We have considered the submissions of both the
parties and have perused the record, what is the nature
of jurisdiction of the Chief Justice while deciding an
application under Section 11 of the Act has elaborately
been considered by Seven Judge Bench of this court in
SBP & CO. versus Patel Engineering Ltd and another
(2005) 8 SCC 618. In para 47 of the judgment,
conclusions were recorded by the larger Bench.
Conclusion IV is relevant for the present case which is
quoted as below:
“47. We, therefore, sum up our conclusions
as follows:
(iv) The Chief Justice or the designated
Judge will have the right to decide the
preliminary aspects as indicated in the
earlier part of this judgment. These will be
his own jurisdiction to entertain the request,
the existence of a valid arbitration
agreement, the existence or otherwise of a
live claim, the existence of the condition for
the exercise of his power and on the
qualifications of the arbitrator or
arbitrators. The Chief Justice or the
designated Judge would be entitled to seek
the opinion of an institution in the matter of
nominating an arbitrator qualified in terms
of Section 11(8) of the Act if the need arises
but the order appointing the arbitrator
could only be that of the Chief Justice or the
designated Judge.”
17. The Chief Justice exercises the judicial power while
passing an order under Section 11 of the Act thus can
examine the question as to whether the claim which has
been raised before him survives and needs to be
adjudicated. It goes without saying that if Chief Justice
finds that claim is a dead claim, he can exercise
jurisdiction in rejecting the application.
18. A two Judge Bench of this court in Indian Oil
Corporation Limited vs. SPS Engineering Limited,
2011 (3) SCC 507, had occasion to consider what is a
‘live claim’ within the meaning of Section 11 of the Act.
Elaborating the jurisdiction of the Chief Justice, under
Section 11 of the Act following was laid down by this
court in para 14 of the judgment:
“14. …….The Chief Justice or his designate
may however choose to decide whether the
claim is a dead (long-barred) claim or
whether the parties have, by recording
satisfaction, exhausted all rights,
obligations and remedies under the contract,
so that neither the contract nor the
arbitration agreement survived. When it is
said that the Chief Justice or his designate
may choose to decide whether the claim is
a dead claim, it is implied that he will do so
only when the claim is evidently and
patently a long time-barred claim and there
is no need for any detailed consideration of
evidence. We may elucidate by an
illustration: if the contractor makes a claim
a decade or so after completion of the work
without referring to any acknowledgment of
a liability or other factors that kept the
claim alive in law, and the claim is patently
long time-barred, the Chief Justice
or his designate will examine whether the
claim is a dead claim (that is, a long
time-barred claim). On the other hand, if
the contractor makes a claim for payment,
beyond three years of completing of the
work but say within five years of
completion of work, and alleges that the
final bill was drawn up and payments
were made within three years before the
claim, the Court will not enter into a
disputed question whether the claim was
barred by limitation or not. The Court will
leave the matter to the decision of the
Tribunal. If the distinction between
apparent and obvious dead claims, and
claims involving disputed issues of
limitation is not kept in view, the Chief
Justice or his designate will end up
deciding the question of limitation in all
applications under Section 11 of the Act.”
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPEALLATE JURISDICTION
CIVIL APPEAL NO. 7184 OF 2008
M/S. EMM ENN ASSOCIATES … APPELLANT(S)
VERSUS
COMMANDER WORKS ENGINEER … RESPONDENT(S)
& ORS
WITH
CIVIL APPEAL NO. 7185 OF 2008
Citation:AIR 2016 SC 3079
ASHOK BHUSHAN, J.
These two appeals raising identical questions of law
have been heard together and are being decided by this
common judgment. For deciding both the appeals, it
shall be sufficient to refer to facts and pleadings in CivilPage 2
2
Appeal No. 7184 of 2008. Appeal No. 7184 of 2008 has
been filed against judgment of Chief Justice of Punjab &
Haryana High Court in Arbitration Case No. 184 of 2006
by which judgment learned Chief Justice has dismissed
the application, filed by appellant for referring the
dispute to an arbitrator in exercise of power under
Section 11 of the Arbitration and Conciliation Act 1996
(hereinafter referred to as ‘Act’).
2. Civil Appeal No. 7185 of 2008 has also been filed
against the identical judgment of learned Chief Justice in
Arbitration Case No. 89 of 2006 by which the application
filed by the appellant for appointing an arbitrator has
been dismissed.
3. Brief facts giving rise to Appeal No. 7184 of 2008
now need to be noted.
The appellant a partnership firm was allotted a
contract on 10.11.1998 for providing additional security
fencing at Mullanpur. The work was completed onPage 3
3
10.7.2000. Work completion certificate was issued. Final
bill was prepared on 20.2.2001 and the payment of final
bill was made to the petitioner on 10.04.2001. Payment
of the undisputed part of the final bill was made by
cheque dated 10.04.2001.
