Punjab-Haryana High Court
Union Of India vs M/S Ankush Engineers And Contractors ... on 15 July, 2016
Author: Amit Rawal
Bench: Amit Rawal
FAO No.3871 of 2016 (O&M) -1-
IN THE HIGH COURT FOR THE STATES OF PUNJAB AND
HARYANA AT CHANDIGARH
FAO No.3871 of 2016 (O&M)
Date of Decision.15.07.2016
Union of India .......Appellant
Vs.
M/s Ankush Engineers & Contractors Pvt. Ltd. and another
........Respondents
Present: Mr. Pankaj Jain, Advocate for the appellant.
Mr. Ashish Aggarwal, Senior Advocate with Mr. Nikhil Handa, Advocate for caveator/respondent No.1.
CORAM:HON'BLE MR. JUSTICE AMIT RAWAL
1. Whether Reporters of local papers may be allowed to see the judgment ?
2. To be referred to the Reporters or not ?
3. Whether the judgment should be reported in the Digest?
-.-
AMIT RAWAL J.
The appellant-Union of India is aggrieved of the order declining their objection under Section 34 of the Arbitration and Conciliation Act, 1996 seeking setting aside of the Award dated 28.04.2011.
Mr. Pankaj Jain, learned counsel for the petitioner submitted that work of Sardar Swaran Singh National Institute of Renewable Energy on Jalandhar-Kapurthala Road, Distt. Kapurthala was awarded to the respondents that was to be completed by 12.06.2004 but further extension was given upto 30.06.2005. However, the respondent-contractor vide letter dated 04.07.2005 repudiated the claim but the appellant granted the extension upto 31.12.2006. The claim before the Arbitrator was time barred in the sense that the arbitration clause was invoked on 28.05.2009 and claim statement was filed on 12.10.2009. Though the objection was called, issue 1 of 9 ::: Downloaded on - 19-07-2016 00:12:41 ::: FAO No.3871 of 2016 (O&M) -2- of limitation was not taken but as per the provisions of Section 43(1) of the Arbitration and Conciliation Act, 1996 and Section 3 of the Limitation Act, the objection of limitation cannot be waived in the absence of specific pleadings. He submitted that once the contractor had abandoned the right by repudiating the contract in the year 2005, the claim made in the year 2009 was ex facie barred by law of limitation. In support of his contention, he has relied upon the judgment rendered by Hon'ble Supreme Court in Steel Authority of India Ltd. Vs. J.C. Budharaja, Government and Mining Contractor AIR 1999 SC 3275; Major (Retd) Inder Singh Rekhi Vs. Delhi Development Authority AIR 1988 SC 1007 and by a Division Bench of this Court in Sharma and Associates Vs. State of Punjab and others 2006(1) RCR (Civil) 213. He further submitted that the Arbitrator exceeded its jurisdiction in granting the Award more than what was claimed in the letter dated 04.07.2005 (Annexure A-2) which is part and parcel of the record of the arbitration proceedings. The contractor had alleged following claims:-
Sr. No. Brief description of claim Amount (`) Remarks 1 The contractor claims a sum of 1,75,00,000/- The Arbitrator is to `1,75,00,000/- on a/c of work done decide, whether the (including interest) @18% with effect claim is justified, if so, from 30.12.2005 to 31.03.2009) to what extent.
2 The contractor claims a sum of 2,50,000/- -do-
`2,50,000/- on a/c of credit item(s) (including interest @18% w.e.f.
30.12.2005 to 31.03.2009).
3 The contractor claims on a/c of 15,00,000/- -do-
withheld (including interest @18% w.e.f 30.12.2005 to 31.03.2009).
4 The contractor claims on a/c of 8,00,000/- -do-
Security of Deposit and Earnest
Money Deposit (including interest
@18% w.e.f 30.12.2005 to
31.03.2009).
5 The contractor claims on a/c of 17,00,000/- -do-
Demobilization (including interest
@18% w.e.f 30.12.2005 to
31.03.2009).
