Andhra HC (Pre-Telangana)
Sridevi Constructions Co., Rep. By Its ... vs Commander Of Works Engineer And Chief ... on 17 June, 2004
Equivalent citations: 2004(4)ALD471, [2005]ICOMPCAS452(AP)
Author: L. Narasimha Reddy
Bench: L. Narasimha Reddy
ORDER L. Narasimha Reddy, J.
1. This revision under Section 115 C.P.C. is directed against the order in O.P. No. 41 of 1997, dated 27-08-2002, passed by the learned II Additional Senior Civil Judge, Visakhapatnam. Petitioners in the O.P. are the petitioners in the revision.
2. The facts relevant to the revision, in brief, are as under:
3. In the year 1987 the respondents, viz., the Commander of Works Engineer and Chief Engineer, Navy, Visakhapatnam, issued tender notice dated 24-08-1987, inviting tenders for the work of construction of residential quarters. The 1st petitioner-for short, the petitioner, is a firm engaged in the construction activity (petitioners 2 and 3 are its managing partners). It quoted a sum of Rs. 28,87,124.90 ps. and emerged as the successful tenderer. The work was scheduled to be completed within 18 months from 23-08-1988. After several extensions being granted, the work was ultimately completed by 7-12-1992. The petitioner submitted the final bill in the year 1993 after the completion of the work. In addition to the rates as per contract, it claimed a sum of Rs. 2,38,389.73 ps. towards escalation charges. The respondents refused to pay the escalation charges and paid the final bill.
4. The petitioner issued a notice dated 31-1-1994, making a claim for Rs. 26,36,389.73 ps. under various heads. It also claimed compensation/interest at 36% per annum on this amount. Invoking clause 70 of the General Conditions of Contract (IAFW-2249), petitioner called upon the respondents to refer the dispute for arbitration by an Engineer Officer to be appointed by them. The respondents issued a reply dated 30-09-1994 stating that the petitioner was paid the final bill against the contract on 07-04-1993; and that it issued a "no further claim certificate" (for short, the certificate) declaring that it had no subsisting claims against the respondents. The respondents further stated that any claims on behalf of the petitioner are deemed to have been waived or extinguished and accordingly informed the petitioner that its claim for reference of the matter for arbitration cannot be entertained.
5. Thereafter the petitioner addressed a letter dated 30-10-1995 reiterating its request. The respondents in turn, have repeated their stand to the reply dated 15-06-1996. Then the petitioner got issued an Advocate's notice on 14-11-1996 and thereafter filed the O.P. under Sections 8 and 20 of the Indian Arbitration Act 1940 (hereinafter referred to as the old Act) with a prayer to appoint an arbitrator and direct such arbitrator to take necessary steps to resolve the dispute. The respondents filed a detailed counter affidavit narrating the relevant facts. They have raised three main objections for the claim of the petitioner, viz., a) non-applicability of the old Act to the proceedings, b) The application being barred by limitation, and c) non-maintainability of the claim, in view of the submission of certificate by the petitioner.
6. No oral evidence was adduced by the parties. ExsA-1 to A-7 were marked on behalf of the petitioners. Respondents did not file any documents. The trial Court took note of the contentions of the parties, and in particular the three objections raised on behalf of the respondents. Through the judgment under revision, the trial Court took the view that the provisions of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the new Act) apply to the proceedings and that the O.P. is barred by limitation. Obviously, because the O.P. was found not maintainable and barred by limitation, it has not discussed the effect of submission of certificate by the petitioner.
7. Sri C.S. Surya Prakash Rao, appearing for Sri Ravi, learned counsel for the petitioner submits that the view taken by the trial Court, be it, as regards the applicability of the old Act to the proceedings or, the question of limitation, cannot be sustained in law. He submits that the record clearly discloses that the proceedings for arbitration were initiated much before the new Act came into force and in that view of the matter, the old Act alone would govern the proceedings. He places reliance upon the judgment of the Supreme Court in Shetty's Constructions Co. Pvt. Ltd. v. Konkan Railway Construction, . As regards the limitation, the learned counsel submits that the petitioner got issued notice dated 31-01-1994 (Ex.A-2), requiring the respondents to refer the claims to arbitration and the respondents have issued the reply dated 03-9-1994 (Ex.A-3), refusing to accede to the request; and in that view of the matter, the starting point of limitation can be only 03-9-1994. Learned counsel submits that the O.P. having been filed on 23-07-1997, i.e. less than 3 years from the date of refusal by the respondents, through Ex.A-3, it cannot be said to be barred by limitation. He relies upon the judgment of this Court in Pesco Engineer v. Union of India rendered by a Division Bench, (D.B.).
