IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO 5849-5850 OF 2002
Visakhapatnam Port Trust ... Appellant
Versus
M/s Continental Construction Company ... Respondent
JUDGEMENT
R.M. Lodha, J.
Both these appeals by special leave, arise out of one and the
same judgment dated 26th April, 2002 rendered by the High Court
of Judicature Andhra Pradesh whereby it allowed the two appeals
being CMA No. 1559/1994 and CMA No. 77/1995.
2. For the sake of convenience, we shall refer the appellant –
Visakhapatnam Port Trust, “VPT” and the respondent – M/s
Continental Construction Company, “the Contractor”.
3. In CMA No. 1559/1994 before the High Court, the dispute
between the parties was in respect of refund of an amount of Rs.
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74,810.38 which was recovered by VPT from the contractor’s
running bill no. 21. VPT entered into an agreement with the
contractor on 7th January, 1973 whereunder the contractor was to
construct the ore berth 263 meters long 29.73 meters wide
comprising of eight numbers of 18 meters x 27.73 meters long
concrete cribs spaced at 35M centres on prepared foundations and
connected by pre-cast pre-stressed deck and R.C.C. slab and
construction of two Mooring Dolphins comprising concrete deck
supported on 900mm internal diameter Racker bored piles. For the
execution of the said contract, VPT was to supply various
equipments comprising of hydraulic jacks, hydraulic pumps, steel
yoke assembly, jack rods etc. and it appears to be fairly admitted
position that 950 nos. of jack rods were supplied by VPT to the
contractor. Towards cost of 500 jack rods, on 8th August, 1974,
from the contractor’s running bill no. 21, an amount of
Rs.74,810.38 was recovered by VPT.
4. As there was a dispute between VPT and the contractor with
regard to return of 950 jack rods valuing Rs. 9,65,155/-, VPT
referred to the dispute to arbitration in the year 1975. The
statement of claim was filed by VPT before the arbitrators on 4th
June, 1976. On 23rd March, 1980, the arbitrators rejected the
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claim of VPT. The award dated 23rd March, 1980 was challenged
by VPT before the Civil Judge, Visakhapatanam by filing a petition
under Sections 30 & 33 of the Arbitration Act, 1940 (for short, `Act,
1940′ ). The Civil Judge, Visakhapatanam dismissed the said
petition on 10th September, 1984.
5. It is pertinent to notice here that until the rejection of claim
made by VPT for Rs. 9,65,155/- towards the cost of 950 jack rods
vide award dated 23rd March, 1980, the contractor did not raise
any dispute with regard to recovery of Rs. 74,810.38 made by VPT
on 8th August, 1974 from the contractor’s running bill no. 21. It
was only thereafter, to be specific on 27th March, 1980 that the
contractor called upon VPT to release the sum of Rs. 74,810.38.
Then on 22nd of September, 1984, the contractor initiated
proceedings under the Act, 1940 in respect of claim of
Rs.74,810.38 by appointing its arbitrator and also called upon VPT
to appoint its arbitrator. The arbitrators entered upon the reference
on 1st February, 1985 and they also appointed an Umpire. The
contractor filed its statement of claim before the arbitrators on 16th
March, 1985. The arbitrators by their award dated 27th October,
1985 accepted the claim of the contractor and passed an award for
Rs.74,810.38 in favour of the contractor.
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6. VPT challenged the award by filing petition (O.P.No.
10/1986) under Sections 30 and 33 of the Act, 1940, inter alia
raising the objection that the claim of the contractor was time
barred. The Court of the Principal Subordinate Judge,
Visakhapatnam vide his judgment dated 16th February, 1994
allowed OP No. 10/1986; set aside the award of the arbitrators and
held that the claim of the contractor was barred by limitation.
7. The contractor challenged the judgment of the Principal
Subordinate Judge, Visakhapatanam dated 16th February, 1994 by
filing an appeal before the High Court which was registered as
CMA No. 1559/1994. The High Court upturned the judgment of the
Principal Subordinate Judge, Visakhapatnam and held that the
claim of the contractor for Rs. 74,810.38 was within limitation.
8. The other appeal being CMA No. 77/1995 before the High
Court arose out of C-3 contract for execution of marine works and
break waters at the outer harbour at Lova Garden, Visakhapatnam .
