Reportable  

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.1282 OF 2011 [Arising out of SLP [C] No.11903/2010]

Indian Oil Corporation Ltd. … Appellant

Vs.

M/s. SPS Engineering Ltd. … Respondent

J U D G M E N T

R.V.RAVEENDRAN, J.

Leave granted.

2. The Indian Oil Corporation Limited, the appellant herein, awarded an  

infrastructure work relating to drinking water system for its Paradip Refinery  

project to the respondent on 17.10.2000 and followed by a formal agreement  

dated 18.1.2001. The period stipulated under the contract for completion of  

the  work   was  13  months  from  the  date  of  issue  of  the  order  dated  

17.10.2000  and  the  contract  value  was  Rs.16,61,17,473/-.  The  appellant  

1

terminated the contract on 29.10.2002 alleging that the respondent contractor  

though required to complete the work within 13 months,  had achieved a  

progress of hardly 15.94% till 30.4.2002 and notified the respondent that the  

work will be got completed through an alternative agency, at the risk and  

cost of the respondent under Clause 7.0.9.0 of the General Conditions of  

Contract.

3. In view of the said termination, the respondent raised certain claims  

against the appellant and invoked the arbitration agreement contained in the  

General Conditions of Contract and filed an application under section 11 of  

the Arbitration and Conciliation Act, 1996 (‘Act’ for short) before the Delhi  

High Court  for appointment  of  an arbitrator.  The Designate  of  the Chief  

Justice of the High Court, by order dated 17.3.2003, appointed a retired High  

Court Judge as the arbitrator.  

4. Before  the  arbitrator,  the  respondent  filed  a  statement  of  claims  

raising eight claims. However in its written submission before the Arbitrator,  

the  contractor  confined  its  claims  to  only  three,  aggregating  to  

Rs.1,31,81,288/-.

2

5. The  appellant  made  several  counter-claims  aggregating  to  

Rs.92,72,529/-. Subsequently the statement of counter-claims was amended  

and the following para was added in regard to the extra cost in getting the  

work completed through an alternative contractor:

“Since the aforementioned contract is still  pending and IOCL is in the   process of inducting agency (ies) to complete the said work, the Engineer- in-charge of the said contract, EIL estimated a minimum expenditure of  Rs.18,36,20,000/-  for  completion  of  the  works  under  the  said  contract  which EIL intimated to IOCL by its letter dated 23.5.2002, a copy whereof  is  annexed  hereto  and  marked  Annexure  RY.  The  said  estimated  expenditure has been revised by IOCL who has arrived at the reduced  figure  of  Rs.2,10,41,626/- (Rupees  Two  Crores  Ten  Lacs  Forty  One  Thousand  Six  Hundred  Twenty  Six  Only)  in  its  proposal  dated  09.09.2006, a copy whereof is annexed hereto and marked Annexure RY- 1.  Accordingly,  IOCL  is  entitled  to  recover  from  SPSEL  any  additional  sums  including  the  abovementioned  Rs.2,10,41,626/-  (Rupees  Two  Crores  Ten  Lacs  Forty  One  Thousand  Six  Hundred  Twenty  Six  Only)  that  it  will  according to its  estimate  incur  upon  execution  of  the  balance  work  by  other  agencies  pursuant  to  the  termination of the said contract in terms of Clause 7.0.6.0 of GCC  along  with  any  other  additional  expenditure  incurred  by  IOCL in  completion of the said works.  IOCL, therefore, is entitled to an amount  of Rs.2,10,41,626/- (Rupees Two Crores Ten Lacs Forty One Thousand  Six Hundred Twenty Six Only) from SPSEL which SPSEL has not paid  till date.”  

(emphasis supplied)

The prayer in the counter-claim however remained unaltered and did not  

include  the  claim  of  Rs.2,10,41,626/-  on  account  of  risk  -  execution  of  

balance work. Even after the above amendment, the prayer continued to be  

as under :

3

“It is therefore prayed that the learned Arbitrator may be pleased to:

(i) award a sum of Rs.92,72,529/- (Rupees Ninety Two Lacs Seventy  Two Thousand Five Hundred Twenty Nine Only)  against  SPSEL  and in favour of IOCL along with the additional amounts which in  IOC’s estimate, IOC will incur in further executing and completing  at  the  Claimant’s  risk  and  cost,  the  balance  works  remaining  incomplete under the said contract.

