TaxTMI 
TaxTMI 
2024 (9) TMI 1300
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....vil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 2 of 150 Rule 9 of O.S. Rules, the Division Bench of the High Court allowed the appeals, set aside the judgment and order of the Single Judge dated 23 December 2020 and restored the arbitral award dated 13 July 2020. THE CONTRACT 2. OPG Power Generation Private Ltd (in short OPG - the appellant in the leading appeal), a subsidiary of Gita Power and Infrastructure Private Limited (in short Gita Power - Respondent No.2 (R-2) in the leading appeal, and appellant in the connected appeal), floated a composite tender for design, manufacture, supply, erection and commissioning of air-cooled condenser unit (ACC Unit) with auxiliaries for 160 MW Coal Based Thermal Power Plant (Project) at Gummidipoondi in the State of Tamil Nadu. Enexio Power Cooling Solutions (in short Enexio - Respondent No.1 (R-1) in the leading appeal) bid for the project. After a series of correspondences /negotiations, on 4 March 2013, R-2 issued two separate orders: (i) for design, engineering and supply of one ACC Unit with auxiliaries for 160 MW Coal Based Power Project at Gummidipoondi (in short, Supply Purchase Order); and (ii) for erection and commissioning....
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....he Services, such as Service Tax, cess, work order tax and other charges which could be levied in connection with and during the Order, whether deducted at source or not, will be borne and paid by the Purchaser. 6.2. Any statutory variation due to implication of new taxes and duties shall be paid by Purchaser." THE DISPUTE BETWEEN PARTIES 6. The intended completion/ commissioning date, as originally contemplated, was 31 March 2014. However, commissioning took place in May 2015. The total amount billed by Enexio (R-1) for the aforesaid two orders was Rs. 46,71,04,493 but the amount paid to it was Rs. 39,59,19,629 only. This gave rise to a dispute. According to Enexio (R-1), Rs. 6,75,15,631 remained payable to it. Whereas, according to the appellant, nothing was due as from the remaining amount, following sums were deductible: "(i) Rs. 3,30,00,000, vide debit note dated 24.08.2015, towards liquidated damages for delay in supply and erection. (ii) Rs. 5,94,06,693, vide debit note dated 16.01.2016, towards customs duty. (iii) Rs. 1,72,854 towards dismantling modification - TG building. (iv) Rs. 27,40,161 towards ACC duct fabrication. T....
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....ded an offer of Rs. 300 lacs to Enexio (R-1) as full and final settlement of the account. This was not accepted by Enexio. Hence, the claim. ENEXIO'S (R-1's) CLAIM 10. On 2 May 2019 Enexio (R-1) invoked the arbitration clause, under the extant ICC Rules, raising the following claims: S.No. Claim Amount (in INR) A Outstanding principal amount as due under the Purchase Orders 6,75,15,631 B Declaration that the Debit Note Nos.076/2015-16 and 077/2015-16, both dated 24.08.2015, issued by the Employer, claiming deduction of aggregate amount of INR 3,30,00,000/- towards Liquidated Damages for the delay, are unlawful and unsustainable. - C Declaration that the Debit Note No.032/2015-16 dated 12.01.2016, issued by the Employer, claiming deduction of Rs. 5,94,06,693/- towards Customs Duty, including CVD and SAD, is unlawful and unsustainable. - D Interest on outstanding principal amount calculated @ 18% p.a. from respective due date(s) of payments till 31.03.2019. 3,51,43,446 E Interest on outstanding principal amount calculated @ 18% p.a. for further period starting from 01.04.2019 till the date of payment. - ....
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.... are payable by Enexio to OPG/ Gita Power for the delay - The claimant was entitled to extension up to the date of completion i.e., 21 September 2015. Therefore, Enexio has no liability towards liquidated damages for the delay. Moreover, all the completion requirements were achieved by that date. (d) No liability of Enexio to pay customs duty - Clause 6 of the Supply / Erection Purchase orders stipulated that all taxes, duties and local levies payable would be borne and paid by the purchaser. Therefore, liability to pay customs duty would fall upon the purchaser/ employer. (e) Limitation - (i) Declaratory relief sought by Enexio qua the debit notes (i.e., towards liquidated damages and customs duty) is beyond the period of limitation prescribed by Article 58 of the Limitation Act, 19634; (ii) However, Enexio's claim for unpaid dues payable under the contract is within the period of limitation; and (iii) OPG's counterclaim for cost of repair/replacement of gearboxes and fan modules is barred by limitation. Reasoning of the Arbitral Tribunal on limitation: 14. Regarding the finding on limitation, the Arbitral Tribunal (in short the "....
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....t these counterclaims were included in the ongoing negotiations. The Tribunal has found that the Taking Over Certificate is deemed to have been issued on 21st September 2015. (See Section 13.13 above). On that date the Claimant is deemed to have completed its obligations and thus, that is the latest date from which the limitation period of three years must run. The Claimant's liabilities are barred by limitation on or earlier than 21st September 2018. The Counterclaim was delivered on 15th July 2019 and is, thus, barred by limitation.........." CHALLENGE TO THE AWARD U/S 34 OF THE 1996 ACT 17. Two applications, namely, O.P. Nos. 533 and 562 of 2020, were filed by OPG (the appellant in the leading Civil Appeal) and Gita Power (appellant in the connected appeal and R-2 in the leading appeal) respectively, under Section 34 of the 1996 Act, for setting aside the award dated 13 July 2020. Grounds of Challenge 18. OPG and Gita Power laid challenge to the arbitral award, inter alia, on the following grounds: (i) Enexio's (R-1's) claim was made beyond the period of limitation prescribed by Articles 14 and 18 of the Schedule to the 1963 Act. The arbitration clause was i....
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....t dates, and perusing the arbitral award, in paragraph 25 of the judgment, the learned Single Judge observed: "25. There is a clear dichotomy in impugned award regarding the legal drill of testing limitation. AT has taken 26.05.2018 as the reckoning date, that being the date on which written offer to settle the matter was made by Gita/OPG vide Ex. C. 79, but for testing the counter claim of Gita/OPG, AT has taken 21.09.2015 as the reckoning date or starting point of limitation, that being the date of deemed completion of said work. This Court is constrained to observe that this dichotomy is akin to classical division between science and mysticism. Therefore, this Court unhesitatingly holds that this is patently illegal and an implausible view. To be noted, this dichotomy is not a mere erroneous application of law, and it needs no reappreciation of evidence. It is also an infract of section 18 of A and C Act which provides for equal treatment of parties. More importantly, the law of limitation being based on public policy, as already delineated supra, infract of the same would clearly vitiate the impugned award as one being in conflict with public policy of India." 21. T....
