Karnataka High Court
Mysore Minerals Limited vs Tam-Tam Pedda Guruva Reddy on 26 September, 2013
Bench: Mohan.M.Shantanagoudar, B.Sreenivase Gowda
1
R
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 26TH DAY OF SEPTEMBER 2013
PRESENT
THE HON'BLE MR. JUSTICE MOHAN .M. SHANTANAGOUDAR
AND
THE HON'BLE MR. JUSTICE B. SREENIVASE GOWDA
MISCELLANEOUS FIRST APPEAL NO.10778 OF 2007 (A.A)
BETWEEN:
Mysore Minerals Limited
(Govt of Karnataka Undertaking)
No.39, Mahatma Gandhi Road
Bangalore-560001
Rep by its Managing Director. ..Appellant
(By Sri D.N. Nanjunda Reddy, Senior counsel for Sri M.K.
Girish, Adv.,)
AND :
Tam-Tam Pedda Guruva Reddy
S/o Sri Pedda Gruver Reddy
Class-I Contractor
R/a No.1427, 18th Main, II Cross
J.P. Nagar II Phase, Bangalore-560 078 ..Respondent
(By Sri Udaya Holla, Senior counsel for Sri K.S. Mahadevan,
Adv. for C/respondent)
2
MFA filed under Section 37(1)(b) of the Arbitration
Conciliation Act against the order dated 6.7.2007 passed in
A.S.No.26/2003 on the file of VI Addl. City Civil Judge,
Bangalore, CCH-11 dismissing the petition filed under
Section 34 of the Arbitration and Conciliation Act for setting
aside the award dated 17.2.2003 passed by the Arbitral
Tribunal.
This MFA having been heard and reserved for
Judgment, coming on for pronouncement of Judgment this
day, MOHAN .M. SHANTANAGOUDAR .J., delivered the
following.
JUDGMENT
This appeal is directed against the Judgment and Order dated 6th July 2007 passed by the VI Addl. City Civil Judge, Bangalore City in A.S. No.26/2003.
2. The records reveal that the appellant herein - Mysore Minerals Limited ('MML' for short) issued tender notice on 18.5.1995 inviting bids from the registered PWD contractors for 'Handling Earthwork Excavation in certain of its mines in Chromite Sector'. The appellant is a Company registered under the Indian Companies Act engaged in 3 extracting and exporting of minerals and it is a State Government undertaking. The respondent herein participated in the tender process by submitting his bid. A Letter of Intent was issued by the appellant on 4.7.1995 in favour of the respondent entrusting the work at an estimated cost of Rs.7,18,90,682/- (approximately Rs.7.18 crores). An agreement came to be entered in writing between the appellant and the respondent on 10.7.1995 for execution of the work. Clause-3 of the said agreement provides that the work is required to be completed within six months from the date of the agreement. On 11.7.1995 the work order was issued. The work order stipulates that 2,00,000 cubic meters of "loose soil" and 8,00,000 cubic meters of "all other types of strata"
has to be excavated at Rs.16.70 and Rs.36.75 per cubic meter respectively in Jambur Chromite Mine. The respondent while informing the difficulties encountered by him in removal of the overburden in one of the Chromite 4 Mines viz., Jambur Chromite Mines, requested for increase of rates on 2.5.1996. On 17.7.1996 the respondent completed the work entrusted to him and he submitted the last running account bill on 25.7.1996. The respondent wrote the letter dated 12.5.2000 to the appellant requesting for settlement of the claim within 30 days and thereby informed the appellant that in the event of failure to settle the claim, the matter would be referred to arbitration. Another letter came to be issued on 29.7.2000 by the respondent to the appellant informing the appellant that since the appellant has failed to settle the accounts, it is presumed that the disputes have arisen between the parties and the matter will be referred to arbitration as per Article-17 of the tender document. Thereafter the respondent submitted the claim statement before the Indian Council of Arbitration ('ICA' for short) on 2.3.2001 claiming a sum of Rs.3.10 crores with interest thereon.5
Pursuant thereto, the ICA wrote the letter/notice dated 9.4.2001 to the appellant enclosing a copy of the claim statement and requested the appellant to file defence statement/reply on or before 9.5.2001. The appellant replied to the letter of the ICA on 7.5.2001 stating that the agreement dated 10.7.1995 entered into between the parties does not contain the arbitration clause and it only provides for settlement of dispute between the parties in the Civil Court at Bangalore. After receipt of such reply, the ICA wrote back to the appellant on 22.6.2001 stating that the ground relating to existence of the arbitration agreement between the parties may also be raised before the Arbitral Tribunal. Another letter came to be issued by the ICA on 21.12.2001 informing the parties that three Member Arbitral Tribunal has been constituted.
3. The appellant filed preliminary objection on 16.1.2002 before the Arbitral Tribunal regarding non- 6 existence of the arbitration agreement between the parties, thereby the appellant questioned the competence of the Arbitral Tribunal to decide the matter between the parties in arbitration. The reply was filed by the respondent on 15.2.2002 to the preliminary objection raised by the appellant. However the appellant filed objections to the main claim statement also on 13.3.2002 without prejudice to the contention regarding the maintainability of the claim petition and jurisdiction of the Arbitral Tribunal to adjudicate the dispute. Based on the pleadings, the Arbitral Tribunal framed points for determination, which are as under:
1. Whether this Arbitral Tribunal has jurisdiction to adjudicate the dispute ?
2. Whether the claim is barred by limitation ?
3. Whether the execution of the work was delayed by compelling circumstances for reasons beyond the control of the claimant and for the defaults of the respondent ?7
4. Whether the Claimant is entitled to compensation by way of interest for the delayed interim payment ?
5. Whether the work in Jambur Mine could not be executed under the ordinary blasting operation in view of the surrounding dwellings and the claimant had to resort to controlled blasting by Rippers which entailed him additional cost and whether the Claimant is entitled to additional compensation for the same and if so, what amount ?
