Madras High Court
The Tamil Nadu Cements ... vs Unicon Engineers on 9 September, 2021
O.P.No.692 & 1030 of 2019
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 09.09.2021
CORAM :
THE HONOURABLE MR. JUSTICE N.SATHISH KUMAR
O.P.Nos.692 & 1030 of 2019
and A.No.6755 of 2019, A.No.363, 3004 and 3112 of 2020
The Tamil Nadu Cements Corporation Ltd.
Rep. by Manager (Materials) in charge,
L.L.A. Building, II Floor,
No.735, Anna Salai, Chennai 600 002. ... Petitioner in both O.Ps.
Vs.
1. Unicon Engineers
Rep. By its Managing Partner
513-A/6, Bharathi Road,
Chinnavedampatty,
Coimbatore – 641 049.
2. The Micro and Small Enterprises
Facilitation Council
Rep. by the General Manager,
Coimbatore Region,
District Industries Centre/zonal office,
No.2, Raja Street, Coimbatore 641 049. … Respondents in both
O.Ps.
PRAYER IN O.P.No.692 of 2019:
Original petition has been filed under Section 34 of the Arbitration
and Conciliation Act 1996 to set aside the award passed by the second
respondent Council, dated 04.6.2016 in Case No.M & SEFC.CBER 11 of 2016 and
1/18
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O.P.No.692 & 1030 of 2019
confirmed the order, dated 25.10.2016 in R.C.No.436/D3/2014, direct the first
respondent to pay a sum of Rs.12,20,940/- as damages suffered by the
petitioner, Rs.17,47,543/- incurred towards various heads including interest and
for costs.
PRAYER IN O.P.No.1030 of 2019
Original petition has been filed under Section 34 of the Arbitration
and Conciliation Act 1996 to set aside the award passed by the second
respondent Council, dated 04.6.2016 and dated 25.10.2016 in Case No.M &
SEFC.CBER 30 of 2016 passed by the second respondent Council, direct the first
respondent to pay a sum of Rs.12,89,225/- paid towards 25% advance amount of
Rs.7,17,500/- and interest Rs.5,71,725/- @ 14.25% p.a. from 1.6.2011 to
31.12.2016 and thereafter till the date of realization with 14.25% p.a.
For Petitioner : Mr.A.Sivaji
For Respondent No.1 : Mr.E.Omprakash, Sr. Counsel for
M/s.B.Manoharan
******
COMMON ORDER
Since both the Original petitions are arising out of the award passed
by the second respondent Council, dated 4.6.2016 and 25.10.2016 in favour of
the first respondent, the aforesaid original petitions are disposed of by a
common order.
FACTS OF THE CASE :
2 It is the case of the claimants/first respondent herein before
the second respondent Council that pursuant to the work order, dated
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O.P.No.692 & 1030 of 2019
16.4.2010, the first respondent supplied Electro Static Precipitators (E.S.P.) to
the petitioner Corporation for a sum of Rs.7,13,10,343/- and a sum of
Rs.37,50,200/- was fixed as erection and commissioning charges. According to
the claimant, 90% payment for erection & commissioning will be released six
months after successful completion of erection & commissioning and the
balance 10% payment for erection & commissioning will be released along with
Sl.No.VII-B (a) on submission of unconditional irrevocable Bank guarantee for
the same value with validity period of 6 months. The first respondent raised
number of invoices from 01.7.2010 to 25.12.2013 for a total sum of
Rs.7,50,76,182/-. However, the petitioner has paid a sum of Rs.7,00,67,381/-
and a sum of Rs.50,08,801/- is still pending. The total claim of the first
respondent is Rs.2,66,80,157/- is outstanding due payable by the petitioner
against the terms of purchase order issued by them.
AWARD PASSED BY THE M.S.E.F. COUNCIL
3. Taking note of the Section 15 & 16 of the M.S.M.E.D. Act, the
second respondent Council held that the petitioner is entitled to recover the
balance retention amount of Rs.39,66,144/- along with interest due to
piecemeal releases of the total retention money of Rs.1,17,57,399/- with effect
from 31.3.2011 and (2) Rs.1,57,59,537/- along with interest with effect from
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O.P.No.692 & 1030 of 2019
17.1.2014 towards additional expenditure incurred by the first respondent due
to the delay of 3 years in execution of civil works by the petitioner Corporation.