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.... (i) The Arbitral Tribunal, in paragraph 16.03(d) of the award qua claims (i), (iv), (v) and (vi) (corresponding claim numbers A, D, E and F) of the claimant-respondent, observed: "As long as meaningful negotiations were ongoing between the parties, the period of limitation of three years had not begun to run. Following the meeting held between the parties on 19th April, 2018 the respondents made a written offer to settle the matter on 26 May 2018. Thus, the Tribunal finds that the period of limitation had not commenced until 26 May 2018 and consequently had not expired when the request for arbitration was received by the ICC Secretariat on 2 May 2019." The afore-quoted observations are in teeth of decisions of this Court in (i) Bharat Sanchar Nigam Limited v. Nortel Networks Pvt. Ltd.5 and (ii) B & T AG v. Ministry of Defence6 where it has been held that mere negotiations will not postpone the cause of action for the purpose of limitation. (ii) The period of limitation for the claim would have to be counted as three years from the date of completion i.e., 21 September 2015, which got over before 2 May 2019 i.e., the date when request was received for ....
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.... Judge justifiably set aside the award that was self-contradictory and perverse. (viii) Counterclaims for cost of repair/ replacement of gear boxes, which were defective, ought to have been adjudicated. In absence thereof, the arbitral award is rendered bad in law. (ix) The Division Bench of the High Court misconstrued the ratio of the decision of this Court in Geo Miller & Co. (P) Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd14 for treating the claim within, and the counterclaim beyond, the period of limitation. (x) The subsequent purchase orders issued by OPG replaced the earlier purchase orders issued by Gita Power, and the supply/ work was in respect of an OPG project, therefore Gita Power could not have been dragged into arbitration and made jointly and severally liable with OPG. SUBMISSIONS ON BEHALF OF FIRST RESPONDENT /ENEXIO 26. The learned counsel for the first respondent, inter alia, submitted: (i) The findings in the award are factually correct. There is no patent illegality, as alleged, or otherwise, which may warrant interference under Section 34 of the 1996 Act. Therefore, the Division Bench of the High Court was justified in se....
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....of the meeting as well as subsequent conduct of the parties to conclude lack of consent on Enexio's part for deductions in the outstanding amount, is a decision within the remit of the arbitral tribunal. Therefore, any error, if at all, would be an error within its jurisdiction, which is not amenable to interference under Section 34 of the 1996 Act. Because, while examining the validity of an award under Section 34, the Court exercises supervisory and not appellate jurisdiction (vide: (i) Steel Authority of India Ltd. versus Gupta Brothers Steel Tubes Ltd.15; (ii) Associated Builders (supra); (iii) Ssangyong Engg (supra); and (iv) Delhi Airport Metro Express Pvt. Ltd. v. DMRC Ltd.16). (vi) The learned Single Judge had erred in observing: (a) 'That any infract qua limitation would violate public policy and attract Section 34 (2) (b) (ii) read with Explanation 1 of the 1996 Act.' Because limitation is a mixed question of fact and law and if its determination depends on interpretation / appreciation of evidence / materials on record, any error, ipso facto, would not render the award amenable to interference as is clear from the Proviso to sub-section (2-A) of Section....
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....t of cost of repair / replacement of gear boxes and fan modules, could be treated as barred by time when the other side's claim, arising out of same contractual relationship, was found within limitation? (d) Whether arbitral award for payment of the outstanding principal amount with interest is perverse because it makes no adjustment for debit note(s) entries even though the prayer to declare them as invalid was rejected as barred by time? (e) Whether the reasoning of the arbitral tribunal is flawed and vitiated by adopting different yardstick for adjudging the counterclaim than what was adopted for adjudging the claim? If so, whether it vitiated the award and rendered it vulnerable to a challenge under Section 34 of the 1996 Act? RELEVANT LEGAL PRINCIPLES GOVERNING A CHALLENGE TO AN ARBITRAL AWARD 29. Before we delve into the issue/ sub-issues culled out above, it would be useful to have a look at the relevant legal principles governing a challenge to an arbitral award. Recourse to a Court against an arbitral award may be made through an application for setting aside such award in accordance with sub-sections (2), (2-A) and (3) of Section 34 of the 1996 Act....
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....t only to harmful cases but also to harmful tendencies; this doctrine of public policy is only a branch of common law, and, just like any other branch of common law, it is governed by precedents; the principles have been crystallized under different heads and though it is permissible for courts to expound and apply them to different situations, it should only be invoked in clear and incontestable cases of harm to the public; Though the heads are not closed and though theoretically it may be permissible to evolve a new head under exceptional circumstances of a changing world, it is advisable in the interest of stability of society not to make any attempt to discover new heads in these days. (Emphasis supplied) 33. In Central Inland Water Transport Corporation v. Brojo Nath Ganguly22, this Court observed that the expressions 'public policy', 'opposed to public policy', or 'contrary to public policy' are incapable of precise definition. It was observed that public policy is not the policy of a particular government. Rather it connotes some matter which concerns the public good and the public interest. It was observed: "92.......what is for the public good or in the publ....
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....on 'public policy' must be construed in the sense the doctrine of public policy is applied in the field of private international law. Applying the said criteria, it was held that enforcement of a foreign award could be refused on the ground of being contrary to public policy if such enforcement would be contrary to (a) fundamental policy of Indian law or (b) the interests of India or (c) justice or morality26. The Court thereafter proceeded to hold that a contravention of the provisions of the Foreign Exchange Regulation Act would be contrary to the public policy of India as that statute is enacted for the national economic interest to ensure that the nation does not lose foreign exchange which is essential for the economic survival of the nation27. 36. What is clear from above is that for an award to be against public policy of India a mere infraction of the municipal laws of India is not enough. There must be, inter alia, infraction of fundamental policy of Indian law including a law meant to serve public interest or public good. 37. In Oil and Natural Gas Corporation (ONGC) v. Saw Pipes Ltd.28 a two-Judge Bench of this Court, in the context of a challenge to a domestic arb....
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....(b) The award could be set aside if it is contrary to: (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality. (c) The award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. (d) It is open to the court to consider whether the award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to public policy of India." 39. In Oil and Natural Gas Corporation Limited v. Western Geco International Limited30, which also related to the period prior to 2015 amendment of Section 34 (2)(b)(ii)31, a three-Judge Bench of this Court, after considering the decision in Saw Pipes (supra), without exhaustively enumerating the purport of the expression 'fundamental policy of Indian law', observed that it would include all such fundamental principles as providing a basis for administration of justice and enforcement of law in this country. The Court thereafter illustratively referred to three fundamental juristic principles, namely, (a) that in every determination that affects the rights of a ci....
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....The afore-mentioned judicial pronouncements were all prior to 2015 Amendment. Notably, prior to the Amendment, 2015 the expression "in contravention with the fundamental policy of Indian law" was not used by the legislature in either Section 34(2)(b)(ii) or Section 48(2)(b). The pre-amended Section 34(2)(b)(ii) and its Explanation read: "S.34. Application for setting aside arbitral award- (1) ******* (2) An arbitral award may be set aside by the court only if- ****** (b) the court finds that - ****** (ii) the arbitral award is in conflict with the public policy of India. Explanation.-- Without prejudice to the generality of sub-clause (ii) it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81. Whereas pre-amended Section 48(2)(b) and its Explanation read: S. 48. Conditions for enforcement of foreign awards. - (1) ******** (2) Enforcement of an arbitral award may also be refused if the court finds that- ....
