Madras High Court
Ion Exchange India Limited vs Angeripalayam Common Effluent
Author: C.Saravanan
Bench: C.Saravanan
O.P.No.574 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on: 21.12.2023Pronounced on: 04.06.2024
CORAM
THE HONOURABLE MR.JUSTICE C.SARAVANAN
Arb.O.P.(Comm.Div.)No.574 of 2022
and
Application Nos.4713 of 2022 & 79 of 2023
Ion Exchange India Limited,
Rep.by its Authorized Signatory
T.D.Srinivasan .. Petitioner
Vs.
Angeripalayam Common Effluent
Treatment Plant Limited,
S.F.No.88, Garden Kanjampalayam,
Pitchampalayam,
Pudur (PO),
Tirupur 641 603. ..
Respondent
Prayer: Original Petition is filed under Section 34 (2),(A) (b) of the
Arbitration and Conciliation Act, 1996 praying to set aside the Impugned
Arbitral Award dated 23.03.2022 (corrected and signed 13.05.2022)
passed by the Second Tribunal and to direct the respondent to pay the
costs and to pass such further and other orders.
For Petitioner : Mr.Sathish Parasaran
Senior Standing Counsel
for Mr.Karthik Sundaram
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For Respondent : Mr.R.Vidhya Shankar
ORDER
I have considered the arguments advanced by the learned Senior Counsel for the petitioner and the learned counsel for the respondent. This is the second round of litigation before this Court. The respondent was the claimant before the Arbitral Tribunal.
2. The present Original Petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 assailing as Arbitral Award dated 23.03.2022 of the Arbitral Tribunal constituted by a Sole Arbitrator. By the Impugned Award dated 23.03.2022, the Arbitral Tribunal has awarded a sum of Rs.17,48,70,000/- together with Interest at 12%.
3. Operative part of the Impugned Award dated 23.03.2023 reads as under:-
72.In the result,
1. The claimant shall be entitled to an Award Rs.17,48,70,000 (Rs.Seventeen crores, forty-
eight lakhs, seventy thousand only) against the respondent.
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2. The respondent shall be liable to make this payment at 12% interest p.a. from the date of the award passed by the 1st Tribunal, viz.
18.04.2018 till the date of payment.
3. The respondent is entitled to counter claim of Rs.48,46,000/- (Rs. Forty-Eight lakhs, Forty- six thousand, eight hundred and ninety two only) against the claimant;
4. The claimant shall be liable to make the aforesaid amount with interest at 12% from the date of commencement of arbitral proceeding, viz., 17.03.2014 till the date of payment.
5. The cost of arbitration shall be borne proportionately to the degree of success for the amounts awarded that bear to the entire claim and counter claim respectively.
4. Earlier, an award dated 18.04.2018 came to be passed by the Arbitral Tribunal presided over by Hon’ble Justice Doraiswamy Raju, Former Judge of the Hon’ble Supreme Court, Hon’ble Justice Mr.N.V.Balasubramaniam former Judge of this High Court (since deceased) and Hon’ble Mr.Justice K.Govindarajan, also a Former Judge of this High Court, wherein a sum of Rs.13,00,00,000/- was awarded to the respondent/claimant as against the total claim of Rs.24,14,00,000/- towards the capital claim.
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5. By the aforesaid award dated 18.04.2018, the Arbitral Tribunal had dismissed / rejected all the other claims of the Respondent / Claimant and the counter claims of the Petitioner herein in its entirety. Details of claims of the respondent / claimant and counter claims of the petitioner are detailed below:-
S.No. Claims of the Claim Counter Claims Counter Claim Respondent amount of the Petitioner amount 1 Capital costs for carrying Rs.24.12 Outstanding Rs.70,00,000/-
out modification to the Crores receivables plant to achieve originally rated installed and designed capacity 2 Individual unit losses due Rs.104.54 Interest Rs.3,39,36,261/-
to direct loss of Crores recoverable on
production due to, account of
closure of an unit owing delayed payment
to pipeline change and
closure order of TNPCB
owing to alleged failure
of plant
3 Direct loss to member Rs.130.92 Expenses incurred Rs.25,00,030/-
unit due to alleged not Crores due to steep
achieving of rated increase in raw
capacity material prices
4 Operational costs to have Rs.42.75 Expenses incurred Rs.52,00,000/-
been incurred for the Crores for stay
period of shut down employees due to
frequent de and re
- mobilization
5 Amounts due for Rs.48,46,892/-
running ETP
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6. The aforesaid award dated 18.04.2018 was challenged by the Petitioner in O.P.No.942 of 2018 under Section 34 of the Arbitration and Conciliation Act, 1996. O.P.No.942 of 2018 came to be dismissed vide Order dated 30.04.2019.
7. Order dated 30.04.2019 passed by the Learned Single Judge in O.P.No.942 of 2018 upholding the said award dated 18.04.2018 was challenged by way of an appeal by the Petitioner the Hon’ble Division Bench in OSA.No.163 of 2019.
8. By an order dated 24.09.2021, the Hon’ble Division Bench disposed of the O.S.A.No.163 of 2019 in accordance with a Joint Memo filed by the petitioner and the respondent herein. While passing the aforesaid order on 24.09.2021, the Hon’ble Division Bench left the issues open to be decided afresh with reference to the first head of claim of the Respondent / Claimant i.e. the capital costs for carrying out modification to the plant to achieve originally rated installed and designed capacity and the counter claim of the petitioner herein in its entirety.
9. The parties also consented for appointment of Retd. Hon’ble https://www.mhc.tn.gov.in/judis 5/49 O.P.No.574 of 2022 Mr.Justice K.Kannan Retd., a former Judge of this Court and the Punjab and Haryana High Court, as the Sole Arbitrator to decide the dispute De Novo in respect of Claim No.1 of the respondent / claimant and Counterclaim of the Petitioner.
10. It is pursuant to the aforesaid order, the Arbitral Tribunal presided over by the Learned Arbitrator Hon’ble Mr.Justice K.Kannan Retd. a former Judge of this Court and the Punjab and Haryana High Court has now passed Impugned final Award dated 23.03.2022 as corrected and signed on 13.05.2022.
11. Pursuant to Miscellaneous Application filed in MA.No.17 of 2022, in the Arbitral Proceeding, the Arbitral Tribunal has now awarded a sum of Rs.17,48,70,000/- to the Respondent / Claimant together with Interest at 12% in the Impugned Award as against the total claim of Rs.24,14,00,000/-. The Arbitral Tribunal has also awarded a sum of Rs.48,46,892/- to the Petitioner. The Respondent / Claimant has not challenged the Impugned Award in so far as it awards Rs.48,46,892/- towards the counter claim to the Petitioner.
