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CIVILAPPELLATEJURISDICTION

ARBITRATIONAPPEALNO.6OF2007

STATEOFMAHARASHTRA
(attheinstanceofIrrigationDepartment,
ExecutiveEngineer,KoynaDivisionNo.2)
...Appellant.

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INTHEHIGHCOURTOFJUDICATUREATBOMBAY.

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V/s.
1.HINDUSTANCONSTRUCTIONCOMPANY
(LTD.(HCC).

2.ARBITRALTRIBUNALOF:
a)S.N.Jha,b)V.M.Ranade,c)B.S.Panchmukhi

...Respondents.

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MrA.A.Kumbhakoni,learnedcounsela/wMrsS.V.SonawanelearnedA.G.P.,Mr
ShardulSinghandMrAbhayAnturkarforAppellant.

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MrAspiChinoy,seniorCounsela/wMrArifDoctori/bM/sHareshJoshi&Co.
forRespondents.
CORAM:R.D.DHANUKAJ.
RESERVEDON:JANUARY09,2013.
PRONOUNCEDON:FEBRUARY01,2013.

JUDGMENT:

By this appeal filed under Section 37 of the Arbitration And

Conciliation Act 1996 ( for short herein after referred as 'the Act'), the
Government seekstochallengeanorderandjudgmentdated29th June2006
passedbythelearnedDistrictJudge,Ratnagirirejectingarbitrationapplication

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No.44of2003filedbytheGovernmentunderSection34oftheAct.

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2.

TheGovernment hadchallengedanawarddeliveredbytheArbitral

Tribunalallowingsomeoftheclaimsmadebytherespondent (forshortthe
Government isreferredas'Government'andtherespondentisreferredas'the

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contractor'). Someoftherelevantfactsforthepurposeofdecidingthisappeal
areasunder:

Pursuant to the invitation of tender on 1st April 1991 by the

Government andsubmission ofbidbythe contractoron 17th June1991,the

Government awardedthe workof construction of civil work of pressure and

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powerhouseinICTcontractNo.2tothecontractor.Theamountofthecontract
awardedwasatRs.6825lakh.Boththepartiesenteredintoanagreementon20th
March 1992. Stipulated date of commencement of the work was 20th March

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1992.Thestipulateddateofcompletionwas19thMarch1997.TheGovernment
grantedextensionoftimetocompletetheworktothecontractortill31stMarch

2000.Theworkwascompletedbythecontractoron31stMarch2000.Thedate
ofcompletionofmaintenanceperiodwas3rdOctober2000.

3.

The dispute arose between the parties during execution of workin

respectofhiddenexpenses.Thecontractorinvokedarbitrationclause.On27th
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April1998,firstarbitrationproceedingsstarted.Byanawarddated4thDecember

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1998,theclaimofthecontractorwaspartlyacceptedbythelearnedarbitrator.
Pursuant to said award, the Government paid sum of Rs.10.2 crore to the
contractor.TheGovernmentdidnotchallengethesaidaward.

On3rdOctober2000,defectliabilityperiodended.Thedisputearose

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4.

betweentheparties. Thematterwasreferredtoarbitration. ArbitralTribunal

wasconstitutedbyappointmentofonearbitratorbyeachparty. Thepresiding

arbitratorwasappointedbytheCentralWaterCommission,NewDelhi.

On26thJune2003,thelearnedarbitratormadeanawardinfavourof

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5.

thecontractorawardingasumofRs.17,81,25,152/. Beingaggrievedbythe
saidaward,theGovernmentfiledarbitrationapplicationNo.44of2003on22 nd

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March2003intheCourtofDistrictJudge,Ratnagirichallengingthesaidaward
underSection34oftheAct.Byanorderandjudgmentdated29thJune2006,the

learnedDistrictJudgedealtwithfiveobjectionsraisedbytheGovernment by
way of preliminary objections only and negatived each of such objection and
rejectedthesaidarbitrationapplication. TheGovernmenthasfiledthisappeal
underSection37oftheActforimpugningtheorderandjudgmentdated29th
June2006passedbythelearnedDistrictJudge.
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Though Mr Kumbhakoni, the learned counsel appearing for the

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Government wantedto advance arguments in respect of various other issues

touching the merits of the claims, however, as the learned senior counsel

appearingforthecontractorobjectedtosuchadditionalsubmissionswhichwere
notmadebeforethelearnedDistrictJudge,MrKumbhakonithelearnedcounsel

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wasnotallowedtoagitatethoseadditionalissues.MrKumbhakoni,thelearned
counsel,thereforedidnotaddressthisCourtonadditionalissuesraisedbythe
GovernmentandaddressedthisCourtonlyonfivepreliminaryobjectionsraised

bytheGovernmentbeforetheDistrictJudgeinthisproceedingsalso.

MrKumbhakoni,thelearnedcounselsubmitsthatthecontractorhad

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7.

accepted payment under final bill without making any protest and thus the
contractitselfceasetoexist.Thelearnedcounselsubmitsthattheclaimsthus

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made by the contractor were not arbitrable in view of such accord and
satisfactionduetoacceptanceoffinalbillwithoutprotest.Thelearnedcounsel

submitsthatthecontractorhadacceptedandsigned164thandfinalbilland165th
andfinalbillwithoutprotest.Itissubmittedthatboththesebillsweresignedby
theauthorisedrepresentativeofthecontractorandchequesforfinalbillhadbeen
acceptedandcreditedinthebankaccountofthecontractor.

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Mr Chinoy, the learned senior counsel appearing on behalf of the

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contractor,ontheotherhandsubmitsthatthesignatoryto164thand165thbills
wasnotauthorisedtosignanysuchbillsbuthewasauthorisedtosign/acceptRA
bills. The learned counsel submits that under clause 60.8 of the GCC, the
contractorhadsubmittedthedraftfinalbillon30thDecember2000containing3

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parts(i) BOQitems,(ii)Extraitemsand(iii)Claims. Itissubmittedthatthe

Governmentsdidnotpreparetherequisitedraftfinalaccountwithin2monthsas
requiredunderClause60.8andalsodidnotpreparefinalcertificateunderthe

saidclause.ItissubmittedthatpaymentofBOQitemsandExtraitemswasmade
bytheGovernmentaspartof164thandfinalbillandpaymentforpricevariation

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wasmadeaspartof165thandfinalbill.Itissubmittedthathowever,inrespect
of5claims,nofinalbillwasissuedeitheracceptingorrejectingtheclaimsmade
bythecontractor.Itissubmittedthateventheamountsascertifiedunder164th

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and165thbillswerepaidbytheGovernmentin34instalments.Itissubmitted
that164thand165thandfinalbillswerenotfinalbillsascontemplatedbyclause

60.8.Thecontractordidnotissuenoclaimcertificate.Itissubmittedthatthus,
therewasnoaccordorsatisfactiononthepartofthecontractorandthusclaims
werearbitrable.

9.
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The learned senior counsel placed reliance upon the judgment of

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Construction1andmoreparticularlypara9whichreadsthus:

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Supreme Court in case of Bharat Coking Coal Ltd. Vs. Annapurna

9.Onlybecausetherespondenthasacceptedthefinalbill,thesamewouldnot
mean that it was not entitled to raise any claim. It is not the case of the
Governmentthatwhileacceptingthefinalbill,therespondenthadunequivocally
statedthathewouldnotraiseanyfurtherclaim....

10.

Relyinguponthesaidjudgment,thelearnedcounselsubmitsthat,as

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thecontractorhadnotunequivocallystatedthathewouldnotraiseanyfurther

claim,contractorwouldbeentitledtoraiseanyclaimandwouldnotbeestopped
orprecludedfromraisinganyclaim.

The arbitral tribunal has considered this issue in paragraph 10 to

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11.

10.13 of the impugned award. It was observed that procedure stated under
clause60.8(b)and(c)wasnotobservedbytheGovernment. Contractoralso

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didnotsubmitthe'draftstatementofFinalAccounts'asperClause60.8(a)and
didnotpursueitwiththeGovernment forissuanceofsuchcertificateofFinal

AccountasperClause60.8(c).TheArbitralTribunalobservedthatneitherthe
contractornortheGovernmenthereinadheredtotheprovisionsofClause60.8.
Ithasbeenheldthatitwouldhavebeenreasonableonthepartofthecontractor
to expect that the five claims would be considered by the Government
1 2004(5)ALLMR(SC)
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independentlyandaccepted,partiallyacceptedorrejectedontheirmeritsasthe

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casemaybeandifthatdecisionoftheGovernment wasnotacceptabletothe
contractor,thedisputecouldthenbereferredtothePanelofArbitratorsasper
Clause66SettlementofDispute.TheArbitralTribunalrenderedafindingthat
thecontractordidnotwaiveitsrighttoreferitsclaimforadjudicationbythe

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Arbitral panel merely because they had not lodged the protest against the
paymentbytheGovernmentoneither164thandfinalor165thorfinalbill.

TheDistrictJudgehasconsideredthisissueinparagraphs33and34

12.

oftheimpugnedOrderandhasrejectedthecontentionraisedbytheGovernment

13.

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afterrecordingreasons.

Onperusaloftherecordsproducedbyboththepartiesandonperusal

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of the award made by the Arbitral Tribunal and order passed by the learned
DistrictJudge,itisclearthattheprocedureunderClause60.8wasnotfollowed

by either party. Thus RA bills 164 and 165 and final bills were rightly not
consideredbytheArbitralTribunalasfinalbills.Itisnotindisputethatthere
wasanyseparatebillpreparedinrespectoffiveclaimsmadebythecontractor.
Inmyview,afterconsideringthefactsandthedocumentsandoninterpretation
ofClause60.8,ArbitralTribunalhasrenderedafindingthattherewasnoaccord
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andsatisfactionandthecontractorhadnotwaiveditsrighttomakeanyclaims.

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SuchfindingsrenderedbytheArbitralTribunalandconfirmedbythelearned
DistrictJudgearenotperverse. Inmyview,nointerferenceisthuswarranted
withsuchfindingsrenderedbytheArbitralTribunalandupheldbytheDistrict

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Judge.

14.

The next submission of Mr Kumbhakoni, the learned counsel

appearingfortheGovernmentisthatClaimNo.1madebythecontractorbefore

thelearnedarbitratorwasbarredby resjudicata. Thelearnedcounselsubmits

thatClaimNo.1oughttohavebeenreferredtoearlierArbitralPanelintheyear

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1998.Itissubmittedthatthoughtheworkinrespectofthisclaimwascompleted
during the pendency of earlier arbitration proceedings, the contractor did not

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raisethisclaimintheearlierarbitration.

15.

