Reference to arbitration after final settlement

In the case of Union of India and Ors v Master Construction Co, the Supreme Court has held that in proceedings under section 11(6) of the Arbitration and Conciliation Act, 1996, where a party pleads that a discharge voucher or no-claim certificate has been obtained by fraud, coercion, duress or undue influence, and the other side contests this, a bald plea is not enough for referral to arbitration.

The party that makes the allegation must place material before the chief justice or designate to prima facie establish the plea. If the chief justice or designate finds merit in the allegation, they may decide the issue or leave it to be decided by the arbitral tribunal. If the plea is found to be an after-thought, make-believe or lacking in credibility, the matter must end then and there.

Background

The petitioner awarded a contract to the respondent contractor in September 1995. The contractor furnished no-claim certificates and the final bill was signed in May 2000. The contractor withdrew the no-claim certificates in July 2000 and lodged certain claims against the petitioner. The chief engineer declined to entertain the claims on the ground that the final bill had been accepted by the contractor after furnishing no-claim certificates and so no claim existed under the contract.

Madhu Sweta is a partner and Amit Mishra is an associate at Singhania & Partners, which is a full-service national law practice. The firm has offices in New Delhi, Noida, Bangalore, Hyderabad and Mumbai.