Telangana High Court
M/S. Extreme Commercials Llp vs M/S. United Traders on 16 July, 2024
Author: B. Vijaysen Reddy
Bench: B. Vijaysen Reddy
THE HON'BLE SRI JUSTICE B. VIJAYSEN REDDY
ARBITRATION APPLICATION No.23 of 2024
ORDER:
This application is filed seeking to appoint a sole arbitrator to
adjudicate the disputes between the applic and the respondent in
terms of the contract agreement dated 10.06.2017.
2. The case of the applicant is that it has entered into agreement
dated 10.06.2017 (hereinafter referred to as 'the agreement') to
facilitate the respondent to secure the order in the tender floated by
the Commissioner of School Education, Government of Andhra
Pradesh, Vijayawada under Tender No.CSCE-MDM/100. That as
per Clause 2 of the terms of the agreement, the respondent shall
pay a share of profit to the applicant at the rate of 2% on the total
value of the contract awarded to the respondent in the above
tender. It is submitted that accordingly, the applicant made all
efforts for securing the contract by the respondent through various
modes. Due to the efforts of the applicant, respondent was
awarded the contract by the School Education Department vide
order dated 28.06.2017 and the respondent was allotted 35% of the
total contract for supply of eggs under MDM scheme and ICDS
scheme to Vishakapatnam, West Godavari, Kadapa and Kurnool
Districts. As per the agreement, the respondent is liable to pay 2%
of the contract value i.e. 9 paise per egg to the applicant.
Respondent has not made the payment even after repeated oral
requests but requested the applicant to reduce the charges from 2%
to 0.7% (from 9 paise to 3 paise per egg). The applicant agreed for
request of the respondent vide letter dated 30.07.2018 and requested
them to make payment of the reduced charge at the rate of 3 paise
per egg as one time settlement within a period of fifteen (15) days
of the payment received by the respondent from the concerned
Department. It is submitted that the respondent has not replied to
the demand letter dated 30.07.2018; the applicant sent several
reminders and also notice to the contractual address of the
respondent mentioned in the agreement but the said notice was not
served on the respondent. That subsequently, through various
other sources, the present address of the respondent was traced out
and the notice dated 14.09.2023 was issued invoking Arbitration
Clause of the agreement and the said notice was received by the
respondent on 25.09.2023 to which respondent issued reply on
18.10.2023 declining to make payment alleging that the claim of the
applicant is barred by limitation.
3. It is submitted that the respondent supplied 31,05,12,057
(thirty one crores five lakhs twelve thousand and fifty seven only)
eggs under the tender for a total value of Rs.1,45,31,96,427/-
(Rupees one hundred and forty five crores thirty one lakhs ninety
six thousand four hundred and twenty seven only) at the rate of
Rs.4.68/- paise per egg and is liable to pay Rs.83,15,362/- (Rupees
eighty three lakhs fifteen thousand three hundred and sixty two
only) to the applicant at the rate of 0.7% reduced rate of charges
i.e. 3 paise per egg. As the respondent failed to make the payment
within 15 days, it is liable to pay twice the amount of the original
2% as per Clause 6 of the agreement i.e. 9 paise per egg
i.e. Rs.5,81,27,857/- (Rupees five crores eighty one lakhs twenty
seven thousand eight hundred and fifty seven only) along with
interest at the rate of 18% i.e. Rs.5,49,30,825/- (Rupees five crores
forty nine lakhs thirty thousand eight hundred and twenty five
only) from 15.08.2018 which comes to the total amount that is liable
to be paid Rs.11,30,58,682/- (Rupees eleven crores thirty lakhs fifty
eight thousand six hundred and eighty two only).
4. In the counter affidavit filed by the respondent, it is stated
that the present application seeking to appoint a sole arbitrator
pursuant to the agreement dated 10.06.2017 is wholly barred by
limitation. The claim made by the applicant is beyond the period
of three (3) years as specified under Article 137 of the Schedule of
Periods of Limitation of the Limitation Act, 1963. The applicant
has not taken any steps to make the claim within the time specified
in the agreement. It is submitted that the respondent issued reply
dated 18.10.2023 to the legal notice dated 14.09.2023 stating that the
claim of the applicant is barred by limitation.
5. Learned counsel for the applicant submitted that "limitation
is a mixed question of law and fact. It is for the arbitrator to decide
whether the claim of the applicant is barred by limitation or not.