4. Aggrieved by the said award passed by the second respondent
Council in favour of the first respondent, the petitioner has filed a petition
under Sec.33 of the Arbitration and Conciliation Act before the second
respondent to recall the Award, dated 04.6.2016 in Case No.M & SEFC.CBER 30
of 2016 and the same was rejected by the Council, by order, dated 25.10.2016.
Challenging the said Award and also rejection order, dated 25.10.2016 rejecting
the request of the petitioner to recall the Award, the present O.Ps. are filed.
5. Heard the learned counsel appearing for the petitioner and the
learned counsel appearing for the first respondent and perused the materials
available on record.
SUBMISSIONS OF THE COUNSEL FOR THE PETITIONER :
6. Though several grounds have been raised, the main contention of
the learned counsel appearing for the petitioner before this Court is that to set
aside the award passed by the Council, Section 34 of the Arbitration and
Conciliation Act is not applicable, otherwise, it is the contention that the award
has to be challenged only under Sec.19 of the M.S.M.E.D. Act. His further
contention is that he filed an application for rectification under Sec.33 of the
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Act to challenge the award under Sec.34 of the Arbitration and Conciliation Act
in time. His further contention is that as per Sec.18 of the M.S.M.E.D. Act,
Sec.65 to 81 of the Arbitration and Conciliation Act alone is applicable to
M.S.M.E.D. Act. Section 18 is silent as far as Sec.34 of the Arbitration and
Conciliation Act is concerned. Sec.34 of Arbitration and Conciliation Act cannot
be applicable to shut the applicant right to challenge the award within a
specific period of limitation provided under Sec.34 of the Act. He further
submitted that there is no proper opportunity given to them and no discussion
with regard to the amount liable to be paid by the petitioner. Hence, the
learned counsel appearing for the petitioner has submitted that award suffers
on the ground of violation of principles of natural justice. Yet another
submission is that the Council has no legal knowledge and therefore, the award
cannot be sustained.
7. It is brought to the notice of this Court by the learned counsel
appearing for the petitioner that he has filed writ petition in W.P.No.29101 of
2017 before this Court challenging the provisions under Sec.16 to 19 of the
M.S.M.E.D. Act, 2008 and he also filed Transfer petition No.980 of 2020 for
transfer of the aforesaid writ petition from this Court to the Hon'ble Supreme
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O.P.No.692 & 1030 of 2019
Court to tag along with the similar issue pending before the Hon''ble Supreme
Court in SLP Nos.19980-19981 of 2016. The present issue went upto the Hon'ble
Supreme Court as against the order passed by this Court in O.S.A.No.184 of 2019
for permitting the respondents to withdraw the amount deposited before this
Court. The Apex Court by its order, dated 12.2.2021 in SLP (Civil) Diary No.18423
of 2020 has observed as under:
“The learned Single Judge, is requested to
take up the objections filed under Sec.34 of the
Arbitration and Conciliation Act, 1996, and decide
O.P.No.692 of 2019 and 1030 of 2019 as expeditiously
as possible, preferably within a period of six months
from today.''
The Apex Court also dismissed the application filed in M.P.No.1025 of 2021 for
transfer of the present O.P. by order, dated 9.7.2021.
SUBMISSION OF THE COUNSEL FOR THE FIRST RESPONDENT:
8. The learned Senior counsel appearing for the first respondent
submitted that the application filed under Sec.34 of the Arbitration and
Conciliation Act is beyond the period of limitation and in fact, the application
for rectification has been filed beyond the period of limitation, despite order
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O.P.No.692 & 1030 of 2019
passed in the application on 25.10.2016 challenge was made much beyond the
period contemplated under Sec.34 of the Arbitration and Conciliation Act.
Further, it is contended that even one day delay in filing application under
Sec.34 of the Act cannot be allowed. It is contended that Courts are held that
mere filing of an application without mandatory deposit do not satisfy the
period of limitation. It is further contended that there is no bar under the
M.S.M.E.D. Act for the Council to act as Arbitrators.
