1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.376 OF 2005 Municipal Corporation of Greater Bombay ....Petitioner Versus M/s.Pre Stress Products (India) ....Respondent Mr.Ramesh D. Dhanuka with Mr.H. C. Pimple i/b Mr.S. H. Ujjainwala for the Petitioner. Mr.Pradeep Sancheti with Mr.Hemant Sethi for the Respondent. CORAM : S.J. VAZIFDAR, J. DATE : 19TH SEPTEMBER, 2008. ORAL JUDGMENT : - 1. This is a Petition under Section 34 of the Arbitration and Conciliation Act, 1996 to set-aside the final award made and published by the sole Arbitrator on 5.5.2005. 2. The Petitioner and the Respondent entered into a contract 2 for carrying out civil, electrical and mechanical work for a waste water treatment facility at Versova by the Respondent for the Petitioner. The scheduled date of completion was 15.3.1991. This date was extended from time to time. The final extension was granted upto 15.10.1995. In the meantime on 8.8.1995 the Petitioner terminated the contract. The Respondent challenged the termination and sought various claims including damages. On 13.7.1997, the Petitioner and the Respondent agreed to appoint a sole Arbitrator who is a former Chief Engineer and General Manager (Technical) of the City Industrial Development Corporation of Maharashtra (CIDCO). 3. On 29.7.1999 the parties agreed before the Arbitrator that the claims pertaining to the bill of quantities items and extra items be taken up first leaving the remaining claims to be taken up subsequently. On 21.6.2001, the parties authorized the Arbitrator to declare an award pertaining to the civil engineering part of B.O.Q. and extra items and that another award should cover the 3 electrical and mechanical portion of the work executed. It was agreed that the claim in respect of escalation, interest, damages and the counter claim field by the Petitioner be determined by a separate award. On 5.3.2002, the Arbitrator made and published an interim award by which the Petitioner was directed to pay Rs.1,33,85,868=66 ps. with interest at 15% p.a. Pursuant to an application under Section 33 of the said Act, the learned Arbitrator issued an addendum to the interim award. 4. The interim award was challenged by the Petitioner filing Arbitration Petition No.229 of 2002. By an order and judgment dated 26.8.2002, the learned single Judge dismissed the Arbitration Petition save and except in regard to about 16 items. In respect of about 16 items, in view of the statement made on behalf of the counsel for both the parties, the learned Judge directed the Arbitrator to make a fresh determination thereof. The award as regards one item was set-aside. 5. The Petitioner filed an Appeal being Appeal No.686 of 2003 4 against the said order and judgment. In view of the concession made on behalf of the Respondent, the Division Bench added two items for variation at the request of the Petitioner. Apart from the same, no further orders were passed in the Appeal which was accordingly disposed of. Thereafter the proceedings before the Arbitrator continued in respect of the said items which were remanded for a fresh decision and in respect of the remaining items for damages, escalation, interest and the counter claim. 6. As recorded in the final award, both the parties confirmed that payability in respect of only one remanded item be reviewed. In respect of the remaining remanded items, as recorded in the final award, neither party sought revision of the interim award. Thus the Arbitrator was required to decide the payability alone in respect of only one of the remanded items. 7. By the said award, the learned Arbitrator awarded a sum of Rs.16,00,000/- towards the claim for under-utilized over heads, a sum of Rs.40,00,000/- towards the claim for loss due to under- utilized tools, plants, equipments and machineries etc. and a sum of 5 Rs.26,834/- towards escalation. The Arbitrator also awarded under the head "reimbursement claims of the claimant i.e. the Respondent", Rs.5133/- in respect of the payment made to the Insurance Company for taking a workmen compensation policy, Rs.41,383/- for taking a Contracts of Risk Insurance Policy and a sum of Rs.4,01,998/- towards the reimbursement of the works contract tax. The Arbitrator further awarded a sum of Rs.1,11,24,976/- towards interest and a sum of Rs.19,14,628=85 ps. in respect of the item referred back to him by the order dated 26.8.2002 as modified. The Arbitrator dismissed the Petitioner's counter claim. Thus the final award which is challenged in the present Petition awarded a sum of Rs.1,91,14,954/-. Further interest on the said sum has also been awarded from the date of making and publishing the award till the date of the decree or payment at the rate "as per the relevant law". 8. Mr.Dhanuka challenged the award on the ground that the claims were barred by limitation, the claims were barred in view of an 6 undertaking dated 27.8.1985, the award was based on the personal knowledge of the Arbitrator and on no evidence and that the award of interest was contrary to law. 9. Mr.Dhanuka's first submission is that the claim was barred by limitation. He further submitted that the arbitrator did not even consider the point of limitation in the award. He submits that the award is therefore liable to be dismissed for both these reasons. The submission is not well founded. 10. It is vital to note that in the reply to the statement of claim, there was merely a bare averment that the claims are barred by law of limitation. Nothing more was stated in this respect. Mr.Dhanuka however submitted that in view of the provisions of Section 3 of the Limitation Act, the arbitrator was bound to consider the point of limitation. Section 43 of the said Act makes the Limitation Act, 1963 applicable to arbitrations as it applies to proceedings in Court. Even if the point of limitation is not pleaded, the Court is bound to dismiss a suit if it is barred by limitation. 