Madhya Pradesh High Court
M/S Sharda Constuction Thr. vs Union Of India on 13 October, 2022
Author: Anand Pathak
Bench: Anand Pathak
1
IN THE HIGH COURT OF MADHYA PRADESH
AT GWALIOR
BEFORE
HON'BLE SHRI JUSTICE ANAND PATHAK
ARBITRATION CASE No. 95 of 2019
Between:-
M/S SHARDA CONSTUCTION THROUGH ITS
PROPRIETOR. CHANDER PAL SHARMA, HOUSE
NO.22009 STREET NO. 12/A POWER HOUSE
ROAD, BATHINDA 151001(PUNJAB)
.....APPLICANT
(BY SHRI ARUN DUDAWAT -ADVOCATE)
AND
1. UNION OF INDIA, THROUGH ITS SECRETARY,
MINISTRY OF DEFENSE, NEW DELHI
2. ENGINEER IN CHIEF, KASHMIR HOUSE, RAJAJI
MARG, NEW DELHI 110011.
3. CHIEF ENGINEER (AIR FORCE), ALLAHABAD
211012.
4. COMMANDER WORKS ENGINEER (AF)
MAHARAJPUR GWALIOR 474020.
5. GARRISON ENGINEER, (AF) TECH AREA, AIR
FORCE STATION, MAHARAJPUR GWLAIOR
474020.
.....RESPONDENTS
(BY SHRI PRAVEEN KUMAR NEWASKAR -ADVOCATE)
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Reserved on : 25-08-2022
2
Delivered on : 13-10-2022
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ORDER
1. The instant application has been preferred by the applicant under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of arbitrator.
2. Precisely stated facts of the case that applicant is a registered firm with the respondents and secured work at Air Force Station, Maharajpur (under the control of Chief Engineer, Air Force, Allahabad) in the month of August, 2006. Contract bearing CA No.CE(AF)/ALD/MHR/01 OF 2006-07 dated 18-08-2006 was awarded to the applicant for PROVN OF CERTAIN ACCN AND ALLIED SERVICES AT AF STN MAHARAJPUR. Work executed by the applicant was governed by the General Condition of Contract known as Indian Army Forms Work 2249 (hereinafter referred to as "IAFW 2249"). Clause 70 of IAFW 2249 refers Arbitration.
3. As submitted, applicant successfully completed the awarded work on 21-10-2011 but in spite of successfully completing the work, respondents did not make payment of final bill to the applicant which was due w.e.f. 20-04-2012 i.e. six months after the date of completion 3 of work in terms of condition of condition No.65 of General Condition of IAFW 2249. Being disgruntled, on 20-05-2015 (Annexure A/4) applicant issued final notice to invoke condition No.70 of IAFW 2249 for going into arbitration but same was replied vide letter dated 11-06- 2015 (Annexure A/5) in which it has been intimated to the applicant that final bill in respect of above work is held up for want of signature of applicant on recovery statement of labour welfare cess, therefore, he was requested to do the formalities. It further appears that vide letter dated 22-08-2015 applicant applied to the respondents and raised its objection about the letter sent by the respondents on 11-06-2015, 23- 06-2015 and 30-06-2015.
4. It appears that thereafter nothing concrete held and in July 2017 said outstanding of Rs.1533/- as labour welfare cess was received by the respondents and Chief Engineer informed the Engineer in chief that contractor has signed final bill without any reservations and payment was made based upon scrutiny by the Audit Authority. Thereafter, on 4 th October, 2019 this application has been preferred for appointment of arbitrator.
5. Learned counsel for the applicant relied upon the judgments of Apex 4 Court in the matter of Duro Felguera S.A. Vs. Gangavaram Port Ld. (2017) 9 SCC 729, Mayavati Trading Pvt. Ltd. Vs. Pradyuat Deb Burman, (2019) 8 SCC 714, Perkins Eastman Architects Vs. HSCC (India) Ltd. AIR 2020 SC 59 and Bharat Sanchar Nigam Limited and another Vs. Nortel Networks India Private Limited, (2021) 5 SCC 738 and sought appointment of arbitrator.
