Delhi District Court
Ok Play Auto (P) Ltd vs Indian Commerce & Industries Co. (P) Ltd on 8 January, 2021
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IN THE COURT OF DISTRICT JUDGE (COMMERCIAL COURT-02),
SOUTH DISTRICT, SAKET COURT, NEW DELHI
OMP (Comm) No. 16/2020
OK Play Auto (P) Ltd.
Through its Authorised Signatory
Having its office at :
124, New Manglapuri, Mehrauli,
New Delhi-110030
[email protected]
.... Petitioner
Versus
Indian Commerce & Industries Co. (P) Ltd.
Through its Managing Director
Having its office at :-
Beehive Buildings No. 57, Prakasram Road,
Broadway, Chennai - 600108
E-mail [email protected]
..... Respondent
Date of institution : 19.03.2020
Date of arguments : 04.01.2021
Date of judgment : 08.01.2021
JUDGMENT
1. This is a petition U/s 34 of Arbitration & Conciliation Act (hereinafter to be referred as "A&C Act") directed against the Award dated 17.12.2019 passed by Ms. R. Kiran Nath, Ld. Sole Arbitrator (Retd. District Judge).
2. This court has heard the submissions advanced by Shri Anirudh Wadhwa, learned counsel appearing for petitioner and Shri Aravindh S., learned counsel, appearing for respondent.
3. In brief, the facts leading to filing of this petition as submitted bh the learned counsel for the petitioner are that petitioner floated a tender for proposed construction of a factory building at Ranet Vellor, Tamilnadu. The OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 1 respondent participated in this tender and was issued a job order dated 29.08.2011 which was accepted by the respondent vide letter dated 02.09.2011. Subsequently, the respondent carried out the said construction work and raised invoices for the same on the petitioner. The tender, job order and the letter of acceptance all contained arbitration clauses. The dispute had arisen between the parties. Initially on 18.08.2015, respondent filed a civil suit bearing CS No. 735/2015 claiming recovery of an amount of Rs.29,15,623/- alongwith interest before the Hon'ble Madras High Court. Vide order dated 03.08.2016, Hon'ble Madras High Court had rejected the said civil suit on the ground that there was no dispute on the existence of arbitration clause. The case of the petitioner was that no sum was payable by it to the respondent and apprehending that the respondent would initiate litigation in Chennai again, on 11.08.2016, the petitioner filed a petition U/s 11 of the A&C Act before the Hon'ble Delhi High Court. Subsequently, respondent filed another petition U/s 11 of A&C Act, 1996 before Hon'ble Madras High Court on 14.09.2016. On 03.03.2017, the Madras High Court rejected Section 11 petition filed by the respondent and on 25.04.2018, Section 11 petition filed by petitioner was allowed by the Hon'ble Delhi High Court and Ms. R. Kiran Nath, (Retd. District Judge) was appointed as Sole Arbitrator.
4. Ld. Counsel for respondent has added that the contract was of the period 2011 on the purchase order dated 29.08.2011 pertaining to the steel work. The terms of the contract that altered frequently by the petitioner and ultimately, it was agreed that the invoices shall be duly certified by the architect appointed by the petitioner namely, M/s C. R. Narayan Rao. The said architect was appointed by the petitioner certified the final bill of the respondent on 29.08.2012. This communication was given by the architect to the petitioner marking a copy to the respondent. It is further stated that as payments were not coming forth from the petitioner and as the place of arbitration was not agreed upon and in dispute the respondent was constrained to approach the Madras High Court by way of civil suit on 18.08.2015 by paying the enormous amount of Court fees and diligently OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 2 prosecuting the suit. The petitioner entered appearance in the said suit and objected to it on the ground of availability of arbitration clause. The Hon'ble High Court of Madras categorically rendered a finding that there was a dispute with respect to the place of arbitration and however, rejected the suit of the respondent allowing it to explore arbitration.
5. It is further submitted by Ld. Counsel for respondent that subsequently, the petitioner herein approached the Delhi High Court on 11.08.2016 by way of a petition u/s 11 of A&C Act. Similarly, the respondent also approached the Madras High Court by way of a petition u/s 11 of A & C Act. The petition of the respondent namely OP 704/2016 on the file of Madras High Court was rejected as the same was found to be instituted subsequent to the proceedings initiated by the petitioner herein at Delhi High Court. The respondent joined the proceedings at Delhi High Court and vide order dated 25.04.2018 in OP 637/2016, Hon'ble Delhi High Court appointed Ms. R. Kiran Nath, as Arbitrator. On completion of proceedings, Ld. Arbitrator passed the Award dated 17.12.2019 whereby claims of the respondent for Rs.29,15,623/- was allowed alongwith interest @ 18% per annum from 01.10.2012 till the date of realization.
6. The petitioner has challenged this award on the ground that it is patently illegal and against public policy of India as set out in U/s 34 of A&C Act.
7. Ld. Counsel for the petitioner has submitted that the claims of respondent have been held within limitation by the Ld. Sole Arbitrator by treating certain communications issued by the petitioner as amounting to an acknowledgement U/s 18 of the Limitation Act despite the respondent never having pleaded, led evidence nor argued on the applicability of Section 18 of Limitation Act. It is further submitted that the only defence on the issue of limitation raised by the respondent was as regards Section 14 and the issue of Section 18 of the Limitation Act was never pleaded by the respondent. It is submitted that as such the award passed by the Ld. Sole Arbitrator is patently illegal and contrary to public policy of India.
OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 3
8. Ld. Counsel for the petitioner has drawn attention of the court towards the pleadings of the claimant (respondent herein) in the statement of claim as well as in the rejoinder as also the affidavit in evidence filed before the Ld. Sole Arbitrator. It is argued that there is not even a whisper of applicability of Section 18 of Limitation Act in the pleadings or in the evidence. In support of his submissions, Ld. Counsel for the petitioner has relied upon a judgment titled as "Rajiv Khanna Vs. Sunrise Freight Forwarders Pvt. Ltd.", 2016 SCC Online Del 3359, wherein the Hon'ble Delhi High Court has held that where a plaintiff seeks to rely upon an acknowledgment in writing saving limitation within the meaning of Section 18 of the Limitation Act, the same must be specifically pleaded and proved by the plaintiff and if no such pleading exists and there is no such evidence then Section 18 cannot be made available to save limitation. The court also held that for a communication to be treated as an acknowledgment of liability U/s 18 of Limitation Act, the same must be cleared, unanimous, unevocable and unconditional and placing the blame on the other party cannot be construed as an acknowledgment.
9. Ld. Counsel for the petitioner has also relied on the judgment titled as "Parmeet Singh Chatwal &Ors, Vs. Ashwani Sahani", OMP 1445/2014 and IA No. 22669/2014 decided on 14.02.2020, which also holds that extension of limitation U/s 18 of the Limitation Act has to be specifically pleaded and urged. It was further held that where an arbitrator's award grants a time barred claim, the said award is contrary to fundamental policy of Indian law and requires to be set aside.
