Smt. Krishna Bai and Others vs Hindustan Steel Limited

Dhirendra Mishra, J.—This miscellaneous appeal u/s 39(1) of the Indian Arbitration Act, 1940 (for short ''Act of 1940'') is directed against the judgment dated 29-3-1993 passed by the Court of learned 5th Additional District Judge, Durg in Civil Suit No. 9-A/93, whereby learned Additional District Judge has allowed the suit of the respondent herein and set aside the learned Umpire''s award dated 20-5-1985.

Facts, in brief, are that original claimant Gulab Bhai had some petty contracts with the Bhilai Steel Plant. Earlier contract dated 19-2-1971 was rescinded with the consent of both the parties and fresh sale order dated 22-4-1972 was communicated by the respondent which was accepted by the original claimant vide his letter of Exh. 21. As per the fresh sale order, the original claimant was to lift agreemented mixed coke of 3000 ton @ Rs. 53.62 paise per ton between 22-5-1972 to 22-4-1973 @ 250 ton mixed coke per month. Grievance of the appellants is that the appellants complied with the conditions of sale order and deposited the purchase money for supply of mixed coke along with security deposit. However, the respondent did not allow the appellants to lift the mixed coke as per condition of the sale order. The appellants addressed several letters dated 6-4-1972, 12-6-1972, 6-10-1972, 18-12-1972, 9-8-1976, 25-10-1976, 14-11-1976 and 24-12-1976 requesting the respondent for revalidating the sale order. However, the respondent cancelled the sale order and ordered refund of security deposit of Rs. 1,000/-. In these circumstances, the appellants invoked arbitration Clause vide letter dated 9-3-1977 (Exh. 28) by nominating Mr. R.B. Shukla, Advocate as their arbitrator and called upon the respondent to nominate their arbitrator. In response to the above notice the respondent appointed one Shri Chandrakant as its arbitrator vide letter dated 15-3-1977 (Exh. 12). Thereafter, it appears from the record that the appellants appointed Mr. K.N. Verma as their arbitrator, whereas, the respondent appointed Mr. P.K. Sinha as its arbitrator. The appellants'' arbitrator did not deliver the award but prepared a draft of the award. The respondent''s arbitrator did not deliver any written award, however, he informed in writing that he did not agree with the draft award. The parties to the proceedings made efforts to appoint Umpire to resolve their dispute, however, when they failed to agree on the name of Umpire, an application u/s 8 of the Act of 1940 was filed for appointment of Umpire and accordingly Mr. Justice P.K. Tare was appointed as Umpire through intervention of the Court and dispute was referred for adjudication to learned Umpire. During the arbitration proceeding before Joint Arbitrators appointed by the parties, original claimant Gulab Bhai died on 15-4-1978 and his legal heirs, Le., appellants herein were substituted.

The appellants in their statement of claim averred that the respondent''s vide sale order dated 22-4-1972 offered the claimant 3000 ton of mixed coke @ Rs. 53.65 paise per ton with the conditions that material has to be lifted by the claimant from the site; quantity was to be lifted within a year from the date of sale order with a minimum off-take of 250 ton per month; delivery was to be allowed against road coupons to be obtained by the claimants after paying consideration and Rs. 1,000/- was to be deposited as security deposit. The above offer was duly accepted by the claimants vide their letter dated 6-4-1972. It has been further averred that arrangement for trucks for lifting the material was made; coupons were purchased after depositing the consideration and security deposit of Rs. 1,000/- was also made on 5-4-1972. However, when the arrangements were completed the respondent vide their letter dated 18-7-1973 (Annexure 9) and Plant Instruction Memo, dated 14-6-1973 cancelled the sale order dated 22-4-1972. Request of the claimants for extending period of lifting of the coke by one year vide letter of Annexure 12 dated 18-12-1972 was not accepted and the sale order was cancelled without any default of the appellants. With these averments a total sum of Rs. 2,63,514/- was claimed under various heads for the losses incurred by the claimant and interest thereon @ 12%.

