- 1 - IN THE HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. O.O.C.J. O.O.C.J. ARBITRATION PETITION NO.472 OF 2003 ARBITRATION PETITION NO.472 OF 2003 ARBITRATION PETITION NO.472 OF 2003 ... ... ... Patel Engineering Ltd. ...Petitioner v/s. v/s. v/s. The Municipal Corporation The Municipal Corporation The Municipal Corporation of Gr.Bombay ...Respondent of Gr.Bombay ...Respondent of Gr.Bombay ...Respondent ... ... ... Mr.Janak Dwarkadas with Mr.T.N. Subramanium and Mr.Janak Dwarkadas with Mr.T.N. Subramanium and Mr.Janak Dwarkadas with Mr.T.N. Subramanium and Mr.D.J. Khambata i/b B. Munim & Co. for the Mr.D.J. Khambata i/b B. Munim & Co. for the Mr.D.J. Khambata i/b B. Munim & Co. for the Petitioner. Petitioner. Petitioner. Mr.R.D. Dhanuka with Mr. J. Xavier for Respondent. Mr.R.D. Dhanuka with Mr. J. Xavier for Respondent. Mr.R.D. Dhanuka with Mr. J. Xavier for Respondent. ... ... ... CORAM: D.K.DESHMUKH, J. DATED: 21ST MARCH,2005 - 2 - P.C.: 1. This petition is filed under Section 33 of the 1. This petition is filed under Section 33 of the 1. This petition is filed under Section 33 of the Arbitration Act, 1940 for a declaration that the Arbitration Act, 1940 for a declaration that the Arbitration Act, 1940 for a declaration that the arbitration agreement between the parties contained arbitration agreement between the parties contained arbitration agreement between the parties contained in clause 97 of the General Conditions of the in clause 97 of the General Conditions of the in clause 97 of the General Conditions of the Contract has come to an end and/or has exhausted Contract has come to an end and/or has exhausted Contract has come to an end and/or has exhausted itself and now there is no Arbitration Agreement in itself and now there is no Arbitration Agreement in itself and now there is no Arbitration Agreement in existence between the parties. existence between the parties. existence between the parties. 2. The facts that are material and relevant for 2. The facts that are material and relevant for 2. The facts that are material and relevant for deciding this petition are that the Petitioner is a deciding this petition are that the Petitioner is a deciding this petition are that the Petitioner is a Public Limited Company engaged in the business of Public Limited Company engaged in the business of Public Limited Company engaged in the business of construction and engineering. The Respondent/Bombay construction and engineering. The Respondent/Bombay construction and engineering. The Respondent/Bombay Municipal Corporation invited tenders in respect of Municipal Corporation invited tenders in respect of Municipal Corporation invited tenders in respect of construction of an underground tunnel for water construction of an underground tunnel for water construction of an underground tunnel for water supply to the Bombay city. The Petitioner submitted supply to the Bombay city. The Petitioner submitted supply to the Bombay city. The Petitioner submitted a tender for execution of the work of construction of a tender for execution of the work of construction of a tender for execution of the work of construction of underground tunnel between Dr.E. Moses Road and underground tunnel between Dr.E. Moses Road and underground tunnel between Dr.E. Moses Road and Ruparel College, Mumbai. The tender of the Ruparel College, Mumbai. The tender of the Ruparel College, Mumbai. The tender of the Petitioner was accepted. The General Conditions of Petitioner was accepted. The General Conditions of Petitioner was accepted. The General Conditions of Contract formed a part of the contract awarded to the Contract formed a part of the contract awarded to the Contract formed a part of the contract awarded to the Petitioner. The work commenced in October, 1989. Petitioner. The work commenced in October, 1989. Petitioner. The work commenced in October, 1989. - 3 - The work could not be completed in time by the Petitioner, therefore, extension of time was sought. Petitioner, therefore, extension of time was sought. Petitioner, therefore, extension of time was sought. Despite extension the Petitioner could not complete Despite extension the Petitioner could not complete Despite extension the Petitioner could not complete the work. Ultimately by letter dated 7th August, the work. Ultimately by letter dated 7th August, the work. Ultimately by letter dated 7th August, 1992 the Respondent issued a notice to the Petitioner 1992 the Respondent issued a notice to the Petitioner 1992 the Respondent issued a notice to the Petitioner to proceed with the work of excavation of the tunnel to proceed with the work of excavation of the tunnel to proceed with the work of excavation of the tunnel using TBM with due diligence within 30 