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INTHEHIGHCOURTOFJUDICATUREATBOMBAY.

CIVILAPPELLATEJURISDICTION ARBITRATIONAPPEALNO.6OF2007STATEOFMAHARASHTRA(attheinstanceofIrrigationDepartment,ExecutiveEngineer,KoynaDivisionNo.2) ...Appellant.

V/s.

1.HINDUSTANCONSTRUCTIONCOMPANY(LTD.(HCC).

2.ARBITRALTRIBUNALOF:a)S.N.Jha,b)V.M.Ranade,c)B.S.Panchmukhi ...Respondents.

MrA.A.Kumbhakoni,learnedcounsela/wMrsS.V.SonawanelearnedA.G.P.,MrShardulSinghandMrAbhayAnturkarforAppellant.

MrAspiChinoy,seniorCounsela/wMrArifDoctori/bM/sHareshJoshi&Co.forRespondents.

CORAM:R.D.DHANUKAJ.RESERVEDON:JANUARY09,2013.PRONOUNCEDON:FEBRUARY01,2013.

JUDGMENT:

By this appeal filed under Section 37 of the Arbitration And

Conciliation Act 1996 ( for short herein after referred as 'the Act'), the

Government seekstochallengeanorderandjudgmentdated29th June2006

passedbythelearnedDistrictJudge,Ratnagirirejectingarbitrationapplication

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No.44of2003filedbytheGovernmentunderSection34oftheAct.

2. TheGovernment hadchallengedanawarddeliveredbytheArbitral

Tribunalallowingsomeoftheclaimsmadebytherespondent (forshortthe

Government isreferredas'Government'andtherespondentisreferredas'the

contractor'). Someoftherelevantfactsforthepurposeofdecidingthisappeal

areasunder:

Pursuant to the invitation of tender on 1st April 1991 by the

Government andsubmissionofbidbythecontractoron17th June1991,the

Government awardedtheworkof constructionof civil workof pressureand

powerhouseinICTcontractNo.2tothecontractor.Theamountofthecontract

awardedwasatRs.6825lakh.Boththepartiesenteredintoanagreementon20th

March1992. Stipulateddateof commencementof theworkwas20th March

1992.Thestipulateddateofcompletionwas19thMarch1997.TheGovernment

grantedextensionoftimetocompletetheworktothecontractortill31stMarch

2000.Theworkwascompletedbythecontractoron31stMarch2000.Thedate

ofcompletionofmaintenanceperiodwas3rdOctober2000.

3. Thedisputearosebetweenthepartiesduringexecutionof workin

respectofhiddenexpenses. Thecontractorinvokedarbitrationclause. On27th

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April1998,firstarbitrationproceedingsstarted.Byanawarddated4thDecember

1998,theclaimofthecontractorwaspartlyacceptedbythelearnedarbitrator.

Pursuant to said award, the Government paid sum of Rs.10.2 crore to the

contractor.TheGovernmentdidnotchallengethesaidaward.

4. On3rdOctober2000,defectliabilityperiodended.Thedisputearose

betweentheparties. Thematterwasreferredtoarbitration. ArbitralTribunal

wasconstitutedbyappointmentofonearbitratorbyeachparty. Thepresiding

arbitratorwasappointedbytheCentralWaterCommission,NewDelhi.

5. On26thJune2003,thelearnedarbitratormadeanawardinfavourof

thecontractorawardingasumofRs.17,81,25,152/. Beingaggrievedbythe

saidaward,theGovernmentfiledarbitrationapplicationNo.44of2003on22nd

March2003intheCourtofDistrictJudge,Ratnagirichallengingthesaidaward

underSection34oftheAct.Byanorderandjudgmentdated29thJune2006,the

learnedDistrictJudgedealtwithfiveobjectionsraisedbytheGovernment by

wayof preliminaryobjectionsonlyandnegativedeachof suchobjectionand

rejectedthesaidarbitrationapplication. TheGovernmenthasfiledthisappeal

underSection37oftheActforimpugningtheorderandjudgmentdated29th

June2006passedbythelearnedDistrictJudge.

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6. Though Mr Kumbhakoni, the learned counsel appearing for the

Government wantedtoadvancearguments inrespect of variousother issues

touching the merits of the claims, however, as the learned senior counsel

appearingforthecontractorobjectedtosuchadditionalsubmissionswhichwere

notmadebeforethelearnedDistrictJudge,MrKumbhakonithelearnedcounsel

wasnotallowedtoagitatethoseadditionalissues.MrKumbhakoni,thelearned

counsel,thereforedidnotaddressthisCourtonadditionalissuesraisedbythe

GovernmentandaddressedthisCourtonlyonfivepreliminaryobjectionsraised

bytheGovernmentbeforetheDistrictJudgeinthisproceedingsalso.

7. MrKumbhakoni,thelearnedcounselsubmitsthatthecontractorhad

accepted payment under final bill without making any protest and thus the

contractitself ceasetoexist. Thelearnedcounselsubmitsthattheclaimsthus

made by the contractor were not arbitrable in view of such accord and

satisfactionduetoacceptanceoffinalbillwithoutprotest. Thelearnedcounsel

submitsthatthecontractorhadacceptedandsigned164thandfinalbilland165th

andfinalbillwithoutprotest.Itissubmittedthatboththesebillsweresignedby

theauthorisedrepresentativeofthecontractorandchequesforfinalbillhadbeen

acceptedandcreditedinthebankaccountofthecontractor.

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8. Mr Chinoy, the learned senior counsel appearing on behalf of the

contractor,ontheotherhandsubmitsthatthesignatoryto164thand165thbills

wasnotauthorisedtosignanysuchbillsbuthewasauthorisedtosign/acceptRA

bills. The learnedcounsel submits that under clause60.8of theGCC, the

contractorhadsubmittedthedraftfinalbillon30thDecember2000containing3

parts(i) BOQitems,(ii)Extraitemsand(iii)Claims. Itissubmittedthatthe

Governmentsdidnotpreparetherequisitedraftfinalaccountwithin2monthsas

requiredunderClause60.8andalsodidnotpreparefinalcertificateunderthe

saidclause.ItissubmittedthatpaymentofBOQitemsandExtraitemswasmade

bytheGovernmentaspartof164thandfinalbillandpaymentforpricevariation

wasmadeaspartof165thandfinalbill.Itissubmittedthathowever,inrespect

of5claims,nofinalbillwasissuedeitheracceptingorrejectingtheclaimsmade

bythecontractor.Itissubmittedthateventheamountsascertifiedunder164th

and165thbillswerepaidbytheGovernmentin34instalments.Itissubmitted

that164thand165thandfinalbillswerenotfinalbillsascontemplatedbyclause

60.8.Thecontractordidnotissuenoclaimcertificate.Itissubmittedthatthus,

therewasnoaccordorsatisfactiononthepartofthecontractorandthusclaims

werearbitrable.

9. The learned senior counsel placed reliance upon the judgment of

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Supreme Court in case of Bharat Coking Coal Ltd. Vs. Annapurna

Construction1andmoreparticularlypara9whichreadsthus:

9.Onlybecausetherespondenthasacceptedthefinalbill,thesamewouldnotmean that it was not entitled to raise any claim. It is not the case of theGovernmentthatwhileacceptingthefinalbill,therespondenthadunequivocallystatedthathewouldnotraiseanyfurtherclaim....

10. Relyinguponthesaidjudgment,thelearnedcounselsubmitsthat,as

thecontractorhadnotunequivocallystatedthathewouldnotraiseanyfurther

claim,contractorwouldbeentitledtoraiseanyclaimandwouldnotbeestopped

orprecludedfromraisinganyclaim.

11. The arbitral tribunal has considered this issue in paragraph 10 to

10.13of the impugnedaward. It was observed that procedure statedunder

clause60.8(b)and(c)wasnotobservedbytheGovernment. Contractoralso

didnotsubmitthe'draftstatementofFinalAccounts'asperClause60.8(a)and

didnotpursueitwiththeGovernment forissuanceofsuchcertificateofFinal

AccountasperClause60.8(c).TheArbitralTribunalobservedthatneitherthe

contractornortheGovernmenthereinadheredtotheprovisionsofClause60.8.

Ithasbeenheldthatitwouldhavebeenreasonableonthepartofthecontractor

to expect that the five claims would be considered by the Government

1 2004(5)ALLMR(SC)

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independentlyandaccepted,partiallyacceptedorrejectedontheirmeritsasthe

casemaybeandifthatdecisionoftheGovernment wasnotacceptabletothe

contractor,thedisputecouldthenbereferredtothePanelofArbitratorsasper

Clause66SettlementofDispute.TheArbitralTribunalrenderedafindingthat

thecontractordidnotwaiveitsrighttoreferitsclaimforadjudicationbythe

Arbitral panel merely because they had not lodged the protest against the

paymentbytheGovernmentoneither164thandfinalor165thorfinalbill.

12. TheDistrictJudgehasconsideredthisissueinparagraphs33and34

oftheimpugnedOrderandhasrejectedthecontentionraisedbytheGovernment

afterrecordingreasons.

13. Onperusaloftherecordsproducedbyboththepartiesandonperusal

of theawardmadebytheArbitral Tribunal andorder passedbythe learned

DistrictJudge,itisclearthattheprocedureunderClause60.8wasnotfollowed

byeither party. Thus RAbills 164and165and final bills were rightly not

consideredbytheArbitralTribunalasfinalbills.Itisnotindisputethatthere

wasanyseparatebillpreparedinrespectoffiveclaimsmadebythecontractor.

Inmyview,afterconsideringthefactsandthedocumentsandoninterpretation

ofClause60.8,ArbitralTribunalhasrenderedafindingthattherewasnoaccord

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andsatisfactionandthecontractorhadnotwaiveditsrighttomakeanyclaims.

SuchfindingsrenderedbytheArbitralTribunalandconfirmedbythelearned

DistrictJudgearenotperverse. Inmyview,nointerferenceisthuswarranted

withsuchfindingsrenderedbytheArbitralTribunalandupheldbytheDistrict

Judge.

14. The next submission of Mr Kumbhakoni, the learned counsel

appearingfortheGovernmentisthatClaimNo.1madebythecontractorbefore

thelearnedarbitratorwasbarredby resjudicata. Thelearnedcounselsubmits

thatClaimNo.1oughttohavebeenreferredtoearlierArbitralPanelintheyear

1998.Itissubmittedthatthoughtheworkinrespectofthisclaimwascompleted

duringthependencyof earlier arbitrationproceedings, thecontractordidnot

raisethisclaimintheearlierarbitration.

15. Mr Chinoy, the learned senior counsel appearing on behalf of the

contractorontheotherhandsubmitsthattherewere3Claimsreferredtoearlier

arbitraltribunaland2Claimswereaddedlateron.Itissubmittedthatpresent

ClaimNo.1wasnotmaturedat that timeandcouldnotbe included in that

arbitration. ItissubmittedthatmakingpaymentforExtra/deviateditemswith

denovorateanalysisafterapplyingthelabourmarkupandoverheadandprofit

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markup,asawardedbytheearlierarbitrationpanelwasunderconsiderationat

variouslevelsoftheGovernment.ThecontractorinitiatedthesaidClaimon30th

March1999andthesamewasrecommendedbytheEngineeroftheGovernment.

