Bombay High Court
Maharashtra Industrial Development ... vs Govardhani Construction Company on 27 February, 2008
Author: Anoop V. Mohta
Bench: S. Radhakrishnan, Anoop V. Mohta
JUDGMENT Anoop V. Mohta, J.
1. Being aggrieved by an order Arbitration Petition, passed by the dated 20.09.2006 and confirming 7.12.2005 passed by the learned of disputes between the parties of Runaway of WEB at Yavatmal, the Appellant (original Petitioner) has filed this Appeal. Appellant (Org.Petitioner) Respondent (Org.Respondent) of rejection of the learned Single Judge the Award dated Arbitrator in the matter regarding construction
2. On 27.10.1993 the Appellant (Maharashtra Industrial Development Corporation Ltd., for short, "MIDC") floated tender for Construction of Air Strip of 1372 meters x 30.5 meters at Yavatmal. The estimated cost of the same was Rs. 1,59,26,027/- and time for completion of the work was 11 months.
3. On 21.12.1993 the Appellant by letter addressed to the Respondent accepted the Respondent's tender and allotted said work to Respondent. The letter also required the Respondent to provide to Appellant bank guarantee in sum of Rs. 3,18,600/-.
4. Thereafter the Respondent and the Appellant entered into and executed contract bearing No. B-1/12 for 93-94 in respect of said work.
5. The Appellant by letter dated 27.12.1993 addressed to the Respondent issued work order in respect of said work. On 27.12.1993 the Appellant accepted the Tender of the Respondent at 5% below the estimated cost of Rs. 1,59,26,027/-.
6. On 29.11.1994 the Appellant decided to extent the Air Strip from 1372 meters 30.50 meters to 2100 meters 45 meters with modification in the appron and some allied work and therefore enquire with the Respondent's as to whether the Respondent were willing to take up the said work under the existing Agreement.
7. The Respondent by letter dated 02.12.1994 addressed to the Appellant, accepted the proposal to construct the additional length of Runway as aforesaid.
8. Stipulated date of completion of the eleven months of contract period was 26.11.1994. The Appellant by letter dated 1.2.1995 addressed to the Respondent granted extension of the contract period by 12 months, i.e. upto 26.11.1995.
9. During execution of work large quantities of hard and soft rock were excavated. The Appellant verbally instructed the Respondent to stack the excavated stones on the Runway. Accordingly the excavated stones were stacked on Runway for purpose of taking measurements. After the measurements were taken, the Appellant instructed the Respondent to convey the stacked stones to a nearby field in Bhari village. However, the concerned farmer objected to the unloading by the Respondent of excavated stones and requested the Respondent to shift them from his land. When this was brought to notice of the Appellant, verbal instructions were issued from the Appellant to the Respondent to re-convey the excavated material from aforesaid field to boundary of Runway and dump it along the entire boundary, and the Respondent accordingly reconveyed the entire excavated material.
10. Whilst excavation for construction of additional length of runway (1372 mtrs to 2100 mtrs) was in progress, the Appellant by letter dated 03.08.1995 addressed to the Respondent, instructed the Respondent to complete the excavation upto 2100 mtrs but to limit the construction of WBM Standard runway to the size of only 1372 mtr. x 30.5 mts. By that time, the Respondent had nearly completed conversion of excavated stones into stone metal for construction of runway in the extended length 1372 mtrs to 2100 mtrs. The instructions of the Appellants to the Respondent, prevented the Respondent from using the stone metal which had been prepared for construction for the WBM layers, in the extended length. Thus, the additional work of extension of Runway from 1372 m upto 2100m remained incomplete. On 3.8.1995 the Superintendent Engineer Circle Office, MIDC, Amravati of the Appellant directed the Respondent to restrict the scope of the work to the extent stated in the said letter.
11. In November 1995, a team of experts from National Airport Authority of India (hereinafter briefly called "NAAI") visited the work site, and suggested to the Appellant and the Respondent certain changes in the work.
12. In the light of the instructions given by experts of NAAI, the Appellant by letter dated 29.03.1996 addressed to the Respondent granted further extension of the contract period by 4 months, i.e. upto 26.3.96 ex-post facto. [The contract period was extended from time to time upto 26.03.1996 so as to complete additional work from 1372 mtrs to 2100 mtrs as also to complete additional excavation in hard rock ordered by the Appellant upto 1372 mtrs length (II-B(606/C-13) & II-B (607/C-14)]. On 23.3.1996 the Respondent completed the work of the Air Strip and the measurements in respect of the work completed by the Respondent were also recorded in the Measurement Book.
13. The original work upto 1372 mtrs and the excavation without flattening of side slopes in the extended length from 1372 mtrs to 2100 mtrs was completed by the Respondent by 23.03.96 within the extended time. Thus the additional work remained incomplete in respect of laying the WBM layers of the Runway and flattering of the side slopes from 1372 m to 2100 m.
