Andhra HC (Pre-Telangana)
Prathyusha Associates Rep. By Its ... vs Rashtriya Ispat Nigam Limited, ... on 16 December, 2005
Equivalent citations: 2006(1)ALT691, 2006(2)ARBLR130(AP)
JUDGMENT D.S.R. Varma, J.
1. Heard both sides.
2. The order of the District Judge, Visakhapatnam, in A.O.P. No. 841 of 2002, is being assailed in this Civil Miscellaneous Appeal.
3. The appellant is the claimant, the first respondent is the employer and the second respondent is the Arbitrator.
4. For the sake of convenience, in this judgment, the appellant, the first respondent and the second respondent will be referred to as "the claimant", "the employer" and "the Arbitrator", respectively.
5. The facts that led to filing of the present Civil Miscellaneous Appeal, in brief, are as under:
Work order, dated 28-7-1992, was issued to the claimant for transportation and stevedoring etc., of pig iron by the employer. Pursuant to the said work order, contract was entered into between the claimant and the employer by way of an agreement, dated 24-2-1993. The agreement contains several clauses and the clauses, which are significant to note, are mentioned in seriatim as under:
Clause 4 deals with the term of agreement, which shall remain in force up to 31 -3-1993. Clause 6 states that no modification or amendment of the contract shall be valid and binding between the parties unless the same are made in writing and are signed by the parties and termed as an amendment to the contract. Clause 7 is to the effect that failure to enforce any of the rates and conditions contained in the contract shall not operate as a waiver of the terms for breach thereof. Clause 26 provides for extension of the contract with the consent of the parties. Clause 35 deals with arbitration.
6. On 22-3-1993, the claimant addressed a letter to the employer seeking extension of time by at least two years. Consequently, through proceedings, dated 5-5-1993, contract was extended till 31-3-1994 at the same rates and on the same terms and conditions. It was further extended up to 30-6-1994. Contract was extended in accordance with the Clause 26 of the General Conditions of the Contract (for brevity "the GCC"), dated 24-2-1993, for a period of two months or till the disposal of the stay petition pending before the High Court of Andhra Pradesh, in W.P. No. 9530 of 1994, the details of which are not necessary for the present. In the said letter, except the prices regarding four items, which are mentioned therein, the employer specifically informed the claimant that "all other terms and conditions of the contract shall remain same except the lead rate".
7. The claimant, through letter, dated 7-7-1994, agreed for reduction of rates by 20% on all items. The contract was further extended through letter, dated 7-10-1994, till 30-11 -1994. The employer again addressed another letter, dated 30-1-1995, to the claimant extending the contract till 31 -3-1995 or till the disposal of the stay petition in W.P. No. 9530 of 1994. It was further extended up to 31 -5-1995 pending disposal of the said writ petition and also further extended till 31-7-1995 under the same circumstances. Again it was specifically mentioned in the said letter that all the terms and conditions shall remain as same except the rates mentioned in the letter, dated 30-6-1994. The said letter was marked as Ex.C-5. Similarly, the employer addressed several letters to the claimant extending the contract from time to time. The last letter addressed by the employer to the claimant appears to be dated 18-12-1994 wherein it was stated that no escalation would be paid on items at SI. Nos. 6 and 7 (not covered by the present dispute) in the schedule of rates as per the contract, dated 24-2-1993, and it was also categorically stated therein that all terms and conditions of the contract shall remain same. Likewise, the contract was being extended from time to time and eventually the works under the contract were completed by 14-9-1997.
8. In the meanwhile, it was stated by the employer through letter, dated 15-7-1996, while extending the contract till 31 -12-1996, the escalation rates shall be payable on such rates for increase with base rate as on 30-6-1994 for all the subsequent periods. The service of the said letter was seriously disputed by the claimant. The significance of the said letter would be dealt with later. On 23-10-1997, the employer asked the claimant to finalize and close the contract, dated 30-6-1994, and also to furnish 'no claim certificate' for the purpose of processing the bills, it was promptly responded by the claimant by letter, dated 18-11-1997, inter alia stating that there was no new contract, dated 30-6-1994, but it was only an extension of original contract, dated 24-2-1993, referring to the above letter, dated 23-10-1997 of the employer, which was marked as Ex.C-7. The employer addressed another letter stating that the required formalities were not complied with for closing the contract and that the claimant would be held responsible for the consequential damages. In this letter, two other letters said to have been addressed; one by the claimant, dated 22-8-1998, and the other, dated 22-5-1997, by the employer, were referred to. But, these two letters were neither made part of the record at any stage, including before the learned Arbitrator, nor were relied on for any purpose.
9. On 4-9-1998, the claimant addressed another letter certifying that there were no claims against the employer under the contract NO. MKTG/T&S/02/2775, dated 28-7-1992, except to the extent of the claim preferred by the claimant as far as the bills mentioned thereunder. Such claims, which were not settled, were mentioned in Annexures-1, 2 and 3. Annexure-3 deals with escalation claims. Another letter, dated 9-5-2000, was addressed by the employer requesting the claimant to confirm about certain amounts in order to process the final payment with a further request to submit the 'no claim certificate'. Subsequently also, there was some correspondence for various charges, including escalation charges, which are not relevant.
10. Yet another crucial event, that is on record, is the letter, dated 25-9-1996, addressed by the claimant, which was marked as Ex.C-6, states inter alia that the escalation calculation was based on 1994 base rate and it was further stated that the claimant reserved his right to claim the difference in escalation charges taking the 1992 base rates and requested to consider the same. It was further stated that since the claimant was facing severe financial crisis, bills were being submitted for the present taking 1994 base rates as advised by the employer. Since the subsequent correspondence turned futile, eventually, a notice, dated 24-3-2001, invoking the arbitration clause, was issued by the claimant. With no protest whatsoever to the said notice, the Arbitrator had been appointed.
11. Before the learned Arbitrator, on behalf of the claimant, P.W.1 was examined and Exs.C-1 to C-37 were marked, whereas none was examined on behalf of the employer. But, Exs.R-1 to R-20 were marked.
12. The learned Arbitrator framed the following issues:
(1) Whether the base rate as on 15-2-1992 or those as on 30-6-1994 are to be taken into consideration for the purpose of computation of the claim for escalation?
(2) Whether the bills under Exs.C-19 to C-26 were calculated correctly?
(3) Whether the claim is barred by limitation?
(4) Whether the claimant is entitled to claim interest?
(5) Which of the parties are entitled to costs of Arbitration?
13. After considering the entire material available on record, including the evidence, both oral and documentary, the learned Arbitrator answered all the issues in favour of the claimant and awarded a total sum of Rs. 5,58,74,023/- with interest at 18% p.a. from the date of the award till the date of realization.
