Calcutta High Court
Union Of India (Uoi), Through The ... vs Ashok Kumar Agarwalla on 4 December, 2003
Equivalent citations: 2004(1)ARBLR228(CAL), 2004(2)CHN498
Author: Azltamas Kabir
Bench: Azltamas Kabir
JUDGMENT Alok Kumar Basu, J.
1. The present appeal is at the instance of Union of India, through General Manager, South Eastern Railway to challenge the judgment and order of the learned Single Judge of this Court dated 27th March, 2002 thereby dismissing the petition of the appellant filed under Sections 30/33 of the Arbitration Act, 1940 for setting aside the Award passed in favour of the respondent.
2. The facts, relevant for disposal of the present appeal, may be briefly stated in this way.
3. The respondent was entrusted with a civil work for repair/ reconstruction of piers between Chengail and Phuleswar Railway Station in Howrah-Kharagpur Division of South Eastern Railway by the appellant through a written contract. The respondent while undertaking the work specified under the contract had to undertake some other additional works under a compelling circumstances and at the request and with approval of the appellant. The respondent on completion of his work on 31st January, 1989 submitted his final bill separately for the original work as well as for the additional work and the appellant while settling the final bill for the original work refused to make any payment for the additional work raising several objections regarding the quantum of work and also regarding the rate for such work as claimed by the respondent.
4. There was several correspondence between the respondent and the appellant over the issue of non-payment regarding the additional work and till December, 1995, there was no settlement of the dispute and ultimately the respondent approached this Court by filing an application under Section 20 of the Arbitration Act, 1940 for appointment of Arbitrator to resolve the dispute. This Court appointed Shri N.K. Bhattacharjee, a retired Judge of this Court as the sole Arbitrator on 15th April, 1997. The sole Arbitrator after considering the claim and counter-claim of the parties along with relevant documents produced by them passed an interim Award on 2nd December, 1998 and the Railway Authority made payment of the said interim Award along with interest on 7th January, 1999.
5. The learned Arbitrator after holding 101 sittings published his final Award on 31st July, 1999 in favour of the respondent along with interest. The Railway Authority being dissatisfied with the final Award by the learned Arbitrator filed application for setting aside the Award sometime in November, 1999 and that application was disposed of by a learned Single Judge of this Court on 6th January, 2000 whereby the objection petition was dismissed. The appellant thereafter preferred an appeal and the Division Bench of this Court dismissed the said appeal giving leave to the appellant to file an appropriate petition before the trial Court for its relief. The appellant thereafter filed a petition before the trial Court for review of its earlier order and that petition was also dismissed on 26th April, 2000 and a decree was duly passed on the basis of the Award by the trial Court on 8th June, 2000. The appellant filed another appeal challenging the decree passed by the trial Court and the Division Bench of this Court by its order dated 20th June, 2000 remanded the matter to the Trial Judge for hearing on the limited question on the principal sum on the various grounds as taken by the appellant in its application for setting aside the Award. After hearing the respective parties the learned Single Judge dismissed the petition for setting aside the Award which was remanded by the appellate Court by his order dated 27th March, 2002 and the present is to challenge the said order of the learned Single Judge.
6. Upon perusal of the order of the learned Single Judge impugned in this appeal, it appears that the appellant sought to challenge the Award in question mainly on the point of limitation. It transpires from the order of the learned Single Judge that after considering submissions of the respective parties and on examination of different decisions cited before him by the respective parties, the learned Single Judge while dismissing the application of the appellant made the following observations.
7. The learned Single Judge was of the view that since the point of limitation was never raised by the appellant at any earlier point of time, although there were several opportunities for doing so, in a collateral proceeding of this nature the appellant was not entitled to raise the plea of limitation to resist the Award.
8. The learned Judge observed on examination of the several letters as pointed out by both the sides that those letters taken as a whole would go to indicate that even if there was any belated claim from the side of the respondent, for due acknowledgement of the said claim within the period of limitation, it was not open for the appellant to raise the plea of limitation at the subsequent stage.
