M/S. AMBICA CONSTRUCTION versus UNION OF INDIA

Citation: [2006] SUPP. 9 S.C.R. 188 · Decided: 20-11-2006 · Supreme Court of India · Bench: AR. LAKSHMANAN · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
M/S. AMBICA CONSTRUCTION 
v. 
UNION OF INDIA 
NOVEMBER 20, 2006 
[DR. AR. LAKSHMANAN AND AL TAMAS KABIR, JJ.] 
'•··, 
Contract-General conditions of contract-Clause 43(2)-Works 
contract-Signing of No' claim certificate by contractor to recover security 
C deposit from the G~nment-Subsequently contractor claiming its lawful 
dues-Entitlement of-Held: Under General Conditions of Contract, No Claim 
Certificate is submitted by contractor once the works are finally measured 
up-Work was yet to be completed and to be finally measured-Arbitrator 
held that No Claim Certificate was given by the contractor under coercion 
and duress-Further, discharge certificate is given in advance for payment 
D of bills on time-Clause 43(2) provides safeguard against frivolous claims 
after final measurement-Thus, having submitted No Claim Certificate 
· contractor not precluded from raising further claim which was genuine. 
Appellant-contractor and respondent-Union oflndia executed a works 
contract. General Conditions of Contract provided for settlement of disputes 
E by arbitration. Appellant was unable to complete the work within the stipulated 
time. Respondent made certain deductions from the running bills submitted 
by the appellant and did not make payment to the appellant for the works 
already done. It also refused to refund the appellant's secruity deposit unless 
appellant submitted a No-Claim Certificate in terms of clause 43(2) of the 
F General Conditions of Contract. Having no other alternate, appellant submitted 
a No Claim Certificate to get refund of the security deposit. Thereafter, 
appellant claimed the amount due under the contract from the respondent. 
Respondent did not pay the dues. Appellant then filed an application for 
reference of its claims to arbitration and for appointment of an Arbitrator. 
During pendency, respondent refunded the security deposit to the appellant 
G but the appellant received the same under protest. Sole Arbitrator was 
appointed. Arbitrator held that the appellant signed the No Claim Certificate 
under duress and coercion; he however, disallowed its claims. Aggrieved 
parties challenged the Award. Single Judge of High Court set aside the Award 
and appointed a new Arbitrator who passed an Award allowing the appellant's 
H 
188 
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AMBICA CONSTRUCTION v. U.O.I. 
189 
claims. Respondent challenged the award. Single Judge of High Court A 
dismissed the application for setting aside the A ward. Respondent then filed 
an appeal. Division Bench of High Court held that apart from a mere statement, 
there was no proof of the allegation that the appellant had been compelled to 
sign No Objection Certificate under coercion or duress; and that having 
submitted a No Claims Certificate, the appellant was precluded from raising B 
any further claims. It set aside order of Single Judge of High Court and the 
Award passed by the Arbitrator. Respondent filed a Review Petition but the 
same was dismissed. Hence the present appeals. 
Allowing the appeals, the Court 
HELD: 1.1. Clause 43(2) of the General Conditions of Contract indicate C 
that a No Claim Certificate is required to be submitted by a contractor once 
the works are finally measured up. In the instant case, the work was yet to be 
completed and there is nothing to indicate that the works, as undertaken by 
the contractor, had been finally measured and on the basis of the same a No 
Objection Certificate had been issued by the appellant. Even the first Arbitrator, D 
who had been appointed had come to a finding that No Claim Certificate had 
been given under coercion and duress. The Division Bench of High Court for 
the first time came to a conclusion that such No Claim Certificate had not 
been submitted under coercion and duress. [194-D; 194-G-H; 195-A-BI 
1.2. From the submissions made by the parties, it is apparent that unless E 
a discharge certificate is given in advance, payment of bills are generally 
delayed. Although, Clause 43(2) has been included in the General Conditions 
of Contract, the same is meant to be a safeguard as against frivolous claims 
after final measurement. It cannot be said that such a clause in the contract 
would be an absolute bar to a contractor raising claims which are genuine, F 
even after the submission of such No Claim Certificate. [195-B-D) 
Chairman and MD. NTPC Ltd v. Reshmi Constructions, Builders and 
Contractors, 120041 2 SCC 663, relied on. 
1.3. In the instant case, the appellant also has 

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