Arbitration Appeal No.125 of 2005,Arbitration Petition No.28 of 2003

20th September, 2017.

Petitioner Counsel: Mr. SAROSH BHARUCHA a/w N.C. PAREKH AND SUNIL VYAS i/by MANSUKHLAL HIRALAL & CO.
Respondent Counsel: Mr. PHIROZ PALKHIWALA a/w DEBOJIT BANERJEE i/by UDWADIA & UDESHI

Cases Cited:
T.P. George Vs. State of Kerala and Anr., (2001) 2 SCC 758 [Para 7]
Numaligarh Refinery Ltd. Vs. Daelim Industrial Co. Ltd., 2008 ALL SCR 580=(2007) 8 SCC 466 [Para 7]
Asian Techs Ltd Vs. Union of India, (2009) 10 SCC 354 [Para 7,17]
Bharat Drilling & Foundation Treatment Pvt Ltd. Vs. State of Jharkhand & Ors., (2009) 16 SCC 705 [Para 7,17]
Oil & Natural Gas Corporation Vs. Saw Pipes Ltd, 2003 (5) SCC 705 [Para 8]
Delhi Development Authority Vs. R.S. Sharma & Co., 2008 ALL SCR 2360=2008 (13) SCC 80 [Para 8]
Associate Builders Vs. Delhi Development Authority, 2015 ALL SCR 375=2015 (3) SCC 49 [Para 8]
Union of India Vs. Ajit Mehta and Associates, AIR 1990 Bombay 45 [Para 10,14]
P. K. Ramaiah and Co. Vs. Chairman and Managing Director, National Thermal Power Corporation, 1994 Supp (3) SCC 126 [Para 10]
Nathani Steels Ltd Vs. Associated Constructions, 1995 Supp (3) SCC 324 [Para 10]
National Insurance Company Limited Vs. M/s Boghara Polyfab Pvt Ltd., 2008 ALL SCR 2533=AIR 2009 SC 170 [Para 10,16]
Cauvery Coffee Traders, Mangalore Vs. Hornor Resources (International) Company Limited, 2012 ALL SCR 208=(2011) 10 SCC 420 [Para 10]
Union of India and Others Vs. Master Construction Company, 2011 ALL SCR 1511=(2011) 12 SCC 349 [Para 10,14]
New India Assurance Company Limited Vs. Genus Power Infrastructure Ltd., 2015(1) ALL MR 988 (S.C.)=(2015) 2 SCC 424 [Para 10,14]
Steel Authority of India Ltd. Vs. J. C. Budharaja, AIR 1999 S.C. 3275 [Para 16]
Associated Engineering Co. Vs. Government of Andhra Pradesh, (91) 4 SCC 93 [Para 17]
Ramnath International Construction (P) Ltd. Vs. Union of India, (2007) 2 SCC 453 [Para 17]
Board of Trustees for the Port of Calcutta Vs. Engineers-DE-SPACE-AGE, (1996) 1 SCC 516 [Para 7,17]

JUDGMENT

Smt. Bharati H. Dangre, J. :- The present appeal challenges the judgment dated 30th August, 2004 delivered by the learned Single Judge thereby setting aside the Award mainly on two counts, namely that there was accord and satisfaction in between the parties as the amount was accepted towards full and final settlement by the claimant without any demur and secondly rejecting the claim for no damages in view of Clause 18 of the Agreement between the parties which dis-entitle the contractor from claiming any compensation for any loss suffered.

For adjudicating the challenge to the order passed by the learned Single Judge, it would be necessary to avert to certain essential facts:-

2. The Reserve Bank of India, (RBI) constituted under the Reserve Bank of India Act, 1934 invited tenders for construction of eighty Class III Quarters and one hundred and twelve Class IV Quarters and a Community Hall at Kharghar, Navi Mumbai. The appellant (hereinafter referred to as the "claimant") is a Private Limited Company engaged in the business of construction submitted its offer which was accepted by the RBI being the lowest and the letter of acceptance was issued to the claimant on 25th June, 1993. An Agreement was signed between the parties on 14th September, 1993 in which the date of commencement was specified as 5th July, 1093 and the period of completion was fixed as 20 months. The total value of work awarded was Rs. 4,89,94,854/-.

