Blue Star Ltd. vs M/S Unison Hotels Ltd.
2013 Latest Caselaw 69 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+                      CS(OS) 984/2008

BLUE STAR LTD.                                      ..... Plaintiff
             Through:             Mr. Arun Khosla and Ms. Shreeanka
                                  Kakkar, Advocates
                       versus

M/S UNISON HOTELS LTD.                ..... Defendant
             Through: Mr. S.K. Agarwal and Mr. S.K. Joshi,
                       Advocates

%                 Date of Decision : January 07, 2013
CORAM:
HON'BLE MS. JUSTICE REVA KHETRAPAL

                                JUDGMENT

: REVA KHETRAPAL, J.

IA No.3864/2010

1. By way of this application under Order VII Rule 11 read with Section 151 CPC, 1908, the Defendant seeks rejection of the plaint on the ground that the present suit filed by the Plaintiff is barred by limitation.

2. Before dealing with the present application, it would be necessary to give a brief background of the facts in the present suit. The Plaintiff is a Public Limited Company engaged in the business of installation and commissioning of central air-conditioning plants. In response to the Defendant Company's Notice Inviting Tenders with respect to the execution of heating, ventilation and air-conditioning

work for the Defendant's Hotel Project, named Hotel Grand Hyatt, Vasant Kunj, New Delhi, the Plaintiff submitted its bid, which was accepted and an Agreement dated 27.09.1996 was entered into between the parties. The initial contract value was ` 8.44 crores, out of which sum the indigenous content was valued at ` 4.82 crores. From time to time, the latter value was revised and the final contract value was increased to ` 6,62,19,819/- along with ESCALATION CLAIM AMOUNT of ` 25,00,000/-, thus aggregating a sum of ` 6,87,19,819/-. In terms of the contract, M/S. LOUIS BERGER INTERNATIONAL INC., 41, Avenue Capucines, Quatre Bornes, Mauritius was nominated to act as a PROJECT MANAGER for "THE WORK" as defined in Clause 1.32 of the SUPPLEMENTARY CONDITIONS to the GENERAL CONDITIONS of the Contract. Clause 14 of the said AGREEMENT set out the TERMS OF PAYMENT, whereunder the "balance 10% of the contract value shall be released against testing and commissioning on pro-rata basis on submission of a Bank Guarantee of 5% issued by Scheduled Bank and valid for the defects liability period." Article 14 of the GENERAL AND SUPPLEMENTARY CONDITIONS to the said AGREEMENT (VOLUME II, EXHIBIT-A) set out the manner and method of "Payments to the contractor and completion", and for the facility of reference is extracted hereinbelow:-

"14.1 .........

Application for Progress Payment:

14.2 At least twenty days before the date established for each progress payment (but not more often than once a month). CONTRACTOR shall submit to PROJECT

MANAGER for review an Application for Payment filled out and signed by CONTRACTOR covering the Work completed as of the date of the Application and accompanied by such supporting documentation as is required by the Contract Documents....

14.3 .........

Review of Applications for Progress Payment: 14.4 PROJECT MANAGER will, within fifteen days after receipt of each Application of Payment, either indicate in writing a recommendation of payment and present the Application to OWNER / EMPLOYER, or return the Application to CONTRACTOR indicating in writing PROJECT MANAGER's reasons for refusing to recommend payment. In the latter case, CONTRACTOR may make the necessary corrections and resubmit the Application. Fifteen days after presentation of the Application for Payment to OWNER/EMPLOYER with PROJECT MANAGER's recommendation, the amount recommended will (subject to the provisions of the last sentence of paragraph 14.7) become due and when due will be paid by OWNER/EMPLOYER to CONTRACTOR. 14.5 PROJECT MANAGER's recommendation of any payment requested in an Application for Payment will constitute a representation by PROJECT MANAGER to OWNER/EMPLOYER, based on PROJECT MANAGER's on-site observations of the executed Work and on the accompanying data and schedules, that to the best of PROJECT MANAGER's knowledge, information and belief: ....

14.6 .........

14.7 PROJECT MANAGER may refuse to recommend the whole or any part of any payment if, in PROJECT MANAGER's opinion, it would be incorrect to make the representation to OWNER/ EMPLOYER referred to in paragraph 14.5. PROJECT MANAGER may also refuse to recommend any such payment, or, because of subsequently discovered evidence or the results of subsequent inspections, or tests, mollify any such

payment previously recommended, to such extent as may be necessary in PROJECT MANAGER's opinion to protect OWNER/EMPLOYER from loss because: ....