Mr Chinoy, the learned senior counsel appearing on behalf of the

contractorontheotherhandsubmitsthattherewere3Claimsreferredtoearlier
arbitraltribunaland2Claimswereaddedlateron.Itissubmittedthatpresent
Claim No.1 was not matured at that time and could not be included in that
arbitration. ItissubmittedthatmakingpaymentforExtra/deviateditemswith
denovorateanalysisafterapplyingthelabourmarkupandoverheadandprofit
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markup,asawardedbytheearlierarbitrationpanelwasunderconsiderationat

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variouslevelsoftheGovernment.ThecontractorinitiatedthesaidClaimon30 th

March1999andthesamewasrecommendedbytheEngineeroftheGovernment.
TheissuewasunderconsiderationatdifferentlevelsoftheGovernmentasthe
GovernmentdidnotpayevenattherateadoptedbytheArbitralTribunalinthe

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earlierarbitration,thecontractorinvokedarbitrationvideletterdated27th July
2000.Itissubmittedthatthelearnedarbitratorhasrenderedafindingoffact.
ClaimNo.1wasreferredbytheGovernmentitselfforadjudicationofthearbitral

tribunal. The District Judge also rejected this contention advanced by the
Government inparagraph45oftheimpugnedorder. TheDistrictJudgeheld

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that the disputes referred in 19971998 were distinct than present one and
therefore,noquestionofresjudicataarises.Thelearnedseniorcounselpointed
outthattheonlygroundraisedinarbitrationapplicationfiledunderSection34

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onthisissuewasthattheClaimwasbarredbytheprinciplesofresjudicata.Itis
pointedoutthatsimilargroundisraisedevenintheappealmemoinground(g).

The learned senior counsel submits that the claim made before the arbitral
tribunal in the second reference was admittedly not made before the arbitral
tribunalinthefirstreference.Therewasnoadjudicationofanysuchclaiminthe
earlierproceedings.Thequestionofapplicabilityoftheprinciplesofresjudicata
therefore,didnotarise.
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Onperusaloftheimpugnedawardaswellastheorderpassedbythe

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learned District Judge, it is clear that the finding is rendered by the arbitral
tribunal as well as the learned District Judge that Claim No.1 pertained to
variation in proposed percentages for the labour mark up and overheads and
profitonthesamelinesforextraitemsanddeviateditemswhichhadcroppedup

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duringtherestofthecontractwork. Ithasbeenheldthatmajorpartofthese
itemshadbeenexecutedevenpriortoreferringtheclaimtotheearlierArbitral
Panel.ThelearnedTribunalobservedthatClaimNo.1hadbeenincludedbythe

Government itselfforadjudicationbeforethe ArbitralTribunal in the second

reference.Afindingisrecordedthattheitemexcludedandclaimedinthesecond

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referenceweredifferent.TheDistrictJudgealsonegativedthecontentionofthe
Governmentontheissuewhilerecordingdetailreasons.Inmyview,asClaim
No.1madeinthepresentproceedingswasnotclaimedadmittedlyintheearlier

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arbitrationproceedings,therewasnoadjudicationonsuchclaimbytheArbitral
Tribunal,andthus questionofapplicabilityofprinciplesof resjudicata didnot

arise. The only ground raised by the Government in its application under
Section34beforetheDistrictJudgeandinthisappealmemofiledunderSection
37 of the Act, it is urged that the claim was barred by the principles of res
judicata.Inmyview,thereisnomeritinthepleaoftheGovernmentthatClaim
No.1isbarredby resjudicata andthus,thisplearaisedbytheGovernment is
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rejected.

17.

ThenextsubmissionurgedbyMrKumbhakoni,thelearnedcounselfor

theGovernmentisthattheclaimsarebarredbylawoflimitation.Itissubmitted
thattheworkofpressureshaftexcavationwasstartedon9thJuly1993andwas

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completedon2nd September1997. Thecontractorreferredthedisputeagainst

item No.3 to the Executive Engineer on 10th February 1997 and invoked
arbitrationon20th November2011. AsfarasworkofTransformerHallArch.

Concrete is concerned, it is submitted that the said workwas started on 23 rd

October 1992 and was completed on 19th February 1994. The dispute was

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referred in respect of this item to Executive Engineer on 14th October 1996

whereasarbitrationwasinvokedon1stJune2001.AsfarasworkofTransformer
Hallexcavationisconcerned,itissubmittedthatthesaidworkwasstartedon

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16thJuly1992andwascompletedon31stMarch1995,whereasissuewasraised
beforetheExecutiveEngineeron4thJune2001.ItissubmittedthatasperClause

66A of the General Conditions of Contract, in case of dispute, the contractor

ought to have promptly asked the Engineer's Representative in writing, for
writtendecisionandtheEngineer'sRepresentativewouldgivethedecisionwithin
60days.Itissubmittedthatonexpiryof60days,thecauseofactionhadarisen
forinvokingarbitration.ItissubmittedthatuponthefailurebytheExecutive
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Engineertodecidethe dispute within 60days,thecontractoroughtto have

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appealedtotheSuperintendingEngineerwithin30days. Itissubmittedthat
afterpreferringthedisputetoExecutiveEngineer,contractorwaitedfor3years
butdidnotexercisehisrighttofileanappeal.ItissubmittedthatitemNos.3,4
and5wereinexistenceintheyear1998whenthefirstarbitrationtookplace.

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The learned counsel placed reliance upon Article18 PartI of schedule to

LimitationAct1963.ItissubmittedthatasperArticle18ofLimitationAct,asno
timehasbeenfixedforpayment,theperiodoflimitationis3yearscommencing

fromthedatewhentheworkwascompleted. Itissubmittedthatinrespectof
ClaimNos.3,4and5,theworkwascompletedmuchpriorto3yearsbeforethe

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arbitration clause was invoked by the contractor. The learned counsel

demonstratedfromtablereferredinwrittensubmissions,thedateofcompletion
ofwork,referencemadetoExecutiveEngineer,rejectionofExecutiveEngineer;

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reference made to Superintending Engineer, rejection by Superintending

Engineer; reference made to Chief Engineer and rejection of Claim by Chief

Engineerandalsothedateofinvokingarbitration.Thesaidtableisreproduced
asunder:

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Work

Ref.to

Rej.by

Ref.to

Rej.by

Ref.To

Rej.By

Arbitration
invoked

Nos.

completed

EE

EE

SE

SE

CE

CE

02.09.97

10.02.97 17.07.00 03.08.00 22.09.00 12.10.00 08.11.00

20.11.00

19.02.94

14.10.96 04.11.00 27.02.01 12.04.01 10.05.01 21.05.01

01.06.01

31.03.95

14.10.96 19.09.00 27.02.01 12.04.01 10.05.01 25.05.01

04.06.01

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Claim

Article18 and Article55 of PartII, Article113 of PartX and

Article137ofPartIIoftheLimitationActreadasunder:
Art.

Descriptionofapplication

Periodof

18

Forthepriceofworkdonebytheplaintiff
forthedefendantathisrequest,whereno
timehasbeenfixedforpayment.

Threeyears

When the work is

done.

For compensation for the breach of any

contract, express of implied not herein
speciallyprovidedfor.

Threeyears

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).

Anysuitforwhichnoperiodoflimitationis
providedelsewhereinthisSchedule.

Thereyears

Whentherighttosue
accrues.

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55

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limitation

113

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Timefromwhich
periodbeginstorun

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Threeyears

When the right to

applyaccrues.

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Anyotherapplicationforwhichnoperiodof
limitation is provided elsewhere in this
division.

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18.

MrKumbhakoni,thelearnedcounselsubmitsthatoncecauseofaction

had commenced, it did not stop. It is submitted that merely because the

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representationand/orClaimwasmadebythecontractorbeforevariousofficers
were pending and were not decided, cause of action would not stop. The
learnedcounselpressedintoserviceSection9oftheLimitationActinsupportof

thisplea.ThelearnedcounselplacedrelianceuponthejudgmentofthisCourt
decidedon9thOctober2012incaseofAdityaBirlaChemicals(India)Ltd.Vs.

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TataMotorsLtd.2inArbitrationPetitionNo.1027of2011deliveredbythisCourt
(R.D.Dhanuaka,J.)andmoreparticularlyparagraphs18an19whichreadthus:

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18. InmyviewclaimmadebytheRespondentwasaclaimsimplicitorfor

recovery of additional lease rent by virtue of disallowance of depreciation by

assessingofficer.Inmyview,Article54oftheScheduletoLimitationActdoesnot
applytoamoneyclaim.Inmyview,therelianceplacedbythelearnedArbitrator
onArticle54whilerejectingthepleaoflimitationistotallyperverseandwithout
applicationofmind. ThelearnedArbitratorhasmisdirectedbyapplyingwrong
articleofScheduletolimitation. InmyviewtheLearnedArbitratorhasdecided
contrarytosubstantiatelawinforceinIndia.AwardiscontrarytoSection28(a)
oftheArbitrationandConciliationAct,1996andisthusinconflictwithpublic
policy.Inmyview,sincetheclaimmadebytheRespondentwasbarredbythelaw
oflimitationasonthedateofthereceiptofnoticeofinvokingarbitrationclause,it
wasdutyoftheLearnedArbitratortorejectsuchtimebarredclaim.
19. Inmyviewrighttosueaccruedwhenclaimfordepreciationmadeby
Respondent was rejected on 31st March, 2004 and raising of demand by the
Respondentbyissuingdebitnoteon19th June,2006andrefusaltopaythesaid
demandbythePetitioneron17thAugust2006wouldnotcommencefreshperiod

2 MANU/MH/1642/2012
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of limitation, which had already commenced on 31st March, 2004. In view of

Section9oftheLimitationAct,1963,oncetimeisbeguntorun,nosubsequent
disabilityorinabilitytoinstituteasuitormakeanapplicationstopsit.Oncetime
starts running, it does not stop. Limitation is not extended unless there is an
acknowledgmentofliabilityorpartpayment.ItisnotthecaseoftheRespondent
thatthePetitioneracknowledgeditsallegedliabilityortherewasanypartpayment
madebythePetitionerafter31stMarch,2004.Inmyview,correspondencesdoes
notextendtheperiodoflimitation.

MrKumbhakoni,the learnedcounsel alsoplaced reliance upon the

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19.

JudgmentofSupremeCourtincaseofJ.C.Budhrajavs.Chairman,OrissaMinig
CorporationLtd.AndAnother3andmoreparticularlyparagraphs25and26in

supportofhispleathatlimitationforasuitiscalculatedasonthedateoffilingof
suit,whereasincaseofarbitration,limitationoftheClaimistobecalculatedon

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thedateonwhichthearbitrationisdeemedtohavebeencommenced.