14. In March/April 1996, the Respondent desired to remove his plant & machinery from site, and accordingly approached MIDC's Executive Engineer for permission to remove the plant & machinery. However, the Executive Engineer orally instructed the Respondent to retain the plant & machinery at the work site, as MIDC was considering whether to have the Respondent compete the balance WBM work upto 2100m. On 25.06.1996, 02.07.1996 and 16.07.1996 the Respondent addressed letters to the MIDC Executive Engineer seeking permission to remove the plant & machinery which was lying idle/unutilized at the work site.
15. On 21.06.96 the Honourable Minister of Industries of State of Maharashtra (Chairman of the Appellant) in his letter addressed to Add.Chief Engineer of the Appellant, duly recorded that he had directed to the Superintending Engineer of the Appellant to retain the machinery of the Respondents at work site.
16. In spite of receipt by the Appellant of the letter dated 25.06.96, no further instructions were received by the Respondent from the Appellant regarding the plant and machinery idling at the work site. Therefore, the Respondent again addressed letters to the Appellant on 02.07.96 and 16.07.96 about removal of the plant and machinery and the idling labour the Respondent from the work site.
17. The Executive Engineer, Yavatmal, of the Appellant, Mr.Tambe, by letter dated 16.08.96 addressed to the Respondent instructed the Respondent in writing "not to remove the plant & machinery from above site till further instructions". He also added in the said letter that "since you have accepted to execute the additional work of extension of the runway at the same rates for above tender without any extra claim, the proposal to get the above work done by your agency is already in process".
18. On 1.11.1996 the fact of retaining plant and machinery was also conformed from by Appellant Executive Engineer Handing over Note, in which he had said that, "H had requested the contractor to do not de-mobilise his plant and machinery from above site."
19. In October, 1996, a sum of Rs. 9,20,000/- was paid to the Respondent as advance towards the 27th and final bill of Rs. 18.73 lakhs in respect of construction of Air Strip.
20. On 27.11.96, Executive and Deputy Engineers of the Appellant signed work completion certificate as:
This is to certify that M/s.Govardhani Construction Co., New Mumbai has completed the work on 23.03.96 satisfactorily." The said work completion certificate was issued to and received by the Respondent on 19-12-1997 alongwith R.A. Bill No. 27, finalized as Final Bill, by the Appellant.
21. On 27.11.96, Executive and Deputy Engineers of the Appellant signed "No Dues Certificate" as:
There are no dues against contractor except shown in Recovery Statement." The Recovery Statement shows NIL recovery. The said No Dues Certificate was issued to and received by Respondent on 19.12.1997 alongwith R.A. Bill No. 27, finalized as Final Bill, by the Appellant.
22. The proposal to extend the Runway beyond 2100 m and upto 2600/2700 m, was furthermore evident from the Appellant's Additional Chief Engineer's note dated 12.02.97 written to the Appellant's CEO. Executive Engineer of the Appellant, Mr.Pannikar by letter dated 19.12.97 addressed to the Respondent, instructed the Respondent to take away the plant & machinery from the work site and advised the Respondent to accept and sign the R.A.Bill No. 27, finalized as Final Bill, by the Appellant. However, as said Final Bill did not provide for the extra work done by the Respondent, the Respondent under protest accepted and signed, the R.A.Bill No. 27, finalized as Final Bill by the Appellant.
23. On 24.12.1997 the Respondent pointed out to MIDC that although he had agreed to complete the work of Runway in WBM upto 2100, he had been subsequently (after completing excavation upto 2100) been stopped from completing the WBM layer from 1372 to 2100.
24. The Respondent by letter dated 30.12.97 submitted to the Appellant preliminary claims of the Respondent worth Rs. 1123 lacs. The Respondent in the letter also informed the Appellant that the Respondent had some other claims which would be submitted to the Appellant in a short period.
25. On 31.12.1997 the Respondent raised claim for sum of Rs. 11,23,21,420/- towards extra excavation, extra conveyance and idle plant and machinery.
26. Accordingly, the Respondent thereafter submitted preliminary further claims of Rs. 11.58 lacs and Rs. 9.90 lacs through letters of the Respondent dated 21.01.98 and 02.03.98 addressed to the Appellant.
27. The Appellant, however, failed and neglected to consider or appreciate the preliminary claims of the the Respondent. As such, the Respondents by letter dated 27.2.1998 addressed to the Additional Chief Engineer of the Appellant, duly invoked the Arbitration Clause No. 21 of the contract. The letter dated 27.2.98 was duly received by Appellant on 02.03.98 whereupon arbitration by and between the Respondent and the Appellant has commenced.
28. Executive Engineer of the Appellant by letter dated 25.03.98 invited the Respondent to visit the work site alongwith the Appellants' Superintending Engineer for inspection of work site for finalization of claims with respect to "above subject work". The letter clearly bears the subject as "Airstrip @ Yavatmal Additional Claims". (This clearly shows that the Appellant had clearly accepted the fact that the claims had arisen out of the contract for "construction of the Airstrip at Yavatmal under Contract No. B-1/12".)