days from the using TBM with due diligence within 30 days from the using TBM with due diligence within 30 days from the receipt of the notice, and failing which it was receipt of the notice, and failing which it was receipt of the notice, and failing which it was stated that further action including cancellation of stated that further action including cancellation of stated that further action including cancellation of the W-20 contract would be taken. In these the W-20 contract would be taken. In these the W-20 contract would be taken. In these circumstances, Arbitration Suit No.2984 of 1992 was circumstances, Arbitration Suit No.2984 of 1992 was circumstances, Arbitration Suit No.2984 of 1992 was filed in this Court by the Petitioner in September, filed in this Court by the Petitioner in September, filed in this Court by the Petitioner in September, 1992 for taking the arbitration agreement on record 1992 for taking the arbitration agreement on record 1992 for taking the arbitration agreement on record and for reference of the disputes between the parties and for reference of the disputes between the parties and for reference of the disputes between the parties to the arbitrator. The Petitioner also filed to the arbitrator. The Petitioner also filed to the arbitrator. The Petitioner also filed Arbitration Petition No.151 of 1992 under Section Arbitration Petition No.151 of 1992 under Section Arbitration Petition No.151 of 1992 under Section 41(b) of the Arbitration Act, 1940 for an order of 41(b) of the Arbitration Act, 1940 for an order of 41(b) of the Arbitration Act, 1940 for an order of injunction restraining the Respondent from injunction restraining the Respondent from injunction restraining the Respondent from terminating the contract. By consent of parties, the terminating the contract. By consent of parties, the terminating the contract. By consent of parties, the arbitration suit was decided by order dated 16th arbitration suit was decided by order dated 16th arbitration suit was decided by order dated 16th October, 1992 and this Court referred all the claims October, 1992 and this Court referred all the claims October, 1992 and this Court referred all the claims and counter claims of the parties to the sole and counter claims of the parties to the sole and counter claims of the parties to the sole arbitrator Hon’ble Mr. Justice D.M. Rege (Retired). arbitrator Hon’ble Mr. Justice D.M. Rege (Retired). arbitrator Hon’ble Mr. Justice D.M. Rege (Retired). Accordingly the parties appeared before the learned Accordingly the parties appeared before the learned Accordingly the parties appeared before the learned arbitrator and filed their claims and counter claims. arbitrator and filed their claims and counter claims. arbitrator and filed their claims and counter claims. - 4 - In the counter claim that was filed by the In the counter claim that was filed by the In the counter claim that was filed by the Respondent, the Respondent stated that as per the Respondent, the Respondent stated that as per the Respondent, the Respondent stated that as per the terms of the contract because of the failure of the terms of the contract because of the failure of the terms of the contract because of the failure of the Petitioner to carry out the entire work, the Petitioner to carry out the entire work, the Petitioner to carry out the entire work, the Respondent/Corporation is entitled to complete the Respondent/Corporation is entitled to complete the Respondent/Corporation is entitled to complete the work at the risk and costs of the Petitioner. It was work at the risk and costs of the Petitioner. It was work at the risk and costs of the Petitioner. It was stated that the actual additional cost of executing stated that the actual additional cost of executing stated that the actual additional cost of executing the balance work under the contract cannot be the balance work under the contract cannot be the balance work under the contract cannot be estimated by them now and hence they reserved their estimated by them now and hence they reserved their estimated by them now and hence they reserved their right and sought liberty to omit to make any claim on right and sought liberty to omit to make any claim on right and sought liberty to omit to make any claim on that count herein and reserved their right to make that count herein and reserved their right to make that count herein and reserved their right to make fresh claim in respect of actual risk and cost of the fresh claim in respect of actual risk and cost of the fresh claim in respect of actual risk and cost of the Petitioner. It appears that the counter claim was Petitioner. It appears that the counter claim was Petitioner. It appears that the counter claim