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CASE NO.:

Appeal (civil) 2754 of 2002

PETITIONER:

Chairman & M.D., N.T.P.C. Ltd.

RESPONDENT:

M/s. Reshmi Constructions, Builders & Contractors

DATE OF JUDGMENT: 05/01/2004

BENCH:

CJI & S.B. Sinha.

JUDGMENT:

J U D G M E N T

V.N. KHARE, CJI.

This appeal which arises out of a judgment and order dated

23-11-2001 passed by the High Court of Kerala at Ernakulam revolves

round the question as to whether an arbitration clause in a

contract agreement survives despite purported satisfaction thereof.

The parties to this appeal entered into an agreement for a

project at Kayamkulam. Upon completion of the work the respondent

herein submitted final bill which was allegedly not accepted by the

appellant, whereafter they themselves prepared the final bill and

forwarded the same along with a printed format being a "No Demand

Certificate". The said "No Demand Certificate" was signed by

the respondent herein which is in the following terms:

NO DEMAND CERTIFICATE

Name of package : Earth filling in Temporary

Township Part \026 II

Letter of award : LOA No. KYM/CS/89/022/NIT-

005/LOA-065 dated 19.3.90

Name of the Contractor : Reshmi Construction, T.C. 4/1298,

Keston Road, Kowdiar, P.O. Trivandrum \026 3

1. This is to certify that we have received all payment in

full and final settlement of the supplied and services

rendered and/ or all work performed by us in respect of

the above referred LOA/ Contract and we have no other

claims whatsoever final or otherwise outstanding against

NTPC. We further confirm that we shall have no claim/

demands in future in respect of this contract of

whatsoever nature, final or otherwise."

2. We would now request you to please release our security

deposit/ contract performance Guarantee."

However, on the same day a letter dated 20-12-1990 was

written by the respondent to the appellant stating:

"We have completed the aforementioned work

in the Kayamkulam Super Thermal Power

Project's temporary township area at

Nangiarkulangara by the end of November 1990

itself. We had submitted a pre-final bill

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in November itself but the authorities

denied the bill and insisted final bill.

But when the alleged final bill was prepared

the authorities insisted that a "No Demand

Certificate" should be executed by us in

favour of the Corporation. They served us

with a printed specimen of the document and

insisted that it should be typed in our own

letterhead and submitted to the N.T.P.C. We

refused to submit such a document.

But the authorities of N.T.P.C. threatened

that unless and until we execute the said

document in favour of the Corporation, the

N.T.P.C. would not effect payment of our

bill. More than six lakhs of Rupees is

pending for payment vide the alleged final

bill. We have incurred huge losses in the

execution of the work purely due to the

latches and lapses of the corporation. More

over lakhs and lakhs of rupees has to be

paid to our Bankers, creditors suppliers,

workers, truck owners etc. etc. Under such

a situation we have no other way other than

budging to the coercion of the authorities

of N.T.P.C. ltd. to get whatever they give

merely for the necessity of our survival.

We have to comply with the instructions of

authorities of N.T.P.C. Ltd. out of our

helplessness in order to receive payment.

Hence this letter.

The certificates, undertakings, etc. as

aforesaid have been executed without

prejudice to our rights and claims

whatsoever on account of the alleged final

bill.

The money invested in the work comprises

loans from the Federal Bank Ltd., private

financiers, etc. as well the Firm's own

funds. Those additional sums raised by

loans have to be paid to the Bank,

financiers, etc. hence under duress,

coerction and under undue influence we are

signing the bill and execute such documents

as aforesaid to receive payment. Under such

coercive circumstances the alleged final

bill cannot be constructed as final bill.

We are signing the alleged final bill under

coerction, under undue influence and under

protest only without prejudice to our rights

and claims whatsoever. There is no accord

and satisfaction between the contracting

parties.

You are therefore requested to kindly pass

the final bill incorporating all the

measurements of the items such as sinkage,

in and under water execution of works,

compensation for suspension of works,

reimbursement of cost escalation due to

price hike of petroleum products, cost of

idling, enhanced rates for quantities

executed beyond the contractual period,

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market rate for excess quantities, extra

additional items etc. besides the losses and

damages by way of idling of tools and

plants, workmen, staff, establishment costs,

capital outlay, interest etc. as per

actuals. We hope and request that your

goodself may do the needful in the matter."

