Madras High Court
M/S.Napc Limited vs The Superintending Engineer on 30 September, 2021
OSA Nos.188 and 189 of 2019
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 30.09.2021
CORAM :
THE HON'BLE MR.SANJIB BANERJEE, CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE P.D.AUDIKESAVALU
OSA Nos.188 and 189 of 2019
M/s.NAPC Limited
184/214, Royapettah High Road
MMPDA Tower, 2nd Floor, Royapettah,
Chennai 600 014. ... Appellant in
both OSAs.
Vs.
1. The Superintending Engineer,
National Highways, TNSCC Complex,
Jai Nagar, 206/N, Jawaharlal Nehru Salai,
Opp. Mofussil Bus Stand, Chennai 600 106.
2. K.Srinivasan
Sole Arbitrator
C2, Block 1, Mayfair Apts, 2A, LIC Colony Road,
Velachery, Chennai 600 042. ... Respondents in
both OSAs.
Appeals filed against the common order dated 10.07.2019 in OP
Nos.881 and 899 of 2018 on the file of original side of this court by
upholding the arbitration award published for implementation.
For the Appellant : Mr.Satish Parasaran,
Senior Counsel,
for Mr.Arun C.Mohan
For the 1st Respondent : Mr.Edwin Prabhakar,
Special Government Pleader
(Civil Side)
http://www.judis.nic.in
____________
OSA Nos.188 and 189 of 2019
COMMON JUDGMENT
(Delivered by the Hon'ble Chief Justice)
The contractor is the appellant questioning an order passed
under Section 34 of the Arbitration and Conciliation Act, 1996 setting
aside an award on the ground of lack of authority and limitation. The
appellant had partially succeeded before the arbitrator and the award
provided for a sum of slightly over Rs.4.21 crore, inclusive of interest
till the date of the award.
2. The contract was for the construction of a two-lane by-pass
around Kanchipuram in the Villupuram Division connecting NH4 and
the Kancheepuram – Vandavasi Road. It included the construction of a
major bridge. The contract was, as accepted by the parties, for a
period of 24 months from April 18, 2010. A first lot of claim was made
by the contractor on January 9, 2012 for the period up to October,
2011, which was rejected by the respondent employer on March 9,
2012. The tenure under the contract was extended on or about April
17, 2012 for a period of seven months. On July 27, 2012, a second lot
of claim came to be made by the contractor for the period November,
2011 to May, 2012. Again, the employer rejected the claim on
September 7, 2012. On or about October 16, 2012, the tenure was
extended for a further six months. On January 30, 2014, the third lot
http://www.judis.nic.in
____________
OSA Nos.188 and 189 of 2019
of claim was made by the contractor. There is no dispute that the
demand for arbitration was made by the contractor on August 14,
2015. Under Section 21 of the Act of 1996, the commencement of
arbitration happens upon a demand for an arbitral reference made by
one party being received by the other party. Despite the demand for
an arbitral reference in accordance with the arbitration clause found at
clause 50 of the agreement between the parties which is dated April
19, 2010, the contractor was constrained to request the Chief Justice’s
Designate under Section 11(6) of the Act of 1996 to constitute an
arbitral tribunal. A sole arbitrator was appointed.
3. Unfortunately, the arbitrator has been quite unnecessarily
impleaded as a party to the appeal since the arbitrator was also
impleaded before the arbitration court. It is completely unnecessary
for arbitrators to be arrayed as party unless personal allegations are
made and the arbitrator is required to answer such allegations. Despite
several orders in such regard, the unsavory practice continues in this
court, of needlessly impleading arbitrators.
