DURGA CHARAN RAUTRAY Vs STATE OF ORISSA
Bench: R.M. LODHA,JAGDISH SINGH KHEHAR
Case number: C.A. No.-001735-001735 / 2006
Diary number: 7022 / 2004
Advocates: PRAVEENA GAUTAM Vs
SHIBASHISH MISRA
“REPORTABLE”
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1735 OF 2006
Durga Charan Rautray …. Appellant
Versus
State of Orissa & Anr. …. Respondents
J U D G M E N T
JAGDISH SINGH KHEHAR, J.
1. The appellant was entrusted with the construction of balance work of
earth dam in connection with the Kharkhai Irrigation Project upto RL
316.50 on 31.12.1975. The estimated cost of the said balance work was
Rs.13,78,810/-. As per the contract agreement, the work was to
commence on 1.1.1976 and was to be completed on or before 31.7.1976.
For some reasons including change in design, the work could not be
completed within the prescribed time. The appellant eventually completed
the assigned work in July, 1978. This delay in completion of work,
according to the appellant, resulted in financial loss to the appellant. In
addition to the aforesaid, the appellant had some other grievances as well.
Illustratively, the appellant sought payment towards some additional work
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executed by him, and also, refund of royalty deducted on account of the
supply of “morum”. All these disputes were raised by the appellant, with
the concerned respondent(s). The respondent(s) chose not to entertain
the claims raised by the appellant. In fact, all communications addressed
by the appellant to the respondents remained unanswered. The appellant
then sought reference of his claims for adjudication before an arbitrator.
This request of the appellant was also not heeded to. The appellant
thereafter obtained a Court order dated 15.5.1981, whereby the disputes
raised by the appellant were referred to an arbitral tribunal. The arbitral
tribunal examined nine items of claim raised by the appellant.
2. The award rendered by the arbitral tribunal dated 15.9.1998,
adjudicated claim item nos. 4, 5, 6 and 9, in favour of the appellant. In so
far as claim item no.4 is concerned, the appellant had demanded an
additional amount of Rs.2 lakhs on account of price escalation. This claim
was based on the fact, that after the work was assigned to him, the State
Government had revised minimum wages of labour, and increased the
same by 16%. The appellant, accordingly, claimed extra payment of 16%
over the gross amount paid in the final bill. The arbitral tribunal held the
appellant entitled to Rs.24,380/- towards price escalation. In claim item
no.5, the appellant claimed Rs.5,51,173/- towards cost of “morum”
supplied, but for which no payment had been released. In this behalf, the
appellant claimed carriage of 47,106 cubic meters with 15 kilometers lead,
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at the rate of Rs.21.35 per cubic meter. While adjudicating the instant
claim, the arbitral tribunal found the appellant entitled to the difference
between the cost of supply of “morum”, as against the cost of supply of
“earth”. In respect of claim item no.5, the appellant was held entitled to a
sum of Rs.78,667/-. In claim item no.6, the appellant demanded a refund
of Rs.20,727/- deducted towards royalty from his bills. The aforesaid
royalty was allegedly charged on the “morum” supplied by the appellant.
The appellant was held entitled to refund of the entire sum of Rs.20,727/-
deducted from his bills towards royalty. In so far as claim item no.9 is
concerned, the appellant claimed interest at the rate of 18% per annum on
the principal claim amount, from the due date till the date of final payment.
The arbitral tribunal held the appellant entitled to interest at the rate of 10%
per annum on the principal awarded amount of Rs.1,23,724/-, with effect
from 19.8.1981 (i.e., the date with effect from which the Interest Act, 1978
came into force) till 5.4.1992. Calculated in the aforesaid terms, the
arbitral tribunal awarded interest of Rs.1,31,544/- to the appellant.