6 The contractor claims of Under 9,00,000/- -do-
Measured Steel (including interest
@18% w.e.f 30.12.2005 to
31.03.2009).
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FAO No.3871 of 2016 (O&M) -3-
Sr. No. Brief description of claim Amount (`) Remarks
7 The contractor claims on account of 2,20,00,000/- -do-
delay and its consequences (including
interest @18% w.e.f 30.12.2005 to
31.03.2009).
8 The contractor claims on account of 6,00,000/- -do-
Bank Guarantee illegally encashed
(including interest @18% w.e.f
30.12.2005 to 31.03.2009).
9 The contractor claims on account of To be calculated -do-
Interest @18% P.A. With Annual
Rests (Balance Pre-Reference
Pendente Lite and Future)
10 Claim on account of costs 5,00,000 -do-
Total 4,57,50,000/-
The claims from Sr. No.5 onwards are on account of demobilization and damages w.e.f. 30.12.2005 to 31.03.2009. Though in the objection petition filed under Section 34 of the Act, this specific objection was not taken but in view of the provisions referred to above, the plea can be taken at any stage of the proceedings. He further submitted that finalization of the bill would not enlarge the scope of limitation, much less, fall within the expression acknowledgment of payment.
He further submitted that the claim on account of loss of profit is not maintainable as it is beyond the scope of Section 73 of Indian Contract Act. The damages have to be ascertained on the day of breach of the contract and no future damages can be claimed in the afore-mentioned provisions. Even the Additional District Judge failed to assign reasons qua the claim being barred by law of limitation. The Arbitrator travelled beyond the terms of the agreement as the appellant was well within its rights to proceed against the contractor under Section 3 (a) (b) and (c) of the Contract. In support of his contention, he has also relied upon the provisions of Article 55 of the Limitation Act and thus, urges this Court for setting aside the Award as well as the impugned order under challenge.
There is a caveat and Mr. Ashish Aggarwal, Senior Advocate 3 of 9 ::: Downloaded on - 19-07-2016 00:12:42 ::: FAO No.3871 of 2016 (O&M) -4- assisted by Mr. Nikhil Handa, Advocate for the caveator raised the following arguments:-
(i) That the appellant fore-closed the contract vide letter dated 16.04.2007 proved by the Government on 13.07.2007 w.e.f.
29.03.2005. The appellant did not get the work done by the contractor on account of not releasing the payment due whereas the appellant-Union of India was cautioned for charging the future interest on outstanding dues. On various occasions, the appellant was requested to effect the measurement of the work already done by the respondent-contractor. On 13.07.2007, 03.08.2007, 07.01.2008 and 03.02.2008, the appellant was requested but did not yield any result. It is only on 26.08.2008, the joint measurement was weighed and there was admission of the appellant for preparation of the final bill on 07.11.2008. The respondent had also submitted the final bill which was rejected by the appellant on 07.01.2009 and since Clause 25 of the Contract envisaged the filing of the appeal to the Superintending Engineer, appeal was filed but again it did not yield result and accordingly, the jurisdiction of the Engineer-in- Chief vide letter dated 28.05.2009 (Annexure A-6) was invoked. Ultimately, the matter was referred to the Arbitrator. In view of the aforementioned facts, the Award cannot be said to be beyond limitation. The Department had acknowledged the preparation of the final bill on 07.11.2008. The joint measurement was done only in 2008 and thus, claim cannot be said to be beyond 3 years as the claim statement was filed on 4 of 9 ::: Downloaded on - 19-07-2016 00:12:42 ::: FAO No.3871 of 2016 (O&M) -5- 12.10.2009 and the matter was referred to the Arbitrator few months back i.e. On 20.07.2009.
(ii) That the claim was totally in consonance with the bills raised qua work done as well as liquidated damages as per the provisions of Section 73 of the Indian Contract Act. This aspect has been noticed by the Arbitrator in extenso. In this regard, he has drawn the attention of this Court to the Award of the Arbitrator.
(iii) He further submitted that there is little scope of interference in the appeal as the objections at the instance of the appellant were not falling within the provisions of Section 34 of the Arbitration and Conciliation Act.
