Delhi High Court
Delhi Tourism & Transportation vs Gammon India Limited on 16 July, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: 05th July, 2018
Pronounced on: 16th July, 2018
+ O.M.P. 510/2015
DELHI TOURISM & TRANSPORTATION ..... Petitioner
Through : Mr.G.Saikumar, Ms.Sowmya
Saikumar, Mr.Abhimanyu Garg
and Ms.Preety Makkar, Advocates
versus
GAMMON INDIA LIMITED ..... Respondent
Through : Mr.Rajiv Bansal, Sr Advocate with
Ms.Awantika Manohar and
Ms.Fiza Saluja, Advocates
CORAM:
HON'BLE MR. JUSTICE YOGESH KHANNA
YOGESH KHANNA, J.
1. The petitioner has filed objections under Section 34 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred as 'the
Act') against the arbitral award dated 09.06.2015 passed against
the petitioner and in favour of the respondent.
2. The facts in brief are as under:-
a) on 03.10.2002 the petitioner awarded the contract for
construction of flyover from Lajpat Nagar to Srinivaspuri, Ring
Road, New Delhi to the respondent against a total consideration
of 42.57 Crores on CPWD 12 (modified) for the completion
period of 18 months i.e. on or before 17.04.2004;
b) on 18.10.2002 the respondent commenced the work. The
petitioner granted the extension of time for completion of work
vide letter DTTDC/Engg/LN54(36)/1984 dated 04.07.2005.
c) on 12.04.2005 the respondent completed the construction
work with delay of almost an year;
d) on 20.09.2005 the respondent raised the final bill upon the
petitioner to the tune of 47,84,83,173/- against which on
28.07.2006 the petitioner made the payment of 42,54,08,660/-
to the respondent, which was duly accepted by the respondent;
e) on 16.09.2008 after expiry of two years of accepting the
payment against the final bill the respondent invoked the
arbitration vide letter No.WSS/G/614; and
f) on 12.11.2008 the Chief Engineer of the petitioner appointed
Shri K.N.Aggarwal, as sole arbitrator, who commenced the
arbitral proceedings on 19.12.2008 and passed an impugned
arbitral award dated 09.06.2015 against the petitioner, hence the
present petition.
3. Admittedly, the completion date of the contract was
12.04.2004 but extension was sought on 04.07.2005 and was
acceded to. The time was extended till 12.04.2005 without
prejudice to the rights of the Government to recover liquidated
damages in accordance with the provisions of clause No.2 of the
Agreement No.02/DTTDC/Engn/LN 2002-03. On 17.05.2005 a
letter was written by the petitioner to the respondent to get the
completion certificate and requested the respondent to submit its
final bill along with final measurements, deviation statements etc
to its office immediately in order to process the same. The
provisional completion certificate was annexed with the said letter.
4. Though, as per the term of the contract, the final bill was to
be submitted within three months but the respondent delayed in
filing the final bill but yet the petitioner entertained it and
processed the same.
5. The respondent submitted its final bill along with 41 claims.
The claims were entertained by the Executive Engineer and some
of them were accepted while remaining were rejected vide
communications dated 28.11.2004, 18.01.2005, 01.12.2005,
01.03.2006, 05.04.2006, 04.09.2006 etc. Thereafter, vide letter
dated 14.11.2006 the petitioner paid security deposit and released
the Bank Guarantees for mobilisation advance, as requested by the
respondent, vide its letter dated 14.11.2006. However, after two
years i.e. on 16.09.2008, the respondent raised demand to the tune
of `16,17,91,203/- against which payment of `2,31,53,000/- was
made in the final bill and an amount of `13,86,38,203/- was said to
be outstanding. Such demand was rejected, hence respondent
preferred raising dispute.
6. The petitioner then appointed Shri K.N. Aggarwal, Retired
DG (W), CPWD as a sole arbitrator to decide and make his award
regarding the claims / disputes raised by the respondent but,
however, subject to their admissibility under clause 25 of the
aforesaid agreement.
7. It is the case of the petitioner since the procedure for making
a dispute arbitrable was never followed by the respondent, the
learned arbitrator erred in allowing its claims. He refers to clause 9
and clause 25 of the agreement.
8. Clause No.9 of the contract notes:-
"CLAUSE 9 Payment of final bill
The final bill shall be submitted by the Contractor in the same
manner as specified in interim bills within three months of
physical completion of the work or within one month of the
date of the final certificate of completion furnished by the
Engineer-in- charge whichever is earlier. No further claims
shall be made by the contractor after submission of the final
bill and these shall be deemed to have been waived and
extinguished. Payments of those items of the bill in respect of
which there is no dispute and of items in dispute, for quantities
and rates as approved by Engineer-in-charge, will, as far as
possible be made within 6 months, the period being reckoned
from the date of receipt of the bill by the Engineer-in- charge
or his authorised Asstt. Engineer, complete with account of
dismantled materials."