11. This however would be in cases where the plaint on a plain 7 reading/on the face of it, discloses that the claim made therein is barred by limitation. If the Defendant contends that the claim is barred by the law of Limitation or is not within time, for any reason not apparent from the plaint, it is for the Defendant to plead and prove the same. The onus to establish the defence would in such cases be on the Defendant. 12. Mr.Sancheti submitted that the plea of limitation was not even taken before the learned arbitrator. Mr. Dhanuka on the other hand contended that the point of limitation was argued before the arbitrator but that the arbitrator did not decide the same. 13. In cases where there is a dispute between the version of the Arbitral Tribunal on the one hand and the parties before him on the other as to what transpired during the arbitration proceedings, it is a moot point as to whether or not a Court in an application under Section 34 of the said Act can consider the dispute. 14. However, in the present case, the Petitioner has not even made an application under Section 33 of the said Act in this regard. Section 33(1)(a) of the said Act reads as under : 8 “33. Correction and interpretation of award; additional award.—(1) Within thirty days from the receipt of the arbitral award, unless another period of time has been agreed upon by the parties— (a) a party, with notice to the other party, may request the Arbitral Tribunal to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature occurring in the award;” If a point was argued and the arbitrator through inadvertence failed to consider the same in the award, an application to have the same recorded would fall within the ambit of the expression “any oth- er errors of a similar nature occurring in the award”. Indeed, in a given case, it would even amount to a typographical error, as for in- stance, where a typist omits to type a portion in the final draft of a lengthy award. 15. In the circumstances, I cannot presume that the point of limitation was argued before the arbitrator. 16. Even assuming that the point of limitation was argued before the Arbitrator, it would make no difference in the present case. 17. I will assume in favour of the Petitioner that the point of limi- 9 tation as pleaded in the petition was in fact taken before the learned arbitrator. In the present case, that would be of no assistance to the Petitioner. 18. Firstly, as noted above, there was only a bald statement about the claims being barred by limitation. The manner in which the bar of limitation has been argued before me, as I shall indicate later, is not even remotely referred to anywhere in the pleadings save as stated later. 19. Mr.Sancheti's reliance upon the judgment of the Supreme Court in Oil & Natural Gas Corporation Ltd. v. M.C. Clelland Engineers S.A., (1999) 4 Supreme Court Cases, 327 is well founded. The Supreme Court held as under : “5. The next contention urged by Shri Datta is that the claim made by the appellant for interest on the alleged delayed payments made by the respondent is barred by the law of limitation. It is pointed out that the award itself notices that the claimants cannot lose their right to interest due on the next delayed payment at the end of the three years per each due date the claim would be barred and that principle was not applied on the delayed payment for the period from 351983 to 5111984. On this aspect of the matter we may notice the 10 pleading raised before the arbitrators. It is stated in para 10(a) as follows: “The present arbitration itself is barred by limitation as the alleged claims are relating to the work done in 198182.” This is a very bald statement without setting out the details as to how the claim made by the respondent before the arbitrators have become barred by the limitation particularly when the stand of the respondent is that they had running bills and payments were made from time to time and an account has to be taken as to what amount becomes due and when; the same has to be worked out. Whether all such details have to be worked out and whether the transactions between the appellant and the respondent did not become complete until the payment of final amount are matters for adjudication. Thus, it becomes very difficult to appreciate that the plea raised before the arbitrators was sufficient to meet the situation to defeat the claim on the bar of limitation. Therefore, we do not think that we can examine the matter in the light suggested now by the learned Senior Counsel for the appellant when no foundation has been laid in the course of the proceedings before the arbitrators either in the pleadings or in the evidence. We are, therefore, of the view that the High Court was justified in dismissing the appeal against the decree passed in terms of the award.” 20. Mr.Dhanuka submitted that the judgment of the Supreme 11 Court in Oil & Natural Gas Corporation Ltd. v. M.C. Clelland Engineers S.A., (supra) is per-incuriam and liable to be ignored as their Lordships attention was not invited to Section 3 of the Limitation Act. The submission requires merely to be stated to be rejected. I am not inclined to ascribe to their Lordships of the Supreme Court, ignorance of the provisions of Section 3 of the Limitation Act merely because it is not expressly referred to in the judgment. The question before the Supreme Court was not whether Section 3 of the Limitation Act was mandatory or not but whether the plea could succeed in the facts and on the pleading in that case. 21. Thus, on the basis of the plea taken in reply to the state- ment of claim, it must be held that it was not sufficient to defeat the claim on the basis of the bar of limitation. 