was filed by the Respondent on 15th March, 1993. The filed by the Respondent on 15th March, 1993. The filed by the Respondent on 15th March, 1993. The balance work was awarded to one Hindustan balance work was awarded to one Hindustan balance work was awarded to one Hindustan Construction Company Ltd. on 14th December, 1994. Construction Company Ltd. on 14th December, 1994. Construction Company Ltd. on 14th December, 1994. The arbitration proceedings continued between the The arbitration proceedings continued between the The arbitration proceedings continued between the parties. The learned Arbitrator made his award on parties. The learned Arbitrator made his award on parties. The learned Arbitrator made his award on 22nd April, 1997. The learned arbitrator awarded 22nd April, 1997. The learned arbitrator awarded 22nd April, 1997. The learned arbitrator awarded certain amounts to the claimant and the learned certain amounts to the claimant and the learned certain amounts to the claimant and the learned arbitrator also awarded certain amounts to the arbitrator also awarded certain amounts to the arbitrator also awarded certain amounts to the Respondent. None of the parties challenged the Respondent. None of the parties challenged the Respondent. None of the parties challenged the award. This award was fully implemented by the award. This award was fully implemented by the award. This award was fully implemented by the parties. parties. parties. - 5 - 3. It appears that the Hindustan Construction 3. It appears that the Hindustan Construction 3. It appears that the Hindustan Construction Company to whom the incomplete work was awarded Company to whom the incomplete work was awarded Company to whom the incomplete work was awarded completed the work in the month of August, 2000. completed the work in the month of August, 2000. completed the work in the month of August, 2000. They submitted their final bill in the month of They submitted their final bill in the month of They submitted their final bill in the month of March, 2001. Thereafter the Respondent issued a March, 2001. Thereafter the Respondent issued a March, 2001. Thereafter the Respondent issued a notice to the Petitioner asking the Petitioner to pay notice to the Petitioner asking the Petitioner to pay notice to the Petitioner asking the Petitioner to pay the amount of damages in March, 2003 and stated that the amount of damages in March, 2003 and stated that the amount of damages in March, 2003 and stated that if the Petitioner does not pay the amount , they will if the Petitioner does not pay the amount , they will if the Petitioner does not pay the amount , they will invoke the arbitration clause 97 and refer the matter invoke the arbitration clause 97 and refer the matter invoke the arbitration clause 97 and refer the matter to arbitration. It is in these circumstances that to arbitration. It is in these circumstances that to arbitration. It is in these circumstances that the present petition has been filed under Section 33 the present petition has been filed under Section 33 the present petition has been filed under Section 33 of the Arbitration Act, 1940. of the Arbitration Act, 1940. of the Arbitration Act, 1940. 4. The learned Counsel appearing for the Petitioner 4. The learned Counsel appearing for the Petitioner 4. The learned Counsel appearing for the Petitioner submits that the cause of action for claiming damages submits that the cause of action for claiming damages submits that the cause of action for claiming damages on account of the work that remained incomplete arose on account of the work that remained incomplete arose on account of the work that remained incomplete arose in the year 1992, when the contract was terminated. in the year 1992, when the contract was terminated. in the year 1992, when the contract was terminated. When the counter claim was filed by the Respondent When the counter claim was filed by the Respondent When the counter claim was filed by the Respondent before the arbitrator, the Respondent had sought before the arbitrator, the Respondent had sought before the arbitrator, the Respondent had sought leave of the learned arbitrator to make a claim for leave of the learned arbitrator to make a claim for leave of the learned arbitrator to make a claim for damages because the amount of damages was not damages because the amount of damages was not damages because the amount of damages was not quantified quantified quantified at that time. In the award the learned In the award the learned In the award the learned arbitrator though referred to the statement in the arbitrator though referred to the statement in the arbitrator though referred to the statement in the reply of the Respondent that they are seeking