M/S Bumbrah Electric Co. vs Delhi Development Authority
2008 Latest Caselaw 1615 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI


+      CS(OS)2094A/1997 & CS(OS)2561A/1998


%                                 Date of decision: 11.09.2008

M/S Bumbrah Electric Co.    .......Plaintiff
                      Through:  Mr. Vivekanand, Advocate


                                  Versus

Delhi Development Authority      ......Defendants
                      Through: Mr. D.S. Mahendru, Advocate


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW


     1. Whether reporters of Local papers may
        be allowed to see the judgment?              Yes

     2. To be referred to the reporter or not?       Not Necessary

     3. Whether the judgment should be reported      Not Necessary
        in the Digest?


RAJIV SAHAI ENDLAW, J (ORAL)


+CS(OS)2094A/1997 & CS(OS)2561A/1998


1.     CS(OS)2094A/1997 was filed by the petitioner/claimant u/s

14 of the Arbitration Act, 1940.           However, the Arbitrator

independently filed the award and which was registered as CS(OS)

2561A/1998 and objections were filed by the petitioner/claimant

thereto.     The Arbitrator has vide the award dated 18.9.1997

dismissed all the claims of the petitioner/claimant on the finding on

the preliminary issue raised at the instance of the respondent,

DDA. The preliminary objection raised by the respondent and as

recorded in the award is:

―The claims of the claimant are barred by limitation‖.

2. The Arbitrator found that the date of the completion of work

was 24.10.1991, the final measurement was recorded by the

respondent on 1.11.1991 and the same was accepted by the

petitioner/claimant on 20.5.1992 without any dispute and the final

payment was made to the petitioner/claimant on 20.10.1992. The

Arbitrator held that as per clause 25 of the agreement, the

petitioner/claimant was to invoke the arbitration within three

months from the date of the final payment on 20.10.1992 i.e., by

27.1.1993. Arbitrator further found that the petitioner/claimant

had for the first time applied for arbitration vide letter dated

25.1.1993 delivered in the office of the Engineer Member of the

respondent on 12.2.1993. It was held that the arbitration clause

was thus invoked on 12.2.1993, beyond 90 days prescribed in

clause 25 of the agreement. The Arbitrator further held that as per

clause 25 of the agreement, the petitioner is deemed to have

waived his claims against the respondent and the claim is barred

and the respondent was held to have stood discharged in respect of

all liabilities in respect of the claims.

3. The submissions of the counsel for the petitioner are two

fold. Firstly, it is argued that the legal reasoning given by the

Arbitrator is contrary to section 28 of the Indian Contract Act,

1972, which was amended w.e.f. 1.8.1997 i.e. prior to the

pronouncement of the award. Secondly, it is contended that the

Arbitrator has misconducted himself in ignoring a vital document,

being letter dated 28.12.1992 of the petitioner invoking the

arbitration and which was filed before the Arbitrator as Ex. C-47.

It is contended that as per the said letter, even if the reasoning of

the arbitrator with respect to clause 25 of the agreement is

accepted, the petitioner has invoked the arbitration within the

period of 90 days.

4. The counsel for the respondent has on the contrary argued

that the amendment to section 28 of the Contract Act shall not

apply in the present case owing to the cause of action having

accrued prior to the amendment of Section 28 of the Contract Act.

It is further contended that the Arbitrator is not required to deal

with each and every document and once it is found that the

Arbitrator has given reasons, whether the same are correct or not,

the Court ought not to exercise appellate jurisdiction and that no

case for setting aside of the award is made out.

5. Clause 25 of the agreement is as under:

―Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs drawings and instruction herein before mentioned and as to the quality on workmanship or materials used on the work or as to any other questions claim, right matter or thing whatsoever, in any way and arising out of or relating to the contract designs drawings, specifications, estimates, instructions orders or these conditions or otherwise concerning the works or the execution or for failure to execute the same whether arising during the progress of the work or after the completion or abandonment there of shall be referred to the sole arbitration of the person appointed by the Engineer Member Delhi Development Authority at the time of dispute. It will be no objection to any such

appointment that the arbitrator so appointed is a Delhi Development Authority employee that he had to deal with the matters to which the contract relates and that in the course of his duties as Delhi Development Authority employees he had expressed view on all or any of the matters in dispute of difference. The arbitrator to whom the matter is originally referred being transferred or vacating office or being unable to act for any reason, such Engineer Member Delhi Development Authority as aforesaid at the time of such transfer, vacation of office or inability to act shall appoint another person to act as arbitrator in accordance with the terms of the cone contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor it is also a term of this contract that no person other than a person appointed by such Engineer Member, Delhi Development Authority as aforesaid should act as arbitrator and, if for any reason that it is no possible, the matter is not to be referred to arbitration at all. In all cases where the amount of the claim in dispute is Rs. 50,000/- (Rupees Fifty thousand) and above, the arbitrator will give reason for the award.