TheissuewasunderconsiderationatdifferentlevelsoftheGovernmentasthe

GovernmentdidnotpayevenattherateadoptedbytheArbitralTribunalinthe

earlierarbitration,thecontractorinvokedarbitrationvideletterdated27th July

2000. Itissubmittedthatthelearnedarbitratorhasrenderedafindingoffact.

ClaimNo.1wasreferredbytheGovernmentitselfforadjudicationofthearbitral

tribunal. The District Judge also rejected this contention advanced by the

Government inparagraph45oftheimpugnedorder. TheDistrictJudgeheld

that the disputes referred in 19971998were distinct than present one and

therefore,noquestionofresjudicataarises.Thelearnedseniorcounselpointed

outthattheonlygroundraisedinarbitrationapplicationfiledunderSection34

onthisissuewasthattheClaimwasbarredbytheprinciplesofresjudicata.Itis

pointedoutthatsimilargroundisraisedevenintheappealmemoinground(g).

The learned senior counsel submits that the claim made before the arbitral

tribunal in thesecondreferencewasadmittedlynot madebefore thearbitral

tribunalinthefirstreference.Therewasnoadjudicationofanysuchclaiminthe

earlierproceedings.Thequestionofapplicabilityoftheprinciplesofresjudicata

therefore,didnotarise.

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16. Onperusaloftheimpugnedawardaswellastheorderpassedbythe

learnedDistrict Judge, it is clear that the finding is renderedby the arbitral

tribunal as well as the learned District Judge that Claim No.1 pertained to

variationinproposedpercentages for the labourmarkupandoverheadsand

profitonthesamelinesforextraitemsanddeviateditemswhichhadcroppedup

duringtherestofthecontractwork. Ithasbeenheldthatmajorpartofthese

itemshadbeenexecutedevenpriortoreferringtheclaimtotheearlierArbitral

Panel.ThelearnedTribunalobservedthatClaimNo.1hadbeenincludedbythe

Government itself foradjudicationbeforetheArbitralTribunal inthesecond

reference.Afindingisrecordedthattheitemexcludedandclaimedinthesecond

referenceweredifferent.TheDistrictJudgealsonegativedthecontentionofthe

Governmentontheissuewhilerecordingdetailreasons. Inmyview,asClaim

No.1madeinthepresentproceedingswasnotclaimedadmittedlyintheearlier

arbitrationproceedings,therewasnoadjudicationonsuchclaimbytheArbitral

Tribunal,andthus questionofapplicabilityofprinciplesof resjudicata didnot

arise. The only ground raised by the Government in its application under

Section34beforetheDistrictJudgeandinthisappealmemofiledunderSection

37of theAct, it is urgedthat theclaimwasbarredbytheprinciplesof res

judicata.Inmyview,thereisnomeritinthepleaoftheGovernmentthatClaim

No.1isbarredby resjudicata andthus,thisplearaisedbytheGovernment is

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rejected.

17. ThenextsubmissionurgedbyMrKumbhakoni,thelearnedcounselfor

theGovernmentisthattheclaimsarebarredbylawoflimitation.Itissubmitted

thattheworkofpressureshaftexcavationwasstartedon9thJuly1993andwas

completedon2ndSeptember1997. Thecontractorreferredthedisputeagainst

item No.3 to the Executive Engineer on 10th February 1997 and invoked

arbitrationon20th November2011. AsfarasworkofTransformerHallArch.

Concrete is concerned, it is submittedthat thesaidworkwasstartedon23rd

October 1992 andwas completed on19th February 1994. The dispute was

referred in respect of this item to Executive Engineer on 14th October 1996

whereasarbitrationwasinvokedon1stJune2001.AsfarasworkofTransformer

Hallexcavationisconcerned,itissubmittedthatthesaidworkwasstartedon

16thJuly1992andwascompletedon31stMarch1995,whereasissuewasraised

beforetheExecutiveEngineeron4thJune2001.ItissubmittedthatasperClause

66Aof theGeneral Conditions of Contract, in caseof dispute, thecontractor

ought to have promptly asked the Engineer's Representative in writing, for

writtendecisionandtheEngineer'sRepresentativewouldgivethedecisionwithin

60days.Itissubmittedthatonexpiryof60days,thecauseofactionhadarisen

forinvokingarbitration.ItissubmittedthatuponthefailurebytheExecutive

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Engineertodecidethedisputewithin60days, thecontractoroughtto have

appealedtotheSuperintendingEngineerwithin30days. It issubmittedthat

afterpreferringthedisputetoExecutiveEngineer,contractorwaitedfor3years

butdidnotexercisehisrighttofileanappeal.ItissubmittedthatitemNos.3,4

and5 wereinexistenceintheyear1998whenthefirstarbitrationtookplace.

The learned counsel placed reliance upon Article18 PartI of schedule to

LimitationAct1963.ItissubmittedthatasperArticle18ofLimitationAct,asno

timehasbeenfixedforpayment,theperiodoflimitationis3yearscommencing

fromthedatewhentheworkwascompleted. Itissubmittedthatinrespectof

ClaimNos.3,4and5,theworkwascompletedmuchpriorto3yearsbeforethe

arbitration clause was invoked by the contractor. The learned counsel

demonstratedfromtablereferredinwrittensubmissions,thedateofcompletion

ofwork,referencemadetoExecutiveEngineer,rejectionofExecutiveEngineer;

reference made to Superintending Engineer, rejection by Superintending

Engineer; reference made to Chief Engineer and rejection of Claim by Chief

Engineerandalsothedateofinvokingarbitration.Thesaidtableisreproduced

asunder:

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Claim

Nos.

Work

completed

Ref.to

EE

Rej.by

EE

Ref.to

SE

Rej.by

SE

Ref.To

CE

Rej.By

CE

Arbitrationinvoked

3 02.09.97 10.02.97 17.07.00 03.08.00 22.09.00 12.10.00 08.11.00 20.11.00

4 19.02.94 14.10.96 04.11.00 27.02.01 12.04.01 10.05.01 21.05.01 01.06.01

5 31.03.95 14.10.96 19.09.00 27.02.01 12.04.01 10.05.01 25.05.01 04.06.01

Article18 and Article55 of PartII, Article113 of PartX and

Article137ofPartIIoftheLimitationActreadasunder:

Art. Descriptionofapplication Periodof

limitation

Timefromwhichperiodbeginstorun

18 Forthepriceofworkdonebytheplaintiffforthedefendantathisrequest, wherenotimehasbeenfixedforpayment.

Threeyears When the work isdone.

55 For compensation for the breach of anycontract, express of implied not hereinspeciallyprovidedfor.

Threeyears Whenthecontract isbroken or (wherethere are successivebreaches) when thebreach in respect ofwhich the suit isinstituted occurs or(where the breach iscontinuing when itceases).

113 AnysuitforwhichnoperiodoflimitationisprovidedelsewhereinthisSchedule.

Thereyears Whentherighttosueaccrues.

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137 Anyotherapplicationforwhichnoperiodoflimitation is provided elsewhere in thisdivision.

Threeyears When the right toapplyaccrues.

18. MrKumbhakoni,thelearnedcounselsubmitsthatoncecauseofaction

had commenced, it did not stop. It is submitted that merely because the

representationand/orClaimwasmadebythecontractorbeforevariousofficers

were pending andwere not decided, cause of action would not stop. The

learnedcounselpressedintoserviceSection9oftheLimitationActinsupportof

thisplea.ThelearnedcounselplacedrelianceuponthejudgmentofthisCourt

decidedon9thOctober2012incaseofAdityaBirlaChemicals(India)Ltd.Vs.

TataMotorsLtd.2inArbitrationPetitionNo.1027of2011deliveredbythisCourt

(R.D.Dhanuaka,J.)andmoreparticularlyparagraphs18an19whichreadthus:

18. InmyviewclaimmadebytheRespondentwasaclaimsimplicitorforrecovery of additional lease rent by virtue of disallowance of depreciation byassessingofficer.Inmyview,Article54oftheScheduletoLimitationActdoesnotapplytoamoneyclaim.Inmyview,therelianceplacedbythelearnedArbitratoronArticle54whilerejectingthepleaoflimitationistotallyperverseandwithoutapplicationofmind. ThelearnedArbitratorhasmisdirectedbyapplyingwrongarticleofScheduletolimitation. InmyviewtheLearnedArbitratorhasdecidedcontrarytosubstantiatelawinforceinIndia.AwardiscontrarytoSection28(a)oftheArbitrationandConciliationAct,1996andisthusinconflictwithpublicpolicy.Inmyview,sincetheclaimmadebytheRespondentwasbarredbythelawoflimitationasonthedateofthereceiptofnoticeofinvokingarbitrationclause,itwasdutyoftheLearnedArbitratortorejectsuchtimebarredclaim.

19. InmyviewrighttosueaccruedwhenclaimfordepreciationmadebyRespondent was rejected on 31st March, 2004 and raising of demand by theRespondentbyissuingdebitnoteon19th June,2006andrefusaltopaythesaiddemandbythePetitioneron17thAugust2006wouldnotcommencefreshperiod

2 MANU/MH/1642/2012

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of limitation, whichhadalreadycommencedon31st March, 2004. InviewofSection9oftheLimitationAct,1963,oncetimeisbeguntorun,nosubsequentdisabilityorinabilitytoinstituteasuitormakeanapplicationstopsit.Oncetimestarts running, it does not stop. Limitation is not extendedunless there is anacknowledgmentofliabilityorpartpayment.ItisnotthecaseoftheRespondentthatthePetitioneracknowledgeditsallegedliabilityortherewasanypartpaymentmadebythePetitionerafter31stMarch,2004.Inmyview,correspondencesdoesnotextendtheperiodoflimitation.

19. MrKumbhakoni, the learnedcounsel alsoplacedrelianceuponthe

JudgmentofSupremeCourtincaseofJ.C.Budhrajavs.Chairman,OrissaMinig

CorporationLtd.AndAnother3andmoreparticularlyparagraphs25and26in

supportofhispleathatlimitationforasuitiscalculatedasonthedateoffilingof

suit,whereasincaseofarbitration,limitationoftheClaimistobecalculatedon

thedateonwhichthearbitrationisdeemedtohavebeencommenced.

25. The learned Counsel for the Government submitted that thelimitationwouldbeguntorunfromthedateonwhichadifferencearosebetweentheparties,andinthiscasethedifferencearoseonlywhenOMCrefusedtocomplywiththenoticedated4.6.1980seekingreferencetoarbitration.Weareafraid,thecontentioniswithoutmerit.TheGovernmentisobviouslyconfusingthelimitationforapetitionunderSection 8(2)oftheArbitrationAct,1940withthelimitationfortheclaimitself.Thelimitationforasuitiscalculatedasonthedateoffilingofthesuit.Inthecaseofarbitration,limitationfortheclaimistobecalculatedonthedateonwhichthearbitrationisdeemedtohavecommenced.

