Andhra Pradesh High Court - Amravati
Rashtriya Ispat Nigam Limited, vs M/S Sencon Systems Private ... on 2 May, 2023
IN THE HIGH COURT OF ANDHRA PRADESH
***
Arbitration Application No.102 of 2015
BETWEEN:
# Rashtriya Ispat Nigam Limited
Rep. by its Deputy General Manager (Projects)
CRMP Construction,
Visakhapatnam Steel Plant,
Visakhapatnam.
.... Applicant
AND
$ M/s. SENCON Systems Private Limited,
Rep. by its Managing Director,
F - 46, D - Block, Auto Nagar,
Visakhapatnam - 530012.
... Respondent
Date of Judgment pronounced on : 02.05.2023
HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO
1. Whether Reporters of Local newspapers : Yes/No
May be allowed to see the judgments?
2. Whether the copies of judgment may be marked : Yes/No
to Law Reporters/Journals:
3. Whether The Lordship wishes to see the fair copy : Yes/No
Of the Judgment?
2 RRR,J
Arb.Appl.No.102 of 2015
*IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
*HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO
+ Arbitration Application No.102 of 2015
% Dated: 02.05.2023
BETWEEN:
# Rashtriya Ispat Nigam Limited
Rep. by its Deputy General Manager (Projects)
CRMP Construction,
Visakhapatnam Steel Plant,
Visakhapatnam.
.... Applicant
AND
$ M/s. SENCON Systems Private Limited,
Rep. by its Managing Director,
F - 46, D - Block, Auto Nagar,
Visakhapatnam - 530012.
... Respondent
! Counsel for Applicant : Sri K. Sarvabhouma Rao
^Counsel for Respondent : Sri Ramachandra Rao Gurram
<GIST :
>HEAD NOTE:
? Cases referred:
1. (2009) 1 SCC 267
2. (2011) 12 SCC 349
3. (2017) 9 SCC 729
4. (2019) 8 SCC 714.
5. (2021) 2 SCC 1
6. (2021) 5 SCC 738
7. (2008) 7 SCC 169
8. 2023 LiveLaw (SC) 287
3 RRR,J
Arb.Appl.No.102 of 2015
HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO
Arbitration Application No.102 of 2015
ORDER:
The applicant had entrusted a work relating to structural steel work
for calcining and refractory material plant - CRMP - Zone 5 to the
respondent on 31.03.2007. A formal agreement was executed on
21.06.2007. The work was to be completed by 23.09.2008. The work was
not completed by that day and extensions were given from time to time.
The applicant, by a notice dated 24.02.2010, terminated a part of the
work. Subsequently, the entire contract was terminated on 23.08.2010 by
the applicant.
2. The respondent, invoked the arbitration clause, available in
the agreement, for reference of certain disputes to the arbitral tribunal.
After the claims of the respondent had filed, the applicant had filed a
counter claim on 13.07.2011. The applicant sought an award of
Rs.3,75,661/- towards the value of estimated dismantled structural steel
and sheeting, which was not handed over to the applicant and a sum of
Rs.7,42,418/- towards the value of fabricated steel structures which had
not yet been arected and which had not been handed over to the
respondent. Apart from this, the applicant also stated that a further sum
of Rs.9,64,293/- is due towards structural sheeting work and the value of
the unfinished work was estimated approximately and sought o set out
exact amount claimed after the figures could be clarified.
4 RRR,J
Arb.Appl.No.102 of 2015
3. After raising the said counter claim, the applicant had filed a
Memo, dated 02.03.2012, withdrawing the counter claim with liberty to
pursue it later. This Memo was recorded by the tribunal non 02.03.2012.
4. The arbitral tribunal had then passed an award on
01.05.2012. In this award, the tribunal recorded that the termination of
the contract by the applicant was unjustified, arbitrary and not tenable.
The arbitral tribunal, after holding that the termination was not tenable,
had gone into the validity of the counter claim of the applicant and had
held that the "risk and cost" clause, under which the applicant was raising
a counter claim was not applicable as the termination itself is unjustified
and arbitrary.