9. The learned Judge finally observed that there was no omission on the part of either of the Arbitrator or by the Trial Court in discharging obligation under Section 3 of the Limitation Act since no plea of limitation was ever raised at any point of time and that apart even if there is an error regarding point of limitation, such error cannot vitiate the Award or cannot affect jurisdiction of the Arbitrator when appellant all along participated in the connected proceeding starting from filing of the application under Section 20 of the Arbitration Act till publication of the final Award.
10. The learned Advocate appearing for the appellant has seriously challenged the above observation of the learned Single Judge and also the final order dismissing thereby the point of limitation which was the sheet-anchor for the appellant to call in question the Award of the learned Arbitrator in the second round of litigation.
11. In course of argument, the learned Advocate for the appellant submits, first of all, that the observation of the learned Single Judge that appellant was not entitled to raise the plea of limitation at a latter point of time is totally erroneous and cannot be supported in the eye of law. The learned Advocate contends that since the point of limitation is the core issue touching the jurisdiction of the Arbitrator and touching the very claim of the respondent for which request was made for reference to the Arbitrator, it was open to the appellant to raise this issue at any stage. The learned Advocate for the appellant has referred to the decisions Commissioner of Income Tax, Madras v. Best & Co. (P) Ltd., Madras , Pandurang Dhondi Chougule and Ors. v. Maruti Hari Jadhav and Ors., in support of his submission.
12. The learned Advocate submits that the settled legal position is that under Article 137 of the Limitation Act, an aggrieved person is required to file application for appointment of Arbitrator with reference to a dispute positively within three years from the date when such difference or dispute arose and from the factual position of this particular case admittedly the work was completed sometime in January, 1989 while the respondent approached the Court for appointment of Arbitrator sometime in December, 1996 and when the claim itself was barred by limitation and when the application for appointment of Arbitrator was hopelessely time barred, the appointment of Arbitrator to consider a claim hopelessly barred by limitation was without jurisdiction and this has vitiated all the proceedings initiated since appointment of Arbitrator including the final Award. The learned Advocate for the appellant in this regard has relied heavily on a Division Bench judgment of the Bombay High Court in Union of India v. Ajit Mehta & Associates, Pune and Ors. , to bring home his point that when there was illegality in the appointment of an Arbitrator, the Court has suo motu power to set aside such Award and when on the question of limitation the appointment of Arbitrator was itself without jurisdiction, the Award can be challenged at any stage.
13. The learned Advocate for the appellant contends that on examination of the statement of claim preferred by the respondent before the learned Arbitrator and also on examination of the application filed by the respondent under Section 20 of the Arbitration Act, 1940, it will appear that there was no statement regarding accrual of cause of action and regarding the starting point of limitation and this is in clear violation of Order VII of the Code of Civil Procedure and on this ground alone, the application filed under Section 20 of the Arbitration Act was liable to be rejected and in this connection the learned Advocate has mentioned an earlier decision of this High Court .
14. The learned Advocate contends that it is the statutory obligation on the part of the Arbitrator as well as on the part of the Court examining the issue to satisfy itself on the point of limitation before entertaining any claim or any relief or any relief touching the said claim and the law in this regard has been well settled in the following decisions :
Manindra Land & Building Corporation Ltd. v. Bhutnath Banerjee and Ors., , Khub Chand and Ors. v. State of Rajasthan and Ors., and M.L. Sethi v. Shri R.P. Kapur, . The learned Advocate submits that by ignoring the point of limitation in the present case the Court appointing the Arbitrator and the Arbitrator also failed to discharge obligation under Section 3 of the Limitation Act and admittedly when the claim was hopelessly barred by limitation even if that point was not raised by the appellant, by ignoring such point, the Court acted without jurisdiction by appointing the Arbitrator and as a consequence the Award of the Arbitrator was invalid and inoperative in the eye of law.