26. Section 37(3)oftheActprovidesthatforthepurposeofLimitationAct, anarbitration isdeemedtohavebeencommencedwhenonepartytothearbitration agreement serves on theother party thereto, a notice requiring theappointmentofanarbitrator.Suchanoticehavingbeenservedon4.6.1980,ithastobeseenwhethertheclaimswereintimeasonthatdate.Iftheclaimswerebarredon4.6.1980,itfollowsthattheclaimshadtoberejectedbythearbitratoron the ground that the claims were barred by limitation. The said period hasnothingtodowiththeperiodoflimitationforfilingapetitionunderSection8(2)oftheAct.InsofarasapetitionunderSection8(2),thecauseofactionwouldarise

3 (2008)2SupremeCourtCases444

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when the other party fails to comply with the notice invoking arbitration.Therefore,theperiodoflimitationforfilingapetitionunderSection8(2)seekingappointmentofanarbitratorcannotbeconfusedwiththeperiodoflimitationformaking a claim. The decisions of this Court in Inder Singh Rekhi v. MANU/SC/0271/1988 : Delhi Development Authority [1988]3SCR351 , PanchuGopal Bose v. MANU/SC/0385/1994Board of Trustees for Port of Calcutta[1993]3SCR361 and Utkal Commercial Corporation v. MANU/SC/0028/1999 : CentralCoalFields[1999]1SCR166alsomakethispositionclear.

20. The learned counsel submits that limitation for seeking an

appointmentofanarbitratorcannotbeconfusedwithperiodof limitationfor

makingaclaim.ItissubmittedthatthelearnedarbitratoraswellastheDistrict

Judgehavemixedthetwoseparatearticlesoflimitationi.e.applicabletoClaims

andformakingapplicationforappointmentofarbitrator. Thelearnedcounsel

submitsthatthelearnedDistrictJudgehasplacedrelianceuponArticle137of

ScheduleI to the Limitation Act and also Article 55 which are not at all

applicabletotheClaimsmade. ItissubmittedthatArticle137appliestothe

applicationinCourtandnottotheClaim.Itissubmittedthattherewasnoclaim

forcompensationbeforethelearnedarbitratorwhichwouldfallunderArticle55.

The learned counsel then placed reliance upon the Judgment of this Court

delivered on 16th December 2011 in case of Maharahshtra State Power

GenerationCo.Ltd.Vs.M/s.GeoMillerCo.Pvt.Ltd.inArbitrationPetition

No.466of2006andmoreparticularlyparagraphs2to8whichreadthus:

2.Therelevantfactsare,thePetitionerhadfloatedatenderforthedesign,manufacture, supply, erection, testing and commissioning of the prewater

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treatment plant, MSEB Chandrapur Thermal Power Station, Unit 6 andadvertisement in that behalf was published by MSEB in the year 1987. TheRespondent participated in the bid and the contract was awarded to theRespondent.DisputearosebetweenthepartieswithregardtocertainclaimsoftheRespondentforextraworkcarriedoutbytheRespondent.ItisanadmittedpositionthattheArbitrationclausewasinvokedbytheRespondentbyletterdated2712001.BeforetheArbitrator,oneoftheobjectionsraisedonbehalfofthePetitionerwasthatthereferenceisbarredbythelawoflimitation. ItisalsocommongroundbeforemethatsofarasthepaymentforthecivilworkdonebytheRespondentisconcerned,thepaymenthasbeenmade.TheclaimwhichhasbeenawardedbythelearnedArbitratorisinrelationtothepriceoftheextraworkcarriedoutbytheRespondent.BeforethelearnedArbitrator it wasclaimedonbehalfofthePetitionerthattheextraworkinrelationtowhichtheclaimhasbeenmadewascompletedon1561992andtheplantwashandedovertothePetitioneron2481994.Thereafter,theRespondentmadeclaimforthepriceoftheextraworkandthatclaimwasrejectedbyletterdated10101995.TheRespondentinvokedarbitrationclauseandmadetheclaimon2712001,andtherefore,itwasclaimedthatitisbarredbythelawoflimitation. ThelearnedArbitratorhasconsideredthisobjectioninhisaward. Heacceptedthatthoughit isclearthattheworkwascompletedon1561992,thattheplantwashandedoverbytheRespondenttothePetitioneron2481994andthatthoughtheclaimswererejectedon10101995,accordingtothelearnedArbitratorasthefinalbillwasnotsubmittedtilltheyear2000andasthecorrespondencebetweenthepartieswasgoingon,causeofactionforinvokingthearbitrationwouldnotarisetill16thDecember,2000. ItisthecaseofthepresentRespondentthatthefinalbillwaspreparedon16122000.

3.ThelearnedCounselappearingforthePetitionersubmitsthatthelearned ArbitratorfailedtoseethattheperiodoflimitationforinvokingthearbitrationclausewillbegovernedbyArticle18oftheScheduleoftheLimitationAct. According to the learned Counsel, the cause of action for invoking thearbitrationclausewillarisewhentheworkforthepriceofwhichthearbitrationclausehasbeeninvokedwasdoneandthat was in the year 1992 andtherefore,invocationofthearbitrationclauseinJanuary,2001isbarredbythelawofLimitation.ThelearnedCounselreferringtotheprovisionsofSection9oftheLimitationActsubmittedthatoncetheperiodoflimitationiscommence,itwillruncontinuouslyandtherefore,merelybecausecorrespondencewasgoingonbetweenthepartiesinrelationtotheamounttobepaid,runningoftheperiodoflimitationwillnotstop.ThereferencehastobemadebytheRespondentwithinaperiodofthreeyearsfromthedateonwhichtheworkwascompleted.

4. The learned Counsel appearing for theRespondent,ontheotherhand,relyingonseveraljudgmentsincludingthejudgmentofthelearnedsingleJudgeofthis court inthecaseofShri NyaneshwaBhiku Dhargalkar v/s.ExecutiveEngineer, 1999(3)RAJ(B0m)submittedthat it is Article 137of theLimitationActwhichappliesinthepresentcaseandthattherighttoapplywill

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accruewhenthedisputebetweenthepartiesarose.AccordingtothelearnedCounseltill thenegotiationsbetweenthepartiesweregoingonandastherewasnodenialtomakethepaymentintheyear1992,thecauseofactionwillnotaccrueandthereforethearbitrationclausewasinvokedwithintheperiodoflimitation.ThelearnedCounselalsoreliesonthejudgmentofthelearnedsingleJudgeoftheDelhiHighCourtinthecaseofPremPowerConstruction(Pvt)Ltd.v/s.NationalHydroelectricPowerCorp.Ltd.&Anr.160(2009)DelhiLawTimes610.PerusalofthejudgmentofthelearnedsingleJudgeofthiscourtinthecaseofNyaneshwar(supra)andthejudgmentofthelearnedsingleJudgeoftheDelhiHighCourtinthecaseofPremPowerConstructionLtd.(supra)showsthat both have relied on the judgment of the Supreme Court in the case ofMajor(Retd.)InderSinghRekhiv/s.DelhiDevelopmentAuthority,(1988)2SCC338. ThelearnedCounselfortheRespondentalsosubmittedthatinanycasetheperiodoflimitationwouldbegovernedbyArticle113oftheLimitationAct. Accordingtohim,thecauseofactionwillarisewhentherighttosueaccruesandtherighttosuewillaccruewhenthePetitionerrefusedtomakethepaymentfortheextraworkafterfinalbill.Thus,therighttosueaccruedintheyear1999whentherewasrefusaltomakethepayment.

5. Now in the light of these rivalsubmissions,iftherecordisperused, it is clear fromtheaward itself that there is no disputebetween thepartiesthattheextraworkforthepaymentofwhichthepresentreferencewasmade was completed on 1561992. There is also no dispute that thePetitioner rejected theclaimmadebytheRespondent for extra workby letterdated10101995.ThelearnedArbitratorhasreferredtothisaspectofthematterinparagraph21oftheawardandhasobservedthus:

EveniftherewasrejectionoftheClaimantsclaimforextraworkon10101995assubmittedbythemthelimitationcannotbesaidtohavecommencedfromthatdate,ifregardbehadtothefactthatevenaccordingtotheRespondentsthefinalbillwaspreparedaslateason16thDecember,2000.

Thus,accordingtothelearnedArbitratorthecauseofactiondoesnotaccrueoncompletionofthework.Itdoesnotaccrueevenonrejectionoftheclaim,butitaccrueswhenthefinalbillisprepared.

6.OnbehalfofthePetitionerrelianceisplacedonArticle18oftheLimitationAct.ThatArticlereadsasunder:

(18)Forthepriceofworkdonebytheplaintiffforthedefendantat hisrequest, wherenotimehasbeenfixedforpayment.ThePeriodoflimitationisthreeyearsandthetimebeginstorunwhentheworkisdone.

7.PerusaloftheabovequotedArticleshowsthatwhenasuitistobe instituted for recovery of the price of the work done by the Plaintiff for the

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Defendant,andwhenthereisnotimefixedforpaymenttobemade, thecauseofactionforinstitutingthesuitariseswhentheworkiscompletedandthesuithastobeinstitutedwithinaperiodofthreeyearsfromtheaccrual ofcauseofaction.ItisclearfromtherecordthatthepresentdisputewhichwasreferredtoarbitrationisforrecoveryofthepriceoftheextraworkdonebytheRespondentforthePetitionerattherequestofthePetitionerandtherewasnotimefixedformakingthepayment. Therefore,accordingtothisArticle,thecauseofactionwillaccruewhentheworkisdone. Thelearned CounselappearingfortheRespondentreliedonArticle113oftheLimitationAct.

Article113readsasunder:

113.Anysuitforwhichnoperiodoflimitationisprovidedelsewherein the Schedule, the period of limitation is three years and the timebeginstorunwhentherighttosueaccrues.

8.PerusaloftheaboveArticlemakesitclearthatthisArticlecomesintoplayonlyonafindingthatforinstitutionofasuitfortheclaimwhichisinvolvedinthepresentmatter,thereisnoperiodoflimitationprovidedelsewhereintheschedule.Therefore,unlessafindingisrecordedthatArticle18doesnotapply,Article113cannotapply.IdonotseeanyreasonwhyArticle18willnotapplytothepresentdispute,becausethepresentdisputeisinrelationtothepriceoftheworkdonebytheRespondentforthePetitioner.ThelearnedCounselfortheRespondentalsocouldnotgiveanyreasonwhyArticle18willnotapply.Thus,astheworkwascompletedintheyear1992,thecauseofactionintermsofArticle18willaccruein1992andthereforethereferencewillhavetobemadewithin a period of 3 years from 1992 unlessaccordingtoRespondentthetimegetsextendedbecauseof any acknowledgement etc.Admittedlyneitherarbitrationclauseisinvokedwithinthreeyearsfrom1992noranyextensionoftheperiodoflimitation is claimed by the Respondent,and therefore the claimwill be barred by the lawof limitation. What isinterestingisthatthequestionbeforethelearnedArbitratorwaswhethertheclaim was made within the period oflimitation. ThelearnedArbitrator has recorded a finding that the claim is not barred by the law oflimitation, but in the entire award there is no reference to any Article in theScheduleoftheLimitationAct,whichappliestothepresentcase.Inmyopinion,thisisanimpossibility.AnargumentastowhetheraclaimismadewithintheperiodoflimitationhasalwaystobemadewithreferencetosomeArticleintheScheduleoftheLimitationAct,withoutreferringtoanyarticleintheScheduleoftheLimitationAct,afindingeitherthattheclaimisbarredbylimitationoritisnotsobarredisimpossibletoberecorded.

