Delhi High Court
Mag Filters Equipments Pvt Ltd vs Era Builsys Ltd on 30 April, 2014
*IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 30th April, 2014
+ FAO(OS) 211/2014
MAG FILTERS EQUIPMENTS PVT LTD ..... Appellant
Through: Mr. Sunil Dalal, Adv.
Versus
ERA BUILSYS LTD ..... Respondent
Through: None.
CORAM :-
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
CM No.7560/2014 (for exemption)
1. Allowed, subject to just exceptions.
2. The application is disposed of.
FAO(OS) 211/2014 & CM No.7559/2014 (for stay)
3. This intra-court appeal impugns the order dated 19.02.2014 of the
learned Single Judge of dismissal of OMP No.117/2013 under Section 34
of the Arbitration & Conciliation Act, 1996 preferred by the appellant.
The said OMP was filed assailing the arbitral award dated 24.07.2013
whereby certain claims of the respondent / claimant were allowed and the
counterclaim of the appellant was rejected.
4. The appellant before the learned Single Judge restricted the
challenge (which has been allowed) to the point of limitation qua claim
no.1 of the respondent / claimant contending that the said claim was
barred by time.
FAO(OS) No.211/2014 Page 1 of 6
5. The learned Single Judge, in the impugned order, has recorded that
the arbitral Tribunal rejected the said defence raised by the appellant of
limitation by first observing that the same was raised as an afterthought
and secondly by considering the merits of the said defence and not
finding any substance therein. The learned Single Judge has agreed with
the reasoning given in the arbitral award and not found any ground to set
aside the award for the said reason.
6. We have heard the counsel for the appellant.
7. The said claim of the respondent / claimant was admittedly for the
balance 20% of the consideration agreed to be paid by the appellant to the
respondent / claimant for supply of material and for erection of Pre-
Engineered Steel Building (PEB) by the respondent / claimant at the site
of the appellant. The contention of the counsel for the appellant is that
the invoices raised by the respondent / claimant on the appellant for the
said balance 20% amount are dated 15.05.2008 and 30.08.2008 and
though the appellant did not pay the amount thereof, arbitration was
invoked only on 01.09.2011 i.e. after three years from the date of the
invoices and the claim for the amount of the said invoices was thus barred
by time.
8. We have enquired from the counsel for the appellant as to which of
the Articles of the Schedule to the Limitation Act, 1963 would apply.
9. The counsel for the appellant states that Article 14 of the
Limitation Act would apply.
FAO(OS) No.211/2014 Page 2 of 6
10. Article 14 provides a limitation of three years commencing from
the date of delivery of goods, for a suit for price of goods sold and
delivered, where no fixed period of credit is agreed or given.
11. The Arbitral Tribunal as well as the learned Single Judge have
found:
(i) that as per the contract between the parties, the said 20% of
the consideration was payable by the appellant to the
respondent / claimant, not upon invoice therefor being raised
but on submission of performance bank guarantee by the
respondent / claimant for the total project costs for 12
months from the date of issue of Completion Certificate by
the appellant;
(ii) that though the work of erection of PEB was completed by
07.08.2008 but the appellant wanted some modifications /
deviations and for which there was a provision in the
contract and which modifications / deviations were carried
out till early 2009;
(iii) that the respondent / claimant thus became entitled to full
and final payment only after the work had been so
completed;
(iv) that the appellant however did not issue the Completion
Certificate to the respondent / claimant;
FAO(OS) No.211/2014 Page 3 of 6
(v) that though the respondent / claimant was required to furnish
the performance bank guarantee only after issuance of the
Completion Certificate by the appellant but the respondent /
claimant nevertheless furnished a performance bank
guarantee dated 29.01.2009, valid upto 31.01.2010; and,
(vi) that the respondent / claimant thus became entitled to the
balance 20% only on 29.01.2009 and the arbitration invoked
on 01.09.2011 was within three years therefrom.
12. We have enquired from the counsel for the appellant that in the
circumstances aforesaid, how can it be said that no fix period of credit
was agreed for the payment of balance 20% to the respondent/claimant.
We have also invited the attention of the counsel to Article 15 of the
Schedule to the Limitation Act which provides limitation of three years
commencing from the date when the period of credit expires, for a suit for
price of goods, sold, supplied and delivered, to be paid after the expiry of
a fixed period of credit. Even though the period from the date of the
invoices and till the date of the performance bank guarantee was not the
period of credit but since the appellant became liable to pay the amount
of the invoice only on the respondent / claimant furnishing a performance
bank guarantee, the cause of action, even under the residuary Article 113,
would accrue only when the claimant became entitled to recover the
balance 20% sale consideration and could not have accrued prior thereto.
Help can also be taken from Article 18 which provides limitation of three
years commencing from the date when the work is done, for a suit for the
FAO(OS) No.211/2014 Page 4 of 6
price of work done for the defendant where no time has been fixed for
payment. Here, as aforesaid, time for payment of the balance 20%
consideration was fixed and the claim has been made within three years
therefrom.
13. The counsel for the appellant then contends that the respondent /
claimant could not unilaterally choose to furnish the bank guarantee at
any date and make a claim for the balance 20% within three years
therefrom. It is also argued that infact no performance bank guarantee
was ever furnished and the same was produced before the Arbitral
Tribunal for the first time.
14. The said hypothetical argument is not found to have been raised,
neither before the Arbitral Tribunal nor before the learned Single Judge.
Moreover that is not even the case. As aforesaid, the finding is, of the
work having been completed in early 2009 and the performance bank
guarantee having been furnished on 29.01.2009. There was thus no delay
in furnishing the same. It also defies logic that the respondent / claimant
would have a performance bank guarantee prepared but not submit the
same to the appellant.
15. Section 37 of the Arbitration Act under which appeal is preferred,
does not permit interference with a finding of fact and law by the Arbitral
Tribunal on the basis of material on record, particularly when the said
finding has been accepted by the learned Single Judge also. As has been
famously said, once the parties agree to be bound by the award of the
arbitrator, they agree to an award even if wrong on law and facts. Even
FAO(OS) No.211/2014 Page 5 of 6
under the old law, mere error in application of law was not a ground for
setting aside the award unless the arbitrator was found to have
misconducted or was shown to be biased and having acted unfairly or the
award to be improperly procured. The 1996 Act has further restricted the
challenge and the grounds as are urged, are not available.
16. There is thus no merit in the appeal which is dismissed. We refrain
from imposing costs.
CHIEF JUSTICE
RAJIV SAHAI ENDLAW, J.
APRIL 30, 2014
'gsr'..
