Calcutta High Court
Kalpataru Projects International ... vs Bharat Heavy Electricals Limited ... on 17 February, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
OCD 9
ORDER SHEET
AP-COM/94/2025
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL DIVISION
KALPATARU PROJECTS INTERNATIONAL LIMITED
VS
BHARAT HEAVY ELECTRICALS LIMITED (BHEL)
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 17th February, 2025.
Appearance:
Mr. Amit Kumar Nag, Adv.
Ms. Pritha Bhaumik, Adv.
...for the petitioner
Mr. Aniruddha Bhattacharya, Adv.
Mr. Arnab Roy, Adv.
...for the respondent
The Court: This is an application for appointment of an Arbitrator in terms
of Clause 43.1 of the Work Order issued to the predecessor-in-interest of the
petitioner. The predecessor-in-interest of the petitioner along with Simplex
Projects Limited formed a consortium and participated in the tender floated by
the respondent. Subsequently, the petitioner amalgamated with the predecessor
company and the work was continued by the petitioner in consortium with
Simplex Projects Limited. The petitioner submitted a bill in July, 2020 which
remained unpaid. The petitioner raised certain disputes, the petitioner was asked
by the respondent to appear before the concerned authority for an amicable
settlement. The specific contention of Ms. Bhaumik, is that, although an
amicable settlement was attempted, no further progress was made and
accordingly, the petitioner invoked arbitration by issuing a notice under Section
21 of the Arbitration and Conciliation Act dated 24 th November, 2023.
Mr. Bhattacharya, learned advocate for the respondent has raised two
objections. First objection is that the claim as also the application before this
court are barred by limitation. The second objection is that, although the
predecessor of the petitioner participated in the tender in consortium with
Simplex Projects Limited, Simplex Projects Limited has not been impleaded as a
respondent in this present proceeding. On the point of limitation, Mr.
Bhattacharya submits that the claim as per the records, was of July, 2020.
After the first invocation, amicable settlement was resorted to, but the time spent
during such amicable settlement should not be counted to exclude the limitation.
It is next submitted that Article 137 of the Limitation Act would be applicable
from the date when the right to sue accrued, which means that, the application
under Section 11 of the Arbitration and Conciliation Act should have been filed
within three years from July, 2020. With regard to non-joinder of parties, it is
specifically urged that the work order, letter of intent etc, were addressed to the
predecessor of the petitioner, but it was made clear that the work was being
awarded to the consortium.
Mr. Bhattacharya has relied on the following decisions on the issue of
limitation: 1) B.K. CONSORTIUM ENGINEERS PRIVATE LIMITED VS. INDIAN
INSTITUTE OF MANAGEMENT, reported in 2023 SCC OnLine Cal 124; and 2)
GEO MILLER AND COMPANY PRIVATE LIMITED VS. CHAIRMAN, RAJASTHAN
VIDYUT UTPADAN NIGAM LIMITED reported in (2020) 14 SCC 643.
Admittedly, the arbitration clause is not in dispute. The notice invoking
arbitration is also not in dispute. The respondent does not raise any objection
with regard to the notices. It is submitted that irrespective of the failure of the
attempts at amicable settlement, this application should have been made within
three years from July, 2020.
JMC Projects (India) Limited had amalgamated with Kalpataru Power
Transmission Limited, by way of a merger, pursuant to an order dated December
21, 2022 passed Company Law Tribunal, Ahmedabad Bench. A scheme of
amalgamation was approved. The name of Kalpataru Power Transmission Limited
was changed to Kalpataru Projects International Limited, i.e., the petitioner with
effect from May 22, 2023.
The erstwhile JMC entered into a tie up agreement with Simplex Projects
Limited on November 24, 2011 and decided to constitute a consortium. It was
agreed between the consortium members that the erstwhile JMC will be the lead
member/leader and will be responsible for execution of the works as mentioned
in the consortium agreement. The consortium agreement provided that the first
party, i.e., JMC shall undertake the works detailed in the NIT, except the piling
work, whereas, the second party, i.e., the Simplex Projects Limited would
undertake piling works.