The COVID-19 period during the years 2020-22 has to be excluded
as per the judgment of the Hon'ble Supreme Court in Suo Moto
Writ Petition (Civil) No.3 of 2020 1." The address of the respondent
was not known to the applicant and there was no communication.
The commission amount is payable to the applicant by the
respondent within 15 days from the date of receipt of payment by
the respondent from the concerned Department. The respondent
has not stated in the affidavit nor produced any documents to
show that it has received the payment from the concerned
Department on a particular date or a particular period of time and
the same was not intimated to the applicant. Only from the date
when the receipt of the payment is intimated to the applicant,
within 15 days thereafter, the payment to the applicant has to be
made. In the absence of such payment details and date not being
clear, it is unjust for this Court to reject the instant application of
the applicant on the ground of limitation.
6. Mr. Vidyasagar, learned Senior Counsel, appearing for
Mr. G. Sai Prasen, learned counsel for the respondent, submitted
that the claim of the applicant is clearly barred by limitation.
Even if the COVID-19 period is to be excluded, the claim of the
1 (2022) 3 SCC 117
applicant is barred by limitation. Learned Senior Counsel placed
on record the following calculation for computing the period of
limitation.
Sl. Date Event Time
No. Period
1. 17.07.2017 Contract awarded - Claims as
per agreement commences
2. 28.07.2017 Period upto the start of
to Covid-19
15.03.2020
3. 15.03.2020 Period to be excluded as per 2 years
to the Hon'ble Supreme Court 7 months
01.03.2022 orders 27 days
4. 01.03.2022 Balance period of limitation
to
04.07.2022
5. Limitation of 3 years expired 4 months
on 04.07.2022 3 days
6. Time elapsed after limitation 1 year
i.e. 05.07.2022 2 months
8 days
7. Learned Senior Counsel placed on record the judgment
passed by the Hon'ble Supreme Court in B and T AG v. Ministry
of Defence2 and relied on the following paragraphs:
"25. Having heard the learned counsel appearing for the
parties and having gone through the materials on record,
the only question that falls for our reconsideration is
whether time-barred claims or claims which are barred
2 2023 SCC online SC 657
by limitation, can be said to be live claims, which can be
referred to arbitration?
42. Whether time barred claims should be referred to for
decision in the arbitration proceedings was looked into
by this Court in National Insurance Company Limited v.
Boghara Polyfab Private Limited, reported in (2009) 1
SCC 267. Paras 22 to 22.2 respectively of the said
judgment read as under:
"22. Where the intervention of the court is sought for
appointment of an Arbitral Tribunal under Section 11,
the duty of the Chief Justice or his designate is defined
in SBP & Co. [(2005) 8 SCC 618) This Court identified
and segregated the preliminary issues that may arise for
consideration in an application under Section 11 of the
Act into three categories, that is, (i) issues which the
Chief Justice or his designate is bound to decide; (ii)
issues which he can also decide, that is, issues which he
may choose to decide; and (iti) issues which should be
left to the Arbitral Tribunal to decide.
22.1. The issues (first category) which the Chief
Justice/his designate will have to decide are:
(a) Whether the party making the application has
approached the appropriate High Court.
(b) Whether there is an arbitration agreement and
whether the party who has applied under Section 11 of
the Act, is a party to such an agreement.
22.2. The issues (second category) which the Chief
Justice/his designate may choose to decide (or leave
them to the decision of the Arbitral Tribunal) are:
(a) Whether the claim is a dead (long-barred) claim or a
live claim.
(b) Whether the parties have concluded the
contract/transaction by recording satisfaction of their
mutual rights and obligation or by receiving the final
payment without objection."
65. On a conspectus of all the aforesaid decisions what
is discernible is that there is a fine distinction between the
plea that the claims raised are barred by limitation and
the plea that the application for appointment of an
arbitrator is barred by limitation.