3. Though the date of completion was specified as 5th July, 1993, the conditional extension was regularly granted and time for completion of the project was finally extended till 31st January, 1997. The virtual completion certificate was granted on 31st March, 1997. The claimant raised final bill in regard to the work carried out by them on 4th May, 1998 which was scrutinized by both the parties, certified by the Architect and finally the claimant accepted the amount of final bill of Rs.4,16,51,201/- towards full and final settlement of their dues (except PVA). Subsequently, even the PVA Bill relating to escalation was scrutinized and claimant received an amount of Rs. 76,23,930/- as full and final claim. The claimant raised a dispute and sought reference of the same to the Arbitrater by virtue of Clause 34 of the contract and Shri Prabhakar Shankar Ambike was the sole arbitrator to whom the dispute was referred. The claimant raised claims under 17 Heads. The respondent/RBI raised issue of jurisdiction of Arbitrator to entertain the alleged claims and claimed that accord and satisfaction had taken place between the parties, bringing the contract to an end and, therefore, no arbitrable dispute exists to be referred to the Arbitrator. It was also a ground of the respondent that there was no compliance of the provisions of arbitration clause having not followed the procedure under clause 34 while referring the matter to the arbitration. The Reserve Bank of India also raised a counter claim before the Arbitrator. The Arbitrator declared his Award on 30th September, 2002 and awarded a sum of Rs. 47,55,507.00 against the 17 claims but rejected the counter claims of the respondent in totality. The Arbitrator further awarded future simple interest @ 12% per annum on the award amount from the date of publishing award till the date of decree or date of payment, whichever is earlier.

4. Being aggrieved by the said Award, RBI filed Arbitration Petition which was numbered as 28 of 2003 before the learned Single Judge of this Court praying for quashing and setting aside the award alleging that the Arbitrator had no jurisdiction to entertain the claims in view of accord and satisfaction reached between the parties and that the amount granted by the Arbitrator ought not to have been granted under the various Heads as the learned Arbitrator had failed to appreciate that the various claims which were raised by the claimant fell under the category of "excepted matters" under the contract on which decision of the Architect is final and there is no appeal.

5. The learned Single Judge by judgment dated 30th August, 2004 was pleased to allow the arbitration petition and set aside the impugned award.

This is how the present appeal is before us.

6. We have extensively heard Advocate Shri Sarosh Bharucha a/with N.C. Parekh and Sunil Vyas i/by Mansukhlal Hiralal & Co. for the Appellant and Advocate Shri. Phiroz Palkhiwala a/with Debojit Banerjee i/by Udwadia & Udeshi for the Respondent.

7. Advocate Shri Sarosh Bharucha appearing for the appellant argued in extenso that the order passed by the learned Single Judge does not fall within the purview of Section 34 of the Arbitration Act and the learned Single Judge could not have substituted the view of the Arbitrator unless and until he recorded a finding of perversity. It is argued by him that the learned Arbitrator's finding that after considering the facts of the case, terms of the contract and evidence on record there was no accord and satisfaction, has been substituted by the learned Single Judge on the ground that the Arbitrator's finding was based on no evidence which is ex facie perverse and contrary to the evidence on record. Further it is also argued by Mr. Bharucha that the finding of the learned Single Judge that the appellant did not demonstrate any case of "financial hardship" on count of delay in release of payments was not established and no pleadings to that effect were raised nor it was proved by any cogent evidence, is also an incorrect finding not based on facts and to demonstrate so the learned counsel took us through the documents contained in the form of letters which specifically refer to the correspondence prior to completion of work and after completion of work but prior to receipt of payment, which according to him was sufficient proof of financial hardship and coercion. In order to substantiate his contention that the learned Single Judge should not have substituted his view for that of the Arbitrator in exercise of powers under clause 34, he placed reliance upon a judgment of the Apex Court in the case of T.P. George Vs. State of Kerala and Anr., (2001) 2 Supreme Court Cases 758. to urge that it was not permissible for the High Court to substitute its views for those of the arbitrator as it could not be said that the view taken by the arbitrator is unreasonable or one which cannot be arrived at by a reasonable person. He also placed his reliance on the case of Numaligarh Refinery Ltd. Vs. Daelim Industrial Co. Ltd., (2007) 8 SCC 466 : [2008 ALL SCR 580]. Shri Bharucha also argued that the finding of the learned Single Judge on clause 18 debarring claimant from raising any claim is also an incorrect finding he attempted to demonstrate before us that the said clause is violative of Section 28 of the Indian Contract Act and such existence of a clause in the Agreement binds the parties but do not bind the Court. In support of his submission he refers to the following judgments of the Hon'ble Supreme Court.