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12. The petitioner has challenged the impugned Award, as the Arbitral Tribunal has enhanced Award amount to Rs.17,48,00,000/- from Rs.13,00,00,000/- earlier award dated 18.04.2018..
13. The dispute in this Arbitration Original Petition arises out of a contract awarded by the Respondent / Claimant to the Petitioner herein under Ex.C-8, Memorandum of Agreement dated 22.04.2006 followed by Supplementary Agreements Ex.C-13 dated 12.09.2006, ExC-24 dated 19.06.2008 and Ex.C-25 dated 18.12.2009 between the parties.
14. The precursor to the Agreement between the Petitioner and Respondent / Claimant was Ex.C-3 Letter dated 07.02.2003 of TNPCB requesting the Respondent / Claimant to furnish a proposal for Reverse Osmosis/Other Membrane Technology and suitable evaporation system for the Reverse Osmosis rejects so as to contain the Total Dissolved Solids Level in the treated trade effluent and reuse RP permeate in the process by the member units.
15. In purported compliance of the directions contained in the https://www.mhc.tn.gov.in/judis 7/49 O.P.No.574 of 2022 Pollution Control Board proceedings, the Respondent / Claimant herein issued Ex.C-4 Tender Notice dated 18.05.2004 which invited proposals from promoters/investors for the Zero Discharge Common Effluent Treatment Plant (‘ETP’ for short) for (1) build own operate and transfer (BOOT) basis (2) Turnkey basis in two parts viz (a) qualified bid and (b) techno economic bid.
16. In response to the same, the Petitioner had sent its communication Ex.C-5 dated 12.10.2004 to provide a zero discharge system to the Respondent / Claimant. The facts on record indicate that the petitioner was awarded a contract by Respondent / Claimant for putting up a common Effluent Treatment Plant (ETP) with reject management systems incorporating specific technologies including nano filtration for industries located in Tirupur District vide Ex.C-8, Memorandum of Agreement dated 22.04.2006 followed by a Supplementary Agreements Ex.C-13 dated 12.09.2006, ExC-24 dated 19.06.2008 and Ex.C-25 dated 18.12.2009.
17. During the interregnum, Ex.C-6 22.03.2005 and Ex.C-7 https://www.mhc.tn.gov.in/judis 8/49 O.P.No.574 of 2022 16.03.2006, letters were exchanged between the petitioner and the respondent, wherein a proposal was given by the Petitioner for an Effluent Recycle System and a requisite for Techno Commercial offer.
18. Initially, the Petitioner was to put a pilot plant for 5 lakhs Liters Per Day which was to be scaled up to 10 Million Liters Per Day subject to the Petitioner satisfactorily implementing the pilot project. On 11.08.2006, Ex.C-9 and Ex.C-10, letters were exchanged between the Petitioner and the Respondent / Claimant with respect to the operation of the pilot plant. The Petitioner had confirmed that the new plant was with a full capacity of 10 MLD with the treatment scheme incorporating MBR being set up for the Respondent/Claimant.
19. The Petitioner completed the work and handed over the Common Effluent Treatment Plant to the respondent on 06.03.2010. On 26.04.2010, immediately after the plant was commissioned, the Respondent / Claimant sent a communication to the Petitioner stating that the systems did not work optimally as per the requirement in the contract and shortfall was noticed by the Tamil Nadu Pollution Control Board immediately after the commissioning of Common Effluent Treatment https://www.mhc.tn.gov.in/judis 9/49 O.P.No.574 of 2022 Plant developed and installed by the petitioner.
20. The Tamil Nadu Pollution Control Board issued Ex.C-28 Closure Notice to the Respondent / Claimant on 18.05.2010, in view of gross deficiency and called upon the Respondent / Claimant to shut down their operations as it was noticed that norms relating to water balancing, hardness and TDS were not achieved and that the evaporator and display set crystallizer did not operate to the expected level.
21. Dispute between the parties arose as the ETP put up by the petitioner could achieve only 3 Million Litres Per Day capacity, though the contract was for 10 Million Litres Per Day capacity. According to the Respondent / Claimant, the said contract was for discharge 10 Million Litres Per Day capacity and that the ETP put up by the petitioner did not meet the specifications adumbrated in the contract between the Petitioner and the Respondent. Thus, Respondent / Claimant issued Ex.C-40 dated 21.12.2020, Legal Notice to the Petitioner.
22. Vide Ex.C-41 reply dated 08.02.2011, the Petitioner denied its https://www.mhc.tn.gov.in/judis 10/49 O.P.No.574 of 2022 liability to all allegations in Ex.C-40 Legal Notice dated 21.12.2010 of the respondent/claimant. Subsequently, on 16.07.2011, there was a meeting between the parties to amicably settle the dispute and differences as per the Arbitration Clause in Ex.C-8, Memorandum of Agreement dated 22.04.2006 followed by Supplementary Agreements Ex.C-13 dated 12.09.2006, ExC-24 dated 19.06.2008 and Ex.C-25 dated 18.12.2009 before issuing a notice under Section 21 invoking the arbitration clause.
23. In the meeting held on 20.08.2011, the Petitioner decided to prepare an action plan for rectification of the ETP. The Petitioner also prepared Ex.C-57-Action Plan dated 20.08.2011 for rectification of the Common Effluent Treatment Plants commissioned installed by the petitioner and undertook to rectify the operation of the plan, as follows:-
Tentative Responsibility Remarks
Sl.No. Action to be carried out Days
1 Implementation /Act plan 60 days ACETP The No.of days are
proion to be taken as per estimated and ACETP
the recommendations can reduced it with
provided in the inspection proper planning and
and observation carried parallel activities
out during IEI personnels
visit from 04.08.2011 to
08.08.2011
2A Testing or RO elements 30 days IEI
and Resins of COF and
Softner at IEI lab
2B Providing of power, Days ACETP 2 fitters and 2 casual
availability of fresh water included labours will be arranged
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for cleaning /filing of in 2A by ACETP for carrying
resin column During out this activity.
removal of reisn samples
and RO membranes
3A MBR Manual cleaning of 60 days IEI Checking of the MBR
modules, Chemical modules will be taken
cleaning with NaOCL, while carrying out this
Citiric acid, Flusing with activities, one Engineer
fresh water and carrying and one supervisor of
out the water trial IEI will monitor the
cleaning activities.
Other manpower like
fitters and helpers need
to be provided by
ACETP
3B Provision of Power, Days ACETP Only one tank will be
Water, Chemical, sugar, included taken for inspection a a
urea and Dap, Man in 3A time. In case if ACETP
Power ( 4 Fitters and 8 provides extra
Helpers) manpower then the
no.of days can be
reduced by tanking
additional tanks for
cleaning.
