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This Bombay High Court Judgement lays down law of limitation applicable to Arbitration Proceedings.
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INTHEHIGHCOURTOFJUDICATUREATBOMBAY.
CIVILAPPELLATEJURISDICTION ARBITRATIONAPPEALNO.6OF2007STATEOFMAHARASHTRA(attheinstanceofIrrigationDepartment,ExecutiveEngineer,KoynaDivisionNo.2) ...Appellant.
V/s.
1.HINDUSTANCONSTRUCTIONCOMPANY(LTD.(HCC).
2.ARBITRALTRIBUNALOF:a)S.N.Jha,b)V.M.Ranade,c)B.S.Panchmukhi ...Respondents.
MrA.A.Kumbhakoni,learnedcounsela/wMrsS.V.SonawanelearnedA.G.P.,MrShardulSinghandMrAbhayAnturkarforAppellant.
MrAspiChinoy,seniorCounsela/wMrArifDoctori/bM/sHareshJoshi&Co.forRespondents.
CORAM:R.D.DHANUKAJ.RESERVEDON:JANUARY09,2013.PRONOUNCEDON:FEBRUARY01,2013.
JUDGMENT:
By this appeal filed under Section 37 of the Arbitration And
Conciliation Act 1996 ( for short herein after referred as 'the Act'), the
Government seekstochallengeanorderandjudgmentdated29th June2006
passedbythelearnedDistrictJudge,Ratnagirirejectingarbitrationapplication
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No.44of2003filedbytheGovernmentunderSection34oftheAct.
2. TheGovernment hadchallengedanawarddeliveredbytheArbitral
Tribunalallowingsomeoftheclaimsmadebytherespondent (forshortthe
Government isreferredas'Government'andtherespondentisreferredas'the
contractor'). Someoftherelevantfactsforthepurposeofdecidingthisappeal
areasunder:
Pursuant to the invitation of tender on 1st April 1991 by the
Government andsubmissionofbidbythecontractoron17th June1991,the
Government awardedtheworkof constructionof civil workof pressureand
powerhouseinICTcontractNo.2tothecontractor.Theamountofthecontract
awardedwasatRs.6825lakh.Boththepartiesenteredintoanagreementon20th
March1992. Stipulateddateof commencementof theworkwas20th March
1992.Thestipulateddateofcompletionwas19thMarch1997.TheGovernment
grantedextensionoftimetocompletetheworktothecontractortill31stMarch
2000.Theworkwascompletedbythecontractoron31stMarch2000.Thedate
ofcompletionofmaintenanceperiodwas3rdOctober2000.
3. Thedisputearosebetweenthepartiesduringexecutionof workin
respectofhiddenexpenses. Thecontractorinvokedarbitrationclause. On27th
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April1998,firstarbitrationproceedingsstarted.Byanawarddated4thDecember
1998,theclaimofthecontractorwaspartlyacceptedbythelearnedarbitrator.
Pursuant to said award, the Government paid sum of Rs.10.2 crore to the
contractor.TheGovernmentdidnotchallengethesaidaward.
4. On3rdOctober2000,defectliabilityperiodended.Thedisputearose
betweentheparties. Thematterwasreferredtoarbitration. ArbitralTribunal
wasconstitutedbyappointmentofonearbitratorbyeachparty. Thepresiding
arbitratorwasappointedbytheCentralWaterCommission,NewDelhi.
5. On26thJune2003,thelearnedarbitratormadeanawardinfavourof
thecontractorawardingasumofRs.17,81,25,152/. Beingaggrievedbythe
saidaward,theGovernmentfiledarbitrationapplicationNo.44of2003on22nd
March2003intheCourtofDistrictJudge,Ratnagirichallengingthesaidaward
underSection34oftheAct.Byanorderandjudgmentdated29thJune2006,the
learnedDistrictJudgedealtwithfiveobjectionsraisedbytheGovernment by
wayof preliminaryobjectionsonlyandnegativedeachof suchobjectionand
rejectedthesaidarbitrationapplication. TheGovernmenthasfiledthisappeal
underSection37oftheActforimpugningtheorderandjudgmentdated29th
June2006passedbythelearnedDistrictJudge.
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6. Though Mr Kumbhakoni, the learned counsel appearing for the
Government wantedtoadvancearguments inrespect of variousother issues
touching the merits of the claims, however, as the learned senior counsel
appearingforthecontractorobjectedtosuchadditionalsubmissionswhichwere
notmadebeforethelearnedDistrictJudge,MrKumbhakonithelearnedcounsel
wasnotallowedtoagitatethoseadditionalissues.MrKumbhakoni,thelearned
counsel,thereforedidnotaddressthisCourtonadditionalissuesraisedbythe
GovernmentandaddressedthisCourtonlyonfivepreliminaryobjectionsraised
bytheGovernmentbeforetheDistrictJudgeinthisproceedingsalso.
7. MrKumbhakoni,thelearnedcounselsubmitsthatthecontractorhad
accepted payment under final bill without making any protest and thus the
contractitself ceasetoexist. Thelearnedcounselsubmitsthattheclaimsthus
made by the contractor were not arbitrable in view of such accord and
satisfactionduetoacceptanceoffinalbillwithoutprotest. Thelearnedcounsel
submitsthatthecontractorhadacceptedandsigned164thandfinalbilland165th
andfinalbillwithoutprotest.Itissubmittedthatboththesebillsweresignedby
theauthorisedrepresentativeofthecontractorandchequesforfinalbillhadbeen
acceptedandcreditedinthebankaccountofthecontractor.
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8. Mr Chinoy, the learned senior counsel appearing on behalf of the
contractor,ontheotherhandsubmitsthatthesignatoryto164thand165thbills
wasnotauthorisedtosignanysuchbillsbuthewasauthorisedtosign/acceptRA
bills. The learnedcounsel submits that under clause60.8of theGCC, the
contractorhadsubmittedthedraftfinalbillon30thDecember2000containing3
parts(i) BOQitems,(ii)Extraitemsand(iii)Claims. Itissubmittedthatthe
Governmentsdidnotpreparetherequisitedraftfinalaccountwithin2monthsas
requiredunderClause60.8andalsodidnotpreparefinalcertificateunderthe
saidclause.ItissubmittedthatpaymentofBOQitemsandExtraitemswasmade
bytheGovernmentaspartof164thandfinalbillandpaymentforpricevariation
wasmadeaspartof165thandfinalbill.Itissubmittedthathowever,inrespect
of5claims,nofinalbillwasissuedeitheracceptingorrejectingtheclaimsmade
bythecontractor.Itissubmittedthateventheamountsascertifiedunder164th
and165thbillswerepaidbytheGovernmentin34instalments.Itissubmitted
that164thand165thandfinalbillswerenotfinalbillsascontemplatedbyclause
60.8.Thecontractordidnotissuenoclaimcertificate.Itissubmittedthatthus,
therewasnoaccordorsatisfactiononthepartofthecontractorandthusclaims
werearbitrable.
9. The learned senior counsel placed reliance upon the judgment of
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Supreme Court in case of Bharat Coking Coal Ltd. Vs. Annapurna
Construction1andmoreparticularlypara9whichreadsthus:
9.Onlybecausetherespondenthasacceptedthefinalbill,thesamewouldnotmean that it was not entitled to raise any claim. It is not the case of theGovernmentthatwhileacceptingthefinalbill,therespondenthadunequivocallystatedthathewouldnotraiseanyfurtherclaim....
10. Relyinguponthesaidjudgment,thelearnedcounselsubmitsthat,as
thecontractorhadnotunequivocallystatedthathewouldnotraiseanyfurther
claim,contractorwouldbeentitledtoraiseanyclaimandwouldnotbeestopped
orprecludedfromraisinganyclaim.
11. The arbitral tribunal has considered this issue in paragraph 10 to
10.13of the impugnedaward. It was observed that procedure statedunder
clause60.8(b)and(c)wasnotobservedbytheGovernment. Contractoralso
didnotsubmitthe'draftstatementofFinalAccounts'asperClause60.8(a)and
didnotpursueitwiththeGovernment forissuanceofsuchcertificateofFinal
AccountasperClause60.8(c).TheArbitralTribunalobservedthatneitherthe
contractornortheGovernmenthereinadheredtotheprovisionsofClause60.8.
Ithasbeenheldthatitwouldhavebeenreasonableonthepartofthecontractor
to expect that the five claims would be considered by the Government
1 2004(5)ALLMR(SC)
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independentlyandaccepted,partiallyacceptedorrejectedontheirmeritsasthe
casemaybeandifthatdecisionoftheGovernment wasnotacceptabletothe
contractor,thedisputecouldthenbereferredtothePanelofArbitratorsasper
Clause66SettlementofDispute.TheArbitralTribunalrenderedafindingthat
thecontractordidnotwaiveitsrighttoreferitsclaimforadjudicationbythe
Arbitral panel merely because they had not lodged the protest against the
paymentbytheGovernmentoneither164thandfinalor165thorfinalbill.
12. TheDistrictJudgehasconsideredthisissueinparagraphs33and34
oftheimpugnedOrderandhasrejectedthecontentionraisedbytheGovernment
afterrecordingreasons.
13. Onperusaloftherecordsproducedbyboththepartiesandonperusal
of theawardmadebytheArbitral Tribunal andorder passedbythe learned
DistrictJudge,itisclearthattheprocedureunderClause60.8wasnotfollowed
byeither party. Thus RAbills 164and165and final bills were rightly not
consideredbytheArbitralTribunalasfinalbills.Itisnotindisputethatthere
wasanyseparatebillpreparedinrespectoffiveclaimsmadebythecontractor.
Inmyview,afterconsideringthefactsandthedocumentsandoninterpretation
ofClause60.8,ArbitralTribunalhasrenderedafindingthattherewasnoaccord
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andsatisfactionandthecontractorhadnotwaiveditsrighttomakeanyclaims.
SuchfindingsrenderedbytheArbitralTribunalandconfirmedbythelearned
DistrictJudgearenotperverse. Inmyview,nointerferenceisthuswarranted
withsuchfindingsrenderedbytheArbitralTribunalandupheldbytheDistrict
Judge.
14. The next submission of Mr Kumbhakoni, the learned counsel
appearingfortheGovernmentisthatClaimNo.1madebythecontractorbefore
thelearnedarbitratorwasbarredby resjudicata. Thelearnedcounselsubmits
thatClaimNo.1oughttohavebeenreferredtoearlierArbitralPanelintheyear
1998.Itissubmittedthatthoughtheworkinrespectofthisclaimwascompleted
duringthependencyof earlier arbitrationproceedings, thecontractordidnot
raisethisclaimintheearlierarbitration.