1) (2009) 10 SCC 354 Asian Techs Ltd Vs. Union of India.

2) (2009) 16 SCC 705 Bharat Drilling & Foundation Treatment Pvt Ltd. Vs. State of Jharkhand & Ors.

3) (1996) 1 SCC 516 Board of Trustees for the Port of Calcutta Vs. Engineers-DE-SPACE-AGE

According to him, the clause dealt by the Apex Court in the aforesaid judgments is of similar nature as clause No.18 and according to him, existence of such a clause will not bind the Arbitrator or even the Court. It is the contention of the learned Counsel that the respondent has not filed an appeal challenging the impugned order and if at all the respondent was aggrieved by the said order on the ground that it had failed to take into consideration various other grounds raised in his petition, it was open for the respondents to challenge the impugned order to that extent and having failed to do so the respondents are precluded from raising the said grounds in the appeal which is filed by the appellant.

8. As against the claim of the appellant, learned Counsel Shri Palkhiwala appeared on behalf of the respondents and argued the matter at length. He placed reliance on the judgment of the Hon'ble Apex Court demonstrating the powers of the Court to interfere with and setting aside an arbitral award under section 34 of the Arbitration Act and by placing heavy reliance upon the judgment of the Apex Court in Oil & Natural Gas Corporation Vs. Saw Pipes Ltd, 2003 (5) SCC 705 he argued that an award can be set aside if it is in contravention of the provisions of the Act or any other substantive law governing the parties and is contrary to the fundamental policy of the Indian Law. He relied upon the judgment of the Apex Court in the case of Delhi Development Authority Vs. R.S. Sharma & Co., 2008 (13) SCC 80 : [2008 ALL SCR 2360] and according to the learned counsel the following grounds permit interference in an arbitral award :-

(a) An award which is contrary to the substantive provisions of law or the said Act, (b) an award which is against the specific terms of the contract, (c) an award which is patently illegal, (d) an award which is prejudicial to the rights of the parties, (e) an award contrary to the fundamental policy of Indian Law and (f) an award which is so unfair and unreasonable that it shocks conscience of the Court. He also placed reliance on the judgment of the Apex Court in the case of Associate Builders Vs. Delhi Development Authority, 2015 (3) SCC 49 : [2015 ALL SCR 375] wherein the Hon'ble Apex Court had interpreted the term "fundamental policy of Indian Law" to include the principles which the Arbitrator must follow and adopt "a judicial approach". The said judgment also mandates the Arbitrator to follow the principles of natural justice and recording of reasons in support of the decision has been held to be fundamental policy of Indian law. The Apex Court has also included the perversity or irrationality of decision to be tested on the touchstone of Wednusbury's Principle of Reasonableness to be included within the purview of "fundamental policy of Indian Law".

9. The learned Counsel advanced argument to the effect that Arbitrator is bound to follow due process, to comply with the requirement of natural justice, fair play and must apply his mind and consider all relevant material before arriving at his findings and if he does not do so, his Award is liable to be set aside on that ground alone. According to him, if findings of Arbitrator are shown to be contrary to law, patently illegal or contrary to the contract, or based on no evidence, or shocks judicial conscience, or are prejudicial to the rights of parties, or contrary to policy of Indian Law, then, such an award needs to be set aside.