(iv) He further submitted that even scope of public policy has been enlarged by the Hon'ble Supreme Court in Associate Builder Vs. Delhi Development Authority 2015 (3) SCC 49 and in view of the aforementioned ratio decidendi, the point of limitation does not fall within the enlarged scope of public policy.
I have heard the learned counsel for the parties, appraised the paper book and of the view that that there is hardly any force, substance or merit in the submissions of Mr. Pankaj Jain, Advocate, much less, the law relied upon by Mr. Jain, as the judgments of Hon'ble Supreme court are based upon the facts which are totally alien to the controversy in the present case. It is a matter of record that there was a delay on the part of the appellant in providing the funds due to non-availability and paucity of funds and this fact had been confirmed by the appellant as noticed by the 5 of 9 ::: Downloaded on - 19-07-2016 00:12:42 ::: FAO No.3871 of 2016 (O&M) -6- Arbitrator. For the sake of brevity, the relevant portion of the Award reads thus:-
" Although 26th R/A bill was released by respondents on 31.03.2005, but their due amount was not released and lot of undue reductions were made, large amount was withheld and the market rates were not allowed for abnormal deviation beyond permissible limit and for large number of items. As such the claimants again explain the difficulties being faced by them and requested for firm assurance about their further payments so as to complete the work timely vide letter dated 10.05.05(C-
51). And position of funding did not improve they repudiated the contract and withdrew from it explaining the position in details vide letter dated 4.7.05 (C-52) after the last extension given by respondents vide letter dated 5.5.2005 expired on 30.06.2005 and he requested for completing and making the payment of their dues. The respondents were also cautioned for charging the future interest on their dues vide this letter.
But the respondents continued to threaten them for action under clause 3 repeatedly. But when the claimants replied to such threats appropriately, pointing out that the respondents themselves are responsible for the delay, the respondents ultimately conceded their fault and closed the contract vide letter dated 13.07.2007 (R-80), after obtaining the approval of C.E. The fact that the funds were not available and no firm assurance was given to respondents by client department is confirmed by respondent in their letters dated 25.01.2006 (C-68). The claimants also filed letter dated 16.12.04 (C-106), 5.1.05 (C-107), dated 19.01.05 (C-108), dated 27.01.05 (C-109), dated 10.02.2005 (C-110), dated 14.02.2005(C-111), 24.2.2005 (C-112), dated 29/30.03.05 (C-113), dated 19.4.2005 (C-115) dated 22.10.2005 (C-115), written by C.E.; Project Manager and E.E. to client department confirming the claimants' contention regarding non- availability and paucity of funds requiring withholding of payment due to claimants and also possibility of claiming damages by contractor.
Regarding joint measurement also the respondents were not interested to record the measurement of the work done by them but which got damaged during the intervening period (from the date of repudiation on 4.7.05 and date of said joint measurement held during August, 2008) due to utter neglect and due to no upkeep and maintenance by respondents, for which only the respondents were responsible who did not consider their genuine repudiation and withdrawal from the contract till more than two years before finally accepting their contention vide letter dated 13.07.2007 (R-80). The reason for not accepting the said 6 of 9 ::: Downloaded on - 19-07-2016 00:12:42 ::: FAO No.3871 of 2016 (O&M) -7- measurement recorded by respondents was confirmed to respondents by them vide letter dated 23.8.08 (C-90). The claimants also relied on letter dated 22.10.05 (C-115), vide which the client department was intimated that C.P.W.D will not responsible of continuing deteriorating condition of incomplete building due to weathering affect and letter dated 30.3.2005 (C-113), dated 19.4.2000 (C-114) and dated 22.10.2005 (C-115) vide which respondents requested the client to take over the building on 'as is where is basis'. Under such situation which is accepted by respondents also they cannot be held responsible for any damages." It is evidently on record that time and again request was made to the appellant for joint measurement but the appellant did not come forward for the same. It is a conceded matter that joint measurement held during 2008, owing to the gross negligence of the appellant. It is not a case where after a repudiation of the contract, the contractor kept writing letters and ultimately, filed the claim in 2009 by losing the right in law. The fact remains that the claim was not measured, much less, could not been determined in the absence of joint measurement. The respondents side accepted the preparation of the final bill as late as in November, 2008, thereafter repudiated and even encashed the bank guarantee of `5 lacs on 01.10.2008. Thus, there is no substance in the submission that the cause of action arose on 04.07.2005 and the claim of the respondents is barred by law of limitation as per Article 55 of the Limitation Act as filed after a lapse of 3 years. Article 55 of the Limitation Act reads thus:-
Descritpion of suit Period of Time from which period begins to run limitation
55. For compensation for the Three years When the contract is broken or (where breach of any contract, express there are successive breaches) when the or implied not herein specially breach in respect of which the suit is provided for. instituted occurs or (where the breach is continuing) when it ceases.