4. Although Clause 67 of general conditions of
contract contemplated for recovery from contractor in
several contingencies one of which as referred in
sub-Clause (f) was that if as a result of any audit and
technical examination, any over payment is discovered in
respect of work done under this contract, the contractor
shall on demand make payment of a sum equal to the
amount of over-payment. Sub-Clause (g) further provided
that the Government shall not be entitled to recover any
over-payment beyond a period of two years from the date
of payment of the undisputed portion of the final bill.
5. Even though, two years period expired after
payment of final bill, no demand for any recovery was
issued by the Government. Contractor by letter datedPage 4
4
23.02.2005 served a notice stating that final bill amount
as paid during April, 2001 did not include the payments
due to contractor against several items which were
claimed as per appendix A annexed to the notice.
6. It was further stated that the decision be
communicated within thirty days failing which it shall be
assumed that the claim is disputed and contractor shall
be left with no remedy except to seek adjudication by an
arbitrator appointed in terms of the contract.
7. The Garrison Engineer issued a letter dated
22.03.2005 informing that contractor had signed the
final bill without any protest and had given ‘No Further
Claim’ certificate. Hence no arbitrable dispute exists.
The claim now intimated after the lapse of a period of
approx four years is baseless and hence denied.
8. A letter dated 24.03.2005 was written by the
contractor to the chief engineer in reference to notice
dated 23.02.2005 with a prayer that arbitrator underPage 5
5
condition 70 of the Contract may kindly be appointed to
adjudicate the dispute. The appellant thereafter filed an
application under Section 11 of the Arbitration Act before
District Judge, Ropar. The application was ultimately
taken by Chief Justice of the High Court and by an order
dated 12.03.2007, the application was rejected taking the
view that appellant’s claim is not a live claim. Aggrieved
against the above judgment dated 12.03.2007 in
Arbitration Case No. 184 of 2006, Appeal No. 7184 of
2008 has been filed.
9. Arbitration Case No. 89 of 2006 has also been filed
by the appellant seeking appointment of an arbitrator
under Section 11 of the Act in the said case and also the
work was completed on 23.09.2000 and the final bill was
paid on 10.04.2001. Notice along with list of claim was
sent by the appellant on 23.02.2005 i.e. on the same day
when notice in Arbitration Case No. 184 of 2006 has
been sent. Page 6
6
10. Hon’ble Chief Justice giving the same reasons
rejected the application in Arbitration Case No. 89 of
2006 holding that the claim made by the appellant is not
a live claim. Hon’ble Chief Justice by order dated
12.03.2007 took the view that final bill has been paid on
10.04.2001, the notice having been given only on
23.02.2005 the period of limitation was over. With
regard to the Clause 67 of the contract, it was observed
by the Chief Justice that Embargo of two years as per
sub-Clause (f) and (g) is with regard to the right of the
Government for effecting recovery from the contractor
which clause does not extend the period of limitation in
favour of the contractor.
11. Shri O. P. Gupta, the partner of the appellant firm
has appeared in-person and made his submission. We
have also heard the learned counsel appearing for the
respondents.
12. The appellant’s case is that the claim raised by
contractor by notice dated 23.02.2005, was not barred by
time and was a live claim which ought not to have been
rejected by the Chief Justice in exercise of his power
under Section 11 of the Act. It is contended that the
issues as to whether the claim is barred by time are the
issues which ought to have been left for decision of
arbitrator. It is contended that payment in respect to the
final bill made on 10.04.2001, was payment with regard
to undisputed amount. Apart from undisputed amount
there were other claims of the contractor and the ‘No
Liability’ certificate given by the appellant was only with
regard to undisputed claim. Payment made on
10.04.2001 was the payment only in reference to
undisputed claim and that in no manner precluded the
appellant from raising claim.
13. As per Clause 67 of the contract, there was two
years period for effecting any recovery from the
contractor and when no claim against the contractor was
raised during the aforesaid period, the appellant raised
the claim for disputed amount which was not paid. ThePage 8
8
period of two years is defect liability period and it was
clearly open for the appellant to raise the claim for
disputed amount after expiry of the aforesaid period of
two years.
14. The respondents never adjudicated the disputed
part of the final bill and after serving notice the appellant
had rightly sought for adjudication by an arbitrator
which application has been rejected by Hon’ble Chief
Justice not on valid considerations.
15. Learned counsel appearing for the respondents
supported the judgment of the Chief Justice and
contends that for filing any application limitation is three
years as per Article 137 of the Limitation Act, 1963.
Final bill had been paid on 10.04.2001, any application
for any claim in respect to final bill ought to have been
raised within three years. It is contended that the
respondents have raised the preliminary objections in
reply objecting the application for arbitration filed by the
appellant, which has rightly been rejected by the Chief
Justice.
16. We have considered the submissions of both the
parties and have perused the record, what is the nature
of jurisdiction of the Chief Justice while deciding an
application under Section 11 of the Act has elaborately
been considered by Seven Judge Bench of this court in
SBP & CO. versus Patel Engineering Ltd and another
(2005) 8 SCC 618. In para 47 of the judgment,
conclusions were recorded by the larger Bench.
