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2021 Supreme(Online)(SC) 1510
SUPREME COURT
Shri Y.V. Ramakrishna, J
Secunderabad Cantonment Board – Appellant
Versus
M/s Ramachandraiah and Sons – Respondent
Application under Section 11 of the Arbitration and Conciliation Act, 1996
For the Appellants/Petitioners: Shri P.S. Narasimha
For the Respondents: Shri Nithin Chowdary Pavuluri
Claims for arbitration must be made within the statutory limitation period, which does not restart with subsequent communications once time has begun to run.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 11 - Limitation Act, 1963 - Claims for reimbursement of price variations in contracts - Appointment of arbitrator - The Respondent’s claims were deemed time-barred as per the timeline established by correspondence regarding the arbitration demand, culminating in the final rejection of the request from Appellant. The court held that the timeline is crucial, beginning from 12.02.2007, and any subsequent demands do not restart this limitation period. The High Court’s judgment was overturned due to this miscalculation. (Paras 10, 20, 21)
(B) Court’s scope of powers - The court should examine only the existence of an arbitration agreement and not delve into the merits of the underlying claims. Unless the dispute is manifestly time-barred or non-arbitrable, the matter should be referred to arbitration. (Paras 19, 20)
Facts of the case:
The appellant issued tenders for road repairs, leading to contracts with the respondent. After work completion, the respondent sought reimbursements for price variations years later, leading to arbitration requests that were denied, claiming they were time-barred.
Findings of Court:
The impugned decision by the High Court which allowed the arbitrator's appointment was overturned, stating that the application was time-barred and no substantive dispute existed to be referred to arbitration. Claims were also ex facie time-barred.
Issues: The primary issues revolved around whether the respondent’s claims were within the limitation period and whether the requests for arbitration had been initiated correctly.
Ratio Decidendi: The established timeline for limitation began with the initial demand in November 2006, not with the later rejection, affirming that any prior claims for reimbursement are legally barred after the stipulated period expires.
Result: Appeals allowed, and the judgment of the High Court set aside.
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 Appellant, the Respondent issued yet another letter dated 13.01.2007, in which it spoke of a fundamental breach of contractual obligations and then stated that it had no option but to rescind the contracts and have an arbitrator appointed within 30 days, in conformity with the arbitration clause provided in the contracts.
8. To this letter, a laconic reply was received from the Appellant on 23.01.2007,