[Emphasis supplied]

The respondent thereafter invoked the arbitration clause by

reason of a letter through his advocate dated 21.12.91 wherein the

claims under several heads as enumerated in clause (a) to (p)

thereof. Therein a request was made to refer all the disputes and

differences to a sole arbitrator for adjudication with a direction

to make and publish the award within the statutory period.

The appellant herein thereafter discussed the matter at the

company level and in its proceedings it was recorded:

"4.0 In case of M/s. Reshmi Constructions,

Trivandrum Kerala (1(c) above) and M/s. C.S.

Prakash, (1(d) above) of Perumbavoor,

Kerala, the total payment for the works done

were effected, the final bills have been

settled without protest and the no-dues

certificate in the standard proforma have

been submitted by the contractors.

5.0 To seek legal opinion in the matter, we

have approached Mr. B.S. Krishnan, a leading

advocate from Cochin. On detailed study of

the claims of the agencies and considering

legal conditions, the advocate has advised

us to appoint arbitrator/s nominated by CMD

of NTPC, immediately. Accordingly our

advocate has written suitable replies to the

contractor's advocate Shri NT John, of

Trivandrum, informing them that they will

hear from NTPC regarding appointment of an

arbitrator in terms of the contract

conditions.

6.0 Submitted to appoint arbitrator/s for

the four contract packages at para 1.0

above, please."

The appellant thereafter by its letter dated 13th February,

1992 replied thereto stating:

"My client acting upon the notice, though

defective, takes it that all your claims are

disputed ones and hence are to be resolved

by Arbitration. Please note that the

reference to arbitration does not mean that

there is admission that the disputes are

arbitrable. Many of the claims raised are

beyond the terms of the contract and the

Arbitrator will have not jurisidiction to

deal with them. This is a matter which has

to be taken up later and not at the stage of

appointment of an Arbitrator.

As appointing authority, my client

refrains from commenting upon in any manner,

on the merits or otherwise of the disputes

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which your notice has set out.

It may be noticed that your client has

already taken the final bill and has issued

'no dues' certificate. This is not merely

accord and satisfaction, but bringing the

contract to an end.

Your client will hear from my client as

regards the appointment of the Arbitrator in

terms of the contract conditions shortly."

[Emphasis supplied]

A purported correction in the said notice was issued by the

advocate of the appellant stating:

"Sub: Correction in the notice is issued by

way of Reply notice is signed on behalf of

M/s. Rashmi Constructions, Trivandrum \026 reg.

Ref: My Regd. Notice No. P3-G1/92/582 dt.

13.2.92.

Under instructions from my clients, the

Chairman & Managing Director, National

Thermal Power Corporation Ltd. NTPC Bhavan,

New Delhi \026 110 003, I issue the following

notice:

In the reply notice issued by me under

reference number cited above, it was stated

that the notice issued by you on behalf of

your clients M/s. Rashmi Constructions,

Trivandrum was returned since it was not

signed by you and that the notice is sent

back as the same was signed on your behalf

by your client. On scrutiny I find that the

notice is returned by you after the same is

signed by you and not by your client on your

behalf. In paragraph 2 of the reply notice,

I stated that the notice is defective. It

was so stated because of the mistaken

impression that the notice is signed by your

client and not by you. I stated that the

mistake is in advert at and the same is

regretted. I would like to bring to your

notice one more fact which was omitted to be

stated in the reply notice sent earlier. I

have already stated that your client has

issued 'no dues' certificate. The final

bill is accepted by your client without any

protest. This is further followed up by

your client receiving the security deposit

released on 21.1.92; that is after the

expiry of the stipulated period reckoned

from the date when the contract came to an

end.

In all other respects the reply notice

earlier sent stands."

The respondent herein filed an application under Section 20

of the Arbitration Act, 1940 before the Hon'ble Subordinate Judge's

Court Mavelikkara and in terms of a judgment and order dated

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30.6.1994 the said application was dismissed. Aggrieved, the

respondent herein preferred an appeal before the High Court of

Kerala which was allowed by reason of the impugned order.

