Delhi High Court
M/S. Raj Kishan & Company vs National Thermal Power ... on 12 September, 2012
Author: Vipin Sanghi
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 31.08.2012
% Judgment delivered on: 12.09.2012
+ O.M.P. No. 320/2010
M/S. RAJ KISHAN & COMPANY ..... Petitioner
Through: Mr. Chetan Sharma, Sr. Advocate
with Mr. D. Moitra and Mr. Sanjay
Bhaumik, Advocates.
versus
NATIONAL THERMAL POWER CORPORATION..... Respondent
Through: Mr. S. K. Taneja, Sr. Advocate with
Mr. Puneet Taneja, Advocate.
CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI
JUDGMENT
VIPIN SANGHI, J.
1. The present petition under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the „Act‟), is directed
against the arbitral award dated 13.11.2009 and the order of modification
dated 22.02.2010 - passed by the Arbitral Tribunal comprising Hon‟ble Mr.
Justice P.K. Bahri (Retd.).
2. The brief facts, leading to the present petition and relevant for the
present purposes, are summarised as under:
2.1. Respondent herein awarded a contract for General Civil Work
Package (4 x 210 MW) at its NCPS (Project) Dadri District, Gautum
Budh Nagar, U.P. to the Petitioner herein. A formal contract was
executed between the parties on 21.03.1989.
2.2. It appears that the petitioner raised certain claims on the respondent
and demanded payments from the respondent vide letter dated
22.02.1999. On 09.08.1999 (vide R-46), the respondent disputed the
said claims. It was alleged that the petitioner had stopped the work
and did not restart the same despite notice. It was also stated that the
respondent had no alternative but to get the balance work executed at
the petitioner‟s risk and cost. It was specifically stated that "there is a
lot of owner issue materials outstanding with M/s RKC which is
required to be returned to NTPC. The detail of the outstanding owner
issue material based on the last RA Bills no.142 is accounted and
enclosed as Annex-I. It is a matter of record that no efforts have been
made to return balance owner issue material inspite of repeated
verbal and written requests". The respondent demanded the petitioner
to return the balance owner issue material. It was stated that the total
recoveries amounted to Rs.283 lacs approximately which includes
recoveries against unaccounted owner issue material. It was stated
that in case the amount of Rs.283 lacs is not paid within 15 days, the
respondent would be constrained to seek arbitration under clause 56 of
the GCC for recoveries. In Annexure III of this letter, the respondent
at serial No.5 claimed an amount of Rs.1,79,81,140 "against FOC
material". The respondent issued a communication dated 06.12.1999
(R-47) to the petitioner in response to the petitioner‟s letter dated
25.08.1999. The respondent in this communication, inter alia, stated:
"....With respect to the release of the payment due, it is
pertinent to mention that the same has not been released in
order to recover the outstanding advance arisen out of
material reconciliation amounting to Rs. 180 lacs approx. For
which detailed calculations have already been enclosed in
terms of material accounting/reconciliation as per special
condition of contract vide our letter dated 9.8.99." (emphasis
supplied)
2.3. On 10.05.2000, the petitioner sent a communication to the Manager
(CCD) of the respondent stating that:
"...Disputes and differences arose between M/s. Raj Kishan &
Co. And N.T.P.C as the Manager (P.H) N.T. P.C Vidyut Nagar
has not made the payment even though notice was sent vide
letter no.RKC/HO/SKG/99/2547 dated 22.2.99.
Subsequently, various correspondence have also been made
which reconfirms/crystallize that dispute formed earlier could
not be amicably settled but remain as a dispute, requiring
adjudication, inspite of various efforts made by the parties to
reconcile.
However at this stage it is very clear that dispute and difference
remain as it is."
The petitioner requested for payment within 15 days failing which, the
petitioner stated that it would be free to approach a forum for sorting
out the dispute.
2.4. On 31.5.2000, the petitioner addressed a communication to Shri V.K.
Srivastava, Sole Arbitrator of the respondent stating that disputes and
differences had arisen between the parties as the Manager of the
respondent had not made payment even though notice was sent vide
letter dated 10.05.2000. The sole Arbitrator was called upon to
adjudicate the disputes thus formed. The disputes and differences
were shown in Annexure A to this communication. On 15.09.2000,
the petitioner sent another communication to the Chairman and
Managing Director of the respondent invoking the arbitration
agreement.
2.5. However, on the respondent‟s failure to appoint an arbitrator as per the
terms of the Contract, the Petitioner filed a petition under Section 11
of the Act before this Court. Vide order dated 25.11.2003, this Court
appointed the aforementioned arbitrator to adjudicate the disputes
between the parties.
2.6. The Arbitral Tribunal vide impugned Award dated 13.11.2009
allowed:
A. Claims of the Petitioner to the following extent:
Claim No. Head Amount awarded
Balance amount payable Rs. 17,96,281/-
1(a) to the
and Petitioner/claimant on
1(i)(i) the basis of the
measurements of the
work executed by the
Petitioner/claimant and
duly entered by the
Respondent in its
measurement books.
Balance payment of Rs. 73,500/-
1(i)(ii) structure steel of
cladding structure
Fitting and fixtures of Rs. 1,69,802/-
1(k) teak wood frames
Quantities of Work Rs. 1,54,28,696/-
2 executed beyond the
deviation limits in
various items of work
Escalation charges Rs. 47,54,047/-
„Overhead losses Rs. 60,04,386/-
7 and 9 suffered by the
Petitioner/claimant due
to under utilisation/
partial utilisation of
tools, plants, machinery,
staff and personnel- for
the prolongation of work
from the stipulated date
of completion‟ AND
„Loss of profitability/
loss of turnover for
prolongation of the
work‟
Extra expenditure Rs. 10,50,000/-
10 incurred in use of the
difference in the
theoretical and actual
weight of steel
Amount of Bank Rs. 12,00,000/-
11 Guarantee enchased by
the Respondent
Amount of the Rs. 6,92,924/-
18 Construction material
belonging to the
Petitioner/claimant and
taken over by the
Respondent
Rs. 3,11,69,636/-
Total:
(emphasis supplied)
B. Counter Claim No. 1 of the Respondent- For recovery for
wastage and excess consumption of cement, reinforcement and
structural steel, which were supplied by the Respondent as free
issue material- to the extent of Rs. 1,56,33,435/-.
