Case title: Union of India VS M/s M.G. Contractors Pvt. Ltd. (Arb. A. No. 1 of 2022)
M/s M.G. Contractors Pvt. Ltd. VS Union of India (Arb. A. No. 2 of 2022)
Case no.: Arb. A. No. 1 of 2022 and Arb. A. No. 2 of 2022
Dated on: 28th May, 2024
Quorum: Hon’ble. MR JUSTICE BHASKAR RAJ PRADHAN
FACTS OF THE CASE
Two connected appeals were made under Section 37 of the Arbitration and Conciliation Act, 1996 assailing the final judgment dated 27.12.2021, one filed by the Union of India and the other by M/s M.G. Contractors Pvt. Ltd.
Tender was invited by CPWD, Chungthang, for construction of ITBP road sometime in the year 2010. In response, M/s M.G. Contractors Pvt. Ltd. submitted its tender which was found to be lowest, accepted and awarded in its favour. The value of work awarded under the contract was Rs.70,65,65,490/- (Rupees seventy crores, sixty-five lakhs, sixty-five thousand, four hundred and ninety only) which was 24.55% above the estimated cost put to tender of Rs.56,72,94,653/- (Rupees fifty-six crores, seventy-two lakhs, ninety-four thousand, six hundred and fifty-three only). Twenty-four months to be reckoned from 22nd day after the date of issue of acceptance letter dated 10.09.2010 was the time allowed for carrying out the work. The stipulated date of start of work was 02.10.2010 and the date of completion was 01.10.2012. The Agreement was executed in the year 2011. The work was delayed due to various reasons and finally completed on 30.06.2015. Certain disputes arose between the parties and M/s M.G. Contractors Pvt. Ltd. invoked Arbitration Clause 25 of the Agreement. The Sole Arbitrator was appointed who entered reference vide letter dated 14.03.2020.
ISSUES
- Whether the claim 7 of M/s M.G. Contractors Pvt. Ltd. Was barred to limitation?
- Whether the applications by the Union of India under Sections 34 and 37 maintainable?
LEGAL PROVISIONS
Section 37 of The Arbitration and Conciliation Act, 1996
The Arbitration and Conciliation Act, 1996 Section 37 provides for filing of appeals against orders of the Court or for that matter an Arbitrator.
Article 55 of The Limitation Act, 1963
For compensation for the breach of any contract, express or implied, not herein specially provided for. Three years When the contract is broken or (where there are successive breaches) when the breach in respect of which the suit is instituted occurs or (where the breach is continuing) when it ceases.
CONTENTIONS OF THE APPELLANT
M/s M.G. Contractors Pvt. Ltd. made 15(fifteen) claims by filing their Statement of Claims. The Union of India did not prefer any counter-claim. The total claim made by M/s M.G. Contractors Pvt. Ltd. was Rs.29,11,26,419/- (Rupees twenty-nine crores, eleven Arb. A. No.1 of 2022 4 Union of India vs. M/s M.G. Contractors Pvt. Ltd. & Arb. A. No.2 of 2022 M/s M.G. Contractors Pvt. Ltd. vs. Union of India lakhs, twenty-six thousand, four hundred and nineteen only) along with interest, GST and cost as actual.
Claim No.7 was for an amount of Rs.8,16,41,135/- (Rupees eight crores, sixteen lakhs, fourty-one thousand, one hundred and thirty-five only) claimed as due and payable for escalation compensation for period October 2012 to June 2015. Claim No.13 was for interest at the rate of 18% from due date to date of payment. Claim No. 14 was the claim for GST at applicable rate as per actual on the claim amounts.
CONTENTIONS OF THE RESPONDENTS
The Union of India filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 before the learned Commercial Court, being Arbitration Case No. 1 of 2021, in the matter of Union of India vs. M/s M.G. Contractors Pvt. Ltd. The Union of India prayed for setting aside Claim No.7 and associate interest under Claim No. 13 and associate GST under Claim No.14 Arb. A. No.1 of 2022 5 Union of India vs. M/s M.G. Contractors Pvt. Ltd. & Arb. A. No.2 of 2022 M/s M.G. Contractors Pvt. Ltd. vs. Union of India granted in favour of M/s M.G. Contractors Pvt. Ltd on the ground that it was barred by limitation. The Union of India categorically asserted “That the applicant had accepted the claim No.1,2,3,4,5,6,8,9,10,11,12,15 and associated interest under claim 13 and associated GST amount under claim 14.”
The pivotal ground on which the Union of India challenges the impugned judgment is that since the learned Sole Arbitrator had himself considered Claim No.7 as a damage claim, as such, cause of action ought to have been reckoned from the last day of hindrance, i.e., the last day of breach of contract on 30.03.2015 instead of last day of bill on 09.03.2017 as per Article 55 of the Schedule to the Limitation Act, 1963. Although, the Union of India in its statement in defence had not taken the plea of limitation, it is submitted that the Sole Arbitrator had himself held that it was a duty cast upon him to examine whether the claims were barred by limitation and further he would be examining whether each of the claims was barred by limitation. However, the Sole Arbitrator failed to examine whether Claim No.7 was barred by limitation.
COURT’S ANALYSIS AND JUDGEMENT
The court was of the view that both these appeals can be disposed of in terms of the judgment of the Hon’ble Supreme Court in Project Director, National Highways No.45E and 220, National Highways Authorities of India vs. M. Hakeem and another1 and S.V. Samudram vs. State of Karnataka and Another2. In both these judgments, the Hon’ble Supreme Court has held that Section 34 does not empower the Court to modify the award passed by the Arbitrator. The court further held that in the proceedings before the learned Commercial Court, whose judgment is impugned in Arb. A. No. 1 of 2022, the application under Section 34 of the Arbitration and Conciliation Act, 1996, was not for setting aside the Award as the Union of India categorically accepted the award of Claim Nos. 1,2,3,4,5,6,8,9,10,11,12,15 and associate interest under Claim 13 and associate GST under Claim No.14. Thus, the Union of India cannot seek the setting aside of Claim No.7 and associate interest under Claim No.13 and associate GST under Claim No.14 granted in favour of M/s M.G. Contractors Pvt. Ltd. That, in effect, would be to seek modification of the Award by the learned Commercial Court, which had no power to do so. The court was also of the opinion that in a proceeding under Section 37 of the Arbitration and Conciliation Act, 1996, it is not authorised to disturb concurrent findings of facts and law by the learned Sole Arbitrator and the learned Commercial Court.
The court therefore held that the first part of the impugned judgment of the learned Commercial Court, vis-à-vis, the challenge of the Union of India in its application under Section 34 of the Arbitration and Conciliation Act, 1996 need not be interfered with. The applications by the Union of India under Sections 34 and 37 were not maintainable. Accordingly, the court dismissed Arb. A. No. 1 of 2022. The second part of the impugned judgment, however, reflects that the learned Commercial Court on its own examined the Award minutely and modified the Award, vis-à-vis, Claim No.13. While doing so the learned Commercial Court exceeded its jurisdiction and so the court did not hesitate in setting aside the impugned judgment to the extent it modifies the Award. Accordingly, Arb. A. No. 2 of 2022 is allowed.
Both the appeals were dismissed.
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Judgement Reviewed by – Fathima Sara Sulaiman