6. Whether the Claimant is entitled to overhead charges worked out at 15% or at any other rate for the extended period of execution of the work ?
7. Whether the respondent is justified in not releasing the balance of Security Deposit of Rs.21,95,699/- ?
8. Whether the claimant has expended at the rate of Rs.200/- per cubic meter for excavation and is entitled at that rate instead of the prescribed rate at Rs.36.75 per cubic meter as per the Agreement dated 10.7.1995 ?8
9. Whether the claimant is entitled to interest ?
If so, at what rate and for what period ?
10. What Award ?
The Point No.1 mentioned supra pertains to the jurisdiction of the Arbitral Tribunal to adjudicate the dispute. However the point relating to jurisdiction was not heard as a preliminary issue. The Arbitral Tribunal decided to consider the jurisdictional issue alongwith other issues at the time of passing of the final award.
At the time of final arguments before the Arbitral Tribunal, the counsel for the appellant herein made a submission that he does not press the objection as to jurisdiction of the Arbitral Tribunal to decide the dispute. However the Arbitral Tribunal proceeded to decide the said issue by way of clarification and held that it has jurisdiction. Ultimately the award came to be passed by the Arbitral Tribunal on 17.2.2003 directing the appellant to pay a sum 9 of Rs.1,89,95,699/- to the respondent herein with interest at 12% per annum from April-1997 till the date of payment.
4. Being aggrieved by the Award of the Arbitral Tribunal, the appellant herein filed an application under Section-34 of the Arbitration and Conciliation Act, 1996 ('the Act' for short) before the Addl. City Civil Judge, Bangalore City and prayed for setting aside the award dated 17.2.2003. The City Civil Court after hearing both the parties dismissed the application filed by the appellant herein on 6.7.2007. Aggrieved by the same, this appeal is filed by the appellant - MML.
5. Sri Nanjunda Reddy, learned Senior advocate appearing on behalf of the appellant has raised the following three points:
10
(A) There is no arbitration agreement signed by the parties as provided under the Act and hence the reference of dispute by ICA to Arbitral Tribunal and consequently the proceedings of the Arbitral Tribunal as well as the award passed by the Arbitral Tribunal are without jurisdiction, null and void. (B) Alternatively, even assuming that the Arbitral Tribunal has got jurisdiction, all the claims of the respondent herein (claimant before the Arbitral Tribunal) are barred by limitation.
(C) In respect of one claim i.e., regarding "controlled blasting", the amount claimed to the tune of Rs.1,56,00,000/- is based on a forged document produced and relied upon by the respondent herein and hence the award is illegal inasmuch as the respondent has not approached the Arbitral Tribunal with clean hands.11
Re.Point (A):
6. Sri Nanjunda Reddy submitted that since the existence of arbitration agreement is sine qua non for the purpose of initiating proceedings under Section-11 of the Act before the Arbitral Tribunal, the proceedings before the Arbitral Tribunal are without jurisdiction. He submits that 'Arbitration agreement' as defined under Section 2(b) of the Act means an agreement referred to in Section 7; Under Section 7 of the Act, the 'arbitration agreement' means an agreement by the parties to submit to arbitration all or certain disputes which have arisen between them in respect of a defined legal relationship, whether contractual or not; an arbitration agreement may be in the form of arbitration clause in a contract or in the form of a separate agreement; an arbitration agreement shall be in writing and such agreement shall be signed by the parties; even an exchange of letters, telex, telegram or other means of telecommunication which provide a record of the agreement 12 or an exchange of statements of claim and defence in which existence of the agreement is alleged by one party and not denied by the other can be called as arbitration agreement in case if the same is in writing. He further submits that even a reference in a contract to the document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. According to him, in the matter on hand, neither there is an arbitration agreement duly signed by the parties nor there is a reference in the agreement between the parties to a document containing the arbitration clause. He further submits that Clause-17 of the Tender Conditions cannot be treated as arbitration clause inasmuch as the tender conditions are neither signed by the parties nor the tender conditions are referred to in the agreement between the parties dated 10.7.1995. Since the tender conditions are not made part and parcel of the agreement between the 13 parties and as there is no reference to the tender conditions in the agreement entered into between the parties, the tender conditions cannot be treated as part and parcel of the agreement and hence there is no arbitral agreement at all between the parties. He draws the attention of the Court to sub-clause (c) of Clause 21 of the Tender Conditions to argue that the successful tenderer i.e., respondent has not executed an agreement incorporating the tender conditions, so also the appellant has not prepared the agreement incorporating the tender conditions and consequently the tender conditions cannot be treated as part of the agreement between the parties.
Sri Nanjunda Reddy further submits that the point of absence of arbitration agreement was raised by the appellant at the earliest inasmuch as the appellant immediately after receipt of the letter from the ICA has brought to the notice of the ICA on 7.5.2001 itself that there is no arbitration agreement between the parties and 14 therefore the matter cannot be adjudicated by the Arbitral Tribunal. Inspite of the same, the ICA replied to the appellant on 22.6.2001 stating that the appellant can raise the point of jurisdiction also before the Arbitral Tribunal. Even before the Arbitral Tribunal, the appellant herein in its reply dated 16.1.2002 raised the question of jurisdiction of the Arbitral Tribunal to decide the issue. The Arbitral Tribunal has raised an issue relating to the jurisdiction of the Arbitral Tribunal to decide the dispute. Thus according to the appellant, the question relating to lack of jurisdiction is raised by the appellant at the earliest.
