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Sunday, February 16, 2014

Sec.21 and sec. 43 of Arbitration & conciliation Act - Sec. 3 of Limitation Act - counter claims - Whether limitation for counter claim starts from the date of disputes or from the date of notice or from the date of arbitration proceedings - Arbitrator dismissed the counter claim as barred by limitation - Single judge High court confirmed the same - the D.B. in appeal negative the same and held that whole counter claim is with in time - Apex court held that for the counter claim limitation starts from date of initiation of arbitration proceedings if a notice was issued after disputes arose and requested for appointment of arbitrator and further held that no court/arbitrator should be allowed to go beyond scope of notice for excess claim added in the counter claim and as such the apex court modified the order of DB and held that excess claim other than mentioned in notice - is only barred by limitation = Voltas Limited ... Appellant Versus Rolta India Limited ...Respondent = 2014 (Feb.Part) judis.nic.in/supremecourt/filename=41224

  Sec.21 and sec. 43 of Arbitration & conciliation Act - Sec. 3 of Limitation Act - counter claims - Whether limitation for counter claim starts from the date of disputes or from the date of notice or from the date of arbitration proceedings - Arbitrator dismissed the counter claim as barred by limitation - Single judge High court confirmed the same - the D.B. in appeal negative the same and held that whole counter claim is with in time - Apex court  held that for the counter claim limitation starts from date of initiation of arbitration proceedings if  a notice was issued after disputes arose and requested for appointment of arbitrator  and further held that  no court/arbitrator should be allowed to go beyond scope of notice  for excess claim added in the counter claim and as such the apex court modified the order of DB and held that excess claim other than mentioned in notice - is only barred by limitation =
Whether the counter claim, or a  substantial  part  thereof,  is
         barred by the law of limitation?
Arbitrator interim award =

 “The respondent has been vigilant and assertive of  its  legal  rights
      right  from  3rd  December  2004  on  which  date  the  Contract   was
      terminated.  The assertions in the letters dated 27th April  2005  and
      29th March 2006 show unmistakable consciousness of its rights  on  the
      part of the Respondent.  The last letter dated 29th March 2006 is  the
      notice of the Advocates of  the  Respondent  asserting  its  right  to
      invoke arbitration.  The Tribunal is of the view that cause of  action
      for the Counter-claim which must be treated as an  independent  action
      to be instituted, really arose latest  by  29th  March  2008,  if  not
      earlier it is clear that the Counter  claim  is  filed  only  on  26th
      September, 2011 and as such it is beyond the period of  limitation  of
      three years.”
High court order under sec.34 of the Act =

   “When the notice was given by the respondent on 29th March, 2006,  the
      said notice was only in respect of the disputes having arisen  between
      the parties due to refusal of claims made by the petitioner.   On  the
      date of issuance of such notice, the petitioner had not even  asserted
      its claim.  After issuance of such notice on  29th  March,  2006,  the
      petitioner by its letter dated 17th April, 2006 had asserted its claim
      for the first time.  The dispute  in  respect  of  the  counter  claim
      raised when the petitioner did not pay the said  amount  as  demanded.
      Such disputes thus did not exist when the notice invoking  arbitration
      agreement was given by the respondent on  29th  March,  2006.   In  my
      view, the arbitral proceedings  therefore,  cannot  be  said  to  have
      commenced in respect of the counter claim when the notice was given by
      the respondent on 29th March, 2006.  The counter claim was  admittedly
      filed on 26th September, 2011 which was  made  beyond  the  period  of
      limitation.  The arbitral proceedings  commenced  in  respect  of  the
      counter claim only when the said  counter  claim  was  lodged  by  the
      petitioner on 26th September, 2011.  Even if the date  of  refusal  on
      the part of the respondent, to pay  the  amount  as  demanded  by  the
      petitioner by its notice dated  17th  April,  2006  is  considered  as
      commencement of dispute, even in such case on the date of  filing  the
      counter claim i.e. 26th September, 2011, the counter claim was  barred
      by law of limitation.  In my view, thus the tribunal was justified  in
      rejecting the counter claim filed by the petitioner as time barred.”
Division Bench in appeal 
the principles stated  in  Oil  and
   Natural Gas  Corporation  Ltd.  v.  Saw  Pipes  Ltd.[3]  as  regards  the
   jurisdiction of the Court while dealing with an application under Section
   34 of the Act, the concept of limitation as has been explained in Praveen
   Enterprises (supra), 
the demand made by the appellant therein  by  letter
   dated 17.4.2006 quantifying a sum of Rs.68.63 crores, 
exclusion of period
   between 3.5.2006 to 19.11.2010 during which period the application  under
   Section 11 of the Act was pending before  the  High  Court  and  
on  that
   foundation, in the ultimate eventuate, came  to  hold  that  the  counter
   claim filed on 26.9.2011  was  within  limitation.   
The  aforesaid  view
   obliged the Division Bench to allow the appeal, set  aside  the  judgment
   and order passed by the learned single Judge as a consequence thereof the
   rejection  of  the  counter  claim  by  the  learned   Arbitrator   stood
   overturned.  
Be it noted, rest  of  the  interim  award  of  the  learned
   Arbitrator was not disturbed.
Apex court judgement =

