Union Of India (Uoi) vs Upper India Couper Paper Mills ...
2007 Latest Caselaw 526 Del

JUDGMENT

Sanjay Kishan Kaul, J.

IA No. 12547/2000 (Under Section 30 and 33 of the Arbitration Act, 1940)

1. The respondent entered into a Rate Contract dated 20.8.1981 for supply of duplicating bleached paper and unbleached printing paper for the period 1.7.1981 to 31.12.1982. Supplies were made in pursuance to the Contract. In terms of the Rate Contract, the increase in Excise Duty was to be borne by the purchaser/Union of India. The Excise Duty increased w.e.f. 1.3.1983 as communicated to the respondent by the department of the petitioner vide its letter dated 22.3.1983. The respondent claimed amendment in the Rate Contract in accordance therewith.

2. The element of enhanced Excise Duty was not paid resulting in the respondent making claim on the petitioner vide letter dated 27.10.1986 (C-43) including for reference of disputes to arbitration. Since no arbitrator was appointed, proceedings under Section 20 of the Arbitration Act, 1940 (hereinafter referred to as the said Act) were filed and ultimately the matter went to arbitration. The arbitration petition was allowed on 22.3.1994.

3. The sole arbitrator appointed by the competent authority of the petitioner - Smt.Shail Goel, made and published the Award dated 25.2.2000 awarding a sum of Rs. 33,321.57 towards the enhanced Excise Duty component as against the claim of Rs. 1,41,654.38 along with interest @12% per annum from the date of the Award till the date of the payment.

4. The respondent aggrieved by this Award has filed the present objections. The awarded amount has already been paid by the petitioner with interest. This awarded amount relates to supplies up to March, 1983. The only controversy, thus, raised is whether the respondent is liable to be also compensated for the enhancement of Excise Duty for the supplies made in February, March and April, 1984.

5. There is really no dispute that the element of increased Excise Duty has to be borne by the petitioner. However, the claim for these three months has been rejected on grounds of limitation as also the ground of waiver/acquisance.

6. Learned Counsel for the parties have been heard who have referred to the arbitral record. Dealing with the second plea first, it transpires that the waiver/acquisance plea in respect of the remaining demand arises from Minutes of the Meeting held on 16.5.1989 as also a letter of the respondent dated 23.1.1989. It may be noticed that there was some dispute about the payable amount up to March, 1983. The Minutes of the Meeting dated 16.5.1989 referred to the fact that demands had been raised for the period up to March, 1983 while no request was pending for the payment of Excise Duty for the three months in question. However, the surprising part is that vide letter dated 27.10.1986 the respondent had already raised the demand for these three months and sought arbitration. Not only that, a petition was also filed under Section 20 of the Act and it could hardly be said that the question was not pending consideration. The arbitration petition was allowed on 22.3.1994. Further, the letter dated 23.1.1989 of the respondent only confirmed that the sum of Rs. 33,321.57 as calculated by the petitioner for the period up to March, 1983 was correct. That had nothing to do for the subsequent period. The calculations for this period were sent under the cover of letter dated 12.1.1989 of the petitioner. The dispute was whether this was the correct amount or the amount of Rs. 34,000/- plus as was originally being calculated by the respondent and there is no question of any waiver/acquisance.

7. So far as the plea of limitation is concerned, the Arbitrator seems to have proceeded on the basis that since the petition under Section 20 of the Act was filed on 11.11.1987 and the claims related to a period of more than three years prior to that date, the same was time-barred. This was in view of Clause 24 of the agreement between the parties which provided for the Limitation Act to apply to the transaction in question.

8. In my considered view, the Arbitrator has fallen in a complete error of law since the demand was made on 27.10.1986 within the period of three years from the date of the amount due for the period of February, March and April, 1984. In this behalf, reference may be made to the provision of Section 37(3) of the said Act which reads as under:

37(3) For the purposes of this section and of the Indian Limitation Act, 1908 (9 of 1908), an arbitration shall be deemed to be commenced when one party to the arbitration agreement serves on the other parties thereto a notice requiring the appointment of an arbitrator, or where the arbitration agreement provides that the reference shall be to a person named or designated in the agreement requiring that the difference be submitted to the person so named or designated.

9. The aforesaid provision makes it clear that it is the date of invocation of the arbitration which was material and as on that date the period of three years had not lapsed. It is not a case where there has been extraordinary delay in invoking the arbitration as a consequence of which the Court has held that no arbitration is liable to be made. Thus, the period of limitation in view of the provisions of Section 37(3) of the said Act would make the claim within time. This view is fortified by the judgment of the Supreme Court in Milkfood Ltd. v. GMC Ice Cream (P) Ltd. AIR 2004 SC 3145 where in para 27, it is noted that for the purpose of the Limitation Act, an arbitration is deemed to have commenced when one party to the arbitration agreement serves on the other a notice requiring the appointment of the Arbitrator.

10. A.K. Sikri, J. in a recent judgment in Power Grid Corporation of India Ltd. v. Bhanu Construction Company Ltd. 2006 VI AD (Delhi) 747 has taken note of this judgment for the purpose of drawing a distinction between 'commencement of an arbitration proceeding' and 'commencement of a proceeding before an arbitrator'. Thus, a notice of arbitration or commencement of an arbitration may not bear the same meaning as different dates may be specified for commencement of arbitration for different purposes.

11. Similarly, another learned Judge of this Court in Ashi P. Ltd. v. U.O.I. (Western Railways) and Ors. observed that Section 37(3) of the said Act provides for the limitation for filing a petition under Section 20 of the said Act to be computed from the date of accrual of the right to apply for arbitration when disputes / differences arose between the parties.

12. There is really no dispute about the balance amount of Rs. 1,08,332.81 and the only plea was of limitation which is not sustainable. The Award to this extent is set aside and the respondent is held entited to the said amount.

13. One further aspect which arises is on the period and rate of interest. There is no reason why the rate of interest of 12% should be interfered with. However, the Arbitrator has granted interest from the date of the Award till the date of payment. The amounts became due in 1983-84. The notice of demand was made on 27.10.1986 and at least from the date of the notice of the demand the interest is liable to be paid. To that extent also the Award stands modified.

14. Application stands disposed of.

The Award dated 25.2.2000 of the sole Arbitrator - Smt.Shail Goel, is set aside/modified to the extent that the respondent is held entitled to the full claim of Rs. 1,41,654.38 and not only Rs. 33,321.57. The respondent has, thus, to be paid a sum of Rs. 1,08,332.81 by the petitioner along with the interest @12% per annum as determined under claim 2. However, the rate of interest is payble from the date of the demand notice dated 27.10.1986. Parties are left to bear their own costs. A decree sheet be drawn accordingly.