8. Sri T. Surya Karan Reddy, learned Senior Standing Counsel for Central Government submits that no interference is called for with the finding of the trial court on the non-applicability of the old Act to the proceedings. As regards limitation, learned Senior Standing Counsel submits that Article 137 of the Limitation Act applies to the Arbitration proceedings and the starting point for computation of limitation is the time when right to apply for arbitration accrues. Placing reliance upon the judgment of the Supreme Court in Steel Authority of India Ltd. v. J.C. Budharaja, , he submits that once a notice has been issued by a party invoking arbitration clause, the limitation starts running and any subsequent event cannot have the effect of stopping it. He has also cited the judgment of the Supreme Court in ASIA RESORTS LTD v. USHA BRECO LTD, .
9. Learned counsel for the parties have also advanced extensive arguments touching on the effect of the certificate, which in fact was in issue before the trial Court, but was not dealt with, either because it was not pressed or was not felt necessary.
10. From the facts narrated above and in view of the submissions made by the learned counsel for the parties, three questions arise for consideration before this Court, viz.,
a) Whether the proceedings on hand are governed by the old Act or the new Act,
b) Whether the O.P was barred by limitation, and
c) Whether the claim of the petitioner is maintainable, in view of the No further claim certificate issued by it.
11. The Arbitration Act, 1940 was in force till it was repealed by the Arbitration and Conciliation Act 1996. The new Act came into force with effect from 26-1-1996. There is no controversy that the O.P was filed on 23-07-1997, after the new Act came into force. If the new Act replaced the old one in all respects and the proceedings already initiated or capable of being initiated under the old Act were brought under the purview of the new Act through a specific transitory provision, things would have been certainly different altogether. Section 85 of the new Act, while repealing the old Act had provided for continuation of the proceedings under the Old Act, which commenced before the new Act came into force.
12. The new Act itself provided the basis to interpret the expression "commenced". Section 21 thereof spells out that the arbitration proceedings can be said to have commenced on the date on which request for referring the dispute, made by one party is received by the other party. There is no dispute that this event has occurred prior to 26-1-1996 in the present case. This is obvious from the fact that the respondents addressed Ex.A-3 on 03-9-1994, on receipt of the request made by the petitioner through Ex.A-2. In Shetty's Construction's case (1 supra), after referring to Sections 21 and 85 of the new Act, the Hon'ble Supreme Court took the view that if the request for referring the dispute for arbitration was received by the other party to the contract prior to 26-1-1996, the provisions of the old Act apply. Learned Senior Counsel sought to distinguish the said judgment on the ground that the relevant proceedings in that case were filed much before 26-1-1996; whereas in the present case it is filed thereafter. In my view, this hardly makes any difference. The fact remains that the arbitration proceedings commenced between the parties before 26-1-1996.
13. The trial Court based its conclusion on this aspect on the judgment rendered by this Court in Marshal Corporation Ltd v. Union of India, 1998 (2) Arb.Law Reporter 175 and a judgment rendered by the Calcutta High Court in Manoranjan Mondal v. Union of India, 1999 Calcutta 117. In the former, it was held that even if the request is made by a party for appointment of an arbitrator before the new Act came into force, the old Act does not apply, if the arbitrator was not appointed by the time the new Act came into force. The Calcutta High Court went a step further and held that even if an arbitrator was appointed under the old Act, the provisions of that Act do not apply in case the arbitrator did not express his willingness to act as arbitrator, before the new Act commenced. In view of the clear language employed in Sections 21 and 85 of the new Act and the judgment of the Supreme Court in Shetty's Constructions Limited(1 supra), it cannot be said that the two judgments referred to above have correctly stated the law. For the foregoing reasons, it is held that the proceedings on hand are governed by the old Act.
