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2023 Supreme(Del) 1997

IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, Amit Mahajan, JJ.
Kidde India Ltd. – Appellant
Versus
National Thermal Power Corpn. Ltd. – Respondent
FAO(OS)(COMM) 361 of 2019
Decided On : 07-02-2023

Advocates appeared:
Mr. Chandan Kumar with Ms. Kirti Atri, Advocates, for the Petitioner.
Mr Puneet Taneja, Ms Laxmi Kumari and Mr Manmohan Singh Narula, Advocates, for the Respondent.

Headnote:

Limitation - Arbitration - Arbitration Act, 1940, Arbitration and Conciliation Act, 1996 - Section 37(1), Section 37(3), Section 21 - The court held that the claims made by the Contractor were not barred by limitation as the notice invoking arbitration was not received by NTPC on 09.12.1989. The court also emphasized that the period of limitation for filing a petition seeking appointment of an arbitrator cannot be confused with the period of limitation applicable to the substantive claims relating to the underlying commercial contract. The court further clarified that negotiations, if any, after 09.12.1989 or letters sent by the Contractor after 09.12.1989, would not defer the accrual of cause of action.

Fact of the Case:

The predecessor-in-interest of the appellant submitted a bid for the installation of fire protection systems. Disputes arose between the parties, and the Contractor invoked the arbitration clause. NTPC objected to the arbitral award on the ground that the claims raised by the Contractor were barred by limitation.

Finding of the Court:

The court found that the claims made by the Contractor were not barred by limitation as the notice invoking arbitration was not received by NTPC on 09.12.1989. The court also emphasized that negotiations or letters sent after 09.12.1989 would not defer the accrual of cause of action.

Issues: The issues involved the determination of whether the claims made by the Contractor were barred by limitation and whether the impugned award was vitiated by patent illegality.

Ratio Decidendi: The court clarified that the period of limitation for filing a petition seeking appointment of an arbitrator cannot be confused with the period of limitation applicable to the substantive claims relating to the underlying commercial contract. The court also emphasized that negotiations or letters sent after 09.12.1989 would not defer the accrual of cause of action.

Final Decision: The court dismissed the appeal, holding that the claims made by the Contractor were not barred by limitation.

JUDGMENT

Vibhu Bakhru, J. The appellant (Kidde India Ltd.) has filed the present appeal impugning an order dated 12.03.2019 (hereafter `the impugned order') passed by the learned Single Judge in CS(OS) 549/2009 captioned "Kidde India v. NTPC". The impugned order sets aside an arbitral award dated 09.12.2008 (hereafter `the impugned award') on the ground that the claims made by the appellant in the arbitral proceedings are barred by limitation.

2. The limited question that falls for consideration of this court is whether the impugned award is vitiated by patent illegality.

Factual Context

3. The predecessor-in-interest of the appellant, one M/s Vijay Machinery Store, submitted its bid for the work of installation of fire protection systems against prescribed specifications for the Ramagundum, Super Thermal Power Project, Stage I (hereafter `the Project). Thereafter, on 18.02.1982, the respondent (hereafter `NTPC') issued a Telex of Award in favour of the predecessor. This was followed by the NTPC issuing a detailed Work Order dated 24.03.1982 (hereafter `the Contract') in favour of the predecessor. The firm M/s Vijay Machinery Store was succeeded by Vijay Fire Protection Private Ltd. Subsequently, the name of the said company was changed to Vijay Fire Protection Systems Limited and thereafter to Vijay Industries and Projects Limited and Kidde India Ltd. (the appellant herein). The firms or appellant are hereafter referred to as the Contractor.

4. After the work was executed, on 04.08.1986, NTPC took over the above-mentioned systems, albeit on a provisional basis. Thereafter, the Contractor raised bills for extra work claimed to have been done by it; however, the same were denied by NTPC. On 06.03.1989, the Contractor raised its Final Bill, relying on various communications exchanged between the parties. Disputes arose between NTPC and the Contractor, and the Contractor issued a letter dated 09.12.1989, invoking the arbitration clause under the Contract and proceeded to appoint its nominee arbitrator. In terms of the said letter, the Contractor also called upon NTPC to nominate its arbitrator.

5. NTPC did not respond to the said letter. One of the principal controversies that arises is whether NTPC had received the said letter. The pleadings of the parties in this regard vary. However, the Contractor claims that NTPC and the Contractor entered into negotiations to settle the claims but the same remained unresolved. Consequently, the Contractor issued another notice dated 10.05.1994, requesting the respondent to nominate its arbitrator. However, the Contractor, in its letter dated 10.05.1994, clarified that it treated the letter dated 09.12.1989 as the first invocation of the arbitration agreement and that it was only reiterating that an arbitral tribunal be constituted for adjudicating its claims. NTPC claims that it did not receive the letter dated 09.12.1989.

6. NTPC did not take any steps to refer the disputes to arbitration. Consequently, the Contractor approached the Institute of Engineers for the appointment of an arbitrator as NTPC's nominee, and the chairman of the Arbitral Tribunal. On 02.06.1995, the Institute of Engineers appointed an arbitrator as NTPC's nominee, as well as the presiding arbitrator.

7. The first hearing of the Arbitral Tribunal as constituted was held on 29.07.1995, however, NTPC did not participate.

8. On 02.09.1995, NTPC filed a suit [being CS(OS) 2065A/1996] impugning the appointment of the Contractor's nominee arbitrator. The proceedings before the Arbitral Tribunal were stayed by this Court. Thereafter, by an order dated 07.03.2003, the suit was disposed of after the arbitrator in question resigned.

9. The Contractor appointed its nominee arbitrator in the year of 2003 to fill the vacancy caused by the resignation of the arbitrator appointed earlier. Thereafter, in the year 2004, the Institute of Engineers re-appointed the presiding arbitrator to fill up the vacancy arising due to the demi

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