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IN THE HIGH COURT OF CALCUTTA
Sanjib Banerjee, J.
Otis Elevator Co. (India) Ltd. - Petitioner
Versus
Birla Industrial & Technological Meseum (BITM) - Opposite Party
AP No. 389 of 2014
Decided On : 24-03-2014
For the Opposite Party :Mr. Samrat Sen, Mr. Biswabrata Basu Mallick, and Mr. Kallol Basu, Advocates
A claim that is barred by limitation cannot be revived by an acknowledgement of the jural relationship made after the expiry of the limitation period.
Headnote:
LIMITATION ACT, 1963 - ARBITRATION AND CONCILIATION ACT, 1996 - SECTION 21, SECTION 34(2)(B)(II) - AWARD SET ASIDE FOR BEING ERRONEOUS AND OPPOSED TO PUBLIC POLICY DUE TO LIMITATION ISSUES.
Fact of the Case:
The petitioner challenged an arbitral award on the ground of limitation. The dispute arose from a contract between the parties, and the arbitration proceedings commenced in March 1998. The arbitrator rejected the petitioner's challenge to the continuation of the reference under Section 16 of the Arbitration and Conciliation Act, 1996.
Finding of the Court:
The court held that the award was clearly erroneous and in derogation of the Limitation Act, 1963, and, as such, opposed to public policy and susceptible to annulment under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996.
Issues: Whether the claim was barred by limitation.
Ratio Decidendi: The court observed that the award-holder had pointed out to the petitioner in March 1993 that it was entitled to liquidated damages and reserved its right to seek refund on account of the liquidated damages claimed. However, the arbitration proceedings did not commence until March 1998. The court held that the award-holder did not take effective steps to pursue the claim between March 31, 1993, and March 1998, and that the claim could not be revived by the petitioner's acknowledgement in September 1997.
Final Decision: The court allowed the petition and set aside the impugned award and the order dated July 19, 2011, holding that the respondent could not have pursued the claim by invoking the arbitration agreement only in March 1998.
Sanjib Banerjee, J.
The award appears clearly to be erroneous and in derogation of the Limitation Act, 1963; and, as such, opposed to public policy and susceptible to annulment under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996. Despite the respondents insistence on an affidavit being filed, such request has been declined since affidavits may be unnecessary in proceedings for setting aside arbitral awards where, applying the dictum in Mohinder Singh Gill v. Chief Election Commissioner, reported at (1978) 1 SCC 405, the award-holder can scarcely improve on the reasons proffered in the award to sustain the same.
2. The challenge is on the ground of limitation. The dates are not in dispute and appear from the short order passed by the arbitrator rejecting the petitioners challenge to the continuation of the reference under Section 16 of the 1996 Act made at the early stage of the reference. Paragraph 3 of the relevant order must be seen in its entirety:
"On hearing both the parties and examining all the documents placed by them it is observed that there was delay in execution of the work, with respect to the stipulated date of completion on June 21, 1992 as agreed upon. The Claimant served notice upon the Respondent regarding imposition of Liquidated Damages as per contract in January, 1993 when delay was continuing. In reply, in February, 1993 the Respondent admitted the delay and requested to waive the Liquidated Damage. The work was completed on 28th January, 1993. Subject to the Settlement of Liquidated Damage the Claimant paid the bill raised by the Respondent for work executed by them in March, 1993. In March, 1994 the Claimant preferred the claim for Liquidated Damage within a reasonable period and, thereafter, requested and reminded the Respondent time to time to make the payment. The Respondent kept on silence for more than three years showing no interest to make any payment or dispute the claim or refer the matter to the Arbitrator till August, 1997. In September, 1997 the Respondent denied and disputed the claim of the Claimant from where the dispute had arisen as well as right to apply accrued for reference to arbitration proceedings as per Clause 7 of the Contract Agreement. Arbitration was sought for by the Claimant in March, 1998 within valid period from the date when right to apply accrued. On March, 1999 the Learned Arbitrator (of previous arbitration) entered into the reference. A court case for setting aside the award followed thereafter vide A.P.O No.484 of 2006/A.P. No. 54 of 2006 in the High Court at Calcutta. The instant arbitration took place according to the order of the Honble High Court."
3. Even though the third and the fourth dates referred to in the paragraph, January 28, 1993 and March, 1993, appear to be irrelevant for the purpose of reckoning limitation, the award-holder may be given the benefit of the doubt and the later of such dates may be taken for the purpose of ascertaining whether the right to pursue the claim was alive at the time that the arbitration proceedings commenced. The reference in the paragraph to March, 1993 corresponds to a document appearing at page 151 of the papers dated March 31, 1993. The document was the covering letter issued by the award-holder while making the final payment, with the following caveat:
"In the event of any excess payment on final settlement of our liquidated damage claimed, you will be liable to refund the same."
4. Thus, it is evident that prior to or by March, 1993 the award-holder had pointed out to the petitioner herein that the award-holder was entitled to liquidated damages in terms of the contract and at the time of the award-holder making the final payment under cover of the letter dated March 31, 1993, the award-holder reserved its right to seek refund on account of the liquidated damages claimed.
5. It is not in dispute that the arbitration agreement was invoked and the arbitral proceedings commenced, within the meanin