DISCUSSION :
9. The matter has been referred to by the first respondent before
the Council on a dispute arising out of the outstanding payment payable by the
petitioner. The petitioner engaged the first respondent for erection and
commissioning of Clinker Cooler at Cement Works in the premises of the
petitioner Corporation. The reference was made for the principal amount of
Rs.2,66,80,157/- from 1.7.2010 to 25.12.2013. The second respondent Council
entertained the reference and conducts conciliation on 14.10.2014, 17.2.2015,
12.2.2016, 4.6.2016 and during the conciliation, the outstanding payment
payable by the petitioner is not denied. The only issue raised before the
Council is a question with regard to quality of E.S.P. As the conciliation is not
materialised, the matter has been referred to Council and the Council has
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O.P.No.692 & 1030 of 2019
passed an award which reads as follows:
“the respondent shall be liable to pay the balance
retention amount of Rs.39,66,144/- along with interest due
to piecemeal releases of the total retention money of
Rs.1,17,57,399/- with effect from 31.3.2011 & (2)
Rs.1,57,59,537/- along with interests with effect from
17.1.2014 towards additional expenditures incurred by the
petitioner due to the delay of 3 years in execution of civil
works by the respondent together with compounded interest
with monthly rest, at three time of the Bank rate notified by
the Reserve Bank of India as stipulated in M.S.M.E.D.Act,
2006 from the appointed due dates respectively as above to
the petitioner, till the date of settlement.''
10. The first point raised by the learned counsel appearing for the
first respondent/petitioner is that Sec.34 of the Arbitration and Conciliation Act
cannot be invoked to set aside the arbitral award passed under the provisions of
M.S.M.E.D. Act. This submission is misconceived, as any award passed pursuant
to the M.S.M.E.D. Council, an application can be made to set aside the award
under the provisions of Arbitration and Conciliation Act. Further, it is contended
that the award can be set aside only under Sec.19 of the Act. The contention
that the award can be challenged only under the provisions of M.S.M.E.D. Act
alone also misconceived. What is contemplated under Sec.19 of the Act is,
mandatory deposit of 75% of the award amount while filing a petition to
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O.P.No.692 & 1030 of 2019
challenge the award. Therefore, it cannot be said that only under the
provisions of M.S.M.E.D. Act, the award can be challenged.
11. As far as the contention that the provisions of M.S.M.E.D Act
apply only to Sec.65 to 81 of the Arbitration and Conciliation Act. It is to be
noted that Sec.18(2) deals with the manner in which conciliation has to be
conducted by the Council. It makes it very clear that while conciliation process
undertaken by the Council, the procedure laid down in Arbitration and
Conciliation Act under Sec.65 to 81 of the Act has to be followed. Therefore, it
cannot be said that M.S.M.E.D. Act is confined only to Sec.65 to 81 of the
Arbitration and Conciliation Act. Such submission made by the learned counsel
appearing for the petitioner is misconceived, cannot be countenanced.
Whereas Sec.18(3) of the Act makes it clear that in the event of conciliation is
not fructified, Council itself either take up the dispute for arbitration or refer it
to any other institution or Centre providing such arbitration. For invoking such
arbitration, the provisions of Arbitration and Conciliation Act, 1996 shall apply.
Therefore, the contention of the learned counsel appearing for the first
respondent that Sec.34 of the Arbitration and Conciliation Act cannot be
invoked to set aside the award under M.S.M.E.D. Act has no legs to stand.
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O.P.No.692 & 1030 of 2019
12. This Court without going into merits of the award, first deal
with the very maintainability of the Original petition filed beyond the period of
limitation. Sec.34 of the Arbitration and Conciliation Act makes it mandatory
that the application to set aside the award shall not be made after three
months have lapsed from the date on which party making application received
Arbitral award or if request has been made under Sec.33, from the date on
which the request was disposed of by the Arbitrator. The proviso to Sec.34(3) of
the Act gives discretion to the Court to extend the period of limitation for
another 30 days but not thereafter, provided sufficient cause shown by the
parties which prevented him from filing the application within time.