10. Shri Palkhiwala also referred two letters dated 28th November, 1998 and 10th December, 1998 which acknowledge the receipt of the amount towards final bill and the PVA bill (i.e. Escalation bill) and he also contended that the amount thereunder in fact has been paid to the appellant. According to him, on such demand and acceptance, all rights and obligations of the parties came to an end, and accord and satisfaction had taken place with respect to the subject contract. He relied upon the following judgments of the Hon'ble Supreme Court and this Court to demonstrate that when accord and satisfaction is reached, the contract comes to an end and there is no scope for arbitration.

i. Union of India v Ajit Mehta and Associates: AIR 1990 Bombay 45.

ii. P. K. Ramaiah and Co. v Chairman and Managing Director, National Thermal Power Corporation: 1994 Supp (3) SCC 126.

iii. Nathani Steels Ltd v Associated Constructions: 1995 Supp (3) SCC 324.

iv. National Insurance Company Limited v M/s Boghara Polyfab Pvt Ltd.: AIR 2009 Supreme Court 170 : [2008 ALL SCR 2533].

v. Cauvery Coffee Traders, Mangalore v Hornor Resources (International) Company Limited: (2011) 10 SCC 420 : [2012 ALL SCR 208].

vi. Union of India and Others v Master Construction Company: (2011) 12 SCC 349 : [2011 ALL SCR 1511].

vii. New India Assurance Company Limited v Genus Power Infrastructure Ltd: (2015) 2 SCC 424 : [2015(1) ALL MR 988 (S.C.)].

11. Shri Palkhiwala also strenuously attempted to demonstrate that the Arbitrator has chosen to ignore all the relevant and germane arguments put forth by the respondent to the effect that no evidence was led to prove alleged coercion or financial hardship and the same was neither pleaded nor proved. He further argued that the Arbitrator has relied upon several trade practices to come to a conclusion that final bill should have been paid within six months from the date of virtual completion. However, no opportunity was given to the respondent to deal with trade practice or to negate the same and moresoever his precise argument is that even if such trade practices exist, it cannot override the specific provision in the contract between the parties. He therefore submitted that the learned Single Judge has rightly set aside the award though on a limited ground of accord and satisfaction being reached between the parties.

12. Mr. Palkhiwala, however, attempted to demonstrate before us that the award was liable to be set aside on several other grounds; namely, it being contrary to specific terms of the contract and the fact that the arbitrator has misconducted himself in allowing the claim and not considering the objection raised by other party and also on the ground that the arbitrator being a creature of contract must operate within four corners of the agreement and cannot travel beyond it. According to him, an act of the arbitrator in allowing claims relating to delayed damages are also contrary to the specific terms of the contract and specific reliance is placed on clause 18 of the contract between the parties. He also assailed the award on the ground that the claimant had not followed the procedure for reference to arbitration under the contract which was prescribed in terms of clause 34 of the contract and according to him said clause created a contractual allegation for the purpose of reference to the arbitration and the reference to the arbitration according to him, itself is unsustainable. He also argued that there was no arbitral dispute at the time of reference. Mr. Palkhiwala also dealt in detail with the individual claims granted by the arbitrator under various heads namely from claim no.1 to claim no.17 and in detail. He demonstrated as to how grant of such claims by the arbitrator cannot be sustained. When we specifically questioned the learned Counsel as to whether this Court while exercising power under section 37 of the Arbitration Act, can look into the award and sit in appeal over the award, which was in fact put to test before the learned Single Judge and the learned Single Judge though on a limited ground found that the award to be not sustainable and has set aside the award and whether it is permissible for this Court to deal with all his arguments. The learned counsel argued that the Court is exercising the appellate power conferred under section 37 of the Arbitration Act and the said section do not in any manner expressly or by necessary implication restrict the power of the Appellate Court. According to the learned counsel, provisions of section 107 of the Code of Civil Procedure will apply fully even to appeals under section 37 of the Arbitration Act and the this Court is required to consider all aspects and contentions to arrive at its conclusion, whether or not the impugned award is required to be set aside.

