Full Text
HIGH COURT OF DELHI
Order reserved on: 16 February 2023
Order pronounced on: 28 February 2023
ADICON INFRASTRUCTURE PVT. LTD ..... Petitioner
Through: Mr. G. L. Verma and Mr. Anuj Verma, Advs.
Through: Ms. Meghna Mital Sankhla and Ms. Arpan Semwal, Advs.
JUDGMENT
1. This petition under Section 11 of the Arbitration and Conciliation Act, 1996[1] seeks the intervention of the Court for constitution of an Arbitral Tribunal. The disputes emanate out of an agreement dated 18 October 2010 for the following work: - “Maintenance of Completed Scheme under NA-II in Rohini Zone for year 2010-11. Sub Head: Clearing and desilting of sewer lines in Rohini Zone from Sector 20 to 24 with Super Sucker Machine (Peripheral lines)”.
2. According to the Petitioner, the work was successfully completed on 17 April 2012 and a communication to that effect also
1 The Act issued by the Executive Engineer on 03 August 2013. The Petitioner alleges that despite the above, the Respondent has failed to attend to the Final bill which had been submitted on 27 July 2013 and to release payments in respect thereof. It is the case of the Petitioner that after adjustment of payments received during the currency of the contract, the total amount which was claimed in terms of the Final Bill amounted to Rs.81,24,158/- which was never paid. The Petitioner further asserts that the Respondent had always assured that payments would be duly made and that the claims raised were being examined. However, and ultimately since no further payments were released, the Petitioner by way of a notice dated 19 June 2020 invoked arbitration in terms of Clause 25 of the agreement. The instant petition thereafter came to be filed on or about 05 February 2022.
3. On 25 April 2022 while granting time to the Respondent to file a reply, the Court had further observed and taken on board the statement made on behalf of the Respondent Authority that there are certain clarifications required and in case the authorized representative of the Petitioner were to approach the Chief Engineer, Rohini, disputes could be resolved to a large extent. According to the Petitioner pursuant to the said order the Chief Engineer had in fact fixed a date for a meeting on 05 May 2022. The Petitioner is stated to have appeared before the said authority on that date. However, it is its case that since the dispute could not be resolved, the petition would have to be taken to its logical conclusion.
4. It may be additionally noted that post the aforesaid meeting which was held between the representative of the Petitioner and the Respondent Authority on 20 July 2022, certain payments were released by the Respondents and which were claimed in respect of the 2nd RA Bill dated 27 January 2012 and the 4th RA Bill dated 14 May
2012.
5. The Respondents in the reply which has been tendered have asserted that the work of cleaning and desilting of sewer lines in Rohini Zone falling in Sectors 20 to 24 was awarded to the Petitioner on 27 October 2010. As per the contract, the date of completion of works was 05 November 2011. It is further averred that as per the Petitioner’s own case the date of actual completion was 17 April 2012 and consequently and in terms of Clause 7 of the agreement, the Final Bill should have been submitted within one month from the said date. It is further contended that the Petitioner ultimately submitted its Final Bill on 27 July 2013. The Respondents also assert that undisputedly the notice invoking arbitration came to be issued after a passage of almost 7 years and thus the claim is clearly barred by limitation.
6. The Respondent then refers to Clause 25 of the agreement which reads as follows: - “Clause 25: Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specification, design, drawings and instructions herein before mentioned and as to the quality of workmanship or material used on the work or as to any other question, claim, right, matter or things whatsoever, in any way arising out of or these condition or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof shall be dealt with as mentioned hereinafter:
(i) If the contractor considers any works demanded of him to be outside the requirement of the contract or disputes any drawings, record or decision given in writing by the Engineer in-charge on any matter in connection with or arising out of the contract or carrying out of the work, to be unacceptable, he shall promptly, within 15 days request the Superintending Engineer in writing for the written instruction or decision. Thereupon, the Superintending Engineer shall give his written instruction or decision within a period of one month from the receipt of the contractor's letter. If the Superintending Engineer fails to give his instruction or decision in writing within the aforesaid period or if the contractor is dissatisfied with the instructions or decision of the Superintending Engineer, the contractor may within 15 days of the receipt of Superintending Engineer's decision, appeal to the Chief Engineer, who shall afford an opportunity to the contractor to be heard, if the latter so desires and to offer evidence in support of his appeal. The Chief Engineer shall give his decision within 30 days of receipt of Contractor's appeal. If the contractor is dissatisfied with this decision, the contractor shall within a period of 30 days from receipt of the decision, give notice to the Engineer Member for appointment of Arbitrator, failing which, the said decision shall be final binding and conclusive and not referable to adjudication by the arbitrator.
