ONGC MANGALORE PETROCHEMICALS LTD.versusM/S ANS CONSTRUCTIONS LTD. & ANR.

598                      [2018]REPORTS
               SUPREME COURT    2 S.C.R. 598              [2018] 2 S.C.R.


A           M/S ONGC MANGALORE PETROCHEMICALS LTD.

                                       v.

                 M/S ANS CONSTRUCTIONS LTD. & ANR.

B                       (Civil Appeal No. 1659 of 2018)

                             FEBRUARY 07, 2018

                [R. K. AGRAWAL AND AMITAVA ROY, JJ.]

C           Arbitration and Conciliation Act, 1996 – s.11 – Exercise of
      power under – When not justified – Appellant awarded contract to
      respondent no.1 – On 21.09.2012, respondent no.1 submitted No
      Dues/No Claim Certificate – On 10.10.2012, appellant made
      payment of final bill to respondent no.1 – On 24.10.2012,
D     respondent no.1 withdrew the No Dues Certificate stating that it
      was furnished under duress and coercion – Vide letter dtd.
      12.01.2013 to appellant, respondent no.1 submitted claim of
      Rs. 96,88,48,642/- as losses incurred during execution of the
      contract, denied by appellant – Respondent no.1 sent notice to the
      appellant for resolving the dispute through Arbitration, request
E     denied by appellant – Petition u/s.11 filed by respondent no.1 before
      High Court, allowed – Held: Admittedly, No-Dues Certificate was
      submitted by respondent no.1 on 21.09.2012 and on their request
      Completion Certificate was issued by appellant – There is nothing
      on record to prove that the said Certificate was given under duress
      or coercion– After a gap of one month, i.e. on 24.10.2012,
F
      respondent no.1 withdrew the No Dues Certificate on grounds of
      coercion and duress – Claim for losses incurred during execution
      of the contract was made on 12.01.2013, i.e., after a gap of 3½
      months, whereas the Final Bill was settled on 10.10.2012 which
      was mutually signed by both the parties – When respondent no.1
G     accepted the final payment in full and final satisfaction of all its
      claims, there was no point in raising the claim for losses incurred
      during the execution of the Contract at a belated stage which creates
      an iota of doubt as to why such claim was not settled at the time of
      submitting Final Bills – The story about duress was an afterthought
      in the background that the losses incurred during the execution of
H
                                     598
     M/S ONGC MANGALORE PETROCHEMICALS LTD. v.                           599
          M/S ANS CONSTRUCTIONS LTD. & ANR.

the Contract were not visualised earlier by respondent No.1 – Mere       A
allegation that no-claim certificate was obtained under financial
duress and coercion does not lead to an arbitrable dispute – No
arbitrable dispute existed so as to exercise power u/s.11 – High
Court was not justified in exercising power u/s.11 – Contract.

      Allowing the appeal, the Court                                     B

      HELD: 1.1 When one refers to discharge of a contract by
an agreement signed by both the parties or by execution of a full
and final discharge voucher/receipt by one of the parties, one
refers to an agreement or discharge voucher which is validly and         C
voluntarily executed. If the party which has executed the
discharge agreement or discharge voucher, alleges that the
execution of such discharge agreement or voucher was on
account of fraud/coercion/undue influence practised by the other
party and is able to establish the same, then obviously the
discharge of the contract by such agreement/voucher is rendered          D
void and cannot be acted upon. Consequently, any dispute raised
by such party would be arbitrable. But in case the party is not
able to establish such a claim or appears to be lacking in
credibility, then it is not open to the courts to refer the dispute to
arbitration at all. [Para 19][612-E-G]                                   E
       1.2 In the case at hand, the High Court allowed the appeal
filed by the contractee-respondent no.1 on the assertion that the
No Dues Certificate was given on account of coercion/undue
influence practiced by the appellant-Contractor. The contractee,
while basing its claim, relied upon the letters issued to the            F
appellant for releasing the payment of Running Accounts (RA)
Bills. Whether there was duress and coercion exerted against
the contractee-Company by the appellant has to be examined
keeping in mind the background in which the said letters were
exchanged between the parties. [Para 22][616-E-G]
                                                                         G
      1.3 Pursuant to taking a false claim of duress and coercion
while filing the No Dues Certificate, the contractee-Company,
vide letter dated 12.01.2013 to the appellant, submitted a claim
for Rs.96,88,48,642/- for the losses incurred during execution of
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600            SUPREME COURT REPORTS                      [2018] 2 S.C.R.


A     the contract at Mangalore. It was claimed that the contractee-
      Company could not continue with the work due to various reasons
      like pooja, shifting of Idols, non-availability of free encumbrance
      of site, obstruction in the blasting work, stoppage of hard rock
      blasting, issues with respect to work to be given to local
      contractors, non-vacation of project displaced families, permission
B
      for forest clearance, permission for shifting of wooden logs etc.
      and the huge expenditure as disclosed in the claim was incurred
      by the contractee-Company due to the factors attributable to the
      appellant. Clause 6.6.0 of the General Conditions of Contract
      deals with “Claims by the Contractor” (contractee in the case at
C     hand). Clause 6.6.1.0. of the Contract states that in case of a
      claim of extra compensation or remuneration, the Contractee shall
      give notice in writing of its claim within 10 days from the date of
      issue of orders or instructions related to any works for which the
      Contractee claims such additional payment. The notice shall give
      full particulars of the nature of such claim, grounds on which it is
D
      based and the amount claimed. Unless and until notice is given,
      the Contractor shall not be liable to pay extra compensation to
      the Contractee. Clause 6.6.3.0 states that any claim of the
      Contractee in accordance with Clause 6.6.1.0 shall be separately
      included in the Final Bill prepared by it in the form of Statement
E     of Claims, giving particulars of the nature of claims, ground on
      which it is based and the amount claimed and shall be supported
      by a copy of the notice and the Contractor shall not be liable in
      respect of any notified claim not specifically reflected in the Final
      Bill in accordance with the provisions of Clause 6.6.3.0 which
      shall be deemed to have been waived by the Contractee. [Para
F
      23][617-B-G]

