1. The appellants-Railways entered into an agreement with the respondent-company and entrusted certain construction work of bridges in Kottavelasa-Kirandole section. In the execution of that construction work, disputes arose between the parties. The respondent-contractor filed the suit (out of which this appeal arises) O.S.No. 112/80 on the file of Principal Subordinate Judge, Visakhapatnam under Section 20 of the Arbitration Act for a direction to the appellant to file agreement dt. 31-3-1973 into the court and for referring the disputes to arbitrator in accordance with the arbitration clause in the said agreement. The appellants contested the suit on the ground that the respondent-company could not complete the work as stipulated, consequently the appellants had to get the work executed through some other agency and that no amount was due to the respondent-plaintiff which is evident from the fact that it gave a no claim certificate on 15-5-1976 (Ex.B.3). It was further stated that the respondent also executed a collateral agreement on 17-5-1976 (Ex.B.2) which supersedes the original agreement dt. 31-3-1973 containing the arbitration clause between the parties. Onthese pleas, it was prayed, that the suit be dismissed.
2. The trial Court, after framing necessary issues and considering the evidence on record, came to the conclusion that as Exs. B.2 and B.3 are disputed, the matter can be referred to the arbitrator who would also go into the question of their genuineness or otherwise. In that view of the matter, it decreed the suit directing the appellant to file the original agreement dt. 31-3-1973 in the court and nominate its arbitrator for reference of the disputes within three months from the date of judgment. Aggrieved by the said judgment and decree, the defendants preferred this appeal.
3. Sri Venkatrama Reddi, the learned counsel for the appellants, submits that a the respondent-contractor has given no claim certificate (Ex.B.3) there can be no dispute which is referable to the arbitrator, as such the judgment under appeal cannot be sustained. In support of this contention, the learned counsel relied on two unreported judgments of this Court viz., (1) Judgment in A.S.NO. 9/72 dt. 25-4-75 and (2) Judgment in C.M.A. No. 169/75 dt. 16-6-77. But in a recent pronouncement of the Supreme Court in Union of India v. L.K. Ahuja & Co., : [1988]3SCR402 , it is held that the existence of the no claim certificate weakens the claim but does not extinguish the same. In that case, the Northern Railways representing Union of India, entered into four agreements with a contractor for construction of quarters. The contractor filed an application under Section 20 of the Arbitration Act claiming that certain amounts due under the said contracts have not been settled and prayed for reference of dispute to arbitrator. The Railways contested the petition under Section 20 of the Act as misconceived on the ground that the contractor had accepted all the amounts due for the work executed under the agreements and had given a no-claim declaration. The trial court accepted the defence and dismissed the petition. On appeal the High Court of Allahabad allowed the appeal and directed the reference of the dispute to the arbitration. The Supreme Court held thus (at p. 11.75 of AIR) :--
'In order to be entitled to ask for a reference under Section 20 of the Act, there must be an entitlement to money and a difference or dispute in respect of the same. It is true thaton completion of the work, right to get payment would normally arise and it is also true that on settlement of the final bill, the right to get further payment gets weakened but the claim subsists and whether it does subsist, is a matter which is arbitrable.'
Having regard to this pronouncement of theirLordships of the Supreme Court, the viewsexpressed by our High Court in the unreportedjudgments above referred to cannot beaccepted as representing correct law. Thiscontention of the learned counsel for theappellant, therefore, fails.
