Supreme Court - Daily Orders
M/S Patel Engineering Ltd. vs The Municipal Corporation Of Greater ... on 22 March, 2022
Bench: A.M. Khanwilkar, Abhay S. Oka, C.T. Ravikumar
1
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.367/2022
M/S PATEL ENGINEERING LTD. APPELLANT(S)
VERSUS
THE MUNICIPAL CORPORATION
OF GREATER BOMBAY RESPONDENT(S)
O R D E R
This appeal takes exception to the judgment and order dated 24.02.2017 in Appeal No.1145/2005 in Arbitration Petition No. 472 of 2003, of the High Court of Judicature at Bombay, disallowing the preliminary objection taken by the appellant regarding the maintainability of the appeal under Section 39 of the Arbitration Act, 1940 (for short, "the Act") filed by the respondent-Corporation. Briefly stated, the parties entered into a contract in respect of construction of underground tunnel which was to be part of Bombay-III Water Supply Project vide agreement dated 23.08.1989. The agreement contained arbitration clause, Signature Not Verified Digitally signed by which reads thus :
DEEPAK SINGHDate: 2022.03.25 18:00:14 IST Reason:
"ARBITRATION
97. All disputes or differences whatsoever which shall at any time arise between the 2 parties hereto touching or concerning the works or the execution or maintenance thereof or this contract or the construction, execution, or maintenance thereof or this contract or the construction meaning operation or effect thereof or, to the rights or liabilities of the parties or arising out of or in relation thereto whether during or after completion of the contract or whether before or after termination, foreclosure or breach of the contract (other than those in respect of which, the decision of any person is by the contract expressed to be final and binding) shall after written notice by either party to the contract to the other of them specify the nature of such dispute or difference and call for the point or points at issue to be referred to the arbitration."
As some dispute arose in relation to the completion of work, the agreement was finally terminated on 10.12.1992 and arbitration clause was invoked. The arbitrator appointed in terms of Clause 97 after considering the rival claims, including the counter claim filed by the respondent, passed award on 22.04.1997. What is relevant to note is that in the counter claim the respondent had stated that they have reserved right to claim general damages.
The award as passed by the Arbitrator, however, does not give any liberty to the respondent to resort to that claim. Instead, the counter claim filed by the respondent came to be finally answered by the same common award dated 22.04.1997. 3
Despite the above, after a gap of nearly six years, the Corporation issued a letter dated 24.02.2003 setting forth certain claims regarding the cost incurred by the Corporation for completing the unfinished work. The said communication reads thus:
"BRIHANMUMBAI MUNICIPAL CORPORATION [Water Supply Project Department) No. Ch. E/SP/P?4559 of 24th Feb. 2003 To, M/s. Patel Engineering Company Ltd., Engineering & Contractors, S.V. Road P.B. No. 8357, Jogeshwari, Mumbai - 400 102 Sub: Bombay III Water Supply Project Construction of Tunnel between Ruparel College and Dr. E. Moses Road, Contract 2789-IN/1750-IN/W-20.
Dear Sir, You are aware that the contract was terminated by the Municipal Corporation on 10.12.1992 under clause 90 of the General conditions of the Contract. The Corporation had made it clear that the Corporation would get the remaining work done through some other at your risk as to costs and consequences. You are further aware that the disputes were referred to the arbitrator. The Hon'lbe Mr. Justice D.M. Rage (Retd.) was appointed as the sole Arbitrator to adjudicate upon the said dispute. On 22.04.1997 the Hon'ble Arbitrator made an award directing the Corporation to pay a sum Rs. 17,42,243/- with interest at the rate of 12% per annum from 19.12.1999 till the date of award and thereafter at the rate of 18% per annum till decree and/or payment whichever is earlier. The Corporation has already honoured the said award and was paid to you the awarded amount.
2. You are further aware that in the written statement filed by you before the learned Arbitrator, the Corporation had contended that the contract was rightly terminated. The Hon'ble Arbitrator had also framed issues including the issue whether the repudiation/termination/cancellation of 4 the contract by the Municipal Corporation was wrongful/illegal". You are aware that the Hon'ble Arbitrator gave finding that the contract was rightly repudiated/terminated/cancelled by the Municipal Corporation and the same was not wrongful/illegal. The said finding is not challenged by your company and has become final.
3. After termination of the contract, the Corporation proposed to award the incomplete and balance work to another contractor, viz. M/s. Hindustan Construction Co. Ltd. under Contract No. W-20(A). The said contract was awarded by the corporation on 14.12.1994.