5. Aggrieved by this award, the applicant had filed a petition
under Section 34 of the Arbitration and Conciliation Act, 1996 (for short
'the Act'), which was dismissed by the District Court after modifying the
interest payable by the applicant. This order was not challenged by the
applicant and has become final against the applicant. However, an appeal
is said to have been filed by the respondent for restoration of the original
interest awarded by the arbitral tribunal, and the same is still pending.
6. The applicant, by notice dated 02.02.2013 invoked the
arbitration clause and made a demand for payment of Rs.72,73,899/-
under the heads, which had already been raised earlier in the counter
claim by the applicant.
5 RRR,J
Arb.Appl.No.102 of 2015
7. The respondent replied to this notice of arbitration by a reply
notice dated 08.03.2013. In the said reply notice, the respondent took the
stand that the applicant cannot invoke arbitration again as all the issues
raised by the applicant, had been considered by the arbitral tribunal, in
the earlier round of arbitration, and as such there was no dispute to be
referred for arbitration.
8. The applicant, in view of the refusal of the respondent to
nominate its arbitrator, under the procedure contemplated in the
arbitration clause, had approached this Court, invoking Section 11(6) of
the Act.
9. The applicant contends, in the arbitration application that
the applicant is entitled to move a fresh claim as the applicant had
withdrawn the counter claim before the arbitral tribunal.
10. The stand of the respondent is that this application is not
maintainable on two grounds. Firstly, the application is hopelessly barred
by the limitation. Secondly, the earlier decision of the arbitral tribunal that
the applicant would not be entitled to any compensation under the heads
raised by the applicant, as the termination of the contract by the applicant
is untenable, would preclude the applicant from filing any fresh claim.
11. Sri K. Sarvabhouma Rao, learned counsel appearing for the
applicant would contends that the scope of enquiry before this Court,
under an application under Section 11(6) of the Act, is restricted to an
6 RRR,J
Arb.Appl.No.102 of 2015
enqiry as to the existence of an arbitral agreement and all other issues
would have to be referred for a decision to the arbitral tribunal itself. He
relies upon the judgement of the Hon'ble Supreme Court in Bharat
Sanchar Nigam Limited and Anr., vs. Nortel Networks India
Private Limited.
12. Sri Ramchander Rao Gurram, appearing for the respondent
would also rely upon the same judgement to support his contentions
mentioned above.
Consideration of the Court:
13. The power of the Court to appoint an arbitrator is traced to
Section 11 of the Act. Section 11(5), 11(6) and 11(6A), which are
relevant, are extracted below.
Section 11(5) - Failing any agreement referred to in sub-
section (2), in an arbitration with a sole arbitrator, if the
parties fail to agree on the arbitrator within thirty days from
receipt of a request by one party from the other party to so
agree the appointment shall be made, upon request of a
party, by the Supreme Court or, as the case may be, the
High Court or any person or institution designated by such
Court.
(6) Where, under an appointment procedure agreed upon by
the parties,--
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach
an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any
function entrusted to him or it under that procedure,
7 RRR,J
Arb.Appl.No.102 of 2015
a party may request 1[the Supreme Court or, as the case may
be, the High Court or any person or institution designated by
such Court]to take the necessary measure, unless the
agreement on the appointment procedure provides other
means for securing the appointment.
(6A) The Supreme Court or, as the case may be, the High
Court, while considering any application under sub-section (4)
or sub-section (5) or sub-section (6), shall, notwithstanding
any judgment, decree or order of any Court, confine to the
examination of the existence of an arbitration agreement.
14. It must be noted that Section 11(6A) was introduced in 2015
by way of an Amendment Act. Prior to this insertion, the Hon'ble Supreme
Court in the seven bench judgment of SBP & Co. vs. Patel Engineering
Ltd.,1 had held that the Court while considering an application under
Section 11 of the Act, would have to go into the questions of whether an
arbitration clause exists; the party seeking arbitration is a party to the
arbitration agreement; whether the claim was a dead one; whether the
claim relates to concluded transactions recording satisfaction of the
mutual rights or by receiving final payment without objection. It was also
left open to the Court to take evidence if necessary to decide these issues.