As the lead member/leader, the petitioner which had stepped into the
shoes of the first party, approached the respondents to pay up the dues and
accordingly invoked the arbitration clause. The application has also been filed by
the first party. The tie-up agreement discloses that works with regard to piling
etc. were to be done by Simplex Projects, whereas the first party was supposed to
execute the other works in terms of the notice-inviting tender. The dispute is with
regard to the final bill and other charges for price valuation, additional works etc.
Under such circumstances, in my prima facie view, this application is
maintainable at the instance of the first party/lead member/leader of the
consortium. All communications were also made by the respondents with the
petitioner-company or JMC. The amicable settlement was done with the
petitioner and payment was released. Thus, the objection with regard to non-
joinder of parties, can be raised before the learned Arbitrator.
With regard to the issue of limitation, this Court finds that the allegation of
the petitioner is that, the respondent did not fulfil its reciprocal promise by
providing the drawings, free materials, handing over of the site on time etc. The
work was ultimately completed on February 25, 2020 with a delay of 71 months.
As the respondent was responsible for the delay, the extension of time upto the
actual date of completion had been granted by the respondent, that is, upto
February 25, 2020 without imposing any liquidated damages. The petitioner has
referred to a letter dated December 2, 2020 in this regard.
The petitioner contends that the respondents failed to make payments of
the final bill, price variation bills, running account bills etc. Accordingly, by
letters dated September 16, 2021 and reminder letter dated December 8, 2021,
demands were made. The respondent failed to respond to the petitioner's claim.
By a letter dated January 12, 2020, the petitioner issued a notice of dispute
resolution and called upon the respondent to resolve the dispute amicably.
Pursuant to the said demand, a meeting for amicable settlement was conducted
between the parties on January 31, 2022 and the petitioner was called upon by
the respondent to attend such meeting. After due deliberation, a sum of
Rs.25,14,445/- was released against the allegedly the claim of Rs.5.52 crores. As
a result of which, dispute resolution by way of amicable settlement failed.
Thereafter, the petitioner invoked the arbitration in Clause 43.1 of the said
work order by a letter dated October 27, 2023. Clause 43.1 of the work order
provided that disputes or differences shall be referred to the sole arbitrator
appointed by BHEL/In-charge(Region), and the provisions of Arbitration and
Conciliation Act, 1996, would apply. However, in terms of the Arbitration and
Conciliation Amendment Act, 2015 and various judgments of the Hon'ble
Supreme Court, the above mechanism for appointment of an Arbitrator is no
longer permissible. Under such circumstances, the petitioner approached this
Court for appointment of an arbitrator.
The disputes are with regard to non-release of various bills on various
accounts, and for refund of illegal deductions, interest and GST amounts, etc.
The factum of the attempt at amicable settlement is available from the letter
written by the respondent. The fact that part of the original claim was settled by
paying Rs.25,14,445/- within the period of limitation, is not in dispute. The
dispute is with regard to the remaining unpaid amount, from the total claim of
Rs.5.52 crores.
The contention of the respondent that the petitioner should have filed the
application under Section 11(6) of the Arbitration and Conciliation Act within
three years from the last date of submission of the final bill, i.e., July 2020, is not
accepted by the Court. It is well settled that the notice invoking arbitration
should be issued within three years from the date of accrual of the cause of
action. In the instant case, after the amicable settlement was entered into
between the parties and a meagre amount was released after the meeting held in
January 2022, the petitioner invoked the arbitration clause on October 27, 2023.
The decision in B.K. Consortium Engineers Private Limited (supra),
does not apply in the facts of this case. Here, the referral Court cannot hold that
the dispute or the claim is ex facie time barred. In the decision cited, the
limitation period, according to the learned Judge, started from March 11, 2016
and the notice invoking arbitration was issued on March 8, 2021. The notice,
according to the learned Judge, was patently time barred as per Article 137 of the
Limitation Act, 1963. The breaking point, according to the learned Judge, was
the date when the final bill was submitted. Geo Miller & Co. Pvt. Ltd. (supra)
also does not apply strictly in the facts of the case for this Court to hold that the
claim is ex facie time barred.