15. Mr Chinoy, the learned senior counsel appearing on behalf of the
contractorontheotherhandsubmitsthattherewere3Claimsreferredtoearlier
arbitraltribunaland2Claimswereaddedlateron.Itissubmittedthatpresent
ClaimNo.1wasnotmaturedat that timeandcouldnotbe included in that
arbitration. ItissubmittedthatmakingpaymentforExtra/deviateditemswith
denovorateanalysisafterapplyingthelabourmarkupandoverheadandprofit
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markup,asawardedbytheearlierarbitrationpanelwasunderconsiderationat
variouslevelsoftheGovernment.ThecontractorinitiatedthesaidClaimon30th
March1999andthesamewasrecommendedbytheEngineeroftheGovernment.
TheissuewasunderconsiderationatdifferentlevelsoftheGovernmentasthe
GovernmentdidnotpayevenattherateadoptedbytheArbitralTribunalinthe
earlierarbitration,thecontractorinvokedarbitrationvideletterdated27th July
2000. Itissubmittedthatthelearnedarbitratorhasrenderedafindingoffact.
ClaimNo.1wasreferredbytheGovernmentitselfforadjudicationofthearbitral
tribunal. The District Judge also rejected this contention advanced by the
Government inparagraph45oftheimpugnedorder. TheDistrictJudgeheld
that the disputes referred in 19971998were distinct than present one and
therefore,noquestionofresjudicataarises.Thelearnedseniorcounselpointed
outthattheonlygroundraisedinarbitrationapplicationfiledunderSection34
onthisissuewasthattheClaimwasbarredbytheprinciplesofresjudicata.Itis
pointedoutthatsimilargroundisraisedevenintheappealmemoinground(g).
The learned senior counsel submits that the claim made before the arbitral
tribunal in thesecondreferencewasadmittedlynot madebefore thearbitral
tribunalinthefirstreference.Therewasnoadjudicationofanysuchclaiminthe
earlierproceedings.Thequestionofapplicabilityoftheprinciplesofresjudicata
therefore,didnotarise.
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16. Onperusaloftheimpugnedawardaswellastheorderpassedbythe
learnedDistrict Judge, it is clear that the finding is renderedby the arbitral
tribunal as well as the learned District Judge that Claim No.1 pertained to
variationinproposedpercentages for the labourmarkupandoverheadsand
profitonthesamelinesforextraitemsanddeviateditemswhichhadcroppedup
duringtherestofthecontractwork. Ithasbeenheldthatmajorpartofthese
itemshadbeenexecutedevenpriortoreferringtheclaimtotheearlierArbitral
Panel.ThelearnedTribunalobservedthatClaimNo.1hadbeenincludedbythe
Government itself foradjudicationbeforetheArbitralTribunal inthesecond
reference.Afindingisrecordedthattheitemexcludedandclaimedinthesecond
referenceweredifferent.TheDistrictJudgealsonegativedthecontentionofthe
Governmentontheissuewhilerecordingdetailreasons. Inmyview,asClaim
No.1madeinthepresentproceedingswasnotclaimedadmittedlyintheearlier
arbitrationproceedings,therewasnoadjudicationonsuchclaimbytheArbitral
Tribunal,andthus questionofapplicabilityofprinciplesof resjudicata didnot
arise. The only ground raised by the Government in its application under
Section34beforetheDistrictJudgeandinthisappealmemofiledunderSection
37of theAct, it is urgedthat theclaimwasbarredbytheprinciplesof res
judicata.Inmyview,thereisnomeritinthepleaoftheGovernmentthatClaim
No.1isbarredby resjudicata andthus,thisplearaisedbytheGovernment is
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rejected.
17. ThenextsubmissionurgedbyMrKumbhakoni,thelearnedcounselfor
theGovernmentisthattheclaimsarebarredbylawoflimitation.Itissubmitted
thattheworkofpressureshaftexcavationwasstartedon9thJuly1993andwas
completedon2ndSeptember1997. Thecontractorreferredthedisputeagainst
item No.3 to the Executive Engineer on 10th February 1997 and invoked
arbitrationon20th November2011. AsfarasworkofTransformerHallArch.
Concrete is concerned, it is submittedthat thesaidworkwasstartedon23rd
October 1992 andwas completed on19th February 1994. The dispute was
referred in respect of this item to Executive Engineer on 14th October 1996
whereasarbitrationwasinvokedon1stJune2001.AsfarasworkofTransformer
Hallexcavationisconcerned,itissubmittedthatthesaidworkwasstartedon
16thJuly1992andwascompletedon31stMarch1995,whereasissuewasraised
beforetheExecutiveEngineeron4thJune2001.ItissubmittedthatasperClause
66Aof theGeneral Conditions of Contract, in caseof dispute, thecontractor
ought to have promptly asked the Engineer's Representative in writing, for
writtendecisionandtheEngineer'sRepresentativewouldgivethedecisionwithin
60days.Itissubmittedthatonexpiryof60days,thecauseofactionhadarisen
forinvokingarbitration.ItissubmittedthatuponthefailurebytheExecutive
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Engineertodecidethedisputewithin60days, thecontractoroughtto have
appealedtotheSuperintendingEngineerwithin30days. It issubmittedthat
afterpreferringthedisputetoExecutiveEngineer,contractorwaitedfor3years
butdidnotexercisehisrighttofileanappeal.ItissubmittedthatitemNos.3,4
and5 wereinexistenceintheyear1998whenthefirstarbitrationtookplace.
The learned counsel placed reliance upon Article18 PartI of schedule to
LimitationAct1963.ItissubmittedthatasperArticle18ofLimitationAct,asno
timehasbeenfixedforpayment,theperiodoflimitationis3yearscommencing
fromthedatewhentheworkwascompleted. Itissubmittedthatinrespectof
ClaimNos.3,4and5,theworkwascompletedmuchpriorto3yearsbeforethe
arbitration clause was invoked by the contractor. The learned counsel
demonstratedfromtablereferredinwrittensubmissions,thedateofcompletion
ofwork,referencemadetoExecutiveEngineer,rejectionofExecutiveEngineer;
reference made to Superintending Engineer, rejection by Superintending
Engineer; reference made to Chief Engineer and rejection of Claim by Chief
Engineerandalsothedateofinvokingarbitration.Thesaidtableisreproduced
asunder:
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Claim
Nos.
Work
completed
Ref.to
EE
Rej.by
EE
Ref.to
SE
Rej.by
SE
Ref.To
CE
Rej.By
CE
Arbitrationinvoked
3 02.09.97 10.02.97 17.07.00 03.08.00 22.09.00 12.10.00 08.11.00 20.11.00
4 19.02.94 14.10.96 04.11.00 27.02.01 12.04.01 10.05.01 21.05.01 01.06.01
5 31.03.95 14.10.96 19.09.00 27.02.01 12.04.01 10.05.01 25.05.01 04.06.01
Article18 and Article55 of PartII, Article113 of PartX and
Article137ofPartIIoftheLimitationActreadasunder:
Art. Descriptionofapplication Periodof
limitation
Timefromwhichperiodbeginstorun
18 Forthepriceofworkdonebytheplaintiffforthedefendantathisrequest, wherenotimehasbeenfixedforpayment.
Threeyears When the work isdone.
55 For compensation for the breach of anycontract, express of implied not hereinspeciallyprovidedfor.
Threeyears Whenthecontract isbroken or (wherethere are successivebreaches) when thebreach in respect ofwhich the suit isinstituted occurs or(where the breach iscontinuing when itceases).
113 AnysuitforwhichnoperiodoflimitationisprovidedelsewhereinthisSchedule.
Thereyears Whentherighttosueaccrues.
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137 Anyotherapplicationforwhichnoperiodoflimitation is provided elsewhere in thisdivision.
Threeyears When the right toapplyaccrues.
18. MrKumbhakoni,thelearnedcounselsubmitsthatoncecauseofaction
had commenced, it did not stop. It is submitted that merely because the
representationand/orClaimwasmadebythecontractorbeforevariousofficers
were pending andwere not decided, cause of action would not stop. The
learnedcounselpressedintoserviceSection9oftheLimitationActinsupportof
thisplea.ThelearnedcounselplacedrelianceuponthejudgmentofthisCourt
decidedon9thOctober2012incaseofAdityaBirlaChemicals(India)Ltd.Vs.
TataMotorsLtd.2inArbitrationPetitionNo.1027of2011deliveredbythisCourt
(R.D.Dhanuaka,J.)andmoreparticularlyparagraphs18an19whichreadthus:
18. InmyviewclaimmadebytheRespondentwasaclaimsimplicitorforrecovery of additional lease rent by virtue of disallowance of depreciation byassessingofficer.Inmyview,Article54oftheScheduletoLimitationActdoesnotapplytoamoneyclaim.Inmyview,therelianceplacedbythelearnedArbitratoronArticle54whilerejectingthepleaoflimitationistotallyperverseandwithoutapplicationofmind. ThelearnedArbitratorhasmisdirectedbyapplyingwrongarticleofScheduletolimitation. InmyviewtheLearnedArbitratorhasdecidedcontrarytosubstantiatelawinforceinIndia.AwardiscontrarytoSection28(a)oftheArbitrationandConciliationAct,1996andisthusinconflictwithpublicpolicy.Inmyview,sincetheclaimmadebytheRespondentwasbarredbythelawoflimitationasonthedateofthereceiptofnoticeofinvokingarbitrationclause,itwasdutyoftheLearnedArbitratortorejectsuchtimebarredclaim.
19. InmyviewrighttosueaccruedwhenclaimfordepreciationmadebyRespondent was rejected on 31st March, 2004 and raising of demand by theRespondentbyissuingdebitnoteon19th June,2006andrefusaltopaythesaiddemandbythePetitioneron17thAugust2006wouldnotcommencefreshperiod
2 MANU/MH/1642/2012
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of limitation, whichhadalreadycommencedon31st March, 2004. InviewofSection9oftheLimitationAct,1963,oncetimeisbeguntorun,nosubsequentdisabilityorinabilitytoinstituteasuitormakeanapplicationstopsit.Oncetimestarts running, it does not stop. Limitation is not extendedunless there is anacknowledgmentofliabilityorpartpayment.ItisnotthecaseoftheRespondentthatthePetitioneracknowledgeditsallegedliabilityortherewasanypartpaymentmadebythePetitionerafter31stMarch,2004.Inmyview,correspondencesdoesnotextendtheperiodoflimitation.
19. MrKumbhakoni, the learnedcounsel alsoplacedrelianceuponthe
JudgmentofSupremeCourtincaseofJ.C.Budhrajavs.Chairman,OrissaMinig
CorporationLtd.AndAnother3andmoreparticularlyparagraphs25and26in
supportofhispleathatlimitationforasuitiscalculatedasonthedateoffilingof
suit,whereasincaseofarbitration,limitationoftheClaimistobecalculatedon
thedateonwhichthearbitrationisdeemedtohavebeencommenced.
25. The learned Counsel for the Government submitted that thelimitationwouldbeguntorunfromthedateonwhichadifferencearosebetweentheparties,andinthiscasethedifferencearoseonlywhenOMCrefusedtocomplywiththenoticedated4.6.1980seekingreferencetoarbitration.Weareafraid,thecontentioniswithoutmerit.TheGovernmentisobviouslyconfusingthelimitationforapetitionunderSection 8(2)oftheArbitrationAct,1940withthelimitationfortheclaimitself.Thelimitationforasuitiscalculatedasonthedateoffilingofthesuit.Inthecaseofarbitration,limitationfortheclaimistobecalculatedonthedateonwhichthearbitrationisdeemedtohavecommenced.