29. The Appellant's Superintending Engineer by letter dated 20.04.98 addressed to the Respondent, informed the Respondent that with reference claims of the Respondent, a report had been received by his office from Executive Engineer and the same was under verification of his office.
30. The Respondent by letter dated 09.06.98 addressed to the Appellant, claimed interest @ 30% on preliminary claim amount.
31. The Executive Engineer of the Appellant, by letter dated 09.06.98 addressed to the Respondent, requested the Respondent to remain present for a meeting with the Additional Chief Engineer in his office on 15.06.98. The letter stated that claims of Rs. 11,37,48,250/- made by the Respondent concerning Contract No. B-1/12, year 93-94 were to be discussed under provision of Clause No. 21 of the Contracts.
32. The Appellant's Executive Engineer, by letter dated 25.08.98 addressed the Respondent, again invited the Respondent to attend a meeting with the Appellant's Additional Chief Engineer on 01.09.98 for settlement of claims.
33. The Appellant's Executive Engineer in his letter dated 10.09.98 has dealt with two claims concerning the (excess) excavation below the desired level and Conveyance of the excavated hard and soft rock. In the letter the Appellant has admitted that excess excavation of 25 cms has been done and the same has not been paid before. Similarly the Appellant has also admitted that payment has not been released for the additional conveyance of the excavated hard and soft rock and that the quantity of such conveyance is about 12,50,000 to 13,00,000 Cum.
34. By their letters dated 09.10.98, 27.10.98, 11.02.99 and 22.02.99, the Appellant informed the Respondent that verification of claims is in process and after verification the claims have been submitted to the senior office of the Appellant for further action. This clearly shows that the claims were under active consideration of the Appellant till February 1999.
35. The Appellant, after going through the claims admitted that a sum of Rs. 7,84,66,240/- will have to be paid for keeping machinery idle and have so recorded in their Internal Note dated 27.06.99.
36. On 09.07.99 also after considering various aspects of claims, the Superintendent Engineer, Mr.Gori, in his Note addressed to the Additional Chief Engineer, has admitted that a sum of Rs. 7,66,30,103/- will have to be paid to the Respondent towards the claims.
37. Thereafter on 09.07.99, the Appellant's Additional Chief Engineer, discussed with the Respondent claims of the Respondent and offered to the Respondent a compensation of Rs. 7,66,30,103/- the Respondent pointed out that said sum was much lesser than even preliminary claim of the Respondent and as such was not acceptable to the Respondent. Thereupon the Additional Chief Engineer verbally informed the Respondent that he would be sending the case to higher authority for settlement. This is also evident by Office Note of additional Chief Engineer dated 13.07.99.
38. Immediately after the meeting, on 11.07.99 the Respondent wrote a letter to the Appellant's Executive Engineer, pointed out that during the meeting held on 09.07.99, the Additional Chief Engineer of the Appellant had offered to the Respondent compensation amount of Rs. 7,66,30,103/-, which was the amount recommended for payment by Shri Gori, the Superintending Engineer of the Appellant.
39. The Respondent, by letter dated 06.08.99 addressed to the Appellant, inquired about the Appellant decision regarding settlement of his dues pending with the Appellant.
40. In reply to the Respondent's letter letter dated 06.08.99, the Appellant's Executive Engineer by letter dated 17.08.99 informed that as the Respondent had declined the Appellant's offer, the same was sent to the Appellant's Head Office for final Decision.
41. The Respondent sent several reminders to the various officers of the Appellant, including the Chief Executive Officer, as also to the Honourable Minister (Industries) who is also the Chairman of the Appellant and also to the Honourable Chief Minister, Govt. of Maharashtra for expeditious settlement of claims.
42. To some of said letters, the Respondent received replies, stating inter alia that their case was under consideration. However, in none of these letters, the Appellant/Officers or Ministers rejected the Respondent's claims.
43. From August 1999 to October, 2003, in response to queries from the Respondent MIDC's officers stated that the claims had been submitted to their head office and they would inform the Respondent when instructions were received from the Head Office.
44. On 21.5.2003, MIDC's Note recording/confirming that Claims 1(a) to 1(d) pertained to work that had been done by the Respondent on oral instructions of MIDC Officers.
45. For the first time the Manager-Legal of the Appellant, by letter dated 21.11.03 addressed to the Respondent, informed the Respondent that all claims were not acceptable to the Corporation (Appellant). The letter denied that a sum of Rs. 7,66,30,103/- was offered by Additional Chief Engineer (North Zone) to the Respondent against the Respondent's claim and stated that Additional Chief Engineer (North Zone) did not have competence to approve the claim of a nature as submitted by the Respondent and it should not be construed that the Appellant had approved the claims for sum of Rs. 7,66,30,103/-.
46. Till 21.11.2003, none of the officials of the Appellant acting on behalf of the Appellant had officially rejected claims of the Respondent. For first time the claims of the Respondent were rejected by the Manager (Legal) of the Appellant on behalf of the Appellant.
