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AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • Dalip Singh
  • Sharad Aggarwal
  • S.K.Mittal
Judges
  • Mr. R.C Lahoti, J.
Acts
  • Article 119 of the Limitation Act,
  • Sec. 30(a) of the Arbitration Act
  • SECTION 3 LIMITATION ACT
  • provisions of Clause 10-C
  • Order 8 Rule 2 CPC
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • Dalip Singh
  • Sharad Aggarwal
  • S.K.Mittal
Judges
  • Mr. R.C Lahoti, J.
Acts
  • Article 119 of the Limitation Act,
  • Sec. 30(a) of the Arbitration Act
  • SECTION 3 LIMITATION ACT
  • provisions of Clause 10-C
  • Order 8 Rule 2 CPC
See more information ...
Smart Summary

Structured Summary of the Court Opinion (R.C. Lahoti, J.)

Factual and Procedural Background

The petitioner (a contractor) entered into a works contract with the respondent (Union of India). Disputes between the parties were referred to arbitration. The Arbitrator delivered an award dated 30.6.1989. After filing the award in Court, proceedings were initiated to make the award a rule of the Court and the parties were noticed. The respondent (Union of India) filed objections to the award. The dispute now before the Court was confined to the Arbitrator's determination under Claim No. 4.

Under Claim No. 4 the petitioner sought Rs. 40,000/- under Clause 10‑C of the contract for increase in labour rates. The Arbitrator granted Rs. 20,000/- under Claim No. 4, having found that a statutory notification (Exhibit C‑30 dated 25.4.1973) proved revision in labour rates that had taken place prior to acceptance of the tender. The respondent objected that any revision predated acceptance of the tender and therefore was not a matter arising during the progress of the work under Clause 10‑C. The Union also contended that the Arbitrator had committed an error apparent on the face of the award and misconduct by ignoring material documents.

Legal Issues Presented

  1. Whether the Arbitrator could lawfully award compensation under Clause 10‑C for revision in labour rates that had taken place before the date of the tender/acceptance and not during the progress of the work.
  2. Whether the Arbitrator committed an error apparent on the face of the award and/or misconduct by acting outside the terms of the contract or by ignoring material documents, thereby attracting interference by the Court.
  3. Whether the respondent's objection petition was barred by limitation and, if so, whether the Court was obliged to dismiss it absent a limitation plea in the respondent's pleadings.

Arguments of the Parties

Petitioner (Contractor) — Main Contentions

  • The provisions of Clause 10‑C of the contract were applicable; accordingly, the Arbitrator rightly allowed the claim for increase in labour rates.
  • On limitation, the petitioner later argued that the objection petition filed by the Union of India was beyond the limitation period prescribed by Article 119 of the Limitation Act and therefore the objection petition should be dismissed as time‑barred, even though limitation was not pleaded by the Union in its pleadings.
  • The petitioner relied on authorities (e.g., Makbool Ahmad v. Onkar Pratap Narain Singh and Tek Chand Madan v. Shyam Kamal Agencies) for the proposition regarding mandatory application of limitation where applicable.

Respondent (Union of India) — Main Contentions

  • The increase in labour rates (as per Exhibit C‑30 dated 25.4.1973) occurred before acceptance of the tender and therefore not during the progress of the work; Clause 10‑C did not apply and the Arbitrator could not have awarded compensation on that basis.
  • The Arbitrator's award under Claim No. 4 was contrary to the terms of the contract and amounted to an error apparent on the face of the award and misconduct because he ignored material documents (including the petitioner's own letter/annexure indicating the tender date).