25.
The learned Counsel for the Government submitted that the
limitationwouldbeguntorunfromthedateonwhichadifferencearosebetween
theparties,andinthiscasethedifferencearoseonlywhenOMCrefusedtocomply
withthenoticedated4.6.1980seekingreferencetoarbitration.Weareafraid,the
contentioniswithoutmerit.TheGovernmentisobviouslyconfusingthelimitation
forapetitionunderSection 8(2) oftheArbitrationAct,1940withthelimitation
fortheclaimitself.Thelimitationforasuitiscalculatedasonthedateoffilingof
thesuit.Inthecaseofarbitration,limitationfortheclaimistobecalculatedonthe
dateonwhichthearbitrationisdeemedtohavecommenced.
26.
Section 37(3) oftheActprovidesthatforthepurposeofLimitation
Act, anarbitration isdeemed to have been commenced when one partytothe
arbitration agreement serves on the other party thereto, a notice requiring the
appointmentofanarbitrator.Suchanoticehavingbeenservedon4.6.1980,ithas
tobeseenwhethertheclaimswereintimeasonthatdate.Iftheclaimswere
barredon4.6.1980,itfollowsthattheclaimshadtoberejectedbythearbitrator
on the ground that the claims were barred by limitation. The said period has
nothingtodowiththeperiodoflimitationforfilingapetitionunderSection8(2)
oftheAct.InsofarasapetitionunderSection8(2),thecauseofactionwouldarise

3 (2008)2SupremeCourtCases444
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when the other party fails to comply with the notice invoking arbitration.
Therefore,theperiodoflimitationforfilingapetitionunderSection8(2)seeking
appointmentofanarbitratorcannotbeconfusedwiththeperiodoflimitationfor
making a claim. The decisions of this Court in Inder Singh Rekhi v.
MANU/SC/0271/1988 : Delhi Development Authority [1988]3SCR351 , Panchu
Gopal Bose v. MANU/SC/0385/1994Board of Trustees for Port of Calcutta
[1993]3SCR361 and Utkal Commercial Corporation v. MANU/SC/0028/1999 :
CentralCoalFields[1999]1SCR166alsomakethispositionclear.

The learned counsel submits that limitation for seeking an

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20.

appointmentofanarbitratorcannotbeconfusedwithperiodoflimitationfor
makingaclaim.ItissubmittedthatthelearnedarbitratoraswellastheDistrict

Judgehavemixedthetwoseparatearticlesoflimitationi.e.applicabletoClaims
andformakingapplicationforappointmentofarbitrator. Thelearnedcounsel

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submitsthatthelearnedDistrictJudgehasplacedrelianceuponArticle137of
ScheduleI to the Limitation Act and also Article 55 which are not at all
applicabletotheClaimsmade. ItissubmittedthatArticle137appliestothe

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applicationinCourtandnottotheClaim.Itissubmittedthattherewasnoclaim
forcompensationbeforethelearnedarbitratorwhichwouldfallunderArticle55.

The learned counsel then placed reliance upon the Judgment of this Court
delivered on 16th December 2011 in case of Maharahshtra State Power
GenerationCo.Ltd.Vs.M/s.GeoMillerCo.Pvt.Ltd.inArbitrationPetition
No.466of2006andmoreparticularlyparagraphs2to8whichreadthus:

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2.Therelevantfactsare,thePetitionerhadfloatedatenderforthedesign,
manufacture, supply, erection, testing and commissioning of the prewater

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treatment plant, MSEB Chandrapur Thermal Power Station, Unit 6 and

advertisement in that behalf was published by MSEB in the year 1987. The
Respondent participated in the bid and the contract was awarded to the
Respondent.Disputearosebetweenthepartieswithregardtocertainclaims
oftheRespondentforextraworkcarriedoutbytheRespondent.Itisanadmitted
positionthattheArbitrationclausewasinvokedbytheRespondentbyletterdated
2712001.BeforetheArbitrator,oneoftheobjectionsraisedonbehalfofthe
Petitionerwasthatthereferenceisbarredbythelawoflimitation.Itisalso
commongroundbeforemethatsofarasthepaymentforthecivilworkdone
bytheRespondentisconcerned,thepaymenthasbeenmade.Theclaim
whichhasbeenawardedbythelearnedArbitratorisinrelationtothepriceofthe
extraworkcarriedoutbytheRespondent.BeforethelearnedArbitrator it was
claimedonbehalfofthePetitionerthattheextraworkinrelationto
whichtheclaimhasbeenmadewascompletedon1561992andtheplantwas
handedovertothePetitioneron2481994.Thereafter,theRespondent
madeclaimforthepriceoftheextraworkandthatclaimwasrejectedbyletter
dated10101995.TheRespondentinvokedarbitrationclauseandmadethe
claimon2712001,andtherefore,itwasclaimedthatitisbarredbythelaw
oflimitation.ThelearnedArbitratorhasconsideredthisobjectioninhis
award. Heacceptedthatthoughitisclear thatthe work wascompletedon
1561992,thattheplantwashandedoverbytheRespondenttothePetitioneron
2481994andthatthoughtheclaimswererejectedon10101995,accordingto
thelearnedArbitratorasthefinalbillwasnotsubmittedtilltheyear2000andas
thecorrespondencebetweenthepartieswasgoingon,causeofactionforinvoking
thearbitrationwouldnotarisetill16thDecember,2000. Itisthecaseofthe
presentRespondentthatthefinalbillwaspreparedon16122000.

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3.ThelearnedCounselappearingforthePetitionersubmitsthatthe
learned Arbitratorfailedtoseethattheperiodoflimitationforinvokingthe
arbitrationclausewillbegovernedbyArticle18oftheScheduleoftheLimitation
Act. According to the learned Counsel, the cause of action for invoking the
arbitrationclausewillarisewhentheworkforthepriceofwhichthearbitration
clausehasbeeninvokedwasdoneandthat was in the year1992and
therefore,invocationofthearbitrationclauseinJanuary,2001isbarredbythe
lawofLimitation.ThelearnedCounselreferringtotheprovisionsofSection9of
theLimitationActsubmittedthatoncetheperiodoflimitationiscommence,itwill
runcontinuouslyandtherefore,merelybecausecorrespondencewasgoing
onbetweenthepartiesinrelationtotheamounttobepaid,runningoftheperiod
oflimitationwillnotstop.ThereferencehastobemadebytheRespondentwithin
aperiodofthreeyearsfromthedateonwhichtheworkwascompleted.
4. The learned Counselappearing for theRespondent,ontheother
hand,relyingonseveraljudgmentsincludingthejudgmentofthelearnedsingle
Judgeofthiscourt inthecase ofShri Nyaneshwa Bhiku Dhargalkar v/s.
Executive Engineer, 1999(3) RAJ (B0m) submitted that it is Article 137 of the
LimitationActwhichappliesinthepresentcaseandthattherighttoapplywill

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accruewhenthedisputebetweenthepartiesarose.Accordingtothelearned
Counseltillthenegotiationsbetweenthepartiesweregoingonandasthere
wasnodenialtomakethepaymentintheyear1992,thecauseofactionwillnot
accrueandthereforethearbitrationclausewasinvokedwithintheperiod
oflimitation.ThelearnedCounselalsoreliesonthejudgmentofthelearned
singleJudgeoftheDelhiHighCourtinthecaseofPremPowerConstruction(Pvt)
Ltd.v/s.NationalHydroelectricPowerCorp.Ltd.&Anr.160(2009)DelhiLaw
Times610.PerusalofthejudgmentofthelearnedsingleJudgeofthiscourtinthe
caseofNyaneshwar(supra)andthejudgmentofthelearnedsingleJudge
oftheDelhiHighCourtinthecaseofPremPowerConstructionLtd.(supra)shows
that both have relied on the judgment of the Supreme Court in the case of
Major(Retd.)InderSinghRekhiv/s.DelhiDevelopmentAuthority,(1988)2
SCC338.ThelearnedCounselfortheRespondentalsosubmittedthatinany
casetheperiodoflimitationwouldbegovernedbyArticle113oftheLimitation
Act. Accordingtohim,thecauseofactionwillarisewhentherighttosue
accruesandtherighttosuewillaccruewhenthePetitionerrefusedtomakethe
paymentfortheextraworkafterfinalbill.Thus,therighttosueaccruedinthe
year1999whentherewasrefusaltomakethepayment.

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5. Now in the light of these rivalsubmissions,iftherecordis

perused, it is clear from the award itself that there is no dispute between the
partiesthattheextraworkforthepaymentofwhichthepresentreferencewas
made was completed on 1561992. There is also no dispute that the
Petitioner rejected the claim made by the Respondent for extra work by letter
dated10101995.ThelearnedArbitratorhasreferredtothisaspectofthe
matterinparagraph21oftheawardandhasobservedthus:

EveniftherewasrejectionoftheClaimantsclaimforextraworkon
10101995assubmittedbythemthelimitationcannotbesaidtohave
commencedfromthatdate,ifregardbehadtothefactthatevenaccordingtothe
Respondentsthefinalbillwaspreparedaslateason16thDecember,2000.

Thus,accordingtothelearnedArbitratorthecauseofactiondoesnotaccrue
oncompletionofthework.Itdoesnotaccrueevenonrejectionoftheclaim,butit
accrueswhenthefinalbillisprepared.

6.OnbehalfofthePetitionerrelianceisplacedonArticle18oftheLimitation
Act.ThatArticlereadsasunder:

(18)Forthepriceofworkdonebytheplaintiffforthedefendantat
hisrequest,where notimehasbeenfixedfor payment.ThePeriodof
limitationisthree years andthe timebegins torunwhenthe workis
done.
7.PerusaloftheabovequotedArticleshowsthatwhenasuitistobe
instituted for recovery of the price of the work done by the Plaintiff for the
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Defendant,andwhenthereisnotimefixedforpaymenttobemade, the
causeofactionforinstitutingthesuitariseswhentheworkiscompletedand
thesuithastobeinstitutedwithinaperiodofthreeyearsfromtheaccrual
ofcauseofaction.Itisclearfromtherecordthatthepresentdisputewhichwas
referredtoarbitrationisforrecoveryofthepriceoftheextraworkdoneby
theRespondentforthePetitionerattherequestofthePetitionerandthere
wasnotimefixedformakingthepayment. Therefore,accordingtothisArticle,
thecauseofactionwillaccruewhentheworkisdone. Thelearned Counsel
appearingfortheRespondentreliedonArticle113oftheLimitation
Act.
Article113readsasunder:

113.Anysuitforwhichnoperiodoflimitationisprovidedelsewhere
in the Schedule, the period of limitation is three years and the time
beginstorunwhentherighttosueaccrues.

