M/S. Gannon Dunkerley & Co. Ltd. vs National Thermal Power ...
2009 Latest Caselaw 4475 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+          I.A. No.6042 of 1996 in C.S. (OS) No.2516A of 1995

M/S. GANNON DUNKERLEY & CO. LTD.              ..... Plaintiff
                 Through: Mr. Vibhu Bakhru, Advocate.

                                  Versus

NATIONAL THERMAL POWER CORPORATION             ..... Defendant
                Through: Mr. S.K. Taneja, Sr. Advocate with
                        Mr. Sanjay Kumar, Mr. Vaibhav
                        Mishra & Mr. Tarun Kr. Tiwari,
                        Advocates.

%                              Date of Decision : NOVEMBER 05, 2009

CORAM:
HON'BLE MR. JUSTICE MANMOHAN

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

MANMOHAN, J (ORAL)

1. By way of the present application, plaintiff has challenged the

Award dated 31st August, 1995 passed by the sole Arbitrator by filing

objections under Sections 16, 30 and 33 of the Arbitration Act, 1940.

2. Briefly stated the facts of the present case are that in December,

1978, Defendant-NTPC invited item rate tenders for civil works for

Circulating Water System Part-I for Korba Super Thermal Power

Project. Though on 25th January, 1979, the tender was opened, it was

only on 20th June, 1979 that a Letter of Intent was issued by the

Defendant-NTPC to the plaintiff- Gannon Dunkerley & Company

Limited.

3. Between September, 1979 and 29th May, 1983, the plaintiff-

claimant executed the work. During the execution of the contract, the

plaintiff-claimant not only raised periodic bills but also claimed labour

escalation, material escalation and increase on account of price of fuel.

Though, certain payments were made by Defendant-NTPC even with

regard to these three additional claims, the plaintiff-claimant was not

satisfied with the said payments.

4. On 5th March, 1986, the final bill was approved and determined

by the Defendant-NTPC. In fact, the plaintiff-claimant signed the final

bill under protest reserving its right to claim further payments under the

afore-mentioned three additional claims.

5. On 10th March, 1988, the defendant-NTPC paid the amount as

determined by it under the final bill. However, as the plaintiff-claimant

was dissatisfied with the said payment, it invoked the arbitration clause

on 18th June, 1990.

6. It was only in February, 1991 in reply to the statement of claim

filed by the plaintiff-claimant that the Defendant-NTPC contended for

the first time that labour escalation had been paid by it under a mistake.

It is pertinent to mention that in the said reply, Defendant-NTPC had

admitted that material and fuel escalation under the same clause was

payable and the same was not arbitrable as there was no dispute with

regard to these two claims.

7. However, as all the three plaintiff-claimant's claims for

escalation, namely, labour, material and fuel arose out of the same

Clause 6 of the Special Conditions of Contract (in short "SCC"), in

April, 1991 Defendant-NTPC claimed before the Arbitrator that even

material and fuel escalation had been paid under a mistake and

defendant was entitled to their refund.

8. The learned Arbitrator vide the impugned Award construed and

interpreted Clause 53-A of the General Conditions of Contract (in short

"GCC") along with Clause 6 of the SCC. The learned Arbitrator

rejected the plaintiff-claimant's claims but while deciding the counter-

claims observed as that the plaintiff-claimant was entitled to escalation

under the three heads, namely, labour, material and fuel provided it

proved its claims by filing documentary evidence. Learned Arbitrator

further stated that if after receipt of documentary evidence, the plaintiff-

claimant was still aggrieved by any decision taken by NTPC, it would

be open to the plaintiff-claimant to agitate its grievances by even

resorting to fresh arbitration.

9. At the outset, I must state that the intent and objective behind

commercial arbitrations is to achieve finality of all disputes in the

shortest possible time. If the arbitrators decide to merely lay down the

law and leave the parties to subsequently prove their claims by way of

another arbitration, then, in my opinion, the entire objective and intent

of arbitrations would be defeated.

10. In the present case, the sole Arbitrator after construing the

contractual provisions had asked one of the parties after twelve years of

completion of the contract to produce evidence of amounts paid on

account of increase in wages, materials and fuel and had further

observed that after the documentary evidence had been produced, the

other party should take a decision and if the first party was aggrieved, it

could once again resort to arbitration.

