Madras High Court
The Chief Engineer Highway vs M/S.Roman Tarmat Ltd on 12 July, 2021
O.S.A.Nos.147 and 153 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 12.07.2021
CORAM :
THE HON'BLE MR.SANJIB BANERJEE, CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE SENTHILKUMAR RAMAMOORTHY
O.S.A.Nos.147 and 153 of 2021
1.The Chief Engineer Highway
Metro/Employer,
No.1, New Street,
Super Bazar Building,
Alandur, Chennai 600 016
2.The Division Engineer,
Highways TNUDP III,
C.M.D.P. Division IV
Chennai 600 016 ... Appellants
Vs
1.M/s.Roman Tarmat Ltd.
rep. By its General manager,
Mr.N.V.Natarajan
2.The Executive Director
T.N.Road Infrastructure Development Corporation
4th Floor, LLA Building,
735, Anna Salai,
Chennai 600 002 ... Respondents
Appeals filed against the Order of this Court dated 24.11.2020 in
O.P.Nos.431 and 413 of 2020.
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For Appellants : Mr.R.Shunmugasundaram,
Advocate-General,
Assisted by Mr.V.T.Aravind Gosh,
A.G.P. (CS)
For Respondents : Mr.M.S.Krishnan,
Senior Counsel,
for Mr.B.Harikrishnan
COMMON JUDGMENT
(made by the Hon'ble Chief Justice)
The appeals arise out of a common judgment and order of
November 24, 2020 passed on petitions challenging an arbitral award
of December 28, 2019. The appellants' challenge to the arbitral award
on the ground of the claim being barred by limitation has been
repelled. On the first respondent contractor's challenge to the
counter-claim filed in the arbitral reference by the appellants herein,
the counter-claim has been rejected.
2. The short question raised in seeking to dislodge the
contractor's claim is that the termination of the two contracts was not
questioned within the time referred to in a clause in the contract; and,
as a consequence whereof, the contractor is deemed to have accepted
the termination of the two contracts. The appellants submit that
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though such ground was squarely taken in course of the proceedings
under Section 34 of the Arbitration and Conciliation Act, 1996 and
even urged in course of the hearing before the arbitration court, it is
apparent from the order impugned that the arbitration court
misconstrued the submission and did not deal with such aspect of the
matter in the judgment and order impugned dated November 24,
2020.
3. The issues involved in the two appeals are identical. The
appellants awarded similar contracts in favour of the respondent
contractor for constructing two stretches of a road for the first ten
kilometer and from the tenth kilometer to the 17th kilometer. Both
contracts required the work to be completed within a certain period of
time and the work to be taken up on a continuous basis.
4. For reasons that are not necessary to be looked into at
present, the contracts were terminated by the employer on April 21,
2011. It is necessary, at this juncture, to notice clause 24 of the
contract in either case that provides as follows:
“If the Contractor believes that a decision given by
the Engineer was either outside the authority given to the
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Engineer by the contract or that the decision was wrongly
taken, the decision shall be referred to Adjudicator within
14 days of the notification of the Engineer’s decision”.
5. The relevant provision implies that the engineer had due
authority to take decisions as to the nature of the work and any other
conditions attendant thereto. However, the engineer’s decision was
subject to scrutiny by an adjudicator, who was named in the relevant
contracts, and the adjudicator could receive any grievance that the
contractor would deem necessary to carry from any decision of the
engineer. It cannot be missed that the clause expressly provides that
the objection to the engineer’s decision should be taken to the
adjudicator, “within 14 days of the notification of the engineer’s
decision”.
6. There is also no dispute that the decision to terminate the
contract made on April 21, 2011 by the engineer concerned was not
challenged before the adjudicator within 14 days of the notification
thereof or of notice in such regard being received by the contractor.
Instead, the contractor instituted W.P.No.12392 of 2011 and
W.P.No.12393 of 2011 which were disposed of without any cheer for
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the contractor except that the contractor was permitted to approach
the adjudicator, if the law so provided.
7. The contractor approached the adjudicator on November 28,
2011, more than seven months after the termination in either case
was notified. The appellants claim that since the relevant clause in
either contract required a decision of the engineer to be carried to the
adjudicator within 14 days of the notification thereof, it implied that
upon the expiry of 14 days and no objection being carried to the
adjudicator, the contractor had accepted the decision. Despite the
clause not providing negative words like ‘not later than’ or ‘not
thereafter’, the appellants insist that the parties by contract fixed a
particular time for an objection to the engineer’s decision to be taken
to the adjudicator and, in the contractor’s failure to adhere to the time
as was consensually fixed, the contractor lost the right to pursue any
objection pertaining to the relevant decision of the engineer that was
not carried to the adjudicator within the time stipulated in the contract.
8. The contention has to be raised to be rejected. However, the
impugned judgment does not refer to it, though the appellants submit
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that the point was clearly taken as would be evident from ground ‘D’ of
the petition lodged under Section 34 of the said Act:
“D. The learned arbitrator ought to have dismissed
the claims of the respondent (the contractor) herein as
barred by the law of limitation as the claims were made
beyond the time-limit prescribed by the statute i.e.