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8.PerusaloftheaboveArticlemakesitclearthatthisArticlecomesintoplay
onlyonafindingthatforinstitutionofasuitfortheclaimwhichisinvolvedinthe
presentmatter,thereisnoperiodoflimitationprovidedelsewhereinthe
schedule.Therefore,unlessafindingisrecordedthatArticle18does
notapply,Article113cannotapply.IdonotseeanyreasonwhyArticle18will
notapplytothepresentdispute,becausethepresentdisputeisinrelationtothe
priceoftheworkdonebytheRespondentforthePetitioner.ThelearnedCounsel
fortheRespondentalsocouldnotgiveanyreasonwhyArticle18willnotapply.
Thus,astheworkwascompletedintheyear1992,thecauseofactionin
termsofArticle18willaccruein1992andthereforethereferencewillhavetobe
madewithin a period of 3 years from 1992 unlessaccording to
Respondentthetimegetsextendedbecauseof anyacknowledgement etc.
Admittedlyneitherarbitrationclauseisinvokedwithinthreeyearsfrom1992nor
anyextensionoftheperiodoflimitation is claimed by the Respondent,
and therefore the claim will be barred by the law of limitation. What is
interestingisthatthequestionbeforethelearnedArbitratorwaswhetherthe
claim was made within the period oflimitation. Thelearned
Arbitrator has recorded a finding that the claim is not barred by the law of
limitation, but in the entire award there is no reference to any Article in the
ScheduleoftheLimitationAct,whichappliestothepresentcase.Inmyopinion,
thisisanimpossibility.Anargumentastowhetheraclaimismadewithin
theperiodoflimitationhasalwaystobemadewithreferencetosomeArticlein
theScheduleoftheLimitationAct,withoutreferringtoanyarticleintheSchedule
oftheLimitationAct,afindingeitherthattheclaimisbarredbylimitationoritis
notsobarredisimpossibletoberecorded.
SofarasapplicationofArticle137isconcerned,that Article is in PartII,
relating to applications. For invoking the arbitration clause the limitation
providedbytheLimitationActformakingapplicationwillnotapply,thelimitation
providedbythescheduleforinstitutionofasuitwillapply.Thelearnedsingle
JudgeofthisCourtinhisjudgmentinNyaneshwarcase(supra)andthelearned

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singleJudgeoftheDelhiHighCourtinthecaseofPremPowerConstructionLtd.
(supra)havereliedonjudgmentoftheSupremeCourtinthecaseofInderSingh
Rekhi,referredtoabove.PerusalofthatjudgmentoftheSupremeCourt shows
thattheretheSupremeCourtwasdealingwiththeapplicationmadeunder
Section20ofArbitrationAct,1940,andasunderSection20 oftheArbitration
Act,1940anapplicationwastobemadetothecourt,obviouslyArticle137ofthe
LimitationActwillapply.Butintheschemeofthe1996Actnosuchapplication
iscontemplatedtobemadetoanycourtforinvokingthearbitration
clause. PerusaloftheprovisionsofSection 21 of the Arbitration Act
showsthatArbitralproceedingscommence,unlessthereisanagreementcontrary
betweentheparties,onthedateonwhicharequestforreferenceofthe
disputetoarbitrationisreceivedbytheRespondent.The1996Act
doesnot contemplate anyapplicationtobemadetothecourtforinvoking the
arbitration application and for commencement of arbitration proceedings.
Subsection 2 of Section 43 of the Arbitration Act lays down that for the
purposeoflimitationActanarbitrationshallbedeemedtohavecommencedon
the date referred to in Section 21. Therefore, it is clear that invocation of the
arbitrationclausehastobemadewithintheperiodoflimitationprovidedbythe
LimitationActforinstitutionofasuitonthesamecauseofaction.So
farasanapplicationtobemadeunderSection11isconcerned,that
applicationisnotforinvokingthearbitrationclause.Thatapplicationisfor
appointment of arbitrator, after invoking the arbitration clause.
Invocation of the arbitration clause precedes an application under Section 11.
Therefore,whenanapplicationunderSection11ismade,thatapplicationhasto
bemadewithintheperiodoflimitation,whichisprovidedbytheLimitationAct
forinstitutionofthesuitonthatcauseofaction.AnapplicationunderSection11
cannot be made after expiry of the period oflimitationprovidedfor
institutionofsuitforrecoveryoftheclaim.TheHonbletheChiefJustice
orhisdesignatewillhavetomakeaninquirytofindoutwhethertheappointment
ofArbitratoratthisjuncturewouldbenecessaryasaperiodoflimitationisover.
TheSupremeCourtinitsjudgmentinthecaseofNationalInsuranceCo.Ltd.v/s.
M/s.BogharaPolyfabPvt.Ltd.,AIR2009SC170,hasreferredtotheissues
whichhavetobedecidedbytheChiefJusticeorhisdesignateunder
Section11andtheissueswhichcanbeleftfordecisionbytheArbitrator.Oneof
theissues,accordingtotheSupremeCourtthathastobedecidedbytheHonble
ChiefJusticeorhisdesignateunderSection11iswhethertheclaimisa
dead claim or a live claim. It means that if an objection is raised, when
applicationunderSection11ismade,thatinvocationofthearbitrationclausein
thatcasehasnotbeenmadewithintheperiodoflimitation,thenthat
questionhastobedecidedbytheChiefJusticeorhisdesignate.Thequestionto
beconsideredatthattimeisnotwhetheranapplicationunderSection11
ismadewithintheperiodoflimitation,butwhethertheinvocation
ofthearbitrationclausewasmadewithintheperiodoflimitation.Inmyopinion,
therefore,thereisnoquestionofprovisionsofSection137applyinginsofaras
invocationofthearbitrationclauseandcommencement of the period of
limitationisconcerned.Sofarasthepresentcaseisconcerned,tomy

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minditisclearthatArticle18oftheLimitationActappliesandthereforeasthe
invocationoftheArbitrationclauseisnotwithinperiodofthreeyearsfromthe
dateofcompletionofthework,whichwasintheyear1992,theclaimwasclearly
barredbythelawoflimitation.

21.

RelyinguponthisJudgmentofthisCourt,thelearnedcounselsubmits

that Article18 was applicable to the claims made by the contractor and not

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Article55 or Article 137 as sought to be applied by the District Judge. The

learnedcounselsubmitsthatboththeseissuesareconsideredbythisCourtand
thefactsofthiscaseareidenticaltothefactsofthecaseincaseofMaharashtra

StatePowerGenerationCo.Ltd.(supra)andthesaidJudgmentisthusbinding.

ThelearnedcounselalsoplacedrelianceupontheJudgmentofPunjab

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22.

AndHaryanaHighCourtincaseof JullunderImprovementTrust,Jullunder
Vs.KuldipSingh4andmoreparticularlyparagraphs4and5whichreadthus:

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4.
Themaincontroversyinthisappealis:whetherthesuitoftheplaintiff
wanwithintimeornot?ItisthecommoncaseofthepartiesthatitisArticle18,
Limitation Act, 1963, which would govern the plaintiffs case. It provides a
limitationofthreeyearsfromthetimetheworkisdone.Thepresentsuitwasfiled
on 921971. According to the plaintiff the cause of action arose to him on
14121967,whenthepaymentofthefinalbill,ExhibitD.19,wasreceivedbyhim
underprotestwhereasthecaseofthedefendantisthattheperiodofthreeyears
would commence from the date the work was done which according to it was
completed on 2891967, as admitted by the plaintiff himself vide, Exhibit D.4,
dated2891967,writteninthisownhandwhereinhehadstatedthat90feetwide
roadunder84acresschemewascompleteand,therefore,hisfinalbill,beprepared
accordingly.Inanycase,accordingtothedefendant,inthefinalbill,ExhibitD.19,
thecertificatetotheeffectthatnecessarydetailedmeasurementshavebeentaken
asrecorded intheMeasurement Book No. 44, was given on 7101967, by the

4 AIR1984PunjabAndHaryana185
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EngineerinchargeMohinderSingh,whoappearedasD.W.7.Thus,itwasargued
onbehalfofthedefendingthatevenafterthatdate.i.e.7101967,thepresent
suitfiledon921971,evenafterallowingthenoticeperiodoftwomonthswas
barredbytime.AccordingtothetrialCourt,thecauseofactionwouldarisetothe
plaintiff for the price of the work done only on furnishing of the completion
certificate by the Engineer in charge. The certificate of the Engineer in charge,
accordingtothetrialCourtdidnotbear anydate.Since,according tothetrial
Court thepayment of the lastbill was received by the plaintiff on 14121967,
under protest, the period of limitation will start from that date and that after
allowing the notice period of two months, the suit filed by the plaintiff on
921971,waswithintime.ThetrialCourtalsofoundthattheplaintiffprosecuted
withduediligenceanothercivilproceedingfoundeduponthesamecauseofaction
inaCourtwhichcouldnotgivethereliefand,therefore,hewasentitledtoget,the
period spent inprosecuting those proceedings excluded under S. 14,Limitation
Act,(hereinaftercalledtheAct).
5.
After hearing the learned counsel for the parries, I am of the
consideredopinionthattheplaintiffssuitwasbarredbytime.

23.

Mr Chinoy, the learned senior counsel appearing on behalf of the

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contractor on the other hand submits that Article18 is not applicable to the
claimsmadebythecontractor. Thelearnedseniorcounselsubmitsthatthe

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claimsmadebeforethearbitraltribunalwereforenhancementofthepricefor
theworkdoneandthusArticle113ofSchedule1ofLimitaitonActwouldapply.

The learned senior counsel placed reliance upon the Judgment in case of
Gannon Dunkerley And Co. Ltd. v. Union of India5 and more particularly
paragraphs2to11whichreadthus:

2. The Sindri Factory Buildings were to be constructed under the advice and
guidance of M/s. Chemical Construction Corporation of New York. That Firm
madedelayinsupplyingthedrawingsandspecificationswhichinvolvedworkofa

51969(3)SupremeCourtCases607
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complicatednaturenotincludedintheoriginalcontract.Timeforcompletionof
theworkwasonthataccountextendedtillFebruary26,1950.
3. On September 20, 1950 the Government Company made a demand for
paymentofanenhancedrateof421/2%overthebasicratesstipulatedunderthe
originalcontract.Thisclaimwasmadeonfivegrounds:

1.thattherewasasubstantialdeviationinthenatureofworkofwhich
thedetailedworkdrawingsweresuppliedtotheGovernment Company
afterthedateofthecontract.Theworkinvolvedwasofacomplexnature
requiring highlyskilledlabour,andthatadditional labour andmaterials
notcoveredbythecontractrateswererequired;

2. thattherewasgreatincreaseinthepriceofmaterialsandlabouron
accountofundueprolongationoftheperiodofwork;

3.thattherewasincreaseinthecostoftransportationonaccountofrise
inthepriceofpetrolandincreaseinrailwayfreight;

4.thattheGovernmentofIndiaenteredintoothercontractsincidentalto
theconstructionoftheSindriFactoryatsubstantiallyhigherrateswhich
directly affected the cost of labour and materials of the Government
Companywhohadtocompetewiththeothercontractors;

5. thatadditionalworkorderedtobedoneinvolvedinmanyinstances
quantityofworkseveraltimestheworksetoutinthecontract.

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4.
ByhisletterdatedSeptember13,1950,theAdditionalChiefEngineer
rejectedtheclaim.InSeptember1954thedisputesrelatingtotheclaimforrisein
costofmaterialandlabourduetodelayinsupplyingdetailedworkdrawings,the
claimarisingfromriseinpriceofpetrolandforincreaseinthecostofmaterialand
labourduetoothercontractorsworkingonthesite,werereferredtoarbitration,
butnottheclaimsforrevisionofratesduetocomplexnatureoftheworkand
increase in the quantity of work. The arbitrator rejected the claims of the
Companyinrespectofthematterswhichwerereferred.
5.
ThereaftertheGovernmentCompanyfiledasuitonAugust9,1956,
against theUnion ofIndia,for adecree for Rs.3,62,674/9/6 being the amount
claimedattherateof421/2%abovethecontractrate,inthealternative,adecree
for Rs.2,44,000/ being the amount claimed at the rate of 28.1% above the
contract rate as recommended by the Executive Engineer, and in the further
alternative,adecreeforRs.1,36,222/attherateof18.17%abovethecontract
rateascertifiedbytheSuperintendingEngineer. TheUnionofIndiacontended,
interalia,thattheclaimwasbarredbythelawoflimitation.