26. Section 37(3)oftheActprovidesthatforthepurposeofLimitationAct, anarbitration isdeemedtohavebeencommencedwhenonepartytothearbitration agreement serves on theother party thereto, a notice requiring theappointmentofanarbitrator.Suchanoticehavingbeenservedon4.6.1980,ithastobeseenwhethertheclaimswereintimeasonthatdate.Iftheclaimswerebarredon4.6.1980,itfollowsthattheclaimshadtoberejectedbythearbitratoron the ground that the claims were barred by limitation. The said period hasnothingtodowiththeperiodoflimitationforfilingapetitionunderSection8(2)oftheAct.InsofarasapetitionunderSection8(2),thecauseofactionwouldarise
3 (2008)2SupremeCourtCases444
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when the other party fails to comply with the notice invoking arbitration.Therefore,theperiodoflimitationforfilingapetitionunderSection8(2)seekingappointmentofanarbitratorcannotbeconfusedwiththeperiodoflimitationformaking a claim. The decisions of this Court in Inder Singh Rekhi v. MANU/SC/0271/1988 : Delhi Development Authority [1988]3SCR351 , PanchuGopal Bose v. MANU/SC/0385/1994Board of Trustees for Port of Calcutta[1993]3SCR361 and Utkal Commercial Corporation v. MANU/SC/0028/1999 : CentralCoalFields[1999]1SCR166alsomakethispositionclear.
20. The learned counsel submits that limitation for seeking an
appointmentofanarbitratorcannotbeconfusedwithperiodof limitationfor
makingaclaim.ItissubmittedthatthelearnedarbitratoraswellastheDistrict
Judgehavemixedthetwoseparatearticlesoflimitationi.e.applicabletoClaims
andformakingapplicationforappointmentofarbitrator. Thelearnedcounsel
submitsthatthelearnedDistrictJudgehasplacedrelianceuponArticle137of
ScheduleI to the Limitation Act and also Article 55 which are not at all
applicabletotheClaimsmade. ItissubmittedthatArticle137appliestothe
applicationinCourtandnottotheClaim.Itissubmittedthattherewasnoclaim
forcompensationbeforethelearnedarbitratorwhichwouldfallunderArticle55.
The learned counsel then placed reliance upon the Judgment of this Court
delivered on 16th December 2011 in case of Maharahshtra State Power
GenerationCo.Ltd.Vs.M/s.GeoMillerCo.Pvt.Ltd.inArbitrationPetition
No.466of2006andmoreparticularlyparagraphs2to8whichreadthus:
2.Therelevantfactsare,thePetitionerhadfloatedatenderforthedesign,manufacture, supply, erection, testing and commissioning of the prewater
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treatment plant, MSEB Chandrapur Thermal Power Station, Unit 6 andadvertisement in that behalf was published by MSEB in the year 1987. TheRespondent participated in the bid and the contract was awarded to theRespondent.DisputearosebetweenthepartieswithregardtocertainclaimsoftheRespondentforextraworkcarriedoutbytheRespondent.ItisanadmittedpositionthattheArbitrationclausewasinvokedbytheRespondentbyletterdated2712001.BeforetheArbitrator,oneoftheobjectionsraisedonbehalfofthePetitionerwasthatthereferenceisbarredbythelawoflimitation. ItisalsocommongroundbeforemethatsofarasthepaymentforthecivilworkdonebytheRespondentisconcerned,thepaymenthasbeenmade.TheclaimwhichhasbeenawardedbythelearnedArbitratorisinrelationtothepriceoftheextraworkcarriedoutbytheRespondent.BeforethelearnedArbitrator it wasclaimedonbehalfofthePetitionerthattheextraworkinrelationtowhichtheclaimhasbeenmadewascompletedon1561992andtheplantwashandedovertothePetitioneron2481994.Thereafter,theRespondentmadeclaimforthepriceoftheextraworkandthatclaimwasrejectedbyletterdated10101995.TheRespondentinvokedarbitrationclauseandmadetheclaimon2712001,andtherefore,itwasclaimedthatitisbarredbythelawoflimitation. ThelearnedArbitratorhasconsideredthisobjectioninhisaward. Heacceptedthatthoughit isclearthattheworkwascompletedon1561992,thattheplantwashandedoverbytheRespondenttothePetitioneron2481994andthatthoughtheclaimswererejectedon10101995,accordingtothelearnedArbitratorasthefinalbillwasnotsubmittedtilltheyear2000andasthecorrespondencebetweenthepartieswasgoingon,causeofactionforinvokingthearbitrationwouldnotarisetill16thDecember,2000. ItisthecaseofthepresentRespondentthatthefinalbillwaspreparedon16122000.
3.ThelearnedCounselappearingforthePetitionersubmitsthatthelearned ArbitratorfailedtoseethattheperiodoflimitationforinvokingthearbitrationclausewillbegovernedbyArticle18oftheScheduleoftheLimitationAct. According to the learned Counsel, the cause of action for invoking thearbitrationclausewillarisewhentheworkforthepriceofwhichthearbitrationclausehasbeeninvokedwasdoneandthat was in the year 1992 andtherefore,invocationofthearbitrationclauseinJanuary,2001isbarredbythelawofLimitation.ThelearnedCounselreferringtotheprovisionsofSection9oftheLimitationActsubmittedthatoncetheperiodoflimitationiscommence,itwillruncontinuouslyandtherefore,merelybecausecorrespondencewasgoingonbetweenthepartiesinrelationtotheamounttobepaid,runningoftheperiodoflimitationwillnotstop.ThereferencehastobemadebytheRespondentwithinaperiodofthreeyearsfromthedateonwhichtheworkwascompleted.
4. The learned Counsel appearing for theRespondent,ontheotherhand,relyingonseveraljudgmentsincludingthejudgmentofthelearnedsingleJudgeofthis court inthecaseofShri NyaneshwaBhiku Dhargalkar v/s.ExecutiveEngineer, 1999(3)RAJ(B0m)submittedthat it is Article 137of theLimitationActwhichappliesinthepresentcaseandthattherighttoapplywill
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accruewhenthedisputebetweenthepartiesarose.AccordingtothelearnedCounseltill thenegotiationsbetweenthepartiesweregoingonandastherewasnodenialtomakethepaymentintheyear1992,thecauseofactionwillnotaccrueandthereforethearbitrationclausewasinvokedwithintheperiodoflimitation.ThelearnedCounselalsoreliesonthejudgmentofthelearnedsingleJudgeoftheDelhiHighCourtinthecaseofPremPowerConstruction(Pvt)Ltd.v/s.NationalHydroelectricPowerCorp.Ltd.&Anr.160(2009)DelhiLawTimes610.PerusalofthejudgmentofthelearnedsingleJudgeofthiscourtinthecaseofNyaneshwar(supra)andthejudgmentofthelearnedsingleJudgeoftheDelhiHighCourtinthecaseofPremPowerConstructionLtd.(supra)showsthat both have relied on the judgment of the Supreme Court in the case ofMajor(Retd.)InderSinghRekhiv/s.DelhiDevelopmentAuthority,(1988)2SCC338. ThelearnedCounselfortheRespondentalsosubmittedthatinanycasetheperiodoflimitationwouldbegovernedbyArticle113oftheLimitationAct. Accordingtohim,thecauseofactionwillarisewhentherighttosueaccruesandtherighttosuewillaccruewhenthePetitionerrefusedtomakethepaymentfortheextraworkafterfinalbill.Thus,therighttosueaccruedintheyear1999whentherewasrefusaltomakethepayment.
5. Now in the light of these rivalsubmissions,iftherecordisperused, it is clear fromtheaward itself that there is no disputebetween thepartiesthattheextraworkforthepaymentofwhichthepresentreferencewasmade was completed on 1561992. There is also no dispute that thePetitioner rejected theclaimmadebytheRespondent for extra workby letterdated10101995.ThelearnedArbitratorhasreferredtothisaspectofthematterinparagraph21oftheawardandhasobservedthus:
EveniftherewasrejectionoftheClaimantsclaimforextraworkon10101995assubmittedbythemthelimitationcannotbesaidtohavecommencedfromthatdate,ifregardbehadtothefactthatevenaccordingtotheRespondentsthefinalbillwaspreparedaslateason16thDecember,2000.
Thus,accordingtothelearnedArbitratorthecauseofactiondoesnotaccrueoncompletionofthework.Itdoesnotaccrueevenonrejectionoftheclaim,butitaccrueswhenthefinalbillisprepared.
6.OnbehalfofthePetitionerrelianceisplacedonArticle18oftheLimitationAct.ThatArticlereadsasunder:
(18)Forthepriceofworkdonebytheplaintiffforthedefendantat hisrequest, wherenotimehasbeenfixedforpayment.ThePeriodoflimitationisthreeyearsandthetimebeginstorunwhentheworkisdone.
7.PerusaloftheabovequotedArticleshowsthatwhenasuitistobe instituted for recovery of the price of the work done by the Plaintiff for the
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Defendant,andwhenthereisnotimefixedforpaymenttobemade, thecauseofactionforinstitutingthesuitariseswhentheworkiscompletedandthesuithastobeinstitutedwithinaperiodofthreeyearsfromtheaccrual ofcauseofaction.ItisclearfromtherecordthatthepresentdisputewhichwasreferredtoarbitrationisforrecoveryofthepriceoftheextraworkdonebytheRespondentforthePetitionerattherequestofthePetitionerandtherewasnotimefixedformakingthepayment. Therefore,accordingtothisArticle,thecauseofactionwillaccruewhentheworkisdone. Thelearned CounselappearingfortheRespondentreliedonArticle113oftheLimitationAct.
Article113readsasunder:
113.Anysuitforwhichnoperiodoflimitationisprovidedelsewherein the Schedule, the period of limitation is three years and the timebeginstorunwhentherighttosueaccrues.