Therefore, by reading the proviso under Sec.34 (3) of the Act makes it clear
that application to set aside the award cannot be made beyond the period of
limitation provided in Sec.34(3) of the Arbitration and Conciliation Act.
FINDINGS :
13. In the light of the above legal position, the date of award
passed by the Arbitrator is 4.6.2016. It is not in dispute that the award received
by the petitioner is on 30.6.2016. From the date of such receipt, the limitation
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O.P.No.692 & 1030 of 2019
for filing an application under Sec.34 of the Arbitration and Conciliation Act will
expire on 1.7.2016. It is also to be noted that if any rectification sought in the
award, the same ought to have been made within 30 days from the date of such
award. Such application ought to have been filed on or before 30.7.2016.
However, in the instant case, a perusal of record makes it clear that the
application under Sec.33 of the Act has been filed on 19.9.2016 almost delay of
149 days in filing such application. The application filed under Sec.33 of the
Act has been rejected by the Council by order, dated 25.10.2016 and the same
was received by the applicant on 7.11.2016. Thereafter, with delay of 65 days,
an application has been filed on 4.1.2017 without making mandatory deposit as
required under Sec.19 of the Act. Such application filed with overall delay of
65 days beyond the period of 120 days time taken by the Council for disposal of
the application under Sec.33 of the Act.
14. From the narration of the aforesaid facts makes it clear that
the application under Sec.34 of the Act should be filed within a maximum
period of 120 days as contemplated under the Act. The proviso to Sec.34 (2)
(3) of the Act makes it clear that even one day beyond 120 days cannot be
condoned by the Court. Such being the legal position, this Court is of the view
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O.P.No.692 & 1030 of 2019
that application to challenge the award under Sec.34 of the Act filed with delay
of 65 days cannot be maintainable. It is also to be noted that though
application filed on 4.1.2017, the same has been filed without making
mandatory deposit as required under Sec.19 of the Act. Deposit has been made
only on 16.7.2019 after two rounds of litigation. This Court in a judgment
reported in 2013 SCC Online Mad 1047 : (2013) 5 CTC 25 [Goodyear India
Ltd. Rep. By its Zonal Manager, A.Baburaj vs. Nortan Intec Rubber (P) Ltd.
and another], held as under:
“25. Even otherwise, whatever the grounds
available to the Petitioner on factual and legal aspects
and also against the validity and enforceability of the
Award, the same can be canvassed only by way of
proper Petition under Section 34 of the Act and when
the relevant provision of law provides that the Petition
shall be entertained only along with pre-deposit of 75%
of the amount awarded, the Petition ought to have been
filed, after complying with mandatory requirement and
on the failure of the Petitioner to do so, the petition shall
be treated as incomplete and improperly filed and shall
not be entertained and shall be rejected. In view of the
same, there is no challenge against the Arbitral Award
and the same entitled the Awardee to enforce the same
and to withdraw the amount deposited by the Petitioner
herein.''
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O.P.No.692 & 1030 of 2019
15. Similarly, the Delhi High Court in the case of Union of India
and another vs. Saboo Minerals Pvt. Ltd. [2003 (71) DRJ 166] has held that
when the application under Sec.33 of the Act is not filed within time, the
appellant cannot take advantage of Section 34(3) of the Act so as to start
limitation from the date of rejection of such an application.
16. In (2007) 10 SCC 742 [State of Arunachal Pradesh vs.
Damani construction Co.] the Hon'ble Supreme Court has held as under
"8. Firstly, the letter had been designed not
strictly under section 33 of the Act because under
Section 33 of the Act a party can seek certain correction
in computation of errors, or clerical or typographical
errors or any other errors of a similar nature occurring in
the award with notice to the other party or if agreed
between the parties, a party may request the arbitral
tribunal to give an interpretation of a specific point or
part of the award. This application which was moved by
the appellant does not come within any of the criteria
falling under Section 33(1) of the Act. It was designed as
if the appellant was seeking review of the award. Since
the Tribunal had no power of review on merit, therefore,
the application moved by the appellant was wholly
misconceived. Secondly, it was prayed whether the
payment was to be made directly to the respondent or
through the Court or that the respondent might be asked
to furnish Bank guarantee from a nationalized Bank as
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O.P.No.692 & 1030 of 2019
it was an interim award, till final verdict was awaited.