6.

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limitation and decreed the claim for Rs. 1,36,222/ as certified by the
Superintending Engineer. Against the decree passed by the Trial Court the
GovernmentCompanyaswellastheUnionofIndiaappealedtotheHighCourt.
7.
Before the High Court, in support of the appeal only the plea of
limitationwaspressedonbehalfoftheUnionofIndia.IntheviewoftheHigh
CourttheclaimwasgovernedeitherbyArticle56orbyArticle115oftheFirst
ScheduletotheLimitationAct,1908,andthesuitnothavingbeenfiledwithin
threeyearsofthedateonwhichtheworkwasdoneandinanyeventofthedate
on which the claim was rejected was barred. The Government Company has
appealedtothisCourtwithcertificate.

8.
TheGovernment Companyhadundertakenunderthetermsofthe
contracttodospecificconstructionworkat"basicrates".TheEngineerincharge
wasbythetermsofClause12oftheagreementcompetenttogiveinstructionsfor
work not covered by the terms of the contract, and it was provided that
remunerationshallbe paidattheratefixedbytheEngineerinchargefor such
additional work, and in case of dispute the decision of the Superintending
Engineer shall be final. It is common ground that the claim made by the
GovernmentCompanywasnotcoveredbythearbitrationagreement,andonthat
account it was not referred to the arbitrator. The claim in suit related to the
revisionofratesduetothecomplexnatureoftheworkandduetoincreaseinthe
quantity of work and also grant of contracts to other competing parties at
substantiallyhigherratesandotherrelatedmatters.

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9.
Article56oftheFirstSchedule totheIndianLimitationAct,1908,
prescribesaperiodofthreeyears forasuitfor thepriceof,work done bythe
plaintiff for the defendant at his request, where no time has been fixed for
payment,andtheperiodoflimitationcommencestorunfromthedatewhenthe
workisdone.AsuitisgovernedbyArticle56ifitarisesoutofacontracttopay
thepriceofworkdoneattherequestofthedefendant.Theclaiminthepresent
caseisforpaymentatanadditionalrateoverthestipulatedrateinviewofchange
incircumstances,andnotforpriceofworkdonebytheGovernmentCompany.It
istruethatadditionalworkwasdoneattherequestoftheEngineerincharge,but
theclaiminsuitwasnotforthepriceofworkdonebutforenhancedratesinview
ofalteredcircumstances.
10.
Article115oftheFirstScheduletotheLimitationActisaresiduary
articledealing withthe claim for compensation for the breach of any contract,
expressorimplied,notinwritingregisteredandnotspeciallyprovidedfor,inthe
First Schedule. The period of limitation in such cases is three years and it
commences to run when the contract is broken, or where there are successive
breacheswhenthebreachinrespectofwhichthesuitisinstitutedoccurs,orwhere
the breach is continuing when it ceases. The suit filed by the Government

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Companyisnotasuitforcompensationforbreachofcontractexpressorimplied:
itisasuitforenhancedratebecauseofchangeofcircumstances,andinrespectof
worknotcoveredbythecontract.TheadditionalworkdirectedbytheEngineerin
charge when carried out may be deemed to be done under the terms of the
contract:buttheclaimforenhancedratesdoesnotariseoutofthecontract:itisin
anycasenotaclaimforcompensationforbreachofcontract.
11.
Theclaimisthereforenotcoveredbyanyspecificarticleunderthe
FirstSchedule,andmustfallwithinthetermsofArticle120.TheSolicitorGeneral
appearingonbehalfoftheUnionofIndiacontendedthateveniftheclaimfalls
within the terms of Article 120 of the Limitation Act, it was barred, for, the
GovernmentCompanyhadinthesuitmadeaclaimforworkdonemorethansix
yearsbeforetheinstitutionofthesuit.CounselsubmittedthatunderArticle120
theperiodoflimitationcommencestorunfromthedateonwhichthedefendant
obtainsthebenefitoftheworkdonebytheplaintiff.ButunderArticle120ofthe
LimitationActtheperiodofsixyearsforsuitsforwhichnoperiodoflimitationis
provided elsewhere in the Schedule commences to run when the right to sue
accrues.Inourjudgment,thereisnorighttosueuntilthereisanaccrualofthe
rightassertedinthesuit,anditsinfringement,oratleastaclearandunequivocal
threattoinfringethatrightbythedefendantagainstwhomthesuitisinstituted;
Bolov.KokanandOrs.

24.

ThelearnedcounselsubmitsthattheSupremeCourthadconsidered

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Article120oftheLimitationAct,1908andArticle56whicharecorrespondingto
Article113 and Article18 to the first schedule to Limitation Act 1963. It is

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submittedthatafterconsideringtheseArticles,theSupremeCourtheldthatthe
periodof6yearsforsuitsforwhichnoperiodoflimitationisprovidedelsewhere

intheSchedulecommencestorunwhentherighttosueaccrues.Itisisheldthat
therewasnorighttosueuntiltherewasaccrualoftherightassertedinthesuit,
anditsinfringement,oratleastaclearandunequivocalthreattoinfringethat
rightbythedefendantagainstwhomthesuitisinstituted.Itissubmittedthat
theSupremeCourthasheldthatinasuitforenhancedratebecauseofchangeof
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circumstances, and in respect of work not covered by the contract, claim for

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enhancedratedidnotariseoutofcontractandwouldbethusnotgovernedby

Article56correspondingtoArticle18underLimitationAct1963butwouldbe
coveredbyArticle120(correspondingtoArticle113underLimitationAct1963).
Thelearnedseniorcounselthus,submitsthatthefactsofthiscaseareidenticalto

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the facts before the Honourble Supreme Court in case of Gannon Dunkerley
(supra)andthusprinciplesoflawlaiddownbytheSupremeCourtaresquarely

applicabletothefactsofthiscaseandarebindingonthisCourt.

25.

ThelearnedseniorcounselalsoplacedrelianceupontheJudgmentof

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RajashthanHighCourtincaseofStateofRajasthanVs.RamKishan(AIR1977
Rajasthan165),JudgmentofAllahabadHighCourtincaseofStateofU.P.v.
ThakurKundanSingh(AIR1984Allahabad161),JudgmentofGujratHigh

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CourtincaseofStateofGujratVs.PirojshaWadiareportedin17GujratLaw
Reporter638; bywhichvariousHighCourtshavetakenasimilarviewwhich

hasbeentakenbytheHonourableSupremeCourtincaseofGannonDunkerly
andOrs(supra).

26.

Perusal of theawardindicatesthatbefore thearbitraltribunal,the

submissionofthecontractorwasthatdisputecouldstartonlyafterrejectionof
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theclaimbytheGovernment.Itwassubmittedthattheclaimswerependingfor

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decisionandthuscauseofactionstartedonlyafterdecisionwasfinallytakenby

theGovernment.Itwassubmittedthatlimitationcommencedfromthedateon
whichcauseofactionhadaccrued.

27.

Thearbitraltribunalhasheldthatallthoseclaimseventhoughthere

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was specific recognisable period of start of incurring of the loss, the same
continuedsincethenduringthecurrencyofthecontract,includingtheextended

periodatleastforClaimNos.1and2.MajorityofthelossincurredforClaimNos.
3,4and5wasknownwhentheitemswerenearlycompletebyMarch1998.Itis

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heldthatinrespectofClaimNos.1and2,thelosscontinuedtillthecurrencyof
thecontract. ThearbitraltribunalthenheldthatforClaimNos.3,4and5,first
referencetoEngineer'srepresentative(ExecutiveEngineer)wasmadeinFebruary

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1997andOctober1996andongettingnodecisionwithin60days,thecontractor
couldhavereferredthedisputetohigherlevelandthentothe'Engineer'asper

provisionsofClause66andinvokedthearbitrationwithin220daysatthemost.
Itisfurtherheldthatthiscoursewasnottakenbythecontractorforthereasons
bestknowntohim.Thecontractormighttaketheshelteroftheword'may'inthe
contractormayappealwithin30daystoEngineer'byclaimingthatitwasnot
obligatoryforhimtoappealincasenoreplywasgiventheExecutiveEngineer.
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Inspiteofsuchfindingrenderedbythearbitraltribunal,itisheldthatthecause

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ofarbitrationwouldbecauseofactionandtimeoflimitationshouldberecorded
from the date for respective claims. The tribunal held that all five claims in
questionwerenottimebarredonaccountoflimitation.Itwouldbeusefulto
extracttherelevantparagraphsonthisissuefromthearbitralawardwhichareas

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Forreferringthedisputetoarbitration,therehadtobeanarbitrationagreement
(clause)andtherehadtobeadispute. Intheinstantcase,Cl66Settlementof
dispute (RTD1/1034) provided for recourse to arbitration. For existence of
'dispute'therehadtobean'assertion'byoneparty&'denial'bytheotherparty.
'Causeofarbitration'aroseintheinstantcasewhenevertherewasrejectionofa
claimbythe'Engineer' (ChiefEngineer Koyna Project) (RTD1/38) Rejection of
inactionbythe'Engineer'srepresentative'i.e.ExecutiveEngineer/Superintending
Engineerdidnot, however, result into'causeofarbitration'. Inwhich case the
claimanthadtoapproachthe'Engineer,furnishrequiredevidenceandonrejection
bythe'Engineer'couldinvokearbitration.

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Clause 66(b) specifically mentioned that 'Performance under the

contract shall if reasonably be possible, continue during the arbitration
proceedings. Henceclaimantcouldeitherlodgeclaimswiththerespondentand
pursuethemfortheirsettlementthroughthe'Employer'bynegotiationsorcould
taketherecourseto arbitration by following obligations/requirements under
Cl.66 culminating into invoking the arbitration. In all the claims the claimant
preferredtotaketheearlierrecoursetobeginwithandcontinuedforquitesome
time. TheclaimantapproachedsecretaryIDandDy.ChiefMinisterduringthis
period.RecoursetoArbitrationwastakenquitelate,aftercompletionofthework
physically. Evenafterreferring someoftheirclaimsunder thiscontract tothe
earlier Arbitral Panel and getting Award for the same in December 1998, the
claimant continued to follow the course of negotiations & pursuations, for the
reasonsbestknowntohim.

