Case Law Details
Union of India & Ors. Vs. M/s. Master Construction Co. (Supreme Court) – If a contractor alleges that he had signed a ‘no-claim’ certificate on the work done by him was under fraud, duress or undue influence, he must show evidence before the dispute is sent for arbitration. A bald allegation of duress will not do, the Supreme Court has stated in the judgment, Union of India vs Master Construction Company. In such cases the Chief Justice/his designate must look into this aspect to find out at least, prima facie, whether or not the dispute is bona fide and genuine.
Where the dispute raised by the claimant with regard to the validity of the discharge voucher or no-claim certificate or settlement agreement appears to be lacking in credibility, there may not be necessity to refer the dispute for arbitration at all. “It cannot be overlooked that the cost of arbitration is quite huge – most of the time, it runs in six and seven figures,” the judgment said. “It may not be proper to burden a party, who contends that the dispute is not arbitrable on account of discharge of contract, with huge cost of arbitration merely because plea of fraud, coercion, duress or undue influence has been taken by the claimant. A bald plea is not enough and the party who sets up such plea must prima facie establish the same by placing material before the Chief Justice/his designate. If the Chief Justice/his designate finds some merit in the allegation of fraud, coercion, duress or undue influence, he may decide the same or leave it to be decided by the arbitral tribunal. On the other hand, if such plea is found to be an after-thought, make-believe or lacking in credibility, the matter must be set at rest then and there.” The Supreme Court thus set aside the order of the Punjab and Haryana high court appointing an arbitrator in this dispute. In this case, the builder was given the task of raising a technical structure. After the payments were made and a no-claim certificate was issued, the contractor raised the plea that it was obtained illegally. This was held to be non-arbitrable.
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3541 OF 2011
Please become a Premium member. If you are already a Premium member, login here to access the full content.
The apex court had rightly observed that many a times an innocent party is burdened with the costs of arbitration and the cost runs to six or seven digits. The apex court should also note there are flow backs and arbitrators appointed are not above board. Many arbitrators look for comforts which they do not normally enjoy otherwise and many a time the high courts nominate only their past masters for variety of reasons.