14. Now comes the question of limitation in filing the O.P. Hardly there exists any controversy, that the limitation for initiation of proceedings for arbitration in a Court is stipulated by Article 137 of the Limitation Act. There is profound authority in the form of precedents, on this aspect. Suffice it to refer to the judgments rendered by the Hon'ble Supreme Court in Inder Singh Rekhi v. Delhi Development Authority, and Union of India vs Momin Construction Company, 1995 SC 1927. The parties do not differ in their contentions on this aspect. The dispute however is as regards the point of time from which the period of limitation begins to run. Article 137 states this to be "when the right to apply accrues".
15. The starting point for computation of limitation can be either static or may fluctuate, depending upon the nature of causes of action or the provisions governing the same. For example, under Article 60 of the Limitation Act, the period of limitation to file a suit to set aside the transfer made by a guardian is prescribed as three years from the date on which the ward attains majority. Under Article 119, the limitation for filing the application to set aside an award is 30 days from the date of service of notice of the filing of the award. There is no scope for fluctuation of starting points in such cases, nor there exists any subjectivity in identifying the starting point. However, in certain cases, such as suits for recovery of immovable property based on title or recovery of money, the starting points are referable to certain events, viz., when the possession of defendant becomes adverse or money becomes payable etc. Finding on these questions would almost be subjective, depending on the facts pleaded by the parties.
16. Where the starting point of limitation is static and certain, examination of subsequent events and facts becomes unnecessary or perfunctory. However, in cases where certain events have the effect of pushing the starting point of limitation forward, examination thereof becomes important. In fact, the Courts are endowed with the duty to undertake an exercise into such matters even if no objection is raised by the parties. It is the mandate under Section 3 of the Limitation Act. It is here that the concepts such as, acknowledgement provided for under Section 20 of Limitation Act become relevant. If an acknowledgement emerges from the concerned party even at the fag end of the period of limitation prescribed in law, it would have the effect of supplying new span of limitation for the cause of action. However, where the starting points for computation of limitation are events such as, death of a person or attaining age of majority, there is hardly any scope for acknowledgement to play any role.
17. If the right to apply to the Court for appointment of an arbitrator can be said to have accrued to the petitioner only when the respondents addressed Ex.A-3 on 03-09-1994, and if the limitation is computed from that date, the filing of the O.P. is within time. The learned counsel for the respondents however, submits that the right to apply for appointment of arbitrator had accrued to the petitioner with the issuance of the notice in Ex.A-2 and the reply issued by the respondents in Ex.A-3, does not have the effect of shifting the starting point for computation of limitation.
18. The question of limitation with specific reference to the starting point for computation thereof in relation to arbitration proceedings was extensively dealt with by the Hon'ble Supreme Court in State of Orissa v. Damodar Das, . After referring to the Indian and foreign authorities on the subject the Hon'ble Supreme Court held as under:
"The period of limitation for the commencement of an arbitration runs from the date on which, had there been no arbitration clause, the cause of action would have accrued."
19. This authoritative pronouncement of the Apex Court almost brings the arbitration proceedings, in the context of limitation, into that category of cases where the starting point is static. Any doubt that may still linger on this aspect was wiped away by the Hon'ble Supreme Court in that very judgment with the following observation.
"Even if the arbitration clause contains a provision that no cause of action shall accrue in respect of any matter agreed to be referred to until an award is made, time still runs from the normal date when the cause of action would have accrued if there had been no arbitration clause".
20. From this it is evident that while deciding the question of limitation an application for appointment of arbitrator the Court has to ascertain the point of time at which the party conveyed its intention of to resort to arbitration, to the other party. It has virtually to be oblivious to any subsequent events. The reason is that no act or factum, which takes place subsequent to the starting point of limitation in such matters, would have the effect of shifting it. This position of law was reiterated by the Supreme Court in recent judgment rendered in Steel Authority of India's case (3 supra). After extensively referring to the judgment in State of Orissa v. Damodar Das (9 supra) the Hon'ble Supreme Court held that the period of limitation for making relevant application runs from the date on which the cause of action would have accrued, had there been no stipulation in the arbitration clause. There is no controversy that the petitioner made its request for appointment of an arbitrator through its notice letter dated 31-01-1994 through Ex.A-2. Naturally, the limitation starts running from that date.