15. The learned Advocate for the appellant submits that the observation of the learned Single Judge that the several letters relied on by the parties taken together would go to indicate that since there was due acknowledgement of the claim of respondent within the period of limitation, the respondent was entitled to have the benefit of Section 18 of the Limitation Act was without any legal foundation and contrary to the proposition of law established by decisions of different High Courts. The learned Advocate submits that to have the benefit of Section 18 of the Limitation Act it was the duty of the respondent to establish jural relationship and such relationship must be inferred from the correspondence and there must be admission of the alleged claim by the party in an unambiguous manner and without any condition thereto. The learned Advocate submits with reference to the letters cited in the paper book dated 16th January, 1992, 20th April, 1995 and 8th June, 1995 at page 489 and onwards that neither of those letters relied on by the respondent succeeded in establishing jural relationship between the parties or in vindicating the stand of the respondent regarding clear and unambiguous admission of the belated claim, of the respondent by the appellant. The learned Advocate has relied on the decisions Mrs. Maniluxmi Fatel and Anr. v. Hindustan Co-operative Insurance Society Ltd. and Anr. , Sha Manmall Misrimall v. K. Radhakrishnan, and Union of India Owning the Southern Rly. represented by the General Manager, Madras v. Seyadu Beedi Co. and Anr., , in support of his contention. In this context the learned Advocate for the appellant has also made reference to the provisions of Section 41A as well as Section 37(3) of the Arbitration Act, 1940 to press his point.
16. The learned Advocate for the respondent while supporting the order under appeal and challenging the instant appeal has strongly refuted all the points taken by the appellant in support of the present appeal. The learned Advocate for the appellant has, first of all, raised a question challenging the scope of the appellant to raise any question on the point of limitation before the learned Single Judge in the second round of litigation keeping in view the specific order of the 2nd Appellate Court. The learned Advocate contends that while setting aside the Award and remitting back the matter for fresh consideration by the trial Court it was the clear observation of the Appellate Court that the appellant would be entitled to raise all those questions taken in the original petition filed under Sections 30/33 of the Arbitration Act only to challenge the principal amount as awarded by the Arbitrator, because, the interest portion has already been remanded to the learned Arbitrator for reconsideration and there was no observation from the Appellate Court on this point. The learned Advocate submits that in the original petition filed under Sections 30/33 of the Arbitration Act, there was no whisper whatsoever regarding the point of limitation and the point of limitation was only raised by the appellant while moving stay petition at the time of preferring the appeal for the second time against the order passing decree by the trial Court on the basis of the Award.
17. The learned Advocate for the respondent submits that from the lists of dates supplied by both the sides it is an undisputed position that respondent undertook additional work with the approval of the appellant and respondent completed the additional work with full satisfaction of the appellant and the Officers of the appellant even in the year 1995 assured the respondent for settlement of the claim after getting sanction from the competent authority and since the completion of the work in 1989 without any break the appellant all along admitted the genuine claim of the respondent, but, resisted the claim and deferred the payment for its own administrative lapses.
18. The learned Advocate contends that it was well within the knowledge of the appellant that it duly acknowledged the claim of the respondent within the period of limitation and hence, there was no plea of limitation, at the time of opposing the petition for appointment of Arbitrator, during the entire 101 sittings before the learned Arbitrator, during publication of the interim Award and its payment, during publication of the final Award, during filing of the petition for setting aside of the Award and its hearing and also during the first and second appeal preferred by the appellant to set aside the Award. The learned Advocate contends that this consistent conduct of the appellant clearly indicates that there was unambiguous waiver and acquiescence on the point of limitation from the side of the appellant and at this stage it has been rightly observed by the learned Single Judge that in a collateral proceeding of this nature there was no scope for the appellant to raise the plea of limitation when the Award has reached its finality.
19. The learned Advocate for the respondent contends that the letters indicated by the appellant and mentioned by the learned Single Judge in his order under challenge would certainly establish the case of the respondent that appellant duly acknowledged the claim of the respondent within the period of limitation and thereby there was extension of the time period for preferring application for appointment of Arbitrator since the claim in question was duly admitted by the appellant well within time. The learned Advocate contends that the interpretation given by the appellant regarding the letters in question is totally erroneous and contrary to factual position and the learned Single Judge rightly interpreted those letters and reached his conclusion.
