Jharkhand High Court
State Of Jharkhand vs M/S Sutlej Construction Limited ... on 12 October, 2018
Equivalent citations: 2019 (1) AJR 279
Author: Shree Chandrashekhar
Bench: Shree Chandrashekhar
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Arbitration Appeal No. 20 of 2007
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1. State of Jharkhand, through the Commissioner & Secretary, Water Resources Department, P.O. & P.S.-Doranda, Ranchi.
2. The Chief Engineer, Water Resources Department, P.O.-
Dhurwa, P.S.-Jagarnathpur, Ranchi.
3. The Superintending Engineer, Water Resources Department, Tenughat Dam Circle, P.O. & P.S.-Tenughat, Tenughat Bokaro.
4. The Executive Engineer, Konar Canal Division, P.O.-Banaso, P.S. Bishnugarh, Banaso, Hazaribagh, Jharkhand.
... Defendants/Petitioners/Appellants Versus M/s Sutlej Construction Limited through its Chairman, Shri S.C. Gupta, SCO No. 858, 2nd Floor, P.S.-Manimajra, NCA Manimajra, Chandigarh-160 101 ...Claimant/opposite party/Respondent
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CORAM : HON'BLE MR. JUSTICE SHREE CHANDRASHEKHAR
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For the Appellants : Mr. Ajit Kumar, Advocate-General Mr. Chanchal Jain, A.C to A.G For the Respondent : Mr. Pandey Neeraj Rai, Advocate Mr. Rohit Ranjan Sinha, Advocate Mr. Akchansh Kishore, Advocate
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Heard on 27/09/2018 & 04/10/2018 Pronounced on 12/10/2018 Aggrieved of the final order dated 27.06.2007 passed in Arbitration Misc. Case No. 13 of 2006 by which challenge to the award dated 31.01.2006 by the appellant-State of Jharkhand (hereinafter referred to as the 'Department') has failed, this arbitration appeal under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996 has been filed.
2. Briefly stated, the claimant-M/s Sutlej Construction Limited was allotted the construction work of "Open channel from 0.00 K.M to 0.652 K.M and tunnel from 0.652 K.Ms to 0.762 K.Ms under Konar Cannel Irrigation Project at Banaso, district-Hazaribagh" vide letter dated 10.04.1989 and Agreement No. IF2 of 1989-90 was executed on 16.08.1989. The total value of the work was Rs. 3,66,00,000/- and the schedule completion period for the work under the contract was 3 years, that is, by 2 15.08.1992; time was essence of the contract. Before 10.08.1992, the claimant, which had informed the Department through letter dated 18.09.1989 that its men and machinery have arrived at the site for the work, has written several letters for allotment of land for construction of colony for its workers, provision for cement, G.I. sheet, track line, approved drawing, temporary electric connection at the site and the difficulties faced by it on account of high water level of Konar Dam, explosive license and objection by the Circle Officer to the construction of colony for the workers. By a letter dated 10.08.1992 the claimant made its intention to raise bills and claim damages with interest at the rate of 24% per annum known to the Department, however, no claim was in fact raised. It was in response to letter dated 23.03.1999 by which the claimant was asked for final measurement followed by letter dated 05.04.1999, the claimant hit back through telegram dated 16.04.1999 raising an objection that measurement after so many years would not serve any purpose.
3. About three years thereafter, the claimant wrote letter dated 13.04.2002 and finally raised a claim through letter dated 08.07.2002 which for the first time was accompanied by a statement of claims. On 23.08.2002 the claimant approached the Superintending Engineer, Tenughat Dam Circle to enter into arbitration and a reminder for arbitration was sent on 14.11.2003. By an order dated 02.03.2005 passed in Arbitration Application No. 06 of 2004 this Court appointed a retired Judge of the High Court as the Arbitrator; the learned Arbitral Tribunal entered into the reference on 30.04.2005. The claimant has raised claim under 10-heads, the 10th claim pertains to interest at the rate of 24% from the date of award to the date of payment. These claims were resisted by the Department by filing a counter-affidavit on 20.11.2005 and a counter-claim for Rs. 28,04,526/- with compound interest at the rate of 12% per annum alleging breach of contract and excess payment to the claimant-contractor was filed by the Department on 30.11.2005. The claimant has objected to the counter-claim by filing its reply on 23.12.2005.
34. An objection to the maintainability of the claims was raised by the Department on the ground that those were time-barred. In its written statement of defence, the Department took a stand that vide letter dated 16.07.1991 the Executive Engineer, Banaso was directed to terminate the agreement on the ground that the claimant was black-listed by the Water Resources Department, Government of Bihar vide letter no. 1049 dated 10.06.1991. The Department has pleaded that the claimant after completely stopping the work never turned up inspite of repeated reminders, in fact abandoned the contract and there was no correspondence by it after August, 1992 and the various claims raised by the claimant are all barred under the specific clauses of the general conditions of contract. It is pleaded that the contractor committed several irregularities and fled away from the site removing its men and machinery from the site and therefore, vide letter dated 02.02.1991 the Officer-in-Charge, Bishnugarh, Hazaribagh was asked to lodge a First Information Report; before that vide order dated 02.07.1990 the Executive Engineer was suspended. In paragraph no. 56 of its counter-affidavit, the Department has asserted that it was only after measurement was taken by the Flying Squad in the year 1999 it could be discovered that bogus payments were made to the claimant.
5. The agreement dated 16.08.1989 was marked as Exhibit-H. It contains an unconditional undertaking by the tenderer to execute the work within the stipulated period. Clause 2 of the conditions of contract provides that the time fixed for completion of the work under the contract shall be strictly observed by the contractor and in the event the work is not completed within the stipulated time the contractor shall be liable to pay compensation at the rate of half percent of the estimated cost of the work for delay of each day. Under clause 3(a) the Executive Engineer is authorized on behalf of the Governor to rescind the contract and clause 5 provides that extension of time may be granted, but only by way of exception and not as a general rule, by a written permission of the Executive Engineer on an application made in writing by the contractor. The Department has asserted 4 that clause 3.1.1 of the agreement gives a brief description of the Konar Irrigation scheme including the climatic condition of the site, hydraulic data and the reservoir level and clause 2.2 requires the contractor to get itself acquainted with the site conditions and other informations.
6. One of the grounds of challenge to the various claims raised by the claimant is that the claims are barred under clause 4.29.0 of the general conditions of contract, which reads as under:
"4.29.1: Payments for any additional items of work shall be governed by clause 11 of P.W.D. Form F2.
4.29.2: No claim for idle labour, idle, machinery, etc. on any account will be entertained.
4.29.3: No claim for increase in cost of labour and materials shall be entertained.
4.29.4: No claim shall be entertained for business loss or any such loss.
4.29.5: No claim will be entertained by the Department on account of any increase in railway or road freight, cost of petrol fuel lubricants, etc. and for any increase in wages of labour, increase in rates of sales tax etc. during the course of construction of this work.
4.29.6: No claims shall be entertained for delay in communication, decision, drawings or specifications by the Department. The Department may, however, consider the grant of extension of time in completion of work, if there is any such genuine reason for it.
4.29.7: In case it is not possible for the Department to make the entire site available on the award of the work, the contractor will have to arrange his working programme accordingly. No claim what-so-ever for not giving the site on award of work and for giving the site gradually will be entertained. However, suitable extension of time may be given at the discretion of the Engineer-in-Charge considering the merits of the case."
7. The individual claims have been dealt with by the learned Arbitrator under Chapter XII of the award in the following manner :
Clam No. (i): Claim on account of payment for the work executed 5 but not paid.