These guidelines were further elaborated by the Hon'ble Supreme Court in
National Insurance Co.Ltd., vs. Boghara Palyfab (p) Ltd.,2 and
Union of India vs. Master Construction Co.,3
(2005) 8 SCC 618
(2009) 1 SCC 267
(2011) 12 SCC 349
8 RRR,J
Arb.Appl.No.102 of 2015
15. Subsequent to these judgments, the Act was amended by
the Arbitration and Conciliation (Amendment) Act, 2015, which introduced
sub-section (6A). The effect of this judgment was considered by the
Hon'ble Supreme Court in Duro Felguera, S.A. vs. Gangavaram Port
Ltd.,4. The Hon'ble Supreme Court had held that the said amendment
legislatively overruled the earlier judgments mentioned above and
encapsulated the law with the statement "after the amendment, all that
the Courts need to see is whether an arbitration agreement exists -
nothing more, nothing less". This decision was followed in Mayavati
Trading (P) Ltd., vs. Pradyuat Deb Burman5.
16. The scope of enquiry under Section 11(6A) was again
considered by the Hon'ble Supreme Court in Vidya Drolia vs. Durga
Trading Corporation.,6. This judgment was followed in Bharat
Sanchar Nigam Limited and Anr., vs. Nortel Networks India
Private Limited,7.
17. In Vidya Drolia vs. Durga Trading Corporation., the
Hon'ble Supreme Court, while considering the scope of power under
Section 8 and Section 11 of the Act, had held that the Court would be
entitled to interfere when it is "manifestly and ex-facie certain that the
arbitration agreement is non-existent, invalid or the disputes are non-
(2017) 9 SCC 729
(2019) 8 SCC 714.
(2021) 2 SCC 1
(2021) 5 SCC 738
9 RRR,J
Arb.Appl.No.102 of 2015
arbitrable" . The Hon'ble Supreme Court held that the Court would have to
exercise a prima facie test to screen out and knock down ex-facie
meritless, frivolous and dishonest litigation. This ex-facie exercise must be
to see whether it is manifest that the claims are ex-facie time barred or
dead or there is no subsisting dispute.
18. The Hon'ble Supreme Court in Bharat Sanchar Nigam
Limited and Anr., vs. Nortel Networks India Private Limited, while
following the judgment in Vidya Drolia vs. Durga Trading
Corporation., had further elucidated that there was a fine distinction
between the jurisdiction of the tribunal and admissibility of a claim before
the arbitral tribunal and this distinction would permit the Court, under
Section 11(6) and (6A), to weed out claims which are not admissible
either on account of the claims being ex-facie time barred and dead or on
account of the fact that there are no subsisting disputes.
Limitation:
19. The respondent contends that the claim of the applicant is
ex-facie time barred and as such the application would have to be
rejected.
20. The question of limitation was considered by the Hon'ble
Supreme Court in Bharat Sanchar Nigam Limited and Anr., vs.
Nortel Networks India Private Limited. The principles laid down by
the Hon'ble Supreme Court can be summarised as follows:
10 RRR,J
Arb.Appl.No.102 of 2015
1. The question of limitation, in an arbitral claim, would consist of two
parts. The first part would be on the question of limitation relating
to the claim itself and the second part would be the period of
limitation within which an application for appointment of arbitral
tribunal can be moved under Section 11.
2. Section 21 of the Act states that an arbitration is said to have
commenced upon notice of arbitration, for the disputes to be
referred to Arbitration, is received by the respondent.
3. At this stage, the question that would arise is whether the said
notice has been sent within the period of limitation prescribed,
under the Limitation Act, for such claims. This is in accordance with
Section 43 of the Act, which stipulates that the provisions of the
Limitation Act would be applicable to arbitration proceedings.
4. The second stage of verifying limitation would arise in relation to
the time period within which the party seeking arbitration would
have to approach the Court under Section 11(5) or 11(6) of the Act.
21. It was earlier argued that the language of Section 43
restricts the applicability of the Limitation Act to only arbitral proceedings
and it would not be applicable to applications being filed under Section 11
of the Act. This contention had been rejected by the Hon'ble Supreme
Court in Consolidated Engineering Enterprises vs. Irrigation
11 RRR,J
Arb.Appl.No.102 of 2015
Department8 and it was held that the Limitation Act would apply to
proceedings under the Arbitration Act, in Court and in arbitration, except
to the extent expressly excluded by the Arbitration Act itself.
