IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE J.B.KOSHY & THE HONOURABLE MRS. JUSTICE K.HEMA MONDAY, THE 28TH JANUARY 2008 / 8TH MAGHA 1929 Arb.A.No. 15 of 2007() ---------------------- (AGAINST THE ORDER DATED 26/08/2006 IN O.P.(Arbn.) NO.288/2005 OF DISRICT COURT, THIRUVANANTHAPURAM) .................... APPELLANT/PETITIONER: ------------------------------------- THE KERALA STATE ELECTRICITY BOARD, VIDHYUTHI BHAVAN, PATTOM, THIRUVANANTHAPURAM REPRESENTED BY ITS SECRETARY. BY ADV. SRI.N.N.SUGUNAPALAN(SR.)SC,KSEB SRI.S.SUJIN RESPONDENT: RESPONDENT: --------------------------------------------- M/S.INDO ASIAN FUSEGEAR LTD., 207, 208, HEMKUNT TOWERS, 97, NEHRU PLACE, NEW DELHI. BY ADV. SRI.K.G.MOHANDAS PAI SRI.K.P.SUJESH KUMAR THIS ARBITRATION APPEALS HAVING BEEN FINALLY HEARD ON 28/01/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Kss J.B.KOSHY & K.HEMA, JJ. -------------------------------------- Arb.A.No.15 OF 2007 ------------------------------------- Dated 28th January, 2008 JUDGMENT Koshy,J . The appellant Kerala State Electricity Board (hereinafter referred to as `the Board') invited global tenders for the purchase of 1500 numbers of Low Voltage Distribution Fues Boards of A and B types. The respondent company's quotation was accepted on a total destination price of Rs.13,02,87,390/= inclusive of tax. As per the agreement, the supply was to be made within six months from the date of the purchase order which was on 7.8.1996. As per the agreement, 95% of the contract price of each consignment shall be paid on presentation of six copies of invoices and other connected documents. 5% of the contract price shall have to be paid within 30 days of issuance of Taking Over Certificate by the purchaser. Although the supply was to be completed before February 1997, the delivery period was extended till 30.6.1997 in the first instance which was further extended till 31.8.97. Some of the items supplied were sent back for alleged defect. However, the supply was completed only on 13.9.1999 after curing all the defects pointed out by the appellant Board. The Taking Over certificate (TOC) was issued on 13.9.99. According to the company, delay was caused by the Board. According to the appellant Board, delivery was extended till 31.8.97 on Arb.A.15/2003 2 condition that Board was entitled to claim liquidated damages for delayed delivery. But, there is no evidence to show that such a condition was accepted by the respondent. Even though 5% amount is payable, only on the issuance of Taking Over Certificate the Board paid Rs.9,94,401/= on 23.9.98 after deducting the liquidated damages. Disputes arose with regard to the deduction of liquidated damages. On 11.9.2002 the company invoked arbitration clause and appointed their Arbitrator. The Board also appointed their Arbitrator and Arbitrators also appointed another person as the Convenor and third Arbitrator. The Arbitral Tribunal considered the matter. The Arbitrator appointed by the Board rejected the claims, whereas the Arbitrator appointed by the company allowed two claims. There were total four claims. Claim Nos. 2 and 3 were withdrawn. Claim Nos.1 and 4 were allowed by the Arbitrator appointed by the company. Third Arbitrator agreed with that award and held that amount retained as liquidated damages was illegal and it was allowed with interest. An amount of Rs.51,22,423/= deducted as liquidated damages together with interest at the rate of 18% per annum from 13.10.99 till payment was awarded. Rs.6,45,118/= was allowed as cost to the company to be realised from the Board. This award was challenged by the appellant under section 34 of the Arbitration & Conciliation Act (in short `the Act'). Arb.A.15/2003 3 2. The main contention taken up by the Board was that the arbitration itself was not maintainable as arbitration was raised after three years of settlement of the claim. It is the contention of the Board that an amount of Rs.9,94,401/= was paid on 23.9.1998 after deducting the liquidated damages in full and final settlement. If three years' time is taken from that date, the arbitration claim is barred by limitation. Whereas the company contended that they need put their claim only after one month of giving Taking Over Certificate and Taking Over Certificate was given only on 13.9.1999. So, they have time up to 30.10.2002 to raise arbitration dispute. It was also submitted that the amount of Rs.9,94,401/= was not accepted by them in full and final settlement of the claim. From the evidence, the Arbitrators found that Board preponed the above amount only because of the World Bank's compulsion and it was paid not in full and final settlement of the claim and that amount was given on production of Bank Guarantee so that if the amount is in excess on final settlement, it can be recovered. The fact that Bank Guarantee was given and subsisting shows that an amount was paid to be adjusted at the time of issuance of TOC and it was not given in full and final settlement of the claims. Arbitrator after considering the documentary as well as oral evidence found that the claim was filed in Arb.A.15/2003 4 time within three years of the relevant date. This contention was meticulously considered by the District Judge also and agreed with the Arbitral Tribunal. Those proceedings are not barred under section 137 of the Limitation Act. In fact, question of limitation is a matter that can be decided by the Arbitrator as it is a mixed question of fact and law. 3. With regard to the findings of the Arbitrators, court cannot interfere. The jurisdiction under Section 34 of the Act to interfere in such decisions is very limited. As held by the Supreme Court in Mcdermott International Inc. v. Burn Standard Co. Ltd. and others ((2006) 11 SCC 181) the jurisdiction of the court is only supervisory and only on the specific grounds under section 34 of the Act court can interfere in the arbitration award. Here, there is no contention that any of the specific grounds under section 34 is attracted in this case for invoking the jurisdiction under section 34 of the Act. The District Court has granted some modifications of the award in favour of the appellant Board. Award of interest of 18% per annum from 13.10.99 was limited from 11.9.2002 till payment as the claim was raised only on 11.9.2002. Further, calculation mistake in the cost awarded was also corrected. Subject to that, District Court found that no grounds are mentioned for setting aside the award Arb.A.15/2003 5 under Section 34 of the Act. With regard to the above modifications of the award in favour of the appellant Board, respondent company did not file any appeal. We fully agree with the findings of the District Court and there is no ground to interfere in the same under Section 34 of the Act. There is no dispute that Arbitrator is entitled to award reasonable interest (Section 31(7) of the Act). Tribunal awarded interest at the rate of 18%. At this juncture, we also note that District Court has granted 18% interest from 11.9.2002. Considering the current rate of interest and also considering the fact that the statutory Board is facing severe financial difficulties, we requested the counsel for the company whether they are agreeable for reducing the interest and he graciously submitted that matter is left to the court. Taking all these circumstances, we reduce the interest rate from 18% to 12% from 11.9.2002 till the date of payment. With the above modification regarding rate of interest, the arbitration appeal is dismissed. J.B.KOSHY JUDGE K.HEMA JUDGE tks