IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision : 06.04.2011 Arb. Case No.124 of 2010 Sunil Goyal ...Petitioner Versus Haryana State Agriculture Marketing Board & others ...Respondents CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA Present : Mr. P.S.Rana, Advocate, for the petitioner. Mr. Durgesh Aggarwal, Advocate, for the respondents. HEMANT GUPTA, J. The petitioner has sought appointment of an Arbitrator in respect of disputes arising out of an Agreement executed between the parties. The work for construction of road from Singhapura to Gahlewala upto Punjab Border was allotted to the petitioner on 13.06.2002. Thereafter, an agreement in this respect was executed between the parties. The petitioner completed the work on 10.10.2004. The petitioner requested for the final payment for which request was made by the petitioner on 20.09.2005. The petitioner was informed to attend the office of the Executive Engineer so as to give rebate for maintaining allotted excess work, so that the final bill can be reviewed. The petitioner resisted such communication. The petitioner was not ready and willing to give rebate as sought for by the Executive Engineer. Therefore, the petitioner sent a Arb. Case No.124 of 2010 communication on 18.05.2006 for an early payment. Thereafter, the petitioner was paid amount on 20.07.2006 after deducting amount in respect of which the Executive Engineer has sought rebate from the petitioner. It is, thereafter, vide communication dated 16.08.2007, the petitioner has sought resolution of the disputes by an Arbitrator in terms of the contract Agreement. In information sought under the Right to Information Act, 2005, the petitioner was informed that the Arbitrator is not being appointed since the claim of the petitioner is time barred. Subsequently, the petitioner filed an application before the learned District Judge, Sirsa for appointment of an Arbitrator. Such petition was dismissed on 10.08.2009 for the reason that the application for filing of arbitration is beyond the period of limitation, which is 180 days from the date of making of final payment. It is, thereafter, the petitioner after withdrawing the revision petition filed against the order passed by the learned District Judge, with liberty to move an appropriate application before the Hon’ble Chief Justice, filed the present petition before this Court. Learned counsel for the petitioner has vehemently argued that restricting the right of the petitioner to raise dispute after the expiry of 180 days from the date of payment of final bill is against the mandate of law, contained in Section 28 of the Indian Contract Act, 1872 (for short ‘the Act’) after its amendment vide Indian Parliament Act No.1 of 1997, notified on 08.01.2007. After the amendment in the Act, any condition in the contract which takes away right of a party to an agreement to raise dispute is void. Learned counsel for the petitioner points out that before the Hon’ble Supreme Court in H.P.State Forest Company Ltd. Vs. M/s United India Insurance Co. Ltd. (2009)2 SCC 252, it was wrongly stated that the 2 Arb. Case No.124 of 2010 amendment carried out by Indian Parliament Act No. of 1997 has been repealed, therefore, the judgments rendered by the Hon’ble Supreme Court prior to amendment of Section 28 of the Act are applicable to the present case, which arises after the amendment in Section 28 carried out by Indian Parliament Act No.1 of 1997. On the other hand, learned counsel for the respondents has argued that the Agreement containing time limit and restricting the right to claim amount from the respondents is valid between the parties and, thus, the petitioner cannot seek adjudication of the disputes by an Arbitrator after the expiry of 180 days from the date of final payment. Clause 25-A of the Agreement between the parties reads as under: “25-A. If any question, difference or objection whatsoever shall arise in any way connected with or arising out of these instruments or the meaning or operations of any part thereof or the rights, duties or liabilities of either party then save in so far as the decision of any such matter herein before provided for and has been so decided every such matter including whatever according or whether its decision has been otherwise provided for and or whether it has been finally decided, the contract should be terminated not has been rightly terminated and as regards the rights and obligations of the parties as the result of such termination shall be referred for arbitration to the capable officer to be appointed by the Chief Administrator Board within 180 days viz six months from the date of making final payment to the contractor or when the contractor is not willing to receive the payment from the date of registered notice sent to him, that this final bill is ready for payment and his decision shall be final and binding and where the matter involves a claim for the payment or recovery or deduction of money, only the amount if any awarded in such arbitration shall, be recoverable in respect of the matter so referred. If the matter is not referred to arbitration within the specified period all the rights and claims under the contract shall be deemed to have been forfeited and absolutely barred.” 