72. Whether any particular facts constitute a cause of
action has to be determined with reference to the facts of
each case and with reference to, the substance, rather
than the form of the action. If an infringement of a right
happens at a particular time, the whole cause of action
will be said to have arisen then and there. In such a case,
it is not open to a party to sit tight and not to file an
application for settlement of dispute of his right, which
had been infringed, within the time provided by the
Limitation Act, and, allow his right to be extinguished by
lapse of time, and thereafter, to wait for another cause of
action and then file an application under Section 11 of the
Act 1996 for establishment of his right which was not
then alive, and, which had been long extinguished
because, in such a case, such an application would mean
an application for revival of a right, which had long been
extinguished under the Act 1963 and is, therefore, dead
for all purposes. Such proceedings would not be
maintainable and would obviously be met by the plea of
limitation under Article 137 of the Act 1963."
8. Clause 5 of the agreement dated 10.06.2017 reads as under:
"The party of the First part agrees to pay the said
amount, as and when the payment is received from the
Department which shall be received only in the separate
account to be opened exclusively for this purpose and
operated under escrow mechanism."
9. Learned Senior Counsel further submitted that the applicant
made a claim under notice dated 30.07.2018 calling upon the
respondent to make payment within 15 days of the said notice.
Thus, the period of limitation commences from the date of expiry
of 15 days on receipt of the notice dated 30.07.2018. Per contra,
learned counsel for the applicant submitted that as per Clause 5
read with Clause 6 of the agreement, if there is any delay in
payment, the respondent has to pay double the amount.
10. In the above conspectus, the point which needs to be decided
is whether the claim of the applicant is barred by limitation or not
and if appointment of an arbitrator is necessary.
11. This Court has limited jurisdiction while adjudicating the
application under Section 11(6) of the Arbitration and Conciliation
Act, 1996 (for short 'the Act'). On admitted facts and
unimpeachable evidence, this Court may decline to appoint an
arbitrator when on the face of the pleadings and documentary
evidence, the claim of the applicant is barred by limitation.
However, if Clause 5 of the agreement is looked into, commission
has to be paid to the applicant by the respondent on receipt of
payment from the concerned Department. Respondent has not
placed before this Court any documents/evidences, the details of
payments and the time during which it has received payment from
the concerned Department. There is no averment in the counter
affidavit filed by the respondent as to when the applicant was
informed about such payment. It is pertinent to note that
respondent is not denying that it has entered into agreement with
the applicant and that claim is made for payment of
Rs.11,30,58,682/- to the applicant. Thus, there is an arbitrable
dispute between the parties. The contention of the respondent is
only that the claim of the applicant is barred by limitation.
12. In the prima facie opinion of this Court, mere issuance of the
notice dated 30.07.2018 cannot be a factor to determine the period
of limitation. Moreover, it is relevant to point out that the amount
payable to the applicant is not quantified, thus to non-suit the
applicant on the ground of limitation only because it has issued
notice dated 30.07.2018 would not be just and proper.
The applicant contends that as per Clause 5 of the agreement,
if there is any delay in payment, the respondent has to pay double
the amount to the applicant. If that be so, in the absence of the
respondent complying with the demand made by the applicant
under notice dated 30.07.2018, the applicant can always fall back
on the terms of the agreement, specifically Clauses 5 and 6.
Further, it is not possible for this Court to say with certainty that
the claim of the applicant is barred by limitation. It is for the
learned Arbitrator to decide such issue and respondent has not
made out any case to reject the application of the applicant at the
threshold. In the opinion of this Court, in the light of the above
observations, the judgment passed by the Hon'ble Supreme Court
in B and T Ag v. Ministry of Defense (supra) is not applicable to
the facts of this case.
13. In view of the above, this application is allowed appointing
Justice Mandhata Seetharama Murti, Former Judge, High Court for
the State of Andhra Pradesh, Flat No. 602, A-Block, White House
Apartment, Road No. 13, Banjara Hills, Hyderabad, as Arbitrator
to adjudicate the claims and disputes between the parties and to
pass an award in accordance with law. The parties are at liberty to
raise all factual and legal grounds in support of their respective
claims. The respondent is further at liberty to raise preliminary
objections and seek rejection of the claim of the applicant as barred
by limitation.
14. The learned Arbitrator is entitled to fees as per the rates
specified in the Fourth Schedule to the Act, 1996 inserted by the
Arbitration and Conciliation (Amendment) Act 2015, No.3 of 2016,
with effect from 23.10.2015, which shall be borne by both parties in
equal shares. There shall be no order as to costs.
As a sequel thereto, miscellaneous applications, if any,
pending in this application stand closed.
_______________________
B. VIJAYSEN REDDY, J
July 16, 2024
RRK