14. The above award had been challenged before the District Judge, Visakhapatnam, by way of A.O.P. No. 841 of 2002 wherein the District Judge, after referring to the rival contentions, framed the only point for consideration as under:
Whether the claim of the claimant-1st respondent in invoking arbitration is barred by limitation and the learned Arbitrator-2nd respondent's award is contrary to settled position of law, and legal propositions laid down by the Supreme Court and various High Courts and thereby the award is contrary to law of the land ?
and, eventually, held that in view of the alleged letter addressed by the employer, dated 15-7-1996, whereby the claimant was informed that for the purpose of base rates, the date 30-6-1994 would be taken into consideration, the dispute raised by the claimant was barred by limitation.
15. Hence, by virtue of the intention of the employer in treating 1992 base rate as agreed base rate, it was for both the parties to consider that there was a dispute with regard to escalation rates and it should be the starting point for the purpose of limitation to raise a dispute under the Arbitration and Conciliation Act, 1996 (for brevity "the new Act").
16. Yet another incidental issue formulated by the Civil Court was that "is the work order, dated 30-6-1994, is not a fresh work order and it is only continuation of original contract, dated 24-2-1993".
17. While dealing this issue, the learned District Judge had taken into consideration Ex.R-10 i.e. letter, dated 15-7-1996, said to have been addressed by the employer to the claimant. It was further recorded by the learned District Judge that it was nearly after three years of Ex.R-10 letter, a reply had been given by the claimant on 8-11-1997 asserting that no fresh agreement, dated 30-6-1994, was entered into and the work executed from 1992 till September 1997 was the work executed under the work order, dated 28-7-1992, and that a new contract, dated 30-6-1994, had been introduced after much deliberation and after the extensions of the contract made in view of the orders passed by the High Court in W.P. No. 9530 of 1994 and further the contracts dated 24-2-1993 and 30-6-1994 are to be treated as distinct and separate and unless and until the rates for escalation of the year 1992 are specifically mentioned in Ex.C-5 letter, dated 30-6-1994, the rates of escalation of the year 1992 cannot be accorded in view of the distinct agreement, dated 30-6-1994. The District Judge also discussed various judgments of various High Courts and Apex Court and eventually set aside the award passed by the learned Arbitrator.
18. The learned Senior Counsel Sri V.R. Reddy appearing for the claimant argued that the agreement was originally entered into on 24-2-1993 agreeing to pay the escalation charges taking the base rates of the year 1992. For some reason i.e. because of filing of the writ petition W.P. No. 9530of 1994 and the interim stay order granted by this Court therein, the claimant could not complete the work within the time stipulated and for the same reason, i.e. pendency of the writ petition, time was being extended from time to time and the employer agreed in all the letters extending the time to the effect that the escalation charges would be paid as per the base rate of the year 1992. This specific agreement could be seen from various documents, which will be referred at the later part of this judgment.
19. It is further contended by the learned Senior Counsel for the claimant that the principle of waiver of right to object is to be made applicable in view of Section-4 of the Arbitration and Conciliation Act, 1996. He further contended that Section-18 of the Limitation Act is the relevant provision, which deals with acknowledgement. In this regard, he placed reliance on Ex.C-10 (No claim certificate issued by the claimant), whereby out of three claims, the employer had accepted only two claims. It is his further contention that the question of limitation has to be decided by the learned Arbitrator either under Section 30 of the Arbitration Act, 1940 (for brevity "the old Act") or under Section 34 of the new Act. Further, he brings to the notice of this Court the letter, dt.9-5-2000, whereby the claimant was requested by the employer to confirm about certain amounts in order to process the final payment with a further request to submit a 'no claim certificate' baring the due amounts mentioned in the said letter, which shows that it is a running account. Hence Section 18 of the Limitation Act, 1963, which deals with the aspect of acknowledgement, is to be made absolute.
20. Percontra, the learned Senior Counsel Sri S. Venkata Reddy appearing for the employer, strenuously contended that law of Limitation is applicable to the new Act, particularly, Articles 18, 55 and 58 of the Limitation Act are applicable, but not Article 137 of the Limitation Act. He further contended that grant of certain claims and rejecting certain claims does not save limitation. In this context, on this issue, he relied on various decisions of the apex Court as well as other High Courts, which will be discussed later. In nutshell, he supports the reasoning and the decisions relied on by the Civil Court.
21. In view of the above facts and contentions, the following points would fall for consideration:
(1) Whether the letter, dated 30-6-1994, amounts to a fresh agreement or in continuation to the original contract dated 24-2-1993?
(2) Whether the dispute raised by the claimant is barred by limitation?
(3) To what relief?
22. In Re Point No. 1: It is not in dispute that originally the agreement was entered into between the parties on 24-2-1993. For the purpose of this issue, it is necessary to refer to Clause No. 6 of the said agreement, which reads as under:
No modification or amendment of this contract shall be valid and binding between the parties unless the same are made in writing and are signed by the parties and termed as an amendment to this contract.
23. The above clause was to the effect that any amendment must be in writing and is to be signed by both the parties and it further postulates that such changed document in writing shall be specifically termed as 'amendment to the original contract'.
24. It is the specific case of the employer that after the said agreement was entered into, a letter, dated 22-3-1993, had been addressed by the claimant to the employer referring to the agreement, dated 24-2-1993, seeking extension of the contract for a period of two years because of the huge investment for preparation of some specialized wire rope specially designed for pig iron and for acquiring necessary infrastructure for transportation and loading etc., purposes. Perhaps, in view of the short period, the said letter might have been addressed. However, the above letter was answered by the employer through letter, dated 5-5-1993, marked as Ex.C-4, referring to the agreement, dated 24-2-1993. The relevant portion of which reads as under:
"Dt: 5th May 1 993.
Ref: Our Agreement dated 24th Feb 93 and your letter dated, 22nd March 93.
(emphasis supplied) * * * Dear Sirs, With reference to the above, we are glad to extend the validity of the Contract till 31st March 1994 at the same rates, terms and conditions subject to the following:
(emphasis supplied) (1) You shall arrange for average transportation of the material by Road @ 1,500 MT per day. (2) You shall arrange for providing additional Security Deposit of 10% on the additional quantity of 96,000 MT to be handled by you.
Please acknowledge receipt and make arrangements for providing Security Deposit accordingly.
Thanking you, Yours faithfully, For VISAKHAPATNAM STEEL PLANT
25. Further, the employer addressed another letter, dated 30-6-1994, marked as Ex.C-5, which is extracted below to the extent relevant.
MKT/EXP/SHP/01 30-6-94.
The Honourable High Court of Andhra Pradesh has stayed award of contract in pursuance to the Tender Enquiry Notice NO. MKTG/T&S/01/6&7/94, dt. 10-5-1994 pending further orders on the petition No. W.P. No. 9530 of 1994.
In accordance with the Clause No. 26.0j of the General Conditions of the contract dated 24-2-1993. we hereby extend the contract for a period of two months or till the disposal of the stay petition pending before the Honourable High Court of Andhra Pradesh in W.P. No. 9530/94 whichever is earlier at the following rates:
(emphasis supplied) Per ton Rate Rs. Ps.
