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Haryana Vidyut Prasaran Nigam Ltd v/s Hindustan Vidyut Product Ltd.

    FAO(OS) 87 OF 2008

    Decided On, 10 April 2008

    At, High Court of Delhi


    For the Appellant: Ruchi Narula, Advocate. For the Respondent: None.

Judgment Text

Manmohan, J.

1. Present appeal has been filed by the appellant under Section 10 of the Delhi High Court Act praying for quashing of the order dated 20th September, 2006 passed in CS(OS) No. 219-A of 1997 and order dated 24th July, 2007 passed in I.A. No. 12419 of 2006. By way of the first order the learned Single Judge has dismissed the Appellant?s application under Sections 8 and 20 of the Arbitration Act, 1940 for appointment of an Arbitrator on the ground that it was barred by limitation. A notice to arbitrate had been issued on 26th July, 1976 and since the claim had been repudiated by the Respondent immediately, the limitation would commence in 1996 itself. As the said order had been passed ex parte, the present petitioner filed an application seeking its recall. The learned Single Judge re-heard the counsel for the Appellant on merits but still dismissed the application for appointment of an Arbitrator on the ground that it was barred by limitation. Learned Single Judge held that by giving a second notice for a larger amount the Appellant would not get a new lease of limitation to file an application seeking appointment of an Arbitrator.

2. Counsel for the Appellant has sought to urge that the present matter has a chequered history and the learned Single Judge fell in error by not taking note of all the relevant facts.

3. Relevant facts for the present case are that in the year 1971 the Appellant invited global tender for purchasing 496 kilometers of ACSR Panther Conductor. Respondent was declared successful in the tender and a detailed purchase order was issued. However, the Respondent failed to deliver the goods in time and consequently the Appellant issued a risk purchase notice upon the Respondent. Though initially in a civil suit the Respondent was successful in getting a stay of risk purchase, the said order was subsequently vacated by the learned Sub Judge.

4. Having gone ahead with the risk purchase, the Appellant on 26th July, 1976, invoked the arbitration clause and issued a notice to the Respondent to either deposit Rs.37,61,456.60 or appoint an Arbitrator of its choice in terms of the arbitration clause.

5. On 24th January, 1977 the Respondent herein filed an OMP before this court being No. 18 of 1977 under Sections 33 and 35 of the Arbitration Act challenging the validity and existence of the arbitration clause itself. A learned Single of this Court stayed the arbitration proceedings. It was only on 1st March, 1985 that this Court dismissed the Respondent?s OMP and held that there was a valid and concluded arbitration agreement between the parties.

6. Immediately thereafter the Respondent filed a Special Leave Petition bearing No. 9524 of 1985 in the Supreme Court. Counsel for the Appellant was not able to inform us as to whether any interim stay order was passed by the Apex Court. The only reply to a query from the Bench as to whether there was an interim order, was that on 17th April, 1990 the Supreme Court dismissed the Special Leave Petition filed by the Appellant.

7. In the year 1991 arbitration proceedings commenced between the Appellant and the Respondent. The Arbitral Tribunal comprised three Arbitrators, namely, Mr. C.M. Lodha (appointed by the Respondent), Mr. J.K. Bahari (appointed by the Appellant) and Mr. O.P. Puri (appointed by the Institute of Engineers). On 5th April, 1991 the Appellant filed a revised claim before the Arbitral Tribunal in which it claimed an amount in excess of rupees one crore. The Respondent herein filed an application before the Arbitral Tribunal raising a preliminary objection that the claim filed by the Appellant was beyond the scope of reference. Though the Arbitral Tribunal dismissed the Appellant?s application on 26th October, 1991, this Court on 17th December, 1991 stayed the Arbitration proceedings. On 4th September, 1995 a learned Single Judge of this Court dismissed the Respondent?s OMP. However, the proceedings ultimately reached the Hon?ble Supreme Court. On 4th April, 1996 the Supreme Court allowed the Respondent?s Special Leave Petition holding that the revised claim of the Appellant amounting to more than rupees one crore was beyond the terms of reference. The relevant portion of the Apex Court order is reproduced herein below for ready reference:

?We are afraid this approach of the Arbitrators is not correct. If the claim made by HSEB is outside the scope of the reference made to the Arbitrators, the Arbitrators must confine themselves to the reference and cannot travel outside it merely because under the terms of the contract the dispute in regard to this matter would have been covered and could have been referred to arbitration. In the instant case, since the reference is in relation to the item set out in the notice, the jurisdiction of the Arbitrators stands confined to those matters only and cannot travel outside it. Therefore, there is no question of examining the claim which is totally different from the one made in the notice which is the basis of the reference as to whether or not damages could be awarded on that claim. Once the claim is outside the reference it is outside the scope and ambit of the inquiry by the Arbitrators and, therefore, the Arbitrators cannot go into it. Therefore, in our view, the claim made in the reference, which is inconsistent with paragraph 6 of the notice, cannot be entertained by the Arbitrators. The appeal succeeds and will stand disposed of accordingly with no order as to costs.?

