IMPORTANT POINT
A request for arbitration can be made informally, and claims for damages do not crystallize into debts until adjudicated, impacting the rights related to bank guarantees.

JUDGMENT :

R. SUBRAMANIAN, J.

Prayer: Original Side Appeal (CAD) filed under Order XXXVI Rule 1 of the Original Side Rules read with Section 37(1)(b) of the Arbitration and Conciliation Act, 1996 read with Clause 15 of the Letters Patent and Section 13(1A) of Commercial Courts Act 2015, to set aside the Judgment and decreetal order dated 26.07.2022 bearing OP No. 298 of 2022 passed by this Hon'ble Court in its entirety.

1. The instant Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 is against the order of the learned Single Judge made in a proceeding under Section 34 of the Arbitration and Conciliation Act, 1996.

2. The background facts are as follows:

2.1. The Appellant entered into a Bulk Water Purchase Agreement [BWPA] with the respondent which was essentially an agreement for erection of a desalination plant with the capacity 100 MLD (Million litres per day). The scope of the contract included erection and operation of the plant. As a successful tenderer, the respondent was awarded the contract. An agreement came to be entered between the parties on 13.09.2005, it was a DBOOT contract that is a contract to design, build, own, operate and transfer. The said agreement was entered into on 13.09.2005, it was for a period of 25 years. As it has become a practice, there was delay on both sides in completion of the contract, and the appellant sought to levy liquidated damages of Rupees 5 Crores and attempted to encash the Bank Guarantee that was offered by the respondent. This led to the respondent moving this court under Section 9 of the Arbitration and Conciliation Act.

2.2. This Court by an order dated 27.07.2010 restrained the appellant from invoking the Bank Guarantee and directed the respondent to keep the bank guarantee alive till such time the arbitration proceedings are completed. Thereafter on 27.04.2011, the respondent nominated one Mr.R.Nadimuthu, a retired Chief Engineer of the Public Works Department as the Arbitrator and called upon the appellant to name its Arbitrator. The appellant, however, responded after nearly three years on 24.07.2014 calling upon the respondent to initiate Arbitration. Even before the said Communications, the matter was referred to the Dispute Resolution Panel as per the agreement and the said Panel held in favour of the respondent.

2.3. By its letter dated 25.11.2014, the Appellant nominated a retired Judge of this Court as an Arbitrator on its side. The two Arbitrators nominated by the parties namely Hon’ble Mr. Justice K.Chandru and Mr.R.Nadimuthu, nominated Hon’ble Mrs.Justice Prabha Sridevan, a retired Judge of this Court, as the umpire, thus a three Member Arbitration Panel came to be constituted. The Arbitrators entered upon the reference and passed an award on 09.10.2017. The Arbitral Tribunal concluded that the claim of the appellant is barred by limitation. A counter claim was made by the respondent seeking return of the bank guarantee that was provided by it, the Arbitral Tribunal rejected the counter claim also on the ground that it is barred by limitation. Having held so, the Arbitral Tribunal directed the parties to bear their costs.

2.4. Thus, on the conclusion of the Arbitration, both the claim and the counter claim were rejected. The appellant did not challenge the award of the Arbitral Tribunal. The respondent filed an application under Section 34 challenging the award of the Arbitral Tribunal, insofar as it rejected the counter claim. The section 34 Court concluded that the rejection of the counter claim on the ground it is barred by limitation by the Arbitral Tribunal is not correct. The Section 34 Court on facts concluded that the letter dated 27.04.2011 addressed by the respondent herein to the appellant nominating Mr.R.Nadimuthu, as an Arbitrator, would constitute a request for reference of the dispute for Arbitration within the meaning of Section 21 of the Arbitration and Consultation Act, 1996. On the said conclusion, the Section 34 Court held that the