The Respondent was, thereby, directed to pay the difference amount,
being Rs. 1,55,36,201/- within three months, failing which the
Respondent would pay to the Petitioner interest at the rate of 12% p.a.
on the unpaid amount, from the date of the award till payment.
2.7. Both parties, thereafter, filed applications under Section 33 of the Act-
seeking corrections in the Award. The Award was corrected vide
impugned order dated 22.02.2010- to the extent that the awarded
amount mentioned under Claim No. 2 was stated to be a clerical
mistake in as much, as, Rs.1,47,49.458.70/- out of Rs.1,54,28,696/-,
admittedly, already stood paid by the Respondent to the Petitioner,
which was also taken note off in Para 79 of the Award. The awarded
amount under Claim No. 2 was, thus, held to be Rs.6,79,237.45/-
instead of Rs.1,54,28,696/-.
2.8. At this stage, I may take note of some of the disputes and differences
of which the petitioner sought reference to arbitration. Under Point
No.7, the petitioner sought a "sum of Rs. 75 lakhs being amount
withheld illegally". Under point No.12 (a) and 12 (b), the petitioner
raised the following disputes and differences:
"12.a A sum of Rs. 9 lacs being difference in theoretical and
actual weight of steel for the work done up to 31.1.99.
12.b A declaration stating that payment of difference in
theoretical and actual weight of steel will continue to accrue, if
work is allowed to be done, after 31.1.99 till date of
completion."
2.9. Being aggrieved by the Award and the order of modification, the
Petitioner has preferred the present petition.
3. The Petitioner herein has sought to challenge the Arbitral award to the
extent it has allowed Counter Claim No.1 of the Respondent.
Petitioner's Submissions
4. Learned Senior Counsel for the petitioner, Mr. Chetan Sharma,
submitted that the Counter claims of the Respondent could not have been
adjudicated upon as the same were barred by limitation. It is submitted that
the Respondent raised a demand towards material accounting/reconciliation
vide letter dated 06.12.1999. Therefore, the cause of action for the
respondent to initiate recovery proceedings arose on that date and, as such,
the Respondent should have filed its counter claims within 3 years from that
date either by filing a suit or commencing arbitral proceedings in terms of
Section 21 of the Act. Not having done so, the counter claims were barred by
limitation. The Counter claims, for the first time, came to be filed along with
the Statement of defence, on or about June 2004, which was beyond the
prescribed period of limitation. Reliance was placed upon the judgments of
the Supreme Court in State of Goa v. Praveen Enterprises, 2011 STPL
(Web) 561 SC; J.C. Budhiraja v. Chairman, Orissa Mining Corporation
Ltd. & Anr., (2008) 2 SCC 444; S. Rajan v. State of Kerala and Anr., AIR
1992 SC 1918; and the judgment of this Court in Smt. Biba Sethi v. Dyna
Securities Limited, 2009 (6) R.A.J. 454 (Del).
5. It was submitted that, even otherwise, the amount awarded under
Counter Claim No. 1 of the Respondent is in violation of Clause 8.3.1 and
more particularly 8.3.1 (e) of the Contract and, as such, is liable to be set
aside. It was submitted that as per the said clause the outstanding
unaccounted material shall not be more than 10% of the value of the security
deposit i.e. Rs 1,20,000/- (10% of Rs. 12,00,000/-) unless otherwise
permitted in writing by the Engineer In-charge. It was submitted that the
Engineer in-charge had not provided any such written permission.
6. It was further submitted that even going by the contractual rates and
the Respondent‟s documents, the counter claims of the Respondent cannot
go beyond Rs.22,52,370.60/-.
7. As regards the order of modification, it was submitted by the Learned
Senior Counsel that the awarded amount of Rs.1,54,28,696/- (under Claim
No. 2) was in addition to the amount of Rs.1,47,49.458.70/-. It was
submitted that the amount of Rs.1,47,49.458.70/- had been paid way back in
December, 1997 whereas the rate analysis, which is the basis of Claim No. 2,
had been prepared and finalised by the Respondent on 25.10.2001 and no
payment had been after that. Hence, the modification was wholly uncalled
for and unwarranted.
Respondent's Submissions
8. Learned Senior Counsel for the Respondent, Mr. S.K. Taneja, on the
other hand raised a preliminary objection to the maintainability of the
present petition- on the ground that the petitioner is an unregistered
partnership concern and as such is barred, by virtue of Section 69 of the
Partnership Act, 1932, to institute claims and prosecute the same before this
Court or any other forum including before the learned Arbitrator. Placing
reliance on Order XXX Rule 20 of the Code of Civil Procedure, 1908
(hereinafter referred to as the „CPC‟), it was further submitted that present
petition has also not been filed by a duly authorised and competent person.
The locus of the person executing the General Power of Attorney in favour
of the person who has filed the present petition was disputed by the
Respondent
9. Learned senior counsel submitted that limitation is a mixed question
of fact and law. Specific pleading with necessary particulars with regard to
the question of limitation should have been raised before the Arbitral
tribunal. Since such a plea was never raise by the Petitioner before the
tribunal, the Petitioner cannot raise the same before this Court for the first
time in these proceedings. Reliance was placed on the judgment of the
Bombay High Court in Bharat M. Nagori v. Satish Ashok Sabnis & Anr.,
2003 (4) R.A.J. 47 (Bom); Vimal G. Jain v. Vertex Financial Services Pvt.
Ltd., 2007 (4) Arb. LR 18 (Bombay) (DB) and judgment of the Supreme
Court in Balasaria Construction (P) Ltd. v. Hanuman Seva Trust & Ors.,
(2006) 5 SCC 658.