(ii) grant  pendent  lite  interest  @  18%  per  annum  on  the  awarded  amount;

(iii) grant interest on the awarded amount @ 18% per annum from the  date of award till the date of payment in full;

(iv) grant cost of arbitration proceedings to IOCL;

(v) grant  such  other  or  further  order(s)  and/or  relief  as  are  deemed  appropriate in the circumstances of the case;”

6. The  arbitrator  made  an  award  dated  27.10.2008.  He  awarded  

Rs.91,33,844  towards  the  claims  of  respondent.  As  against  the  counter  

claims aggregating  to  Rs.92,72,529 made by  the  appellant,  the  arbitrator  

awarded a sum of Rs.11,10,662. In regard to the averments made by the  

appellant in regard to the extra cost involved in getting the work completed  

through an alternative contractor, the arbitrator observed thus :

“102. The  contract  was  terminated  in  October  2002  and  till  date  the  balance work of the contract has not been executed. Such damage could  have  been  allowed  to  the  respondent  if  in  a  reasonable  period  after  termination of the contract, the respondent had executed the balance work  at the risk and costs of the claimant. In case the costs actually incurred  have been more than the costs which were required to be incurred under  the contract, then the difference between the two costs could have been  awarded as damages to the respondent. There is no proper evidence on the  record to show that what could have been the costs of the balance work if  it had been executed within reasonable period after the termination of the  

4

contract.  Such  damage  cannot  be  awarded  on  mere  opinion  of  any  particular  person  or  on  hypothetical  basis.  Under  clause  7.0.9.0  of  General Conditions of the Contract, the respondent was entitled at the risk  and expenses  of the contractor  to  get  completed the balance work and  recover the costs from the claimant. This clause further contemplates that   on the amount actually expended by the owner for the completion of the   work  15% to  be  added  as  supervision  charges,  the  same  would  have   become recoverable from the claimant. In the present case, no such cost   has been incurred till date. Thus, for these reasons, I reject this counter  claim.”  

       (emphasis supplied).

The arbitrator adjusted Rs.11,10,662 awarded to the appellant, towards the  

sum of Rs.91,33,844 awarded in favour of the respondent and consequently  

directed the appellant to pay to the respondent, the balance of Rs.80,23,182.  

He further directed that if the amount was not paid within three months from  

the date of award, the appellant shall  pay interest  at the rate of 12% per  

annum from the date of award till payment. The appellant did not challenge  

the award and it thus attained finality.  

7. The appellant claims that it entrusted the incomplete work to Deepak  

Construction  Company  for  completion  in  the  year  2005,  that  the  said  

contractor completed the work on 29.12.2007, and that the final bill of the  

said alternative agency was settled on 7.5.2008. On that basis, the appellant  

calculated the actual extra cost incurred in completing the work and the total  

amount recoverable from the petitioner in terms of the contract, as under:

5

A. Amount determined as payable to the alternative  agency (Deepak Construction Co.) for the

  balance work Rs.4,05,74,465.00

B. Material supplied to the alternative agency      for completing the work (+) Rs.2,78,68,861.64

          ---------------------- C. Total Cost (A + B) Rs.6,84,43,326.64

D. The cost of such unfinished work, if it had  been completed by the respondent, as per  

   its contract rates. (-) Rs.3,30,93,996.75

---------------------- E. Extra cost incurred on account

of  getting the work completed at the risk and cost of respondent (C – D) Rs.3,53,49,329.89

F. Supervision charges at 15% on  Rs.6,84,43,326.64 (+) Rs.1,02,66,499.00

----------------------

Total amount recoverable  from the respondent (E+F) Rs.4,56,15,828.89 ----------------------

Towards the said claim against the respondent, the appellant adjusted the  

sum  of  Rs.80,23,182/-  awarded  by  the  arbitrator  to  the  respondent  and  

arrived at the net amount recoverable from the respondent towards extra cost  

for  completion  as  Rs.3,75,92,646.89.  The  appellant  by  notice  dated  

22.1.2009  called  upon  the  respondent  to  pay  the  said  sum  of  

Rs.3,75,92,646.89 (and interest thereon at 18% per annum if the amount was  

not paid within seven days) and informed the respondent that if it disputed  

6

its liability, to treat the said letter as appellant’s notice invoking arbitration.  

The appellant also suggested a panel of three names (including Justice P.K.  