From measurement book no. 6 which is Ext. - J the learned Arbitrator has assessed the quantum of gross work done by the claimant at Rs. 55,23,724.60/-. On the basis of the claimant's admission that it has received Rs.43,89,462/- on account of work executed by it and Rs.3,05,199/- was to be deducted on account of power connection, electricity charges, cement, steel and M.S plates which were consumed by the claimant, this claim has been allowed to the extent of Rs.8,29,063.60/- against the total claim for Rs.67,14,486/-. Claim No. (ii): The claim for Rs.2,14,53,480/- on account of idle machinery and man power due to various obstructions has been rejected by the learned Arbitrator.
Claim No. (iii): The claimant has claimed Rs.1,75,37,500/- on account of loss and profit and overload charges due to prolongation of the contract period to 31.03.2002.
The learned Arbitrator has awarded Rs. 19,70,052/- on this count.
For granting this claim the learned Arbitrator has referred to the statement of claim whereunder the claimant has mentioned the idle period from 01.07.1991 to 31.12.1995; period upto 1992 is covered under Claim No. (iv). This claim has been allowed by awarding 6% interest for 3 years on Rs. 1,09,44,741/- which according to the learned Arbitrator would be the expenses for 1 year incurred by the claimant.
Claim No. (iv): A claim for Rs. 37,75,066/- has been raised by the claimant on account of loss of profit and overhead charges on the balance work due to stoppage of work in illegal and arbitrary manner.
The learned Arbitrator has awarded Rs. 37,65,777/- for this claim by awarding 12% interest on Rs. 3,13,81,475/- which is the amount arrived at by deducting Rs.52,18,525/- which is the total value of the work executed by the claimant from the total contract value which was Rs. 3,66,00,000/-. Claim No. (v): The claim for Rs. 5,00,000/- on account of 6 expenditure incurred for shifting of staff and workers due to stoppage of work in an illegal and arbitrary manner has been rejected by the learned Arbitrator.
Claim No. (vi): On account of loss suffered due to delay in payment for the work executed, the learned Arbitrator has allowed the claim for Rs. 6,50,000/-.
Claim No. (vii): Claim on account of material and machinery remaining at the site which became scrap due to their retention at the site after stoppage of work has been rejected by the learned Arbitrator.
Claim No. (viii): The claim for escalation has been rejected by the learned Arbitrator.
Claim No. (ix): A claim for Rs.26,34,232/- was raised on account of security and earnest money and damage for not realizing the bank guarantee.
The learned Arbitrator has, however, awarded Rs.5,48,846/- which is the amount of security deposit and earnest money.
Claim No. (x): Interest at the rate of 24% from the date of accrual till the date of payment was claimed by the claimant.
The learned Arbitrator has awarded interest at the rate of 7% on the award amount from 01.08.2002 till 31.01.2006, that is, the date of award and three months thereafter, that is, from 01.05.2006, if the award amount is not paid before that, it shall carry interest at the rate of 9% per annum till it is actually paid or realized in accordance with law.
8. The counter-claim for Rs.28,04,526/- of the Department which according to the Department was the excess payment made to the claimant has been rejected primarily on three counts; it was raised after about 13 years, incomplete measurement book vide Ext.-J makes this claim doubtful and measurement taken by the Flying Squad, Water Resources Department 13 years after the earthwork was unreliable, unacceptable and cannot be accepted as accurate.
7
Award at a glance
Sl. Claim Amount Award
No. Claimed
1 Claim on account of payment for Rs.67,14,486 Rs. 8,29,063/-
the work executed, but not paid.
2 Claim on account of idle machinery Rs. 2,14,53,480 Rejected
and man power due to various
obstructions
3 Claim on account of loss and profit Rs. 1,75,37,500/- Rs. 19,70,052/-
and overload charges due to
prolongation of contract period for
not allowing to complete the work
and other breaches of contract (for
the period from 16.08.1992 to
31.03.2002).
4 On account of loss of profit and Rs. 37,75,066 Rs.37,65,777/-
overhead charges on the balance
work due to stoppage of work in an
illegal and arbitrary manner.
5 Claim on account of expenditure Rs.5,00,000/- Rejected
incurred for shifting of staff and
workers due to stoppage of work in
an illegal and arbitrary manner.
6 Claim on account of loss suffered Rs. 6,50,000/- Rs. 6,50,000/-
due to delay in making running
payment for the work executed.
7 Claim on account of material and Rs. 18,00,000/- Rejected
machinery remaining at site after
stoppage of work and having
become scrap.
8 Claim on account of escalation Rs.30,50,285 Rejected
9 Claim on account of security and Rs. 26,34,232/- Rs.5,48,846/-
earnest money and damage for not
realizing the bank guarantee.
10 Claim on account of interest @ Interest on the Award amount will be
24% from the date of accrual till thepaid @ 7% per annum from date of payment. 01.08.2002, and this date is fixed on the basis that the claimant had demanded vide letter dated 8.7.2002 (Ext. C-79) (giving some grace period from the letter dated 8.7.2002, Ext. C-79 addressed to the Executive Engineer) raising claims with interest, to the date of Award i.e. 31.01.2006. Thereafter, for 3 months i.e. upto 01.02.2006 to 30.04.2006, no interest shall be payable on any amount whatsoever. If the Award amount is not paid on or before 30.04.2006, the Award amount will carry interest @ 9% per annum from 01.05.2006 to the date on which either the amount is paid or realized in accordance with law.
Counter Claim 11 Counter Claim Rs.28,04,526/- Rejected 8
9. At this stage, few important facts of the case which are apparent from the records are also required to be recorded. These are: (i) time was essence of the contract (clause 2), (ii) schedule period for completion of the work under contract was 36 months and this period was not extended by the Department, (iii) under clause 5 extension of time for completion of work under the contract can be granted on certain conditions but no application for extension of time was made by the claimant, (iv) last joint measurement was taken on 09.08.1991 (letter dated 28.08.1991),
(v) after 10.08.1992 the claimant did not raise any grievance till 16.04.1999 on non-payment of the bills, if any, for the work executed by it and after the contract period was over, that is, after 15.08.1992 no claim for payment of unpaid amount or refund of security deposit and earnest money was raised, atleast till 13.04.2002, (vi) no work was executed by the claimant after 01.07.1991 (para 6 of the statement of claim, also referred by the learned Arbitrator at page 81 of the award), (vii) the claimant has claimed payment on account of idle men and machinery till 1995,
(viii) according to the award the unpaid amount was Rs.8,29,063/- only, though this also has been challenged by the Department,
(ix) payment of Rs.43,89,462/- to it has been accepted by the claimant, (x) the claimant has not led oral evidence or produced proof of actual expenses on account of overload charges in support its claim, and (xi) against the rejection of claims or reduction in the amount claimed under different heads the claimant has not laid a challenge to the award.
10. In the aforesaid factual background, the learned Advocate-General has questioned legality of the impugned order dated 27.06.2007 passed in Arbitration Misc. Case No. 13 of 2006 and, in turn, launched a 3-pronged attack on the award dated 31.01.2006 inter alia on the following grounds: (i) the claims were barred under the law of limitation, (ii) the claims were barred under the specific clauses of the general conditions of contract, and
(iii) the award rendered is against the public policy.
11. Mr. Pandey Neeraj Rai, the learned counsel for the claimant would submit that once it is found that the date of 9 final measurement by the Department has not been disclosed - somewhere it is simply stated that it was taken in the year 1999 - and, if that is so, if the date of final measurement falls after August, 1999 the claims would be well within time; there was no letter by the Executive Engineer/Superintending Engineer directing the claimant to stop work; the claimant has claimed that it was very much there at the site always ready and willing to complete the work, however, on account of site conditions it could not complete the work, and therefore the Department has failed to prove that the claims were barred by limitation. Moreover, the learned Arbitrator has answered the issue of limitation against the Department, an issue which primarily is a question of fact, and therefore not open to re-examination under Section 34 of the Act.