Conclusion IV is relevant for the present case which is
quoted as below:
“47. We, therefore, sum up our conclusions
as follows:
(iv) The Chief Justice or the designated
Judge will have the right to decide the
preliminary aspects as indicated in the
earlier part of this judgment. These will be
his own jurisdiction to entertain the request,
the existence of a valid arbitration
agreement, the existence or otherwise of a
live claim, the existence of the condition for
the exercise of his power and on the
qualifications of the arbitrator or
arbitrators. The Chief Justice or the
designated Judge would be entitled to seek
the opinion of an institution in the matter of
nominating an arbitrator qualified in terms
of Section 11(8) of the Act if the need arises
but the order appointing the arbitrator
could only be that of the Chief Justice or the
designated Judge.”
17. The Chief Justice exercises the judicial power while
passing an order under Section 11 of the Act thus can
examine the question as to whether the claim which has
been raised before him survives and needs to be
adjudicated. It goes without saying that if Chief Justice
finds that claim is a dead claim, he can exercise
jurisdiction in rejecting the application.
18. A two Judge Bench of this court in Indian Oil
Corporation Limited vs. SPS Engineering Limited,
2011 (3) SCC 507, had occasion to consider what is a
‘live claim’ within the meaning of Section 11 of the Act.
Elaborating the jurisdiction of the Chief Justice, under
Section 11 of the Act following was laid down by this
court in para 14 of the judgment:
“14. …….The Chief Justice or his designate
may however choose to decide whether the
claim is a dead (long-barred) claim or
whether the parties have, by recording
satisfaction, exhausted all rights,
obligations and remedies under the contract,
so that neither the contract nor the
arbitration agreement survived. When it is
said that the Chief Justice or his designate
may choose to decide whether the claim is
a dead claim, it is implied that he will do so
only when the claim is evidently and
patently a long time-barred claim and there
is no need for any detailed consideration of
evidence. We may elucidate by an
illustration: if the contractor makes a claim
a decade or so after completion of the work
without referring to any acknowledgment of
a liability or other factors that kept the
claim alive in law, and the claim is patently
long time-barred, the Chief Justice
or his designate will examine whether the
claim is a dead claim (that is, a long
time-barred claim). On the other hand, if
the contractor makes a claim for payment,
beyond three years of completing of the
work but say within five years of
completion of work, and alleges that the
final bill was drawn up and payments
were made within three years before the
claim, the Court will not enter into a
disputed question whether the claim was
barred by limitation or not. The Court will
leave the matter to the decision of the
Tribunal. If the distinction between
apparent and obvious dead claims, and
claims involving disputed issues of
limitation is not kept in view, the Chief
Justice or his designate will end up
deciding the question of limitation in all
applications under Section 11 of the Act.”
19. Further this court has observed that an application
under Section 11 of the Act is expected to contain
pleading about the existence of a dispute and the
applicant is not expected to justify the claim or plead
extensively in regard to limitation or production of
document to demonstrate that claim is within time in
proceeding under Section 11 and that issue should
normally be left to the Arbitral Tribunal. Following was
observed in para 15:
“15. An application under Section 11 of
the Act is expected to contain pleadings
about the existence of a dispute and the
existence of an arbitration agreement to
decide such dispute. The applicant is not
expected to justify the claim or plead
exhaustively in regard to limitation or
produce documents to demonstrate that
the claim is within time in a proceeding
under Section 11 of the Act. That issue
should normally be left to the Arbitral
Tribunal. If the Chief Justice or his
designate is of the view that in addition to
examining whether there is an arbitration
agreement between the parties, he should
consider the issue whether the claim is a
dead one (long time-barred) or whether
there has been satisfaction of mutual
rights and obligation under the contract,
he should record his intention to do so and
give an opportunity to the parties to place
their materials on such issue. Unless the
parties are put on notice that such an
issue will be examined, they will be under
the impression that only questions of
jurisdiction and existence of arbitration
agreement between the parties will be
considered in such proceedings.”
20. From the above, it is clear that Chief Justice may
chose to hold a claim as a dead claim only when the
claim is evidently and patently long time barred claim
and there is no need for any detailed consideration of
evidence. An illustration have been given in para 14 as
extracted above. The above illustration becomes relevant
for the facts of the present case. In the present case also,
the appellant has raised the claim beyond the three years
of completing of the work but within five years of
completion of the work.
21. In the present case, the appellant has also
contended that there is a defect liability period of twoPage 15
15
years during which any recovery can be made from the
contractor. Further the categorical case of the appellant
was that final payment made at 10.04.2001 was the final
payment of the undisputed claim and there were other
claims of the appellant which were disputed and the
payment received on 10.4.2001 was with regard to
undisputed claim. There being no adjudication with
regard to disputed claim the claim raised by notice dated
23.02.2005 cannot be said to be barred by time or a dead
claim.
22. In the present appeal by IA No. 03 of 2012, the
appellant has brought certain additional materials for
consideration of the Court. By annexure 16 certain
certificates which were given by the contractor on
20.02.2001 that is when the final bill was prepared, has
been brought on record. The payment was made by
cheque dated 10.04.2001 and para 3/4 of the certificate
filed at the 2nd page of the annexure 16 states as follows:Page 16
16
“3. Printed Certificate signed by the
petitioner at the time of receiving payment
of the undisputed part of the Final Bill.