Bahri  -  the arbitrator who had made the award dated 27.10.2008) with a  

request to select one of them as the arbitrator. The respondent by reply dated  

18.3.2009 refused to comply,  contending that the counter claim in regard to  

the risk-execution cost had already been rejected by the arbitrator, by his  

award dated 27.10.2008 and that award having attained finality, there could  

be no further arbitration. In view of the said stand of the respondent, the  

appellant filed a petition under section 11 of the Act praying for appointment  

of an arbitrator to decide its claim for the extra cost in getting the work  

completed through the alternative agency.  

8. The learned Designate of the Chief Justice of the Delhi High Court  

(for short ‘the Designate’) by the impugned order dated 8.12.2009 dismissed  

the application with costs of Rs.50,000/-. He held that the application under  

section  11 of  the  Act  by the  appellant  was  misconceived,  barred by  res  

judicata,  and  mala  fide.  The  Designate  held  (i)  that  the  claim  by  the  

appellant in regard to extra cost had already been considered and rejected by  

the  Arbitrator;  (ii)  that  the  claim  regarding  extra  cost  was  barred  by  

limitation (by drawing an inference from the observation of the Arbitrator  

that the risk execution tender was not awarded to Deepak Construction Co.  

7

within a reasonable period of termination of respondent’s contract); and (iii)  

that as the work was completed by Deepak Construction Co. on 29.12.2007  

and the earlier arbitration proceedings had came to an end much later on  

27.10.2008,  the  claim in  regard  to  actual  extra  cost  ought  to  have  been  

crystallized and claimed in the first round of arbitration.  

9. The said order is challenged in this appeal by special leave. On the  

contentions urged the questions that arise for consideration are as follows :

(i) Whether the Chief Justice or his designate can examine the tenability  

of a claim, in particular whether a claim is barred by  res judicata,  

while considering an application under section 11 of the Act?  

(ii) Whether  the  Designate  was  justified in holding that  the claim was  

barred by res judicata and that application under section 11 of the Act  

was misconceived and mala fide?

Re : Question (i)

10. This  Court,  in  National  Insurance  Co.  Ltd.  vs.  Boghara  Polyfab   

Private Limited [2009 (1) SCC 267] following the decision in SBP & Co. v.   

Patel Engineering Ltd. [2005 (8) SCC 618], identified and segregated the  

issues that may be raised in an application under section 11 of the Act into  

three categories, as under :

8

“22.1.   The issues (first category) which the Chief Justice/his designate  will have to decide are :

(a) Whether  the  party  making  the  application  has  approached  the  appropriate High Court?

(b) Whether there is an arbitration agreement and whether the party who  has  applied  under  Section  11  of  the  Act,  is  a  party  to  such  an  agreement?   

22.2.  The issues (second category) which the Chief Justice/his designate  may  choose  to  decide  (or  leave  them  to  the  decision  of  the  Arbitral  Tribunal) are:

  (a) Whether the claim is a dead (long-barred) claim or a live claim?

(b) Whether  the  parties  have  concluded  the  contract/transaction  by  recording satisfaction of their mutual rights and obligation or by  receiving the final payment without objection?

22.3.  The issues (third category) which the Chief Justice/his designate  should leave exclusively to the Arbitral Tribunal are:  

(i) Whether a claim made falls within the arbitration clause (as for  example,  a  matter  which  is  reserved  for  final  decision  of  a  departmental authority and excepted or excluded from arbitration)?

(ii) Merits or any claim involved in the arbitration.”

11. To find out whether a claim is barred by  res judicata, or whether a  

claim is “mala fide”, it will be necessary to examine the facts and relevant  

documents. What is to be decided in an application under section 11 of the  

Act is whether there is an arbitration agreement between parties. The Chief  

Justice or his designate is not expected to go into the merits of the claim or  

examine the tenability of the claim, in an application under section 11 of the  

Act.  The  Chief  Justice  or  his  Designate  may  however  choose  to  decide  

9

whether the claim is a dead (long-barred) claim or whether the parties have,  

by  recording  satisfaction,  exhausted  all  rights,  obligations  and  remedies  