4. The items left incomplete by your company were also part of the scope of the new contract awarded to M/s. Hindustan Construction Co. Ltd. The said work had commenced on 10.01.1995 and completed on 09.08.2000. As far as items left incomplete by your company is concerned, the said items were carried out by the said Hindustan Construction Co. Ltd. at the total cost of Rs. 21,33,276.74 ps. The detail of the said items are provided in the statement appended hereto (Pg. 1 to 19).
5. Since, you were solely responsible for termination or the contract which has also been found by the learned Arbitrator in the said award, the Corporation had awarded the said part of the work to another contract at your risk and costs under clause 90 of the General Conditions of the Contract. You are therefore liable to pay the said amount of Rs. 21,33,18,276.74 ps. being the loss suffered by the Corporation in view of your failure to complete the work in time and in view of the loss suffered by the Corporation in getting the said work done by another contractor with interest at 18% per annum thereon. You are therefore called upon to pay the said amount within 14 days from the date of receipt of this letter, failing which the Corporation shall be compelled to invoke arbitration clause and to refer the dispute to arbitration under the provisions of the Arbitration and Conciliation Act, 1996 read with General Conditions of the Contract.
Yours faithfully, Sd/-
24.02.03 (U.D. Holla) Chief Engineering (Water Supply Project)"
After sending the aforesaid letter, the Corporation reiterated the demand vide letter dated 11.08.2003. As a consequence of the claim set forth by the 5 Corporation, the appellant was advised to file arbitration petition under Section 33 of the Act for the following reliefs :
(a) That this Hon'ble Court may be plesed to order and declare that the Arbitration agreement between the parties contained in Clause 97 of the General Conditions of the Contract has come to an end and/or has exhausted itself and there is no Arbitration Agreement in existence between the parties.
(b) Strictly without prejudice to (a) above and in the alternative thereto that this Hon'ble court be pleased to order and declare that the Arbitration Agreement contained in Clause 97 of the General conditions of Contract stands rescinded revocked and/or that the Petitioner is entitled to and has rescinded the said Agreement and is relieved and discharged therefrom.
(c) That this Hon'ble Court be pleased to order and declare that the Award dated 22nd April, 1997 (Exhibit "F" hereto) fully and finally concluded the disputes between and claims of the Petitioners and the Respondent against each other existing as upon 22nd April, 1997 and accordingly that the Respondent is barred in law and/or estopped from claiming the claimed loss and from referring the claimed loss or any dispute relating thereto arbitration.
(d) That this Hon'ble Court may be pleased by a perpetual order and injunction to restrain the Respondent, its officers servants and agents from in any manner invoking the Arbitration Agreement contained in Clause 97 of the General Conditions of the Contract.
(e) That pending the hearing and final disposal of the present petition, this 6 Hon'ble Court may be pleased to grant a temporary order and injunction restraiing the Respondent, its officers, servants and agents from in any manner:
i) Invoking the Arbitration Agreement contained in Claus 97 of the General conditions of the Contract and from proceeding with or implementing or pursuing the purported reference to arbitration of the claimed loss including by the letter dated 24th February, 2003
ii) Disqualifying the Petitioner from participating in or blacklisting the petitioner in respect of any other tender/bid/contract of the Respondent.
(f) Ad interim reliefs in terms of prayer clause (e) above;
(g) Costs of the present Petition;
(h) Such further and other reliefs as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case"
The learned Single Judge after hearing both sides dealt with the objection raised by the respondent that the Arbitration Petition bearing No.472 of 2003 was not maintainable and in fact was premature. The learned Single Judge, however, allowed the Arbitration Petition No.472 of 2003 vide order dated 21.03.2005. Against this decision, the respondent-Corporation carried the matter in appeal under Section 39 of the Act being Appeal No. 1145/2005.
In the said appeal, preliminary objection was 7 raised by the appellant regarding maintainability of the appeal. The Division Bench has answered the said objection against the appellant vide impugned judgment and order.
The first question that needs to be answered is whether the opinion expressed by the Division Bench about the maintainability of appeal under Section 39 of the Act can be sustained?