13. We have carefully considered the submissions advanced on behalf of both the parties and also perused the judgment of the learned Single Judge dated 30th August, 2004. It is not in dispute that the contract was entered into between the claimant and the RBI in pursuance of acceptance of a bid by the former for the construction of residential quarters and Community hall for the later at Belapur with an estimated cost of Rs.483.64 lakhs. The agreement executed between the parties contained several clauses including the clauses for payment to be made to the claimant, the phase and manner of such payments apart from the technical specifications of the work to be carried out by the contractor. As per clause 31, the contractor is to be paid from time to time an amount by the employer by instalments under interim certificates to be issued by the Architect to the contractor on account of the works executed. According to clause 33 of the Agreement, the decision, opinion, direction, certificate for payment issued by the Architect was final and conclusive and binding on the parties. Clause 34 of the contract provides for settlement of disputes arising out of or in connection with contract or carrying out of the work to be referred and decided by the arbitrator to be agreed upon by both the parties. The existence of the arbitration clause is not in dispute. However, the dispute in the present matter revolves around the date when the payment was due and the period of honouring the certificates of payment. According to the agreement, defective liability period was for 12 months and the period of final measurement is prescribed as three months from the date of virtual completion. The period of honouring the certificate of payment was prescribed as one month for running account bill and three months for final bill. According to the respondent RBI, the work under the tender was to be completed within 20 months i.e. by 4th March, 1995 but there was delay in execution of the work and extension was granted from time to time for completion of the said work and the period for execution was extended upto 31st January, 1997, virtual certificate was issued on 31st March, 1997 subject to certain conditions. It appears that the claimant raised the final bill with regard to the work carried out by them on 4th March, 1998. The virtual completion certificate issued on 27th August, 1997 mentions that the works were to be considered virtually completed on 31st March, 1997 subject to rectification of defects as per respondent's letter of 10th June, 1997 and other cited instructions and it also mention that the defect and liability period would start from the date of handing over buildings after rectification of defects. On 6th October 1997 the RBI asked the appellant to rectify the defects and hand over the buildings in the phased manner. On 1st May, 1998 the final bill was submitted by the appellant and on 14th July,1998 adhoc payment of Rs.17,57,471/- was made by the respondent to the appellant. On 16th July, 1998 the respondent noted serious lapse on the part of the appellant in failing to furnish the water proof guarantee. On 30th September, 1997 the RBI recorded that there is a delay on the part of the contractor for rectification, taking measurement and handing over of the premises and in the same letter it asked the contractor to depute their representative to discuss and finalize the final bill on 9th October, 1998 the meeting took place for discussion of the final bill to be cleared pending rectification with an assurance that the rectification would be completed before settlement of final bill failing which the respondent could retain a reasonable amount from the final bill towards rectification of defects. It was on 9th October, 1998 the final bill was certified for payment by the Architect. On 16th October, 1998 the respondent paid the balance 50% of the retention money to the appellant. We have noted that on 28th November, 1998 the appellant unequivocally accepted the amount of final bill scrutinised by the respondent and admitted that the same was correct and the appellant accepted the amount mentioned in the said bill as full and final settlement except for the PVA Bill amount relating to escalation which was to be certified and paid separately. In pursuance of the said letter on 1st December, 1998 the RBI paid the amount mentioned in the said bill to the appellant and on 10th December, 1998 the appellant issued a letter accepting that the scrutinised escalation bill was corrected and accepted the amount thereunder as full and final settlement. On 10th December, 1998 the escalation bill amount was paid towards full and final settlement, retaining amount of Rs. 50,000/- for non-compliance by the appellant as far as attending to the defects and deficiencies.