SofarasapplicationofArticle137isconcerned,that Article is in PartII,relating to applications. For invoking the arbitration clause the limitationprovidedbytheLimitationActformakingapplicationwillnotapply,thelimitationprovidedbythescheduleforinstitutionofasuitwillapply. ThelearnedsingleJudgeofthisCourtinhisjudgmentinNyaneshwarcase(supra)andthelearned

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singleJudgeoftheDelhiHighCourtinthecaseofPremPowerConstructionLtd.(supra)havereliedonjudgmentoftheSupremeCourtinthecaseofInderSinghRekhi,referredtoabove.PerusalofthatjudgmentoftheSupremeCourt showsthat theretheSupremeCourtwasdealingwiththeapplicationmadeunderSection20ofArbitrationAct,1940,andasunderSection20 oftheArbitrationAct,1940anapplicationwastobemadetothecourt,obviouslyArticle137oftheLimitationActwillapply.Butintheschemeofthe1996Actnosuchapplicationiscontemplatedtobemadetoanycourtforinvokingthearbitrationclause. PerusaloftheprovisionsofSection 21 of the Arbitration ActshowsthatArbitralproceedingscommence,unlessthereisanagreementcontrarybetweentheparties,onthedateonwhicharequestforreferenceofthedisputetoarbitrationisreceivedbytheRespondent.The1996Act doesnotcontemplateanyapplicationtobemadetothecourtfor invokingthearbitration application and for commencement of arbitration proceedings.Subsection 2 of Section43of theArbitrationAct lays downthat for thepurposeoflimitationActanarbitrationshallbedeemedtohavecommencedonthedatereferredto inSection21. Therefore, it is clear that invocationof thearbitrationclausehastobemadewithintheperiodoflimitationprovidedbytheLimitationActforinstitutionofasuitonthesamecauseofaction.SofarasanapplicationtobemadeunderSection11isconcerned,thatapplicationisnotforinvokingthearbitrationclause.Thatapplicationisforappointment of arbitrator, after invoking the arbitration clause.Invocation of the arbitration clause precedes an application under Section 11.Therefore,whenanapplicationunderSection11ismade,thatapplicationhastobemadewithintheperiodoflimitation,whichisprovidedbytheLimitationActforinstitutionofthesuitonthatcauseofaction.AnapplicationunderSection11cannot be made after expiry of the period oflimitationprovidedforinstitutionofsuitforrecoveryoftheclaim.TheHonbletheChiefJusticeorhisdesignatewillhavetomakeaninquirytofindoutwhethertheappointmentofArbitratoratthisjuncturewouldbenecessaryasaperiodoflimitationisover.TheSupremeCourtinitsjudgmentinthecaseofNationalInsuranceCo.Ltd.v/s.M/s.BogharaPolyfabPvt.Ltd.,AIR2009SC170,hasreferredtotheissueswhichhavetobedecidedbytheChiefJusticeorhisdesignateunder Section11andtheissueswhichcanbeleftfordecisionbytheArbitrator.Oneoftheissues,accordingtotheSupremeCourtthathastobedecidedbytheHonbleChiefJusticeorhisdesignateunderSection11iswhethertheclaimisadead claim or a live claim. It means that if an objection is raised, whenapplicationunderSection11ismade,thatinvocationofthearbitrationclauseinthatcasehasnotbeenmadewithintheperiodoflimitation,thenthatquestionhastobedecidedbytheChiefJusticeorhisdesignate.ThequestiontobeconsideredatthattimeisnotwhetheranapplicationunderSection11ismadewithintheperiodoflimitation,butwhethertheinvocationofthearbitrationclausewasmadewithintheperiodoflimitation.Inmyopinion,therefore,thereisnoquestionofprovisionsofSection137applyinginsofarasinvocationofthearbitrationclauseandcommencement of the period oflimitationisconcerned.Sofarasthepresentcaseisconcerned,tomy

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minditisclearthatArticle18oftheLimitationActappliesandthereforeastheinvocationoftheArbitrationclauseisnotwithinperiodofthreeyearsfromthedateofcompletionofthework,whichwasintheyear1992,theclaimwasclearlybarredbythelawoflimitation.

21. RelyinguponthisJudgmentofthisCourt,thelearnedcounselsubmits

that Article18 was applicable to the claims made by the contractor andnot

Article55or Article 137as sought to beappliedby the District Judge. The

learnedcounselsubmitsthatboththeseissuesareconsideredbythisCourtand

thefactsofthiscaseareidenticaltothefactsofthecaseincaseofMaharashtra

StatePowerGenerationCo.Ltd.(supra)andthesaidJudgmentisthusbinding.

22. ThelearnedcounselalsoplacedrelianceupontheJudgmentofPunjab

AndHaryanaHighCourtincaseof JullunderImprovementTrust,Jullunder

Vs.KuldipSingh4andmoreparticularlyparagraphs4and5whichreadthus:

4. Themaincontroversyinthisappealis:whetherthesuitoftheplaintiffwanwithintimeornot?ItisthecommoncaseofthepartiesthatitisArticle18,Limitation Act, 1963, which would govern the plaintiffs case. It provides alimitationofthreeyearsfromthetimetheworkisdone.Thepresentsuitwasfiledon 921971. According to the plaintiff the cause of action arose to him on14121967,whenthepaymentofthefinalbill,ExhibitD.19,wasreceivedbyhimunderprotestwhereasthecaseofthedefendantisthattheperiodofthreeyearswouldcommence fromthedatetheworkwasdonewhichaccordingto it wascompletedon2891967, asadmittedbytheplaintiff himself vide, Exhibit D.4,dated2891967,writteninthisownhandwhereinhehadstatedthat90feetwideroadunder84acresschemewascompleteand,therefore,hisfinalbill,bepreparedaccordingly.Inanycase,accordingtothedefendant,inthefinalbill,ExhibitD.19,thecertificatetotheeffectthatnecessarydetailedmeasurementshavebeentakenasrecordedintheMeasurement BookNo. 44, wasgivenon7101967, bythe

4 AIR1984PunjabAndHaryana185

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EngineerinchargeMohinderSingh,whoappearedasD.W.7.Thus,itwasarguedonbehalfofthedefendingthatevenafterthatdate.i.e.7101967,thepresentsuitfiledon921971,evenafterallowingthenoticeperiodoftwomonthswasbarredbytime.AccordingtothetrialCourt,thecauseofactionwouldarisetotheplaintiff for the price of the work done only on furnishing of the completioncertificate bytheEngineer incharge. Thecertificate of theEngineer incharge,accordingtothetrialCourtdidnotbearanydate.Since,accordingtothetrialCourt thepayment of the lastbill wasreceivedbytheplaintiff on14121967,under protest, the periodof limitation will start from that date and that afterallowing the notice period of two months, the suit filed by the plaintiff on921971,waswithintime.ThetrialCourtalsofoundthattheplaintiffprosecutedwithduediligenceanothercivilproceedingfoundeduponthesamecauseofactioninaCourtwhichcouldnotgivethereliefand,therefore,hewasentitledtoget,theperiodspentinprosecutingthoseproceedingsexcludedunderS. 14,LimitationAct,(hereinaftercalledtheAct).

5. After hearing the learned counsel for the parries, I am of theconsideredopinionthattheplaintiffssuitwasbarredbytime.

23. Mr Chinoy, the learned senior counsel appearing on behalf of the

contractor on the other handsubmits that Article18 is not applicable to the

claimsmadebythecontractor. Thelearnedseniorcounselsubmitsthatthe

claimsmadebeforethearbitraltribunalwereforenhancementofthepricefor

theworkdoneandthusArticle113ofSchedule1ofLimitaitonActwouldapply.

The learned senior counsel placed reliance upon the Judgment in case of

GannonDunkerley AndCo. Ltd. v. Union of India5 and more particularly

paragraphs2to11whichreadthus:

2. The Sindri Factory Buildings were tobeconstructedunder theadvice andguidance of M/s. Chemical Construction Corporationof NewYork. That Firmmadedelayinsupplyingthedrawingsandspecificationswhichinvolvedworkofa

51969(3)SupremeCourtCases607

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complicatednaturenotincludedintheoriginalcontract. TimeforcompletionoftheworkwasonthataccountextendedtillFebruary26,1950.

3. On September 20, 1950 the Government Company made a demand forpaymentofanenhancedrateof421/2%overthebasicratesstipulatedundertheoriginalcontract.Thisclaimwasmadeonfivegrounds:

1.thattherewasasubstantialdeviationinthenatureofworkofwhichthedetailedworkdrawingsweresuppliedtotheGovernment Companyafterthedateofthecontract.Theworkinvolvedwasofacomplexnaturerequiringhighlyskilledlabour,andthatadditional labourandmaterialsnotcoveredbythecontractrateswererequired;

2. thattherewasgreatincreaseinthepriceofmaterialsandlabouronaccountofundueprolongationoftheperiodofwork;

3.thattherewasincreaseinthecostoftransportationonaccountofriseinthepriceofpetrolandincreaseinrailwayfreight;

4.thattheGovernmentofIndiaenteredintoothercontractsincidentaltotheconstructionoftheSindriFactoryatsubstantiallyhigherrateswhichdirectly affected the cost of labour and materials of the GovernmentCompanywhohadtocompetewiththeothercontractors;

5. thatadditionalworkorderedtobedoneinvolvedinmanyinstancesquantityofworkseveraltimestheworksetoutinthecontract.

4. ByhisletterdatedSeptember13,1950,theAdditionalChiefEngineer

rejectedtheclaim.InSeptember1954thedisputesrelatingtotheclaimforriseincostofmaterialandlabourduetodelayinsupplyingdetailedworkdrawings,theclaimarisingfromriseinpriceofpetrolandforincreaseinthecostofmaterialandlabourduetoothercontractorsworkingonthesite,werereferredtoarbitration,butnottheclaimsforrevisionofratesduetocomplexnatureoftheworkandincrease in the quantity of work. The arbitrator rejected the claims of theCompanyinrespectofthematterswhichwerereferred.

