P. C. ANAND v. REGIONAL ENGINEERING COLLEGE SOCIETY
1998-09-08
KAMALESH SHARMA
body1998
DigiLaw.ai
JUDGMENT Kamlesh Sharma, J. - The above Arbitration Petitions and C.M.Ps. are being disposed of by a common judgment as these involve common questions of fact and law and between the same parties. These petitions have been filed by the petitioner-claimant under sub-section (6) of Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter called the 'Act') with the prayer that an Arbitrator may be appointed to adjudicate upon the disputes between the parties as detailed therein. 2. It is not in dispute that the parties had entered into three separate agreements whereby the following construction works were allotted to the petitioner-claimant : (i) Workshop Block for Regional Engineering College, Hamirpur. (ii) Construction of 12 Assistant Professors Type IVA Block residences. (iii) Construction of 12 Assistant Professors Type IVB Block residences. It is also not in dispute that Clause 25 of each of the agreements pertains to arbitration. It is : "Clause 25 - Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions hereinbefore mentioned and as to quality of workmanship or materials used on the work or as to any other question claim, right, matter or thing whatsoever, in any way arising out of or relating to the contract, designs, drawings, specifications estimates, instructions, orders or these conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the REC, Society. It will be no objection to any such appointment that the Arbitrator so appointed is a Society servant, that he had to deal with the matter to which the contract relates and that in the course of his duties as Society servant he had expressed views on all or any of the matters in dispute or difference. The Arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason the Principal, REC Society at the time of such transfer vacation of office or inability to act, shall appoint another person to act as Arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with reference from the stage at which it was left by his predecessor.
Such person shall be entitled to proceed with reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by Principal, REC Society should act as Arbitrator and if for any reason, that is not possible, the matter is not to be referred to arbitration at all. In all cases where the amount of the claim in dispute is Rs. 50,000/- (rupees fifty thousand) and above the Arbitrator shall give reasons for the award. Subject as aforesaid the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause. It is also term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claim in respondent of each such dispute. It is also a term of the contract that if contractor(s) do/does not make any demand for arbitration in respect of any claim(s) in writing within 90 days of receiving the intimation from the Society that the bill is ready for payment, the claim of the contractor(s) will be deemed to have been waived and absolutely barred and the Society shall be discharged and released of all liabilities under the contract in respect of these claims. The decision, of Principal/Superintending Engineer, regarding the quantum of reduction as well as justification thereof in respect of rates for sub-standard work which may be decided to be accepted, will be final would not be open to arbitration, The Arbitrator(s) may from time to time with the consent of the parties enhance the time for making and publishing the award." 3. In reply to these petitions the respondents have taken three preliminary objections.
In reply to these petitions the respondents have taken three preliminary objections. One of these preliminary objections is that the present application is not maintainable being time barred in view of the specific stipulation in the arbitration agreement that if the contractor does not make any demand for arbitration in respect of any claim in writing within 90 days of receiving the intimation from the Society that the bill is ready for payment, the claim of the contractor will be deemed to have been waived and absolutely barred and the society shall be discharged and released of all liability under the contract in respect of these claims in para 1 of the reply on merits specific dates have also been given when the intimation that the final bills were ready for payments in each contract, which are subject matter of these petitions, was given to the petitioner-claimant to show that his claim is miserably time barred. 4. Instead of filing rejoinder to the reply the petitioner-claimant has moved an application under sub-clause (3) of Section 43 of the Act in each arbitration petition for extending the time fixed in the agreement for referring the disputes to arbitration, stating : "(2) That though the final bill for the work was paid to the claimant and he had also signed the same, he did not have a copy of the same and as such was not very certain about the exact extent to which he had been paid for the various items for work and as such he could not prefer his claims within the period of 90 days as fixed by the agreement. (3) That the claimant had preferred his claims and sought reference of the disputes to arbitration at the earliest after coming to know the details of the payments made to him in the final bill and it is submitted that the claimant shall suffer undue hardship in the event of the reference to arbitration is declined only on the ground of the request for the appointment having been made after 90 days of the payment of the final bill. (4) That the claims as preferred by the claimant are otherwise within the period of limitation as prescribed by the Limitation Act, 1963.
