Trust Vs. M/S. Continental Construction Company  INSC 383 (20 February
JURISDICTION CIVIL APPEAL NO 5849-5850 OF 2002 Visakhapatnam Port Trust ...
Appellant Versus M/s Continental Construction Company ... Respondent
R.M. Lodha, J.
these appeals by special leave arise out of one and the same judgment dated
26th April, 2002 rendered by the High Court of Judicature Andhra Pradesh
whereby it allowed the two appeals being CMA No. 1559/1994 and CMA No. 77/1995.
the sake of convenience, we shall refer the appellant - Visakhapatnam Port
Trust, "VPT" and the respondent - M/s Continental Construction
Company, "the Contractor".
CMA No. 1559/1994 before the High Court, the dispute between the parties was in
respect of refund of an amount of Rs. 2 74,810.38 which was recovered by VPT
from the contractor's running bill no. 21. VPT entered into an agreement with
the contractor on 7th January, 1973 whereunder the contractor was to construct
the ore berth 263 meters long 29.73 meters wide comprising of eight numbers of
18 meters x 27.73 meters long concrete cribs spaced at 35M centres on prepared
foundations and connected by pre-cast pre-stressed deck and R.C.C. slab and
construction of two Mooring Dolphins comprising concrete deck supported on
900mm internal diameter Racker bored piles. For the execution of the said
contract, VPT was to supply various equipments comprising of hydraulic jacks,
hydraulic pumps, steel yoke assembly, jack rods etc. and it appears to be
fairly admitted position that 950 nos. of jack rods were supplied by VPT to the
contractor. Towards cost of 500 jack rods, on 8th August, 1974, from the
contractor's running bill no. 21, an amount of Rs.74,810.38 was recovered by
there was a dispute between VPT and the contractor with regard to return of 950
jack rods valuing Rs. 9,65,155/-, VPT referred to the dispute to arbitration in
the year 1975. The statement of claim was filed by VPT before the arbitrators
on 4th June, 1976. On 23rd March, 1980, the arbitrators rejected the 3 claim
of VPT. The award dated 23rd March, 1980 was challenged by VPT before the Civil
Judge, Visakhapatanam by filing a petition under Sections 30 & 33 of the
Arbitration Act, 1940 (for short, `Act, 1940' ). The Civil Judge,
Visakhapatanam dismissed the said petition on 10th September, 1984.
is pertinent to notice here that until the rejection of claim made by VPT for
Rs. 9,65,155/- towards the cost of 950 jack rods vide award dated 23rd March,
1980, the contractor did not raise any dispute with regard to recovery of Rs.
74,810.38 made by VPT on 8th August, 1974 from the contractor's running bill
no. 21. It was only thereafter, to be specific on 27th March, 1980 that the
contractor called upon VPT to release the sum of Rs. 74,810.38.
Then on 22nd of
September, 1984, the contractor initiated proceedings under the Act, 1940 in
respect of claim of Rs.74,810.38 by appointing its arbitrator and also called
upon VPT to appoint its arbitrator. The arbitrators entered upon the reference
on 1st February, 1985 and they also appointed an Umpire. The contractor filed
its statement of claim before the arbitrators on 16th March, 1985. The
arbitrators by their award dated 27th October, 1985 accepted the claim of the
contractor and passed an award for Rs.74,810.38 in favour of the contractor.
challenged the award by filing petition (O.P.No. 10/1986) under Sections 30 and
33 of the Act, 1940, inter alia raising the objection that the claim of the
contractor was time barred. The Court of the Principal Subordinate Judge,
Visakhapatnam vide his judgment dated 16th February, 1994 allowed OP No.
10/1986; set aside the award of the arbitrators and held that the claim of the
contractor was barred by limitation.
contractor challenged the judgment of the Principal Subordinate Judge,
Visakhapatanam dated 16th February, 1994 by filing an appeal before the High
Court which was registered as CMA No. 1559/1994. The High Court upturned the
judgment of the Principal Subordinate Judge, Visakhapatnam and held that the
claim of the contractor for Rs. 74,810.38 was within limitation.
other appeal being CMA No. 77/1995 before the High Court arose out of C-3
contract for execution of marine works and break waters at the outer harbour at
Lova Garden, Visakhapatnam .