The respondent in its reply denied the claim and objected to the maintainability of the claim on the ground that the same is barred by principle of waiver, acquiescence and estoppel. It is also specifically averred that by accepting the sale order dated 22-4-1972, the appellants also accepted the conditions mentioned in the said order and as per condition No. 2 the material could be lifted within a period of one year from the date of forwarding of the sale order and not beyond that. Since the appellants'' right for lifting the material expired after one year, the contract stood cancelled and the respondent vide their memo dated 14-6-1973 formally communicated about the cancellation of the sale order to the appellants.

On the basis of the pleading of the respective parties the learned Umpire framed in all 12 issues. The appellants examined Shri K.M. Manyani and Motilal as witnesses in support of their claim petition.

After hearing the parties, learned Umpire vide reasoned award dated 20-5-1985 allowed the claim of the appellants with cost and awarded Rs. 1,55,849.55 paise towards damages and Rs. 2,884.60 paise towards price of road coupons with interest @ 10% per annum on the amount of damages from the date of award till realization.

The respondent moved an application u/s 30 of the Act of 1940 for setting aside the award before the learned District Judge, Durg, who vide impugned judgment has set aside the award passed by the Umpire with a finding that the claim of the appellants was barred by limitation.

Learned Counsel for the appellants vehemently argued that learned District Judge was not justified in re-appreciating the evidence for reaching to the conclusion that the claim was barred by limitation. The finding of learned District Judge that the period of limitation did not commence from 9-12-1975 is also erroneous. In the admitted premises that the dispute was referred for arbitration by the respondent; the respondent themselves appointed arbitrator on their behalf and thereafter Umpire was also appointed with the consent of the respondent and they participated in the arbitration proceeding; the respondent was estopped from raising the question of limitation as the same is hit by Doctrine of Promissory Estoppel and estoppel by acquiescence. It was further argued that the arbitrator has wide powers and even the error in law made by the arbitrator does not vitiate the award and the judgment by consent may operate as contract in appropriate cases. Delay, if any, in invoking the arbitration Clause stands impliedly condoned as the respondent agreed to make reference. Reliance is placed on the judgments of the Hon''ble Supreme Court in the matters of Major (Retd.) Inder Singh Rekhi Vs. Delhi Development Authority, ; Inder Sain Mittal Vs. Housing Board, Haryana and Others, ; B.S.N.L. and Others Vs. Subash Chandra Kanchan and Another, ; Shree Ram Mills Ltd. v. Utility Premises (P) Ltd. (2007) 4 SCC 599 and Utkal Commercial Corporation Vs. Central Coal Fields Ltd., .

On the other hand, learned Counsel for the respondent submits that the sale order dated 22-4-1972 clearly stipulates that lifting may be allowed within one year from the date the sale order was forwarded. The appellant was to take delivery of minimum 250 ton of the ordered mixed coke per month. The said sale order was governed by the terms of business of the respondent-Company which provides for arbitration Clause for resolution of the dispute. The sale order was cancelled after expiry of period of one year vide Plant Instruction Memo dated 14-6-1973 with a further direction to refund the security deposit. The above order was again forwarded to the appellant vide memo dated 18-7-1973 and the receipt of the same was duly acknowledged by the original claimant Gulab Bhai vide his memo dated 18-7-1973 (Annexure 10) whereby he declined to accept the refund of security deposit and reiterated his request to start the supply of mixed coke failing which legal action was contemplated. However, the appellant invoked the arbitration Clause only on 5-3-1977, i.e., beyond the period of three years and as such the same was barred by law of limitation. It was further argued that the learned Umpire has also recorded that proceeding for reference was initiated on 4-9-1977. It has also been held that limitation for invoking the arbitration Clause is three years, as per Article 137 of the Act of 1963, however, the starting point for limitation would not commence on 14-6-1973, as the respondent submitted to the jurisdiction of arbitrators by agreeing to appoint the arbitrators, which constitutes acknowledgment u/s 18 of the Act of 1963 and therefore, limitation starts from 9-12-1975. It was argued that by agreeing to appoint arbitrator, it cannot be construed that the legal objection that the invoking arbitration Clause is barred by limitation is waived, particularly when the consistent stand of the respondent is that claim of the appellants was barred by limitation. The finding in the award that the time was not the essence of the contract is also erroneous. The sale order clearly mentions that the appellant was to lift the ordered coke within a period of one year from the date of order. The said contract of supply/sale of goods became voidable after expiry of period of one year at the option of the promisee as per Section 55 of the Indian Contract, 1872. The appellant could not claim as a matter of right for extension of time to supply the goods. The learned Umpire has committed legal misconduct by wrongfully awarding compensation to the appellant by the impugned award. Reliance is placed on the judgment delivered in the matter of Sumerchand Hukwnchand and Ors. v. Hukumchand Mathuradas and Ors. 1965 MPLJ 829.