On a careful reading of the verdict in Praveen Enterprises  (supra),  we
   find that the two-Judge Bench, after referring  to,  as  we  have  stated
   hereinbefore, 
Sections 21 and  43  of  the  Act  and  Section  3  of  the
   Limitation Act has opined, regard being had to the language  employed  in
   Section 21, that an exception  has  to  be  carved  out.  
 It  saves  the
   limitation for filing a counter claim if  a  respondent  against  whom  a
   claim has been made satisfies the twin test, namely, he had made a  claim
   against the claimant and sought arbitration by serving a  notice  to  the
   claimant.  
In our considered opinion the said exception squarely  applies
   to the case at hand inasmuch as the  appellant  had  raised  the  counter
   claim and sought arbitration by expressing its  intention  on  number  of
   occasions.  
That apart, it is also perceptible  that  the  appellant  had
   assured for appointment of an arbitrator.  
Thus, the  counter  claim  was
   instituted on 17.4.2006 and hence, the irresistible conclusion is that it
   is within limitation.
In the present case, when it is absolutely clear that the counter  claim
   in respect of the enhanced sum is totally barred by limitation and is not
   saved by  exception  carved  out  by  the  principle  stated  in  Praveen
   Enterprises (supra), we are unable to agree with the view of the Division
   Bench of the High Court that the counter claim, as a whole, is not barred
   by limitation.  Thus analysed, the counter claim relating to  the  appeal
   which deals with civil contracts shall be restricted to the amount stated
   in the letter dated 17.4.2006, i.e., Rs.68,63,72,178.08, and  as  far  as
   the other appeal which pertains to air-conditioning contract, the quantum
   shall stand restricted to as specified in  the  letter  dated  21.3.2006,
   i.e., Rs.19,99,728.58.

Consequently, both the appeals are allowed in part, the judgment of  the
   Division Bench in Appeals Nos. 7 of 2013 and 8 of 2013  is  modified  and
   the interim award passed by learned Arbitrator as  regards  rejection  of
   the counter claims in toto  stands  nullified.  


 2014 (Feb.Part) judis.nic.in/supremecourt/filename=41224                   ANIL R. DAVE, DIPAK MISRA


 IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                    CIVIL APPEAL NO. 2073        OF 2014
               (Arising out of SLP (Civil) No. 30015 of 2013)

Voltas Limited                                     ... Appellant

                                   Versus

Rolta India Limited                                 ...Respondent

                                    WITH

                    CIVIL APPEAL NO. 2076        OF 2014
               (Arising out of SLP (Civil) No. 31195 of 2013)






                               J U D G M E N T


Dipak Misra, J.


      Leave granted in both the Special Leave Petitions.

2. Regard being had to the similitude of controversy  in  both  the  appeals
   they were heard together and are disposed of by a common judgment.  Be it
   noted, the Division Bench of the High Court of Judicature at  Bombay,  by
   two separate judgments and orders passed on 16.8.2013 in Appeals  Nos.  7
   of 2013 and 8 of  2013  has  set  aside  the  judgment  and  order  dated
   1.10.2012 passed by the learned single Judge in Arbitration Petition  (L)
   Nos. 1239 of 2012 and 1240 of 2012 respectively as a consequence of which
   two interim awards passed by  the  learned  Arbitrator  on  26.7.2012  in
   respect of two contracts between the same parties rejecting  the  counter
   claim of the respondent-herein have  been  annulled.   For  the  sake  of
   clarity and convenience we  shall  state  the  facts  from  Civil  Appeal
   arising out of Special Leave Petition (C) No.  30015  of  2013,  for  the
   Division Bench has observed that the Appeal No. 7 of  2013  had  emanated
   from the disputes which arose in respect of civil construction  agreement
   dated 2.2.2001 and in Appeal No.  8  of  2013  the  disputes  related  to
   agreement dated 8.1.2003 for air-conditioning of the two buildings to  be
   constructed for the appellant therein and no  separate  submissions  were
   advanced before it and the position  was  the  same  before  the  learned
   single Judge.

3. The expose’ of facts are that the appellant and respondent  entered  into
   a civil construction contract for construction of two buildings known  as
   Rolta Bhawan II (RB-II)  and  Rolta  Bhawan  III  (RB-II)  and  also  for
   modification of building Rolta Bhawan I(RB-I) previously  constructed  by
   the respondent.
As certain disputes arose, on 3.12.2004  the  respondent
   terminated the  contract.   
After  certain  correspondences  between  the
   parties pertaining to the termination of the contract  the  appellant  by
   letter dated 29.3.2006 invoked the arbitration clause in respect  of  its
   claims against the respondent.
As the respondent failed  to  appoint  an
   arbitrator, it filed an application under Section 11 of  the  Arbitration
   and Conciliation Act, 1996 (for short “the Act”) before the High Court of
   Bombay for appointment of arbitrator and the designated Judge vide  order
   dated 19.11.2010 appointed the sole arbitrator.

4. After the controversy came in seisin before the  learned  Arbitrator,  he
   issued certain directions and, as the facts would unfurl,  the  appellant
   filed  its  statement  of  claim  on  13.4.2011   claiming   a   sum   of
   Rs.23,31,62,429.77 together with interest at the rate of  15%  per  annum
   from the  respondent.  
The  respondent,  after  filing  its  defence  on
   24.8.2011, filed the counter claim of  Rs.333,73,35,026/-  together  with
   interest at the rate of 18% per  annum  from  the  date  of  filing  till
   payment/realization  thereof.  
In  the  counter  claim  the   respondent
   justified the termination of the agreement  and  contended  that  it  was
   entitled to damages for breach of contract.
 In  the  counter  claim  the
   notice dated 17.4.2006 sent by the respondent detailing its counter claim
   to the appellant was referred to.

5. After the counter  claim  was  lodged,  the  appellant-herein  filed  its
   objections about the tenability of the counter  claim  stating  that  the
   same was not maintainable and was also barred by limitation.  The learned
   Arbitrator on 7.1.2012 framed two issues  regarding  the  tenability  and
   limitation of the counter claim as preliminary issues.  They are: -

      “(i)  Whether the counter claim, or a  substantial  part  thereof,  is
         barred by the law of limitation?