10. It was submitted that even under Order VII Rule 11, CPC, a suit
cannot be dismissed on the ground of limitation without proper pleadings,
framing of issues and taking of evidence. Reference in this regard was made
to the judgment of the Supreme Court in Ramesh B. Desai and Others v.
Bipin Vadilal Mehta and Others, (2006) 5 SCC 638. It was submitted that
this Court while exercising jurisdiction under Section 34 of the Act cannot
re-appreciate the facts and evidence. The Court does not sit in appeal to take
up the issues which were never argued or pleaded before the Arbitral
Tribunal.
11. Learned senior counsel submitted that the counter claims were not
time barred as per the law of limitation. The Petitioner having invoked the
arbitration clause under the contract, there was neither any contractual nor
any legal requirement for the Respondent to invoke arbitration clause again
for its counter claims arising under the same contract between the same
parties. It was therefore submitted that the question of non-invocation of the
arbitration agreement in compliance of Section 21 of the Act does not arise.
12. It was submitted by the Respondent that clause 8.3.1 (e) has no
application in the facts of the case and, therefore, has rightly not been relied
upon by the Arbitral tribunal. It was submitted that merely because as per
clause 8.3.1 (e) the unaccounted outstanding material cannot be beyond 10%
of the value of the security deposit given by the contractor, unless otherwise
permitted by the Engineer In-charge, it does not mean that the counter claim
of the Respondent for the recovery of wastage and excess consumption
cannot, in fact, be beyond 10%. It was submitted that the Petitioner has itself
not disputed the quantum of material issued and consumed and is now,
merely to evade the liability, relying upon a clause which even otherwise has
no application in the facts aforesaid. Such a plea was never set up by the
Petitioner before the Arbitral Tribunal and, therefore, cannot be raised before
this Court in these proceedings.
13. It was submitted that there was no basis for the Petitioner to submit
that the counter claim of the Respondent cannot go beyond
Rs.22,52,370.60/-. It was submitted that the Petitioner cannot be permitted to
so allege, at this stage, when he had not disputed the quantity of materials
issued, consumed, and wastage of materials issued by the respondent owner,
and the only issue raised was of benefit of overweight steel, which was also
accounted for. It was reiterated that the Petitioner cannot be permitted to set
up a new defence in the present proceedings which did not form part of the
pleadings before the Arbitrator.
14. It was submitted that by virtue of the modification order, the Arbitral
tribunal corrected a calculation error with respect to the payment of claim no.
2 and that the same was well within the powers of the Arbitrator under
Section 33 of the Act. It was denied that the Petitioner is entitled to
Rs.1,54,28,696.15/- in addition to the amount of Rs.1,47,49,458.70/-.
According to the Respondent, the same was merely an afterthought. It was
submitted that the entire claim allowed with respect to claim no. 2 was
Rs.1,54,28,696.15/-, which was the amount shown in the final bill (as the
recovery amount could have been worked out only then). After giving
adjustment of the payment made, till the second last running bill of
Rs.1,47,49,458.70/-, the petitioner (under the final bill) was entitled to only
Rs.6,79,237.45/- under claim no. 2.
Petitioner's submissions in Rejoinder
15. The Petitioner in rejoinder arguments denied that the Petitioner is an
unregistered partnership firm. It was submitted that the same objection was
raised by the Respondent before the Arbitral tribunal, to which the Petitioner
had furnished a registration certificate- available on the records of the
Arbitral Tribunal at page C-820. It was further denied that the present
petition had not been duly instituted by an authorised person. Reliance was
placed by the Petitioner on a power of attorney executed in favour of the
person who has instituted the present petition, viz. Shri Jitendra Singh S/o
Late Sh. Khajan Singh. Furthermore, it was submitted that in terms of
Section 19 of the Act, the provisions of the CPC, specifically Order XXX
Rule 1 and 2, are not strictly applicable to the proceedings under the Act and,
as such, the preliminary objection of the Respondent, as regards
maintainability of the present petition, is unsustainable.
16. It was submitted that the question of limitation being a pure question
of law, could be raised at any point of time. Reference in this regard was
made to the judgments of the Supreme Court in The Management of State
Bank of Hyderabad v. Vasudev Anant Bhide etc., 1969 (2) SCC 491, V.M.
Salgaocar & Bros. v. Board of Trustees of Port of Mormugao and
Another, AIR 2005 SC 4138, and Gannmani Anasuya and Others. v.
Parvatini Amarendra Chowdhary and Others, (2007) 10 SCC 296;
judgments of this Court in Ashok K. Khurana v. M/s Steelmen Industries
and Anr., AIR 2000 Delhi 336, Oil & Natural Gas Corporation Ltd. v.
Amtek Geophysical Pvt. Ltd., 2004 (3) R.A.J. 581 (Del), Jammu & Kashmir
Bank Ltd. v. Shree Digvijay Cement, 154 (2008) DLT 80 (DB) and Gannon
Dunkerley and Co. Ltd. v. National Thermal Power Corporation,
MANU/DE/2910/2009; judgment of the High Court of Punjab in Santa
Singh Gopal Singh and Others v. Rajinder Singh Bur Singh and Others,
AIR 1965 Punjab 415 ; judgment of the Calcutta High Court in M/s Orient
Ceramic Products Pvt. Ltd. v. Calcutta Municipal Corporation, AIR 2000
Calcutta 17; and judgment of the Bombay High Court in Sealand Shipping
& Export Pvt. Ltd. Vs. Kinship Services (India) Pvt. Ltd., 2012 (1) R.A.J.
589 (Bom).