4. There is no dispute that the request under Section 11(6) of
the Act of 1996 was prosecuted upon notice to the employer. At such
point of time, the employer did not step up to suggest that there was
no arbitration agreement between the parties or that the disputes
http://www.judis.nic.in
____________
OSA Nos.188 and 189 of 2019
raised by the contractor were not covered by any arbitration
agreement. It was only upon the arbitrator appointed by the Chief
Justice’s Designate taking up the reference that an application was
moved under Section 16 of the Act of 1996 questioning the authority
of the arbitrator to proceed with the reference on the ground that a
particular government order of 1990 vintage issued by the Public
Works Department precluded arbitral references where the value of
the claim was in excess of Rs.5 lakh. Though the employer asserted
the application of G.O.Ms.No.1545 dated July 26, 1990 before the
arbitrator and seeks to rely on such notification to sustain the
judgment and order impugned herein dated July 10, 2010, it does not
appear that the relevant notification was referred to, even indirectly, in
the agreement of April 19, 2020.
5. According to the respondent employer, the agreement
between the parties makes a reference to "PS to SSRB" at clause
4.2(c). Clause 4.2 covers the governing law and the heading of such
clause is "Laws governing contract, observance of laws". Sub-clause
(c) and the reference to "PS to SSRB" implies the set of guidelines
contained in the Preliminary Specifications to Standard Specifications
to Roads and Bridges.
6. Though the submission in such regard makes little meaning,
http://www.judis.nic.in
____________
OSA Nos.188 and 189 of 2019
so that the entirety of the argument made on behalf of the employer is
at least referred to, the whole of Clause 4.2 may be seen:
“4.2 LAWS GOVERNING CONTRACT OBSERVANCE OF
LAWS:
Local regulations and attachments
a) The law to which the contract is to be subject and
according to which the contract is to be constructed shall
be the law for the time being in force in the Union of India
and State of Tamil Nadu.
b) The contractor shall conform to all laws of the land, and
the regulations and bylaws of any local authority, and of
any after or lighting companies with whose systems the
structure is proposed to be connected. He shall, before
making any variations from the drawings or specification
that may be necessitated for so conforming give to the
Engineer written notice, specifying the variations proposed
to be made and the reasons for making them, and apply
for instructions thereon. In case the contractor shall not
receive such instructions within seven days, he shall
proceed with the work conforming to the provisions,
regulations or by-laws in question and any variations in the
drawings or specifications so necessitated shall be dealt
with under Clause 27. The contractor shall give all notice
required by the said Acts, regulations or by-laws and pay
all fees in connection therewith. He shall also ensure that
no attachments are made against all claims or liabilities
arising from or based on the violation of such laws
ordinances, regulations, by-laws, decrees or attachments
by him or by his employees.
http://www.judis.nic.in
____________
OSA Nos.188 and 189 of 2019
c) P.S.to S.S.R.B. is inseparable part of this contract.”
7. Such clause has also, incidentally, been quoted in the
impugned judgment. Nothing in sub-clauses (a) or (b) of Clause 4.2 of
the said agreement makes any government notification or order
applicable to the contract between the parties herein by the remotest
reference thereto. It is now to be seen whether the obscure reference
to "PS to SSRB" would incorporate the reference to the government
order of 1990. Extracts from the Preliminary Specifications to Standard
Specifications to Roads and Bridges have been relied upon on behalf of
the employer at pages 12 to 24 of the typed set filed on its behalf on
September 29, 2021. It is submitted that paragraph 108.02 in the said
Preliminary Specifications would cover the present situation. There is
absolutely no connection between paragraph 108.02 of the Preliminary
Specifications and G.O.Ms.No.1545 dated July 26, 1990. However, to
do justice to the submission made on behalf of the employer, the
entirety of the paragraph is noticed:
"108.02 Laws to the (sic ‘be’) observed -
The Contractor shall at all times observe and
comply with all Union and state laws, local laws,
ordinances and regulations which in any manner affect
the conduct of the works and all such orders as exist at
the present and which may be enacted in the future by
legislative bodies or tribunals having legal jurisdiction
http://www.judis.nic.in
____________
OSA Nos.188 and 189 of 2019
or authority over the work, and no place of
misunderstanding or ignorance thereof will be
considered. He shall indemnify and save harmless the
Government and all its officers, agents employees and
servants against any claim or liability arising from or
based on the violation of any such law, ordinance,
Regulation, order or decree whether by himself or by
his employees.