(ii) Except where the decision has become final, binding and conclusive in terms of Sub para (i) above, disputes or difference shall be referred for adjudication through arbitration by a Sole Arbitrator, who shall be a technical person having the knowledge and experience of the trade, appointed by the Engineer Member, DDA. It will be no objection to any such appointment that the arbitrator so appointed is a DDA employee that he had to deal with the matter to which the contract relates and that in the course of his duties as DDA employee, he has expressed his views in all or any of the matter in disputes of difference. If the arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever, another sole arbitrator shall be appointed in the manner aforesaid. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is a term of this contract that the party invoking arbitration shall give a list of disputes with amounts claimed in respects of each such disputes along with the notice for appointment of the arbitrator and giving the reference to the rejection by the Chief Engineer of the appeal. It is also a term of this contractor that no person other than a person appointed by the Engineer Member, DDA, as aforesaid, should act as arbitrator and if, for any reason that is not possible, the matter shall not be referred to the arbitration at all. It is also a term of this contract that if the contractor does not make any demand for appointment of arbitrator in respect to any claims in writing as aforesaid within 120 days of receiving the intimation from the Engineer-in-charge that the final bill is ready for the payment, the claim of the contractor shall be deemed to have been waived and absolutely barred and Delhi Development Authority shall be discharged and released of all liabilities under the contract in respect of these claims. The arbitration shall be conducted in accordance with the provisions of the Arbitration and Conciliation Act, 1996 (26 of
1996) or any statutory modifications or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceedings under this clause. It is also a term of this contract that arbitrator shall adjudicate only such disputes as are referred to him by the appointing authority and give separate awards against each dispute and claim referred to him and, in all, cases where the total amount of the claims by any party exceeds Rs 1,00,000/- the arbitrator shall give reasons for the award. It is also a term of the contract that if any fees are payable to the arbitrator, these shall be paid equally by both the parties. It is also a term of the contract that the arbitrator shall be deemed to have entered on the reference on the date he issued the notice to both the parties calling them to submit their statement of claims and counter statement of claims. The venue of the arbitration shall be such place as may be fixed by the arbitrator in his sole discretion. The fees, if any, of the arbitrator, shall, if required, to be paid before the award is made and published, be paid half and half by each of the parties. The cost of the reference and the award including fees, if any, of the arbitrator shall be in the discretion of the arbitrator who may direct to any by whom and in what manner such costs or any part thereof shall be paid and fix or settle the amount of cost to be paid. (B) The decision of the Superintending Engineer/Chief Engineer regarding the quantum of reduction as well as justification thereof in respect of rates for substandard work below specification which may be decided to be accepted will be final and would not open to arbitration.”
7. It becomes pertinent to note that in terms of the said clause, if a contractor were to raise a dispute it would have to be promptly submitted to the Superintending Engineer for a decision being taken thereon. Clause 25 further stipulates that the Superintending Engineer shall give his written instructions or decision within a period of one month from the receipt of the contractor’s letter. The said provision goes on further to prescribe that if the Superintending Engineer fails to give any instructions or render a decision in writing or if the contractor be dissatisfied with the decision taken by the said authority it may prefer an appeal to the Chief Engineer. The Chief Engineer in terms of Clause 25 is to communicate its decision on the contractor’s appeal within 30 days. It is only after the said decision is taken on the appeal and the contractor is dissatisfied with the decision taken by the Chief Engineer that a notice is envisaged to be submitted to the Engineer Member for appointing an arbitrator. The Respondent oppose the grant of the reliefs claimed in this petition on account of the failure on the part of the petitioner to have followed the procedure prescribed.
8. Undisputedly, the aforesaid procedure as set out under the contract was never followed by the Petitioner at the relevant point in time. All that is disclosed on the petition is reminders having been sent for final payment on 21 July 2013, 01 April 2014 and 05 May
2014. The Petitioner as per its own showing approached the Superintending Engineer and the Chief Engineer only on 16 July 2020 and 14 August 2020 respectively seeking reference of disputes to arbitration. All that the petitioner appears to have done after submission of the Final Bill was to send reminders for payment till it finally issued the notice dated 19 June 2020 invoking arbitration.