20. The learned Advocate for the respondent further contends that there is no dispute on the legal proposition that a Court even suo motu can set aside an Award which is illegal and invalid and without any jurisdiction on the face of record. The learned Advocate submits that while exercising discretionary jurisdiction of a Court under Sections 30/33 of the Arbitration Act, 1940, the Court must satisfy itself regarding the nature of objection taken by a party against an Award which was published by a person whose authority was duly approved by both the sides under a written agreement and by subsequent order of the Court. The learned Advocate contends that in the present case in a collateral proceeding for the first time appellant raised a mixed question of fact and law relating to the point of limitation and in fact the respondent never got an opportunity to substantiate his counter point on the question of limitation either before the Court appointing the Arbitrator or before the Arbitrator who published the final Award after holding 101 sittings. The learned Advocate submits that the decision of the Apex Court in this context is very much relevant which has been Oil & Natural Gas Commission v. M.C. Clelland Engineers S.A., , where the Apex Court recorded its observation that when no foundation of a point has been laid in the courses of proceedings before the learned Arbitrators either on the pleading or in the evidence, the same cannot be examined by the Court subsequently and this observation of the Court relates to a plea of limitation taken by the appellant for the first time before the Supreme Court and that too, without substantiating the plea with sufficient materials. The learned Advocate contends that in the present case also the position is almost identical since no plea of limitation was raised either at the time of appointment of the Arbitrator or during continuation of the proceeding before the Arbitrator and hence, at this stage such plea must be discarded by the Court.
21. The learned Advocate for the respondent finally submits that a Court exercising discretionary power should be guided not by legal consideration alone, but, also by the consideration of equity and good conscience and in this particular case when the work was undertaken by the respondent beyond the original contract under the compelling circumstances and at the request of the appellant and when there was clear appreciation from the side of the appellant regarding the work done by the respondent and also a clear promise to make the payment after obtaining the sanction of the competent authority, there was no earthly reason from the side of the appellant to refuse the claim and when an Arbitrator as per terms of the written contract was appointed and the said Arbitrator after holding several sittings and after considering all the papers and documents of both the sides published an Award, there was no justiciable ground from the side of the appellant to refuse to honour the Award on a flimsy ground of limitation taken at a belated stage. The learned Advocate for the respondent to substantiate his point has finally relied on a decision of the Hon'ble Supreme Court , wherein it was observed by the Hon'ble Court that failure to discharge duties under Section 3 of the Limitation Act is merely an error of law and such error cannot affect the jurisdiction of the Arbitrator or for that matter cannot vitiate the Award published by such Arbitrator after giving reasonable opportunities to the participating parties to press their respective point. The learned Advocate for the respondent submits that in view of what has been stated above and in view of the materials placed before this Court, there is no scope for interference with the judgment of the learned Single Judge and there is practically no merit in the present appeal and the same is liable to be dismissed with exemplary costs.
22. We have considered the submissions of the respective parties put forward in course of oral arguments. From the materials placed before us and also from the submissions of both the sides along with written notes of argument, it is undisputed that the respondent-contractor in fact undertook additional work beyond the original agreement and completed the same to the satisfaction of the Railway Authority. It is also available from the materials available with the paper book placed before us that the contractor made his demand for the outstanding bill in connection with the additional work well within the period of three years as contemplated under Article 137 of the Limitation Act and from subsequent correspondence made between the parties there are enough reasons to hold that Railway Authority never disputed the additional work performed by the contractor, but, the objection raised by the Railway Authority against the claim of the contractor had been regarding the actual quantum of work done by the contractor and regarding the rate claimed by the contractor and it is further available that such claim and counter-claim through letters continued till December, 1995 and subsequent thereto the contractor finally approached this Court for appointment of Arbitrator.
23. It is also undisputed that the Railway Authority never raised any question of limitation challenging either the claim of the contractor for the additional work done by him or challenging the claim of the contractor for appointment of Arbitrator on the ground of limitation. It is not in dispute that the Railway Authority participated in the Arbitration proceeding from the beginning to the end and Railway Authority also honoured the interim Award passed by the Arbitrator by making due payment of the same along with interest. The Railway Authority challenged the Award before the learned trial Court and it is evident from record itself that at the time of hearing of that matter the Railway Authority mainly confined its submission on the question of interest which according to Railway Authority was arbitrary and excessive. It is pertinent to mention that the learned Trial Judge at the first instance recorded its opinion that awarding of interest by the Arbitrator on the principal amount was indeed excessive and to some extent arbitrary and considering the point that public money was involved, the learned Single Judge while affirming the Award regarding the principal amount remanded back the interest part to the Arbitrator for fresh consideration after hearing the parties.