He further submits that the counsel appearing on behalf of either of the parties cannot confer jurisdiction on the Arbitral Tribunal in the absence of an arbitration agreement between the parties; existence of arbitration agreement is sine qua non to decide the matter by an Arbitral Tribunal; the doctrine of waiver or acquiescence has 15 no application in such matters and therefore concession by the learned advocate for the appellant cannot confer jurisdiction; Since it is a case of inherent lack of jurisdiction, the impugned award by the Tribunal is void abinitio. He further submits that the Tribunal while deciding the point relating to jurisdiction has not applied its judicious mind independently and therefore finding on the question of jurisdiction is erroneous.
7. Sri Udaya Holla, learned senior advocate appearing on behalf of the respondent submits that the advocate for MML did not press the question of jurisdiction before the Arbitral Tribunal and the same is noted by the Arbitral Tribunal in the award; Relying on Section 7(4)(c) of the Act, he submits that an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other, amounts to arbitration agreement; since the respondent had alleged 16 the existence of arbitration agreement both in the claim statement made before the ICA as well as before the Arbitrators and as the appellant did not deny such submission made by the respondent before the Arbitrators during the course of arguments, it is clear that the arbitration agreement exists between the parties. He further draws the attention of the Court to the fact that the Deputy General Manager of the appellant has signed the tender conditions and such fact is not disputed by MML at any point of time before the Arbitral Tribunal and therefore the tender conditions are binding on the parties and shall form part of the agreement between the parties. The Tender Condition No.17 clearly reveals the arbitration clause. He further submits that the Letter of Intent dated 4.7.1995 issued by MML to the respondent refers to the Tender Notification dated 18.5.1995; even the Work Order issued to the respondent by the appellant refers to the Letter of Intent dated 4.7.1995 and as aforementioned the 17 Letter of Intent in turn contains reference to the Tender Notification dated 18.5.1995. Even the agreement dated 10.7.1995 entered between the parties also testifies that the tenders were invited by issuing the Tender Notification dated 18.5.1995. Thus he submits that the Tender Notification and the conditions enumerated therein shall form part of the agreement dated 10.7.1995 and shall be read alongwith the said agreement.
8. It is not in dispute that the tender notice dated 18.5.1995 was issued by the appellant inviting bids from the registered Public Works Department contractors for 'handling earthwork excavation in its mines in Chromite Sector'. The respondent's bid was accepted and a Letter of Intent was issued to the respondent on 4.7.1995 by the appellant entrusting the work at an estimated cost of Rs.7,18,90,682/-. Pursuant thereto, an agreement also came to be entered into between the parties on 10.7.1995 18 for execution of the work. On 11.7.1995 the work order was issued. The respondent was required to complete the work within six months from the date of the agreement. These facts are not in dispute.
9. The tender notice contains the arbitration clause, which reads thus:
"17. ARBITRATION:
All disputes or differences whatsoever arising between the parties out of or relating to the constructions, meaning and operation or effect of the agreement or the breach thereof, shall be settled by arbitration in accordance with the Rules of arbitration of the Indian Council of arbitration and the award made in pursuance thereof shall be binding on both the parties."19
10. Clause 18 of the tender notice stipulates jurisdiction. It states that the Courts situated at Bangalore alone have got jurisdiction to decide all such disputes and claims that may arise between the parties.
11. Clause 21 (c) of the tender notice reads thus:
"21. GENERAL :
c) The successful tenderer shall execute an agreement incorporating the above conditions. The draft agreement will be prepared by Mysore Minerals Limited and sent separately to the successful tenderer after finalization of tenders."
12. From the above, it is clear that the successful tenderer shall execute an agreement incorporating the conditions enumerated in the tender notice, which clearly means that it is incumbent on the successful 20 tenderer/respondent herein to abide by the conditions enumerated in the tender notice. The Letter of Intent dated 4.7.1995 refers to the tender notification dated 18.5.1995. It is clearly mentioned in the Letter of Intent that pursuant to the tender notification dated 18.5.1995 and subsequent correspondence and discussion, the offer was made by the appellant to the respondent to perform the work found in the Letter of Intent at the cost of Rs.7,18,90,682/-. One of the works entrusted to the respondent is relating to Jambur mines, which contains loose soil as well as all other types of strata. The Letter of Intent also prescribes the rate per cubic meter i.e., at Rs.16.70 in respect of loose soil and Rs.36.75 per cubic meter in respect of all other types of strata. Even the agreement dated 10.7.1995 discloses that the appellant company has invited tenders for the work mentioned in the agreement pursuant to the tender notification dated 18.5.1995. Thus it is clear that the tender process has 21 been initiated pursuant to the tender notification dated 18.5.1995. The respondent as well as the appellant knew very well that both the parties are bound by the tender conditions. The tender notification is referred to in the Letter of Intent as well as in the agreement entered into between the parties mentioned supra. The work order issued to the respondent by the appellant dated 11.7.1995 refers to the Letter of Intent dated 4.7.1995. The tender notification, Letter of Intent, agreement entered into between the parties and the work order have to be read homogeneously and together. They cannot be read in isolation. The intention of the parties can be gathered by reading these documents homogeneously together.