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.... erroneous application of the law or by re-appreciation of evidence. 46. Explanation 1 to Section 34(2)(b)(ii), specifies that an arbitral award is in conflict with the public policy of India, only if,- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. 47. In the instant case, there is no allegation that the making of the award was induced or affected by fraud or corruption, or was in violation of Section 75 or Section 81. Therefore, we shall confine our exercise in assessing as to whether the arbitral award is in contravention with the fundamental policy of Indian law, and/ or whether it conflicts with the most basic notions of morality or justice. Additionally, in the light of the provisions of sub-section (2-A) of Section 34, we shall examine whether there is any patent illegality on the face of the award. 48. Before undertaking the aforesaid exercise, it would be apposite to consider as to how the expressions (a) "in contravention with the fundam....
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....ples to public policy will open the floodgates. Hence, Explanation 2 to Section 34(2)(b)(ii) has been proposed. After taking note of the supplementary report, the statement of objects and reasons of the Amendment Act, 2015, and the amended provisions of Sections 28, 34 and 48, this Court held: "34. What is clear, therefore, is that the expression public policy of India, whether contained in section 34 or in section 48, would now mean the fundamental policy of Indian law as explained in paras 18 and 27 of Associate Builders i.e. the fundamental policy of Indian law would be relegated to Renusagar's understanding of this expression. This would necessarily mean that Western Geco expansion has been done away with. In short, Western Geco, as explained in Paras 28 and 29 of Associate Builders, would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach the court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, in so far as principles of natural justice are concerned, as contained in sections 18 and 34(2)(a) (iii) of the 1996 Act, these co....
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....s, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterized as perverse. ********* ******* ******* 69. We therefore hold, following the aforesaid authorities, that in the guise of misinterpretation of the contract, and consequent errors of jurisdiction, it is not possible to state that the arbitral award would be beyond the scope of submission to arbitration if otherwise the aforesaid misinterpretation [which would include going beyond the terms of the contract], could be said to have been fairly comprehended as disputes within the arbitration agreement or which were referred to the decision of the arbitrators as understood by the authorities above. If an arbitrator is alleged to have wandered outside the contract and dealt with matters not allotted to him, this woul....
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....rd is in conflict with the public policy of India, inter alia, if it conflicts with the 'most basic notions of morality or justice'. Justice 54. Justice is the virtue by which the society/ court / tribunal gives a man his due, opposed to injury or wrong. Justice is an act of rendering what is right and equitable towards one who has suffered a wrong. Therefore, while tempering justice with mercy, the court must be very conscious, that it has to do justice in exact conformity with some obligatory law, for the reason that human actions are found to be just or unjust on the basis of whether the same are in conformity with, or in opposition to, the law42. Therefore, in 'judicial sense', justice is nothing more nor less than exact conformity to some obligatory law; and all human actions are either just or unjust as they are in conformity with, or in opposition to, the law43. 55. But, importantly, the term 'legal justice' is not used in Explanation 1, therefore simple conformity or nonconformity with the law is not the test to determine whether an award is in conflict with the public policy of India in terms of Explanation 1. The test is that it must conflict with the most basic ....
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....n the view of the Court, breached the fundamental principles of justice, namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered with the other party46. However, a note of caution was expressed in the judgment by observing that this ground is available only in very exceptional circumstances and under no circumstance can any court interfere with an arbitral award on the ground that justice has not been done in the opinion of the court because that would be an entry into the merits of the dispute. 58. In the light of the discussion above, in our view, when we talk about justice being done, it is about rendering, in accord with law, what is right and equitable to one who has suffered a wrong. Justice is the virtue by which the society/ court / tribunal gives a man his due, opposed to injury or wrong. Dispensation of justice in its quality may vary, dependent on person who dispenses it. A trained judicial mind may dispense justice in a manner different from what a person of ordinary prudence would do. This is so, because a trained judicial mind is likely t....
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.... Patent Illegality 60. Sub-section (2-A) of Section 34 of the 1996 Act, which was inserted by 2015 Amendment, provides that an arbitral award not arising out of international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is visited by patent illegality appearing on the face of the award. The proviso to subsection (2-A) states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence. In Saw Pipes (supra), while dealing with the phrase 'public policy of India' as 49 See paragraph 39 of Associate Builders (supra) Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 56 of 150 used in Section 34, this court took the view that the concept of public policy connotes some matter which concerns public good and public interest. If the award, on the face of it, patently violates statutory provisions, it cannot be said to be in public interest. Thus, an award could also be set aside if it is patently illegal. It was, however, clarified that illegality must go to the root of the matter and if the illegality is of trivial nature, it cannot be held that award is against publ....
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....o pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon. It was also observed that an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on that score. 65. In Ssangyong (supra), which dealt with the legal position post 2015 amendment in Section 34 of the 1996 Act, it was observed that a decision which is perverse, while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. It was pointed out that an award based on no evidence, or which ignores vital evidence, would be perverse and thus patently illegal. It was also observed that a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence in as much as such decision is not based on evidence led by the parties, and therefore, would also have to be characterized as perverse54. 66. The tests laid down in Associate Builders (supra) to determine perversity were followed in Ssyanyong (supra) and later approved by a t....
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....ion 34 cannot be equated with the normal appellate jurisdiction. Rather, the approach ought to be to respect the finality of the arbitral award as well as party's autonomy to get their dispute adjudicated by an alternative forum as provided under the law. 70. Now, we shall examine the scope of interference with an arbitral award on ground of insufficient, or improper/erroneous, or lack of, reasons. Reasons for the Award - When reasons, or lack of it, could vitiate an arbitral award. 71. Section 31 (3)57 of the 1996 Act provides that an arbitral award shall state reasons upon which it is based, unless (a) the parties have agreed that no reasons are to be given, or (b) the award is an arbitral award on agreed terms under Section 30. 71.1 As to the form of a reasoned award, in Russell on Arbitration (24th Edition, page 304) it is stated thus: "6.032. No particular form is required for a reasoned award although 'the giving of clearly expressed reasons responsive to the issues as they were debated before the arbitrators reduces the scope for the making of unmeritorious challenges'. When giving a reasoned award the tribunal need only set out what, on its view of ....
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...., they reveal a flaw in the decision-making process. If the challenge to an award is based on impropriety or perversity in the reasoning, then it can be challenged strictly on the grounds provided in section 34 of the Arbitration Act. If the challenge to an award is based on the ground that the same is unintelligible, the same would be equivalent of providing no reasons at all. Coming to the last aspect concerning the challenge on adequacy of reasons, the court while exercising jurisdiction under section 34 has to adjudicate the validity of such an award based on the degree of particularity of reasoning required having regard to the nature of issues falling for consideration. The degree of particularity cannot be stated in a precise manner as the same would depend on the complexity of the issue even if the court comes to a conclusion that there were gaps in the reasoning for the conclusions reached by the tribunal, the court needs to have regard to the document submitted by the parties and the contentions raised before the tribunal so that awards with inadequate reasons are not set aside in casual and cavalier manner. On the other hand, ordinarily unintelligible awards are to be se....