9. Clause No.25 is relevant for deciding the issue and it notes:-
"CLAUSE 25
Settlement of Disputes & Arbitration
Except where otherwise provided in the contract all questions
and disputes relating to the meaning of the specifications,
design, drawings and instructions here-in-before mentioned
and as to the quality of workmanship or materials used on the
work or as to any other question, claim, right, matter or thing
whatsoever in any way arising out of relating to the contract,
designs, drawings, specifications, estimates, instructions,
orders or these conditions or otherwise concerning the works
or the execution or failure to execute the same whether arising
during the progress of the work or after the cancellation,
termination, completion or abandonment thereof shall be dealt
with as mentioned hereinafter:-
i) If the contractor considers any work demanded of
him to be outside the requirements of the contract, or disputes
any drawings, record or decision given in writing by the
Engineer-in-charge on any matter in connection with or
arising out of the contract or carrying out of the work, to be
unacceptable, he shall promptly within 15 days requests the
Superintendent Engineer in writing for written instruction or
decision. Thereupon, the Superintending Engineer in writing
shall give his written instructions or decision within a period
of one month from the receipt of the contractor‟s letter.
If the Superintending Engineer fails to give his instructions
or decision in writing within the aforesaid period or if the
contractor is dissatisfied with the instructions or decision of
the Superintending Engineer, the contractor may, within 15
days of the receipt of the Superintending Engineer‟s decision,
appeal to the Chief Engineer who shall afford an opportunity
to the contractor to be heard, if the latter so desires, and to
offer evidence in support of his appeal. The Chief Engineer
shall give his decision within 30 days of receipt of
contractor‟s appeal. If the contractor is dissatisfied with this
decision, the contractor shall within a period of 30 days from
the receipt of the decision, give notice to the Chief Engineer
for appointment of arbitrator failing which the said decision
shall be final, binding and conclusive and not referable to
adjudication by the arbitrator.
ii) Except where the decision has come final, binding
and conclusive in terms of Sub Para (i) above disputes or
difference shall be referred for adjudication through
arbitration by a sole arbitrator appointed by the Chief
Engineer, DTTDC, in charge of the work or if there be no
Chief Engineer, the administrative head of the said DTTDC. If
the arbitrator so appointed is unable or unwilling to act or
resigns his appointment or vacates his office due to any
reason whatsoever another sole arbitrator shall be appointed
in the manner aforesaid. Such person shall be entitled to
proceed with the reference from the stage at which it was left
by his predecessor.
It is a term of this contract that the party invoking
arbitration shall give a list of disputes with amounts claimed
in respect of each such dispute along with the notice for
appointment of arbitrator and giving reference to the rejection
by the Chief Engineer of the appeal.
It is also a term of this contract that no person other
than a person appointed by such Chief Engineer, DTTDC or
the administrative head of the DTTDC, as aforesaid should
act as arbitrator and if for any reason that is not possible, the
matter shall not be referred to arbitration at all.
It is also a term of this contract that if the
contractor does not make any demand for appointment of
arbitrator in respect of any claims in writing as aforesaid
within 120 days of receiving the intimation from the
Engineer-in-charge that the final bill is ready for payment,
the claim of the contractor shall be deemed to have been
waived and absolutely barred and the DTTDC/Govt. shall be
discharged and released of all liabilities under the contract
in respect of these claims."
10. The learned counsel for the petitioner also referred to a
letter dated 12.11.2016 qua the appointment of the learned
arbitrator and it notes:-
"Subject: In the matter of arbitration between M/s Gammon
India Ltd. and Delhi Tourism & Transportation Development
Corporation Limited, regarding the work "Construction of
flyover, ground Level Roads and Pedestrian Subway from
Lajpat Nagar to Sriniwaspuri Ring Road, New Delhi.
Agreement No.- 02/DTTDC/Engg/LN/2002-03.
Whereas M/s Gammon India Ltd. have written to me vide their
letter no. WSS/ G I 614 dated 16.09.08 that certain disputes
have arisen between the above noted parties in respect of the
above noted work. I, Jose Kurian, Chief Engineer, DTTDC by
powers conferred on me under clause 25 of the said
Agreement hereby appoint Shd K.N Agrawal, Retired D. G.
(W) CPWD as Sole Arbitrator to decide and make his award
regarding the claims/disputes by the contractor, if any, as
shown in the statements · enclosed subject always, however, to
their admissibility under clause 25 of- the aforesaid
agreement.
The amount of the claims in dispute being above Rs.1,00,000/-
the Arbitrator shall give reasons for the award.
-sd-
(Jose Kurian)
Chief Engineer
DTT DC"
11. Thus, the petitioner argue only those disputes which had
gone through the channel of the officials viz an Executive
Engineer, Superintending Engineer and then the Chief Engineer,
per clause 25 (supra), could only be referred to arbitration.