3 Arb. Case No.124 of 2010 I have heard learned counsel for the parties and find that the right of the petitioner to claim adjudication of the disputes arising out of a contract cannot be restricted after the amendment in Section 28 of the Act vide Indian Parliament Act No.1 of 1997, notified on 08.01.2007. Section 28 of the Act has been amended in pursuance of the 97th Report of the Law Commission of India. The Law Commission has noticed that Section 28 of the Act as per the existing case law is in form of two prepositions: “(a) The parties to an agreement are not allowed to substitute their own periods of limitation in place of the period laid in the general law of limitation. (b) But the parties to an agreement are allowed to substitute their own periods of prescription, that is to say, they are free to provide that if a party does not sue within a specified period, then the rights accruing under the contract shall be forfeited, or extinguished or that a party shall be discharge from all liability under the contract. (The precise words used may differ from agreement to agreement, but in substance their object is usually to forfeit or extinguish the rights). In other words, a clause limiting the time for enforcing a remedy is prohibited, but a clause limiting the duration upto which the rights remain alive, and extinguishing those rights at the end of such period, is permissible.” Considering the existing law, the Law Commission noticed that a distinction between the ‘remedy’ and ‘right’ and that a clause barring a remedy is void, but a clause extinguishing the rights is valid. This approach may be sound in theory, but it causes serious hardship and might even be abused, so as to defeat the cause of economic justice. Such contractual clauses are usually inserted where the parties are not in an equal bargaining position. It was observed that under present law, a more radical and serious consequence – the abrogation of rights – becomes permissible, while a less serious device – the extinction of the mere remedy-becomes impermissible. 4 Arb. Case No.124 of 2010 It was observed that such a position appears to be highly anomalous. The Law Commission recommend to amend Section 28 of the Act as under: “28. Every agreement – (a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract by the usual legal proceedings in the ordinary tribunals, or (b) which limits the time within which he may thus enforce his rights, or (c) which extinguishes the rights of any party thereto under or in respect of any contract on the expiry of a specified period or on failure to make a claim or to institute a suit or other legal proceeding within a specified period, or (d) which discharges any party thereto from any liability under or in respect of any contract in the circumstances specified in clause (c), is void to that extent.” Considering such recommendations, Clause (b) was inserted vide Indian Parliament Act No.1 of 1997 while the existing provision was renumbered as sub-clause (a). After amendment, Section 28 reads as under: “28. Agreements in restrain of legal proceedings void – Every agreement – (a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, or (b) which extinguishes the rights of any party thereto, or discharges any party thereto from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to that extent.” In terms of such amendment, Clause (a) deals with remedy, whereas Clause (b) deals with right and the anomalous situation observed by the Law Commission was, thus, sought to be remedied. The above said provisions of Law have been considered by the Delhi High Court in Hindustan Construction Corporation Vs. Delhi Development Authority 1999 (1) Arb. LR 272 and J.K.Anand Vs. Delhi 5 Arb. Case No.124 of 2010 Development Authority and another 2001 (2) Arb. LR 663. In the said cases, amended Section 28 was applied to the contracts, whereby the period of limitation for availing right under the Contract was found to be not applicable. However, the detailed discussion has been made in a later judgment reported as M/s Continental Construction Ltd. Vs. Food Corporation of India and others AIR 2003 Delhi 32, wherein it was held to the following effect: “11. Section 28 of the Contract Act as reproduced above was introduced on the recommendation of the Law Commissioner in order to remove the anomalies created by the earlier Act. The position of law settled before the amendment was that Section 28 would invalidate only a clause in an agreement which restricts a party from enforcing his right absolutely or which limits the time within which he may enforce his right. Section 28 before the amendment does not come into operation when contractual term spell out an extension of a right of a party to sue or spell out the discharge of a party from the liabilities. It is true that the argument of the applicants learned counsel as per the amended provisions of Section 28 of the Act would come to his rescue but the snag in the argument is that Section 28 of the Contract Act as amended is not retrospective in its operation. The present contract between the parties had been arrived at before the amendment and even the work executed before that. Consequently, the provisions of Section 28 of the Contract Act will not have a role to play, so far as the present dispute is concerned. In that view of the matter the said argument so much though of will be of little avail.” It may be noticed that in M/s Continental Construction Ltd. case (supra), the contract between the parties was arrived at before amendment, therefore, the provisions of amended Section 28 of the Act were not found to be applicable. In The Oriental Insurance Company Limited Vs. Karur Vysya Bank Limited AIR 2001 Madras 489, a Division Bench of Madras High Court considered the scope of amended Section 28 of the Act and held 6 Arb. Case No.124 of 2010 that the amendment is prospective in operation, therefore, the same cannot effect the contracts made earlier. It was held to the following effect: “9. …..We are of the view that it is unnecessary to refer the same since the amendment to Section 28 was brought into effect only on 8.1.1997. In the absence of any specific reference in the amended provision regarding its operation, it is presumed that it is only prospective. Though it is clear that by the Indian Contract (Amendment) Act, 1997, the original Section 28 has been replaced by a new paragraph in which such extinction of right unless exercised within a specified period of time, if not beyond the period of limitation, is also rendered void. As observed earlier, in the