10. Ld. Counsel for the petitioner has further argued that, in any event, the findings of Ld. Arbitrator that certain communications issued by the petitioner amount to acknowledgment U/s 18 of the Limitation Act is perverse and is contrary to the clear terms of the said communications. In this regard, he has referred to the findings of the Arbitrator that communications dated 20.09.2012, 30.10.2012 and 05.06.2015 are amounting to acknowledgment U/s 18 of Limitation Act. Ld. Counsel for the petitioner has drawn attention of OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 4 the court towards the said communications. It is submitted that E-mail dated 20.09.2012 sent by the petitioner to the respondent pointing out quality issues in the construction work done by the respondent. This mail, according to petitioner, no where contains an acknowledgement of liability as required U/s 18 of Limitation Act. In fact the pleadings of the respondent itself in the statement of claim are that the petitioner itself stated that no payment is to be made; E-mail dated 30.12.2012 sent by the petitioner to respondent pointing out the leak and rusted bolt and nuts in the work done by them. According to the petitioner, even this e-mail does not amount to an acknowledgment of liability U/s 18 of Limitation Act; Reply - legal notice dated 05.06.2015 is a reply issued by the counsel for petitioner to the communication of the respondent demanding payment dated 17.04.2015. It is argued that the Ld. Arbitrator has grossly mis-construed the instant reply - legal notice as amounting to an acknowledgment contrary to the clear terms of such notice whereby the counsel for petitioner has clearly denied that any payment is or was ever due to the respondent from the petitioner.
11. Ld. Counsel for the petitioner in this regard has referred MMTC Ltd. Vs. Anglo American Metallurgicial Coal Pty Ltd., FAO (OS) 532/15 decided on 02.03.2020, in support of his proposition that if a conclusion or inference drawn by the Arbitral Tribunal is not supported by a plain, objective and clear eyed reading of document, the court would not hesitate in interfering with the award specially if it goes to the root of the matter. Ld. Counsel for the petitioner has further submitted that the judgments cited by the Ld. Arbitrator in the Award to support the findings on limitation were never put to the petitioner and as such the petitioner had no opportunity of explaining/distinguishing them. In fact the petitioner argues the said judgments supports the case of the petitioner. In this regard, petitioner has referred a judgment titled as Satender Kumar Vs. Municipal Corporation of Delhi, 168 (2010) DLT 15 which has been relied upon by the Ld. Arbitrator in the impugned award for the proposition that raising of quality issues would amount to acknowledgement U/s 18 of Limitation Act. It is argued by the petitioner that it is evident from the said judgment that it distinguished the OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 5 previous judgment of the Hon'ble Supreme Court in National Aluminum Company Ltd. & Another Vs. G.C. Kanungo, (2009) 14 SCC 365, has been limited to its peculiar facts. It was held that only if the issue is a live issue (as in the case of National Alluminium) would the correspondence amount to an acknowledgment U/s 18 of Limitation Act. In fact the Delhi High Court specifically held in Satender Kumar's case (Supra) that "No fresh period of limitation can arise simply because letters and reminders are written time and again attempting to keep the claim alive."
12. Ld. Counsel for petitioner has further argued that therefore, the reliance placed in the impugned award on the judgment of Satender Kumar is clearly misplaced and the same in facts support case of the petitioner that the claims of the respondent are time barred. Ld. Counsel has further referred to the judgment in National Alluminium (supra) where the communication of the employer stating that the claims of the respondent are under consideration and a decision is awaited were held to amount to an acknowledgement U/s 18 of Limitation Act. It is argued that on the other hand, in the instant case, it is the consistent stand of the petitioner that no further amount in respect of two invoices in question (02.05.2012 and 23.08.2012) were payable by the petitioner to respondent.
13. Ld. Counsel for the petitioner has further relied upon a judgment titled as New Standard Engg. Co. Ltd. Vs. Karnataka Power Corporation Ltd., Suit No. 2068 of 1983 decided on 08.06.2005 (Bombay High Court) to contend that correspondence exchanged between the parties raising disputes about the quality of goods/services will not amount to acknowledgment U/s 18 of Limitation Act and cannot extend the period of limitation. Ld. Counsel for the petitioner has further argued that it is evident from the facts that the claims of the claimant are in respect of two invoices dated 02.05.2012 and 23.08.2012. It is further the finding of the Ld. Arbitrator as well as the case pleaded by the respondent that the period of limitation is to be reckoned as of the date of appointment of the Ld. Sole Arbitrator by the Hon'ble Delhi High Court on 25.04.2018. Therefore, it is clear that a period OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 6 of about six years has passed from the date of these invoices till the date of commencement of arbitration. As such, the claims of the claimant are clearly beyond the period of limitation.
14. It is further submitted by Ld. counsel for petitioner that in view of findings relating to section 18 of the Limitation Act, Ld. Arbitrator did not go into the contention of the respondent u/s 14 of the Limitation Act regarding exclusion of time spent in "Frivolous litigation" before the Hon'ble High Court of Madras. Ld. Counsel for petitioner submits that even assuming for the sake of argument, the case of the respondent at its highest that the respondent is entitled to the benefit of section 14 of the limitation Act, the claims of the respondent would still be hopelessly time barred. In this regard, it is submitted that it is an admitted position that no notice u/s 21 of the A&C Act was ever served upon the petitioner by the respondent. Further, it is the case of the respondent itself as well as the finding of the Ld. Arbitrator that the arbitration proceeding commenced from the date of the order of Hon'ble Delhi High Court i.e. from 25.04.2018. Thus, according to this it is clear that the arbitration proceedings have commenced after a period of 5¾ years from the invoice dated 02.05.2012 and 5½ years from the invoice dated 23.08.2012.
15. If it is further submitted that even if it is assumed for the sake of argument that the respondent is entitled to the benefit of Section 14 of the Limitation Act for the time spent in prosecuting the civil suit before the Hon'ble Madras High Court which is for the period from 18.08.2015 to 03.08.2016 (roughly 11½ months) and for the time spent in the section 11 of A&C Act proceedings initiated by the respondent before the Hon'ble Madras High Court which is for the period from 14.09.2016 to 03.03.2017 (roughly 5 ½ months), and as assumed by Ld. Arbitrator that the invoices dated 02.05.2012 and 23.08.2012 became payable on 03.06.2012 and 30.09.2012, even then the arbitration proceedings commenced after a period of more than 4 years 5 months from 03.06.2012 and 4 years 1 month from 30.09.2012, and as such still hopelessly time barred. Therefore, it is OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 7 submitted that even taking the case of the respondent at the highest, it is clear that the claims of the respondent are barred by limitation and their award by Ld. Arbitrator is a clear case of patent illegality and being contrary to the public policy of India.
16. The learned counsel for petitioner further submits that the respondent, even otherwise, is not entitled to the benefit of section 14 of the limitation Act in the instant facts as the respondent did not file the proceedings before Hon'ble Madras High Court in good faith and with due diligence. Ld. Counsel for petitioner submits that it is evident from the record that the respondent was very much aware of the arbitration clause and extensively negotiated with the petitioner on the same. As such, the existence of the arbitration clause was a very important commercial consideration for the respondent. The respondent has further admitted in the cross examination of CW-1 before Ld. Arbitrator to having taken legal advice at the time of filing of civil suit and in fact, was represented by the same law firm in the civil suit before Hon'ble Madras High Court as well as the instant arbitration. The respondent is also a large corporation having tremendous experience in litigation and arbitration and having access to legal advice. Despite this, the respondent instead of initiating arbitration in the first instant, chose to file a wholly non-maintainable civil suit before Hon'ble Madras High Court. As such, the filing of the said civil suit cannot be sent to have been prosecuted in good faith or with due diligence.
17. It is further submitted by Ld. Counsel for petitioner that similarly, as regards the proceedings filed by the respondent u/s 11 of A&C Act before Hon'ble Madras High Court, the same was filed more than one month after the petitioner had filed its application u/s 11 of A&C Act before Hon'ble Delhi High Court. As such, it is submitted that the proceedings filed by the respondent u/s 11 of A&C Act were by way of clear counter blast and were rejected by the Hon'ble Madras High Court. Therefore, even these proceedings cannot be said to have been initiated in good faith or prosecuted with due diligence by the respondent. Thus, benefit of Section 14 of OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 8 Limitation Act cannot be given to the respondent in respect of either of these proceedings which were initiated before Hon'ble Madras High Court.