12. The learned counsel for the petitioner relied upon Indian Oil
Corporation Limited vs ERA Construction (India) Limited
189(2012) DLT 120 which held:-
"32. This Court is unable to appreciate the approach of the
learned Arbitrator in holding that the mere fact that the
parties were in correspondence and discussion amounted to a
waiver by IOCL of the requirement of compliance by ECIL
with the above clauses. There was no question of the clauses
merely being "followed in spirit." There is a specific
procedure envisaged which has to be followed before such a
claim could be entertained. The learned Arbitrator was in
terms of Section 28 of the Act bound to follow the clauses of
the contract in determining whether ECIL's counterclaims
were arbitrable. This was made explicit in the decision in M/s.
Uttam Singh Duggal & Co. (P) Limited v. Indian Oil
Corporation Limited where these very clauses were examined
and in Para 18 it was observed as under:
"18. xxxx Thus, the parties agreed that before
any claim/dispute could be subject matter of
arbitration, certain formalities had to be gone
into. Clause 9.0.0.0 which deals with arbitration
applies only to disputes and differences arising
out of a notified claim included in the final bill
of the contractor. As noted above, there is no
time limit prescribed in clause 9.0.0.0. In these
circumstances, it is therefore difficult to see as to
how the provisions of S. 37(4) would apply to the
requirements of clause 6.6.1.0, assuming that the
disputes in the present case are (1) covered
under clause 9.0.0.0, and (2) that the contractor
did take steps to commence arbitration
proceedings within the time fixed by the
arbitration agreement. Mr. Watel's argument is
that notified claim is nothing but a claim in
writing to the Corporation within ten days of the
date of occurrence and this claim is to be
included separately in the final bill. According to
him clauses 6.6.1.0, 6.6.3.0 and 9.0.0.0 are
inextricably interlinked and, therefore, the
notified claim is merely "some other steps to
commence arbitration proceedings" as
envisaged in S. 37(4) of the Act."
33. Although the above case arose under the Arbitration Act
1940, the ratio applies on all fours to the case on hand. The
inescapable conclusion is that the learned Arbitrator erred in
entertaining the counter claims of ECIL despite those claims
not being notified claims, not included in the final bill of ECIL
and therefore not arbitrable. It is not as if ECIL was without a
remedy as regards those counter claims. It could have filed a
suit. This was an error of jurisdiction committed by the
learned Arbitrator and, therefore, the impugned Award to that
extent cannot be sustained in law. However, it is clarified that
the Award to the extent it orders the admitted amount to be
paid by IOCL to ECIL with interest at 8% per annum from the
date ECIL invoked the arbitration clause up to the date of
payment, is upheld."
13. Further International Building and Furnishing Company
(Calcutta) Private Limited vs Indian Oil Corporation Limited
1995 (1) Arb LR 548 (Delhi) (DB) it was held:-
"7. It is, therefore, clear that arbitration at the instance of the
contractor is available under clause 9.0.1.0 only in respect of
"notified claim". That would mean that the contractor must
have gone through the procedure-indicated in clause 6.6.1.0
and 6.6.3.0 and notified his claims to the Engineer-in-
Charge and the Site Engineer within the period of ten day of
the date of issue of orders or instructions relative to any
works for which the contractor was claiming such additional
payment or compensation. In such a situation it is obvious
that if the claim is not a "notified claim", the arbitration
clause cannot be invoked by the contractor."
14. Further in Harsha Constructions vs Union of India & Others
(2014) 9 SCC 246 it was held:-
"18. Arbitration arises from a contract and unless there is
a specific written contract, a contract with regard to
arbitration cannot be presumed. Section 7(3) of the Act clearly
specifies that the contract with regard to arbitration must be
in writing. Thus, so far as the disputes which have been
referred to in Clause 39 of the contract are concerned, it was
not open to the Arbitrator to arbitrate upon the said disputes
as there was a specific clause whereby the said disputes had
been "excepted". Moreover, when the law specifically makes
a provision with regard to formation of a contract in a
particular manner, there cannot be any presumption with
regard to a contract if the contract is not entered into by the
mode prescribed under the Act.
19. If a non-arbitrable dispute is referred to an Arbitrator
and even if an issue is framed by the Arbitrator in relation to
such a dispute, in our opinion, there cannot be a presumption
or a conclusion to the effect that the parties had agreed to
refer the issue to the Arbitrator. In the instant case, the
respondent authorities had raised an objection relating to the
arbitrability of the aforestated issue before the Arbitrator and
yet the Arbitrator had rendered his decision on the said
"excepted" dispute. In our opinion, the Arbitrator could not
have decided the said "excepted" dispute. We, therefore, hold
that it was not open to the Arbitrator to decide the issues
which were not arbitrable and the award, so far as it relates to
disputes regarding non-arbitrable disputes is concerned, is
bad in law and is hereby quashed."