The dispute seems to
have arisen between VPT and the contractor on 3rd February, 1975 in respect of
the charges for power driven survey boat used by the contractor. The dispute
was referred to the consulting engineers who opined vide their report dated 3rd
May, 1975 that it was the responsibility of the contractor to 5 provide the
survey vessel and consequently, the contractor's claim in this regard was
untenable. The contractor then on 15th May, 1975 appointed Shri G.N. Bajpai as
its arbitrator and called upon VPT to appoint its arbitrator. VPT appointed one
Mr. T.V. Rajaram as its arbitrator and the arbitrators in turn appointed Mr. A.W.
De'Lima as Umpire. The arbitrators, however, could not enter upon the
reference. The contractor, accordingly, approached the Principal Subordinate
Judge, Visakhapatnam for the appointment of arbitrators by invoking Sections 8,
9 and 20 of the Act, 1940.
Subordinate Judge, Visakhapatnam treated that suit under Section 8 of the Act,
1940 and vide its order dated 10th September 1984 allowed the suit filed by the
contractor and directed each party to appoint its arbitrators within 15 days
there from. Each party, accordingly, appointed its arbitrator and the appointed
arbitrators entered upon reference. On 14th March, 1985, the contractor filed
claim in the sum of Rs. 8,49,000/- with interest and cost pertaining to the
charges for power driven survey boat.
arbitrators passed the award on 20th November, 1985 allowing the claim of the
contractor for Rs. 6,44,500/- but no interest or cost were allowed.
challenged the award dated 20th November, 1985 in the Court of Subordinate
Judge, Visakhapatnam by filing petition numbered as OP No. 164/1986. The award
was mainly opposed by VPT on the ground of limitation and that the award was
sub-ordinate Judge, Visakhapatnam allowed the petition vide its order dated
16th February, 1994 and set aside the award holding that the claim was barred
contractor, then carried the matter to the High Court by filing CMA No.
77/1995. The said appeal has been allowed by the High Court vide its judgment
dated 26th April, 2002.
noticed above, it is from the common judgment dated 26th April, 2002 disposing
of CMA No. 1559/1994 and CMA No. 77/1995 that these two appeals arise.
shall first deal with the contractor's claim of Rs.74,810.38. The only issue
that falls for our consideration with regard to this claim is whether it is
barred by limitation.
37 of the Arbitration Act, 1940 and Article 137 of the Limitation Act, 1963 are
relevant for the purpose.
The Arbitration Act,
Limitations. - (1) All the provisions of the Indian Limitation Act, 1908 (9 of
1908), shall apply to arbitrations as they apply to proceedings in Court.
any term in an arbitration agreement to the effect that no cause of action
accrue in respect of any matter required by the agreement to be referred until
an award is made under the agreement, a cause of action shall, for the purpose
of limitation, be deemed to have accrued in respect of any such matter at the
time when it would have accrued but for that term in the agreement.
(3) For the purposes
of this section and of the Indian Limitation Act, 1908 (9 of 1908), an
arbitration shall be deemed to be commenced when one party to the arbitration
agreement serves on the other parties thereto a notice requiring the
appointment of an arbitrator, or where the arbitration agreement provides that
the reference shall be to a person named or designated in the agreement, requiring
that the difference be submitted to the person so named or designated.
(4) Where the terms
of an agreement to refer further differences to arbitration provide that any
claims to which the agreement applies shall be barred unless notice to appoint
an arbitrator is given or an arbitrator is appointed or some other step to
commence arbitration proceedings is taken within a time fixed by the agreement,
and a difference arises to which the agreement applies, the Court if it is of
opinion that in the circumstances of the case undue hardship would otherwise be
caused, and notwithstanding that the time so fixed has expired, may on such
terms, if any, as the justice of the case may require, extend the time for such
period as it thinks proper.
(5) Where the Court
orders that an award be set aside or orders, after the commencement of an
arbitration, that the arbitration agreement shall cease to have effect with
respect to the difference referred, the period between the commencement of the
arbitration and the date of the order of the Court shall be excluded in
computing the time prescribed 8 by the Indian Limitation Act, 1908 (9 of 1908)
for the commencement of the proceedings (including arbitration) with respect to
the difference referred."
