Andhra HC (Pre-Telangana)
The Union Of India (Uoi), Rep. By General ... vs P. Kameswar Rao, Contractor on 20 July, 1995
Equivalent citations: 1995(3)ALT451
Author: B.S. Raikote
Bench: B.S. Raikote
JUDGMENT B.S. Raikote, J.
1. This appeal is preferred by the South Central Railway by its Officers being aggrieved by the judgment and order passed by the III Additional Judge, City Civil Court, Hyderabad, dated 22nd November, 1994 in O.S. No. 97 of 1991. By the impugned judgment, the suit was decreed by appointing Sri M. Markandeya, retired District Judge as sole arbitrator to settle the disputes arisen between the parties to the suit agreement.
2. The present appellants were the defendants in the suit. The learned Counsel for the appellants contended that the impugned judgment and decree are illegal, contrary to the arbitration clause. On the basis of the conditions stipulated in the agreement which was entered in to between the appellants and the respondent contractor. The present dispute could not have been referred to the arbitrators. On the other hand, the learned Counsel for the respondent contractor strenuously supported the impugned, judgment and decree.
3. In order to appreciate the rival contentions of both parties, it is necessary to note a few facts of the case. The fact that is not disputed is that the respondent entered into an agreement for the construction of Central CHE Rapair Shop at Kazipet with the defendants under an agreement No. 29/DEN/VBRE/ KAJ. 1982, dated 6-9-1982. But, alleging that the Railway Department subsequently shifted the construction site to a place 4 K.Ms. away from the original site and the new site was inaccessible for the movement of the vehicles of the contractor. The plaintiff claimed 12% over and above the S.S.R. rates to compensate the loss sustained by him over and above the tender rate. He further alleged that there was delay in commencing the work itself due to laches on the part of the Railway Department for non-supplying the drawings and in the meanwhile, there was rise in the prices of the materials and the labour charges. He made a representation to that effect. The Department, instead of considering the same, terminated the contract illegally. In these circumstances, he made several representations to the defendants to refer the matter to the arbitrator as per Clause 64(3) of the General Conditions of Contract. Since the defendants failed to do that, the present suit was filed. The suit was contested by the defendants by filing written statement. They alleged that the plaintiff did not make any attempt to commence the work or to collect the material to carry out the construction. In these circumstances, number of letters were addressed to him, but without any response and ultimately, there was no alternative, but to terminate the contract. As such, the contract was terminated. They further contended that as per the tender conditions, particulars of work were specified and special conditions were provided in addition to the general conditions of the contract which the plaintiff had accepted. They alleged that the plaintiff himself was guilty in not performing his part of the contract. In these circumstances, the plaintiff was not entitled to the relief as prayed for in the suit. They further contended that the suit claim was barred by limitation.
4. No oral evidence was adduced either by the plaintiff or by the defendants. However, documents were got marked vide Exs.A-1 to A-13. After hearing the arguments on both sides, the Court below has decreed the suit as prayed for by the plaintiff. In these circumstances, the present appeal is preferred by the defendants.
5. The learned Counsel for the Railway Department strenuously contended that the impugned order is liable to be set aside because the claims sought to be referred for the arbitration were barred by time, in view of the general conditions contemplated in the contract. By elaborating his argument, he contended that under Clause 64(1)(i) of the general conditions, the contractor has to make his claim within a reasonable time, at any rate, not later than 90 days after final bill and within 180 days of his presenting the final claim on the disputed matter. He shall also make demand in writing that the dispute be referred to an arbitrator. Under Clause 64(1)(i), the demand for arbitration shall specify the matters which are in dispute and only such disputes or difference, in respect of which the demand has been made, shall be referred to arbitration and not other matters. He further submits that under Clause 64(1)(iii), if the contractor does not prefer his specific and final claims in writing within a period of 90 days of receiving the intimation from the Government that the final bill is ready for payment, he will be deemed to have waived his claims and the Railway Department shall be deemed to have been discharged and released of all liabilities under the contract. He further submits that these conditions have not been fulfilled before the suit was filed. Therefore, the suit ought to have been dismissed by the Court below. But, however, the learned Counsel for the respondent contended that there is no such violation. Assuming that if there is any violation, it does not materially affect the plaintiff's case in seeking the relief at the hands of the Court in a suit filed under Section 20 of the Arbitration Act. He relied upon a number of rulings in support of his contentions.
