Delhi High Court recently held that merely the fact that a contractor accepts payment from the employer for the work done does not mean that all disputes between them had ended.
In Union of India v Baga Brothers, disputes and differences between the parties arose on account of a contract work of construction given to the contractor, Baga Brothers, by the appellant government. The contract was completed in 1997 and the final bill finalized in 1998. The disputes were referred to arbitration and the arbitrator held that the disputes were alive/not finally settled and hence arbitrable. The arbitrator passed a final award in December 2004, allowing some of the claims of the contractor, which was unsuccessfully challenged by the government.
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In the government’s appeal before Delhi High Court, the court held that merely because contractor had written “accepted” in the final bill would not mean that the amount received would be taken as full and final satisfaction of all dues. For a full and final settlement or an accord and satisfaction, specific language must also show that the accord and satisfaction has taken place without any coercion or undue influence. It is well known that if a contractor does not sign the final bill even the admitted payment would not be released to the contractor.
The high court further held that the contractual provision on resorting to conciliation was not mandatory. An arbitration petition may be filed near the expiry of the period of limitation and there may not be sufficient time, therefore, to go through the conciliation procedure. The main arbitration petition cannot be allowed to become time barred merely because the arbitration clause contains a conciliation procedure in arbitration clause.
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The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.