under the contract, so that neither the contract nor the arbitration agreement  

survived. When it is said that the Chief Justice or his Designate may choose  

to decide whether the claim is a dead claim, it is implied that he will do so  

only when the claim is evidently and patently a long time barred claim and  

there  is  no  need  for  any  detailed  consideration  of  evidence.  We  may  

elucidate by an illustration : If the contractor makes a claim a decade or so  

after completion of the work without referring to any acknowledgement of a  

liability or other factors that kept the claim alive in law, and the claim is  

patently long time barred, the Chief Justice or his Designate will examine  

whether the claim is a dead claim (that is, a long time barred claim). On the  

other hand, if the contractor makes a claim for payment, beyond three years  

of completing of the work but say within five years of completion of work,  

and alleges that the final bill was drawn up and payments were made within  

three years before the claim, the court will not enter into a disputed question  

whether the claim was barred by limitation or not. The court will leave the  

matter to the decision of the Tribunal. If the distinction between apparent  

and obvious dead claims, and claims involving disputed issues of limitation  

is not kept in view, the Chief Justice or his designate will end up deciding  

the question of limitation in all applications under section 11 of the Act.  

10

12. An application  under  section  11 of  the  Act  is  expected  to  contain  

pleadings about the existence of a dispute and the existence of an arbitration  

agreement to decide such dispute. The applicant is not expected to justify the  

claim or plead exhaustively in regard to limitation or produce documents to  

demonstrate that the claim is within time in a proceedings under section 11  

of the Act. That issue should normally be left to the Arbitral Tribunal. If the  

Chief Justice or his designate is of the view that in addition to examining  

whether  there  is  an  arbitration  agreement  between the parties,  he  should  

consider the issue whether the claim is a dead one (long time barred) or  

whether there has been satisfaction of mutual rights and obligation under the  

contract, he should record his intention to do so and give an opportunity to  

the parties to place their materials on such issue. Unless parties are put on  

notice that such an issue will be examined, they will be under the impression  

that  only  questions  of  jurisdiction  and existence  of  arbitration  agreement  

between the parties will be considered in such proceedings.  

13. The question whether a claim is barred by res judicata, does not arise  

for consideration in a proceedings under section 11 of the Act. Such an issue  

will have to be examined by the arbitral tribunal. A decision on res judicata  

requires  consideration  of  the  pleadings as  also the claims/issues/points  

11

and the  award in  the  first  round of  arbitration,  in  juxtaposition  with  the  

pleadings and the issues/points/claims in the second arbitration. The limited  

scope of section 11 of the Act does not   permit such examination of the  

maintainability or tenability of a claim either on facts or in law. It is for the  

arbitral tribunal to examine and decide whether the claim was barred by res  

judicata. There can be no threshold consideration and rejection of a claim on  

the ground of res judicata, while considering an application under section 11  

of the Act.  

Re : Question (ii)

14. We extract below the reasoning adopted by the Designate to dismiss  

the appellant’s application under section 11 of the Act :

“5. In my opinion, not only the aforesaid para 102 in the Award dated  27.10.2008 operates as  res judicata against the present petitioner, I find  that the present petition is misconceived and and mala fide because, if the  present  petitioner  is  correct  in  saying  and which  I  doubt  it  is,  that  its  limitation/right  would  only  begin  after  the  work  is  completed  by  M/s  Deepak Construction  Company when the  amount  of  the  higher  cost  is  known,  even  then,  the  work  was  completed  by  the  M/s  Deepak  Construction  Company admittedly  on  29.12.2007,  and thus  the  present  petitioner,  could  well  have  proved  its  counter  claim  in  the  earlier  proceedings  and could  have crystallized  the  amount  in  the  said  earlier  arbitration  proceedings.  If  necessary  it  could  have  even  amended  its  pleadings as regards the counter claim. On a further query by the Court to  the counsel for the petitioner with respect to the statement in the notice  dated 22.01.2009 sent by the petitioner to the respondent which states that  M/s  Deepak  Construction  Company  has  completed  the  work  on  29.12.2007 and its final bill has now been settled” that when was the bill  of M/s Deepak Construction Company settled, the counsel for petitioner  

12

states that for the present no such information is at all available whether in  the form of any assertion in the present petition or in any document in  support thereof.  