Limitation Act, 1963 and the agreement between the
parties (14 days) under Clause 24 of the conditions of
contract."
9. However absurd the ground urged by the appellants herein
may have been, when an objection as to limitation – not only on the
basis of a contractual term but also under the governing statute – was
taken, the arbitration court was obliged to deal with such aspect of the
matter. On a reading of the judgment and order impugned dated
November 24, 2020, it is evident that another aspect of limitation
engaged the attention of the arbitration court but the appellants’
contention as to impermissibility of the contractor's claims on the
ground of limitation may have been misconstrued and the fact that the
ground was clearly taken in the petition may have been altogether
overlooked.
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10. The objection on the ground of clause 24 was taken in
course of the arbitral proceedings and all murmurs of the contractor to
the contrary have to be ignored. The award dated December 28, 2019
clearly records the objection on the ground of limitation “due to the
contractual provisions” in paragraph 11 thereof. The discussion on
such aspect covers several pages of the award before the ground is
rejected, though in somewhat unsatisfactory terms. At least, there is
some substance in the appellants’ grievance that both before the
arbitrator and in the challenge proceedings before the arbitration
court, the substance of the objection raised was not appropriately
received or dealt with. As far as the arbitrator was concerned, the
point was dealt with and the ground dispelled without the appropriate
reasons being indicated. The aspect does not appear to have been
considered at all by the arbitration court, though it appears that the
ground was squarely urged.
11. While dealing with the objection, the arbitrator has referred
to Section 14 of the Limitation Act, 1963 and the period of time that is
excluded when a party bona fide approaches an erroneous forum and
diligently pursues the matter before such wrong forum. In such a case,
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where the invocation of the jurisdiction of the initial forum must be
bona fide and the prosecution of the matter must be diligent, the time
spent before the wrong forum is excluded while counting the period of
limitation before the subsequent forum. Ordinarily, the contractor
approaching the writ court in this case may not have been regarded as
having approached an erroneous forum since the writ court was an
alternative forum, but not a wrong forum. Accordingly, the reference
to Section 14 of the Act of 1963 by the arbitral Tribunal was
completely unnecessary and utterly inapposite.
12. The arbitrator has next referred to the contractor having
invoked Section 11 of the Act of 1996 to obtain the appointment of the
arbitrator. It is true that an objection on the ground of limitation ought
to be taken in Section 11 proceedings, whether on account of the
substance of the claim being barred by limitation or the right to go to
arbitration being barred by limitation. As is well known, there are two
elements to limitation in arbitration matters: the limitation as to the
subject-matter of the claim and the limitation to proceed in arbitration
in such regard. In either case, if the remedy is barred, there is no
question of an arbitral reference being directed.
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13. Even though while reversing the previous Constitution Bench
view in such regard, in S.B.P. and Co. vs. Patel Engineering Ltd.
[(2005) 8 SCC 618], the Supreme Court held that objections as to
limitation qua the subject-matter of the claim may be adjudicated by
the Chief Justice or his designate in proceedings under Section 11 of
the Act, it is not entirely impermissible for an objection on the ground
of limitation to be urged before the arbitral tribunal notwithstanding
such ground not having been taken in the previous proceedings under
Section 11 of the Act. To such extent, the arbitrator in this case
erroneously held that merely because the arbitral reference
commenced upon an order passed in proceedings under Section 11 of
the Act, the point of limitation was not open to the respondent in the
reference before it. The arbitrator completely glossed over the
appellants’ reliance on clause 24 and the permissibility of such clause
to be regarded as a clause of limitation despite no words of restriction
or impediment being evident therefrom.
14. As noted above, the issue, though directly and substantially
raised in the challenge to the award, was lost on the arbitration court.
Usually, when a ground of importance is canvassed but is not
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addressed by an adjudicatory authority, the superior adjudicatory
authority in seisin of a revision or an appeal may not go into the
aspect by itself and may set aside the order impugned before it and
remand the matter for a fresh consideration by the lower adjudicatory
authority. However, a practical view of the matter also needs to be
taken. If the point is of such substance that it cannot be said with a
degree of certainty as to whether the point would be accepted or
rejected, it would be better to allow the adjudicating authority of first
instance to give an opinion thereon since an original adjudication at
the revisional or appellate level on such aspect would deprive the party
which loses the point a court of appeal or a forum of revision.
However, when the revising or appellate authority finds that there is
hardly any merit in the point and it may be summarily dealt with on
the basis of established principles, the time-consuming exercise of
remanding the matter for a fresh adjudication may be avoided.
15. In the present case, it is the fervent appeal of the
respondent that there is no merit in the ground of limitation urged by
the appellants and when the objection taken inherently lacks merit, the
appellate or revisional forum should not send the matter for a fresh
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consideration and prolong the time spent in court or the suffering of
the parties. It is on such basis that the objection as to limitation as
raised by the appellants herein is taken up for consideration even
though such aspect of the matter did not receive the consideration of
the arbitration court in seisin of the challenge to the award and the
issue was inadequately and inappropriately dealt with by the
arbitrator.