QuestionnowbeforetheArbitralPanelwaswhethertheclaimshad
becometimebarredbecauseofthisapparentdelayonthepartoftheclaimantin
notinvokingthearbitrationearlyandpromptly. Theclaimantwassaidtohave
beensufferinglossbecauseofvariousreasonsinrespectofseveralitemsofthe
contract,whichresultedintoinitiatingtheclaimsrightfromthebeginningofthe
contract andcontinued toincur the loss for certainperiod since thenfor some
claims(No.3,4&5)andtillthecompletionofthecontractforsome(ClaimNo.1).

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LossonaccountofclaimNo.2wassaidtohaveoccurredonlyduringtheextension
period andcontinued till completion of the contract. The claimant could have
pursued theseclaims with therespondent for some reasonable timebut should
havegoneinforsettlementofdisputeasperCl.66eitherwhenitemsfor3claims
(3,4&5)weremostlycompletei.e.after3/98orwhenthecumulativelosseswere
foreseentobebeyondthecapacityoftheclaimanttopullonwithoutimpairingthe
progressofthecontractedwork,whichever wasearlier. IFtheclaimNo.1had
been referred to thearbitration (or even tothe earlier Arbitral panel) claimant
couldhavegotthecompensationintime.ForclaimNo.2,issuecouldhavebeen
pursuedvigorouslywiththerespondentsayduringayearorsoaftergettingthe
first extension and failing to get favourable response (or partial response), the
claimantcouldhaveinvokedthearbitration.

Theclaimantinallthecorrespondence hadbeenmentioning about

incurringofheavylosses,financialcrunch,heavystrainorfinancialresourcesetc.
becauseoftheseclaims.Butapparentlythefollowup/pursuationsforsettlement
ofclaimswasveryverypoordespiteprovisionofclauseforarbitration.Arbitrators
hadhenceobservedduringthethirdmeetingthat'effortsoffollowup&pursuation
oftheclaimswouldbeexpectedtoberelatedtotheamountinvolvedintheclaims
because, delay insettlement ofsubstantial amount ofclaimwaslikely toaffect
performanceofthecontract'.

Itcouldnotbeascertainedfromtherecordorfromthedeliberations
duringthemeetingsastowhythislogicalandeasiercoursecouldnotbetakenby
theclaimant.Claimantscontention/argumentonthispointhadconsistentlybeen
that,withoutrejectionoftheclaimsbythe'Engineer',recoursetoarbitrationwas
notopentothem.Inalltheseclaimseventhoughtherewasspecificrecognisable
periodofstartofincurringoftheloss,thesamecontinuedsincethenduringthe
currencyofthecontract,includingtheextendedperiodatleastforclaimNos.1&
2.MajorityofthelossincurredforclaimNos.3,4&5wasknownwhentheitems
werenearlycompleteby3/98.ButforclaimNos.1&2thelosscontinuedtillthe
currencyofthecontract. Questionthenwas,whatshouldbeconsideredasthe
startofreckoningofthetimeoflimitation.ForclaimNos.3,4&5,firstreference
toEngineer'srepresentative(ExecutiveEngineer)wasmadeinFeb97&Oct96.
On getting no decision within 60 days, the claimant could have referred the
disputetohigherlevelandthentothe'Engineer'asperprovisionsofCl.66and
invokedthearbitrationwithinabout200to220daysatthemost.Thiscoursewas
nottakenbytheclaimantforthereasonsbestknowntohim.Theclaimantmight
taketheshelteroftheword'may'inthecontractormayappealwithin30daysto
Engineer'byclaimingthatitwasnotobligatoryforhimtoappealincasenoreply
wasgivenbytheExecutiveEngineer.

om

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Asmita

Therehavebeencitationsstatingthatthecauseofactionandcauseof
arbitrationtobethesameforreckoningthestartoftimeoflimitation.Itwastrue
thatthe'causeofaction',ifitwasotherthanthe'causeofarbitration'couldnotbe
pinpointedasaspecificpointoftimeintheactivityoftheexecutionofthecontract

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(includingextensions).Losscontinued,negotiations/pursuationscontinued,work
continued but 'cause of arbitration' or invoking the arbitration' were the only
specificeventsinthisactivity.

HencetheArbitralPanelhadcometotheconclusionthat'causeof
arbitration' would be the 'cause of action' and time of limitation should be
reckonedfromthatdateforrespectiveclaims.Henceallthe5claimsinquestion
werenottimebarredonaccountoflimitations.

Onequestionthatrequiredtobeconsideredanddecidedwasthat,
shouldtheclaimantprefertodeferanddelaytheactionofinvokingthearbitration
apparentlyfornoreasonorforsomeotherreasonsbestknowntohim,everwhen
provisionofclauseforsettlementofdisputeexistedinthecontractandcontinued
tomaketherespondent sufferbecause ofanyextraliabilityonaccountofsuch
avoidabledelay.Arbitralpanelhascometoaconclusionthatclaimantshouldnot
beawardedinterestontheclaimsforpastperiodattherateswhichnormally&
reasonablyaclaimantwouldhavebeenentitledto.Itwasdecidedthatforclaim
Nos.1,3,4&5heshouldbegrantedonlypriceescalationasperTenderformulae
up to 3132000 (date of completion of the contract period) by treating that
paymentforamountoftheseclaimswasmadeonthatdate.From142000tothe
dateofreferencetoarbitrationforeachclaim,interestonlyat10%(tenpercent)
perannumshallonlybepaidontheescalatedamount.

28.

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TheDistrictJudgehasdealtwithissueoflimitationinparagraphs35

to37ofitsJudgment. Thecontractorarguedthatlimitationoftheperiodof

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threeyearshadtobereckonedfromthedateoffinalrejectionbythecompetent
authorityi.e.Engineerinthepresentcase.Itwassubmittedthatinrespectof

alltheclaims,arbitrationwasinvokedwithin30daysafterfinalrejectionbythe
EngineerasperClause66Aofthecontract. Itwassubmittedthatwhenthe
contract was spread over for a period and damage was sustained during the
wholeperiod, thelimitationfortotaldamageswouldcommencefromthedate
when the period of contract ends. It was submitted that the claim for
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compensationforsuccessivecontinuingbreachesofanycontract,theperiodof

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threeyearslimitationwouldbecomputedwhenthebreachceasedtooccur.It
wassubmittedthatdisputecouldstartonlyafterthedenialofanassertion.The
contractorsubmittedthatlimitationwouldnotstartfromthedateofentitlement
ofpaymentbutonwhichtheclaimwasmadebythecontractorandwasrejected

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by the Government and such rejection would be the accrual of the cause of
action. Itwassubmittedthattheclaimswerependingfordecisionforyears
together, thelimitationwouldstartonlyafterthedecisionwascommunicated.

DistrictJudgerenderedafindingthatthecontractorcouldeitherlodgeclaims
with the Government and pursue them for their settlement through the

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Governmentbynegotiationsorbyculminatingintoinvokingthearbitration.It
isheldthatthecontractorpreferredtotakeearlierrecoursetobeginwithand
continuetoquitesometime. The contractorapproachedSecretary,Irrigation

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DepartmentandDy.ChiefMinisterduringthatperiodandrecoursetoarbitration
wastakenquitelateaftercompletionoftheworkphysically.TheDistrictJudge

heldthatArticle137oftheLimitationActwouldbeinvokedinthiscase.Relying
uponArticle137,itisheldthattheperiodoflimitationstartswhentherightto
apply accrues under Article137. The District Judge held that the period of
limitationforcommencinganarbitrationrunsfromthedateonwhichcauseof
arbitrationaccruesi.etosayfromthedatewhenthecontractoracquiredeither
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rightof action orrighttorequirean arbitration takesplaceupon the dispute

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concerned. It is held that cause of arbitration arose when the contractor

becameentitledtoraisethequestion.TheDistrictJudgeheldthatClaimNos.1,
2,3and5wereinthenatureofextraitemsandnewrateswerenecessitatedby
thevariationinparticularworkorderedbytheGovernment.TheDistrictJudge

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held that under Article 55 of the Limitation Act, when the breach was
continuing,thelimitationofthreeyearscommenceswhenitceases.TheDistrict
Judgefinallyheldthatthecauseofactionwouldcommencefrom25thMay2001

when the claim was finally rejected by the Chief Engineer. In my view,
Article55couldnotbeattractedinrespectoftheclaimsmadebythecontractor

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fortheworkdone.ThelearnedDistrictJudge,however,hasappliedArticle55of
theScheduletotheLimitationActtoalltheclaimswhichshowspatentillegality

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onthefactoftheJudgmentofthelearnedDistrictJudge.

29.

ThearbitraltribunalhasrenderedafindingthatinrespectofClaim

Nos.3,4and5,theclaimcouldbesaidtohaveinitiatedwhentheconcerneditems
wereexecutedanditcontinuedtillcompletionofeachsuchitem. Thearbitral
tribunalalsorenderedafindingthatacontractorcouldhavepursuedClaimNo.2
with the Government for some reasonable time but shouldhave gone in for
settlementofdisputeasperClause66eitherwhenitemsfor3ClaimNos.3,4and
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5weremostlycompletei.eafterMarch1998orwhenthecumulativelosseswere

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foreseentobebeyondthecapacityofthecontractortopullonwithoutimpairing
theprogressofthecontractedwork,whicheverwasearlier.Similarlyinrespect
of Claim No.2, the arbitral tribunal held that issue could have been pursued
vigorouslywiththeGovernment duringtheyearorsoonaftergettingthefirst

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extension and failing to get favourable response or partial response, the

contractorcouldhaveinvokedthearbitration.Itisfurtherobservedthatthough
thecontractorinallthecorrespondencewereallegingincurringofheavylosses,

financialcrunch,heavystrainetc.,followup/pursuationsforsettlementofclaims
onthepartofcontractorwasverypoordespiteprovisionofclauseforarbitration.

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Thelearnedarbitraltribunalobservedthatitcouldnotbeascertainedfromthe
recordorfromthedeliberationsduringthemeetingsastowhythislogicaland

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easiercoursecouldbetakenbythecontractor.

30.

Thearbitraltribunalthoughrenderedafindingagainstthecontractor

for gross delay in making a claim and pursuing it, rejected the plea of the
Government forrejectionoftheclaimsonthegroundoflimitation. Onone
hand,thearbitraltribunalobservedthattheGovernment shallnotsufferany
extraliabilityonaccountofavoidabledelayonthepartofthecontractorand
contractorshouldnotbeawardedinterestontheclaimsforpastperiodatthe
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rateswhichnormallyandreasonablyacontractorwouldhavebeenentitledto.

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Inmyview,itisclearthattheconclusiondrawnbythearbitraltribunalistotally
inconsistentwiththefinding renderedbythe arbitraltribunal ontheissue of

limitation. Theissueoflimitationhasbeendealtwithwithoutapplicationof

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mind.

31.