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....y illegal. However, an arbitral tribunal has jurisdiction to interpret a contract having regard to terms and conditions of the contract, conduct of the parties including correspondences exchanged, circumstances of the case and pleadings of the parties. If the conclusion of the arbitrator is based on a possible view of the matter, the Court should not intefere58. But where, on a full reading of the contract, the view of the arbitral tribunal on the terms of a contract is not a possible view, the award would be considered perverse and as such amenable to interference59. Whether unexpressed term can be read into a contract as an implied condition. 73. Ordinarily, terms of the contract are to be understood in the way the parties wanted and intended them to be. In agreements of arbitration, where party autonomy is the grund norm, how the parties worked out the agreement, is one of the indicators to decipher the intention, apart from the plain or grammatical meaning of the expressions used60. 74. However, reading an unexpressed term in an agreement would be justified on the basis that such a term was always and obviously intended by the parties thereto. An unexpressed term can b....
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.... (b) Enexio (R-1 - the claimant) submitted a single unpriced techno-commercial offer covering both projects. Following negotiations, a revised techno commercial offer covering both projects was submitted in August 2012. Thereafter, following further negotiations, another technical offer covering both projects was submitted by Enexio on 6 October 2012. (c) On 5 November 2012, with reference to the techno offers, OPG addressed a letter to Enexio, in respect of T.N. Unit, stating thus: "Design, Engineering, Supply, Installation, Testing and Commissioning of Air Cooled Condenser with auxiliaries for 1 X 160 MW (Phase III) Coal Based Power Project at Gummudipoondi. We refer to your offer GCTQD/ OPG - Gujarat - Gummidipoondi /4239/12 / Rev 2 dated October 6, 2012 and technical and commercial discussions we had with you of date. We have pleasure in informing you of our intent to award a contract for Air Cooled Condenser with auxiliaries in conformance to the discussions you had with us. Price: The price for the total scope is Rs. 44,00,00,000/- (Forty four crores only). Price basis: F.O.R. destination (Power Project site at Gummidipoondi) ....
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....octrine is applicable, as OPG and R-2 have represented themselves as a single economic entity which could switch duties and obligations from one to the other. The Tribunal held that - (a) R-2 is a proper party; (b) both OPG and R- 2 were bound by the arbitration agreements, which gave rise to the arbitral proceedings; and (c) OPG and R-2 were jointly and severally liable to the claimant for complying with the award. 80. In Cox & Kings Ltd. v. SAP India (P) Ltd.63, a Constitution Bench of this Court held that by interpreting the express language employed by the parties in the record of agreement, coupled with surrounding circumstances of its formation, performance, and discharge of the contract, a Court or Arbitral Tribunal is empowered to determine whether a non-signatory is a party to an arbitration agreement. It was held that 'Group of Companies' doctrine is premised on ascertaining the intention of the nonsignatory to be party to an arbitration agreement. The doctrine requires the intention to be gathered from additional factors such as direct relationship with the signatory parties, commonality of subject matter, composite nature of the transaction, and performance of the co....
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..... (c) Even if it is assumed that the deemed date of completion was 21 September 2015 (as held by the arbitral tribunal), the claim being filed on 2 May 2019, was well beyond 3 years from that date. (d) Once the period of limitation started to run, in terms of Articles 14 and 18, mere negotiations could not have extended the period of limitation. Therefore, the award, which takes a contrary view, is patently illegal. 83. Before proceeding further, we must remind ourselves that sub-section (1) of Section 4364 of the 1996 Act makes the Limitation Act, 1963 (in short, 1963 Act) applicable to arbitrations as it applies to proceedings in Court. Sub-section (2) of Section 43 provides that unless otherwise agreed by the parties, an arbitral proceeding shall be deemed to have commenced on the date specified in Section 2165. On a conjoint reading of sub-sections (1) and (2) of Section 43 of the 1996 Act along with Sections 366 and 2 (j)67 of the 1963 Act it is clear that if on the date of commencement of the arbitral proceeding, as referred to in Section 21 of the 1996 Act, the claim(s) is/are barred by limitation, as per the provisions of the 1963 Act, the Arbitral Trib....
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....received 10% of the order price in advance on 4 July 2013, and another 10% on 23 July 2013. Both the advance payments were received from Gita Power (R-2). (f) While the work was in progress, in July 2013 OPG issued two orders replicating those that were issued by Gita Power (R-2) with insignificant variation. (g) As per the Supply Purchase Order, payments were to be made in the following order: Payments: (i) 10% of Order Price as advance money on submission of request for advance and advance payment bank guarantee for 10% of the Order Price, valid until completion of supply; (ii) 10% against approval of Engineering Documentation; (iii) 65% of the Order Price on Pro Rata basis along with 100% taxes after receipt of material at site; (iv) 5% of the Order Price upon submission of (a) invoice, and (b) certificate on completion of punch points duly signed by Parties; (v) 5% of the Contract Price upon submission of (a) invoice, (b) take over certificate of Equipment issued by Purchaser; and (iii) warranty bond for 10% of the contract valid up to the end of warranty period; (vi) 5% of the Contract Price upon ....
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....liquidated damages permissible under the Supply Purchase Order and Erection Purchase Order for the delay in execution. (m) On 28 August 2015 Enexio wrote to OPG questioning the debit notes. (n) On 21 September 2015 Enexio informed OPG that the turbine generator was running at full load and, thereby, requested OPG to arrange for Performance Guarantee Test (PG Test). This request was repeated by e-mails dated 3 October 2015 and 8 October 2015. Later, on 9 October 2015, Enexio sent a letter to OPG attaching six protocols confirming commissioning of all relevant segments of the project. Not only that, on 20 October 2015, Enexio sent a procedure for the PG Test. But the PG Test was not undertaken. (o) On 12 January 2016, OPG issued debit note against OPG's account for customs duty. (p) On 22 August 2016 OPG informed Enexio that fan assembly had detached. On 20 January 2017 Enexio sent an e-mail to OPG, saying: "Sir, This is further to our visit to your site on 7/1/2016. Considering the time availability and on the interest of closing the issue, we suggest the following: 1. Using in-situ machining agency, the shaft d....
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....y Enexio. Whereafter, arbitration proceeding commenced. Material Observations in the Award. 87. We shall now extract few observations/ findings in the award which, in our view, would be useful in determining the limitation issue. These observations/ findings, with their corresponding paragraph number in the award, are extracted below: "1). On 1st April 2013 the Claimant prepared its L1 Network Schedule which indicated the final activities leading to commissioning ..: Hook up with TG: 8-Mar-14 to 14-Mar-14 Commissioning 22-Mar-14 to 31-Mar-14. ......(para 13.02 of the award) 2). The Purchase Orders are silent on the mode of payment of the Claimant's invoices except to note that: 7.3. 65% of the Order Price shall be paid on Pro rata basis along with 100% Taxes and Duties after receipt of material at site. 7.7 Payments will be made within twenty-five days of submission of Invoice/ request for payment and other documents. ..... (para 13.08 (b) of the award) 3). No indication is given in the Purchase Orders as to what 'other documents are required. .....(para 13.08 (c) of the award) 4). The claimant asserts that until ....