Another contention raised on behalf of the claimant is that notwithstanding a specific bar under the general conditions of contract the Arbitrator would have jurisdiction to award a claim; on price escalation refer "Associated Construction Vs. Pawanhans Helicopters Limited" reported in (2008) 16 SCC 128, on interest pendente-lite refer "Board of Trustees for the Port of Calcutta Vs. Engineers-De-Space- Age" reported in (1996) 1 SCC 516, on payment of interest on delayed payment refer "State of Rajasthan and Another Vs. Nav Bharat Construction Co." reported in (2002) 1 SCC 659, on loss of profit refer "Dwaraka Das Vs. State of M.P. and Another" reported in (1999) 3 SCC 500 and "M/s A.T. Brij Paul Singh and Others Vs. State of Gujarat" reported in (1984) 4 SCC 59.
The learned counsel would finally submit that if the Department has failed to plead a specific ground to challenge any of the claims under the award this Court would not permit the Department to urge a new ground of challenge. The learned counsel for the claimant has specifically referred to challenge by the Department to claim no. (iv) which pertains to "loss of profit and overhead charges on the balance work due to stoppage of work in an illegal and arbitrary manner". A specific challenge to the said claim according to the learned counsel for the claimant was not made with reference to clause 4.29.4 of the general conditions of contract either in the counter-affidavit filed by the Department in 10 opposition to the claim petition or in the application under Section 34, but for a faint reference under ground no. 16, which, of course, is of a general nature.
12. Ever since the Arbitration Act, 1940 was enacted power of the Court to interfere with the award of the Arbitrator/Arbitral Tribunal has been debated ferociously and the debate has continued unabated even after the Arbitration and Conciliation Act, 1996 has been enforced. The plain language of Section 34 of the Arbitration and Conciliation Act makes the legislative intendment more than clear that sanctity of an arbitral award must be preserved and the judicial interference with the award must remain confined to the grounds mentioned under Section 34. The non-obstante clause with which Section 5 begins, gives overriding effect to the provisions under Part I of the Act, only under which any interference with the arbitral proceeding or an arbitral award is permissible. The expression, "only by" in sub-section (1) to Section 34 and "only if" in sub-section (2) leave no scope for any judicial interference with an arbitral award except on an application for setting-aside an award under sub-section (1) which must be founded on the specified grounds mentioned under sub-section (2) of Section 34. Several judgments were cited by the learned counsel for the claimant on limitation on the powers of the Court to interfere with a speaking award. The central theme of all the judgments is that the Arbitrator is the master of evidence and the question of evidence falls within the realm of the Arbitrator's jurisdiction - a plausible view of the Arbitrator should not be substituted by the Court on re-appreciation of the evidence by its own view, to do what it considers to be just - and, decision of the arbitrator on a specific question of law even if erroneous does not make the award illegal. However, if it appears on the face of the award that the arbitrator has proceeded illegally that is to say admitting an inadmissible evidence or adopting a principle of construction which in law cannot be countenanced, the arbitrator makes an apparent error in law which may be a ground for setting-aside the award [refer "U.P. Hotels and Others Vs. U.P. State Electricity Board" reported in (1989) 1 SCC 359].
1113. It was in "Associate Builders Vs. Delhi Development Authority" reported in (2015) 3 SCC 49 - the decision seems to put final seal on the powers of the Court to interfere with an arbitral award - wherein it has been held that merits of an arbitral award can be looked into if the award has been challenged on the ground of public policy of India.
14. By now it is well-settled that there are atleast three situations in which the Court can look into the evidence laid by the parties before the Arbitral Tribunal, where the award is challenged on the ground that (i) it is against the public policy, or (ii) it is perverse, or (iii) it is barred by limitation.
15. The award has been challenged by the Department by a petition under Section 12, 13, 16 and 34 of the Arbitration and Conciliation Act, 1996. Order dated 27.06.2007 passed in Arbitration Misc. Case No. 13 of 2006 records various grounds on which the Department has challenged validity of the award, however, the learned trial Judge, observing that the award has been made after discussing the documents, evidence and materials on record, has refused to interfere with the award, primarily on the ground that in a proceeding under Section 34 of the Arbitration Act the Court cannot re-appreciate the evidence and no interference with the award is permissible unless the award itself is perverse or rendered on a wrong proposition of law. It needs to be recorded here that one of the grounds of challenge urged on behalf of the Department was that the claims were barred by limitation.
16. The concept of public policy is incapable of a precise definition and what has been incorporated in the Arbitration and Conciliation Act, 1996 through explanation to Section 34 is, something which is in excess of jurisdiction and in breach of the due process [refer "Venture Global Engineering Vs. Satyam Computer Services Limited and Another" reported in (2010) 8 SCC 660]. But then, the law itself is a dynamic concept which like life keeps changing with time and place. What is the public policy of India and what are the circumstances which can be said to be covered under the expression "public policy" were discussed by the Supreme Court in "Renusagar Power Co. Ltd. Vs. General Electric 12 Corporation" reported in (1994) Sup. (1) SCC 644, before the new Arbitration Act came into existence. In Renusagar the recovery of compound interest on interest being contrary to statutory law only was held not against any fundamental policy of Indian law. However, in the context of Section 34 (2)(b)(ii) of the Arbitration and Conciliation Act, 1996, in "Oil and Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd." reported in (2003) 5 SCC 705, the Supreme Court felt it necessary to give the expression "public policy of India" a wider meaning. In addition to the three instances viz. (i) the fundamental policy of Indian law, (ii) interest of India, and
(iii) justice or morality, which would fall under the expression "public policy" as held in Renusagar, the decision in Saw Pipes found a new entrant in the arena of "public policy" under Section 34 - patent illegality. In this connection, para 58-60 of the judgment in "Mcdermott International Inc. Vs. Burn Standard Co. Ltd. and Others" reported in (2006) 11 SCC 181 provide an insight how to conclude what would constitute "public policy". In "Mcdermott International", the Supreme Court has observed thus:
"58. In Renusagar Power Co. Ltd. v. General Electric Co. this Court laid down that the arbitral award can be set aside if it is contrary to
(a) fundamental policy of Indian law; (b) the interests of India; or
(c) justice or morality. A narrower meaning to the expression "public policy" was given therein by confining judicial review of the arbitral award only on the aforementioned three grounds. An apparent shift can, however, be noticed from the decision of this Court in ONGC Ltd. v. Saw Pipes Ltd. (for short "ONGC"). This Court therein referred to an earlier decision of this Court in Central Inland Water Transport Corpn. Ltd. v.
Brojo Nath Ganguly wherein the applicability of the expression "public policy" on the touchstone of Section 23 of the Indian Contract Act and Article 14 of the Constitution of India came to be considered. This Court therein was dealing with unequal bargaining power of the workmen and the employer and came to the conclusion that any term of the agreement which is patently arbitrary and/or otherwise arrived at because of the unequal bargaining power would not only be ultra vires Article 14 of the Constitution of India but also hit by Section 23 of the Indian Contract Act. In ONGC this Court, apart from the three grounds stated in Renusagar, added another ground thereto for exercise of the court's jurisdiction in setting aside the award if it is patently arbitrary".
"59. Such patent illegality, however, must go to the root of the matter. The public policy violation, indisputably, should be so unfair and unreasonable as to shock the conscience of the court. Where the arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute would come within the purview of Section 34 of the Act. However, we would consider the applicability of the aforementioned principles while noticing the merits of the matter."
"60. What would constitute public policy is a matter dependant upon the nature of transaction and nature of statute. For the said purpose, the pleadings of the parties and the materials brought on 13 record would be relevant to enable the court to judge what is in public good or public interest, and what would otherwise be injurious to the public good at the relevant point, as contradistinguished from the policy of a particular Government. (See State of Rajashtan V. Basant Nahata.)"
