Delhi High Court
Sagar Constructions Through Shri ... vs Govt. Of Nct Of Delhi on 6 October, 2021
$~5
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 06th October, 2021
+ ARB.P. 856/2021
SAGAR CONSTRUCTIONS THROUGH SHRI
SUBASH CHAND SAINI ..... Petitioner
Through Mr. Sanjay Bansal, Adv.
versus
GOVT. OF NCT OF DELHI ..... Respondent
Through Mr. Naushad Ahmed Khan,
Adv.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
[Hearing Held Through Videoconferencing]
VIBHU BAKHRU, J. (ORAL)
1. The petitioner has filed the present petition under Section 11 of
the Arbitration & Conciliation Act, 1996 (hereafter the 'A&C Act'),
inter alia, praying that an Arbitrator be appointed to adjudicate the
disputes, which have arisen between the parties.
2. By a letter dated 10.11.2014, the respondent awarded the work
of construction of twelve numbers SPS type (D/S) class rooms with
toilet block and staircase at Government Co-Ed. School B-4, Paschim
Vihar, New Delhi, to the petitioner. The said work was to be
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RAWAL
completed within a period of four months from the date of the Letter
of Acceptance (LoA), that is, on or before 19.03.2015.
3. The petitioner completed the said works on 16.03.2015.
4. The petitioner claims that the respondent had failed and
neglected to release the payment due in respect of the aforesaid
Contract. In the said context, the petitioner issued a letter dated
23.02.2016 requesting the concerned Superintendent Engineer to
resolve the disputes and/or take further steps in accordance with
Clause 25 of the General Conditions of Contract (GCC) as applicable
to the Contract between the parties. Thereafter, the petitioner also
approached the Chairman of the Dispute Resolution Committee
(DRC) in terms of Clause 25 of the GCC. However, the disputes
remain unresolved.
5. Thereafter, by letters dated 10.09.2018 and 11.12.2019, the
petitioner requested the concerned Chief Engineer to appoint an
Arbitrator for adjudication of the disputes. The petitioner's request for
the appointment of an Arbitrator was denied on the ground that the
petitioner had not invoked the Dispute Resolution Clause within a
period of one hundred and twenty days from the date of preparation of
the Final Bill.
6. Mr. Khan, learned counsel appearing for the respondent,
submits that the claims made by the petitioner are also barred by
limitation as the same were made beyond the period of three years
from the date of completion of the work. Clause 25 of the GCC,
which is applicable to the Contract in question, reads as under:
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RAWAL
"CLAUSE 25
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, claims, right,
matter or thing whatsoever in any way arising out
of or 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 request the Superintending
Engineer in writing for written instruction
or decision. Thereupon, the Superintending
Engineer 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
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receipt of Superintending Engineer's
decision, appeal to the Chief Engineer who
shall afford an opportunity to the contractor
to be heard, if the letter 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
the decision of the Chief Engineer, the
contractor may within 30 days from the
receipt of the Chief Engineer decision,
appeal before the Dispute Redressal
Committee (DRC) along with a list of
disputes with amounts claimed in respect of
each such dispute and giving reference to
the rejection of his disputes by the Chief
Engineer. The Dispute Redressal
Committee (DRC) shall give his decision
within a period of 90 days from the receipt
of Contractor's appeal. The constitution of
Dispute Redressal Committee (DRC) shall
be as indicated in Schedule 'F'. If the
Dispute Redressal Committee fails to give
his decision within the aforesaid period or
any party is dissatisfied with the decision of
Dispute Redressal Committee (DRC), then
either party may within a period of 30 days
from the receipt of the decision of Dispute
Redressal Committee (DRC), give notice to
the Chief Engineer for appointment of
arbitrator on prescribed proforma as per
Appendix XV, failing which the said
decision shall be final binding and
conclusive and not referable to adjudication
by the arbitrator.
It is a term of contract that each party
invoking arbitration must exhaust the
aforesaid mechanism of settlement of
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RAWAL
claims / disputes prior to invoking
arbitration.
(i) Except where the decision has become
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, CPWD, in charge of the
work or if there be no Chief Engineer, the
Additional Director General of the
concerned region of CPWD or if there is no
Additional Director General, the Director
General, CPWD. 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 or 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 CPWD or Additional
Director General or Director General,
CPWD, 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.
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RAWAL
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 discharged and released
of all liabilities under the contract in respect
of these claims.
The arbitration shall be conducted in
accordance with the provisions of the
Arbitration and Conciliation Act, 1996 (26
of 1996) or any statutory modifications or
re-enactment thereof and the rules made
thereunder and for the time being in force
shall apply to the arbitration proceeding
under this clause.
It is also a term of this contract that the
arbitrator shall adjudicate on only such
disputes as are referred to him by the
appointing authority and give separate
award against each dispute and claim
referred to him and in all cases where the
total amount of the claims by any party
exceeds Rs.1,00,000/-, the arbitrator shall
give reasons for the award.
It is also a term of the contract that if any
fees are payable to the arbitrator, these shall
be paid equally by both the parties.
It is also a term of the contract that the
arbitrator shall be deemed to have entered
on the reference on the date he issues notice
to both the parties calling them to submit
their statement of claims and counter
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statement of claims. The venue of the
arbitration shall be such place as may be
fixed by the arbitrator in his sole discretion.
The fees, if any, of the arbitrator shall, if
required to be paid before the award is
made and published, be paid half and half
by each of the parties. The cost of the
reference and of the award (including the
fees, if any, of the arbitrator) shall be in the
discretion of the arbitrator who may direct
to any by whom and in what manner, such
costs or any part thereof shall be paid and
fix or settle the amount of costs to be so
paid."