14. We have noted that the appellant referred the dispute to the arbitration on 23.1.1999 and submitted his statement of claim before the Arbitrator on 21.8.1999. The respondent submitted their reply in response to the claim on 15th November, 1999 and on 1st December, 1999 the rejoinder was filed by the appellant in which for the first time they protested/stated that the letter dated 28th November, 1998 and 10th December, 1998 accepting the amounts towards full and final settlement were obtained by coercion and pressure. It was only when the respondent in the written statement pointed out that "accord and satisfaction" had taken place in view of two letters and the payment having been made and accepted by the appellant, there was no question of arbitrator entertaining the claims and there was no arbitrable dispute. In rejoinder the appellant, for the first time, contended that the said letters had been obtained by causing extreme financial hardship and coercion and is therefore invalid in law. Thus, the allegations that the acceptance of the amount towards full and final settlement was on account of free will was made for the first time on 1st December, 1999. However, it is noteworthy to mention that there are no particulars given about any financial hardship or coercion except making bald statements. The Arbitrator brushed aside the said objection which was duly raised by the respondent RBI. The arbitrator after noting dates of virtual completion certificate as on 31.3.1997 observed that as per normal trade practice the final bill is required to be certified and finalized within reasonable time and normally the final bill should have been paid within six months' time. The Arbitrator also observed that the respondent could have on its own prepared the final bill after giving notice to the claimant and there is a practice that the payment was actually released as latest on 31.12.1998. The arbitrator did not accept the contention of the respondent in respect of "accord and satisfaction" and concluded that looking to the chronology of the events the amount of final bill involved in releasing retention bill and also bill as PVA one would think that the claimant were under pressure so far as getting their legitimate dues are concerned. The arbitrator therefore agreed with the claim of the claimant that "no claim certificate" was procured as delay in payment was causing financial hardship to the claimant and in the circumstances, if the claimants have accepted the final bill without murmur, it is not necessary that it is by way of accord and satisfaction. The learned Single Judge has rightly dislodged the conclusion of the arbitrator on the said point. The learned Counsel for the respondent has rightly relied upon the judgment of the Apex Court in the case of Union of India and Anr. Vs. Master Construction Co [2011 ALL SCR 1511] wherein the Court has held that the 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/ designated. In New India Assurance Co. Ltd vs. Genesis Infrastructure Ltd, (2015) 2 SCC 424 : [2015(1) ALL MR 988 (S.C.)], the Apex Court observed as follows :-

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 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 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 not therefore justified in exercising power under section 11 of the Act."

15. In the case in hand, the appellant did not plead as to how he was under the financial hardship which coerced him to accept the amount towards full and final settlement and in fact the plea that the amount has been accepted under coercion was raised for the first time after a period of one year from writing such letters. In case, if it was the case of the appellant that he was coerced to accept the amount and he was undergoing a financial hardship which prompted him to accept the amount that ought to have been the case of the appellant while filing his claim before the arbitrator. It is, however, only when the reply was filed by the respondent, wherein an objection was raised about "accord and satisfaction" being reached between the parties, the plea has come forth. No evidence is adduced to demonstrate the financial hardship and it is very apparent that the said plea is merely an after thought to counter the case of the respondent of reaching accord and satisfaction. The learned Single Judge has rightly recorded in paragraph 6 of the judgment that the requirement of giving particulars of coercion is a basic requirement of compliance and no particulars whatsoever of alleged financial hardship or coercion are given. The learned Single Judge has also observed that what circumstance can operate as coercion in relation to one person may not so operate in relation to another person and it was for the respondent to give particulars of the alleged financial hardship and coercion and in the absence of the same being pleaded or proved, mere delay in preparation of final bill will not itself amount to financial hardship or coercion. The learned Single Judge has therefore proceeded to conclude that the findings recorded by the arbitral tribunal was based on no evidence and therefore has rightly set aside the same.

16. As regards the contention of the respondent that there was no arbitrable dispute which called for the reference to arbitration, since there was "accord and satisfaction", we have carefully analysed the position of law on the said aspect. Though for a considerable time there was an issue as to whether in spite of full and final settlement of the claim, the arbitration clause in the contract can be invoked which provide for reference to arbitration in case of existence of an arbitrable dispute. The trend of judgment took a view that Court need not refer the dispute to the arbitrator, if it did not exist at all. In case of Steel Authority of India Ltd. Vs. J. C. Budharaja, AIR 1999 S.C. 3275 it was held that once there is full and final settlement in respect of any particular dispute or difference in relation to matter covered under arbitration clause in the contract and that dispute or difference is finally settled by and between the parties, such a dispute or reference does not remain to be arbitrable dispute and arbitration clause cannot be invoked even though for certain other matter contract may be in existence. The Apex Court further observed that once parties have carried out the settlement in respect of any dispute arising under a contract and that dispute or difference is amicably settled by way of final settlement, unless that settlement is set aside in appropriate proceeding, it cannot lie in the mouth of one party to the settlement to spurn it on the ground that it was mistake and to proceed to invoke arbitration clause and if this is permitted sanctity of contract, settlement also being a contract would be wholly lost and it would be open to one party to take benefit under the settlement and question the same on the ground of mistake without having the settlement set aside.