The Limitation Act,
" 137. Any other
application three years When the for which no period of right to apply
limitation is provided accrues."
elsewhere in this
is apparent from the bare reading of Section 37 that the law of limitation is
applicable to the proceedings before the arbitrators as it applies to
proceedings before the Courts. Under Sub-section (3), arbitration proceedings
are to be deemed to have commenced when notice is served by one party upon the
other - (i) requiring him to appoint an arbitrator, or (ii) if the arbitrator
was named or designated in the arbitration agreement, requiring him to submit
the difference to arbitrator named or designated.
the backdrop of aforesaid legal position, let us now turn to the facts. On 8th
August, 1974, VPT recovered an amount of Rs.74,810.38 being the cost of 500
jack rods from running bill no.
21 tendered by the
contractor. The dispute with regard to claim of Rs. 74,810.38, thus, arose on
that date. The contractor ought to have given notice calling upon VPT to
appoint arbitrator within three years therefrom or apply to the Court within
this time. However, it was after ten years on 22nd September, 1984 that the
contractor appointed its arbitrator and called upon VPT to appoint its
arbitrator. Significantly, VPT had already made a claim of Rs. 9,65,155/-
against the contractor for withdrawal and return of jack rods and the dispute
was referred to arbitration at the instance of VPT in the year 1976. Although
the contractor contested the said claim of VPT before the arbitrators but
curiously no counter claim for Rs. 74,810.38 was made in those proceedings. It
is true that arbitrators rejected the claim of VPT on 23rd March, 1980 and the
petition before the Civil Judge, Visakhapatnam also came to be dismissed on
10th September, 1984 but that does not improve the case of the contractor in so
far as limitation is concerned as the limitation began to run from 8th August,
1974. It was too late on 22nd September, 1984 for the contractor to agitate the
claim of Rs.74,810.38 for which the cause of action accrued on 8th August,
1974. The contractor ought to have made counter claim before the arbitrators in
the year 1976 itself when VPT made a claim of 9,65,155/- for withdrawal of jack
rods. In any view of the matter, the claim of Rs. 74,810.38 raised for the
first time after 10 years of 10 accrual of cause of action is apparently
barred by time and rightly rejected by Principal Subordinate Judge,
Visakhapatnam vide judgment dated 16th February, 1994.
a matter of fact, Mr. S.B. Upadhyay, Senior Counsel for the respondent could
not show that claim for Rs. 74,810.38 was within time.
noticed above, CMA No. 77/1995 before the High Court related to non-payment of
the charges of the power driven survey boat used by the contractor. Admittedly,
the dispute in this regard arose between the parties on 3rd February, 1975 and
the matter was referred to the consulting engineers. The consulting engineers
rejected the claim of the contractor on 3rd May, 1975 holding that it was the
responsibility of the contractor to provide survey vessel.
The contractor on
15th May, 1975 appointed its arbitrator and gave notice to VPT requiring them
to appoint their arbitrator. VPT also appointed its arbitrator but the
arbitrators could not enter upon the reference. It was in the year 1979, then
that the contractor approached the Principal Subordinate Judge, Visakhapatnam
by filing suit under the Arbitration Act, 1940 which was allowed vide order
dated 10th September, 1984 directing each party to appoint its 11 arbitrator
within 15 days. In compliance thereof, the parties appointed their arbitrators
and on 16th March,1985 the contractor filed its statement of claim for payment
of hire charges for power driven survey boat.
(3) of Section 37 of the Act, 1940, inter alia, provides that an arbitration
shall be deemed to be commenced when one party to the arbitration agreement
serves on the other party thereto a notice requiring the appointment of an
The core controversy
is: in the facts and circumstances of the case, when the arbitration can be
said to have commenced.
what we have already noticed above, the dispute with regard to charges for the
power driven survey boat arose on 3rd February, 1975 and after the claim was
rejected by the consulting engineers on 3rd May, 1975, the contractor appointed
the arbitrator on 15th May, 1975 and asked VPT to appoint its arbitrator. In
other words on 15th May, 1975, the contractor served on VPT a notice requiring
them to appoint their arbitrator under the agreement. Thus under Section 37(3),
the arbitration shall be deemed to have commenced on 15th May,1975 i.e. well
within time and the High Court rightly rejected the objection of VPT that the
12 claim with regard to charges for the survey vessel was time barred.
Merely because, the
arbitrators could not enter upon reference and the contractor had to approach
the Court in the year, 1979 by filing suit which was allowed on 10th September,
1984 and new arbitrators were appointed by the parties and statement of claim
was filed by the contractor on 14th March, 1985, that would not render the
contractor's claim time barred.