16. For a start, a clause of the kind that is sought to be pressed
into service here by the appellants cannot be read to be a clause in the
nature of limitation since it does not preclude the contractor
approaching the adjudicator beyond a period of 14 days from the
engineer's decision. Logically, it may be said that the clause implies a
sense of limitation; but law is not always dependent on logic and the
experience of law instructs that when a particular act – that would be
permissible in the usual course – is sought to be prohibited, there
must be an express embargo spelt out and not one gleaned out by
implication. Secondly, it does not follow from the clause that merely
because the contractor does not object to the engineer's decision by
carrying a grievance to the adjudicator within 14 days of the
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engineer's decision, the contractor has no other remedy available.
Thirdly, even if the adjudicator, whose role is that of a mediator or the
like, is not approached, it cannot be said that the clause would prohibit
a civil suit to enforce the contractor's claim or the institution of an
arbitral reference if the contract was governed by an arbitration
clause. Finally, though it is not necessary to comprehensively answer
the issue on such score, what was done by the employer in this case
was to terminate the contract and bring the relationship between the
parties to an end. It is possible that the impact of the clause was
limited to matters pertaining to engineering decisions and directions as
to how the work would proceed or continue and it did not extend to a
seminal decision as the termination of the contract by the employer.
17. At any rate and without prejudice to the above, any
impediment to the natural or legal right of a party to approach a court
or an appropriate tribunal with the relief that it perceives it is entitled
to, would fall foul of Section 28 of the Contract Act, 1872 just as
prescribing a shorter period of limitation to institute the relevant action
will also render the clause void under the same provision.
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18. For the reasons aforesaid, the ground of limitation urged by
the appellants herein is found to be utterly unmeritorious. It is true
that the aspect should have been adequately dealt with by the
arbitrator and engaged the attention of the arbitration court; but
merely because the ground was raised and may not have been
appropriately or adequately addressed would not imply that the
substance of the ground cannot be assessed even at this stage and
appropriate reasons be indicated to the appellants.
19. The other side of the limitation issue raised by the appellants
pertains to the permissibility of the counter-claim being carried by the
appellants herein before the arbitral tribunal. Such part of the matter
has been appropriately and more than adequately dealt with in the
judgment and order impugned. Merely because an arbitral reference
may have been lodged before the arbitrator on a particular day would
not imply that the period of limitation to file the counter-claim would
begin to be counted from such date. The period of limitation in a
counter-claim starts to run from when the cause of action arises. The
distinction between a counter-claim and a set-off is that a set-off is in
the nature of confession and avoidance and a set-off can be pleaded
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and asserted notwithstanding any period of limitation; though a
counter-claim on similar grounds cannot be carried beyond the period
of limitation, for the substance of such counter-claim has to stand
independent of the rival principal claim.
20. On facts, the arbitration court in this case found that the
appellants herein had done nothing before lodging the counter-claim
before the arbitrator to stop the clock of limitation running, so to say.
In matters pertaining to arbitration, a claim may be filed before the
arbitrator ten years after the contract is terminated as long as there is
an earlier request for the constitution of an arbitral tribunal since the
commencement of the arbitral reference, within the meaning of
Section 21 of the Act of 1996, is reckoned from the date on which a
request for a reference is made by one party and such request is
received by the other. The clock of limitation stops immediately upon
the receipt of the request by the other party. The subject-matter of the
claim cannot be said to be barred by limitation if the commencement
of the arbitral reference within the meaning of Section 21 of the Act
has happened ten years prior to the statement of claim being lodged
before the arbitrator.
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21. At the same time, just because the clock of limitation has
stopped for one party to the contract, it does not imply it has stopped
for the other party, too. It would not do for a party to a contract to
receive a request for an arbitral reference, not take any action in
respect thereof and not even pursue its own claim; and then, to wait
for the statement of claim of the other party to be lodged before
starting to count the period of limitation. The period of limitation would
still be running from the time the cause of action accrued to make the
counter-claim irrespective of whatever steps may have been taken by
the other party to the contract. The reasoning in the judgment and
order impugned in such regard, as to the counter-claim of the
appellants herein being hopelessly barred by limitation at the time it
was lodged, cannot be flawed and calls for no interference whatsoever.
22. For the reasons indicated above, the appeals are dismissed
and the arbitral award of December 28, 2019 as upheld and modified
by the judgment and order impugned dated November 24, 2020 is left
untouched, though on some additional grounds not found either in the
award or the impugned judgment.
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23. O.S.A.Nos.147 of 2021 and 153 of 2021 stand dismissed.
There will, however, be no order as to costs. Consequently,
C.M.P.Nos.6623 and 6711 of 2021 are closed.
(S.B., CJ.) (S.K.R., J.)
12.07.2021
Index : yes
tar
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To
The Sub Assistant Registrar (Original Side),
Madras High Court.
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THE HON'BLE CHIEF JUSTICE
AND
SENTHILKUMAR RAMAMOORTHY, J.
(tar)
O.S.A.Nos.147 and 153 of 2021
12.07.2021
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