We have heard learned Counsel for the parties. We have perused the record of the Arbitral Tribunal as also impugned award. We have also gone through the impugned judgment of the learned District Judge.

From perusal of the record, statement of claim, reply of the respondent and the impugned award, undisputed facts that emerges are as under:

Sale order dated 22-4-1972 (Exh. 7) was communicated to the original claimant vide forwarding memo dated 22-5-1972 (Exh. 8) and the same was accepted by him vide Exh. 21. There is a reference in the sale order that terms and conditions of the sale will apply to the above sale and quantity of coke was to be lifted within a period of one year from the date of communication of the sale order.

The sale order was to be treated as cancelled as per Plant Instruction Memo dated 14-6-1973 and security deposit was directed to be refunded to the original claimant. The above memo was also forwarded to the original claimant along with memo dated 18-7-1973 and the same was duly acknowledged by him in his response dated 18-7-1973.

The appellant invoked the arbitration Clause on 5-3-1977.

Learned Umpire after framing issues on the basis of pleadings of the respective parties and after affording opportunity of leading evidence, has passed the impugned reasoned award.

While deciding Issue No. 1-B, whether reference is not maintainable as the claim is barred by waiver, acquiescence and estoppel; and Issue No. 1-C whether the claim is barred by limitation, the learned Umpire has held that there is no oral or documentary evidence to show that the claim is barred by waiver, acquiescence or estoppel. However, the learned Umpire has held that for invoking arbitration Clause residuary of Article 137 would be applicable which provides for limitation of three years from the date when the right to apply for arbitration accrued. Referring to various correspondences of the claimant, the learned Umpire has held that the appellant was continuously raising the grievance that the respondent was not honouring the contract and on final refusal by the respondent, arbitration Clause was invoked on 5-3-1977 (Exh. 72). It has been further observed that respondent submitted to the jurisdiction of the arbitrators and therefore, they were estopped from challenging the jurisdiction. It has been also held that limitation, if at all, will starts from 9-12-1975 as respondent vide their letter dated 9-2-1975 (Exh. 16) and 13/15-10-1976 contended that contract automatically lapsed after one year.

While deciding Issue No. 3 whether time was the essence of the contract in terms of the sale order dated 22-4-1972, the learned Umpire referring to the Clause 11 of the terms of business has held that the above Clause does not include any non-delivery in breach of the contract and therefore, time cannot be construed as essence of contract.

In view of above undisputed facts in the matter, the only question for consideration before us is whether the learned District Judge while allowing the application u/s 30/33 of the Act of 1940 was justified in holding that the claim of the appellant was barred by law of limitation ?

We propose to examine the legal submissions of Shri Tamaskar, learned Counsel for the appellant on the point of limitation.

In the matter of Mayor (Retd.) Inder Singh Rekhi (supra), it has been held that Article 137 of the Limitation Act, 1963 would apily to any petition or application filed in the Civil Court. The period of three years would commence from the date when right to apply accrues, i.e., when a claim is asserted by one party and denied by the other party on whatever ground. In the above case, since the final bills were not prepared at the time when claimant asserted his claim, it has been held that cause of action arose to the claimant on the date he asserted the claim.

In the matter of Inder Sain Mittal (supra), the Hon''ble Apex Court, while considering the jurisdictional error as a ground for setting aside the award, has held that right to take such objection would be defeated if party raising it has participated under the arbitration proceeding and thus acquiesced in functioning of arbitrator despite invalidity of his conduct. In Para 12 of the judgment, it has been concluded thus:

In view of the foregoing discussions, with reference to the provisions of the Act, we conclude thus:

(i) Grounds of objection u/s 30 of the Act to the reference made, with or without intervention of the Court, arbitration proceedings and the award can be classified into two categories viz., one emanating from agreement and the other from law.