(1) Transportation of Pig Iron from VSP Plant site to Visakhapatnam Port: --
(2) Transportation of materials from Stockpiles to the wharf: --
(3) Hooking: --
(4) On Board Stevedoring: --
All other terms and conditions of the contract shall remain same except the load rate which is 4,000 MT per W WD.
In token of acceptance of the above terms and conditions, you are required to sign one of this letters and return the same.
Thanking you, Yours faithfully, For VISAKHAPATNAM STEEL PLANT
26. The above letter makes it further clear that the period of contract was extended by two months or till the disposal of the interim stay petition in Writ Petition No. 9530 of 1994. Further, the extension was subject to slashing of rates on certain items. The said items, as could be seen from the above, do not cover the escalation charges, or the date or year of commencement of the claim of such charges in future.
27. Other important letters, dt. 7-10-1994 (Ex.C-27), 31-1-1995 (Ex.C-28), 31-3-1995 (Ex.C-29), 31-5-1995 (Ex.C-30), 19-10-1995 (Ex.C-31) and 18-12-1995 (Ex.C-32), would clearly show firstly that the time of the contract was being extended from time to time, secondly the said extension was with reference to the original contract, dated 24-2-1993, and thirdly 24-2-1993, shall remain the same except for few changes mentioned in letter, dated 30-6-1994.
28. Therefore, it is obvious that both the parties were very much clear in their minds that there was only one contract, which is otherwise called as 'original contract', dated 24-2-1993, and because of the pendency of the litigation in the High Court and also as requested by the claimant, invoking Clause 26 of the GCC, time was being extended from time to time without there being any change in the date of effect of the contract.
29. Further more, in all the letters, referred to above, there was a specific expression that all other terms and conditions of the contract, dated 24-2-1993, would be in tact. In other words, these letters are only meant for the extension of the period of contract because of the contingencies prevailed at that time and that there was no intention on either of the parties to effectively alter the terms and conditions of the contract, dated 24-2-1993, barring few. Therefore, the basic document of contract would and should remain to be the one dated 24-2-1993.
30. Further more, the Clause 6 of the agreement, which was extracted above, specifically postulates that any change in the original contract shall be in writing and be signed by the parties and any such document with amendment shall be termed as 'amendment to the original contract'. None of the letters referred to above would show that such term was expressly used nor was signed by both the parties. In other words, those letters, which are basically meant for extension of the original contract, dated 24-2-1993, cannot, at any stretch of imagination, be treated as amended contract or contracts, for the simple reason that they do not carry any of the features of the original contract, dated 24-2-1993.
31. Further, the apex Court in Fertilisers & Chemicals Travancore Ltd. v. K.S.E. Board held that any unilateral change in the contract is not permissible.
32. In the instant case, all the letters referred to above are only the letters addressed by the employer. Of course, there were few minor changes in the rates of certain items, but those changes were under the contingencies mentioned in those letters and they were not objected to by the claimant on all occasions. Therefore, it implies that the minor changes suggested under some special circumstances while extending the original contract, dated 24-2-1993, from time to time, were agreed to by the claimant but such minor changes, by themselves, are not capable of changing the very basic nature of the original contract, dated 24-2-1993, nor the sporadic changes cannot be termed as total departure from original contract, which are ultimately resulting in cessation or termination of the contract.
33. Hence, even if, as contended by the employer or as described by the Court below, the said letter, dated 30-6-1994, is to be treated as a new contract, but not in continuation to the original contract, dated 24-2-1993, the same amounts to a contract, which is not valid, since not in conformity with Clause 6 of the agreement, and in violation of the basic tenets of law of Contracts since such amendments, even if really made, amount to unilateral alteration of conditions of the contract.
34. At this juncture itself, it is useful to note that the small changes reflected in the letter, dated 30-6-1994, are, in fact, not the subject matter of the arbitration at all and the real and actual subject matter of arbitration was regarding the base rate 'whether 1992 or 1994' for the purpose of computing the escalation charges. The relevance of the said letter, dated 30-61994, would be dealt with separately while dealing with other issues.
35. It is further conspicuous from the record that none of the letters of extension referred to above i.e., Exs.C-27 to C-32, which, in fact, were addressed in the year 1995, does not relate to the letter, dated 30-6-1994. On the other hand, all those letters including the crucial letter, dated 30-6-1994, referred to the original contract, dated 24-2-1993, wherein it was explicitly mentioned "all other terms and conditions shall remain intact". Therefore, it is rather preposterous to treat the letter, dated 30-6-1994, as a date line between the date of commencement of the contract, dated 24-2-1993, till its termination on 14-9-1997. If really it is to be treated as a missing link in the contract, as already noticed above, all the letters i.e., Exs.C-27 to C-32, which were addressed in the year 1995 i.e., subsequent to 30-6-1994, would only disclose that the parties understood the contract, dated 24-2-1993, as the original contract with few changes owing to certain contingencies and further that the dispute relating to the date of computation of escalation charges was never subjected to any change, at any time, in the documents, referred to above.
36. It would be useful to extract such letters, dated 7-10-1994 (Ex.C-27) and 30-1-1995 (Ex.C-28) respectively, for better appreciation, which are thus:
Ex.C-27:
Mktg./Exp/SHP/01, October 7, 1994 M/s. Prathyusha Associates, 48-10-24, Srinagar, Visakhapatnam-16.
Dear Sirs, Sub: Transportation, handling, stacking and stevedoring of Export consignments of Pig Iron. The Hon'ble High Court of Andhra Pradesh has stayed award of contract in pursuance to the tender enquiry Notice No. MKTG/T&S/01/6&7/94 dt. 10-5-94, pending further orders on the petition WP No. 9530/94. In accordance with Clause No. 26.0 of General Conditions of Contract dt. 24-2-93, we hereby extend the contract till 30th November, 94 or till the disposal of the stay petition pending before the Hon'ble High Court of Andhra Pradesh.... All other terms and conditions of the contract shall remain same. A token of acceptance of the above terms and conditions, you are required to sign one of this letter and return the same. Thanking you, Yours faithfully, For Visakhapatnam Steel Plant, Sd/- xx xxx xx, (G.S. Reddy), Dy. General Manager (MKTG.) Ex.C-28:
MKtg/Exp/SHP/02/967, 30th January, 1995.
M/s. Prathyusha Associates, 48-10-24, Sri Nagar, Visakhapatnam-530 016.
Dear Sir, Sub: Transportation, handling, stevedoring etc., of Export Consignment of Pig Iron - Extension of Contract - Reg. The honorable High Court of Andhra Pradesh has stayed award of Contract in pursuance to the Tender enquiry No. MKTG/T&S/01/6&7/94 dt. 10-5-94, pending further orders on the petition WP No. 9530/94. In accordance with Clause No. 26.0 of General Conditions of Contract dt. 24-2-93, we hereby extend the contract till 31st March, 1995 or till the disposal of the stay petition pending before the Hon'ble High Court of Andhra Pradesh in WP No. 9530/94 whichever is earlier. (emphasis supplied) All other terms and conditions of the Contract shall remain same except the rates mentioned in our letter dt.30-6-94. (emphasis supplied) In token of acceptance of the above terms and conditions, you are required to sign one of the letters and return the same. Thanking you, Yours faithfully, For Visakhapatnam Steel Plant, Sd/- xx xxx xx, (BS REDDY), Dy. General Manager/ MKTG-E&S.
