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M/s. ENEXIO Power Cooling Solutions India Pvt. Ltd., No.443, Rep. by President & CEO T. Parasuram v/s Gita Power and Infrastructure Pvt. Ltd., Rep. by its Authorised Signatory, Kaushik Ganguly & Another

    O.S.A.(CAD) Nos. 174 &175 of 2021

    Decided On, 01 September 2021

    At, High Court of Judicature at Madras

    By, THE HONOURABLE CHIEF JUSTICE MR. SANJIB BANERJEE & THE HONOURABLE MR. JUSTICE P.D. AUDIKESAVALU

    For the Appellant: R. Parthasarathy, P. Giridharan, H. Siddarth, Advocates. For the Respondents: R1, AR.L. Sundaresan, Senior Advocate for M/s. Krishna Prasad, Advocate, R2, No appearance.



Judgment Text

(Prayer: Appeals filed against the common Judgment and Decree dated 23.12.2020 passed in O.P.No.562 of 2020 and O.P.No.533 of 2020 on the file of original side of this court.)

Common Judgment

Sanjib Banerjee, CJ.

1. The flourishing export of litigation by this country may continue unabated till the penchant for wanton tinkering with arbitral awards is reined in. Despite instructive pronouncements in recent years beginning the Associate Builders case [(2015) 3 SCC 49], the narrow ambit of authority available in this jurisdiction, sometimes, appears to be beyond the comprehension of courts in receipt of challenges to arbitral awards.

2. In the present case, an award rendered by the arbitral tribunal constituted by the International Chamber of Commerce (ICC) has been rendered to naught on the perception of the arbitration court that the period of limitation applicable to the claim and the counter-claim may not have been appropriately reckoned and that the arbitral tribunal failed to take into account evidence that was before it and ignored the same. In effect, the arbitral award of July 13, 2020 has been set aside on the ground that it was opposed to public policy as being contrary to the law of the land. The arbitration court has also proceeded to render independent findings on certain aspects despite the award dealing with such matters in great detail.

3. It may do well to recount the rules of assessment in this jurisdiction at the outset. The court exercising authority under Section 34 of the Arbitration and Conciliation Act, 1996 does not assume appellate authority. Indeed, it has been the refrain in this jurisdiction over a century and more of jurisprudence that has developed that the court is loathe to correct any error since the parties had abandoned the sovereign forum of the court and had agreed to carry their disputes to a consensual forum. There is no doubt that the court exercises a degree of superintendence; but, ordinarily, errors of jurisdiction are corrected, rather than errors within jurisdiction. It is also accepted, as in the case of exercise of discretion, that if two views are possible on an issue or an aspect, that the other view appears more plausible to the court may not empower the court to supplant its view over the arbitral tribunal’s while assessing the propriety of an award.

4. The contract here provided for the setting up of a cooling tower in Gummudipoondi. The claim of the appellant contractor was on account of the work and supplies for which it remained unpaid. The counter-claim by the respondent employer was on account of liquidated damages for the delay in the erection and commissioning of the plant, the customs duty component which it ought to have been reimbursed and sundry other claims on account of damaged gear box or faulty ducts or the like.

5. The contentions put forth on behalf of the respondent while challenging the award have been recorded at paragraph 16 of the judgment and order impugned dated December 23, 2020. Five principal grounds appear to have been canvassed. The respondent claimed that the principal claim of the contractor was barred by limitation; that the tribunal adopted varying yardsticks for examining the claim and the counter-claim; that the tribunal ignored vital evidence particularly as apparent from the minutes of a meeting held between the parties on April 19, 2018; that the arbitral tribunal virtually extended the time qua liquidated damages and rejected the claim on such account by finding that the contractor was entitled to more time to complete the work than what the contract indicated; and, that material evidence pertaining to the debit note qua customs duty was ignored.