15. Hence it was argued that the respondent was to adhere to the
procedure stated in clause No.9 and clause No.25 of the agreement
and the arbitrator also was to look into and adhere to these clauses
in passing the judgment as is also held in UB Engineering Limited
vs Indian Oil Corporation Limited and Another 2013 (3) RCR
(Civil) 487 wherein the Punjab and Haryana High Court held:-
"24. Having heard this contention, clause 6.6.1.0 of the
general conditions of the contract between the parties being
the creation of the contract between them, the appellant was
bound by the terms of the agreement. As per Section 28 of the
Arbitration and Conciliation Act, 1996, the arbitrator was to
act in accordance with the terms of contract and to adjudicate
the dispute accordingly. He had no authority to avoid the
terms of contract while sitting with no party could insist
upon certain compliance of the terms of the contract as they
themselves go by the strict compliance of the certain clauses
of the contract. Certain clauses of the contract, which are
unreasonable, unconscious, unfair and result of domination
may make the claim as an excepted matter but does not
extinguish the remedy."
16. The learned counsel for the petitioner also referred to para
No.11 of its statement of defence filed by it before the learned
arbitrator and it read:-
"11.0. The Claimants sent notice vide (Exhibit R-36 P-263)
under clause no.25, GCC for the settlement of dispute and
requested to appoint but the request of claimant for
appointment of Sole Arbitrator is contrary to Agreement
Clause no.25."
17. Further the learned counsel for the petitioner argued once
the final bill was settled on 28.07.2006 then after two years the
respondent was precluded from raising fresh claims as is held in
Cauvery Coffee Traders, Mangalore vs Hornor Resources
(International) Company Limited (2011) 10 SCC 420:-
27. This Court in M/s. P.K. Ramaiah & Company v.
Chairman & Managing Director, NTPC, (1994) Supp. 3 SCC
126 considered the ambit of accord and satisfaction by the
parties voluntarily entered into and dispute raised
thereunder. This Court after considering the entire
controversy held that:
"8..... Admittedly the full and final satisfaction
was acknowledged by a receipt in writing and
the amount was received unconditionally. Thus
there is accord and satisfaction by final
settlement of the claims. The subsequent
allegation of coercion is an afterthought and a
devise to get over the settlement of the dispute,
acceptance of the payment and receipt
voluntarily given.... Having acknowledged the
settlement and also accepted measurements and
having received the amount in full and final
settlement of the claim, there is accord and
satisfaction. There is no existing arbitrable
dispute for reference to the arbitration."
(Emphasis added)"
18. The same proposition as laid in Union of India vs Popular
Builders, Calcutta (2000) 8 SCC 1 and in Wild Life Institute of
India, Dehradun vs Vijay Kumar Garg (1997) 10 SCC 528.
19. The learned counsel for petitioner then referred to para 1.1
of the award wherein the learned arbitrator himself noted the
reference of claims was subject to a proviso qua the admissibility
under clause 25 of the Agreement, but despite this proviso did not
prefer to deal with it.
20. Heard.
21. Now if one looks at order dated 12.10.2015, the petition was
admitted entirely on different grounds than what is been argued by
the learned counsel for the petitioner; the grounds for admission
being:-
"Learned counsel for the petitioner submits that the petitioner
made the payment of the final bill to the respondent on 28th
July, 2006, whereupon the respondent requested for release of
bank guarantees security deposit which were also released. It
is further submitted that the respondent raised the claim after
two years on 16th September, 2008. It is further submitted that
the petitioner raised the objection that the respondent‟s claim
was barred by clause 25 of the contract which provides a
limitation period of four months from the date of the
intimation of the final bill but the arbitrator has not even
cared to discuss this issue in the entire award. ....."
22. Thus, the challenge is qua limitation to move the fresh claim
and there is no whisper in the pleadings; in the statement of
defence or in the written submissions filed by the petitioner before
the learned arbitrator; as to what is been argued in this Court.
23. The statement of defence filed by the petitioner in arbitral
proceedings is as follows:-
"11.0. The Claimants sent notice vide (Exhibit R-36 P-263)
under clause no. 25, GCC for the settlement of dispute and
requested to appoint but the request of claimant for
appointment of Sole Arbitrator is contrary to Agreement
Clause no 25.
xxx
18.0. It is submitted that the Statement of Claim is liable to be
dismissed, inter-alia, on the following grounds:-
A. Claims are time barred.
B. Making of Statement of Claim is contrary to Clause 25 of
the contract. As the Clause 25 specifically states that if the
Claimant does not make any demand for appointment of
arbitrator in respect of any claims fn writing within 120 days
receiving the information from the Engineer-In-charge that
final bill is ready for payment, the claim of the Claimant shall
be deemed to have been waived and barred and that the
Respondent shall be discharged and released of all liabilities
under the contract in respect of such claims. Admittedly,
request for arbitration has not been made within the stipulated
period of 120 days and
therefore the Claimant is presumed to have waived all claims
resulting in discharge and release of the Respondent of their
all liabilities under the contract.