47. Clause 21 of the contract bestowed authority upon the Appellant's Additional Chief Engineer, to decide the Respondent's claims and accordingly the Appellant's Additional Chief Engineer had partially settled the claims, but the Appellant vitiated the process of settlement of claims stating that (Additional Chief Engineer) had no authority to decide upon the claims and was not competent to decide upon the claims.
48. Therefore in reply to letter dated 21.11.2003, the Respondent issued notice dated 4.12.2003 to the Appellant to appoint an independent and neutral arbitrator for settlement of the dispute. The Respondent submitted a panel of three eminent persons who would be acceptable to the Respondent as Arbitrator. The notice also stipulated that if the Appellant did not agree with any of the 3 persons, then he was at liberty to appoint his own co-arbitrator and the Respondent would select one from the list.
49. In reply to the notice dated 4.12.2003, the Appellant by letter dated Respondent, informed that the before the Appellant Board The Appellant also requested the Respondent to defer appointment of neutral Arbitrator till then.24.12.2003 addressed to the proposal would be put up of Directors for decision.
50. Thereafter, the Respondent & the Appellant orally agreed to termination of mandate of the Appellant's Additional Chief Engineer and appointment of neutral Arbitrator under aegis of High Court. The Appellant thereafter with consent of Respondent terminated mandate of Additional Chief Engineer, and participated in appointment of neutral Arbitrator under aegis of High Court.
51. Accordingly, in January, 2004, the Respondent moved Arbitration Application No. 7 of 2004 before the Hon'ble High Court Bombay for appointment of a sole arbitrator. After hearing both the parties this Court by Order dated 20.02.2004 held interalia, "...after hearing the parties for some time, the learned Counsel for the parties are mutually agreeable to have Mr.Justice P.S.Shah (Retd.) as sole Arbitrator. Under these circumstances, Mr.Justice P.S.Shah (Retd) is appointed as the Sole Arbitrator to resolve all the disputes between the parties".
52. On 22.03.2004, thereafter, the Respondent formally submitted certain claims in the Statement of Claims on various grounds before learned Arbitrator, Mr.Justice P.S.Shah (Retd.). In the course of arbitration, the Respondent amended certain claims. The first amendment was for increment in the total claimed amount from Rs. 15487.15 lacs to Rs. 15820.89 lacs. The second amendment was for reduction of claimed amount from Rs. 15820.89 to Rs. 13937.64 lacs.
53. On 28.4.2005 the Appellant opposed the said amendment by; filing a detail reply and pointed out that the Respondent (Original Claimants) have already completed their arguments and amendment at such a late stage to change the entire case of the Respondent (Original Claimants) should not be permitted.
54. On 30.4.2005 the learned Arbitrator allowed the amendment. The Appellant recorded their protest and reserve their right to challenge the said order of allowing the amendment. The learned Arbitrator recorded the said submission of the Appellant in the said order.
55. On 09.06.2004 the Appellant filed Reply before learned Arbitrator to the Statement of Claim of the Respondent.
56. On 07.08.2004 the Respondent filed application for amendment of the Statement of Claim by addition of claim No. 8, i.e. claim for pushing rock into the valley by engaging bulldozer. The Appellant filed a Reply to the amendment Application.
57. On 03.09.2004 The learned Arbitrator passed Order allowing the amendment of Statement of Claim by addition of said Claim No. 8. Issues were framed by learned Arbitrator in the arbitration.
58. On 21.10.2004 the Respondent filed Affidavit dated 21.10.2004 of Evidence of Mr.Mhatre before learned Arbitrator. From 04.11.2004 to 28.01.2005 the Appellant cross-examined Mr.Mhatre of Respondent before learned Arbitrator. On 28.01.2005 the evidence of the Respondent was closed before learned Arbitrator.
59. On 18.04.2005 the Respondent, after commencing arguments on the claims, sought to file Application before learned Arbitrator for amendment of the Statement of Claims. On 19.04.2005, the Respondent filed the Application before learned Arbitrator for amendment of the Statement of Claims; the Appellant filed a Reply to the amendment Application.
60. On 30.04.2005 learned Arbitrator passed Order allowing the amendment to the Statement of Claims.
61. The Respondent filed additional affidavit dated 30.06.2005 of evidence of Mr.Mhatre before learned Arbitrator.
62. From 09.07.2005 to 30.07.2005 the Appellant further cross-examined Mr.Mhatre of the Respondent before learned Arbitrator.
63. On 05.08.2005 the Respondent re-examined Mr.Mhatre before learned Arbitrator. The Appellant did not examine any witness or led any evidence on their behalf. The learned Arbitrator directed parties to commence arguments. The Appellant and the Respondent made oral submissions before learned Arbitrator in the arbitration. On 25.10.2005 the Appellant and the Respondent filed written submission before learned Arbitrator, who then heard the parties on their written submissions.