37. Similar are the letters under Exs.C-29 to C-32, dated 31-3-1995, 31-5-1995, 19-10-1995 and 18-12-1995 respectively.
38. It is not in dispute that the work was completed on the contract. Further more, there was no termination of the contract, at any point of time, from the date of commencement of the contract i.e. 24-2-1993 till 14-9-1997 at the instance of either of the parties, either implied or express.
39. However, the observations made by the District Judge, are thus:
However, in the cross examination, P.W.1 stated that in the year 1994, the tenders were invited afresh for the said contract and the negotiations were then accepted. It is but natural that P.W.1 would say that the rates of 1992 would form the basis for claiming escalation. The learned Arbitrator was pleased to observe that as nobody was examined on the side of steel plant, who has taken part in the negotiations, this would show that there were no negotiations from the Steel Plant that 1994 contract will form the basis for claiming the escalation.
One basic aspect is that, in spite of 1992 order, when the same is extended in view of the orders passed by the Hon'ble High Court, it is not as though simple proceedings have been issued by the Steel Plant in 1994 calling upon the contractor to continue the contract basing upon 1992 base rates. The very fact that a new contract has been introduced, after much deliberation, would show that the two contracts are distinct and separate and by normal and usual parlance the rates of escalation of 1992, unless specifically mentioned, cannot be expected to continue even when a new contract was entered into in the year 1994.
40. From the above observations, it could be seen that the District Judge had at once jumped into the discussion regarding Ex.R-10, a letter, dated 15-7-1996, indicating that escalation charges cannot be based on 1992 base rates, but only on 1994 base rates.
41. In this regard, it is to be borne in mind that the District Judge, while observing as extracted above, had totally forgotten the letters addressed by the employer through Exs.C-27 to C-32 in the year 1995, in which, it was categorically referred to the contract, dated 24-2-1993, only. Further, the District Judge, having referred to those letters, without expressing a clear opinion on them, again arrived at a conclusion that the letter, dated 30-6-1994 (Ex.C-5), is a different and distinct contract. This is totally in contravention to the letters in Exs.C-27 to C-32. Of course, there is a difference in some escalation charges in Items-6 and 7 in Ex.C-32. But, those escalation charges are in a different context. In other words, if there was a break or termination in the original contract, dated 24-2-1993, by way of novation of the same through letter, dated 3-6-1994, it is rather unthinkable and absurd as to how Exs.C-27 to C-32 were addressed by the employer.
Therefore, the above reasoning accorded by the District Judge cannot be attached with any irrationality (sic. rationality). Accordingly, Point No. 1 is answered in favour of the claimant.
42. In Re Point No. 2: On this point, it is necessary to look into the judgment rendered by the apex Court in Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority . In the said case, it appears that the claimant addressed a letter on 28-2-1983 and subsequently several other letters were also addressed. Eventually, on 7-9-1985 the claimant addressed a letter to the employer to finalize the bills and serving the notice to refer the dispute to the arbitrator and later on in the month of January, 1986, an application was filed under Section 20 of the old Act. A contention was raised by the employer that the application under Section 20 of the old Act was barred by limitation. It was further noticed in the said decision that in the light of the decision of the apex Court in Kerala State Electricity Board v. T.P.K.K. Amsonm and Besom, Kerala , Article 137 of the Limitation Act, 1963, would apply to any petition or application filed in a civil Court under Section 29(1) of the old Act. It was further observed by Their Lordships.
...It is true that a party cannot postpone the accrual of cause of action by writing reminders or sending reminders but where the bill had not been finally prepared, the claim made by a claimant is the accrual of the cause of action. A dispute raises where there is a claim and a denial and repudiation of the claim. The existence of dispute is essential for appointment of an arbitrator under Section 8 of a reference under Section 20 of the Act.
43. However, it further appears in the said case that the works were completed by April, 1980 and between February 1983 to December 1095 the claimant sent several letters to the employer to finalize the bills. It also further appears that the first letter was written on 28-2-1983. In spite of several letters being addressed y the claimant seeking reference under Section-20 of the old Act, upon the failure on the part of the employer to refer the existing dispute to the arbitrator, the claimant filed an application before the competent Civil Court seeking appointment of an arbitrator. In those circumstances, the application filed by the claimant under Section 20 of the old Act was held to be within the period of limitation.
44. Though the learned Senior Counsel appearing for the employer relied on the said judgment (2 supra), the observations made by Their Lordships of the apex Court are more in favour of the claimant.
45. From the above judgment, the following would emerge:
(1) A claim is permitted to be made by the claimant, (2) The question of making a claim would arise at the stage of finalization of the bills.
(3) At that stage, if there is any dispute existing, can be sought to be referred to the arbitrator.
(4) For computing the period of limitation for the said purpose is governed by Article 137 of the Limitation Act and the period of limitation is three years; and (5) The period of limitation is for three years commencing from the date of making or asserting the claim and consequent repudiation and denial of the same.
46. In Eastern Coalfields v. Joscon (2003) 12 SCC 339 while considering the question of limitation, Their Lordships of the apex Court, at paragraph No. 5, observed:
Learned counsel appearing for the appellant urged that in fact the petition filed by the respondent under Section 20 of the Arbitration Act was barred by limitation. Learned counsel urged that under Article 137 of the Limitation Act the petition under Section 20 could be filed within three years from the date when the cause of action arose. In this case we find that finally the Chief Engineer rejected the request of the respondent to refer the matter to arbitration by letter dated 5-9-1990 and the petition was filed in September 1993 which was well within the period of limitation. We, therefore, reject this argument.
47. In view of the decisions of the apex Court in Kerala State Electricity Board's case and Eastern Coalfield's case (3 supra), it is clear that Article 137 of the Limitation Act would apply to the applications filed within three years from the date when the cause of action arose under Section 20 of the old Act or under Section 11 of the New Act.
48. At this juncture, it is to be remembered that the apex Court discussed and decided the question of limitation in a case where a petition was filed before the Civil Court seeking appointment of arbitrator under Section 20 of the old Act and the question that was decided was regarding limitation for filing the application under Section 20 of the old Act before the civil Court, but not the question whether the very claim raised was barred by limitation.