8. On 26th June, 1996 the Appellant, through its lawyer sent , a notice calling upon the Respondent to appoint an Arbitrator in terms of the initial contract. The relevant portion of the said legal notice is reproduced hereinbelow for ready reference:

?6. You have been filing suits in the District High Courts and in the High Court but you lost. Hon?ble Supreme Court in SLP Civil No.6220 of 1996 vide order dated 4th April 1996 are pleased to grant SLP as claim sought by my client which was not in order. I now call upon you that you may appoint your arbitrator in terms of the agreement dated 3/4 August, 1972 and instructions to the bidder along with the form of General Conditions were the part of the contract and as per Clause 32 of the General Conditions of the contract. Kindly do the needful within a month from the receipt of this notice.?

9. On 26th July, 1996, the Respondent though its lawyer replied to the legal notice contending that the earlier reference to arbitration had been disposed of by the Supreme Court and, therefore a second reference of the same dispute was misconceived and untenable.

10. In the year 1997, the Appellant filed a petition under Sections 8 and 20 of the Arbitration Act, 1940 contending that in view of the Hon?ble Supreme Court?s order the Petitioner was filing fresh claims (para 9 of the Section 20 petition). In this petition it was further contended that as the Respondent had refused to appoint an Arbitrator vide its lawyer?s letter dated 26th July, 1996, the Appellant was left with no other alternative but to file a petition under Sections 8 and 20 of the Arbitration Act. As already pointed out hereinabove, the said application was dismissed by the learned Single Judge on 20th September, 2006 on the ground that it was barred by limitation. A subsequent application filed by the Appellant for recall of the said order was also dismissed on 24th July, 2007 on the ground that as the principal claim itself was barred by limitation, the Appellant?s attempt to issue a subsequent notice demanding a larger amount would not extend the period of limitation for a petition seeking appointment of an Arbitrator.

11. From the abovementioned facts it would be apparent that the Appellant?s endeavour to seek a reference to arbitration for a sum in excess of the amount stipulated in its initial notice dated 26th July, 1976 would clearly be barred by limitation. Confronted with this situation, counsel for the Appellant sought to urge that she was restricting the Appellant?s claim for the initial amount of Rs.37,61,465.60 as demanded from the Respondent in terms of its notice to arbitrate dated 26th July, 1976. According to us, even this plea of the Appellant is untenable in law inasmuch as in the year 1991 an Arbitral Tribunal had been constituted and the said Tribunal had also commenced its proceedings. No second reference of the dispute already referred to arbitration was possible.

12. Learned counsel for the Appellant then sought to urge that the present application under Sections 8 and 20 of the Arbitration Act was necessitated because the Arbitrator nominated by the Respondent had refused to participate or go ahead with the arbitration proceedings. The Appellant?s counsel has not placed on record either any order sheet of the Arbitral Tribunal or any correspondence exchanged between the Arbitrators to show that the Respondents? Arbitrator had refused to act. In fact this was not the case of the Appellant either in its Second Notice to arbitrate dated 26th June, 1996 or in the Section 8 and 20 application filed by the Appellant. Faced with this situation, the Appellant?s counsel sought to refer to two letters written by the Appellant?s lawyer on 7th March, 1996 which are neither referred to in the Section 8 and 20 petition nor part of the record before the Single Judge. In fact, on a reading of one of the letters of 7th March, 1996, it seems that the Arbitrator nominated by the Respondent did not proceed with the arbitration as the time for making Award had expired and none of the parties had obtained extension of time from the High

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Court. We asked the Appellant?s counsel to refer to the responses, if any, given by the Respondent to the two letters dated 7th March, 1996, but the counsel for the Appellant stated that the relevant record was not available. In these circumstances we have no other option but to conclude that if the Respondent?s Arbitrator had refused to participate in the proceedings on the ground that the statutory period of four months for making of Award had expired, the remedy of the appellant lay in filing a proceeding under Section 28 of the Arbitration Act, 1940 and not by filing a Section 8 and 20 petition as it did in the present case. 13. In fact, from a reading of all the documents it seems to us that the Appellant through its legal notice dated 26th June, 1996 was seeking to refer its revised claim in excess of Rs.37,61,465.60 to arbitration and consequently the learned Single Judge was right in his conclusion that the same were barred by limitation. 14. The present appeal is, therefore devoid of any merit and is dismissed with no order as to costs.