Thus merely because the agreement dated 10.7.1995 does not contain the arbitration clause would not debar the respondent to invoke the arbitration clause contained in the tender notification. Since the tender notification is referred 22 to not only in the Letter of Intent but also in the agreement entered into between the parties as also in the work order issued to the respondent by the appellant, the same should be read as part and parcel of the agreement itself. Therefore the parties are bound by the tender conditions also.
Moreover, the point of lack of jurisdiction of the Arbitral Tribunal was not pressed by the advocate for the appellant before the Arbitral Tribunal. The same is specifically noted by the Arbitral Tribunal in its award. However as a matter of clarification, the said point of jurisdiction is also decided by the Arbitral Tribunal rightly in favour of the respondent holding that the terms of the Tender Notification containing the arbitration clause binds the parties and therefore the Arbitral Tribunal has jurisdiction to decide the said dispute. 23
As could be seen from Section 7(4)(c) of the Act, an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other, can be treated as the arbitration agreement in writing. In the matter on hand, the claim petition was filed by the respondent before the ICA, which in turn referred the dispute to the Arbitral Tribunal for adjudication. It is no doubt true that the appellant has not only raised the question of lack of jurisdiction on the part of the Arbitral Tribunal before the ICA, but also before the Arbitral Tribunal; however subsequently during the course of hearing, the advocate appearing on behalf of the appellant did not press the issue relating to lack of jurisdiction before the Arbitral Tribunal. Thus it is clear that the respondent has stated in his claim statement that the arbitration agreement exists between the parties and the same is not denied by the appellant subsequently before the Arbitral Tribunal. Thereby, the appellant through 24 his advocate has conceded to the jurisdiction of the Arbitral Tribunal. Hence in our considered opinion, the provisions of Section 7(4)(c) of the Act are rightly pressed into service by the respondent to contend that such non denial of arbitration agreement during the course of hearing before the Arbitrators, amounts to existence of the arbitration agreement. Therefore, the appellant cannot now contend at the appellate stage that the Arbitral Tribunal had no jurisdiction to decide the dispute between the parties.
13. As aforementioned, Sri Nanjunda Reddy submits that the counsel for the appellant cannot confer jurisdiction on the Arbitral Tribunal; the existence of arbitration agreement is a source of jurisdiction to decide the dispute between the parties by the Arbitral Tribunal; the concession cannot confer jurisdiction and that the doctrine of waiver or acquiescence has no application. In the matter on hand, as aforementioned, the matter does not 25 solely rest on the concession of the advocate for the appellant. On the other hand, as aforementioned, the tender notice is referred to in the agreement between the parties as well as in the Letter of Intent issued by the appellant to the respondent, which means the tender notification is made part and parcel of the agreement between the parties. Since the tender notice contains the arbitration clause, the Arbitral Tribunal is justified in concluding that it has got jurisdiction to decide the dispute between the parties.
14. Sri Holla has contended that the Tender Notification dated 18.5.1995 is also signed by the Deputy General Manager of MML. He further submits that signature of the Deputy General Manager as found in the Tender Notification is not disputed by MML at any point of time before the Arbitral Tribunal though objections are filed by MML before the Arbitral Tribunal and additional 26 statement of objections are filed by the Law Officer on behalf of the MML. Sri Nanjunda Reddy, per contra drawing the attention of the Court to different copy of the tender notice dated 18.5.1995 submits that the tender notice does not contain the signature of the Deputy General Manager.
Thus there is some confusion in that regard. The tender notice, in original, is not placed before the Court by the appellant on the ground that all the originals are in the office of the Lokayukta pending enquiry. In the absence of the original records, this Court desists itself from commenting on the said aspect of the matter. Even assuming that the tender notice is not signed by the parties, the same would not debar the respondent from getting the dispute adjudicated before the Arbitral Tribunal in view of the arbitration clause found in the tender notice and for the reasons mentioned in the earlier paragraphs. 27 Thus the Tribunal has rightly concluded that it has got jurisdiction.
Re. Point (B):
15. According to the appellant's counsel, all the claims of the respondent herein (claimant) are barred by limitation. He draws the attention of the Court to the fact that all the works were completed by the respondent in July-1996 as found from the claim statement filed by the respondent herein before the Arbitral Tribunal; the award of the Arbitral Tribunal (paragraph 19.1) specifically and correctly states that the last running accounts bill was prepared on 25.7.1996; under Article No.5 of the agreement dated 10.7.1995, the payment should be made within one month from the date of production of the bill; thus according to him, the period of limitation starts to run from one month after 25.7.1996, the date of last running accounts bill submitted by the respondent/claimant. But 28 the claim is made by the respondent before the ICA on 2.3.2001 and the claim petition is received by the appellant herein from the ICA on 16.4.2001. The limitation prescribed under Articles 18, 27, 113 of the Limitation Act read with Sections 43 and 21 of the Arbitration Act is three years from the date of cause of action. Thus according to him, the claim made by the respondent before the ICA being dated 2.3.2001, the same is beyond the period of three years from 25.8.1996 (one month after the date of last running account bill dated 25.7.1996). Even the notice by respondent to the appellant intimating him about invoking the arbitration clause was issued on 12.7.2000. Thus according to him, at any rate the claim of the respondent as well as his right to invoke arbitration clause is barred by limitation. He further submits that Section 3 of the Limitation Act makes it clear that every suit instituted, appeal preferred and application made after the 29 prescribed period shall be dismissed, although the question of limitation has not been set up as a defence.
