Madras High Court
M/S.Enexio Power Cooling ... vs Gita Power And Infrastructure ... on 1 September, 2021
O.S.A.(CAD)Nos.174 and 175 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 01.09.2021
CORAM :
THE HON'BLE MR.SANJIB BANERJEE, CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE P.D.AUDIKESAVALU
O.S.A.(CAD) Nos.174 and 175 of 2021
M/S.ENEXIO Power Cooling Solutions
India Pvt. Ltd., No.443, Anna Salai,
Teynampet, Chennai 600 018,
Rep. by President and CEO T.Parasuram. ... Appellant
in both OSAs.
Vs
1. Gita Power and Infrastructure Pvt. Ltd
Rep. by its Authorised Signatory,
Kaushik Ganguly,
No.6, Sardar Patel Road, Guindy,
Chennai 600 032. ... 1st respondent
in OSA.174/2021
and
2nd respondent
in OSA.175/2021
2. OPG Power Generation Private Limited,
Rep. by its Authorised Signatory,
P.Venkatasubramanian, No.6, Sardar Patel Road,
Guindy, Chennai 600 032. ... 2nd respondent
in OSA 174/2021
and
st
1 respondent
in OSA.175/2021
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Appeals filed against the common Judgment and Decree dated
23.12.2020 passed in O.P.No.562 of 2020 and O.P.No.533 of 2020 on
the file of original side of this court.
For the Appellant : Mr.R.Parthasarathy
in both the appeals for Mr.P.Giridharan, and
Mr.H.Siddarth
For the 1st Respondent : Mr.AR.L.Sundaresan,
in both the appeals Senior Advocate
for M/s.Krishna Prasad
For the 2nd Respondent : No appearance
in both the appeals
COMMON JUDGMENT
(Delivered by the Hon'ble Chief Justice)
The flourishing export of litigation by this country may continue
unabated till the penchant for wanton tinkering with arbitral awards is
reined in. Despite instructive pronouncements in recent years
beginning the Associate Builders case [(2015) 3 SCC 49], the narrow
ambit of authority available in this jurisdiction, sometimes, appears
to be beyond the comprehension of courts in receipt of challenges to
arbitral awards.
2. In the present case, an award rendered by the arbitral
tribunal constituted by the International Chamber of Commerce (ICC)
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has been rendered to naught on the perception of the arbitration
court that the period of limitation applicable to the claim and the
counter-claim may not have been appropriately reckoned and that
the arbitral tribunal failed to take into account evidence that was
before it and ignored the same. In effect, the arbitral award of July
13, 2020 has been set aside on the ground that it was opposed to
public policy as being contrary to the law of the land. The arbitration
court has also proceeded to render independent findings on certain
aspects despite the award dealing with such matters in great detail.
3. It may do well to recount the rules of assessment in this
jurisdiction at the outset. The court exercising authority under
Section 34 of the Arbitration and Conciliation Act, 1996 does not
assume appellate authority. Indeed, it has been the refrain in this
jurisdiction over a century and more of jurisprudence that has
developed that the court is loathe to correct any error since the
parties had abandoned the sovereign forum of the court and had
agreed to carry their disputes to a consensual forum. There is no
doubt that the court exercises a degree of superintendence; but,
ordinarily, errors of jurisdiction are corrected, rather than errors
within jurisdiction. It is also accepted, as in the case of exercise of
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discretion, that if two views are possible on an issue or an aspect,
that the other view appears more plausible to the court may not
empower the court to supplant its view over the arbitral tribunal's
while assessing the propriety of an award.
4. The contract here provided for the setting up of a cooling
tower in Gummudipoondi. The claim of the appellant contractor was
on account of the work and supplies for which it remained unpaid.
The counter-claim by the respondent employer was on account of
liquidated damages for the delay in the erection and commissioning
of the plant, the customs duty component which it ought to have
been reimbursed and sundry other claims on account of damaged
gear box or faulty ducts or the like.
5. The contentions put forth on behalf of the respondent while
challenging the award have been recorded at paragraph 16 of the
judgment and order impugned dated December 23, 2020. Five
principal grounds appear to have been canvassed. The respondent
claimed that the principal claim of the contractor was barred by
limitation; that the tribunal adopted varying yardsticks for examining
the claim and the counter-claim; that the tribunal ignored vital
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evidence particularly as apparent from the minutes of a meeting held
between the parties on April 19, 2018; that the arbitral tribunal
virtually extended the time qua liquidated damages and rejected the
claim on such account by finding that the contractor was entitled to
more time to complete the work than what the contract indicated;
and, that material evidence pertaining to the debit note qua customs
duty was ignored.
