Objection After Full & Final Payment

In day –to-day business affairs, we have to deal with the payment of bills on almost regular basis.  It is a common belief that once the party has accepted the payment of final bill then the receiving party can not raise on any objection or  extra  claim after payment of final bill.  However, legal position is slightly different.

We are talking about the latest supreme court judgment passed in case of  D.C. Routhy Vs State of Orisaa  by  the bench of Hon’ble  Justice R.M. Lodah and Justice J.S. Khehar judgment dated 01^st November 2011.  In this case Lordship has made clear stand point on issues of objection/ claim after receipt of Full & final payment of final bill.

In this case, the dispute arose between  the rival parties in the year  1975. The appellant filed  a civil suite before Civil Court. The Civil Court referred this  matter to arbitration in year 1981 on the basis of arbitration clause in the contract between the parties.

Arbitrator passed an award in favor of appellant. In the execution proceeding the matter again objected by the respondents that appellant can  not  raise objections once accepted the payment for its final payment.  Contention raised that if there was any objection on final bill then appellant could have raised at the time of submitting of final bill or any time before the receipt of payment.  Appeal filed against order of court of execution before  High court. High court set aside the arbitral award mentioning that once the bill accepted then further claim/objection cannot be entertained.

Appellant filed the SLP in the year 2003  and after the grant of leave  the matter filed as Civil appeal in the year 2006 before supreme court.   Supreme court  has stated that  entire contract  should be examined and  specially the dispute settlement clause or arbitration clause.  In absence of any specific clause which prevents the rights of  objecting party to raise objection  after full & final payment , the dispute  shall be govern by arbitration clause of the agreement.  Court has quoted the case of  Bharat Cooking Company Vs Annapurna Construction 2003,8,  SCC  154   it is laid down by Hon’ble Supreme court that in absence of any clear undertaking  stating that the receiving party would not raise any objection in future and issuing the undertaking after full satisfaction of payment , it always open to the the party to claim objection after full & final bill payment.  The undertaking would act as estoppels.  Since in the present case there  was not such undertaking is on record the fore party can raise the claim even after final bill payment.  

Another important point decided in the present case that once the matter referred to the arbitrator  and both the parties participate before the arbitrator in arbitral proceedings, it is not open for party to say  that matter in dispute was not a subject matter of arbitration.  It is really useful case of commercial laws.

Regards

Ambrish  Tiwari

MBA, LL.B