The dispute seems to have arisen between VPT and the
contractor on 3rd February, 1975 in respect of the charges for
power driven survey boat used by the contractor. The dispute was
referred to the consulting engineers who opined vide their report
dated 3rd May, 1975 that it was the responsibility of the contractor to
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provide the survey vessel and consequently, the contractor’s
claim in this regard was untenable. The contractor then on 15th
May, 1975 appointed Shri G.N. Bajpai as its arbitrator and called
upon VPT to appoint its arbitrator. VPT appointed one Mr. T.V.
Rajaram as its arbitrator and the arbitrators in turn appointed Mr.
A.W. De’Lima as Umpire. The arbitrators, however, could not enter
upon the reference. The contractor, accordingly, approached the
Principal Subordinate Judge, Visakhapatnam for the appointment of
arbitrators by invoking Sections 8, 9 and 20 of the Act, 1940.
The Principal Subordinate Judge, Visakhapatnam treated that suit
under Section 8 of the Act, 1940 and vide its order dated 10th
September 1984 allowed the suit filed by the contractor and
directed each party to appoint its arbitrators within 15 days
therefrom. Each party, accordingly, appointed its arbitrator and the
appointed arbitrators entered upon reference. On 14th March,
1985, the contractor filed claim in the sum of Rs. 8,49,000/- with
interest and cost pertaining to the charges for power driven survey
boat.
9. The arbitrators passed the award on 20th November, 1985
allowing the claim of the contractor for Rs. 6,44,500/- but no interest
or cost were allowed.
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10. VPT challenged the award dated 20th November, 1985 in the
Court of Subordinate Judge, Visakhapatnam by filing petition
numbered as OP No. 164/1986. The award was mainly opposed
by VPT on the ground of limitation and that the award was non-
reasoned.
11. The sub-ordinate Judge, Visakhapatnam allowed the petition
vide its order dated 16th February, 1994 and set aside the award
holding that the claim was barred by limitation.
12. The contractor, then carried the matter to the High Court by
filing CMA No. 77/1995. The said appeal has been allowed by
the High Court vide its judgment dated 26th April, 2002.
13. As noticed above, it is from the common judgment dated 26th
April, 2002 disposing of CMA No. 1559/1994 and CMA No.
77/1995 that these two appeals arise.
14. We shall first deal with the contractor’s claim of
Rs.74,810.38. The only issue that falls for our consideration with
regard to this claim is whether it is barred by limitation.
15. Section 37 of the Arbitration Act, 1940 and Article 137 of the
Limitation Act, 1963 are relevant for the purpose.
The Arbitration Act, 1940;
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“37. Limitations. – (1) All the provisions of the Indian
Limitation Act, 1908 (9 of 1908), shall apply to arbitrations as
they apply to proceedings in Court.
(2) Notwithstanding any term in an arbitration agreement to
the effect that no cause of action accrue in respect of any
matter required by the agreement to be referred until an
award is made under the agreement, a cause of action shall,
for the purpose of limitation, be deemed to have accrued in
respect of any such matter at the time when it would have
accrued but for that term in the agreement.
(3) For the purposes of this section and of the Indian
Limitation Act, 1908 (9 of 1908), an arbitration shall be
deemed to be commenced when one party to the arbitration
agreement serves on the other parties thereto a notice
requiring the appointment of an arbitrator, or where the
arbitration agreement provides that the reference shall be to a
person named or designated in the agreement, requiring that
the difference be submitted to the person so named or
designated.
(4) Where the terms of an agreement to refer further
differences to arbitration provide that any claims to which the
agreement applies shall be barred unless notice to appoint
an arbitrator is given or an arbitrator is appointed or some
other step to commence arbitration proceedings is taken
within a time fixed by the agreement, and a difference arises
to which the agreement applies, the Court if it is of opinion
that in the circumstances of the case undue hardship would
otherwise be caused, and notwithstanding that the time so
fixed has expired, may on such terms, if any, as the justice of
the case may require, extend the time for such period as it
thinks proper.
(5) Where the Court orders that an award be set aside or
orders, after the commencement of an arbitration, that the
arbitration agreement shall cease to have effect with respect
to the difference referred, the period between the
commencement of the arbitration and the date of the order of
the Court shall be excluded in computing the time prescribed
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by the Indian Limitation Act, 1908 (9 of 1908) for the
commencement of the proceedings (including arbitration) with
respect to the difference referred.”
The Limitation Act, 1963 ;
" 137. Any other application three years When the
for which no period of right to apply
limitation is provided accrues."
elsewhere in this division.