6. Certain facts are not in dispute and the relevant dates in such regard must be taken from the submission made on behalf of the respondent herein. According to the respondent, the last bill that was raised by the appellant in connection with the work was on December 31, 2014. The two debit notes that the respondent raised on the contractor were issued on August 24, 2015 and January 12, 2016. The respondent complains that the arbitral tribunal erred in holding that the deemed date of completion of the work was September 21, 2015 despite the contract providing otherwise. The respondent lays great stress on a meeting of the parties held on April 19, 2018, the minutes whereof would receive greater attention here than may have been given thereto in the arbitral award. An offer for settling the accounts between the parties, not only in respect of the Gummidipoondi work but also in respect of a similar contract between the parties in Gujarat was made by the respondent via an email of May 26, 2018. Finally, the respondent refers to the claim being lodged before the ICC secretariat on or about May 2, 2019.

7. In addition to the grounds urged to challenge the award as noticed in the judgment impugned, the respondent also contends that the arbitral tribunal erred in rejecting the entirety of the counter-claim on limitation without considering the merits thereof. The respondent suggests that the starting point for limitation should have been the same for both parties. Finally, the respondent seeks to rely on a recent Supreme Court judgment placed by the appellant to suggest that if the time taken to conduct the negotiations had to be excluded, such time would be excluded for both sides and not only for the claimant.

8. The award dated July 13, 2020 refers extensively to the scope of the work, the nature of the work, the rival claims, the evidence and, finally, from paragraph 9 thereof, the findings of the tribunal have been indicated over roughly 30 or so pages of the appeal papers. The arbitral tribunal, comprising three members, referred to “Delays and liquidated damages” at paragraph 13 of the award. In course of the discussion on such aspect, the arbitral tribunal alluded to the counter-claim on account of liquidated damages exclusively at paragraph 13.15. Prior to that, in the general discussion as to the rights of the parties and how the contract was executed, the arbitral tribunal came to a finding that because of delays that were beyond the control of the contractor, the time to complete the work stood extended till September 21, 2015. Upon rendering such finding, the arbitral tribunal recorded thus in respect of the respondent’s counter-claim of liquidated damages for delay:

“As the tribunal has granted an extension of time for completion of the ACC Unit to 21 September 2015 and has also found that the requirements for completion of the ACC Units were achieved on that date, the Tribunal finds that the Claimant has no liability for liquidated damages. ...”

9. The other major head of counter-claim that had been carried by the respondent to the reference pertained to customs duty. In such regard, the respondent relied on a letter dated January 24, 2014 issued by an employee or representative of the contractor to the employer which clearly stated that the customs duty was payable by the contractor, but made an appeal to the employer to immediately pay the customs duty and adjust the amount out of the Gujarat contract which was being simultaneously executed. There is no dispute that the admission in the relevant letter is apparent. However, the arbitral tribunal, upon noticing the letter and the wording of the agreement between the parties that provided for various kinds of taxes and duties to be to the account of the employer, observed that in the light of the imminent arrival of the fin tube bundles in Chennai, at the time that the letter of January 24, 2014 was issued, it was necessary to have the goods cleared to avoid demurrage charges. The tribunal considered the apparent admission contained in the relevant letter to have been made under pressure or in the extreme situation where a dispute between the parties as to the liability to pay customs duty would have left the goods rotting in the docks and unnecessary demurrage charges adding up. In such circumstances, the tribunal found that the debit note dated August 28, 2015 on account of liquidated damages was unjustified.

10. At paragraph 14.04 of the award, the arbitral tribunal referred to the relevant clause in the agreement between the parties to consider whether it was the employer’s liability to pay the customs duty component despite “customs duty not being specifically included in the relevant term”. The tribunal held that the customs duty component in excess of Rs.5.94 crore “is not reimbursable by the claimant”. In such circumstances, the tribunal held that the debit note issued for customs duty on January 12, 2016 was without any basis. Thus, it is evident that the two major heads of the counter-claim carried by the employee to the arbitral reference were rejected on merits.

11. Much is made out by the respondent here as to the issue of limitation. It is necessary to see the two principal documents which may be relevant in such regard. The first of such documents is the recording of the discussion held between the parties at a meeting of April 19, 2018. The relevant minutes incorporate a chart at the beginning, which clearly spells out certain heads; including the total amount billed by the contractor and the total amount paid to the contractor, the balance amount due to the contractor that had been retained, the two claims on account of liquidated damages for supply and erection, the claim on account of customs duty, and the employer’s claim on account of dismantling modification and duct fabrication.There is no dispute that at the bottom of the chart, it was recorded that an amount of Rs.2,78,04,090 was “Final Payable by Enexio”. Enexio is the contractor.