      (ii)  Whether the counter claim is not  maintainable  and  beyond  the
         scope of reference?”

6. After adumbrating to the facts the learned Arbitrator came to  hold  that
   the limitation for making a counter claim is required to be asserted with
   reference to the date on which the cause of action arises and the date on
   which  the  counter  claim  is  filed.   After  so  opining  the  learned
   Arbitrator recorded as follows: -

      “The respondent has been vigilant and assertive of  its  legal  rights
      right  from  3rd  December  2004  on  which  date  the  Contract   was
      terminated.  The assertions in the letters dated 27th April  2005  and
      29th March 2006 show unmistakable consciousness of its rights  on  the
      part of the Respondent.  The last letter dated 29th March 2006 is  the
      notice of the Advocates of  the  Respondent  asserting  its  right  to
      invoke arbitration.  The Tribunal is of the view that cause of  action
      for the Counter-claim which must be treated as an  independent  action
      to be instituted, really arose latest  by  29th  March  2008,  if  not
      earlier it is clear that the Counter  claim  is  filed  only  on  26th
      September, 2011 and as such it is beyond the period of  limitation  of
      three years.”

      It may be noted here that the learned Arbitrator,  however,  overruled
the objection with regard to the maintainability of the counter claim  being
beyond the scope of reference.

7. After the interim  award  was  passed  by  the  learned  Arbitrator,  the
   respondent filed an application under Section 34 of the Act  for  setting
   aside the decision of the learned Arbitrator rejecting the counter claims
   made by it on the ground of limitation.  The learned single Judge,  after
   adverting to the facts in  detail  and  the  contentions  raised  by  the
   learned counsel for the parties, referred to certain authorities, namely,
   Ispat Industries Limited v. Shipping Corporation of India Limited[1]  and
   State of Goa v.  Praveen  Enterprises[2],  and  came  to  hold  that  the
   arbitral proceedings in respect of those disputes commenced on  the  date
   on which the request for the said disputes to be referred to  arbitration
   was received by the respondent, and further that only such disputes which
   were referred to in the notice  invoking  arbitration  agreement  with  a
   request to refer  the  same  to  arbitration,  the  arbitral  proceedings
   commenced and it would not apply to the counter  claim.   Thereafter  the
   learned single Judge proceeded to state as follows: -

      “When the notice was given by the respondent on 29th March, 2006,  the
      said notice was only in respect of the disputes having arisen  between
      the parties due to refusal of claims made by the petitioner.   On  the
      date of issuance of such notice, the petitioner had not even  asserted
      its claim.  After issuance of such notice on  29th  March,  2006,  the
      petitioner by its letter dated 17th April, 2006 had asserted its claim
      for the first time.  The dispute  in  respect  of  the  counter  claim
      raised when the petitioner did not pay the said  amount  as  demanded.
      Such disputes thus did not exist when the notice invoking  arbitration
      agreement was given by the respondent on  29th  March,  2006.   In  my
      view, the arbitral proceedings  therefore,  cannot  be  said  to  have
      commenced in respect of the counter claim when the notice was given by
      the respondent on 29th March, 2006.  The counter claim was  admittedly
      filed on 26th September, 2011 which was  made  beyond  the  period  of
      limitation.  The arbitral proceedings  commenced  in  respect  of  the
      counter claim only when the said  counter  claim  was  lodged  by  the
      petitioner on 26th September, 2011.  Even if the date  of  refusal  on
      the part of the respondent, to pay  the  amount  as  demanded  by  the
      petitioner by its notice dated  17th  April,  2006  is  considered  as
      commencement of dispute, even in such case on the date of  filing  the
      counter claim i.e. 26th September, 2011, the counter claim was  barred
      by law of limitation.  In my view, thus the tribunal was justified  in
      rejecting the counter claim filed by the petitioner as time barred.”

8. After  so  stating  the  learned  single  Judge  held  that  the  opinion
   expressed by the learned Arbitrator was not perverse and based on correct
   appreciation of documents and was resultant of a plausible interpretation
   and accordingly rejected the application preferred under  Section  34  of
   the Act.

9. Being dissatisfied, the respondent-herein preferred an appeal before  the
   Division Bench which chronologically referred to the correspondences made
   between the parties, the reasoning ascribed by  the  learned  Arbitrator,
   the submissions propounded before it, the principles stated  in  Oil  and
   Natural Gas  Corporation  Ltd.  v.  Saw  Pipes  Ltd.[3]  as  regards  the
   jurisdiction of the Court while dealing with an application under Section
   34 of the Act, the concept of limitation as has been explained in Praveen
   Enterprises (supra), the demand made by the appellant therein  by  letter
   dated 17.4.2006 quantifying a sum of Rs.68.63 crores, exclusion of period
   between 3.5.2006 to 19.11.2010 during which period the application  under
   Section 11 of the Act was pending before  the  High  Court  and  on  that
   foundation, in the ultimate eventuate, came  to  hold  that  the  counter
   claim filed on 26.9.2011  was  within  limitation.   The  aforesaid  view
   obliged the Division Bench to allow the appeal, set  aside  the  judgment
   and order passed by the learned single Judge as a consequence thereof the
   rejection  of  the  counter  claim  by  the  learned   Arbitrator   stood
   overturned.  Be it noted, rest  of  the  interim  award  of  the  learned
   Arbitrator was not disturbed.