leave reply of the Respondent that they are seeking leave reply of the Respondent that they are seeking leave of the arbitrator, he neither granted the leave nor of the arbitrator, he neither granted the leave nor of the arbitrator, he neither granted the leave nor - 6 - rejected the same. Therefore the only remedy rejected the same. Therefore the only remedy rejected the same. Therefore the only remedy available to the Respondent was to challenge the available to the Respondent was to challenge the available to the Respondent was to challenge the award on that ground, but the Respondent did not award on that ground, but the Respondent did not award on that ground, but the Respondent did not challenge the award and accepted the same. According challenge the award and accepted the same. According challenge the award and accepted the same. According to the learned Counsel for the Petitioner, therefore, to the learned Counsel for the Petitioner, therefore, to the learned Counsel for the Petitioner, therefore, in these circumstances invocation of the arbitration in these circumstances invocation of the arbitration in these circumstances invocation of the arbitration clause now for claiming damages is barred by clause now for claiming damages is barred by clause now for claiming damages is barred by principle analogous to Order 2 Rule 2 of CPC. principle analogous to Order 2 Rule 2 of CPC. principle analogous to Order 2 Rule 2 of CPC. 5. The learned Counsel further submits that the 5. The learned Counsel further submits that the 5. The learned Counsel further submits that the cause of action for claiming damages arose in the cause of action for claiming damages arose in the cause of action for claiming damages arose in the year 1992 when the contract was terminated. year 1992 when the contract was terminated. year 1992 when the contract was terminated. According to the learned Counsel, in any case when According to the learned Counsel, in any case when According to the learned Counsel, in any case when the Respondent awarded the contract to Hindustan the Respondent awarded the contract to Hindustan the Respondent awarded the contract to Hindustan Construction Company in December, 1994, they knew Construction Company in December, 1994, they knew Construction Company in December, 1994, they knew what was the amount of damages, therefore, they could what was the amount of damages, therefore, they could what was the amount of damages, therefore, they could have added their claim by amending their reply filed have added their claim by amending their reply filed have added their claim by amending their reply filed before the arbitrator. But the Respondent did before the arbitrator. But the Respondent did before the arbitrator. But the Respondent did nothing. According to the learned Counsel, nothing. According to the learned Counsel, nothing. According to the learned Counsel, therefore, even if it is assumed that the leave of therefore, even if it is assumed that the leave of therefore, even if it is assumed that the leave of the arbitrator sought by the Respondent was granted the arbitrator sought by the Respondent was granted the arbitrator sought by the Respondent was granted by the arbitrator, then also the claim for damages by the arbitrator, then also the claim for damages by the arbitrator, then also the claim for damages had to be made within a period of three years from had to be made within a period of three years from had to be made within a period of three years from the date of accrual of the cause of action. the date of accrual of the cause of action. the date of accrual of the cause of action. Admittedly, no such claim has been made within a Admittedly, no such claim has been made within a Admittedly, no such claim has been made within a - 7 - period of three years from the date of accrual of the period of three years from the date of accrual of the period of three years from the date of accrual of the cause of action. Therefore, the claim is also barred cause of action. Therefore, the claim is also barred cause of action. Therefore, the claim is also barred by the law of limitation. The learned Counsel for by the law of limitation. The learned Counsel for by the law of limitation. The learned Counsel for the Petitioner submits that even the claim of the the Petitioner submits that even the claim of the the Petitioner submits that even the claim of the Respondent that invocation of the arbitration clause Respondent that invocation of the arbitration clause Respondent that invocation of the arbitration clause would be governed by the provisions of new Act and would be governed by the provisions of new Act and would be governed by the provisions of new Act and not the old Act is not proper because