The divergence of views was put to rest by the Apex Court in the case of National Insurance Co. Vs. M/s Boghra, AIR 2009 SCC 170 : [2008 ALL SCR 2533] where the Apex Court in paragraph 24 observed as follows:-

24. "We thus find that the cases referred fall under two categories. The cases relied on by the appellant are of one category where the court after considering the facts, found that there was a full and final settlement resulting in accord and satisfaction, and there was no substance in the allegations of coercion/ undue influence. Consequently, this Court held that there could be no reference of any dispute to arbitration. The decisions in Nav Bharat and Nathani Steels are cases falling under this category where there were bilateral negotiated settlements of pending disputes, such settlements having been reduced to writing either in the presence of witnesses or otherwise. P.K. Ramaiah is a case where the contract was performed and there was a full and final settlement and satisfaction resulting in discharge of the contract. It also falls under this category. The cases relied on by the respondent fall under a different category where the court found some substance in the contention of the claimants that 'no due/claim certificates', or 'full and final settlement Discharge Vouchers' were insisted and taken (either in a printed format or otherwise) as a condition precedent for release of the admitted dues. Alternatively, they were cases where full and final discharge was alleged, but there were no documents confirming such discharge. Consequently, this Court held that the disputes were arbitrable. None of the three cases relied on by the appellant lay down a proposition that mere execution of a full and final settlement receipt or a discharge voucher is a bar to arbitration, even when the validity thereof is challenged by the claimant on the ground of fraud, coercion or undue influence. Nor do they lay down a proposition that even if the discharge of contract is not genuine or legal, the claims cannot be referred to arbitration"

Ultimately, the Apex Court held that whether there was a "full and final satisfaction" is also an issue which has to be looked into by the Arbitrator and it would depend on the facts and circumstances of each case and the Chief Justice/ Designate would consider while exercising jurisdiction under Section 11 as to whether there was really "accord and satisfaction" or "discharge of contract by performance". If the answer is in the affirmative, he will refuse to refer the dispute to the arbitration, however, if he comes to conclusion that full and final settlement received/or discharged, was a result of any fraud/ coercion / undue influence he will have to hold that there was no discharge and refer the dispute to arbitration.

In view of the aforesaid legal position, facts and circumstances of the case would have to be looked into to determine, whether the arbitrable dispute existed and cause for reference to arbitration. In the present case, after the claim was raised though after period of almost a year, the appellant raised a plea of fraud and coercion it was looked into by the arbitrator and concluded that it was a case of "financial hardship" and it cannot be said that there was no case of "accord and satisfaction" and the claim was entertained. The learned Single Judge also dealt with the issue of accord and satisfaction and held that there was, one in the form of acknowledgement receipt. In such circumstances, we do not feel it necessary to conclude that the dispute was not arbitrable.

17. The learned Single Judge has also made reference to the clause 18 of the contract and it was argued by the Counsel for the appellant that existence of such a clause which prevented the claim to be entertained, in any event, did not bind the arbitrator or the Court. He had relied upon judgment in case of Asian Techs Ltd. Vs. Union of India, (2009) 10 SCC 354 to canvass that a clause on similar nature did not preclude adjudication in the said case. The referable clause reads as under :-

(C) "No claim in respect of compensation or otherwise howsoever arising as result of extensions granted under condition (A) &

(B) above shall be admitted."

In recording a finding the Hon'ble Apex Court referred to its earlier judgment in the case of Board of Trustees for the Port of Calcutta Vs. Engineers-DESPACE-AGE and Bharat Drilling & Foundation, (1996) 1 SCC 516. Treatment Pvt Ltd. Vs. State of Jharkhand & Ors., (2009) 16 SCC 705 cited supra.