          14.7.1       .........
          14.7.2 to 14.11     .........
          Final Application for Payment:

14.12 After CONTRACTOR has completed all such corrections to the satisfaction of PROJECT MANAGER and delivered in accordance with the Contract Documents all maintenance and operating instructions, schedules, guarantees, Bonds, certificates or other evidence of insurance required, certificates of inspection, marked-up record documents (as provided in paragraph 6.19) and other documents, CONTRACTOR may make application for final payment. The final Application for payment shall be accompanied (except as previously delivered) by: (I) all documentation called for in the Contract Documents.

Final Payment and Acceptance:

14.13 lf, on the basis of PROJECT MANAGER's observation of the Work during construction and final inspection, and PROJECT MANAGER's review of the final Application for Payment and accompanying documentation as required by the Contract Documents. PROJECT MANAGER is satisfied that the Work has been completed and CONTRACTOR's other obligations under the Contract Documents have been fulfilled, PROJECT MANAGER will, within sixty days after receipt of the final Application for Payment, indicate in writing PROJECT MANAGER's recommendation of payment and present the Application to OWNER/EMPLOYER for payment. At the same time PROJECT MANAGER will also give written notice to OWNER / EMPLOYER and CONTRACT that the Work is acceptable subject to the provisions

of paragraph 14.15. Otherwise, PROJECT MANAGER will return the Application of CONTRACTOR, indicating in writing the reasons for refusing to recommend final payment, in which case CONTRACTOR shall make the necessary corrections and resubmit the Application. Thirty days after the presentation to OWNER/EMPLOYER of the Application and accompanying documentation, in appropriate form and substance and with PROJECT MANAGER's recommendation and notice of acceptability, the amount recommended by PROJECT MANAGER will become due and will be paid by OWNER/EMPLOYER to CONTRACTOR.

14.14 If, through no fault of CONTRACTOR, final completion of the Work is significantly delayed and if PROJECT"-MANAGER so confirms, OWNER/EMPLOYER shall, upon receipt of CONTRACTOR's final Application of Payment and recommendation of PROJECT MANAGER, and without terminating the Agreement, make payment of the balance due for the portion of the Work fully completed and accepted....."

3. According to the Plaintiff, there was a novation of the contract to the extent that the Plaintiff was required to submit all Running Bills and the Final Bill to the Defendant's GENERAL MANAGER, Mr. Anil Gupta, who headed the Defendant's PROJECT TEAM for the said Contract and the Plaintiff's interaction was confined to the latter with no part being delegated to the aforementioned PROJECT MANAGER, i.e., M/S. LOUIS BERGER INTERNATIONAL INC. During the execution of "THE WORK", certain disputes arose between the parties compelling the Plaintiff to institute a Civil Suit,

being CS(OS) No.485/2000, which suit was disposed of in terms of a compromise application jointly filed by the parties vide order dated 22nd August, 2000. Under the said compromise, the Defendant was liable to pay a sum of ` 25 lacs in four equal instalments under the Head of ESCALATION. The Defendant paid the first three instalments in compliance with the said order but defaulted in the release of the last instalment of ` 6.25 lac, thereby compelling the Plaintiff to institute separate execution proceedings for the recovery thereof. The said amount, however, does not form part of the relief prayed for in the present suit.

4. The Plaintiff's Final Bill No.P-84/05831-W/XVII dated 01.03.2002 in the sum of ` 6,62,19,819/- along with ESCALATION CLAIM AMOUNT of ` 25,00,000/-, (aggregating a sum of ` 6,87,19,819/-) was presented to the Defendant Company. The Plaintiff alleges that till date the said Bill has been satisfied only to the extent of ` 6,35,35,603/- (inclusive of the payment towards escalation of ` 18,75,000/-) leaving thereby a balance amount of ` 51,84,216/-. From this sum, the sum of ` 6.25 lacs is sought to be recovered under a separately instituted execution proceeding as already stated hereinabove, thereby leaving a balance principal amount of ` 45,59,216/-, which is sought to be recovered with interest thereon in the present suit. The Plaintiff further alleges that despite repeated reminders the Defendant's PROJECT TEAM, which was delegated the task of reviewing the Plaintiff's Final Bill for payment and recommending the release of payment, has not processed the