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Hind Builders v. Union of India, (1990) 3 SCC 338 : AIR 1990 SC 1340 Authority cited by petitioner that an erroneous conclusion by an arbitrator is not necessarily ground for interference. Court observed that such authorities proceed on their own facts and their principles did not apply to the present case where the Arbitrator acted outside the contract.
Sudershan Trading Co. v. The Govt of Kerala, AIR 1989 SC 890 Authority cited by petitioner on limits of judicial interference with arbitral awards. Court noted it did not apply to the present facts because the Arbitrator had acted beyond contractual terms.
Hindustan Tea Co. v. K. Shashikant & Co., AIR 1987 SC 81 Authority cited by petitioner on appellate interference with arbitral findings. Court held the case was distinguishable and its rule not applicable here.
Associated Engineering Co. v. Govt. of Andhra Pradesh, JT 1991 (3) S.C. 123; 1991 (2) ALR 180 Distinction between errors in construction within arbitrator's jurisdiction and acts going outside the contract which are jurisdictional errors; arbitrator cannot decide questions otherwise than in accordance with the contract. Court relied on this principle to conclude that the Arbitrator committed a jurisdictional error by awarding outside the terms of the contract.
K.P. Paulose v. State of Kerala, AIR 1975 SC 1259 Held that ignoring very material documents can constitute misconduct by an arbitrator under Sec. 30(a) of the Arbitration Act. Court invoked this authority to support the conclusion that the Arbitrator's ignoring of material documents amounted to misconduct.
Govt. of Kerala v. V.P. Jolly, AIR 1992 Kerala 187 Full Bench decision that ignoring a supplemental agreement or giving an award contrary to obvious contract terms can amount to misconduct warranting setting aside of the award. Court relied on the reasoning that awards contrary to obvious contract terms or ignoring material contract provisions may be set aside.
Pandurang v. Maruti, AIR 1966 SC 153 Held that a plea of limitation is a plea of law concerning the jurisdiction of the Court. Court used this to explain the nature of a limitation plea but distinguished when limitation can be applied without adjudication of disputed facts.
Banarsi Dass v. Kanshi Ram, AIR 1963 SC 1165 Rule that a plea involving mixed question of law and fact should not be raised first at the stage of arguments. Court relied on this principle to require that limitation pleas involving disputed facts must be pleaded and adjudicated, not raised belatedly.
Central India Chemicals Pvt. Ltd v. Union of India, AIR 1962 MP 301 Distinction between limitation as an arguable point requiring pleading and limitation obvious on the proved facts. Court applied this distinction to find the limitation plea in the present case was not sustainable on the record as raised for the first time in argument.
Mst. Imam Bandi v. Hargovind Ghosh, (1848) 4 Moor IA 403 Illustrates that when limitation arises out of facts not put in issue by pleadings it should not be allowed to operate. Court cited this to support the proposition that limitation pleas founded on disputed facts cannot be raised belatedly.
Makbool Ahmad v. Onkar Pratap Narain Singh, AIR 1935 PC 85 Authority relied upon by petitioner for the mandatory application of limitation rules. Court noted the petitioner relied on this case but emphasized limitation applies only where facts making the bar obvious are undisputed.
Tek Chand Madan v. Shyam Kamal Agencies, ILR 1971 (1) Delhi 348 Authority relied upon by petitioner in support of the limitation plea. Court acknowledged reliance but found the factual record did not support dismissal on limitation without adjudication.

Court's Reasoning and Analysis

The Court proceeded in the following analytical steps, applying contractual interpretation and arbitral jurisdiction principles strictly as recorded in the opinion:

  1. Identification of operative facts: the Court examined the contract, the petitioner's own letter (an allonge) indicating the tender date as 18.5.1973, the Arbitrator's finding, and Exhibit C‑30 (notification dated 25.4.1973 revising labour rates). The Arbitrator himself recorded that the revision had taken place prior to acceptance of the tender.
  2. Construction of Clause 10‑C: Clause 10‑C applies where, "if during the progress of the work" the price of materials or wages increases as a direct result of coming into force of any fresh law/statutory order and such increase exceeds ten percent of the price/wages prevailing at time of receipt of the tender, the contract amount shall be varied. The Court emphasized the phrase "during the progress of the work" and that the clause entitles reimbursement only for increases occurring during progress, not for increases that predate formation of the contract.
  3. Application of facts to the clause: a bare perusal of the contract and Exhibit C‑30 convinced the Court that the wage revision was effective before the date of tender (and hence before formation of the contract) and therefore did not fall within Clause 10‑C's scope. The wages had not increased during the progress of the work and the increase was not a direct consequence of any statute coming into force during progress of the work.
  4. On the Arbitrator's approach: although the Arbitrator recorded that the increase had taken place prior to acceptance of the tender, he nonetheless proceeded to allow an equitable award (half of the claimed amount) on the basis that if any increase had taken place, the claimant was entitled to reimbursement. The Court found that the Arbitrator had not upheld entitlement under Clause 10‑C but had instead applied his own equitable reasoning.
  5. Jurisdictional error and misconduct: relying on Associated Engineering and other authorities, the Court held that an arbitrator who goes outside the contract's terms commits a jurisdictional error. Further, by ignoring material documents (the petitioner's own letter and Exhibit C‑30), the Arbitrator's conduct amounted to misconduct within the meaning of principles applied in K.P. Paulose and related cases.
  6. Conclusion on the award: for these reasons the Court concluded that the award of Rs. 20,000/- under Claim No. 4 could not be sustained because it was outside the contract and founded on improper reasoning.
  7. Treatment of limitation plea: the petitioner raised for the first time (in argument) that the objection petition was time‑barred. The Court reviewed authorities and explained that mandatory rejection for limitation applies only where the limitation bar is obvious on admitted facts. Where limitation depends on disputed facts, the party raising the bar must plead and prove them. On the record the Court found service evidence (acknowledgement and process server endorsement indicating service on 2.11.1989) and that the objection petition filed on 29.11.1989 was within the limitation period calculated from 2.11.1989. Because the petitioner had not pleaded the limitation point and the factual position was not incontestably against the respondent, the Court refused to entertain the belated limitation plea.