8.PerusaloftheaboveArticlemakesitclearthatthisArticlecomesintoplayonlyonafindingthatforinstitutionofasuitfortheclaimwhichisinvolvedinthepresentmatter,thereisnoperiodoflimitationprovidedelsewhereintheschedule.Therefore,unlessafindingisrecordedthatArticle18doesnotapply,Article113cannotapply.IdonotseeanyreasonwhyArticle18willnotapplytothepresentdispute,becausethepresentdisputeisinrelationtothepriceoftheworkdonebytheRespondentforthePetitioner.ThelearnedCounselfortheRespondentalsocouldnotgiveanyreasonwhyArticle18willnotapply.Thus,astheworkwascompletedintheyear1992,thecauseofactionintermsofArticle18willaccruein1992andthereforethereferencewillhavetobemadewithin a period of 3 years from 1992 unlessaccordingtoRespondentthetimegetsextendedbecauseof any acknowledgement etc.Admittedlyneitherarbitrationclauseisinvokedwithinthreeyearsfrom1992noranyextensionoftheperiodoflimitation is claimed by the Respondent,and therefore the claimwill be barred by the lawof limitation. What isinterestingisthatthequestionbeforethelearnedArbitratorwaswhethertheclaim was made within the period oflimitation. ThelearnedArbitrator has recorded a finding that the claim is not barred by the law oflimitation, but in the entire award there is no reference to any Article in theScheduleoftheLimitationAct,whichappliestothepresentcase.Inmyopinion,thisisanimpossibility.AnargumentastowhetheraclaimismadewithintheperiodoflimitationhasalwaystobemadewithreferencetosomeArticleintheScheduleoftheLimitationAct,withoutreferringtoanyarticleintheScheduleoftheLimitationAct,afindingeitherthattheclaimisbarredbylimitationoritisnotsobarredisimpossibletoberecorded.
SofarasapplicationofArticle137isconcerned,that Article is in PartII,relating to applications. For invoking the arbitration clause the limitationprovidedbytheLimitationActformakingapplicationwillnotapply,thelimitationprovidedbythescheduleforinstitutionofasuitwillapply. ThelearnedsingleJudgeofthisCourtinhisjudgmentinNyaneshwarcase(supra)andthelearned
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singleJudgeoftheDelhiHighCourtinthecaseofPremPowerConstructionLtd.(supra)havereliedonjudgmentoftheSupremeCourtinthecaseofInderSinghRekhi,referredtoabove.PerusalofthatjudgmentoftheSupremeCourt showsthat theretheSupremeCourtwasdealingwiththeapplicationmadeunderSection20ofArbitrationAct,1940,andasunderSection20 oftheArbitrationAct,1940anapplicationwastobemadetothecourt,obviouslyArticle137oftheLimitationActwillapply.Butintheschemeofthe1996Actnosuchapplicationiscontemplatedtobemadetoanycourtforinvokingthearbitrationclause. PerusaloftheprovisionsofSection 21 of the Arbitration ActshowsthatArbitralproceedingscommence,unlessthereisanagreementcontrarybetweentheparties,onthedateonwhicharequestforreferenceofthedisputetoarbitrationisreceivedbytheRespondent.The1996Act doesnotcontemplateanyapplicationtobemadetothecourtfor invokingthearbitration application and for commencement of arbitration proceedings.Subsection 2 of Section43of theArbitrationAct lays downthat for thepurposeoflimitationActanarbitrationshallbedeemedtohavecommencedonthedatereferredto inSection21. Therefore, it is clear that invocationof thearbitrationclausehastobemadewithintheperiodoflimitationprovidedbytheLimitationActforinstitutionofasuitonthesamecauseofaction.SofarasanapplicationtobemadeunderSection11isconcerned,thatapplicationisnotforinvokingthearbitrationclause.Thatapplicationisforappointment of arbitrator, after invoking the arbitration clause.Invocation of the arbitration clause precedes an application under Section 11.Therefore,whenanapplicationunderSection11ismade,thatapplicationhastobemadewithintheperiodoflimitation,whichisprovidedbytheLimitationActforinstitutionofthesuitonthatcauseofaction.AnapplicationunderSection11cannot be made after expiry of the period oflimitationprovidedforinstitutionofsuitforrecoveryoftheclaim.TheHonbletheChiefJusticeorhisdesignatewillhavetomakeaninquirytofindoutwhethertheappointmentofArbitratoratthisjuncturewouldbenecessaryasaperiodoflimitationisover.TheSupremeCourtinitsjudgmentinthecaseofNationalInsuranceCo.Ltd.v/s.M/s.BogharaPolyfabPvt.Ltd.,AIR2009SC170,hasreferredtotheissueswhichhavetobedecidedbytheChiefJusticeorhisdesignateunder Section11andtheissueswhichcanbeleftfordecisionbytheArbitrator.Oneoftheissues,accordingtotheSupremeCourtthathastobedecidedbytheHonbleChiefJusticeorhisdesignateunderSection11iswhethertheclaimisadead claim or a live claim. It means that if an objection is raised, whenapplicationunderSection11ismade,thatinvocationofthearbitrationclauseinthatcasehasnotbeenmadewithintheperiodoflimitation,thenthatquestionhastobedecidedbytheChiefJusticeorhisdesignate.ThequestiontobeconsideredatthattimeisnotwhetheranapplicationunderSection11ismadewithintheperiodoflimitation,butwhethertheinvocationofthearbitrationclausewasmadewithintheperiodoflimitation.Inmyopinion,therefore,thereisnoquestionofprovisionsofSection137applyinginsofarasinvocationofthearbitrationclauseandcommencement of the period oflimitationisconcerned.Sofarasthepresentcaseisconcerned,tomy
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minditisclearthatArticle18oftheLimitationActappliesandthereforeastheinvocationoftheArbitrationclauseisnotwithinperiodofthreeyearsfromthedateofcompletionofthework,whichwasintheyear1992,theclaimwasclearlybarredbythelawoflimitation.
21. RelyinguponthisJudgmentofthisCourt,thelearnedcounselsubmits
that Article18 was applicable to the claims made by the contractor andnot
Article55or Article 137as sought to beappliedby the District Judge. The
learnedcounselsubmitsthatboththeseissuesareconsideredbythisCourtand
thefactsofthiscaseareidenticaltothefactsofthecaseincaseofMaharashtra
StatePowerGenerationCo.Ltd.(supra)andthesaidJudgmentisthusbinding.
22. ThelearnedcounselalsoplacedrelianceupontheJudgmentofPunjab
AndHaryanaHighCourtincaseof JullunderImprovementTrust,Jullunder
Vs.KuldipSingh4andmoreparticularlyparagraphs4and5whichreadthus:
4. Themaincontroversyinthisappealis:whetherthesuitoftheplaintiffwanwithintimeornot?ItisthecommoncaseofthepartiesthatitisArticle18,Limitation Act, 1963, which would govern the plaintiffs case. It provides alimitationofthreeyearsfromthetimetheworkisdone.Thepresentsuitwasfiledon 921971. According to the plaintiff the cause of action arose to him on14121967,whenthepaymentofthefinalbill,ExhibitD.19,wasreceivedbyhimunderprotestwhereasthecaseofthedefendantisthattheperiodofthreeyearswouldcommence fromthedatetheworkwasdonewhichaccordingto it wascompletedon2891967, asadmittedbytheplaintiff himself vide, Exhibit D.4,dated2891967,writteninthisownhandwhereinhehadstatedthat90feetwideroadunder84acresschemewascompleteand,therefore,hisfinalbill,bepreparedaccordingly.Inanycase,accordingtothedefendant,inthefinalbill,ExhibitD.19,thecertificatetotheeffectthatnecessarydetailedmeasurementshavebeentakenasrecordedintheMeasurement BookNo. 44, wasgivenon7101967, bythe
4 AIR1984PunjabAndHaryana185
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EngineerinchargeMohinderSingh,whoappearedasD.W.7.Thus,itwasarguedonbehalfofthedefendingthatevenafterthatdate.i.e.7101967,thepresentsuitfiledon921971,evenafterallowingthenoticeperiodoftwomonthswasbarredbytime.AccordingtothetrialCourt,thecauseofactionwouldarisetotheplaintiff for the price of the work done only on furnishing of the completioncertificate bytheEngineer incharge. Thecertificate of theEngineer incharge,accordingtothetrialCourtdidnotbearanydate.Since,accordingtothetrialCourt thepayment of the lastbill wasreceivedbytheplaintiff on14121967,under protest, the periodof limitation will start from that date and that afterallowing the notice period of two months, the suit filed by the plaintiff on921971,waswithintime.ThetrialCourtalsofoundthattheplaintiffprosecutedwithduediligenceanothercivilproceedingfoundeduponthesamecauseofactioninaCourtwhichcouldnotgivethereliefand,therefore,hewasentitledtoget,theperiodspentinprosecutingthoseproceedingsexcludedunderS. 14,LimitationAct,(hereinaftercalledtheAct).
5. After hearing the learned counsel for the parries, I am of theconsideredopinionthattheplaintiffssuitwasbarredbytime.
23. Mr Chinoy, the learned senior counsel appearing on behalf of the
contractor on the other handsubmits that Article18 is not applicable to the
claimsmadebythecontractor. Thelearnedseniorcounselsubmitsthatthe
claimsmadebeforethearbitraltribunalwereforenhancementofthepricefor
theworkdoneandthusArticle113ofSchedule1ofLimitaitonActwouldapply.
The learned senior counsel placed reliance upon the Judgment in case of
GannonDunkerley AndCo. Ltd. v. Union of India5 and more particularly
paragraphs2to11whichreadthus:
2. The Sindri Factory Buildings were tobeconstructedunder theadvice andguidance of M/s. Chemical Construction Corporationof NewYork. That Firmmadedelayinsupplyingthedrawingsandspecificationswhichinvolvedworkofa
51969(3)SupremeCourtCases607
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complicatednaturenotincludedintheoriginalcontract. TimeforcompletionoftheworkwasonthataccountextendedtillFebruary26,1950.
3. On September 20, 1950 the Government Company made a demand forpaymentofanenhancedrateof421/2%overthebasicratesstipulatedundertheoriginalcontract.Thisclaimwasmadeonfivegrounds:
1.thattherewasasubstantialdeviationinthenatureofworkofwhichthedetailedworkdrawingsweresuppliedtotheGovernment Companyafterthedateofthecontract.Theworkinvolvedwasofacomplexnaturerequiringhighlyskilledlabour,andthatadditional labourandmaterialsnotcoveredbythecontractrateswererequired;
2. thattherewasgreatincreaseinthepriceofmaterialsandlabouronaccountofundueprolongationoftheperiodofwork;
3.thattherewasincreaseinthecostoftransportationonaccountofriseinthepriceofpetrolandincreaseinrailwayfreight;
4.thattheGovernmentofIndiaenteredintoothercontractsincidentaltotheconstructionoftheSindriFactoryatsubstantiallyhigherrateswhichdirectly affected the cost of labour and materials of the GovernmentCompanywhohadtocompetewiththeothercontractors;
5. thatadditionalworkorderedtobedoneinvolvedinmanyinstancesquantityofworkseveraltimestheworksetoutinthecontract.
4. ByhisletterdatedSeptember13,1950,theAdditionalChiefEngineer
rejectedtheclaim.InSeptember1954thedisputesrelatingtotheclaimforriseincostofmaterialandlabourduetodelayinsupplyingdetailedworkdrawings,theclaimarisingfromriseinpriceofpetrolandforincreaseinthecostofmaterialandlabourduetoothercontractorsworkingonthesite,werereferredtoarbitration,butnottheclaimsforrevisionofratesduetocomplexnatureoftheworkandincrease in the quantity of work. The arbitrator rejected the claims of theCompanyinrespectofthematterswhichwerereferred.