10. Assailing  the  legal  substantiality  of  the  view  expressed  by  the
   Division Bench, Mr. K.K. Venugopal, learned senior counsel appearing  for
   the appellant, has raised the following contentions: -

   i) Existence of dispute is fundamentally essential for a  controversy  to
      be arbitrated upon and in the case at  hand  there  being  no  dispute
      raised by the respondent as warranted in law, the  counter  claim  put
      forth before the learned Arbitrator  deserved  to  be  thrown  at  the
      threshold and the High Court would have been well advised to do so.

  ii) The limitation for a counter claim has to be  strictly  in  accordance
      with Section 43(1) of  the  Act  read  with  Section  3(2)(b)  of  the
      Limitation Act, 1963 and any deviation therefrom  is  required  to  be
      authorized by any other provision of law.  The only other provision of
      law which can depart from Section 43(1) of the Act read  with  Section
      3(2)(b) of the Limitation Act, is the provision contained  in  Section
      21 of the Act, where the respondent to the  claimant’s  claim  invokes
      arbitration in regard to specific or particular disputes  and  further
      makes a request for the said disputes to be  referred  to  arbitration
      and in that event alone, the date of filing of the counter claim would
      not be the relevant date but the  date  of  making  such  request  for
      arbitration would be the date for computing limitation.  The  Division
      Bench has not kept itself alive to the requisite twin  tests  and  has
      erroneously ruled that the counter claim as filed by the respondent is
      not barred by limitation.

(iii) The principle stated in Praveen Enterprises’s case is  not  applicable
     to the present case because the correspondences made by the respondent,
     including the letter dated 17.4.2006, show that there had neither  been
     any enumeration of specific claims nor invocation  of  the  arbitration
     clause but merely computation of certain claims, though for application
     of the exception as carved out in Praveen Enterprises (supra), both the
     conditions  precedent,  namely,  making  out  a  specific   claim   and
     invocation of arbitration are to be satisfied.

(iv)  The exclusion of the period during pendency of the  application  under
     Section 11 of the Act, as has been  held  by  the  Division  Bench,  is
     wholly contrary to the principle laid down in paragraphs 20 and  32  in
     Praveen Enterprises (supra).

(v)   Assuming the principle stated in Praveen Enterprises (supra)  is  made
     applicable, the claims asserted by the respondent in its  letter  dated
     17.4.2006 could only be saved being not hit by limitation and  not  the
     exaggerated counter claim  that  has  been  filed  before  the  learned
     Arbitrator.

(vi)  The Division Bench completely erred in interfering  with  the  interim
     award in exercise of power under Section 34  of  the  Act,  though  the
     principle stated in Saw Pipes Ltd. (supra) is not attracted and further
     that the recording of finding that the  award  passed  by  the  learned
     Arbitrator suffers  from  perversity  of  approach  is  not  acceptable
     inasmuch as a possible and plausible interpretation of the contract and
     documents has been made which is  within  the  domain  of  the  learned
     Arbitrator as has been stated in Rashtriya Ispat Nigam Limited v. Dewan
     Chand Ram Saran[4].

11. Mr. R.F. Nariman, learned senior counsel appearing for  the  respondent,
   defending the impugned judgment, has proponed the following: -

a) The documents brought  on  record  demonstrably  establish  that  dispute
   existed between the parties as regards the counter claim and  hence,  the
   submission raised on behalf of  the  appellant  on  that  score  is  sans
   substance.

b) The Division Bench has rightly come to hold that the counter claim  filed
   by the respondent-herein was within time on the basis  of  the  law  laid
   down in Praveen Enterprises (supra) inasmuch as the date of filing of the
   counter claim has to relate back  to  the  date  of  claim  made  by  the
   respondent and the correspondences between the parties  do  clearly  show
   that the respondent had raised its claim and also sought for  arbitration
   in a legally accepted manner.

c) The alternative submission that the counter claim has to be  confined  to
   the amount quantified in the letter dated 17.4.2006  is  unacceptable  in
   law, for in Praveen  Enterprises  (supra)  it  has  been  held  that  the
   statement of claim need not be restricted to the claims in the notice and
   on that base it can safely be concluded that the said  proposition  holds
   good for counter claims as well.  That apart,  the  principle  also  gets
   support from what has been laid down in McDermott International  Inc.  v.
   Burn Standard Co. Ltd. and others[5].

12. First, we shall address to the submissions pertaining to  existence  and
   raising of dispute as regards the counter claim.  We are required to deal
   with the same in the case at hand since  Mr.  Venugopal,  learned  senior
   counsel, has urged that if no dispute was raised at any point of time, it
   could not have been raised before the learned Arbitrator as it  would  be
   clearly hit by limitation.  Learned senior counsel has placed reliance on
   Major (Retd.) Inder Singh Rekhi v.  Delhi  Development  Authority[6]  and
   Jammu and Kashmir State  Forest  Corporation  v.  Abdul  Karim  Wani  and
   others[7], to bolster the  submission  that  in  the  case  at  hand  the
   disputes as regards the counter claim really had  not  arisen,  for  mere
   assertions and denials do not constitute a dispute capable  of  reference
   to arbitration and hence, not to be entertained when it is dead or stale.

13. In Major (Retd.) Inder Singh Rekhi (supra) the High Court  had  rejected
   the petition preferred under Section  20  of  Arbitration  Act,  1940  as
   barred by limitation.  The two-Judge Bench referred to Section 20 of  the
   1940 Act and opined that in order to be entitled to  order  of  reference
   under Section 20, it is necessary that there  should  be  an  arbitration
   agreement and  secondly,  dispute  must  arise  to  which  the  agreement
   applied.  In the said case, there had been an assertion of claim  of  the
   appellant and silence as well as refusal in respect of the  same  by  the
   respondent.  The Court observed that a dispute had arisen regarding  non-
   payment of the alleged dues  to  the  appellant  and,  in  that  context,
   observed thus: -

      “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, first 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 of 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.”