6. Before I proceed to discuss the rival contentions raised in the case, I think it proper to extract the relevant part of Clause 64 of the General Conditions of the contract which reads as under:
"64. (1) (i). In the event of any dispute or difference between the parties hereto as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account, or as to the withholding by the Railway of any certificate to which the contractor may claim to be entitled to, or if the Railway fails to make decision within a reasonable time, then and in any such case, save the 'expected matters' referred to in Clause 63 of these conditions, the contractor, after 90 days but within 180 days of his presenting his final claim on disputed matter, shall demand in writing that the dispute "or difference" be referred to arbitration.
1. (ii) The demand for arbitration shall specify the matters which are in question, dispute or difference, only such dispute(s) or difference(s) in respect of which the demand has been made shall be referred to arbitration and other matters shall not be included in the reference.
1. (iii) If the contractor(s) does/do not prefer his/their specific and final claims in writing, within a period of 90 days of receiving the intimation from the Government that the final bill is ready for payment, he/they will be deemed to have waived his/their claim(s) and the Railway shall be discharged and released of all liabilities under the contract in respect of these claims."
The learned Counsel for the respondent contends that under Clause 64, there is no limitation fixed for seeking the relief at the hands of the Court or for referring the matter to the arbitration under Clause 64. When the period of limitation is not prescribed, under Article 137 of the Limitation Act the period of limitation is three years. He relies upon the ruling of the Supreme Court in support of his proposition. He invited my attention to paragraphs 4 and 5 of the judgment. In the said judgment, their Lordships in paragraphs 4 and 5 have held as under:
"It is true that on completition of the work a right to get payment would normally arise but where the final bills as in this case have not been prepared as appears from the record and when the assertion of the claims was made on 28th Feb. 1983 and there was non-payment, the cause of action arose from the date, that is to say, 28th Feb. 1983. It is also true that a party cannot postpone the accrual of cause of action by writing reminder or sending reminders but where the bill had not been finally prepared, the claim made by a claimant is the accrual of the cause of action. A dispute arises where there is a claim and a denial and repudiation of the claim. The existence of dispute is essential for appointment of an arbitrator under Section 8 or a reference under Section 20 of the Act. See Law of Arbitration by R.S. Bachawat, 1st Edition, page 354. There should be dispute and there can only be a dispute when a claim is asserted by one party and denied by the other on whatever grounds. Mere failure or inaction to pay does not lead to the inference of the existence of dispute. Dispute entails a positive element and assertion in denying, not merely inaction to accede to a claim or a request. When in a particular case a dispute has arisen or not has to be found out from the facts and circumstances of the case. The application under Section 20 of the Act was filed in Court in January, 1986, that is to say, within the period of three years therefore the application was within time. The High Court was in error in dismissing the application on the ground of limitation."
From the reading of this judgment, it is clear that the period of limitation starts after the preparation of the final bill when the same is disputed by one party and denied by the other. The Supreme Court further held that since no period of limitation is provided for filing the suit under the Arbitration Act, Article 137 of the Limitation Act would apply and the limitation is three years from the date of cause of action. The learned Counsel for the respondent contended that as per the material placed in the case, the final bill was processed and kept ready by the Railway Department for the first time on 12-12-1988 vide its letter Ex.A-10. Further, he contended that it was this final bill that was disputed by the respondent vide his reply letter dated 9th December, 1989 which was referred to under reference No. 3 in his letter dated 18-7-1990 vide Ex.A-11. He submitted that it was only then cause of action arose to the plaintiff in the light of the above decision. He further submitted that if the preparing the final bill as on 12-12-1988 is taken into consideration, the suit would be in time and it would be within limitation of three years as per Article 137 of the Limitation Act. But, to this, the learned Counsel for the Railway Department contends that the request made by the respondent to refer the matter to the arbitrator in terms of Clause 64 of the General Conditions of the Contract has already been rejected long back vide letter dated 29-8-1986. The respondent, therefore, should have filed the suit within three years from 29-8-1986. Therefore, the present suit was hopelessly barred by time. On the other hand, the learned Counsel for the respondent contended that even after the letter dated 29-8-1986 (Ex. A-8) he has made a further a request to refer the matter for arbitration vide his letter dated 6-4-1987 Ex. A-9, alleging that there was an initial delay in finalisation of the site and as such, there was delay in execution of the contract and negotiations were on in that behalf for more than four and half years and therefore, it was a case for referring the matter to the arbitrator. Accordingly, a request was made to the General Manager, South Central Railway, Secunderabad to refer the matter to the arbitrator in terms of Clause 64 of the General Conditions of the contract. He submitted that the said request was still pending with the Railway Department and the same has not been rejected. At any rate, he contended that the cause of action for making such a request for arbitration would arise only after final bill was prepared and not earlier to that. Therefore, he submitted that the earlier rejection of the request of the contractor to refer the dispute to the arbitrator in the year 1986 absolutely had no consequence, because, the request to refer the matter for arbitration could be after final bill is prepared i.e., on or after 12-12-1988. Even after 12-12-1988 also there were further requests made by the contractor to the Railway Department to refer the matter to the arbitration, but, all in vain. Therefore, he contended that taking 12-12-1988 as the date on which the cause of action arose to the contractor, to get the matter referred to the arbitration, the suit filed under Section 20 was in time.
