Union Of India vs M/S. Karnataka Implements & ...
2009 Latest Caselaw 3473 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                 CS(OS)No.2481/1993

%                         Date of decision:1st September,2009

UNION OF INDIA                                         ....Petitioner
                        Through: Ms. Geeta Sharma, Ms. Maneesha Dhir
                                 & Ms. Preeti Dala, Advocates.

                               Versus

M/S. KARNATAKA IMPLEMENTS &
MACHINERIES CO. LTD.                                  .. Respondent

                        Through: Mr. Naveen R. Nath, Advocate.


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

1.    Whether reporters of Local papers may
      be allowed to see the judgment?   No

2.    To be referred to the reporter or not?    No

3.    Whether the judgment should be reported         No
      in the Digest?


RAJIV SAHAI ENDLAW, J.

1. The suit was registered on filing of an arbitral award dated 10th

August, 1993 by the arbitrator in this court. Notice of the filing of

the award was ordered to be issued to the parties thereto. The

petitioner Union of India has not preferred any objections to the

award. The respondent M/s Karnataka Implements & Machineries

Co. Ltd. which, vide application filed in the year 2002, was informed

to have been taken over by the Karnataka Road Transport

Corporation vide orders of the Government of Karnataka, filed IA

No.3881/1994 under Sections 30 & 33 of the Arbitration Act, 1940

objecting to the award. Pleadings in the said application were

completed and usual issues framed on 8th November, 1995 and again

on 8th July, 1999. The counsels made statement that no evidence is

required to be produced and the parties would be relying upon the

arbitration record only.

2. The counsel for the respondent/objector, at the outset,

informed that the respondent is a company of the Government of the

State of Karnataka. On inquiry, as to why the disputes were not

referred to the Cabinet Secretary for resolution by the Committee of

Disputes, as directed to be set-up vide judgment in ONGC Vs.

Collector of Central Excise 1995 Supp (4) SCC 541, the counsel

for the respondent stated that since the disputes are of a period prior

to that judgment, the same were not referred and even after the said

judgment no attempt was made for reference thereof to the

Committee of Disputes. The matter having remained pending in this

court for the last 16 years, at this stage it is not deemed appropriate

to defer the hearing by referring the parties to the said Committee of

Disputes.

3. The counsel for the respondent/objector has stated that he is

urging only two points for consideration before the court. He has

further fairly stated that neither of the same was taken up before the

arbitrator. The first point urged is, of the claims of the petitioner

Union of India allowed by the arbitrator, as well as the invocation of

arbitration being barred by limitation. The other contention urged is

of the contract having stood frustrated under Section 56 of the

Contract Act and the petitioner being thus not been entitled to any

claims for breach thereof against the respondent.

4. The petitioner Union of India had placed an order for supply of

„Beaters‟ made of steel and for use by the Railways, on the

respondent. The counsel for the respondent/objector admits that the

entire agreed quantity was not supplied by the respondent to the

petitioner; it is stated that there was an unusual increase in price of

steel during the term of the contract; there was no clause in the

agreement for escalation of price on such increase in price of steel;

that the respondent requested the petitioner to consider increase in

price but the petitioner rejected the said request ; that the

respondent was unable to complete the supplies at the agreed rate;

the same resulted in termination of agreement by the petitioner. The

agreement provided for Risk Purchase by the petitioner; the said

Risk Purchase is stated to have been affected by the petitioner in the

year 1981. The counsel for the respondent contends that thus the

cause of action for the petitioner Union of India to make claim

against the respondent arose in 1981 but the arbitration was invoked

after more than three years in 1984. It is thus averred that the

claims of the petitioner Union of India against the respondent for

Rs.25,18,047/- allowed by the arbitrator was barred by time. The

counsel for the respondent/objector has argued that even though the

respondent did not set-up the plea of limitation before the arbitrator

but the same can always be set-up in as much as it was incumbent

upon the arbitrator to consider whether the claims had been made

within time or not and even in the absence of a plea in this regard.

Reliance in this regard is placed on Binod Bihari Singh Vs. Union

of India (1993) 1 SCC 572.

5. The counsel for the respondent/objector has further argued

that the Article of the Schedule to the Limitation Act applicable in

such case would be Article 55 providing for compensation for breach

of any contract and the limitation for preferring such claim is three

years from the date when the contract is broken; it is contended that

even if the cause of action is counted from the date of Risk Purchase,

the claims were preferred after more than three years therefrom

also.

6. At this stage, the contention of the counsel for the petitioner

Union of India may be noted. It is argued that the plea of limitation

cannot be made by a bold statement without setting out the details

and in the absence whereof it is difficult to appreciate such a plea.

Reliance is placed on ONGC Vs. M/s. MC Clelland Engineers S.A.

(1999) 4 SCC 327 where the plea of limitation was not permitted to

be raised in these circumstances. It is also urged that since this plea

was not taken before the arbitrator, it cannot be raised in objections

under Sections 30 & 33 of the Act. Reliance in this regard is placed

on Bharat M.N Vs. Satish Ashok Sabni 2003 (3) Arb. Law

Reporter 472 Bombay and M/s Naraindass R. Israni Vs. Union of

India AIR 1993 Delhi 78.

7. Though I respectfully concur with the view aforesaid that a

plea not taken before the Arbitral Tribunal cannot be permitted to be

taken for the first time in objections against the award but in view of

Section 3 of Limitation Act and so as to adjudicate all pleas raised,

arguments were heard on and finding is returned on the merits of

the plea of limitation also.