Received Rs. 57532/-. This payment is in
full and final settlement of all money due
under C WE/AF CHD / CHD-5/98-99 and I
have no further claim in respect of the
………………..
Sd/-
Contractor”
“4. Payment by Cheque of the undisputed
part of the Final Bill made by the
dispersing officer,
mentioned-herein-below:-
Cheque No. H – 916930 dated 10.4.2001
for Rs. 57532/- issued in favour of M/s
Emm Enn Associates on SBI AF
Chandigarh Treasury.
Sd/-
Signature of Dispersing Office ”
23. Para 04 of the above certificate as quoted above
clearly mentions payment by cheque of the undisputed
part of the final bill and above certificate also clearly
indicates that payment on 10.04.2001 was made of the
undisputed part of the final bill which presupposes that
there are certain other claims which are disputed.
Clause 67 of the contract entered between the partiesPage 17
17
also uses expressions “undisputed portion of the Final
Bill”
24. Appellant had relied on Clause 67 which contains a
heading “Recovery From Contractor” under sub-Clause (f)
and (g) which is to the following effect:
(f) If, as a result of such audit and
technical examination, any over-payment
is discovered in respect of the work done
under this Contract, the contractor shall
on demand make payment of a sum equal
to the amount of over-payment or agree for
effecting necessary adjustment from any
amounts due to him by Government. If
however, he refuses or neglects to make
the payment on demand or does not agree
for effecting adjustment from any amounts
due to him, Government shall be entitled to
take action as in sub-para (a) hereinbefore.
If as a result of such audit and technical
examination any under payment is
discovered, the amount of under payment
shall be duly paid to the Contractor by
Government.
(g) Provided, that, nothing hereinbefore
contained shall entitled the Government to
recover any over-payment in respect of any
price agreed between the C.W.E or the G.E.
and the Contractor under the
circumstances specifically prescribed for
such method of assessment and that the
said right of the Government to adjustPage 18
18
over-payment from any sum due or from
any sum which may become due to the
Contractor or from Security Deposit or
Security Bond amount and adjust under
payment, shall not extend beyond a period
of two years from the date of payment of
the undisputed portion of the Final Bill or
in the case of minus Bill, from the date,
the net amount of the final bill is
communicated to the Contractor. “
25. In sub-Clause (g) the period of two years under
which the Government is entitled to make recovery is
“from the date of payment of the undisputed portion of
the final bill”. The examination of the additional materials
brought on this appeal, does indicate that the case
required consideration of relevant bills and certificates
and determination on the question as to whether the
claim laid by appellant was a dead claim and was not a
live claim depended upon scrutiny of relevant
documents. The pleadings in the proceeding under
Section 11 by the appellant were clearly to the effect that
on 10.04.2001, he was paid only undisputed part andPage 19
19
the appellant has reserved his right to raise claim to the
disputed part.
26. In view of the Division Bench judgment in Indian
Oil Corporation Ltd. supra para 14 as extracted above,
the present was the case which ought to have been left
for the decision by the Tribunal. We, however, have
proceeded further to examine the claim raised by the
appellant in his notice dated 23.02.2005. The pleadings
of the appellant are categorical to the effect that the final
payment made on 10.04.2001 was only with regard to
undisputed portion and he has reserved his right to raise
claim with regard to other disputed claims.
27. The disputed claims having never been adjudicated,
we are of the view that there was a dispute which needed
an adjudication after looking into all relevant documents,
bills and certificates which could have been appropriately
examined by Arbitral Tribunal and the observation of the
Chief Justice “As the appellant has failed to prima facie
show this court that there was a live claim of the
appellant” does not commend us.
28. The claim raised by petitioner in the facts of the
case could not have been said to be a dead claim.
Especially in view of the additional documents which
have been placed before us by IA No. 03 of 2012. We are
thus of the view that the order dated 12.03.2007 passed
in Arbitration Case No. 184 of 2006 and 89 of 2006
deserves to be set-aside.
29. As a consequence thereof, the application made by
the appellant under Section 11 of the Act is allowed. We,
however, consider it apposite to remit the case to the
High Court (designated Judge) to pass consequential
orders for appointment of the arbitrator for deciding the
disputes which have arisen between the parties. The
appointment of the arbitrator may be made in the first
instance with the consent of the parties and if, for any
reason, it is not possible to do so then the Court willPage 21
21
appoint the arbitrator in its discretion. It be done within
one month from the date of the parties appearance.
30. Parties to appear before the designated Judge in the
High Court on 25.07.2016 to enable the Court to pass
appropriate consequential order as directed above. Both
the appeals are accordingly allowed.
………………….…...........................J.
(ABHAY MANOHAR SAPRE)
………………..…...........................J.
(ASHOK BHUSHAN)
NEW DELHI,
JUNE 26, 2016.
