Airport Authority Of India vs Frick India Limited And Anr.
2006 Latest Caselaw 442 Del

JUDGMENT

Sanjay Kishan Kaul, J.

Page 1297

1. IA No. 6080/2003 (u/S 30 and 33 of the Arbitration Act, 1940) The petitioner entered into a contract with the respondent for installation of the air conditioning equipment at the Bombay Airport. The contract was executed on 30.07.1997. The equipment was installed and the petitioner issued a completion certificate dated 06.07.1982 in terms of Clause 6 of the Page 1298 conditions of contract. The plant was taken over on 07.07.1982. The effective portion of the completion certificate reads as under:

As a result of inspection on 11th June 1982 and the monsoon tests carried out in the presence of Superintending Engineer (E), IAAI, between 11-16 the June, 1982, it is found that the work has been carried out generally to the specifications and has been completed satisfactorily. The plant is deemed to be taken over subject to the rectifications of the following defects/short comings.

2. The petitioner however specified certain matters to be rectified by the respondent enumerated thereafter.

3. The aforesaid certificate, as noticed above, was in pursuance to the requirement of Clause 6 which provided that within ten days of completion of work, the contractor was to give a notice of completion to the Engineer In Charge and within 10/30 days of the receipt of such notice, the engineer in charge was to inspect the work and if no defect in the work was found, to furnish the contractor with a certificate of completion otherwise a provisional certificate to be made available at reduced rates. The liability of the contractor for damages is specified in Clause 17 which reads as under:

Clause 17 If the contractor or is work people or servant shall break, deface, injure or destroy any part of building in which they may working, or any building, road, road curb, fence, enclosure, water pipe, cables, drains, electric or telephone post or wires, trees, grass or grassland or cultivated ground contiguous to the premises on which the work or any part of its being executed, or if any damage shall happen to the work while in progress, from any cause whatever or if any defect, shrinkage or other faults appear in the work within 12 months (three months in case of any work other than road work costing Rs 40,000 and below) after a certificate final or otherwise of its completion shall have been given by the Engineer in Charge as aforesaid arising out of defective or improper materials or workmanship the contractor shall upon a receipt of a notice in writing on that behalf make the same good at his own expense, or in default the Engineer in charge may cause the same to be made good by other workmen and deduct the expense from any sums that may be then, or at any time hereinafter may become due to the contractor or from his security deposit except for the portions pertaining to asphaltic work, which is governed by Sub-para (III) of Clause 35 or the proceeds of sale thereof or of a sufficient portion thereof. The security deposit of the contractor except the portion pertaining to asphaltic works which is governed by Sub Para (III) of Clause 35 shall not be refunded before the expiry of guarantee and defects liability period of twelve months.

4. A reading of the aforesaid clause 17 thus shows that the defect liability period in terms of Clause 17 is specified as a period of 12 months. The petitioner after issuing the certificate of completion continued to grant maintenance contract to the respondent till 1985. It appears that a show cause notice was issued on 17.06.1985 by the petitioner to the respondent which culminated in the letter dated 06.11.1985 of the petitioner alleging Page 1299 that the respondent had failed to complete the work by the extended date of completion and thus the contract was determined/rescinded and the works were taken out of the hands of the respondent insofar as they remained executed for giving it to another contract for completion at the cost of the respondent. This letter was replied to by the respondent vide letter dated 24.12.1985. The said letter states as under:

REF: BPJE:3395/F-261/85 December 24, 1985 The Executive Engineer (E) International Airports Authority of India Electrical Maintenance Terminal - I Bombay Airport, Santacruz, Bombay 400 099

Dear Sir,

Sub: Extension to the existing Terminal Building at Bomaby Airport ? Provision of Air conditioning for the proposed International Baggage Claim Area and Transit Lounge. Agreement No. 14/SE/EMD/BOM/77-78