5. ThereaftertheGovernmentCompanyfiledasuitonAugust9,1956,against theUnionofIndia,for adecreeforRs.3,62,674/9/6beingtheamountclaimedattherateof421/2%abovethecontractrate,inthealternative,adecreefor Rs.2,44,000/ being the amount claimed at the rate of 28.1% above thecontract rate as recommended by the Executive Engineer, and in the furtheralternative,adecreeforRs.1,36,222/attherateof18.17%abovethecontractrateascertifiedbytheSuperintendingEngineer. TheUnionofIndiacontended,interalia,thattheclaimwasbarredbythelawoflimitation.

6. TheTrial Court held that theclaimwasnot barredby the lawof

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limitation and decreed the claim for Rs. 1,36,222/ as certified by theSuperintending Engineer. Against the decree passed by the Trial Court theGovernmentCompanyaswellastheUnionofIndiaappealedtotheHighCourt.

7. Before the High Court, in support of the appeal only the plea oflimitationwaspressedonbehalfoftheUnionofIndia.IntheviewoftheHighCourttheclaimwasgovernedeitherbyArticle56orbyArticle115oftheFirstScheduletotheLimitationAct,1908,andthesuitnothavingbeenfiledwithinthreeyearsofthedateonwhichtheworkwasdoneandinanyeventofthedateon which the claimwas rejected was barred. The Government Company hasappealedtothisCourtwithcertificate.

8. TheGovernment Companyhadundertakenunderthetermsofthecontracttodospecificconstructionworkat"basicrates".TheEngineerinchargewasbythetermsofClause12oftheagreementcompetenttogiveinstructionsforwork not covered by the terms of the contract, and it was provided thatremunerationshallbepaidattheratefixedbytheEngineerinchargeforsuchadditional work, and in case of dispute the decision of the SuperintendingEngineer shall be final. It is common ground that the claim made by theGovernmentCompanywasnotcoveredbythearbitrationagreement,andonthataccount it was not referred to the arbitrator. The claim in suit related to therevisionofratesduetothecomplexnatureoftheworkandduetoincreaseinthequantity of work and also grant of contracts to other competing parties atsubstantiallyhigherratesandotherrelatedmatters.

9. Article56oftheFirstScheduletotheIndianLimitationAct, 1908,prescribesaperiodofthreeyearsforasuitforthepriceof, workdonebytheplaintiff for the defendant at his request, where no time has been fixed forpayment,andtheperiodoflimitationcommencestorunfromthedatewhentheworkisdone.AsuitisgovernedbyArticle56ifitarisesoutofacontracttopaythepriceofworkdoneattherequestofthedefendant.Theclaiminthepresentcaseisforpaymentatanadditionalrateoverthestipulatedrateinviewofchangeincircumstances,andnotforpriceofworkdonebytheGovernmentCompany.ItistruethatadditionalworkwasdoneattherequestoftheEngineerincharge,buttheclaiminsuitwasnotforthepriceofworkdonebutforenhancedratesinviewofalteredcircumstances.

10. Article115oftheFirstScheduletotheLimitationActisaresiduaryarticledealingwiththeclaimforcompensationfor thebreachofanycontract,expressorimplied,notinwritingregisteredandnotspeciallyprovidedfor,intheFirst Schedule. The period of limitation in such cases is three years and itcommences to runwhen thecontract is broken, or where there aresuccessivebreacheswhenthebreachinrespectofwhichthesuitisinstitutedoccurs,orwherethe breach is continuing when it ceases. The suit filed by the Government

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Companyisnotasuitforcompensationforbreachofcontractexpressorimplied:itisasuitforenhancedratebecauseofchangeofcircumstances,andinrespectofworknotcoveredbythecontract.TheadditionalworkdirectedbytheEngineerincharge when carried out may be deemed to be done under the terms of thecontract:buttheclaimforenhancedratesdoesnotariseoutofthecontract:itisinanycasenotaclaimforcompensationforbreachofcontract.

11. TheclaimisthereforenotcoveredbyanyspecificarticleundertheFirstSchedule,andmustfallwithinthetermsofArticle120.TheSolicitorGeneralappearingonbehalfoftheUnionofIndiacontendedthateveniftheclaimfallswithin the terms of Article 120 of the Limitation Act, it was barred, for, theGovernmentCompanyhadinthesuitmadeaclaimforworkdonemorethansixyearsbeforetheinstitutionofthesuit.CounselsubmittedthatunderArticle120theperiodoflimitationcommencestorunfromthedateonwhichthedefendantobtainsthebenefitoftheworkdonebytheplaintiff.ButunderArticle120oftheLimitationActtheperiodofsixyearsforsuitsforwhichnoperiodoflimitationisprovided elsewhere in the Schedule commences to run when the right to sueaccrues.Inourjudgment,thereisnorighttosueuntilthereisanaccrualoftherightassertedinthesuit,anditsinfringement,oratleastaclearandunequivocalthreattoinfringethatrightbythedefendantagainstwhomthesuitisinstituted;Bolov.KokanandOrs.

24. ThelearnedcounselsubmitsthattheSupremeCourthadconsidered

Article120oftheLimitationAct,1908andArticle56whicharecorrespondingto

Article113andArticle18 to the first schedule to LimitationAct 1963. It is

submittedthatafterconsideringtheseArticles,theSupremeCourtheldthatthe

periodof6yearsforsuitsforwhichnoperiodoflimitationisprovidedelsewhere

intheSchedulecommencestorunwhentherighttosueaccrues.Itisisheldthat

therewasnorighttosueuntiltherewasaccrualoftherightassertedinthesuit,

anditsinfringement,oratleastaclearandunequivocalthreattoinfringethat

rightbythedefendantagainstwhomthesuitisinstituted.Itissubmittedthat

theSupremeCourthasheldthatinasuitforenhancedratebecauseofchangeof

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circumstances, and in respect of worknot coveredby thecontract, claim for

enhancedratedidnotariseoutofcontractandwouldbethusnotgovernedby

Article56correspondingtoArticle18underLimitationAct1963butwouldbe

coveredbyArticle120(correspondingtoArticle113underLimitationAct1963).

Thelearnedseniorcounselthus,submitsthatthefactsofthiscaseareidenticalto

the factsbefore theHonourbleSupremeCourt incaseof GannonDunkerley

(supra)andthusprinciplesoflawlaiddownbytheSupremeCourtaresquarely

applicabletothefactsofthiscaseandarebindingonthisCourt.

25. ThelearnedseniorcounselalsoplacedrelianceupontheJudgmentof

RajashthanHighCourtincaseofStateofRajasthanVs.RamKishan(AIR1977

Rajasthan165),JudgmentofAllahabadHighCourtincaseofStateofU.P.v.

ThakurKundanSingh(AIR1984Allahabad161),JudgmentofGujratHigh

CourtincaseofStateofGujratVs.PirojshaWadiareportedin17GujratLaw

Reporter638; bywhichvariousHighCourtshavetakenasimilarviewwhich

hasbeentakenbytheHonourableSupremeCourtincaseofGannonDunkerly

andOrs(supra).

26. Perusal of theawardindicatesthatbeforethearbitral tribunal, the

submissionofthecontractorwasthatdisputecouldstartonlyafterrejectionof

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theclaimbytheGovernment.Itwassubmittedthattheclaimswerependingfor

decisionandthuscauseofactionstartedonlyafterdecisionwasfinallytakenby

theGovernment.Itwassubmittedthatlimitationcommencedfromthedateon

whichcauseofactionhadaccrued.

27. Thearbitraltribunalhasheldthatallthoseclaimseventhoughthere

was specific recognisable period of start of incurring of the loss, the same

continuedsincethenduringthecurrencyofthecontract,includingtheextended

periodatleastforClaimNos.1and2.MajorityofthelossincurredforClaimNos.

3,4and5wasknownwhentheitemswerenearlycompletebyMarch1998.Itis

heldthatinrespectofClaimNos.1and2,thelosscontinuedtillthecurrencyof

thecontract. ThearbitraltribunalthenheldthatforClaimNos.3,4and5,first

referencetoEngineer'srepresentative(ExecutiveEngineer)wasmadeinFebruary

1997andOctober1996andongettingnodecisionwithin60days,thecontractor

couldhavereferredthedisputetohigherlevelandthentothe'Engineer'asper

provisionsofClause66andinvokedthearbitrationwithin220daysatthemost.

Itisfurtherheldthatthiscoursewasnottakenbythecontractorforthereasons

bestknowntohim.Thecontractormighttaketheshelteroftheword'may'inthe

contractormayappealwithin30daystoEngineer'byclaimingthatitwasnot

obligatoryforhimtoappealincasenoreplywasgiventheExecutiveEngineer.

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Inspiteofsuchfindingrenderedbythearbitraltribunal,itisheldthatthecause

ofarbitrationwouldbecauseofactionandtimeoflimitationshouldberecorded

fromthedatefor respectiveclaims. Thetribunal held that all fiveclaimsin

questionwerenottimebarredonaccountoflimitation. Itwouldbeusefulto

extracttherelevantparagraphsonthisissuefromthearbitralawardwhichareas

under:

Forreferringthedisputetoarbitration,therehadtobeanarbitrationagreement(clause)andtherehadtobeadispute. Intheinstantcase,Cl66Settlementofdispute (RTD1/1034) provided for recourse to arbitration. For existence of'dispute'therehadtobean'assertion'byoneparty&'denial'bytheotherparty.'Causeofarbitration'aroseintheinstantcasewhenevertherewasrejectionofaclaimbythe 'Engineer' (ChiefEngineerKoynaProject)(RTD1/38)Rejectionofinactionbythe'Engineer'srepresentative'i.e.ExecutiveEngineer/SuperintendingEngineerdidnot, however, result into 'causeofarbitration'. Inwhichcasetheclaimanthadtoapproachthe'Engineer,furnishrequiredevidenceandonrejectionbythe'Engineer'couldinvokearbitration.

Clause 66(b) specifically mentioned that 'Performance under thecontract shall if reasonably be possible, continue during the arbitrationproceedings. Henceclaimantcouldeitherlodgeclaimswiththerespondentandpursuethemfortheirsettlementthroughthe'Employer'bynegotiationsorcouldtaketherecourseto arbitration by following obligations/requirements underCl.66culminating into invoking thearbitration. Inall theclaimstheclaimantpreferredtotaketheearlierrecoursetobeginwithandcontinuedforquitesometime. TheclaimantapproachedsecretaryIDandDy.ChiefMinisterduringthisperiod.RecoursetoArbitrationwastakenquitelate,aftercompletionoftheworkphysically. Evenafterreferringsomeoftheirclaimsunderthiscontract totheearlier Arbitral Panel and getting Award for the same in December 1998, theclaimant continued to followthe course of negotiations & pursuations, for thereasonsbestknowntohim.