18. It is submitted by counsel for the petitioner that the issue of Section 14 of the Limitation Act, 1963 is not considered by the arbitrator in the Impugned Award and the Arbitrator has relied only upon the provisions of Section 18 of the Limitation Act. It is further submitted by counsel for the petitioner that the respondent herein is claiming benefit of Section 14 for all the 3 proceedings. The learned counsel for the petitioner submits that the respondent is not entitled to the benefit of Section 14, Limitation Act, 1963 for any of the three proceedings.
19. It is submitted by counsel for the petitioner that it is settled law that to claim the benefit of Section 14 of the Limitation Act, 1963, it is imperative for the Plaintiff/Claimant to show that it was prosecuting "with due diligence" another civil proceeding on the same cause of action "in good faith" in a Court which, from defect of jurisdiction (or other cause of like nature), was unable to entertain it. Ld. Counsel for the petitioner submits that in the instant case to claim benefit of Section 14 the Respondent herein (Claimant) must necessarily fulfill all of the abovementioned requirements/conditions laid down in Section 14, inter alia being:--
(1) That it was prosecuting a civil suit; (2) It was prosecuting the said suit in good faith; and (3) It was prosecuting with due diligence.
20. Ld. Counsel for the petitioner submits that it is relevant to note that the meaning of the expression "good faith" as used in Section 14(1) of the Limitation Act, 1963 is to be found in the definition of that expression in Section 2 (7) of the said Act which is as follows: "Nothing shall be deemed to be done in good faith which is not done with due care and attention". [See - K.G. Khosla & Co. v. Trustees of The Port of Bombay, 1970 SCC OnLine Del 63]. In this regard it is submitted that from the record of the instant case it is apparent that the respondent is a sophisticated organisation and was at all times aware of the existence of an Arbitration Clause in the Tender executed between the parties; Despite existence of an Arbitration Clause in the Tender, OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 9 the respondent, in clear defiance of the said Arbitration Clause as well as Sections 5 and 8 of the A&C Act, 1996 proceeded to file a suit for Recovery before the Hon'ble Madras High Court, being CS 735/2015; Prior to instituting the said suit for Recovery before the Hon'ble Madras High Court, the Claimant took sufficient legal advice from two separate chambers; The Hon'ble Madras High Court vide Order dated 03.08.2016 dismissed the aforesaid suit observing that 'there is no dispute on the existence of the Arbitration Clause'. It is pertinent to note here that the respondent admitted to the existence of an Arbitration Clause in the Contract before the Hon'ble Madras High Court and no appeal was filed by the Respondent against the said Order dated 03.08.2016; The respondent then filed a Petition under Section 11 of A&C Act, 1996 before the Hon'ble Madras High Court being O.P. No 704/2016. As the Petitioner herein had filed a Petition under Section 11, A&C Act before the Hon'ble Delhi High Court, being OMP(Comm) prior to the said OP No. 704/2016, the Hon'ble Madras High Court vide Order dated 03.03.2017 rejected this O.P. No 704/2016. It is pertinent to note that the Petitioner had served an advance copy of the petition filed by it before the Hon'ble Delhi High Court on the respondent before filing the same, yet the respondent chose to file a frivolous Section 11 petition before the Hon'ble Madras High Court for reasons best known to it.
21. Ld. Counsel for the petitioner submits that it is evident from the above that the conduct of the respondent in (i) filing a civil suit inspite of admittedly being aware of the existence of an arbitration clause in the Contract; and (ii) filing a frivolous Section 11 Petition before the Hon'ble Madras High Court inspite of receiving an advance copy and thereby being aware of the Section 11 Petition filed by the Petitioner herein before the Hon'ble Delhi High Court, evidently suffers from mala fides and, at the very least, is a case of gross negligence.
22. Ld. Counsel for the petitioner submits that it is evident that none of the proceedings before the Hon'ble Madras High Court were in any way bona fide or in good faith and therefore benefit of Section 14 of the Limitation Act, 1963 cannot be claimed by the respondent for the time spent in the said OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 10 proceedings. It is submitted that no evidence has been led by the respondent to justify any exclusion of period spent in litigation before an incorrect forum in terms of Section 14 of the Limitation Act, 1963.
23. Ld. Counsel for the petitioner submits that coming to the Respondent's misconceived attempt to seek benefit of Section 14 for the period of the proceedings in the Section 11 Petition (being Arb. Pet. 637/2016) filed by the Petitioner herein, it is submitted that the said issue was never argued or pleaded by the Respondent before the Ld. Arbitrator and the argument is sought to be advanced for the first time before this Court. It is further submitted by counsel for petitioner that in any event, the party claiming the benefit of Section 14 has to satisfy the Court that it was the one prosecuting the civil suit. However, in the instant case, it is abundantly clear that the Respondents were merely defending the said Section 11 Petition filed by the Petitioner before the Hon'ble Delhi High Court and cannot in any manner be said to be prosecuting the said Section 11 Petition. As such, in terms of settled law the respondents cannot be entitled to the benefit of Section 14 of the Limitation Act for exclusion of time spent in the said Section 11 petition filed by the Petitioner which the respondent was defending instead of prosecuting. [See - Chhabubhai v. Panchan, 2010 (5) Mh LJ 885; and Narayan v. Gurunathgoud, AIR 1939 Bom 1; and BPCL v. Hill Top Consultants Pvt. Ltd., (2013) 4 Mah LJ 479.
24. It is further submitted by the learned counsel for the petitioner that in any event, it may be noted that the petitioner in the Section 11 petition has asserted on multiple occasions that the claims of the respondent are "barred by limitation" and the appointment of the arbitrator is sought at Delhi, since the respondent is purporting to drag the petitioner through unwarranted litigation in Chennai. As such, for this reason also, when the petitioner itself in those proceedings is asserting that the claims of the respondent are "barred by limitation"; the benefit of these proceedings for the purposes of limitation cannot be made available to the respondent.
25. It is therefore, submitted that in light of the above, the findings of Ld. Arbitrator in the impugned award dated 17.12.2019 relating to the issue OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 11 of limitation are perverse, contrary to the public policy of India and patently illegal. This issue goes to the root of the award and consequently, the award requires to be set-aside.
26. On the other hand, Sh. Aravindh S., Ld. counsel for respondent submits that this ground is not available to the petitioner and thus the present petition u/s 34 of A & C Act is not maintainable. In support of said submission, Ld. Counsel for respondent submits that the final bill of the respondent was duly certified by the architect appointed by the petitioner on 29.08.2012. This final bill was after giving due credits of the earlier payments received by the respondent. Although it is specifically agreed that the bills shall be settled not later than 30 days from the day when they have been duly payable. The respondent malafidely refused payment. In the best interest of a business man the respondent was regularly following up with the petitioner and also tried to meet the Managing Director of the petitioner which was avoided by the petitioner. Therefore, the respondent filed CS 35/2015 on 18.08.2015 which was well within the period of three years from the date of bills of the petitioner being certified by the architect of the petitioner on 29.08.2012.
27. Ld. Counsel for respondent further submits that the fact of relevance of certification by architect can be evidenced by the communication issued by the Managing Director of the petitioner by name Sh. Rajan Handa on 19.10.2012 wherein he has specifically raised the query "why is the architect not copied on this mail? Is it not he who certifies the bills?" It is further submitted by Ld. counsel for respondent that in the meanwhile the President of the petitioner call the email dated 20.09.2012 and raised the certain defects. This was responded to by the respondent by a letter dated 26.09.2012 affirming the corrections of the defects. The respondent also called for a joint inspection to verifying the works attended by the respondent.