17. In view of the above referred pronouncements, it was submitted that
mere failure to raise the plea of limitation would not be fatal, as it was the
duty of the Arbitral tribunal to deal with the same. It was submitted that the
Limitation Act, 1963 applies to arbitrations under the Act, as it applies to
proceedings in Court. Relying upon Section 28(1)(a) of the Act, it was
submitted that in an arbitration (other than an international commercial
arbitration), which takes place in India, the arbitral tribunal is bound to
decide the dispute submitted to arbitration in accordance with the substantive
law for the time being in force in India. It was submitted that Section 4 of the
Act applies only to derogable provisions under the Act, such as, Section
12(3), 19(2), 20(1), 22 etc., and the said provision (Section 4), therefore,
cannot be invoked to render Section 28 of the Act and Section 3 of the
Limitation Act otiose. The Tribunal would, therefore, be obliged to decide
the dispute in accordance with the Substantive law in force in India.
18. It was submitted that the „Counter Claims‟ are also „Claims‟ raised by
a Respondent. Hence, the provision of Section 21 of the Act is squarely
applicable and, consequently, until and unless a notice is served upon the
claimant, the question of Arbitral proceeding, in respect of the counter claim,
commencing would not arise.
19. It was submitted that the Arbitral tribunal being a creature of the
contract between the parties, cannot ignore the provisions of the contract and
more specifically, clause 8.3.1 (e) in the present case. It was submitted that
the counter claim allowed was beyond the scope of the contract and as such
was liable to be set aside.
20. The Petitioner denied to have not disputed the quantity of materials
issued, consumed and wasted. It was submitted that the Learned Arbitrator,
under the garb of Section 33 of the Act, has re-written the Award against
claim No.2 as an adjustment- which is not permissible under the law.
Discussion
21. The primary question to be determined in the present petition is,
whether, the petitioner can be permitted to urge for the first time in these
proceedings that the counter claims of the Respondent were barred by
limitation. However, before I examine the same, I shall first deal with the
preliminary objection raised by the Respondent with regards to
maintainability of the present objections/petition.
22. The petitioner, on this objection being raised before the learned
Arbitrator had placed (at page C-820 of the arbitral record), a copy of the
Certificate of Registration of the petitioner firm which shows, inter alia, Shri
Ashwini Kumar Gupta as one of the partners. The copy of the Power of
Attorney given to Shri Jatindra Singh - who has instituted the objection
petition- duly authorised him to institute legal proceedings on behalf of the
petitioner firm, and the same has been filed along with the rejoinder. The
learned Arbitrator has not allowed the aforesaid preliminary objection of the
respondent. Therefore, in view of the aforesaid, I find no merit in the
respondent‟s objection either on the ground that the petitioner is not a
registered firm, or that the present petition has not been instituted by a
competent person.
23. The petitioner claims that the counter claims of the respondent was
barred by limitation on the premise that, since the respondent raised a
demand towards material accounting/reconciliation vide letter dated
06.12.1999, the cause of action arose on that date and, as such, the
Respondent should have filed its counter claims within 3 years from that
date, either by filing a suit or commencing arbitral proceedings in terms of
Section 21 of the Act. Not having done so, the counter claims were barred by
limitation. To fortify its submission, the petitioner referred to the judgment
of the Supreme Court in State of Goa v. Praveen Enterprises (supra), and
more specifically to the following observation:
"17. As far as counter claims are concerned, there is no room
for ambiguity in regard to the relevant date for determining the
limitation. Section 3(2)(b) of Limitation Act, 1963 provides that
in regard to a counter claim in suits, the date on which the
counter claim is made in court shall be deemed to be the date of
institution of the counter claim. As Limitation Act, 1963 is made
applicable to arbitrations, in the case of a counter claim by a
respondent in an arbitral proceedings, the date on which the
counter claim is made before the arbitrator will be the date of
"institution" in so far as counter claim is concerned. There is,
therefore, no need to provide a date of „commencement‟ as in
the case of claims of a claimant. Section 21 of the Act is
therefore not relevant for counter claims. There is however one
exception. Where the respondent against whom a claim is made,
had also made a claim against the claimant and sought
arbitration by serving a notice to the claimant but subsequently
raises that claim as a counter claim in the arbitration
proceedings initiated by the claimant, instead of filing a
separate application under section 11 of the Act, the limitation
for such counter claim should be computed, as on the date of
service of notice of such claim on the claimant and not on the
date of filing of the counter claim."
24. The issues which arose before the Supreme Court for consideration,
and which the Supreme Court was dealing with were not the same as the one
raised by the petitioner. The issue raised and considered by the Supreme
Court was "Whether the respondent in an arbitration proceedings is
precluded from making a counter-claim, unless a) it had served a notice
upon the claimant requesting that the disputes relating to that counter-claim
be referred to arbitration and the claimant had concurred in referring the
counter claim to the same arbitrator; and/or b) it had set out the said
counter claim in its reply statement to the application under section 11 of the
Act and the Chief Justice or his designate refers such counter claim also to
arbitration". Therefore, the issue was not of limitation for filing a counter
claim, but of the maintainability thereof without giving notice therefor.
25. The judgment of the Supreme Court in S. Ranjan (Supra), also does
not advance the case of the petitioner. In that case, the question before the
Supreme Court was when did the right to apply under Section 20 of the
Arbitration Act, 1940, for appointment of arbitrator, accrue- for the purpose
of deciding the maintainability of the application under Section 20 on the
issue of limitation. The Supreme Court observed that, reading Article 137 of
the Limitation Act and sub-section (1) of Section 20 of the Arbitration Act
together, the right to apply accrues when differences arise between the
parties. The same being a question of fact has to be determined having
regard to the facts of the case.
26. Petitioner‟s reliance upon the judgment of this Court in Smt. Biba
Sethi (supra) is entirely misplaced. The question before the Court was
whether the period of limitation to prefer claims as provided for under the
byelaws of NSE would override the law of limitation. In other words, the
issue before the Court was whether an arbitration, under the Byelaws of
NSE, is an arbitration under any other enactment, within the meaning of
Section 2(4) of the Arbitration Act, so as to make Section 43 thereof- and,
consequently, the Limitation Act inapplicable to such arbitration. The Court
held that the legislative intent was not to empower the State Government to,
while framing rules, prescribe the period of limitation for preferring claims.