            1.4 From the materials on record, it is found that the
      contractee-Company had issued the “No Dues/No Claim
      Certificate” on 21.09.2012, it had received the full amount of the
G     final bill being Rs. 20.34 crores on 10.10.2012 and after 12 days
      thereafter, i.e., only on 24.10.2012, the contractee-Company
      withdrew letter dated 21.09.2012 issuing “No Dues/No Claim
      Certificate”. Apart from it, the Final Bill was mutually signed by
      both the parties to the Contract accepting the quantum of work
      done, conducting final measurements as per the Contract, arriving
H
     M/S ONGC MANGALORE PETROCHEMICALS LTD. v.                             601
          M/S ANS CONSTRUCTIONS LTD. & ANR.

at final value of work, the payments made and the final payment            A
that was required to be made. The contractee-Company accepted
the final payment in full and final satisfaction of all its claims. In
the present facts and circumstances, the raising of the Final Bill
and mutual agreement of the parties in that regard, all claims,
rights and obligation of the parties merge with the Final Bill and
                                                                           B
nothing further remained to be done. Further, the appellant issued
the Completion Certificate dated 19.06.2013 pursuant to which
the appellant was discharged of all the liabilities. With regard to
the issue that the “No Dues Certificate” had been given under
duress and coercion, there is nothing on record to prove that the
said Certificate had been given under duress or coercion and as            C
the Certificate itself provided a clearance of no dues, the
contractee could not now turn around and say that any further
payment was still due on account of the losses incurred during
the execution of the Contract. The story about duress was an
afterthought in the background that the losses incurred during
                                                                           D
the execution of the Contract were not visualised earlier by the
contractee. As to financial duress or coercion, nothing of this
kind is established prima facie. Mere allegation that no-claim
certificates have been obtained under financial duress and
coercion, without there being anything more to suggest that, does
not lead to an arbitrable dispute. The conduct of the contractee           E
clearly shows that “No Claim Certificate” was given by it
voluntarily; the contractee accepted the amount voluntarily and
the contract was discharged voluntarily. [Para 24][617-H; 618-
A-F]

       1.5 Admittedly, “No Dues Certificate” was submitted by              F
the contractee-Company on 21.09.2012 and on their request
Completion Certificate was issued by the appellant-Contractor.
The contractee, after a gap of one month, that is, on 24.10.2012,
withdrew the “No Dues Certificate” on the grounds of coercion
and duress and the claim for losses incurred during execution of           G
the Contract site was made vide letter dated 12.01.2013, i.e.,
after a gap of 3 ½ (three and a half) months whereas the Final Bill
was settled on 10.10.2012. When the contractee accepted the
final payment in full and final satisfaction of all its claims, there is
no point in raising the claim for losses incurred during the
                                                                           H
602            SUPREME COURT REPORTS                      [2018] 2 S.C.R.


A     execution of the Contract at a belated stage which creates an
      iota of doubt as to why such claim was not settled at the time of
      submitting Final Bills that too in the absence of exercising duress
      or coercion on the Contractee by the appellant-Contractor. The
      plea raised by the contractee-Company is bereft of any details
      and particulars, and cannot be anything but a bald assertion. In
B
      the circumstances, there was full and final settlement of the claim
      and there was really accord and satisfaction and no arbitrable
      dispute existed so as to exercise power under Section 11 of the
      Act. [Para 25][618-G-H; 619-A-C]

C           Union of India and Others v. Master Construction Co.
            (2011) 12 SCC 349 : [2011] 5 SCR 853 ; New India
            Assurance Co. Ltd. v. Genus Power Infrastructure Ltd.
            (2015) 2 SCC 424 : [2014] 12 SCR 360 ; National
            Insurance Company Limited v. Boghara Polyfab Private
            Limited (2009) 1 SCC 267 : [2008] 13 SCR 638 ;
D           R.L. Kalathia & Co. v. State of Gujarat (2011) 2 SCC
            400 : [2011] 1 SCR 391 – referred to.

                             Case Law Reference

            [2011] 5 SCR 853           referred to         Para 17
E
            [2014] 12 SCR 360          referred to         Para 18

            [2008] 13 SCR 638          referred to         Para 20

            [2011] 1 SCR 391           referred to         Para 21
F
            CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1659
      of 2018.

            From the Judgment and Order dated 12.01.2015 of the High Court
      of Karnataka at Bengaluru in CMP No. 35 of 2014.
G
            P. S. Narasimha, Sr. Adv, Prabhat Kumar, Shauth Kumar Mahale,
      S. R. Kamalacharan, Rajesh Mahale, Krutin Joshi, Advs. for the
      Appellant.

             P. Vinay Kumar, Ms. Sadiqua Fatma, Ms. Grusha Mehta, Advs.
H     for the Respondents.
     M/S ONGC MANGALORE PETROCHEMICALS LTD. v.                                603
          M/S ANS CONSTRUCTIONS LTD. & ANR.