28. Ld. Counsel for the respondent has argued that the respondent also sought for the release of a sum of Rs.29,15,624.69 paise which was due and payable to the respondent. A joint inspection was done on 21.12.2012 OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 12 wherein it was affirmed that all the defects pointed out by the petitioner have been rectified. It is pertinent to note that there was no other communication to the contra from the petitioner. The petitioner withheld payments on one pretext or the other. It is further submitted by Ld. counsel for respondent that petitioner claimed that it had rectified the works done by the respondent through one M/s J. B. Contractors and therefore,he was not liable to pay anything to the respondent. As far as the point of limitation is concerned, CS 735/2015 was filed on 18.08.2015 before Madras High Court which is well within the period of three years from the date 29.08.2012 when the architect of the petitioner certified the final bill of the respondent. The respondent submitted before Madras High Court that the parties had not agreed to the place of arbitration and Hon'ble Madras High Court has recorded a finding on the said facts in its order dated 03.08.2016. Express liberty was also given to the respondent who had recourse to the Arbitration and Conciliation Act
29. It is further submitted by Ld. Counsel for respondent that in the meanwhile the petitioner approached the Delhi High Court in OP 637/2016 u/s 11 of A & C Act on 11.08.2016 which was exactly within 8 days of the order passed by Madras High Court permitting recourse to the provisions of A&C Act. Hon'ble High Court of Delhi allowed the said application filed by the petitioner herein on 25.04.2018 therewith appointing Smt. R. Kiran Nath as Arbitrator.
30. Ld. Counsel for respondent further contended that in the meanwhile the respondent also approached the Madras High Court u/s 11 of A & C Act being OP 704/2016. Hon'ble Madras High Court rejected the said petition on the basis of the Section 11 petition filed by the petitioner herein at Delhi High Court being earlier in point of time. Thus, it cannot be in dispute that the arbitration proceedings culminating in the impugned award dated 17.12.2019 is the outcome of the order passed by Hon'ble High Court of Delhi in OP 637/2016 preferred by the petitioner u/s 11 of A & C Act. Thus, prima-facie the arbitration proceedings are well within the time and the law. It is settled law that the time taken by parties for diligently following litigation of OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 13 proceedings in the wrong Court will be saved u/s 14 (2) of the Limitation Act. This principle has been laid down by Hon'ble Supreme Court in its judgment in Consolidated Engineering Enterprises vs Principal, Secretary, Irrigation reported in (2008) Vol VII SCC Page 169.
31. Ld. Counsel for respondent further submits that during the course of arbitration proceedings the Ld. Arbitrator on the basis of the various documents available on record raised a legal query with respect to the application of Section 18 of the Limitation Act. In addition to the above, Ld. Arbitrator also noticed that the communication dated 20.09.2012 issued by the President of the petitioner alongwith the communication inter-se between the parties subsequently would amount to an acknowledgment as envisaged u/s 18 of the Limitation Act.
32. It is further submitted by Ld. counsel for respondent that the case law relied upon by the counsel for the petitioner in the matters of Rajiv Khanna & Parmeet Singh (supra) are of no help to him inasmuch as the case of Rajiv Khanna is u/s 96 of Civil Procedure Code wherein the scope of examination under appeal is much wider than the scope available u/s 34 of A&C Act. The further distinguishing factor is that in the said case of Rajiv Khanna (supra) the only contention was u/s 18 of Limitation Act and not as an additional ground considered to be available to the respondent herein in the present case. To reiterate the arbitration proceedings are well within time as the same are saved u/s 14 and 18 of the Limitation Act. It was the wisdom of Ld. Arbitrator on the basis of material available on record specially the communication inter-se the parties which established jural relationship of debtor and creditor inter-se the parties. Ld. Arbitrator in her wisdom concluded that there was sufficient material to entertain the claim of respondent herein u/s 18 of the Limitation Act. It was the wisdom of Ld. Arbitrator that the question of Section 14 of Limitation Act need not be gone into on the overwhelming records available. This conduct of Ld. Arbitrator is being put forth as a ground for challenge by the petitioner in this proceeding OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 14 u/s 34 of A & C Act. The petitioner has conveniently forgotten the limited scope available for interference into an award u/s 34 of A & C Act.
33. Ld. counsel for respondent further contended that it is settled law that by Hon'ble Supreme Court in the case of Ssanyong Engineering & Construction Company Ltd. vs. NHAI (2019) Vol XV SCC page 131 reiterating its finding in the case of Associate Builders vs DDA (2015) 3 SCC 49 that interference u/s 34 is available on the grounds of contravention of public policy and the arbitrator not adopting the judicial approach , the breach of principle of natural justice, patent illegality and the award being contrary to the basic notions of justice. Hon'ble Supreme Court held in same case of Ssanyong Engineering (supra) that there must be patent illegality appearing on the face of the award which goes to the root of the matter and not something which is a mere erroneous application of law. The other ground laid down by Hon'ble Supreme Court was that the contravention of a statute cannot be brought in by the back door and mere contravention of substantive law of India, by itself, is no longer ground available to set-aside an arbitral award. Thus, looking at the impugned award, none of the ground as made out in the judgment of Hon'ble Supreme Court is available to the petitioner and hence, the present petition will have to be failed on this ground alone.
34. Ld. Counsel for respondent further stated that the scope of interference of section 34 of A & C Act is available on the grounds provided in the said section and not anything else. Ld. Counsel for respondent has relied upon the decision of Hon'ble Supreme Court in M. Anasuya Devi & Anr. vs M. Manik Reddy &Ors. reported in (2003) vol. VIII page 565 wherein it was categorically laid down as to what are the grounds available for setting aside the award u/s 34 of A & C Act, Hon'ble Court stated that the award can be interfered only on the grounds provided u/s 34 and none else.
35. Ld. counsel for respondent urged that the requirement of section 21 of A & C Act has also been complied in the present case inasmuch as the arbitration proceedings in the present matter has arisen as a consequence of the petition and filed by the petitioner u/s 11 of A & C Act OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 15 before Delhi High Court, Hon'ble Supreme Court in its judgment in the matter of State of Goa vs Praveen Enterprises reported in 2012 Vol XII SCC page 581 has held that the arbitration proceedings shall be deemed to commence on the date on which the request for that dispute to be referred to arbitration is received by the respondent and therefore, the relevant date for the purpose of limitation is the aspect u/s 21 of A&C Act. Here, the arbitration proceedings having been initiated pursuant to the order of Hon'ble High Court of Delhi in OP 637/2016 is wholly within time. The petitioner had approached the High Court of Delhi on 11.08.2016 and excluding the time taken by the respondent before High Court of Madras in the proceedings validly initiated by it, the impugned proceedings cannot be claimed to be barred by limitation.
36. Ld. Counsel for respondent submitted that at the cost of repetition, it may be stated that the final bill of the respondent was certified on 29.08.2012 by architects of the petitioner and the suit was filed by the respondent on 18.08.2015 which was well within the period of limitation. The suit of the respondent was rejected on 03.08.2016 with liberty to explore the relief under the provisions of A & C Act. The petitioner has approached the Hon'ble High Court of Delhi on 11.08.2016 which is once again eight days within the order of Hon'ble Madras High Court and the Ld. Arbitrator had been appointed in the said proceedings. Thus, by no stretch of imagination can it be said that the proceedings are barred by limitation. The proceedings are maintainable u/s 14 and also u/s 18 of Limitation Act as held by Ld. Arbitrator. Hence, the award cannot be interfered on the ground of patent illegality as envisaged by the Hon'ble Supreme Court in the case of Ssanyong and Associate Builders (supra).