4A Check for the quality of 2 Days IEI
sludge identified by
ACETP
4B Lodaing of activated 32 days ACETP Total Requirement 96
sludge in the MBR tank tanker 12 tanker /MBR
(assuming 3 tankers tank. In case, ACETP
available /day) can arrange for more
tankers,then the no.of
days can be reduced.
5 Commissioning of MBR 60 days IEI
system for maximum
capacity achievable under
the present condition of
the plant
6 COF Open back manual 24days IEI ACETP to provide fitters
washing/manual cleaning and Helper to carry out
and regeneration and the activities
restarting
7 Softner Open back 24days IEI ACETP to provide fitters
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manual washing/manual and Helper to carry out
cleaning and regeneration the activities
and restarting
8 RO system cleaning/and 30 days IEI ACETP to provide fitters
recommissioning and Helper to carry out
the activities.
24. After a gap of nearly two years, the Respondent / Claimant issued Ex.c-68 dated 17.03.2014 and invoked the arbitration clause in Ex.C-8 Memorandum of Agreement dated 22.04.2006 followed by Supplementary Agreements Ex.C-13 dated 12.09.2006, ExC-24 dated 19.06.2008 and Ex.C-25 dated 18.12.2009 under Section 21 of the Arbitration and Conciliation Act, 1996. Ex.C-68 Notice dated 17.04.2014 invoking the Arbitration Clause by the Respondent / Claimant under Section 21 of the Arbitration and Conciliation Act, 1996 was dispatched on 25.03.2014 and was received by the Petitioner on 28.03.2014.
25. The case of the Petitioner is that the initiation of the arbitration proceedings vide Ex.C.68 dated 17.03.2014 was hopelessly time barred in as much as the cause of action against the Petitioner commenced when the plant was commissioned on 06.03.2010 and therefore expired on 05.03.2013 or on 20.12.2013 being three years from the date of Ex.C-40 Legal Notice dated 21.12.2010 of the Respondent / Claimant. https://www.mhc.tn.gov.in/judis 13/49 O.P.No.574 of 2022 Submissions of the Petitioner:-
26. It is the contention of the Learned Senior Counsel for the petitioner that invocation of Arbitration Clause vide Ex.C-68 as late as 17.03.2014 was clearly time barred in view of Article 55 of the Limitation Act, 1963.
27. It is the case of the Petitioner that the invocation of the Arbitration Clause vide Ex.C.68 notice dated 17.03.2014 was time barred in the light of the decision of the Hon'ble Supreme Court in Bharat Sanchar Nigam Limited and Another v. Nortel Networks (India) (P) Ltd., (2021) 5 SCC 738.
28. A reference was made to the decision of the Hon'ble Supreme Court in Sriram Mills Ltd Vs. Utility Premises Pvt Ltd, 2007 4 SCC 599 and in Hari Shankar Singhania & Ors Vs. Gaur Hari Singhania & Ors 2006 4 SCC 658.
29. The decision of the Hon’ble Supreme Court in Hari Shankar Singhania Vs. Gaur Hari Singhania, 2006 4 SCC 658 is not relevant as far as the commercial transactions are concerned. It is submitted that https://www.mhc.tn.gov.in/judis 14/49 O.P.No.574 of 2022 once the limitation had commenced the proceedings should have been initiated within three years in terms of Article 55 of the Limitation Act, 1963.
30. The submission of the Petitioner is that the underlying claim of the Respondent / Claimant is itself barred by limitation and that the Impugned Award incorrectly applies Article 137 of the Limitation Act to hold that the claim of the Respondent was not barred by limitation and was in complete contravention of the well settled law laid down by the Hon’ble Supreme Court in Bharath Sanchar Nigam Limited and Anr Vs. Nortel Networks India Ltd. 2021 (5) SCC 738. It is submitted that from reading of the Impugned Award, it is clear that the Tribunal has applied Article 137 of the Limitation Act as opposed to Article 55 of the Limitation Act, 1963.
31. It is submitted that Article 55 of the Limitation Act, 1963 would be applicable to the present facts and that the Arbitral Tribunal grossly erred by having applied the Residuary Article 137 when a specific provision in Article 55 of the Limitation Act, 1963 was applicable. It is submitted that the Impugned Award recognises the correct position of law https://www.mhc.tn.gov.in/judis 15/49 O.P.No.574 of 2022 Article 55 of the Limitation Act yet has erred in proceeding to apply Article 137 of the Limitation Act, 1963.
32. It was further argued that the period of limitation for issuing notice of arbitration would not get extended by mere exchange of letters or mere settlement discussions where a final bill is rejected by making deductions or otherwise.
33. It is submitted that Section 5 to 20 of the Limitation Act do not exclude the time taken on account of Settlement Discussions. It is stated that Section 9 of the Limitation Act, 1963 makes it clear that, once the time has begun to run, no subsequent disability to institute a suit or make an application would stop it.
34. It is submitted that to initiate proceedings to recover damages, a suit or an arbitration proceedings should have initiated within a period of three years from the date of the breach of contract in terms of Article 55 of the Limitation Act, 1963 and thus the limitation expired on 05.03.2013 or by latest 20.12.2013 which is three years from the commissioning of the plant and the issuance of Ex.C-40 Legal Notice https://www.mhc.tn.gov.in/judis 16/49 O.P.No.574 of 2022 dated 21.12.2010 by the respondent/claimant.
35. It is submitted that issuance of Ex.C-40 Legal Notice dated 21.12.2010 pre-supposes a breach and therefore, in the worst case scenario the arbitration proceedings should have been commenced within three years on 20.12.2013 from Ex.C-40 dated 21.12.2010.
36. In other words, according to the Learned Senior Counsel for Petitioner, the limitation for initiating the arbitration proceedings ended on 20.12.2013, whereas Ex.C-68 Notice under Section 21 of the Arbitration and Conciliation Act, 1996 itself was issued by the respondent only on 17.03.2014. It is submitted that the Arbitral Tribunal has not properly considered the same and therefore liable to be set aside.
37. It is submitted that the limitation prescribed for initiating proceedings under Section 11 of the Arbitration and Conciliation Act, 1996 under Article 137 of the Limitation Act, 1963 cannot be confused with the limitation for initiating proceedings. It is stated that invocation of the arbitration clause in Ex.C-68 dated 17.03.2014 should not be confused with the breach of contract and cannot be confused with the https://www.mhc.tn.gov.in/judis 17/49 O.P.No.574 of 2022 limitation prescribed for initiating proceedings under Section 11 of the Arbitration and Conciliation Act, 1996.