11. Awards are intended to achieve finality as well as put an end to

all the disputes that have arisen between the parties, and not to be

agreement to re-litigate. Accordingly, even if the Arbitrator wanted the

petitioner-claimant to file documentary evidence and the defendant-

NTPC to take a decision thereon, the Arbitrator should have passed an

interim Award and thereafter proceeded to adjudicate the disputes

finally between the parties. [Refer to : National Highways Authority

of India Vs ITD Cementation India Ltd reported in 2007 (4) Arb. L.R.

555 (Delhi) (DB)]

12. Though the learned counsel for the plaintiff submitted that the

interpretation of Clause 53 of GCC and Clause 6 of SCC was not

correct and on this ground alone the Award was liable to be set aside, I

am of the view that construction of a contract is within the jurisdiction

of the Arbitrator and interpretation of a contract is a matter for the

Arbitrator to determine even if it amounts to determination of a

question of law (refer to Mcdermott International Inc. Vs. Burn

Standard Co. Ltd. reported in 2006 (11) SCC 181, Pure Helium India

Pvt. Ltd. Vs. Oil & Natural Gas Commission reported in 2003 (8) SCC

593 and D.D. Sharma Vs. Union of India reported in 2004 (5) SCC

325). In any event, the interpretation of contractual provisions made by

the Arbitrator cannot certainly be said to be one that is perverse or

contrary to the terms of the contract. Accordingly, in my opinion on

this ground the Arbitrator's Award is not liable to be set aside.

13. However, in my opinion, the Arbitrator's Award with regard to

NTPC's Counter-Claims for refund of material and fuel escalation is

liable to be set aside on the ground that it suffers from an error apparent

on the face of the record as the learned Arbitrator has arrived at a

contradictory finding inasmuch as there was no question of asking the

plaintiff-claimant to prove its payments under these two claims,

specially when the Arbitrator while dismissing the plaintiff-claimant's

claim with regard to these two items itself had concluded that they were

not arbitrable as the defendant-NTPC had not disputed the said two

claims. I may mention that I am setting aside the Arbitrator's

conclusion with regard to these two Counter-Claims because the

findings of the learned Arbitrator are contradictory on the face of the

Award itself and I do not have to scrutinise either merits of the

documents or the material on record. In my opinion, learned Arbitrator

could not have reached the conclusion under the head of Counter-

Claims 2 and 3 that the said amounts had been paid under a mistake

because in the earlier portion of the Award, the Arbitrator himself had

concluded that there was no dispute with regard to payments of material

escalation or fuel escalation. Accordingly, the Arbitrator's conclusion

with regard to Counter-Claims No.2 and 3 are set aside.

14. As far as the finding reached by the learned Arbitrator with

regard to defendant-NTPC's Counter-Claim for refund of excess of

amount paid on account of labour escalation is concerned, I find that

the said Counter-Claim was clearly barred by limitation as admittedly

the final bill had been approved and determined by Defendant-NTPC as

it deemed fit and proper on 5th March, 1986. It was only in February,

1991 that for the first time the defendant-NTPC in its reply to statement

of claim averred that it had made excess payments to the plaintiff-

claimant under the head of labour escalation.

15. Though facts were not disputed, Mr. Taneja, learned senior

counsel for defendant-NTPC submitted that this Court should not reject

the Arbitrator's conclusion with regard to its Counter-Claim No. 1 on

the ground of limitation as this defence had not been taken by plaintiff-

claimant in its reply to the Counter-Claim. In this context, Mr. Taneja

placed reliance upon a judgment of Patna High Court in the case of

Pioneer Engineering Works Vs. Union of India reported in AIR 1959

PATNA 374, wherein it has been held as under :-

"The argument of the learned Government Advocate on behalf of the appellant is that the claim of the respondent with regard to over payment have been made on 7-1-1954, and not 18-2-1954, and that the counter-claim of the respondent with regard to over payment was barred by time. We do not accept the submission of the learned Government advocate as right. It appears from the record of the case that the appellant took no objection before the arbitrator that

the counterclaim was made by the respondent beyond the time granted by the arbitrator nor did it make any complaint before him, whether any prejudice was caused to it because of the delay made by the respondent in making their claim.

xxxxx xxxxx xxxxx

It appears to us, therefore that the appellant was full aware of the counter claim made by the respondent and it sought to lead evidence before the arbitrator to show that the counter-claim was not substantiated. It appears to us that the irregularity, if any, made by the arbitrator in accepting the counter claim beyond the time fixed by him in Ex. 2 has been waived by the appellant who took part in the proceedings before the arbitrator with full knowledge of the irregularity and without protest.