      The Judgment of the Court was delivered by                              A
      R. K. AGRAWAL, J. 1. Leave granted.
      2. This appeal is directed against the final judgment and order
dated 12.01.2015 passed by the High Court of Karnataka at Bengaluru
in C.M.P. No. 35 of 2014 whereby learned single Judge of the High
Court allowed the petition filed by the respondent No. 1- Company for         B
appointment of an arbitrator for resolution of the dispute between the
appellant-Company and respondent No. 1-Company.
      3. Brief facts:
       (a) Respondent No. 1-the Contractee Company was awarded a              C
Contract for “Site Grading, Construction of Roads, Water Drains and
Compound Wall for Aromatic Complex at Mangalore” in Mangalore
SEZ by the appellant-Contractor on 17.03.2008. The total contract value
as per the Letter of Acceptance (LOA) was Rs. 163,25,68,576/- which
was subsequently revised to Rs. 195,68,24,399.02/- vide letter dated
20.09.2010 and the completion period was also extended upto 30.11.2010.       D
       (b) On 21.09.2012, the Contractee Company submitted a No Dues/
No Claim Certificate certifying the payment of all the bills and in total
settlement of all the claims whatsoever against the Contract. Thereafter,
on 10.10.2012, the appellant herein-the Contractor Company made a
payment of the final bill of Rs. 20.34 crores to the Contractee Company.      E
       (c) Subsequently, on 24.10.2012, the Contractee Company
withdrew letter dated 21.09.2012 for “No Dues/No Claim Certificate”
stating that it was a pre-requisite condition for release of their long due
legitimate payment against the works executed under the Contract and
the same was furnished by the Contractee Company under duress and             F
coercion of the appellant-Contractor.
       (d) The Contractee-Company, vide letter dated 12.01.2013 to the
appellant-Contractor, submitted a claim of Rs. 96,88,48,642.00 for the
losses incurred during execution of the contract at Mangalore. On
19.06.2013, the appellant-Contractor issued a Completion Certificate          G
stating that the works awarded under the Contract have been executed
and completed in all respects and no claim certificate has also been
submitted by the Contractee-Company. After several communication in
writing, the appellant-Contractor, vide letter dated 25.07.2013, denied
the claim of the contractee-Company.
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604            SUPREME COURT REPORTS                          [2018] 2 S.C.R.


A            (e) Vide letter dated 14.09.2013, the contractee-Company sent a
      notice to the appellant-Contractor for resolving the dispute between the
      parties through Arbitration as envisaged under Article 9.0.2.0 to the
      Contract and appointed Mr. K. Mohandas, Former General Manager
      (Law)- SBI as its Arbitrator. The appellant-Contractor, vide letter dated
      18.10.2013 denied the request of the contractee-Company as not tenable
B
      in law.
             (f) Being aggrieved by the decision of the appellant-Contractor in
      not referring the dispute to Arbitration, the contractee-Company preferred
      a C.M.P. No. 35 of 2014 before the High Court of Karnataka at Bangalore.
C           (g) Learned single Judge of the High Court, vide judgment and
      order dated 12.01.2015, allowed the petition filed by the contractee-
      Company.
           (h) Being aggrieved by the order dated 12.01.2015, the appellant-
      Contactor has filed this appeal by way of special leave before this Court.
D           4. Heard Mr. P.S. Narasimha, learned senior counsel for the
      appellant-Company and Mr. P. Vinay Kumar for the Respondents.
            Point for consideration:
             5. The only point for consideration before this Court is whether
      the respondent-Contractee Company has made out a case for referring
E
      the dispute to Arbitration?
            Rival Submissions:
             6. Learned senior counsel for the Contractor-the appellant
      Company strenuously contended that the High Court erred in holding
F     that the contractee-Company established a case to show that there was
      a genuine and serious dispute regarding the claim and that the claim that
      No Dues Certificate/No Claim Certificate was issued under duress/
      coercion is erroneous and unsustainable. Learned senior counsel further
      contended that there was no withholding of payment and the extension
      was granted subject to the contractee-Company’s request and the
G     contract does not provide for escalation of costs.
            7. Learned senior counsel further contended that the delay in
      payment does not arise at all because as per Clause 6.4.0.0, there was
      no obligation cast upon the Contractor to pay the RA Bills in full but it
      was to be done merely on the assessment of the Engineer-in charge.
H
    M/S ONGC MANGALORE PETROCHEMICALS LTD. v.        605
M/S ANS CONSTRUCTIONS LTD. & ANR.[R. K. AGRAWAL, J.]

The High Court erred in referring to few letters exchanged much prior         A
to the Final Bill. In fact, the alleged claims were never brought up at the
time of issuance of Final Bill or No Dues Certificate on 21.09.2012 and
now at this stage it is not open for the contractee-Company to raise the
issue of losses incurred during the execution of the Contract.
       8. Learned senior counsel finally contended that when both the         B
parties to a contract confirm in writing that the contract has been fully
and finally discharged by performance of all obligations and there are no
outstanding claims or disputes, court will not refer the subsequent claim
or dispute to arbitration. There was complete accord and satisfaction of
the contract between the parties and nothing further was left to be done
by either parties. The High Court was not right in allowing the petition      C
filed by the contractee-Company and no case is made out for referring
the dispute to Arbitration and also for the payment of the alleged amount
to the contractee-Company.
       9. Per contra, learned counsel for the contractee-Respondent
No. 1 herein submitted that during the execution of Contract, the             D
contractee Company raised Running Account Bills (RA Bills) to the
Contractor-Company for the expenses incurred towards carrying out
the construction work but the same were cleared with inordinate delay
and even the final bill to the tune of Rs. 20.34 crores was released by
the appellant- Contractor only when the contractee Company furnished          E
“No Dues/No Claim Certificate” dated 21.09.2012. Upon submitting
the above Certificate, the appellant-Contractor issued a Completion
Certificate approving the work carried out by the contractee under the
Contract.
       10. Learned counsel for the contractee-Company further submitted       F
that since the appellant-Contractor was not clearing the legitimate and
genuine dues payable under the RA Bills and was always at the mercy
of the appellant-Contractor for the release of payment from the very
beginning of the Contract, the last payment of Rs. 20.34 crores and the
release of performance bank guarantee was deliberately withheld by
the appellant-Contractor. The work got completed on 30.06.2011 and it         G
was only after the submission of No-Dues Certificate on 21.09.2012,
the final payment was released. Due to non-payment of RA Bills on
time, the contractee-Company was under severe financial crunch and
could not have refused to issue the “No Dues Certificate” which was
issued under duress and has no meaning in the eyes of law.                    H
606             SUPREME COURT REPORTS                           [2018] 2 S.C.R.