17. Question of limitation is a question relating to the jurisdiction of the Court in as much as it goes to the very root of the Court's jurisdiction to entertain and decide a matter. It has been held that laws of limitation are founded on public policy. It is in the maxim interest reipublicae ut sit finis litium which means it is for the general welfare that a period be put to litigation, the law of limitation finds its genesis. Section 3(1) of the Limitation Act casts a duty upon the Court to dismiss a suit if made after the prescribed period, although limitation is not set up as a defence. In "Maqbul Ahmad and Others Vs. Onkar Pratap Narain Singh and Others"
reported in AIR 1935 PC 85, the Privy Council has held that the Court is bound under Section 3 of the Limitation Act to ascertain for itself whether the suit before it is within time and if it fails to do so and entertains a suit or claim which is barred by limitation the Court acts without jurisdiction. In "Rajendra Singh and Others Vs. Santa Singh and Others" reported in (1973) 2 SCC 705 the Supreme Court has held thus; "11. ....... Indeed, it is the duty of the Court, in view of Section 3 of the Limitation Act, to apply the bar of Limitation where on patent facts it is applicable even though not specifically pleaded".
18. Evidently, an award under which a time-barred claim has been allowed would be in conflict with the public policy of India.
19. The records would speak that from the very beginning the Department has raised an objection that the claims are time-barred. Order dated 02.03.2005 passed in Arbitration Application No. 06 of 2004 records objection of the Department on maintainability of the claims and it was also specifically pleaded before the learned Arbitrator. The plea on limitation was again raised in Arbitration Misc. Case No. 13 of 2006 and it has been pressed before me as the focal point for attack on the impugned order dated 27.06.2007 and the award dated 31.01.2006. It is this question on maintainability of the claims raised before the learned 14 Arbitrator - whether the claims were time-barred - that has to be decided first.
20. The issue of limitation has been discussed in detail from paragraph nos. 100 to 129 under Chapter XII of the award. The aforesaid paragraphs read as under:
"100. The opposite party has raised question on limitation and also has submitted that the arbitration proceeding was not maintainable being time-barred.
101. The opposite party has submitted that vide Exhibit C letter no. 1385 dated 08.07.1991 the Superintending Engineer has given instructions to Executive Engineer to terminate the contract on account of the decision of government of Bihar black listing the contractor (claimant) in relation to another contract of the irrigation Department and a copy of the letter was forwarded to the claimant by letter no. 7541 dated 16.07.1991 by the Executive Engineer.
102. Therefore according to the opposite party the cause of action arose in 1991 (16.07.1991) Exhibit B, the letter of Govt. to the claimant about black listing of another work are not the work (contract act) of Arbitration. Further it has been submitted that matter of fact the contract had come to an end on 15.08.1992 which was the date of the completion of the work that being so the argument is that appointment of the arbitrator was made in the year 2002 which is beyond the period of limitation.
103. The opposite party has relied upon a decision reported in 2005 (8 Supreme Court cases) page 709.
104. The claimant has resisted the contention raised by and has submitted that absolutely it is wrong to say that the contract had been either terminated or rescinded. No action has been taken for the same as provided in the agreement clause 3 (a) it has already been discussed above.
105. It has been stated that matter of fact the starting point of cause of action has to be judged from the point that the occasion had arisen for the denial of any right or claim which were permissible for adjudication and only thereafter the period of imitation will arise.
106. It has been submitted on behalf of the claimant that letter dated 23.03.1999 Exhibit C 74 was sent to the claimant to participate in the final measurement. In addition as stated and discussed above it would appear that letters were sent to the claimant by the opposite party much after 1991 indicating that the chapter of agreement had not been closed finally at all. It is supported by letter dated 23.03.1999 Exhibit C-4 letter from the opposite party to the claimant informing that as per the records upto 12.09.1990 payment of 15 Rs. 43,89,462.00 had been made. The claimant was further asked to participate in final measurement which were to be taken from 20.04.1999 to 25.04.1999.
107. Another letter dated 05.04.1999 Exhibit C-75 was received in this regard by the claimant. The claimant had given a reply on 16.04.1999 Exhibit C-76 the claimant has also raised the question that unilaterally and illegally the work has been suspended and he be allowed to resume and complete the work. It appears that correspondences between parties continued till on 16.04.2000, 28.08.2000, 15.05.2001 and 21.11.2001 by which demand was made that the claimant be allowed to resume the work. It appears that the claimant had also but forwarded its claim to work by letter dated 13.04.2002 Exhibit C-77.
108. Matter of fact the opposite party had made measurement in 2002 after the Jharkhand State had been formed about the final measurement.
109. Thereafter it appears that the opposite party has closed this chapter and this attitude amounted to denial of legal rights within frame work of agreement to resume the work, to receive the payments and ask for claims due to losses incurred by the conduct of the opposite party which was fundamental breach of contract.
110. Letter dated 10.06.1991, from the Govt. to the claimant, copy to Chief Engineer Ext. B letter dated 08.07.1991 Exhibit-C, from the Superintending Engineer to Executive Engineer and letter dated 03.07.1991 Ext D cannot be the date or dates for starting of the limitation. It is because-
(a) Letters are in between the opposite parties only excepting Exhibit-B is memo to the claimant.
(b) All the letters originate from the subject matter of Durgawati Spill-way of the claimant which is quite a different work and Contract/Agreement than the present which is involved in the Arbitration.
(c) Absolutely no notice given to the claimant as provided under clause 3(a) of the Agreement.
(d) Letter Exhibit-B states that the claimant company shall not be given any work in the future. It is not effective retrospectively.
Nothing is mentioned about the work under Arbitration and its Agreement or Contract.
(e) Letter Exhibit-C is simply directions to the Executive Engineer and by letter never the Contract under Arbitration is terminated.
(f) Even letter Exhibit-D is a direction to the Executive Engineer. This letter cannot be a notice and action under Clause 3 (a) for 16 termination of the Contract.
111. There is no mention of black listing in the agreement. Power lies only to the State Govt. Govt. has not black listed the company relating to the work contract Agreement involved in the Arbitration. Moreover it relates to all coming and not past.
112. Of course Executive Engineer can terminate or modify any work but that has to be under clause 3(a) with notice.
113. Therefore the contract was not terminated.
114. It continued is established from the letter of the Executive Engineer no. 111 dated 04.03.1992 in which it has been mentioned : "SINCE THE WORK IS IN PROGRESS SO REMOVAL OF SILT IN APPROACH CHANNEL IS THE DUTY OF AGENCY TO REMOVE. FOR PAYMENT DEPARTMENT IS TRYING THEIR BEST AS THERE IS ACUTE SCARCITY OF FUND...."
115. The above mentioned letter is dated 04.03.1992 after the date of all the three letter Exhibit B, C and D, the continuation of contract is established.
116. Therefore the contention of the opposite party, B,C and D being the date of starting point of limitation is not correct.
117. On the contrary, the claimant was in regular having correspondence with the opposite party establishing commercial relationship.
118. The opposite party has written letter no. 240 dated 23.03.1999 to participate in the measurement to be from 20.04.1999 to 25.04.1999. It has also been stated in the letter that if the claimant absented, exparte measurement would be taken and also per term and condition of the Agreement the cost likely to be involved in the final measurement will be recoverable by the claimant.
119. Therefore it means that finality of cause of action had not reached for being starting of the point of limitation and commercial relationships existed.
120. Since the Arbitration is for claims within the frame work of Agreement and Law, and not black listing, the starting point of limitation would be that point where and when the claims are refused by words or implications.
121. Even after 23.03.1999 the opposite party sent a letter dated 13.04.2002 relating to claim.
122. After receipt of this letter the claimant sent letter dated 08.07.2002 to the opposite party requesting payment of claims failing which it would be presumed that the opposite party do not intend to pay in normal course and dispute the same, the claimant will take action to recover.
123. Thereafter the claimant sent a notice/letter dated 23.08.2002 Exhibit C-80 to the opposite party for referring the dispute for Arbitration.