6. A conspectus of the aforesaid facts show that firstly in the earlier  arbitration proceedings, the counter claim of the present petitioner on this  very subject matter was specifically dismissed by holding and observing  that  the  risk  purchase  tender  awarded  to  M/s  Deepak  Construction  Company  was  not  given  within  a  reasonable  period  of  time  after  termination of the work of the present respondent. Secondly, it has further  become clear that the work was completed by M/s Deepak Construction  Company admittedly as per the case of the petitioner on 29.12.2007 and  the earlier arbitration proceedings came to an end later by passing of the  Award on 27.10.2008 and, therefore, the claim with respect to any cost of  the total materials for the substitute contract for the risk purchase could  very  well  have  been  crystallized  and claimed  in  the  earlier  arbitration  proceedings. Thirdly, admittedly there is no challenge to the award dated  27.10.2008 by the present petition whereby its counter claim was rejected.  Fourthly, I am of the view that once a risk and cost tender is issued at the  risk and cost of a person, then, the amount which is to be claimed from the  person who is guilty of breach of  contract and against whom risk and cost  is tendered, becomes crystallized when the risk purchase tender at a higher  cost is awarded. Once a higher cost of work is known as compared to the  cost of the work for the earlier work for which the earlier contract was  there and with respect to which the earlier contractor was in breach, then  not only the amount becomes crystallized but limitation also commences  for  filing  of  the  legal  proceedings  against  the  person  in  breach  of  obligations under the earlier contract.  It  cannot be that limitation and a  right  continues  indefinitely  to  be  extended  till  the  performance  is  completed  under  a  subsequent  risk  purchase  contract.  This  would give  complete uncertainty to the period of limitation striking at the very root of  one of the principles of the Limitation Act and which is that evidence is  lost by passage of time and which will cause grave prejudice to the person  against whom a stale claim is filed.”    

15. The appellant  submitted that having regard to clause 7.0.9.0 of the  

contract,  damages  can  be  claimed  by  it  (as  employer),  in  regard  to  the  

additional  amount  incurred  for  getting  the  work  completed  through  an  

alternative  agency  at  the  risk  and  cost  of  the  contractor  along  with  the  

13

supervision  charges,  only  when  the  amount  was  actually  expended for  

completion of the entire work; and therefore, unless the work was completed  

by the alternative agency and the final bill was settled or finalized, the actual  

extra cost could not be determined. It was pointed out that in the first round  

of arbitration, the hearing was concluded by the Arbitrator on 13.3.2008 and  

matter was reserved for orders and the award was declared on 27.10.2008;  

that the work was completed by the alternative agency on 29.12.2007 and  

final bill of the alternative agency was drawn and settled only on 7.5.2008,  

after the conclusion of the hearing, by the Arbitrator; that the actual extra  

cost could be worked out only when the final bill was prepared, and not on  

the date of completion of work; that therefore the appellant could not make  

the  claim for  actual  extra  cost,  in  the  first  round arbitration.  It  was  also  

submitted that the appellant was not expected to give details of completion  

of work and preparation of the final bill, or produce documents in support of  

it in a proceeding under section 11 of the Act; and that the Designate was not  

therefore justified in finding fault with the appellant for not stating  the date  

of settlement of the final bill in the petition under section 11 of the Act and  

for not producing the final bill.  

16. The appellant also contended that when its statement of counter claim  

was  amended  before  the  Arbitrator,  the  appellant  had  only  indicated  its  

14

estimation  of  the  probable  extra  cost  to  be  Rs.2,10,41,626/-,  as  advance  

indication of a claim to be made in future on the basis of actuals, and that it  

had not prayed for award of the said amount in the said proceeding. It was  

pointed out that even after mentioning the proposed claim by amending the  

statement  of  counter  claim, the  actual  counter  claim before the arbitrator  

remained as only Rs.92,72,529/- exclusive of any claim on account of the  

risk completion cost. It was submitted that having regard to clause 7.0.9.0,  

the counter claim for extra cost could not have been made when the first  

arbitration was in progress and that the arbitrator had in fact noticed in his  

award (at para 102) that only when the cost actually incurred, the appellant  

could make the claim for the extra cost. It is contended that the “rejection”  

by the arbitrator was not on the ground that the claim for extra cost was not  

recoverable, nor on the ground that no extra cost was involved in completing  

the work, but on the ground that as on the date of the award, the appellant  

had not actually incurred any specific extra cost; and that as the arbitrator  

clearly held that any claim for extra cost was premature and could not be  

considered at that stage,  the observation that ‘I  reject  this  counter  claim’  

only meant that the claim relating to extra cost was not being considered in  

that award and that appellant should make the claims separately after the  

amount was actually expended.  