Section 39 reads thus:
"39(1) Appealable orders.- (1) An appeal shall lie from the following orders passed under this Act (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order:
An order-
(i) superseding an arbitration;
(ii) on an award stated in the form of a special case;
(iii) modifying or correcting an award;
(iv) filing or refusing to file an arbitration agreement;
(v) staying or refusing to stay legal proceedings where there is an arbitration agreement;
(vi) setting aside or refusing to set aside an award;
Provided that the provisions of this section shall not apply to any order passed by a Small Cause Court.
(2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court."
Even on a closer scrutiny of the said provision 8 and keeping in mind the fact situation of the present case, none of clauses referred to in Section 39 would be attracted for maintaining the appeal. The nearest clause which could be invoked by the respondent is Clause (i) of sub-Section (1), being appeal against superseding an arbitration.
In our opinion, this clause has no application to the fact situation of the present case, inasmuch as the parties invoked arbitration clause in the agreement and also contested the matter before the arbitrator.
Indisputably, the respondent had preferred counter claim and also sought liberty to claim general damages at a later stage. That liberty, as aforesaid, was not granted in the final award as passed.
If the respondent was dissatisfied with that part of the award, the respondent should have challenged the same but cannot be heard to press the claim referred to in the communication dated 24.02.2003.
It is a different matter that the appellant resorted to arbitration petition before the respondent had invoked arbitration clause in furtherance of its communication dated 24.02.2003. To that extent, the respondent may be justified in 9 contending that the arbitration petition filed by the appellant was premature.
The fact remains that the appeal as filed by the respondent Corporation was against the order declaring that arbitration agreement between the parties had worked out consequent to invocation of arbitration clause 97 of the agreement, which culminated with the passing of the award after contest, by the arbitrator. Admittedly, that award has been allowed to attain finality by the parties.
As a result, in our opinion, the appeal as filed by the respondent against the order of the learned Single Judge dated 21.03.2005 allowing the arbitration petition filed by the appellant under Section 33 of the Act, would not be maintainable under Section 39 of the Act.
Be that as it may, the next question is whether the respondent-Corporation can be given liberty to pursue arbitration claim on the basis of communication dated 24.02.2003.
We have no manner of doubt that the respondent- Corporation cannot be allowed to pursue that option at this distance of time and more particularly because the Corporation had in fact sought liberty before the Arbitrator for reserving its right to 10 claim general damages, but that liberty was not given in the award as passed by the Arbitrator on 22.04.1997, which as aforesaid has become final. In that view of the matter the respondent- Corporation cannot be permitted to now pursue any proceedings much less in respect of subject matter referred to in its communication dated 24.02.2003. We agree with the learned Single Judge that permitting the respondent-Corporation to do so would be avoidable burden on the public exchequer. In view of the above, the appeal must succeed. The impugned judgment and order is set aside; and the decision of the learned Single Judge is upheld. The appeal is accordingly allowed. No order as to costs.
....................,J.
(A.M. KHANWILKAR) ....................,J.
(ABHAY S. OKA) ....................,J.
(C.T. RAVIKUMAR)
NEW DELHI
MARCH 22, 2022
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ITEM NO.101 COURT NO.3 SECTION III
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No(s). 367/2022
M/S PATEL ENGINEERING LTD. Appellant(s)
VERSUS
THE MUNICIPAL CORPORATION OF GREATER BOMBAY Respondent(s)
(FOR ADMISSION and I.R. and IA No.52378/2017-PERMISSION TO FILE ADDITIONAL DOCUMENTS ) Date : 22-03-2022 This appeal was called on for hearing today. CORAM :
HON'BLE MR. JUSTICE A.M. KHANWILKAR HON'BLE MR. JUSTICE ABHAY S. OKA HON'BLE MR. JUSTICE C.T. RAVIKUMAR For Appellant(s) Mr. Shyam Divan, Sr. Adv.
Mr. Mahesh Agarwal, Adv.
Mr. Rohaan Cama, Adv Mr. Shanay Shah, Adv.
Mr. Ankur Saigal, Adv.
Mr. Rishabh Parikh, Adv.
Mr. Kaustubh Singh, Adv.
Mr. Abhinav Garg, Adv.
Mr. E. C. Agrawala, AOR For Respondent(s) *Mr. Pallav Shishodia, Sr. Adv.
Mr. Bhargava V. Desai, AOR UPON hearing the counsel the Court made the following O R D E R The appeal is allowed in terms of the signed order.
Pending applications shall stand disposed of.
(NEETU KHAJURIA) (VIDYA NEGI)
COURT MASTER COURT MASTER
(Signed order is placed on the file.) *Appearance not received.