38. It is further submitted that cause of action pursuant to Ex.C-40 Legal Notice dated 21.12.2010 expired on 20.12.2013. It is, therefore, submitted Ex.C-68 Notice dated 17.03.2014 issued under Section 21 of the Arbitration and Conciliation Act, 1996 would not have saved the limitation under Section 21 and 43 of the Arbitration and Conciliation Act, 1996.
39. The further contention of the petitioner is that the basis/method of computation of damages employed by the Tribunal was in contravention of the settled principles of Sections 73-75 of the Indian Contracts Act, 1872 and the provisions of the Specific Relief Act,1983 It is submitted that the Arbitral Tribunal has grossly erred in considering Rs.24,14,00,000/- as the basis of the alleged damages suffered by the Respondent / Claimant to award a sum of Rs.17,48,70,000/- to the Respondent / Claimant. The Learned Senior Counsel for the Petitioner would therefore submit that the Impugned Award also suffers from patent illegality.
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40. It is submitted that the Arbitral Tribunal has erred in awarding a sum of Rs.17,48,70,000/- as against the award amount of Rs.24,14,00,000/-. It is submitted that the enhancement of the Arbitral Award of Rs.17,48,70,000/- from Rs.13,00,00,000/- that was earlier awarded by the Arbitral Tribunal vide award dated 18.04.2018 itself shows there is perversity in the Impugned Award.
41. It is further submitted that the Arbitral Tribunal has awarded the aforesaid amount of Rs.17,48,70,000/- by deducting the estimates given by the Anna University Report dated 16.04.2012, more specifically Table 15 of the Report titled “List of new units with Estimated Cost”. It is submitted that the Tribunal has grossly erred in considering Rs.24,14,00,000/- as the basis for awarding Rs.17,48,70,000/- on which the actual damage suffered by the Respondent / Claimant is to be computed.
List of new units with Estimated Cost:-
S.No Equipments/ Vendor Status Amount, Rs.
Machinery in Lakhs
1 Multi Effect Ketav proposed 316.00
Evaporator Consultant,
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System (500 Ahmedabad
KLD) - II
2 Multi Effect N.K.Chem proposed 105.00
Evaporator Engineers &
Accessories Services,
500 KLD II Perundurai
3 REvamping of GET Water order placed 50.00
Mechanical Solutions
Vapor Pvt.Ltd
recompression Chennai
Evaporator
MVRE
42. It is submitted that the actual cost is only Rs.13,10,00,000/-. It is submitted that the work carried out by GET Water Solutions Private Limited, pursuant to the aforesaid Memorandum of agreement dated 26.03.2013 to execute the implementation of 10 MLD Effluent Treatment Plant with reject management to achieve Zero Liquid Discharge (ZLD) specifically states the contract value is only Rs.13,10,00,000/- as opposed to the proposal of Rs.24,14,00,000/-.
43. However, in the Impugned Award an amount of Rs.17,48,70,000/- has been awarded to the Respondent / Claimant after deducting a few items as mentioned above from the estimates cost given by Anna University Report and pursuant to the agreement entered into between the respondent/claimant and G.E.T. Water Solutions Private https://www.mhc.tn.gov.in/judis 20/49 O.P.No.574 of 2022 Limited.
44. That apart, it is submitted that the Arbitral Tribunal has attributed towards the contributory negligence on the part of the Respondent / Claimant but has apportioned the blame between the claimant in the ratio of 10:90 and has scaled down the compensation to 10% to awards sum of Rs.17,48,70,000/-.
45. Relevant portion of the Impugned Award which deals with the apportionment of contributory negligence in Paragraph 51 of the Impugned Award, reads as under:-
51. I have extracted the above passage only to bring home the point that issues apportionment of blame, the way we address the issue as contributory negligence in tort claims is judicially appreciated and adjudicated. Taking the principle in mind and on a conspectus of all the matters concerning the respective obligations, I will take the deficits pointed out by the experts about the faulty design and processes, the promises made by the respondent to deliver and the inability to do so even after full 4 years after the initial setting up of a pilot plant to the stage when correctives were sought to be applied and a revised detailed report was submitted by the respondent, which was not accepted, will far outweigh the failures on the part of the claimant and concerning that https://www.mhc.tn.gov.in/judis 21/49 O.P.No.574 of 2022 claimant’s fallibilities cannot make alright a failed system and response which have to be placed at the respondent’s door step, I will apportion the blame between the claimant in the ration of 10.90 and scale down the entitlement of the claimant by 10% of the total value of damages that I have assessed to be payable to the claimant. I have stated in para 44 above that an of Rs.19.43 Cr is the quantum, I shall scale it down by 10% and find that Rs.17,48,70,000/-
(Seventeen Crores Forty Eight Lakhs and Seventy Thousand) is the quantum assessed as damages payable to the claimant by the respondent.”
46. The Learned Senior Counsel for the petitioner would submit that the failure on the part of the Arbitral Tribunal to reckon the limitation from the date of issuance of Legal Notice dated 21.12.2010 suffers from patent illegality.
47. Therefore, it is submitted that the Impugned Award is perverse and patently illegal and is in conflict with the public policy of the country and is in contravention with the principles of the Indian Contracts Act, 1872 and Specific Relief Act, 1963 pertaining to the award and computation of damages and on the ground that the Arbitral Tribunal has erred in holding that the arbitration proceedings were commenced within the period of limitation.
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48. In support of the above, the Petitioner has relied on the following decisions of the Hon’ble Supreme Court:-
“A. Ssanyong Engineering and Construction Co Ltd Vs. National Highways Authority of India (2019 15 SCC 131) B. PSA Sicul Terminals Ltd Vs. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin and Ors (2021 Scc Online SC 508.) C. Bharath Sanchar Nigam Limited and Anr Vs. Nortel Networks India Ltd (2021 5 SCC 738). D. B and T AG Vs. Ministry of Defence (2023 SCC Online SC 657) E. Associate Builders Vs Delhi Development Authority, 2015 3 SCC 49 F. Oil and Natural Gas Corporation Vs. Saw pipes Ltd, 2003 5 SCC 705 G. Hari Shankar Singhania Vs. Gaur Hari Singhania, 2006 4 SCC 658 H. Shree Ram Mills Ltd Vs. Utility Premises Ltd, 2007 4 SCC 599 I. Geo Miller & Co Ltd Vs. Rajasthan Viyut Utpadan Nigam Ltd, 2020 14 SCC 643”.
Submissions of the Respondent / Claimant:-
49. The Counsel for the Respondent, on the other hand, submits that the Tribunal was cognisant of the difference between the limitation https://www.mhc.tn.gov.in/judis 23/49 O.P.No.574 of 2022 applicable for computing period of limitation for an appointment of an arbitrator as opposed to the commencement of arbitration under Section 21 on the substantive claim and has noted that the limitation has to be tested on the basis of the relevant article of the limitation act. It is stated that the Tribunal has come to a factual conclusion that a dispute can be said to have when the action plan dated 20.08.2011 is given by the Petitioner as the ‘real final offer’ of the petitioner and that the tribunal considers the action plan as constituting the clear final offer.