17124. The opposite party has taken a plea that the Arbitration clause has been deleted by the Department.
125. It has been rightly argued that, that had been done without the consent and knowledge of the claimant, unilaterally and thus being illegal can not bind down the claimant.
126. On refusal by the opposite party the claimant filed Request Case No. A.A. No. 6 of 2004 in Hon'ble High Court and thus this Arbitration Proceeding, by the order of the Hon'ble Court.
127. In the result in view of the facts stated above I hold that there is no bar of Limitation.
128. The decisions mentioned in the written argument are not applicable to the facts and circumstances of this case.
129. Therefore on the basis of the discussions made above and also by critically examining the facts brought by both the parties and the documents referred to prima-facie the case for award has been made out. However the award will be considered in the next chapter."
21. At this stage it needs to be recorded that no oral evidence was led by the parties and the award has been made on the basis of pleadings of the parties and the documents produced before the learned Arbitrator. Therefore, few letters which have been referred by the learned Arbitrator in the aforesaid paragraphs of the award require a look. These are letters dated 16.07.1991, 04.03.1992, 10.08.1992, 23.03.1999, 05.04.1999, 16.04.1999, 13.04.2002 and 08.07.2002 LETTER DATED 16.07.1991 :
v/kh{k.k vfHk;Urk dk dk;kZy;
rsuq?kkV ck¡/k vapy rsuq?kkVA i=kad 1385 @ rsuq?kkV fnukad 8-7-91 lsok es]a dk;Zikyd vfHk;Urk dksukj ugj ize.My cuklhA fo"k;%& nqxkZorh Lihyos ds fuekZ.k ls lacaf/kr fufonk dh fu/kkZfjr 'krksZ ls eqdj tkus ,oa dk;Z u djus ds QyLo:i CySd fyLV fd;s tkus ds laca/k esaA izlax%& eq[; vfHk;Urk] ty lalk/ku foHkkx jk¡ph ds i=kad 1732 fn0 3-7-91 egk'k;] mi;qZDr fo"k;k/khu izklafxd i= dh izfrfyfi layXu djrs gq, funsZ'k fn;k tkrk gS fd vkids ize.My ds v/khu esllZ lryt dUlVªD'ku dEiuh ds }kjk djk;s tk jgs bUVsd LVªDpj ,oa ,izksp pSusy dk dk;Z tks ,djkjukek la0A ,Q 2 vkWQ 89&90 ls lacaf/kr gS mldk vc rd djk;s x;s dk;Z dh vfUre ekih ysdj lwfpr djsAa rFkk ,djkjuek dks cUn dj fn;k tk;A QZe ds }kjk fn;s x;s cs xkjaVh la0 21@89 vkWQ :i;s 18]00]000-00 ¼:i;s vBkjg yk[k½ dh fo'ks"k nwr izfrfu;qDr dj iwoZ esa fn;s x;s funs'kkuqlkj LVsV cSad vkWQ bf.M;k] gtkjhckx 18 'kk[kk esa tek djkdj buds'k djk fy;k tk;A vuqikyu izfrosnu i= izkfIr dh frfFk ls iUnzg fnuksa ds vUnj bl dk;kZy; esa HkstsA bldh lwpuk eq[; vfHk;Urk dks Hkh nh tk jgh gSA vuq0&;FkksDrA g0@& v/kh{k.k vfHk;Urk rsuq?kkV ck¡/k vapy] rquq?kkVA i=kad 1385 @rsuq?kkV fn0 8-7-91 izfrfyfi eq[; vfHk;Urk] ty lalk/ku foHkkx jk¡ph dh i=kad 1732 fn0 3-7-91 ds izlax esa lwpukFkZ izsf"krA g0@& v/kh{k.k vfHk;Urk rsuq?kkV ck¡/k vapy] rquq?kkVA Letter No. 754 / Banaso Date 16.7.91 Copy forwarded to M/s Sutlej Construction Company Banaso for information and necessary action, They are requested to act accordingly as per directed by Superintending Engineer, Tenughat Dam Circle, Tenughat. Encl:- as above 16.7.91 Executive Engineer Konar Canal Division, Banaso (Hazaribagh) (In English) Office of the Superintending Engineer Tenughat Dam Circle, Tenughat.
Letter No. 1385/Tenughat dated 8.7.1991.
To, The Executive Engineer, Konar Canal Division, Banaso.
Subject: Regarding breach of the conditions of tender related to construction of Durgawati Slipway and black-listing for not completing the work.
Ref.: Letter No. 1732 dated 3.7.1991 of the Chief Engineer, Water Resource Department, Ranchi.
Sir, Enclosed herewith is photocopy of the above referred letter and subject. You are directed to inform after taking the final measurement of work-done till now by the M/s Sutlaj Construction Company of Intake Structure and Approach Channel under your Division which is related to Agreement No. 1F2 of 89-90, and the agreement be terminated. The Bank Guarantee No. 21/89 of Rs. 18,00,000.00 (Rupees Eighteen Lac) deposited in the State Bank of India, Hazaribagh Branch shall be encashed by deputing a special messenger as per previous direction. Send the compliance report to this office within 15 days of receipt of this letter. Enclosure : As above Sd/-
Superintending Engineer, Tenughat Dam Circle, Tenughat Letter No. 1385/Tenughat dated 8.7.1991.
Copy to the Chief Engineer in reference to letter no. 1732 dated 3.7.1991 of 19 Water Resource Department, Ranchi.
Sd/-
Superintending Engineer, Tenughat Dam Circle, Tenughat Letter No. 754/ Banaso Date 16.7.1991.
Copy forwarded to M/s Sutlej Construction Company Banaso for information and necessary action. They are requested to act accordingly as per directed by Superintending Engineer, Tenughat Dam Circle, Tenughat. Enclosure : as above Sd/-
16.7.91 Executive Engineer Konar Canal Division, Banaso (Hazaribagh) LETTER DATED 04.03.1992 :
Office of the Executive Engineer Konar Canal Division, Banaso Distt: Hazaribagh No. 111 / Banaso, dated 4.3.92 To, The Sutlaj Construction Limited Camp: Banaso Ref: Your letter No. 54 dated 22.2.92 Dear Sir, With reference to subject mentioned above it is to inform that your work at 2.50 R.D. (approach Channel, Intake Structure and Tunnel portion) is stopped since October, 91. You have shifted your men and machinery without giving any notice to the Department while every facilities has been given to you. Neither any authorised man is available at site nor any work going on since long back. Design and drawing for construction of coffer dam, approach channel, Intake Structure and Tunnel are available but no-body is present at your site to receive it. There is no any condition in agreement to lower down the water level of Konar dam. Arrangement of explosive Licence is your responsibility. Since the work is in progress so removal of si in approach channel, if the duty of agency to remove. For payment Department is trying their best as there is acute scarcity of fund.
Once again I reveal the facts that no dewatering work is going on since long back. If the work is going on you are requested to be present at 20 the site on 13.03.1992 and show the pumps whether dewatering is going on.
Yours faithfully, Executive Engineer Konar Canal Division, Sinha/-
LETTER DATED 10.08.1992 :
SUTLEJ CONSTRUCTIONS LIMITED PHONE: 42991, 42993, 42407 GRAMS: SUTCONST TELEX: 0395-426 SRFL-IN S.C.O. 16, SECOND FLOOR, SECTOR 26, MADHYA MARG, CHNDIGARH-160 026, India Registered A.D. Dated: 10.8.1992 To, The Executive Engineer, Konar Irrigation Project, BANASSO Distt. Hazaribagh (Bihar) Re: Construction of approach channel from 00.0 K.M. to 0.652 K.M. tunnel 0.652 to 0.762 K.M. and intake structure of Konar Irrigation Project at Banasso in the Distt. of Hazaribagh.