He shall also ensure that no attachments are
made against materials or work forming part of or for
the use of the contract.
All scaffolding runways hoists and other
temporary construction shall comply with all pertinent
requirements of Union and state laws, local laws,
ordinances and regulations."
8. The relevant clause quoted above refers to Union and State
laws, local laws, ordinances and regulations but does not refer to any
instructions or orders issued by any government. Though the word
"order" appears in the initial part of the clause, such word must be
seen in the context in which it has been used and pertains to the
conduct of the works and all such orders as existing at the time of the
Preliminary Specifications being published as long as they were made
by “legislative bodies or tribunals having legal jurisdiction or authority
over the work.” At any rate, if the government order of 1990 were to
apply to the agreement of April 19, 2010 between the parties, a
http://www.judis.nic.in
____________
OSA Nos.188 and 189 of 2019
solitary line could have been incorporated either in the arbitration
clause or elsewhere, particularly when the agreement was so detailed
and specific.
9. The objection under Section 16 of the Act failed before the
arbitrator. The arbitrator, thereafter, proceeded to render a speaking
award on merits. The respondent herein was obliged to wait to revive
the challenge to the authority of the arbitrator in course of the
proceedings under Section 34 of the Act. The objection was accepted
by the arbitration court.
10. In the judgment and order impugned herein, the work
undertaken and the other preliminary details are noticed over the first
16 pages or so of the judgment before clause 4.2 of the general
conditions governing the agreement dated April 19, 2010 is quoted in
its entirety. The judgment, thereafter, notices G.O.Ms.No.1545, dated
July 26, 1990 and quotes the same. In the discussion at paragraphs
13 to 25 where two issues are referred in tandem – limitation and the
authority to go to arbitration – the impugned judgment refers to
several precedents, including one cited by the respondent in course of
this appeal, before concluding that the claim carried to the reference
was barred by limitation and the value of the claim was such that it
could not have been carried to an arbitral reference. The judgment and
http://www.judis.nic.in
____________
OSA Nos.188 and 189 of 2019
order impugned does not refer in any great detail to the relevant dates
as to why the claim of the contractor was perceived to be barred by
limitation. In any event, when the arbitration court was minded to hold
that the arbitration was without jurisdiction, the point of limitation may
not have been addressed.
11. The respondent has referred to a judgment reported at
(2001) 10 SCC 30 (State of A.P. vs. Obulu Reddy) where, in
connection with a reference under the 1940 Act, a similar circular
issued by the State of Andhra Pradesh was referred to. The objection
was taken at the earliest stage when a petition for appointment of an
arbitrator was filed before a Civil Judge (Senior Division). Though the
objection was overruled by the Civil Judge (Senior Division), the
objection was accepted before the High Court and the Supreme Court
endorsed the view taken by the High Court.
12. The judgment has no manner of application in the present
case, particularly when no objection as to the invocation of arbitration
was raised at the Section 11(6) stage by the respondent herein. At any
rate, since the matrix contract of April 19, 2010, which contains the
arbitration agreement was a stand-alone document and did not refer
to the government order of 1990 or any other material from which the
incorporation of the relevant government order would be necessary to
http://www.judis.nic.in
____________
OSA Nos.188 and 189 of 2019
be implied, the arbitrator cannot be faulted for having repelled, the
rather unnecessary objection raised by the respondent herein.
13. The second judgment which has been cited by the
respondent is reported at (2009) 7 SCC 696 (M.R.Engineers and
Contractors Private Limited vs. Som Datt Builders Limited). Section
7(5) of the Act of 1996 was considered by the court and it was held,
inter alia, that where the contract between the parties stipulated that a
condition of contract of one of the parties to the contract would form a
part of their contract, (for example, the general conditions of contract
of the Government where the Government is a party), the arbitration
clause forming a part of the general conditions of contract would apply
to the contract between the parties.