Mr. Bhatt, the learned counsel appearing on behalf of the

appellant urged that as the contract itself came to an end upon

execution of the "No Demand Certificate" and together with the

same the arbitration clause also perished. In support of the said

contention, reliance has been placed on M/s. P.K. Ramaiah and

Company Vs. Chairman & Managing Director, National Thermal Power

Corpn. [1994 Supp (3) SCC 126] and Nathani Steels Ltd. Vs.

Associated Constructions [1995 Supp (3) SCC 324].

Mr. Bhatt further urged that as in its application under

Section 20 of the Arbitration Act, the respondent did not raise a

plea that they had been coerced to submit the "No Demand

Certificate", the High Court committed a manifest error in passing

the impugned judgment.

The learned counsel appearing on behalf of the respondent, on

the other hand, submitted that in the facts and circumstances of

the case neither any new contract has come into being nor there was

any accord and satisfaction of the contract agreement.

The learned counsel appearing on behalf of the respondent

also contended that despite coming to an end of the contract, the

arbitration clause survives and all questions arising out of or in

relation to the execution of the contract are referable to

arbitration. Reliance in this connection has been placed on

Damodar Valley Vs. K.K. Kar [(1974) 1 SCC 141], M/s. Bharat Heavy

Electricals Limited Vs. M/s. Amar Nath Bhan Prakash [(1982) 1 SCC

625], Union of India and Another Vs. M/s. L.K. Ahuja and Co.

[(1988) 3 SCC 76] and Jayesh Engineering Works Vs. New India

Assurance Co. Ltd. [(2000) 10 SCC 178].

On the arguments of learned counsel for the parties, the

questions that arise for our consideration are:

(i) Whether after the contract comes to an end by completion

of the contract work and acceptance of the final bill in

full and 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?

(ii) Whether in view of letter dated 20.12.1990 sent by the

respondent contractor the arbitration clause contained in

the agreement can be invoked ?

(iii) Whether the arbitration clause in the agreement has

perished with the contract?

In this context it is relevant to refer the arbitration clause

contained in the agreement which runs as under:

"56. Except where otherwise provided for in

the contract all questions and disputes

relating to the meaning of the

specifications, designs, drawing and

instructions herein before mentioned and as

to the quality of workmanship or materials

used on the work or as to any other

question, claim, right, matter or thing

whatsoever in any way arising out of or

relating to the contract, designs drawing,

specifications, estimates, instructions,

orders or these conditions or otherwise

concerning the works; or the execution or

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failure to execute the same whether arising

during the progress of the work or after the

completion or abandonment thereof shall be

referred to the sole arbitration of the

General Manager of National Thermal Power

Corporation Ltd.; and if the General Manager

is unable or unwilling to act: to the sole

arbitration of some other person appointed

by the Chairman and Managing Director;

National Thermal Power Corporation Ltd.

willing to act as such arbitrator. There

will be no objection if the arbitrator so

appointed is an employee of National Thermal

Power Corporation Ltd. and that he had to

deal with the matters to which the contract

relates and that in the course his duties as

such he had expressed views on all or any of

the matters in dispute or difference. The

arbitrator to whom the matter is originally

referred being transferred or vacating his

office or being unable to act for any reason

as aforesaid should act as arbitrator and if

for any reason, that is not possible; the

matter is not to be referred to arbitration

at all.

Subject as aforesaid the provision of the

Arbitration Act, 1940 or any statutory

modification or reenactment thereof and the

rules made thereunder and for the time being

in force shall apply to the arbitration

proceeding under this clause.

It is a term of the contract that the party

invoking arbitration shall specify the

disputes or disputes to be referred to

arbitration under this clause together with

the amount or amounts claimed in respect of

each such dispute.

The arbitrator(s) may from time to time with

consent of the parties enlarge the time, for

making and publishing the award.

The work under the Contract shall, if

reasonable possible, continue during the

arbitration proceedings and no payment due

or payable to the Contractor shall be

withheld on account of such proceedings.

The Arbitrator shall be deemed to have

entered on the reference on the date he

issues notice to both the parties fixing the

date of the first hearing.

