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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
DR.S. RADHAKRISHNAN & ANOOP V. MOHTA, JJ.
Maharashtra Industrial Development Corporation Ltd.—Petitioner
Vs.
Govardhani Construction Company — Respondent
Mr. C.J. Sawant, Senior Advocate with Mr. P.P. Chavan and Mr. Kiran Gandhi i/b. M/s. Little & Co. for the Appellants.
Appeal No.903 of 2006 In Arbitration Petition No. 159 of 2006
ON: 27th February,2008
Arbitration and Conciliation Act, 1996 - Section 23 (3)-Amendment-Grant of by Arbitrator-Case of patent illegality or perversity made out-Amendment affecting rights-Goes to root of matter-Order granting amendment as well as resulting order or Award together arising out of said amendment can be challenged by aggrieved party-Interlocutory order of the Arbitrator including an order granting amendment cannot be challenged in the Court either immediately or under Section 34 as submitted by the learned Counsel for the Respondent for the above reason is unacceptable. Under the Arbitration Act against the grant of amendment of such nature there is no specific remedy provided. The Arbitrator after grant of such amendment immediately proceeded with the main matter and passed the Award. The parties therefore cannot be rendered remedy less. If case is made out of patent illegality or perversity and as such amendment affects the rights and/or goes to the root of the matter, the aggrieved party has a right to challenge the said order or grant of amendment as well as the resulting order or Award together arising out of the said amendment. Therefore the appellant, in our view, is entitled to raise all the grounds surrounding and relief to the grant of amendment as well full or part of Award arising out of the same.
Arbitration and Conciliation Act, 1996 - Section 34-Limitation Act, 1963, Section 5-Appeal-Limitation for-Point of claim barred by limitation not raised before Arbitrator-It deemed to be waived-Cannot be raised in appeal filed under Section 34 of A & C Act for first time.-If the point of the claims being barred by limitation was not raised before the learned Arbitrator, it would be deemed to have been waived and it could not be raised for the first time in the proceedings under Section 34. Therefore, there is no question now allowing to raise such grounds in appeal arising out of the order based on Section 34 petition.
Limitation Act, 1963 - Section 3-Limitation-Court’s duty-Arbitration claim by correspondence made within period of limitation-Order of rejection, not intimated-Arbitration invoked immediately after communication of order of rejection-Court appointed arbitrator in application under Section 11 of Arbitration Act-Defence of limitation taken out tenable.-The letters were also addressed to the Additional Chief Engineer of Nagpur of MIDC though not to the appellant-MIDC or the Chief Executive Officer of MIDC. The respondents addressed the above letter as the MIDC had not settled the claim and requested the Additional Chief Engineer to have the disputes resolved and thereby invoked the provisions of Arbitration Clause No. 21 of the Contract. This according to us, is a request to the MIDC to refer the matter for arbitration within limitation. This fact is further endorsed as the Executive Engineer of MIDC by its letter dated 9th June 1998 requested the respondents to remain present at a meeting with the Additional Chief Engineer in his office on 15th June, 1998 to discuss the claims made therein. Subsequently, the appellant themselves questioned the authority of the Additional Chief Engineer to decide the dispute by a communication dated 21.11.2003. The appellants and the respondents had agreed for termination of mandate and for appointment of neutral Arbitrator. Thereafter by letter dated 4th December, 2003 the respondents addressed a letter to the Executive Officer of MIDC and requested for appointment of Arbitrator. The respondents bound to await the decision or at least such communication and therefore lastly by letter dated 4th December, 2003 addressed to the Executive Officer of MIDC and requested for appointed of Arbitrator. In such type of commercial contract it is difficult to accept that the party after completion of the work would not lodge claim within limitation. The earlier correspondence itself shows that they lodged the claims within limitation. There is nothing on record to show that there was any communication addressed to the respondent rejecting their claims.
Furthermore, both the parties in pursuance to the order passed by this Court under Section 11 of the Arbitration Act agreed to appoint a neutral Arbitrator. Having once accepted the said position and the order of appointment of Arbitrator, there is no question of raising the ground of limitation. There was no such specific contention raised by the appellants before the Court at the time of appointment of the neutral Arbitrator.