64. On 6.8.2005 the Appellant commenced their arguments.
65. Learned Arbitrator passed arbitral Award dated 07.12.2005 whereunder certain claims of the Respondent have been allowed in part.
66. On 04.03.2006 the Appellant filed Arbitration Petition No. 159 of 2006 under Section 34 of Arbitration and Conciliation Act, 1996 (for short, "Arbitration Act") to impugn the Award dated 07.12.2005.
67. On 26.06.2006 Order passed by Vazifdar, J. admitting the Arbitration Petition No. 159 of 2006.
68. On 20.09.2006 Order passed by Deshmukh, J. dismissing Arbitration Petition No. 159 of 2006.
69. On 10.11.2006 the Appellant filed this Appeal, being Appeal No. 903.2006, under Section 37 of Arbitration and Conciliation Act, 1996.
70. On 19.12.2006 Order passed by Lodha & Bobde, JJ. admitting Appeal No. 903 of 2006.
71. The submission of the learned senior counsel for the Appellants that in view of Section 26 of the Arbitration Act read with Section 43 of the Arbitration Act as held in Milk Food Limited v. GMC Ice Cream (Pvt.) Limited. the arbitration in the present case cannot be said to be commenced within limitation. The claims are barred by limitation on the face of record. Therefore, in view of Section 3 of the Limitation Act, 1963 it is the duty of the Court to satisfy itself that the claims are within limitation.Therefore the learned Judge ought not to have precluded the Appellants from contending that in Section 34 Arbitration Petition the claims were barred by the limitation, including added claims barred under Clause 15(B) of the Contract.
72. The acceptable proposition of law with regard to Section 3 of the Limitation Act need no discussion. However, we have to consider the facts of the case. These cases as cited, are distinct and distinguishable on facts from the case in hand:
(i) Mahindra Land and Building Corporation v. Bhutnath Banerjee. and Ors. (paras 9 and 10)
(ii) V.M. Salgaocar and Bros. v. Board of Trustees of Port of Mormugao and Anr. - (paras 19, 20 and 21). &
(iii) Steel Authority of India v. J.C.Budhraja, Government and Mining Contractor Contractor Contractor (Paras 23 to 29).
73. A letter dated 21.1.1998 was addressed to the Executive Engineer, MIDC, Akola Division, Akola with a copy to Deputy Engineer, Yavatmal, Superintending Engineer, Amravati Division, Additional Chief Engineer, Nagpur thereby various claims have been elaborated with a request to sanction the same. In reference to that the letter dated 27.2.1998 was issued which was duly received by the Additional Chief Engineer, Nagpur. The contents of the said letter as relevant is reproduced as under:
I have submitted my claims to your Executive Engineer on 21.1.98. Ins this regard I would like to inform you that despite correspondence with the Executive Engineer and Superintending Engineer and also personal discussion with them time and again about the claims put forth by me, they are purposely avoiding action on the claims submitted by us. It is requested to kindly obtain the necessary proposal regarding my claims and settle my claims as per the provisions of Arbitration Clause No. 21 on page-85 of Tender immediately.
74. By letter dated 9.6.1998 Office of the Executive Engineer, MIDC Division, Akola with reference to the claim for compensation of losses intimated to the Respondent to remain present at MIDC Office, Nagpur on 5.6.1998 for meeting. A copy was also submitted to the Superintending Engineer, MIDC Circle, Amravati. As the Appellant failed to take note, various reminders were sent by the Respondent to consider their claim for compensation right upto 2003, as the Appellant never communicated any rejection order of the claim as submitted by the Respondent. It is not the case of the Appellant that it was rejected at earlier point of time. The only ground now raised is of delay and latches. The reference of 1997/1998 of their first request and explanation in writing dated 11.7.1999 to consider their claim was referred throughout and lastly by letter dated 28.10.2003 also.
75. The Appellant by communication dated 21.11.2003 with reference to Respondent's letter dated 28.10.2003 as referred above expressed their inability to consider the the claim of Rs. 7.66 crores and communicated that "The ACE (NZ) does not have competence to approve a claim of the nature as submitted by you.".
76. The Respondents by letter dated 4.12.2003 in this background requested to settle the dispute as per the arbitration clause. They suggested the names of three Arbitrators also. On 24.12.2003 it was further communicated by the Appellant to the Respondent that the matter is proposed to be placed before ensuing Board Meeting of the Corporation and decision will be communicated.
77. It is clear that even as per the submission of the Appellant that though correspondences were made, it were not with the authority in respect of the appointment of Arbitrator or deciding claims. The fact which just cannot be overlooked that the Respondent had filed the claims in the year 1998 and correspondences made in the year 1999 after acceptance of the final bill under protest. The Appellants communicated their inability to some extent, to settle the claim and inform accordingly in the year 2003 only. The invocation of arbitration thereafter, in the facts and circumstances of the case in December, 2003, with reference to Arbitration Act cannot be said to be barred by limitation. It is not only question of the appointment of the Arbitrator, but the relevant factor is filing of the respective claim within limitation.