TheDistrictJudgehasrenderedafindinginfavourofthecontractor

onerroneouspremisethatArticle137oftheLimitationActwasapplicabletothe

claims made by the contractor. In my view, Article 55 of the Limitation Act

wouldnotapplyfortheclaimforpriceincreaseinrespectoftheworkcarriedout

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undertheprovisionsofcontract.ApplicationofArticle55totheclaimforwork
done by the District Judge, is totally an erroneous and is on the face of it
perverse.Article137oftheLimitationActappliestotheapplicationsandnotto

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the claims. In myview,for invoking the arbitration clause,the limitation

providedbythe Limitation Actfor making application will notapply,butthe

limitationprovidedbythescheduleforinstitutionofasuitwillapply.ThisCourt
hasheldthatthereisnoquestionofprovisionsofArticle137applyinginsofaras
invocation of the arbitration clause and commencement of the period of
limitationisconcerned.ThisCourtheldthatinrespectoftheclaimforpriceof
extraworkcarriedoutbythecontractor,Article18oftheLimitationActwould
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applyandnotArticle137.Itisheldthatwhenasuitisinstitutedforrecoveryof

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thepriceoftheworkdonebytheplaintiffforthedefendant,andwhenthereis
notimefixedforpaymenttobemade,thecauseofactionforinstitutingthesuit
ariseswhentheworkiscompletedandthesuithasbeinstitutedwithinaperiod
ofthreeyearsfromtheaccrualofcauseofaction.Itisheldthatcauseofaction

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wouldaccruewhentheworkisdone.AfterconsideringArticle113onwhichthe
contractorhasplacedreliance,thisCourtheldthatthesaidArticlecomesinto
playonlyonfindingthatforinstitutionofasuitfortheclaimwhichwasinvolved

in that matter, there was no period of limitation provided elsewhere in the

schedule.ItisheldthatonlyonafindingrecordedthatArticle18didnotapply,

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Article113couldnotapply.ThisCourtheldthatthoughthelearnedarbitrator
hadrecordedafindingthattheclaimwasnotbarredbylawoflimitation,inthe
entire award there was no reference to any Articles in the Schedule of the

om

LimitationAct,whichappliestothatcase.ThisCourtobservedthatsuchfinding

recordedbythelearnedarbitratorwasanimpossibility.

32.

Inmyview,refusaltopaytheamountdemandedbythepetitioner,

wouldnotcommencefreshperiodoflimitationwhichhadalreadycommenced.
InviewofSection9oftheLimitationAct,1963,oncetimeisbeguntorun,no
subsequentdisabilityorinabilitytoinstituteasuitormakeanapplicationstops
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it.Oncetimestarts,itdoesnotstop.Limitationisextendedonlywhenthereis

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an acknowledgment of liability or part payment. Correspondence does not

extendtheperiodoflimitation.

33.

Itisnotthecaseofthecontractorthattherewasanypartpayment

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madebytheGovernmentinrespectoftheclaimsinquestionortherewasany
acknowledgmentofliabilitymadebytheGovernmentinfavourofthecontractor
inrespectofsuchclaims.Merelybecause,therewasinactionand/ordelayonthe

partoftheofficersoftheGovernmentinconsideringand/orrejectingtheclaims
madebythecontractor, limitationwouldnotbeextended.Thelimitationhad

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alreadycommencedwhentheworkwasdoneandthepaymentwasnotmade.It
isnotindisputethattheworkinrespectoftheclaimsinquestionwascompleted
morethanthreeyearspriortothedateofcontractormakingrepresentationtothe

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concernedofficersoftheGovernment. Inmyview,eveniftheofficersofthe
Governmenthadnotdecidedtherepresentationand/orclaimofthecontractor

withinthetimespecifiedunderClause66,causeofactionhadnotstopped.

34.

In my view, the arbitral tribunal as well as the District Judge has

mixeduptheissueoflimitationinmakingaclaimandinmakinganapplication
totheCourtforappointmentofarbitrator. ThereferencemadebytheDistrict
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JudgetoArticle137andArticle55istotallymisplacedandcontrarytolaw.In

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myview,limitationformakingaclaimandlimitationformakinganapplication
forappointmentofarbitratorcannotbemixedup.

35.

Perusal of the award indicates that Claim No.1 was for revision of

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ratesdemandedbythecontractoronthebasisthatcertainitemsofworkwhich
were different from those included in BOQ (Bill of Quantities) items were
requiredtobeexecuted.Itwasthecaseofthecontractorthatthereweresome

extra items where rates of item could not be derived from the BOQ rates by
makingappropriatevariations. UnderClause51ofthecontract,theEngineer

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y

hadpowerstomakeanyvariationoftheform,qualityorquantityoftheworksor
anypartthereof.Procedureofvaluationofvariationhadbeenspecifiedunder
Clause52 of the contract. Accordingly, the Government had prepared rate

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analysiswith'labourmarkup'as50%andoverheadandprofitas20%. The
contractor,howeverdemandedthesameas195%and40%respectively. The

learnedlearnedarbitraltribunal,intheimpugnedawardallowedthisclaim. It
wasthepleaoftheGovernmentthatdisputeregardingratesofextra/deviated
itemsstartedwhenthefirstpaymentwasmadepriorto27thJuly1997;whereas
the contractor had invoked arbitration clause on 27th July 2000. It is not in
disputethatthesaidworkwascarriedoutasorderedbytheGovernmentunder
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Clause51 read with Clause52 of the contract. The said work was thus,

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contractualworkasorderedbytheGovernment.Thelimitationformakingsuch
claimforratesofsuchextra/deviateditemswillthusarisewhensuchitemofwrk
wasdonebythecontractor,whichinthiscase,muchpriorto27thJuly1997.In
myview,Article18ofScheduletoLimitationActwouldapplytothisclaimand

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not Article113 as sought to be applied by the contractor in the present

proceedings.ThelearnedarbitratordidnotrefertoanyArticlewhilerejecting

thepleaoflimitationintheimpugnedaward.

36.

InsofarasClaimNo.2isconcerned,perusaloftheawardindicates

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that the said claim was for compensation for the work carried out by the
contractor beyond the original stipulated date of completion which was 19th
March1997.TheGovernmentgrantedfiveextensionsfortheperiodbetween

om

20thMarch1997makingthesametermsandconditionsapplicableforthework
carriedoutduringtheextendedperiod. Thecontractorthus,oughttohave

invoked arbitration clause no sooner such extension was granted by the

Governmentbymakingthesametermsandconditionsapplicableforthework
carried out during the extended period. The cause of action for claim for
compensationwouldarisewhenthebreachiscommittedbytheeitherparty.If
accordingtothecontractor,theGovernmentwasresponsibleforprolongationof
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contractandextensionwasnecessitatedduetosuchreasonsandthecontractor

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wasnotboundtocarryoutthebalanceworkonthesametermsandconditions,
cause of action would begin as soon as such breach was committed by the
Government according to the contractor. The learned arbitral tribunal,

however,didnotdecidethisissueintheimpugnedawardbutrejectedthepleaof

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limitationmerelyonthegroundthattheclaimwasinitiatedon18thMarch1997
i.e the date on which the Government granted extension under the same
conditions of contract and its effect will start from 20 th March 1997 and it

continuedtillactualcompletionofthecontract. Thelearnedarbitraltribunal
consideredthattheEngineerhadrejectedtheclaimon6thSeptember2000and

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thearbitrationwasinvokedon21stSeptember2000,thustheclaimwasintime.
NoArticleofLimitationActhasbeenreferredbythelearnedarbitraltribunal
while dealing with plea of limitation even in respect of this claim for

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compensation.

37.

AsfarasClaimNo.3madebythecontractorisconcerned,perusalof

theawardindicatesthatthesaidclaimwasmadeforrevisionofratesforPressure
Shaft Excavation. According to contractor, it encountered various difficulties
duringtheexcavationsofthePressureShaftssuchaschangedsequenceofthe
work,methodandtiming,physicalobstructionsintheworkduetoworkofother
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agency, variation in rock strata/geological conditions etc., which was not

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attributabletothecontractor.Accordingtocontractor,inviewofsuchsituation,
theychangedthescopeofitemandthecontractorpreparedrateanalysisforeach
component of the work based on componentwise expenditure. The learned

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arbitraltribunalallowedthisclaim.

38.

Perusaloftheawardindicatesthatthisitemwascarriedoutduring

theperiodbetweenJuly1993toMarch1998totheextentof94%.Thedemand

wasmadebeforetheExecutiveEngineeron10thFebruary1997.Itwasrejected
byExecutiveEngineeron17thJuly2000.Inmyview,thecontractoroughtto

ba
y

havemadethisclaimwhenanysuchbreachwascommittedbytheGovernment
resulting in suffering of compensation due to breaches attributable to the
Government.Thecontractorwasnotboundtowaitbeyond60daysfordecision

om

oftheExecutiveEngineer.Inthiscase,itisclearthatthecontractorwaitedfor
decision of Executive Engineer for more than three years and four months.

Limitationoncecommenced,doesnotstop.Thelearnedarbitraltribunalhasnot
referredtoanyArticleofLimitationActwhiledealingwiththistypeofclaim.In
my view, the claim in view of the alleged breaches committed by the
Government,oughttohavemadewithinthreeyearsfromthedateofalleged
breach and claim not having made within three years, was barred by law of
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limitation.

39.

InsofarasClaimNo.4isconcerned,perusalofawardindicatesthat

thesaidclaimwasmadeforfixationoftherateonaccountofvariationinthe
itemofTransformerHallArchConcreteduetotheproblemssuchaschangesin

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natureofrock,doingadditionalworknotprovidedinthecontract,changesin
sequenceandmethodology,delayinissueofdrawings,increaseinquantitiesetc.,
resultingincontractortoincurextraexpenditurenotcontemplatedintherate

analysis.Thecontractormadethatclaimbywayofcompensationtowardsextra
expensesallegedtohavebeenincurredbyit. Thelearnedarbitraltribunal

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allowedthisclaim.Thedataplacedonrecordintheawardindicatesthatthis
work was carried out during the period between October 1993 and February
1994. The contractor made a demandbefore the Executive Engineer on 14th

om

October1996.TheExecutiveEngineerrejectedthisclaimon4thNovember2000.
Arbitrationwasinvokedon1stJune2001.Inmyview,thecontractoroughtto

havemadethisclaimwhensuchworkwasdoneandnopaymentwasmadeto
thecontractorforthesame.Thecontractorwasnotboundtowaitfordecision
ofExecutiveEngineerbeyondtheperiodof60dayswhereas,inthis case,he
waited for decision of the Executive Engineer for a period of more than four
years.Inmyview,thisclaimwasonthefaceofitisbarredbylawoflimitation.
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Thelearnedarbitraltribunalhasnotconsideredthesefactsinproperdirection.

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40.