21. A Division Bench of this Court in Pesco Engineer's case (2 supra) took the view that the limitation will commence, or the cause of action to file a suit would arise, when the request for appointment of an arbitrator is finally rejected. The attention of the Division Bench was not drawn to judgment of the Hon'ble Supreme Court in Damodar Das's case (9 supra), which was directly on the issue on this aspect. Further, in view of the subsequent judgment of the Supreme Court in Steel Authority of India (3 supra), the judgment of this Court in Pesco Engineer's case (2 supra) cannot be said to be in consonance with the law laid down by the Supreme Court.
22. With the issuance of Ex.A-2 notice a right had accrued to the petitioner to apply for appointment of an arbitrator. A reading of the various provisions of the old Act, particularly Sections 8 and 20 discloses that a party to the contract seeking appointment of an arbitrator is not required to await the response of the other party. Under the relevant provisions, existence of arbitration, agreement and arisal of disputes constitute sufficient cause of action to apply to the court for appointment of an arbitrator.
23. Another way of considering this aspect is to see whether law requires any particular steps to be taken before an application made for appointment of arbitrator, on the analogy of notice contemplated under Section 80 of C.P.C. The old Act does not contain any such provisions. No reference is found in any of the provisions indicating that refusal by the other party would constitute the cause of action. Therefore, the reply of respondents in Ex.A-3, dated 3-9-1994 is hardly of any significance from the point of view of accrual of rights or cause of action. Nor does it have the effect of postponing the date, on which the right had accrued to the petitioner with the issuance of the notice under Ex.A-2. Therefore, the limitation has to be computed from the date on which the petitioner addressed Ex.A-2. Since it is a matter of record that the O.P was filed on 23-7-1997, which is clearly beyond three years from the date of Ex.A-2, the O.P., is barred by limitation.
24. The learned counsel for the petitioner made an endeavour to persuade this Court to distinguish the judgment of the Supreme Court in Steel authority of India (3 supra), in the context of judgment of the Supreme Court in ASIA RESORTS LTD v. USHA BRECO LTD (4 supra). In the latter case, specific reference was made to the former in para 15 of the judgment. There is nothing to indicate that the principle laid down in Steel Authority of India (3 supra) was in any way either diluted or departed from. In ASIA RESORTS LTD (4 supra) the Supreme Court was dealing with a case in which various steps were required to be taken by the parties in terms of the agreement, before seeking reference of the matter to arbitration. On facts, it was held that the process of resolution of disputes through mutual consultation, which was a condition precedent for resorting to arbitration, was not exhausted. Hence, the ratio laid down in the said case is of no use for the petitioner. At any rate, the Supreme Court condoned the delay in that case; where as there is no application under Section 5 of Limitation Act, in the present case. In that view of the matter, no interference is called for with the findings recorded by the trial Court that the O.P. is barred by limitation.
25. There is another aspect, which has a direct and important bearing on the matter. The respondents raised a specific plea before the trial Court that the claim of the petitioner is not maintainable for the reason that it had received full payment under the contract and issued a 'No further claim certificate'. According to them, the question of appointing an arbitrator even if otherwise feasible in law, would arise if only there existed any dispute or claim, and once the petitioner itself has certified and represented that it had no further claim against the respondents, the proceedings initiated by the petitioner were not maintainable. This aspect of the matter was not dealt with by the trial court either because the parties did not press for it, or because it was felt not necessary, since the O.P. was dismissed on other grounds. Inasmuch as extensive arguments were advanced on this question, it needs to be dealt with.
26. It was through Ex.A-2 that the petitioner invoked the arbitration clause and sought reference of the disputes by the sole arbitrator in terms of the agreement. The respondents replied through Ex.A-3 stating that in view of the certificate issued by the petitioner, its claim can be said to have been either waived or extinguished. It is important to note that this constituted the only basis for the respondents to refuse to accede to the request of the petitioner. Learned counsel for the petitioner submits that his client was virtually forced, or left with no alternative except, to issue the certificate and that it has no effect or consequence in law. He submits that valuable accrued rights cannot be taken away on the strength of a certificate, which was procured almost through coercion. He relied upon recent judgment of Hon'ble Supreme Court in Chairman and MD, NTPC Ltd v. Reshmi constructions, and the judgment of this Court in Union of India and others v. K.B. Joseph, 2001 (4) ALD 620 and Union of India and others v. Vungarala Constructions, .