12. However, what is of consequence is the remainder of minutes:

“However, we request that the CD, CVD, and LD’s be looked at leniently and mutually settled. The Contract calls for all taxes such as ED, ST to be reimbursed and CVD is equivalent to Excise duty.

LD is not only due to our ENEXIO’s fault. In any case, this did not cause for any delay in Plant commissioning. We have had huge losses due to US dollar increase during Project stage to the tune of Rs.1.82 crores.

ENEXIO requested that the above amount of Rs.2,78,04,090/- payable by them to M/s.OPG Power Generation Pvt Ltd be adjusted against the amount to be received by M/s.ENEXIO Power Cooling Solutions (I) Pvt Ltd from M/s.OPGS Power Gujarat Pvt Ltd.”

13. Despite the chart at the top of the minutes of the meeting April 19, 2018 recording the claims of both parties and with the final line that a certain amount was payable by the contractor to the employer, it is evident that the contractor insisted, though in somewhat more polite language, that the customs duty was not payable by it, nor was any liquidated damages payable since there was no delay on its part. Much emphasis is placed by the respondent on the final paragraph of the minutes which, according to the respondent, amounts to a virtual admission of the debt due from the contractor to the employer; but, on a reading of the entirety of the document and the nature of the relationship between the parties, it may not have been an unconditional admission that would have left an open and shut game for the employer in the course of the arbitral reference. Indeed, the respondent’s assertionthat the last paragraph of the minutes of April 19, 2018 was an admission, is belied by the immediate subsequent correspondence exchanged between the parties. On May 25, 2018, an email was issued by the contractor to the employer, maintaining that a sum in excess of Rs.23 crore remained due and owing to it for over two years from the employer. The contractor wanted an immediate release of Rs.3 crore to enable the contractor to meet its salary commitments. In response to such email, the employer replied on the same date. The following line from the employer’s mail of May 26, 2018 stands out:

“Perusing (sic, pursuant to) our discussion, it was my request to close the accounts with Rs.300 Lacs as full and final settlement”.

14. For a start, the admitted mail of May 26, 2018 issued by the employer, at the very least, amounts to an unabashed acknowledgment of the jural relationship between the parties and the employer being the net debtor to the contractor. Though the respondent insists that the relevant email combines both the Gummudipoondi and the Gujarat accounts, the fact that even if the two accounts were combined for the employer to acknowledge in writing the jural relationship that it was an overall debtor qua the contractor, the ingredients in Section 18 of the Limitation Act, 1963 were fulfilled for a fresh period of limitation to run from such date.

15. The arbitral tribunal noticed the minutes of such meeting of April 19, 2018 at paragraph 16.03(d) of the award while discussing the issue of limitation and held that the subsequent correspondence of May 26, 2018 extended the period of limitation qua the claimant in the reference.

16. Thankfully, the respondent has not propounded as an absolute proposition that the period of limitation has to be the same for both parties. It is possible that the period of limitation may be extended by reason of an act of the other side while the period of limitation for the original party may not have been extended. However, the point that the respondent seeks to make is that if there were negotiations between the parties and if the document of April 19, 2018 acknowledged a debt due from the contractor to the employer, the arbitral tribunal’s finding that the entirety of the counter-claim was barred by limitation may have been out of place. To some extent, the respondent may be justified, though the correspondence exchanged on May 26, 2018 can, by no means, be the starting point of limitation as far as the employer was concerned albeit such correspondence giving the contractor such benefit.

17. The arbitral tribunal dealt with the several heads of the counter-claim exclusively at paragraph 16 of the award, apart from having dealt with the same on merits earlier and on the ground of limitation at paragraph 16 thereof. At paragraph 17, the discussion is rather terse in view of the earlier findings and discussion on the several heads of the counter-claim. Paragraph 17.02 indicates the five heads of the counter-claim pertaining to liquidated damages for delay, customs duty, cost of erection of horizontal and vertical exhaust duct, cost of repair of gear box and cost of repair of fan modules. Though the reasons given in paragraphs 13, 14 and 15, respectively, in respect of the first three heads are indicated in parenthesis at paragraph 17 of the award, two other heads appear, clearly to have been rejected only on the ground of limitation and not otherwise.