4. The next submission made by the learned counsel for the appellant is that in the collateral agreement, Ex.B.2 dt. 17-5-1976, the parties have agreed that the earlier agreement dt. 31-3-1975 is superseded, therefore, the dispute cannot be referred to arbitration. Sri Sitarama Murthy, the learned counsel for the respondent, on the other hand, contends that the agreement, Ex.B.2, is not a valid agreement, first because it is executed due to coercion and undue influence and secondly because it is not supported by any consideration and thirdly because the contract is not signed by the appellant either in accordance with Article 299 of the Constitution or otherwise, therefore, there is no binding agreement between the parties so as to supersede the original agreement of March 31, 1975. However, it is submitted by the learned counsel for the appellant that these pleas were not taken in the pleadings, so they cannot be permitted in the appeal. In so far as the first two contentions are concerned, I am inclined to agree with the learned counsel for the appellant. But in regard to the third contention viz., that Ex.B.2 is not signed by and on behalf of the Railways much less it is executed in accordance with Article 299 of the Constitution, though this ground was not taken before the trial Court, yet the fact remains that not signing of the contract is evident on the face of Ex.B.2 itself and does not require adducing of any evidence. I consider that in the interests of justice, this point may be permitted to be urged. The written statement contains a recital that the original agreement is being filed along with the written statement, which is marked as Ex, B.2 in evidence. However, on the request of the learned counsel to enable him to find out whether any original of the said collateral agreement duly signed in accordance with Article 299 of the Constitution is available withthe appellant, I granted him sufficient time. Ultimately, he repeated that no other original collateral agreement is available with the appellant. Having regard to these facts, I cannot but hold that Ex.B.2 is the original collateral agreement and that it is not signed by the Railways, so there is no concluded contract which supersedes the agreement of Mar 31, 1975. However, Sri P. Venkatrami Reddi, the learned counsel for the appellant submits that though the contract is unenforceable as against the appellant, in so far as the respondent is concerned, it is binding on him as he has signed. In support of his contention he relied on the following passages in 'Chitty on Contracts (24th Edn) para 17 at page 13-
'Sometimes the contract is enforceable by one party but not by the other. Thus a contract for the sale of an interest in land can be enforced by the party who has not signed the note or memorandum against the one who has.'
and also at para 250 at page 121-
'A contract which fails to comply with the statutory formalities is not void but only unenforceable. No action can be brought to enforce it directly. Nor can it be indirectly enforced by suing on some other cause of action. Thus if A orally agrees to allow B to dig for gravel on A's land and later turns B and his machinery of the land, B cannot sue A in trespass. But as the contract is not void, it can sometimes be relied upon as a defence.'
and also in 'Cheshire and Fifoot's 'Law ofContract' (10th Edition) at page 192-
'In the third place, a contract, which fails to satisfy the statutory requirements, while it may not be sued upon at common law, may yet be used in certain circumstances as a defence.''
5. I have perused the passages and the context in which they are written. While discussing the effect of non-compliance with statutory requirements, particularly with reference to Section 40 of the Law of PropertyAct, 1925* the learned authors stated that such a contract is not void but only unenforceable. Having regard to the wording of the said Section 40, it was held by the Courts in England that failure to satisfy the requirements of this section does not affect the validity but only enforceability of the contract. It may further be noticed that Section 40 required the party to be charged to sign the contract and there was no obligation on both the parties to sign the contract.
In fact, the learned author of 'Chitty on Contracts' while stating that the contract for the sale of interest in the land can be enforced by the party who has not signed the note or memorandum against one who has further observed 'more often, however, the contract is enforceable by neither party'. In my view, the question of non-enforceability of a contract arises only in a situation where there is a concluded contract between the parties which is incapable of being enforced due to non-compliance with any statutory provision. But where there has been no concluded contract, the question could not be whether there is an enforceable contract but whether there is a valid contract in law. In the instant case, the parties to the contract have not signed it. Therefore, there is no binding contract between the parties. No provision or authority has been brought to my notice that notwithstanding the non-signing of the contract by the Railways representing Union of India the contract will be a concluded contract. Further, due to non-compliance, of Article 299(1) of the Constitution which is held to be mandatory the contract is void. There is, therefore, no contract in the eye of law. As such in my view, the collateral agreement Ex.B.2 does not have the effect of superseding the original agreement of Mar. 1975 containing arbitration clause. In this view of the matter, I do not find any illegality in the order under appeal.
6. The civil miscellaneous appeal is therefore dismissed but, in the circumstances, without costs .