2016 (7) TMI 51 - SC - Indian Laws

Supreme Court clarifies jurisdiction on live claims under Arbitration Act, overturns time-bar decision

The Supreme Court found that the appellant's claim was a live claim requiring detailed adjudication by an arbitrator, overturning the Chief Justice's ... Arbitration proceedings - whether the disputed claim is live claim or not - Hon’ble Chief Justice giving the reasons rejected the application in Arbitration Case No. 89 of 2006 holding that the claim made by the appellant is not a live claim. - Held that:- In sub-Clause (g) the period of two years under which the Government is entitled to make recovery is “from the date of payment of the undisputed portion of the final bill”. The examination of the additional materials brought on this appeal, does indicate that the case required consideration of relevant bills and certificates and determination on the question as to whether the claim laid by appellant was a dead claim and was not a live claim depended upon scrutiny of relevant documents. The pleadings in the proceeding under Section 11 by the appellant were clearly to the effect that on 10.04.2001, he was paid only undisputed part and the appellant has reserved his right to raise claim to the disputed part. The disputed claims having never been adjudicated, we are of the view that there was a dispute which needed an adjudication after looking into all relevant documents, bills and certificates which could have been appropriately examined by Arbitral Tribunal and the observation of the Chief Justice “As the appellant has failed to prima facie show this court that there was a live claim of the appellant” does not commend us. The claim raised by petitioner in the facts of the case could not have been said to be a dead claim - As a consequence thereof, the application made by the appellant under Section 11 of the Act is allowed. - Matter remitted back to High Court for appointing the arbitrator for deciding the disputes which have arisen between the parties - Decided in favor of appellant. Issues Involved:1. Whether the claim raised by the appellant was a live claim or a dead claim.2. Whether the Chief Justice had the jurisdiction to decide on the existence of a live claim under Section 11 of the Arbitration and Conciliation Act, 1996.3. Whether the appellant's claim was barred by limitation.Detailed Analysis:1. Whether the claim raised by the appellant was a live claim or a dead claim:The appellant, a partnership firm, was allotted a contract on 10.11.1998, which was completed on 10.07.2000. The final bill was prepared on 20.02.2001, and payment was made on 10.04.2001. The appellant contended that the payment made was only for the undisputed portion of the final bill and that there were other disputed claims. The appellant served a notice on 23.02.2005, claiming additional payments. The Chief Justice dismissed the application, stating that the claim was not a live claim and was barred by limitation. However, the Supreme Court found that the claim raised by the appellant was not evidently and patently long time-barred and required detailed consideration of evidence, making it a live claim that needed adjudication by an arbitrator.2. Whether the Chief Justice had the jurisdiction to decide on the existence of a live claim under Section 11 of the Arbitration and Conciliation Act, 1996:The Supreme Court referred to the judgment in SBP & Co. vs. Patel Engineering Ltd., which established that the Chief Justice or the designated Judge has the right to decide preliminary aspects, including the existence of a live claim. The Chief Justice exercises judicial power under Section 11 of the Act and can reject an application if the claim is found to be a dead claim. However, the Supreme Court emphasized that such a decision should be made only when the claim is evidently and patently long time-barred without needing detailed consideration of evidence.3. Whether the appellant's claim was barred by limitation:The respondents argued that the limitation period for filing any application is three years as per Article 137 of the Limitation Act, 1963. Since the final bill was paid on 10.04.2001, any claim should have been raised within three years. However, the Supreme Court noted that the appellant's claim involved disputed amounts and was raised within five years of the completion of the work. The Court found that the Chief Justice's decision to dismiss the application as time-barred was not based on valid considerations, as the claim required detailed examination of relevant documents and certificates.Conclusion:The Supreme Court set aside the orders dated 12.03.2007 in Arbitration Case No. 184 of 2006 and 89 of 2006, allowing the appellant's application under Section 11 of the Act. The case was remitted to the High Court (designated Judge) to pass consequential orders for the appointment of an arbitrator. The appointment should be made with the consent of the parties or at the Court's discretion if consent is not possible. The parties were directed to appear before the designated Judge in the High Court on 25.07.2016 to enable the Court to pass appropriate consequential orders. Both appeals were accordingly allowed.