"Clause 1.21.4 reads as under : No claim shall be entertained for delays in communicating decision drawing or specifications by the Department. The Department may however consider the grant of extension of time in completion of work. If there is any such genuine reason of it."

The principle of law discernable from the aforesaid judgment reveals to us that it is for the arbitrator to decide the effect of the said clause and deal with the issue.

Per contra, Shri Palkhiwala had relied upon the judgment of the Apex Court in the case of Associated Engineering Co. Vs. Government of Andhra Pradesh, (91) 4 SCC 93 and Ramnath International Construction (P) Ltd. Vs. Union of India, (2007) 2 SCC 453 wherein the Apex Court has held that any derogation from terms of contract is not sustainable and award of damages ignoring the terms of contract amounted to legal misconduct on the part of Arbitrator. In the present case, clause 18 reads as follows :-

18. "The contractor shall not be entitled to any compensation for any loss suffered by him on account of delays in commencing or executing the work, whatever the cause of delays may be, including delays arising out of modifications to the work entrusted to him or in any subcontract connected therewith or delays in awarding contracts for other trades of the project or in commencement or completion of such works or in procuring Government controlled or other building materials or in obtaining water and power connections for construction purposes or for any other reason whatsoever and the Employer shall not be liable for any claim in respect thereof. The Employer does not accept liability for any sum besides the tender amount, subject to such variations as are provided for herein."

By virtue of said clause, the contractor is not held entitled for any compensation for any loss suffered on account of delays, whatever may be cause, the arbitrator has to operate within the parameters of the agreement and is bound by its terms and if the clause provide that the contractor will not be entitled for any claim, it binds both the parties since the agreement was signed by both the parties and now it is not open to the appellant to construe clause No.18 so as to seek benefit and contend that the clause is binding between the parties but do not bind the arbitrator or the Court. The judgment cited by the Counsel for the appellant does not support him for the said proposition which he had attempted to canvass. If the clause specifically prohibits any claim on account of delay, on any ground whatsoever, by ignoring the said clause 18, arbitrator has travelled beyond his jurisdiction as his existence depends upon the agreement and his function is to act within its limits. It is settled law that arbitrator is creature of the contract between the parties and if he ignores the specific terms of the contract, it would be question of a jurisdictional error on his part which could be corrected by Court.

18. We find that the learned Single Judge has rightly construed clause No.18 and arrived at a conclusion that the contractor is not entitled to claim any interest or damages and in fact the arbitrator has excluded from his consideration clause no.18 which was relevant for deciding the claim for damages.

The learned counsel Shri Palkhiwala is not successful in persuading us to look into various other flaws, which the arbitrator has committed, because according to us, our jurisdiction is appellate one, where an appeal is carried against the judgment of the learned Single Judge and therefore we will confine ourselves to the findings of the learned Single Judge, who has set aside the Award. The respondents did not carry an appeal against the judgment of the learned Single Judge and rightly so, since the purpose of respondent in the arbitration petition is achieved by setting aside of the Award. The Arbitration Act contains provision for supervision by the Courts over the specially created Forum of Arbitrator, only with a view to ensure fairness. The jurisdiction of the Court under Section 34 is not appellate in nature and it is not open to the Court to interfere with the Award, merely because other view is possible if the arbitrator has taken a plausible view on facts, evidence and pleadings before him. The extent of judicial scrutiny under section 34 of the Act is limited and under Section 37 it is further narrower. Appeal under section 37 is in the nature of second appeal, and where there are concurrent findings of facts and law, first by the Arbitraral Tribunal which are then confirmed by the Court, while scrutinizing it under Section 34, the Scope of the Appellate Court is minimal. In our opinion, the learned Single Judge has rightly set aside the award since it suffered from patent illegality and found it to be unfair and unreasonable. We do not propose to enhance the scope of Section 37 to sit in appeal over the Award once again and we refrain to advert to the arguments advanced by the learned Counsel Shri. Palkhiwala for setting aside the Award on grounds other than the one which are reflected in the impugned judgment passed by the learned Single Judge.

In the result, we uphold the order and judgment of the learned Single Judge and dismiss the appeal.

The appeal is dismissed.

Appeal dismissed.