Subject as aforesaid the provisions of the Arbitration Act, 1940 or any statutory modification or re- enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this Clause. It is a term the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such dispute. It is also a term of the contract that if the contractor (s) does/do not make demand for arbitration in respect of any claim (s) in writing within 90 days of receive of the intimation from the Engineer-in-charge that the Bill is ready for payment, claim (s) of the contractor (s) will be deemed to have been waived and absolutely barred and the Delhi Development Authority shall be discharged and released of all liability under the contract in respect of those claims.‖

6. Section 28 of the Indian Contract Act, prior to its amendment

w.e.f. 01.08.1997 was as under :

―Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or

which limits the time within which he may thus enforce his rights, is void to that extent.‖

After amendment, it stands as under:

―28. Agreements in restraint of legal proceedings, void.--[Every agreement -

(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or

(b) which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contact on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to that extent.]‖

7. The Apex Court in National Insurance Co Ltd v Sujir

Ganesh Nayak & Co AIR 1997 SC 2049 with reference to the

unammended Section 28 held that an agreement which seeks to

curtail the period of limitation would be void but an agreement

which provides for the forfeiture or waiver of the right itself if no

action is commenced within the time stipulated in the agreement

would not fall within the mischief of Section 28.

8. The record reveals that the counsel for the

petitioner/claimant had before the Arbitrator cited case law with

respect to unamended section 28 and also brought to the notice of

the Arbitrator the amendment to section 28 of the Act. However,

the award is conspicuously quiet on the said aspects and does not

deal with the said contentions of the petitioner/claimant. The claim

of the petitioner/claimant being more than of Rupees

50,000/-, the Arbitrator under the agreement was required to give

a reasoned award. The Arbitrator was thus required to give

reasons for not accepting the contentions aforesaid of the

petitioner/claimant. It is significant that the preliminary issue

raised, as noted in the award also was of the claim being barred by

time and not of the claim having been waived. The Arbitrator has

failed to give any reasons whether in the facts of the case, the

claim was barred by limitation or stood waived, which the apex

courts also in National Insurance Co Ltd (supra) noted had a

fine distinction. The amendment to section 28 does away with the

distinction made by apex court in National Insurance Co Ltd

(supra). The arbitrator has also not dealt with Munilal Vs.

Oriental Fire and General Insurance Co. 1996, Raj. Law

Reporter (SC) 9 cited by the counsel for petitioner/claimant before

the Arbitrator where the apex court appears to have taken a view

different from National Insurance Co Ltd (supra). The

Arbitrator has also not adjudicated the effect, if any of amendment

of section 28. Section 28 was amended to do away with the flaw

which according to the legislature had crept into the unamended

section 28 due to interpretation thereof. Would such an

amendment apply to pending cases or not, will be an important

question arising for adjudication.

9. Counsel for the petitioner has before this court also relied

upon Hindustan Construction Corporation Vs. Delhi

Development Authority, 77(1999) Delhi Law Times 165, where in

a similar situation the ground for setting aside of the award u/s. 30

& 33 of the Act was held to have been made out. The same was the

position in M/s. Naresh Kumar Gupta Vs. The Vice

Chairman/Engineer Member, DDA & Ors. 2003 II AD (Delhi)

628 and Union of India Vs. Simplex Concrete Pipes India (P)

Ltd. 2004 III AD(Delhi)305. The counsel for the respondent has on

the contrary placed reliance on Shri Ram Singh Vs. Delhi

Development Authority, 1996(1) Arb. L.R.163, where a Single

Judge of this court has set aside the award for the reason of the

same allowing a claim contrary to the Clause 25 of the Agreement.

However, I find that there is no discussion in this judgment about

section 28 of the Contract Act and thus in my view, is not to be

construed as laying down any law.

10. The award being contrary to the agreement requiring the

arbitrator to give reasons, is liable to be set aside on this ground

alone and there is error apparent on the face of the record.

11. I find merit in the second submission of the petitioner also of

the award being liable to be set aside the reason of the Arbitrator

having ignored the document dated 28.12.1992. The said

document was very much in consideration as borne out from the

proceedings before the Arbitrator. However, the Arbitrator has

again chosen to remain quiet and not adjudicated as to why, if the

said document is to be accepted, there is compliance of clause 25.

The reliance by the counsel for the petitioner on K.P. Poulose Vs.

State of Kerala, AIR 1975 Supreme Court 1259, in this regard is

apposite where the Apex Court has held that ignoring the

document falls within the definition of misconduct within the

meaning of section 30 of the Act. The same view was taken in

Satya Narayan Brothers (P) Ltd. Vs. Tamil Nadu Water

Supply & Drainage Board, 2004(5)SCC 314.

12. The objections of the petitioner/claimant are, therefore,

allowed. The matter is quite old. The respondent is directed to

appoint Arbitrator within four weeks from today. Considering the

age of the matter, the Arbitrator to decide the disputes within six

months of entering reference. The arbitration record may be

returned to the respondent for forwarding to the new Arbitrator.

RAJIV SAHAI ENDLAW,J September 11, 2008 k