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M/s. Kamalakanta Engineering & Construction Company Private Limited v/s National Projects Construction Corporation Ltd.

    ARBP No. 35 of 2020
    Decided On, 30 July 2021
    At, High Court of Orissa
    For the Petitioner: S. Dwibedi, Advocate. For the Opposite Party: D. Mohapatra, Advocate.

Judgment Text
1. This is a petition under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (the 'Act') seeking the appointment of an Arbitrator to adjudicate the disputes between the Petitioner and the Opposite Party-National Projects Construction Corporation Ltd. (NPCCL), arising from a work order dated 25th November, 2005 for the work of "Nergundi-Cuttack-Paradeep doubling Construction of washable aprons, Island platform, Longitudinal drain and other ancillary works at Cuttack station yard."

2. The facts in brief are that the Petitioner was assigned the aforementioned work in terms of the work order dated 25th November, 2005 with the scheduled date of commencement as 16th May, 2005 and the date of completion as 15th April, 2006. The work order contained an arbitration clause which reads as under:

"16. Except where otherwise provided in the contract all question and disputes relating to the meaning of the specifications, designs, drawings and instructions before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right matter or thing whatsoever, in any way arising out off or relating to the contract, designs, drawings specifications estimate instructions, orders or those conditions or otherwise concerning the works, for the executions or failure to execute the same, whether arising during the progress of the work or after the complete or abandonment thereof shall be referred to the sole Arbitration of the persons appointed by the Managing Director of the National Projects Construction Corporation Limited, acting as such at the time of dispute. It will be no objection to any such appointment that the Arbitrator, so appointed is and that in the course of his duties as Corporation Officer he had expressed views in all/or any of the matters in dispute or difference. The Arbitrator to whom the matter is originally referred being transferred or vacating of his office being unable to act for any reason, the Managing Director shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a terms of this contract that no person other than a person appointed by the Managing Director as aforesaid should act as arbitrator and if for any reason, that is not possible, the matter is not to be referred to arbitrator at all. The arbitrator may from time to time with the consent of the parties enlarge the time, for making and publishing the award.

Subject as aforesaid the provisions of the Arbitration Act, 1940 or any statutory modification or reenactment thereof and the rules made there under and for the time proceeding under this clause."

3. According to the Petitioner, it completed the work by 28th February 2007. It claims that this fact has been acknowledged by NPCCL, as well as by East Coast Railway (ECR), which engaged NPCCL for the work.

4. In para-5 of the petition, a vague averment is made as regards the steps taken by the Petitioner for recovery of its dues from NPCCL. It is stated that ECR had initiated certain recovery from NPCCL for some other work, as a result of which, NPCCL's bills and securities "remained stuck" with ECR. Then, it is averred as under:

"xxx. Though the petitioner approached the Opp. Party on various occasions for the said payments, the petitioner was thwarted with the impression that, as the Opp. Party's payment has been withheld by its employer, hence the payment of the Petitioner will only be released pursuant to such payment of dues of the Opp. Party. As it was condition precedent that only upon receipt of the dues of the Opp. Party, the dues of the petitioner shall be released, the petitioner had no option than to await the result of the said arbitration proceeding.xxx"

5. The Petitioner then avers in para-6 about becoming aware of the fact that in an arbitration between ECR and the NPCCL, an award was passed in favour of NPCCL, pursuant to which ECR had to release amounts in favour of NPCCL. It is claimed that thereafter the Petitioner by a letter dated 31st August 2019 approached the NPCCL for releasing its admitted dues and that pursuant to the said letter, on 24th January 2020 NPCCL wrote the following letter to the Petitioner:

"Sub: Release of payment.

Dear Sir, Inviting reference cited above, it is informed that Final bill for the construction of washable apron against your work order No.7-12/311 dated 25.11.2005 has been prepared. It is requested to sign the bill for further processing for release of due payment."

6. Thereafter, notice was sent on 13th February 2020 to NPCCL by the Petitioner seeking release of its final bill, security deposit and EMD together with interest. A lawyer's notice was sent subsequently on 14th May 2020 seeking the appointment of an Arbitrator. Thereafter, the present petition was filed on 2nd November 2020.

7. Pursuant to the notice issued in the present petition, a reply has been filed by NPCCL in which inter alia a preliminary objection is taken as to limitation. It is submitted that the contingency of initiation of recovery by ECR from NPCCL is of no relevance as far as the Petitioner's claim is concerned. As regards the letter dated 24th January 2020, it is pointed out that it cannot revive a claim which has already become time barred.