A            11. Learned counsel further submitted that it is prima facie evident
      that there is a genuine and serious dispute between the parties which
      requires the appointment of an Arbitrator under the clauses of the
      Contract to adjudicate upon the claims made by the contractee and it
      will cause grave injustice to the party if the claims are not adjudicated in
      terms of the Contract. Learned counsel further submitted that under
B
      these circumstances, the withdrawal of No Dues/No Claim Certificate,
      which was given under duress, is not an afterthought and in a number of
      decisions of this Court it has been held that if a party who has executed
      the discharge agreement or discharge voucher alleges that execution of
      such document was on account of fraud/coercion/undue influence
C     practiced by the other party then such discharge of the contract by such
      agreement would be rendered void and cannot be acted upon.
             12. Learned counsel further submitted that the contractee-
      Company could not continue with the work due to various reasons like
      pooja, shifting of idols, non-availability of free encumbrance of site,
D     obstruction in the blasting work, stoppage of hard rock blasting, issues
      with respect to work to be given to local contractors, non-vacation of
      project displaced families, permission for forest clearance, permission
      for shifting of wooden logs etc. and the huge expenditure as disclosed in
      the claim was incurred by the contractee-Company due to the factors
      attributable to the appellant-Contractor.
E
             13. Learned counsel finally contended that the “No Dues
      Certificate” was filed by the contractee-Company under duress owing
      to their huge payment pending towards the appellant-Contractor which
      was rightly withdrawn for the losses incurred due to the appellant-
      Contractor. Further, when there is an Arbitration clause in the agreement,
F     the contractee Company has the right to invoke the same. The High
      Court was right in allowing the petition filed by the contractee-Company
      and no interference is sought for by this Court in this regard.
            Discussion:

G            14. The appellant Contractor-ONGC Mangalore Petrochemicals
      Ltd. invited tender for “Award of Work for Site Grading, Construction
      of Roads, Storm Water Drains & Compound Wall for Aromatic Complex
      at Mangalore”. The bid document was issued by M/s Toyo Engineering
      India Limited (TEIL)-Respondent No. 2 herein on behalf of the OMPL
      (the contractor) being their Project Management Consultant. M/s ANS
H
    M/S ONGC MANGALORE PETROCHEMICALS LTD. v.        607
M/S ANS CONSTRUCTIONS LTD. & ANR.[R. K. AGRAWAL, J.]

Constructions Limited-Respondent No. 1 herein submitted its bid on            A
15.11.2007. Respondent No. 1 herein was awarded the Contract vide
Letter of Acceptance (LOA) dated 17.03.2008. The total Contract Value
was estimated at Rs. 163,25,68,576/- which was later on revised to Rs.
195,68,24,399.02, pursuant thereto, the completion period was also
extended upto 30.11.2010.
                                                                              B
       15. During the subsistence of the contract, the contractee-Company
raised RA Bills for the expenses incurred towards carrying out the
construction work. It is evident on record that the contractee-Company
made several requests to the appellant-Contractor to clear their legitimate
and genuine dues payable under the Bills which was paid to them after
inordinate delay. It is also the claim of the contractee-Company that the     C
contractee was compelled to file No Dues Certificate/No Claim
Certificate dated 21.09.2012 in order to get the release of the Final Bill
under the Contract. On 10.10.2012, the contractor-Company made the
payment of the final bill of Rs. 20.34 crores to the contractee-Company.
After the release of the Final Bill, the contractee-Company withdrew          D
the “No Dues/No Claim Certificate” stating that the letter dated
21.09.2012 was pre-requisite condition for release of their long due
legitimate payment against the works executed under the Contract and
the same was furnished under duress and coercion of the appellant-
Contractor. Further, on 12.01.2013, the contractee-Company submitted
a claim for Rs. 96,88,48,642.00 for the losses incurred during execution      E
of the contract at Mangalore.
       16. The appellant-Contractor, vide letter dated 25.07.2013, rejected
the claim of the contractee-Company on the ground that the Contractee
has submitted No Dues/No Claim Certificate and withdrawal of the
same on the ground that it was obtained under duress and coercion is          F
wrong, incorrect and not tenable in law. Being aggrieved by the rejection
of their claim, the contractee-Company invoked the Arbitration clause
under the Contract and appointed its Arbitrator. The appellant-Contractor,
vide letter dated 18.10.2013, declined to nominate its Arbitrator. The
contractee-Company filed a Civil Miscellaneous Petition under Section         G
11 of the Arbitration and Conciliation Act, 1996 (in short ‘the Act’) for
the appointment of an Arbitrator in lieu of the nominee arbitrator of the
appellant-Contractor so that the said arbitrator along with the nominee
arbitrator already appointed by the contractee-Company agree upon the
appointment of the third/presiding arbitrator for constitution of a three
                                                                              H
608            SUPREME COURT REPORTS                            [2018] 2 S.C.R.


