Shiv Narayan Dhingra, J.@mdashBy this petition u/s 33 read with Sections 8, 11 and 12 of the Indian Arbitration Act, 1940 (''the Act'', for short) the petitioner has made a prayer that this Court should decide the existence, validity and effect of the arbitration agreement between the parties and declare that no arbitral dispute exits inter se parties which could be referred to the arbitrator in view of accord and satisfaction confirmed by respondents No. 1 and 2.
2. Brief facts relevant for the purpose of deciding this petition are that the petitioner Punjab National Bank (PNB) entered into a contract with respondents for construction of a building at Sri Ganga Nagar, Rajasthan. The contract between the parties contained an arbitration clause being Clause No. 5.44 which provided that the disputes between the parties should be referred to and would be adjudicated through the means of arbitration and the procedure for appointment of the arbitrator was provided in the clause itself. The respondent invoked the arbitration clause vide letter dated 14th April, 1995 alleging that respondent was short-paid its final bill and had not been paid the amount for deviated quantities. The amounts were wrongly deducted from the final bill under defect liability and liquidated damages. The respondent asked the bank for appointment of an arbitrator and for referring the disputes for adjudication. In response to this letter, the bank informed the respondent that respondent had already given a receipt in lieu of full and final payment of all claims in respect of Sri Ganga Nagar Project and no dispute existed for referring to the arbitrator. When the bank did not refer the dispute to the arbitrator on above ground, respondent in terms of Clause 5.44 sent a panel of three names to the petitioner viz. Mr. V.D. Tiwari, Mr. B.G. Kora, Justice Avadh Bihari Rohtagi (retired) and asked the petitioner to choose one of the arbitrators. The petitioner still stuck to its stand that there was no dispute to be referred to the arbitrator and did not choose out of the names suggested by respondent. In terms of arbitration clause, in case of failure on the part of petitioner to choose one of the arbitrators out of the penal suggested by respondent, the respondents was at liberty to chose one of the arbitrators, so the respondent appointed Mr. V.D. Tiwari, retired Chief Engineer CPWD as the arbitrator and referred the disputes to him. It is after appointment of Mr. V.D. Tiwari that the petitioner filed this petition with the aforesaid prayer.
3. A perusal of petition filed by the petitioner would show that the only stand of the petitioner is that the respondent had executed full and final receipt on 24th January, 1995.
4. It is submitted that the architect of the petitioner bank had issued a certificate regarding final bill of respondent approving it for Rs. 81,56,784.42, after making certain deductions etc. The petitioner paid the remaining outstanding amount of Rs. 16,53,521.74 to the respondents on 23rd January, 1995. This payment was accepted by the respondent against the final bill as full and final payment and as settlement of all his claims against petitioner in respect of the contract. The respondent also confirmed this vide a receipt dated 24th January, 1995 that no amount in respect of the work executed by him was due from the bank. The copy of receipt executed by respondent is placed on record.
5. The respondent in his reply took the stand that the total value of the work executed by him was Rs. 88 lac. The architect did not give a proper certificate and did not reflect the true and correct picture. Respondent was not bound by the certificate issued by the architect. The architect had earlier given a certificate in favour of respondent certifying work of Rs. 84 lac approximately, however, later on, at the behest of the petitioner bank, he reduced the same to about Rs. 81 lac, making wholly unjustified deductions. The petitioner had committed default in payment of the final bill of respondent. The lumpsum payment made by petitioner bank was accepted by respondent under protest and the respondent lodged his claim with the petitioner bank about the loss of interest for delayed period also alongwith other claims soon after the payment of Rs. 16,53,521.74 on 24th January 1995. It is stated that the respondents were forced to sign a pre-typed receipt while handing over a cheque of Rs. 16,53,523.74 and was told that the cheque would be released only subject to signing of the said receipt. When respondents refused to sign the said receipt, the petitioner refused to release the payment. Finding no alternative, respondent was made to sign the receipt. However, after signing the receipts, respondents wrote a letter dated 27th January 1995 to the petitioner that the receipt was got signed from him under duress and coercion and he challenged the action of the petitioner. Respondent then gave a notice to the petitioner bank for payment of the remaining amount as per the final bill prepared by respondent and also asked petitioner to pay interest for the delayed period and other claims of the respondent. When petitioner failed to make the payment despite writing letters, respondent had no alternative but to invoke the arbitration clause. Respondent in terms of the arbitration clause, asked the bank to appoint an arbitrator. It is only when the bank did not appoint an arbitrator, the respondent had a right to name a panel of arbitrators in terms of arbitration clause. Respondent sent names of panel of arbitrators to the petitioner but the petitioner refused to act and that is why respondent was compelled to choose one of the arbitrators from the panel and referred the matter to him.