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....d to drive the pump, had to be re-ordered. The claimant asserts, and respondent no.1 does not deny, that the original pump and motor would have been delivered to site on or about 17th February 2014. ........(para 13.10 (a) of the award) 8). It was agreed at the hearing in this arbitration that the actual delivery date of the motors (which arrived a few days after the pump) could be taken as on or about 7th May 2014. Thus, there was a delay of approximately 79 days in delivery. ......(para 13.10 (b) of the award). 9). On balance, the Tribunal is satisfied that the drain pump together with its motor, although a low value component, was a necessary part of the ACC unit and the decision by Respondent no. 1 to replace it at a late stage risked delaying the project. The time elapsed between the original estimated delivery date, and the assumed actual delivery date was 79 days. .......(para 13.10 (e) of the award) 10). The tribunal finds the following facts to be significant: (i) The ACC unit could not be connected to the turbine generator flange until the turbine generator was in place to have the connection made. Thus, welding of the ACC unit....
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.... of the award) 11). The tribunal now considers when, if at all, the ACC system was completed. There are three certificates which are referred to in the erection purchase order. These are: A certificate on competition of punch points; A Take Over Certificate of Equipment; and A certificate of competition of performance test. None of these certificates have been issued. .........(para 13.13 (d) of the award) 12). The only certificate issued by the respondents was dated 2nd March 2017. In separate correspondence, Respondent no.1 stated that this certificate was issued for marketing purposes and did not absolve the claimant from its contractual obligation under the Purchase Orders. ........(para 13.13 (e) of the award) 13). Notwithstanding the respondents' caveat, the issuance by the respondents of the 2nd March 2017 certificate is considered significant by the tribunal. The respondents knew the purpose for which the certificate was required by the claimant and, if it did not believe in the veracity of what it was certifying, even for marketing purposes, then it behaved dishonestly. The tribunal has no basis for assum....
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.... would be deemed to have been carried out satisfactorily only after a further 180 days had elapsed. Thus, the tribunal finds that the deemed achievement of Supplier's liability in respect to Performance Guarantee Test pursuant to Clause 10.5 of Annexure A of the Erection Purchase Order only became effective on 19th March 2016. As the claimant was still requesting a PG test as late as 20th May 2016 the tribunal is satisfied that the deeming provisions apply and the ACC unit is deemed to have passed the PG test. The Erection Purchase Order states that, where the PG test is deemed to have been carried out, the respondents remained liable for the guaranteed performance during the 180 days. However, it is silent on whether the deemed achievement of supplier's liability in respect to Performance Guarantee test is retrospective to the date when the performance can be said to have been achieved. The tribunal finds that for the purposes of determining the delay caused by the failure to arrange a PG test it would be just to consider that the required performance was achieved on 21st September 2015 - the date on which the tribunal has found that the ACC unit was deemed to have been taken over....
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....io. Notably, the claim was in respect of: (a) declaration qua invalidity of Debit note(s); (b) outstanding principal amount; and (c) interest. Insofar as relief qua declaration was concerned, it was found barred by time prescribed by Article 58, and there is no serious challenge to that finding. As regards claim for the outstanding principal amount, it was a composite claim for the balance amount payable for supplies made and work done under the Supply Purchase Order and the Erection Purchase Order respectively, which was found within limitation. 89. According to the appellant(s), Article 14 is applicable to the claim in respect of balance amount for the price of the goods supplied under the Supply Purchase Order; and Article 18 would apply to the claim for the work done under the Erection Purchase Order. It is their case that if the project was to be completed by 31 March 2014, three years period should be counted from that date and, therefore, claim would be barred by limitation as on 2 May 2019 i.e., the date of commencement of the arbitral proceeding. 90. Per contra, Enexio's case is that it is a composite contract for design, manufacture, supply, erection and commissioni....
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....e of the work done, neither Article 14 nor Article 18 will apply, but only Article 55, which provides for all actions ex contractu (i.e., based on a contract) not otherwise provided for, would apply77. 92. Article 55, which is a combination of erstwhile Articles 11578 and 11679 of the First Schedule to the 1908 Act, is a residuary Article in respect of all actions based on a contract not otherwise specially provided for. For the applicability of Article 55, four requirements should be satisfied, namely, (1) the suit should be based on a contract; (2) there must be breach of the contract; (3) the suit should be for compensation; and (4) the suit should not be covered by any other Article specially providing for it. 93. A breach of a contract may be by non-performance, or by repudiation or by both80. In Anson's Law of Contract (29th Oxford Edition), under the heading 'Forms of Breach Which Justify Discharge', it is stated thus: "The right of a party to be treated as discharged from further performance may arise in any one of three ways: the other party to the contract (a) may renounce its liabilities under it; (b) may by its own act make it impossible to fulfil them, (....
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....d to the defendant; and also to article 5684, which lays down a period of three years for a suit to recover the price of work done by the plaintiff for the defendant. Now, as stated above, the plaintiff supplied not only the materials, but also the labour, and it is clear that neither of the aforesaid articles governs the suit in its entirety. It is, however, urged that the action comprises two claims, one for the price of the material supplied by the plaintiff, and the other relating to the price of the work done by him, and that these two claims should be dealt with separately, and that they are governed by article 52 and article 56, respectively. The rule of law is no doubt firmly established that a combination of several claims in one action does not deprive each claim of its specific character and description. The Code of Civil Procedure allows a plaintiff, in certain circumstances, to combine in one action two or more distinct and independent claims, and it is quite possible that one of the claims may be barred by limitation, and the other may be within time; though both of them arise out of one and the same cause of action. In a case of that description there is no reason wh....
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....as well as in article 11687 has the same meaning as it has in section 7388 of the Indian Contract Act and denotes a sum of money payable to a person on account of the loss or damage caused to him by the breach of a contract. It has been held, and we consider rightly, that a suit to recover a specified sum of money on a contract is a suit for compensation within articles 115 and 116 --- vide Nobocoomar Mookhopadhaya v. Siru Mullick89 and Husain Ali Khan v. Hajiz Ali Khan90. We are accordingly of opinion that the present claim must be regarded as one for compensation for the breach of a contract, and that there is no special provision in the Act which governs the claim. It must, therefore, come under the general provision contained in article 115, which governs every action arising out of contract, not otherwise specially provided for." (Emphasis supplied) 97. In Dhapia v. Dalla91 before a Full Bench of the Allahabad High Court the question was, what Article of the First Schedule to the 1908 Act would apply to a suit for recovery of a specified sum under a contract. In that suit, the plaintiff had made defendant(s) partner to one half of the fishery rights in the tank ....