22. Mr.Dhanuka then relied upon Clause 96 of the General Conditions of Contract, which reads as under : “Any dispute If any doubt, dispute or difference or difference arises or happens between the to be referred Engineer or any other officer on to Commissioner one hand and the Contractor on 12 the other hand, touching or concerning the said works or any of them, or relating to the quantities, qualities description or manner of work done and executed by the Contractor, of to the quantity or quality of the materials to be employed therein, or in respect of any additions, deductions, alterations, or deviations made into or from the said works or any part of them, or touching or concerning the meaning or intention of this contract or of any part thereof or of any plans, drawings, instructions or di- rections referred to therein or which may be fur- nished, or given during the progress of the works, or touching or concerning any certificate, order, or reward which have been made or in any way what- soever relating to the interests of the Municipal Corporation or of the Contractor in the premises, every such doubt, dispute and difference shall from time to time be referred to the Commis- sioner who shall give his decision within a period of 90 days and if the contractor is not satisfied with the decision of the Commissioner or the Com- missioner fails to give the decision within the period of 90 days, such dispute may be referred to arbitra- tion as per condition no.97.” (emphasis supplied) He submitted that the Respondent was bound to refer the dispute or difference “from time to time” to the Commissioner. In other words, according to him, the moment there was a dispute of any nature including on account of delay for any duration, which could have led to a claim for damages, the Respondent ought to have 13 referred the same to the Commissioner in the first instance, under Clause 96. He submitted that the period of limitation would com- mence from the date of the alleged delay. The Respondent, he sub- mitted, failed to do so. 23. It is important to note that it was not contended that the claims were barred on the basis of the statement of claim. The question before me is that the point not having been taken before the arbitrator, whether it can be taken for the first time in a petition under Section 34. The nature of the defence in the present case was such that facts were required to be pleaded to establish the same. This was necessary because a number of answers may have been available to the Respondent had the relevant facts in support of the defence of limitation been pleaded or even argued before the learned arbitrator. This aspect quite clearly was not even argued be- fore the learned arbitrator. For instance, it would have been open to the Respondent to urge Section 21 and Article 55 of the Limitation Act which deals with successive breaches or continuing breaches. 24.(A). Learned Single Judge of this Court in M/s.R.N. Ghanekar & 14 Co. v. Municipal Corporation of Greater Mumbai by a judgment dated 11.4.2005 in Arbitration Petition No.394 of 2003, construed Clauses 96 and 97. It was held that under the Scheme of Clause 96 and clause 97, as soon as the Contractor becomes entitled to any pay- ment from the Corporation, he must lodge the claim with the Engineer and in case the Engineer does not direct the payment to be made within a reasonable period, the contractor has to lodge his claim with the Commissioner and if the Commissioner rejects the claim within 90 days or does not take any decision on the claim/payment within a pe- riod of 90 days, then the Contractor has to invoke the arbitration clause. It was held that the reference to arbitration has to be made within a period of three years from the date when, according to the Contractor, he becomes entitled to the payment. It was held that the period of limitation commences from the date the right to claim the amounts accrues to the contractor and that at the most a contractor may be entitled to claim exclusion of the period of 90 days during which time the matter remains with the Commissioner. (B). I do not see how this judgment can be of any assistance to 15 the Petitioner. As I have already discussed in detail the facts necessary to set up a plea even on this construction has not been pleaded. The issue has not been raised. There was nothing on the basis of which the arbitrator could have decided this issue. 25. The contention based on Clause 96 not having been raised either before the Arbitrator or even in the petition filed in this Court, it is not open for the Petitioner to raise the same. 26. Mr.Dhanuka also relied upon the provisions of Clause 97 of the General Conditions of Contract which pertains to arbitration. The relevant part thereof reads as under :- “97. Arbitration ....................................................... The Arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties fixing the date of the first hearing.” He submitted that for the purpose of limitation, time stops running only when the arbitrator sends a notice for the date of hear- ing. He submitted that this provision constituted an exception under Section 21 of the said Act, which reads as under :- “21. Commencement of arbitral proceedings.