37. It is submitted that submissions of the learned counsel for the petitioner are untenable. It is further submitted that Section 14 of the Limitation Act in the wisdom of the Ld. Arbitrator would not be relevant in as much as the arbitration proceedings is the outcome of the orders of the Delhi High Court appointing the Ld. Arbitrator vide its order dated 25.04.2018. The OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 16 relevant dates prior to the same are 29.08.2012 when the final bill of the respondent was certified by the Architect of the petitioner. Despite repeated requests, the petitioner ready to pay the amount due which compelled the respondent to file civil suit in Madras High Court by paying the relevant court fees adhering to all requirement of Civil Procedure Code. The said suit came to be rejected on 03.08.2016 with liberty to both parties to pursue remedies under the A&C Act. The said order also recorded that although there was consensus with regard to the Arbitration agreement there was dispute with respect to place and manner of arbitration. Subsequently on 11.08.2016 the petitioner approached the Delhi High Court U/s 11 of A&C Act pursuant to which the arbitrator was appointed. It is submitted that the time calculated between 30.09.2012 till the date 11.08.2016 would clearly shows that the proceedings were well within time after deducting the time taken by the respondent in the civil suit. It is submitted that petitioner does not deny the same. It is submitted that the contention of the petitioner that the civil suit was not bonafide is also untenable for the reasons that finding of the Madras High Court qua the existence of the dispute with reference to the arbitration clause has become final. It is further submitted that the same is the finding by the Hon'ble Delhi High Court in its order dated 25.04.2018. "The conclusion that follows is that the parties have failed to reach a consensus ad-idem on the procedure to appoint an arbitrator/seat of the arbitrator". Thus, by no stretch of imagination can it be concluded that civil suit filed by the respondent at Chennai was not bonafide.
38. Ld. counsel for the respondent further submitted that Section 11(11) of A&C Act reads that when more than one request has been made under Sub Section 4, 5 and 6 of A&C Act to the Chief Justices of different High Court or their designate, the Chief Justice or his designate to whom the request has been first made under the relevant sub sections shall alone be competent to decide on the request. The statutory provisions being such the Section 11 application filed by the respondent before the Madras High Court came to be rejected that it was a subsequent proceeding to the proceedings initiated by the petitioner before the Hon'ble Delhi High Court. As far as the OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 17 proceeding in the Delhi High court goes the order dated 25.04.2018 specifically shows that the contention of the respondent was only with respect to the jurisdiction and the place of arbitration. It was never contended by the respondent that arbitration shall not be available. In this background the Ld. Arbitrator who came to be appointed by the orders of the Hon'ble Delhi High Court in her wisdom sought to not go into the aspect of Section 11 of A&C Act. The whole procedure of appointment of arbitrator was within time.
39. Ld. Counsel for respondent further submitted that although the petitioner had favourable order by getting an arbitrator appointed did not chose to file the claim before the Ld. Arbitrator. The prayer in Section 11 petition of the petitioner before the Hon'ble Delhi High Court was to take necessary measures to secure appointment of an independent arbitrator for adjudication of the dispute between the parties. The prayer of the petitioner being thus it is not known as to on what basis the petitioner is now coming forward with the arguments that the claim is barred by limitation. It is submitted that the petitioner has relied upon certain judgments of Bombay High Court in support of his arguments. It is submitted that none of the above judgments would apply to the present case in as much as all the aforesaid judgments relied upon by the learned counsel for the petitioner pertain to civil suits and the provisions of CPC where there is no statutory bars as envisaged under section 11(11) of A&C Act. At the most a civil suit filed subsequently can only be a matter of res-subjudice U/s 10 of CPC, therefore, the submissions of the learned counsel for the petitioner and the reliance placed by him on judgments do not help his case. Further the judgment in Narayan Jivaji Vs. Gurunath Gouda (supra) in its operational portion clarifies that there was no bar under CPC for filing a separate suit. This finding of the Division Bench of the Bombay High Court clearly supports the contentions put forth that Section 11(11) of A&C Act bars maintainability of subsequent petition.
40. Ld. Counsel for the respondent further submits that it is not the case of the petitioner that the amount claimed in the claim petition was not OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 18 due to the respondent. The petitioner has miserably failed to establish its claim for set off by leading evidence for the same. The claim of the petitioner that he had carried out the same works through J.B. Contractors finds no support by any material which has been placed on the record. Per contra, the respondent has examined its Mg. Director who was subjected to extensive cross-examination by the learned counsel for the petitioner and the said evidence conclusively shows the claim of the respondent to be correct and true and the fact there was no consensus with reference to the place and procedure of appointment of an arbitrator.
41. Ld. counsel for the respondent further submits that the contention of the learned counsel for the petitioner that the respondent would not be entitled to benefit of the time taken by the petitioner in its petition U/s 11 of A&C Act before the Hon'ble Delhi High Court is also untenable for the reasons that in the present factual matrix the respondent could not have filed separate Section 11 petition so as to claim that it was prosecuting the proceedings especially in the light of statutory bar. Thus, looking at it from any angle the present petition U/s 34 of A&C Act with the limited scope of interference available to this court is wholly unsustainable and thus liable to be rejected with the exemplary costs.
42. In rejoinder, Ld. Counsel for the petitioner has denied the argument raised by the counsel for the respondent, that the period of time spent by the respondent in pursuing the Civil Suit filed by it before the Madras High Court (from 18.08.2015 to 03.08.2016) should be excluded under Section 14 of the Limitation Act on the ground that it was purportedly done under the bona fide belief that there was a dispute as regards the place of arbitration. In this respect, it is submitted by the counsel for the petitioner that the Hon'ble Madras High Court in its order dated 03.08.2016 rejecting the said Civil Suit expressly recorded that "there is no dispute on the existence of the arbitration clause". This Order attained finality in as much as no appeal was filed by the Respondent against such Order. As such, it is completely incorrect for the Respondent to now attribute any bona fide belief in the filing of the Civil Suit despite the fact that undisputedly there existed an OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 19 arbitration clause between the parties. Once the arbitration clause is undisputed, and is agreed to by both parties, there can be no bona fide reason for the Respondent to circumvent the same by filing a Civil Suit.
43. It is further submitted by the counsel for the petitioner that the assertion of the respondent that the time relating to pendency of the Section 11 Petition filed by the Petitioner before the Delhi High Court (i.e. from 11.08.2016 to 25.04.2018) should also be excluded, is also grossly incorrect. In this regard, it is submitted that the said petition was filed by the petitioner expressly asserting that the so-called claims of the respondent are denied and that the same are apart from being time-barred are even otherwise not maintainable on merits. Furthermore, the said Petition was heavily contested by the Respondent; and the Order of the Delhi High Court dated 25.04.2018 rejected such arguments of the respondent. It may be noted that no appeal was preferred by the Respondent against the Order of the Delhi High Court dated 25.04.2018 which has become final.
44. As such, it is submitted by counsel for petitioner in rejoinder that it cannot be said that the benefit of the pendency of the said Section 11 petition can ensure to the Respondent as neither was it being prosecuted by the Respondent, nor did the same amount to a raising/submissions of the claims of the respondent. In fact, the wording of Section 14 of the Limitation Act is clear and it applies only to those proceedings which are 'prosecuted' by a party as 'Plaintiff'. Since the Section 11 proceedings before the Delhi High Court were being prosecuted by the petitioner, and were being contested by the respondent; it cannot seek exclusion of time-spent in those proceedings. In this regard, it may further be noted that the judgment of the Supreme Court in Praveen Enterprises (Supra) rather than supporting the case of the Respondent, supports the petitioner. Since no Section 21 notice was issued by the respondent, the first time the said claims are raised are as part of the Statement of Claims before the Ld. Arbitrator in May 2018 - which is the relevant date which would be relevant for the purpose of limitation. Moreover, it is also important to note that the said argument (viz. that the time-period spent by the Petitioner in prosecuting the Section 11 Petition OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 20 before the Delhi High Court) had never been raised by the respondent before, and is being raised by the Respondent for the first time in these proceedings obviously after the Respondent had realized that its claims are time-barred and not maintainable, even if its case is taken at its highest.