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....to be done......" 10. A suit for the recovery of a specified sum under a contract cannot be said to be a suit of the nature where pecuniary compensation would not afford adequate relief. We are, therefore, of the opinion that the suit out of which this civil revision arises cannot be said to be a suit for the specific performance of a contract and will not be governed by Article 113 of the First Schedule to the Indian Limitation Act, 1908 xxxxx xxxxx 13. We now proceed to consider why Article 115 of the First Schedule to the Limitation Act should apply to the facts of the present case. Article 115 applies when there is a breach of contract, and suit is for compensation for the loss suffered by the innocent party. A breach of contract 'occurs where a party repudiates or fails to perform one or more of the obligations imposed upon him by the contract': (vide Cheshire and Fifoot, p 484). 'If one of two parties to a contract breaks the obligation which the contract imposes, a new obligation will in every case arise - a right of action conferred upon the party injured by the breach' (vide Anson's Law of Contract, p 412). Admittedly, in the present case, there ....
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....ach...... Illustrations .................... (n) A contracts to pay a sum of money to B on a day specified. A does not pay the money on that day; B, in consequence of not receiving the money on that day is unable to pay his debts, and is totally ruined. A is not liable to make good to B anything except the principal sum he contracted to pay, together with interest up to the day of payment.' 18. It is, therefore, clear that the word compensation has been used, in section 73 of the Indian Contract Act in a very wide sense and the present case would be covered by it. 19. We see no reason why the words 'compensation for breach of contract' as used in Article 115 should be given a meaning different from the same words as used in Article 116. Article 115 being a residuary Article for suits based on breach of contract, it is obvious that the suit out of which this revision arises would be governed by the said Article." (Emphasis supplied) 98. On a consideration of the aforesaid decisions as well as the provisions of Section 73 of the Contract Act and Article 55 of the Schedule to the 1963 Act, we are of the view that even a suit for recovery of....
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.... into existence. It was also observed that it would not lie in the mouth of the claimant to plead that it waited to refer the dispute to arbitration because it was making representations and sending reminders to the respondent to settle the matter. 101. In Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority99, in the context of commencement of the period of limitation for making a reference application under Section 20 of the erstwhile Arbitration Act, 1940, it was held by this Court that to be entitled to have an order of reference under Section 20, it is necessary that there should be an arbitration agreement and secondly, differences must arise to which the agreement applied. Once there is an assertion of claim by the appellant and silence as well as refusal in respect of the same by the respondent, a dispute would arise regarding non-payment of the alleged dues. The Court thereafter went on to observe: "4. ....... The High Court proceeded on the basis that the work was completed in 1980 and therefore, the appellant became entitled to the payment from that date, and the cause of action under article 137 arose from that date. But in order to be entitled to ....
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..../ request for payment, and other documents100. The award recites that there is no indication in the Purchase Orders as to what 'other documents' were required101. Not only that, payment, including balance payment, was dependent on issuance of: (i) certificate on completion of punch points signed by parties; (ii) take over certificate of equipment (to be issued by the Purchaser); and (iii) certificate of completion of performance test of equipment (to be issued by the Purchaser)102. But none of these certificates was issued103. In these circumstances, the Arbitral Tribunal had to consider various facts and circumstances to come to a definite conclusion that the work was completed on 21 September 2015. In holding so, Tribunal relied on: (a) an e-mail sent by the claimant on 21 September 2015 showing its readiness to a performance guarantee test; and (b) the fact that there was no evidence to suggest that the certificates on completion, as ought to have been issued, should not have been issued on or before 21 September 2015104. The Tribunal also took note of the terms and conditions of the contract which were to the effect that the performance guarantee test can be deemed satisfactory....
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.... for the outstanding amount in respect of goods supplied and the work done. As already noticed above, the payment(s) under the contract were to be made on pro rata basis, dependent on work done and certificates issued, which, as per the finding in the award, were not issued. Hence, the claimant was entitled to make a composite claim for the goods supplied and the work done after the project was successfully complete i.e., when the Unit was commissioned followed by guaranteed performance. Because it is only then, when the outstanding amount, as per the Bills / Invoices raised, became due and payable to the claimant in terms of the contract. Thus, in our view, Article 18 would also not apply. 107. As it is not demonstrated that any other Article of the Schedule specially providing for the claim, as was made by R-1, was applicable, in our view, Article 55 of the Schedule was applicable to the claim, inter alia, for the following reasons: (a) The claim was for compensation (in as much as the term 'compensation' includes a specified amount payable under a contract107) in respect of the goods supplied and the work done under a contract; and (b) The claim was based on....
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....d its liability in respect of the guaranteed performance. Apparently, passing the performance guarantee test was last of the supplier's (claimant's) obligations, whereafter the supplier was entitled for release of the balance amount. The Tribunal has found: (a) that as per certificate dated 2 March 2017, the commissioning took place in May 2015; (b) at that time there were certain technical issues, which were resolved later; (c) on 21 September 2015, claimant sent request to the appellant(s) to undertake performance guarantee test, but there was no response to the request; and (d) the period of 180 days, counted from 21 September 2015, expired on 19 March 2016. In the light of the above findings, the Tribunal concluded that commissioning took place in the month of May 2015; technical issues were resolved by 21 September 2015; and performance guarantee period expired on 19 March 2016. 113. Based on the above, while bearing in mind that final payment of the principal outstanding amount was dependent on meeting the requirement of performance guarantee, in our view, the cause of action for the claim, as made, matured on expiry of that stipulated period of 180 days within which, desp....
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....right, an acknowledgement of liability in respect of such right has been made in writing signed by the party against whom such right is claimed, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. The Explanation to this section provides that an acknowledgment may be sufficient though it omits to specify the exact nature of the right or avers that the time for payment has not yet come or is accompanied by a refusal to pay, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the right. 117. In Khan Bahadur Shapoor Fredom Mazda v. Durga Prasad Chamaria and others109 while dealing with Section 19 of the 1908 Act, which is pari materia Section 18 of the 1963 Act, this Court held that for a valid acknowledgement, under the provision, the essential requirements are: (a) it must be made before the relevant period of limitation has expired; (b) it must be in regard to the liability in respect of the right in question; and (c) it must be made in writing and must be signed by the party against whom such right is claimed. In paragraph 6 of the judgment, it was observed: "6. ..... The sta....
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.... acknowledgment. But if the defendant merely says, without admitting liability, it would like to examine the claim or the accounts, it may not amount to acknowledgment. In other words, a writing, to be treated as an acknowledgement of liability should consciously admit his liability to pay or admit his intention to pay the debt. Let us illustrate. If a creditor sends a demand notice demanding payment of Rs. 1,00,000 due under a promissory note executed by the debtor and the debtor sends a reply stating that he would pay the amount due, without mentioning the amount, it will still be an acknowledgment of liability. If a writing is relied on as an acknowledgement for extending the period of limitation in respect of the amount or right claimed in the suit, the acknowledgement should necessarily be in respect of the subject matter of the suit. If a person executes a work and issues a demand letter making a claim for the amount due as per the final bill and the defendant agrees to verify the bill and pay the amount, the acknowledgement will save limitation for a suit for recovery of only such bill amount, but will not extend the limitation in regard to any fresh or additional claim for ....