A     member Arbitral Tribunal as per the agreed terms of the Contract for
      adjudicating upon the dispute arising out of execution of the Contract.
             17. Learned senior counsel for the appellant-Contractor, after
      taking us through the material on record, submitted that the contract has
      come to an end and the obligations therein have been discharged and
B     there is no point of raising a belated claim in the form of losses incurred
      during the execution of the Contract that too after submitting the Final
      Bills as well as the No Dues Certificate. In support of his claim, learned
      senior counsel relied upon a decision of this Court in Union of India
      and Others vs. Master Construction Co. (2011) 12 SCC 349 wherein
      it was held as under:-
C
            “18. In our opinion, there is no rule of the absolute kind. In a case
            where the claimant contends that a discharge voucher or no-claim
            certificate has been obtained by fraud, coercion, duress or undue
            influence and the other side contests the correctness thereof, the
            Chief Justice/his designate must look into this aspect to find out at
D           least, prima facie, whether or not the dispute is bona fide and
            genuine. Where the dispute raised by the claimant with regard to
            validity of the discharge voucher or no-claim certificate or
            settlement agreement, prima facie, appears to be lacking in
            credibility, there may not be a necessity to refer the dispute for
E           arbitration at all.
            19. It cannot be overlooked that the cost of arbitration is quite
            huge—most of the time, it runs into six and seven figures. It may
            not be proper to burden a party, who contends that the dispute is
            not arbitrable on account of discharge of contract, with huge cost
F           of arbitration merely because plea of fraud, coercion, duress or
            undue influence has been taken by the claimant. A bald plea of
            fraud, coercion, duress or undue influence is not enough and the
            party who sets up such a plea must prima facie establish the same
            by placing material before the Chief Justice/his designate. If the
            Chief Justice/his designate finds some merit in the allegation of
G           fraud, coercion, duress or undue influence, he may decide the
            same or leave it to be decided by the Arbitral Tribunal. On the
            other hand, if such plea is found to be an afterthought, make-
            believe or lacking in credibility, the matter must be set at rest then
            and there.”
H
    M/S ONGC MANGALORE PETROCHEMICALS LTD. v.        609
M/S ANS CONSTRUCTIONS LTD. & ANR.[R. K. AGRAWAL, J.]

       18. Further, learned senior counsel relied upon a judgment of this    A
Court in New India Assurance Co. Ltd. vs. Genus Power Infrastructure
Ltd. (2015) 2 SCC 424 wherein this Court has held as under:-
      7. The question that arises is whether the discharge in the present
      case upon acceptance of compensation and signing of subrogation
      letter was not voluntary and whether the claimant was subjected        B
      to compulsion or coercion and as such could validly invoke the
      jurisdiction under Section 11 of the Act. The law on the point is
      clear from following decisions of this Court. In National Insurance
      Co. Ltd. v. Boghara Polyfab (P) Ltd in paras 26 and 51 it was
      stated as under:
                                                                             C
         “26. When we refer to a discharge of contract by an agreement
         signed by both the parties or by execution of a full and final
         discharge voucher/receipt by one of the parties, we refer to an
         agreement or discharge voucher which is validly and voluntarily
         executed. If the party which has executed the discharge
         agreement or discharge voucher, alleges that the execution of       D
         such discharge agreement or voucher was on account of fraud/
         coercion/undue influence practised by the other party and is
         able to establish the same, then obviously the discharge of the
         contract by such agreement/voucher is rendered void and
         cannot be acted upon. Consequently, any dispute raised by           E
         such party would be arbitrable.
         * *     *
      51. The Chief Justice/his designate exercising jurisdiction under
      Section 11 of the Act will consider whether there was really accord
      and satisfaction or discharge of contract by performance. If the       F
      answer is in the affirmative, he will refuse to refer the dispute to
      arbitration. On the other hand, if the Chief Justice/his designate
      comes to the conclusion that the full and final settlement receipt
      or discharge voucher was the result of any fraud/coercion/undue
      influence, he will have to hold that there was no discharge of the     G
      contract and consequently, refer the dispute to arbitration.
      Alternatively, where the Chief Justice/his designate is satisfied
      prima facie that the discharge voucher was not issued voluntarily
      and the claimant was under some compulsion or coercion, and
      that the matter deserved detailed consideration, he may instead
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610      SUPREME COURT REPORTS                            [2018] 2 S.C.R.


A     of deciding the issue himself, refer the matter to the Arbitral
      Tribunal with a specific direction that the said question should be
      decided in the first instance.”
      8. In the decision rendered in Union of India v. Master
      Construction Co this Court observed as under:
B       “18. In our opinion, there is no rule of the absolute kind. In a
      case where the claimant contends that a discharge voucher or
      no-claim certificate has been obtained by fraud, coercion, duress
      or undue influence and the other side contests the correctness
      thereof, the Chief Justice/his designate must look into this aspect
C     to find out at least, prima facie, whether or not the dispute is bona
      fide and genuine. Where the dispute raised by the claimant with
      regard to validity of the discharge voucher or no-claim certificate
      or settlement agreement, prima facie, appears to be lacking in
      credibility, there may not be a necessity to refer the dispute for
      arbitration at all.
D
         19. It cannot be overlooked that the cost of arbitration is quite
      huge—most of the time, it runs into six and seven figures. It may
      not be proper to burden a party, who contends that the dispute is
      not arbitrable on account of discharge of contract, with huge cost
      of arbitration merely because plea of fraud, coercion, duress or
E     undue influence has been taken by the claimant. A bald plea of
      fraud, coercion, duress or undue influence is not enough and the
      party who sets up such a plea must prima facie establish the same
      by placing material before the Chief Justice/his designate. If the
      Chief Justice/his designate finds some merit in the allegation of
F     fraud, coercion, duress or undue influence, he may decide the
      same or leave it to be decided by the Arbitral Tribunal. On the
      other hand, if such plea is found to be an afterthought, make-
      believe or lacking in credibility, the matter must be set at rest then
      and there.

G     * *       *
        22. The above certificates leave no manner of doubt that upon
      receipt of the payment, there has been full and final settlement of
      the contractor’s claim under the contract. That the payment of
      final bill was made to the contractor on 19-6-2000 is not in dispute.
      After receipt of the payment on 19-6-2000, no grievance was
H
    M/S ONGC MANGALORE PETROCHEMICALS LTD. v.        611
M/S ANS CONSTRUCTIONS LTD. & ANR.[R. K. AGRAWAL, J.]

