TaxTMI 
TaxTMI 
2023 (1) TMI 1259
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....er referred to as the 'IIMC'), which empowers the IIMC director to appoint a sole arbitrator for dispute resolution between the parties. Facts 3. The factual matrix of the case is delineated below - a. A notice inviting tender dated July 9, 2008 was issued by the respondent for civil work and basic utility works for the proposed residential (hostel) complex at IIMC, Joka. A bid was submitted by the petitioner and in response to the same, a work order was issued on August 29, 2008, in terms of which the project was required to be completed within August 31, 2009, at a total cost of INR 39,03,20,185 (Rupees Thirty-Nine Crores Three Lakhs Twenty Thousand One Hundred Eighty-five Only). Subsequently, a formal contract being CDP/6 of 2008-09 was entered into by and between the petitioner and respondent in respect of the said work as stipulated in the said work order. b. During the course of execution of the work, the respondent, from time to time, introduced additions to the scope of work, and as a result, the value of the contract stood revised to INR 80,23,73,260/- (Rupees Eighty Crores Twenty-Three Lakhs Seventy-Three Thousand Two Hundred Sixty Only). The petit....
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.... the respondent replied vide letter September 12, 2017 denying the validity of any such claim in light of the full & final settlement of the claim and bill pertaining to the job contract. It was reiterated by the respondent that "any claim related to the escalation thus cannot be accepted under the said contract agreement; hence can't be entertained at this stage". A reply to this was sent by the petitioner vide letter dated September 15, 2017 wherein they claimed to have accepted the final settlement of the bill under coercion. f. The last in the series of price escalation letters by the petitioner was sent on February 22, 2019 wherein the earlier claims were reiterated. The respondent responded vide its advocate's letter dated March 13, 2020, denying the existence of any claims whatsoever in the first place. It was again clarified by the respondent that basis the terms of the contract and subsequent acceptance of the entire consideration money in lieu of full and final settlement against the enhanced work order, the respondent was not liable to pay for any further claims. g. Furthermore, letters dated February 26, 2021, and February 3, 2021, were delivered by th....
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....e formula provided therein. The counsel stated that both time and cost overrun of the project had caused huge financial losses to the petitioner and this issue was brought to the notice of respondent through protracted contemporaneous undisputed correspondence. He argued that the petitioner's bills were never disputed by the respondent and in fact, the petitioner was assured that the same would be taken care after completion of the work. c. The counsel submitted that pursuant to the request of the petitioner, a sub-committee of IIMC was constituted which held a meeting with the petitioner on November 12, 2012. Here, the claim was discussed in detail and the petitioner was requested to complete the work in all respects with an assurance to settle escalation claim thereafter. Headed that BKC relied upon the said assurance and duly proceeded thereafter to complete the work. It is only after about 14 months from the date of submission of the final bill, the executive engineer of the respondent vide its letter dated March 11, 2016 instructed the petitioner to accept the final bill as prepared by the respondent in their specified format. Hence, the counsel argued, the petitioner....
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....otice. In support of this contention, reliance was placed upon Geo Miller & Company Private Ltd. -v- Rajasthan Vidyut Utpadan Nigam Limited reported in 2019 SCC OnLine SC 1137, the relevant paragraph of which has been reproduced below - "Having perused through the relevant precedents, we agree that on a certain set of facts and circumstances, the period during which the parties were bona fide negotiating towards an amicable settlement may be excluded for the purpose of computing the period of limitation for reference to arbitration under the 1996 Act. However, in such cases the entire negotiation history between the parties must be specifically pleaded and placed on the record. The Court upon careful consideration of such history must find out what was the 'breaking point' at which any reasonable party would have abandoned efforts at arriving at a settlement and contemplated referral of the dispute for arbitration. This 'breaking point' would then be treated as the date on which the cause of action arises, for the purpose of limitation. The threshold for determining when such a point arises will be lower in the case of commercial disputes, where the party's primary interes....
