Full Text
HIGH COURT OF DELHI
FAO (OS) (COMM) 44/2021, CM APPLs. 9555-58/2021
HINDUSTAN PETROLEUMCORPORATIONLTD....Appellant
Through: Mr.Parijat Sinha with Ms.Pallak Bhagat and Mr.Devesh Mishra, Advocates.
Through: Mr.Santosh Kumar Tripathi, standingcounsel for DTC.
Date of Decision: 10th March,2021
HON'BLE MS. JUSTICE ASHA MENON
JUDGMENT
1. Present appeal has been heard by way of video conferencing.
2. Present appeal has been filed challenging the order dated 16th February 2021 passed by the learned Single Judge whereby the petition preferred by the Appellant against the arbitral award was dismissed by the Single Judge.
3. Learned counsel for the Appellant submits that the learned Single Judge erred in holding that thepetition challenging the award was barred by limitation.He statesthat the learned Single Judge did not appreciate that due to the nationwide COVID 19 lockdown andsubsequent delay by 2021:DHC:918-DB the office of the Sole Arbitrator,the signedcopy of the Arbitral Award was received only on 14th July 2020 by the Appellant and the Petition challenging the award was filed on 19th August 2020. Consequently, according to him, the petition filed by the appellant was within the limitation prescribed under Section 34(3) of the Arbitration and Conciliation Act, 1996.
4. He also submits that the SingleJudgeerred in holding that the claim of the Respondent was not barred by time.He states that the Appellant communicated its inability to supply thelubricants vide letter dated 19th June 2008 and the limitation for filing the claim by the Respondent expired on 19th June, 2011. He pointsout that the Respondent filed its claims before the learnedArbitrator on 27th March 2012 which is clearly beyond the limitation period of three (3) years. He emphasises that Respondent-DTC had initially called upon the Appellant to refer the dispute to permanent machinery of arbitration to which the appellant vide letter dated 19th July, 2010 had given its no objection. He, however, contends that subsequently theRespondent-DTC unilaterally appointed a retired Judge of thisCourt as theSole Arbitrator.
5. The relevant factsof the present case are that the Respondent-DTC had issued a limitedinquirydated 12th October 2007, inviting tenders from public sector oil marketing companies, including the Appellant, for supply of lubricants.The Appellant’s bid dated 23rd October 2007 was accepted, and purchase orders were placed upon theAppellant by the Respondent- DTC.
6. Subsequentlyon 19th June 2008, the Appellant sent a letter to the Respondent apprising it about rising oil prices in theinternational market and the Appellantrequested that the prices of the lubricants be increased by Rs. 20.50 per litre. The Respondent-DTC did not agree to the request made by the Appellant vide letter dated 16th July, 2008 and therefore the Appellant did not continue with thesupplyof the lubricants.
7. In fact it is the case of the Appellant that that due to increase in oil prices internationally, thepurchase orders placed by the Respondent-DTC upon the Appellant stoodfrustrated.
8. On 29th July 2008, the Respondents issued a second tender inquiry and the Appellant’s bid was again selectedfor supplying the same items under same termsand conditionsas set out in the first limited inquiry dated 12th October 2007. Needless to state theAppellant was re-awarded the bid at a higherprice.
9. Vide legal notice dated 13th May 2010, the Respondent-DTC informed the Appellant about thedamages incurred by the Respondent- DTC due to non-supply of items under the first tender andcalled upon the Appellant to refer the dispute to permanent machinery of arbitration. Appellant vide letter dated 19th July, 2010 stated that it had noobjection to the arbitration reference.
10. The Respondent-DTC appointeda retired Judge of thisCourt as the Sole Arbitratorwith consent of theappellant,who subsequently awardeda sum of Rs.1,09,22,527.42/- alongwith interest @ 9% per annum in favour of Respondent-DTCvide arbitral award dated 28th November,2019. The fact that the Sole Arbitrator had been appointed with consent of the appellant is admitted by the appellant in paragraph 2.12 of the present appeal.