27. Learned Senior Standing Counsel on the other hand submits that the petitioner had received the entire payment under the contract and accordingly issued the certificate; and consequently no claim can be said to be subsisting against the respondents. He submits that there is nothing on record to disclose that the petitioner was either forced or compelled to issue such a certificate. Placing reliance upon the judgment of the Supreme Court in Nathani Steels Ltd. v. Associated Constructions, 1995 Supp (3) SCC 324 learned Senior Standing Counsel submits that the claim of the petitioner was not maintainable even otherwise.
28. The issue under consideration mainly relates to realm of waiver, acquisance or acknowledgement, which in turn are the various facets of doctrine of estoppel. Broadly stated, it is to the effect that where one party makes a representation to another, be it, through acts or omissions, and the latter acts on such representation and suffers detriment, it shall not open to the former to turn around or retrieve from the representation so made. Such representation can be either express or implied. It can be through specific acts or through omission where the party concerned, was under obligation to act. It all depends on the nature of transactions and circumstances surrounding them. The doctrine constitutes an important content of law of evidence running across all legal systems.
29. In the field of contracts, various steps are required to be taken by the parties from time to time, and these in turn depend on the type of representations the parties may make to each other. The principle of estoppel, in the ultimate analysis, requires the party making a representation to abide by it. As with any other phenomena in the law of contract, such representations would be valid only as long as they are not tainted with the factors like, fraud, coercion, mistake and undue influence etc. If it is established as required under law, that a particular representation was vitiated on account of fraud, mistake, coercion, undue influence etc., the party guilty of procuring such representation is barred from pleading estoppel. Conversely, the party who is victim of such factors would be relieved of the legal consequences that flow from such representation. However, law places heavy burden on the persons seeking to relieve themselves on the strength of such factors, in the matter of pleadings and proof. The reason is that a party who had derived the benefit out of the representation made by it, cannot be permitted to deny the corresponding benefit to the other party by simply stating that its representation was not out of free volition or will. Necessary facts have not only to be pleaded but also proved to the satisfaction of the Court. There is no question of drawing an inference, or presumption in the absence of specific plea and proof.
30. On completion of the work by the end of 1992 the petitioner submitted its final bill. Along with the actual costs for various items, it claimed a sum of Rs. 2,38,289.73 ps towards escalation. The respondents did not agree to pay this amount. After some correspondence the petitioner received the amount under the final bill excluding the amount towards escalation. If at all anything, there existed difference of opinion as to the payment of Rs. 2,38,389.73 ps. From a reading of the notice Ex.A-2 issued by the petitioner it is evident that the basis for the respondent in not acceding to the request for payment of escalation charges is that no variation is permissible if the work is carried out beyond 1-9-1990, and that while seeking extension of time for completion of the work the petitioner has agreed not to claim any reimbursement or variation of the prices.
31. Whatever be the reason, the petitioner received the full payment and issued a no further claim certificate. With the issuance of this certificate, the mutual rights and obligations of the petitioner on the one hand and the respondent on the other have virtually come to an end. If at all the petitioner was of the view that it is still entitled to be paid any amounts by the respondents, it ought to have either declined to give the said certificate or indicated that the certification is without prejudice to its further claims, apart from the amounts that is paid. Such instances are not lacking.
32. In Nathani Steels Ltd (13 supra), the Bench of the Supreme Court comprising 3 Hon'ble Judges, following its earlier decisions in P.K Ramesh and Co. v. Chairman and MD, NTPC, 1994 Supp (3) SCC 126 and State of Maharashtra v. Nav Bharat Builders, 1994 Supp (3) SCC 83 held that if the parties settle their claims or disputes between them finally, there does not remain or exist an arbitrable dispute and the arbitration clause in the contract between them cannot be invoked in respect of such settled claims and disputes. Learned counsel for the petitioner relies upon certain observations made by the Supreme Court in Chairman and MD NTPC Ltd. V. Reshmi Constructions (10 supra, for short 'NTPC' case) particularly those in paras 27 and 28, to contend that having regard to the fact that the respondents are a powerful state agency and the petitioner is only an ordinary contractor, the existence of coercive circumstances for the petitioner to issue no further claim certificate can be inferred. He also contends that in view of these observations, the law laid down in Nathani Steels Ltd. (13 supra) cannot be said to be holding the field any longer.