Holding and Implications

Holding: The Court issued the following dispositive rulings:

  • The objection petition filed by the Union of India is allowed in part.
  • The award given by the Arbitrator under Claim No. 4 (Rs. 20,000/-) is set aside.
  • The remainder of the Arbitrator's award is made the rule of the Court.
  • In accordance with the parts of the award maintained, the respondent Union of India is directed to pay Rs. 5,183.12p with interest at 12% p.a. from the date of the award until payment to the petitioner.
  • Costs of these proceedings are to be borne by the parties as incurred.
  • The opinion records: "Appeal dismissed."

Implications:

  • Direct effect: The specific monetary relief awarded under Claim No. 4 by the Arbitrator is annulled; the balance of the award is enforced as a Court rule and a specific payment with interest is directed to be made by the Union of India.
  • Legal principle reinforced: An arbitrator who decides outside the terms of the contract or ignores material documents may be found to have committed jurisdictional error or misconduct such that a court may set aside the award (as applied in this case).
  • Limitation point: The decision reiterates that limitation bars that depend on disputed facts must be pleaded and proved; courts will not apply a limitation bar based on contested facts raised for the first time during argument.
  • Precedential effect: The Court's decision applies the authorities cited to the facts at hand. The opinion does not purport to create a new legal precedent beyond applying established principles to these facts; the primary consequence is the annulment of the specific portion of the arbitral award impugned.

This summary is confined to and derived exclusively from the content of the provided opinion. No information beyond the text of the opinion has been added.

Show full summary ...

    Shri Amar Nath Satya v. Shri Amar Nath Satya .

    Mr. R.C Lahoti, J.— The petitioner had entered into a works contract with the respondent. Disputes having arisen between the parties, the same were referred to adjudication by arbitration. The Arbitrator has given his award dated 30.6.1989 On the award having been filed in the Court, proceedings for making it a rule of the Court were initiated. The parties were noticed. The respondent Union of India has filed its objections to the award. The controversy raised is confined to the award made by the Arbitrator under claim No. 4.

    2. The petitioner had claimed an amount of Rs. 40,000/- under Clause 10-C of the Contract on account of increase in labour rates. The Arbitrator has given a reasoned award. The gist of his finding is summarised in the next para.

    3. According to the Arbitrator, the document Exhibit C-30, which is a notification dated 25.4.73, proves the statutory increase in wages. Tender was accepted on 23.6.1973 The increase had taken place prior to acceptance of the tender but after the submission of the tender. Clause 19-B of the contract referred to a fair wage schedule, wherein the labour rates, were quoted. If increase in wages had taken place, the claimant was entitled to reimbursement. The Arbitrator has assessed the claimant entitled to an award of Rs. 20,000/- and not Rs. 40,000/- as claimed. Accordingly, Rs. 20,000/- have been awarded under Claim No. 4.

    4. The objection of the respondent-Union of India is that the increase in rates of wages had taken place prior to the acceptance of the tender and certainly not during the progress of the work and so the Arbitrator could not have awarded any claim on account of increase in labour rates. The award made by the Arbitrator runs contrary to the terms of the contract.

    5. It is not only an error apparent on the face of the award but also misconduct on the part of the Arbitrator. It is also submitted by the learned Counsel that if only the Arbitrator would have applied his mind to the documents available on record, he could not have allowed the impugned claim to the petitioner.

    6. In reply, the contractor-petitioner has submitted that the provisions of Clause 10-C of the contract were applicable to the case and the claim of the petitioner was justly upheld by the Arbitrator.