QuestionnowbeforetheArbitralPanelwaswhethertheclaimshadbecometimebarredbecauseofthisapparentdelayonthepartoftheclaimantinnotinvokingthearbitrationearlyandpromptly. Theclaimantwassaidtohavebeensufferinglossbecauseofvariousreasonsinrespectofseveralitemsofthecontract,whichresultedintoinitiatingtheclaimsrightfromthebeginningofthecontract andcontinuedtoincurthelossforcertainperiodsincethenforsomeclaims(No.3,4&5)andtillthecompletionofthecontractforsome(ClaimNo.1).

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LossonaccountofclaimNo.2wassaidtohaveoccurredonlyduringtheextensionperiodandcontinuedtill completionof thecontract. Theclaimant couldhavepursuedtheseclaimswiththerespondent forsomereasonable timebutshouldhavegoneinforsettlementofdisputeasperCl.66eitherwhenitemsfor3claims(3,4&5)weremostlycompletei.e.after3/98orwhenthecumulativelosseswereforeseentobebeyondthecapacityoftheclaimanttopullonwithoutimpairingtheprogressofthecontractedwork,whicheverwasearlier. IFtheclaimNo.1hadbeenreferredtothearbitration(oreventotheearlierArbitral panel)claimantcouldhavegotthecompensationintime.ForclaimNo.2,issuecouldhavebeenpursuedvigorouslywiththerespondentsayduringayearorsoaftergettingthefirst extensionand failing toget favourable response (or partial response), theclaimantcouldhaveinvokedthearbitration.

Theclaimantinall thecorrespondencehadbeenmentioningaboutincurringofheavylosses,financialcrunch,heavystrainorfinancialresourcesetc.becauseoftheseclaims.Butapparentlythefollowup/pursuationsforsettlementofclaimswasveryverypoordespiteprovisionofclauseforarbitration.Arbitratorshadhenceobservedduringthethirdmeetingthat'effortsoffollowup&pursuationoftheclaimswouldbeexpectedtoberelatedtotheamountinvolvedintheclaimsbecause, delayinsettlementofsubstantial amountofclaimwaslikelytoaffectperformanceofthecontract'.

Itcouldnotbeascertainedfromtherecordorfromthedeliberationsduringthemeetingsastowhythislogicalandeasiercoursecouldnotbetakenbytheclaimant.Claimantscontention/argumentonthispointhadconsistentlybeenthat,withoutrejectionoftheclaimsbythe'Engineer',recoursetoarbitrationwasnotopentothem.Inalltheseclaimseventhoughtherewasspecificrecognisableperiodofstartofincurringoftheloss,thesamecontinuedsincethenduringthecurrencyofthecontract,includingtheextendedperiodatleastforclaimNos.1&2.MajorityofthelossincurredforclaimNos.3,4&5wasknownwhentheitemswerenearlycompleteby3/98.ButforclaimNos.1&2thelosscontinuedtillthecurrencyofthecontract. Questionthenwas,whatshouldbeconsideredasthestartofreckoningofthetimeoflimitation.ForclaimNos.3,4&5,firstreferencetoEngineer'srepresentative(ExecutiveEngineer)wasmadeinFeb97&Oct96.On getting no decision within 60 days, the claimant could have referred thedisputetohigherlevelandthentothe'Engineer'asperprovisionsofCl.66andinvokedthearbitrationwithinabout200to220daysatthemost.Thiscoursewasnottakenbytheclaimantforthereasonsbestknowntohim.Theclaimantmighttaketheshelteroftheword'may'inthecontractormayappealwithin30daystoEngineer'byclaimingthatitwasnotobligatoryforhimtoappealincasenoreplywasgivenbytheExecutiveEngineer.

Therehavebeencitationsstatingthatthecauseofactionandcauseofarbitrationtobethesameforreckoningthestartoftimeoflimitation.Itwastruethatthe'causeofaction',ifitwasotherthanthe'causeofarbitration'couldnotbepinpointedasaspecificpointoftimeintheactivityoftheexecutionofthecontract

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(includingextensions).Losscontinued,negotiations/pursuationscontinued,workcontinued but 'cause of arbitration' or invoking the arbitration' were the onlyspecificeventsinthisactivity.

HencetheArbitralPanelhadcometotheconclusionthat'causeofarbitration' would be the 'cause of action' and time of limitation should bereckonedfromthatdateforrespectiveclaims.Henceallthe5claimsinquestionwerenottimebarredonaccountoflimitations.

Onequestionthatrequiredtobeconsideredanddecidedwasthat,shouldtheclaimantprefertodeferanddelaytheactionofinvokingthearbitrationapparentlyfornoreasonorforsomeotherreasonsbestknowntohim,everwhenprovisionofclauseforsettlementofdisputeexistedinthecontractandcontinuedtomaketherespondentsufferbecauseofanyextraliabilityonaccountofsuchavoidabledelay.Arbitralpanelhascometoaconclusionthatclaimantshouldnotbeawardedinterestontheclaimsforpastperiodattherateswhichnormally&reasonablyaclaimantwouldhavebeenentitledto.ItwasdecidedthatforclaimNos.1,3,4&5heshouldbegrantedonlypriceescalationasperTenderformulaeup to 3132000 (date of completion of the contract period) by treating thatpaymentforamountoftheseclaimswasmadeonthatdate.From142000tothedateofreferencetoarbitrationforeachclaim,interestonlyat10%(tenpercent)perannumshallonlybepaidontheescalatedamount.

28. TheDistrictJudgehasdealtwithissueoflimitationinparagraphs35

to37ofitsJudgment. Thecontractorarguedthatlimitationoftheperiodof

threeyearshadtobereckonedfromthedateoffinalrejectionbythecompetent

authorityi.e.Engineerinthepresentcase.Itwassubmittedthatinrespectof

alltheclaims,arbitrationwasinvokedwithin30daysafterfinalrejectionbythe

EngineerasperClause66Aofthecontract. Itwassubmittedthatwhenthe

contract wasspreadover for a periodanddamagewas sustainedduring the

wholeperiod, thelimitationfortotaldamageswouldcommencefromthedate

when the period of contract ends. It was submitted that the claim for

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compensationforsuccessivecontinuingbreachesofanycontract,theperiodof

threeyearslimitationwouldbecomputedwhenthebreachceasedtooccur.It

wassubmittedthatdisputecouldstartonlyafterthedenialofanassertion.The

contractorsubmittedthatlimitationwouldnotstartfromthedateofentitlement

ofpaymentbutonwhichtheclaimwasmadebythecontractorandwasrejected

by theGovernment andsuchrejectionwouldbetheaccrual of thecauseof

action. Itwassubmittedthattheclaimswerependingfordecisionforyears

together, thelimitationwouldstartonlyafterthedecisionwascommunicated.

DistrictJudgerenderedafindingthatthecontractorcouldeitherlodgeclaims

with the Government and pursue them for their settlement through the

Governmentbynegotiationsorbyculminatingintoinvokingthearbitration.It

isheldthatthecontractorpreferredtotakeearlierrecoursetobeginwithand

continuetoquitesometime. ThecontractorapproachedSecretary, Irrigation

DepartmentandDy.ChiefMinisterduringthatperiodandrecoursetoarbitration

wastakenquitelateaftercompletionoftheworkphysically.TheDistrictJudge

heldthatArticle137oftheLimitationActwouldbeinvokedinthiscase.Relying

uponArticle137,itisheldthattheperiodoflimitationstartswhentherightto

apply accrues under Article137. The District Judge held that the period of

limitationforcommencinganarbitrationrunsfromthedateonwhichcauseof

arbitrationaccruesi.etosayfromthedatewhenthecontractoracquiredeither

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rightof actionorrighttorequireanarbitrationtakesplaceuponthedispute

concerned. It is held that cause of arbitration arose when the contractor

becameentitledtoraisethequestion.TheDistrictJudgeheldthatClaimNos.1,

2,3and5wereinthenatureofextraitemsandnewrateswerenecessitatedby

thevariationinparticularworkorderedbytheGovernment.TheDistrictJudge

held that under Article 55 of the Limitation Act, when the breach was

continuing,thelimitationofthreeyearscommenceswhenitceases.TheDistrict

Judgefinallyheldthatthecauseofactionwouldcommencefrom25thMay2001

when the claim was finally rejected by the Chief Engineer. In my view,

Article55couldnotbeattractedinrespectoftheclaimsmadebythecontractor

fortheworkdone.ThelearnedDistrictJudge,however,hasappliedArticle55of

theScheduletotheLimitationActtoalltheclaimswhichshowspatentillegality

onthefactoftheJudgmentofthelearnedDistrictJudge.

29. ThearbitraltribunalhasrenderedafindingthatinrespectofClaim

Nos.3,4and5,theclaimcouldbesaidtohaveinitiatedwhentheconcerneditems

wereexecutedanditcontinuedtillcompletionofeachsuchitem. Thearbitral

tribunalalsorenderedafindingthatacontractorcouldhavepursuedClaimNo.2

withtheGovernment for somereasonabletimebutshouldhavegone infor

settlementofdisputeasperClause66eitherwhenitemsfor3ClaimNos.3,4and

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5weremostlycompletei.eafterMarch1998orwhenthecumulativelosseswere

foreseentobebeyondthecapacityofthecontractortopullonwithoutimpairing

theprogressofthecontractedwork,whicheverwasearlier.Similarlyinrespect

of ClaimNo.2, the arbitral tribunal held that issue could have beenpursued

vigorouslywiththeGovernment duringtheyearorsoonaftergettingthefirst

extension and failing to get favourable response or partial response, the

contractorcouldhaveinvokedthearbitration.Itisfurtherobservedthatthough

thecontractorinallthecorrespondencewereallegingincurringofheavylosses,

financialcrunch,heavystrainetc.,followup/pursuationsforsettlementofclaims

onthepartofcontractorwasverypoordespiteprovisionofclauseforarbitration.

Thelearnedarbitraltribunalobservedthatitcouldnotbeascertainedfromthe

recordorfromthedeliberationsduringthemeetingsastowhythislogicaland

easiercoursecouldbetakenbythecontractor.

30. Thearbitraltribunalthoughrenderedafindingagainstthecontractor

for gross delay in making a claim and pursuing it, rejected the plea of the

Government forrejectionoftheclaimsonthegroundoflimitation. Onone

hand,thearbitraltribunalobservedthattheGovernment shallnotsufferany

extraliabilityonaccountofavoidabledelayonthepartofthecontractorand

contractorshouldnotbeawardedinterestontheclaimsforpastperiodatthe

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rateswhichnormallyandreasonablyacontractorwouldhavebeenentitledto.

Inmyview,itisclearthattheconclusiondrawnbythearbitraltribunalistotally

inconsistentwiththefindingrenderedbythearbitral tribunal onthe issueof

limitation. Theissueof limitationhasbeendealt withwithoutapplicationof

mind.