It is well settled that in such a case the Court will not permit any of the parties to lie by or act in an indecisive manner so as to obtain the benefit of the award if it is in his favour and endeavour to set it aside if it is not. That is the view taken by Tinddal, C. J., in Bignall v. Gale, (1841) 10 LJCP 169 at p. 171, where he says as follows :

''In coming to a determination upon this case, I cannot get rid of what makes a great impression upon my mind, that the defendant for three weeks knew of every objection which has now been urged to this award, and gave no notice of his intention to dispute it on those grounds. He knew on the 17th of December, these witnesses had been examined in his absence.

What right had he then to lie by with his grievance dormant in his own bosom, and now dispute for the first time, the validity of the authority which has been exercised? He ought at the time to have made his election, and to have insisted on another meeting at which he might have been confronted with the witnesses and given his explanation of their testimony. But this case may be decided on another ground."

xxxxx xxxxx xxxxx

In view of this principle, we hold that the appellant cannot be permitted to raise the objection in the present appeal, and the objection must be overruled. In our opinion, the lower Court was right in dismissing the application of the appellant and passing a decree in terms of the award. We do hold that there is no substance in this appeal. It is accordingly dismissed with costs."

16. In my opinion, though a decree or award passed in a suit/petition

barred by limitation is not a nullity, but still the defence of limitation

can be raised or agitated if it is only a question of law which arises on

admitted facts. Relevant portion of Section 3 of Limitation Act, 1963

reads as under :-

"3.Bar of limitation:-(1)Subject to the provisions contained in sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed although limitation has not been set up as a defence."

(2) For the purposes of this Act--

xxx xxx xxx

(b) any claim by way of a set off or a counter claim, shall be treated as a separate suit and shall be deemed to have been instituted--

(i) in the case of a set off, on the same date as the suit in which the set off is pleaded;

(ii )in the case of a counter claim, on the date on which the counter claim is made in court;......."

(emphasis supplied)

17. The Hon'ble Supreme Court in Panchu Gopal Bose Vs. Board

of Trustees for Port of Calcutta reported in AIR 1994 Supreme Court

1615 has held as under :-

"12. Therefore, the period of limitation for commencement of an arbitration runs from the date on which, had there been no arbitration clause, the cause of action would have accrued. Just as in the case of civil actions the claim is not to be brought after the expiration of a specified number of years from the date on which the cause of action accrued, so in the case of arbitrations, the claim is not to be put forward after the

expiration of the specified number of years from the date when the claim accrued."

xxx xxx xxx

14. The law of Arbitration by Justice Bachawat in Chapter XXXVII at p.549 it is stated that just as in the case of actions the claim is not to be brought after the expiration of a specified number of years from the date when the claim accrues, as also in the case of arbitrations the claim is not to be put forward after the expiration of a specified number of years from the date when the claim accrues. For the purpose S. 37(1) 'action' and 'cause of action' in the limitation Act should be construed as arbitration and cause of arbitration. The cause of arbitration, therefore, arises when the claimant becomes entitled to raise the question, i.e. when the claimant acquires the right to require arbitration. The limitation would run from the date when cause of arbitration would have accrued, but for the agreement.

15. Arbitration implies to charter out timous commencement of arbitration availing the arbitral agreement as soon as difference or dispute has arisen. Delay defeats justice and equity aid the promptitude and resultant consequences. Defaulting party should bear the hardship and should not transmit the hardship to the other party, after the claim in the cause of Arbitration was allowed to be barred......"