19.3. With reference to the statements made in paragraphs 4.1
to 4.15 it is submitted that the Respondents are not liable to
pay to the Claimant any amount in respect of any of the
claims. It is further submitted that the claims are vague in
nature and contrary to the terms of the contract and
furthermore all the claims by now have become time barred in
terms of Clause 25, of the contract. Finally, it is submitted that
all the sums due and payable under the contract have already
been paid to the Claimant as such the Claimant is not entitled
to raise any Claim when the account has already been
settled."
GROUNDS
"a. Because the issue of limitation has serious bearing on the
admissibility of the Respondent's claims. The Claims are
contrary to Clause 25 of the contract. As Clause 25
specifically states that if the Respondent does not make any
demand for appointment of arbitrator in respect of any claims
in writing within 120 days of receiving the information from
the Engineer-In-charge that final bill is ready for payment, the
claim of the Respondent shall be deemed to have been waived
and barred and that the Petitioner shall be discharged and
released of all liabilities under the contract in respect of such
claims. Admittedly, request for arbitration has not been made
within the stipulated period of 120 days, and therefore, the
Respondent is presumed to have waived all claims resulting
in discharge and release of the Petitioner of all liabilities
under the contract. The award is therefore patently illegal on
this account. The issue of limitation goes to the root of the
matter."
24. The written submissions of the petitioner filed before the
Arbitral Tribunal also notes:-
a. Non-speaking Award with respect to maintainability- The
Petitioner had submitted their averments through their
Statement of Defence, (Pg. 242 243, O.A) before the Ld.
Arbitrator that the claims of the' Respondent are barred as per
Clause 25(iii) of the Contract. However, the Award has been
passed, without giving any reasoned order in relation to the
jurisdiction of the arbitrator, in relation to Clause 25. The
Claims are contrary to Clause 25, since it specifically states
that if Respondent does not make any demand for appointment
of arbitrator in respect of any claims in writing within 120
days of receiving the information from Engineer-In-charge
that final bill is ready for payment, the claim of Respondent
shall be deemed to have been waived and barred and that
Petitioner shall be discharged and released of all liabilities
under the contract in respect of such claims. Admittedly,
request for arbitration has not been made within the
stipulated period of 120 days, and therefore, Respondent is
presumed to have waived the right of arbitration in respect of
all claims. The award is non reasoned and non-speaking, and
thus, patently illegal.
The Ld. Arbitrator has passed an unreasoned award and has
not applied his mind to the objections raised by Petitioner and
has illegally passed a non-speaking award in favor of
Respondent. Therefore, not only does the arbitral award suffer
from patent illegalities but also suffers from jurisdictional
error as the Ld. Arbitrator traversed beyond the terms of the
contract between the parties."
25. Hence, the above do show the petitioner had only challenged
the limitation to file fresh claims per clause No.25 (supra).
26. The petitioner is also harping upon the time limits
mentioned in clauses No.9 & 25 (supra) i.e. final bill was to be
submitted within three months of the physical completion or one
month of the final certificate of completion furnished by Engineer-
in-charge, whichever is earlier and the Engineer-in-charge may
take six months for finalization and payment of the bills and if any
of the party is not satisfied it may approach the arbitrator within
120 days thereafter.
27. Though the learned counsel for the petitioner has stressed
upon the word subject to admissibility under clause 25 and in
various paras viz. No.11, 17, 18(B) and 19.3 of its Statement of
Defence has only pleaded the time limit for filing fresh claim, as
given in clauses No.9 & 25, (supra) but did not ever plead the
constitution of the arbitral tribunal was illegal; hence has waived
off its right to challenge, per Section 4 of the Act.
28. Section 4 of the Act notes:-
"4. Waiver of right to object. --A party who knows that--
(a) any provision of this Part from which the parties may
derogate, or
(b) any requirement under the arbitration agreement, has not
been complied with and yet proceeds with the arbitration
without stating his objection to such non-compliance without
undue delay or, if a time limit is provided for stating that
objection, within that period of time, shall be deemed to have
waived his right to so object."
29. The aforesaid clearly evinces if the petitioner regarded the
procedure prescribed under Clause 25 of the Contract for
arbitrability of claims (of referring the claims first to the Engineer-
in-Charge, then to the Superintending Engineer and then the Chief
Engineer) was not followed, then it should have raised the said
objection before proceeding with the Arbitration without undue
delay. However, in the instant case since the petitioner failed to
raise any such objection before the learned arbitrator, therefore it is
now barred under Section 4 to raise the said plea for the first time
before this Court only in oral submissions. Reliance is placed on
paragraph 39 of the judgment in Bharat Sanchar Nigam Limited vs
Motorola India Private Limited (2009) 2 SCC 337.