----------
Dear Sir, Due to failure of Department to fulfill the conditions, lapses and defaults, which are on the records, the Department is wholly responsible for delay of work and also liable to payment of work done as well as claims for damages with interest @ 24% p.a on the all dues. We are sending claims and Bills separately.
Thanking you.
Yours faithfully, For Sutlej Constructions Ltd.
(Balwinder Singh) General Attorney LETTER DATED 23.03.1999 :
OFFICE OF THE EXECUTIVE ENGINEER
KONAR CANAL DIVISION, BANASO,
(Hazaribagh)
Registered with A/D
Letter No. 240 /Banaso, Date 23.3.99
To,
M/s Sutlej Construction Ltd.
M.C.O. 820, Second Floor, Main Mazra,
Chandigarh.
21
Sub:- Final measurement of Approach channel from K.M. 0.00 to 0.652 and Intake structure at K.M. 0.652 along with tunnel from K.M. 0.652 to 0.762 .
Ref :- Your Agreement No. 1 F2 of 1989-90 . Dear Sir, Kindly, refer your agreement No. 1 F2 /1989-90 through which the work under subject was allotted to you and the date of commencement and completion was given as 16.8.1989 and 15.8.92 respectively.
As per the record available it appears that by 12.9.90 The payment amount made to you comes to Rs. 43,89,462=00 .
However you are requested to participate in the final measurement to be taken up from 20.4.99 to 25.4.99. It is to be mentioned that, during the aforesaid fixed period the final measurement will be taken in every case, even in case of your absence and in that situation the exparty measurement taken even in your absence by the Department will be final and binding upon you and no claim what-so-ever will be tenable. Also as per terms and condition of the Agreement, the cost likely to be involved in the final measurement will be recoverable from you.
This should be treated as urgent and also as final notice.
Yours faithfully, Executive Engineer Konar Canal Division, Banaso (Hazaribagh) LETTER DATED 05.04.1999 :
OFFICE OF THE SUPERINTENDING ENGINEER, TENUGHAT DAM CIRCLE, TENUGHAT (BOKARO) BIHAR.
Letter No. 527 Dated 5.4.99
From,
Er. Harshwardhan Prasad,
Superintending Engineer,
Tenughat Dam Circle, Tenughat
Distt : Bokaro(Bihar)
To,
M/S. Sutlej Construction Ltd,
M.C.O. 820, Second Floor, Main Mazra,
Chandigarh.
Sub: Final measurement of Approach Channel from K.M. 0.00 to 0.652 and
Intake structure at K.M. 0.652 along with Tunnel from K.M. 0.652 to 0.762.
Ref: Your Agreement No. 1F-2 of 1989-90 and Executive Eng. Konar Canal Division Letter No. 240 dt. 23.3.99 Sir, Your kind attention is drawn towards the above noted subject in reference to your agreement in which the work was partially executed by you and the date of completion was 15.8.92.
As per the record available it appears that by 12.9.90 the payment 22 amount made to you comes to Rs. 43,89,462.00.
However, you are requested to witness the final measurement to be taken up from 20.4.99 to 25.4.99 as per notice served to you by Executive Engineer, Konar Canal Division, Banaso vide his letter No. 240 dt. 23.3.99. In case you or your duly authorized representative fails to attend and witness the present final measurement, the measurement will be taken by the deptt. as per above scheduled programme and that will be final and binding up on you and no claim, what so ever will be tenable.
Again it is to be noted that the cost incurred in taking the final measurement is to be borne by you as per terms & condition of the agreement, so you are requested to make your presence sure and to make necessary arrangement to meet the expenses in taking the final measurement. In case you or your authorized representative are not present & also do not make arrangements for meeting the expenses, then the same is expenditure involved in taking final measurement will be recoverable from you.
This should be noted as urgent and final notice.
Thanking you.
Yours faithfully, Superintending Engineer, Tenughat Dam Circle, Tenughat.
Bokaro (Bihar) TELEGRAM DATED 16.04.1999 :
SCL SUTLEJ CONSTRUCTIONS LIMITED REGD OFFICE: S.C.O 802, 2ND FLOOR, NAC, MANIMAJRA, CHANDIGARH- 160 101 PHONE : (0) 553715, FAX: 0172-567767, MOBILE 98150-16715 Telegramme/Ordinary Executive Engineer, Konar Canal Division, Banaso.
Hazaribagh (Bihar) Refy let No. 240 Dated 23.03.99.
Work of Approach Channel & intake structure of Konar Irrigation agreement No. 1 F2/89-90 has not been got executed from us for the last so many years for the reasons best known to you. Payment for the work done not released till date inspite of repeated requests and reminders. Measurements taken after so many years can not be said to be correct measurements. Request to release the long outstanding payment and permit us to resume/complete the work failing which Department will be responsible for all consequences.
Sutlej Constructions Ltd.
------------------------------------------------------------------------------------------------------- N.T.T. No. SCL/99-2000/1015-16 Dated :- 16.04.99 Copy by post in confirmation to 23
1. The Executive Engineer, Konar Canal Division, Banaso, Hazaribagh (Bihar) for information and necessary action please, with reference to his letter No. 240/Banaso Dated 23.03.99. The work was unilateraly & illegally suspended and we were not allowed to resume/complete the work. Even the payments for the work done by us has not been released inspite of repeated requests and reminders. We are at a loss to understand as to how and on what basis the Department intend to take the measurement of the work after so many years of its having illegally/unilateraly been suspended.
We, therefore, request you to release the payment of the work already done by us without any further delay.
2. The Superintending Engineer, Tenughat Dam Circle Tenughat (Bokaro), Bihar for information and necessary action with reference to his letter No. 527 dated 05.04.99 with the request to get the outstanding payment of the work done released without any further delay.
For Sutlej Constructions Ltd.
(S.C. Gupta) Chairman LETTER DATED 13.04.2002 :
No. SCL/2001-02/1797-98 Dated: 13.04.2002 To The Executive Engineer, Konar Canal Division, Banaso, Hazaribagh (Jharkhand) Ref: Agreement No. 1 F2 of 1989-90 Sub: Construction of Approach Channel from 0.00 km to 0.652 km, In-take structure at 0.652 KM and Tunnel from 0.652 KM to 0.762 KM- Konar Irrigation Project in District Hazaribagh.
Dear Sir, Your attention is invited towards our telegram dated 16.4.1999 copy sent by post in confirmation to the Executive Engineer as well as Superintending Engineer, Tenughat Circle, Bokaro, Jharkhand and the reminders dated 16.4.2000, 28.8.2000, 15.5.2001 and 21.11.2001 vide which it has been repeated pointed out that we have not been allowed to proceed with the work and our pending payment for the works already executed are still pending. The department is not giving any attention to our repeated requests and we are suffering financially as well as otherwise on account of the long delay and unusual impediments in the construction of the works. It seems that the department is not interested in getting the works executed from us. The department is not appreciating the difficulties being faced by us, who are having their headquarters at Chandigarh, which is more than 1000 kilometer from the project site.
You are requested to intimate us in clear terms as to whether the department wants to get the works completed or on account of financial 24 constraints, being suffered by the department, it wants to terminate the project.
Please note that the agreement was signed in the year 1989 and in the past 13 years, the prices and rates have gone up manifolds. The agency is finding it extremely difficult to take any action as our previous payments are withheld and we are not being allowed to continue with the work. The plant and machinery installed at the site by the agency has been lying idle althrough this period.
You are requested to convey the decision of the department in this regard. It is also requested that the pending bills of the agency may kindly be cleared. Please note that in case no reply is received, we shall be constrained to initiate appropriate action as per the terms and conditions of the agreement for settlement of our disputes with the department. An early reply is requested.
Yours sincerely, For Sutlej Construction Ltd.