    raised or lodged by the contractor immediately. The authority              A
    concerned, thereafter, released the bank guarantee in the sum of
    Rs 21,00,000 on 12-7-2000. It was then that on that day itself, the
    contractor lodged further claims.”
    9. It is therefore clear that a bald plea of fraud, coercion, duress
    or undue influence is not enough and the party who sets up a plea,         B
    must prima facie establish the same by placing material before
    the Chief Justice/his designate. Viewed thus, the relevant
    averments in the petition filed by the respondent need to be
    considered, which were to the following effect:
        “(g) That the said surveyor, in connivance with the respondent
        Company, in order to make the respondent Company escape                C
        its full liability of compensating the petitioner of such huge loss,
        acted in a biased manner, adopted coercion, undue influence
        and duress methods of assessing the loss and forced the
        petitioner to sign certain documents including the claim form.
        The respondent Company also denied the just claim of the               D
        petitioner by their acts of omission and commission and by
        exercising coercion and undue influence and made the petitioner
        Company sign certain documents, including a pre-prepared
        discharge voucher for the said amount in advance, which the
        petitioner Company were forced to do so in the period of
        extreme financial difficulty which prevailed during the said           E
        period. As stated aforesaid, the petitioner Company was forced
        to sign several documents including a letter accepting the loss
        amounting to Rs 6,09,55,406 and settle the claim of Rs
        5,96,08,179 as against the actual loss amount of Rs 28,79,08,116
        against the interest of the petitioner Company. The said letter        F
        and the aforesaid pre-prepared discharge voucher stated that
        the petitioner had accepted the claim amount in full and final
        settlement and thus, forced the petitioner Company to unilateral
        acceptance of the same. The petitioner Company was forced
        to sign the said document under duress and coercion by the
        respondent Company. The respondent Company further                     G
        threatened the petitioner Company to accept the said amount
        in full and final or the respondent Company will not pay any
        amount towards the fire policy. It was under such compelling
        circumstances that the petitioner Company was forced and
        under duress was made to sign the acceptance letter.”                  H
612            SUPREME COURT REPORTS                          [2018] 2 S.C.R.


A           10. In our considered view, the plea raised by the respondent is
            bereft of any details and particulars, and cannot be anything but a
            bald assertion. Given the fact that there was no protest or demur
            raised around the time or soon after the letter of subrogation was
            signed, that the notice dated 31-3-2011 itself was nearly after
            three weeks and that the financial condition of the respondent
B
            was not so precarious that it was left with no alternative but to
            accept the terms as suggested, we are of the firm view that the
            discharge in the present case and signing of letter of subrogation
            were not because of exercise of any undue influence. Such
            discharge and signing of letter of subrogation was voluntary and
C           free from any coercion or undue influence. In the circumstances,
            we hold that upon execution of the letter of subrogation, there
            was full and final settlement of the claim. Since our answer to the
            question, whether there was really accord and satisfaction, is in
            the affirmative, in our view no arbitrable dispute existed so as to
            exercise power under Section 11 of the Act. The High Court was
D
            not therefore justified in exercising power under Section 11 of the
            Act.”
             19. When we refer to discharge of a contract by an agreement
      signed by both the parties or by execution of a full and final discharge
      voucher/receipt by one of the parties, we refer to an agreement or
E     discharge voucher which is validly and voluntarily executed. If the party
      which has executed the discharge agreement or discharge voucher,
      alleges that the execution of such discharge agreement or voucher was
      on account of fraud/coercion/undue influence practised by the other party
      and is able to establish the same, then obviously the discharge of the
F     contract by such agreement/voucher is rendered void and cannot be
      acted upon. Consequently, any dispute raised by such party would be
      arbitrable. But in case the party is not able to establish such a claim or
      appears to be lacking in credibility, then it is not open to the courts to
      refer the dispute to arbitration at all.
G            20. In support of the claim of duress and coercion while issuing
      the said Certificate, learned counsel for the contractee-Company has
      taken us through a decision of this Court in National Insurance Company
      Limited vs. Boghara Polyfab Private Limited (2009) 1 SCC 267
      wherein it was held as under:-

H
    M/S ONGC MANGALORE PETROCHEMICALS LTD. v.        613
M/S ANS CONSTRUCTIONS LTD. & ANR.[R. K. AGRAWAL, J.]

     “24. What is however clear is when a respondent contends that           A
    the dispute is not arbitrable on account of discharge of the contract
    under a settlement agreement or discharge voucher or no-claim
    certificate, and the claimant contends that it was obtained by fraud,
    coercion or undue influence, the issue will have to be decided
    either by the Chief Justice/his designate in the proceedings under
                                                                             B
    Section 11 of the Act or by the Arbitral Tribunal as directed by the
    order under Section 11 of the Act. A claim for arbitration cannot
    be rejected merely or solely on the ground that a settlement
    agreement or discharge voucher had been executed by the
    claimant, if its validity is disputed by the claimant.
       50. Let us consider what a civil court would have done in a           C
    case where the defendant puts forth the defence of accord and
    satisfaction on the basis of a full and final discharge voucher issued
    by the plaintiff, and the plaintiff alleges that it was obtained by
    fraud/coercion/undue influence and therefore not valid. It would
    consider the evidence as to whether there was any fraud, coercion        D
    or undue influence. If it found that there was none, it will accept
    the voucher as being in discharge of the contract and reject the
    claim without examining the claim on merits. On the other hand, if
    it found that the discharge voucher had been obtained by fraud/
    undue influence/coercion, it will ignore the same, examine whether
    the plaintiff had made out the claim on merits and decide the            E
    matter accordingly. The position will be the same even when there
    is a provision for arbitration.
      51. The Chief Justice/his designate exercising jurisdiction under
    Section 11 of the Act will consider whether there was really accord
    and satisfaction or discharge of contract by performance. If the         F
    answer is in the affirmative, he will refuse to refer the dispute to
    arbitration. On the other hand, if the Chief Justice/his designate
    comes to the conclusion that the full and final settlement receipt
    or discharge voucher was the result of any fraud/coercion/undue
    influence, he will have to hold that there was no discharge of the       G
    contract and consequently, refer the dispute to arbitration.
    Alternatively, where the Chief Justice/his designate is satisfied
    prima facie that the discharge voucher was not issued voluntarily
    and the claimant was under some compulsion or coercion, and
    that the matter deserved detailed consideration, he may instead
                                                                             H
614      SUPREME COURT REPORTS                           [2018] 2 S.C.R.