30. Since the petitioner has neither pleaded nor argued before
the learned sole arbitrator about non-compliance of the procedure
to be followed for arbitrability of claims under Clause 25 of the
Contract, nor pleaded the same before this Court in any of the
submissions (Section 34 Petition, Rejoinder and Written
Submissions), the same cannot be now considered by this Court,
per Bharat Singh and Others vs. State of Haryana and Others
(1988) 4 SCC 534; refer paragraph 13; and Ritesh Tiwari and
Another vs. State of U.P. & Others, reported as (2010) 10 SCC
677; refer paragraph 24.
31. The reliance placed by the petitioner on the cases of Harsha
Constructions v. Union of India and Others, (2014) 9 SCC 246 and
Indian Oil Corporation Limited v. ERA Construction (India) Ltd.,
OMP No.104/2006 in this Court is completely misplaced. The
decision in Harsha Construction (supra) case clearly provides
there is a separate clause being Clause 39 which is an excepted
matter and hence could not have been adjudicated upon by the
Arbitrator as provided under Clause 63. However, in the instant
case the issue of excepted matter does not arise. Even assuming
without admitting for the sake of argument, that there is a
procedure prescribed to be followed for arbitrability of claims, it
by no stretch of imagination can mean that it be considered as an
excepted matter. Hence, reliance on Harsha Construction (supra)
is completely misplaced.
32. Let me now find how the learned Arbitral Tribunal has dealt
with the issue of limitation:-
"1.3.3. The findings/decision of the Arbitrator:
A. A reading of Claimants letter dated 20.09.2005. (Exhibit C-
l22), through which they submitted their Final Bill to
Respondents and Claimants' letter dated 16-09-2008 (Exhibit
C-152), invoking arbitration and seeking the appointment of
Arbitrator, brings out the following facts:
i) The Final Bill submitted on 20-09-2005, was for a gross
amount of Rs.61,15,41,411/- and the net amount of the bill
was Rs.16,17,91,203/-. The bill also included Claimants'
Claims No.1-41 for an amount of Rs.11,96,17,555/ - in the
Annexure-E of the Final Bill. The final Bill was passed/paid
on 28-07-2006 by the Respondents to the Claimants.
ii) The Claimants in their letter dated 16.09.2008, invoking
arbitration, have acknowledged of having received a net
payment of Rs.2,31,53,000/ - against the net Final Bill amount
of Rs.16,17,91,203/-as submitted by them, which being short
by an amount of Rs.13,86,38,203/ -, was sought to be referred
to arbitration.
B. The Chief Engineer/ DTTDC, on 12th November 2008,
referred Claims No. 1-41, as were included in the Annexure-E
of the Final Bill, totaling to an amount of Rs.11,96,17,555/-;
and later another Claim for the 'balance amount of Final Bill'
amounting to Rs.l,58,05,820/ - was referred on 23rd
November 2010, with reference to Claimants' letter dated 3-
07-2010.
The total amount referred thus comes to Rs.13,54,23,375/-,
which is within the amount of Rs.13,86,38,203/ - originally
sought to be referred for arbitration by Claimants. Thus
essentially both the references arise out of the Claimants'
original request dated 16.09.2008. It is thus noted that claims
covered in the two references have arisen because of the gap
between the Final Bill as submitted by Claimants on 20-09-
2005 and as paid by Respondents on 28-07-2006.
C. The Respondents have referred to Contract Clause 9, as
per which no further claims shall be made by the Contractor
after submission of the final bill and these shall be deemed to
have been waived and/ extinguished. Without going into the
merit and legal validity of such a contract provision in view of
Section 28 of the Indian Contract Act, it is however evident
that the Claims in question are those as were a part of the
Final Bill submitted by the Claimants. Thus the
Respondents' contention that the claims alleged by
Claimants before this arbitral tribunal were never raised or
mentioned in the final bill is disproved.
D. Further the Respondents have alleged that the claims were
made on 16-09-2008, which is after expiry of more than three
years after the date of completion of work, which was 12-04-
2005. The argument of Respondents is flawed in as much as
the reference point for the purpose of limitation would not be
the date of completion of work but the date of payment of the
Final Bill which as per the Respondents themselves, was on
28-07-2006. Thus the Claims having been raised by
Claimants on 16-09-2008 is well within three years of the
payment of Final Bill by Respondents.
E. In fact as per details furnished by Respondents on February
25, 2014 in their Exhibit R-S8, showing the details of various
payments released to Claimants, it is noticed that the last
payment was released by Respondents on 27-02-2007. If the
same is considered as the cut-off date for the purpose of
limitation then the Claims have been raised by Claimants
even in a lesser period than mentioned above.
F. In view of the above the question of limitation does not
arise and the preliminary objection raised by Respondents is
found to be without any merit and there appears to be no
ground for such an objection. Therefore the objection raised
by Respondents is not considered to be sustainable and is
accordingly rejected.
1.3.4. Since the preliminary objections raised by Respondents
have not been found to be sustainable, the matter is decided
on merits as follows."