The Arbitrator shall give a separate award

in respect of each dispute or difference

referred to him.

The venue of arbitration shall be such place

as may be fixed by the Arbitrator in his

sole discretion.

The award of the arbitrator shall be final,

conclusive and binding on the all parties to

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this contract.

The cost of arbitration shall be borne by

the parties to the dispute, as may be

decided by the arbitrator (s).

In the event of disputes or differences

arising between one public sector enterprise

and a Govt. Department or between two public

sector enterprises the above stipulations

shall not apply, the provisions of B.P.E.

Office Memorandum No. BPE/GL-001/76/MAN/2

(110-75-BPE(GM-1) dated 1st January 1976 or

its amendments for arbitration shall be

applicable."

Clause 52 of the agreement reads as follows:

"52. The final bill shall be submitted by

the contractor within three months of

physical completion of the works. No

further claims shall be made by the

contractor after submission of the final

bill and these shall be deemed to have been

waived and extinguished. Payment of those

items of the bill in respect of which there

is no dispute and of items in dispute, for

quantities and at rates as approved by

Engineer-in-Charge, shall be made within the

period specified hereunder, the period being

reckoned from the date of receipt of the

bill by the Engineer-in-Charge:

(a) Contract amount not exceeding Rs. 5

lakhs \026Four months.

(b) Contract Amount exceeding Rs. 5

lakhs \026 Six months.

After payment of the amount of the final

bills payable as aforesaid has been made,

the Contractor may if he so desires,

reconsider his position in respect of the

disputed portion of the final bill and if he

fails to do so within 90 days, his disputed

claim shall be dealt with as provided in

contract."

[Emphasis supplied]

The issues are required to be determined having regard to the

facts as which arise for consideration whether by reason of the

act of the parties the old contract was substituted by a new

contract. Only in the event a new contract came into being, the

arbitration agreement cannot be invoked.

In Damodar Valley Corporation vs. K.K. Kar [(1974) 1 SCC

141],this Court held:

"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

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sought to be referred."

Normally, an accord and satisfaction by itself would not

affect the arbitration clause but if the dispute is that the

contract itself does not subsist, the question of invoking the

arbitration clause may not arise. But in the event it be held that

the contract survives, recourse to the arbitration clause may be

taken. [See Union of India Vs. Kishorilal Gupta (AIR 1959 SC 1362)

and Majhati Jute Mills Vs. Khvalirsa (AIR 1968 SC 522).

In Bharat Heavy Electricals Limited (supra) this Court

observed that whether there was discharge of the contract by accord

and satisfaction or not is a dispute arising out of a contract and

is liable to be referred to arbitration.

Yet again in L.K. Ahuja (supra) Sabyasachi Mukharji, J., as

the learned Chief Justice then was, laid down the ingredients of

Section 20 of the Arbitration Act stating:

6. It appears that these questions were

discussed in the decision of the Calcutta

High Court in Jiwnani Engineering Works Pvt.

Ltd. v. Union of India [AIR 1978 Cal 228]

where one of us (Sabyasachi Mukharji, J.)

was a party and which held after discussing

all these authorities that the question

whether the claim sought to be raised was

barred by limitation or not, was not

relevant for an order under Section 20 of

the Act. Therefore, there are to aspects.

One is whether the claim made in the

arbitration is barred by limitation under

the relevant provisions of the Limitation

Act and secondly, whether the claim made for

application under Section 20 is barred. In

order to be a valid claim for reference

under Section 20 of the Arbitration Act,

1940, it is necessary that there should be

an arbitration agreement and secondly

differences must arise to which the

agreement in question applied and, thirdly,

that must be within time as stipulated in

Section 20 of the Act.

It was held that having regard to the fact that the existence

of an arbitration agreement was not denied and there had been an

assertion of claim and denial thereof, the matter would be

arbitrable. It was observed:

In order to be entitled to ask for a

reference under Section 20 of the Act, there

must be an entitlement to money and a

difference or dispute in respect of the

same. It is true that on completion of the

work, right to get payment would normally

arise and it is also true that on settlement

of the final bill, the right to get further

payment get weakened but the claim subsists

and whether it does subsist, is a matter

which is arbitrable.