7. Having considered the material on record, I am of the opinion that from 12-12-1988, the suit is in time. Though the department earlier rejected the request made by the contractor in the year 1986, it was a premature request and a premature rejection, since the cause of action had not arisen at that time. The cause of action arose only after the final preparation of the bill on 12-12-1988 as per the decision of the Supreme Court referred to above. Hence, the suit filed on 15-4-1991 was in time. As held by the Supreme Court in the decision referred to above, Article 137 of the Limitation Act that is applicable to the circumstances of this type. If three years is computed from 12-12-1988, the suit would be in time. However, the learned Counsel for the appellants contended that under Clause 64(1)(iii) of the General Conditions of the contract, after final bill was prepared, the contractor can make a final claim in writing within a period of 90 days of receiving intimation of the preparation of the final bill and if he has not done so, he will be deemed to have waived his rights and accordingly, the liabilities of any, on the part of the Railway Department stands discharged. To this, the learned Counsel for the respondent contends that this is not a mandatory clause in view of the decision of this Court . The Division Bench of this Court in the said decision dealt with the similar clause, though not identical, held that such clause in the contract was only for the convenience of the parties. In the said decision, this Court was considering Clause 83 of the specific conditions of the agreement stipulated by the parties in that case. The contract pertained to the Irrigation Department under the State of Andhra Pradesh. The said Clause 83 stipulated that the contractor had to prepare his claim within 15 days from the date of cause of action. Relying on the said clause, it was strenuously contended by the Advocate-General that the claim was not preferred within 15 days time. Rejecting the said contention, this Court held that:
"In our view Condition No. 83 is a condition meant for convenience of both the parties and does not lay down a rule of limitation, much less a pre- condition for the arbitrator to entertain the claim. The contention of the learned Advocate-General is therefore rejected."
8. In the instant case also, there is a condition that after the final bill is prepared, the contractor shall prepare his final claim within 90 days of the intimation of the final bill and if he fails to do so, he shall be deemed to have waived his right. Accordingly, the liability of the Railway Department stands discharged. But, in the light of the judgment of this Court, I am of the opinion that this is a rule of caution and meant for the convenience of the parties. This cannot have the effect of taking away the effect of Law of Limitation of the land. It is an established principle of law that by a contract, the parties are not entitled to amend the law. By contract, parties cannot confer a jurisdiction on a Court which does not have or taking away the jurisdiction vested in a Court. Likewise, when the Law of Limitation has prescribed a period of limitation by contract, parties are not entitled to modify or amend it. Therefore, this condition in Clause 64(1)(iii) cannot have the effect of taking away the limitation that is prescribed under Article 137 of the Limitation Act. Therefore, in the light of the decision of this Court and in the light of the general principles of law, I am of the opinion that in the instant case, the contractor in not preferring his claim within 90 days from the date of final preparation of the bill absolutely has no legal consequence and it cannot take away the right of the contractor to prefer his claim if otherwise it is in time according to law. As already held by the Supreme Court, in the decision referred to above, the limitation of three years starts only after preparation of the final bill and after the said bill is disputed. In the instant case, as I have already held above, the suit is in time from the date of final bill was prepared on 12-12-1988. Accordingly, the contention of the learned Counsel for the appellants in this behalf is rejected. The learned Counsel for the appellants further submitted that only because there were repeated representations on the part of the contractor for a request to refer the dispute to the arbitration, the limitation is not saved. For this proposition, he relied on the judgment of the Supreme Court reported in "". In the light of my discussions above, I am not taking any representations for the purpose of limitation I have specifically taken the date of preparing the final bill as on 12-12-1988 as the date on which cause of action arose to the plaintiff. This decision, according to me, does not apply to the facts of this case.
9. For the above reasons, there are no merits in the appeal and the same is dismissed. In the circumstances of the case, there shall not be any order as to costs.