Plaintiff's Final Bill for payment, which it ought to have done within 60 days after the receipt of the same though the Defendant has made ad-hoc payments over the years in part satisfaction of the Final Bill. The Plaintiff's repeated requests that the Defendant discharge its liability under the Agreement have been stone walled by the Defendant on one pretext or the other. Thus, for instance, in response to the Plaintiff's letter dated 04.08.2003 addressed to the Defendant's Managing Director Mr. Umesh Saraf, one M/s. SPC Associates, 79, Samrat Enclave, Opposite Modern Bakeries, Ring Road, Delhi - 110 034 has written letter No.UHL/184 dated 03.09.2003 purporting to act under the Defendant's instructions and on its behalf to state that "the payment can be released only after the clearance of the following points which has been intimated to your Engineer." The Plaintiff claims that though the requirements set out in the aforementioned letter dated 03.09.2003 were duly met by the Plaintiff, but even thereafter there has been inexplicable silence from the Defendant's end. The Plaintiff also alleges that under Article 16.1 of the aforementioned GENERAL CONDITIONS all disputes or differences were to be decided by the OWNER/EMPLOYER within a reasonable time after their presentation, the said Article is reproduced hereunder for ready reference:-

"16.1 All disputes and differences of any kind whatsoever arising out of or in connection with the CONTRACT whether during the progress of the works or after their, completion shall be referred by the CONTRACTOR to the OWNER/EMPLOYER and the OWNER/EMPLOYER shall within a reasonable time

after their presentation make and notify decisions thereon in writing.

The decisions, directions, clarifications, measurements, drawings and certificates with respect to any matter the decision for which is specially provided for by these or other special conditions to be given and made by the OWNER/EMPLOYER or by the PROJECT MANAGER and OWNER'S Consultants on behalf of the OWNER/EMPLOYER are matters which are referred to hereinafter as Excepted Matters and shall be final and binding upon the CONTRACTOR and shall not be set aside on account of non-observance of any formality, any omission, delay or error in proceeding in or about the same or on any other grounds or for any reason and shall be without appeal.

16.2 In the event of any dispute or difference between the parties hereto as to the construction or operation of this contract, or the respect rights and liabilities of the parties on any matter in question, dispute or difference on certificate to which the CONTRACTOR may claim to be entitled, or if the OWNER/EMPLOYER fails to make a decision within reasonable time, then and in any such case, but except in any of the Excepted Matters referred to elsewhere in these General Conditions, the CONTRACTOR after 90 days of his presenting his final claim on the disputed matters, may demand in writing that the dispute or difference be referred to arbitration. Such in question, dispute or difference, and only such dispute or difference other than Excepted Matters of which the demand has been made and no other dispute or difference shall be referred to the arbitration of an officer of the OWNER/EMPLOYER to be nominated by the Managing Director at the relevant then by the Board of Directors of the OWNER/EMPLOYER and the provision of the Indian Arbitration Act 1940, for the time being in force, shall apply to such arbitration. Arbitration

16.3 The CONTRACTOR shall not, except with the consent in writing of the OWNER/EMPLOYER or the OWNER'S Consultants, in any way delay the carrying out of the work by reason of any such matter, question or dispute being referred to arbitration but shall proceed with the work with all due diligence and shall, until the decision of the arbitration is given, abide by the decision of the PROJECT MANAGER/ OWNER'S Consultants and no award of the arbitrator shall relieve the CONTRACTOR of his obligation to adhere strictly to the PROJECT MANAGER/OWNER'S Consultants' instructions with regard to the actual carrying out of the work except as specifically affected by such award."

5. The Plaintiff asserts that the Plaintiff's Vice President Mr. S. Sankaran had met with the Defendant's Managing Director who had assured the release of ad-hoc payments and the same assurance was confirmed in the Plaintiff's letter dated 18.08.2004. The Plaintiff's representatives had also met with the Defendant's Chief Engineer on 23.08.2005 and had confirmed the various issues discussed in the letter dated 24.08.2005, which includes a request for the release of the balance payments. The Defendant's Managing Director was once again vide the Plaintiff's letter dated 12.11.2005 reminded to make good the promise of payment made by him, but to no avail. The Defendant's Managing Director and other Executives have over the years kept on passing the buck from one to the other with regard to the decision in respect of the release of the Plaintiff's balance payment under the subject Contract, but no decision has been taken till date. The Plaintiff was, therefore, compelled to issue legal notice dated 04.09.2007. The said notice was not responded to and the

Plaintiff had no option except to institute the present suit, claiming a declaration to the effect that the Defendant had abdicated its authority to decide the question of the amounts due and payable to the Plaintiff as laid down in Article 16.1 of the GENERAL CONDITIONS of the CONTRACT, and is hence not entitled to exercise the said authority and for the relief of recovery of the sum of ` 45,59,216/- along with interest calculated at the rate of 15% per annum from 01.03.2002 till 29.02.2008 amounting to a sum of ` 41,03,294/-, thus aggregating a total sum of ` 86,62,510/-.