45. It is submitted by counsel for the petitioner that the issue of limitation is in and of itself determinative and sufficient for the impugned award dated 17.12.2019 to be set aside. However, for the sake of argument, and without prejudice to the above, it is submitted that the Ld. Arbitrator has on a perverse reading of the terms of the contract between the parties assumed that the amount of Rs.29,15,623/- pertaining to invoices dated 02.05.2012 and 23.08.2012 raised by the respondent, became due and payable on the certification of the said invoices by the Project Architect. In this regard, it is submitted that the said contract between the parties does not contain any provision or certification of invoices by the Project Architect, therefore in the absence of any such clause/term in the contract, Ld. Arbitrator could not read the same into the contract and on this basis hold that the respondent is entitled to the said amount of Rs.29,15,623/-.
46. Ld. Counsel for petitioner further submits that it is evident from the certificate given by the Project Architect that he only checked the bills and the veracity there of and did not actually check/verify the quality of the works carried out by the respondent. Ld. Counsel for petitioner submits that Ld. Arbitrator has on a perverse reading of clause 32 of the tender held that the contractor shall be entitled to payment for the works combined. In this regard, it is submitted that a complete reading of clause 32 makes it abundantly clear that the said provision shall be applicable only in the event of termination of the said tender and even then the petitioner would be legally entitled to deduct any amounts due from the contractor (respondent) to the owner (petitioner). In fact, clause 32 requires to be seen alongwith other relevant clauses in the tender i.e. inter-alia clauses 23, 25 and 26 which all are clear that the petitioner is well within its rights to withholds the payments claimed by the respondent on account of defective workmanship of the respondent.
OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 21
47. Ld. Counsel further submits that Ld. Arbitrator failed to appreciate the clear admission of liability on the part of the respondent as vide communication dated 09.01.2013, the respondent after conducting a joint inspection of the work site has clearly and un-equivocably admitted the fact that there were several deficiencies and defects in the work carried out by it and informed the petitioner that an additional and extra adhoc payment of Rs.20,00,000/- was required to procure the materials for rectifying only one of the major defects. It is thus, submitted that in view of the above, counsel submits that Ld. Arbitrator's finding that the respondent is entitled to the claim of Rs.29,15,623/- is patently illegal , perverse, based on non-appreciation of evidence on record and wholly contrary to the fundamental policy of Indian law and award must be set-aside. In support of this proposition, counsel for petitioner relies on Judgment of Hon'ble Supreme Court of India in the matter of Ssanyong Engineering & Construction Company Ltd. vs. NHAI (2019) SCC OnLine SC 677 and Associate Builders vs DDA (2015) 3 SCC 49.
48. Ld. Counsel for respondent submits that the entitlement of the respondent has been questioned by the petitioner. The President of the petitioner by way of his communication dated 20.09.2012 raised the following issues in the steel construction put up by the respondent:
(i) Parlins are found fixed with bend (ii) The flushing plate of the structure which protrudes beyond the finished structure has to be aesthetically made (iii) All joints are not leak proof we correct the leak after every rain
49. Ld. Counsel further submitted that in response to the above communication, the respondent addressed a letter dated 26.09.2012 asserting that the defects have been rectified and sought for a joint inspection at the site. The respondent by its letter dated 08.11.2012 has stated that the representative of the respondent have attended to the defects and sent photographs evidence in same. The respondent reiterated its claim to release Rs.29,15,624.69/- as certified by the architect of the petitioner.
OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 22
50. Ld. Counsel for respondent further stated that a joint inspection was conducted on 21.12.2012 wherein it was pointed out that all the defects have been duly cleared. It is pertinent to note that no communication of any sought has been received from the petitioner denying the same or stating anything contrary. The petitioner has bluntly denied the payments due to the respondent without any acceptable proof that M/s J. B. Contractors have rectified/attended to the same works that was supposed to be attended by the respondent. The petitioner relied upon a bill of M/s J. B. Contractors dated 13.03.2013. A mere perusal of the bill would in itself show that the alleged modification work carried by M/s J. B. contractors was (i) existing gal valume roof sheet changing work as per standard specification; (ii) poly carbonate sheet fixing work and (iii) supplying and fixing of curved and flashing, turbo ventilators as per standard specifications.
51. Ld. counsel submits that this document i.e. bill issued by M/s J. B. Contractor dated 13.03.2013 (Ex.R-1) is being relied upon by the petitioner to deny the claim of the respondent. However, a perusal of the final bill dated 13.03.2013 purportedly to be issued by M/s J. B. Contractor specifically stats that it is a bill for civil works and description found in the bill is as follows "final bill for construction of factory building, compound wall and existing ground earth work cutting and leveling and filling. New road formation work including culvert and earthen work." It is the claim of the petitioner that the details of the work is available wherein under entry C of the said tabular column, the purported works of rectification to the PEB Factory shed has been done. There is nothing on record to show that the defects pointed out in the work of the respondent are the same which have been carried out by M/s J.B. Contractors. Nobody from M/s J. B. Contractors has been examined to prove the same. RW-1 Sh. Sanjay Kumar Arora deposed that he knew nothing about the contract between the petitioner and M/s J. B. contractors. With reference to Ex.R-1, RW-1 stated that he knew nothing about the document except that was posted in the accounts department. To further questions, RW-1 affirmed that from the bill it can be made out that M/s J. B. contractors are civil contractors as the bill is raised OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 23 for the civil work done. RW-1 pleaded ignorance that the tender issued to the respondent was for steel work. RW-1 further to a question in the purported invoice Ex.R-1 after looking into the same has reiterated that the same is an invoice and the details of the work done are mentioned on the said document Ex.R-1. RW-1 admitted that no number has given for invoice Ex.R-1.
52. Ld. Counsel for respondent has submitted that the respondent had examined his Managing Director Sh. C. Ravindran as CW-1 and marked as many as 25 exhibits to establish the amounts due to the respondent. None of the Ex.C-1 to C-25 marked before Ld. Arbitrator in support of the claim of the respondent has been disproved by the petitioner in any manner known to law. Ld. Counsel for respondent further submits that a perusal of tendered document show that the same was invited for the purpose of steel works in the factory building being put up by the petitioner at Ranipet Chennai. It is not in dispute that the works carried out by the respondent have been specifically certified by the architect of the petitioner. That being so it is not open to the petitioner to now state that the architect appointed by him merely certified the bills and did not look into the quality and work done by the respondent. The petitioner was not prevented from examining his architect to establish this fact. The petitioner having chosen not to lead any evidence to the contrary now estopped from wriggling out of his liability on this ground.
53. Ld. Counsel for respondent has further submitted that the respondent had categorically established his entitlement to the sum awarded by way of documentary evidence on record and that the same having not been contradicted in any manner by the petitioner. Ld. Counsel for respondent further urged that the petitioner is burdened to prove the documents and evidence produced by him. Mere production of documents without the same being supported by credible evidence both oral and circumstantial will in no manner help the case of the petitioner. The production of bill dated 13.03.2013 (Ex. R-1) does not in any manner proved the case of petitioner that he has validly denied the entitlement of the OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 24 respondent. Ld. Counsel for respondent submits that the Ld. Arbitrator has rightly granted the claim of the respondent and award is not liable to be interfered with.