    7. Clause 10-C of the contract provides as under:

    “If during the progress of the work, the price of any materials incorporated in the works (not being a materials supplied from the Engineer-in-charge's stores in accordance Clause 10 hereof) and/or wages of labour increases as a direct result of the coming into for of any fresh law, or statutory rule or order (but not due to any changes in sales tax) and such increase exceeds ten per cent of the price and/or wages prevailing at the time of receipt of the tender for the work, and the contractor thereupon necessarily and properly pays in respect of that material (incorporated in the works) such increased price and/or in respect of labour engaged on the execution of the work such increased wages, then the amount of the contract shall accordingly be varied, provided always that any increase so payable is not, in the opinion of the Superintending Engineer (whose decision shall be final and binding) attributable to delay in execution of the contract within the control of the contractor.”

    (underlining by me)

    8. The letter dated 22.6.76 issued by the petitioner himself to the respondent constitutes a part of the contract. Therein itself, the petitioner has mentioned the date of tender as 18.5.93

    9. Exhibits C-30 filed before the Arbitrator is the notification dated 25.4.1973 issued by the Government of India, Ministry of Labour and published in the Gazette of India (Extra-ordinary) which has entailed revision in labour rates.

    10. A bare perusal of the contract and the notification dated 25.4.73 puts it beyond any shadow of doubt that revision in labour rates, the benefit whereof was claimed by the petitioner had taken place before the date of tender. The wages of labour had not increased during the progress of the work. The increase in the wages of labour was not occasioned as a direct result of the coming into force of any fresh law or statutory rule or order during the progress of the work. If the increase had taken place before the date of entering into the contract between the parties, then it was not a dispute arising out of the contract. It was certainly not a dispute referable to Clause 10C of the Contract. The Arbitrator could not have therefore, awarded the claim by reference to Clause 10C abovesaid.

    11. Placing reliance on Hind Builders v. Union Of India., (1990) 3 SCC 338 : AIR 1990 S.C 1340, Sudershan Trading Co v. The Govt of Karela, AIR 1989 SC 890 and Hindustan Tea Co. v. K. Shashikant & Co., (AIR 1987 SC 81) Counsel for the petitioner submitted that merely because the Arbitrator might have reached a wrong conclusion or might have committed a mistake in appreciation of facts or even if he might have formed a wrong opinion on question of facts or law that would not be enough for this Court to interfere with the award of the Arbitrator. Each of the cases cited by the Counsel for the petitioner proceeds on its own facts and law laid down therein does not apply to the facts of the case at hand.

    12. The Arbitrator has clearly recorded a finding that increase had taken place prior to the acceptance of the tender. He has nowhere upheld the entitlement of the petitioner to the award of the claim by reference to Clause 10C of the Contract. On the contrary, as the award shows he has proceeded to apply his own reasoning an equitable one, that if any increase in wages had taken place the claimant was entitled to reimbursement. This is not permissible.

    13. In Associated Engineering Co. v. Govt of Andhra Pradesh, JT 1991 (3) S.C 123, their Lordships have held that if their be an error in the construction of a contract then the error was within the jurisdiction of the Arbitrator; however, if he goes outside the contract, he commits jurisdictional error. Their Lordships have held:—

    “A dispute as to the jurisdiction of the arbitrator is not a dispute within the award, but one which has to be decided outside the award. An umpire or arbitrator cannot widen his jurisdiction by deciding a question not referred to him by the parties or by deciding a question otherwise than in accordance with the contract.”(emphasise supplied)

    14. In Associated Engineering Co v. Govt of A.P, 1991 (2) ALR 180, also their Lordships of the Supreme Court have held that an award outside the terms of the contract would be an award without jurisdiction disclosing an error apparent on its face because the Arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract.

    15. The learned Counsel for the respondent-Union of India has rightly pointed out that the letter dated 22.6.73 affixed as an allonge with the contract and signed by the petitioner clearly indicates the tender having been given on 18.5.73 while the schedule of rates on the basis whereof extra charges were claimed was dated 25.4.73, the copy of the notification being available on record (marked C-30) and if only the Arbitrator would have noticed these documennts, his award would not have been what it is and this amounts to an error apparent on the face of the record.

    16. In K.P Paulose v. State of Karela, AIR 1975 SC. 1259, their Lordships of the Supreme Court have held it to be a misconduct on the part of the arbitrator within the meaning of Sec. 30(a) of the Arbitration Act if he arrives at a decision by ignoring very material documents. In Govt. of Kerala v. V.P Jolly, AIR 1992 Kerala 187, a Full Bench of the High Court of Kerala has held that by ignoring the Arbitrator to refer to supplemental agreement in award which prohibited grant of additional compensation and extra rate amounted to misconduct on his part requiring setting aside of the award. It has further been held:—

    “Even non speaking award are liable to set aside if the award are contrary to the basic or rather obvious features of the contract or traverse beyond the obvious terms of such contracts and so long as such decisions can be arrived at without interpreting or construing the terms of the contract. The violation must be evident from a mere look at the terms of the contract.”

