M/S. Collage Estates Pvt. Ltd. vs Blue Star Ltd.
2018 Latest Caselaw 4890 Del

$~39
*    IN THE HIGH COURT OF DELHI AT NEW DELHI

+                      FAO (OS) (COMM) 186/2018

                                    Date of decision: 20th August, 2018

       M/S. COLLAGE ESTATES PVT. LTD.         ..... Appellant
                     Through: Mr. D.P. Singh and Ms. Ishita
                     Jain, Advocates.

                Versus
       BLUE STAR LTD.                      ..... Respondent
                     Through:   Mr. Akhil Sibal, Sr. Advocate
                     with Mr. Yashvardhan, Mr. Pradeep
                     Chhindra, Ms. Smita Kant and Mr. Puneet
                     Kumar, Advocates.
       CORAM:
       HON'BLE MR. JUSTICE SANJIV KHANNA
       HON'BLE MR. JUSTICE CHANDER SHEKHAR
SANJIV KHANNA, J. (ORAL)

Caveat No.746/2018

Caveator is present and will be heard.

Caveat stands disposed of.

C.M. No.33485/2018

Exemption allowed, subject to all just exceptions.

FAO (OS) (COMM) 186/2018

M/s. Collage Estates Pvt. Ltd. has filed the present intra-Court appeal

under Section 37 of the Arbitration and Conciliation Act, 1996 (A & C

Act, for short) read with Section 13 of the Commercial Courts,

Commercial Division and Commercial Appellate Division of the High

Courts Act, 2015.

2. The impugned order dated 4th July, 2018 dismisses objections

filed by the appellant under Section 34 of the A & C Act vide OMP

(COMM) No.268/2017, challenging the arbitral award dated 6 th

March, 2017.

3. The appellant had entered into an agreement dated 8th February,

2008 with Blue Star Limited, respondent before us, for installation and

commissioning of Heating, Ventilation and Air Conditioning (HVAC)

system in the under construction Viva Collage Mall on Jalandhar-

Phagwara Road, Jalandhar, Punjab. The agreement, inter alia, had

required installation and commissioning of three imported centrifugal

water cooled chillers of 650 TR capacity and one rotary screw water

cooled chiller of 220 TR capacity. The total value of the contract

awarded by the appellant to the respondent was for Rs.12,71,40,000/-.

4. Disputes arose between the parties and as the parties could not

agree over the appointment of an arbitrator, the respondent filed a

petition under Section 11 of the A & C Act, before this Court. The

petition was allowed vide order dated 21th December, 2015,

appointing sole arbitrator to adjudicate and decide the disputes.

5. The primary claim of the respondent was that the appellant had

failed to make balance payment of Rs.1,78,27,556/-. The appellant,

on the other hand, had pleaded breach of contract on the part of the

respondent and had claimed damages under different heads to the tune

of Rs.7,71,96,439/-.

6. The Award passed by the learned Arbitrator accepts the claim

of the respondent and directs payment of Rs.1,78,27,556/- along with

interest @ 9% per annum. Counter claims filed by the appellant have

been rejected. The impugned award is a detailed one and runs into as

many as 160 typed pages and elucidates and decides the factual and

legal pleas raised, including the plea of limitation which we shall

refer to and examine in some detail.

7. Contention of the appellant is that the claim made by the

respondent was barred by limitation in view of the assertion by the

respondent that they had completed installation of four chillers on or

before 9th November, 2010 and the arbitration clause was invoked vide

notice dated 17th March, 2015. No particular Article of the limitation

Limitation Act, 1963 was relied upon by the appellant. Learned single

Judge had referred to Article 18 in the Schedule of the Limitation Act,

1963, which reads:-

"

        Description Period of limitation         Time from which period
        of suit                                  begins to run
        Time from Three years                    When the work is done.
        which
        period
        begins to
        run
                                                                                   "

8. Rejecting the plea of limitation, learned single Judge in the

impugned order has referred to judgment of the Delhi High Court

interpreting Article 18 of the Limitation Act, 1963 in Municipal

Corporation of Delhi vs. M/s. Gurbachan Singh & Sons, 208 (2014)

DLT 177, wherein it was held:-

"3. xxx

Three things, inter-alia, can be culled out from these paragraphs. Firstly ordinarily on the completion of the work, the right to get payment begins. Though Article 18 is not stated, this line is in terms of

Article 18 of the Limitation Act. The second aspect is that a dispute arises when there is a claim on one side and its denial/repudiation by the other. The third aspect is that a person cannot postpone the accrual of cause of action by repeatedly writing letters or sending reminders.

16. A summary of the conclusions on reading of the aforesaid relevant clauses of the contract in question and the judgments as dealt with above, bring out the following salient points:

(i) Limitation commences when the cause of action accrues/arises.

(ii) Accrual/arising of cause of action necessarily varies as per facts and circumstances of each case and the nature of jural relationship between the parties viz contractual or otherwise and so on.

(iii) As regards contracts for execution of building work, Article 18 comes into play in that when no specific date for payment is fixed, limitation commences and the cause of action accrues for the purpose of limitation on the completion of work.