6. I have heard the counsel for petitioner as well as respondent (who appeared in person and argued the matter) and perused the documents placed on record. A perusal of receipt of full and final settlement would show that the receipt was a pre-typed receipt prepared on 23rd January 1995 and signed by the respondent on that date and it was again signed by respondent on a revenue receipt on 24th January 1995 and it is only after signing this receipt that the cheque dated 20th January, 1994 was handed over to respondent. In fact, the contract itself contained a clause that the final bill would be paid subject to the contractor (respondent herein) executing a full and final payment receipt.
7. The final bill as raised by the contractor was not paid by the petitioner. The petitioner made various deductions out of this bill on alleged approval from the architect. Respondents obviously received this amount under protest as is clear from the letter dated 27th January 1995 and asked the petitioner to give details of deductions time and again. The respondent has placed on record the documents showing that the work was complete sometime in February 1994 and final bill in respect of the work was prepared by Mr. R.K. Beri, an engineer of petitioner bank who forwarded it to respondent along with his letter dated 4th May, 1994. The architect of the bank wrote a letter dated 4th July 1994 to the petitioner�s Chief Architect (BNC of PNB) wherein details of the work done by respondents have been specified. A perusal of this letter dated 4th July 1994 would show that the gross value of the bill as approved by the architect was Rs. 83,61,604/-. This letter specifically mentions that the work was completed on 2nd February 1994 and the building was handed over to the petitioner bank on that day and the defect liability period starts from 3rd February 1994 and will continue up to 2nd February 1995. It also specifies that the measurements mentioned in the final bill were on the basis of measurements books and the work recorded in the measurement books have been executed at the site satisfactorily as per the tender drawings and conditions. The architect approved the gross amount of Rs. 83,61,604.27 and directed that the remaining payment be made to respondents. Despite this letter of the architect written on 4th July 1994, the payment was not released to the respondent and the respondent/contractor kept on writing letters for releasing the payment. The architect had also given another certificate in August, 1994 certifying that the construction was satisfactorily completed by respondent on 2nd February 1994 for total bill amount of Rs. 83,61,000/-.
8. As per the contract, the payment on account of final bill was to be made within six months from the date of completion certificate issued by the architect/ site engineer. As per architect�s letter, the completion was made on 2nd February 1994 and the building was handed over. The six months� period for clearing final bill expired on 2nd August 1994. It is apparent that the bank (petitioner herein) deliberately withheld the payment of the respondent contrary to the contract and the contractor (respondent) was being put to unnecessary harassment. A perusal of letters of the contractor would show that the contractor had been writing of its facing severe financial constraints. It is not understood as to how subsequently the architect varied and reduced the amount of final bill to Rs. 81,56,784.42. The correspondence also shows that the petitioner bank had withheld the security deposit and another amount of Rs. 38,000/- on account of defect liabilities and another Rs. 32,500/- towards liquidated damages. There is no reason given by the bank as to how the liquidated damages were imposed when no notice for defects was given to the respondents. No reason is given why the security deposit was not refunded to the contractor. The petitioner, however, vide another letter dated 13th July 1995 told the respondent that only a balance of Rs. 1,09,916/- was payable to him and sent a cheque to the respondent. All this shows that the account between the parties had not been finalized and the bank was exerting coercion and pressure on the respondents to sign the final payment receipt without which the payment was not being released. I consider that it cannot be said that no dispute existed between the parties or accounts had been finally settled and there was no dispute left for arbitration.
9. In view of my foregoing discussion, I find no merits in the petition. The petition is hereby dismissed with costs, cost is quantified as Rs. 1 lac, with directions that the arbitrator appointed by respondents shall continue with arbitral proceedings. Since considerable time has already elapsed, the arbitrator shall give his award within a period of six months from receipt of this order.