6. In the backdrop of the aforesaid facts, the Defendant seeks rejection of the plaint through the present application on the ground that the Plaintiff had admittedly submitted Final Bill on 01.03.2002 for the contracted work after the Minutes of the Meeting were signed by the parties in June, 2000 and on 18.06.2002 a sum of ` 4,89,500/- was paid to the Plaintiff by the Defendant in full and final satisfaction of the claim of the Plaintiff. Thus, the Plaintiff's right to claim any further amount/amounts does not survive and any such alleged right has long since lapsed. According to the Defendant, had there been the slightest truth in the allegations of the Plaintiff with regard to the amount due to the Plaintiff, the Plaintiff would not have waited for six years to file the instant suit, which is clearly bogus, wholly vexatious and patently frivolous, and is the product of ingenious drafting. It is submitted that a bare perusal and reading of the plaint would show that the suit is barred by limitation, the Final Bill of the work Contract having been submitted on 01.03.2002 and having been cleared to the satisfaction of the

Plaintiff. It is also submitted that the present suit is filed solely with the ulterior motive of harassing the Defendant and causing wrongful loss to the Defendant by abusing the process of law and is hence liable to be rejected. This apart, the plaint has not been filed by a duly authorized person and deserves to be rejected.

7. Opposing the aforesaid application, the Plaintiff submits that the Final Bill for the work in question was submitted by the Plaintiff but not settled by the Defendant despite repeated reminders till date. The Plaintiff also makes the following submissions:-

(i) The Defendant is the sole exclusive arbiter with regard to the release of payments against Bills raised by the Plaintiff as the Bills relate to excepted matters and the Plaintiff has no other remedy under the contract between the parties except to institute the present suit. The present suit has, therefore, been instituted.

(ii) It was the duty of the Defendant as the sole exclusive authority for the decision of the question of release of payments to decide the said question "within reasonable time". The Defendant having abdicated its authority in that regard has compelled the Plaintiff to institute the present suit.

(iii) The suit is instituted well within the period of limitation. The cause of action is a continuing and subsisting one on account of the non-specification in the contract of the ambit and scope of the expression "reasonable time" within which the Defendant was to take a decision with regard to the release of payments.

(iv) The period of limitation would commence from the date when the Final Bill submitted by the Plaintiff was rejected wholly or in part and on the refusal of the Defendant to make the payment of the Final Bill and not prior thereto. Till the institution of the suit, the Defendant neither rejected the Final Bill of the Plaintiff nor declined to make payment thereunder. It is for this reason that that Plaintiff sent reminder after reminder to the Defendant, and yet there was no rejection of the Bill on the part of the Defendant and, therefore, the suit filed by the Plaintiff in May, 2008 is clearly within the period of limitation.

8. Mr. Arun Khosla, the learned counsel for the Plaintiff submitted that the case of the Plaintiff would be covered under Article 113 of the Limitation Act, 1963 (Article 120 of the Limitation Act, 1908). In this context, Mr. Khosla sought to draw a distinction between the right to sue on the one hand and the accrual of that right and its infringement on the other. Heavily relying upon the decision of the Privy Council in Mt. Bolo vs. Mt. Koklan and Others reported in AIR 1930 Privy Council 270, Mr. Khosla contended that as laid down in the said decision there can be no right to sue until there is an accrual of the right asserted in the suit and its infringement. In the instant suit, the right to sue would arise only upon the rejection of the Final Bill of the Plaintiff by the Defendant and not prior thereto. The following extract of the judgment was specifically adverted to:-

"There can be no "right to sue" until there is an accrual of the right asserted in the suit and its infringement or at least clear and unequivocal threat to infringe that right

by the defendant against whom the suit is instituted. No doubt Mt. Koklan's right to the property arose on the death of Tara Chand, but in the circumstances of this case their Lordships are of opinion that there was no infringement of, or any clear and unequivocal threat to her rights till the year 1922, when the suit, as stated above, was instituted."

9. Reliance was also placed by Mr. Arun Khosla upon the decision of the Calcutta High Court in 24, Paraganas Zilla Parishad vs. M/s. Mercantile Engineering Co. and Anr., AIR 1969 Calcutta 564, in which case the said High Court rejecting the contention of the Defendant that Article 56 of the Limitation Act of 1908 (now Article 18 of the Limitation Act, 1963) would apply, upheld the Plaintiff's contention that the suit of the Plaintiff for payment of the amount due to him for installation of the road roller including the boiler would be governed by the general Article 120 (now Article 113 under 1963 Act) and, therefore, could not be said to be barred by limitation. In the present case also, the contention of Mr. S.K. Agarwal, the learned counsel for the Defendant is that it is Article 18 which is applicable and not Article 113 of the Limitation Act, 1963. The said Article reads as follows:-

Description of suit Period of Time from which limitation period begins to run

18. For the price of work done Three years When the work is by the plaintiff for the done.

defendant at his request, where no time has been fixed for payment.