We are in receipt of your Registered AD letter no. 54(93)/85-EMD- I/IAAI/BOM/2718 dated 6th November, 1985 wherein you have invoked to sub clause 3(a), 3(b), 3(c) of Clause 3 of the agreement and assumed the powers contained therein. The power so assumed by you is strongly refuted on the following grounds:

a) That the entire work was completed and seasonal test had also been conducted on 18.06.02. The test was duly accepted and plant taken over vide your letter no. 54(93)/82/EMD-I/IAAI/BOM/1743 dated 07.07.92. This is further authenticated by the fact that after taking over of the pl ant you awarded us an operation and maintenance contract from March 1983 for a period of one year at a total price of Rs 15,000 (Rupees Fifteen Thousand Only) Per month. Subsequently, the said contract was extended for a period of six months from 18.05.1984 at the same rate of Rs 15,000 (Rupees Fifteen Thousand Only) per month.

On your being satisfied with the conditions maintained by the Plant and its operation, you further renewed the said contract from 12th November, 1984 for a period of one year at the rate of Rs 22,500 (Rupees Twenty Two Thousand Five Hundred Only) per month on 24 hours basis.

The plant was operated by us for two and a half years and gave you excellent service. We were able to maintain the desired inside conditions at the Airport. The temperature and other parameters were duly recorded in the Log Book jointly signed by your staff and our staff. Thus, now you cannot be allowed to exercise the power to determine/rescind the contract or forfeit the security deposit.

b) That the contents of para 'b' of your notice are untenable since the entire work is complete and the question of your giving remaining part of the contract to somebody else does not arise as Page 1300 explained in para (a) above. The contents of this para of your notice are inserted only to avoid outstanding payment due to us from you.

With regard to the second part of this para your attention is drawn to our letter no. BPJE:3395F-261/85 dated 06.12.1985 wherein you have been informed that the measurements have already been jointly signed 4 to 5 years back on the basis of which certain payments were released to us Hence, we do no t understand the purpose of your notice for resigning of the measurement books and any measurement done by your department unilaterally are not binding on us in any way whatsoever.

c) That the entire purpose of your said notice is to avoid huge amount of payment totalling to Rs 7,59,861/- (Rupees Seven Lakhs ? Fifty Nine Thousand Eight Hundred only) on account of main contract and Rs 3,82,709.95 (Rupees Three Lakhs Eighty Two Thousand Seven Hundred Nine and Paise Ninety Five only) on account of supply of spare parts and operation which have been illegally withheld by you. Whenever we have approached you for release of this amount you have on one pretext or the other refused to release the payment and now you have resorted to this method of avoiding the payment of the outstanding amount. It is submitted t hat you cannot avoid your liability under the garb of this notice to pay the outstanding amount.

You are therefore called upon to release the above amount totalling to Rs 11,42,570.95 (Rupees Eleven Lakhs Forty Two Thousand Five Hundred Seventy and Paise Ninety Five only) along with interest

18% per annum from the date of installation and taking over of the plant within fifteen days from the receipt of this letter failing which we shall be constrained to hand over the file to our Legal Advisor to take appropriate steps for the recovery of the said amount which shall be at your cost and consequence.

Thanking you Yours faithfully for FRICK INDIA LIMITED (BRANCH MANAGER)

5. Insofar as the petitioner is concerned, there is apparently a silence thereafter and not much really happened even insofar as the respondent is concerned. It appears that it is in the year 1990 that the respondent decided to invoke arbitration clause 25 to claim amounts mentioned int he letter dated 24.12.1985 as the balance due out of the main contract and for the supply of spare parts amounting to Rs 7,59,861/- and Rs 3,82,709.75/- respectively. The petitioner filed a counter claim of Rs 42,59,706.62/- towards damages as it was the case of the petitioner that in 1990 they had to get the work rectified through M/s Blue Star Limited which was completed in the year 1992. The sole arbitrator Mr.M.P.Patkar has made and published the awarded dated 27.07.1998. The respondent aggrieved by the same has filed the objections under section 30 and 33 of the Arbitration Act, 1940 (herein after referred to as the 'said Act') The arbitrator rejected the claims of the respondent but found favor with the counter claims of the respondent Page 1301 to the extent of Rs 33,63,601.43/- and awarded the same with interest at the rate of 18 per cent from 21.12.1995 till date of payment or date of award whichever is earlier apart from costs of the proceedings.