6. Learned counsel for the respondents opposed the submissions and submitted that as per the contract, applicant completed the work on 21- 10-2011 but after two years i.e. on 21-08-2013, applicant submitted final bill vide Annexure R/1. On scrutiny/audit check, certain statutory recoveries as such; Commercial Tax of Rs.78/-, recovery on account of Suretendent of Technical Examiner (STE Observation) Rs.4000/- and labour welfare cess Rs.4,16,515/- as per the Building and Other Construction Workers' Welfare Cess Act, 1996 was made by the Controller of Defence Account (CDA). After due discussion with audit department Rs.1553/- was to be paid by the contractor to the department, therefore, letter dated 11-06-2015 Annexure R/2 to sign the recovery bills were issued to the applicant. Incidentally, applicant put his signature on recovery bills without any protest, without any fear 5 and pressure.
7. It is further submitted by learned counsel for the respondents that vide letter dated 20-05-2015, applicant requested for appointment of arbitrator by the department whereas present application has been preferred on 04-10-2019 therefore, application suffers from delay and laches because it is beyond the period of limitation which is 3 years as per Section 43 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") read with article 137 of the Limitation Act. He relied upon the judgment of Apex Court in the matter of Bharat Sanchar Nigam Ltd. and Ors. Vs. Nortel Networks India Pvt. Ltd. (2021) 5 SCC 738
8. Heard learned counsel for the parties and perused the documents appended thereto.
9. This is a case where applicant is seeking appointment of arbitrator as per condition No.70 of IAFW 2249. From the Pleadings and submissions it appears that construction was started in 2006 and completed in 2011. Final bill was raised on 21-08-2013 duly signed by the contractor. Therefore, at that point of time, applicant new the status of final bill. Condition No.65 of the agreement deals in respect of final bill which is 6 reproduced as under:
"65. Final Bill (Applicable only to Measurement and Lump Sum Contracts).- The Final Bills shall be submitted by the Contractor on IAFW-2262 in duplicate within three months of physical completion of the works to the satisfaction of the Engineer-in-charge.
It shall be accompanied by all abstracts, vouchers, etc., supporting it and shall be prepared in the matter prescribed by the G.E. No further claims shall be made by the Contractor after submission of the Final Bill and these shall be deemed to have been waived and extinguished.
The Contractor shall be entitled to be paid the final sum less the value of payments already made on account, subject to the certification of the final bill by the G.E..
No charges shall be allowed to the Contractor on account of the preparation of the final bill."
10. Not only this, but on 20-05-2015 (Annexure A/4) applicant issued final notice to invoke arbitration clause as per condition No.70 of IAFW 2249 it means that respondents had to react till 19-06-2016 and thereafter limitation started and he had to submit application for appointment of arbitrator on or before 19-06-2018 as per Section 43 of the Act read 7 with article 137 of the Limitation Act. Present application is filed on 04- 10-2019, therefore, it is hopelessly barred by time.
11. Aspect of limitation has been considered by the Apex Court in the case of Bharat Sanchar Nigam Limited and another (supra) and held as under:
"40.Conclusion Accordingly, we hold that:
(i) The period of limitation for filing an application under Section 11 would be governed by Article 137 of the First Schedule of the Limitation Act, 1963. The period of limitation will begin to run from the date when there is failure to appoint the arbitrator;
It has been suggested that the Parliament may consider amending Section 11 of the 1996 Act to provide a period of limitation for filing an application under this provision, which is in consonance with the object of expeditious disposal of arbitration proceedings;
(ii) In rare and exceptional cases, where the claims are ex facie time-barred, and it is manifest that there is no subsisting dispute, the Court may refuse to make the reference."