Limitation Act, 1963 - Sections 3 and 5-Limitation-Starting point of-A mixed question of law and fact-Defence of limitation-Required to be raised before Arbitrator-Defence raised in appeal for first time-Cannot be considered.-The point of limitation is a mixed question of law and fact, specifically in the present case. Therefore, the parties ought to have agitated the same before the Arbitrator in detail. The appellants had not pressed the point of limitation expect with regard to Clause 15(B) as referred above.
Limitation Act, 1963 - Section 3 - Limitation - Court’s duty - Arbitration claim by correspondence made within period of limitation - Order of rejection, not intimated - Arbitration invoked immediately after communication of order of rejection - Court appointed arbitrator in application under Section 11 of Arbitration Act - Defence of limitation taken out tenable. - The letters were also addressed to the Additional Chief Engineer of Nagpur of MIDC though not to the appellant-MIDC or the Chief Executive Officer of MIDC. The respondents addressed the above letter as the MIDC had not settled the claim and requested the Additional Chief Engineer to have the disputes resolved and thereby invoked the provisions of Arbitration Clause No. 21 of the Contract. This according to us, is a request to the MIDC to refer the matter for arbitration within limitation. This fact is further endorsed as the Executive Engineer of MIDC by its letter dated 9th June 1998 requested the respondents to remain present at a meeting with the Additional Chief Engineer in his office on 15th June, 1998 to discuss the claims made therein. Subsequently, the appellant themselves questioned the authority of the Additional Chief Engineer to decide the dispute by a communication dated 21.11.2003. The appellants and the respondents had agreed for termination of mandate and for appointment of neutral Arbitrator. Thereafter by letter dated 4th December, 2003 the respondents addressed a letter to the Executive Officer of MIDC and requested for appointment of Arbitrator. The respondents bound to await the decision or at least such communication and therefore lastly by letter dated 4th December, 2003 addressed to the Executive Officer of MIDC and requested for appointed of Arbitrator. In such type of commercial contract it is difficult to accept that the party after completion of the work would not lodge claim within limitation. The earlier correspondence itself shows that they lodged the claims within limitation. There is nothing on record to show that there was any communication addressed to the respondent rejecting their claims.
Certainly. Based on the provided legal document, here are the key points summarized:
The dispute pertains to arbitration proceedings initiated by the Respondent against the Petitioner, relating to claims for additional work, damages, and delays in a construction contract. The arbitration process involved amendments to claims and pleadings, which were permitted by the Arbitrator and subsequently upheld by the court (!) (!) .
The core issue includes whether certain claims were barred by limitation under the contractual clause requiring claims to be submitted within one month of cause arising. The Arbitrator and the court examined whether the claims were made within the stipulated period, considering correspondence and conduct of the parties, including acceptance, acknowledgment, and conduct indicating acknowledgment of claims within limitation (!) (!) (!) .
The interpretation and application of contractual clauses, particularly regarding the limitation period and the scope of claims, were within the purview of the Arbitrator. The courts generally deferred to the Arbitrator’s interpretation unless patent illegality or perversity was established (!) (!) .
The issue of amendment of pleadings and claims during arbitration was addressed, with the Arbitrator permitting amendments even after the close of evidence, based on the provisions of the Arbitration Act. The court held that such amendments, if made within the jurisdiction and without patent illegality, are valid and cannot be challenged in proceedings under Section 34 unless there is a patent illegality affecting rights (!) (!) .
The procedural aspect regarding the challenge to interlocutory orders, including amendments, was clarified. The courts emphasized that such orders, made during arbitration, are generally not subject to challenge under Section 34 unless they involve patent illegality or go to the root of the matter (!) (!) .
The issue of limitation was considered a mixed question of law and fact, which should have been raised before the Arbitrator. Failure to do so results in waiver, and such grounds cannot be raised for the first time in an appeal under Section 34. The courts reiterated that claims made within the contractual limitation period are valid unless explicitly rejected or barred by clear communication (!) (!) .
The courts recognized that correspondence and conduct of the parties, including acceptance of claims and discussions regarding settlement, indicate that claims were made within the limitation period. The delay in rejecting claims or communicating rejection did not amount to abandonment or waiver of the right to claim within limitation (!) (!) .
The interpretation of contractual clauses, particularly those relating to the scope of claims and limitation periods, was within the jurisdiction of the Arbitrator. The courts upheld the Arbitrator’s reasoning and the subsequent awards, affirming that unless there is a patent illegality, their decisions should not be disturbed (!) .