(4) That the claims as preferred by the claimant are otherwise within the period of limitation as prescribed by the Limitation Act, 1963. It is submitted that being an institution of the State the respondent may also not be permitted to take the technical plea of the application being not maintainable on the grounds of it having been preferred after the period of 90 days of receipt of the final bill." 5. In reply to the application the respondents have taken the preliminary objection that no cause whatsoever has been shown for extending the time fixed by the agreement for referring the dispute to arbitration. The details of payment of final bill of each of the works given by the respondents and the correspondence annexed to their reply show that the final bills for the works : Construction of Workshop Block and Construction of 12 Nos. Assistant Professors Type-IVA Block, were passed and adjusted in September, 1994 and balance and adjusted in September, 1994 and balance security amounts were paid in March, 1995, whereas, the final bill for the work : Construction of 12 Nos. Assistant Professors Type-IVB residences as passed and adjusted in 1995. Thereafter, the petitioner-claimant had asked for the details of total amount payable as per final bill and that of recovery by his letter dated 5-7-1995 (Annexure R2 to the reply to each application), which were supplied by letter dated 11-7-1995 (Annexure R3 to the reply to the each application), whereas the demand for arbitration was made on 24-7-1996 by giving legal notice (Annexures A to B each Arbitration Petition). From these facts it is established that demand for arbitration was not made within 90 days of receiving the intimation from the respondents that final bills were ready for payments in the contracts in question. 6. In this backdrop the question arises whether in the circumstances on record undue hardship would be caused to the petitioner-claimant if the time fixed by the agreement for referring the dispute to arbitration is not extended, as provided under sub-section (3) of Section 43 of the Act Section 43 of the Act is : "43. Limitations - (1) The Limitation Act, 1963 (36 of 1963), shall apply to arbitrations as it applies to proceedings in Court.
Limitations - (1) The Limitation Act, 1963 (36 of 1963), shall apply to arbitrations as it applies to proceedings in Court. (2) For the purposes of this section and the Limitation Act, 1963 (36 of 1963), an arbitration shall be deemed to have commenced on the date referred in Section 21. (3) Where an arbitration agreement to submit future disputes to arbitration provides that any claim to which the agreement applies shall be barred unless some step to commence arbitral proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the Court, if it is of opinion that in the circumstances of the case undue hardship could 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. (4) Where the Court orders that an arbitral award be set aside, 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 by the Limitation Act, 1963 (36 of 1963), for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted." 7. Sub-section (3) of Section 43 of the Act is pari materia to sub-section (4) of Section 37 of the Arbitration Act, 1940, which is pari materia to Section 16(6) of the English Arbitration Act, 1934, which is practically the same as Section 27 of the English Arbitration Act, 1950. Therefore, the Supreme Court in Sterling General Insurance Company Limited v. Planters Airways Private Limited (AIR 1975 SC 415), held that interpretation placed by English Courts upon Section 16(6) and Section 27 of the respective Acts has great persuasive value. Referring to the interpretation given towards 'undue hardship' in Steamship Company of 1912 v. Anglo-American Grain Company ((1958) 2 Lloyd's Rep. 341), Watney Combe Read and Company v. Dower and Company Limited ((1956) 2 Lloyd's Rep. 129), F. E. Hookway and Company Limited v. H. W. Hooper and Company ((1950) 2 All ER 842), Stanhope Stemship Company Limited v. British Phosphote Commrs. ((1956) 2 Lloyd's Rep. 325), and Liberian Shipping etc.