49. Regarding limitation, the apex Court in Union of India and Anr. v. L.K. Ahuja and Co. held firstly that it will be entirely wrong to mix up the two aspects viz. , whether there was any valid claim for reference under Section 20 of the old Act and secondly whether the claim to be adjudicated by the arbitrator, was barred by lapse of time. The second is a matter, which the arbitrator would decide unless, however, if on admitted facts a claim is found at the time of making an order under Section 20 of the old Act, to be barred by limitation. Further, in order to be entitled to ask for a reference under Section 20 of the old Act, there must be an entitlement to money and a difference or dispute in respect of the same. Above is a case where the claimant, having accepted the payment of final bills and consequently having given no claim declaration, raised a dispute after quite some time and to that effect, an application had been made before the trial Court for certain claims. In that context, the apex Court observed thus:
8. In view of the well settled principles we are of the view that it will be entirely wrong to mix up the two aspects, namely, whether there was any valid claim for reference under Section 20 of the Act, and, secondly, whether the claim to be adjudicated by the arbitrator, was barred by lapse of time. The second is a matter, which the arbitrator would decide unless, however, if on admitted facts a claim is found at the time of making an order under Section 20 of the Arbitration Act, to be barred by limitation. In order to be entitled to ask for a reference under Section 20 of the Act, there must be an entitlement to money and a difference or dispute in respect of the same. It is true that on completion of the work, right to get payment would normally arise and it is also true that on settlement of the final bill, the right to get further payment gets weakened but the claim subsists and whether it does subsist, is a matter which is arbitrable. In this case the claim for reference was made within three years commencing from April 16, 1976 and the application was filed on December 13,1976. We are, therefore, of the view the High Court was right in this case.
(emphasis supplied)
50. Following the observations made in Ahuja's case (4 supra), the apex Court in Jayesh Engineering Works v. New India Assurance Co. Ltd. held:
Whether any amount is due to be paid and how far the claim made by the appellant is tenable are matters to be considered by the arbitrator. In fact, whether the contract has been fully worked out and whether the payment have been made in full and final settlement are questions to be considered by the arbitrator when there is a dispute regarding the same.
51. It is well settled principle that question of limitation is a mixed question of law and fact. What is the effect of the finding recorded by the Arbitrator on the question of limitation is another incidental substantial question.
52. In Tarapore and Company v. Cochin Shipyard Limited Cochin and Anr. . Their Lordships of the Supreme Court observed as under:
As an alternative to Court proceedings, arbitration as a method of resolving disputes by domestic tribunal constituted by the choice of parties became acceptable. The basis difference between the Court proceedings and the arbitration is the choice of the tribunal. Ordinarily, all matters in which relief can be claimed from the Court may become subject matter of arbitration. Now if in a law Court incidental questions of law arise in the course of proceeding, the Court has an obligation to decide those questions of law. but when it came to a tribunal not endowed with the judicial power of the State but by conferment by the parties to the dispute or which acquires jurisdiction by a submission of the parties to the dispute to invite the decision by the forum of their choice and to be bound by it a question arose whether a pure question of law if at all can be referred to an arbitrator for his decision and even if he decides, can the decision be questioned on the ground that there is an error apparent on the face of the award in deciding the question. Now as stated a sort while ago, a question of law may figure before an arbitrator in two ways. It may arise as an incidental point while deciding the main dispute referred to the arbitrator or in a given case parties may refer a specific question of law to the arbitrator for his decision. There is no more gainsaying the fact that a pure question of law may and can be referred to an arbitrator for his decision. Russel on the Law of Arbitration, Twentieth Edition at page 22 states as under:
A pure question of law may be referred to an arbitrator; and where such a question is specifically referred his award will not be set aside merely upon the ground that his decision is wrong. In Halsbury's Laws of England, Vol.2, Para 623, Fourth Edition the statement of law reads as under: If a specific question of law is submitted to the arbitrator for his decision and he decides it, the fact that the decision is erroneous does not make the award bad on its face so as to permit its being set aside; and where the question referred for arbitration is a question of construction, which is, generally speaking, a question of law, the arbitrator's decision cannot be set aside only because the Court would itself have come to a different conclusion.
53. In State of Bihar v. Hanuman Mal Jain it was contended that the Arbitrator had committed a patent error in not considering the question of limitation and a non-speaking award was passed. The observations of Their Lordships, at paragraph No. 9, are thus:
It becomes, therefore, clear that the arbitrator while passing non-speaking awards in both these cases had considered all statements, evidences and arguments offered by the contesting parties before him and then he had passed the awards. It is also pertinent to note that amongst the documents considered by the arbitrator the Agreement between the parties including Clause 11 with both its provisos duly signed by the parties was obviously on the record and whatever contentions were canvassed by the defendants regarding the applicability of Clause 11 were stated to have been considered by the arbitrator and then the non-speaking awards were passed. Consequently it is impossible to appreciate the contention that there was any patent error on the part of the arbitrator in not considering the question of limitation as mentioned in the second proviso to Clause 11. It is also necessary to not that the said proviso does not totally prohibit granting of a claim for the work on extra items carried out by the contractor but it only lays down the procedure how the claim could be lodged.
54. Therefore, the aspect of "limitation" though a mixed question of fact and law, basically related to the issue of jurisdiction, ought not to have been gone into by the Court below, since there is elaborate reasoning accorded by the learned Arbitrator before recording a finding regarding cause of action and consequently the question of limitation. Most importantly, the reasoning of the Arbitrator can hardly be termed as illegal or contrary to law, facts and terms of the contract; attracting any of the disqualifications to set aside. Least can be said is the view of the Arbitrator is also possible and in which event the jurisdiction under Section 34 of the new Act cannot be exercised by the Court below to set aside the award.
55. In Ispat Engineering & Foundry Works v. Steel Authority of India Ltd. . Their Lordships of the apex Court observed that "needless to record that there exists a long catena of cases through which the law seems to be rather well settled that the reappraised of evidence by the Court is not permissible, basing on various other judgments of the apex Court, including Union of India v. Bungo Steel Furniture (P) Ltd. wherein it was held to the effect that "the Court had no jurisdiction to investigate into the merits of the case or to examine the documentary and oral evidence in the record for the purposes of finding out whether or not the Arbitrator has committed an error of law. The Court as a matter of fact, cannot substitute its own evaluation and come to the conclusion that the Arbitrator had acted contrary to the bargain between the parties."
56. However, it was further observed by Their Lordships of the apex Court that the abovementioned principle is subject to the situation that no apparent error or illegality on the face of the record is found.
57. The judgment of the apex Court relied upon by the learned Senior Counsel appearing for the claimant in Bhagawati Oxygen Ltd. v. Hindustan Copper Ltd. (2005) 6 SCC 462 deals with the subject of waiver or abandonment of contractual rights.
58. However, Their Lordships of the apex Court elaborately dealt with the circumstances under which the Court can interfere with the award of the Arbitrator.
59. In fact, this aspect had already been dealt with elaborately by the apex Court in ONGC Ltd. v. Saw Pipes Ltd.
60. In the instant case, on facts, it is to be seen that the claimant made a claim regarding escalation charges on a couple of occasions firstly during the performance of the contract, and secondly after completion of the works and at the time of preparation of the final bills. It is to be further seen, in this context, that on the first occasion, a letter was allegedly addressed by the employer under Ex.R-10, dated 15-7-1996, stating that escalation charges will not be paid prior to 1994 and bills will be paid only from the year 1994 instead of 1992 base rates. The said letter was denied by the claimant. The finding about the service of the said letter, recorded by the Arbitrator and civil Court, was divergent -former in favour of the claimant and later in favour of the employer for the purpose of computing the starting point of cause of arbitration.