Print Page
parties and have perused the record, what is the nature
of jurisdiction of the Chief Justice while deciding an
application under Section 11 of the Act has elaborately
been considered by Seven Judge Bench of this court in
SBP & CO. versus Patel Engineering Ltd and another
(2005) 8 SCC 618. In para 47 of the judgment,
conclusions were recorded by the larger Bench.
Conclusion IV is relevant for the present case which is
quoted as below:
“47. We, therefore, sum up our conclusions
as follows:
(iv) The Chief Justice or the designated
Judge will have the right to decide the
preliminary aspects as indicated in the
earlier part of this judgment. These will be
his own jurisdiction to entertain the request,
the existence of a valid arbitration
agreement, the existence or otherwise of a
live claim, the existence of the condition for
the exercise of his power and on the
qualifications of the arbitrator or
arbitrators. The Chief Justice or the
designated Judge would be entitled to seek
the opinion of an institution in the matter of
nominating an arbitrator qualified in terms
of Section 11(8) of the Act if the need arises
but the order appointing the arbitrator
could only be that of the Chief Justice or the
designated Judge.”
17. The Chief Justice exercises the judicial power while
passing an order under Section 11 of the Act thus can
examine the question as to whether the claim which has
been raised before him survives and needs to be
adjudicated. It goes without saying that if Chief Justice
finds that claim is a dead claim, he can exercise
jurisdiction in rejecting the application.
18. A two Judge Bench of this court in Indian Oil
Corporation Limited vs. SPS Engineering Limited,
2011 (3) SCC 507, had occasion to consider what is a
‘live claim’ within the meaning of Section 11 of the Act.
Elaborating the jurisdiction of the Chief Justice, under
Section 11 of the Act following was laid down by this
court in para 14 of the judgment:
“14. …….The Chief Justice or his designate
may however choose to decide whether the
claim is a dead (long-barred) claim or
whether the parties have, by recording
satisfaction, exhausted all rights,
obligations and remedies under the contract,
so that neither the contract nor the
arbitration agreement survived. When it is
said that the Chief Justice or his designate
may choose to decide whether the claim is
a dead claim, it is implied that he will do so
only when the claim is evidently and
patently a long time-barred claim and there
is no need for any detailed consideration of
evidence. We may elucidate by an
illustration: if the contractor makes a claim
a decade or so after completion of the work
without referring to any acknowledgment of
a liability or other factors that kept the
claim alive in law, and the claim is patently
long time-barred, the Chief Justice
or his designate will examine whether the
claim is a dead claim (that is, a long
time-barred claim). On the other hand, if
the contractor makes a claim for payment,
beyond three years of completing of the
work but say within five years of
completion of work, and alleges that the
final bill was drawn up and payments
were made within three years before the
claim, the Court will not enter into a
disputed question whether the claim was
barred by limitation or not. The Court will
leave the matter to the decision of the
Tribunal. If the distinction between
apparent and obvious dead claims, and
claims involving disputed issues of
limitation is not kept in view, the Chief
Justice or his designate will end up
deciding the question of limitation in all
applications under Section 11 of the Act.”
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPEALLATE JURISDICTION
CIVIL APPEAL NO. 7184 OF 2008
M/S. EMM ENN ASSOCIATES … APPELLANT(S)
VERSUS
COMMANDER WORKS ENGINEER … RESPONDENT(S)
& ORS
WITH
CIVIL APPEAL NO. 7185 OF 2008
Citation:AIR 2016 SC 3079
ASHOK BHUSHAN, J.
These two appeals raising identical questions of law
have been heard together and are being decided by this
common judgment. For deciding both the appeals, it
shall be sufficient to refer to facts and pleadings in CivilPage 2
2
Appeal No. 7184 of 2008. Appeal No. 7184 of 2008 has
been filed against judgment of Chief Justice of Punjab &
Haryana High Court in Arbitration Case No. 184 of 2006
by which judgment learned Chief Justice has dismissed
the application, filed by appellant for referring the
dispute to an arbitrator in exercise of power under
Section 11 of the Arbitration and Conciliation Act 1996
(hereinafter referred to as ‘Act’).
2. Civil Appeal No. 7185 of 2008 has also been filed
against the identical judgment of learned Chief Justice in
Arbitration Case No. 89 of 2006 by which the application
filed by the appellant for appointing an arbitrator has
been dismissed.
3. Brief facts giving rise to Appeal No. 7184 of 2008
now need to be noted.
The appellant a partnership firm was allotted a
contract on 10.11.1998 for providing additional security
fencing at Mullanpur. The work was completed onPage 3
3
10.7.2000. Work completion certificate was issued. Final
bill was prepared on 20.2.2001 and the payment of final
bill was made to the petitioner on 10.04.2001. Payment
of the undisputed part of the final bill was made by
cheque dated 10.04.2001.