(S.C. Gupta) Chairman CC:
Superintending Engineer, Tenughat Dam Circle, Tenughat (Bakaro), Jharkhand for information and necessary action.
LETTER DATED 08.07.2002 :
SUTLEJ CONSTRUCTIONS LIMITED REGD. OFFICE: S.C.O 858, 2ND FLOOR, NAC MANIMAJRA, CHANDIGARH- 160 101 INDIA TELE : (0172-733715, FAX; 0172-584637 email:[email protected] No. SCL/2002-03/1871-73 Dated 08.07.2002 The Executive Engineer, Konar Canal Division, Banaso.
Distt. Hazaribagh (Jharkhand) Ref:- Agreement No. 1 F2 of 1989-90 Your letter No. 349/Banaso dated 17.05.2002. Sub:- Construction of Approach Channel from 0.00 km to 0.652 km, Intake Structure at 0.652 km and tunnel from 0.652 km to 0.762 km-Konar Irrigation Project in District Hazaribagh.
Dear Sir, We are in receipt of your letter No. 349/Banaso dated 17/05/2002 in reply to our letter No. SCL/2001-02/1797-98 dated 13/04/2002 wherein we had brought out in detail as to how in view of the difficulties/non cooperative behavior of the department it had not been possible for us to complete the work referred to above as a result of which we have suffered huge losses and had requested you to allow us to complete the work. Now in view of the decision of the department not to allow us to complete the work and also not releasing the payment for the work done we are left with no alternative but to 25 lodge our claims due to losses suffered by us as a result of unilateral and arbitrary action of the department.
Please find enclosed herewith statement 'A' detailing our claims. All the claims are being raised in terms of the contract agreement. These claims are also covered by the provisions of the contract Act.
We request you to release the payment due to us against these claims within 30 days of the receipt of this letter. It may please be noted that in case the payment of the amount claimed is not made in full within the specified period it shall be presumed that you do not intend to make payment of the same in normal course and dispute the same.
As such we shall be within our right to seek release of the payment including any further amount be coming due in terms of the contract through forum of appropriate jurisdiction under the relevant provisions of the contract agreement without any further notice to you.
It may further be added that we reserve our right to review or add our claims after finalization of our account and availability of record.
Thanking you.
Yours Faithfully, For Sutlej Constructions Ltd.
(S.C. Gupta) Chairman CC: Copy alongwith copy of statement of claims forwarded to:
1. The Superintending Engineer, Tenughat Dam Circle, Tenughat (Bokaro)
2. The Chief Engineer, Water Resources Deptt., Ranchi Jharkhand.
For information and necessary action please.
22. According to the Department, on the question of limitation the first check-post is the letter dated 16.07.1991 and, in the alternative, the last date for completion of the work under contract, that is, 15.08.1992 shall be the starting point for counting the period of limitation (para 102 of the award). According to the learned Advocate-General, this was the second check-post, which, in any event the claimant has failed to cross. The first plea on limitation has been rejected by the learned Arbitrator inter alia on the following grounds; (i) the contract was not terminated,
(ii) letter dated 16.07.1991 was not a notice under clause 3(a) for termination of the contract, (iii) letters were exchanged by the opposite parties amongst themselves only, (iv) letter dated 26 16.07.1991 is only a memo forwarded to the claimant, (v) the order of black-listing was in relation to a different work, (vi) the order of black-listing was not with retrospective effect, and (vii) that the contract has continued is apparent from letter dated 04.03.1992 (para 114).
23. A glance at the letter dated 08.07.1991 reveals decision of the Department; a direction was issued to the Executive Engineer to terminate the contract and encash the bank guarantee. This letter was communicated to the claimant and its receipt has not been denied by it. What has been denied by the claimant is that notice under clause 3(a) of the Agreement was not served upon it by the Department. Letter dated 04.03.1992 has been referred by the learned Arbitrator to conclude that the contract had continued. This letter was written by the Executive Engineer in response to the letter dated 22.02.1992 of the claimant whereby it has assured the Department to complete the work if obstacles are removed. In letter dated 04.03.1992, the Executive Engineer has recorded that the claimant has stopped work and removed its men and machinery. In these facts, whether a specific notice under clause 3(a) was given or not is not relevant, what is significant to note is that there was no application under clause 5 of the Agreement by the claimant seeking extension of time for completion of contract after 15.08.1992, nor this period was extended by the Department. The claimant has never objected to the letter dated 08.07.1991 which was forwarded to it through letter dated 16.07.1991, though it continued to write letters to the Department till 10.08.1992 on various difficulties allegedly faced by it in execution of the work and for payment of the running bill. However, in none of the letters the claimant has quantified its claim and the Department has never acknowledged any claim for payment to the claimant. A bare reading of paragraph nos. 100 to 129 would make it apparent that the findings recorded by the learned Arbitrator, that the commercial relationship between the parties continued and thus the claims were not barred by limitation, are contrary to the evidence and such findings are perverse. In "Moffett Vs. Gough"
reported in (1878) 1 LR 1r 331, the Court has observed that a 27 perverse verdict may probably be defined as one that is not only against the weight of evidence but is altogether against the evidence. This observation in Muffett now seems a well-accepted definition of the term "perverse". Before the claimant sent telegram dated 16.04.1999 and about three years thereafter wrote a letter on 13.04.2002, it has never raised any claim. All that it has done is to express its grievance on non-payment of the bill for the work executed by it and, that too, lastly on 10.08.1992. The letters written by the Department on 23.03.1999 and thereafter, do not admit even the claim for payment of any amount to the claimant and the fact that measurement was taken in the year, 1999 can not be construed as an acknowledgment by the Department of the claims raised before the learned Arbitrator.
24. The learned Arbitrator has observed that the starting point for cause of action has to be judged from the point when a right or claim has been denied (para 105). In this context it is pertinent to point out that this principle would apply when a right or the claim is alive and it is not that a time-barred claim, or a stale claim, or an abandoned claim can be revived on the basis of a letter written by the other party, much after the claim became dead. What the learned Arbitrator has done is that he takes note of the exchange of letters between the parties, but in the process he has over-looked that it was a letter written by the Department on 23.03.1999 directing the claimant to participate in the measurement which had triggered the exchange of letters between the parties. But before that there was a complete lull between the period from 10.08.1992 to 23.03.1999. In the interregnum no fresh cause of action had arisen and mid-way the period of limitation has expired. It is also important to record that it was only the claim for payment against the running bill pursuant to joint measurement taken on 09.08.1991 which was raised lastly by the claimant on 10.08.1992 and thereafter it was for the first time through telegram dated 16.04.1999 which, in fact, was an objection to the proposed measurement, that the claimant has stated that payment has not been made to it. This was followed by letter dated 13.04.2002. The letters dated 23.03.1999 and 05.04.1999, in response to which 28 telegram dated 16.04.1999 was sent by the claimant, were written not in response to any communication from the claimant and the circumstances under which these letters were written have been pleaded in para 56 and 57 of the counter-affidavit filed by the Department. These facts have been completely over-looked by the learned Arbitrator. The learned Arbitrator goes one step ahead and takes note of the correspondence dated 16.04.2000, 28.08.2000, 15.05.2001 and 21.11.2001 (paragraph no. 107), however, the aforesaid letters were never brought on record during the arbitral proceeding. These letters have been referred by the learned Arbitrator to hold that the claimant sought permission to resume the work and the Department invited the claimant to participate in the final measurement and, thus, commercial relationship between the parties had continued. In the first place, as noticed above, there was no correspondence between the parties between 10.08.1992 to 23.03.1999. The Department has pleaded that the claimant had abandoned the contract, left the site with its men and machinery and did not raise any demand for about a decade. Neither any document has been produced by the claimant nor it has been established by it that negotiation between the parties to resolve the dispute had continued between this period; atleast there is no reference of such a document or a plea in the award. A similar situation has been dealt with by the Supreme Court in "Steel Authority of India Ltd Vs. J.C Budharaja, Government and Mining Contractor" reported in AIR 1999 SC 3275 - facts, of course, are a little different; thus :
"31. In the present case, as stated above, on 29th August, 1979, the contractor wrote letter making certain claims. Thereafter, the supplementary agreement was executed on 20th December, 1980. In that agreement it is nowhere stated that contractors alleged right of getting damages or losses suffered by him was kept alive. On the contrary, he has agreed to complete the work within the time stipulated in the second agreement by charging some higher rate. Contractor has not sought any reference within three years from the date when cause of action arose, i.e., from 29th August, 1979. Only in 1985 when dispute arose with regard to the second agreement, respondent gave notice on 2nd December, 1985 to appoint sole arbitrator. The sole arbitrator was appointed with a specific reservation regarding the tenability, maintainability and validity of reference as also on the ground that claim was barred by the period of limitation and it pertained to excepted matters in terms of general conditions of the contract. From these facts, it is apparent that claim before the arbitrator in November-December, 1985 was apparently barred by period of limitation. Letter dated 29 3rd September, 1983 written by the appellant repudiating the respondent's claim on account of damages or losses sustained by him would not give fresh cause of action. On that date cause of action for recovering the said amount was barred by the period of three years prescribed under Art. 137 of the Limitation Act, 1963. Under S.3 of the Limitation Act, it was the duty of the arbitrator to reject the claim as it was on the face of it, barred by the period of limitation."