3. Notice to make the arbitral award dated 15.9.1998 “rule of the court”
was issued on 22.2.1999. In March, 1999, the respondents were served
with the said notice. On 21.12.1999, the Government Pleader entered
appearance on behalf of the respondents, and sought time to file
objections. Objections on behalf of the respondents were filed before the
Civil Judge, Senior Division, Bhubaneswar on 6.3.2000. To contest the
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arbitral award dated 15.9.1998, the respondents filed objections under
sections 30 and 33 of the Arbitration Act, 1940 by filing a “Miscellaneous
Case”. It would be relevant to mention that section 30 aforesaid,
postulates the grounds for setting aside an award, whereas, section 33
lays down the course to be adopted for challenging, inter alia, the validity
of an arbitral award.
4. The “Miscellaneous Case”, filed by the respondents was contested
by the appellant inter alia by raising a preliminary objection. It was sought
to be asserted, that the “Miscellaneous Case” was barred by limitation.
The “Miscellaneous Case” filed by the respondents was rejected by the
Civil Judge, Senior Division, Bhubaneshwar by accepting the plea of
limitation raised by the appellant. The suit filed by the appellant was
decreed on 30.4.2002. The award of the arbitral tribunal dated 15.9.1998
was made “rule of the court”. The respondents were directed to pay the
awarded amount to the appellant, failing which, the appellant was granted
liberty to recover the same through Court.
5. Dissatisfied with the order passed by the Civil Judge, Senior
Division, Bhubaneshwar, the respondents preferred an appeal before the
High Court of Orissa under section 39 of the Arbitration Act, 1940. In the
said appeal, the respondents raised two contentions. Firstly it was sought
to be asserted, that the objections filed by the respondents through the
“Miscellaneous Case” filed under sections 30 and 33 of the Arbitration Act,
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1940, were wrongly rejected by the Civil Judge, Senior Division,
Bhubaneshwar, on the ground of limitation. Secondly it was asserted, that
the controversy raised by the appellant could not have been referred for
adjudication by way of arbitration, after the appellant had received the final
bill without raising any objection.
6. The determination by the Civil Judge, Senior Division,
Bhubaneshwar, on the issue of limitation was upheld by the High Court.
Yet the contention advanced at the hands of the respondents, that it was
not open to the appellant to have sought adjudication of his claims, by way
of arbitration, after the appellant had received payments on the preparation
of the final bill without raising any objections, was accepted. In sum and
substance, therefore, by its order dated 22.12.2003 it was concluded by
the High Court, that the appellant could not reap the benefits of the award
rendered by the arbitral tribunal in his favour on 15.9.1998.
7. Dissatisfied with the judgment rendered by the High Court dated
22.12.2003, the appellant filed a petition for special leave to appeal
bearing no.12183 of 2004. Leave was granted on 20.3.2006.
Consequently, the matter came to be renumbered as civil appeal no.1735
of 2006.
8. Since the plea of limitation had been decided in favour of the
appellant and against the respondents, the only question to be adjudicated
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upon, in the present appeal filed by the appellant, is, whether the
disputes/claims raised by the appellant could have been referred for
arbitration, after the appellant had received payment after the preparation
of the final bill, without raising any objections. The answer to the instant
query must necessarily flow from the relevant clause of the agreement
which entitled the appellant to seek redressal of disputes through
arbitration, as it is the arbitration clause alone which defines the
parameters of the disputes which rival parties can raise for adjudication
before an arbitrator (or arbitral tribunal). In so far as the instant aspect of
the matter is concerned, clause 23 of the agreement dated 31.12.1975 is
relevant. The same is being extracted hereinbelow:
“Clause 23 – Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions hereinbefore mentioned and as to the quality of workmanship of materials used on the work, or as to any other questions, claim, right matter, or thing whatsoever, if any way arising out of, or relating to the contract, designs, drawings, specifications, estimates instructions, orders or these conditions, or otherwise concerning the work or the execution, or failure to execute the same, whether arising during the progress of the work, or after the completion or abandonment thereof shall be referred to the sole arbitration of a Superintending Engineer of the State Public Works Department unconnected with the work at any stage nominated by the concerned Chief Engineer. If there be no such Superintending Engineer, it should be referred to the sole arbitration of the Chief Engineer concerned. It will be no objection to any such appointment that the arbitrator so appointed is a Government Servant. The award of the Arbitrator so appointed shall be final, conclusive and binding on all parties to these contract.”