4. Although Clause 67 of general conditions of
contract contemplated for recovery from contractor in
several contingencies one of which as referred in
sub-Clause (f) was that if as a result of any audit and
technical examination, any over payment is discovered in
respect of work done under this contract, the contractor
shall on demand make payment of a sum equal to the
amount of over-payment. Sub-Clause (g) further provided
that the Government shall not be entitled to recover any
over-payment beyond a period of two years from the date
of payment of the undisputed portion of the final bill.
5. Even though, two years period expired after
payment of final bill, no demand for any recovery was
issued by the Government. Contractor by letter datedPage 4
4
23.02.2005 served a notice stating that final bill amount
as paid during April, 2001 did not include the payments
due to contractor against several items which were
claimed as per appendix A annexed to the notice.
6. It was further stated that the decision be
communicated within thirty days failing which it shall be
assumed that the claim is disputed and contractor shall
be left with no remedy except to seek adjudication by an
arbitrator appointed in terms of the contract.
7. The Garrison Engineer issued a letter dated
22.03.2005 informing that contractor had signed the
final bill without any protest and had given ‘No Further
Claim’ certificate. Hence no arbitrable dispute exists.
The claim now intimated after the lapse of a period of
approx four years is baseless and hence denied.
8. A letter dated 24.03.2005 was written by the
contractor to the chief engineer in reference to notice
dated 23.02.2005 with a prayer that arbitrator underPage 5
5
condition 70 of the Contract may kindly be appointed to
adjudicate the dispute. The appellant thereafter filed an
application under Section 11 of the Arbitration Act before
District Judge, Ropar. The application was ultimately
taken by Chief Justice of the High Court and by an order
dated 12.03.2007, the application was rejected taking the
view that appellant’s claim is not a live claim. Aggrieved
against the above judgment dated 12.03.2007 in
Arbitration Case No. 184 of 2006, Appeal No. 7184 of
2008 has been filed.
9. Arbitration Case No. 89 of 2006 has also been filed
by the appellant seeking appointment of an arbitrator
under Section 11 of the Act in the said case and also the
work was completed on 23.09.2000 and the final bill was
paid on 10.04.2001. Notice along with list of claim was
sent by the appellant on 23.02.2005 i.e. on the same day
when notice in Arbitration Case No. 184 of 2006 has
been sent. Page 6
6
10. Hon’ble Chief Justice giving the same reasons
rejected the application in Arbitration Case No. 89 of
2006 holding that the claim made by the appellant is not
a live claim. Hon’ble Chief Justice by order dated
12.03.2007 took the view that final bill has been paid on
10.04.2001, the notice having been given only on
23.02.2005 the period of limitation was over. With
regard to the Clause 67 of the contract, it was observed
by the Chief Justice that Embargo of two years as per
sub-Clause (f) and (g) is with regard to the right of the
Government for effecting recovery from the contractor
which clause does not extend the period of limitation in
favour of the contractor.
11. Shri O. P. Gupta, the partner of the appellant firm
has appeared in-person and made his submission. We
have also heard the learned counsel appearing for the
respondents.
12. The appellant’s case is that the claim raised by
contractor by notice dated 23.02.2005, was not barred by
time and was a live claim which ought not to have been
rejected by the Chief Justice in exercise of his power
under Section 11 of the Act. It is contended that the
issues as to whether the claim is barred by time are the
issues which ought to have been left for decision of
arbitrator. It is contended that payment in respect to the
final bill made on 10.04.2001, was payment with regard
to undisputed amount. Apart from undisputed amount
there were other claims of the contractor and the ‘No
Liability’ certificate given by the appellant was only with
regard to undisputed claim. Payment made on
10.04.2001 was the payment only in reference to
undisputed claim and that in no manner precluded the
appellant from raising claim.
13. As per Clause 67 of the contract, there was two
years period for effecting any recovery from the
contractor and when no claim against the contractor was
raised during the aforesaid period, the appellant raised
the claim for disputed amount which was not paid. ThePage 8
8
period of two years is defect liability period and it was
clearly open for the appellant to raise the claim for
disputed amount after expiry of the aforesaid period of
two years.
14. The respondents never adjudicated the disputed
part of the final bill and after serving notice the appellant
had rightly sought for adjudication by an arbitrator
which application has been rejected by Hon’ble Chief
Justice not on valid considerations.
15. Learned counsel appearing for the respondents
supported the judgment of the Chief Justice and
contends that for filing any application limitation is three
years as per Article 137 of the Limitation Act, 1963.
Final bill had been paid on 10.04.2001, any application
for any claim in respect to final bill ought to have been
raised within three years. It is contended that the
respondents have raised the preliminary objections in
reply objecting the application for arbitration filed by the
appellant, which has rightly been rejected by the Chief
Justice.
16. We have considered the submissions of both the
parties and have perused the record, what is the nature
of jurisdiction of the Chief Justice while deciding an
application under Section 11 of the Act has elaborately
been considered by Seven Judge Bench of this court in
SBP & CO. versus Patel Engineering Ltd and another
(2005) 8 SCC 618. In para 47 of the judgment,
conclusions were recorded by the larger Bench.