11. Subsequently, the Respondent-DTC filed a petition before this Court for execution of the arbitral award on 14th August, 2020.
12. The appellant thereafter filed a petition dated 19th August 2020 under Section 34 of the Arbitration and Conciliation Act, 1996 challenging thearbitral award.
13. The learned Single Judge of this Court by way of the impugned order dated 16th February 2021 dismissed the petition preferred by the Appellant challenging the arbitral award both on the grounds of limitation as well as merits and imposedcosts of Rs. 25,000/- on the Appellant for being ‘economical with documents’. The relevant portion of the impugned order passed by the learnedSingle Judge is reproduced hereinbelow:- “14. This Court is of the view that the present petition has been filed beyond the period of limitation as prescribed under Section 34(3) of the A&C Act. Admittedly, the impugned award was received by HPCL‟s counsel on 28.11.2019 and, thus, HPCL was fully aware of the award against it. However, it took no steps to challenge the same. Although it is asserted that HPCL had not received a signed award, HPCL took no steps to collect the same. As noticed above, HPCL claims that it had sent a letter dated 07.02.2020 to the learned Arbitrator regarding the same and the arbitrator had responded by informing HPCL that the signed award had been sent to HPCL‟s office. It is relevant to note that the said communication has not been placed on record. Further, HPCL has also not placed on record, copies of the Dak inward register, to establish that it had not received any communication/courier from the learned Arbitrator.
15. Even after being informed by the learned Arbitrator that a signed award has been dispatched to HPCL, it took no steps to obtain a copy of the same or to challenge the impugned award. HPCL claims that it finally sent an office boy to the office of the learned Arbitrator on 06.06.2020 and received the signed award on 14.07.2020.It is material to note that HPCL has not filed any evidence of receiving the signed award on 14.07.2020, as claimed by it. xxx xxx xxx
17. According to HPCL, the three months period as stipulated under Section 34(3) of the A&C Act expired on 02.03.2020. The nationwide lockdown was declared on 23.03.2020 due to outbreak of Covid-19. According to HPCL, the period of limitation stopped running from that date and therefore, there is a delay of only twenty-one days in filing the petition.
18. The said contention is, plainly, unpersuasive. The Supreme Court had by an order dated 23.03.2020 passed in Re Cognizance for Extension of Limitation: Suo Moto Writ petition
(Civil) No. 3/2020 extended the period of limitation in all matters till further orders. However, by an order dated 06.05.2020, the Supreme Court clarified that in case the period of limitation had expired after 15.03.2020, the same would be suspended till fifteen days after the lockdown is lifted. The lockdown was lifted with effect from 01.06.2020 and therefore, the period of limitation would expire on 15.06.2020. It is also doubtful whether the said orders would inure were to the benefit of HPCL, since the same were only applicable to cases where the period of limitation was expiring after 15.03.2020.In the present case, the time period for filing the petition had expired on 02.03.2020. xxx xxx xxx
24. This Court finds no infirmity with the aforesaid view. It is trite law that merely because a contract has become financially unviable, it would not absolve the contracting parties to perform the same. It is important to note that HPCL does not dispute that the prices quoted by it were to remain firm for the duration of the contract.
25. The Arbitral Tribunal also rejected the contention that the claims were barred by limitation. The Arbitral Tribunal noted that although HPCL had declined to supply lubes at the rates as agreed with effect from 15.07.2008, DTC had not accepted the same. DTC had by its letters dated 16.07.2008 and 28.07.2008 emphasized that the Contract between the parties had provided for a fixed rate and therefore, any demand for increase in prices would be in contravention of the Contract. Since HPCL had declined to supply the lubricants at the agreed price, DTC had procured the remaining quantity by inviting fresh tenders. It had, thereafter, issued a notice dated 13.05.2010 calling upon HPCL to settle the disputes and agree to refer the matter to the Permanent Machinery of Arbitration.