14. There are two aspects to the dictum in the said judgment.
The first is the factual aspect as to whether there is any other
document or the like which is referred to in the contract between the
parties for such other document or the like to be looked into and an
arbitration agreement culled out therefrom. For the moment, it may be
assumed that even the negative is read into the Supreme Court
dictum, implying thereby that if a specific arbitration clause is included
in the agreement and a document is referred to in the agreement
which negates the operation of the arbitration clause in certain cases,
http://www.judis.nic.in
____________
OSA Nos.188 and 189 of 2019
the same has to be recognised. In the present case, the factual matrix
is not satisfied since no document or material is produced or cited by
the respondent from which it may be reasonably gleaned or inferred
that G.O.Ms.No.1545 would be applicable and would eclipse the
specific arbitration agreement between the parties if the value of the
claim was in excess of Rs.5 lakh. It is only upon the factual
requirement being met that the legal aspect of the dictum would be
required to be gone into: as to the impact of something in another
document or record, which would detract from the specific clause in
the agreement between the parties. In the absence of there being
anything to detract from the arbitration clause, as in the present case,
the second part of the exercise is completely unnecessary.
15. The arbitrator was perfectly justified in completely
disregarding the needless objection carried by the employer,
particularly in the light of the employer not taking such ground at the
Section 11(6) stage. It probably is a matter that needs to be
addressed at some level by the Government. Objections are needlessly
carried and challenges are made and pursued mindlessly – and the
State exchequer burdened – by the whims of officers who do not take
any responsibility and seek to waste time and money on litigation since
the money does not come out of their pockets.
http://www.judis.nic.in
____________
OSA Nos.188 and 189 of 2019
16. As to the issue of limitation, since it is the admitted position
that the commencement of the arbitral proceedings was on August 14,
2015, any claim that may have been lodged or the cause of action
pertaining to which may have arisen within three years prior to August
14, 2015 could not be said to be barred by limitation. It has been
noticed earlier in this judgment that three lots of claims had been
made by the appellant herein: the first on January 9, 2012 which was
rejected on March 9, 2012; the second on July 27, 2012 which was
rejected on September 7, 2012; and the third on January 30, 2014,
irrespective of when it may have been rejected. Since the claims in
respect of the second and the third lots were made at a point of time
within three years prior to August 14, 2015 when the arbitration
proceedings would be deemed to have commenced, the arbitrator
quite appropriately considered such claims on merits and passed
adequate reasons to allow parts thereof. By the same yardstick, the
arbitrator was justified in rejecting the claim initially made by the
contractor on January 9, 2012, since the cause of action in respect
thereof arose at a point of time more than three years prior to August
14, 2015 when the arbitral proceedings are deemed to have
commenced.
17. For the reasons aforesaid, the judgment and order impugned
dated July 10, 2019 cannot be accepted and the same are hereby set
http://www.judis.nic.in
____________
OSA Nos.188 and 189 of 2019
aside. The arbitral award dated May 23, 2018 is restored. It is
recorded that the challenge to the award made by the contractor, to
the extent the further claim made therein was rejected, has been
expressly abandoned at this appellate stage. There is no merit in the
respondent’s challenge to the arbitral award, whether on the ground of
lack of authority or limitation or on merits. Accordingly, OSA Nos.188
and 189 of 2019 stand allowed to the extent indicated.
18. The appellant will also be entitled to costs of the proceedings
in this court assessed at Rs.50,000/- (Rupees Fifty Thousand only). It
would be ideal if such costs came out of the relevant officer of the
respondent who engineered the challenge to the arbitral award in this
court.
(S.B., CJ.) (P.D.A., J.)
30.09.2021
Index : yes
tar
http://www.judis.nic.in
____________
OSA Nos.188 and 189 of 2019
THE HON'BLE CHIEF JUSTICE
AND
P.D.AUDIKESAVALU, J.
(tar)
OSA Nos.188 and 189 of 2019
30.09.2021
http://www.judis.nic.in
____________