6. Certain facts are not in dispute and the relevant dates in
such regard must be taken from the submission made on behalf of
the respondent herein. According to the respondent, the last bill that
was raised by the appellant in connection with the work was on
December 31, 2014. The two debit notes that the respondent raised
on the contractor were issued on August 24, 2015 and January 12,
2016. The respondent complains that the arbitral tribunal erred in
holding that the deemed date of completion of the work was
September 21, 2015 despite the contract providing otherwise. The
respondent lays great stress on a meeting of the parties held on April
19, 2018, the minutes whereof would receive greater attention here
than may have been given thereto in the arbitral award. An offer for
settling the accounts between the parties, not only in respect of the
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Gummidipoondi work but also in respect of a similar contract between
the parties in Gujarat was made by the respondent via an email of
May 26, 2018. Finally, the respondent refers to the claim being
lodged before the ICC secretariat on or about May 2, 2019.
7. In addition to the grounds urged to challenge the award as
noticed in the judgment impugned, the respondent also contends that
the arbitral tribunal erred in rejecting the entirety of the counter-
claim on limitation without considering the merits thereof. The
respondent suggests that the starting point for limitation should have
been the same for both parties. Finally, the respondent seeks to rely
on a recent Supreme Court judgment placed by the appellant to
suggest that if the time taken to conduct the negotiations had to be
excluded, such time would be excluded for both sides and not only for
the claimant.
8. The award dated July 13, 2020 refers extensively to the
scope of the work, the nature of the work, the rival claims, the
evidence and, finally, from paragraph 9 thereof, the findings of the
tribunal have been indicated over roughly 30 or so pages of the
appeal papers. The arbitral tribunal, comprising three members,
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referred to “Delays and liquidated damages” at paragraph 13 of the
award. In course of the discussion on such aspect, the arbitral
tribunal alluded to the counter-claim on account of liquidated
damages exclusively at paragraph 13.15. Prior to that, in the general
discussion as to the rights of the parties and how the contract was
executed, the arbitral tribunal came to a finding that because of
delays that were beyond the control of the contractor, the time to
complete the work stood extended till September 21, 2015. Upon
rendering such finding, the arbitral tribunal recorded thus in respect
of the respondent's counter-claim of liquidated damages for delay:
"As the tribunal has granted an extension of time
for completion of the ACC Unit to 21 September 2015 and
has also found that the requirements for completion of
the ACC Units were achieved on that date, the Tribunal
finds that the Claimant has no liability for liquidated
damages. ..."
9. The other major head of counter-claim that had been carried
by the respondent to the reference pertained to customs duty. In
such regard, the respondent relied on a letter dated January 24, 2014
issued by an employee or representative of the contractor to the
employer which clearly stated that the customs duty was payable by
the contractor, but made an appeal to the employer to immediately
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pay the customs duty and adjust the amount out of the Gujarat
contract which was being simultaneously executed. There is no
dispute that the admission in the relevant letter is apparent.
However, the arbitral tribunal, upon noticing the letter and the
wording of the agreement between the parties that provided for
various kinds of taxes and duties to be to the account of the
employer, observed that in the light of the imminent arrival of the fin
tube bundles in Chennai, at the time that the letter of January 24,
2014 was issued, it was necessary to have the goods cleared to avoid
demurrage charges. The tribunal considered the apparent admission
contained in the relevant letter to have been made under pressure or
in the extreme situation where a dispute between the parties as to
the liability to pay customs duty would have left the goods rotting in
the docks and unnecessary demurrage charges adding up. In such
circumstances, the tribunal found that the debit note dated August
28, 2015 on account of liquidated damages was unjustified.
10. At paragraph 14.04 of the award, the arbitral tribunal
referred to the relevant clause in the agreement between the parties
to consider whether it was the employer’s liability to pay the customs
duty component despite “customs duty not being specifically included
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in the relevant term”. The tribunal held that the customs duty
component in excess of Rs.5.94 crore “is not reimbursable by the
claimant”. In such circumstances, the tribunal held that the debit
note issued for customs duty on January 12, 2016 was without any
basis. Thus, it is evident that the two major heads of the counter-
claim carried by the employee to the arbitral reference were rejected
on merits.
11. Much is made out by the respondent here as to the issue of
limitation. It is necessary to see the two principal documents which
may be relevant in such regard. The first of such documents is the
recording of the discussion held between the parties at a meeting of
April 19, 2018. The relevant minutes incorporate a chart at the
beginning, which clearly spells out certain heads; including the total
amount billed by the contractor and the total amount paid to the
contractor, the balance amount due to the contractor that had been
retained, the two claims on account of liquidated damages for supply
and erection, the claim on account of customs duty, and the
employer’s claim on account of dismantling modification and duct
fabrication. There is no dispute that at the bottom of the chart, it was
recorded that an amount of Rs.2,78,04,090 was “Final Payable by
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Enexio”. Enexio is the contractor.