5. ThereaftertheGovernmentCompanyfiledasuitonAugust9,1956,against theUnionofIndia,for adecreeforRs.3,62,674/9/6beingtheamountclaimedattherateof421/2%abovethecontractrate,inthealternative,adecreefor Rs.2,44,000/ being the amount claimed at the rate of 28.1% above thecontract rate as recommended by the Executive Engineer, and in the furtheralternative,adecreeforRs.1,36,222/attherateof18.17%abovethecontractrateascertifiedbytheSuperintendingEngineer. TheUnionofIndiacontended,interalia,thattheclaimwasbarredbythelawoflimitation.
6. TheTrial Court held that theclaimwasnot barredby the lawof
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limitation and decreed the claim for Rs. 1,36,222/ as certified by theSuperintending Engineer. Against the decree passed by the Trial Court theGovernmentCompanyaswellastheUnionofIndiaappealedtotheHighCourt.
7. Before the High Court, in support of the appeal only the plea oflimitationwaspressedonbehalfoftheUnionofIndia.IntheviewoftheHighCourttheclaimwasgovernedeitherbyArticle56orbyArticle115oftheFirstScheduletotheLimitationAct,1908,andthesuitnothavingbeenfiledwithinthreeyearsofthedateonwhichtheworkwasdoneandinanyeventofthedateon which the claimwas rejected was barred. The Government Company hasappealedtothisCourtwithcertificate.
8. TheGovernment Companyhadundertakenunderthetermsofthecontracttodospecificconstructionworkat"basicrates".TheEngineerinchargewasbythetermsofClause12oftheagreementcompetenttogiveinstructionsforwork not covered by the terms of the contract, and it was provided thatremunerationshallbepaidattheratefixedbytheEngineerinchargeforsuchadditional work, and in case of dispute the decision of the SuperintendingEngineer shall be final. It is common ground that the claim made by theGovernmentCompanywasnotcoveredbythearbitrationagreement,andonthataccount it was not referred to the arbitrator. The claim in suit related to therevisionofratesduetothecomplexnatureoftheworkandduetoincreaseinthequantity of work and also grant of contracts to other competing parties atsubstantiallyhigherratesandotherrelatedmatters.
9. Article56oftheFirstScheduletotheIndianLimitationAct, 1908,prescribesaperiodofthreeyearsforasuitforthepriceof, workdonebytheplaintiff for the defendant at his request, where no time has been fixed forpayment,andtheperiodoflimitationcommencestorunfromthedatewhentheworkisdone.AsuitisgovernedbyArticle56ifitarisesoutofacontracttopaythepriceofworkdoneattherequestofthedefendant.Theclaiminthepresentcaseisforpaymentatanadditionalrateoverthestipulatedrateinviewofchangeincircumstances,andnotforpriceofworkdonebytheGovernmentCompany.ItistruethatadditionalworkwasdoneattherequestoftheEngineerincharge,buttheclaiminsuitwasnotforthepriceofworkdonebutforenhancedratesinviewofalteredcircumstances.
10. Article115oftheFirstScheduletotheLimitationActisaresiduaryarticledealingwiththeclaimforcompensationfor thebreachofanycontract,expressorimplied,notinwritingregisteredandnotspeciallyprovidedfor,intheFirst Schedule. The period of limitation in such cases is three years and itcommences to runwhen thecontract is broken, or where there aresuccessivebreacheswhenthebreachinrespectofwhichthesuitisinstitutedoccurs,orwherethe breach is continuing when it ceases. The suit filed by the Government
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Companyisnotasuitforcompensationforbreachofcontractexpressorimplied:itisasuitforenhancedratebecauseofchangeofcircumstances,andinrespectofworknotcoveredbythecontract.TheadditionalworkdirectedbytheEngineerincharge when carried out may be deemed to be done under the terms of thecontract:buttheclaimforenhancedratesdoesnotariseoutofthecontract:itisinanycasenotaclaimforcompensationforbreachofcontract.
11. TheclaimisthereforenotcoveredbyanyspecificarticleundertheFirstSchedule,andmustfallwithinthetermsofArticle120.TheSolicitorGeneralappearingonbehalfoftheUnionofIndiacontendedthateveniftheclaimfallswithin the terms of Article 120 of the Limitation Act, it was barred, for, theGovernmentCompanyhadinthesuitmadeaclaimforworkdonemorethansixyearsbeforetheinstitutionofthesuit.CounselsubmittedthatunderArticle120theperiodoflimitationcommencestorunfromthedateonwhichthedefendantobtainsthebenefitoftheworkdonebytheplaintiff.ButunderArticle120oftheLimitationActtheperiodofsixyearsforsuitsforwhichnoperiodoflimitationisprovided elsewhere in the Schedule commences to run when the right to sueaccrues.Inourjudgment,thereisnorighttosueuntilthereisanaccrualoftherightassertedinthesuit,anditsinfringement,oratleastaclearandunequivocalthreattoinfringethatrightbythedefendantagainstwhomthesuitisinstituted;Bolov.KokanandOrs.
24. ThelearnedcounselsubmitsthattheSupremeCourthadconsidered
Article120oftheLimitationAct,1908andArticle56whicharecorrespondingto
Article113andArticle18 to the first schedule to LimitationAct 1963. It is
submittedthatafterconsideringtheseArticles,theSupremeCourtheldthatthe
periodof6yearsforsuitsforwhichnoperiodoflimitationisprovidedelsewhere
intheSchedulecommencestorunwhentherighttosueaccrues.Itisisheldthat
therewasnorighttosueuntiltherewasaccrualoftherightassertedinthesuit,
anditsinfringement,oratleastaclearandunequivocalthreattoinfringethat
rightbythedefendantagainstwhomthesuitisinstituted.Itissubmittedthat
theSupremeCourthasheldthatinasuitforenhancedratebecauseofchangeof
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circumstances, and in respect of worknot coveredby thecontract, claim for
enhancedratedidnotariseoutofcontractandwouldbethusnotgovernedby
Article56correspondingtoArticle18underLimitationAct1963butwouldbe
coveredbyArticle120(correspondingtoArticle113underLimitationAct1963).
Thelearnedseniorcounselthus,submitsthatthefactsofthiscaseareidenticalto
the factsbefore theHonourbleSupremeCourt incaseof GannonDunkerley
(supra)andthusprinciplesoflawlaiddownbytheSupremeCourtaresquarely
applicabletothefactsofthiscaseandarebindingonthisCourt.
25. ThelearnedseniorcounselalsoplacedrelianceupontheJudgmentof
RajashthanHighCourtincaseofStateofRajasthanVs.RamKishan(AIR1977
Rajasthan165),JudgmentofAllahabadHighCourtincaseofStateofU.P.v.
ThakurKundanSingh(AIR1984Allahabad161),JudgmentofGujratHigh
CourtincaseofStateofGujratVs.PirojshaWadiareportedin17GujratLaw
Reporter638; bywhichvariousHighCourtshavetakenasimilarviewwhich
hasbeentakenbytheHonourableSupremeCourtincaseofGannonDunkerly
andOrs(supra).
26. Perusal of theawardindicatesthatbeforethearbitral tribunal, the
submissionofthecontractorwasthatdisputecouldstartonlyafterrejectionof
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theclaimbytheGovernment.Itwassubmittedthattheclaimswerependingfor
decisionandthuscauseofactionstartedonlyafterdecisionwasfinallytakenby
theGovernment.Itwassubmittedthatlimitationcommencedfromthedateon
whichcauseofactionhadaccrued.
27. Thearbitraltribunalhasheldthatallthoseclaimseventhoughthere
was specific recognisable period of start of incurring of the loss, the same
continuedsincethenduringthecurrencyofthecontract,includingtheextended
periodatleastforClaimNos.1and2.MajorityofthelossincurredforClaimNos.
3,4and5wasknownwhentheitemswerenearlycompletebyMarch1998.Itis
heldthatinrespectofClaimNos.1and2,thelosscontinuedtillthecurrencyof
thecontract. ThearbitraltribunalthenheldthatforClaimNos.3,4and5,first
referencetoEngineer'srepresentative(ExecutiveEngineer)wasmadeinFebruary
1997andOctober1996andongettingnodecisionwithin60days,thecontractor
couldhavereferredthedisputetohigherlevelandthentothe'Engineer'asper
provisionsofClause66andinvokedthearbitrationwithin220daysatthemost.
Itisfurtherheldthatthiscoursewasnottakenbythecontractorforthereasons
bestknowntohim.Thecontractormighttaketheshelteroftheword'may'inthe
contractormayappealwithin30daystoEngineer'byclaimingthatitwasnot
obligatoryforhimtoappealincasenoreplywasgiventheExecutiveEngineer.
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Inspiteofsuchfindingrenderedbythearbitraltribunal,itisheldthatthecause
ofarbitrationwouldbecauseofactionandtimeoflimitationshouldberecorded
fromthedatefor respectiveclaims. Thetribunal held that all fiveclaimsin
questionwerenottimebarredonaccountoflimitation. Itwouldbeusefulto
extracttherelevantparagraphsonthisissuefromthearbitralawardwhichareas
under:
Forreferringthedisputetoarbitration,therehadtobeanarbitrationagreement(clause)andtherehadtobeadispute. Intheinstantcase,Cl66Settlementofdispute (RTD1/1034) provided for recourse to arbitration. For existence of'dispute'therehadtobean'assertion'byoneparty&'denial'bytheotherparty.'Causeofarbitration'aroseintheinstantcasewhenevertherewasrejectionofaclaimbythe 'Engineer' (ChiefEngineerKoynaProject)(RTD1/38)Rejectionofinactionbythe'Engineer'srepresentative'i.e.ExecutiveEngineer/SuperintendingEngineerdidnot, however, result into 'causeofarbitration'. Inwhichcasetheclaimanthadtoapproachthe'Engineer,furnishrequiredevidenceandonrejectionbythe'Engineer'couldinvokearbitration.
Clause 66(b) specifically mentioned that 'Performance under thecontract shall if reasonably be possible, continue during the arbitrationproceedings. Henceclaimantcouldeitherlodgeclaimswiththerespondentandpursuethemfortheirsettlementthroughthe'Employer'bynegotiationsorcouldtaketherecourseto arbitration by following obligations/requirements underCl.66culminating into invoking thearbitration. Inall theclaimstheclaimantpreferredtotaketheearlierrecoursetobeginwithandcontinuedforquitesometime. TheclaimantapproachedsecretaryIDandDy.ChiefMinisterduringthisperiod.RecoursetoArbitrationwastakenquitelate,aftercompletionoftheworkphysically. Evenafterreferringsomeoftheirclaimsunderthiscontract totheearlier Arbitral Panel and getting Award for the same in December 1998, theclaimant continued to followthe course of negotiations & pursuations, for thereasonsbestknowntohim.