A     of deciding the issue himself, refer the matter to the Arbitral
      Tribunal with a specific direction that the said question should be
      decided in the first instance.
      52. Some illustrations (not exhaustive) as to when claims are
      arbitrable and when they are not, when discharge of contract by
B     accord and satisfaction are disputed, to round up the discussion
      on this subject are:
           (i) A claim is referred to a conciliation or a pre-litigation Lok
         Adalat. The parties negotiate and arrive at a settlement. The
         terms of settlement are drawn up and signed by both the parties
C        and attested by the conciliator or the members of the Lok
         Adalat. After settlement by way of accord and satisfaction,
         there can be no reference to arbitration.
           (ii) A claimant makes several claims. The admitted or
         undisputed claims are paid. Thereafter negotiations are held
D        for settlement of the disputed claims resulting in an agreement
         in writing settling all the pending claims and disputes. On such
         settlement, the amount agreed is paid and the contractor also
         issues a discharge voucher/no-claim certificate/full and final
         receipt. After the contract is discharged by such accord and
         satisfaction, neither the contract nor any dispute survives for
E        consideration. There cannot be any reference of any dispute
         to arbitration thereafter.
           (iii) A contractor executes the work and claims payment of
         say rupees ten lakhs as due in terms of the contract. The
         employer admits the claim only for rupees six lakhs and informs
F        the contractor either in writing or orally that unless the
         contractor gives a discharge voucher in the prescribed format
         acknowledging receipt of rupees six lakhs in full and final
         satisfaction of the contract, payment of the admitted amount
         will not be released. The contractor who is hard-pressed for
G        funds and keen to get the admitted amount released, signs on
         the dotted line either in a printed form or otherwise, stating
         that the amount is received in full and final settlement. In such
         a case, the discharge is under economic duress on account of
         coercion employed by the employer. Obviously, the discharge
         voucher cannot be considered to be voluntary or as having
H
    M/S ONGC MANGALORE PETROCHEMICALS LTD. v.        615
M/S ANS CONSTRUCTIONS LTD. & ANR.[R. K. AGRAWAL, J.]

         resulted in discharge of the contract by accord and satisfaction.     A
         It will not be a bar to arbitration.
           (iv) An insured makes a claim for loss suffered. The claim is
         neither admitted nor rejected. But the insured is informed during
         discussions that unless the claimant gives a full and final voucher
         for a specified amount (far lesser than the amount claimed by         B
         the insured), the entire claim will be rejected. Being in financial
         difficulties, the claimant agrees to the demand and issues an
         undated discharge voucher in full and final settlement. Only a
         few days thereafter, the admitted amount mentioned in the
         voucher is paid. The accord and satisfaction in such a case is
         not voluntary but under duress, compulsion and coercion. The          C
         coercion is subtle, but very much real. The “accord” is not by
         free consent. The arbitration agreement can thus be invoked
         to refer the disputes to arbitration.
            (v) A claimant makes a claim for a huge sum, by way of
         damages. The respondent disputes the claim. The claimant who          D
         is keen to have a settlement and avoid litigation, voluntarily
         reduces the claim and requests for settlement. The respondent
         agrees and settles the claim and obtains a full and final
         discharge voucher. Here even if the claimant might have agreed
         for settlement due to financial compulsions and commercial            E
         pressure or economic duress, the decision was his free choice.
         There was no threat, coercion or compulsion by the respondent.
         Therefore, the accord and satisfaction is binding and valid and
         there cannot be any subsequent claim or reference to
         arbitration.”
                                                                               F
      21. Learned counsel further relied upon a decision of this Court in
R.L. Kalathia & Co. vs. State of Gujarat (2011) 2 SCC 400 wherein it
was held as under:-
      “10. Before going into the factual matrix on this aspect, it is useful
      to refer the decisions of this Court relied on by Mr Altaf Ahmed.        G
      In NTPC Ltd. v. Reshmi Constructions, Builders &
      Contractors1 which relates to termination of a contract, one of
      the questions that arose for consideration was:
          “(i) Whether after the contract comes to an end by completion
      of the contract work and acceptance of the final bill in full and
                                                                               H
616            SUPREME COURT REPORTS                            [2018] 2 S.C.R.


A           final satisfaction and after issuing a ‘no-demand certificate’ by
            the contractor, can any party to the contract raise any dispute for
            reference to arbitration?”
      While answering the said issue this Court held:
               “27. Even when rights and obligations of the parties are worked
B           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 a case where a contractor has made huge investment, he
C           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
D           be considered on its own facts.
               28. Further, necessitas non habet legem is an age-old maxim
            which means necessity knows no law. A person may sometimes
            have to succumb to the pressure of the other party to the bargain
            who is in a stronger position.”
E
              22. In the case at hand, the High Court allowed the appeal filed
      by the contractee on the assertion that the No Dues Certificate was
      given on account of coercion/undue influence practiced by the appellant-
      Contractor. The contractee, while basing its claim, relied upon the letters
      issued to the appellant-Contractor for releasing the payment of RA Bills.
F     Whether there has been duress and coercion exerted against the
      contractee-Company by the appellant-Contractor has to be examined
      keeping in mind the background in which the said letters have been
      exchanged between the parties. Learned counsel for the contractee-
      Company categorically submitted the relevant dates for our perusal to
G     show that RA Bills were raised on various dates for making payments to
      suppliers and others but were advertently delayed causing grave financial
      crisis to the contractee-Company to carry out the works and losses on
      account of delay in settling the claims of the contractee-Company
      periodically. However, it is contended from the side of the appellant-
      Contractor that the High Court was not right in considering it a genuine
H
    M/S ONGC MANGALORE PETROCHEMICALS LTD. v.        617
M/S ANS CONSTRUCTIONS LTD. & ANR.[R. K. AGRAWAL, J.]