12. However, what is of consequence is the remainder of
minutes:
“However, we request that the CD, CVD, and LD’s
be looked at leniently and mutually settled. The Contract
calls for all taxes such as ED, ST to be reimbursed and
CVD is equivalent to Excise duty.
LD is not only due to our ENEXIO’s fault. In any
case, this did not cause for any delay in Plant
commissioning. We have had huge losses due to US dollar
increase during Project stage to the tune of Rs.1.82
crores.
ENEXIO requested that the above amount of
Rs.2,78,04,090/- payable by them to M/s.OPG Power
Generation Pvt Ltd be adjusted against the amount to be
received by M/s.ENEXIO Power Cooling Solutions (I) Pvt
Ltd from M/s.OPGS Power Gujarat Pvt Ltd.”
13. Despite the chart at the top of the minutes of the meeting
April 19, 2018 recording the claims of both parties and with the final
line that a certain amount was payable by the contractor to the
employer, it is evident that the contractor insisted, though in
somewhat more polite language, that the customs duty was not
payable by it, nor was any liquidated damages payable since there
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was no delay on its part. Much emphasis is placed by the respondent
on the final paragraph of the minutes which, according to the
respondent, amounts to a virtual admission of the debt due from the
contractor to the employer; but, on a reading of the entirety of the
document and the nature of the relationship between the parties, it
may not have been an unconditional admission that would have left
an open and shut game for the employer in the course of the arbitral
reference. Indeed, the respondent’s assertion that the last paragraph
of the minutes of April 19, 2018 was an admission, is belied by the
immediate subsequent correspondence exchanged between the
parties. On May 25, 2018, an email was issued by the contractor to
the employer, maintaining that a sum in excess of Rs.23 crore
remained due and owing to it for over two years from the employer.
The contractor wanted an immediate release of Rs.3 crore to enable
the contractor to meet its salary commitments. In response to such
email, the employer replied on the same date. The following line from
the employer’s mail of May 26, 2018 stands out:
“Perusing (sic, pursuant to) our discussion, it was
my request to close the accounts with Rs.300 Lacs as full
and final settlement”.
14. For a start, the admitted mail of May 26, 2018 issued by the
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employer, at the very least, amounts to an unabashed
acknowledgment of the jural relationship between the parties and the
employer being the net debtor to the contractor. Though the
respondent insists that the relevant email combines both the
Gummudipoondi and the Gujarat accounts, the fact that even if the
two accounts were combined for the employer to acknowledge in
writing the jural relationship that it was an overall debtor qua the
contractor, the ingredients in Section 18 of the Limitation Act, 1963
were fulfilled for a fresh period of limitation to run from such date.
15. The arbitral tribunal noticed the minutes of such meeting of
April 19, 2018 at paragraph 16.03(d) of the award while discussing
the issue of limitation and held that the subsequent correspondence
of May 26, 2018 extended the period of limitation qua the claimant in
the reference.
16. Thankfully, the respondent has not propounded as an
absolute proposition that the period of limitation has to be the same
for both parties. It is possible that the period of limitation may be
extended by reason of an act of the other side while the period of
limitation for the original party may not have been extended.
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However, the point that the respondent seeks to make is that if there
were negotiations between the parties and if the document of April
19, 2018 acknowledged a debt due from the contractor to the
employer, the arbitral tribunal’s finding that the entirety of the
counter-claim was barred by limitation may have been out of place.
To some extent, the respondent may be justified, though the
correspondence exchanged on May 26, 2018 can, by no means, be
the starting point of limitation as far as the employer was concerned
albeit such correspondence giving the contractor such benefit.
17. The arbitral tribunal dealt with the several heads of the
counter-claim exclusively at paragraph 16 of the award, apart from
having dealt with the same on merits earlier and on the ground of
limitation at paragraph 16 thereof. At paragraph 17, the discussion is
rather terse in view of the earlier findings and discussion on the
several heads of the counter-claim. Paragraph 17.02 indicates the
five heads of the counter-claim pertaining to liquidated damages for
delay, customs duty, cost of erection of horizontal and vertical
exhaust duct, cost of repair of gear box and cost of repair of fan
modules. Though the reasons given in paragraphs 13, 14 and 15,
respectively, in respect of the first three heads are indicated in
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parenthesis at paragraph 17 of the award, two other heads appear,
clearly to have been rejected only on the ground of limitation and not
otherwise.