Appellant's counsel further submits that the reasons assigned by the Arbitral Tribunal on the question of Limitation are wholly erroneous. The intermittent payments made by the appellant up to October-1997 cannot be termed as acknowledgment of liability for the purpose of extension of limitation. According to him, the acknowledgment of liability should be specific and in the acknowledgment, the person acknowledging should specifically acknowledge that the period of limitation is extended by virtue of intermittent payment of bills. In other words, according to the learned counsel for the appellant, mere payment of intermittent bills cannot be termed as acknowledgment of debts or liability and therefore fresh period of limitation does not start. 30
Learned counsel for the appellant specifically clarifies that claim No.3 in respect of Rs.1,56,00,000/- is barred by limitation inasmuch as such claim is made for the first time after the lapse of three years. After the claim in respect of Rs.1,56,00,000/- is made by the respondent, no payment is made by the appellant and hence there is no acknowledgment of liability in respect of Rs.1,56,00,000/-. The intermittent payments were made only in the year 1997 in order to satisfy the running accounts bill and not in respect of the claim for Rs.1,56,00,000/-. But the claim in respect of Rs.1,56,00,000/- is made only in the year 1999- 2000.
16. Sri Udaya Holla submits that the final bill is not at all issued by the respondent and therefore the limitation has not commenced; what were issued by the respondent are only the running bills; The last running bill is dated 25.7.1996; it is not the last and the final bill, but it is only a last running bill; the last bill will be generated only after 31 calculating the arrears; part payments are made from time to time by the appellant in respect of the running bills. Section 19 of the Limitation act, 1963 makes it amply clear that fresh period of limitation shall be computed from the time when the payment is made on account of a debt or of interest before the expiration of the prescribed period by the person liable to pay the debt or interest. The letter dated 20.8.1998 written by the appellant to the respondent states that an amount of Rs.11,94,225/- is still due to the respondent as on 31.3.1998. The Arbitrators have considered the question of limitation in detail in paragraphs 19.1 to 19.3 of the award; the Arbitrators have also rightly concluded that the running bill submitted by the claimant and the intermittent payments made thereon cannot be regarded as settling the final accounts. It is by now well settled that the limitation starts from the date of the final bill and not from the date of the running bill. 32
17. According to the appellant's counsel the claims are barred by limitation. The works entrusted to the respondent were completed in the month of July-1996. Even the claim statement of the respondent would reveal that the work in Jambur mines was completed in the month of July-1996. The last running accounts bill was prepared and submitted by the respondent on 25.7.1996. As per the terms of the agreement dated 10.7.1995 (Article 5), the payment shall be made within one month on production of the bills. In the matter on hand, the claim is made by the respondent before the ICA on 2.3.2001 and the claim petition is received by the appellant on 16.4.2001 from the ICA. The appellant has raised the objection relating to the limitation in its additional statement of objections on
10.4.2002 before the Arbitrators. Consequently, the issue relating to limitation also raised by the Arbitral Tribunal. According to the learned counsel for the appellant, the time starts to run from the date of the last running accounts bill 33 i.e. from 25.7.1996, but the claim is made before the ICA only on 2.3.2001 i.e., beyond the period of limitation of three years.
The said submission cannot be accepted. It is no doubt true that the last running Accounts bill is dated 25.7.1996. But it is not the final bill prepared by the respondent. The last running accounts bill cannot be equated to final bill. The final bill will be prepared only after verifying the payments made by the appellant in favour of the respondent and such bill will be prepared to claim the remaining amount which is unpaid. The running bill submitted by the respondent and the intermittent payments made thereon by the appellant cannot be regarded as settling the final account. The final account will be settled after the final bill is prepared. 34
18. In the matter on hand, notice was issued by the respondent to the appellant invoking the arbitration clause on 12.5.2000. As could be seen from the acknowledgment issued by MML dated 20.8.1998, it is clear that the outstanding dues according to the MML was Rs.11,94,225/- as on 31.3.1998. Thus it is clear that there was acknowledgment of liability by the MML with regard to the arrears on 20.8.1998. As aforementioned, notice was issued by the respondent invoking the arbitration clause on 12.5.2000. Under Section 21 of the Act, the commencement of the arbitral proceedings shall be from the date on which the request for referring the dispute for arbitration made by the claimant is received by the appellant. In the matter on hand, admittedly the notice was issued by the respondent to the appellant invoking the arbitration clause on 12.5.2000, whereas the acknowledgment of liability by the appellant to the tune of 35 Rs.11,94,225/- as on 31.3.1998 was made on 20.8.1998. Thus the claims are not barred by limitation.
19. There cannot be any dispute that on completion of the work, a right to get payment would normally arise, but where the final bills have not been prepared as in this case and when the assertion of the claim was made by the respondent on 12.5.2000 and since there was non- payment, the cause of action also arose from that day i.e. 12.5.2000. As has been held by the Apex Court in the case of GREATER BOMBAY MUNICIPAL CORPORATION .vs. NAGPAL PRINTING MILLS reported in AIR 1988 SC 1007, the 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 cause of action. A dispute arises where there is a claim and a denial and repudiation of the claim.