50. It is submitted by the Respondent that the Arbitral Tribunal has taken into consideration the arguments of the Petitioner and Respondent as regards Limitation in the Impugned Award. It is stated that limitation is a question of fact and not question of law, based on a consideration of several judgements. It is stated that it is the breaking point, wherein the Ex.C-57 Action Plan dated 20.08.2011 was submitted by the Petitioner that could be treated as the date of which the cause of action arose for the purpose of computation of the period of limitation.
51. It is further submitted that the argument of the Petitioner that mere engagement in discussion will not extend the limitation will not hold a place in view of the various decisions including Panchu Gopal Bose https://www.mhc.tn.gov.in/judis 24/49 O.P.No.574 of 2022 Vs. Board of Trustees for Port of Calcutta, 1993 4 SCC 338. It is stated that the dispute must be taken to arise when there is a claim by one party and denial by the other. It is stated that this view has also been agreed by the Arbitral Tribunal.
52. It was further submitted that when such clear and categorised findings on facts have been rendered and based on such findings, the issue of the limitation has been decided, there is no patent illegality in the Award. It is stated that the finding of the Arbitral Tribunal is based on the settled principles of law. Further, it is submitted that the issue of limitation raised by the Petitioner was considered by the earlier Arbitral Tribunal and also by this Court under Section 34 and answered in favour of the Respondent / Claimant, therefore it is stated that the Petitioner cannot ad nauseum request the Courts and Tribunals to look into the same issues aforestated.
53. It is submitted by the Learned Counsel for the Respondent / Claimant that the grounds available under Section 34 to a party seeking to set aside an Arbitral Award, is very narrow. It is submitted that a bare https://www.mhc.tn.gov.in/judis 25/49 O.P.No.574 of 2022 reading of the petition shows that no grounds have been made out for setting aside the Award. It is stated that this Hon’ble Court cannot act as an Appellate Court to examine the legality of Award, nor can examine the merits of claim by entering in a factual arena like an Appellate Court as held in Venture Global Engineering LLC and Ors Vs. Tech Mahindra Ltd. and Ors, 2018 1 SCC 656.
54. In support of the above, the Respondent primarily relies upon the following judicial decisions:-
A. Delhi Airport Metro Express Private Limited Vs. DMRC, 2022 1 SCC 131.
B. Ssanyong Engineering and Construction Co Ltd Vs. National Highways Authority of India, 2019 15 SCC 131 C. Geo Miller & Co Ltd Vs. Rajasthan Viyut Utpadan Nigam Ltd, 2020 14 SCC 643.
D. Hari Shankar Singhania Vs. Gaur Hari Singhania, 2006 4 SCC 658 E. McDermott International Inc Vs. Burn Standard Co.Ltd, 2006 11 SCC 181.
F. Lachia Shetty & Sons Ltd Vs. Coffee Board, Bangalore, 1980 4 SCC 636 G. Muralidhar Chiranjilal Vs. Harishchandra Dwarkardas, 1962 1 SCR 653.
https://www.mhc.tn.gov.in/judis 26/49 O.P.No.574 of 2022 H. Atlanta Ltd Vs. Union of India, 2022 3 SCC 739 I. KMC Brahmaputra Infrastructure Limited Vs Chief Engineer, Roads & Bridges department, Government of Sikkim, 2022 SCC Online Sikk 130 J. Haryana State Industrial and Infrastructure Development Corporation Vs. IDBI Bank 2022 SCC Online Del 903.
K. State of UP Vs. Allied Constructions 2003 7 SCC 396 Discussion:-
55. In Ssangyong Engineering and Construction Co Ltd vs. National Highway Authority of India, (2019) 15 SCC 131 the Hon’ble Supreme Court has held that an award can be set aside on the ground of patent illegality under section 34 (2-A) of the Arbitration And Conciliation Act, 1996 only where the illegality in the award goes to the root of the matter. It further held that erroneous application of law by an Arbitral Tribunal or the reappreciation of evidence by the court under section 34 (2-A) of the Arbitration and Conciliation Act, 1996 is not available.
56. The Court held that the above ground is available only where https://www.mhc.tn.gov.in/judis 27/49 O.P.No.574 of 2022 the view taken by the Arbitral Tribunal is an impossible view while construing the contract between the parties or where the award of the tribunal lacks any reasons. The Court further held that an award can be set aside only if an arbitrator/arbitral tribunal decide(s) the question beyond the contract or beyond the terms of reference or if the finding arrived by the Arbitral Tribunal is based on no evidence or ignoring vital evidence or is based on documents taken as evidence without notice to the parties.
57. The Honourable Supreme Court in Patel Engineering Ltd V. NEEPCO, (2020) 7 SCC 167 held that patent illegality as a ground for setting aside an award is available only if the decision of the arbitrator is found to be perverse or so irrational that no reasonable person would have arrived at the same or the construction of the contract is such that no fair or reasonable person would take or that the view of the arbitrator is not even a possible view.
58. The Honourable Supreme Court in Sutlej Construction Ltd. v. UT of Chandigarh (2018) 1 SCC 718, held that when the award is a https://www.mhc.tn.gov.in/judis 28/49 O.P.No.574 of 2022 reasoned one and the view taken is plausible, re-appreciation of evidence is not allowed while dealing with the challenge to an award under Section 34 of the Arbitration And Conciliation Act, 1996 for setting aside an award. It further held that the proceedings challenging the award cannot be treated as a first appellate court against a decree passed by a trial court
59. It is also settled law that where two views are possible, the Court cannot interfere in the plausible view taken by the arbitrator supported by reasoning. This view has been followed by the Hon’ble Supreme Court in Dyna Technologies Private Limited Vs. Crompton Greaves Limited, (2019) 20 SCC 1, wherein, it has been observed as under:-
“29. There is no gainsaying that arbitration proceedings are not per se comparable to judicial proceedings before the Court. A party under Indian Arbitration Law can opt for an arbitration before any person, even those who do not have prior legal experience as well. In this regard, we need to understand that the intention of the legislature to provide for a default rule, should be given rational meaning in light of commercial wisdom inherent in the choice of arbitration.
34. The mandate under Section 31(3) of the Arbitration Act is to have reasoning which is intelligible and adequate and, which can in https://www.mhc.tn.gov.in/judis 29/49 O.P.No.574 of 2022 appropriate cases be even implied by the courts from a fair reading of the award and documents referred to thereunder, if the need be. The aforesaid provision does not require an elaborate judgment to be passed by the arbitrators having regard to the speedy resolution of dispute.