[Emphasis supplied]

This aspect of the matter has also been considered in Jayesh

Engineerng Works (supra) wherein following L.K. Ahuja (supra) it

was held:

"Whether any amount is due to be paid and

how far the claim made by the appellant is

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tenable are matters to be considered by the

arbitrator. In fact, whether the contract

has been fully worked out and whether the

payments have been made in full and final

settlement are questions to be considered by

the arbitrator when there is a dispute

regarding the same."

In M/s. P.K. Ramaiah and Company (supra) the amount was

received unconditionally. The full and final satisfaction was

acknowledged by a separate receipt in writing. In that situation

the following finding was recorded :

"Thus there is accord and satisfaction by

final settlement of the claims. The

subsequent allegation of coercion is an

afterthought and a devise to get over the

settlement of the dispute, acceptance of the

payment and receipt voluntarily given."

We, however, may observe that the quotation from Russell on

Arbitration may not be apt inasmuch as at the stage of reference

what would be a good defence is not a matter to be taken into

consideration.

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.

The appellant herein did not raise a question that there has

been a novation of contract. The conduct of the parties as

evidenced in their letters, as noticed hereinbefore, clearly go to

show that not only the final bill submitted by the respondent was

rejected but another final bill was prepared with a printed format

that a "No Demand Certificate" has been executed as other final

bill would not be paid. The respondent herein, as noticed

hereinbefore, categorically stated in its letter dated 20.12.1990

that as to under what circumstances they were compelled to sign the

said printed letter. It appeares from the appendix appended to

the judgment of the learned Trial Judge that the said letter was

filed even before the trial court. It is, therefore, not a case

whether the respondent's assertion of "under influence or coercion"

can be said to have been taken by way of an afterthought.

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.

Further, necessitas non habet legem is an old age maxim which

means necessity knows no law. A person may sometimes have to

succumb to the pressure of other party to the bargain who is on a

stronger position.

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We may, however, hasten to add that such a case has to be

made out and proved before the Arbitrator for obtaining an award.

At this stage, the Court, however, will only be concerned

with the question whether triable issues have been raised which are

required to be determined by the Arbitrators.

Circumstances leading to passing an order by the courts of

law directing the parties to get their disputes determined by

domestic tribunal selected by them having regard to the

correspondences exchanged between the solicitors came up for

consideration in Goodman Vs. Winchester and Alton Rly [(1984) 3 All

ER 594] wherein it was held:

"As I have already recounted, the

plaintiff's solicitor may have had in mind

that if there were an arbitration clause

various matters could be sorted out cheaply

and quickly under it. There is no evidence,

in my judgment, that when he drafted the

terms of the arbitration clause he had in

mind that it would not apply to a

repudiation of the contract by the

defendants. He is a solicitor; he is

clearly an experienced solicitor; and he

should have appreciated (and I feel certain

he did) that the arbitration clause which he

drafted, and which was accepted by the

defendants, would cover every aspect of the

contract, including repudiation. But, apart

altogether from what the plaintiff's

solicitor had in mind, there is no evidence

at all as to what the defendant company had

in mind when it agreed to accept the

arbitration clause, and it was wrong, in my

judgment, for the Judge to say that neither

party had in mind that it would apply to the

summary dismissal of the plaintiff. It

follows, therefore, that at the very

beginning of his judgment the judge

misdirected himself as to the construction

of the arbitration clause and what it was

mended to deal with."

Even correspondences marked as without prejudice may have to

be interpreted differently in different situations.

What would be the effect of without prejudice offer has been

considered in Cutts Vs. Head and Another [(1984) 2 WLR 349] wherein

Oliver L.J. speaking for the Court of Appeals held:

"In the end, I think that the question of

what meaning is given to the words "without

prejudice" is a matter of interpretation

which is capable of variation according to

usage in the profession. It seems to be

that, no issue of public policy being

involved, it would be wrong to say that the

words were given a meaning in 1889 which

isimmutable ever after, bearing in mind that

the precise question with which we are

concerned in this case did not arise in

Walker v. Wilsher, 23 Q.B.D. 335, and the

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court did not deal with it. I think that

the wide body of practice which undoubtedly

exists must be treated as indicating that

the meaning to be given to the words is

altered if the offer contains the

reservation relating to the use of the offer

in relation to costs."