The byelaw to that extent was held to be purely contractual and, in view of
Section 28 of the Contract Act, the same was declared to be void.
27. The judgment of the Supreme Court in J.C. Budhiraja (supra) also
does not bolster the submissions of the petitioner herein, since the same dealt
with an entirely different issue. In that case, the Supreme Court set aside the
finding/assumption of the Arbitrator that if the application for appointment
of arbitrator was made in time, then all claims made in the claim statement
filed before the appointed arbitrator are also in time. The Supreme Court
held that Section 37(3) of the Arbitration Act 1940 provides that for the
purpose of the Limitation Act, an arbitration is deemed to have been
commenced when one party to the arbitration agreement serves on the other
party thereto, a notice requiring the appointment of an arbitrator. Such a
notice having been served, it has to be seen whether the claims were in time
as on that date. If the claims are barred by limitation on that date, it follows
that the claims had to be rejected by the Arbitrator on the ground that the
claims were barred by limitation. The said period of limitation has nothing to
do with the period of limitation for filing a petition under Section 8(2) of the
Arbitration Act, 1940 for appointment of an arbitrator- as the cause of action
in that case would arise when the other party fails to comply with the notice
invoking arbitration.
28. For the purposes of deciding the question whether the counter claims
were barred by limitation, the starting point of institution of counter claim
would have to be the date of institution of counter claims before the Arbitral
tribunal. If the said date was within the period of limitation when taken from
the date on which the cause of action to institute the counter claims last
arose, then the same would not be barred by limitation and if not so, then it
would be barred.
29. There can be no quarrel with the above proposition. But what is to be
examined in each case, as a matter of fact and of law is - when the cause of
action last arose in respect of a particular claim/counter claim. Since the
primary issue, i.e. when the cause of action last arose for raising the counter
claim, is a mixed question of fact and law, the issue of limitation cannot be
raised in proceedings under Section 34 of the Act for the first time.
30. In Santa Singh (supra), the full bench of the Punjab High Court
permitted the raising of the plea of limitation, though the same had not been
raised before the trial court, as the same was not altogether a new issue in the
facts of the case. It was observed that the no new facts had to be proved, and
all that had to be seen was whether, according to the pleadings of the parties
and the findings which have been given and which are binding on them, the
suit was barred by limitation. In Management of State Bank of Hyderabad
(supra), the Supreme Court permitted the appellant to raise a plea of
limitation for the first time since no fresh facts had to be investigated and the
matter could be dealt with as a pure question of law. In Ashok K. Khurana
(Supra), the appellant had assailed the order of trial court- dismissing the
appellant‟s suit for recovery, filed against the respondent, on the ground that
the same was barred by limitation. The respondent/defendant had it in its
written statement, inter-alia, raised a preliminary objection that the suit was
barred by limitation. On the basis of the pleadings the trial court framed the
preliminary issue- whether the suit is within the period of limitation. The
trial court decided the same in favour of the respondent/defendant and
dismissed the suit. In appeal, this Court observed that the question of
limitation, in the case at hand, was a question of fact and the
appellant/plaintiff could not be non-suited without a trial. The order of the
trial court was accordingly set aside and the suit was remanded back to the
trial.
31. The last three decisions referred to above do not advance the
petitioner‟s submissions for the reason that in all those cases, the Court
which permitted the raising of the issue of limitation for the first time was
acting as the appellate Court. It is well settled that an appeal is a
continuation of the original proceedings. The entire matter is at large before
an appellate Court. The same is not true about a Court hearing objections to
an arbitral award under Section 34 of the Act. The arbitrator is the final
judge of facts. The Court while hearing objections does not scrutinize the
award as an appellate forum.
32. Reliance placed on Orient Ceramic Products Pvt. Ltd. (supra) also
seems to be misplaced. In this case, the defendant sought to set up a counter
claim. The Court, after examination of the facts before it, as pleaded in the
application, whereby the counter claim was sought to be set up, came to a
definite conclusion that the same was barred by limitation. It was on this
account that the Court did not permit the counter claim to be filed by the
defendant. Moreover, the counter claim was sought to be set up after the
filing of the written statement and without furnishing any justification for not
raising the same when the written statement was filed.
33. In Bharat M. Nagori (Supra), the issue before the Bombay High
Court was whether it is open for the petitioner to raise a plea of limitation, in
a case where the plea was not raised before the Arbitrator, while assailing the
award. The Court observed that the issue of limitation, pleaded on facts,
would be mixed question of fact and law and as such considering the
pleadings, in the case at hand, it was not possible to hold that the claim filed
is barred by limitation. The High Court also took note of the judgment of the
Supreme Court in Oil & Natural Gas Commission v. M.C. Clelland
Engineers S.A., 1994 (4) SCC 327, wherein the Supreme Court while
dealing with the contention of limitation raised before it, observed that when
no foundation has been laid in the course of the proceedings before the
Arbitrator either in the pleadings or in the evidence, it would be difficult to
examine the plea as raised.
34. Oil & Natural Gas Corporation Ltd. v. Amtek Geophysical Pvt. Ltd.
(supra), is a decision rendered in its own facts and does not advance the
petitioner‟s case. The petitioner assailed the award of the Arbitral tribunal
dismissing the counter claim filed by it on the ground that the same was
barred by limitation. Therefore, the issue of limitation was raised before, and
considered by the Arbitral Tribunal, which is not the position in the case at
hand.
35. V.M. Salgaocar (supra) too has no relevance for the simple reason
that the plea of limitation had been squarely raised by the defendant in the
written statement. The issue examined by the Court was whether the
defendant had waived the said plea, as a partial decree had been passed on
admission under Order 12 Rule 6 C.P.C. The Supreme Court held that the
plea of waiver was not a pure question of law, and could not be permitted to
be raised at a later stage. Therefore, the issue of limitation had to be
examined. As aforesaid, in the present case the issue of limitation qua the
counter claim was never raised by the petitioner before the Arbitral Tribunal.