24. The Railway Authority, of course, raised an objection before the Appellate Forum that the learned Judge did not record its objection on the principal amount, but, from the order of the Appellate Forum it is clear that this objection did not find support with the Division Bench disposing of the appeal, but, the Division Bench while dismissing the appeal gave a liberty to the Railway Authority to press this point once again before the Trial Judge. The Railway Authority subsequently filed a petition before the Trial Judge for recording its objection against the principal amount of the Award and to record observation accordingly, but, that petition was dismissed on a contested hearing. While disposing of the subsequent appeal preferred by the Railway Authority challenging the decree of the Trial Judge passed on the basis of the Award, the Division Bench was of the view that for the sake of Justice, Railway Authority should be given another opportunity to challenge the Award also regarding principal amount and thus setting aside the decree and allowing the appeal, the matter was sent back on remand to the trial Court for fresh adjudication regarding the question of admissibility of the principal amount and in this regard there was specific observation of the Division Bench that the trial Court should consider submissions of the appellant as available in its petition filed under Sections 30/33 of the Arbitration Act, 1940.
25. As it has been indicated earlier there was no plea of limitation taken by the appellant in its petition under Sections 30/33 of the Arbitration Act, 1940. of the application and it has already been stated that no such plea was also raised while opposing the original petition for appointment of Arbitrator or before the Arbitrator at any point of time. From the record it appears that the plea of limitation was taken for the first time in the stay petition accompanying the memorandum of appeal which was preferred against the decree passed by the learned Single Judge on the basis of the Award.
26. In the above factual background, which is totally undisputed, a question arose before the learned Single Judge while disposing of the matter after remand as to whether in the given fact and circumstances and in view of the legal position there was any scope for the appellant to press the point of limitation to resist the decree and the Award. As we have already recorded the observations of the learned Single Judge we do not want to repeat the same, but, it would be suffice to mention in this context that the learned Single Judge after hearing both the sides in the background of undisputed factual position and after considering several decisions cited by the parties came to a clear observation that when the question of limitation was not raised in the main proceeding or even before the Arbitrator at any point of time, the appellant was not entitled to raise such question in a collateral proceeding of the present nature. The learned Single Judge at the same time accepted the stand taken by the respondent regarding interpretation of the several letters which according to respondent was due acknowledgement of his claim by the appellant within the period of limitation and thereby extending the period of limitation for preferring the claim and the respondent, in fact, preferred his claim within that extended period of limitation.
27. It has been the persistent endeavour of the appellant to convince this Court that once it is proved from record that the claim of the respondent was hopelessly barred by limitation and the application for appointment of Arbitrator was also hit by limitation, it would be a valid and sufficient ground to set aside the Award without asking for any other legal proof, because, the admitted legal position is that if an Award is passed by an authority having no jurisdiction and if it can be shown that the Award is illegal no other ground should be established by the party challenging the Award. The appellant has also argued that once it is shown that the appointment of Arbitrator was without jurisdiction vitiating the Award itself, law does not prohibit the appellant to raise such plea even in a collateral proceeding. The appellant has also tried to demolish the case of the respondent and also the observation of the learned Single Judge on the question of granting benefit of Section 18 of the Limitation Act to the respondent and it was the view of the appellant that since no jural relationship was established, the letters in question could be of any help to the respondent.
28. From the record we find that the original as well as the additional work was completed in January, 1989 and on examination of the different letters written by both the sides between 1989 and 1992 and thereafter between 1992 and December 1995, there are sufficient grounds to hold that Railway Authority never discarded the jural relationship and the Railway Authority never discarded the claim of the respondent, on the contrary, those letters in a very clear term indicated that only for determination of the rate applicable to the work payment was deferred and that determination was in the process and naturally in view of those letters and in view of subsequent conduct of the Railway Authority, in our view the learned Single Judge rightly concluded that those letters certainly gave benefit of Section 18 of the Limitation Act to the respondent contractor and at least the appellant failed miserably to prove the contrary.