6. Learned counsel for the respondent does not dispute or challenge the rejection of the claim by the arbitrator as made by the respondent. The grievance however made is in respect of the counterclaim of the petitioner which has been allowed. The only real submission made by learned counsel for the respondent is that counter claim of the petitioner was clearly barred by time and the arbitrator ought to have rejected the said counter claim as barred by time. Learned counsel submits that in fact this is the very reason the respondent has not filed objections in respect of the rejection of the claim made before the respondent since apparently even the claims so made were barred by time.

7. In order to appreciate the aforesaid plea, the counter claim of the respondent had to be perused to see as to what was the cause of action pleaded by the respondent to bring the counter claim within the prescribed period of limitation. The relevant para 11 and 12 in this behalf are as under:

11. Around November 1984, the Claimant was asked to demonstrate the capacity of the plant by conducting load test. The claimant agreed for the same but while carrying out some rectification the plant again suffered a major breakdown on 25.02.1985 and its assembly gear got damaged. The Claimant failed to put the plant in operation despite repeated letters, meetings, notices, etc. In absence of the positive response from the Claimant the Respondent having left with no choice, issued a show cause notice to the Claimant vide no.59(93) 85/EMD/IAAI/Bom/1569 dated 17.06.1985 and thereafter rescinded the contract vide letter No. 54(93) 85/END-I/IAAI/Bom/3718 dated 06.11.1985 and decided to replace the plant at the risk and cost of the Claimant. (Photocopies of the Communications addressed to the Claimant for rectification of defects/shortcomings after the completion of the installations are enclosed.

12. Consequent upon rescission of the contract, Claimants Managing Director met Chairman and Member (Engg.) of the Respondent on 27.01.1989 and requested vide their letter dated 23.03.1989 that Respondent should not replace the plant at the risk and cost of the Claimant and they would attend and rectify the defects and run the plant within 40 to 45 days. After delaying for a considerable period, the Claimant put up a proposal on 23.06.1989 in which they wanted Respondent to pay them a sum of Rs 1.70 lac plus another Rs. 1 lac towards gas and cil charges for making the plant serviceable. Chairman of Claimant met Chairman of Respondent on 20.07.1989. The Claimant was informed that since they have failed to supply the plant as per the rated capacity and proper services, the Respondent is left with no choice but to replace the plant at the risk and cost in terms and conditions of the contract.

8. The petitioner filed the written statement to the counter claim and it would be relevant to refer to Para 11 and 12 which are as under:

11. That the contents of para No.11 of the Counter Claim of the respondents are also wrong and incorrect hence denied except thePage 1302 notice dated 06.11.1985 which was duly replied on 24.12.1985. Copies of these documents already supplied to the respondent. It is submitted here that the respondents have not supplied any photo copies to the claimants as mentioned in the para under reply. It is submitted here that when the matter has been settled in August, 1983 then the claimants could not be held responsible for any mis happening, if any occurred, after that date.

12. That the contents of Para under reply are also wrong and incorrect hence denied. There is nothing on the record of the claimants regarding the alleged fact.

9. A reading of the aforesaid paragraphs show that the respondent was certainly disputing that the counter claim of the petitioner was within time. Learned counsel for the respondent has also pointed out that the petitioner had filed a summary of submissions on its behalf on the preliminary point of limitation on 16.07.1998 which are on record.

10. The pleadings show that the counter claim is sought to be brought within the period of limitation as per the averments made in Para 12 on the basis that there was a letter dated 23.03.1989 written by the Chairman asking the petitioner not to replace the plant at the risk and cost of the respondent and that the respondent would attend and rectify the defects and run the plants within 40-45 days. These communications have been denied by the respondent. Learned counsel for the respondent states that the petitioner failed to place on record any such communication before the arbitrator and that is the reason that these communications have not been discussed by the arbitrator. In fact the grievance made is that question of limitation has really not even been considered by the arbitrator even though tis was one of the major preliminary issue on which hearing took place.

