction to restore the suit on file and refer the dispute to arbitration after hearing the parties,

16. Appeal allowed


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