26. It is relevant to note that HPCL had, by its letter dated 13.05.2010, expressed that it had no objection for “arbitration reference”. Thereafter, the learned Arbitrator was appointed and DTC had filed its Statement of Claim before the learned Arbitrator in March, 2012. The period of limitation would end with DTC suggesting that the disputes be referred to Permanent Machinery of Arbitration and evincing its intention to refer the disputes to arbitration. It would also end with HPCL agreeing to refer the disputes to arbitration.
27. It is not HPCL‟s case that the learned Arbitrator was appointed beyond the period of three years of it agreeing to refer the disputes to arbitration. It is also not HPCL‟s case that the Arbitral Tribunal was constituted beyond the period of limitation.
28. In view of the above, this Court finds no reason to interfere with the impugned award.”
14. It is settled law that to invoke the arbitration, there should be a dispute and the dispute entails a positive element andassertion of denying not merelyinaction to accede to a claim or a request. [See: Major (Retd.) Inder Singh Rekhi Vs. Delhi Development Authority,(1988) 2 SCC 338].
15. From the facts statedhereinabove, it is apparent that the dispute between the parties did not arise on 19th June, 2008, as contended by learned counsel for Appellant. In fact,the cause of action arose when the Appellant denied the claim raised by the Respondent-DTC – which could have only happened afterthe damages hadbeen calculated i.e. after the purchase order under thesecondtender had been issued. Further, within the period of three years i.e. on 19th July,2010, the Appellant had agreed to Respondent-DTC’s suggestion to resolve the disputes between the parties by way of arbitration.
16. It needs to be emphasised that though initially the Respondent-DTC had called upon the Appellant to refer the dispute to permanent machinery of arbitration to which the Appellant had agreed vide letter dated 19th July, 2010, yet subsequently,a retired Judge of this Court was appointed as the Sole Arbitratorwith the consent of the Appellant as has been admitted in paragraph 2.12 of the present appeal. Consequently, invocation of the arbitration clause by the Respondent-DTC was within the period of limitation.
17. This Court is in agreement with the finding of the learned Single Judge that the Arbitral Tribunal was constitutedwithin limitation as the appointmentof the Arbitrator was not beyond the period of three years of the reference being madeby the parties to the arbitration.
18. Learned SingleJudge hasalso correctlypointedout that admittedly the impugned award was received by the counsel of Appellant on 28th November,2019 itself and Appellant for the first time had sent a letter to the learned Arbitrator asking for a signed copy of the award only on 07th February, 2020.Further, even though the Appellant was informed by the learned Arbitrator that a signed copy of the award had been sent to Appellant’s office,the Appellant had sent an employee to the office of the learned Arbitrator on 06th June, 2020 i.e. much after the limitation for filing the Award hadexpired on 02nd March, 2020. This Court is of the view that thedelay of more than two and a half months in asking for a signed copy of the award and thereafter sending an office boy to collect a copy of the signed award afterfour months is inexcusable as the essence of arbitration is expeditious disposal of thedispute. Theappellant is also not entitled to the extended period of limitation vide order of Supreme Court dated 23rd March, 2020 passed in Re Cognizance for Extension of Limitation: Suo Moto Writ Petition (Civil) No. 3/2020 as the limitation had expired prior to the onset of Covid-19 Pandemic.
19. It is further settled law that thereis clear distinction between the frustration of contract and the contract being commercially unviable. In the present case, the contract was not frustratedbut it definitely ceased to be a commercially viable proposition for the Appellantafter the increase of internationaloil prices. However,commercial unviability of a contract is not a ground toevade performanceof a contract. Consequently,neither the impugned award nor theimpugned order of the learned Single Judge calls for any interference.
20. Accordingly, the present appeal along with pending applications is dismissed.
21. The order be uploaded on the websiteforthwith.Copy of the order be also forwarded to the learned counsel through e-mail. MANMOHAN,J ASHA MENON, J MARCH 10, 2021 KA/AS