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....ittee, written submissions were also submitted on January 20, 2021, and February 3, 2021 together with relevant documents. k. In response to the respondent's contentions that the claims are time barred and deadwood, the counsel opposed the same and stated that by the virtue of negotiations in such meetings and exchange of documents, the claim stands alive and falls out of the purview of being a deadwood. l. The counsel contended that by reason of such a legitimate claim being withheld and/or denied, a dispute has arisen between the parties which are referable to arbitration as per the terms of the contract. The counsel further submitted that no intimation was received about the final bill being ready for payment and as such, the period for invoking the arbitration clause has not lapsed. Elaborating further on the point of arbitration, the counsel questioned the appointment procedure as invalid as it empowered the respondent to appoint a sole arbitrator and the same is hit by the disqualification contained in Schedule V to the Arbitration and Conciliation Act, 1996. m. The counsel in support of his contentions cited the judgment of the Supreme Court in Vid....
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.... Seeking support from this judgment, the counsel reminded the Court that the respondent did not raise any dispute regarding the existence of the arbitration clause invoked by the petitioner, and that in the absence of such an objection, this Court has to refer the matter to arbitration and any questions with respect to the jurisdiction or otherwise has to be adjudicated upon and decided by the arbitrator. Further, the respondent had itself acknowledged that the matter in hand can be referred to arbitration process and had also independently suggested an arbitrator vide its letter dated April 10, 2021. 5. Mr. Sabyasachi Chowdhry, Advocate appearing on behalf of the respondent, has propounded the following arguments: a. The counsel submitted that the said petition is misconceived, not maintainable and is liable to be dismissed. He contended that the alleged claim, on the face of the record, is barred by limitation and even considered otherwise, the said claim is beyond the scope of the contract and therefore, is not maintainable. b. The counsel asserted that it is a matter of record that all claims under the contract were settled, resulting in final payment o....
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....e contract and does not have any right to receive any escalation claim under the said clause or otherwise at all. Further, as per clause 17 of the special terms and conditions, no escalation was payable in relation to the said contract for any reasons whatsoever. He contended that the allegations regarding escalation are immaterial and irrelevant, particularly after the contract was revised on September 27, 2013 wherein the total value thereof was enhanced to INR 80.23 crores from the original value of around INR 39 crores. g. The counsel submitted that in view of petitioner's acceptance of the final bill and the final settlement of all its demands on March 16, 2016, there was no occasion to make any response thereafter. He observed that the contents of the letter dated September 12, 2017, are self-explanatory and merely reiterated their earlier stated position. h. The counsel denied that any high level committee was constituted to reconsider the grievance of the petitioner as alleged. In any event, the counsel submitted, the formation of any internal committee will not entitle the applicant to reagitate its stale and dead claim afresh. The counsel states that by ....
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....tion, once the applicant has asserted their claim and the respondent fails to respond to such claim, such failure will be treated as a denial of the applicant's claim giving rise to a dispute, and therefore the cause of action for reference to arbitration. It does not lie to the applicant to plead that it waited for an unreasonably long period to refer the dispute to arbitration merely on account of the respondent's failure to settle their claim and because they were writing representations and reminders to the respondent in the meanwhile." (Emphasis supplied) m. Concluding his arguments, Mr. Chowdhury placed reliance upon the judgment of Supreme Court in Secunderabad Cantonment Board -v- B. Ramachandraiah and Sons reported in (2021) 5 SCC 705, which further endorses the principles as laid down in Vidya Drolia (supra) and BSNL -v- Nortel (supra), to argue that mere exchange of letters or settlement discussions will not be sufficient to stretch the limitation period. Observations & Analysis 6. I have heard the counsel appearing on behalf of the parties and perused the materials on record. 7. Before delving into other major issues plaguing the prese....
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....pearing on behalf of the petitioner argued that judicial intervention in a Section 11 arbitration application is limited to mere examination of the validity and existence of the arbitration agreement. I find myself in disagreement with this argument as in a Section 11 application, the Court is not supposed to undertake a meager cosmetic exercise to examine the existence and/or validity of the arbitration agreement, and then simply refer the matter to arbitration just because the arbitration clause is valid. Had this been the intent of the law makers and the judicial pronouncements on this subject, the determination could have been delegated to an AI-empowered computer system, thereby eliminating the need for applicability of a judicial mind and relieving the courts of the sedulous task of adjudicating such matters. 12. In my view, if it is manifestly evident on the face of it that the issues purported to be referred to arbitration are hopelessly time barred and/or are non-arbitrable, the courts can intervene and decline reference to arbitration in such cases. The entire objective of judicial intervention, in certain circumstances, has been to ensure the efficacy and utility of t....