16. It is apparent from the bare reading of Section 37 that the law
of limitation is applicable to the proceedings before the arbitrators
as it applies to proceedings before the Courts. Under Sub-section
(3), arbitration proceedings are to be deemed to have commenced
when notice is served by one party upon the other – (i) requiring
him to appoint an arbitrator, or (ii) if the arbitrator was named or
designated in the arbitration agreement, requiring him to submit the
difference to arbitrator named or designated.
17. In the backdrop of aforesaid legal position, let us now turn to
the facts. On 8th August, 1974, VPT recovered an amount of
Rs.74,810.38 being the cost of 500 jack rods from running bill no.
21 tendered by the contractor. The dispute with regard to claim of
Rs. 74,810.38, thus, arose on that date. The contractor ought to
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have given notice calling upon VPT to appoint arbitrator within three
years therefrom or apply to the Court within this time. However,
it was after ten years on 22nd September, 1984 that the contractor
appointed its arbitrator and called upon VPT to appoint its
arbitrator. Significantly, VPT had already made a claim of Rs.
9,65,155/- against the contractor for withdrawal and return of jack
rods and the dispute was referred to arbitration at the instance of
VPT in the year 1976. Although the contractor contested the said
claim of VPT before the arbitrators but curiously no counter claim
for Rs. 74,810.38 was made in those proceedings. It is true that
arbitrators rejected the claim of VPT on 23rd March, 1980 and the
petition before the Civil Judge, Visakhapatnam also came to be
dismissed on 10th September, 1984 but that does not improve the
case of the contractor in so far as limitation is concerned as the
limitation began to run from 8th August, 1974. It was too late on 22nd
September, 1984 for the contractor to agitate the claim of
Rs.74,810.38 for which the cause of action accrued on 8th August,
1974. The contractor ought to have made counter claim before the
arbitrators in the year 1976 itself when VPT made a claim of
9,65,155/- for withdrawal of jack rods. In any view of the matter,
the claim of Rs. 74,810.38 raised for the first time after 10 years of
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accrual of cause of action is apparently barred by time and rightly
rejected by Principal Subordinate Judge, Visakhapatnam vide
judgment dated 16th February, 1994.
18. As a matter of fact, Mr. S.B. Upadhyay, Senior Counsel for
the respondent could not show that claim for Rs. 74,810.38 was
within time.
19. As noticed above, CMA No. 77/1995 before the High Court
related to non-payment of the charges of the power driven survey
boat used by the contractor. Admittedly, the dispute in this regard
arose between the parties on 3rd February, 1975 and the matter
was referred to the consulting engineers. The consulting engineers
rejected the claim of the contractor on 3rd May, 1975 holding that it
was the responsibility of the contractor to provide survey vessel.
The contractor on 15th May, 1975 appointed its arbitrator and gave
notice to VPT requiring them to appoint their arbitrator. VPT also
appointed its arbitrator but the arbitrators could not enter upon the
reference. It was in the year 1979, then that the contractor
approached the Principal Subordinate Judge, Visakhapatnam by
filing suit under the Arbitration Act, 1940 which was allowed vide
order dated 10th September, 1984 directing each party to appoint its
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arbitrator within 15 days. In compliance thereof, the parties
appointed their arbitrators and on 16th March,1985 the contractor
filed its statement of claim for payment of hire charges for power
driven survey boat.
20. Sub-Section (3) of Section 37 of the Act, 1940, inter alia,
provides that an arbitration shall be deemed to be commenced
when one party to the arbitration agreement serves on the other
party thereto a notice requiring the appointment of an arbitrator.
The core controversy is: in the facts and circumstances of the
case, when the arbitration can be said to have commenced.
21. In what we have already noticed above, the dispute with
regard to charges for the power driven survey boat arose on 3rd
February, 1975 and after the claim was rejected by the consulting
engineers on 3rd May, 1975, the contractor appointed the arbitrator
on 15th May, 1975 and asked VPT to appoint its arbitrator. In
other words on 15th May, 1975, the contractor served on VPT a
notice requiring them to appoint their arbitrator under the
agreement. Thus under Section 37(3), the arbitration shall be
deemed to have commenced on 15th May,1975 i.e. well within time
and the High Court rightly rejected the objection of VPT that the
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claim with regard to charges for the survey vessel was time barred.
Merely because, the arbitrators could not enter upon reference and
the contractor had to approach the Court in the year, 1979 by filing
suit which was allowed on 10th September, 1984 and new
arbitrators were appointed by the parties and statement of claim
was filed by the contractor on 14th March, 1985, that would not
render the contractor’s claim time barred.