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A perusal of clause 23 of the contractual agreement extracted above,
leaves no room for any doubt that the appellant could claim arbitration on
account of disputes arising from the contract “except where otherwise
provided”. It is not the case of the respondents, that the appellant was
precluded by any clause in the contractual agreement from seeking
settlement of claims raised by the appellant (which have been allowed in
favour of the appellant by the arbitral tribunal). Clause 23 includes within
the purview of arbitration, disputes whether arising during the progress of
the work or after the completion or abandonment thereof. There is no
restraint whatsoever expressed in clause 23, which would deprive the
appellant from seeking redressal by way of arbitration, merely because he
had received payments after the preparation of the final bill, without raising
any objections. Accordingly, we are of the view, that even after the receipt
of payment on the preparation of the final bill, it was open to the appellant
to seek redressal of his disputes by way of arbitration, even though he had
not raised any objections. Secondly, in so far as the instant aspect of the
matter is concerned, the issue in hand stands concluded by this Court in
Bharat Coking Coal Ltd. v. Annapurna Construction (2003) 8 SCC 154
wherein it has been held as under:
“Only because the respondent has accepted the final bill, the same would not mean that it was not entitled to raise any claim. It is not the case of the appellant that while accepting the final bill, the respondent had unequivocally stated that he would not raise any further claim. In absence of such a
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declaration, the respondent cannot be held to be estopped or precluded from raising any claim…”.
In the instant case also the appellant, while accepting payment on the
preparation of the final bill, did not undertake that he would not raise any
further claims. As such, we are satisfied that the judgment rendered in
Bharat Coking Coal Ltd., case (supra) leads to the irresistible
conclusion, that despite receipt of payment on the preparation of the final
bill, it was still open to the appellant to raise his unsatisfied claims before
an arbitrator, under the contract agreement. Thirdly, it was no longer open
to the respondents to contest the claim of the appellant on the instant issue
after the appellant had obtained the court order dated 15.5.1981 which
referred the disputes raised by the appellant to an arbitral tribunal. The
Court order dated 15.5.1981 referring the disputes raised by the appellant
to arbitration, attained finality inasmuch as the same remained
uncontested at the hands of the respondents. The respondents were,
thereafter precluded from asserting that the claims raised by the appellant
could not be adjudicated upon by way of arbitration. Once the disputes
raised by the appellant were referred for arbitration and the rival parties
submitted to the arbitration proceedings without any objection, it is no
longer open to either of them to contend that arbitral proceedings were not
maintainable. And fourthly, the order passed by the High Court is
contradictory in terms. Once the High Court had concluded, that the
Miscellaneous Case filed by the respondents raising objections was barred
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by limitation, it was not open to the High Court to consider one of the
objections raised by the respondents and to uphold the same, so as to
disentitle the appellant from reaping the fruits of the arbitral award. In
other words, once the plea of limitation had been upheld, the objection(s)
filed by the respondents, irrespective of the merit(s) thereof were liable to
be rejected.
9. For the reasons recorded hereinabove, we are of the view that the
High Court erred in concluding that the appellant having received payment
after preparation of the final bill, without having raised any objection, could
not have initiated arbitral proceedings. The judgment rendered by the High
Court dated 22.12.2003 is, accordingly, set aside. The order passed by
the Civil Judge, Senior Division, Bhubaneshwar dated 30.4.2002 is upheld.
The instant appeal is accordingly allowed. The respondents are directed to
pay the appellant the awarded amount, failing which, the appellant shall be
at liberty to recover the same through Court.
10. There will be no order as to costs.
…………………………….J. (R.M. Lodha)
…………………………….J. (Jagdish Singh Khehar)
New Delhi; November 1, 2011.
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