QuestionnowbeforetheArbitralPanelwaswhethertheclaimshadbecometimebarredbecauseofthisapparentdelayonthepartoftheclaimantinnotinvokingthearbitrationearlyandpromptly. Theclaimantwassaidtohavebeensufferinglossbecauseofvariousreasonsinrespectofseveralitemsofthecontract,whichresultedintoinitiatingtheclaimsrightfromthebeginningofthecontract andcontinuedtoincurthelossforcertainperiodsincethenforsomeclaims(No.3,4&5)andtillthecompletionofthecontractforsome(ClaimNo.1).
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LossonaccountofclaimNo.2wassaidtohaveoccurredonlyduringtheextensionperiodandcontinuedtill completionof thecontract. Theclaimant couldhavepursuedtheseclaimswiththerespondent forsomereasonable timebutshouldhavegoneinforsettlementofdisputeasperCl.66eitherwhenitemsfor3claims(3,4&5)weremostlycompletei.e.after3/98orwhenthecumulativelosseswereforeseentobebeyondthecapacityoftheclaimanttopullonwithoutimpairingtheprogressofthecontractedwork,whicheverwasearlier. IFtheclaimNo.1hadbeenreferredtothearbitration(oreventotheearlierArbitral panel)claimantcouldhavegotthecompensationintime.ForclaimNo.2,issuecouldhavebeenpursuedvigorouslywiththerespondentsayduringayearorsoaftergettingthefirst extensionand failing toget favourable response (or partial response), theclaimantcouldhaveinvokedthearbitration.
Theclaimantinall thecorrespondencehadbeenmentioningaboutincurringofheavylosses,financialcrunch,heavystrainorfinancialresourcesetc.becauseoftheseclaims.Butapparentlythefollowup/pursuationsforsettlementofclaimswasveryverypoordespiteprovisionofclauseforarbitration.Arbitratorshadhenceobservedduringthethirdmeetingthat'effortsoffollowup&pursuationoftheclaimswouldbeexpectedtoberelatedtotheamountinvolvedintheclaimsbecause, delayinsettlementofsubstantial amountofclaimwaslikelytoaffectperformanceofthecontract'.
Itcouldnotbeascertainedfromtherecordorfromthedeliberationsduringthemeetingsastowhythislogicalandeasiercoursecouldnotbetakenbytheclaimant.Claimantscontention/argumentonthispointhadconsistentlybeenthat,withoutrejectionoftheclaimsbythe'Engineer',recoursetoarbitrationwasnotopentothem.Inalltheseclaimseventhoughtherewasspecificrecognisableperiodofstartofincurringoftheloss,thesamecontinuedsincethenduringthecurrencyofthecontract,includingtheextendedperiodatleastforclaimNos.1&2.MajorityofthelossincurredforclaimNos.3,4&5wasknownwhentheitemswerenearlycompleteby3/98.ButforclaimNos.1&2thelosscontinuedtillthecurrencyofthecontract. Questionthenwas,whatshouldbeconsideredasthestartofreckoningofthetimeoflimitation.ForclaimNos.3,4&5,firstreferencetoEngineer'srepresentative(ExecutiveEngineer)wasmadeinFeb97&Oct96.On getting no decision within 60 days, the claimant could have referred thedisputetohigherlevelandthentothe'Engineer'asperprovisionsofCl.66andinvokedthearbitrationwithinabout200to220daysatthemost.Thiscoursewasnottakenbytheclaimantforthereasonsbestknowntohim.Theclaimantmighttaketheshelteroftheword'may'inthecontractormayappealwithin30daystoEngineer'byclaimingthatitwasnotobligatoryforhimtoappealincasenoreplywasgivenbytheExecutiveEngineer.
Therehavebeencitationsstatingthatthecauseofactionandcauseofarbitrationtobethesameforreckoningthestartoftimeoflimitation.Itwastruethatthe'causeofaction',ifitwasotherthanthe'causeofarbitration'couldnotbepinpointedasaspecificpointoftimeintheactivityoftheexecutionofthecontract
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(includingextensions).Losscontinued,negotiations/pursuationscontinued,workcontinued but 'cause of arbitration' or invoking the arbitration' were the onlyspecificeventsinthisactivity.
HencetheArbitralPanelhadcometotheconclusionthat'causeofarbitration' would be the 'cause of action' and time of limitation should bereckonedfromthatdateforrespectiveclaims.Henceallthe5claimsinquestionwerenottimebarredonaccountoflimitations.
Onequestionthatrequiredtobeconsideredanddecidedwasthat,shouldtheclaimantprefertodeferanddelaytheactionofinvokingthearbitrationapparentlyfornoreasonorforsomeotherreasonsbestknowntohim,everwhenprovisionofclauseforsettlementofdisputeexistedinthecontractandcontinuedtomaketherespondentsufferbecauseofanyextraliabilityonaccountofsuchavoidabledelay.Arbitralpanelhascometoaconclusionthatclaimantshouldnotbeawardedinterestontheclaimsforpastperiodattherateswhichnormally&reasonablyaclaimantwouldhavebeenentitledto.ItwasdecidedthatforclaimNos.1,3,4&5heshouldbegrantedonlypriceescalationasperTenderformulaeup to 3132000 (date of completion of the contract period) by treating thatpaymentforamountoftheseclaimswasmadeonthatdate.From142000tothedateofreferencetoarbitrationforeachclaim,interestonlyat10%(tenpercent)perannumshallonlybepaidontheescalatedamount.
28. TheDistrictJudgehasdealtwithissueoflimitationinparagraphs35
to37ofitsJudgment. Thecontractorarguedthatlimitationoftheperiodof
threeyearshadtobereckonedfromthedateoffinalrejectionbythecompetent
authorityi.e.Engineerinthepresentcase.Itwassubmittedthatinrespectof
alltheclaims,arbitrationwasinvokedwithin30daysafterfinalrejectionbythe
EngineerasperClause66Aofthecontract. Itwassubmittedthatwhenthe
contract wasspreadover for a periodanddamagewas sustainedduring the
wholeperiod, thelimitationfortotaldamageswouldcommencefromthedate
when the period of contract ends. It was submitted that the claim for
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compensationforsuccessivecontinuingbreachesofanycontract,theperiodof
threeyearslimitationwouldbecomputedwhenthebreachceasedtooccur.It
wassubmittedthatdisputecouldstartonlyafterthedenialofanassertion.The
contractorsubmittedthatlimitationwouldnotstartfromthedateofentitlement
ofpaymentbutonwhichtheclaimwasmadebythecontractorandwasrejected
by theGovernment andsuchrejectionwouldbetheaccrual of thecauseof
action. Itwassubmittedthattheclaimswerependingfordecisionforyears
together, thelimitationwouldstartonlyafterthedecisionwascommunicated.
DistrictJudgerenderedafindingthatthecontractorcouldeitherlodgeclaims
with the Government and pursue them for their settlement through the
Governmentbynegotiationsorbyculminatingintoinvokingthearbitration.It
isheldthatthecontractorpreferredtotakeearlierrecoursetobeginwithand
continuetoquitesometime. ThecontractorapproachedSecretary, Irrigation
DepartmentandDy.ChiefMinisterduringthatperiodandrecoursetoarbitration
wastakenquitelateaftercompletionoftheworkphysically.TheDistrictJudge
heldthatArticle137oftheLimitationActwouldbeinvokedinthiscase.Relying
uponArticle137,itisheldthattheperiodoflimitationstartswhentherightto
apply accrues under Article137. The District Judge held that the period of
limitationforcommencinganarbitrationrunsfromthedateonwhichcauseof
arbitrationaccruesi.etosayfromthedatewhenthecontractoracquiredeither
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rightof actionorrighttorequireanarbitrationtakesplaceuponthedispute
concerned. It is held that cause of arbitration arose when the contractor
becameentitledtoraisethequestion.TheDistrictJudgeheldthatClaimNos.1,
2,3and5wereinthenatureofextraitemsandnewrateswerenecessitatedby
thevariationinparticularworkorderedbytheGovernment.TheDistrictJudge
held that under Article 55 of the Limitation Act, when the breach was
continuing,thelimitationofthreeyearscommenceswhenitceases.TheDistrict
Judgefinallyheldthatthecauseofactionwouldcommencefrom25thMay2001
when the claim was finally rejected by the Chief Engineer. In my view,
Article55couldnotbeattractedinrespectoftheclaimsmadebythecontractor
fortheworkdone.ThelearnedDistrictJudge,however,hasappliedArticle55of
theScheduletotheLimitationActtoalltheclaimswhichshowspatentillegality
onthefactoftheJudgmentofthelearnedDistrictJudge.
29. ThearbitraltribunalhasrenderedafindingthatinrespectofClaim
Nos.3,4and5,theclaimcouldbesaidtohaveinitiatedwhentheconcerneditems
wereexecutedanditcontinuedtillcompletionofeachsuchitem. Thearbitral
tribunalalsorenderedafindingthatacontractorcouldhavepursuedClaimNo.2
withtheGovernment for somereasonabletimebutshouldhavegone infor
settlementofdisputeasperClause66eitherwhenitemsfor3ClaimNos.3,4and
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5weremostlycompletei.eafterMarch1998orwhenthecumulativelosseswere
foreseentobebeyondthecapacityofthecontractortopullonwithoutimpairing
theprogressofthecontractedwork,whicheverwasearlier.Similarlyinrespect
of ClaimNo.2, the arbitral tribunal held that issue could have beenpursued
vigorouslywiththeGovernment duringtheyearorsoonaftergettingthefirst
extension and failing to get favourable response or partial response, the
contractorcouldhaveinvokedthearbitration.Itisfurtherobservedthatthough
thecontractorinallthecorrespondencewereallegingincurringofheavylosses,
financialcrunch,heavystrainetc.,followup/pursuationsforsettlementofclaims
onthepartofcontractorwasverypoordespiteprovisionofclauseforarbitration.
Thelearnedarbitraltribunalobservedthatitcouldnotbeascertainedfromthe
recordorfromthedeliberationsduringthemeetingsastowhythislogicaland
easiercoursecouldbetakenbythecontractor.
30. Thearbitraltribunalthoughrenderedafindingagainstthecontractor
for gross delay in making a claim and pursuing it, rejected the plea of the
Government forrejectionoftheclaimsonthegroundoflimitation. Onone
hand,thearbitraltribunalobservedthattheGovernment shallnotsufferany
extraliabilityonaccountofavoidabledelayonthepartofthecontractorand
contractorshouldnotbeawardedinterestontheclaimsforpastperiodatthe
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rateswhichnormallyandreasonablyacontractorwouldhavebeenentitledto.
Inmyview,itisclearthattheconclusiondrawnbythearbitraltribunalistotally
inconsistentwiththefindingrenderedbythearbitral tribunal onthe issueof
limitation. Theissueof limitationhasbeendealt withwithoutapplicationof
mind.