the cause of not the old Act is not proper because the cause of not the old Act is not proper because the cause of action for claiming damages arose in the year 1992 action for claiming damages arose in the year 1992 action for claiming damages arose in the year 1992 when the contract was terminated and not when the when the contract was terminated and not when the when the contract was terminated and not when the amount of damages got crystalised. In 1992 when the amount of damages got crystalised. In 1992 when the amount of damages got crystalised. In 1992 when the cause of action arose it was the old Act, which was cause of action arose it was the old Act, which was cause of action arose it was the old Act, which was in force and therefore the new Act would not apply. in force and therefore the new Act would not apply. in force and therefore the new Act would not apply. 6. The learned Counsel appearing for the Respondent, 6. The learned Counsel appearing for the Respondent, 6. The learned Counsel appearing for the Respondent, on the other hand, submits that this petition under on the other hand, submits that this petition under on the other hand, submits that this petition under Section 33 is not maintainable because the disputes Section 33 is not maintainable because the disputes Section 33 is not maintainable because the disputes arising even after the termination of the contract arising even after the termination of the contract arising even after the termination of the contract can be referred to the arbitration and therefore it can be referred to the arbitration and therefore it can be referred to the arbitration and therefore it cannot be said that because the contract is over the cannot be said that because the contract is over the cannot be said that because the contract is over the arbitration clause ceased to operate. The learned arbitration clause ceased to operate. The learned arbitration clause ceased to operate. The learned Counsel submits that on the principle analogous to Counsel submits that on the principle analogous to Counsel submits that on the principle analogous to Order 2 Rule 2 of CPC the leave of the arbitrator was Order 2 Rule 2 of CPC the leave of the arbitrator was Order 2 Rule 2 of CPC the leave of the arbitrator was sought, though the arbitrator has referred to it in sought, though the arbitrator has referred to it in sought, though the arbitrator has referred to it in his award the arbitrator has not refused to grant his award the arbitrator has not refused to grant his award the arbitrator has not refused to grant the leave. Therefore, the leave is presumed to have been leave. Therefore, the leave is presumed to have been leave. Therefore, the leave is presumed to have been - 8 - granted in favour of the Respondent. It is further granted in favour of the Respondent. It is further granted in favour of the Respondent. It is further claimed that the limitation starts from the date on claimed that the limitation starts from the date on claimed that the limitation starts from the date on which the amount of damages were crystalised and which the amount of damages were crystalised and which the amount of damages were crystalised and according to the learned Counsel that crystallisation according to the learned Counsel that crystallisation according to the learned Counsel that crystallisation has taken place in March, 2003 when the demand was has taken place in March, 2003 when the demand was has taken place in March, 2003 when the demand was made and payment was not made. The learned Counsel made and payment was not made. The learned Counsel made and payment was not made. The learned Counsel submits that the present petition under Section 33 is submits that the present petition under Section 33 is submits that the present petition under Section 33 is not maintainable because invocation of the not maintainable because invocation of the not maintainable because invocation of the arbitration clause is now under the new Act and not arbitration clause is now under the new Act and not arbitration clause is now under the new Act and not under the old Act. under the old Act. under the old Act. 7. Now, in the light of these rival submissions it 7. Now, in the light of these rival submissions it 7. Now, in the light of these rival submissions it becomes necessary first to refer to clause 97 of the becomes necessary first to refer to clause 97 of the becomes necessary first to refer to clause 97 of the General Conditions of Contract. It reads as under: General Conditions of Contract. It reads as under: General Conditions of Contract. It reads as under: ARBITRATION ARBITRATION ARBITRATION 97. All disputes or differences whatsoever 97. All disputes or differences whatsoever 97.