On plain and simple reading of the aforementioned Article, it reveals that period of three years would arise from when the breach is 7 of 9 ::: Downloaded on - 19-07-2016 00:12:42 ::: FAO No.3871 of 2016 (O&M) -8- continued in respect of which the suit is instituted and when it ceases. The provisions of Article 55 of the Limitation Act does not come to the aid of Mr. Jain, rather it supports the submission of Mr. Aggarwal.
As regards the facts of the case in Steel Authority of India Ltd. (supra), it was a case where after execution of the contract and repudiation thereof, a supplementary agreement had taken place which ultimately failed and the contractor raised the claim for damages as sought before execution of the supplementary agreement. Keeping in view these facts, the Hon'ble Supreme Court found that the claim was time barred. In Major (Retd) Inder Singh Rekhi (supra), it was a case where after completion of the work on 02.04.1980, the department sat silent and contractor kept on writing letters from 1983 onwards till 1985 and thereafter, instituted an application under Section 20 of the Arbitration and Conciliation Act as late as in January, 1996. In these circumstances, the Hon'ble Supreme Court had an occasion to hold that the claim was barred by law of limitation.
In view of the facts noticed above, it is not a case of kind where there was contractor remained silent after repudiation of the contract on 04.07.2005. The joint measurement had taken place in August, 2008 and the bank guarantee was encashed in October, 2008. Thus, the ratio decidendi relied upon by the counsel for the appellant Mr. Jain as culled out in the judgments of the Supreme Court does not apply to the facts and circumstances of the present case.
As regards the ratio decidendi culled out in the judgment of the Supreme Court in Sharma and Associates (supra), the claimant had remained silent and raised a plea of accrual of cause of arbitration on the 8 of 9 ::: Downloaded on - 19-07-2016 00:12:42 ::: FAO No.3871 of 2016 (O&M) -9- ground that the final bill had been prepared after 15 years. There is no dispute to the aforementioned proposition. Ignorance of law is not a bliss. But as facts narrated above, the applicability of the aforementioned judgment does not apply to the facts and circumstances of the present case.
In my view, there is a substance in the submission of Mr. Ashish Aggarwal, Senior Advocate to some extent with regard to having not taken any plea of applicability of the Limitation Act but I am not in agreement with the aforementioned plea as there cannot be waiver against the law of limitation. A cumulative reading of the aforementioned facts would reveal that the claim instituted in the year 2009 was not barred by limitation in view of the fact that the department had encashed the bank guarantee on 01.10.2008 and rejected the final bill in January, 2009. Thereafter, contractor approached the Superintending Engineer and Chief Engineer. The department had been callous and had lackadaisical approach in coming forward for joint measurement and rather has entailed into payment of heavy amount of interest on account of negligent act of the officials. Had the joint measurement been taken place in time and bill had been prepared, perhaps the payment of interest would have considerably been reduced and there would not have been an occasion for the Arbitrator to grant such interest.
In the wake of aforementioned reasonings, I am of the view that there is no illegality and perversity in the Award passed by the Arbitrator as well as the order under challenge. The appeal is dismissed.
(AMIT RAWAL) JUDGE July 15, 2016 Pankaj* 9 of 9 ::: Downloaded on - 19-07-2016 00:12:42 :::