The decision in Aslam Isamil Khan Deshmukh vs. ASAP Fluids Private
Limited and anr. reported in (2025) 1 SCC 502, has clarified that, the referral
court must only conduct a limited enquiry for the purpose of examining whether
the application under Section 11(6) had been filed within the period of three
years or not. Further, at this stage, it would not be proper for the referral court to
indulge in an intricate evidentiary enquiry into the question of whether the
claims raised by the petitioner were time barred or not. Such determination
should be left to the arbitrator. Courts, at the referral stage, can interfere only
when it is manifest that the claims are expressly time barred and dead or when
there are no subsisting disputes. In all other cases, the matter should be referred
to the arbitral tribunal for decision on merits. In Arif Azeem Co. Ltd. vs. Aptech
Ltd. reported in (2004) 5 SCC 313, it was observed that the period of limitation
to file an application under Section 11(6) of the 1996 Act, would be covered by
Article 137 of the Limitation Act, 1963, which prescribed a period of three years
from the date when the right to apply accrued. The limitation period for filing an
application seeking appointment of an arbitrator was held to commence only
after a valid notice invoking arbitration had been issued by one of the parties to
the other party and there had been either a failure or refusal on the part of the
other party to comply with the requirements of the said notice. Under such
circumstances, my prima facie view is that the claim is not a deadwood. The
notice invoking arbitration was issued on October 27, 2023.
Under such circumstances, this Court is of the view that issue of limitation
can be raised before the learned Arbitrator at the appropriate stage. In the
decision of SBI General Insurance Co. Ltd. vs. Krish Spinning reported in
2024 SCC OnLine SC 1754, the Hon'ble Apex Court clarified the position of law
that, the scope of enquiry at the stage of appointment of an arbitrator is limited
to the scrutiny of, prima facie, existence of an arbitration agreement and nothing
else. By referring the disputes to arbitration, the referral court upholds and gives
effect to the original understanding of the contracting parties that, all disputes
and differences shall be resolved by arbitration.
The Court also holds that the procedure prescribed under the dispute
resolution clause with regard to appointment of an arbitrator by the officer of
BHEL is no longer good law. Reference is made to the decision of the Central
Organization for Railway Electrification vs. ECI SPIC SMO MCML (JV) A
Joint Venture Company reported in 2024 SCC Online SC 3219. Under such
circumstances, the petitioner rightly applied before this Court for appointment of
an arbitrator. The dispute resolution clause is quoted below:-
"43.1. In case amicable settlement is not reached in the event of any
dispute or difference arising out of the execution of the Contract or the
respective rights and liabilities of the parties or in relating to interpretation
of any provision by you in any manner touching upon the Contract, such
dispute or difference shall (except as to any matters, the decision of which
is specifically provided for therein) be referred to the sole arbitration of the
arbitrator appointed by BHEL/In-charge (Region).
The ward of the Arbitrator shall be biding upon the parties to the dispute.
Subject as aforesaid, the provisions of Arbitration and Reconciliation Act,
1996 (India) or statutory modifications or reenactments thereof and the
rules made thereunder and for the time being in force shall apply to the
arbitration proceedings under this clause. The venue of the arbitration
shall be the place from which the contract is issued or such other place as
the Arbitrator at his discretion may determine."
This Court appoints Hon'ble Justice Bhaskar Bhattacharya, former Chief
Justice of the Gujarat High Court, as learned
Arbitrator to arbitrate upon the disputes between the parties. This order is
subject to compliance of Section 12 of the Arbitration and Conciliation Act, 1996.
The learned Arbitrator shall fix his own remuneration as per the Schedule
of the Act.
AP-COM/94/2025 is, accordingly, disposed of.
(SHAMPA SARKAR, J.)
B.Pal/PA