7. There is no dispute as to the existence of an Agreement to refer
the disputes between the parties, relating to the contract in question, to
arbitration.
8. Mr. Khan, learned counsel appearing for the respondent does
not dispute the existence of the Arbitration Clause or that the
petitioner had invoked the same. He, however, submits that since the
request for arbitration was not made within a period of one hundred
and twenty days from the date of preparation of the Final Bill, the
petitioner has lost its rights to seek the aforesaid remedy. He also
submits that in any event, the petitioner's claims are barred by
limitation.
9. Mr. Bansal, learned counsel appearing for the petitioner, has
countered the aforesaid submissions.
10. The question whether the period of invoking the arbitration
could be restricted to a period less than as provided under the
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Limitation Act, 1963 is no longer res integra.
11. In Grasim Industries Limited v State of Kerala: (2018) 14 SCC
265, the Supreme Court considered an appeal from an order where the
appellant was non suited on the ground that the demand for
appointment of the Arbitral Tribunal was not made within the time as
stipulated in the arbitration agreement. The Supreme Court found that
the relevant clause did not stipulate any time and further held as under:
"11. Section 28(b) [of the Contract act, 1872]
unequivocally provides that an agreement which
extinguishes the right of a party on expiry of the a
specified period, would be void. Therefore, even if
a restricted period for raising an arbitral dispute has
actually been provided for (as was determined in
the impugned order), the same would be treated as
void"
12. A Coordinate Bench of this Court in the case of National
Highways Authority India v. Mecon - Gea Energy Systems India
Ltd. JV: 199 (2013) DLT 397 held as under:
41. A perusal of the amended Section 28 of the
Contract Act, 1957 extracted above would show
that both kinds of agreements i.e. agreements
which restrict the period of limitation within
which claims could be referred, as also
agreements which extinguish the right of a party
to prefer a claim or discharges any party from any
liability under a contract on expiry of a specified
period, are void to that extent.
42. Before the amendment of Section 28 in 1997,
the agreements reducing the period of limitation
were distinguished from those which did not limit
the time within which a party might enforce his
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RAWAL
rights, but which provided for a release or
forfeiture of rights, if no suit was brought within
the period stipulated in the agreement; and the
latter class of agreements, being outside the scope
of the section, were held to be binding between
the parties. Thus, in National Insurance Co.
Ltd. v. Sujir Ganesh Nayak & Co. (AIR 1997 SC
2049), the Supreme Court drew a clear distinction
between an agreement which curtails the period
of limitation and an agreement which provides for
forfeiture or waiver of the right itself, if no action
is commenced within the period stipulated by the
agreement. The first was held to be void as
offending Section 28 but, the later was held not
falling within the mischief of Section 28. Thus, it
was held that curtailment of the period of
limitation was not permissible in view of Section
28 but extinction of the right itself, unless
exercised within the specified time, was
permissible and can be enforced.
43. After the 1997 amendment to Section 28 of
the Indian Contract Act, 1872, not only the
curtailment of the period of limitation is void, but
also the extinction of right, if sought to be brought
by the agreement within a specific period, which
period is less than the period of limitation
prescribed for the suit under the Contract in
question, is also rendered void. In other words,
after the amendment to Section 28 of the Indian
Contract Act, 1872 by Act 1 of 1997, the
distinction between curtailing of the period of
limitation and extinction of the right itself, after
the specified period, no longer exists."
13. The contention that the claims made by the petitioner are time
barred is also without merit. There is a distinction between the
disputes being barred by limitation and the petition under Section 11
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RAWAL
of the A&C being barred by limitation. The period of limitation for
filing the petition would run from receipt of notice under Section 21 of
the A&C Act and since no specific period is specified, Article 137 of
Limitation Act, 1963 would apply (See - Bharat Sanchar Nigam
Limited & Anr. v Nortel Networks India Private Limited: (2021) 5
SCC 738).
14. The period of limitation for the disputes will commence from
the date of cause of action till invocation of the agreement to refer the
disputes to arbitration. The question whether the disputes are within
the period of limitation falls within the jurisdiction of the Arbitral
Tribunal and unless it is, ex facie, apparent that the disputes are barred
by limitation, the parties are required to be referred to arbitration (See
-Vidya Drolia & Ors. v Durga Trading Corporation: (2021) 2 SCC
1).
15. This Court is also unable to readily accept that the claims made
by the petitioner are barred by limitation. It is clearly a contentious
issue and it is not necessary for this Court to address the said issue in
this proceeding as the same would be required to be considered by the
Arbitral Tribunal.
16. The present petition was listed on 07.09.2021 when the learned
counsel for the respondent accepted notice and had sought time to file
a reply. The respondent was granted two weeks' time to file the reply.
However, no reply has been filed by the respondent as yet.
17. In view of the above, the material averments made in the
present petition are accepted as uncontroverted. However, it is
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RAWAL
clarified that this will not preclude the parties in any manner from
canvassing such contentions as advised before the Arbitral Tribunal.
18. Considering that there is no dispute as to the existence of the
Arbitration Agreement and the petitioner has invoked the same, this
Court considers it apposite to allow the same.
19. Accordingly, Mr M.C. Mehra, District Judge (Retired) (Mobile
No. 9868980027), is proposed to be appointed as the Sole Arbitrator
to adjudicate the disputes between the parties.
20. The parties are at liberty to approach the Arbitrator for eliciting
his consent and the necessary disclosure as required under Section
12(1) of the A&C Act.
21. Let the same be furnished to this Court before the next date of
hearing.
22. List on 25.10.2021
VIBHU BAKHRU, J
OCTOBER 6, 2021
'gsr'
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