33. Section 28 of the Indian Contract Act, is also relevant in the
context and it read:-
"28 Agreements in restraint of legal proceedings, void. --
Every agreement,--
(a) by which any party thereto is restricted absolutely from
enforcing his rights under or in respect of any contract, by the
usual legal proceedings in the ordinary tribunals, or which
limits the time within which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or
discharges any party thereto, from any liability, under or in
respect of any contract on the expiry of a specified period so
as to restrict any party from enforcing his rights, is void to
that extent."
34. The clause No.9 of the contract herein relate to Section 28
(b) and clause No.25 of the contract herein relate to Section 28(a)
of the Contract Act.
35. To adjudicate upon the issue of limitation it is necessary to
consider the relevant portions of Clauses 9 and 25 of the contract
between the parties hereto. While Clause 9 provides once the final
bill is raised, payments of those items in the bill in respect of
which there is no dispute and of items in dispute will as far as
possible be made within six months. Clause 25 provides that if the
contractor does not make any demand for appointment of arbitrator
in respect of any claims in writing within 120 days of receiving the
intimation that the final bill is ready for payment, the claim of the
contractor shall be deemed to have been waived and absolutely
barred and the Petitioner herein shall be discharged and released of
all liabilities under the contract in respect of these claims. Clause
25 inasmuch as it extinguishes claims, much before the prescribed
period of limitation under the Limitation Act, is void as per
Section 28 of the Contract Act, 1872, as amended. This issue being
no longer res integra.
36. In Hindustan Construction Corporation vs Delhi
Development Authority 77 (1999) DLT 165 this Court noted:-
"8. Learned counsel for the petitioner on the other hand has
argued that the said clause is hit by an amendment which has
been made to Section 28 of the Contract Act (vide Amendment.
Act 1 of 1997) whereby clause (b) has been incorporated
therein. Section 28 of the Contract Act deals with agreements
in restraint of legal proceedings, void. It envisages as under :-
"Every agreement,-
(a) by which any party thereto is restricted
absolutely from enforcing his rights under or in
respect of any contract, by the usual legal
proceedings in the ordinary tribunals, or which
limits the time within which he may thus enforce
his rights: or
(b) which extinguishes the rights of any party
thereto, or discharges any party thereby, from any
liability, under or in respect of any contract on
the expiry of a specified period so as to restrict
any party from enforcing his rights."
9. Learned counsel for the petitioner inspired by Section 28(b)
alluded to above, has then contended that the said provision of
law is very much applicable to the facts and circumstances of
the present case. By the incorporation of clause 25 in the
agreement his right to claim arbitration came to an end after
the expiry of period of 90 days from the date of intimation of
the final bill being ready for payment and thus he was
deprived of a very valuable right to claim the amount which
was due to him from the respondent.
10. A perusal of the impugned award reveals that the claims of
the petitioner herein were defeated simply on the ground that
the invocation of the arbitration clause was barred by time.
Consequently the arbitrator did not decide the claims on
merit.
11. In the circumstances stated above the petitioner are
entitled to succeed. The objections are hereby allowed. The
award dated January 7, 1994 is hereby set aside. The
arbitrator is hereby directed to decide the claims of the
petitioner on merits. In case the arbitrator who rendered the
impugned award is not available in that eventuality a new
arbitrator would be appointed by the authorities to go into the
claims of the petitioner and to render the award within the
statutory period."
37. Further in Grasim Industries Limited vs State of Kerala
2017 SCC OnLine SC 877 the Court noted:-
"9. Section 28(b) unequivocally provides, that an agreement
which extinguishes the right of a party on the expiry of a
specified period, would be void. Therefore, even if a restricted
period for raising an arbitral dispute had actually been
provided for (as was determined, in the impugned order), the
same would have to be treated as void.
10. In view of the legal position expressed hereinabove, the
limitation with reference to the claim raised by the appellant,
would have to be determined only under article 137 of the
limitation act. Insofar as the instant aspect of the matter is
concerned, the High Court found that the claim raised by the
appellant was even beyond the period postulated under article
137 of the limitation act. In this behalf, the High Court
recorded the following observations:
„7. It is not actually a decision on the claim
made under Annexure-X; but it is a decision of
the arbitration clause in the agreement. Apart
from that the claim put forward by the applicant
in respect of the shortage of supply of raw
materials from 1988-89 onwards also is barred
by limitation under article 137 of the limitation
act. The Supreme Court in Steel Authority of
India Limited v. J.C Budharaja [(1999) 8 SCC
122] held that the provisions of art.137 of the
limitation act would apply and any action should
be brought within three years from the date when
the cause of action to recover the amount rose.
Thus the request for appointment of arbitrator
will have only to be rejected."
38. In the instant case, the respondent herein had submitted the
Final Bill on 20.09.2005 and the Final Bill approved by the
Engineer was signed by the respondent on 28.07.2006. The dispute
had, therefore, arisen between the parties on 28.07.2006, when the
respondent herein came to know about the amounts and claims not
approved by the Engineer-in-Charge. Therefore, the Statement of
Claims, having been filed on 16.09.2008 by the respondents herein
is well within the limitation period of 3 years.