absence of any specific reference in the amended Act, it is prospective in nature and the same cannot affect the contract made earlier. However, the law as if no stands after this amendment not only the curtailment of limitation period is impermissible, but also the extinction of right, if sought to be brought by the agreement within a specified period, which period is less than the period of limitation prescribed for the suit under the contract in question is also rendered void. In view of our conclusion, as stated earlier, it is unnecessary to consider the contention regarding failure to plead etc.” In terms of the said judgment, the amended Section 28 would be applicable to the facts of the present case and the extinguishment of right contemplated by Clause 25-A of the Agreement cannot be given effect to in terms of Section 28 of the Act as amended by Indian Parliament Act No.1 of 1997. In the present case, the contract between the parties was executed in the year 2002 i.e. much after Section 28 of the Act was modified. Therefore, the principle discussed in the aforesaid judgment would be applicable to the facts of the present case. It appears that in H.P.State Forest Company Ltd. case (supra), a statement was made that the amendment has been repealed. Therefore, the provisions, as it existed prior to the amendment have to be examined. In fact, such statement made by the counsel for the appellant before the 7 Arb. Case No.124 of 2010 Hon’ble Supreme Court was under a mistaken belief. Indian Parliament Act No.1 of 1997 amended Section 28 of the Act. Later by Indian Parliament Act No.30 of 2001, the enactments specified in the first schedule were repealed to the extent mentioned in 4th column thereof. Indian Parliament Act No.1 of 1997 has been repealed, but such repeal does not affect any other enactment in which repealed enactment has been applied, incorporated or referred to in terms of the repealing Act. In terms of Section 6-A of the General Clauses Act, 1897, the amendment in the Act incorporated by the amending Act does not stand repealed by such Repealing and Amending Act, 2001. The periodical process of repealing is carried out to prune Statutes on the Statute Book. Section 6-A of the General Clauses Act, 1897 has been interpreted in Jethanand Betab v. State of Delhi, AIR 1960 SC 89, wherein identical provision of Repealing and Amending Act, 1952 came up for consideration. It was held to the following effect: “…The substance of the aforesaid provisions may be stated thus: The Act of 1949 inserted Section 6(1-A) in the Act of 1933. The 1949 Act was repealed by the 1952 Act, but the latter Act saved the operation of other enactments in which the repealed enactment has been applied, incorporated or referred to. The first question that arises for consideration is whether the amendments inserted by the 1949 Act in the 1933 Act were saved by reason of Section 4 of the 1952 Act. 6. The general object of a repealing and amending Act is stated in Halsbury’s Laws of England, 2nd Edn., Vol. 31, at p. 563, thus: “A statute Law Revision Act does not alter the law, but simply strikes out certain enactments which have become unnecessary. It invariably contains elaborate provisos.” In Khuda Bux v. Manager, Caledonian Press AIR 1954 Cal. 484, Chakravartti, C.J., neatly brings out the purpose and scope of such Acts. The learned Chief Justice says at p. 486: 8 Arb. Case No.124 of 2010 “Such Acts have no Legislative effect, but are designed for editorial revision, being intended only to excise dead matter from the statute book and to reduce its volume. Mostly, they expurgate amending Acts, because having imparted the amendments to the main Acts, those Acts have served their purpose and have no further reason for their existence. At times, inconsistencies are also removed by repealing and amending Acts. The only object of such Acts, which in England are called Statute Law Revision Acts, is legislative spring-cleaning and they are not intended to make any change in the law. Even so, they are guarded by saving clauses drawn with elaborate care,….” It is, therefore, clear that the main object of the 1952 Act was only to strike out the unnecessary Acts and excise dead matter from the statute book in order to lighten the burden of ever increasing spate of legislation and to remove confusion from the public mind. The object of the Repealing and Amending Act of 1952 was only to expurgate the amending Act of 1949, along with similar Acts, which had served its purpose.” In India Tobacco Co. Ltd. Vs. CTO, (1975) 3 SCC 512, the court held: “17. …. Broadly speaking, the principal object of a repealing and amending Act is to “excise dead matter, prune off superfluities and reject clearly inconsistent enactments” — see Mohinder Singh v. Harbhajan Kaur AIR 1955 Punj 141.” In view of the above, the Indian Parliament Act No.30 of 2001 does not have the affect of repealing the amendment carried out by Indian Parliament Act No.1 of 1997. The proceedings before the learned District Judge were not maintainable and without jurisdiction after the judgment of Supreme Court in State Bank of Patiala vs. Patel Engineering (2005) 8 SCC 618. 9 Arb. Case No.124 of 2010 Therefore, the decision in such proceedings cannot bar the jurisdiction of this court in appointing an arbitrator. Therefore, the rejection of the claim of the petitioner for the reason that the petitioner has sought appointment of an Arbitrator after 180 days from the date of payment of final bill cannot extinguish either the right or the remedy of the petitioner. Since the respondents have failed to appoint an Arbitrator, the disputes between the parties are required to be adjudicated upon by an Arbitrator. Consequently, Shri B.R.Gupta, Addl. District Judge (Retd.), resident of H.No.587, Sector-8, is appointed as an Arbitrator to adjudicate upon the disputes between the parties. 06.04.2011 (HEMANT GUPTA) Vimal JUDGE 10