The Single Bench of the Delhi High Court in the case of Siemens Healthcare Pvt. Ltd. vs Director General Armed Forces Medical Services consisting of Justice V. Kameswar Rao dismissed a petition filed u/s 11 (6) of the Arbitration & Conciliation Act, 1996 (“A&C Act, 1996”) seeking appointment of Arbitrator as being barred by limitation under Art. 137 of the Limitation Act, 1963 (“the Act”).
Facts
The petitioner is a company incorporated under the provisions of Companies Act, 2013 with Siemens Healthineers AG as the parent company. The respondent floated a tender for supply of certain medical equipments for Army Hospital, Delhi & CH (SC), Pune on Turnkey Basis. The petitioner submitted its bid which was accepted, and the acceptance of Tender was issued in terms of which the date of delivery was 270 days from the date of handing over of the site. But the work could only be started after securing certain approvals for which application was to be made by the respondent. So, the petitioner wrote to the respondent that the time for getting such approvals will be excluded from the 270 days. It also informed the respondent regarding the change of the third-party for the supply of Treating Planning Systems (TPS) along with the new details and quotations. It also submitted a Performance Bank Guarantee and requested the respondent to release a Letter of Credit (‘L/C’) to meet the project completion deadline and avoid any Liquidated Damages on account of delay. In addition, it submitted a comparison of TPS to the respondent. The respondent sent a letter to the petitioner instructing it to commence turnkey scope for the Delhi consignee. Accordingly, it kept acting as per the scope of work and requirement and regularly updated the respondent. However, the respondent kept delaying the issue of L/C on the pretext that alternate TPS was still under evaluation and that the work progress was being monitored regularly. Thus, the L/C opening was not processed when the respondent shared observation regarding the increased cost of ₹10,41,199.00 of TPS manufactured by the current third party. The respondent sought confirmation from the petitioner regarding the reduction of the value of the supply of ₹10,41,199.00.
Contentions Made
Petitioner: The petitioner agreed to reduce the price and requested the respondent for amendment of the order. A meeting was also held for a status update. The respondent sent a letter to the petitioner terminating the contract in 2015, overlooking the fact that the complete scope was already complete, which was not accepted. The petitioner had invested a massive amount of money and time which the respondent did not consider. The petitioner had sought time to discuss the matter in person. The respondent is in unauthorized possession of the petitioner’s equipment due to which it was impossible to amortize the value of the property. The respondent was obliged to discharge the liability of ₹1,35,70,000/- along with the interest on the outstanding amount. It issued a legal notice to discharge the afore-mentioned liability, but the respondent failed to do so. The act of the respondent was against the spirit of the Tender Document. It prayed for appointing a sole Arbitrator for adjudication of the issue.
Respondent: No action was taken by the petitioner against the termination of the contract except writing two letters in 2016 and 2021 respectively. Reliance was placed on BSNL & Anr. v. Nortel Networks India Pvt Ltd to submit that the invocation is barred by time.
Observations of the Court
Since Clause 22 of the Schedule B of General Conditions of Contract was relied upon by the petitioner, the Bench noted that the respondent did not contest the existence of the arbitration clause in the contract and concurred with the submission that the petitioner has not contested the termination till it had sent the letters after which no follow-up was made by the petitioner till when it issued a final invoice, following the non-payment of which it had sent a legal notice. The cause of action if any, had arisen to the petitioner in the year 2015, when the respondent had terminated the contract.
Relying on BSNL & Anr. vs. Nortel Networks India Pvt Ltd, it was noted that the period of limitation for filing an application u/s 11 of the A&C Act, 1996 would be governed by Article 137 of the First Schedule of the Act which provides for a period of limitation of 3 years from the date when the right to apply accrues.
Judgment
The Court observed that the petitioner did not invoke the arbitration clause within three years from the date of the termination of the contract, so now it cannot seek an appointment of Arbitrator for adjudication of termination letter. The petition was hereby dismissed. Regarding the contention that the equipment was in the respondent’s possession, it directed the respondent to send a reply on this aspect to the petitioner within four weeks and even after the receipt of reply if any dispute survived, the parties were at liberty to seek such remedy as available in accordance with law.
Case: Siemens Healthcare Pvt. Ltd. vs Director General Armed Forces Medical Services
Citation: ARB.P. 84/2022
Bench: Justice V. Kameswar Rao
Decided on: 5th July 2022
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