M/S Stup Consultants Pvt. Ltd. vs M/S Indian Oil Corporation Ltd.
2009 Latest Caselaw 5228 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                          Arb.P.No. 208/2009
                                                             December 15, 2009.


M/S STUP CONSULTANTS PVT. LTD.                                     ...Petitioner

                                 Through:        Mr. D. Moitra, and Mr. P. Roy
                                                 Chaudhuri Advocates
                                 VERSUS

M/S INDIAN OIL CORPORATION LTD.                                  ....Respondent
                                 Through:        Mr. V.N.Kaura, Advocate with
                                                 Ms. Paramjeet Benipal,
                                                 Advocate
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

     1. Whether the Reporters of local papers may be allowed to see
        the judgment?

     2. To be referred to the Reporter or not?         Yes

     3. Whether the judgment should be reported in the Digest? Yes
    %                      JUDGMENT(ORAL)


VALMIKI J. MEHTA, J.

*

1. This is a petition under Section 11 of the Arbitration and Conciliation

Act,1996 whereby the petitioner seeks reference of the disputes between it

and the respondents to arbitration. The disputes pertain to the Letter of

Arb.P.208/2009 Page 1 Intent dated 11.12.2000 and the Letter of Acceptance dated 23.3.2001 issued

by the respondent in favour of the petitioner in respect of a contract whereby

the petitioner was to give to the respondent certain consultancy services for

architectural/design engineering, interior decoration/horticulture/

landscaping, project management work etc. The contract in question

contains an Arbitration Clause 15 whereunder the disputes are to be referred

to arbitration of a sole Arbitrator to be agreed upon between the parties.

2. It is not disputed that a contract was entered into between the parties

and it is not further disputed that the contract contains an arbitration clause.

It is further also not in dispute that differences have arisen between the

parties under the subject agreement.

3. Mr. Kaura, counsel for the respondent has however argued against

reference of the disputes on the ground that the relevant part of Clause 15.1

of the contract in question requires that only a notified claim can be referred

to arbitration and the disputes do not pertain to a notified claim and

consequently the right to seek reference of the disputes to arbitration stands

extinguished. The relevant portion of Clause 15.1 is reproduced as below:-

"15.1 Any dispute or difference between the parties hereto arising out of any notified claim of the CONSULTANT hereof and/or arising out of any amount claimed by the OWNER (whether

Arb.P.208/2009 Page 2 or not the amount claimed by the OWNER or any part thereof shall have been deducted from the Final Bill of the CONSULTANT or any amount paid by the OWNER to the CONSULTANT in respect of the work) shall be referred to arbitration in accordance with the UNICITRAL Rules as adopted in India by the Arbitration and Conciliation Act, 1996."

It has additionally been argued by Mr. Kaura that claims which are

preferred by the petitioner are barred by time.

4. A reading of the aforesaid Clause 15.1 of the Conditions of Contract

shows that seemingly only a notified claim can be referred to Arbitration.

On a query by the Court to the counsel for the respondent as to whether the

expression "notified claim" is defined in the contract, the counsel for the

respondent admits that there is no definition of the expression "notified

claim" in the contract. Therefore, I would have to look at the normal

meaning of the expression "notified claim". In the opinion of this court,

"notified claim" would simply mean a claim which is notified by the

petitioner to the respondent. Taking such meaning, I may at this stage, refer

to the letter dated 7.2.2007 written by the petitioner to the respondent, and as

brought to my notice by the counsel for the petitioner. Para 2 of this letter

shows that the claims which are sought to be referred to Arbitration were

duly notified to the respondent. The counsel for the petitioner has also

brought to my attention the reply given to this letter on behalf of the

Arb.P.208/2009 Page 3 respondent through its Advocates on 13.11.2007, and in which reply there is

no denial of the averment with regard to the notification of the claims to the

respondent as stated in the letter of the petitioner dated 7.2.2007. The

counsel for the petitioner has further brought to my notice the last para of the

reply dated 13.11.2007, in which the respondent itself has proposed the

names of the Arbitrators to whom the disputes can be referred to.

5. On the facts itself as stated in para 4 above, therefore, it is quite clear

that there is no bar in terms of Clause 15.1 to hold that the right of a

claimant to seek reference of the disputes to Arbitration is extinguished in as

much it is quite clear that the claimant had very much notified the claims

and the fact that such claims were notified was not disputed by the

respondent.

6. In my opinion, in fact, that part of Clause 15.1 of the Contract, as

reproduced above is wholly illegal and void if it is read as extinguishing the

right to seek arbitration. This conclusion follows from a reading of Section

28 of the Contract Act, 1872 and which Section was amended in 1997 for

this very purpose to declare such clauses as void. Section 28 of the Contract

Act, after amendment by Act-1 of 1997, reads as under:-

"28. Agreement in restraint of legal proceedings, void-

Arb.P.208/2009                                                             Page 4
 (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 contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to that extent."