18. It is at this stage that the minutes of the meeting held on April 19, 2018 require to be noticed in greater detail. For a start, since the arbitral award refers to the relevant document, it cannot be said, as the respondent asserts, that the minutes were ignored or the contents thereof were not considered. When the arbitrators specifically refer to the document and read it in the context of the subsequent email exchanged between the parties on May 26, 2018, it cannot be said with any degree of certainty that the contents of the minutes may not have been noticed or the purports of the discussion reflected therein may not have been considered while the award was rendered.

19. Indeed, while rejecting the counter-claims also on the ground of limitation, including the last two heads of counter-claim, the arbitral tribunal is deemed to have specifically noticed what was recorded below the chart in the minutes of the meeting held on April 19, 2018. After all, the last line in the chart indicated an amount due from the contractor to the employer and even the final paragraph of the minutes can be loosely be said to be a somewhat halting admission of the contractor’s indebtedness to the employer. However, a commercial document has to be read in context and it must not be lost sight of the fact that the contractor could not have asserted its claim in more aggressive terms since it was the employer from which it had to extract the balance payment. It cannot be missed that even though the chart indicated that the contractor owed money to the employer, immediately below the chart, the contractor indicated that it was not at all responsible for the delay. Thus, the contractor clearly disputed its liability on account of liquidated damages on both heads. The contractor also indicated that customs duty was payable by the employer. Again, the second major head of claim of the employer was dealt with. It is in such light that the subsequent admission in the last paragraph of the minutes should be seen and the admission, at the highest, was conditional and hedged with the contractor’s appeal that it should not be found liable for the delay or on account of customs duty.

20. In contrast and notwithstanding the respondent’s assertion that both the Gummudipoondi and Gujarat contracts were dealt with in the contractor’s email of May 26, 2018, the employer did not assert its claims on any of the heads specifically and merely offered to close the transaction by seeking to pay a further amount of Rs.3 crore in full and final settlement. In a sense, it is evident that notwithstanding the apparent admission in the minutes of April 19, 2018, the contractor, at least, kept the contractor’s defense pertaining to liquidated damages and customs duty open though the employer did not specifically assert any of its claims. Thus, the negotiations that were held between the parties may have been confined to the areas of disagreement rather than the areas of acceptance which included the claims on account of the duct repair, fan repair and the like. It is thus the arbitral tribunal concluded that the email of May 26, 2018 would hold good for a fresh period of limitation to be counted therefrom for the contractor, but it would not hold good in respect of the specific heads of claim of the employer.

21. On the facts as they panned out before the arbitral tribunal, it was a possible view. Once it is acknowledged that a possible view on the set of facts had been taken by the arbitral tribunal, that the other view appeals more to the court is of no relevance as the court cannot substitute the tribunal’s view by supplanting its own.

22. As to whether the enforcement of a claim is barred by the prescription of limitation, it depends on the nature of the claim and the period prescribed therefor in the Schedule to the Limitation Act, 1963. For the purpose of ascertaining which of the Articles in the Schedule would be attracted to a particular claim, the surrounding circumstances need to be noticed to find the appropriate provision. It is possible for a claim to either fall under Article 18 of the Schedule for the price of work or such a claim may also be seen to be under residuary Article 113 of the Schedule. Again, upon ascertaining the nature of the claim and assessing the appropriate Article which would be applicable, it would lead, in some cases, for it to be determined as to whether the period of limitation for enforcement of the claim would be reckoned from when the right to sue accrues or when the right to sue first accrues.

23. In paragraph 16 of the award, the arbitral tribunal specifically referred to the Act of 1963 and considered the applicability “of a time bar” to each of the heads of claim and to the counter-claim. In respect of the counter-claim, the tribunal noted that there was no evidence that the heads of counter-claim “were included in the ongoing negotiations.” The tribunal reckoned that the contractor “is deemed to have completed its obligations” on September 21, 2015 “and thus, that is the latest date from which the limitation period of three years must run”in respect of the counter-claim. On such reasoning, the arbitral tribunal held that the counter-claim delivered by the employer on July 15, 2019 was barred by limitation.

