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2025 Supreme(Telangana) 111
IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
K. LAKSHMAN, J.
CH. Punyamurthy - Appellant
Versus
Union of India - Respondent
Arbitration Application No.180 Of 2024
Decided On : 09-06-2025
Advocate Appeared:
For the Appellant : J SRINADH REDDY
For the Respondent: K MOHAN
The arbitration request was timely, and the contract termination was illegal; hence, an arbitrator was appointed to resolve disputes.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 11(5) and 11(6) - Application for appointment of an arbitrator - Applicant awarded contract subsequently terminated by respondents citing slow progress - Court found termination illegal as agreement expired before termination and arbitration clause enforceable - Requests for arbitration timely. (Paras 3, 6, 7)
(B) Limitation in arbitration - Time spent in pre-arbitration negotiations excluded from limitation calculations as per Apex Court rulings. (Para 6ii)
(C) Mismanagement of contract execution by respondents and delays not attributable to applicant, to be considered by Arbitrator. (Paras 6ix, 6x)
Facts of the case:
The applicant, having won a contract for S&T works with the total value of Rs.59,11,058/-, faced delays due to incomplete engineering work, leading to wrongful termination after the contract expired. The applicant sought arbitration amidst ignored requests for compensation for losses.
Findings of Court:
Court finds the claim valid and within the limitation period, disputes are arbitrable, and appoints a retired judge as Arbitrator.
Issues: Whether the termination of the contract was valid and whether the arbitration request was timely.
Ratio Decidendi: Court ruled that the arbitration clause remains valid, and prior delays in requesting arbitration were due to the respondents' inaction. Claims not ex-facie time-barred, disputes capable of resolution through arbitration.
Result: Application allowed, arbitrator appointed.
| Table of Content |
|---|
| 1. contract execution and delays due to mismanagement. (Para 2 , 3) |
| 2. claims for illegal termination and compensation. (Para 4) |
| 3. respondents' argument on time-barred claims. (Para 5) |
| 4. court's findings on arbitration and limitation. (Para 6) |
| 5. appointment of arbitrator and conclusion. (Para 7) |
ORDER :
K. LAKSHMAN, J.
Heard Mr. J. Srinadh Reddy, learned counsel for the applicant and Mr. K. Mohan, learned counsel for the respondents.
2. This application is filed under Section - 11 (5) & (6) of the Arbitration and Conciliation Act, 1996 (for short ‘Act, 1996’), to appoint a sole Arbitrator to adjudicate the disputes/claims between the applicant and the respondents.
3. CASE OF THE APPLICANT
i) The applicant had participated in a tender issued by the Signal and Telecommunications (S&T) Department of the South- Central Railway for the execution of certain works under Tender Notice No.GNT/SG/2012-13/TTR-NLPD-NDL/17-19 dated 22.06.2012. Upon being declared the successful bidder, the contract was awarded vide Letter of Acceptance (LOA) No. GNT/SG/2012- 13/TTR-NLPD-NDL/19(la) dated 11.12.2012 for a total contract value of Rs.59,11,058/-, with a completion period of six months, ending on 10.06.2013.
ii) The contract work was interdependent on the track renewal work being carried out by the Engineering Department of the respondent. The applicant contends that the S&T authorities mismanaged the scheduling of the contract, inviting tenders prematurely before the engineering work was completed, which resulted in substantial delays.
iii) The applicant was unable to commence the work due to pending track renewal. Despite notifying the authorities in 2012, the agreement execution was delayed until 10.04.2015. Meanwhile, the applicant continued to extend the performance guarantee.
iv) The respondents issued several notices of slow progress despite the applicant’s inability to proceed due to the respondents’ failure to provide a work-front. Eventually, a termination notice was issued on 04.01.2017, after the contract had already expired on 10.06.2015. The applicant claims that the termination was illegal.
v) The applicant requested arbitration in terms of the contract by sending notices on 30.06.2017, 10.05.2022, and 29.06.2022. However, the respondents rejected the request, leading to filing the present petition for appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.
4. CONTENTIONS OF THE APPLICANT
i) The applicant contends that the termination of the contract is illegal as the agreement had already expired on 10.06.2015. The subsequent notices of slow progress, 7-day notice, and 48-hour notice were all issued without legal validity.
ii) The applicant is entitled to a refund of the Earnest Money Deposit (EMD) and the performance guarantee since the contract was terminated without fault on his part.
iii) The applicant incurred significant expenses towards office maintenance, salaries, advances to suppliers and labor, and other costs due to the respondents' mismanagement, which should be reimbursed.
iv) A legitimate loss of profit amounting to 10% of the contract value is sought as compensation for the invalid termination of the contract.
v) Interest at 18% per annum on all claims is sought from the date of termination until the actual payment.
vi) The applicant further contends that the arbitration clause remains enforceable, and the delay in referring the matter to arbitration was due to the respondents' inaction.
5. CONTENTIONS OF THE RESPONDENTS
i) The respondents contend that the petition is time-barred under the contract’s provisions, which require arbitration requests to be submitted within 120 days of termination. The applicant's first request was made on 30.06.2017, 195 days after termination, rendering it invalid.
ii) The respondents further contend that the applicant failed to execute any work despite multiple extensions, including one with liquidated damages imposed. The termination was justified b