78. Having filed the claim within limitation, the submission that claim as raised is barred by limitation is not correct and unacceptable. The submission, therefore, based on Mahindra Land and V.M. Salgaoncar (supra) that the claim was barred by limitation is not acceptable. The facts and circumstances in that case were totally different. The period of limitation as even noted by Steel Authority of India (supra) is required to be considered on the basis of the arbitration clause between the parties and the facts and circumstances of the case.
79. The letters were also addressed to the Additional Chief Engineer of Nagpur of MIDC, though not to the Appellants-MIDC or the Chief Executive Officer of MIDC. The Respondents addressed the above letter as the MIDC had not settled the claim and requested the Additional Chief Engineer to have the disputes resolved and thereby invoked the provisions of Arbitration clause No. 21 of the Contract. This, according to us, is a request to the MIDC to refer the matter for arbitration within limitation. This fact is further endorsed as the Executive Engineer of MIDC by its letter dated 9th June, 1998 requested the Respondents to remain present at a meeting with the Additional Chief Engineer in his office on 15th June, 1998 to discuss the claims made therein. Subsequently, the Appellant themselves questioned the authority of the Additional Chief Engineer to decide the dispute by a communication dated 21.11.2003. The Appellants and the Respondents had agreed for termination of mandate and for appointment of neutral Arbitrator. Thereafter by letter dated 4th December, 2003 the Respondents addressed a letter to the Executive Officer of MIDC and requested for appointment of Arbitrator. The Respondents bound to await the decision or at least such communication and, therefore, lastly by letter dated 4th December, 2003 addressed to the Executive Officer of MIDC and requested for appointment of Arbitrator. In such type of commercial contract, it is difficult to accept that the party, after completion of the work would not lodge claim within limitation. The earlier correspondences itself shows that they lodged the claims within limitation. There is nothing on record to show that there was any communication addressed to the Respondents rejecting their claims. In 2007 (4) SCC 599 Shree Ram Mills Ltd v. Utility Premises (P) Ltd. the Supreme Court reiterated that "till such time as the settlement talks are going on directly or by way of correspondence no issue arises and with the result the clock of limitation does not start ticking.".
80. Furthermore, both the parties in pursuance to the Order passed by this Court under Section 11 of the Arbitration Act agreed to appoint a neutral Arbitrator. Having once accepted the said position and the order of appointment of Arbitrator, there is no question of raising the ground of limitation. There was no such specific contention raised by the Appellants before the Court at the time of appointment of the neutral Arbitrator.
81. Even otherwise, the point of limitation is a mixed question of law and fact, specifically in the present case. Therefore the parties ought to have agitated the same before the Arbitrator in detail. The Appellants had not pressed the point of limitation except with regard to Clause 15(B) as referred above.
82. The learned Judge after considering the material placed on record and in view of the submissions raised and argued at the relevant time, held that before the Arbitrator the Appellants-petitioners had only pressed that the claims were barred by limitation having regard to the Clause 15(B) of the Contract inasmuch as they had not made/preferred within one month. The Arbitrator, therefore, held that claim Nos. 1(a) to 1(d) are not hit by Clause 15(B); that claim No. 2 was made within one month: the claim Nos. 3,4 and 8 barred by Clause 15(B) as not made within one month. The learned Judge observed and that there was no specific grounds having been taken in arbitration petition that the whole case was barred by limitation and that the Arbitrator had wrongly failed to consider or decide the same,. The Appellants/petitioners therefore could not be permitted to urge for the first time the said ground in the application under Section 34 as observed.
83. The Division Bench of this Court in the case of Vimal G. Jain v. Vertex Financial Services Pvt. Ltd., Pune and Anr. 2007 (3) Mh. L.J. 866 has held that if the point of the claims being barred by limitation was not raised before the learned Arbitrator, it would be deemed to have been waived and it could not be raised for the first time in the proceedings under Section 34. Therefore, there is no question now allowing to raise such grounds in Appeal arising out of the order based on Section 34 Petition.
84. As per Clause 15(B) of the Contract, which is reproduced as under, the Appellant's case that claim Nos. 1 (a) to 1(d) were raised vide letter dated 30th December 1997 and 21st January 1998 pertaining to the year 1994, 1995 and 1996, therefore, barred by the above clause. Clause 15(B) of the Contract reads as under:
Under no circumstances whatever shall be Constructor be entitle to any compensation from Maharashtra Industrial Development Corporation on any account unless the Contractor shall have submitted the claim in writing to the Engineer in charge within one month of cause of such claim occurring.