24. What is apparent from the award is that the arbitral tribunal was aware of the applicable law and made an assessment in accordance therewith. In such circumstances, that there could be a different view taken on the set of facts may not be an appropriate ground under Section 34 of the Act of 1996 to obliterate the finding on such count rendered by the arbitral tribunal and substitute it by the other view which appeals more to the court. After all, the assessment in the jurisdiction under Section 34 of the Act of 1996 has more to do with the decision-making process, rather than the decision itself, unless the decision appears to be palpably erroneous or manifestly arbitrary and causes grave miscarriage of justice.

25. A challenge to an arbitral award requires high tests to be met by the challenger. An apparently erroneous view may not necessarily be corrected, nor will a flawed finding or a perceived mistaken interpretation excite the court unless there is something more to the matter. The high tests were not met by the respondent herein and it appears that the arbitration court embarked on an independent exercise to assess the several of the heads of claim and counter-claim, including on the aspect of limitation, without reference to the award or attempting to ascertain whether the arbitral tribunal had applied its mind to the matters in issue.

26. Since both the parties have referred to a judgment reported at (2020) 14 SCC 643 (Geo Miller and Company Pvt. Ltd vs. Chairman, Rajasthan Vidyut Utpadan Nigam Ltd) and paragraph 28 thereof, such judgment needs to be noticed. The discussion pertaining to the judgment must begin with a caveat that it was in the context of a request under Section 11 of the Act of 1996 and, as they say, a judgment must be seen to have decided exactly what it did and not the larger conspectus which it may deemed to have. Paragraph 28 of the report in Geo Miller instructs as follows:

“28. Having perused through the relevant precedents, we agree that on a certain set of facts and circumstances, the period during which the parties were bona fide negotiating towards an amicable settlement may be excluded for the purpose of computing the period of limitation for reference to arbitration under the 1996 Act. However, in such cases the entire negotiation history between the parties must be specifically pleaded and placed on the record. The Court upon careful consideration of such history must find out what was the ‘breaking point’ at which any reasonable party would have abandoned efforts at arriving at a settlement and contemplated referral of the dispute for arbitration. This “breaking point” would then be treated as the date on which the cause of action arises, for the purpose of limita

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tion. The threshold for determining when such a point arises will be lower in the case of commercial disputes, where the party’s primary interest is in securing the payment due to them, than in family disputes where it may be said that the parties have a greater stake in settling the dispute amicably, and therefore delaying formal adjudication of the claim. 27. On any liberal reading of the dictum as evident from the above passage, it cannot be said that a special period of limitation has been carved out by the Supreme Court in addition to the provisions of the Act of 1963. The passage instructs that when parties are in the process of negotiation and an issue as to limitation comes up and the party seeking to explain away the time seriously pleads the time taken for negotiations and brings cogent evidence in such regard, the block of time may have to be excluded. The entire discussion in the above passage has to be seen in the light of Section 18 of the Act of 1963 and how the acknowledgement of a jural relationship between the parties gives a fresh lease of time under the Limitation Act to the claimant. If “A” and "B” are found to have been in negotiation and there is some written evidence of the negotiation, where “A” asserts as a creditor, the very fact that there is evidence of the negotiation is a virtual acknowledgment of jural relationship between theparties. The judgment cannot be read to have provided any more than what is already permissible in law. 28. The judgment and order impugned cover territories which a court in exercise of its limited authority under Section 34 of the Act should restrain itself from venturing into. The judgment reveals a completely different basis for reckoning what the period of limitation ought to have been without expressly referring to the findings in the arbitral award or the discussion relevant in such regard. Indeed, the impugned judgment embarks on an independent exercise to assess the claim or the validity thereof, which is scarcely possible within the restricted ambit of authority available under the relevant statutory provision. 29. For the reasons aforesaid, O.S.A.Nos.174 and 175 of 2021 are allowed and the judgment and order impugned dated December 23, 2020 are set aside. The arbitral award of July 13, 2020 is restored. 30. Since it was possible for the employer in this case to urge some of the grounds, including limitation, there will be no order as to costs as far as the present appeals are concerned. C.M.P.No.7963 of 2021 is closed.
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