10. Learned counsel for the Plaintiff, on the other hand, contends that the present case does not fall within the ambit of Article 18 as the work done in the present case is governed by the terms of the Agreement dated 27.09.1996 between the parties which clearly lays down in Article 16.1 of the General Conditions that all disputes or differences are to be decided by the owner/employer within a reasonable time of their presentation in respect of excepted matters. However, in the case of disputes and differences which do not relate to excepted matters, the contractor, after 90 days of his presenting the final claim on the disputes matters, may demand in writing that the dispute or difference be referred to arbitration. Counsel contended that it is not the case of the Defendant that the matters in suit are not excepted mattes nor it is the case of the Defendant that nothing is due to the Plaintiff and it was so intimated to the Plaintiff. There is also no allegation from the side of the Defendant that the payment is not being made to the Plaintiff by the Defendant for any fault of the Plaintiff's, and as a matter of fact it has not been denied by the Defendant that the bank guarantee executed by the Plaintiff in the Defendant's favour in terms of the Agreement (in order to secure the payment of the last instalment of 10% of the contract value) stands expired by efflux of time, the Defendant not having chosen to encash the said bank guarantee. Counsel contended that in this view of the matter, until and unless there is an unequivocal declaration from the side of the Defendant that nothing is due to the Plaintiff and the Plaintiff is informed that nothing is due to him, the right of the

Plaintiff to sue survives and it cannot be said that any infringement of the said right has occurred setting in motion the period of limitation.

11. I find merit in the aforesaid contention of the Plaintiff, more so as in the course of hearing there was not a whisper from the side of the Defendant of any default committed by the Plaintiff in the execution of the work or that nothing was due to the Plaintiff for the work executed by the Plaintiff. A feeble attempt was made by the learned counsel for the Defendant to urge that part payment of the Final Bill dated 01.03.2002 having been made on 18 th June, 2002, by necessary implication the remainder of the Final Bill must be deemed to be rejected. I find from the Agreement between the parties that there is no such deeming provision incorporated in the Agreement and, on the other hand, the Agreement clearly states that the Defendant shall decide the matter of payment within a reasonable time. The Defendant not having chosen to decide the matter within a reasonable time cannot now be allowed to capitalize on its own default and to blame the Plaintiff for not instituting the suit on the basis that there was a deemed rejection of the Plaintiff's claims. There is no gainsaying that had the Plaintiff instituted the suit without the Defendant's rejection of its claims for payment, the suit may have been thrown out by this Court on the ground of its being premature and having been instituted without accrual of the right to sue. The accrual of the right and its necessary concomitant, which is infringement of that right, are sine qua non for accrual of the cause of action and justifiably it is open to the Plaintiff to urge that no inroad

having been made into his right, no cause of action could be said to have accrued.

12. Before parting with this application, it may be noticed that Mr. Arun Khosla, the learned counsel for the Plaintiff also heavily relied upon the decision of the Hon'ble Supreme Court in the celebrated case of Gannon Dunkerley and Co. Ltd. vs. The Union of India, AIR 1970 SC 1433 and it was sought to be urged by him that the present case is on all focus with the said case, wherein it has been held that there is no right to sue until there is an accrual of the right asserted in the suit, and its infringement, or at least a clear and unequivocal threat to infringe that right by the defendant. The law in this regard is too well settled to require reiteration. While it is true that by mere writing of letters and communications, limitation cannot be extended, it is equally well established that merely because an employer keeps a decision pending cannot mean that it can turn around and say that the suit is barred by limitation. Indubitably, no refusal or rejection was ever communicated to the Plaintiff despite the repeated reminders of the Plaintiff and the matter was kept pending at the end of the Defendant. For the Defendant to now turn around and state that although no refusal was ever communicated inspite of the repeated reminders of the Plaintiff the claim of the Plaintiff must be deemed to be rejected by implication and the suit thrown out as barred by limitation would be wholly unjustified and unwarranted.

13. In view of the aforesaid discussion, there is no merit in the present application, which is accordingly dismissed with the usual

caveat that the findings recorded hereinabove shall have no bearing on the final outcome of the suit.

CS(OS) 984/2008 List before the Joint Registrar on 11th February, 2013 for further proceedings.

REVA KHETRAPAL (JUDGE) January 07, 2013 km