22. Mr. Kailash Vasudev, Senior Counsel contended that the
non-reasoned award is bad in law. In this connection, learned
Senior Counsel referred to Section 17 of the Act, 1940 which
came to be amended by insertion of proviso vide Andhra Pradesh
Act (1 of 1990).
23. Section 17 of the Act, 1940 reads thus ;
“17. Judgment in terms of award. – Where the Court sees —
no cause to remit the award or any of the matters referred to
arbitration for reconsideration or to set aside the award, the
Court shall, after the time for making an application to set
aside the award has expired, or such application having been
made, after refusing it, proceed to pronounce judgment
according to the award, and upon the judgment so
pronounced a decree shall follow and no appeal shall lie
from such decree except on the ground that it is in excess of,
or not otherwise in accordance with, the award.”
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24. Vide Andhra Pradesh Act ( 1 of 1990), the following proviso
have been inserted to Section 17;
“Provided that where as award pending in the Court at the
commencement of the Arbitration (Andhra Pradesh
Amendment) Act, 1990 or an award filed in the Court,
thereafter does not contain reasons therefore as required by
the proviso to sub-section (1) of Section 14 the Court shall
not proceed to pronounce the judgment according to the
award, but shall remit the award to the arbitrators or the
umpire for giving reasons therefore as required by the said
proviso and thereupon the arbitrators or umpire shall, within
thirty days from the date of remittance of the award to them by
the Court give reasons for the award and file the same in the
Court:
Provided Further that on the application of the arbitrators or
the umpire and for reasons to be recorded in writing, it shall
be competent for the Court, to extend the period of thirty days
aforesaid for a further period not exceeding fifteen days:
Provided also that where an award pending in the court as
aforesaid does not contain any reasons and there is no
possibility to remit the award to the arbitrator or panel of
arbitrators or umpire due to their incapacity, negligence,
refusal to act or death, the Court shall set aside the award
and direct the parties to initiate fresh arbitration in accordance
with the terms of the agreement.”
25. Firstly, amendment in Section 17 vide Andhra Pradesh Act (1
of 1990) is not attracted in the present fact situation as the award
was passed by the arbitrators on 20th November, 1985 i.e. much
before the amendment. As per Section 17 then obtaining, it was
not imperative for the arbitrators to give reasons in support of the
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award. Secondly, upon the award dated 20th November, 1985
being challenged by VPT before Principal Sub-ordinate Judge,
Visakhapatnam, the Principal Sub-ordinate Judge, Visakhapatnam,
directed the arbitrators to give reasons for the award in the light of
the amendment aforenoticed.
26. Consequently, the arbitrators gave the following reasons:
“Having gone through the various provisions in the contract
documents which have a bearing on the dispute between the
parties and after applying correct and proper interpretation for
adjudication of the said dispute, we find that the Visakhapatnam
Port trust, the Respondents in this case, were under a Contractual
obligation to make available a Survey Boat for use on these works
and that, although the survey boat was available with them, they
failed totally to fulfil that contractual obligation necessitating the
claimants to obtain a boat from their own resources and deploy the
same on the works throughout the construction period. We find that
after allowing some adjustments found necessary on perusal of the
contract and after having considered the written as also the oral
submissions made to us by the parties, the claimants are entitled to
be paid by the Respondent the sum as determined by us in our
award.”
27. Although this exercise was unnecessary but the fact of the
matter is, that subsequently the arbitrators did give their reasons.
Reasonableness of the reasons given by arbitrators cannot be
gone into by the Court. This objection of the Senior Counsel is,
accordingly, overruled.
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28. For the foregoing reasons, we dispose of these appeals as
follows:-
(1) The judgment of the High Court of Judicature of
Andhra Pradesh in CMA No. 1559/1994 is set
aside. The claim of M/s Continental Construction
Company for Rs. 74,810.38 stands dismissed.
The amount of Rs. 74,810.38 deposited with the
executing Court by Visakhapatnam Port Trust
pursuant to the order dated 27th September,
2004 of this Court shall be refunded to them
alongwith interest accrued thereon.
(2) The judgment of the High Court in CMA No.
77/1995 is affirmed. The amount of Rs. 6,44,500/-
deposited by Visakhapatnam Port Trust with the
executing Court pursuant to the order of this Court
dated 27th September, 2004 shall be paid to M/s
Continental Construction Company alongwith
interest accrued thereon.
(3) The parties shall bear their own costs.
................................J.
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(MARKANDEY KATJU)
.................................J.
(R.M. LODHA)
New Delhi
February 20, 2009.