    17. The award of Rs. 20,000/- under claim No. 4 cannot therefore be sustained.

    18. Faced with this situation, the learned Counsel for the petitioner attempted at setting up a stumble block to the entertainability itself of the objection petition filed by the Union of India by submitting that the objection having been filed beyond the period of limitation prescribed by Article 119 of the Limitation Act, this Court should dismiss the objection petition as barred by time without any adjudication on merits. Plea as to limitation has not been raised in the pleadings. It has been flung up during the course of hearing. By reference to Section 3 of the Limitation Act, the learned Counsel for the petitioner submitted that the objection petition was liable to be dismissed though the limitation was not set up as a defence and it was obligatory on the part of the Court to do so. Forceful reliance was placed by the learned Counsel on Makbool Ahmad v. Onkar Pratap Narain Singh, (AIR 1935 PC 85) and Tek Chand Madan v. Shyam Kamal Agencies (ILR 1971 (1) Delhi 348).

    19. It is true that an application filed beyond the prescribed period of limitation shall have to be dismissed although limitation was not set up as a defence. However, the rule has application when the bar of limitation is attracted on admitted facts or facts beyond controversy. The rule is not attracted when the plea of limitation is founded on such facts as are disputed, without adjudication whereof the Court cannot determine whether the bar of limitation was attracted or not. In such a case, the party relying on the bar of limitation has to allege the facts, on proof whereof, the Court shall apply the bar of limitation.

    20. In Pandurang v. Maruti, (AIR 1966 S.C 153) their Lordships of the Supreme Court have held that a plea of limitation is a plea of law, which concerns the jurisdiction of the Court trying the proceedings and finding on the plea in favour of the party raising it would oust the jurisdiction of the Court. In Banarsi Dass v. Kanshi Ram, (AIR 1963 SC 1165) their Lordships have held that a plea of limitation which was not purely one of law, but was a mixed question of law and facts should not have been allowed to be raised for the first time at the stage of arguments. In Central India Chemicals Pvt. Ltd v. Union of India, (AIR 1962 MP 301) a Division Bench of the High Court of Madhya Pradesh has drawn a distinction between a case where limitation is an arguable point and therefore has to be pleaded and one where it is patent and non-controversial on the proved facts. In Mst. Imam Bandi v. Hargovind Ghosh, (1848 (4) Moor IA 403) also the question of limitation emerged out of the facts and the same not having been put in issue by the pleadings, was not allowed to operate upon the case. Order 8 Rule 2 CPC enjoins for a plea of limitation, if raising issues of fact, to be raised and facts pleaded specifically failing which it shall not be taken note of.

    21. In the case at hand, the notice of filing of the award was issued to the respondent by the Court on 4.10.1989 On the backside of the notice, there is an acknowledgement made “received, sd/- 2,11,89”. Below it is affixed the official seal of the respondent. This is followed by an endorsement of the process server dated 2.11.89 certifying the service. Somewhere at the top of the back side of the notice, there appears an illegible unidentifiable signature dated 20.10.89 which, in the submission of the learned Counsel for the petitioner, must be deemed to be the date of service. This contention of the learned Counsel has to be rejected outright. There is absolutely no basis for assuming or holding this signature dated 20.10.89 to be of anyone receiving the notice or representing the respondent. If only a plea to that effect would have been raised by the petitioner, then it could have been inquired into. The objection on behalf of the Union of India was filed in the Court on 29.11.89 Calculated from 2.11.89, it was filed within limitation. In the facts and circumstances of the case, the plea of limitation raised by the petitioner without any foundation in the pleadings cannot be entertained.

    22. For the foregoing reasons, the objection petition is allowed. The award given by the Arbitrator under Claim No. 4 is set aside. The rest of the award, is made the rule of the Court. In terms of the award to the extent to which it has been maintained, the respondent Union of India is directed to pay an amount of Rs. 5,183.12p. with interest @ 12% p.a from the date of award till the date of payment to the petitioner. Costs of these proceedings shall be borne by the parties as incurred.

    Appeal dismissed.
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    Comments

    Shri Amar Nath Satya v. Shri Amar Nath Satya .
    (Sep 1, 1994)