31. TheDistrictJudgehasrenderedafindinginfavourofthecontractor
onerroneouspremisethatArticle137oftheLimitationActwasapplicabletothe
claimsmadebythecontractor. In myview,Article55of theLimitationAct
wouldnotapplyfortheclaimforpriceincreaseinrespectoftheworkcarriedout
undertheprovisionsofcontract.ApplicationofArticle55totheclaimforwork
done by the District Judge, is totally an erroneous and is on the face of it
perverse.Article137oftheLimitationActappliestotheapplicationsandnotto
theclaims. Inmyview,for invokingthearbitrationclause, the limitation
providedbytheLimitationActformakingapplicationwill notapply, butthe
limitationprovidedbythescheduleforinstitutionofasuitwillapply.ThisCourt
hasheldthatthereisnoquestionofprovisionsofArticle137applyinginsofaras
invocation of the arbitration clause and commencement of the period of
limitationisconcerned.ThisCourtheldthatinrespectoftheclaimforpriceof
extraworkcarriedoutbythecontractor,Article18oftheLimitationActwould
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applyandnotArticle137.Itisheldthatwhenasuitisinstitutedforrecoveryof
thepriceoftheworkdonebytheplaintiffforthedefendant,andwhenthereis
notimefixedforpaymenttobemade,thecauseofactionforinstitutingthesuit
ariseswhentheworkiscompletedandthesuithasbeinstitutedwithinaperiod
ofthreeyearsfromtheaccrualofcauseofaction.Itisheldthatcauseofaction
wouldaccruewhentheworkisdone.AfterconsideringArticle113onwhichthe
contractorhasplacedreliance,thisCourtheldthatthesaidArticlecomesinto
playonlyonfindingthatforinstitutionofasuitfortheclaimwhichwasinvolved
in that matter, there was no period of limitation provided elsewhere in the
schedule.ItisheldthatonlyonafindingrecordedthatArticle18didnotapply,
Article113couldnotapply.ThisCourtheldthatthoughthelearnedarbitrator
hadrecordedafindingthattheclaimwasnotbarredbylawoflimitation,inthe
entire award there was no reference to any Articles in the Schedule of the
LimitationAct,whichappliestothatcase.ThisCourtobservedthatsuchfinding
recordedbythelearnedarbitratorwasanimpossibility.
32. Inmyview,refusaltopaytheamountdemandedbythepetitioner,
wouldnotcommencefreshperiodoflimitationwhichhadalreadycommenced.
InviewofSection9oftheLimitationAct,1963,oncetimeisbeguntorun,no
subsequentdisabilityorinabilitytoinstituteasuitormakeanapplicationstops
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it.Oncetimestarts,itdoesnotstop.Limitationisextendedonlywhenthereis
an acknowledgment of liability or part payment. Correspondence does not
extendtheperiodoflimitation.
33. Itisnotthecaseofthecontractorthattherewasanypartpayment
madebytheGovernment inrespectoftheclaimsinquestionortherewasany
acknowledgmentofliabilitymadebytheGovernmentinfavourofthecontractor
inrespectofsuchclaims.Merelybecause,therewasinactionand/ordelayonthe
partoftheofficersoftheGovernmentinconsideringand/orrejectingtheclaims
madebythecontractor, limitationwouldnotbeextended. Thelimitationhad
alreadycommencedwhentheworkwasdoneandthepaymentwasnotmade.It
isnotindisputethattheworkinrespectoftheclaimsinquestionwascompleted
morethanthreeyearspriortothedateofcontractormakingrepresentationtothe
concernedofficersoftheGovernment. Inmyview,eveniftheofficersofthe
Government hadnotdecidedtherepresentationand/orclaimofthecontractor
withinthetimespecifiedunderClause66,causeofactionhadnotstopped.
34. In myview, the arbitral tribunal as well as the District Judgehas
mixeduptheissueoflimitationinmakingaclaimandinmakinganapplication
totheCourtforappointmentofarbitrator. ThereferencemadebytheDistrict
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JudgetoArticle137andArticle55istotallymisplacedandcontrarytolaw.In
myview,limitationformakingaclaimandlimitationformakinganapplication
forappointmentofarbitratorcannotbemixedup.
35. Perusal of theaward indicates that ClaimNo.1was for revisionof
ratesdemandedbythecontractoronthebasisthatcertainitemsofworkwhich
were different from those included in BOQ (Bill of Quantities) items were
requiredtobeexecuted.Itwasthecaseofthecontractorthatthereweresome
extra itemswhererates of itemcouldnotbederivedfromtheBOQratesby
makingappropriatevariations. UnderClause51ofthecontract,theEngineer
hadpowerstomakeanyvariationoftheform,qualityorquantityoftheworksor
anypartthereof.Procedureofvaluationofvariationhadbeenspecifiedunder
Clause52 of the contract. Accordingly, the Government had prepared rate
analysiswith 'labourmarkup'as50%andoverheadandprofitas20%. The
contractor,howeverdemandedthesameas195%and40%respectively. The
learnedlearnedarbitraltribunal,intheimpugnedawardallowedthisclaim. It
wasthepleaoftheGovernmentthatdisputeregardingratesofextra/deviated
itemsstartedwhenthefirstpaymentwasmadepriorto27thJuly1997;whereas
thecontractorhad invokedarbitrationclauseon27th July2000. It is not in
disputethatthesaidworkwascarriedoutasorderedbytheGovernmentunder
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Clause51 read with Clause52 of the contract. The said work was thus,
contractualworkasorderedbytheGovernment.Thelimitationformakingsuch
claimforratesofsuchextra/deviateditemswillthusarisewhensuchitemofwrk
wasdonebythecontractor,whichinthiscase,muchpriorto27thJuly1997.In
myview,Article18ofScheduletoLimitationActwouldapplytothisclaimand
not Article113 as sought to be applied by the contractor in the present
proceedings.ThelearnedarbitratordidnotrefertoanyArticlewhilerejecting
thepleaoflimitationintheimpugnedaward.
36. InsofarasClaimNo.2isconcerned,perusaloftheawardindicates
that the said claim was for compensation for the work carried out by the
contractor beyond the original stipulated date of completion which was 19th
March1997. TheGovernmentgrantedfiveextensionsfortheperiodbetween
20thMarch1997makingthesametermsandconditionsapplicableforthework
carriedoutduringtheextendedperiod. Thecontractorthus,oughttohave
invoked arbitration clause no sooner such extension was granted by the
Governmentbymakingthesametermsandconditionsapplicableforthework
carried out during the extended period. The cause of action for claim for
compensationwouldarisewhenthebreachiscommittedbytheeitherparty. If
accordingtothecontractor,theGovernmentwasresponsibleforprolongationof
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contractandextensionwasnecessitatedduetosuchreasonsandthecontractor
wasnotboundtocarryoutthebalanceworkonthesametermsandconditions,
cause of action would begin as soon as such breach was committed by the
Government according to the contractor. The learned arbitral tribunal,
however,didnotdecidethisissueintheimpugnedawardbutrejectedthepleaof
limitationmerelyonthegroundthattheclaimwasinitiatedon18thMarch1997
i.e the date on which the Government granted extension under the same
conditions of contract and its effect will start from 20th March 1997 and it
continuedtill actualcompletionofthecontract. Thelearnedarbitraltribunal
consideredthattheEngineerhadrejectedtheclaimon6thSeptember2000and
thearbitrationwasinvokedon21stSeptember2000,thustheclaimwasintime.
NoArticleofLimitationActhasbeenreferredbythelearnedarbitraltribunal
while dealing with plea of limitation even in respect of this claim for
compensation.
37. AsfarasClaimNo.3madebythecontractorisconcerned,perusalof
theawardindicatesthatthesaidclaimwasmadeforrevisionofratesforPressure
Shaft Excavation. According to contractor, it encounteredvarious difficulties
duringtheexcavationsofthePressureShaftssuchaschangedsequenceofthe
work,methodandtiming,physicalobstructionsintheworkduetoworkofother
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agency, variation in rock strata/geological conditions etc., which was not
attributabletothecontractor.Accordingtocontractor,inviewofsuchsituation,
theychangedthescopeofitemandthecontractorpreparedrateanalysisforeach
component of the work based on componentwise expenditure. The learned
arbitraltribunalallowedthisclaim.
38. Perusaloftheawardindicatesthatthisitemwascarriedoutduring
theperiodbetweenJuly1993toMarch1998totheextentof94%.Thedemand
wasmadebeforetheExecutiveEngineeron10thFebruary1997.Itwasrejected
byExecutiveEngineeron17thJuly2000. Inmyview,thecontractoroughtto
havemadethisclaimwhenanysuchbreachwascommittedbytheGovernment
resulting in suffering of compensation due to breaches attributable to the
Government.Thecontractorwasnotboundtowaitbeyond60daysfordecision
oftheExecutiveEngineer.Inthiscase,itisclearthatthecontractorwaitedfor
decision of Executive Engineer for more than three years and four months.
Limitationoncecommenced,doesnotstop.Thelearnedarbitraltribunalhasnot
referredtoanyArticleofLimitationActwhiledealingwiththistypeofclaim.In
my view, the claim in view of the alleged breaches committed by the
Government,oughttohavemadewithinthreeyearsfromthedateofalleged
breachandclaimnot havingmadewithin threeyears, was barredby lawof
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limitation.
39. InsofarasClaimNo.4isconcerned,perusalofawardindicatesthat
thesaidclaimwasmadeforfixationoftherateonaccountofvariationinthe
itemofTransformerHallArchConcreteduetotheproblemssuchaschangesin
natureofrock,doingadditionalworknotprovidedinthecontract,changesin
sequenceandmethodology,delayinissueofdrawings,increaseinquantitiesetc.,
resultingincontractortoincurextraexpenditurenotcontemplatedintherate
analysis.Thecontractormadethatclaimbywayofcompensationtowardsextra
expensesallegedtohavebeenincurredbyit. Thelearnedarbitral tribunal
allowedthisclaim.Thedataplacedonrecordintheawardindicatesthatthis
workwascarriedoutduringtheperiodbetweenOctober 1993andFebruary
1994. ThecontractormadeademandbeforetheExecutiveEngineeron14th
October1996.TheExecutiveEngineerrejectedthisclaimon4thNovember2000.
Arbitrationwasinvokedon1stJune2001.Inmyview,thecontractoroughtto
havemadethisclaimwhensuchworkwasdoneandnopaymentwasmadeto
thecontractorforthesame.Thecontractorwasnotboundtowaitfordecision
ofExecutiveEngineerbeyondtheperiodof60dayswhereas, inthis case,he
waited fordecisionof theExecutiveEngineer foraperiodof morethanfour
years.Inmyview,thisclaimwasonthefaceofitisbarredbylawoflimitation.
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Thelearnedarbitraltribunalhasnotconsideredthesefactsinproperdirection.