35. When we consider the requirement of a reasoned order, three characteristics of a reasoned order can be fathomed. They are: proper, intelligible and adequate. If the reasonings in the order are improper, they reveal a flaw in the decision-
making process. If the challenge to an award is based on impropriety or perversity in the reasoning, then it can be challenged strictly on the grounds provided under Section 34 of the Arbitration Act. If the challenge to an award is based on the ground that the same is unintelligible, the same would be equivalent of providing no reasons at all. Coming to the last aspect concerning the challenge on adequacy of reasons, the Court while exercising jurisdiction under Section 34 has to adjudicate the validity of such an award based on the degree of particularity of reasoning required having regard to the nature of issues falling for consideration. The degree of particularity cannot be stated in a precise manner as the same would depend on the complexity of the issue. Even if the Court comes to a conclusion that there were gaps in the reasoning for the conclusions reached by the Tribunal, the Court needs to have regard to the documents submitted by the parties and the contentions raised before the Tribunal so that awards with inadequate reasons are not set aside in casual and cavalier manner. On the other hand, ordinarily unintelligible awards are to be set aside, subject to party autonomy to do away with the reasoned award. Therefore, the courts are required to be https://www.mhc.tn.gov.in/judis 30/49 O.P.No.574 of 2022 careful while distinguishing between inadequacy of reasons in an award and unintelligible awards”.
60. The Hon’ble Supreme Court has reiterated the above position in the case of MMTC Limited Vs. Vedanta Limited, (2019) 4 SCC 163, wherein, it has been held as under:-
“14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section
34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision.
Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.
61. In UHL Power Company Limited Vs. State of Himachal Pradesh, (2022) 4 SCC 116, the Hon’ble Supreme Court reiterated the view in the case of Dyna Technologies Private Limited referred to supra and held as under:-
“18. It has also been held time and again by this Court that if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned arbitrator proceeds to accept one https://www.mhc.tn.gov.in/judis 31/49 O.P.No.574 of 2022 interpretation as against the other. In Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd. [Dyna Technologies (P) Ltd.v.Crompton Greaves Ltd., (2019) 20 SCC 1] , the limitations on the Court while exercising powers under Section 34 of the Arbitration Act has been highlighted thus : (SCC p. 12, para 24) “24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.”
62. In Larsen Air Conditioning and Refrigeration Company Vs. Union of India and others, 2023 SCC OnLine SC 982, it was held as under:-
“15. The limited and extremely circumscribed jurisdiction https://www.mhc.tn.gov.in/judis 32/49 O.P.No.574 of 2022 of the court under Section 34 of the Act, permits the court to interfere with an award, sans the grounds of patent illegality, i.e., that “illegality must go to the root of the matter and cannot be of a trivial nature”; and that the tribunal “must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground” [ref : Associate Builders (supra)]. The other ground would be denial of natural justice. In appeal, Section 37 of the Act grants narrower scope to the appellate court to review the findings in an award, if it has been upheld, or substantially upheld under Section 34. It is important to notice that the old Act contained a provision which enabled the court to modify an award. However, that power has been consciously omitted by Parliament, while enacting the Act of 1996. This means that the Parliamentary intent was to exclude power to modify an award, in any manner, to the court. This position has been iterated decisively by this court in Project Director, National Highways No. 45E and 220 National Highways Authority of India v. M. Hakeem:
“42. It can therefore be said that this question has now been settled finally by at least 3 decisions [McDermott International Inc.v.Burn Standard Co. Ltd.,(2006) 11 SCC 181], [Kinnari Mullick v.
Ghanshyam Das Damani, (2018) 11 SCC 328 : (2018) 5 SCC (Civ) 106], [Dakshin Haryana Bijli Vitran Nigam Ltd. v.
Navigant Technologies (P) Ltd.,(2021) 7 SCC 657] of this Court. Even otherwise, to state that the judicial trend appears to favour an interpretation that would read https://www.mhc.tn.gov.in/judis 33/49 O.P.No.574 of 2022 into Section 34 a power to modify, revise or vary the award would be to ignore the previous law contained in the 1940 Act;
as also to ignore the fact that the 1996 Act was enacted based on the Uncitral Model Law on International Commercial Arbitration, 1985 which, as has been pointed out in Redfern and Hunter on International Arbitration, makes it clear that, given the limited judicial interference on extremely limited grounds not dealing with the merits of an award, the “limited remedy” under Section 34 is coterminous with the “limited right”, namely, either to set aside an award or remand the matter under the circumstances mentioned in Section 34 of the Arbitration Act, 1996.”
63. In this case, the respondent-claimant had issued Ex.C.40-Legal Notice dated 21.12.2010 to the petitioner. Ex.C.40 - Legal Notice dated 21.12.2010 was responded by the petitioner vide Ex.C.41– reply dated 08.02.2011. Thereafter, Ex.C.57 - Action Plan dated 20.08.2011 was given by the petitioner to the respondent-claimant to rectify the defect/deficiencies.
64. Ex.C.57 Action Plan dated 20.08.2011 of the petitioner was either not accepted by the Respondent/claimant or acted upon by the petitioner. In any event, no steps were taken by the petitioner to rectify the defects pointed out by the Respondent/claimant as agreed to be https://www.mhc.tn.gov.in/judis 34/49 O.P.No.574 of 2022 rectified by the petitioner in Ex.C.57-Action Plan dated 20.08.2011.
65. Thus, the respondent-claimant had three years to approach the Arbitral Tribunal by invoking the arbitration clause under Ex.C.8, Memorandum of Agreement dated 22.04.2006 (read with Supplementary Agreements Ex.C-13 dated 12.09.2006, ExC-24 dated 19.06.2008 and Ex.C-25 dated 18.12.2009) from Ex.C.57 – Action Plan dated 20.08.2011 of the petitioner. Thus, the respondent-claimant had time till 19.08.2014 from Ex.C.57 – Action Plan dated 20.08.2011, to institute proceeding applying Article 55 of Part III, First Division of the Limitation Act, 1963.
66. The respondent/claimant however invoked the Arbitration Clause vide Ex.C-68 Legal Notice dated 17.03.2014 under Section 21 of the Arbitration and Conciliation Act, 1996. Ex.C-68 Legal Notice dated 17.03.2014 issued under Section 21 of the Arbitration and Conciliation Act, 1996 was received by the petitioner on 28.03.2014. Ex.C-68 Legal Notice dated 17.03.2014 issued under Section 21 of the Arbitration and Conciliation Act, 1996 was received by the petitioner on 28.03.2014 before 19.08.2014.