Admittedly, the work was completed on March 23, 1996. The work completion certificate was issued on November 26, 1996. The payment in respect of the final bill was effected some time in December, 1997. Therefore, the Respondent in fact raised claim before 1997 itself. The above claims were in the nature of compensation for alleged extra work carried out by the Respondent. The Arbitrator, as recorded, after considering the relevant Clause 15(B) rightly held that Clause 15(B) was not applicable to claim Nos. 1(a) to 1(d) that they were for the price of work which had been done under the contract pursuant to the direction of MIDC Officers. There is ample material on record to show that this work had been done in reference to claim Nos. 1(a) to 1(d) by the Respondent in pursuance to the direction of the MIDC Officers. The Arbitrator, therefore, after considering the submission on law of limitation granted claim No. 2 as made within one month and rejected other claim Nos. 3, 4 and 8 being barred by time in view of Clause 15(B) itself. The learned Judge, therefore, considering the settled law that the possible view as expressed by the Arbitrator while interpreting a particular clause need not be interfered with or at least need no intervention under Section 34 of the Arbitration Act. It is also settled that the interpretation of the contract and its clause is within the province of the Arbitrator and if the Arbitrator construed or interprets a particular clause of the contract in a particular manner, the Court will not interfere with its decision, vide State of U.P. v. Allied Constructions; Ispat Engg. & Foundry Works v. Steel Authority of India Ltd. and 2007(9) SCC 503 BOC India Ltd. v. Bhagwati Oxygen Ltd. The learned Judge, therefore, not interfered with the said interpretation given by the Arbitrator. There is no reason and/or even case made out by the Appellant that the Appellate Court should interfere with the interpretation given by the Arbitrator which has been confirmed by the learned Single Judge. On this submission also, we see no reason to disturb the judgment of the learned Judge as it discloses no error and as it is well within the frame work of law and fact.
85. The Arbitrator, in pursuance to the submission raised with regard to Clause 15(B) of the Contract held that it would cover only claims for compensation and this clause is not applicable to claims 1(a) to 1(d) as they were for the price of work which had been done under the Contract in pursuance of the directions of MIDC Officer. The Arbitrator further held that claim No. 2 had been made within one month period and claim Nos. 3, 4 and 8 were for compensation which were barred by limitation as the same have not been made prior to stipulated period of one month as recorded above. There is no challenge made by the Respondent so far as the rejection of their claim as referred above.
86. The other submission is with regard to the amendment of pleadings. On April 19, 2005, after completion of the evidence and completion of the argument on 18th April, 2005, the Respondent moved an application under Section 23(3) of the Arbitration Act for amendment of the pleadings. The Respondent contended by this amendment application that the plant and machinery was kept at site for the completion of the original work. The said proposed amendment was allowed by the learned Arbitrator by order dated 30.4.2005. The said order recorded the protest and objection of the Appellant that the Appellant reserve their right to challenge the said order. The order of grant of amendment was never challenged at any point of time except grounds raised in the application under Section 34 of the Arbitration Act. The learned Judge, however, held that there was no ground in the petition challenging order dated 30.4.2005 allowing the amendment.
87. The learned Arbitrator, after allowing the said amendment, recorded the protest of the Appellant and proceeded with the matter. The added claim for the idle plant and machinery has also been granted. The Appellant therefore has challenged the grant of amendment as well as the grant of an additional claim for idle plant and machinery. The grant of amendment order has been now merged with the final Award dated 7th December, 2005.
88. In Chapter XLII-A, Rule 803, A to F of the Bombay High Court (O.S.) Rules under the Arbitration Act, do not prescribe any specific form in respect of an application under Section 34 of the Act. Rule 803-C (a) only contemplates that every petition shall be divided into paragraph numbers consequential and contain a concise form of statement of material facts relied on, the nature of relief sought and the person liable to be affected. The submission based upon the Supreme Court judgement in Madan Lal (dead) by his legal representative v. Sunder Lal and Anr. & Bharat Coking Coal Ltd. v. L.K. Ahuja and Co. , that as there is no specific form prescribed for making such an application and in an appropriate case, an objection may be treated as an application, if it is filed within the period of limitation, though accepted, but still on merit as noted above, after hearing both the parties, by giving opportunity, the Arbitrator has only partly allowed the said claim and partly rejected also. Those two supreme Court judgments are therefore of no assistance to the Appellant even on this ground also.
89. The submission that considering the scheme and provision of the Arbitration Act in particular Sections 5, 16(4), 34 and 37 such interlocutory orders made by the Arbitrator in the course of the reference cannot be challenged before the Court. Section 37(2) stipulates only certain orders of the Arbitrator which can be challenged by way of an Appeal. Accordingly, such interlocutory order of the Arbitrator including an order granting amendment cannot be challenged in the Court either immediately or under Section 34 as submitted by the learned Counsel for the Respondent for the above reason is unacceptable. Under the Arbitration Act, against the grant of amendment of such nature, there is no specific remedy provided. The Arbitrator after grant of such amendment, immediately proceeded with the main matter and passed the Award. The parties therefore cannot be rendered remedyless. If case is made out of patent illegality or perversity and as such amendment affects the rights and/or goes to the root of the matter, the aggrieved party has a right to challenge the said order of grant of amendment as well as the resulting order or Award together arising out of the said amendment. Therefore, the Appellant, in our view, is entitled to raise all the grounds surrounding and relief to the grant of amendment as well full or part of Award arising out of the same.