— 16 Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.” 27. Mr. Dhanuka submitted that the above extract from Clause 97 constituted an agreement between the parties within the ambit of Section 21. I am unable to agree. This clause has no bearing on the issue of limitation whatsoever. 28. Section 43(1) and 43(2) reads thus :- 43. Limitations.—(1) The Limitation Act, 1963 (XXXVI of 1963), shall apply to arbitrations as it applies to proceedings in court. (2) For the purposes of this section and the Limitation Act, 1963 (XXXVI of 1963), an ar- bitration shall be deemed to have commenced on the date referred in Section 21.” Firstly, there is no pleading that there was any agreement between the parties as to when the arbitral proceedings shall be deemed to commence. This is a pure question of fact. It was required to be pleaded. If, according to the Petitioner, the above extract from Clause 97 constituted such an agreement, it was 17 necessary for the Petitioner to plead the same. It did not do so. 29. Further, it is important to note that it is not even contended that such an agreement was pleaded before the arbitrator. In ground xxviii of the above petition, it is merely contended that the claim was on the face of it barred, for the period of three years from the date of the notice by the arbitrator i.e. notice under Clause 97 of the General Conditions of Contract fixing the date of the first meeting. The Petitioner averred that the learned arbitrator had fixed the first meeting on 14.8.1998 and that the claims made by the Respondent being prior to three years thereto, were barred by limitation. 30. Even assuming that this contention was argued before the arbitrator, there is no manner in which the arbitrator could have even considered the submission in the absence of any pleading. 31. The necessity of a pleading in such cases is that it gives the other side an opportunity of meeting the case even on facts. The plea is one of an agreement contrary to the presumption under Section 21. Such an agreement could have been altered/modified or even 18 abandoned by the parties. What is important to note is that the absence of a plea on such facts, deprives the other side of meeting the case altogether. The arbitrator therefore could not even have gone into this question. 32. Mr. Sancheti relied upon a judgment of a Division Bench of this Court in Vimal G. Jain v. Vertex Financial Services Pvt. Ltd., 2007 (5) Bombay Cases Reporter, 478 = MANU/MH/0116/2007. One of the grounds in the petition under Section 34 was that the claims were barred by limitation, as prescribed under the bye-laws of the Stock Exchange. The point regarding the bar of limitation was not raised before the learned arbitrator. The Division Bench held as under :- “8. The Section 4 of the said Act provides that: 4. Waiver of right to object: A party who knows that (a) any provision of this Part from which the parties may derogate, or (b) any requirement under the arbitration agreement, has not been complied with and yet proceeds with the arbitration without Page 0784 stating his objection to such non-compliance without undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object. 19 Further, the Section 16(2) of the said Act clearly provides that a plea that the Arbitral Tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because he has appointed, or participated in the appointment of, an arbitrator. Conjoint reading of the above provisions of law would disclose that a party to the arbitration proceedings seeking to raise the point of bar of limitation for initiating the arbitration proceedings should raise the issue at the earliest opportunity and in any case not later than the submission of the statement of defence, otherwise it would be deemed to have been waived. The law in that regard is well-settled by the decision of the Apex Court in Narayan Prasad Lahia v. Nikunj Kumar Lohia and Ors. Reported in MANU/SC/0114/2002 wherein it has been clearly held that unless the objection in terms of Section 16(2) is raised within the time prescribed under the said Section, it would be deemed to have been waived in terms of Section 4 of the said Act. In the case in hand, undisputedly, the point regarding the bar of limitation was never raised before the learned arbitrator. Being so, it should be deemed to have been waived.” 9. Even otherwise, the point of limitation is a mixed question of law and fact. In fact, the law in this regard also is well-settled and the same was reiterated by the Apex Court in the decision sought to be relied upon on behalf of the appellant himself. In Ramesh Desai’s case (supra), it was clearly observed by the Apex Court that “A plea of limitation cannot be decided as an abstract 20 principle of law divorced from facts as in every case the starting point of limitation has to be ascertained which is entirely a question of fact. A plea of limitation is a mixed question of law and fact.”. Once it is clear that the point of limitation was not raised before the learned Arbitrator, apart from the fact that it is deemed to have been waived, the question of entertaining such point in proceedings under Section 34 of the said Act or in an appeal arising from the order passed therein, cannot arise. Hence no fault can be found with the impugned order in that regard.” 33. Mr.Sancheti also relied upon an another judgment of a Division Bench of this Court in Maharashtra Industrial Development Corporation Ltd. v. Govardhani Construction Company, MANU/MH/0246/2008 where it was held :- “81. Even otherwise, the point of limitation is a mixed question of law and fact, specifically in