14. In Abdul Karim Wani and others (supra) the question  arose  whether  the
   dispute  mentioned  in  the  contractor’s  application  could  have  been
   referred to the arbitration at all.  The majority came to hold  that  the
   claim raised by the plaintiff in his application was not covered  by  the
   arbitration clause and, therefore, was not permissible to be referred for
   a decision to the arbitrator.  Be it noted, in the said  case,  the  work
   under the contract had already been executed without  any  dispute.   The
   majority also observed that in  the  absence  of  a  repudiation  by  the
   Corporation of the respondent’s right  to  be  considered,  if  and  when
   occasion arises, no  dispute  could  be  referred  for  arbitration.   It
   further ruled that in order that there may be a reference to arbitration,
   existence of a dispute is essential and the dispute  to  be  referred  to
   arbitration must arise under the arbitration agreement.

15. The principles laid down in the aforesaid cases were under the 1940  Act
   at the stage of appointment of arbitrator.  In the case at  hand,  though
   we are dealing with a lis under the 1996 Act, yet we are to deal with the
   said facet as the learned Arbitrator  has  passed  an  interim  award  as
   regards the sustenance of the counter  claim.   In  this  regard,  it  is
   necessary to refer  to  the  correspondences  entered  into  between  the
   parties and to appreciate the effect and impact of  such  communications.
   By letter dated 1.3.2005 the appellant, while  referring  to  the  letter
   dated 3.12.2004 issued by the respondent terminating the contract on  the
   ground of alleged delay and default in completion of the project, without
   prejudice had made a request for payment of final bill in full and settle
   the claim made therein at the earliest.  It was  also  suggested  therein
   that if the respondent needed any additional information or  material  in
   support of the claim put forth, the appellant would furnish the same.  On
   18.3.2005 the  respondent  communicated  to  the  appellant  through  its
   counsel that it  would  compute  its  losses,  damages,  costs,  charges,
   expenses, etc. after the building work was over and claim the  same  from
   the appellant.  The appellant vide letter  dated  7.4.2005,  through  its
   counsel, intimated the respondent that it  was  not  liable  to  pay  any
   alleged losses, damages, costs, charges and expenses, allegedly  suffered
   by the respondent.  On 27.4.2005 by another  communication  an  assertion
   was made about the losses suffered by  the  respondent.   The  respondent
   asseverated  that  it  was  not  liable  to  pay  to  the  appellant  any
   compensation and damages or other amounts as claimed in the letter  dated
   1.3.2005 to the respondent.  In fact, the  respondent  was  compelled  to
   terminate  the  civil  contractor  as  per  the  recommendation  of   the
   Architects, M/s. Master & Associates, and  the  respondent  had  suffered
   huge losses and  damages  and  had  incurred  heavy  costs,  charges  and
   expenses for which the appellant was solely  respondible.   It  was  also
   mentioned in the letter that the respondent reserved its  right  to  take
   appropriate steps against the appellant as per the agreement entered into
   between the parties as per law.  As the factual exposition would  unfurl,
   on 29.3.2006 the appellant, referring to its earlier communications dated
   14.4.2004,  23.4.2004,  24.5.2004,  18.6.2004,  13.7.2004  and  1.3.2005,
   claimed for appointment of an arbitrator.  On  17.4.2006  the  respondent
   specified the claims under various heads and also claimed payment  to  be
   made within seven days failing  which  it  will  invoke  the  arbitration
   clause.  To  the  said  communication  and  another  communication  dated
   21.4.2006 we shall refer to at a later stage while dealing with the other
   facet of submission. It may be noted here that on 9.5.2006 the appellant,
   referring to letter dated 17.4.2006 whereby the respondent had raised its
   claims, stated as follows: -

      “Our clients deny that  the  claim  made  against  you  is  false  and
      frivolous.  Our clients deny that any amount is due  to  you  for  the
      alleged breach of the aforesaid contract.  Our clients deny that  they
      have committed any breach of the aforesaid contract.

                  xxx              xxx             xxx

      In view of what is stated hereinabove, our clients deny that they  are
      liable to pay to you a sum of Rs.68,63,72,743.08 or any other sum.”

16. Thus, the correspondences between the parties make  it  vivid  that  the
   claims made by the respondent were denied by  the  appellant  on  many  a
   ground and, therefore, it would be inappropriate to say  that  there  was
   inaction or mere denial.  Therefore, in the obtaining fact situation, the
   principles stated in Major (Retd.) Inder Singh Rekhi  (supra)  and  Abdul
   Karim Wani and others (supra) are not applicable.

17. The next aspect that has been highlighted by Mr. Venugopal is  that  the
   respondent had never, in the true sense of the term, invoked  arbitration
   by appropriately putting forth specified claims.  In this context, we may
   refer to the letter dated 29.3.2006 which would show that  the  appellant
   had asserted that the disputes and differences  had  arisen  between  the
   parties to the agreement and invoked the arbitration clause calling  upon
   the respondent to appoint an independent unbiased  arbitrator  within  30
   days from the receipt of the said notice, failing  which  they  would  be
   constrained to approach the designated Judge  of  the  Chief  Justice  of
   Bombay High Court for appointment of an arbitrator under  Section  11  of
   the Act.  The respondent, vide letter dated 17.4.2006, sent  through  its
   counsel while stating that it was surprised to receive the demand made by
   the appellant with regard  to  the  final  R.A.  bill  dated  21.12.2004,
   clearly stated that the earlier letter dated 1.3.2005  had  already  been
   replied to vide letter dated  18.3.2005.   In  the  said  letter  it  was
   mentioned by the respondent that it had crystallized its claim  amounting
   to Rs.68,63,72,743.08 and, be it  noted,  the  said  claim  was  made  on
   various heads by the respondent.  Reproduction of part of the said letter
   would be apposite: -

      “The final R.A. Bill sent by you is incorrect in many respects; one of
      them being that you have made claims based on works actually not  done
      by you Nothing is due and payable by us to you against your final R.A.
      Bill.   We  call  upon  you  to  pay  to  us  the  aforesaid  sum   of
      Rs.68,63,72,743.08 within seven days of the receipt  of  this  letter,
      failing which you will be liable to pay interest at the  rate  of  18%
      p.a. on expiry of seven days after receipt of this letter by you, till
      payment and/or realization.  Please note that if the aforesaid payment
      is not made within seven days of the receipt of this letter,  we  will
      invoke the arbitration clause of the  civil  contract  and  refer  the
      disputes to arbitration.”