90. However, we have to consider the merit of the grant of the said amendment as well as resulting Award arising out of the same. With the assistance of the learned senior counsel for the parties, we have gone through paragraphs 21, 22 and 27 of the Arbitration Petition by which according to the Appellant they challenged the order of amendment dated April 30, 2005. The learned Single Judge held in referring to paragraphs 21 and 22 and ground No. 27(s) of the Arbitration Petition that it did not contain a ground impugning the order of grant of amendment and therefore based on Vastu Investment v. Gujarat Lease Finance Ltd. accepted the submission of the Respondent that "all grounds on which the award is sought to be set aside have to be taken in the petition itself" and, therefore, as no specific ground was taken in the petition, the contention of the Appellant was rejected in this regard.
91. The facet which just cannot be overlooked is that the object and purpose of settlement of all disputes, arising out of the main contract, need be decided at once and in pending arbitration proceedings and not in piecemeal or in part. The claim was made for damages prior to invocation of arbitration. Once such a claim was made prior to invocation, it became a dispute within the meaning of the provisions of the Arbitration Act vide McDermott International Inc. v. Burn Standard Co. Ltd. and Ors. .
92. There is ample material on record and as noted by the Arbitrator (pages 49 to 61 of the Award) and specially letter dated 16.8.1996 and 13.7.1999 which reflect that the machinery had been detained by MIDC Officers in connection with the proposed completion of the contract work/accepted work of constructing the WBM Runway from 1372 to 2100 and not for the proposed extension from 2100 mtrs to 2600 mtrs. the proposed extension had not even initially noted by MIDC. In the circumstances and the above clear position could not be affected by the statement which had been made by the claimant's witnesses prior to the amendment being allowed and which apparently incorrect statement which were corrected by the claimant's witness post amendment. The learned Judge also has considered the documentary evidence and oral testimony and held that the conclusion of the Arbitrator that the detention of the machinery was in connection with the incomplete contracted trade of work of constructing the runway in WBM from 1372 to 2100 See letter dated 16.8.1996 and 13.7.1993 - i.e. possible view. The learned Judge has also observed that the MIDC in the course of the contract directed the claimant-respondent to retain his machinery at the site from March, 1996 to December, 1997 and claimant had in fact retained his machinery at site for non-utilization thereof from March, 1996 to December, 1997. In view of the documentary evidence and material on record, the claimant's witness statement prior to the amendment just cannot be relied upon as the said statement is ex-facie erroneous and contrary to the undisputed document on record. On the contrary, this erroneous statement were corrected by the amendment and fresh affidavit filed by the claimants and cross-examined thereafter by the Appellant. The view therefore as expressed cannot be said to be contrary to record or incorrect. In this background, we are also of the view that the Arbitrator had only permitted the claimant-Respondent to correct apparent error in their statement of claim and affidavit evidence and was rightly considered and permitted under Section 23(3) of the Arbitration Act. The submission therefore that the grant of amendment as well as the grant of Award arising out of the same is without jurisdiction is also unacceptable. The finding therefore of the Arbitrator as well as the learned Judge is within the frame work of the law and the record and specially when the interpretation so given and opinion so expressed was not an impossible one. We cannot overlook the fact that in arbitration proceedings and pursuant to Section 23(3) the Arbitrator can allow or grant amendment. Having once granted the same and passed an order based upon additional affidavit and material placed on record, the submission that only the original pleading and evidence need to be taken note of is not correct. The learned Arbitrator as well as the learned Single Judge based upon the existing material after amendment, gave the reasoning and passed the Award which is confirmed by the learned Judge and, therefore, need no interference by the Appellate Court in the present case. No other grounds on merit of the matter were urged.
93. Insofar as the interest is concerned, in view of the judgment in Krishna Bhagya Jala Nigam Ltd. v. Harischandra Reddy and Anr. 2007 AIR SCW 527, the Supreme Court has restricted the rate of interest at 9% p.a. in such construction contract matters. For the present matter the relevant para is para No. 11 which is reproduced as under:
11. On the merits of the claims made by the contractor we find from the impugned Award dated 25.6.2000 that it contains several Heads. The Arbitrator has meticulously examined the claims of the contractor under each separate Heads. We do not see any reason to interfere except on the rates of interest and on the quantum awarded for letting machines of the contractor remaining idle for the periods mentioned in the Award. Here also we may add that we do not wish to interfere with the Award except to say that after economic reforms in our country the interest regime has changed and the rates have substantially reduced and, therefore, we are of the view that the interest awarded by the Arbitrator at 18% for the pre-arbitration period, for the pendente lite period and future interest be reduced to 9%. Therefore, the whole Award/Judgment is maintained except the substitution of the rate of interest at 9% p.a. in place of 12% p.a. from 20.12.1997 till payment. The Award as well as the impugned Judgment is modified accordingly.
94. The Appeal is therefore disposed of accordingly. No order as to costs.