12. Later on in the case of Secunderabad Cantonment Board Vs. B. 8 Ramachandraiah & Sons, (2021) 5 SCC 705, the judgment passed in the matter of Bharat Sanchar Nigam Limited and another (supra) has been discussed and affirmed. Discussion of the factual details of that case vis -a -vis article 137 of Limitation Act in respect of appointment of arbitrator would make the case luculent and would bring clarity to the issue. Relevant extract as discussed in Bharat Sanchar Nigam Limited and another (supra) is reproduced as under:
"19. This Court went on to hold that limitation is not a jurisdictional issue but is an admissibility issue. It then referred to a recent judgment of this Court in Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1, and stated as follows:
"36. In a recent judgment delivered by a three-judge bench in Vidya Drolia v. Durga Trading Corporation [(2021) 2 SCC 1], on the scope of power under Sections 8 and 11, it has been held that the Court must undertake a primary first review to weed out "manifestly ex facie non-existent and invalid arbitration agreements, or non-arbitrable disputes."
The prima facie review at the reference stage is to cut the deadwood, where dismissal is bare faced and pellucid, and when on the facts and law, the litigation must stop at the first stage. Only when the Court is 9 certain that no valid arbitration agreement exists, or that the subject matter is not arbitrable, that reference may be refused.
In paragraph 144 (in Vidya Drolia Vs. Durga Trading Corporation, (2021) 2 SCC 1 case), the Court observed that the judgment in Mayavati Trading had rightly held that the judgment in Patel Engineering had been legislatively overruled.
Paragraph 144 reads as :
"144. As observed earlier, Patel Engg. Ltd. explains and holds that Sections 8 and 11 are complementary in nature as both relate to reference to arbitration. Section 8 applies when judicial proceeding is pending and an application is filed for stay of judicial proceeding and for reference to arbitration. Amendments to Section 8 vide Act 3 of 2016 have not been omitted. Section 11 covers the situation where the parties approach a court for appointment of an arbitrator. Mayavati Trading (P) Ltd., in our humble opinion, rightly holds that Patel Engg. Ltd. has been legislatively overruled and hence would not apply even post omission of sub-section (6-A) to Section 11 of the Arbitration Act. Mayavati Trading (P) Ltd. has elaborated upon the object and purposes and history of the amendment to Section 11, with reference to sub-section (6-A) to elucidate that the section, as originally enacted, 10 was facsimile with Article 11 of the Uncitral Model of law of arbitration on which the Arbitration Act was drafted and enacted." (emphasis supplied). While exercising jurisdiction under Section 11 as the judicial forum, the court may exercise the prima facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation. Limited jurisdiction of the Courts would ensure expeditious and efficient disposal at the referral stage. At the referral stage, the Court can interfere "only" when it is "manifest" that the claims are ex facie time barred and dead, or there is no subsisting dispute.
Paragraph 148 of the judgment reads as follows :
"148. Section 43(1) of the Arbitration Act states that the Limitation Act, 1963 shall apply to arbitrations as it applies to court proceedings. Sub-section (2) states that for the purposes of the Arbitration Act and Limitation Act, arbitration shall be deemed to have commenced on the date referred to in Section 21. Limitation law is procedural and normally disputes, being factual, would be for the arbitrator to decide guided by the facts found and the law applicable. The court at the referral stage can interfere only when it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute. All other cases should be referred to the Arbitral 11 Tribunal for decision on merits. Similar would be the position in case of disputed "no-claim certificate" or defence on the plea of novation and "accord and satisfaction". As observed in Premium Nafta Products Ltd. [Fili Shipping Co. Ltd. v. Premium Nafta Products Ltd., 2007 UKHL 40 : 2007 Bus LR 1719 (HL)] , it is not to be expected that commercial men while entering transactions inter se would knowingly create a system which would require that the court should first decide whether the contract should be rectified or avoided or rescinded, as the case may be, and then if the contract is held to be valid, it would require the arbitrator to resolve the issues that have arisen.