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67. As per Section 21 of the Arbitration and Conciliation Act, 1996, the Arbitral proceeding is deemed to have commenced on 28.03.2014 i.e the date on which Ex.C-68 Legal Notice dated 17.03.2014 issued under Section 21 of the Arbitration and Conciliation Act, 1996 was received by the petitioner.
68. As per Section 43 of the Arbitration and Conciliation Act, 1996, the provision of Limitation Act, 1963 applies to the Arbitral proceeding.
69. As per Section 43(2) of the Arbitration and Conciliation Act, 1996, an arbitration proceeding shall be deemed to have been commenced on the date referred to in Section 21 of the Arbitration and Conciliation Act, 1996 for the purpose of limitation. Section 21 and 43 of the Act are reproduced below:-
Section 21 of the Arbitration and Section 43 of the Arbitration and Conciliation Act, 1996 Conciliation Act, 1996 Commencement of arbitral Limitations.— proceedings.— Unless otherwise agreed by the (1)The Limitation Act, 1963 (36 of parties, the arbitral proceedings in 1963), shall apply to arbitrations respect of a particular dispute as it applies to proceedings in https://www.mhc.tn.gov.in/judis 36/49 O.P.No.574 of 2022 Section 21 of the Arbitration and Section 43 of the Arbitration and Conciliation Act, 1996 Conciliation Act, 1996 commence on the date on which a court.
request for that dispute to be (2) For the purposes of this section and referred to arbitration is received the Limitation Act, 1963 (36 of by the respondent 1963), an arbitration shall be deemed to have commenced on the date referred to in section 21.
(3)Where an arbitration agreement to submit future disputes to arbitration provides that any claim to which the agreement applies shall be barred unless some step to commence arbitral proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may on such terms, if any, as the justice of the case may require, extend the time for such period as it thinks proper (4)Where the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act, 1963 (36 of 1963), for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted.
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70. In this, the respondent/claimant had filed claim statement before the Arbitral Tribunal on 20.06.2014. It is after the commencement of the Arbitral proceedings on 28.03.2014 under Section 43 of the Arbitration and Conciliation Act,1996 read with Section 21 of the Arbitration and Conciliation Act,1996. Thus, it cannot be said that the claim statement of the respondent/claimant on 20.06.2014 before the Arbitral Tribunal was time barred.
71. Only if the parties had failed to appoint an Arbitrator and /or constitute an Arbitral Tribunal under Ex.C.8 Memorandum of Agreement dated 22.04.2006 (read with Supplementary Agreements Ex.C-13 dated 12.09.2006, ExC-24 dated 19.06.2008 and Ex.C-25 dated 18.12.2009) within three years from 28.3.2014 (being the date receipt of Ex.C-68 Legal Notice dated 17.03.2014 issued under Section 21 of the Arbitration and Conciliation Act, 1996), the remedy to approach this Court under Section 11 of the Arbitration and Conciliation Act, 1996 would have been time barred under Article 137 in Part II & Third Division of the Limitation Act, 1963, https://www.mhc.tn.gov.in/judis 38/49 O.P.No.574 of 2022
72. The limitation for approaching the Court under Section 11 of the Arbitration and Conciliation Act, 1996 would have thus, expired on 27.03.2017 (only) if the either of the parties had failed to appoint an Arbitrator(s) to constitute an Arbitral Tribunal in view of Section 43 read with Section 21 of the Arbitration and Conciliation Act, 1996 read with Article 137 in Part II to Third Division of the Limitation Act, 1963. This is not the case. In this case, the respondent/claimant had already filed a claim statement on 20.06.2014, long before the expiry of Limitation.
73. Article 137 in Part II to Third Division of the Limitation Act, 1963 reads as under:-
Description of Period of Time from which
suit limitation period begins to run
Any other Three years. When the right to
application for apply accrues.
which no period
of limitation is
provided
elsewhere in this
Division.
74. Thus, the remedy for the constitution of the Arbitral Tribunal pursuant to invocation of arbitration clause vide Ex.C-68 would have got https://www.mhc.tn.gov.in/judis 39/49 O.P.No.574 of 2022 time barred only on 27.03.2017, i.e., within three years from receipt of Ex.C-68 Notice issued on 28.03.2014 issued under Section 21 of the Arbitration and Conciliation Act, 1996 if there was no consensus in view of Article 137 of Part II to Third Division of the Limitation Act,1963.
75. Since, the Arbitral proceeding had already commenced on 28.03.2014 before 19.08.2014 in view of receipt of Ex.C-68 Legal Notice dated 17.03.2014 issued under Section 21 of the Arbitration and Conciliation Act, 1996, cannot be said that the proceeding was time barred.
76. Thus, Article 137 in Part II to Third Division of the limitation Act, 1963 has no relevance in the facts of the present case as the respondent/claimant filed a claim statement on 20.06.2014, long before the expiry of Limitation before the Arbitral Tribunal.
77. Only if the Respondent / Claimant was to approach this Court under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of Arbitrator within three years from 28.03.2014 the petitioner would be correct in stating three years from the date when the https://www.mhc.tn.gov.in/judis 40/49 O.P.No.574 of 2022 right to apply accrued under Article 137 in Part II to Third Division of the Limitation Act, 1963 had elapsed.
78. In the present case, during the interregnum, the Respondent- claimant has also obtained reports of the experts to substantiate its case. Therefore, it is not open for the petitioner to state that the claim statement, before the Arbitral Tribunal on 20.06.2014 was time barred by operation of law in view of Section 21 of the Arbitration and Conciliation Act, 1996 the Limitation read with Section 43(3) of the Arbitration and Conciliation Act, 1996.
79. It cannot be thus said that the claim dated 26.06.2014 of the respondent/claimant pursuant to Ex.C.68 Notice dated 17.03.2014 before the Arbitral Tribunal was time barred in the light of the decision of the Hon’ble Supreme Court in Bharat Sanchar Nigam Limited and Another v. Nortel Networks (India) (P) Ltd, (2021) 5 SCC 738 as the said decision was rendered in the peculiar facts of the case therein by the Hon’ble Supreme Court.
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80. In the claim of the respondent, Nortel Networks (India) (P) Ltd was rejected by the Bharat Sanchar Nigam Limited (BSNL) on 04.08.2014. Notice invoking Arbitration clause under Section 21 of the Arbitration and Conciliation Act, 1996 was issued only on 29.04.2020. It was after 5 ½ years since claims was rejected by Bharat Sanchar Nigam Limited on 04.08.2014.
81. It was in the above circumstances, the Hon'ble Supreme Court held that the period of limitation under Section 21 of the Arbitration and Conciliation Act, 1996 would not get extended by mere exchange of letters after Limitation had expired.