It cannot be said that the counter claim was ex-facie barred by limitation.
Consequently, this case is of no avail to the petitioner.
36. In Balasaria Construction (P) Ltd. (Supra), the Supreme Court took
the view that the "suit could not be dismissed as barred by limitation without
proper pleadings, framing of an issue of limitation and taking of evidence.
Question of limitation is a mixed question of law and fact. Ex facie in the
present case on the reading of the plaint it cannot be held that the suit is
barred by time."
37. In Ramesh B. Desai (Supra), the appellants had filed a company
petition under Section 155 of the Companies Act, 1956. Respondent no. 1
and 2 moved an application to dismiss the petition on the ground that the
same was barred by limitation. The application was allowed by the Ld.
Company Judge and the order was affirmed in appeal by a Division Bench of
the High Court. The Supreme Court, in appeal, observed that "A plea of
limitation cannot be decided as an abstract principle of law divorced from
facts as in every given case the starting point of limitation has to be
ascertained which is entirely a question of fact. A plea of limitation is a
mixed question of law and fact". Relying upon the principle laid down in its
earlier judgment, in Balasaria Construction (P) Ltd. (Supra), it observed
that "unless it becomes apparent from the reading of the company petition
that the same is barred by limitation, the petition cannot be rejected under
Order VII Rule 11 (d) CPC". After considering the contents of the petition
and having regard to the provisions of the Limitation Act, 1963, the Supreme
Court observed that the company petition could not have been thrown out at
the preliminary stage- as being barred by limitation without giving
opportunity to the appellants to lead evidence.
38. In Vimal G. Jain (supra), a Division Bench of the Bombay High Court
observed that on a conjoint reading of Section 4 and 16(2) of the Act it
would appear that a party to the arbitration proceedings seeking to raise the
point of bar of limitation for initiating the arbitration proceedings should
raise the issue at the earliest opportunity and, in any case, not later than the
submission of the statement of defence, otherwise it would be deemed to
have been waived. Referring to the decision of the Supreme Court in
Narayan Prasad Lohia v. Nikunj Kumar Lohia, (2002) 3 SCC 572,-
wherein it has been held that unless the objection in terms of section 16(2) is
raised within the time prescribed under the said Section, it would be deemed
to have been waived in terms of section 4 of the said Act- the Bombay High
Court held that since the point regarding the bar of limitation was never
raised before the learned arbitrator, the same should be deemed to have been
waived.
39. In Jammu & Kashmir Bank Ltd. (Supra), the appellant, assailed the
judgment of the learned Single Judge, inter alia, on the ground that the suit
instituted by the Respondent was barred by limitation. The Division Bench
observed that "An issue of limitation does not arise as a pure question of
law. It is always a mixed question of fact and law. In order to decide the
issue of limitation, the Court has to perforce appreciate the facts and
evidence, unless from a plain reading of the plaint, the suit appears to be
unambiguously barred by limitation". This Court further observed that "In
such a case, the appellate Court may set aside the decree and dismiss the
suit on the ground of limitation on the basis of the evidence and record
available if, from such record and evidence, without more, the suit appears
to be struck by the law of limitation. However, if the question of limitation is
allowed without examining the relevant facts and evidence, or if the appeal,
in which the plea has been raised for the first time, is allowed and suit is
dismissed without giving an opportunity to the plaintiff to oppose it on the
facts and evidence, it may cause prejudice to some of the parties to the suit."
The situation, in a case like the present, is still worse for the party raising a
belated plea of limitation because the Court, as aforesaid, is not an appellate
forum qua the arbitral award. As aforesaid, an appeal is a continuation of an
original suit proceeding. Therefore, it is possible to amend the plaint even
during the pendency of an appeal. It is also possible to lead additional
evidence at the appellate stage. But this facility is not available before the
Court hearing objections to an arbitral award. For the aforesaid reason, the
decision in Gannmani Anasuya (supra), has no relevance.
40. In Gannon Dunkerley (Supra), this Court allowed the plea of
limitation to be raised for the first time in a petition/objections under Section
16, 30 and 33 of the Arbitration Act, 1940 against an arbitral award, as the
facts of the case were not disputed and the issue of limitation appeared on
the face of the record. As aforesaid, that does not appear to be the position
in the present case.
41. In Tamil Nadu Water Supply and Drainage Board v. N. Abdul
Kareem and Ors., (2010) Arb. LR 581 (Madras) (DB), the Division Bench
of the Madras High Court upheld the order of the Ld. Single Judge wherein,
the plea of limitation, having been raised for the first time in the
petition/objections under Section 34 of the Act, had been rejected. It was
observed that specific pleading with necessary particulars with regard to the
question of limitation could have been made before the arbitral tribunal.
Considering that the question of limitation is a mixed question of law and
facts, the High Court, in view of the lack of evidence on record, observed
that the same could not be decided at this stage.
42. The decision in Sealand Shipping & Export Pvt. Ltd. (supra), in my
view, has no application for various reasons. Firstly, this decision does not
take note of the Division Bench decision of the same High Court in Vimal G.
Jain (supra). Secondly, the fact situation in that case was materially
different. The plea of limitation had been raised before the Arbitral
Tribunal, however, the Tribunal did not frame an issue on this plea and did
not decide the same. In the present case, admittedly, no plea of limitation
was raised by the petitioner. Pertinently, the respondent raised the plea of
limitation in respect of the petitioner‟s claim. Inspite of this, the petitioner
did not raise the plea of limitation in respect of the counter claim.
43. Last but not least, I may take note of the decision of this Court
rendered inter partes in M/s Raj Kishan & Company Vs. National Thermal
Power Corporation Limited, O.M.P. No. 333/2004 decided on 13.03.2012.
In that case as well, the petitioner herein did not raise the plea of the
respondent/NTPC‟s claim being barred by limitation before the Arbitral
Tribunal. The only difference is that, whereas, in the present case this plea
has been raised in these proceedings, in O.M.P. No. 333/2004 it was not
even raised in the objection petition. The learned Single Judge rejected the
said plea by holding as follows:
"This ground has been raised only at the time of the arguments.