31. TheDistrictJudgehasrenderedafindinginfavourofthecontractor

onerroneouspremisethatArticle137oftheLimitationActwasapplicabletothe

claimsmadebythecontractor. In myview,Article55of theLimitationAct

wouldnotapplyfortheclaimforpriceincreaseinrespectoftheworkcarriedout

undertheprovisionsofcontract.ApplicationofArticle55totheclaimforwork

done by the District Judge, is totally an erroneous and is on the face of it

perverse.Article137oftheLimitationActappliestotheapplicationsandnotto

theclaims. Inmyview,for invokingthearbitrationclause, the limitation

providedbytheLimitationActformakingapplicationwill notapply, butthe

limitationprovidedbythescheduleforinstitutionofasuitwillapply.ThisCourt

hasheldthatthereisnoquestionofprovisionsofArticle137applyinginsofaras

invocation of the arbitration clause and commencement of the period of

limitationisconcerned.ThisCourtheldthatinrespectoftheclaimforpriceof

extraworkcarriedoutbythecontractor,Article18oftheLimitationActwould

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applyandnotArticle137.Itisheldthatwhenasuitisinstitutedforrecoveryof

thepriceoftheworkdonebytheplaintiffforthedefendant,andwhenthereis

notimefixedforpaymenttobemade,thecauseofactionforinstitutingthesuit

ariseswhentheworkiscompletedandthesuithasbeinstitutedwithinaperiod

ofthreeyearsfromtheaccrualofcauseofaction.Itisheldthatcauseofaction

wouldaccruewhentheworkisdone.AfterconsideringArticle113onwhichthe

contractorhasplacedreliance,thisCourtheldthatthesaidArticlecomesinto

playonlyonfindingthatforinstitutionofasuitfortheclaimwhichwasinvolved

in that matter, there was no period of limitation provided elsewhere in the

schedule.ItisheldthatonlyonafindingrecordedthatArticle18didnotapply,

Article113couldnotapply.ThisCourtheldthatthoughthelearnedarbitrator

hadrecordedafindingthattheclaimwasnotbarredbylawoflimitation,inthe

entire award there was no reference to any Articles in the Schedule of the

LimitationAct,whichappliestothatcase.ThisCourtobservedthatsuchfinding

recordedbythelearnedarbitratorwasanimpossibility.

32. Inmyview,refusaltopaytheamountdemandedbythepetitioner,

wouldnotcommencefreshperiodoflimitationwhichhadalreadycommenced.

InviewofSection9oftheLimitationAct,1963,oncetimeisbeguntorun,no

subsequentdisabilityorinabilitytoinstituteasuitormakeanapplicationstops

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it.Oncetimestarts,itdoesnotstop.Limitationisextendedonlywhenthereis

an acknowledgment of liability or part payment. Correspondence does not

extendtheperiodoflimitation.

33. Itisnotthecaseofthecontractorthattherewasanypartpayment

madebytheGovernment inrespectoftheclaimsinquestionortherewasany

acknowledgmentofliabilitymadebytheGovernmentinfavourofthecontractor

inrespectofsuchclaims.Merelybecause,therewasinactionand/ordelayonthe

partoftheofficersoftheGovernmentinconsideringand/orrejectingtheclaims

madebythecontractor, limitationwouldnotbeextended. Thelimitationhad

alreadycommencedwhentheworkwasdoneandthepaymentwasnotmade.It

isnotindisputethattheworkinrespectoftheclaimsinquestionwascompleted

morethanthreeyearspriortothedateofcontractormakingrepresentationtothe

concernedofficersoftheGovernment. Inmyview,eveniftheofficersofthe

Government hadnotdecidedtherepresentationand/orclaimofthecontractor

withinthetimespecifiedunderClause66,causeofactionhadnotstopped.

34. In myview, the arbitral tribunal as well as the District Judgehas

mixeduptheissueoflimitationinmakingaclaimandinmakinganapplication

totheCourtforappointmentofarbitrator. ThereferencemadebytheDistrict

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JudgetoArticle137andArticle55istotallymisplacedandcontrarytolaw.In

myview,limitationformakingaclaimandlimitationformakinganapplication

forappointmentofarbitratorcannotbemixedup.

35. Perusal of theaward indicates that ClaimNo.1was for revisionof

ratesdemandedbythecontractoronthebasisthatcertainitemsofworkwhich

were different from those included in BOQ (Bill of Quantities) items were

requiredtobeexecuted.Itwasthecaseofthecontractorthatthereweresome

extra itemswhererates of itemcouldnotbederivedfromtheBOQratesby

makingappropriatevariations. UnderClause51ofthecontract,theEngineer

hadpowerstomakeanyvariationoftheform,qualityorquantityoftheworksor

anypartthereof.Procedureofvaluationofvariationhadbeenspecifiedunder

Clause52 of the contract. Accordingly, the Government had prepared rate

analysiswith 'labourmarkup'as50%andoverheadandprofitas20%. The

contractor,howeverdemandedthesameas195%and40%respectively. The

learnedlearnedarbitraltribunal,intheimpugnedawardallowedthisclaim. It

wasthepleaoftheGovernmentthatdisputeregardingratesofextra/deviated

itemsstartedwhenthefirstpaymentwasmadepriorto27thJuly1997;whereas

thecontractorhad invokedarbitrationclauseon27th July2000. It is not in

disputethatthesaidworkwascarriedoutasorderedbytheGovernmentunder

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Clause51 read with Clause52 of the contract. The said work was thus,

contractualworkasorderedbytheGovernment.Thelimitationformakingsuch

claimforratesofsuchextra/deviateditemswillthusarisewhensuchitemofwrk

wasdonebythecontractor,whichinthiscase,muchpriorto27thJuly1997.In

myview,Article18ofScheduletoLimitationActwouldapplytothisclaimand

not Article113 as sought to be applied by the contractor in the present

proceedings.ThelearnedarbitratordidnotrefertoanyArticlewhilerejecting

thepleaoflimitationintheimpugnedaward.

36. InsofarasClaimNo.2isconcerned,perusaloftheawardindicates

that the said claim was for compensation for the work carried out by the

contractor beyond the original stipulated date of completion which was 19th

March1997. TheGovernmentgrantedfiveextensionsfortheperiodbetween

20thMarch1997makingthesametermsandconditionsapplicableforthework

carriedoutduringtheextendedperiod. Thecontractorthus,oughttohave

invoked arbitration clause no sooner such extension was granted by the

Governmentbymakingthesametermsandconditionsapplicableforthework

carried out during the extended period. The cause of action for claim for

compensationwouldarisewhenthebreachiscommittedbytheeitherparty. If

accordingtothecontractor,theGovernmentwasresponsibleforprolongationof

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contractandextensionwasnecessitatedduetosuchreasonsandthecontractor

wasnotboundtocarryoutthebalanceworkonthesametermsandconditions,

cause of action would begin as soon as such breach was committed by the

Government according to the contractor. The learned arbitral tribunal,

however,didnotdecidethisissueintheimpugnedawardbutrejectedthepleaof

limitationmerelyonthegroundthattheclaimwasinitiatedon18thMarch1997

i.e the date on which the Government granted extension under the same

conditions of contract and its effect will start from 20th March 1997 and it

continuedtill actualcompletionofthecontract. Thelearnedarbitraltribunal

consideredthattheEngineerhadrejectedtheclaimon6thSeptember2000and

thearbitrationwasinvokedon21stSeptember2000,thustheclaimwasintime.

NoArticleofLimitationActhasbeenreferredbythelearnedarbitraltribunal

while dealing with plea of limitation even in respect of this claim for

compensation.

37. AsfarasClaimNo.3madebythecontractorisconcerned,perusalof

theawardindicatesthatthesaidclaimwasmadeforrevisionofratesforPressure

Shaft Excavation. According to contractor, it encounteredvarious difficulties

duringtheexcavationsofthePressureShaftssuchaschangedsequenceofthe

work,methodandtiming,physicalobstructionsintheworkduetoworkofother

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agency, variation in rock strata/geological conditions etc., which was not

attributabletothecontractor.Accordingtocontractor,inviewofsuchsituation,

theychangedthescopeofitemandthecontractorpreparedrateanalysisforeach

component of the work based on componentwise expenditure. The learned

arbitraltribunalallowedthisclaim.

38. Perusaloftheawardindicatesthatthisitemwascarriedoutduring

theperiodbetweenJuly1993toMarch1998totheextentof94%.Thedemand

wasmadebeforetheExecutiveEngineeron10thFebruary1997.Itwasrejected

byExecutiveEngineeron17thJuly2000. Inmyview,thecontractoroughtto

havemadethisclaimwhenanysuchbreachwascommittedbytheGovernment

resulting in suffering of compensation due to breaches attributable to the

Government.Thecontractorwasnotboundtowaitbeyond60daysfordecision

oftheExecutiveEngineer.Inthiscase,itisclearthatthecontractorwaitedfor

decision of Executive Engineer for more than three years and four months.

Limitationoncecommenced,doesnotstop.Thelearnedarbitraltribunalhasnot

referredtoanyArticleofLimitationActwhiledealingwiththistypeofclaim.In

my view, the claim in view of the alleged breaches committed by the

Government,oughttohavemadewithinthreeyearsfromthedateofalleged

breachandclaimnot havingmadewithin threeyears, was barredby lawof

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limitation.

39. InsofarasClaimNo.4isconcerned,perusalofawardindicatesthat

thesaidclaimwasmadeforfixationoftherateonaccountofvariationinthe

itemofTransformerHallArchConcreteduetotheproblemssuchaschangesin

natureofrock,doingadditionalworknotprovidedinthecontract,changesin

sequenceandmethodology,delayinissueofdrawings,increaseinquantitiesetc.,

resultingincontractortoincurextraexpenditurenotcontemplatedintherate

analysis.Thecontractormadethatclaimbywayofcompensationtowardsextra

expensesallegedtohavebeenincurredbyit. Thelearnedarbitral tribunal

allowedthisclaim.Thedataplacedonrecordintheawardindicatesthatthis

workwascarriedoutduringtheperiodbetweenOctober 1993andFebruary

1994. ThecontractormadeademandbeforetheExecutiveEngineeron14th

October1996.TheExecutiveEngineerrejectedthisclaimon4thNovember2000.

Arbitrationwasinvokedon1stJune2001.Inmyview,thecontractoroughtto

havemadethisclaimwhensuchworkwasdoneandnopaymentwasmadeto

thecontractorforthesame.Thecontractorwasnotboundtowaitfordecision

ofExecutiveEngineerbeyondtheperiodof60dayswhereas, inthis case,he

waited fordecisionof theExecutiveEngineer foraperiodof morethanfour

years.Inmyview,thisclaimwasonthefaceofitisbarredbylawoflimitation.

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Thelearnedarbitraltribunalhasnotconsideredthesefactsinproperdirection.