Yet again in Rush & Tompkins Ltd. Vs. Greater London Council

and Another [(1988) 1 All ER 549]:

"The rule which gives the protection of

privilege to 'without prejudice'

correspondence 'depends partly on public

policy, namely the need to facilitate

compromise, and partly on 'implied

agreement' as Parker LJ stated in South

Shropshire DC v Amos [1987] 1 All ER 340 at

343, [1986] 1 WLR 1271 at 1277. The nature

of the implied agreement must depend on the

meaning which is conventionally attached to

the phrase 'without prejudice'. The classic

definition of the phrase is contained in the

judgment of Lindley LJ in Walker v. Wilsher

(1889) 23 QBD 335 at 337:

'What is the meaning of the words "without

prejudice"? I think they mean without

prejudice to the position of the writer of

the letter if the terms he proposes are not

accepted. If the terms proposed in the

letter are accepted a complete contract is

established, and the letter, although

written without prejudice, operates to alter

the old state of things and to establish a

new one.'

Although this definition was not necessary

for the facts of that particular case and

was therefore strictly obiter, it was

expressly approved by this court in Tomlin v

Standard Telephones and Cables Ltd. [1969] 3

All ER 201 at 204, 205, [1969] 1 WLR 1378 at

1383, 1385 per Danckwerts LJ and Ormrod J.

(Although he dissented in the result, on

this point Ormrod J agreed with the

majority.) The definition was further cited

with approval by both Oliver and Fox LJJ in

this court in Cutts v. Head [1984] 1 All ER

597 at 603, 610, [1984] Ch. 290 at 303, 313.

In our judgment, it may be taken as an

accurate statement of the meaning of

'without prejudice', if that phrase be used

without more. It is open to the parties to

the correspondence to give the phrase a

somewhat different meaning, e.g. where they

reserve the right to bring an offer made

'without prejudice' to the attention of the

court on the question of costs if the offer

be not accepted (See Cutts v. Head) but

subject to any such modification as may be

agreed between the parties, that is the

meaning of the phrase. In particular,

subject to any such modification, the

parties must be taken to have intended and

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agreed that the privilege will cease if and

when the negotiations 'without prejudice'

come to fruition in a concluded agreement."

Meaning the words "without prejudice" come up for

consideration before this Court in Superintendent (Tech. I) Central

Excise, I.D.D. Jabalpur and Others Vs. Pratap Rai [(1978) 3 SCC

113] wherein it has been held:

"The Appellate Collector has clearly used

the words "without prejudice" which also

indicate that the order of the Collector was

not final and irrevocable. The term

"without prejduce" has been defined in

Black's Law Dictionary as follows:

Where an offer or admission is made 'without

prejduce', or a motion is defined or a bill

in equity dismissed 'without prejudice', it

is meant as a declaration that no rights or

privileges of the party concerned are to be

considered as thereby waived or lost, except

in so far as may be expressly conceded or

decided. See, also Dismissal Without

Prejudice.

Similarly, in Wharton's Law Lexicon the

author while interpreting the term 'without

prejudice' observed as follows:

The words import an understanding that if

the negotiation fails, nothing that has

passed shall be taken advantage of

thereafter; so, if a defendant offers,

'without prejudice', to pay half the claim,

the plaintiff must not only rely on the

offer as an admission of his having a right

to some payment.

The rule is that nothing written or said

'without prejudice' can be considered at the

trial without the consent of both parties \026

not even by a Judge in determining whether

or not there is good cause for depriving a

successful litigant of costs \005. The word is

also frequently used without the foregoing

implications in statutes and inter partes to

exclude or save transactions, acts and

rights from the consequences of a stated

proposition and so as to mean 'not

affecting', 'saving' or 'excepting'.

In short, therefore, the implication of

the term 'without prejudice' means (1) that

the cause or the matter has not been decided

on merits, (2) that fresh proceedings

according to law were not barred."