8. It was put to the counsel for the respondent/objector during

the course of hearing that the Article of the Schedule of the

Limitation Act applicable should be Article 112 applicable to "any

suit by or on behalf of Central Government" since the petitioner is

the Central Government/Union of India. Section 37(1) of the

Arbitration Act, 1940 provides for the provisions of Limitation Act to

apply to arbitrations as if they apply to proceedings before court.

The counsel for the respondent/objector however contended that

since a special provision relating to breach of contract had been

made in Article 55, the same will override Article 112. That is not the

correct position in law. Article 112 overrides other articles in the

Limitation Act so far as suits by the Government are concerned,

irrespective of whatever be the nature of the suit. The counsel for

the respondent/objector had also sought to suggest that the said

Article would not apply because the respondent also is a Government

Company. However, no such restriction is contained in Article 112. A

suit by or on behalf of Central Government does not cease to be so

solely because it is against the State Government (even though the

respondent is not a State Government but a company owned by the

State Government). Article 112 applies whenever the suit is by or on

behalf of a Government, whosoever may be the defendant, whether

any other Government or a private citizen, unless the suit is covered

by the provisions of Article 131 of the Constitution. The law of

limitation debars the remedy and not a right; the legislature thought

it fit for larger period to be provided to the State to enforce its right.

The law gives a special facility to the State. Taking into consideration

the rationale behind the specific article providing special limitation

in case of State as compared to the individual, the argument of the

counsel for the respondent of the non-applicability of the said article

because of the existence of Article 55 or because of the claim being

against a company owned by the State Government cannot be

accepted.

9. Thus, in my view, the limitation for the petitioner to prefer the

claim against the respondent was 30 years and not three years as

contended by the counsel for the respondent. The plea of the claim

being barred by time thus does not lie. Faced with the aforesaid, the

counsel for the respondent urged that even if the prescribed period

of limitation was 30 years, the limitation for seeking reference to

arbitration was three years only. It is stated that it has been held by

the Courts that Article 137 of the Limitation Act applies to an

application invoking arbitration and thus the arbitration ought to

have been commenced within three years. On inquiry, as to whether

there can be separate period of limitation for preferring a claim in a

civil suit and in arbitration, the counsel for the respondent contends

that that would be the effect of the law as laid down in State of

Orissa Vs. Damodar Das (1996) 2 SCC 216 making Article 137

applicable for commencing arbitration.

10. At this stage, it may be noted that the counsel for the

petitioner has contended that the argument is fallacious; she points

out that under Section 37 (3) of the 1940 Act, arbitration commences

when the notice requiring appointment of arbitrator is given or when

the disputes/differences are required to be so submitted; she has

further pointed out that the petitioner had given the notice dated 7th

October, 1983, existing on the arbitral record, to the respondent and

even if the dates orally argued by the respondent are to be believed,

the said notice is within the period of three years. A perusal of the

said notice shows that the same is by the petitioner Union of India to

the respondent demanding the aforesaid sum of rs.25,18,047/- and

further stating that if the amounts are not paid, further action as per

the terms and conditions of the contract shall be taken. Though

neither of the counsels has drawn attention to the arbitration clause

and from the award also it cannot be deciphered, as to when the

arbitration proceedings commenced but I may state that I am even

otherwise not convinced by the legal proposition propounded by the

respondent. There cannot be in law two periods of limitation

prescribed for the same relief, one for preferring the claim before

the courts and the other for preferring the same before the

arbitrator. There cannot be a shorter period of limitation for

preferring the claim before the arbitrator. If the limitation for the

claim is 30 years under Article 112, it cannot be shortened by

applying the limitation of three years for invoking arbitration. Such

an interpretation would result in barring the claim in spite of the

same being within limitation.

11. Thus, it cannot be said that the claim or the invocation of

arbitration was barred by time.

12. Though the counsel for the respondent/objector had initially

also sought to contend that the claim was barred by Section 56 of

the Contract Act but in view of the judgments aforesaid, did not

make any submissions thereon. Even otherwise the plea of

frustration of contract and discharge of liabilities thereunder is a

plea of fact and having admittedly not been taken before the

arbitrator, cannot be permitted to be taken before this court. The

counsel for the petitioner Union of India has also contended that

under the arbitration agreement there was no requirement for giving

reasons and the award in the present case is a non-speaking one and

no objections lie thereagainst.

13. Before concluding, it may also be noted that the respondent

had also preferred counter claim before the arbitrator which were

dismissed by the Arbitral Tribunal.

14. The award does not give any interest to the petitioner on the

amount awarded. The proceedings for making the award rule of the

court have remained pending in this court for long as aforesaid. In

the circumstances, under Section 29 of the 1940 Act, simple interest

@ 9% per annum on the awarded amount is allowed to the petitioner

against the respondent from the date of institution of the

proceedings in this court and till the date of payment.

15. The objections being IA No.3881/1994 are accordingly

dismissed. The award is made a rule of the court. The decree in

terms of the award and with interest as aforesaid is passed in favour

of the petitioner and against the respondent. The petitioner is also

awarded costs of Rs.22,000/- of these proceedings.

RAJIV SAHAI ENDLAW (JUDGE)

September 1st, 2009 PP