18. In this regard reference  to  letter  dated  21.4.2006  written  by  the
   appellant is seemly.  The relevant part of the said letter is as follows:
   -

      “We are instructed to inform you that our client was out of  India  in
      connection with the business tour and returned to India on 19th April,
      2006.  Our client thereafter has been extremely busy with the work  of
      the Company.  He has seen your letter dated 29th March, 2006.

            Please, therefore, ask your clients to note that our client will
      appoint an Arbitrator within 30 days from the date of  his  return  to
      India.”

19.  These  two  communications  make  it  clear  that  the  respondent  had
   crystallized the claims on various heads by letter  dated  17.4.2006  and
   the appellant had agreed to appoint an  arbitrator  within  thirty  days.
   The heads  that  have  been  mentioned  in  the  letter  dated  17.4.2006
   pertained to liquidated damages for delay in performance, cost of repairs
   and rework which had to be done by the respondent, differential  cost  of
   the works left over by the appellant and was completed by the  respondent
   through other agencies, cost  of  direct  consequential  damages  to  the
   respondent due to defect in the work  done  by  the  appellant,  cost  of
   consultancy fees and other expenses, loss of profit for four years  based
   on revenue generated per  employee,  etc.  and  outstanding  mobilization
   advance remaining with the appellant.  The total sum as mentioned in  the
   letter was Rs.74,78,34,921.54.  From the said amount monies  retained  by
   the respondent and monies received by the respondent as per the contract,
   i.e.,  Rs.6,14,62,178.46  were  reduced.   Needless  to  emphasize,   the
   validity of the claims had to be addressed by the learned Arbitrator  but
   the fact remains that the respondent had  raised  the  claims  by  giving
   heads.  Thus, there can be no scintilla of doubt that the respondent  had
   particularized or specified its claims and  sought  arbitration  for  the
   same.

20. Keeping in view the aforesaid factual scenario we shall now  proceed  to
   appreciate what has been stated by  this  Court  in  Praveen  Enterprises
   (supra).  In the said case, the respondent  therein  had  raised  certain
   claims and  given  a  notice  to  the  appellant-therein  to  appoint  an
   arbitrator in terms of the arbitration clause.  As the appellant did  not
   do so, the respondent filed an application under Section 11  of  the  Act
   and  an  arbitrator  was  appointed.   The  respondent  filed  its  claim
   statement before the arbitrator and  the  learned  arbitrator  passed  an
   award.  In regard to the  counter  claims  made  by  the  appellant,  the
   arbitrator awarded certain sum  without  any  interest.   An  application
   under Section 34 of the Act was filed by the respondent  challenging  the
   award for rejection of its other claims and award made  on  a  particular
   item of the counter claim.   The  civil  court  disposed  of  the  matter
   upholding the award in respect  of  the  claims  of  the  respondent  but
   accepted the objection raised by it in regard to the award  made  on  the
   counter claim opining that the arbitrator could  not  have  enlarged  the
   scope of the reference and entertain either fresh claims by the claimants
   or counter claims from the respondent.  The  said  judgment  came  to  be
   assailed before the High Court which dismissed the appeal by holding that
   the counter claims were bad in law as they were never placed  before  the
   court by the appellant in the proceeding under Section 11 of the Act  and
   they were not referred to by the court to arbitration and, therefore, the
   arbitrator had no jurisdiction to entertain the matter.

21. This Court posed two questions, namely, whether  the  respondent  in  an
   arbitration proceeding is precluded from making a counter  claim,  unless
   (a) it had served a notice upon the claimant requesting that the disputes
   relating to that  counter  claim  be  referred  to  arbitration  and  the
   claimant  had  concurred  in  referring  the  counterclaim  to  the  same
   arbitrator; and/or (b) it had set out the said counterclaim in its  reply
   statement to the application under Section 11 of the Act  and  the  Chief
   Justice or his designate refers such counter claim also  to  arbitration.
   Thereafter,  the  Court  referred  to  the  concept  of   “reference   to
   arbitration” and, analyzing the anatomy of Sections 21 and 43 of the  Act
   and Section 3 of the Limitation Act, 1963, opined thus: -
      “Section  3  of  the  Limitation  Act,  1963  specifies  the  date  of
      institution for suit, but does not specify the date  of  “institution”
      for arbitration proceedings.  Section  21  of  the  Act  supplies  the
      omission. But for Section 21 there would be considerable confusion  as
      to  what  would  be  the  date  of  “institution”  in  regard  to  the
      arbitration proceedings. It will be possible for the respondent in  an
      arbitration to argue that the limitation has to be  calculated  as  on
      the date on which statement of claim was filed, or the date  on  which
      the arbitrator entered upon the reference, or the date  on  which  the
      arbitrator was appointed by the  court,  or  the  date  on  which  the
      application was filed under Section 11 of the Act. 
In view of  Section
      21 of the Act providing that  the  arbitration  proceedings  shall  be
      deemed to commence on the date on which “a request for that dispute to
      be referred to arbitration is received by  the  respondent”  the  said
      confusion is cleared. Therefore, the purpose of Section 21 of the  Act
      is  to  determine  the  date  of  commencement  of   the   arbitration
      proceedings, relevant mainly for deciding whether the  claims  of  the
      claimant are barred by limitation or not.”