It is a settled position of law that plea of limitation cannot be
decided as an abstract plea of law divorced from the facts. As
explained in Ramesh B. Desai v. Vipin Vadilal Mehta 2006 (5)
SCC 638 "a plea of limitation is a mixed question of law and
fact." Consequently, unless the plea of limitation is raised at the
earliest point in time before the learned Arbitrator, it cannot be
adjudicated upon as a mixed question of law and fact. In Oil
and Natural Gas Corporation Limited vs. Mc Chemical
Engineers, 1999 (2) Raj. 149 (SC) the Supreme Court
negatived the plea of limitation raised for the first time in the
course of challenge to the award before the Court. In Tamil
Nadu Water Supply v. M. Abdul Karim, 2010 (4) ALR 581
(Madras) it was again held that without a proper foundation of
facts laid before the learned Arbitrator to demonstrate that the
claims were barred by limitation, a plea to that effect cannot be
raised for the first time in Court. A Division Bench of Bombay
High Court in Vimal G. Jain v. Vertex Financial Services Pvt.
Ltd., 2007 (4) Arb LR 18 (Bombay) held that if the point
regarding the bar of limitation is not raised before the
Arbitrator, it should be deemed to have been waived.
Consequently, "the question of entertaining such point in
proceedings under Section 34 of the Act or in an appeal arising
from the order passed therein cannot arise." This Court has
held to the same effect in M/s. Uppal Engineering Corporation
v. C.W.C., 2009 (3) Raj. 666 (Del.) and M. Sons Enterprises
Pvt. Limited v. Shri Suresh Jagasia and Anr. 2011(123) DRJ
266. In that view of the matter, the Petitioner cannot be
permitted to urge the ground regarding limitation for the first
time during arguments."
44. It is not for this Court to speculate with regard to the possible defences
that the respondent may have been in a position to raise and may have raised,
as also all the defences which may have been accepted by the learned
Arbitrator in answer to the bar of limitation that the petitioner could have
raised but failed to raise. However, to deal with the petitioner‟s submission
that the present case is an open & shut case in which the respondent could
possibly not have raised any defence to the plea of limitation in respect of
the respondents counter-claim and that, therefore, this Court should entertain
the said plea even at this stage, I may only demonstrate what all pleas the
respondent could and might have raised, had the petitioner raised the plea of
limitation, which defences may have been accepted by the Arbitral Tribunal,
which come to my mind.
45. On the basis of the correspondence exchanged between the parties, as
referred to in para 2.2 and 2.3 above, the respondent could have contended
that what the respondent nomenclatured as a counter claim was, in fact, an
already undertaken adjustment of the amount due to it from the petitioner on
account of owner issued materials. The respondent could have contended
that since the amount adjusted on this account was less than the amount due
from the respondent to the petitioner, there was no need or occasion for the
respondent to have invoked the arbitration agreement, and to seek reference
of the said dispute to arbitration. It could have been argued that the
respondent could well have waited for the petitioner to invoke the arbitration
agreement to claim the amounts due to it, and in such proceedings to set up
its defence to seek adjustment of the amount due from the petitioner to the
respondent towards owner issued materials. One possible view that the
tribunal could have taken, could be that the limitation did not run against the
respondent, as such a defence could be raised at any point of time, as and
when the claim is made against the respondent. The respondent could also
have argued that when the petitioner invoked the arbitration agreement, the
petitioner itself sought to raise the issue of adjustment sought to be made by
the respondent on account of owner issued material, by placing reliance on
the communication dated 10.05.2000 extracted in para 2.3 above. The
respondent could have also contended that the petitioner itself sought
reference of the disputes with regard to the amount adjusted by the
respondent to arbitration, as that was the justification offered by the
respondent to not pay the dues of the petitioner under the contract. It
appears, that because the issue of limitation was never raised by the
petitioner, the tribunal could not examine whether the counter claim was in
the nature of an adjustment. Even if the said counter claim was not in
respect of an adjustment but an independent counter claim, the learned
Arbitrator was precluded from considering the issue as to when the cause of
action last arose in favour of the respondent, and when the period of
limitation for making the said counter claim started to run against the
respondent. This was a mixed question of facts and law. The tribunal could
also not consider the issue, whether in terms of the arbitration agreement, it
was incumbent for the respondent to have raised the claim and also
demanded arbitration before preferring the counter claim.
46. Lastly, the tribunal was also precluded from considering whether the
said issue of adjustment/counter claim of the respondent was covered by the
invocation of the arbitration agreement by the petitioner.
47. Consequently, I find no merit in the petitioner‟s objection that the
counter-claim of the respondent was barred by limitation. This plea is not
open to the petitioner to raise at this stage as the same was never raised
before the Arbitral Tribunal.
48. The objection of the petitioner that the award made by the learned
Arbitrator qua recovery for wastage and excess amounts of cement,
reinforcement steel and structural steel is contrary to the contractual terms
also has no merit. The petitioner has placed reliance on Clause 8.3.1 (e) of
the contract, which reads as follows:
"At any point of time, the material outstanding as unaccounted
for, shall be limited to 10% of the value of the security deposit
given by the contractor for the materials unless & otherwise
permitted in writing by Engineer Incharge."
49. The petitioner‟s submission is that since no permission was given by
the Engineer-in-Charge permitting the petitioner to retain the material in
value terms beyond the limit of 10% of the security deposit, it could not be
accepted that the petitioner, in fact, was holding or had consumed excess
amounts of cement, reinforcement steel or structural steel.