Kailash Vasudev, Senior Counsel contended that the non-reasoned award is bad in
law. In this connection, learned Senior Counsel referred to Section 17 of the
Act, 1940 which came to be amended by insertion of proviso vide Andhra Pradesh
Act (1 of 1990).
17 of the Act, 1940 reads thus ;
"17. Judgment in
terms of award. - Where the Court sees -- no cause to remit the award or any of
the matters referred to arbitration for reconsideration or to set aside the
award, the Court shall, after the time for making an application to set aside
the award has expired, or such application having been made, after refusing it,
proceed to pronounce judgment according to the award, and upon the judgment so
pronounced a decree shall follow and no appeal shall lie from such decree
except on the ground that it is in excess of, or not otherwise in accordance
with, the award."
Andhra Pradesh Act ( 1 of 1990), the following proviso have been inserted to
where as award pending in the Court at the commencement of the Arbitration
(Andhra Pradesh Amendment) Act, 1990 or an award filed in the Court, thereafter
does not contain reasons therefore as required by the proviso to sub-section
(1) of Section 14 the Court shall not proceed to pronounce the judgment
according to the award, but shall remit the award to the arbitrators or the
umpire for giving reasons therefore as required by the said proviso and
thereupon the arbitrators or umpire shall, within thirty days from the date of
remittance of the award to them by the Court give reasons for the award and
file the same in the Court:
Provided Further that
on the application of the arbitrators or the umpire and for reasons to be
recorded in writing, it shall be competent for the Court, to extend the period
of thirty days aforesaid for a further period not exceeding fifteen days:
Provided also that
where an award pending in the court as aforesaid does not contain any reasons
and there is no possibility to remit the award to the arbitrator or panel of
arbitrators or umpire due to their incapacity, negligence, refusal to act or
death, the Court shall set aside the award and direct the parties to initiate
fresh arbitration in accordance with the terms of the agreement."
amendment in Section 17 vide Andhra Pradesh Act (1 of 1990) is not attracted in
the present fact situation as the award was passed by the arbitrators on 20th
November, 1985 i.e. much before the amendment. As per Section 17 then
obtaining, it was not imperative for the arbitrators to give reasons in support
of the award. Secondly, upon the award dated 20th November, 1985 being
challenged by VPT before Principal Sub-ordinate Judge, Visakhapatnam, the
Principal Sub-ordinate Judge, Visakhapatnam, directed the arbitrators to give
reasons for the award in the light of the amendment aforenoticed.
the arbitrators gave the following reasons:
through the various provisions in the contract documents which have a bearing
on the dispute between the parties and after applying correct and proper
interpretation for adjudication of the said dispute, we find that the
Visakhapatnam Port trust, the Respondents in this case, were under a
Contractual obligation to make available a Survey Boat for use on these works
and that, although the survey boat was available with them, they failed totally
to fulfil that contractual obligation necessitating the claimants to obtain a
boat from their own resources and deploy the same on the works throughout the
construction period. We find that after allowing some adjustments found
necessary on perusal of the contract and after having considered the written as
also the oral submissions made to us by the parties, the claimants are entitled
to be paid by the Respondent the sum as determined by us in our award."
this exercise was unnecessary but the fact of the matter is, that subsequently
the arbitrators did give their reasons.
Reasonableness of the
reasons given by arbitrators cannot be gone into by the Court. This objection
of the Senior Counsel is, accordingly, overruled.
the foregoing reasons, we dispose of these appeals as follows:- (1) The
judgment of the High Court of Judicature of Andhra Pradesh in CMA No. 1559/1994
is set aside. The claim of M/s Continental Construction Company for Rs.
74,810.38 stands dismissed.
The amount of Rs. 74,810.38
deposited with the executing Court by Visakhapatnam Port Trust pursuant to the
order dated 27th September, 2004 of this Court shall be refunded to them
alongwith interest accrued thereon.
(2) The judgment of
the High Court in CMA No. 77/1995 is affirmed. The amount of Rs. 6,44,500/-
deposited by Visakhapatnam Port Trust with the executing Court pursuant to the
order of this Court dated 27th September, 2004 shall be paid to M/s Continental
Construction Company alongwith interest accrued thereon.
(3) The parties shall
bear their own costs.
16 (MARKANDEY KATJU)