40. InsofarasClaimNo.5isconcerned,thesaidclaimwasmadebythe
contractor for fixation of new rate on account of variation in the item of
TransformerHallexcavation.Itwasthecaseofthecontractorthatexcavationof
horizontalnicheshaddelayedtheworkandcausedextraexpensesduetoother
reasons,suchasstoppageofworkofshotcrete,increaseinquantityofrockbolts,
frequentrevisionofdrawings,additionalworks,reductionandomissionofsome
worksetc.necessitatedappropriatedcompensationinfavourofcontractor.The
learned arbitral tribunal allowed this claim for compensation. The award
indicatesthatthisworkwasexecutedduringtheperiodbetweenJanuary1993
and September 1995. The contractor made this claim before the Executive
Engineeron14thOctober,1996whichwasrejectedbytheExecutiveEngineeron
19thSeptember,2000.Arbitrationclausewasinvokedon6thJune2001.Inmy
view, when the work was carried out and payment was not made by the
Government,causeofactionhadcommenced.Inanyevent,thecontractorwas
notrequiredtowaitforthedecisionoftheExecutiveEngineerformorethan60
dayswhereasforthis claim,thecontractorwaitedfordecisionforaboutfour
years.Inmyview,theclaimonthefaceofit,isbarredbylawoflimitation.
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41. In so far as judgment of the Supreme Court in case of Gannon
Dunkerly(supra)relieduponbythecontractorisconcerned,inmyview,itwas
notthepleaofthecontractorbeforethearbitraltribunalorbeforetheDistrict
JudgethatArticle113oftheLimitationAct(correspondingtoArticle120ofthe
LimitationAct1908)wouldapplytothefactofthiscase.Inmyview,asnosuch
pleawasnotraisedbeforethearbitraltribunalplacingrelianceuponArticle113
corresponding to Article120 of Limitation Act 1908, and since no finding is
rendered by the arbitral tribunal applying Article113, contractor cannot be
permittedtoraisesuchpleaforthefirsttimeinthepresentproceedingsunder
Section37oftheActof1996.Pleaoflimitationisamixedquestionoffactand
lawandunlesssuchspecificpleabyplacingrelianceuponArticle113wasfirst
raisedbeforethearbitraltribunal,itcannotbeallowedtoberaisedforthefirst
timeinappealunderSection37oftheActof1996.Iam,therefore,oftheview
thatrelianceplacedbythelearnedseniorcounselappearingforthecontractorin
caseof GannonDunkerley (supra)isofnoassistancetothecontractorinthe
factsofthiscase.
42. Inanyevent,consideringthenatureofclaimsmadebythecontractor
i.e.ClaimNos.1to5whichwereallowedbythelearnedarbitraltribunal,itis
clearthattheclaimswereeitherforworkdoneorforcompensationandthus
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specificArticleforreferringthedisputetoarbitrationwouldbeattractedsuchas
Article18 or Article55 of Schedule of the Limitation Act and therefore,
Article113cannotbeattracted.Inmyview,thusthefactsofthecasebeforethe
HonourableSupremeCourt in caseof GannonDunkerley (supra)areclearly
distinguishablewiththefactsofthiscaseandthus,saidjudgmentrelieduponby
thecontractor,withgreatrespect,isofnoassistancetothecontractor.
43. The next submission of Mr Chinoy, the learned senior counsel
appearingforthecontractoristhatevenifArticle18isapplicabletotheclaims
madebythecontractor, periodof limitationwouldcommenceonlywhenthe
entireworkisdone.Thelearnedseniorcounselsubmitsthattheclaimsmadeby
thecontractorwerenotfortheentireworkdonebythecontractorbutwasonly
inrespectofsomeitemsfromthescopeofentireworkawardedtothecontractor.
Thelearnedseniorcounselsubmitsthatonlywhentheentireworkiscompleted,
causeofactionwouldariseformakingclaimsevenforitemsfortheworkdone.
It is submitted that if thecontractor is asked to invokearbitrationclauseon
completionofeachitemindispute,therewouldbemultiplicityofarbitrations
underthesamecontract.
44. MrKumbhakoni, learnedcounsel appearing fortheGovernmenton
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theotherhandonthisissueinrejoinder submitsthatthecontractorhadmade
claimsinrespectofeachitemsseparatelyanddidnotmakeclaimfortheentire
work. It is submitted that even in the earlier arbitration proceedings, the
contractorhadmadeclaimshavingariseninrespectoftheitemsofthework
done and did not wait till completion of work. The Government had made
paymentitemwisetothecontractorandthusitcannotbeconstruedthatcause
ofactionwouldariseonlyafterentireworkwasdoneandnotwhenitemsof
workwasdoneinrespectofwhichthedisputehadalreadyarisen.Clause66(A)
andClause66(b)oftheGeneralConditionsofContractreadasunder:
66A)SETTLEMENTOFDISPUTESARBITRATION:
(A) IftheContractorconsidersanyworkdemandedofhimtobeoutsidetherequirementsofthecontractorconsidersanydrawings,recordorrulingoftheEngineer'sRepresentativeonanymatterinconnectionwithorarisingoutoftheContractorthecarryingoutofworktobeunacceptable,heshouldpromptlyaskthe Engineer's representative in writing, for written instructions or decision.Thereupon theEngineer's Representative shall givehis written instructions ofdecisionwithinaperiodof60daysofsuchrequest.
Uponreceiptofthewritteninstructionsordecisions,thecontractorshallpromptlyproceedwithoutdelaytocomplywithsuchinstructionsordecision.
IftheEngineer'sRepresentativefailstogivehisinstructionsordecisioninwritingwithinaperiodof60daysofbeingrequestedoriftheContractorisdissatisfiedwiththeinstructionsordecisionoftheEngineer'sRepresentativetheContractormaywithin30daysafterreceivingtheinstructionsordecisionappealupwardstoEngineerwhoshallaffordanopportunitytotheContractortobeheardandtoofferevidenceinsupportofhisappeal.TheEngineershallgiveadecisionwithinaperiodof60daysaftertheContractorhasgiventhesaidevidenceandfurtherdocumentaryprooftheEngineercallsforinsupportofContractor'sappeal.
IftheContractorisdissatisfiedwiththisdecision,theContractorwithinaperiodof30daysfromreceiptofthedecisionshallindicatehisintentiontoreferthedisputetoArbitration,aspertheproceduresetoutinClause66(b)below,failingwhich
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thesaiddecisionshallbefinalandconclusive.
66(b):ARBITRATION:
Intheeventofanydisputeordifferencearisingoutoforinanywayrelatingtoorconcerning these presents or the construction or effect of these presents (thesettlementwhereofhasnotbeenhereinbeforeexpresslyprovidedfor),thesameinrespectofwhichthedecisionisnotfinalandconclusive,shallontheinitiativeofeitherpartytothecontractbereferredtothreearbitrators,onetobeappointedbytheemployer, thesecondbythecontractor andthirdbytheChairmanCentralWater Commission in the case of Indian Contractors. In the case of ForeignContractor, thethirdarbitratorwillbedecidedbythetwoarbitratorswithin60daysoftheirappointment. ThetermIndianContractorshallincludeanIndianfirm or a group of firms or a joint venture eligible for price preference as adomestictenderer.ThetermForeignContractorshallincludeaforeignfirmoragroup of firms and joint venture consortia not eligible for price preference asdomestic tenderer. TheArbitrationshall be conducted inaccordance with theprovisions of the Indian Arbitration Act 1940 or any statutory modificationsthereof. The arbitration shall be held at such place and time in India as thearbitrators maydetermine. If eitherof thepartiesfail toappoint its arbitratorwithinsixtydaysafterreceiptofnoticefortheappointmentofanarbitratorfromtheotherpartythentheChairman,CentralWaterCommissionshallappointanarbitratoronreceiptoftherequestfromtheaggrievedparty. AcertifiedcopyoftheappointmentsmadebytheChairmanCWCshallbefurnishedtobothparties.
Thedecisionofthemajorityofthearbitratorsshallbefinalandbindinguponboththeparties.Theexpenseofthearbitratorsshallbepaidasmaybedeterminedbythearbitrators.
Performanceunderthecontract, shallifreasonablybepossible, continueduringthearbitrationproceedingsandpaymentsduetotheContractorbytheEngineer'srepresentative shall not be withheld, unless theyare the subject matter of thearbitrationproceedings.
All awardsshall be inwritingand in case of claims equivalent toRupees onehundred thousand or more, such awards shall state reasons for the amountsawarded.
NeitherpartyisentitledtobringaclaimtoarbitrationifitsArbitratorhasnotbeenappointedbythirtydaysaftertheexpirationofthedefectsliabilityperiod.
45. Perusalofthearbitrationclauseindicatesthatincaseofanydispute,
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thecontractorwasrequiredtopromptlyasktherepresentativeoftheGovernment
inwriting,forwritteninstructionsordecision.Fromtheperusaloftheclauses,it
is clearthat it contemplatesdispute tobereferredevenduringthecourseof
executionofworkandthecontractorwasnotrequiredtowaittillcompletionof
the work. Perusal of the arbitrationclause indicates that thecontractor was
permittedtoreferthedisputestoarbitrationarisingduringtheexecutionofthe
workandsimultaneouslytocontinuetoperformunderthecontractifreasonably
possible. ThisClauseindicatesthatthecontractorwasnotboundtowaitfor
completionfortheentirework,butcouldhaveinvokedarbitrationpromptlyas
soonasdisputehadariseneveninrespectofitemsofworkoutofentirescopeof
workwere executed. It is not in dispute that even in respect of the earlier
arbitrationarising under the samecontract, the contractor hadalreadymade
claimsinrespectofsomeoftheitemsofwork.Iamthus,notinclinedtoaccept
thesubmissionmadebythelearnedseniorcounselappearingforthecontractor
thatthecauseofactionwouldariseonlywhentheentireworkwascompletedby
thecontractorandnotwhenthepaymentwasnotmadeinrespectoftheitemsof
workdoneoncompletionofthatitem. Inmyview,causeofactionhadarisen
whentheworkwasdoneinrespectoftheitemsofworkdoneandcauseofaction
wouldnotpostponetillthedateofcompletionofentirescopeofworkawardedto
thecontractor.Inmyview,thelearnedarbitraltribunaloughttohavereferredto
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therelevantArticlewhichwouldbeattractedforthepurposesofdecidingthe
issueoflimitation,whichisabsentintheimpugnedaward.ThelearnedDistrict
JudgehasmisdirectedbyapplyingwrongArticletothefactsofthiscase.
46. Theawardisvitiatedandisinconflictwithpublicpolicyontheissue
oflimitation. ViewtakenbythelearnedDistrictJudgeisalsocontrarytolaw
anddeservestobesetaside.I,therefore,passthefollowingorder.
i) Impugnedorderandjudgmentdated29th June2006passedbythe
learnedDistrictJudge,RatnagiriinArbitrationApplicationNo.44of
2003andtheimpugnedawarddated26th June2003passedbythe
learnedarbitraltribunalaresetasideonthegroundoflimitation.
ii) ArbitrationApplicationNo.44of2003filedbytheGovernment is
allowed.
iii)Appealisdisposedofinaforesaidterms.Thereshallbenoorderasto
costs.
iv) Respondentisdirectedtorefundtheamountwithdrawnintheabove
matterwithinterest@12%perannumfromthedateof withdrawaltill
paymentwithineightweeksofthisorder.
(R.D.DHANUKA,J.)
Asmita 48/48
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