22. Thereafter, addressing the  issue  pertaining  to  counter  claims,  the
   Court observed as follows: -
      “20. As far as counterclaims are  concerned,  there  is  no  room  for
      ambiguity  in  regard  to  the  relevant  date  for  determining   the
      limitation. Section 3(2)(b) of the Limitation Act, 1963 provides  that
      in  regard  to  a  counterclaim  in  suits,  the  date  on  which  the
      counterclaim is made in court shall  be  deemed  to  be  the  date  of
      institution of the counterclaim. As the Limitation Act, 1963  is  made
      applicable to arbitrations,  in  the  case  of  a  counterclaim  by  a
      respondent  in  an  arbitral  proceeding,  the  date  on   which   the
      counterclaim is made  before  the  arbitrator  will  be  the  date  of
      “institution”  insofar  as  counterclaim  is  concerned.   There   is,
      therefore, no need to provide a date of “commencement” as in the  case
      of claims of a claimant.
 Section  21  of  the  Act  is  therefore  not
      relevant for counterclaims. 
There is however one exception. Where  the
      respondent against whom a claim is made, had also made a claim against
      the claimant and  sought  arbitration  by  serving  a  notice  to  the
      claimant but subsequently raises that claim as a counterclaim  in  the
      arbitration proceedings initiated by the claimant, instead of filing a
      separate application under Section 11 of the Act, the  limitation  for
      such counterclaim should be computed, as on the  date  of  service  of
      notice of such claim on the claimant and not on the date of filing  of
      the counterclaim.”
                                                           [Italics is ours]

23. Mr. R.F. Nariman, learned senior counsel appearing for  the  respondent,
   submitted that the case of the respondent  comes  within  that  exception
   because it had raised its claims on various dates and crystallized it  by
   letter dated 17.4.2006 and  had  sought  arbitration  also.   It  is  his
   submission that the learned single Judge had incorrectly  understood  the
   exception carved out in the aforesaid case and has opined that  the  date
   of filing of the counter claims, i.e., 26.9.2011 is the  pertinent  date.
   It is urged by him that the Division Bench has correctly  determined  the
   date to  be  17.4.2006.   Mr.  Venugopal,  learned  senior  counsel,  has
   disputed the said position by relying upon Section 3  of  the  Limitation
   Act which stipulates the limitation to be mandatory.

24. On a careful reading of the verdict in Praveen Enterprises  (supra),  we
   find that the two-Judge Bench, after referring  to,  as  we  have  stated
   hereinbefore, 
Sections 21 and  43  of  the  Act  and  Section  3  of  the
   Limitation Act has opined, regard being had to the language  employed  in
   Section 21, that an exception  has  to  be  carved  out.   It  saves  the
   limitation for filing a counter claim if  a  respondent  against  whom  a
   claim has been made satisfies the twin test, namely, he had made a  claim
   against the claimant and sought arbitration by serving a  notice  to  the
   claimant.  In our considered opinion the said exception squarely  applies
   to the case at hand inasmuch as the  appellant  had  raised  the  counter
   claim and sought arbitration by expressing its  intention  on  number  of
   occasions.  That apart, it is also perceptible  that  the  appellant  had
   assured for appointment of an arbitrator.  Thus, the  counter  claim  was
   instituted on 17.4.2006 and hence, the irresistible conclusion is that it
   is within limitation.

25. Presently to  the  alternative  submission  of  Mr.  Venugopal,  learned
   senior counsel for the appellant.  It basically pertains to  the  nature,
   scope and gamut of applicability of the exception carved out  in  Praveen
   Enterprises (supra) for the purpose  of  saving  a  counter  claim  being
   barred by limitation.  The learned senior counsel would submit  that  the
   respondent  had  crystallized  its  claims  by  letter  dated   17.4.2006
   amounting to  Rs.68,63,72,743.08  whereas  in  the  counter  claim  dated
   26.9.2011   filed   before   the   learned    Arbitrator    amounts    to
   Rs.333,73,35,026/- which is impermissible.  In essence, the submission of
   Mr. Venugopal is that the claims which were  not  raised  in  the  letter
   dated 17.4.2006 have to be treated as being barred  by  limitation.   Mr.
   R.F. Nariman, learned senior counsel for the respondent, on the contrary,
   has referred to paragraph  11  of  the  Praveen  Enterprises  (supra)  to
   buttress his submission that when all the disputes are  referred  to  the
   arbitrator, he has the jurisdiction to decide  all  the  disputes,  i.e.,
   both the claims and counter  claims.   That  apart,  the  respondent  had
   reserved its rights to quantify the claim.  In this regard, he  has  also
   drawn inspiration from McDermott International Inc. (supra) wherein  this
   Court has stated that while claiming damages, the amount therefor is  not
   required to be quantified, for quantification of  a  claim  is  merely  a
   matter of proof.  Mr. Nariman has also commended us to  the  decision  in
   Bharat Sanchar Nigam  Limited  and  another  v.  Motorola  India  Private
   Limited[8] wherein it has been ruled  that  the  question  of  holding  a
   person liable for liquidated damages and the question of quantifying  the
   amount to be paid by way of liquidated damages  are  entirely  different.
   Fixing of liability is primary while the quantification is  secondary  to
   it.

