IMPORT POINT
Section 21 carves out an exception to limitation.

Headnote:(a) Arbitration and Conciliation Act, 1969 – Section 34 – Arbitral claim – Claims made by respondent were denied on many a ground – No inaction or mere denial – Dispute subsisting. (Para 16)
       (1988) 2 SCC 338; (1989) 2 SCC 701 – Distinguished
       (b) Arbitration and Conciliation Act, 1996 – Section 21 – Limitation for filing a counter claim is saved if a respondent against whom a claim has been made had made a claim against the claimant and sought arbitration by serving a notice to the claimant. (Para 24)
       (2012) 12 SCC 581 – Relied upon
       (c) Arbitration and Conciliation Act, 1996 – Section 21 – Limitation for “such counter claim” should be computed as on the “date of service of notice” of “such claim on the claimant” – Not on the date of final counter claim. (Para 26)
       (2012) 12 SCC 581 – Relied upon
       Arb. Petition No. 570 of 2001 decided on 4.12.2001; (2003) 5 SCC 705; (2006) 11 SCC 181 – Referred
       (d) Arbitration and Conciliation Act, 1996 – Section 21 – Limitation – Claim by way of amendment after institution of arbitration proceeding could be cause of action for fresh proceeding – Barred by limitation in instituted proceeding. (Para 29)
       1995 Supp (3) SCC 17; (2008) 14 SCC 632; (2010) 14 SCC 596; (2009) 10 SCC 84 – Relied upon
       (2012) 5 SCC 306 (2012) 5 SCC 306 – Distinguished
       Facts of the case:
       The appellant and respondent entered into a civil construction contract for construction of two buildings known as Rolta Bhawan II (RB-II) and Rolta Bhawan III (RB-II) and also for modification of building Rolta Bhawan I(RB-I) previously constructed by the respondent. As certain disputes arose, on 3.12.2004 the respondent terminated the contract.
       The appellant invoked the arbitration clause in respect of its claims against the respondent. Sole arbitrator was appointed by the High Court.
       The appellant filed its statement of claim and the respondent filed his counter claim.
       The appellant-herein filed its objections about the tenability of the counter claim stating that the same was not maintainable and was also barred by limitation.
       The arbitrator rejected the counter claim of the respondent.
       The Arbitrator, however, overruled the objection with regard to the maintainability of the counter claim being beyond the scope of reference.
       The respondent filed an application under Section 34 of the Act for setting aside the decision of the Arbitrator rejecting the counter claims made by it on the ground of limitation.
       The single Judge held that the opinion expressed by the Arbitrator was not perverse and based on correct appreciation of documents and was resultant of a plausible interpretation and accordingly rejected the application preferred under Section 34 of the Act.
       The Division Bench came to hold that the counter claim was within limitation. The appeal was allowed and as a consequence the rejection of the counter claim by the Arbitrator stood overturned. Rest of the interim award of the Arbitrator was not disturbed.
       Finding of the Court:
       Impugned order cannot be wholly sustained.
       Result: Appeals allowed partly.

JUDGMENT : -

Dipak Misra, J.

Leave granted in both the Special Leave Petitions.

2. Regard being had to the similitude of controversy in both the appeals they were heard together and are disposed of by a common judgment. Be it noted, the Division Bench of the High Court of Judicature at Bombay, by two separate judgments and orders passed on 16.8.2013 in Appeals Nos. 7 of 2013 and 8 of 2013 has set aside the judgment and order dated 1.10.2012 passed by the learned single Judge in Arbitration Petition (L) Nos. 1239 of 2012 and 1240 of 2012 respectively as a consequence of which two interim awards passed by the learned Arbitrator on 26.7.2012 in respect of two contracts between the same parties rejecting the counter claim of the respondent-herein have been annulled. For the sake of clarity and convenience we shall state the facts from Civil Appeal arising out of Special Leave Petition (C) No. 30015 of 2013, for the Division Bench has observed that the Appeal No. 7 of 2013 had emanated from the disputes which arose in respect of civil construction agreement dated 2.2.2001 and in Appeal No. 8 of 2013 the disputes related to agreement dated 8.1.2003 for air-conditioning of the two buildings to be constructed for the appellant therein and no separate submissions were advanced before it and the position was the same before the learned single Judge.

3. The expose’ of facts are that the appellant and respondent entered into a civil construction contract for construction of two buildings known as Rolta Bhawan II (RB-II) and Rolta Bhawan III (RB-II) and also for modification of building Rolta Bhawan I(RB-I) previously constructed by the respondent. As certain disputes arose, on 3.12.2004 the respondent terminated the contract. After certain correspondences between the parties pertaining to the termination of the contract the appellant by letter dated 29.3.2006 invoked the arbitration clause in respect of its claims against the respondent. As the respondent failed to appoint an arbitrator, it filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 (for short “the Act”) before the High Court of Bombay for appointment of arbitrator and the designated Judge vide order dated 19.11.2010 appointed the sole arbitrator.

4. After the controversy came in seisin before the learned Arbitrator, he issued certain directions and, as the facts would unfurl, the appellant filed its statement of claim on 13.4.2011 claiming a sum of Rs.23,31,62,429.77 together with interest at the rate of 15% per annum from the respondent. The respondent, after filing its defence on 24.8.2011, filed the counter claim of Rs.333,73,35,026/- together with interest at the rate of 18% per annum from the date of filing till payment/realization thereof. In the counter claim the respondent justified the termination of the agreement and contended that it was entitled to damages for breach of contract. In the counter claim the notice dated 17.4.2006 sent by the respondent detailing its counter claim to the appellant was referred to.

5. After the counter claim was lodged, the appellant-herein filed its objections about the tenability of the counter claim stating that the same was not maintainable and was also barred by limitation. The learned Arbitrator on 7.1.2012 framed two issues regarding the tenability and limitation of the counter claim as preliminary issues. They are: -

“(i) Whether the counter claim, or a substantial part thereof, is barred by the law of limitation?

(ii) Whether the counter claim is not maintainable and beyond the scope of reference?”

6. After adumbrating to the facts the learned Arbitrator came to hold that the limitation for making a counter claim is required to be asserted with reference to the date on which the cause of action arises and the date on which the counter claim is filed. After so opining the learned Arbitrator recorded as follows: -

“The respondent has been vigilant and assertive of its legal rights right from 3rd December 2004

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2014 Supreme(SC) 109

IMPORT POINTSection 21 carves out an exception to limitation.

Cases Referred (11)

IMPORT POINT
Section 21 carves out an exception to limitation.