61. However, due to financial constraints and having invested huge amounts, the claimant addressed a letter, dated 25-9-1996, while reserving his right to claim the same at a later point of time, responded and submitted bills quoting 1994 base rates, only in order to meet the further expenditure in execution of the works. The said letter, dated 25-9-1996, which was marked as Ex.C-6, cannot be treated as acceptance of the bills for full and final settlement, for the reason that the works were still going on and ultimately completed only on 14-9-1997. In other words, it should be understood that though there was a grievance for the claimant regarding the commencement of base date, the same has not been disputed, for the reasons accorded, but reserved his right to raise a dispute at a later date.
62. To put it in a different way, there was no actual dispute, which alone should be the basis for invoking arbitration clause and on the other hand, the same had been reserved for a future date. That means the grievance of the claimant was in the shape of difference of opinion on the conditions of the agreement, but the same was not capable of being treated as a dispute.
63. It may appear that the above observation may look as contrary to the observation made by the apex Court in Major (Retd.) Inder Singh Rekhi's (2 supra) that such reservation may amount to postponement of accrual of cause of action. But, in fact, on facts, we find no divergence with the view taken by the apex Court.
64. Reserving of the right to claim at a future date, in our considered view, cannot be treated as postponement of the dispute, which is the basis for the cause of action. The reason would be that at a later point of time, having regard to the request made by the claimant or because of other circumstances, which cannot be foreseen at the time of such reservation of right to claim for a future date, may disappear or do not exist. The dispute may disappear because of mutual consent of parties in due course of execution of works and eventually, dispute or the cause of action for dispute may wither away, for example; by way of concession or adjustment etc., in view of the possible changed circumstances. It should be further remembered that the reservation of right to claim in the instant case is during the progress of works.
65. As could be seen from the above judgment, the date of finalization of the bills after completion of the works should be the relevant period for the purpose of raising any substantial claim or at least certain types of claims. Otherwise, if every difference is to be treated as a dispute, there may have to be several arbitrations conducted at the cost of works in progress.
66. Further, it should be seen from the present set of facts that the employer through letter, dated 24-8-1998, requested the claimant to raise the bills to which the claimant made three claims and the third claim was regarding the year of commencement of escalation charges as commencing from 1992 instead of 1994. The respondent considered the first two claims and rejected the third one, which is the subject matter in this dispute.
67. The learned Senior Counsel appearing for the employer also relied on the judgment of the High Court of Patna in Bindeshwari Prasad v. District Board, Saran wherein it was held that in the context of Section 19 of the Limitation Act under certain circumstances refusal also amounts to acknowledgment. But, in the instant case, it is not clear from the documents filed by both sides before the learned Arbitrator as to whether in reply to letter, dated 4-9-1998, while admitting the claims in Annexures-l and II, refused the claim in Annexure-III. Therefore, we are unable to express any opinion in the present case, though we are convinced with the principles laid down by the Patna High Court in the said judgment.
68. It is to be seen that neither of the parties approached the Court of law under Section 11 read with Section 15 of the new Act seeking appointment of an arbitrator. Only a notice, dated 24-3-2001, had been sent by the claimant seeking appointment of an arbitrator, upon which without any protest or denial, the arbitrator had been appointed. In other words, the appointment of arbitrator in the present case is the creature of parties to the agreement, but not owing to the judicial intervention. It is to be further seen that at the earliest point of time i.e. before the appointment of arbitrator, having conceded the request for appointment of an arbitrator by the claimant, an objection had been raised as regards the limitation.
69. Hence, now the question would be the same as the one raised by their lordships in Ahuja 's case (4 supra). Precisely, the question is not regarding the reference under the new Act, but it is a dispute to be adjudicated by the arbitrator alone, for the reason that the applicability of Article 137 of the Limitation Act is only for the purpose of reference under Section 11 read with Section 15 of the new Act. If it is a question of limitation regarding the reference to the arbitrator, it is for the aggrieved party to raise the question of limitation and it is for the Court to refer the said objection to the arbitrator and upon such reference, on any question of law like limitation, the arbitrator has to render his opinion and the same can be challenged by way of making an application under Section 34 of the new Act before the Civil Court. In the instant case, it is on record that the competent authority of the employer, upon the notice issued by the claimant, having issued a reply notice, however, appointed the sole arbitrator. The question of limitation had been one among the issues, which actually is the only question of law.
70. In this regard, it could be seen that either of the parties to the agreement did not raise this question in their notices. Further, it appears that the said question has been raised by the employer before the learned arbitrator and in those circumstances; an issue had been framed and had also been answered by the learned arbitrator.
71. The main submission of the learned Counsel for the employer before the arbitrator as well as before civil Court appears to be that the letter dated 30-6-1994 addressed by the employer amounts to a new contract, as per which, for the purpose of calculating the escalation charges, 1994 base rate has to be taken into consideration.
72. But, as already discussed in the first issue, and at the risk of repetition, in brief, there was no mention with regard to the base rate relating to escalation charges in the said letter at all. There were few changes in rates on certain items in a special contingency of the pendency of the writ petition before this Court. Nevertheless, all other conditions of the original agreement dated 24-2-1993 were agreed to be intact and further that the said letter was only a communication and it cannot be treated as a fresh contract inasmuch as the terms and conditions of the contract as defined under Clause (6) of the original agreement, dated 24-2-1993, are fully absent and consequently, the same cannot be termed as "amended agreement".
73. As already noticed above, the claimant reserved his right to claim escalation charges on the basis of 1992 base rates and such reservation of the right to claim cannot be treated as postponement of cause of action.
74. It is significant to refer to the judgment Panchu Gopal Bose v. Board of Trustees for Port of Calcutta relied on by the learned senior counsel for the respondent, from which it is obvious that the period of limitation for the commencement of arbitration runs from the date on which cause of arbitration arises. It was observed therein that for the purpose of Section 37(1) of the old Act, 'action' and 'cause of action' in the Limitation Act should be construed as arbitration and cause of arbitration. The cause of arbitration, therefore, arises when the claimant becomes entitled to raise the question i.e. when the claimant acquires the right to require arbitration. The limitation would run from the date when cause of arbitration would have accrued, but for the agreement. Just as in the case of actions the claim is not to be brought after the expiration of a specified number of years from the date on which the cause of action accrued, so in the case of arbitrations, the claim is not to be put forward after the expiration of the specified number of years from the date when the claim accrued.