50. The Arbitral Tribunal has dealt with the submission of the petitioner
and interpreted Clause 8.3.1(e) in the award in paragraphs 195 to 198. The
learned Arbitrator notes that the said clause requires reconciliation of
material on quarterly basis on the execution of works up to the specified
percentages including at the final stage. He also notes that there was no
evidence or averment of the respondent that the procedure had been followed
by the Engineer-in-Charge. He thereafter goes on to observe as follows:
"196. However, the claimant cannot be allowed to get undue
enrichment, if on getting the details from the documents, the
respondent is able to prove that the respondent is entitled to
make recovery in accordance with the provisions of the
contract for excess/less consumption of material is enumerated
in the contract, which is not in dispute.
197. I will first take up the recovery in respect of
Reinforcement Steel. Although in the statement of counter
claim, the amount claimed in respect of this material was Rs.
1,49,89,462/-. Yet, in the details filed by the respondent during
the proceedings on 24.5.2007, which were furnished to the
counsel for the claimant at that time but filed on the record on
31.1.2009, show that the respondent is now claiming
Rs.1,27,70,884/-. There is no dispute with regard to the
quantity of material issued to the claimant.
198. The claimant however, has endeavored to show that the
steel so issued was over weight. The respondent in its
calculation has given due account of the overweight material as
appeared on the record. The claimant on the other hand has
assumed without any basis that over weight found in respect of
particular quantity of steel should be spread over by average in
a generalized manner in respect of the entire quantity of the
steel issued to the claimant. There is no basis for the same. It
can be seen at page 151 of Book No.5 (Vol.XXX), the claimant
had mentioned about the weight difference at Sl No.3.Col.No.3
for the quantity of steel issued for section 16mm dia, whereas,
the store issue voucher (SI V) at C-682 (Book No.6) Vol.XIV,
the steel of section 16 mm dia is underweight i.e. 1.56 kg/mt as
compared to theoretical weight of 1.58 kg/mt and similarly, in
C-697, the claimant is getting the weight certified in respect of
the steel of section 20 mm dia and not of 16 mm dia, when it is
to the knowledge of the claimant that steel of 16 mm dia issued
to the claimant was under weight. The respondent has taken
out the actual issued material and the weight so recorded and
whenever so desired by the claimant for giving its calculation.
There is no reason to doubt the correctness of the details given
by the respondent, hence, I allow Rs.1,27,70,884/- as recovery
on the rates fixed in the contract, which are not in dispute."
51. The Respondent under counter claim no. 1 claimed Rs. 2,83,38,453/-
(which thereafter, on 31.01.2009, was claimed to be Rs. 1,27,70,884/- ) as a
recovery for wastage and excess consumption of cement, reinforcement steel
and structural steel, which were supplied by the respondent as free issue
material. The petitioner herein refuted the counter claim and also denied the
correctness of the details given in respect of the counter claim.
52. As per clause 8.3.1. (a) of the GCC, the re-conciliation of the actual
consumption and the theoretical consumption of the material so issued, was
to done as directed by the Engineer-in-charge on quarterly basis and also at
different stages of the works in accordance with the procedure prescribed
therefor. However, as noted by the arbitrator, there was no averment or
evidence that such procedure had been followed by the Engineer-in-charge.
53. The same, however, as observed by the Ld. Arbitrator, and rightly so,
would not entitle/allow the petitioner to get undue enrichment. Mere non-
obsservance of the procedure prescribed in clause 8.3.1(e) could not efface
the factual position as it was found to be existing on the record. The said
clause does not say that if the said procedure is not adopted, the respondent
would not be entitled to claim any amount in excess of 10% of the security
deposit or that the remaining claim of the respondent would be barred or
stand waived. The Arbitrator has returned a finding of fact that the
respondent was able to prove that there was excess consumption of free issue
material. The aspects of the method of calculating the consumption of
material, as enumerated in the contract, and the quantity of material issued to
the petitioner- were not disputed. These aspect, therefore, do not call for
interference in these proceedings.
54. The petitioner herein, however, tried to wash its hands of the said
liability by endeavouring to show that the steel issued by the respondent was
over-weight. The Ld. Arbitrator, while returning a finding of fact, rejected
the said defence on the ground that the petitioner assumed, without any
basis, that the over weight found in respect of particular quantity of steel
should be spread over by average in a generalised manner in respect of the
entire quantity of the steel issued to the claimant. The respondent, on the
other hand, as taken note of in the award, gave a due account of the
overweight material and the material actually issued along with its recorded
weight and the corresponding calculation- to stake its counter claim.
Consequently, the Ld. Arbitrator found no reason to doubt the correctness of
the details given by the respondent and accordingly allowed the counter
claim. The reasons given by the Ld. Arbitrator while dealing with the
counter claim of the respondent appear to be logical and plausible. There is
nothing to suggest that the interpretation of clause 8.3.1 of the contract is
perverse or contrary to the contractual terms. This objection of the
petitioner, accordingly, stands rejected.
55. The petitioner has assailed the aforementioned modification of the
award, as noticed in para 2.7 above, not on the ground that the amount of the
second last running bill was not paid to it by the respondent, but on an
entirely new ground i.e. that the amount of Rs. 1,54,28,696/- under Claim
No. 2 was in addition to the amount of Rs. 1,47,49.458.70/-. It was submitted
that the amount of Rs. 1,47,49.458.70/- had been paid way back in
December, 1997, whereas the rate analysis, which is the basis of Claim No.
2, had been prepared and finalised by the Respondent on 25.10.2001 and no
payment had been made thereafter. The raising of such entirely new grounds,
obviously, cannot be permitted at this stage.
56. The said plea is otherwise also unsustainable as, before the arbitrator
(at the time of the order of modification) it was pleaded that the said amount
had not been paid. However, the petitioner in the present proceedings admits
to have received the same - and that too, way back in December 1997. The
petitioner cannot be permitted to blow hot and cold at the same time and take
frivolous stands, just to somehow defeat the claim of the respondent. The
same is, accordingly, dismissed.
57. Accordingly, the present objection petition is dismissed with costs
quantified at Rs.30,000/-, to be paid by the petitioner to the respondent.
(VIPIN SANGHI)
JUDGE
SEPTEMBER 12, 2012
BSR/sr