18. It is at this stage that the minutes of the meeting held on
April 19, 2018 require to be noticed in greater detail. For a start,
since the arbitral award refers to the relevant document, it cannot be
said, as the respondent asserts, that the minutes were ignored or the
contents thereof were not considered. When the arbitrators
specifically refer to the document and read it in the context of the
subsequent email exchanged between the parties on May 26, 2018, it
cannot be said with any degree of certainty that the contents of the
minutes may not have been noticed or the purports of the discussion
reflected therein may not have been considered while the award was
rendered.
19. Indeed, while rejecting the counter-claims also on the
ground of limitation, including the last two heads of counter-claim,
the arbitral tribunal is deemed to have specifically noticed what was
recorded below the chart in the minutes of the meeting held on April
19, 2018. After all, the last line in the chart indicated an amount due
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from the contractor to the employer and even the final paragraph of
the minutes can be loosely be said to be a somewhat halting
admission of the contractor’s indebtedness to the employer. However,
a commercial document has to be read in context and it must not be
lost sight of the fact that the contractor could not have asserted its
claim in more aggressive terms since it was the employer from which
it had to extract the balance payment. It cannot be missed that even
though the chart indicated that the contractor owed money to the
employer, immediately below the chart, the contractor indicated that
it was not at all responsible for the delay. Thus, the contractor clearly
disputed its liability on account of liquidated damages on both heads.
The contractor also indicated that customs duty was payable by the
employer. Again, the second major head of claim of the employer was
dealt with. It is in such light that the subsequent admission in the
last paragraph of the minutes should be seen and the admission, at
the highest, was conditional and hedged with the contractor’s appeal
that it should not be found liable for the delay or on account of
customs duty.
20. In contrast and notwithstanding the respondent’s assertion
that both the Gummudipoondi and Gujarat contracts were dealt with
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in the contractor’s email of May 26, 2018, the employer did not assert
its claims on any of the heads specifically and merely offered to close
the transaction by seeking to pay a further amount of Rs.3 crore in
full and final settlement. In a sense, it is evident that notwithstanding
the apparent admission in the minutes of April 19, 2018, the
contractor, at least, kept the contractor’s defense pertaining to
liquidated damages and customs duty open though the employer did
not specifically assert any of its claims. Thus, the negotiations that
were held between the parties may have been confined to the areas
of disagreement rather than the areas of acceptance which included
the claims on account of the duct repair, fan repair and the like. It is
thus the arbitral tribunal concluded that the email of May 26, 2018
would hold good for a fresh period of limitation to be counted
therefrom for the contractor, but it would not hold good in respect of
the specific heads of claim of the employer.
21. On the facts as they panned out before the arbitral tribunal,
it was a possible view. Once it is acknowledged that a possible view
on the set of facts had been taken by the arbitral tribunal, that the
other view appeals more to the court is of no relevance as the court
cannot substitute the tribunal's view by supplanting its own.
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22. As to whether the enforcement of a claim is barred by the
prescription of limitation, it depends on the nature of the claim and
the period prescribed therefor in the Schedule to the Limitation Act,
1963. For the purpose of ascertaining which of the Articles in the
Schedule would be attracted to a particular claim, the surrounding
circumstances need to be noticed to find the appropriate provision. It
is possible for a claim to either fall under Article 18 of the Schedule
for the price of work or such a claim may also be seen to be under
residuary Article 113 of the Schedule. Again, upon ascertaining the
nature of the claim and assessing the appropriate Article which would
be applicable, it would lead, in some cases, for it to be determined as
to whether the period of limitation for enforcement of the claim would
be reckoned from when the right to sue accrues or when the right to
sue first accrues.
23. In paragraph 16 of the award, the arbitral tribunal
specifically referred to the Act of 1963 and considered the
applicability “of a time bar” to each of the heads of claim and to the
counter-claim. In respect of the counter-claim, the tribunal noted
that there was no evidence that the heads of counter-claim “were
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included in the ongoing negotiations.” The tribunal reckoned that the
contractor “is deemed to have completed its obligations” on
September 21, 2015 “and thus, that is the latest date from which the
limitation period of three years must run” in respect of the counter-
claim. On such reasoning, the arbitral tribunal held that the counter-
claim delivered by the employer on July 15, 2019 was barred by
limitation.