36
20. In the case of RAM DITTA MAL .vs. FOOD CORPORTATION reported in (1987)2 Arbitration Law Reporter 73, the Delhi High Court has held that the period of limitation will not start running from the date of completion of the work or the non-payment of running bills; The cause of action will arise only after the respondent is intimated of the preparation of the final bill or his having accepted the payment. We agree with the dictum laid down by the Delhi High Court in the case cited supra. In view of the above, we are of the clear opinion that the claims of the respondent are not barred by limitation. Re. Point (C) :
21. Sri Nanjunda Reddy for the appellant submits that the claim in respect of Rs.1,56,00,000/- relating to controlled blasting by use of rippers is based on the forged document produced by the respondent; the claim at the rate of Rs.20/- per cubic meter made by the respondent in 37 excess of the amount agreed to be paid by the appellant while accepting the tender of respondent has no basis and such assessment at the rate of Rs.20/- per cubic meter is one sided, to which the appellant has not agreed at any point of time. He further submits that the said claim of Rs.1,56,00,000/- is not only barred by limitation as already mentioned but also such claim is made based on the forged document. According to him, the letter of the respondent dated 2.5.1996 demanding Rs.10/- per cubic meter in excess of the agreed amount is tampered by substituting Rs.20/- in place of Rs.10/-; Since fraud is committed by the respondent, the proceedings in respect of claim of Rs.1,56,00,000/- would vitiate; Added to it, the appellant has never agreed to pay either Rs.10/- or Rs.20/- or Rs.200/- demanded by the respondent; None of the running bills submitted by the respondent including the last running bill for the period from 16.3.1996 to 17.7.1996 indicates that the respondent had claimed such enhanced 38 amount of Rs.10/- or Rs.20/- or Rs.200/- per cubic meter; Only in the claim petition filed before the ICA, he has sought for enhanced amount. He further submits that the agreement dated 10.7.1995 is signed by the Managing Director on behalf of the MML and hence only the Managing Director has got power to modify the terms of the agreement; in other words, even the General Manager of MML has no power to alter the terms of the agreement dated 10.7.1995 on behalf of the MML; RW-1 - B.T. Lakshman, General Manager of MML in his evidence has not admitted that there is an agreement between the parties to pay extra amount in favour of the respondent at any point of time; Moreover there is no clause in the agreement dated 10.7.1995 to pay higher amount than agreed.
Lastly, Sri Nanjunda Reddy submitted that the rate of interest imposed by the Arbitrators at 12% per annum on the excess amount claimed by the respondent is on the 39 higher side. On these among other grounds, he prays for allowing the appeal.
22. Sri Udaya Holla, refuting the contentions of the appellant, submits that in the examination-in-chief (in the form of an affidavit) before the Arbitrators, the General Manager of appellant has clearly deposed that he knows the facts and circumstances of the case and he is authorized to swear the affidavit on behalf of MML. He has admitted in his examination-in-chief itself that Jambur Mine was surrounded by dwellings, coconut gardens, agricultural fields, pathway, pump house etc., and hence the normal blasting operations were obstructed by the villagers and that only after assuring the villagers that blasting operations will be restricted and controlled to avoid damage to their life and properties, the work was allowed to be continued and consequently the respondent was strictly instructed to carry out controlled blasting operations with 40 the help of rippers in Jambur mines. In the cross- examination, the said witness has admitted that the certificate dated 16.7.1997 was issued by him to the respondent stating that the total quantity of execution of work by the claimant is 32,00,000 cubic metres and estimated cost was Rs.60,00,00,000/- at the schedule rates of Public Works Department for that year. However he has clarified that he has issued such a certificate since the respondent wanted such a certificate to be produced for securing other works from other sources. The evidence of the claimant as well as the evidence of the villagers clearly reveal that the respondent had to carry out mining operation in hard rock which would have in the normal circumstances damaged the public property and therefore the respondent was constrained to use controlled blasting mode with the help of rippers. The escalation is awarded by the Arbitrators not on the basis of the agreement between the parties, but on the merits of the matter, 41 having regard to the totality of the facts and circumstances of the matter. The Arbitrators having satisfied that the respondent had to spend extra amount for the purpose of controlled blasting by using rippers, awarded Rs.20/- per cubic meter which may not be said to be on the higher side.
Sri Udaya Holla further submits that the escalation of price is permissible in such matters though there is no provision for claiming excess amount in the agreement between the parties. Lastly, he submitted that the rate of interest awarded by the Arbitrators is just and proper in the facts and circumstances of the case inasmuch as the appellant had withheld the amount due to the respondent arbitrarily.
23. As per the agreement entered into between the parties on 10.7.1995, the respondent was entrusted with the work of removal of overburden by way of excavation in Jambur Chromite Mine alongwith other Chromite Mines. 42 The agreement further makes it clear that the claimant had to remove 10,00,000 cubic meters of overburden by way of excavation of all types of strata for mining and transporting the overburden to a distance of two kilometers. It is also made clear in the very agreement that the said work of removal of overburden by way of excavation includes drilling, blasting and dewatering and any other incidental work. Out of such 10,00,000 cubic meters, the claimant had to remove overburden by way of excavation in respect of 2,00,000 cubic meters of loose soil and 8,00,000 cubic meters of all other types of strata. Thus it is made clear in the agreement itself that the claimant not only had to remove the overburden by way of excavation of the loose soil to an extent of 2,00,000 cubic meters but also in respect of all other types of strata to an extent of 8,00,000 cubic meters. As per the agreement, in the revised Schedule (B), the claimant has quoted Rs.16.70 per cubic meter for loose soil and Rs.36.75 per cubic meter for all 43 other types of strata. The words, "all other types of strata" would definitely include hard rock also. All other types of strata means every type of strata except the loose soil. Thus it includes hard rock also. Therefore it is not open for the respondent to contend that all other types of strata does not include hard rock. Hence it is clear that the respondent had got the knowledge about existence of the hard rock also even at the time of submission of the bids pursuant to the tender notification as well as at the time of executing the agreement. As aforementioned, the removal of overburden by way of excavation includes drilling, blasting and de-watering and any other incidental works. Therefore the respondent knew very well that he had not only to drill, but also blast for removal of overburden by way of excavation. The Arbitral Tribunal has also rightly held that "all other strata" means and includes "hard rock"
also.44
24. There cannot be any dispute that the respondent has willingly accepted the terms of the Tender Notification and quoted the rates for removal of overburden even in respect of the other strata. In the cross-examination, the respondent has admitted that he had visited the site of work before submitting the tender. Therefore he also knew very well that he was required to excavate the hard rock and that he had to remove such hard rock without causing damage to the properties of villagers. Since he had visited the spot prior to submission of the tender, he would definitely know that in and around the spot, the villagers are residing and that he should take care of the properties of the villagers also while blasting the rock. However in the further cross-examination, he has deposed that he came across the hard rock only at the time of execution of the work and consequently he had planned to use controlled blasting mode for hard rock subsequently and therefore he has demanded for higher rates. He has 45 further deposed that he could not have demanded higher rate than the tender rate at the initial stage inasmuch as it was at the negotiating stage and no approval was given by the appellant for claiming at the higher rates at that stage. He has also admitted that the Local Officer did not certify the quantity of work executed by him in respect of the controlled blasting. Two villagers were examined on behalf of the respondent to prove that the respondent had adopted the mode of controlled blasting with the help of rippers so as to avoid damage to the life and properties of the villagers.