(ii) In case the ground of attack flows from agreement between the parties which would undoubtedly be a lawful agreement, and the same is raised at the initial stage, the Court may set it right at the initial stage or even subsequently in case the party objecting has not participated in the proceedings or participated under protest. But if a party acquiesced to the invalidity by his conduct by participating in the proceedings and taking a chance therein cannot be allowed to turn round after the award goes against him and is estopped from challenging validity or otherwise of reference, arbitration proceedings and/or award inasmuch as right of such a party to take objection is defeated.

(iii) Where ground is based upon breach of mandatory provision of law, a party cannot be estopped from raising the same in his objection to the award even after he participated in the arbitration proceedings in view of the well-settled maxim that there is no estoppel against statute.

(iv) If, however, basis for ground of attack is violation of such a provision of law which is not mandatory but directory and raised at the initial stage, the illegality, ii appreciate case, may be set right, but in such an eventuality if a party participated in the proceedings without any protest, he would be precluded from raising the point in the objection after making of the award.

In the matter of BSNL and others (supra), the Hon''ble Supreme Court has held that a litigant is represented by an advocate. A concession made by such an advocate is binding on the party whom he represents and such party cannot resile therefrom, subject to just exceptions. However, it has been further held that wrong concession made by an advocate on a legal question may not be binding on his client.

In the matter of Shree Ram Mills Ltd. (supra), the question before the Hon''ble Supreme Court was whether the claim in question was alive one and/or not barred by limitation. Referring to Para 24 of the judgment in the matter of Hari Shankar Singhania and Others Vs. Gaur Hari Singhania and Others, , with approval it has been held that where negotiations were still on between the parties, there would be no question of starting of the limitation period.

In Utkal Commercial Corporation (supra), the Hon''ble Supreme Court while dealing with the limitation for filing an application u/s 8 of the Act of 1940 has held that for the purpose of filing the application u/s 8, prescribed period of limitation, according to Article 137 of the Act of 1963, is three years from the date when right to make an application accrues and a dispute arises where there is claim and a denial and repudiation of the claim.

In the matter of S. Rajan Vs. State of Kerala and another, , the works contract of the State with the appellant was terminated on his failure to execute the contract in time and the same was completed through another agency resulting in loss to the State. The demand notice was issued by the State in the year 1974 calling upon the appellant to pay the assessed amount of loss. Writ petition against the demand notice was dismissed in the year 1978. Request for reference of dispute to arbitrator by the appellant to the Government was made in the year 1983 and after rejection of the request, application u/s 20 was filed by the appellant in the year 1995. In the aforesaid circumstances, it was held that right to apply u/s 20 accrued on the date of service of demand notice in the year 1974, that being the date when difference between the parties arose and the application having been filed long after the period of three years from the date of the notice, the application and even the request were barred by limitation under Article 137 of the Limitation Act, 1963.

In the matter of Sumerchand Hukumchand (supra), a suit for specific performance of contract dated 20-11-1951 or in the alternative for refund of advance money together with interest was filed by the plaintiff in the year 1958. The suit was contested mainly on the ground that it was barred by the provisions of Order 2 Rule 2 of the CPC and that was also time barred. The Division Bench of M.P. High Court while considering the question of limitation held that where time for the performance of the contract is fixed, limitation forthwith begins to run as from that time, irrespective of the question of notice or refusal to perform. It is settled law that where a time is fixed for performance, the second part of Column 3 in Article 113 has no application.

In the matter of SBP & Co. v. Patel Engineering Ltd. and Anr. (2005) 8 SCC 618 : 2006(1) M.P.H.T. 61 (SC), 7 Judges Bench of the Hon''ble Supreme Court while dealing with the question as to what exactly the Chief Justice, approached with an application u/s 11 of the Act of 1996, is to decide at that stage, held that it is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long-barred claim that was sought to be resurrected and whether the parties have concluded the transactions by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. It may not be possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. It will be appropriate if that question is left to be decided by the Arbitral Tribunal on taking evidence, along with the merits of the claims involved in the arbitration.