Conclusion IV is relevant for the present case which is
quoted as below:
“47. We, therefore, sum up our conclusions
as follows:
(iv) The Chief Justice or the designated
Judge will have the right to decide the
preliminary aspects as indicated in the
earlier part of this judgment. These will be
his own jurisdiction to entertain the request,
the existence of a valid arbitration
agreement, the existence or otherwise of a
live claim, the existence of the condition for
the exercise of his power and on the
qualifications of the arbitrator or
arbitrators. The Chief Justice or the
designated Judge would be entitled to seek
the opinion of an institution in the matter of
nominating an arbitrator qualified in terms
of Section 11(8) of the Act if the need arises
but the order appointing the arbitrator
could only be that of the Chief Justice or the
designated Judge.”
17. The Chief Justice exercises the judicial power while
passing an order under Section 11 of the Act thus can
examine the question as to whether the claim which has
been raised before him survives and needs to be
adjudicated. It goes without saying that if Chief Justice
finds that claim is a dead claim, he can exercise
jurisdiction in rejecting the application.
18. A two Judge Bench of this court in Indian Oil
Corporation Limited vs. SPS Engineering Limited,
2011 (3) SCC 507, had occasion to consider what is a
‘live claim’ within the meaning of Section 11 of the Act.
Elaborating the jurisdiction of the Chief Justice, under
Section 11 of the Act following was laid down by this
court in para 14 of the judgment:
“14. …….The Chief Justice or his designate
may however choose to decide whether the
claim is a dead (long-barred) claim or
whether the parties have, by recording
satisfaction, exhausted all rights,
obligations and remedies under the contract,
so that neither the contract nor the
arbitration agreement survived. When it is
said that the Chief Justice or his designate
may choose to decide whether the claim is
a dead claim, it is implied that he will do so
only when the claim is evidently and
patently a long time-barred claim and there
is no need for any detailed consideration of
evidence. We may elucidate by an
illustration: if the contractor makes a claim
a decade or so after completion of the work
without referring to any acknowledgment of
a liability or other factors that kept the
claim alive in law, and the claim is patently
long time-barred, the Chief Justice
or his designate will examine whether the
claim is a dead claim (that is, a long
time-barred claim). On the other hand, if
the contractor makes a claim for payment,
beyond three years of completing of the
work but say within five years of
completion of work, and alleges that the
final bill was drawn up and payments
were made within three years before the
claim, the Court will not enter into a
disputed question whether the claim was
barred by limitation or not. The Court will
leave the matter to the decision of the
Tribunal. If the distinction between
apparent and obvious dead claims, and
claims involving disputed issues of
limitation is not kept in view, the Chief
Justice or his designate will end up
deciding the question of limitation in all
applications under Section 11 of the Act.”
19. Further this court has observed that an application
under Section 11 of the Act is expected to contain
pleading about the existence of a dispute and the
applicant is not expected to justify the claim or plead
extensively in regard to limitation or production of
document to demonstrate that claim is within time in
proceeding under Section 11 and that issue should
normally be left to the Arbitral Tribunal. Following was
observed in para 15:
“15. An application under Section 11 of
the Act is expected to contain pleadings
about the existence of a dispute and the
existence of an arbitration agreement to
decide such dispute. The applicant is not
expected to justify the claim or plead
exhaustively in regard to limitation or
produce documents to demonstrate that
the claim is within time in a proceeding
under Section 11 of the Act. That issue
should normally be left to the Arbitral
Tribunal. If the Chief Justice or his
designate is of the view that in addition to
examining whether there is an arbitration
agreement between the parties, he should
consider the issue whether the claim is a
dead one (long time-barred) or whether
there has been satisfaction of mutual
rights and obligation under the contract,
he should record his intention to do so and
give an opportunity to the parties to place
their materials on such issue. Unless the
parties are put on notice that such an
issue will be examined, they will be under
the impression that only questions of
jurisdiction and existence of arbitration
agreement between the parties will be
considered in such proceedings.”
20. From the above, it is clear that Chief Justice may
chose to hold a claim as a dead claim only when the
claim is evidently and patently long time barred claim
and there is no need for any detailed consideration of
evidence. An illustration have been given in para 14 as
extracted above. The above illustration becomes relevant
for the facts of the present case. In the present case also,
the appellant has raised the claim beyond the three years
of completing of the work but within five years of
completion of the work.
21. In the present case, the appellant has also
contended that there is a defect liability period of twoPage 15
15
years during which any recovery can be made from the
contractor. Further the categorical case of the appellant
was that final payment made at 10.04.2001 was the final
payment of the undisputed claim and there were other
claims of the appellant which were disputed and the
payment received on 10.4.2001 was with regard to
undisputed claim. There being no adjudication with
regard to disputed claim the claim raised by notice dated
23.02.2005 cannot be said to be barred by time or a dead
claim.
22. In the present appeal by IA No. 03 of 2012, the
appellant has brought certain additional materials for
consideration of the Court. By annexure 16 certain
certificates which were given by the contractor on
20.02.2001 that is when the final bill was prepared, has
been brought on record. The payment was made by
cheque dated 10.04.2001 and para 3/4 of the certificate
filed at the 2nd page of the annexure 16 states as follows:Page 16
16
“3. Printed Certificate signed by the
petitioner at the time of receiving payment
of the undisputed part of the Final Bill.