33. It is rather difficult to accept this contention. Firstly, it needs to be observed that Nathani steels' case was decided by a Bench comprising of three Hon'ble Judges; whereas the one is NTPC case was decided by two Hon'ble Judges. Secondly, Nathani Steels limited case was specifically referred to in the judgment in NTPC case and there is nothing to indicate that the Supreme Court has either distinguished or deviated from the principle laid down in Nathani steels' case. Thirdly, what are indicated in paragraphs in 27 and 28 of the judgment in NTPC case are the circumstances which can buttress the plea of undue influence or coercion, if raised in accordance with law, by the petitioner. The fact that such plea has to be specifically raised and established to the satisfaction of the Court, has in fact been reiterated by the Supreme Court in NTPC case.
34. A perusal of the record of this case discloses that the petitioner made an attempt to plead that it was left with no alternative except to issue the No further claim certificate, to receive the long pending and outstanding bills. The emphasis appears to have been to indicate that the certificate was not issued out of free will and volition. Except making certain general submissions, not a single circumstance touching on this aspect was indicated in the petition. Even the averments in paragraphs (g) and (h) of the petition appear to be clear afterthoughts. This evident is from the following factors:
35. The petitioner issued a detailed notice dated 31-1-1994, Ex.A-2 running into 10 typed pages. Stage from floating of tender to the stage of payment of the final bill, passing through the stages of extension of time etc., were referred to extensively. Not a word is said to the effect that the submission of the certificate was vitiated in any manner. Even assuming that the necessity to plead the relevant facts touching on the submission of the said certificate did not arise till the respondents rejected the claim through Ex.A-3. The immediate conduct and reaction of the petitioner to Ex. A-3 assumes significance. After receiving Ex.A-3 the petitioner made a further representation dated 30-10-1993 marked as Ex.A-4. Specific reference is made to Ex.A-3 in Ex.A-4. It is apt to refer to paragraphs 4 and 5 of Ex.A-4. They read as under:
"Para-4: While it remains an obligation on your part to appoint an Engineer Officer as the Sole Arbitrator in terms and Conditions of the contract to adjudicate the persisting disputes, you have not only failed thus far to perform your contractual obligation of appointing the Arbitrator but by your letter No. 84170/CWE(V)/2479/E8 dated 26th May 1994 addressed to the Accepting Officer also has been instrumental in the issuance of letter No. 81549/355/E8 dated 3rd September 1994 by CWE, Visakhapatnam addressed to us with copy to you. The CWE's letter is of no consequence to us.
Para-5: It is therefore evident from the foregoing that your failure and/or denial thus far to appoint an Arbitrator amounts to misdemeanor and misconduct tantamount to breach of contract and we therefore reserve our right to claim damages for the same".
36. It is evident that the petitioner did not make any demur as to the legality of the certificate. On receipt of Ex.A-4, the respondents replied through Ex.A-5, dated 15-06-1996 which is almost on similar lines with Ex.A-3. It was only in the legal notice dated 14-11-1996, marked as Ex.A-6, that the petitioner made an attempt to lay a semblance of foundation, to plead that the certificate was not issued out of free will. Even assuming that there is sufficient pleading touching on the legality of the certificate or its being vitiated on account of factors like coercion, undue influence etc., it was obligatory on the part of the petitioner to prove it through oral evidence, particularly when the respondents refuted the allegation. None were examined on behalf of the petitioner. Therefore, the said allegations remained unproved.
37. Learned counsel for the petitioner has relied upon two judgments of this Court in Union of India and others v. Vungarala Constructions (12 supra), and Union of India and others v. K.B. Joseph (11 supra), rendered by the same Bench headed by Chief Justice S.B. Sinha as His Lordship then was. In both the cases the no claim certificates were conditional and subject to settlement of subsisting claims. While issuing no claim certificates, as regards some items, the respondents therein, have reserved their rights vis--vis remaining items of the contract. It was in that context that arbitration proceedings initiated in respect of unsettled claims were held valid.
38. Viewed from any angle this Court does not find any basis to interfere with the judgment of the trial Court. The C.R.P. is accordingly dismissed.