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....E 120. Now, we shall consider whether the counterclaim was barred by limitation. Before that, we must understand the true nature of a counterclaim. A counterclaim is a claim made by a defendant in a suit against the plaintiff. It is a claim, independent of and separable from the plaintiff's claim, which can be enforced by a cross action. Counterclaim preferred by the defendant in a suit is a cross suit and even if the suit is dismissed, counterclaim shall remain alive for adjudication. The purpose of the scheme relating to counterclaim is to avoid multiplicity of proceedings112. 121. In Afcons Gunanusa JV (supra), after considering a plethora of precedents and authoritative texts, this Court summarized the legal principles relating to counterclaims, in the context of arbitral proceedings, as under: "168. On our analysis of the statutory framework of the Arbitration Act and the CPC, related academic discourse and judicial pronouncements, the following conclusions emerge: (i) Claims and counter-claims are independent and distinct proceedings; (ii) A counter-claim is not a defense to a claim and its outcome is not contingent on the outcome of the claim....
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.... accrual of the cause of action. 124. It is therefore well settled that a counterclaim is like a cross suit, or a separate suit, and the limitation of a counterclaim is to be counted from the date of accrual of the cause of action which it seeks to espouse. As a logical corollary thereof, it is quite possible that even though a suit or a claim is within the period of limitation, the counterclaim may well be barred by limitation, if the cause of action espoused therein accrued beyond the prescribed period of limitation. 125. In the instant case, the counterclaims were for: (a) liquidated damages for the delay in supply and erection; (b) reimbursement of customs duties; (c) cost of erection of horizontal and vertical exhaust duct through an external agency; (d) cost of repair/ replacement of Gear Box, due to alleged defective supply; and (e) cost of repair/ replacement of Fan Modules, due to alleged defective supply. Out of the above five counterclaims, three counterclaims, namely, (a), (b) and (c), were dealt by the Arbitral Tribunal on merits, as they stood recited in the minutes of meeting dated 19 April 2018. Whereas the remaining two, namely, (d) and (e), were treated as b....
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....f the supplier, it is to be deemed that the supplier has discharged its liability of a guaranteed performance of 180 days. 128. The Tribunal takes 21 September 2015 as the start point of limitation for the counterclaim on the premise that it would be the date when the Takeover Certificate is deemed to have been issued. That is, the supplier had fulfilled its obligations. On basis thereof, the Tribunal found counterclaims (d) and (e) barred by time as the counterclaim was filed on 15 July 2019 i.e., more than three years later, and there existed no acknowledgement in respect thereof. 129. However, while dealing with the previous issue, we found 19 March 2016 as the start point of limitation for the claim because that is the date when 180 days period of guaranteed performance, which was part of supplier's liability, expired. Be that as it may, whether we count the limitation period from 21 September 2015 or 19 March 2016, the counterclaim which was filed on 15 July 2019 was beyond the prescribed period of three years inasmuch as its cause of action could not have arisen after 19 March 2016 because by 19 March 2016, the supplier / contractor had fulfilled its obligation of guara....
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....edgment is specific and in respect of certain items only. 133. In J.C. Budhraja (supra) this Court held that a writing to be an acknowledgement of liability must involve an admission of a subsisting jural relationship between the parties and conscious affirmation of an intention of continuing such relationship regarding existing liability. The Court added that the admission need not be in respect of any precise amount nor by expressed words. However, it was clarified that any admission of jural relationship in regard to a certain sum due, or a pending claim, cannot be an acknowledgement for a new additional claim for damages122. That apart, in J.C. Budhraja (supra), this Court rejected an argument that if there was acknowledgment of any liability in regard to a contract, then one was at liberty to make any claim in regard to the contract. Relevant portion of the judgment is extracted below: "27. The appellant next contended, relying on Section 18 of the Limitation Act, that as there was acknowledgement of liability in regard to Contract no. 30/F-2 in the letter dated 28-10- 1978, and the notice invoking arbitration was issued on 4-6-1980 within three years from 28- 10-1....
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....t to be relied by the plaintiff as an acknowledgement made by solicitor of the defendant stated thus: "Your client Babu Hari Prasad Saha was the gomoshta at Calcutta in the employ of the firm of Dwarka Nath Makhan Lal Saha, remunerated by a share of the profits, and being liable for a proportionate share of the losses. He was struck by paralysis in the Bengali year 1307, from which time he could not do active work. He, however, continued to be in Calcutta till 1311 when he left Calcutta and went away to his home at Urapara. Our clients have all along been ready and willing to have the accounts duly taken up to this time that your client retired from Calcutta. Your client as the managing gomostha has to make up and explain the accounts up to that time. Our clients will offer every facility in the matter of the adjustment of accounts. ...... It is not the fact that your client retired on 27th June 1910. He ceased to do active work in 1307 and retired in 1311. Our clients have no recollection of any notice from Messrs Dutta and Guha. Our clients are ready to pay to your client whatever may be found due on an adjustment of the accounts up to 1311." Interpreting the aforesai....
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....ed to refer to a subsisting liability as on the date of the statement. However, where an acknowledgement is in respect of a specified sum of money or a specific right only, and not in general terms, it would extend the period of limitation only in respect thereof, and not of other claims which, though may have arisen out of same jural relationship, are not specified therein. In other words, where an acknowledgement of liability is made only with reference to a portion of the claim put forward by the plaintiff/ claimant, it would extend limitation only in respect of such portion, and not of the entire claim of the plaintiff. 138. Reverting to the case in hand, the minutes of meeting dated 19 April 2018 made no reference to the items referable to counterclaims (d) and (e). There is also no acknowledgment in general terms in regard to liabilities subsisting under the contract. Therefore, in our view, the said minutes could not be treated as an acknowledgment for the purpose of extending limitation of counterclaims (d) and (e), which were not specified therein. In consequence, when counterclaims (d) and (e) were otherwise barred by limitation on the date of filing of counterclaim, t....
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.... January 2016. Therefore, the period of limitation i.e., three years expired before 2 May 2019, that is, when request for arbitration was received by ICC Secretariat. In these circumstances, the relief for declaratory relief was held barred by limitation, and rightly so, by the arbitral tribunal. 141. Now, the question is whether rejection of declaratory relief impacted the relief for compensation. Answer to it, in our view, is obviously no. The reason is that the relief for compensation was not a consequential relief i.e., dependent on debit note(s) being declared invalid because issuance of debit note(s) was a unilateral act of the employer which on its own did not extinguish the right of the contractor. No doubt, where the relief sought is consequential to the declaration, and declaratory relief is found barred by time, the prayer for consequential relief will also fail129. But where declaration is just an optional relief i.e., on which the main relief is not dependent, rejection of it as barred by limitation would not extinguish the claim in respect of which substantive relief is sought. In the instant case, debit note was unilaterally issued by the employer of the contracto....