Section 28 was amended by adding sub-section (b) thereto and as per

which any clause in a contract which extinguishes the rights of any party

thereto, or discharges any party thereto, from any liability, under or in

respect of any contract on the expiry of a specified period so as to restrict

any party from enforcing his rights, is void to that extent.

7. A learned Single Judge of this Court, Hon'ble Mr. Justice Sanjay

Kishan Kaul, in the judgment reported as Pandit Construction Company vs

DDA 2007 (143) DLT 270 has held that any such clause in a contract which

extinguishes the rights of the parties on the expiry of a period would be

considered as void. The learned Single Judge has referred to the earlier

judgments on this aspect and has also gone into the aspect of amendment to

Section 28 while also referring to the Supreme Court judgment prior to the

amendment and has distinguished them.

8. No doubt the relevant part of Clause 15.1 does not contain a time

period, however, when no time period is specified for doing of an act under

Arb.P.208/2009 Page 5 the contract, then, the time requirement will be a reasonable period of time

vide Section 46 of the Contract Act. Thus a conjoint reading of Clause 15.1

and Section 46 would mean that if the claims are not notified in a reasonable

period, the rights thereto get extinguished and which is exactly what Section

28 of the Contract Act prohibits.

9. When this judgment was being dictated in open Court after the

counsel for the parties were heard, and when I came to the stage of dictating

the aforesaid portion under Section 28 of the Contract Act, Mr. Kaura

argued that the judgment should not be passed by making a reference to

Section 28 as that issue was not argued. I do not think it is fair on the part of

the counsel for the respondent to urge that the court cannot independently

rely upon any Section or any judgment if it is of the opinion that such a

Section or that judgment applies. A court is bound, not by the limited

submissions of the counsel, but by the law of the land. I would only state

that the prerogative of the counsel comes to an end when the arguments are

concluded. I could have as well reserved the judgment and thereafter while

dictating the judgment relied upon Section 28 of the Contract Act and the

judgment in the case of Pandit Construction Company(supra) but, I have

chosen to dictate the judgment in the open court, but, this however, cannot

Arb.P.208/2009 Page 6 mean that the counsel can in the middle of the dictation of the judgment seek

to interfere with the court proceedings and say that the judgment should not

be passed. Accordingly, I reject the contention as raised by Mr. Kaura on

behalf of the respondent.

10. So far as the issue that the claims are within limitation or barred by

limitation, this is an issue of merits as held by the Supreme Court in the

judgment reported as National Thermal Power Corporation Ltd. Vs.

Siemens, 2007(4) SCC 451. In fact, a decision on the issue of limitation has

been held in this judgment to be an interim award under the provisions of the

Arbitration and Conciliation Act, 1996 entitling the party to file an objection

to the same under Section 34 thereof. Accordingly, this issue of limitation I

feel would be decided by the Arbitrator in the arbitration proceedings and

not by this court while appointing an arbitrator under Section 11 of the

Arbitration and Conciliation Act.

11. Accordingly, I am of the opinion that this petition deserves to be

allowed. At this stage of referring the disputes to the Arbitration, I put it to

the counsel for the parties that whether they are agreeable to refer the

disputes to the Arbitration Centre of the Delhi High Court and be bound by

the rules thereof. To this position the counsel for the petitioner had no

Arb.P.208/2009 Page 7 objection but the counsel for the respondent states that since the judgment is

not acceptable to the respondent, the respondent would not agree to the

Arbitration of the Delhi High Court Arbitration Centre.

12. The petition under Section 11 is accordingly allowed and I appoint

Justice Arun Kumar, (Retired), 9, Tyag Raj Marg, New Delhi-110011,

9810398777, 26510146, (who is on the panel/list of Arbitrators of the Delhi

High Court Arbitration Centre) as an Arbitrator to decide

disputes/claims/counter-claims/differences in any manner connected with or

arising out of the subject contract between the parties whereby consultancy

services were provided by the petitioner to the respondent. I may state that

the fees of the Arbitrator will be the same as per the schedule of fees as

given under the rules of the Delhi High Court Arbitration Centre. The

Arbitrator as far as possible should decide the matter before him within a

period of one year from the date of his entering upon the reference. The

petitioner shall file its statement of claim before the Arbitrator within a

period of six weeks from today. The respondent shall file the written

statement and counter claim if any, within another period of four weeks

thereafter. Replication and written statement to the counter-claim will be

filed within another period of four weeks thereafter. Parties to appear before

Arb.P.208/2009 Page 8 the Arbitrator on 26th March, 2010 at 5.00 PM. A copy of this judgment be

sent to the Arbitrator.

13 With the aforesaid observations, the present petition is disposed of as

allowed with costs quantified at Rs.50,000/-.

DECEMBER 15, 2009                                  VALMIKI J. MEHTA, J.


ib




Arb.P.208/2009                                                         Page 9