22. A perusal of the Limitation Act and the schedule annexed to
the Limitation Act would show that there is no provision relating to an
application under Section 11 of the Arbitration Act. Consequently, various
High Courts had taken the view that Article 137 of the schedule which is
the residuary article, would be applicable and a party would have three
years for filing an application for appointment of an arbitrator under
Section 11 from the expiry of 30 days after receipt of notice for
appointment of arbitrator is received by the party, which refuses to
appoint its arbitrator. This principle has now been approved by the
Hon'ble Supreme Court in Bharat Sanchar Nigam Limited and Anr.,
vs. Nortel Networks India Private Limited.
23. In view of the law set out above, this Court would have to
consider whether there is an ex-facie clear and undisputed bar of
limitation. This would mean that this Court, without going into an
elaborate exercise of fact finding, would have to decide whether there is
ex-facie bar of limitation or whether such a question should also be
referred to the arbitral tribunal.
(2008) 7 SCC 169
12 RRR,J
Arb.Appl.No.102 of 2015
24. As mentioned above, the contract had been terminated on
23.08.2010 and the notice of the respondent to appoint arbitrator to
consider the claim of the applicant was issued on 08.03.2013. Thereafter,
the present arbitration application came to be filed on 03.07.2015, which
is within three year period from the date of issue of notice dated
08.03.2013.
25. As far as the period of limitation relating to the claim itself is
concerned, there is a gap of more than three years between the
termination of contract and the request for reference of the dispute to
arbitration. However, it is the case of the applicant that the claim could
only be raised after the works have been executed by the contractors who
had been appointed subsequently. In the circumstances, there is no ex-
facie clear bar of limitation. As such, this Court while declining to go into
this question, would have to leave it open for the arbitral tribunal to
decide the issue. However, the said situation may not arise on account of
the final order being passed in this application.
26. The law, as enunciated by the Hon'ble Supreme Court, is
that this Court can reject an application for appointment of arbitrator
under Section 11, if it is either ex-facie barred by the limitation, or there is
no subsisting dispute. In the present case, the disputes that are sought to
be raised by the applicant were raised in the counter claim filed in the
earlier round of arbitration. These claims were rejected by the arbitral
tribunal, on the ground that the claim under the "risks and costs" clause
13 RRR,J
Arb.Appl.No.102 of 2015
would not be available to the applicant as the termination of the contract
itself was irregular and not tenable. The applicant contends that the
arbitral tribunal could not have gone into this issue as the applicant had
withdrawn the counter claim and sought liberty to claim later and the
arbitral tribunal could not have gone into this issue at all.
27. A comparison of the heads of claim considered by the
arbitral tribunal in the award dated 01.05.2012 and the heads of claim
raised by the applicant in the present application would show that they are
the same heads of claim. The question of whether the arbitral tribunal
could have gone into these issues after the applicant had withdrawn the
counter claim, would be a matter to be raised before the Court under
Section 34 of the Act in relation to the award dated 01.05.2012. The
application filed under Section 34 of the Act, against the award dated
01.05.2012 has been dismissed and has become final as no appeal has
been filed against the said decision. In such circumstances, the present
claims are ex-facie not subsisting.
28. A learned Single Judge of the Hon'ble High Court of Calcutta
in Tantia Construction Limited vs. Union of India9, had, while considering a
similar contention, held that there cannot be two arbitrations for the same
claims and that once a dispute has already been adjudicated upon, it
cannot be said to be a subsisting dispute that requires resolution. This
2023 LiveLaw (SC) 287
14 RRR,J
Arb.Appl.No.102 of 2015
order of the learned Single Judge was carried in appeal to the Hon'ble
Supreme Court of India by way of Special Leave to Appeal (c) No.10722 of
2022. The Hon'ble Supreme Court had upheld the view of the learned
Single Judge and dismissed the special leave application, on 15.07.2022.
29. In the circumstances, the claim raised by the applicant is not
a subsisting dispute which can be referred to arbitration by appointing an
arbitral tribunal.
30. Accordingly this Arbitration Application is dismissed. There
shall be no order as to costs. As a sequel, pending miscellaneous petitions,
if any, shall stand closed.
_________________________
R. RAGHUNANDAN RAO, J.
2nd May, 2023
Js.
15 RRR,J
Arb.Appl.No.102 of 2015
HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO
Arbitration Application No.102 of 2015
2nd May, 2023
Js.