75. Though the principles laid down by their Lordships of the apex Court in the said judgment are unexceptionable, the same are not applicable to the instant case, inasmuch as, it is not the case of the employer either before the learned arbitrator, or before the Court below or in this Court that the letter dated 25-9-1996 had to be treated as the crucial date for the purpose of commencement of limitation. It is only the letter dated 15-7-1996, which was the basis all through, for the employer to treat 15-7-1996 as the crucial date, wherein it was stated that for the purpose of computation of escalation charges, base rate of 1994 alone should be mentioned. Service of this letter had been seriously contested before the learned arbitrator and the learned arbitrator recorded that the said letter was not properly served on the claimant and hence it cannot be taken into consideration.
76. However, the District Judge had relied solely on this letter as was served on the claimant and held, relying on the same, that since 1994 base rates alone have to be taken into consideration for the purpose of escalation charges, treated the letter dated 30-6-1994 (extracted in paragraph No. 24) an independent contract/amended contract, in order to deny the escalation charges with effect from 1992.
77. In this regard, basically, we are at loss to understand as to how the learned Judge could connect the letter dated 30-6-1994, with the disputed letter dated 15-7-1996. In order to substantiate his reason, the learned District Judge had taken note of the statement made by the claimant who was examined as P.W.1 to the effect that in the year 1994 tenders were invited afresh for the said contract and negotiations were then accepted.
78. But, it is to be further seen that even P.W.1 admitted that negotiations were held in the year 1994 after calling for new tenders, and since the negotiations were held and successfully concluded, no new agreement was entered into and precisely that is the reason why it appears that the re was reduction in the prices on certain items with a specific understanding that all other conditions of the original contract dated 24-2-1993 would continue. This aspect, in fact, strengthens the case of the claimant. As already noticed, the letter dated 30-6-1994 was only a letter of correspondence without reference to any negotiations or charge in the terms and conditions of the contract, more particularly while referring to the agreement dated 24-2-1993. If that be the situation, it is incomprehensible as to how the controversial letter dated 15-7-1996 alone can be made the basis to determine the question of limitation by the Court below.
79. We are of the further view that in order to oust the claimant from the arbitral proceedings, on the ground of limitation, the reasons recorded by the District Judge basing on the solitary and controversial document dated 15-7-1996, are neither apt, nor adequate, nor fair.
80. Only such of those findings, which are so palpably erroneous or contrary to the agreement can be interfered with by the Court while exercising jurisdiction under Section 4 of the new Act. Therefore, when the question of limitation was sought to be decided and a finding was invited by both the parties before the arbitrator, without there being any direction by the Court to decide this issue in the arbitration, the findings recorded by the learned arbitrator on such mixed question of law and fact cannot be and shall not be interfered with.
81. Further, the scope and object of Section 34 of the new Act have been elaborately discussed in ONGC's case (11 supra). The findings of the apex Court, to the extent relevant, are thus:
"Conclusions
74. In the result, it is held that:
(A)(1) The Court can set aside the arbitral award under Section 34(2) of the Act if the party making the application furnishes proof that:
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration.
82. Further, at para 31 of the same judgment, it was held:
..the result would be - award could be set aside if it is contrary to:
(a) fundamental policy of Indian Law; or
(b) the interest of India; or
(c) justice or morality, or
(d) in addition, if it is patently illegal.
Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court. Such award is opposed to public policy and is required to be adjudged void.
83. In the instant case, we do not find any of the above circumstances in order to set aside the award made by the arbitrator, since every aspect had been discussed, including the case, law with adequately elaborate and convincing reasoning.
84. Further more, the only controversial material in the shape of letter dated 15-7-1996 is the only reason for the District Judge to set aside the award of the arbitrator on the ground of patent illegality.
85. But, in our view, the illegality, as held by the apex Court, must be capable of going to the root of the matter and further if the same is trivial in nature; such trivial illegality cannot be termed as 'contra to the public policy.'
86. In fact, it is the reasoning given by the District Judge shocking to our conscience as to how the solitary that too most controversial document be treated as a conclusive factor for the purpose of determination of a substantial question like limitation. In other words, the document, which is under cloud, cannot be treated as a crucial document for the purpose of determination of question of limitation and it is further more shocking as to how the Court below jumped at the conclusion that the letter dated 30-6-1994 can be treated as a distinct and separate agreement, particularly, in the light of the extension of the term from time to time quoting the original agreement dated 24-2-1993. But, those letters and the contents had obviously gone off the hat of the Court below. Had that been considered, a finding regarding the letter dated 30-6-1994, as an independent contract would not have been recorded.
87. Obviously, the Court below had not gone through Clause (6) of the general terms and conditions of the contract, which deals with modification or amendment of the original contract and the manner in which the amended contract can be brought into existence. Neither of those conditions stipulated in the said clause are present in the said letter. Therefore, we are of the view that the Court below had arrived at such adverse conclusions on those two letters i.e. 30-6-1994 and 15-7-1996 on mere surmises without any basis.
88. The next incidental question that crops up is, what date can possibly be taken for the purpose of deciding the question of limitation.
89. Undisputedly, the works were completed on 14-9-1997. As observed by the apex Court in Inder Singh Rekhi case (2 supra), normally the dispute would arise at the stage of finalization of bills.
90. It is on record that on 23-10-1997 the employer addressed a letter to the claimant to finalize the closing of contract, dated 14-9-1997, with request to submit copies of various documents and also no claim certificate for the purpose of processing the bills.
91. For ready reference, the letter reads as under:
REF: MKT/EXP/SHP/3.
Dt. 23-10-1997 M/s. Prathyusha Associates, 48-10-24, Srinagar, Visakhapatnam - 530 016.
Dear Sir, Sub: Closing of contract on 14-9-1997-Reg.
Ref: Our letter No. MKT/EXP/SHP/01, dt. 30-6-94.
Contract bearing No. MKT EXP/SHP/01 dt. 30.6.1994 for Transportation, Handling and Stevedoring of Pig Iron export has ended on 14-9-1997.
To finalize the closing of contract on 14-9-1997 the following documents are required for submitting to our Contract Labour Cell so as to obtain Clearance from them. This also required to process the August and September, 1997 bills and releasing of bank guarantee towards Security Deposit and other pending bills if any.
1. Labour Licence.
2. Form VI-A in duplicate (enclosed)
3. Copy of Workmen Compensation Insurance for the total contract period.
4. No Accident Certificate during the period not covered by Workmen Compensation Insurance.
5. Proof of Payment of PF Contributions.
6. Muster rolls for the period.
7. Wage Sheets for the period.
8. Custodian Certificate for the Material at Port and Hindustan Shipyard.
9. Acknowledgement/Receipts from workers for full & final settlement of their duties.
You are requested to submit copies of the above documents in duplicate which will be checked with Original documents to enable us to finalize and close the contract.
In addition to the above you re requested to submit "No Claim Certificate" in prescribed format.
Thanking you, Yours faithfully, For Visakhapatnam Steel Plant.
92. The intriguing and noticeable fact in the above letter is that the claimant referred to no claim certificate with regard to certain items, referring to a letter addressed by the employer dated 30-6-1994. Mentioning of the letter dated 30-6-1994 was explained by the claimant by letter dated 18-11 -1997. The explanation of the said letter, to the relevant extent, is extracted as under for ready reference.