82. The Hon'ble Supreme Court referred to its views in S.S. Rathore v. State of M.P., (1989) 4 SCC 582 : 1990 SCC (L&S) 50; Union of India v. Har Dayal, (2010) 1 SCC 394; CLP (India) (P) Ltd. v. Gujarat Urja Vikas Nigam Ltd., (2020) 5 SCC 185].
83. It was in that context, the Court held that settlement discussions after the expiry of limitation would not revive the limitation https://www.mhc.tn.gov.in/judis 42/49 O.P.No.574 of 2022 where a final bill was rejected. Thus, the Court held that Sections 5 to 20 of the Limitation Act,1963 do not exclude the time taken on account of settlement discussions. It further held Section 9 of the Limitation Act makes it clear that: once the time has begun to run, no subsequent disability or inability to institute a suit or make an application stops it.
84. As far as limitation is concerned, it is a mixed question of facts and law. Under Article 55 of Part III, First Division of the Limitation Act, 1963, the period of limitation is three years from the date when the contract is broken or where there are successive breaches, when the breach in respect of which the suit is instituted occurs or where the breach is continuing, when it ceases.
85. As the claim of the Respondent / Claimant is dated 26.06.2014 before the Arbitral Tribunal, the claim filed before the Arbitral Tribunal on 26.06.2014is within the period of limitation i.e. three years receipt from Ex.C-68 Legal Notice dated 17.03.2014 under Section 21 of Arbitration and Conciliation Act, 1996 on 28.03.2014. https://www.mhc.tn.gov.in/judis 43/49 O.P.No.574 of 2022
86. In the case of Geo Miller and Company Private Limited vs. Chairman, Rajasthan Vidyut Utpadan Nigam Limited, (2020) 14 SCC 643, the Hon'ble Supreme Court held as under :-
“28. Having perused through the relevant precedents, we agree that on a certain set of facts and circumstances, the period during which the parties were bona fide negotiating towards an amicable settlement may be excluded for the purpose of computing the period of limitation for reference to arbitration under the 1996 Act. However, in such cases the entire negotiation history between the parties must be specifically pleaded and placed on record. The Court upon careful consideration of such history find out what was the “breaking point” at which any reasonable party would have abandoned efforts at arriving at a settlement and contemplated referral of the dispute for arbitration. This breaking point would then be treated as the date on which the cause of action arises for the purpose of limitation.”
87. As far as the challenge to the impugned award granting a sum of Rs.17,48,70,000/- to the respondent together with interest 12% p.a. from the date of Award dated 18.04.2018 (i.e the date of the award passed by the First Arbitral Tribunal) till the date of payment, it is the specific case of the petitioner that the Arbitral Tribunal awarded amount over and above, the amount that was earlier awarded by the Arbitral https://www.mhc.tn.gov.in/judis 44/49 O.P.No.574 of 2022 Tribunal on 18.04.2018 for a sum of Rs.13,00,00,000/- which was the subject matter of O.P.No.942 of 2018. Such an argument cannot be countenanced.
88. Merely because the award amount was enhanced from Rs.13,00,00,000/- in Award dated 18.04.2018 to Rs.17,48,70,000/- in the Impugned Award dated 23.03.2022, it cannot be said there was patent illegality.
89. After the award dated 18.04.2018 was passed by the Arbitral Tribunal in the first round presided by a Panel of three Arbitrators (Former Judge of the High Court and Supreme Court), the petitioner herein had challenged the aforesaid Award in O.P.No.942 of 2018 was dismissed vide order dated 30.04.2019 by the Learned Single Judge of this Court.
90. Aggrieved by the Order dated 30.04.2019, the petitioner preferred appeal Before The Division Bench in O.S.A.No.163 of 2019 against the Order dated 30.04.2019 in O.P.942 of 2018, both the parties Respondent / Claimant filed a Joint Memorandum. This is recorded in the https://www.mhc.tn.gov.in/judis 45/49 O.P.No.574 of 2022 Order dated 24.09.2021 in O.S.A.No.163 of 2019 of the Division Bench. They agreed that the alleged capital cost incurred by the Respondent / Claimant for a sum of Rs.24,12,00,000/- and the Counter-claims of the petitioner in its entirety would be re-examined by an Arbitral Tribunal.
91. The challenge to the aforesaid award in O.P.No.942 of 2018 was unsuccessful as both the ground of limitation and on merits by applying the ratio of the Hon'ble Supreme Court in Associate Buildes vs. Delhi Development Authority, (2015) 3 SCC 49, and held as under:-
“A careful perusal of the impugned award and materials which were placed before AT reveals that there was enough and more materials before At to arrive at this conclusion. To be noted, there is a clear reference to Ex.C.62. This court has borne in mind Hodgkinson principle. Hodgkinson principle is a time honoured principle and it is to the effect that AT is the best judge of both quality and quantity of evidence before it. To be noted, this Hodgkinson principle has been referred to by the Hon’ble Supreme Court in the off-quoted and celebrated Associate Builders Vs. Delhi Development Authority reported in 2015 3 SCC 49. Going by Hodgkinson principle, AT is the best judge of quantity and quality of evidence before it. Therefore, this ground does not qualify as one https://www.mhc.tn.gov.in/judis 46/49 O.P.No.574 of 2022 that renders the impugned award being in conflict with public policy in India or being in contravention with fundamental policy of Indian Law or being in conflict with the basic notions of justice.”
92. Thus, it is clear that the parties agreed for re-examination of the claim of the respondent/claimant for Rs.24,14,00,000/- and the counter claims of the petitioner in its entirety by the Arbitral Tribunal. Thus, the Award dated 18.04.2018 was set aside with the above understanding of the parties. Therefore, challenge to the Impugned Award on the ground of patent illegality or against the public policy under section 34 (2-A) of the Arbitration And Conciliation Act, 1996 cannot be countenanced.
93. In view of the above discussions, I find no merits in the challenge to the Impugned Award dated 23.03.2022. Even if there are minor mistakes in the award quantum, it cannot be a subject matter of challenge in the light of the well settled principles of law. That apart the Arbitral Tribunal is the best judge while awarding compensation. There is neither patent illegality nor can it be said that the Impugned Award is in conflict with the public policy of India, so as to attract string under section 34 ii b ii ready with explanation ii. There is also no patent https://www.mhc.tn.gov.in/judis 47/49 O.P.No.574 of 2022 illegality so as to set aside the Impugned Award under section 34 (2-a) of the Act.
94. In the result, the Impugned Award is upheld and the present OP challenging the award is dismissed leaving it open for the Respondent/Claimant for enforcing the award. No costs. Consequently, connected applications are closed.
04.06.2024
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Internet : Yes/No
Neutral Citation : Yes/No
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