8. Mr. D. Mohapatra, learned counsel for the NPCCL submits that the settled legal position is that the acknowledgment for the purpose of extension of limitation must itself have been given within the period of limitation. In this context, he refers to the decision of the Andhra Pradesh High Court in Matha Manikeshwari Enterprises v. General Manager, South Central Railways (2014) 3 ALT 70. Secondly, he refers to the portion of the Arbitration Clause, which states:

"It is also a term of this contract that no person other than a person appointed by the Managing Director as aforesaid should act as arbitrator and if for any reason that is not possible the matter is not to be referred to the arbitrator at all."

9. Referring to the decision of the Supreme Court in TFR Ltd. v. Energo Engineering Projects Ltd. (2017) 8 SCC 377, Mr. Mohapatra contends that in view of the above restriction in Clause-16, the clause concerning arbitration has become inoperative and otiose and cannot bind the parties. Thirdly, relying on the decision in Bharat Broadband Network Ltd. V. United Telecoms Ltd. (2019) 5 SCC 755, Mr. Mohapatra contends that the position that was in vogue prior to the 2015 amendment to the Act would apply. In other words, according to him, the Managing Director is not in a position to appoint an arbitrator since in any event the matter is not to be referred to arbitration at all. Therefore, no other person can be appointed as arbitrator.

10. Mr. S. Dwibedi, learned counsel for the Petitioner on the other hand contends that the letter dated 24th January 2020 constitutes an acknowledgment by NPCCL of its liability. He submits that in any event, the question whether the claim is time-barred can be decided in the arbitration and this cannot be a ground for the Court to decline to appoint an Arbitrator.

11. The above submissions have been considered.

12. In explaining the scope of the proceedings under Section 11 of the Act, the Constitution Bench of the Supreme Court in S. B. P. and Company v. Patel Engineering Ltd. (2005) 8 SCC 618 held that "Chief Justice or the designated Judge can also decide whether the claim is a dead one or a long-barred claim." This was further elaborated by the Supreme Court in Indian Oil Corporation Ltd v. SPS Engineering Limited (2011) 3 SCC 507 where it explained as under:

"11. To find out whether a claim is barred by res judicata, or whether a claim is "mala fide", it will be necessary to examine the facts and relevant documents. What is to be decided in an application under section 11 of the Act is whether there is an arbitration agreement between parties. The Chief Justice or his designate is not expected to go into the merits of the claim or examine the tenability of the claim, in an application under section 11 of the Act. The Chief Justice or his Designate may however choose to decide whether the claim is a dead (long-barred) claim or whether the parties have, by recording satisfaction, exhausted all rights, obligations and remedies under the contract, so that neither the contract nor the arbitration agreement survived. When it is said that the Chief Justice or his Designate may choose to decide whether the claim is a dead claim, it is implied that he will do so only when the claim is evidently and patently a long time barred claim and there is no need for any detailed consideration of evidence. We may elucidate by an illustration : If the contractor makes a claim a decade or so after completion of the work without referring to any acknowledgement of a liability or other factors that kept the claim alive in law, and the claim is patently long time barred, the Chief Justice or his Designate will examine whether the claim is a dead claim (that is, a long time barred claim). On the other hand, if the contractor makes a claim for payment, beyond three years of completing of the work but say within five years of completion of work, and alleges that the final bill was drawn up and payments were made within three years before the claim, the court will not enter into a disputed question whether the claim was barred by limitation or not. The court will leave the matter to the decision of the Tribunal. If the distinction between apparent and obvious dead claims, and claims involving disputed issues of limitation is not kept in view, the Chief Justice or his designate will end up deciding the question of limitation in all applications under section 11 of the Act.

12. An application under section 11 of the Act is expected to contain pleadings about the existence of a dispute and the existence of an arbitration agreement to decide such dispute. The applicant is not expected to justify the claim or plead exhaustively in regard to limitation or produce documents to demonstrate that the claim is within time in a proceedings under section 11 of the Act. That issue should normally be left to the Arbitral Tribunal. If the Chief Justice or his designate is of the view that in addition to examining whether there is an arbitration agreement between the parties, he should consider the issue whether the claim is a dead one (long time barred) or whether there has been satisfaction of mutual rights and obligation under the contract, he should record his intention to do so and give an opportunity to the parties to place their materials on such issue. Unless parties are put on notice that such an issue will be examined, they will be under the impression that only questions of jurisdiction and existence of arbitration agreement between the parties will be considered in such proceedings."

13. Recently, in Secunderabad Cantomnet Board v. M/s. B. Ramachandraiah & Sons 2021 (1) CLR 1014, the Supreme Court referred extensively to and followed its earlier decision in Uttarakhand Purv Sainik Kalyan Nigam v. Northern Coal Field Limited (2020) 2 SCC 455 where it was held that limitation is not a jurisdictional issue but is an admissibility issue. There, the Supreme Court inter alia observed:

"While exercising jurisdiction under Section 11 as the judicial forum, the court may exercise the prima facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation. Limited jurisdiction of the Courts would ensure expeditious and efficient disposal at the referral stage. At the referral stage, the Court can interfere "only" when it is "manifest" that the claims are ex facie time barred and dead, or there is no subsisting dispute."