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....urt further went on to hold that- 93. Section 43(1) of the Arbitration Act states that the Limitation Act, 1963 shall apply to arbitrations as it applies to court proceedings. Sub-section (2) states that for the purposes of the Arbitration Act and Limitation Act, arbitration shall be deemed to have commenced on the date referred to in Section 21. Limitation law is procedural and normally disputes, being factual, would be for the arbitrator to decide guided by the facts found and the law applicable. The court at the referral stage can interfere only when it is manifest that the claims are ex facie time barred and dead, or there is no subsisting dispute. All other cases should be referred to the arbitral tribunal for decision on merits. Similar would be the position in case of disputed 'no claim certificate' or defence on the plea of novation and 'accord and satisfaction'. As observed in Premium Nafta Products Ltd., it is not to be expected that commercial men while entering transactions inter se would knowingly create a system which would require that the court should first decide whether the contract should be rectified or avoided or rescinded, as the case may be, and then....
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....the Act. Such a review, as already clarified by this Court, is not intended to usurp the jurisdiction of the Arbitral Tribunal but is aimed at streamlining the process of arbitration. Therefore, even when an arbitration agreement exists, it would not prevent the Court to decline a prayer for reference if the dispute in question does not correlate to the said agreement." 16. Reference can also be made to the apex court's decision in Bharat Sanchar Nigam Ltd. & Anr. -v- M/s Nortel Networks India Pvt. Ltd. reported in [2021] 2 S.C.R. 644 wherein the court held that adjudication of the limitation issue at the referral stage does not tantamount to stepping into the arbitrator's jurisdictional territory. The relevant paragraphs have been delineated below- 30. Issue of Limitation is normally a mixed question of fact and law, and would lie within the domain of the arbitral tribunal. There is, however, a distinction between jurisdictional and admissibility issues. An issue of 'jurisdiction' pertains to the power and authority of the arbitrators to hear and decide a case. Jurisdictional issues include objections to the competence of the arbitrator or tribunal to hear a dispute, s....
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.... of cases. While party autonomy and independence of the arbitral tribunal are the cornerstones of creating an arbitration friendly atmosphere, but at the same time, the courts are not supposed to act as mere spectators in every Section 11 application. 18. Mr. Mitra relied upon Uttarakhand Purv Sainik (supra) to argue that the Court is 'only required to examine the existence of arbitration agreement' and 'all other preliminary or threshold issues are left to be decided by the arbitrator under Section 16, which enshrines the kompetenz-kompetenz principle'. 19. However, to my mind, this is an incomplete reading of the position of law on the aspect of judicial interference in a Section 11 application as the kompetenz-kompetenz principle upheld in Uttarakhand Purv Sainik (supra) emanated from the reasoning where the question of limitation is within the arbitrator's domain under Section 16 of the Act. Having said that, the apex court in BSNL -v- Nortel (supra) held that the question of limitation is not a challenge to the arbitrator's jurisdiction under Section 16 of the Act but rather it is a challenge to the admissibility of the claims itself. In the light of the same, the judgme....
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.... / no subsisting dispute since the cause of action arose on 04.08.2014, 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. In the notice invoking arbitration dated 29.04.2020, it has been averred that: "Various communications have been exchanged between the Petitioner and the Respondents ever since and a dispute has arisen between the Petitioner and the Respondents, regarding non payment of the amounts due under the Tender Document." The period of limitation for issuing notice of arbitration would not get extended by mere exchange of letters, 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 insti....