and serious dispute regarding the claim made and the conduct of the            A
parties as reflected in the correspondence exchanged between the parties
disclosing that the contractee-Company encountered several financial
constraints.
        23. Pursuant to taking a false claim of duress and coercion while
filing the No Dues Certificate, the contractee-Company, vide letter dated      B
12.01.2013 to the appellant-Contractor, submitted a claim for
Rs. 96,88,48,642.00 for the losses incurred during execution of the contract
at Mangalore. It has been claimed that the contractee-Company could
not continue with the work due to various reasons like pooja, shifting of
Idols, non-availability of free encumbrance of site, obstruction in the
blasting work, stoppage of hard rock blasting, issues with respect to          C
work to be given to local contractors, non-vacation of project displaced
families, permission for forest clearance, permission for shifting of
wooden logs etc. and the huge expenditure as disclosed in the claim was
incurred by the contractee-Company due to the factors attributable to
the appellant-Contractor. Clause 6.6.0 of the General Conditions of            D
Contract deals with “Claims by the Contractor” (contractee in the case
at hand). Clause 6.6.1.0. of the Contract states that in case of a claim
of extra compensation or remuneration, the Contractee shall give notice
in writing of its claim within 10 days from the date of issue of orders or
instructions related to any works for which the Contractee claims such
additional payment. The notice shall give full particulars of the nature of    E
such claim, grounds on which it is based and the amount claimed. Unless
and until notice is given, the Contractor shall not be liable to pay extra
compensation to the Contractee. Clause 6.6.3.0 states that any claim of
the Contractee in accordance with Clause 6.6.1.0 shall be separately
included in the Final Bill prepared by it in the form of Statement of          F
Claims, giving particulars of the nature of claims, ground on which it is
based and the amount claimed and shall be supported by a copy of the
notice and the Contractor shall not be liable in respect of any notified
claim not specifically reflected in the Final Bill in accordance with the
provisions of Clause 6.6.3.0 which shall be deemed to have been waived
by the Contractee.                                                             G

       24. From the materials on record, we find that the contractee-
Company had issued the “No Dues/No Claim Certificate” on 21.09.2012,
it had received the full amount of the final bill being Rs. 20.34 crores on
10.10.2012 and after 12 days thereafter, i.e., only on 24.10.2012, the
                                                                               H
618             SUPREME COURT REPORTS                            [2018] 2 S.C.R.


A     contractee-Company withdrew letter dated 21.09.2012 issuing “No Dues/
      No Claim Certificate”. Apart from it, we also find that the Final Bill has
      been mutually signed by both the parties to the Contract accepting the
      quantum of work done, conducting final measurements as per the
      Contract, arriving at final value of work, the payments made and the
      final payment that was required to be made. The contractee-Company
B
      accepted the final payment in full and final satisfaction of all its claims.
      We are of the considered opinion that in the presents facts and
      circumstances, the raising of the Final Bill and mutual agreement of the
      parties in that regard, all claims, rights and obligation of the parties merge
      with the Final Bill and nothing further remains to be done. Further, the
C     appellant-Contractor issued the Completion Certificate dated 19.06.2013
      pursuant to which the appellant-Contractor has been discharged of all
      the liabilities. With regard to the issue that the “No-Dues Certificate”
      had been given under duress and coercion, we are of the opinion that
      there is nothing on record to prove that the said Certificate had been
      given under duress or coercion and as the Certificate itself provided a
D
      clearance of no dues, the contractee could not now turn around and say
      that any further payment was still due on account of the losses incurred
      during the execution of the Contract. The story about duress was an
      afterthought in the background that the losses incurred during the
      execution of the Contract were not visualised earlier by the contractee.
E     As to financial duress or coercion, nothing of this kind is established
      prima facie. Mere allegation that no-claim certificates have been
      obtained under financial duress and coercion, without there being anything
      more to suggest that, does not lead to an arbitrable dispute. The conduct
      of the contractee clearly shows that “no-claim certificate” was given by
      it voluntarily; the contractee accepted the amount voluntarily and the
F
      contract was discharged voluntarily.
             Conclusion:
            25. Admittedly, No-Dues Certificate was submitted by the
      contractee-Company on 21.09.2012 and on their request
G     Completion Certificate was issued by the appellant-
      Contractor. The contractee, after a gap of one month, that is, on
      24.10.2012, withdrew the No Dues Certificate on the grounds of coercion
      and duress and the claim for losses incurred during execution of the
      Contract site was made vide letter dated 12.01.2013, i.e., after a gap of
      3 ½ (three and a half) months whereas the Final Bill was settled on
H
    M/S ONGC MANGALORE PETROCHEMICALS LTD. v.        619
M/S ANS CONSTRUCTIONS LTD. & ANR.[R. K. AGRAWAL, J.]

10.10.2012. When the contractee accepted the final payment in full and             A
final satisfaction of all its claims, there is no point in raising the claim for
losses incurred during the execution of the Contract at a belated stage
which creates an iota of doubt as to why such claim was not settled at
the time of submitting Final Bills that too in the absence of exercising
duress or coercion on the Contractee by the appellant-Contractor. In
                                                                                   B
our considered view, the plea raised by the contractee-Company is bereft
of any details and particulars, and cannot be anything but a bald assertion.
In the circumstances, there was full and final settlement of the claim
and there was really accord and satisfaction and in our view no arbitrable
dispute existed so as to exercise power under Section 11 of the Act. The
High Court was not, therefore, justified in exercising power under Section         C
11 of the Act.
      26. In view of the foregoing discussion, we set aside the judgment
and order dated 12.01.2015 passed by the High Court. The appeal is
allowed.
                                                                                   D

Divya Pandey                                                     Appeal allowed.




                                                                                   E




                                                                                   F




                                                                                   G




                                                                                   H