(iv) In its application, Article 18 will cause different dates for accrual of causes of action in building works when a time period is fixed for submitting of a bill by the contractor and to which there is no response of the owner. Where a final bill is submitted and liability under the same, even if, in part, is admitted or some payment is made then such actions extend limitation in terms of Section 18 of the Limitation Act.

(v) No fresh period of limitation can arise simply because letters and reminders are written time and

again, attempting to keep the claim alive, although the claim by virtue of Article 18 of the Limitation Act, has become clearly time barred.

xxx"

9. Article 18 would come into play when no specific date is fixed

for payment. In such cases limitation commences or starts when the

work is complete. This is the date when the cause of action accrues.

Answer to the question when the work was complete and cause of

action had accrued would depend upon the facts and circumstances. It

is in this context referring to the legal position that the impugned order

passed by the learned single Judge affirms the findings recorded by

the learned Arbitrator that the claim made by the respondent was not

barred by limitation.

10. Learned Arbitrator on the facts had referred to the terms of

payment, the correspondence/emails exchanged and the meetings and

discussions held between the parties. Clause 20 of the agreement dated

8th February, 2008 had provided and stipulated terms of payment. The

appellant was to pay 100% CIF value of the chillers, which were to be

imported, on opening of the letter of credit and was also to pay the

prevailing customs duty on arrival. It is accepted and admitted that this

payment was made by the appellant. Clause 20 had also stipulated that

the appellant was to pay 10% advance excluding the Letter of Credit

part of the contract value, against bank guarantee of equivalent value

valid for the contract period from an acceptable schedule bank. 70%

pro-rata was to be paid on delivery. 10% pro-rata payment was due

and payable on erection. Balance and last 10% was payable on

commission. The respondent was to also execute bank guarantee of

equivalent of 10% value valid for 12 month from commissioning or 15

months from delivery, which ever was earlier. Thus there were counter

obligations, in respect of the last 10% payment.

11. As per the Award, the three imported chillers were

commissioned on 23rd April, 2010, 19th June, 2010 and 11th

September, 2010. The fourth chiller of 220 TR capacity was installed

on 23rd April, 2010 respectively. However, dispute arose with regard

to the third chiller of 650 TR capacity purportedly commissioned on

9th November, 2010. There was exchange of correspondence and

meetings with regard to its commissioning and working were held.

Contention of the appellant was that the third chiller was not properly

installed and commissioned. Subsequently, Global C Inc., a project

management consultant, had carried out inspection on 6th January,

2012 for checking, verification etc. of the bills raised. Global C Inc.

had certified that the respondent had completed work to the tune of

Rs.11,75,89,559/- and that extra work done by the respondent of Rs.

10,83,963/- would be settled separately. Thus, their report was in

favour of the respondent. Thereupon, the respondent had again pressed

for payment of balance money.

12. In spite of the inspection report by Global C Inc., the appellant

had sent details of defaults via snag list claiming that certain work was

not complete or the equipment installed was defective and faulty. The

respondent had then vide email dated 1st June, 2012 replied to the snag

list and stated that the snag list did not pertain to any major defect or

default and had been issued only to delay payment of legitimate dues

of the respondent. Nevertheless, to satisfy and meet the objection

raised, the respondent had rectified or repaired the defect or fault

stated in the snag list. It may be stated that the Award records that the

first chiller had run for 6000 hours, the second chiller had run for 5300

hours and the third chiller had run for 4400 hours till January, 2014.

Thus, it was observed that there could not be any doubt that chillers

had been installed and their working was satisfactory.

13. The appellant had not raised the plea of limitation in their

reply/objections to the petition under Section 11 of the A & C Act,

which was filed in July of 2015. It is relevant to point out that the

respondent had invoked arbitration clause vide letter dated 17th March,

2015, within the limitation period of 3 years from the email dated 1 st

June, 2012. It may be pertinent to state that the Arbitral Award also

refers to extra work awarded by the appellant to the respondent in the

internal areas which was beyond the scope of the original contract.

This extra work was also referred to by the Global C Inc. in their

report.

14. We would record that there is somewhat a contradiction in the

plea of limitation raised by the appellant. The appellant has predicated

their defence and raised the claim for damages asserting and claiming

that the chillers were not commissioned and were defective. Thus, the

balance amount of Rs.1,78,27,556/- had not become due and payable

to the respondent. The learned Arbitrator has highlighted the said

aspect in the Award and observed that the appellant had stated that the

respondent has not completed the work awarded and that the claim

was also barred by limitation. The impugned order also records that it

was on 27th April, 2015 that the appellant finally got their chillers

commissioned through a third party, statedly at the risk and cost of the

respondent.

15. The learned Arbitrator has taken the aforesaid facts into

consideration and thereafter held that the claim of the respondent was

not barred by limitation.

16. In the facts and circumstances of the case and in light of the

aforesaid discussion, we do find no infirmity in the Award. The appeal

is dismissed, with no order as to costs.

SANJIV KHANNA, J.

AUGUST 20, 2018/NA                         CHANDER SHEKHAR, J.