40. InsofarasClaimNo.5isconcerned,thesaidclaimwasmadebythe

contractor for fixation of new rate on account of variation in the item of

TransformerHallexcavation.Itwasthecaseofthecontractorthatexcavationof

horizontalnicheshaddelayedtheworkandcausedextraexpensesduetoother

reasons,suchasstoppageofworkofshotcrete,increaseinquantityofrockbolts,

frequentrevisionofdrawings,additionalworks,reductionandomissionofsome

worksetc.necessitatedappropriatedcompensationinfavourofcontractor.The

learned arbitral tribunal allowed this claim for compensation. The award

indicatesthatthisworkwasexecutedduringtheperiodbetweenJanuary1993

and September 1995. The contractor made this claim before the Executive

Engineeron14thOctober,1996whichwasrejectedbytheExecutiveEngineeron

19thSeptember,2000.Arbitrationclausewasinvokedon6thJune2001.Inmy

view, when the work was carried out and payment was not made by the

Government,causeofactionhadcommenced.Inanyevent,thecontractorwas

notrequiredtowaitforthedecisionoftheExecutiveEngineerformorethan60

dayswhereasforthis claim,thecontractorwaitedfordecisionforaboutfour

years.Inmyview,theclaimonthefaceofit,isbarredbylawoflimitation.

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41. In so far as judgment of the Supreme Court in case of Gannon

Dunkerly(supra)relieduponbythecontractorisconcerned,inmyview,itwas

notthepleaofthecontractorbeforethearbitraltribunalorbeforetheDistrict

JudgethatArticle113oftheLimitationAct(correspondingtoArticle120ofthe

LimitationAct1908)wouldapplytothefactofthiscase.Inmyview,asnosuch

pleawasnotraisedbeforethearbitraltribunalplacingrelianceuponArticle113

corresponding to Article120 of Limitation Act 1908, and since no finding is

rendered by the arbitral tribunal applying Article113, contractor cannot be

permittedtoraisesuchpleaforthefirsttimeinthepresentproceedingsunder

Section37oftheActof1996.Pleaoflimitationisamixedquestionoffactand

lawandunlesssuchspecificpleabyplacingrelianceuponArticle113wasfirst

raisedbeforethearbitraltribunal,itcannotbeallowedtoberaisedforthefirst

timeinappealunderSection37oftheActof1996.Iam,therefore,oftheview

thatrelianceplacedbythelearnedseniorcounselappearingforthecontractorin

caseof GannonDunkerley (supra)isofnoassistancetothecontractorinthe

factsofthiscase.

42. Inanyevent,consideringthenatureofclaimsmadebythecontractor

i.e.ClaimNos.1to5whichwereallowedbythelearnedarbitraltribunal,itis

clearthattheclaimswereeitherforworkdoneorforcompensationandthus

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specificArticleforreferringthedisputetoarbitrationwouldbeattractedsuchas

Article18 or Article55 of Schedule of the Limitation Act and therefore,

Article113cannotbeattracted.Inmyview,thusthefactsofthecasebeforethe

HonourableSupremeCourt in caseof GannonDunkerley (supra)areclearly

distinguishablewiththefactsofthiscaseandthus,saidjudgmentrelieduponby

thecontractor,withgreatrespect,isofnoassistancetothecontractor.

43. The next submission of Mr Chinoy, the learned senior counsel

appearingforthecontractoristhatevenifArticle18isapplicabletotheclaims

madebythecontractor, periodof limitationwouldcommenceonlywhenthe

entireworkisdone.Thelearnedseniorcounselsubmitsthattheclaimsmadeby

thecontractorwerenotfortheentireworkdonebythecontractorbutwasonly

inrespectofsomeitemsfromthescopeofentireworkawardedtothecontractor.

Thelearnedseniorcounselsubmitsthatonlywhentheentireworkiscompleted,

causeofactionwouldariseformakingclaimsevenforitemsfortheworkdone.

It is submitted that if thecontractor is asked to invokearbitrationclauseon

completionofeachitemindispute,therewouldbemultiplicityofarbitrations

underthesamecontract.

44. MrKumbhakoni, learnedcounsel appearing fortheGovernmenton

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theotherhandonthisissueinrejoinder submitsthatthecontractorhadmade

claimsinrespectofeachitemsseparatelyanddidnotmakeclaimfortheentire

work. It is submitted that even in the earlier arbitration proceedings, the

contractorhadmadeclaimshavingariseninrespectoftheitemsofthework

done and did not wait till completion of work. The Government had made

paymentitemwisetothecontractorandthusitcannotbeconstruedthatcause

ofactionwouldariseonlyafterentireworkwasdoneandnotwhenitemsof

workwasdoneinrespectofwhichthedisputehadalreadyarisen.Clause66(A)

andClause66(b)oftheGeneralConditionsofContractreadasunder:

66A)SETTLEMENTOFDISPUTESARBITRATION:

(A) IftheContractorconsidersanyworkdemandedofhimtobeoutsidetherequirementsofthecontractorconsidersanydrawings,recordorrulingoftheEngineer'sRepresentativeonanymatterinconnectionwithorarisingoutoftheContractorthecarryingoutofworktobeunacceptable,heshouldpromptlyaskthe Engineer's representative in writing, for written instructions or decision.Thereupon theEngineer's Representative shall givehis written instructions ofdecisionwithinaperiodof60daysofsuchrequest.

Uponreceiptofthewritteninstructionsordecisions,thecontractorshallpromptlyproceedwithoutdelaytocomplywithsuchinstructionsordecision.

IftheEngineer'sRepresentativefailstogivehisinstructionsordecisioninwritingwithinaperiodof60daysofbeingrequestedoriftheContractorisdissatisfiedwiththeinstructionsordecisionoftheEngineer'sRepresentativetheContractormaywithin30daysafterreceivingtheinstructionsordecisionappealupwardstoEngineerwhoshallaffordanopportunitytotheContractortobeheardandtoofferevidenceinsupportofhisappeal.TheEngineershallgiveadecisionwithinaperiodof60daysaftertheContractorhasgiventhesaidevidenceandfurtherdocumentaryprooftheEngineercallsforinsupportofContractor'sappeal.

IftheContractorisdissatisfiedwiththisdecision,theContractorwithinaperiodof30daysfromreceiptofthedecisionshallindicatehisintentiontoreferthedisputetoArbitration,aspertheproceduresetoutinClause66(b)below,failingwhich

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thesaiddecisionshallbefinalandconclusive.

66(b):ARBITRATION:

Intheeventofanydisputeordifferencearisingoutoforinanywayrelatingtoorconcerning these presents or the construction or effect of these presents (thesettlementwhereofhasnotbeenhereinbeforeexpresslyprovidedfor),thesameinrespectofwhichthedecisionisnotfinalandconclusive,shallontheinitiativeofeitherpartytothecontractbereferredtothreearbitrators,onetobeappointedbytheemployer, thesecondbythecontractor andthirdbytheChairmanCentralWater Commission in the case of Indian Contractors. In the case of ForeignContractor, thethirdarbitratorwillbedecidedbythetwoarbitratorswithin60daysoftheirappointment. ThetermIndianContractorshallincludeanIndianfirm or a group of firms or a joint venture eligible for price preference as adomestictenderer.ThetermForeignContractorshallincludeaforeignfirmoragroup of firms and joint venture consortia not eligible for price preference asdomestic tenderer. TheArbitrationshall be conducted inaccordance with theprovisions of the Indian Arbitration Act 1940 or any statutory modificationsthereof. The arbitration shall be held at such place and time in India as thearbitrators maydetermine. If eitherof thepartiesfail toappoint its arbitratorwithinsixtydaysafterreceiptofnoticefortheappointmentofanarbitratorfromtheotherpartythentheChairman,CentralWaterCommissionshallappointanarbitratoronreceiptoftherequestfromtheaggrievedparty. AcertifiedcopyoftheappointmentsmadebytheChairmanCWCshallbefurnishedtobothparties.

Thedecisionofthemajorityofthearbitratorsshallbefinalandbindinguponboththeparties.Theexpenseofthearbitratorsshallbepaidasmaybedeterminedbythearbitrators.

Performanceunderthecontract, shallifreasonablybepossible, continueduringthearbitrationproceedingsandpaymentsduetotheContractorbytheEngineer'srepresentative shall not be withheld, unless theyare the subject matter of thearbitrationproceedings.

All awardsshall be inwritingand in case of claims equivalent toRupees onehundred thousand or more, such awards shall state reasons for the amountsawarded.

NeitherpartyisentitledtobringaclaimtoarbitrationifitsArbitratorhasnotbeenappointedbythirtydaysaftertheexpirationofthedefectsliabilityperiod.

45. Perusalofthearbitrationclauseindicatesthatincaseofanydispute,

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thecontractorwasrequiredtopromptlyasktherepresentativeoftheGovernment

inwriting,forwritteninstructionsordecision.Fromtheperusaloftheclauses,it

is clearthat it contemplatesdispute tobereferredevenduringthecourseof

executionofworkandthecontractorwasnotrequiredtowaittillcompletionof

the work. Perusal of the arbitrationclause indicates that thecontractor was

permittedtoreferthedisputestoarbitrationarisingduringtheexecutionofthe

workandsimultaneouslytocontinuetoperformunderthecontractifreasonably

possible. ThisClauseindicatesthatthecontractorwasnotboundtowaitfor

completionfortheentirework,butcouldhaveinvokedarbitrationpromptlyas

soonasdisputehadariseneveninrespectofitemsofworkoutofentirescopeof

workwere executed. It is not in dispute that even in respect of the earlier

arbitrationarising under the samecontract, the contractor hadalreadymade

claimsinrespectofsomeoftheitemsofwork.Iamthus,notinclinedtoaccept

thesubmissionmadebythelearnedseniorcounselappearingforthecontractor

thatthecauseofactionwouldariseonlywhentheentireworkwascompletedby

thecontractorandnotwhenthepaymentwasnotmadeinrespectoftheitemsof

workdoneoncompletionofthatitem. Inmyview,causeofactionhadarisen

whentheworkwasdoneinrespectoftheitemsofworkdoneandcauseofaction

wouldnotpostponetillthedateofcompletionofentirescopeofworkawardedto

thecontractor.Inmyview,thelearnedarbitraltribunaloughttohavereferredto

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therelevantArticlewhichwouldbeattractedforthepurposesofdecidingthe

issueoflimitation,whichisabsentintheimpugnedaward.ThelearnedDistrict

JudgehasmisdirectedbyapplyingwrongArticletothefactsofthiscase.

46. Theawardisvitiatedandisinconflictwithpublicpolicyontheissue

oflimitation. ViewtakenbythelearnedDistrictJudgeisalsocontrarytolaw

anddeservestobesetaside.I,therefore,passthefollowingorder.

i) Impugnedorderandjudgmentdated29th June2006passedbythe

learnedDistrictJudge,RatnagiriinArbitrationApplicationNo.44of

2003andtheimpugnedawarddated26th June2003passedbythe

learnedarbitraltribunalaresetasideonthegroundoflimitation.

ii) ArbitrationApplicationNo.44of2003filedbytheGovernment is

allowed.

iii)Appealisdisposedofinaforesaidterms.Thereshallbenoorderasto

costs.

iv) Respondentisdirectedtorefundtheamountwithdrawnintheabove

matterwithinterest@12%perannumfromthedateof withdrawaltill

paymentwithineightweeksofthisorder.

(R.D.DHANUKA,J.)

Asmita 48/48

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