25. From the aforementioned, it is clear that though there is no agreement empowering the respondent to claim enhanced amount for controlled blasting by using rippers, he demanded a sum of Rs.1,56,00,000/- based on the rate at Rs.20/- per cubic meter in respect of blasting of hard rock. It is also clear that such demand by the respondent is not acceded to by the appellant at any point of time. 46
26. A letter came to be written by the respondent on 13.9.1995 to the appellant intimating the appellant that blasting has become problem at Jambur Mines and there was some agitation by the public and hence the Manager of the Mines has instructed the respondent to reduce the quantity of Ammonium Nitrate to reduce the blasting effect and to do controlled blasting, consequent upon which the effect of blast would be reduced and ultimately expenditure would become more. Thus by the said letter, the respondent has informed the appellant that the expenditure becomes more and the work will be delayed. In reply, the appellant has stated in its letter dated 25.9.1995 that the problem at Jambur Chromite Mine is solved and there is no agitation either from the public or anybody. However the appellant has requested the respondent to take steps for blasting in accordance with the Mining Regulations as indicated in the agreement. Ultimately the respondent 47 demanded certain more sums of money per cubic meter from the appellant. According to the appellant, the respondent demanded Rs.10/- per cubic meter and whereas according to the respondent, he has demanded Rs.20/- per cubic meter under the letter dated 2.5.1996.
In that regard, Sri Nanjunda Reddy, learned Senior advocate for the appellant submits that the letter dated 2.5.1996 is tampered by the respondent by altering the rate from Rs.10/- to Rs.20/- per cubic meter. Thus according to the appellant, the respondent has committed fraud by relying upon the tampered document and therefore his claim needs to be rejected.
27. We are unable to verify as to whether the letter dated 2.5.1996 is tampered or not inasmuch as the original of the document dated 2.5.1996 is not forthcoming. It is brought to the notice of the Court by the learned advocate 48 appearing for the appellant that all the original records including the letter dated 2.5.1996 issued by the respondent to the appellant claiming Rs.10/- are seized by the office of the Lokayukta. Consequently, we are unable to come to a definite conclusion as to whether the additional demand made by the respondent was Rs.10/- or Rs.20/- per cubic meter by the letter dated 2.5.1996. It is relevant to note here itself that the appellant has not acceded to the demand of the respondent to pay extra either at Rs.10/- per cubic meter or Rs.20/- per cubic meter at any time. It is also relevant to note that respondent has subsequently requested the appellant to pay at Rs.200/- per cubic meter. The same is also not acceded to by the appellant. Even in the cross-examination of Mr. Lakhman, the General Manager of the appellant, a question is posed to him by the respondent that the appellant agreed for payment of the excess amount. Such suggestion is denied by the said witness. However he admits that a certificate 49 is issued by him to the respondent indicating therein that the work executed by the respondent is worth Rs.60,00,00,000/- (sixty crores). However, the said witness hastens to volunteer that such certificate was issued in favour of the respondent only at his request and to help him for getting other works from other establishments. The affidavit of the Officer of appellant company is filed alongwith the application for additional evidence dated 19.8.2008 before this Court. Curiously in the said affidavit dated 19.8.1998 filed by the Officer on behalf of the appellant - company at paragraphs 3 and 4, it is averred as under:
"3. I state that, before the Arbitral Tribunal of Honourable Justice Jagannath Shetty, Retired Judge, Supreme Court of India and before the City Civil Court, Bangalore in AS 26/2003, the appellant had taken the 50 defense that the Appellant Company is not liable to pay Rs.20 per M3 as claimed by the claimant, but it was Rs.10 per M3.
4. I state that though before the Arbitral Tribunal of Hon'ble Justice Jaganath Shetty, Retired Judge, Supreme Court of India and before the City Civil Court, Bangalore in AS 26/2003 it was asserted and stated as Rs.20 per M3 is not liable to be paid to the claimant. The appellant has not written such letter and he is not justified in claiming the same as there is interpolation of the numerical figures as Rs.20 in lieu of Rs.10 per M3. The respondent produced the 51 Xerox copy of the interpolated document before the Arbitral Tribunal.