In paragraph 154.4, it has been concluded that: "154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny. The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably "non-arbitrable" and to cut off the deadwood. The court by default would refer the matter when contentions relating to non-arbitrability are plainly 12 arguable; when consideration in summary proceedings would be insufficient and inconclusive; when facts are contested; when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitration proceedings. This is not the stage for the court to enter into a mini trial or elaborate review so as to usurp the jurisdiction of the Arbitral Tribunal but to affirm and uphold integrity and efficacy of arbitration as an alternative dispute resolution mechanism." (emphasis supplied) In paragraph 244.4 it was concluded that:
"244.4. The court should refer a matter if the validity of the arbitration agreement cannot be determined on a prima facie basis, as laid down above i.e. "when in doubt, do refer"."
37. The upshot of the judgment in Vidya Drolia is affirmation of the position of law expounded in Duro Felguera and Mayavati Trading, which continue to hold the field. It must be understood clearly that Vidya Drolia has not resurrected the pre-amendment position on the scope of power as held in SBP & Co. v. Patel Engineering (supra).
It is only in the very limited category of cases, where there is not even a vestige of doubt that the claim is ex facie time-barred, or that the dispute is non-arbitrable, 13 that the court may decline to make the reference. However, if there is even the slightest doubt, the rule is to refer the disputes to arbitration, otherwise it would encroach upon what is essentially a matter to be determined by the tribunal." (emphasis in original) Apex Court in the case of Secunderabad Cantonment Board (supra) explained the application of law of limitation in following manner:
20. Applying the aforesaid judgments to the facts of this case, so far as the applicability of Article 137 of the Limitation Act to the applications under Section 11 of the Arbitration Act is concerned, it is clear that the demand for arbitration in the present case was made by the letter dated 07.11.2006. This demand was reiterated by a letter dated 13.01.2007, which letter itself informed the Appellant that appointment of an arbitrator would have to be made within 30 days. At the very latest, therefore, on the facts of this case, time began to run on and from 12.02.2007. The Appellant's laconic letter dated 23.01.2007, which stated that the matter was under
consideration, was within the 30-day period. On and from 12.02.2007, when no arbitrator was appointed, the cause of action for appointment of an arbitrator accrued to the Respondent and time began running from that day.
Obviously, once time has started running, any final rejection by the Appellant by its letter dated 10.11.2010 14 would not give any fresh start to a limitation period which has already begun running, following the mandate of Section 9 of the Limitation Act. This being the case, the High Court was clearly in error in stating that since the applications under Section 11 of the Arbitration Act were filed on 06.11.2013, they were within the limitation period of three years starting from 10.11.2020. On this count, the applications under Section 11 of the Arbitration Act, themselves being hopelessly time barred, no arbitrator could have been appointed by the High Court."
13. In the case of Vidya Drolia (supra) three Judge Bench considered the scope of power under Section 8 and 11 and held that Court must undertake a primary review to weed out "manifestly ex facie non- existent and invalid arbitration agreements, or non-arbitrable disputes. The prima facie review at the reference stage is to cut the deadwood, where dismissal is bare faced and pellucid, and when on the facts and law, the litigation must stop at the first stage. Only when the Court is certain that no valid arbitration agreement exists, or that the subject matter is not arbitrable, that reference may be refused.
14. The judgment of Vidya Drolia (supra) has been referred by the Apex Court in the case of Bharat Sanchar Nigam Limited and another (supra) and Secunderabad Cantonment Board (supra). Here, it 15 appears that case is not only barred by limitation but case is under the category of dead wood also because here some recovery was made by the respondents on the pretext referred above and applicant duly paid the amount to the respondents vide Annexure R/4 on 06-10-2018 and therefore, after settling the accounts primarily on 06-10-2018, after one year on 04-10-2019 applicant moved this application. Applicant is trying to take chance much after lapse of limitation and this case falls under the category of dead wood also. Such type of frivolous litigation cannot be allowed to continue.
15. In the considered opinion of this Court, no case for appointment of any arbitrator is made out by the applicant. Application sans merit and is hereby dismissed.
(Anand Pathak) Judge Anil* ANIL KUMAR CHAURASIYA 2022.09.22 15:03:23 -07'00'