9. The Respondents in the reply which has been submitted have also taken the objection of the claims being barred by time. They have firstly referred to Article 137 of the Limitation Act, 1963[2] to contend that the petition should have been preferred within three years from the date when the cause of action accrued. It is their contention that the cause of action in the present case accrued firstly on 17 November 2012 which would constitute the date falling after the expiry of the one month plus + six months period as contemplated under Clause 7 of the agreement. They assert that the invocation of arbitration by way of the notice dated 19 June 2020 is clearly barred by time. The submission essentially is that the Section 11 petition is itself barred by limitation.
10. Proceeding then to deal with the merits of the claim itself it was submitted that notwithstanding the failure on the part of the Petitioner to have submitted the Final bill within one month from the date of completion of work, and which would have required it being mandatorily submitted on or before 17 May 2012, the Petitioner Limitation Act submitted that bill only on 27 July 2013. The Respondent asserts that no claim in respect of the aforesaid Final Bill was raised within the period of limitation prescribed. It was in the aforesaid backdrop that it was contended that the claim which is essentially for money would also not lie. Relying upon the judgment rendered by the Court in Satender Kumar vs. Municipal Corporation of Delhi[3] learned counsel appearing for the Respondents submitted that bearing in mind Clause 7, the Final bill was to be submitted by 17 May 2012 and payments in connection therewith to be disbursed by 17 November
2012. It is their contention that counting a period of three years from the said date it would be manifest that limitation would exhaust on 17 November 2015. It becomes relevant to further note that it is also their case that even if limitation were to be computed from 27 July 2013 when the Petitioner submitted its Final bill then too it is evident that the claim is hopelessly barred by time and would thus not merit reference to arbitration.
11. Insofar as the decision of the Court in Satender Kumar is concerned learned counsel placed reliance upon the following passages of that decision:
12. Reliance was also placed in this respect on the judgment rendered by the Court in Municipal Corporation of Delhi vs. Gurbachan Singh & Ors.[4] where the following observations came to be made: -
13. Having noticed the essential facts, it would be pertinent to firstly advert to the salient principles which must be borne in mind at the stage of considering a Section 11 petition. At that stage and while undertaking a primary review, which the referral court is obliged to exercise at the stage of consideration of a Section 11 petition, the guiding principle as enunciated in Vidya Drolia v. Durga Trading Corpn.[5] was that courts would proceed to refer disputes for resolution by way of arbitration unless it be found that the claim rests on a manifestly and ex facie non-existent or invalid arbitration agreement or relates to non-arbitrable disputes. The Court had observed that the prima facie test is to enable the Section 11 Court to shut out those claims which are ex facie meritless or frivolous. The Court had succinctly enunciated the foundational principle to be “when in doubt, do refer”. This would be evident from the following observations as made by the Supreme Court in Vidya Drolia:
244.4. The court should refer a matter if the validity of the arbitration agreement cannot be determined on a prima facie basis, as laid down above i.e. “when in doubt, do refer”.
14. The issue of the prescription of limitation both in the context of a filing under Section 11 of the Act as also of the claim itself fell for consideration of the Supreme Court in BSNL v. Nortel Networks (India) (P) Ltd.[6] On the facts which obtained in BSNL, the Supreme Court found that the claims were ex facie time barred by over five and a half years and thus held that the reference of disputes to arbitration by the High Court was liable to be set aside. The Court deems it apposite to extract the following passages from BSNL: -
“47. It is only in the very limited category of cases, where there is not even a vestige of doubt that the claim is ex facie time-barred, or that the dispute is non-arbitrable, that the court may decline to make the reference. However, if there is even the slightest doubt, the rule is to refer the disputes to arbitration, otherwise it would encroach upon what is essentially a matter to be determined by the tribunal.
48. Applying the law to the facts of the present case, it is clear that this is a case where the claims are ex facie time-barred by over 5½ years, since Nortel did not take any action whatsoever after the rejection of its claim by BSNL on 4-8-2014. The notice of arbitration was invoked on 29-4-2020. There is not even an averment either in the notice of arbitration, or the petition filed under Section 11, or before this Court, of any intervening facts which may have occurred, which would extend the period of limitation falling within Sections 5 to 20 of the Limitation Act. Unless, there is a pleaded case specifically adverting to the applicable section, and how it extends the limitation from the date on which the cause of action originally arose, there can be no basis to save the time of limitation.
49. The present case is a case of deadwood/no subsisting dispute since the cause of action arose on 4-8-2014, when the claims made by Nortel were rejected by BSNL. The respondent has not stated any event which would extend the period of limitation, which commenced as per Article 55 of the Schedule of the Limitation Act (which provides the limitation for cases pertaining to breach of contract) immediately after the rejection of the final bill by making deductions.