The issue of interest rates was also addressed, with the courts reducing the rate of interest awarded by the Arbitrator from a higher rate to a statutory rate, reflecting current legal standards for such construction disputes (!) .
Overall, the courts emphasized the importance of adherence to contractual arbitration clauses, procedural compliance during arbitration, and the principle that questions of interpretation and limitation are primarily for the Arbitrator, barring patent illegality or perversity. The final awards and orders were upheld, with modifications to interest rates, and the appeal was disposed of accordingly (!) (!) (!) .
Would you like a detailed legal analysis or specific advice based on these points?
Being aggrieved by an order of rejection of the Arbitration Petition, passed by the learned Single Judge dated 20.09.2006 and confirming the Award dated 7.12.2005 passed by the learned Arbitrator in the matter of disputes between the parties regarding construction of Runaway of WEB at Yavatmal, the Appellant (original Petitioner) has filed this Appeal.
2. On 27.10.1993 the Appellant (Maharashtra Industrial Development Corporation Ltd., for short, "MIDC") floated tender for Construction of Air Strip of 1372 meters x 30.5 meters at Yavatmal. The estimated cost of the same was Rs.1,59,26,027/- and time for completion of the work was 11 months.
3. On 21.12.1993 the Appellant by letter addressed to the Respondent accepted the Respondent’s tender and allotted said work to Respondent. The letter also required the Respondent to provide to Appellant bank guarantee in sum of Rs.3,18,600/-.
4. Thereafter the Respondent and the Appellant entered into and executed contract bearing No.B-1/12 for 93-94 in respect of said work.
5. The Appellant by letter dated 27.12.1993 addressed to the Respondent issued work order in respect of said work. On 27.12.1993 the Appellant accepted the Tender of the Respondent at 5% below the estimated cost of Rs.1,59,26,027/-.
6. On 29.11.1994 the Appellant decided to extent the Air Strip from 1372 meters 30.50 meters to 2100 meters 45 meters with modification in the appron and some allied work and therefore enquire with the Respondent’s as to whether the Respondent were willing to take up the said work under the existing Agreement.
7. The Respondent by letter dated 02.12.1994 addressed to the Appellant, accepted the proposal to construct the additional length of Runway as aforesaid.
8. Stipulated date of completion of the eleven months of contract period was 26.11.1994. The Appellant by letter dated 1.2.1995 addressed to the Respondent granted extension of the contract period by 12 months, i.e. upto 26.11.1995.
9. During execution of work large quantities of hard and soft rock were excavated. The Appellant verbally instructed the Respondent to stack the excavated stones on the Runway. Accordingly the excavated stones were stacked on Runway for purpose of taking measurements. After the measurements were taken, the Appellant instructed the Respondent to convey the stacked stones to a nearby field in Bhari village. However, the concerned farmer objected to the unloading by the Respondent of excavated stones and requested the Respondent to shift them from his land. When this was brought to notice of the Appellant, verbal instructions were issued from the Appellant to the Respondent to re-convey the excavated material from aforesaid field to boundary of Runway and dump it along the entire boundary, and the Respondent accordingly reconveyed the entire excavated material.
10. Whilst excavation for construction of additional length of runway (1372 mtrs to 2100 mtrs) was in progress, the Appellant by letter dated 03.08.1995 addressed to the Respondent, instructed the Respondent to complete the excavation upto 2100 mtrs but to limit the construction of WBM Standard runway to the size of only 1372 mtr. x 30.5 mts. By that time, the Respondent had nearly completed conversion of excavated stones into stone metal for construction of runway in the extended length 1372 mtrs to 2100 mtrs. The instructions of the Appellants to the Respondent, prevented the Respondent from using the stone metal which had been prepared for construction for the WBM layers, in the extended length. Thus, the additional work of extension of Runway from 1372 m upto 2100m remained incomplete. On 3.8.1995 the Superintendent Engineer Circle Office, MIDC, Amravati of the Appellant directed the Respondent to restrict the scope of the work to the extent stated in the said letter.
11. In November 1995, a team of experts from National Airport Authority of India (hereinafter briefly called "NAAI") visited the work site, and suggested to the Appellant an
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