54. In rejoinder, it is submitted by the learned counsel for the petitioner that it is incorrect for the respondent to assert that all defects pointed out by the petitioner were rectified and that the same was noted in the joint inspection on 21.12.2012 after which, according to the respondent "no communication of any sort has been received from the petitioner denying the same or stating anything to the contrary." In this regard, it may be noted that the respondent has completely ignored its own communication dated 09.01.2013 which is subsequent to the joint inspection, and where the Respondent admitted that there are several deficiencies and defects in the works carried out by it and informed the petitioner that an additional ad hoc payment of Rs.20,00,000/- was required to procure the materials for rectifying only one of the various defects. It may be noted that this was the last communication on the issue of defects exchanged between the parties and the respondent has expressly admitted existence of defects and sought payment of Rs.20,00,000/- from the petitioner. Further, it is a matter of record as has come out in the cross examination of CW-1 that after this communication in 09.01.2013, no further work was done by the respondent nor did the petitioner make the payment of Rs.20,00,000/- as demanded by the respondent.
55. It is further submitted by the learned counsel for petitioner that as regards the issue of proof of documents it is relevant to note that the Arbitrator has specifically recorded during the proceedings dated 11.07.2019, wherein it has clearly been held that since the claimant/respondent had not filed his affidavit of admission/denial of the documents and thus the documents filed by the petitioner herein on the record of the Ld. Arbitral Tribunal are deemed to be admitted. It is for this reason that, as the documents already stood proved according to the Order of the Ld. Arbitrator, no further or other witness was required to prove the documents and the only OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 25 witness produced by the petitioner was by way of abundant caution and that too only from its accounts department.
56. Ld. Counsel for petitioner has submitted that Ld. Arbitrator has erroneously awarded 18% per annum interest on the claim amount of Rs.29,15,623/- w.e.f. October 2012 till the date of realization. This has been done on the sole basis that the transaction between the parties was purportedly one of a "commercial" nature without offering any other explanation or reasoning and that too in contravention of the terms of the said tender. In this regard, counsel for the petitioner submits that Ld. Arbitrator gravely erred in failing to appreciate the fact that a bare perusal of the salient conditions of the said tender makes it evident that the petitioner cannot in any circumstance be held liable to pay interest on any delayed payments.
57. It is submitted that it is settled law that interest if prohibited under the contract between the parties, cannot be awarded by Ld. Arbitrator. Same is evident from a reading of Section 31 (7) of A & C Act as well as various judgments of Hon'ble Supreme Court including in Jai Prakash Associates Ltd. vs Tehri Hydro Development Corporation India ltd. (2019) SCC OnLine SC 143. Ld. Counsel further submits that even otherwise, Ld. Arbitrator fails to appreciate that as per Section 31 (7) (b) of A & C Act, the rate of interest awarded shall not be more than 2% higher than the current rate of interest prevailing on the date of award. It is submitted that the award of interest @18% per annum being clearly contrary to the agreement of parties as well as the statutory scheme under the A & C Act 1996 requires to be set-aside.
58. Ld. counsel for respondent submitted that the contract between the parties being a commercial contract and the respondent having executed its part of the contract have been wrongly deprived of its dues by the petitioner and has chosen to award interest @ 18% as provided u/s 31 (7) of A&C Act. The contention of petitioner if accepted would clearly go against all notions of justice. Thus, the Ld. Arbitrator was right in awarding interest as OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 26 per Section 31 (7) of A & C Act. Ld. counsel for the respondent has further submitted that Section 31(7) of A&C Act vests discretion with the Ld. Arbitrator who had awarded 18% interest.
59. Ld. counsel for petitioner submits that Ld. Arbitrator has perversely and in contravention of public policy of India disallowed the petitioner's claim in relation to being compensated/restituted suitably for the cost and expenditure incurred by it towards prosecuting and defending in various litigations before Hon'ble Madras High Court and Delhi High Court as well as the arbitration proceedings despite the fact that the documents on record exhibit the vexatious conduct adopted by the respondent in preferring time barred claims and further instituting various proceedings in relation to such claims. Ld. Counsel for petitioner further claims that the Ld. Arbitrator even fails to appreciate the fact the respondent has with malafide intentions failed to pay cost of Rs.50,000/- imposed on it by Ld. Arbitrator vide order dated 07.01.2019 and 06.02.2019 and which are on record of this Court.
60. Ld. counsel for respondent submits that the institution of suit by the respondent at the Madras High Court was pursuant to the fact that there was no agreement with reference to the place of arbitration. The respondent has suffered huge Court fee for the institution of the said suit. This would categorically show the bonafides and the diligence required on the part of respondent to realize its dues from the petitioner. The proceedings u/s 11 initiated by the respondent at Chennai was also duly initiated on the basis of the conclusive finding of Hon'ble Madras High Court in CS 735/2015. The said finding having become final is not now questionable by the petitioner. The allegations of the petitioner that the proceeding initiated by the respondent at Chennai lack bonafide has no legs to stand. Despite all these the respondent has participated in the proceedings at Delhi with the clear intention to realize its legitimate dues that have been wrongfully withheld.
61. Ld. counsel for respondent has argued that award is not patently illegal, perverse biased, inconsistent and in conflict with public policy. The award also does not contravene any provision of the Indian law and OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 27 does not traverse beyond the oral and documentary documents available on record. It is also not in conflict with the basic notion of justice and morality, does not suffer or display any error apparent on the face of record. It also does not display non-application of mind on the part of Ld. Arbitrator. It is neither based on conjuncture and surmises nor made in a manner so shockingly infracting the fundamental notions of the principles of justice. Lastly, it is submitted that none of the judgment relied upon by Ld. counsel for petitioner support his case, rather those judgments support the case of the respondent. Thus, none of the grounds available u/s 34 of A & C Act are made out and hence, the award cannot be interfered with and requires to be upheld.
CONCLUSION
62. Pursuant to issuance of tender, a job order dated 29.08.2011 was issued by petitioner to respondent whereby the job of steel work was granted to the respondent in a total sum of Rs.2,47,28,726/-. The work was to be completed within four months and the payment was to be made as per the terms and conditions as mentioned in the tender. Admittedly as per Clause 23 of the tender, the payment was to be made on monthly cyclical basis. There is no dispute that meaning of the said term construed by the Ld. Arbitrator as 30 days from the date of certification. The tender notes that certification shall be on monthly basis and bill value will be paid within 30 days. In the present case, final tax invoice in the sum of Rs.1,96,95,436.69 paise dated 23.08.2012 was raised and was certified on 29.08.2012 by the architect of the petitioner.
63. Admittedly e-mail dated 20.09.2012 was written by the petitioner to respondent raising quality issues and some defects in the work which was required to be rectified by the respondent. Thereafter another e- mail dated 30.11.2012 was sent by the petitioner to the respondent in which petitioner refused to pay the balance demanded/claimed amount Rs.29,15,624/-. There is no dispute between the parties Article 113 of Limitation Act would apply in the factual scenario of the case. As per Article OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 28 113 of Limitation Act, limitation period of three years commencing from the date of accrual of cause of action. The cause of action accrues when there is a refusal to make the payment.
64. Admittedly, there were 3 different legal proceedings which were initiated prior to the appointment of the arbitrator by the Delhi High Court in April 2018, being (i) the Civil Suit filed by the respondent before the High Court at Chennai; (ii) the Section 11 proceedings filed by the respondent before the High Court at Chennai; (iii) the Section 11 proceedings filed by the petitioner before the High Court at Delhi. There is no dispute that respondent had filed a civil suit for recovery in Madras High Court on 19.08.2015 and that suit was contested by the petitioner on the grounds of existence of arbitration agreement and the said case was disposed of after about one year on 03.08.2016 and liberty was granted to the parties to have recourse to the arbitration clause.
