UNION OF INDIA & ORS. versus M/S. BHARAT ENTERPRISE

Citation: [2023] 8 S.C.R. 803 · Decided: 23-03-2023 · Supreme Court of India · Bench: K.M. JOSEPH · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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803
UNION OF INDIA & ORS.
v.
M/S. BHARAT ENTERPRISE
(Civil Appeal Nos. 3441-3442 of 2015)
MARCH 23, 2023
 [K. M. JOSEPH, KRISHNA MURARI AND
B. V. NAGARATHNA, JJ.]
Arbitration and Conciliation Act, 1996 – Arbitrator passed
an award allowing claims which were submitted after the submission
of the final bill (containing No Claims Certificate) by the
Respondent-Contractor – During the arbitration, the appellant filed
an application u/s.16 invoking clauses 65 and 65A of the Contract
which interdicted the submission of a new claim after the submission
of the final bill – Application rejected – Petition filed by the
appellant u/s.34 challenging the award, allowed – Order set aside
by High Court in appeal u/s.37 – Held: When a contractor seeks to
wriggle out of a final bill or a ‘no claims due certificate’ which he
has submitted, he must establish a case that a final bill or a
certificate of no further claims was the result of any of the vitiating
factors under the law – Sans such finding, the final bill would stand
– If the final bill cannot be overridden by any factors known to law
then the clauses relied upon by the appellants in this case would
operate – There was no finding by the Arbitrator that the final bill
and the no claims certificate were vitiated – The clauses in the
contract were binding not only on the parties but also on the
Arbitrator – Going against the terms of clauses 65 and 65A would
indeed render the Award illegal being contrary to the contract and,
therefore, without jurisdiction – If the clauses operate, the inevitable
result is the arbitrator could not have traveled outside of the
contractual prohibition and passed an award allowing claims
submitted after the submission of the final bill – While, the reasoning
adopted by the High Court cannot be subscribed to, it cannot also
be lost sight of that the amounts in question are fairly meagre and
the final bill was settled only after long delay of over an year – It
was apparently the long delay in the payment of the final bill amount
which led to the raising of the new claims – Perhaps, if the final bill
itself was not kept pending for such a long time, the entire dispute
   [2023] 8 S.C.R. 803
803
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SUPREME COURT REPORTS
[2023] 8 S.C.R.
may not have arisen at all – Impugned order set aside – Appellants
to pay Rs.3 lakhs to the respondent in full and final settlement of its
claims – Constitution of India – Art. 136.
Arbitration and Conciliation Act, 1996 – ss.16(2), (3), 34, 37
– Plea of the respondent that the order dtd. 04.03.2009 passed by
the Arbitrator u/s.16 had attained finality as the same was not
impugned u/s.37 – Held: Under s.37(2)(a), an appeal lies to the
Court from an order of the Arbitral Tribunal accepting the plea
referred to in sub-sections (2) and (3) of s.16 – This means that an
appeal can be preferred against the order of the Arbitral Tribunal
allowing the plea that the Arbitral Tribunal does not have jurisdiction
– Similar is the case with reference to an order which is rendered
appealable u/s.16(3) – Thereunder also, it is the plea that the Arbitral
Tribunal is exceeding the scope of its authority which is allowed
which is rendered appealable – In the present case, by order
dtd.04.03.2009, the Arbitral Tribunal did not allow the plea be it u/
s.16(2) or u/s.16(3) – On the other hand, the Tribunal rejected the
plea of the appellants – Therefore, no appeal could have been filed
u/s.37 against the order dtd.04.03.2009 – An order passed by the
Arbitral Tribunal rejecting the plea u/s.16(2) or 16(3) being part of
the Award itself, it is open to the parties to challenge the same when
a petition is filed u/s.34 challenging the Award.
Arbitration – Arbitrator is a creature of the parties and the
contract – As Arbitrator he cannot stray outside the contours of the
contract – He is bound to act within its confines – A disregard of
the specific provisions of the contract would incur the wrath of the
Award being imperiled.
Allowing the appeals, the Court
HELD: 1.1 The clauses which have been relied upon by
the appellants are clear and unambiguous. What they interdict is
the submission of a new claim after the submission of the final
bill. If there are any claims left after the submission of the final
bill, the parties have agreed that they shall stand waived. These
are the clauses which are binding not only on the parties but also
on the Arbitrator. Going against the terms of clauses 65 and 65A
would indeed ren

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