29. Once we come to the conclusion that the period of limitation was extended through acknowledgement, the plea of limitation raised by the appellant before us looses much of its force and significance. Even if it is accepted that claim of the respondent contractor was barred under the law of limitation, still, the appellant cannot take that benefit at this belated stage in view of the fact that appellant participated in the Arbitration proceeding and appellant even made the payment of interim Award without any protest or objection. This conduct of the appellant clearly indicated that the question of limitation was raised at a belated stage as an argument of desperation in an attempt to avoid the Award. Having acquiesced in the passing of the interim Award without demur, the appellant is estopped from raising the aforesaid plea in collateral proceedings, particularly in the facts of this case.
30. There is no dispute over the legal position that the Court and also the Arbitrator before entertaining a claim of the party must satisfy itself whether the claim of the party is well within time and on the question of limitation, the claim is liable to be rejected without calling for any other legal proof. In a given case where there is disputed question relating to the point of limitation and when that disputed question was never raised and also when raised not substantiated with sufficient documentary proof, the Court and Arbitrator would be well within its jurisdiction to ignore that point of limitation and this is the legal position which emerges from the decision of the Hon'ble Supreme Court as (supra).
31. The settled legal position is that an Award if vitiated by fraud and patent illegality and if passed by an authority having no jurisdiction is certainly liable to be set aside and even if no objection is raised from any corner, the Court having the opportunity to examine the Award can set aside the same even suo motu. Naturally, before exercising that power the Court must be satisfied that there was fraud in obtaining the Award or there was patent illegality that vitiated the Award and the Arbitrator having no jurisdiction entered upon the reference and passed the Award. In the present case we find that it is not the case of the appellant that any fraud was practised in lodging the claim of the respondent or in obtaining the Award from the Arbitrator. It is not the case of the appellant that there was patent illegality that vitiated the Award or the Arbitrator lacked inherent jurisdiction in entering upon the reference and in passing the Award. The appellant wanted to convince us that as the question of limitation was ignored while appointing the Arbitrator the subsequent act of the Arbitrator is vitiated and so also the final Award.
32. We respectfully disagree with the proposition sought to be established by the appellant to challenge the Award in the manner it was done before the learned Single Judge. From the undisputed factual position, we are fully satisfied that the respondent was legally and morally entitled to get remuneration for the additional work done by it. More so, when the same was duly admitted by the Railway Authority as available from several letters lying with the paper book. We also find from record that no allegation had been made regarding the conduct of the Arbitrator at any stage, rather, the Railway Authority itself honoured the interim Award of the Arbitrator by making prompt payment along with interest. Thus, after hearing the submissions of the respective parties, we are of the view that in the present facts and circumstances even if there was any delay in preferring the claim or in that matter in filing the petition under Section 20 of the Arbitration Act, the acknowledgements of the Railway Authority regarding the claim of the respondent within the period of limitation has extended the period of limitation and even if there is any doubt regarding the period of limitation and even if it is held that there was delay in the matter of appointment of the Arbitrator, the error was merely irregular in nature and it was not so fatal that it could vitiate the entire proceeding and the Award and in this regard we rely on the principle of law settled by the Hon'ble Court in the case (supra). Accordingly we are of clear opinion that the plea of limitation at a belated stage in a collateral proceeding of the present nature cannot be entertained and the learned Single Judge rightly rejected such contention.
33. Thus, having regard to the submissions of the respective parties and after considering all the relevant materials and decisions, we are of the view that there is no merit in the present appeal and the same is liable to be dismissed.
34. The appeal is accordingly dismissed and all pending petitions stand disposed of. The order of the learned Single Judge is hereby affirmed. The learned Advocate for the respondent has submitted for imposition of exemplary cost against the appellant for adopting dilatory tactics to defeat the bona fide claim of the respondent, but, having regard to the peculiar facts and circumstances of the present we restrain ourselves from imposing any cost.
35. Having regard to the judgment delivered by us, the learned Registrar, Original Side who was appointed Receiver over the decretal amount deposited with him by the Reserve Bank of India pursuant to the order dated 7th January, 2003 is directed to release the said amount after encashing the fixed deposit with accrued interest to the respondent.
36. Having regard to the view expressed hereinbefore, the prayer for stay of this judgment made on behalf of the appellant is considered and refused.
37. All parties and the Registrar, Original Side to act on the signed copy of the operative portion of the judgment on usual undertakings.
38. Certified copy of this judgment, if applied for, may be supplied as expeditiously as possible after complying with all necessary formalities.
Kabir, J.
39. I agree.