26. In our considered opinion, the aforesaid decisions  do  not  render  any
   assistance to the proposition canvassed by the learned senior counsel for
   the respondent.  We are inclined to think so on two  counts.  
First,  in
   Praveen Enterprises (supra) the Court has carved out  an  exception  and,
   while carving out an exception, has clearly stated  that  the  limitation
   for “such counter claim” should be computed as on the “date of service of
   notice” of “such claim on the claimant” and not  on  the  date  of  final
   counter claim.  We are absolutely conscious that a judgment is not to  be
   read as a statute but to understand the correct ratio stated in the  case
   it is necessary to appreciate the repetitive  use  of  the  words.   That
   apart, if  the  counter  claim  filed  after  the  prescribed  period  of
   limitation before the arbitrator is  saved  in  entirety  solely  on  the
   ground that a  party  had  vaguely  stated  that  it  would  be  claiming
   liquidated damages, it would not attract the conceptual exception  carved
   out in Praveen Enterprises (supra).
In fact, it would be contrary to the
   law laid down not only in the said case, but also to the basic  principle
   that a time barred claim cannot be asserted after the  prescribed  period
   of limitation.

27. Mr. Nariman,  learned  senior  counsel,  has  also  contended  that  the
   counter claims filed before the learned Arbitrator is an  elaboration  of
   the amount stated in the notice and, in fact, it is an amendment  of  the
   claim of the respondent which deserved to be dealt with  by  the  learned
   Arbitrator.  In this context, we may refer with profit to the  ruling  in
   K. Raheja Construcitons Ltd. and  another  v.  Alliance  Ministeries  and
   others[9] wherein the plaintiff had filed a suit for permanent injunction
   and sought an amendment for grant of relief of specific performance.  The
   said prayer was rejected by the learned trial court.   A  contention  was
   canvassed that the appellant had not come forward with new plea  and,  in
   fact, there were material  allegations  in  the  plaint  to  sustain  the
   amendment of the plaint.  The Court  observed  that  having  allowed  the
   period of seven years to elapse from the date of filing the suit, and the
   period of limitation being three years under Article 54 of  the  Schedule
   to the Limitation Act, 1963, any amendment on the grounds set out,  would
   defeat the valuable right of limitation accruing to the respondent.   The
   said principle has been  reiterated  in  South  Konkan  Distilleries  and
   another  v.  Prabhakar  Gajanan  Naik  and  others[10]  and  Van   Vibhag
   Karamchari Griha Nirman Sahkari Sanstha Maryadit (Registered)  v.  Ramesh
   Chander and others[11].

28. In Revajeetu Builders and  Developers  v.  Narayanaswamy  and  sons  and
   others[12],
while laying down some basic principles for  considering  the
   amendment, the Court has stated that as a general rule the  court  should
   decline amendments if a fresh suit on the amended claims would be  barred
   by limitation on the date of application.

29. In the present case, when it is absolutely clear that the counter  claim
   in respect of the enhanced sum is totally barred by limitation and is not
   saved by  exception  carved  out  by  the  principle  stated  in  Praveen
   Enterprises (supra), we are unable to agree with the view of the Division
   Bench of the High Court that the counter claim, as a whole, is not barred
   by limitation.  Thus analysed, the counter claim relating to  the  appeal
   which deals with civil contracts shall be restricted to the amount stated
   in the letter dated 17.4.2006, i.e., Rs.68,63,72,178.08, and  as  far  as
   the other appeal which pertains to air-conditioning contract, the quantum
   shall stand restricted to as specified in  the  letter  dated  21.3.2006,
   i.e., Rs.19,99,728.58.

30. At this juncture, we may, for the sake of completeness,  deal  with  the
   justifiability of the interference by the Division  Bench  in  the  award
   passed by the learned Arbitrator.  It has been urged  by  Mr.  Venugopal,
   learned senior counsel for the appellant, that the view expressed by  the
   learned Arbitrator being a plausible interpretation of the  contract  the
   same did not warrant interference.
We have already  analyzed  at  length
   how the interim award is indefensible as there  has  been  incorrect  and
   inapposite appreciation of the proposition of  law  set  out  in  Praveen
   Enterprises’s case.
In Rashtriya Ispat Nigam Limited (supra) this  Court
   has  opined  that  the  learned  Arbitrator   had   placed   a   possible
   interpretation on clause 9.3 of the contract involved therein and  hence,
   the interference was exceptionable.
In the  present  case,  the  factual
   matrix and the controversy that have emanated  are  absolutely  different
   and hence, the principle stated in the said authority is not  applicable.
   Thus, we unhesitatingly  repel  the  submission  of  the  learned  senior
   counsel for the appellant that the award passed by the learned Arbitrator
   did not call for any interference.

31. Consequently, both the appeals are allowed in part, the judgment of  the
   Division Bench in Appeals Nos. 7 of 2013 and 8 of 2013  is  modified  and
   the interim award passed by learned Arbitrator as  regards  rejection  of
   the counter claims in toto  stands  nullified.   The  learned  Arbitrator
   shall now proceed to deal with the counter claims, as has been  indicated
   hereinabove by us.  Needless to say, we have not expressed any opinion on
   the merits of the claims or the counter claims put forth by  the  parties
   before the learned Arbitrator.  The parties shall bear  their  respective
   costs.

                                                             …………….……..…..J.
                                                              [Anil R. Dave]




                                                               …………………….….J.
                                                               [Dipak Misra]


New Delhi;
February 14, 2014.

-----------------------
[1]    Arbitration Petition No. 570 of 2001 decided on 4.12.2001.
[2]    (2012) 12 SCC 581
[3]    (2003) 5 SCC 705
[4]    (2012) 5 SCC 306
[5]    (2006) 11 SCC 181
[6]    (1988) 2 SCC 338
[7]    (1989) 2 SCC 701
[8]    (2009) 2 SCC 337
[9]    1995 Supp (3) SCC 17
[10]   (2008) 14 SCC 632
[11]   (2010) 14 SCC 596
[12]   (2009) 10 SCC 84

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