Received Rs. 57532/-. This payment is in
full and final settlement of all money due
under C WE/AF CHD / CHD-5/98-99 and I
have no further claim in respect of the
………………..
Sd/-
Contractor”
“4. Payment by Cheque of the undisputed
part of the Final Bill made by the
dispersing officer,
mentioned-herein-below:-
Cheque No. H – 916930 dated 10.4.2001
for Rs. 57532/- issued in favour of M/s
Emm Enn Associates on SBI AF
Chandigarh Treasury.
Sd/-
Signature of Dispersing Office ”
23. Para 04 of the above certificate as quoted above
clearly mentions payment by cheque of the undisputed
part of the final bill and above certificate also clearly
indicates that payment on 10.04.2001 was made of the
undisputed part of the final bill which presupposes that
there are certain other claims which are disputed.
Clause 67 of the contract entered between the partiesPage 17
17
also uses expressions “undisputed portion of the Final
Bill”
24. Appellant had relied on Clause 67 which contains a
heading “Recovery From Contractor” under sub-Clause (f)
and (g) which is to the following effect:
(f) If, as a result of such audit and
technical examination, any over-payment
is discovered in respect of the work done
under this Contract, the contractor shall
on demand make payment of a sum equal
to the amount of over-payment or agree for
effecting necessary adjustment from any
amounts due to him by Government. If
however, he refuses or neglects to make
the payment on demand or does not agree
for effecting adjustment from any amounts
due to him, Government shall be entitled to
take action as in sub-para (a) hereinbefore.
If as a result of such audit and technical
examination any under payment is
discovered, the amount of under payment
shall be duly paid to the Contractor by
Government.
(g) Provided, that, nothing hereinbefore
contained shall entitled the Government to
recover any over-payment in respect of any
price agreed between the C.W.E or the G.E.
and the Contractor under the
circumstances specifically prescribed for
such method of assessment and that the
said right of the Government to adjustPage 18
18
over-payment from any sum due or from
any sum which may become due to the
Contractor or from Security Deposit or
Security Bond amount and adjust under
payment, shall not extend beyond a period
of two years from the date of payment of
the undisputed portion of the Final Bill or
in the case of minus Bill, from the date,
the net amount of the final bill is
communicated to the Contractor. “
25. In sub-Clause (g) the period of two years under
which the Government is entitled to make recovery is
“from the date of payment of the undisputed portion of
the final bill”. The examination of the additional materials
brought on this appeal, does indicate that the case
required consideration of relevant bills and certificates
and determination on the question as to whether the
claim laid by appellant was a dead claim and was not a
live claim depended upon scrutiny of relevant
documents. The pleadings in the proceeding under
Section 11 by the appellant were clearly to the effect that
on 10.04.2001, he was paid only undisputed part andPage 19
19
the appellant has reserved his right to raise claim to the
disputed part.
26. In view of the Division Bench judgment in Indian
Oil Corporation Ltd. supra para 14 as extracted above,
the present was the case which ought to have been left
for the decision by the Tribunal. We, however, have
proceeded further to examine the claim raised by the
appellant in his notice dated 23.02.2005. The pleadings
of the appellant are categorical to the effect that the final
payment made on 10.04.2001 was only with regard to
undisputed portion and he has reserved his right to raise
claim with regard to other disputed claims.
27. The disputed claims having never been adjudicated,
we are of the view that there was a dispute which needed
an adjudication after looking into all relevant documents,
bills and certificates which could have been appropriately
examined by Arbitral Tribunal and the observation of the
Chief Justice “As the appellant has failed to prima facie
show this court that there was a live claim of the
appellant” does not commend us.
28. The claim raised by petitioner in the facts of the
case could not have been said to be a dead claim.
Especially in view of the additional documents which
have been placed before us by IA No. 03 of 2012. We are
thus of the view that the order dated 12.03.2007 passed
in Arbitration Case No. 184 of 2006 and 89 of 2006
deserves to be set-aside.
29. As a consequence thereof, the application made by
the appellant under Section 11 of the Act is allowed. We,
however, consider it apposite to remit the case to the
High Court (designated Judge) to pass consequential
orders for appointment of the arbitrator for deciding the
disputes which have arisen between the parties. The
appointment of the arbitrator may be made in the first
instance with the consent of the parties and if, for any
reason, it is not possible to do so then the Court willPage 21
21
appoint the arbitrator in its discretion. It be done within
one month from the date of the parties appearance.
30. Parties to appear before the designated Judge in the
High Court on 25.07.2016 to enable the Court to pass
appropriate consequential order as directed above. Both
the appeals are accordingly allowed.
………………….…...........................J.
(ABHAY MANOHAR SAPRE)
………………..…...........................J.
(ASHOK BHUSHAN)
NEW DELHI,
JUNE 26, 2016.
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