Consequently, it does appear that even at the stage of appointment of an Arbitrator, the Chief Justice or his designate Judge can in fact examine whether a claim is "evidently and patently a long time-barred claim" and if it is, there is no need to proceed with the appointment of an Arbitrator to adjudicate such claim.

14. In Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority (1988) 2 SCC 338, the Supreme Court explained the legal position as regards seeking reference to arbitration under Section 20 of the Arbitration Act, 1940 of a time barred claim. This would equally apply to an application under Section 11 (6) of the Act. The relevant observations in this regard read as under:

"In order to be entitled to ask for a reference under section 20 of the Act there must not only be an entitlement to money but there must be a difference or dispute must arise. It is true that on completion of the work a right to get payment would normally arise but where the final bills as in this case have not been prepared as appears from the record and when the assertion of the claim was made on 28th February, 1983 and there was non-payment, the cause of action arose from that date, that is to say, 28th of February, 1983. It is also true that a party cannot postpone the accrual of cause of action by writing reminders or sending reminders but where the bill had not been finally prepared, the claim made by a claimant is the accrual of the cause of action. A dispute arises where there is a claim and a denial and repudiation of the claim. The existence of dispute is essential for appointment of an arbitrator under section 8 or a reference under section 20 of the Act. See Law of Arbitration by R.S. Bachawat, 1st Edition, page 354. There should be dispute and there can only be a dispute when a claim is asserted by one party and denied by the other on whatever grounds. Mere failure or inaction to pay does not lead to the inference of the existence of dispute. Dispute entails a positive element and assertion in denying, not merely inaction to accede to a claim or a request. Whether in a particular case a dispute has arisen or not has to be found out from the facts and circumstances of the case."

15. In the present case, the facts narrated by the Petitioner show that after it completed the work on 28th February 2007, it wrote to NPCCL regarding payment of its dues only on 31st August 2019, i.e. more than 12 years thereafter. No averment has been made by the Petitioner, and no document has been placed on record, to show that during this period there was any acknowledgment by NPCCL in writing of any liability it owed the Petitioner flowing from the aforementioned work order. The sole basis for the Petitioner to maintain its claim against NPCCL is the so called "acknowledgment" of debt by NPCCL by way of its letter dated 24th January 2020.

16. Going by the averments made in the petition, it is seen that between the date of completion of the work by the Petitioner i.e. 28th February, 2007 and the letter written by it on 31st August, 2019 to NPCCL, the only letter referred to by the Petitioner is one dated 26th August, 2011 by which it is supposed to have given its consent for the arbitration between NPCCL and ECR. However, as pointed out by NPCCL in its reply, there is no provision in the Agreement between the Petitioner and NPCCL which requires any consent from the Petitioner for the arbitration between ECR and NPCCL and that in any event, this cannot be a ground to revive a stale claim. Indeed, between 28th February 2007 and 31st August 2019, no claim appears to have been raised by the Petitioner against the NPCCL. Therefore, the so called "acknowledgment" of 24th January 2020 was not within but well beyond the period of limitation.

17. Section 43 (1) of the Act states that the Limitation Act, 1963 shall apply to arbitrations as it applies to court proceedings. Section 18 of the Limitation Act, 1963 talks of the effect of acknowledgment in writing and it reads as under:

"18. Effect of acknowledgment in writing.--(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from time when the ackno

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wledgment was so signed. (2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received." 18. Thus in order to be valid and enforceable, an acknowledgment in writing must be given before the expiration of the prescribed period of limitation. If it is after the period of limitation, it will have no effect. As held in Matha Manikeshwari Enterprises v. General Manager, South Central Railways (supra) "in order to have an acknowledgment in writing, this must be done within the period of limitation and, after the period of limitation, there will be no effect of acknowledgment." 19. The conclusion is inescapable that in the present case the claim of the Petitioner against NPCCL arising out of the aforementioned work order dated 25th November 2005 is hopelessly time-barred. Consequently, the Court declines the prayer of the Petitioner for appointment of an Arbitrator. Since the petition is being decided on the solitary ground of the claim itself being barred by limitation, I do not consider it necessary to decide the other objections raised by NPCCL to the maintainability of the petition. 20. The petition is accordingly dismissed, but in the circumstances, with no order as to costs. 21. As the restrictions due to resurgence of COVID-19 situation are continuing, learned counsel for the parties may utilize a printout of the order available in the High Court's website, at par with certified copy, subject to attestation by the concerned advocate, in the manner prescribed vide Court's Notice No.4587, dated 25th March, 2020 as modified by Court's Notice No.4798, dated 15th April, 2021.