InsofarasClaimNo.5isconcerned,thesaidclaimwasmadebythe

contractor for fixation of new rate on account of variation in the item of

TransformerHallexcavation.Itwasthecaseofthecontractorthatexcavationof

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horizontalnicheshaddelayedtheworkandcausedextraexpensesduetoother
reasons,suchasstoppageofworkofshotcrete,increaseinquantityofrockbolts,
frequentrevisionofdrawings,additionalworks,reductionandomissionofsome

worksetc.necessitatedappropriatedcompensationinfavourofcontractor.The
learned arbitral tribunal allowed this claim for compensation. The award

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indicatesthatthisworkwasexecutedduringtheperiodbetweenJanuary1993
and September 1995. The contractor made this claim before the Executive
Engineeron14thOctober,1996whichwasrejectedbytheExecutiveEngineeron

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19thSeptember,2000.Arbitrationclausewasinvokedon6thJune2001.Inmy
view, when the work was carried out and payment was not made by the

Government,causeofactionhadcommenced.Inanyevent,thecontractorwas
notrequiredtowaitforthedecisionoftheExecutiveEngineerformorethan60
dayswhereas for this claim,thecontractorwaitedfordecision for aboutfour
years.Inmyview,theclaimonthefaceofit,isbarredbylawoflimitation.

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In so far as judgment of the Supreme Court in case of Gannon

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41.

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Dunkerly(supra)relieduponbythecontractorisconcerned,inmyview,itwas
notthepleaofthecontractorbeforethearbitraltribunalorbeforetheDistrict

JudgethatArticle113oftheLimitationAct(correspondingtoArticle120ofthe
LimitationAct1908)wouldapplytothefactofthiscase.Inmyview,asnosuch

ig
h

pleawasnotraisedbeforethearbitraltribunalplacingrelianceuponArticle113
corresponding to Article120 of Limitation Act 1908, and since no finding is
rendered by the arbitral tribunal applying Article113, contractor cannot be

permittedtoraisesuchpleaforthefirsttimeinthepresentproceedingsunder
Section37oftheActof1996.Pleaoflimitationisamixedquestionoffactand

ba
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lawandunlesssuchspecificpleabyplacingrelianceuponArticle113wasfirst
raisedbeforethearbitraltribunal,itcannotbeallowedtoberaisedforthefirst
timeinappealunderSection37oftheActof1996.Iam,therefore,oftheview

om

thatrelianceplacedbythelearnedseniorcounselappearingforthecontractorin
caseof GannonDunkerley (supra)isofnoassistancetothecontractorinthe

factsofthiscase.

42.

Inanyevent,consideringthenatureofclaimsmadebythecontractor

i.e.ClaimNos.1to5whichwereallowedbythelearnedarbitraltribunal,itis
clearthattheclaimswereeitherforworkdoneorforcompensationandthus
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specificArticleforreferringthedisputetoarbitrationwouldbeattractedsuchas

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Article18 or Article55 of Schedule of the Limitation Act and therefore,

Article113cannotbeattracted.Inmyview,thusthefactsofthecasebeforethe
Honourable Supreme Court in case of Gannon Dunkerley (supra) are clearly
distinguishablewiththefactsofthiscaseandthus,saidjudgmentrelieduponby

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thecontractor,withgreatrespect,isofnoassistancetothecontractor.

43.

The next submission of Mr Chinoy, the learned senior counsel

appearingforthecontractoristhatevenifArticle18isapplicabletotheclaims
made bythe contractor,periodof limitation wouldcommence onlywhen the

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entireworkisdone.Thelearnedseniorcounselsubmitsthattheclaimsmadeby
thecontractorwerenotfortheentireworkdonebythecontractorbutwasonly
inrespectofsomeitemsfromthescopeofentireworkawardedtothecontractor.

om

Thelearnedseniorcounselsubmitsthatonlywhentheentireworkiscompleted,
causeofactionwouldariseformakingclaimsevenforitemsfortheworkdone.

It is submitted that if the contractor is asked to invoke arbitration clause on

completionofeachitemindispute,therewouldbemultiplicityofarbitrations
underthesamecontract.

44.
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MrKumbhakoni,learned counsel appearing for the Government on

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theotherhandonthisissueinrejoindersubmitsthatthecontractorhadmade

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claimsinrespectofeachitemsseparatelyanddidnotmakeclaimfortheentire
work. It is submitted that even in the earlier arbitration proceedings, the
contractorhadmadeclaimshavingariseninrespectoftheitemsofthework
done and did not wait till completion of work. The Government had made

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paymentitemwisetothecontractorandthusitcannotbeconstruedthatcause
ofactionwouldariseonlyafterentireworkwasdoneandnotwhenitemsof
workwasdoneinrespectofwhichthedisputehadalreadyarisen.Clause66(A)

andClause66(b)oftheGeneralConditionsofContractreadasunder:
66A)SETTLEMENTOFDISPUTESARBITRATION:

(A)
IftheContractorconsidersanyworkdemandedofhimtobeoutside
therequirementsofthecontractorconsidersanydrawings,recordorrulingofthe
Engineer'sRepresentativeonanymatterinconnectionwithorarisingoutofthe
Contractorthecarryingoutofworktobeunacceptable,heshouldpromptlyask
the Engineer's representative in writing, for written instructions or decision.
Thereupon the Engineer's Representative shall give his written instructions of
decisionwithinaperiodof60daysofsuchrequest.

om

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Uponreceiptofthewritteninstructionsordecisions,thecontractorshallpromptly
proceedwithoutdelaytocomplywithsuchinstructionsordecision.

IftheEngineer'sRepresentativefailstogivehisinstructionsordecisioninwriting
withinaperiodof60daysofbeingrequestedoriftheContractorisdissatisfied
withtheinstructionsordecisionoftheEngineer'sRepresentativetheContractor
maywithin30daysafterreceivingtheinstructionsordecisionappealupwardsto
EngineerwhoshallaffordanopportunitytotheContractortobeheardandto
offerevidenceinsupportofhisappeal.TheEngineershallgiveadecisionwithin
aperiodof60daysaftertheContractorhasgiventhesaidevidenceandfurther
documentaryprooftheEngineercallsforinsupportofContractor'sappeal.

IftheContractorisdissatisfiedwiththisdecision,theContractorwithinaperiodof
30daysfromreceiptofthedecisionshallindicatehisintentiontoreferthedispute
toArbitration,aspertheproceduresetoutinClause66(b)below,failingwhich

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thesaiddecisionshallbefinalandconclusive.
66(b):ARBITRATION:

Intheeventofanydisputeordifferencearisingoutoforinanywayrelatingtoor
concerning these presents or the construction or effect of these presents (the
settlementwhereofhasnotbeenhereinbeforeexpresslyprovidedfor),thesamein
respectofwhichthedecisionisnotfinalandconclusive,shallontheinitiativeof
eitherpartytothecontractbereferredtothreearbitrators,onetobeappointedby
the employer, the second by the contractor and third by the Chairman Central
Water Commission in the case of Indian Contractors. In the case of Foreign
Contractor,thethirdarbitratorwillbedecidedbythetwoarbitratorswithin60
daysoftheirappointment. ThetermIndianContractorshallincludeanIndian
firm or a group of firms or a joint venture eligible for price preference as a
domestictenderer.ThetermForeignContractorshallincludeaforeignfirmora
group of firms and joint venture consortia not eligible for price preference as
domestic tenderer. The Arbitration shall be conducted in accordance with the
provisions of the Indian Arbitration Act 1940 or any statutory modifications
thereof. The arbitration shall be held at such place and time in India as the
arbitrators maydetermine. Ifeither of the parties fail toappoint its arbitrator
withinsixtydaysafterreceiptofnoticefortheappointmentofanarbitratorfrom
theotherpartythentheChairman,CentralWater Commissionshallappoint an
arbitratoronreceiptoftherequestfromtheaggrievedparty. Acertifiedcopyof
theappointmentsmadebytheChairmanCWCshallbefurnishedtobothparties.

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Thedecisionofthemajorityofthearbitratorsshallbefinalandbindinguponboth
theparties.Theexpenseofthearbitratorsshallbepaidasmaybedeterminedby
thearbitrators.
Performanceunderthecontract,shallifreasonablybepossible,continueduring
thearbitrationproceedingsandpaymentsduetotheContractorbytheEngineer's
representative shall not be withheld, unless they are the subject matter of the
arbitrationproceedings.
All awards shall be in writing and in case of claims equivalent to Rupees one
hundred thousand or more, such awards shall state reasons for the amounts
awarded.
NeitherpartyisentitledtobringaclaimtoarbitrationifitsArbitratorhasnotbeen
appointedbythirtydaysaftertheexpirationofthedefectsliabilityperiod.

45.

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Perusalofthearbitrationclauseindicatesthatincaseofanydispute,

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thecontractorwasrequiredtopromptlyasktherepresentativeoftheGovernment

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inwriting,forwritteninstructionsordecision.Fromtheperusaloftheclauses,it
is clear that it contemplates dispute tobe referred even during the course of
executionofworkandthecontractorwasnotrequiredtowaittillcompletionof
the work. Perusal of the arbitration clause indicates that the contractor was

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permittedtoreferthedisputestoarbitrationarisingduringtheexecutionofthe
workandsimultaneouslytocontinuetoperformunderthecontractifreasonably
possible. ThisClauseindicatesthatthecontractorwasnotboundtowaitfor

completionfortheentirework,butcouldhaveinvokedarbitrationpromptlyas
soonasdisputehadariseneveninrespectofitemsofworkoutofentirescopeof

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work were executed. It is not in dispute that even in respect of the earlier
arbitration arising under the same contract, the contractor had already made
claimsinrespectofsomeoftheitemsofwork.Iamthus,notinclinedtoaccept

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thesubmissionmadebythelearnedseniorcounselappearingforthecontractor
thatthecauseofactionwouldariseonlywhentheentireworkwascompletedby

thecontractorandnotwhenthepaymentwasnotmadeinrespectoftheitemsof
workdoneoncompletionofthatitem.Inmyview,causeofactionhadarisen
whentheworkwasdoneinrespectoftheitemsofworkdoneandcauseofaction
wouldnotpostponetillthedateofcompletionofentirescopeofworkawardedto
thecontractor.Inmyview,thelearnedarbitraltribunaloughttohavereferredto
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therelevantArticlewhichwouldbeattractedforthepurposesofdecidingthe

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issueoflimitation,whichisabsentintheimpugnedaward.ThelearnedDistrict
JudgehasmisdirectedbyapplyingwrongArticletothefactsofthiscase.

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Theawardisvitiatedandisinconflictwithpublicpolicyontheissue

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oflimitation. ViewtakenbythelearnedDistrictJudgeisalsocontrarytolaw
anddeservestobesetaside.I,therefore,passthefollowingorder.
i)

Impugnedorderandjudgmentdated29th June2006passedbythe

learnedDistrictJudge,RatnagiriinArbitrationApplicationNo.44of
2003andtheimpugnedawarddated26th June2003passedbythe

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learnedarbitraltribunalaresetasideonthegroundoflimitation.

ii) ArbitrationApplicationNo.44of2003filedbytheGovernment is
allowed.

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iii)Appealisdisposedofinaforesaidterms.Thereshallbenoorderasto
costs.

iv) Respondentisdirectedtorefundtheamountwithdrawnintheabove
matterwithinterest@12% perannumfromthedateof withdrawal till
paymentwithineightweeksofthisorder.
(R.D.DHANUKA,J.)

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