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....ties were found payable by the purchaser. The findings thereon are based on construction of the terms of the contract with reference to the conduct of the parties, therefore, it does not call for interference under Section 34 of the 1996 Act. 144. As far as extension of limitation by negotiation is concerned, a careful look at paragraph 16.03(d) of the arbitral award would indicate that there is a reference to two more aspects, 'apart from meaningful negotiations', to conclude that limitation for the claim was saved. These are: (a) the minutes of meeting dated 19 April 2018; and (b) the written offer of OPG (respondent(s) to the claim) dated 26 May 2018 to settle the matter. We have already found, while deciding sub-issues (b) and (c), that the minutes of meeting dated 19 April 2018 tantamounted to an acknowledgment under Section 18 of the 1963 Act qua the items mentioned therein. We also noticed that it carried no mention regarding those items on which counterclaims were based, and therefore, they were rejected as barred by limitation. In these circumstances, though paragraph 16.03(d) of the award gives the impression that limitation was extended because negotiations were ongoi....
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....rclaim regarding which there is an acknowledgement. Because the Court or the Tribunal would have to decide the claim or the counterclaim, if within limitation, upon consideration of the entire evidence led before it. No doubt, in that process, the acknowledgement would also have to be considered as a piece of evidence. Thus, in our view, the tribunal was well within its jurisdiction in drawing a conclusion, based on consideration of the entire evidence, at variance with the recitals in the acknowledgement. 146. Otherwise also, as is clear from the award, the claimant had challenged the recital in the minutes i.e., regarding its liability for liquidated damages and customs duties, by claiming that it was economically coerced into making such admission. Circumstances, proven on record, indicated that (a) soon after the meeting dated 19 April 2018, the claimant had sent a denial of its liability; and (b) later, on 26 May 2018, the appellant(s) herein had made an offer of Rs. 3 crores to Enexio towards full and final settlement of all its claim. In these circumstances, based on the evidence led by the parties, the tribunal was well within its remit to conclude that the claimant was ....
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....urt took pains, and rightly so, to understand and explain the underlying reason on which the claim of Enexio was found within limitation. As noticed above, paragraph 16.03 (d) of the award contains the reason based on which the arbitral tribunal concluded that Enexio's claim was within limitation. However, in paragraph 16.03 (d), the arbitral tribunal failed to state, in so many words, that it was treating the minutes of meeting dated 19 April 2018 as an acknowledgment within the meaning of Section 18 of the 1963 Act. This omission on the part of the arbitral tribunal was trivial and did not travel to the root of the award, therefore, in our view, the appellate court was well within its jurisdiction to explain the underlying legal principle which the arbitral tribunal had applied; and in doing so, it did not supplant the reasons provided in the award. In this view of the matter, the impugned order of the Division Bench does not suffer from any legal infirmity. Sub-issue (e) is decided in the aforesaid terms. SUMMARY OF OUR CONCLUSIONS 150. In the light of the analysis above, we summarize our conclusions as follows: (i) Though the ACC Unit /project was of OPG, Gita Po....
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....and restoring the arbitral award. Accordingly, the appeal(s) fail and are hereby dismissed. Parties to bear their own costs. 152. Pending application(s), if any, stand disposed of. Footnotes 1High Court of Judicature at Madras ^21996 Act ^32015 Act ^41963 Act 5(2021) 5 SCC 738, paragraphs 20 and 21 6(2024) 5 SCC 358, paragraph 73 7(2019) 15 SCC 131 8(2015) 3 SCC 49 9(2022) 4 SCC 116, paragraphs 16 to 21 10(2019) 20 SCC 1, paragraphs 27-43 ^112022/DHC/003952 12(2019) 4 SCC 163, paragraphs 11 to 13 13(2022) 3 SCC 237, paragraphs 7 & 8 14(2020) 14 SCC 643 (para 28) 15(2009) 10 SCC 63 16(2022) 1 SCC 131 17(2024) 4 SCC 481 18Section 34. Application for setting aside arbitral award. --- (1) ........... (2) An arbitral award may be set aside by the Court only if--- (a) the party making the application establishes on the basis of the record of the arbitral tribunal that--- (i) a party was under some incapacity; or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or ....
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....he party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the court is satisfied that the applicant was prevented by sufficient cause from making the application within the set period of three months it may entertain the application within a period of 30 days, but not thereafter. ^19Section 23.-- What consideration and objects are lawful, and what not. -- The consideration or object of an agreement is lawful, unless - it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies, injury to the person or property of another; or the court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is wide. 20Volume 1, 35th Edition, paragraph 19-112 21AIR 1959 SC 781 22(1986) 3 SCC 156, paragraph 92 231994 Supp (1) SCC 644 24Section 7. Conditions for enforceme....
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....rbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India ******* (2) ***** (3) while deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction. (As substituted by Act 3 of 2016 w.e.f 23.10.2015) Prior to substitution by Act 3 of 2016, sub-section (3) of Section 28 read as under: "(3) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction. 52 See paragraph 37 of Ssyangyong (supra) 53 See paragraph 38 of Ssyangyong (supra) 54 See Paragraph 41 of Ssyangyong (supra). 55 (2020) 7 SCC 167 56 2024 INSC 292 57 Section 31. Form and contents of arbitral award. - (1) ..... (2).... (3) The arbitral award shall state the reasons upon which it is based, unless - (a) the parties have agreed that no reasons are to be given, or (b) the award is an arbitral award on agreed terms under section 30. 58 See: Steel Authority of India Ltd. v. Gupta Broth....
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.... although limitation has not been set up as a defense. (2) For the purposes of this Act - (a) a suit is instituted - (i) in an ordinary case, when the plaint is presented to the proper officer; (ii) in the case of a pauper, when his application for leave to sue as a pauper is made; and (iii) in the case of a claim against the company which is being wound up by the court, when the claimant first sends in his claim to the official liquidator; (b) any claim by way of a set-off or a counter claim, shall be treated as a separate suit and shall be deemed to have been instituted - (i) in the case of a set off, on the same date as the suit in which the set off is pleaded; (ii) in the case of a counter claim, on the date on which the counter claim is made in court; (c) an application by notice of motion in a High Court is made when the application is presented to the proper officer of that court. 67 Section 2. Definitions. - In this Act, unless the context otherwise requires, -- (j) 'period of limitation' means the period of limitation prescribed for any suit, appeal or application by the Schedule, and 'prescribed period' means the period of limitation compu....
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....cient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the property or right; (b) the word 'signed' means signed either personally or by an agent duly authorized in this behalf; and (c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right. 74 Section 19. Effect of payment on account of debt or of interest on legacy.--- Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorized in this behalf, a fresh period of limitation shall be computed from the time when the payment was made: Provided that, save in the case of payment of interest made before the 1st day of January, 1928, an acknowledgement of the payment appears in the handwriting of, or in writing signed by, the person making ....
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.... registered. Six years When the period of limitation would begin to run against a suit brought on a similar contract not registered. 88 The Indian Contract Act, 1872. Section 73. Compensation for loss or damage caused by breach of contract.-- When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, would be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract.--- When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract. Explanation.-- In estimating the loss or damage arisi....