Both these prayers in this case were not within the
scope of Section 33. Neither review was maintainable
nor the prayer which had been made in the application
had anything to do with Section 33 of the Act. The
prayer was with regard to the mode of payment. When
this application does not come within the purview of
Section 33 of the Act, the application was totally
misconceived and accordingly the arbitrator by
communication dated 10.4.2004 replied to the following
effect.
" However, for your benefit I may mention here that
as per the scheme of the Act of 1996, the issues/
claims that have been adjudicated by the interim
award dated 12.10.2003 are final and the same
issues cannot be gone into once again at the time of
passing the final award."
9. Therefore, the reply given by the arbitrator
does not give any fresh cause of action to the appellant
so as to move an application under Section 34 (3) of the
Act. In fact, when the award dated 12.10.2003 was
passed the only option with the appellant was either to
have moved an application under Section 34 within
three months as required under sub-section (3) of
Section 34 or within the extended period of another 30
days. But in stead of that a totally misconceived
application was filed and there too the prayer was for
review and with regard to mode of payment. The
question of review was totally misconceived as there is
no such provision in the Act for review of the award by
the arbitrator and the clarification sought for as to the
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O.P.No.692 & 1030 of 2019
mode of payment is not contemplated under Section 33
of the Act. Therefore, in this background, the application
was totally misconceived and the reply sent by the
arbitrator does not entitle the appellant a fresh cause of
action so as to file an application under Section 34(3) of
the Act, taking it as the starting point of limitation from
the date of reply given by the arbitrator i.e. 10.4.2004.''
17. Section 33 of the Act cannot be invoked to set aside the award
or to recall of the award, whereas the application filed in the given case is only
in the nature of First Appeal before the Council and the same has been rightly
rejected by the Council on 25.10.2016.
18. In the case of S.P.S. RANA vs. MTNL & OTHERS [2010 SCC
Online Del 136] the Hon'ble Supreme Court has held as follows:
“9. Section 33 of the Act does not use the words
"but not thereafter". However, the period of 30 days is
subject to "unless another period of time has been
agreed upon by the parties". In our view the said
expression has to be read in the same manner as the
expression "but not thereafter" was interpreted in M/s
Popular Construction Co. (supra). Also, Section 32 inter
alia provides for termination of the arbitral proceedings
by the final award. Section 32 (3) lays down that the
mandate of the Arbitral Tribunal shall terminate with the
termination of the arbitral proceedings, subject inter alia
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O.P.No.692 & 1030 of 2019
to Section 33. It will thus be seen that unless a case is
covered by Section 33, the mandate of the Arbitral
Tribunal is terminated. Thus, unless an application/
petition under Section 33(1) of the Act is preferred within
30 days of the making of the award, the mandate of the
Arbitral Tribunal terminates. Once the mandate of the
Arbitral Tribunal terminates, it is not possible to file the
application / petition under Section 33 of the Act.''
19. Having regard to the above legal position and the provisions of
law itself makes it clear that application under Sec.34 of the Act to set aside
the award cannot be entertained unless it is filed within a maximum period of
120 days as provided under Sec.34 of the Act.
20. In sofar as the award of the Council, it is the contention of the
petitioner counsel that as the conciliation is not fructified, the second
respondent Council itself invoked arbitration proceedings, though Council has
not followed the procedure contemplated under the Act, that cannot be gone
into when the application itself filed under Sec.34 of the Act is not
maintainable before this Court on the ground of limitation.
21. Such view of the matter, both the Original petitions are
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O.P.No.692 & 1030 of 2019
dismissed. Consequently, connected applications are closed.
09.09.2021
Speaking/Non speaking order
Index : Yes/No
vaan
N.SATHISH KUMAR, J.
vaan
https://www.mhc.tn.gov.in/judis/
O.P.No.692 & 1030 of 2019
O.P.No.692 & 1030 of 2019
and A.No.6755 of 2019,
A.No.363, 3004 and 3112 of 2020
Dated: 09.09.2021
https://www.mhc.tn.gov.in/judis/