On the basis of principles of law laid down by the Hon ''ble Supreme Court in the aforesaid judgments, the settled law emerges as under:

(a) Article 137 of the Act of 1963 would apply to any petition or application for appointment of arbitrator under the Act of 1940.

(b) Period of three years would commence when the dispute arose between the parties, Le., when a claim is asserted by one party and denied by another party on whatever ground, and right to apply accrues.

(c) A party is precluded from challenging the award on the ground of jurisdiction of the arbitrator when he has participated in the arbitral proceedings. However, where ground is based upon breach of mandatory provisions of law, such objection to the award can be raised even after he participated in the arbitral proceedings.

(d) The question whether the claim was a dead one or long-barred claim that was sought to be resurrected may be decided by the Arbitral Tribunal on taking evidence along with merits of the claim involved in the arbitration.

In the instant case, as already observed above that the sale order dated 22-4-1972 was for a period of one year. The appellant was to lift 3000 ton of mixed coke @ 250 ton per month within a period of one year, however, till the expiry of the period no coke was lifted. The sale order was cancelled through the Plant Instruction Memo dated 14-6-1973 and the same was duly communicated to the appellants vide memo dated 18-7-1973. The Plant Instructions Memo also contains direction for refund of the security deposit. The appellant by his reply dated 18-7-1973 declined to accept the refund of security deposit.

The learned Umpire decide the question of limitation against the respondent on the grounds that:

(i) The claimant invoked arbitration Clause vide his letter dated 5-3-1977 after he failed in evoking any response for redressal of his dispute.

(ii) The respondent submitted to the jurisdiction of the arbitrators and therefore, they were estopped from challenging that jurisdiction, as agreeing to appoint arbitrator would amount to acknowledgment u/s 18 of the Act of 1963.

(iii) Since the respondent''s stand vide their letters dated 9-12-1975 and 13/15-10-1976 was that the contract lapsed automatically after period of one year and therefore, it has been held that limitation, if at all, will starts from 9-12-1975 and therefore, invoking arbitration Clause was within time.

It is true that the respondent acceded to the request of the appellant and appointed arbitrator for resolution of the dispute. However, the stand of the respondent right from the beginning was that dispute raised by the appellant is barred by limitation, as the same has been raised after about four years of the expiry of the period when the ordered coke was to be lifted as per sale order as also more than three years after the sale order was cancelled by the respondent on 14-6-1973.

We have already referred to various judgments of the Hon''ble Supreme Court wherein it has been held that objection based on breach of mandatory provision of law can be raised even after participation in the proceeding and the party cannot be estopped from raising the same in his objection to the award even after he participated in the arbitration proceeding in view of the well-settled maxim that there is no estoppel against statute.

Therefore, the reasoning assigned by the learned Umpire for rejecting the objection regarding limitation of the respondent isperse erroneous and without any legal basis as objection regarding limitation is based on the mandatory provisions of law and the same can be raised in an objection to the award even after participating in the arbitration proceedings. The another finding that agreeing to appoint an arbitrator would amount to an acknowledgment u/s 18 of the Act of 1963 is also perverse as the acknowledgment of liability must be precisely in respect of the right claimed. The finding that respondent by letters dated 9-12-1975 and 13/15-10-1976 have stated that the contract stands cancelled automatically after expiry of period of one year and therefore, period of limitation will start from 9-12-1975 is also without any substance as the respondent had already cancelled the sale order on 14-6-1973 and had also directed to refund security deposit. Therefore, dispute, if any, arose on 14-6-1973 and the right to apply for appointment of arbitrator accrued to the appellants on that date when the sale order was cancelled. There is nothing on record which reveals that the parties entered into any negotiation for settling the dispute between them after cancellation of sale order on 14-6-1973 and therefore, no fresh cause of action arose to the appellants on 9-12-1975 as held by the learned Umpire.

For the aforesaid reasons, we are of the considered opinion that there is no illegality or infirmity committed by the learned District Judge in allowing the application made u/s 30/33 of the Act of 1940, the instant appeal is without any substance, the same deserves to be dismissed and accordingly, it is dismissed with cost.