18. The Supreme Court in Rama Shankar Singh and Anr. Vs.

Shyamlata Devi and Ors. reported in (1969) 2 SCR 360 has observed

as under :-

"3. The High Court was right in allowing the defendant to raise the point of limitation, though the plea was not taken in the written statement. Under Section 184 of the Bihar Tenancy Act a suit instituted after the expiry of the period of limitation is liable to be dismissed though limitation has not been pleaded learned counsel for the appellants could not tell us what further evidence his clients could adduce on this point. In the circumstances, the absence of the plea of limitation in the written statement did not cause the appellants any prejudice."

(emphasis supplied)

19. In the case of Balaram Vs. Mangta Dass reported in (1907) ILR

34 Calcutta 941, a similar issue arose for consideration and the

majority view of the Full Bench was as under :-

"3. There is, no doubt, a conflict of rulings between this Court and the Bombay High Court on this point. The Bombay High Court has ruled that Article 147 of the second schedule to the Limitation Act applies to a suit like the present, in which case no doubt this suit would not be barred by limitation. But we are bound by the Full Bench ruling of this Court, and must hold that the period of limitation is 12 years, and that the suit accordingly is barred. This question of limitation was never raised in either of the Courts below; nor has it been raised in the memorandum of the appeal to this Court. But we have felt ourselves constrained to allow it to be taken, although at a very late stage, in accordance with the provisions of Section 4 of the Limitation Act. The provisions of that section appear to us to be mandatory; and in accordance with them, we are bound to hold that the suit is barred by limitation and to dismiss it accordingly"

(emphasis supplied)

.

20. The concurring view of Justice Mookerjee is also reproduced

herein below :-

"14. If the determination of the question of limitation turns upon facts which were not investigated by reason of the omission of the defendant to take the plea of limitation in the Court of first instance, the Court of appeal cannot be invited to entertain the point and remand the case for fresh investigation; if, however, the point arises on the face of the pleadings or on the facts found, the question must be considered. The true rule is laid down by Mr. Justice Banerjee in the case of Nadhu Mandal v. Kartick Mandal (1903) 9 C.W.N. 56, where that learned Judge observed that Section 4 of the Limitation Act, which requires that the Court should give effect to the rules of limitation even though limitation may not be set up in defence, applies to a Court of Appeal when the point appears on the face of the record and does not stand in need of being developed by evidence. This distinction, which appears

to me to be well founded on reason, principle and convenience, is recognised in the cases Mapan v. Manny, Sasi Baw (1901) 2 U.B.R. 446, Mangun Jha v. Dolhin Golab Koer (1898) I.L.R. 25 Calc. 692, 695, Harak Chand v. Deo Nath Sahay (1897) I.L.R. 25 Calc. 409, 410, and Dso Narain Chowdhury v. Webb (1900) I.L.R. 28 Calc. 86. The cases of Atma Ram v.Sardar Koer (1884) 4 All. W.N. 327, Ahmad Ali v. Waris Husain (1893) I.L.R. 15 All. 123, Dattu v. Kasai (1884) I.L.R. 8 Bom. 585, Shivapa v. Dod Nagaya (1886) I.L.R. 11 Bom. 114 do not lay down any inconsistent principle; they only show that a Court of Appeal will not entertain a question of limitation for the first time, when to do so would render necessary a fresh enquiry into the facts."

(emphasis supplied)

21. Keeping in view the aforesaid Supreme Court and Calcutta High

Court Judgments, I am of the opinion that even if the plea of limitation

had not been raised by the plaintiff-claimant before the learned

Arbitrator it can still be raised before this court in Sections 30 and 33

petition as the facts in the present case are not disputed and the issue of

limitation appears on the face of the record. Since in the present case

final bill was approved on 5th March, 1986 and the said Counter-Claim

was filed for the first time in February, 1991, the defendant-NTPC's

Counter-Claim with regard to refund of excess payment on account of

wage escalation is clearly barred by limitation. Accordingly, the

impugned Award to that extent is also set aside.

22. Consequently, in my opinion, none of the parties would be

entitled to any further amount by way of claim or Counter-Claim.

23. In view of the aforesaid, the impugned Award with regard to the

Counter-Claims is set aside and the Registry is directed to prepare a

decree sheet in accordance with the aforesaid judgment stating that no

further amount is payable to either of the parties.

24. Accordingly, the present application and suit stand disposed of.

MANMOHAN, J.

NOVEMBER 05, 2009 'AA'