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....ited by Mr. Chowdhury. On perusal of the paragraphs reproduced below, it becomes crystal clear that the factual situation in that case is akin to the one in the present matter. The relevant portion has been extracted below - "19. Applying the aforesaid judgments to the facts of this case, so far as the applicability of Article 137 of the Limitation Act to the applications under Section 11 of the Arbitration Act is concerned, it is clear that the demand for arbitration in the present case was made by the letter dated 7-11-2006. This demand was reiterated by a letter dated 13-1-2007, which letter itself informed the appellant that appointment of an arbitrator would have to be made within 30 days. At the very latest, therefore, on the facts of this case, time began to run on and from 12-2-2007. The appellant's laconic letter dated 23-1-2007, which stated that the matter was under consideration, was within the 30-day period. On and from 12-2-2007, when no arbitrator was appointed, the cause of action for appointment of an arbitrator accrued to the respondent and time began running from that day. Obviously, once time has started running, any final rejection by the appellant....
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....of the Supreme Court in Geo Miller & Company Private Ltd. -v- Rajasthan Vidyut Utpadan Nigam Ltd., reported in 2019 SCC OnLine SC 1137 to argue that the limitation period in the present case had already expired and that the petitioner cannot justify the unreasonable delay in invocation of arbitration by taking refuge in the purported settlement discussions. While this Court accepts the principle propounded in the aforesaid case as was also done by the apex court in BSNL-v-Nortel (supra) but the present case factually differs from the situation in Geo Miller (supra). In Geo Miller (supra), the final bill was still pending settlement whereas in the present case the final bill was not only settled but the retention money was also refunded to the petitioner. The petitioner clearly accepted the settlement by two letters, indicating no duress or coercion whatsoever, accepted the payments as per the final bill and the refund of the retention money. 30. Next, Mr. Mitra sought to challenge the acceptance of such final bill on the grounds that the same was done under duress from the respondent. This reminded me of the old saying of hitting arrows in the dark in the hope that one of them w....
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.... Anr. reported in 2022 SCC OnLine Del 3123 wherein Bhambani J. held that limitation cannot be extended by consent. The relevant portions have been extracted below - 14. To be abundantly clear as to the concept of 'limitation' barring a legal remedy, the following observations of the Hon'ble Supreme Court in N.9 Balakrishnan v. M. Krishnamurthy may be noticed: "11. Rules of limitation are not meant to destroy the rights of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. The law of limitation fixes a lifespan for such legal remedy for the redress of the legal injury so suffered. Time is precious and wasted time would never revisit. During the efflux of time, newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a lifespan must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. The law of limitation is thus founded on public policy. It is enshrined in the maxim interest reipubli....
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....t as a barrier in the pathway of justice, but instead it acts as a means to ensure efficiency in the process of justice. 36. For ease of reference of the parties, I have attempted to encapsulate below the relevant juridical principles which emerge from the various judgments discussed above - a. The Supreme Court vide its decisions in Perkins Eastman Architects DPC & Another -v- HSCC (India) Ltd. (supra) and TRF Ltd. -v- Energo Engineering Projects Ltd. (supra) has univocally made it clear that unilateral appointment of an arbitrator by an interested party is not permissible. b. The three judges' bench in Vidya Drolia -v- Durga Trading Corporation (supra) empowered the Courts adjudicating a Section 11 application to intervene in certain circumstances and held that such interventional exercise does not interfere with the principle of competence-competence and separation as to obstruct arbitration proceedings but ensures that vexatious and frivolous matters gets weeded out at the initial stage. It is to be noted that the Supreme Court in this case observed that an absolute hands off approach would be counterproductive and harm arbitration, whereas limited yet effe....
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....ed efforts at arriving at a settlement and contemplated referral of the dispute for arbitration. This date would then be treated as the date on which the cause of action arises, for the purpose of limitation. The threshold for determining when such a point arises will be lower in the case of commercial disputes, where the party's primary interest is in securing the payment due to them, than in family disputes where it may be said that the parties have a greater stake in settling the dispute amicably, and therefore delaying formal adjudication of the claim. f. In Secunderabad Cantonment Board -v- B. Ramachandraiah & Sons (supra), the apex court ruled that once the limitation period has started running, any final rejection by the respondent would not give any fresh start to the limitation period which has already begun running, following the mandate of Section 9 of the Limitation Act, 1963. g. Lastly, in Extramarks Education India Pvt. Ltd -v- Shri Ram School (supra), the Delhi High Court remarked that limitation for invoking a legal remedy cannot be extended even by consent and that unending period for launching the remedy may lead to unending uncertainty and consequential ....