The appellant has in its letter dated 20th December, 1990

has used the term 'without prejudice'. It has explained the

situation under which the amount under the 'No Demand Certificate'

had to be signed. The question may have to be considered from that

angle. Furthermore, the question as to whether the respondent has

waived its contractual right to receive the amount or is otherwise

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estoppel from pleading otherwise will itself be a fact which has to

be determined by the arbitral tribunal.

In Halsbury's Laws of England, 4th Edition, Vol.16

(Reissue) para 957 at page 844 it is stated:

"On the principle that a person may not

approbate and reprobate a special species of

estoppel has arisen. The principle that a

person may not approbate and reprobate

express two propositions:

(1) That the person in question, having a choice

between two courses of conduct is to be

treated as having made an election from

which he cannot resile.

(2) That he will be regarded, in general at any

rate, as having so elected unless he has

taken a benefit under or arising out of

the course of conduct, which he has first

pursued and with which his subsequent

conduct is inconsistent."

In American Jurisprudence, 2nd Edition, Volume 28, 1966,

Page 677-680 it is stated:

"Estoppel by the acceptance of benefits:

Estoppel is frequently based upon the

acceptance and retention, by one having

knowledge or notice of the facts, of

benefits from a transaction, contract,

instrument, regulation which he might have

rejected or contested. This doctrine is

obviously a branch of the rule against

assuming inconsistent positions.

As a general principle, one who knowingly

accepts the benefits of a contract or

conveyance is estopped to deny the validity

or binding effect on him of such contract or

conveyance.

This rule has to be applied to do equity and

must not be applied in such a manner as to

violate the principles of right and good

conscience."

The fact situation in the present case, would lead to the

conclusion that the arbitration agreement subsists because:

(i) Disputes as regard final bill arose prior to its

acceptance thereof in view the fact that the same was

prepared by the respondent but was not agreed upon in its

entirety by the appellant herein;

(ii) The appellant has not pleaded that upon submission of the

final bill by the respondent herein any negotiation or

settlement took place as a result whereof the final bill,

as prepared by the appellant, was accepted by the

respondent unequivocally and without any reservation

therefor;

(iii) The respondent herein immediately after receiving the

payment of the final bill, lodged its protest and

reiterated its claims.

(iv) Interpretation and/or application of clause 52 of the

agreement would constitute a dispute which would fall for

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consideration of the arbitrator.

(v) The effect of the correspondences between the parties

would have to be determined by the arbitrator,

particularly as regard the claim of the respondent that

the final bill was accepted by it without prejudice.

(vi) The appellant never made out a case that any novation of

the contract agreement took place or the the contract

agreement was substituted by a new agreement. Only in the

event, a case of creation of new agreement is made out the

question of challenging the same by the respondent would

have arisen.

(vii) The conduct of the appellant would show that on receipt of

the notice of the respondent through its advocate dated

21.12.1991 the same was not rejected outright but

existence of disputes was accepted and the matter was

sought to be referred to the arbitration.

(viii) Only when the clarificatory letter was issued the plea

of settlement of final bill was raised.

(ix) The finding of the High Court that a prima facie in the

sense that there are triable issues before the Arbitrator

so as to invoke the provisions of Section 20 of the

Arbitration Act, 1940 cannot be said to be perverse or

unreasonable so as to warrant interference in exercise of

extraordinary jurisdiction under Article 136 of the

Constitution of India.

(x) The jurisdiction of the arbitrator under the 1940 Act

although emanates from the reference, it is trite, that in

a given situation the arbitrator can determine all

questions of law and fact including the construction of

the contract agreement. (See Pure Helium India Pvt. Ltd.

Vs. Oil and Natural Gas Commission reported in 2003 (8)

SCALE 553).

(xi) The cases cited by the learned counsel for the appellant

[P.K. Ramaiah and Company (supra) and Nathani Steels

(supra)] would show that the decisions therein were

rendered having regard to the finding of fact that the

contract agreement containing the arbitrator clause was

substituted by another agreement. Such a question has to

be considered and determined in each individual case

having regard to the fact situation obtaining therein.

For the reasons aforementioned, we are of the opinion that

there is no infirmity in the impugned judgment. This appeal is,

therefore, dismissed. No Costs.