25. Even where there is an acknowledgment by the other party, a time-barred claim cannot be revived. In "J.C. Budhraja Vs. Chairman, Orissa Mining Corporation Ltd. and Another" reported in (2008) 2 SCC 444, it has been held that an acknowledgment made with reference to a liability cannot extend limitation for a time-barred liability.
26. The learned counsel for the claimant has relied on the decisions in "Major (Retd.) Inder Singh Rekhi Vs. Delhi Development Authority" reported in (1988) 2 SCC 338, "State of Orissa and Another Vs. Damodar Das" reported in (1996) 2 SCC 216, "Hari Shankar Singhania and Others Vs. Gauri Hari Singhania and Others" reported in (2006) 4 SCC 658, "Punjab State and Others Vs. Dina Nath" reported in (2007) 5 SCC 28 and "Rashtriya Ispat Nigam Limited Vs. Prathyusha Resources and Infra Private Limited and Another" reported in (2016) 12 SCC 405, to contend that before a clear and unequivocal denial by the Department to make payment, there was no occasion for the claimant to invoke the arbitration clause and it was only on 13.04.2002, when a letter was written by the claimant which was replied by the Department vide letter dated 17.05.2002, the cause for arbitration arose [refer "State of Orissa and Another Vs. Damodar Das" reported in (1996) 2 SCC 216]. Observations in Inder Singh Rekhi : where the bill had not been finally prepared the claim made by a claimant is the accrual of the cause of action; Hari Shankar Singhania : where negotiations for settlement are pending the strict rights of the parties do not come into play, have been referred by the learned counsel for the claimant to emphasize that it was the correspondence between the parties from 23.03.1999 till 08.07.2002 through which the parties have staked their claims and, thus, there was no cessation of cause of action so as to hold that the claims were barred under the law of limitation. The learned counsel for the claimant has contended that the finding recorded by the learned Arbitrator at para 119 of the 30 award that the cause of action has continued is a finding of fact and, therefore, immune from review in an application either under Section 34 or under Section 37.
27. To say that a finding of fact recorded by the Arbitrator is immune from review in a proceeding under Section 34 or Section 37 of the Arbitration and Conciliation Act, 1996, would be to ignore the well-accepted position in law that a perverse finding and an error apparent on the face of the award are not immune from judicial scrutiny. It is also well-settled that an objection founded on a plea of limitation can be examined by looking into the evidence. In "Ramesh B. Desai and Others Vs. Bipin Vadilal Mehta and Others" reported in (2006) 5 SCC 638, the Supreme Court has held that "19. A plea of limitation cannot be decided as an abstract principle of law divorced from facts as in every case the starting point of limitation has to be ascertained which is entirely a question of fact". The learned Arbitrator has not only proceeded on erroneous assumptions on the starting point as well as the last date when three years which is the period of limitation would end, the finding that the claims are not barred by limitation is an error apparent on the face of the award. A bare reading of the paragraph nos. 100 to 129 of the award would disclose that the finding of the learned Arbitrator on the issue of limitation is based on irrelevant considerations. In "M/s Sudarsan Trading Co. Vs. Government of Kerala and Another" reported in (1989) 2 SCC 38, referring to one of the earliest judgment of the Court on the powers of the Court to interfere with the award - the judgment in "Alopi Parshad and Sons Ltd. Vs. Union of India" reported in AIR 1960 SC 588 - the Supreme Court has held that the award is liable to be set-aside on the ground of an error apparent on the face of the award and also on the ground that the reasons given for the decision, either in the award or in any document incorporated with it, are based upon a legal proposition which is erroneous.
28. If not on 16.07.1991, the limitation for raising the claims which have been raised before the learned Arbitrator must start running from 10.08.1992, which is the last communication by the claimant, or atleast from 15.08.1992, that is, from the last date 31 of the contract. Writing letters, years after the period of limitation has expired, would not give a fresh lease of life to the claims which were dead and already barred under the law of limitation. In "State of Uttaranchal and Another Vs. Shiv Charan Bhandari and Others"
reported in (2013) 12 SCC 179, the Supreme Court has observed that a mere submission of representation would not arrest time and a representation relating to a stale claim or a grievance even if submitted pursuant to direction of the Court or Tribunal would not give rise to a fresh cause of action. By referring to letters dated 23.03.1999 and 05.04.1999 of the Department, to hold that the cause of action had continued and the claims were finally not rejected by that time and, thus, not time-barred, the learned Arbitrator has put a kind of reverse burden on the Department [refer para 13 of "Lachhman Singh (Deceased) Through Legal Representatives and Others Vs. Hazara Singh (Deceased) Through Legal Representatives and Others" reported in (2008) 5 SCC 444"]. More than six and half years after the period of contract had expired, letters written by the Department, without acknowledging the claim or even referring to any claim, can not be the basis to conclude that the claims were still alive. In "N. Balakrishnan Vs. M. Krishnamurthy" reported in (1998) 7 SCC 123, the Supreme Court has observed that unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. The judgments in Inder Singh Rekhi, Damodar Das etc. are of no avail to the claimant; a reference to arbitration may be well within time but the claims still may be time-barred.
29. In view of the aforesaid facts and for the reasons indicated hereinabove, it is held that the claims raised by the claimant which have been allowed by the learned Arbitrator were time-barred claims and to this extent the award dated 31.01.2006 is held illegal, without jurisdiction and against the public policy. The learned trial Judge has erroneously refused to exercise a jurisdiction - to examine validity of the award dated 31.01.2006 - which is legally vested in it. The impugned order dated 27.06.2007 passed in Arbitration Misc. Case No. 13 of 2006 suffers from serious infirmities in law, and therefore it warrants 32 interference by this Court. In so far as counter-claim is concerned, the Department has not raised any specific ground to challenge rejection of the counter-claim and in view of the fact that the Department has failed to produce records before the Arbitral Tribunal to explain the delay of about 13 years in making a claim for Rs.28,04,526/-, I am not inclined to interfere with this part of the award, and accordingly challenge by the Department on this count fails.
30. In the result, this arbitration appeal partly succeeds. Arbitration Appeal No. 20 of 2007 is allowed, in the aforesaid terms, and the impugned order dated 27.06.2007 passed in Arbitration Misc. Case No. 13 of 2006 stands set-aside to the above extent.
(Shree Chandrashekhar, J.) Amit/Tanuj AFR