Dt: November 18,1997 You have also mentioned contract bearing No. MKT/EXP/SHP/01, dt.30-6-94fortransportation, handling and stevedoring of Pin Iron export. In this regard, we would like to explain you there is no such contract from 30-6-94. The contract is the work carried out for the period of 1992-97 against your Work Order No. MKT/ T&S/02/2775, dt.28-7-92 against the Tender No. MKTAT&S/02, dt.31-3-92.
93. Another letter was addressed on 4-9-1998 by the claimant certifying that there were no claims against the employer except to the extent of claim preferred by them towards escalation charges. All the three claims were detailed in annexure I, II and III. It is not in dispute that the claims mentioned by the claimant in annexures I and II were settled. The two bills mentioned in annexures I and II are pertaining to the years 1993 and 1994. Undisputedly, those bills were also cleared. The above fact shows that till 4-9-1998, the bills, after completion of works, were not settled. Even after the conditional 'no claim certificates' dated 30-12-1999 marked as Ex.C-11 and 7-2-2000 marked as Ex.C-15, there were requests made by the claimant to close the contract by releasing the final bills and bank guarantee. Till that time there was actually no dispute. Therefore, for the purpose of computation of date of limitation, the effective date, at best, would be 4-9-1998 or later, but certainly not before.
94. We are fortified with the view taken by a learned Judge of the Jammu & Kashmir High Court in Ghulam Qadir v. State AIR 1972 J&K 44 the quintessence of which is that every 'difference' cannot be treated as a 'dispute'. The learned Judge, in paragraph-5 of that judgment, observed thus:
... Section 2 (a) of the Arbitration Act defines an "arbitration agreement" as a "written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not". The words of this Sub-clause of this section ware very wide and can embrace within their fold all matters and it is only a negligible percentage of matters, which can fall outside this definition. The words which are very significant are "present or future differences". The section does not use the word "dispute". "Difference" is a much wider term than "dispute". I may have difference with "B" on any point but at the same time I may not have dispute over that matter with him. "Differences' indicates the working of the mind of a particular party with respect to a certain matter. "Dispute" is a more positive term; when such differences assume a more definite and concrete form, they become dispute.
95. We are of the further view that every dispute would be preceded by various causes of action which ultimately may result in filing of a suit or seeking arbitration. But, all the causes of action cannot be bundled and treated as the actual cause of action. At times, depending upon the nature of the dispute, the cause of action may vary. In some cases, basing on the conditions of the contract, the cause of action would be explicit. But, on many occasions and in many cases, the true cause of action for a dispute has to be culled out by the Court from a bundle of causes of action. For example, the subject matter of the arbitral dispute if otherwise is a subject matter of the suit and instead opting for appointment of an arbitrator, if either of the parties approaches a civil Court, all the events which have been referred to already would have been mentioned as the causes of action. For the purpose of limitation, there would be only one cause of action among many and that particular event alone should be treated as the exact cause of action and from that date alone the period of three years for the purpose of limitation should be computed.
96. Hence, we are of the view that every 'difference' need not be treated as a 'dispute'. Similarly, every 'dispute', having regard to the facts and circumstances, need not necessarily be treated as a 'dispute' for the purpose of cause of action/cause of arbitration, and unless and until such dispute turns out to be as material action, the same cannot be treated as 'cause of action' to raise a dispute.
97. Even if the controversial letter, dated 15-7-1996 (Ex.R-10), is taken into account, as was done by the District judge, there was no immediate material reaction, capable of constituting a 'dispute' initialed by the claimant. Such expected reaction was apparently raised in the year 1998 through the letter, dated 4-9-1998. Of course, this letter did result in exchange of a couple of letters more by both sides.
98. Yet another factor is that bills were not finalized as could be seen from the letters, dated 7-2-2000 and 9-5-2000 (Annexures 14 and 15 respectively), addressed by the employer. Therefore, either the letter dated 4-9-1998 or the letters in Annexures 14 and 15 must be the 'cause of action' for raising a dispute. The registered notice obviously issued on 24-3-2001.
99. The claim and denial, both put together, would constitute a dispute. Mere making a claim and if there is no effective and conclusive repudiation, the controversy would not take the shape of a dispute. Precisely, it is that date on which the differences between both the parties culminated into a 'dispute' would and should be the starting point of cause of action for the purpose of computation of limitation.
100. The learned senior counsel appearing for the claimant relied on the decision of the apex Court In Sundaram Finance Ltd. v. NEPC India Ltd. the apex Court dealt with the scope and application of Section 9 of the new Act. It has no direct bearing on the issue in the instant case. Therefore, the said judgment is not applicable to the facts and circumstances of the instant case.
101. The learned senior counsel appearing for the claimant also relied upon the decisions of the apex Court in Kanpur Nagar Maha v. Narain Das Haribansh Arosan Enterprises Ltd. v. Union of India , Maharashtra Seb v. Sterilite Industries (India) .
102. The learned senior counsel relied on the decision of the apex Court in Kanpur Nagar Maha v. Narain Das Haribansh the apex Court, at paragraph No. 8, observed thus:
This Court in the case of Dr. S. Dutt v. University of Delhi said "in our view all that is necessary for an award to disclose an error on the face of it is that it must contain, either in itself or in some paper intended to be incorporated in it, some legal proposition which on the face of it and without more, can be said to be erroneous.
103. The facts and circumstances in the judgment of apex Court in M/s. Arosan Enterprises Ltd. v. Union of India (17 supra) are different from the facts and circumstances and the question involved in the instant case and hence the observations and the conclusions arrived at by the apex Court, though unexceptional, are not applicable to the instant case.
104. In Maharashtra Seb v. Sterilite Industries (18 supra), the apex Court held that unless the error of law is patent on the face of the award, neither the High Court nor the Supreme Court can interfere with the award and further the question of liquidated damages was to exclude the provisions of Section 73 of the Indian Contract Act was one of the points for consideration and it was held that it was a matter of appreciation of facts in a case, and where the arbitrators dismissed the claim for liquidated damages and found that Section 73 of the Indian Contract Act was inapplicable, and the objections raised in that regard were rejected.
105. Since the facts and circumstances in the said case are also not similar and different from the facts and circumstances in the instant case, the guidelines issued by Their Lordships in the said judgment are also not applicable to the instant case.
106. However, having regard to the facts and circumstances and with reference to the present day's context, as noticed by the apex Court in several cases and various situations like the depletion in the rates of interest of the financial institutions like Banks etc., we deem it appropriate, in the instant case, to reduce the rate of interest to 9% per annum throughout on the amounts awarded by the Arbitrator and from their respective dates, as fixed by the Arbitrator, till the date of realization.
107. For the foregoing reasons and in the result, the Civil Miscellaneous Appeal is allowed in part, to the extent indicated above. However, there shall be no order as to costs.