65. On consideration of material on record and hearing the submissions advanced by the parties, this Court finds no merit in the submissions advanced by the petitioner. Section 14 of the Limitation Act deals with exclusion of time of proceeding bona fide in a court without jurisdiction. The policy of the section is to afford protection to a litigant against the bar of limitation when he institutes a proceeding which by reason of some technical defect cannot be decided on merits and is dismissed. While considering the provisions of Section 14 of the limitation Act, proper approach will have to be adopted and the provisions will have to be interpreted so as to advance the cause of justice rather than abort the proceedings. It has to be kept in mind that an element of mistake is inherent in the invocation of Section 14. In fact, the section is intended to provide relief against the bar of limitation in cases of mistaken remedy or selection of a wrong forum. On reading Section 14 of the Act it becomes clear that the legislature has enacted the said section to exempt a certain period covered by a bona fide litigious activity. The principle is clearly applicable not only to a case in which a litigant brings his application or suit in the court, that is, a court having no jurisdiction to entertain it but also where he brings the suit or OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 29 the application in the wrong court in consequence of bona fide mistake of law or defect of procedure. Having regard to the intention of the legislature, this Court is of the firm opinion that the equity underlying Section 14 should be applied to its fullest extent and time taken diligently pursuing a remedy, in a wrong court, should be excluded.
66. It cannot be held in the present case that there was any malafide or respondent was not prosecuting a judicial remedy with due diligence and soon after the said suit was disposed of by the Madras High Court directing parties to have recourse to the process of arbitration, it was the petitioner herein who had shown quickness in filing a petition u/s 11 of A&C Act before the Hon'ble Delhi High Court seeking adjudication of the disputes by an arbitrator. It has already noted above that petitioner had raised the issues of quality and on refusal to make the payment of balance demanded/claimed amount Rs.29,15,624/- on 30.11.2012 by sending an email, the cause of action to take recourse to judicial remedy had arisen in favour of respondent. There is no dispute that respondent was required contest the proceeding u/s 11 of A & C Act filed by the petitioner at Delhi as he had filed his petition u/s 11 A & C Act later at Madras High Court and in view of the specific provisions in the A & C Act, the petition u/s 11 filed by the respondent was not allowed since the petition u/s 11 was filed earlier in point of time by the petitioner.
67. Petitioner cannot non-suit the respondent by acting smartly and choosing to file petition u/s 11 A&C first before respondent filed the same and thereby raising a dispute which according to him was required to be adjudicated upon by Ld. Arbitrator and after the award was passed and the proceedingwas concluded, then argue that respondent had not prosecuted the proceeding in view of the existing legal position but was rather defending the same and that Section 14 of Limitation Act would apply only if respondent had been prosecuting and not contesting. Court will have to consider the factual matrix and the situation as a whole and if the parties' hyper technical views are accepted, the interest of justice would suffer. This Court is satisfied that claim of the respondent was within time. Ld. Arbitrator had discussed the OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 30 point of limitation at length. Ld. Arbitrator had noted that period of limitation would start a fresh from 20.09.2012 and then from 30.10.2012 Ex. C-20 and we have already noted above that it was on 30.11.2012, when there was a refusal to pay by the petition and from which date cause of action had accrued to the respondent. It has further been noted in the award that there was demand letter/notice Ex.C-22 dated 17.04.2015 whereby claimant/respondent demanded said balance outstanding which was replied by the petitioner herein vide legal notice dated 05.06.2015 Ex.C-23. It was further observed by Ld. Arbitrator that the order of High Court of Delhi appointing her arbitrator dated 25.04.2018 which was within the period of limitation as time started running afresh from 05.06.2015 when respondent sent the reply Ex.C-23 and at no point of time the claim had become dead between the parties because of the quality issues between the two parties remained live during the entire period.
68. Ld. Arbitral Tribunal relied upon National Aluminum Companies case and did not felt the need of going into the contentions of the petitioner herein regarding excluding the time spent in frivolous litigation before Hon'ble High Court of Madras in between. No fault can be found with the reasoning of Ld. Arbitrator in this regard.
69. This court finds that submissions advanced by the learned counsel for the petitioner regarding Section 18 of Limitation Act are not much relevant as it has been observed above that the cause of action had actually accrued on 30.11.2012 when petitioner had refused the payment. It may however, be noted that in the present case also, already quality issues had been raised by the petitioner and no fault can be found as regards the observations of the Ld. Arbitral Tribunal that the issues were live issues even in the present case and that appears to be the reason that petitioner himself chose to file petition U/s 11 of the A&C Act before respondent/claimant could do so after the disposal of the civil suit by the Hon'ble Madras High Court.
70. This court finds no defect as regards entitlement of the claimant to the sum of Rs.29,15,623/- as the principal outstanding from the petitioner. This court cannot re-appreciate the evidence discussed by the Ld. Arbitrator OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 31 and no perversity can be found therein. Ld. Arbitrator had discussed at length regarding the set off claimed by the petitioner by appreciating the evidence on record and had found that the doubt was created whether the bills placed on record by the petitioner in respect of rectification of the defects in the work of claimant from M/s J.B. Contractors and, therefore, the claim of the petitioner in the sum of Rs.33,98,000/- was disallowed.
71. As regards interest also, this court is in agreement with the view taken by the Ld. Arbitrator as the interest of 18% per annum awarded with respect to commercial transaction cannot be said to be unconscionable. It cannot be observed that a party would not be entitled to interest even if his huge due payment was not made for a long period of 7-8 years. Court and Tribunals have to consider the totality of facts and circumstances apart from the terms of the contract, if any, to balance the conflicting interest and to find just resolution of the disputes. A party cannot be allowed to unjust enrichment by refusing to make payment and then taking recourse to the alleged terms regarding non-payment of interest. It may be noted that even the term of that nature would be restricted for a period for which the terms or the period of work done had to be concluded at best. In the present case, work was to be completed within four months and payment was to be made in the cyclical monthly mode. In case, there is a delay in completion of work done or breach of specific performance of the contract or the manner in which the payment was to be made then it lies within the discretion of the Ld. Arbitrator to award the appropriate interest. Otherwise it would be injustice as in the present case, if a sum of Rs.29,15,623/- is awarded to a party after more than 8 years that would not be in the interest of equity, fair play and justice. Award of interest is an aspect of restorative justice.
72. This court is of the considered view that the interpretation of the learned arbitrator on the provisions of is a possible interpretation, and such a possible interpretation cannot be substituted by another interpretation by this Court under section 34 of the Arbitration Act. Arbitrator being the master of facts, on the basis of record and materials placed before him by the parties came to such specific findings in reaching its conclusions which cannot be OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 32 stigmatized as perverse by this Court. This court finds no patent illegality in the impugned award. Tribunal has given detailed findings on facts based on evidence adduced before it.
73. To sum up, this court is satisfied that Ld. Arbitrator had considered all the relevant facts, material and issues raised by both the parties and passed a reasoned award dated 17.12.2019 having no defect and as such merits no interference and thus, this petition U/s 34 of A&C Act deserves to be dismissed. Order accordingly. File be consigned to record room.
VINAY KUMAR Digitally signed by VINAY
KUMAR KHANNA
(Dictated and announced
today i.e. 08.01.2021) KHANNA Date: 2021.01.08 23:00:18
+05'30'
(VINAY KUMAR KHANNA)
District Judge
(Commercial-02)
South Distt., Saket, New Delhi/08.01.2021
OK Play Auto(P) Ltd. Vs. Indian Commerce & Industries Co. (P) Ltd. Page 33