51. The period of limitation for issuing notice of arbitration would not get extended by mere exchange of letters, [S.S. Rathore v. State of M.P., (1989) 4 SCC 582: 1990 SCC (L&S) 50; Union of India v. Har Dayal, (2010) 1 SCC 394; CLP (India) (P) Ltd. v. Gujarat Urja Vikas Nigam Ltd., (2020) 5 SCC 185] or mere settlement discussions, where a final bill is rejected by making deductions or otherwise. Sections 5 to 20 of the Limitation Act do not exclude the time taken on account of settlement discussions. Section 9 of the Limitation Act makes it clear that: “where once the time has begun to run, no subsequent disability or inability to institute a suit or make an application stops it.” There must be a clear notice invoking arbitration setting out the “particular dispute” [Section 21 of the Arbitration and Conciliation Act, 1996.] (including claims/amounts) which must be received by the other party within a period of 3 years from the rejection of a final bill, failing which, the time bar would prevail. Conclusion
53. Accordingly, we hold that:
53.1. The period of limitation for filing an application under Section 11 would be governed by Article 137 of the First Schedule of the Limitation Act, 1963. The period of limitation will begin to run from the date when there is failure to appoint the arbitrator. It has been suggested that Parliament may consider amending Section 11 of the 1996 Act to provide a period of limitation for filing an application under this provision, which is in consonance with the object of expeditious disposal of arbitration proceedings.
53.2. In rare and exceptional cases, where the claims are ex facie time-barred, and it is manifest that there is no subsisting dispute, the Court may refuse to make the reference.”
15. Applying the principles which were expounded in Vidya Drolia and BSNL to the facts of the present case, the Court finds that as per the undisputed facts which emerge from the pleadings exchanged between the parties and the material placed on the record, it is manifest and ex facie evident that the petitioner seeks the reference of a claim which is hopelessly barred by time. As per the disclosures made in these proceedings, the date of completion of the contract was prescribed to be 05 November 2011. According to the petitioner, the date of completion was 17 April 2012. The Court, for the purposes of evaluating the issue of limitation shall proceed on the assumption that what the petitioner claims to be the date of completion is correct. Undisputedly, the Final Bill was submitted on 27 July 2013. There was an alleged failure on the part of the Respondent to pay the total amounts claimed by the petitioner within the period of six months therefrom as prescribed in the contract. All that the Petitioner did thereafter was send reminders and demands for payment. It is also not shown to have followed the procedure specified and laid out in Clause
25. In any case, the Final Bill constituted a claim for money. Once the respondent had failed to release payments within six months from the submission of the Final Bill, it was incumbent upon the Petitioner to initiate legal proceedings and seek recourse for the constitution of an Arbitral Tribunal for resolution of disputes.
16. However, and as would be evident from the record, the Petitioner took no steps in that direction and invoked arbitration for the first time by way of a notice dated 19 June 2020. The aforesaid notice itself came to be issued more than seven years after the submission of the Final Bill on 27 July 2013. The Petitioner then waited for almost two more years till he ultimately filed the instant petition on or about 05 February 2022. As was aptly observed in BSNL, the march of limitation would not be paused by mere exchange of letters or settlement discussions. It is also pertinent to note that the Petitioner also does not refer to or rely upon any material or act of the Respondent which could have been construed as an acknowledgement of debt made within the period of limitation. The subsequent payments which appear to have been made by the Respondent voluntarily in 2022 also cannot be taken into consideration since they were clearly made years after the expiry of the three-year period when computed from the date when final payments were to be released by the Respondent.
17. As was observed hereinbefore, the Final Bill clearly constituted a monetary claim and for which proceedings should have been initiated within three years. The said three year period would have to be computed from the date when the petitioner became entitled to raise a claim for payment. That, in the facts of the present case, would have been six months from the date of submission of the Final Bill. The Petitioner has clearly failed to take any steps for the enforcement of its claim against the respondent within the period of limitation which applies. Tested either in terms of Articles 18 or 113 as placed in the Schedule to the Limitation Act, it is manifest that the claim raised by the Petitioner is hopelessly barred by time. The Petitioner has abjectly failed to refer to any material or evidence which may have been taken into consideration for the purposes of acknowledging that the period of limitation which otherwise applies, stood extended. The instant case clearly represents what Vidya Drolia referred to as “deadwood” and claims which are ex facie time barred. This is clearly an instance where it would be wholly unjust and inequitable to compel parties to pursue arbitration.
18. For all the aforesaid reasons, the petition shall stand dismissed.
19. Pending applications shall stand disposed of.
YASHWANT VARMA, J. FEBRUARY 28, 2023