341), Watney Combe Read and Company v. Dower and Company Limited ((1956) 2 Lloyd's Rep. 129), F. E. Hookway and Company Limited v. H. W. Hooper and Company ((1950) 2 All ER 842), Stanhope Stemship Company Limited v. British Phosphote Commrs. ((1956) 2 Lloyd's Rep. 325), and Liberian Shipping etc. v. A. King and Sons ((1967) 1 All ER 934), the learned Judges have concluded that they will have to take a liberal view of the meaning of these words. They also held that 'undue' must mean something which is not merited by the conduct of the claimant, or is very much disproportionate to it. In the facts and circumstances of the case before them the learned Judges found the conduct of the claimant reasonable and both the amounts at stake and the reasons for delay, such as to cause undue hardship to the claimant if time was not extended. They were also of the view that no material prejudice would be cause to the other side by extending the time. The material observations of the learned Judges are found in the end of paragraph 18 : "..... There would be undue hardship if time is not extended as the consequences of non-extension would in any event be excessive and out of proportion to the fault of the respondent, if any, in not being prompt. We do not say that the mere fact that a claim would be barred would be undue hardship. But considering the amount involved and the reasons for the delay, we think it would be undue hardship to the respondent if time is not extended." 8. Reference to the observations made by Denning J.L. in F. E. Hookway and Company Limited v. H. W. Hooper and Company (supra), will further make it clear that the extent of delay is relevant circumstance to be considered that if the delay is not on account of the fault of the buyer it would no doubt be an undue hardship on him to hold the clause against him, but if the delay is his own fault, the hardship may not be undue, as it may be a hardship which it is due and proper that the should bear.
It was further stated that another relevant circumstance was whether there was any evidence of any loss on any sub-contracts and claims by sub-buyers or any complaints by them and if there was evidence of such loss or claims, then the Court would take a lenient view of the delay and hold that, notwithstanding, it there was undue hardship on buyer. In the said case Denning L.J. was dealing with the application of the buyers for extension of time under Section 16(6) of the English Act of 1934. 9. Applying the principles laid down by the Supreme Court in Sterling General Insurance Company Limited v. Planters Airways Private Limited (supra), to the facts and circumstances of the petitions in hand, this Court is of the view that no undue hardship will be caused to the petitioner if time is not extended as prayed for by him. Admittedly, on receipt of the final bills of the three contracts in September, 1994 the petitioner had asked for the details of the total amount payable to him as per final bills and that of recovery made by the respondents by his letter dated 5-7-1995, which information was supplied to him by letter dated 11-7-1995, whereas, the demand for arbitration was made on 24-7-1996 by giving legal notice. Therefore, assuming the limitation started from the date the petitioner received details of total amounts payable as per the final bills and that of recovery in July, 1995, the limitation of 90 days expired by the end of October, 1995, whereas, the demand for arbitration was made in July, 1996. Therefore, after receiving the details of total amount payable as per final bills and that of recovery made by the respondents in July, 1995 the petitioner had no reason to wait upto July, 1996 to make demand for arbitration and he himself was responsible for delay and cannot claim that 'undue hardship' will be caused if it is not condoned. On the other hand, the respondents had been prompt in supplying the details by their letter dated 11-7-1995 in response to letter dated 5-7-1995 of the petitioner. In the words of Denning L.J. if the delay is due to his own fault, the hardship may be due and proper which the claimant should bear because he may only have himself to thank for it.
In the words of Denning L.J. if the delay is due to his own fault, the hardship may be due and proper which the claimant should bear because he may only have himself to thank for it. No doubt the amount of the claims of the petitioner is substantial, which would have been a consideration to hold that there would be undue hardship to the petitioner had he not been at fault or consequences of non-extension been excessive and cut of proportion to his fault. 10. Relying upon the judgment of Supreme Court in The Madras Port Trust v. Hymanshu International by its Proprietor v. Venkatadri (dead) by LRs. (AIR 1979 SC 1144), learned Counsel for the petitioner has urged that public authorities like respondent No. 1 should not take up the plea of limitation for defeating the legitimate claim of the petitioner. The ratio of this judgment does not apply to the facts and circumstances of the petitions in hand for the obvious reasons that the claim of the petitioner is disputed and the limitation was prescribed by mutual agreement between the parties, the purpose of which cannot be defeated by the claimant by causing willful, intentional and undue long delay, during which period the evidence for and against the alleged claim might have been destroyed and there might be sea-change in the relevant considerations. 11. The result of above discussion is that there is not merit in the applications under sub-section (3) of Section 43 of the Act and these are rejected, as a consequence of which the petitions under sub-section (6) of Section 11 of the Act for the appointment of Arbitrator, are dismissed as not maintainable, being time-barred, in view of the terms of the arbitration agreement. There is no order as to costs. Petition dismissed.