39. A bare perusal of the respondent's letter dated 20.09.2005,
through which it had submitted its Final Bill to the petitioner and
the respondent's letter dated 16.09.2008 invoking arbitration and
seeking appointment of arbitrator makes it evidently clear that the
Final Bill submitted on 20.09.2005 was for a gross amount if
`61,15,41,411/- and the net amount of the bill was `16,17,91,203/-
The bill also included the respondent's claim Nos.1-41 for an
amount of `11,96,17,555/- in the Annexure E of the Final Bill. The
Final bill was passed/paid on 28.07.2006 by the petitioner to the
respondent. Further, the respondent vide dated 16.09.2008,
invoking arbitration, has acknowledged of having received a net
payment of `2,31,53,000/- against the net Final Bill amount of
`16,17,91,203/- as submitted by them, which being short by an
amount of `13,86,38,203/- was sought to be referred to arbitration.
40. The Chief Engineer of the petitioner on 12.11.2008 referred
Claims No.1-41, as were included in the Annexure - E of the Final
Bill, totaling to an amount of `11,96,17,555/- and later another
claim for the 'balance amount of Final Bill' amounting to
`1,58,05,280/- was referred on 23.11.2010, with reference to the
respondent's letter dated 03.07.2010. The total amount referred
thus comes to `13,54,23,275/-which is within the amount of
`13,86,38,203/- originally sought to be referred for arbitration by
the respondent herein. Thus, essentially both the references arise
out of the respondent's original request dated 16.09.2008. Thus the
claims covered in the two references have arisen because of the
gap between the Final Bill as submitted by the respondent herein
on 20.09.2005 and as paid by the petitioner herein on 28.07.2006.
41. As per the details furnished by the petitioner showing details
of various payments released to the respondent herein, it is noticed
the last payment was released by the petitioner herein on
27.02.2007. If the same is considered to be the cut-off date for the
purpose of limitation then the claims have been raised by
claimants/respondent herein even in a lesser period than mentioned
above.
42. The completion certificate for the works was issued by the
petitioner herein on 01.06.2006 stating the actual date of
completion as 12.04.2005. Further, Clause 9 of the Contract
between the parties hereto provides the Final Bill submitted by the
respondent shall include all the amounts due and payable as
considered by the claimants. Therefore, from a bare perusal of
Clause 9 it is evident the parties had agreed that all the amounts
that the respondent considers due and payable, including the
disputed amount, has to be included in the Final Bill and the
Engineer-in-Charge has to approve the Final Bill within a period of
six months. Obviously, only after the receipt of the approval of
payment by the Engineer-in-Charge, the dispute, if any, will arise
and thereafter the Contractor will be eligible for referring such
dispute to arbitration.
43. The contention of the petitioner the limitation period shall
commence from the date of completion of the works is not in
accordance with the provisions of the contract. Further, the dispute
between the parties shall occur only after submission of the bill
and approval or rejection.
44. The letter dated 18.10.2006 written by the respondent herein
to the Superintending Engineer after rejection of its claim by the
Executing Engineer was to ask the superintendent Engineer to
reimburse its claims and to look into the merits of the case and
impart justice. On 21.02.2007 the Superintending Engineer
however rejected the claims and ultimately on 12.11.2007 the
claims and disputes were referred to the arbitrator subject to their
admissibility under Clause No.25 of the aforesaid agreement. All
the three authorities have rejected the claim as such Clause No.25
was duly complied with, even if, the claim was not preferred
within 120 days but was within three years, which per Section
28(a) of the Indian Contract Act, was perfectly justified.
45. A perusal of award would reveal the arbitral tribunal has
examined all the documents placed on record, appreciated the
evidence led by the parties and made a reasoned award. Thus, there
being no infirmity in the award passed by the learned arbitrator, I
see no reason why it should be set aside. The law is well settled
this Court is not to re-appreciate the evidence produced during
arbitral proceedings and it is only for the arbitrator to weigh such
evidence and to reach to a conclusion which the learned arbitrator
has fairly done in this case. It is a settled law if two views are
possible the view taken by the learned arbitrator cannot be
interfered with unless it is perverse and shock the conscience of the
Court.
46. The jurisdiction of this Court is limited to see if the learned
tribunal has transgressed beyond the contract or has not acted in
accordance with law or if has applied wrong principles of law. The
Court under Section 34 of the Act does not sit in appeal over the
award and there is no scope of re-evaluation on merits or
reinterpreting the terms of the contract. This position has even
been upheld by the Apex Court in Associate Builders vs. DDA
(2015) 3 SCC 49.
47. The petition is dismissed. No orders as to cost.
YOGESH KHANNA, J
JULY 16, 2018
M