24. What is apparent from the award is that the arbitral tribunal
was aware of the applicable law and made an assessment in
accordance therewith. In such circumstances, that there could be a
different view taken on the set of facts may not be an appropriate
ground under Section 34 of the Act of 1996 to obliterate the finding
on such count rendered by the arbitral tribunal and substitute it by
the other view which appeals more to the court. After all, the
assessment in the jurisdiction under Section 34 of the Act of 1996
has more to do with the decision-making process, rather than the
decision itself, unless the decision appears to be palpably erroneous
or manifestly arbitrary and causes grave miscarriage of justice.
25. A challenge to an arbitral award requires high tests to be
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met by the challenger. An apparently erroneous view may not
necessarily be corrected, nor will a flawed finding or a perceived
mistaken interpretation excite the court unless there is something
more to the matter. The high tests were not met by the respondent
herein and it appears that the arbitration court embarked on an
independent exercise to assess the several of the heads of claim and
counter-claim, including on the aspect of limitation, without reference
to the award or attempting to ascertain whether the arbitral tribunal
had applied its mind to the matters in issue.
26. Since both the parties have referred to a judgment reported
at (2020) 14 SCC 643 (Geo Miller and Company Pvt. Ltd vs.
Chairman, Rajasthan Vidyut Utpadan Nigam Ltd) and paragraph 28
thereof, such judgment needs to be noticed. The discussion
pertaining to the judgment must begin with a caveat that it was in
the context of a request under Section 11 of the Act of 1996 and, as
they say, a judgment must be seen to have decided exactly what it
did and not the larger conspectus which it may deemed to have.
Paragraph 28 of the report in Geo Miller instructs as follows:
“28. Having perused through the relevant
precedents, we agree that on a certain set of facts and
circumstances, the period during which the parties were
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bona fide negotiating towards an amicable settlement
may be excluded for the purpose of computing the period
of limitation for reference to arbitration under the 1996
Act. However, in such cases the entire negotiation history
between the parties must be specifically pleaded and
placed on the record. The Court upon careful
consideration of such history must find out what was the
‘breaking point’ at which any reasonable party would have
abandoned efforts at arriving at a settlement and
contemplated referral of the dispute for arbitration. This
"breaking point" would then be treated as the date on
which the cause of action arises, for the purpose of
limitation. The threshold for determining when such a
point arises will be lower in the case of commercial
disputes, where the party’s primary interest is in securing
the payment due to them, than in family disputes where it
may be said that the parties have a greater stake in
settling the dispute amicably, and therefore delaying
formal adjudication of the claim.”
27. On any liberal reading of the dictum as evident from the
above passage, it cannot be said that a special period of limitation
has been carved out by the Supreme Court in addition to the
provisions of the Act of 1963. The passage instructs that when parties
are in the process of negotiation and an issue as to limitation comes
up and the party seeking to explain away the time seriously pleads
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the time taken for negotiations and brings cogent evidence in such
regard, the block of time may have to be excluded. The entire
discussion in the above passage has to be seen in the light of Section
18 of the Act of 1963 and how the acknowledgement of a jural
relationship between the parties gives a fresh lease of time under the
Limitation Act to the claimant. If “A” and “B” are found to have been
in negotiation and there is some written evidence of the negotiation,
where “A” asserts as a creditor, the very fact that there is evidence of
the negotiation is a virtual acknowledgment of jural relationship
between the parties. The judgment cannot be read to have provided
any more than what is already permissible in law.
28. The judgment and order impugned cover territories which a
court in exercise of its limited authority under Section 34 of the Act
should restrain itself from venturing into. The judgment reveals a
completely different basis for reckoning what the period of limitation
ought to have been without expressly referring to the findings in the
arbitral award or the discussion relevant in such regard. Indeed, the
impugned judgment embarks on an independent exercise to assess
the claim or the validity thereof, which is scarcely possible within the
restricted ambit of authority available under the relevant statutory
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provision.
29. For the reasons aforesaid, O.S.A.Nos.174 and 175 of 2021
are allowed and the judgment and order impugned dated December
23, 2020 are set aside. The arbitral award of July 13, 2020 is
restored.
30. Since it was possible for the employer in this case to urge
some of the grounds, including limitation, there will be no order as to
costs as far as the present appeals are concerned.
C.M.P.No.7963 of 2021 is closed.
(S.B., CJ.) (P.D.A., J.)
01.09.2021
Index : yes
tar/sasi
To:
The Sub Assistant Registrar
Original Side
High Court
Madras.
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O.S.A.(CAD)Nos.174 and 175 of 2021
THE HON'BLE CHIEF JUSTICE
AND
P.D.AUDIKESAVALU, J.
(sasi)
O.S.A.(CAD)Nos.174 and 175 of 2021
01.09.2021
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