The appellant was not in a position to trace out and file and produce the document before the Hon'ble Arbitral Tribunal or before the City Civil Court, Bangalore, as such the Hon'ble members of the Arbitral Tribunal and Hon'ble City Civil Court accepted the claim of the claimant and accepted the case of the claimant."
(Emphasis supplied)
28. The conjoint reading of paragraphs 3 and 4 of the affidavit of the Officer of the appellant prima facie reveals that the appellant has taken stand that the appellant is not liable to pay Rs.20/- per cubic meter as claimed by the appellant, but is liable to pay Rs.10/- per cubic meter. In 52 view of such admission made by the Officer of the appellant on oath in the affidavit dated 19.8.2008, it appears that the appellant also had thought it fit to accede to the claim of the respondent in respect of the enhanced amount at Rs.10/- per cubic meter. Even in paragraph-5(h) of the memorandum of appeal, the appellant has pleaded that the respondent has tampered the letter dated 2.5.1996 by altering the rate from Rs.10/- per cubic meter to Rs.20/- per cubic meter. Having regard to the facts and circumstances, we are of the view that the appellant was also of the opinion that Rs.10/- per cubic meter may be paid to the respondent in excess of agreed amount. As aforementioned, in paragraph-3 of the affidavit dated 19.8.2008 of the Officer of the appellant - company, it is mentioned that even before the Arbitral Tribunal as well as before the City Civil Court in A.S. No.26/2003, the appellant has taken the defence that the appellant - company is not liable to pay Rs.20/- per cubic meter, but is 53 liable to pay Rs.10/- per cubic meter. Therefore we are of the opinion that the appellant has conceded for payment of Rs.10/- per cubic meter in excess of the agreed amount in respect of the hard rock excavation.
29. Even otherwise, we find that the Arbitral Tribunal not only based on the demand made by the respondent by virtue of the letter dated 2.5.1996, but also on merits has come to the conclusion that the respondent is entitled to Rs.20/- per cubic meter in excess of the agreed amount. The Arbitral Tribunal having felt that the respondent had to spend lot of money for excavation and for the purpose of controlled blasting by use of rippers, awarded Rs.1,56,00,000/- in favour of the respondent based on demand of the respondent at Rs.20/- per cubic meter. In our considered opinion, such conclusion reached by the Arbitral Tribunal in respect of awarding Rs.20/- per cubic meter in respect of "any other strata" appears to be on the 54 higher side. As aforementioned, the respondent had visited the spot before he had tendered his bid. He knew very well that he has to excavate, drill etc., other types of strata also which include the hard rock. He knew very well at the inception itself that he had to carry out the work without affecting the villagers and their properties. Admittedly, the rates quoted by the respondent and accepted by the appellant in respect of loose soil is Rs.16.70 per cubic meter, whereas in respect of all other types of strata is Rs.36.75 per cubic meter, which means the appellant has accepted the rate quoted by the respondent in respect of "all other types of strata", which is more than the double of the rate quoted for the loose soil. Hence we are of the opinion that the respondent knew very well about the hazards of the job. There cannot be any dispute that when a Contractor starts excavation, he may come across not only loose soil but also the hard rock and hence he has to be prepared for it. Therefore naturally, higher price is paid 55 to the Contractor in respect of "all other types of strata" i.e. at the rate of Rs.36.75 per cubic meter.
There is no material as to how much quantity of "hard rock" was excavated out of total quantity of 8,00,000 cubic meters of "all other types of strata". Therefore it is unreasonable to presume that entire 8,00,000 cubic meters of "all other types of strata" was the "hard rock".
Consequently, it is not permissible to award excess amount on that basis at Rs.20/- per cubic meter for entire quantity of 8,00,000 of "all other types of strata" treating it as "hard rock". Therefore the award of the Arbitrators needs to be modified to certain extent.
Be that as it may, having regard to the totality of the facts and circumstances and as we concur with the reasons assigned by the Arbitral Tribunal that the respondent had to spend extra amount for controlled blasting with the help of 56 rippers in order to reduce the secondary effect of blasting etc., and as the appellant has admitted the claim of the respondent as aforementioned to an extent of Rs.10/- per cubic meter, we hold that the respondent shall be paid Rs.10/- per cubic meter in excess of the agreed amount in respect of any other strata instead of Rs.20/- per cubic meter as awarded by the Arbitral Tribunal. In addition to the same, the respondent is entitled to Rs.12,00,000/- which is the payment due under the bills and Rs.21,95,699/- pertaining to Security Deposit as awarded by the Arbitral Tribunal and confirmed by the City Civil Judge in Arbitration Suit.
Since we find that the rate of interest at 12% per annum awarded by the Arbitral Tribunal and confirmed by the City Civil Judge in Arbitration Suit is just and proper, we decline to interfere with the rate of interest. 57
28. In view of the above, the impugned Award made by the Arbitral Tribunal, as confirmed by the City Civil Judge in Arbitration Suit No.26/2003, is modified in the following terms:
The respondent/claimant is entitled to the following amounts, which shall be paid by the appellant.
a) Payment due under the bills : Rs.12,00,000/-
b) Security Deposit : Rs.21,95,699/-
c) Extra cost for controlled
blasting operations : Rs.78,00,000/-
..............................
Total Rs.1,11,95,699/-
(Rupees one crore, eleven lakhs, ninety-five thousand six hundred and ninety-nine only) Award of interest at 12% per annum by the Arbitral Tribunal and confirmed by the City Civil Judge in Arbitration Suit is left undisturbed.58
Miscellaneous First Appeal is disposed of accordingly.
Sd/-
JUDGE Sd/-
JUDGE gss/-