11. A reading of the award shows that there is no discussion on this aspect much less any reasoning on this account. It must be kept in mind that the completion certificate was issued by the petitioner as far back as 06.07.1982, of course subject to certain rectifications. The plant was taken over on 07.07.1982 and even the maintenance contract was awarded to the respondent. This position continued till 1985 when apparently differences and disputes cropped up between the parties resulting in the letter dated 06.11.1985 which was replied to by the respondent on 24.12.1985 denying any liability. If any of the parties had a grievance in this behalf, the claim ought to have been filed within a period of three years from the said date. It may be added that apparently the plant continued to function till 1990 and it is only at that stage that the issue arose of replacement of the plant by which time the plant had been performing for eight years. Certainly the life of the plant could not be indefinite.

12. The contractual liability period as per Clause 17 was admittedly a period of 12 months. If the respondent had failed to remedy any defects after issuance of the completion certificate, the action ought to have been taken by the petitioner soon thereafter. The petitioner continued to have the plant maintained by the respondent for a period of three years thereafter.

13. The petitioner has failed to place any material on record to show that the averments Page 1303 made in Para 12 of their counter claim are correct. No document as alleged has apparently been placed on record. Even if such a document of the year 1989 was to be considered as per the allegation made in the counter claim, the same would be of not much assistance to the petitioner in view of the provisions of The Limitation Act, 1963 (hereinafter referred to as 'the Limitation Act'). The counter claim purports to state that the the communication was addressed by the respondent asking the petitioner not to do something at the risk and cost of the respondent and the respondent would take certain steps for maintenance. This communication is stated to be dated 23.03.1989. The cause of action arose in November or December, 1985 and thus even this communication is beyond the period of three years from the date of cause of action. Section 9 of the Limitation Act prescribes the circumstances under which there is a continuous running of time and Section 18 prescribes the effect of acknowledgement in writing. The said provisions are as under:

9. Continuous running of time ? Where once time has begun to run, no subsequent disability or inability to institute a suit or make an application stops it:

Provided that where letters of administration to the estate of a creditor have been granted to his debtor, the running of the period of limitation for a suit to recover the debt shall be suspended while the administration continues.

18. Effect of acknowledgment in writing (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of Limitation shall be computed from the time when the acknowledgment was so signed.

2) Where the writing containing the acknowledgment is undated, oral evidence maybe given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 oral evidence of its contents shall not be received.

Explanation -For the purposes of this section

a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the ti me for payment, delivery, performance or enjoyment ha snot yet co me or is accompanied by a refusal to pay, deliver, perform or permit to enjoy or is coupled with a claim to set off or is addressed to a person other than a person entitled to the property or right;

b) the word 'signed' means signed either personally or by an agent duly authorised in this behalf; and

c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.'` In the present case the time had begun to run at least on 24.12.1985 when the respondent repudiated any liability. The time was thus Page 1304 continue to run. The period of limitation as per the schedule would be three years in the present case and thus the time ran out at the end of December, 1988. The letter dated 23.03.1989 would not be of any assistance to the petitioner in view of Section 18(1) of the Limitation Act which prescribes that the acknowledgment of liability has to be 'before the expiration of the prescribed period for a suit' Thus even if the said letter could be taken into account, the same could not be treated as an acknowledgment of the liability in view of Provisions of Section 18(1) of The Limitation Act. In the present case, apparently the document has not even been produced or at least has not been pointed out to the court and it appears from the averments made in the counter claim that the same can hardly be an acknowledgment of liability.

14. In view of the aforesaid position, I am of the considered view that the counter claim filed by the petitioner was clearly barred by time and could not have been awarded against the respondent. The objections are accordingly allowed.

15. CS(OS) No 2018A/1998 The objections having been allowed, the award of the sole arbitrator Mr. M.P.Patkar dated 27.07.1998 is set aside leaving the parties to bear their own cots.

16. Decree sheet be drawn up accordingly.

17. It may be noted at this stage that the matter was effective item no.1 on the regular board and there were only seven short matters. The matter was called at 11 AM and learned counsel for the respondent was heard. Orders were held over to await learned counsel for the petitioner, but none appeared till 12.30 PM when the orders were dictated. None appeared for the petitioner till 1.15 PM.