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2021 Supreme(Online)(SC) 495
SUPREME COURT
Shri V.R. Krishna Iyer, J
Secunderabad Cantonment Board – Appellant
Versus
M/s Ramachandraiah and Sons – Respondent
Arbitration Application | Section 11
For the Appellants/Petitioners: Shri P.S. Narasimha
For the Respondents: Shri Nithin Chowdary Pavuluri
Limitations for seeking arbitration under Section 11 must adhere to defined periods; failure to act within these confines renders claims time-barred.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 11 - Limitation Act, 1963 - Contractual agreements - An application for the appointment of an arbitrator must be filed within three years from the date on which the cause of action arises - The court found that the Respondent's claim for price variation reimbursement was time-barred as final payments were made by March 2003, with subsequent correspondence failing to extend limitation - As a result, the appointment of an arbitrator was deemed void because the requests fell outside the permissible time frame - The Respondent's claim arose on expiration of time to appoint an arbitrator after the lapse of two months from the initial request and the rejection of subsequent claims did not restart the limitation period. (Paras 12, 20, 21)
(B) Finding the Request for Arbitration - The court emphasized that silence on claims does not extend the limitation period for arbitration requests; mere writing of letters does not delay the commencement of limitation. (Paras 13, 20)
(C) Ex Facie Time-Barred Claims - Claims must be brought forward before limitations expire, and a final rejection of claims does not renew the limitation clock, referencing recent precedents on arbitration delays and boundaries. (Paras 19, 20)
Facts of the case:
The appeals arose from a dispute regarding three contracts for road repairs between the Secunderabad Cantonment Board and a contractor. Disputes emerged over price variation claims after final payments were made, leading to arbitration requests.
Findings of Court:
The applications under Section 11 of the Arbitration Act were held to be time-barred, confirming the dismissal of claims as the Respondent failed to initiate arbitration within the requisite period.
Issues: Determination of the applicability of limitation regarding requests for arbitrator appointment and the validity of a claim for price variation reimbursements.
Ratio Decidendi: Claims arise from and must be pursued within limited time frames. A failure to appoint an arbitrator does not renew or reset the limitation period. The court set aside the High Court's decision on undue extension of time.
Result: Appeals allowed.
| Table of Content |
|---|
| 1. contractual obligations and execution timeline (Para 2 , 3 , 4 , 5 , 6 , 7 , 8) |
| 2. claims made for reimbursement timelines and responses (Para 9 , 10) |
| 3. scope of arbitration applications and timelines (Para 11 , 12) |
| 4. arguments on limitation periods and causes of action (Para 13 , 14 , 15) |
| 5. judicial review of arbitration requests and limitations (Para 16 , 17 , 18 , 19 , 20 , 21) |
1. Leave granted.
2. These appeals arise out of applications under Section 11 of the Arbitration and Conciliation Act, 1996 ["Arbitration Act"]. On 02.09.2000, the appellant before us, Secunderabad Cantonment Board ["Appellant"], floated a notice inviting tender ["N.I.T."] for an annual term contract for:
1. Repairs to Main Roads (Resurfacing with Centralised with Hot Mix Plant and Paver);
2. Repairs to Main Roads (Widening of Roads with Centralised Hot Mix Plant and Paver);
3. Repairs to Internal Roads (Resurfacing with Hot Mix Paver and Plant).
3. Pursuant to the aforesaid N.I.T., three agreements were entered into with the respondent, M/s Ramachandraiah and Sons ["Respondent"], the first one dated 23.09.2000 and the other two dated 17.09.2001. Clause 5 of each of the aforesaid agreements, which is in identical terms, is important and reads as follows:
"5. Final Bill: The Contractor shall submit his final bill of the work with full and complete measurements showing the deductions on account of part payments received and stores supplied by the Board cost of water and any other items received by him under the contract within 08 days from the date of completion and handing over the work. The contractor shall also submit alongwith his bill a no claim certificate stating that there are no claims from the cantonment board on account of the work undertaken and completed by him under the contract and that no claim thereafter shall be entertainable. The bill shall also contain a statement showing the justification of cement consumed by the Contractor."
4. The arbitration clause contained in Clause 17 of each of the aforesaid agreements reads as follows:
"17. LAW Governing the Contract: The Contract shall be governed by the Indian Law. [A]ll disputes between the parties to this contract or being out of relating to the contract other than those for which the decision of the accepting officer is final and conclusive shall after the written notice given by either party to the other be referred to the sole arbitrator as appointed by the [President Cantonment Board [S]ecunderabad. The award of the Arbitrator shall be final, conclusive and binding on both parties to the contract"
5. Work orders were issued with respect to the aforesaid works. The Appellant argued that the Respondent had failed to complete the work within the stipulated period, but vide its meeting dated 05.10.2002, it resolved to grant an extension of time upto 31.12.2002 on an undertaking from the Respondent that the Appellant would be at liberty to impose penalty as provided in the contracts and as decided by the Appellant in case balance works were not completed by 31.12.2002. On 30.10.2002, the Respondent submitted the required undertaking.
6. It is not disputed that vide the final contract certificates issued by the Appellant on 18.02.2003 and 26.03.2003, final payment was received by the Respondent in respect of the works in question. After a hiatus of about six months, the Respondent then started making demands towards reimbursement on account of variation in prices of material, labour and fuel. These demands were made vide letters dated 08.09.2003, 24.07.2004 and 12.10.2004.
7. After a silence of over two years, the Respondent then issued a letter dated 07.11.2006 by which the Respondent requested for the appointment of an arbitrator in respect of the claim of reimbursement on account of price variation in all the three contracts. It was specifically stated that necessary steps should be taken by the Appellant within 15 days of receipt of the letter. Receiving no reply from the App