15

17. Clause 7.0.9.0 of the contract relied upon by the appellant reads thus :  

“clause 7.0.9.0  

Upon termination of the contract, the owner shall be entitled at the risk  and  expenses  of  the  contractor  by  itself  or  through  any  independent  contractor(s)    or  partly  by  itself  and/or  partly  through  independent  contractor(s) to complete to its entirety the work as contemplated in the  scope of work and to recover from the contractor in addition to any other  amounts, compensations or damages that the owner may in terms hereof or  otherwise be entitled to (including compensation within the provisions of  clause   4.4.0.0  and  clause  7.0.7.0  hereof)  the  difference  between  the  amounts as would have been payable to the contractor in respect of the  work (calculated as provided for in clause 6.2.1.0 hereof read with the  associated  provisions  thereunder  and  clause  6.3.1.0  hereof)  and  the  amount actually expended by the owner for completion of the entire work  as aforesaid together with 15% (fifteen per cent) thereof to cover owner’s   supervision charges,  and in the event  of  the latter  being in the excess   former, the owner shall be entitled (without prejudice to any other mode  of recovery available to the owner) to recover the excess from security   deposit or any monies due to the contractor.”  

(emphasis supplied)  

18. On a perusal of the order of the Designate, we find that the Designate  

has clearly exceeded his limited jurisdiction under section 11 of the Act, by  

deciding  that  the  claim for  extra  cost,  though covered  by  the  arbitration  

agreement was barred by limitation and by the principle of res judiata. He  

was also not justified in terming the application under section 11 of the Act  

as ‘misconceived and malafide’. Nor could he attribute ‘mala fides’ to the  

appellant, a public sector company, in filing an application under section 11  

of the Act, without any material to substantiate it. We may refer to some of  

the  findings  of  fact  recorded  by  the  Designate,  which  were  wholly  

16

unwarranted in a proceeding under section 11 of the Act and the fallacy in  

such findings :  

(i) Finding : The appellant did not state anywhere in the petition the date  

which  the  final  bill  was  settled  and  did  not  produce  any  document  

containing such information. The appellant was not expected or required to  

give such information in a petition under section 11 of the Act or produce  

the  documents  showing  the  settlement  of  final  bill  along  with  the  said  

petition. Therefore, the appellant could not be found fault for such omission.  

In fact, the Designate noticed that the work was completed on 29.12.2007.  

The  claim  was  in  time  with  reference  to  the  date  on  which  the  work  

completed (29.12.2007) by the alternative agency.

(ii) Finding : As the work was completed on 29.12.2007 and as the award   

was made only on 27.10.2008, the appellant ought to have crystalised the   

extra  cost  and  claimed  it  in  the  first  arbitration  proceedings. The  

assumption that the appellant ought to have made the claim for extra cost  

which arose after the commencement of the arbitration proceedings, in the  

pending proceedings by way of amendment, has no basis either in law or in  

contract. If the cause of action arose after the completion of pleadings and  

17

commencement of hearing in the first round of arbitration, nothing prevented  

the appellant from making a separate claim by initiating a second arbitration.  

(iii) Finding : Once a risk and cost tender is issued at the risk and cost of   

a person, then, the amount which is to be claimed from the person who is   

guilty of breach………. becomes crystallized when the risk purchase tender   

at a higher cost is awarded.. This may be true as a general proposition. But  

it may not apply if there is a specific provision in the contract (like clause  

7.0.9.0) which requires that the employer should claim as extra cost, only the  

difference  between  the  “amounts  as  would  have  been  payable  to  the  

contractor in respect of the work” and “the amount actually expended by the  

owner for completion of the entire work”.  

19. The Designate should have avoided the risks and dangers involved in  

deciding an issue relating to the tenability of the claim without necessary  

pleadings and documents, in a proceeding relating to the limited issue of  

appointing  an  Arbitrator.   It  is  clear  that  the  Designate  committed  a  

jurisdictional error in dismissing the application filed by the appellant under  

section 11 of the Act, on the ground that the claim for extra cost was barred  

by  res  judicata and  by  limitation.  Consideration  of  an  application  under  

18

section 11 of the Act, does not extend to consideration of the merits of the  

claim or the chances of success of the claim.  

20. We may at this stage refer to one aspect of the claim for extra cost.  

The award amount due to the respondent under the award dated 27.10.2008  

is an ascertained sum due, recoverable by executing the award as a decree.  

On the other hand the claim of the appellant for reimbursement of the extra  

cost for getting the work completed, is a claim for damages which is yet to  

be  adjudicated  by  an  adjudicating  forum.  The  appellant  cannot  therefore  

adjust  the  amount  due  by  it  under  the  award,  against  a  mere  claim for  

damages made by it against the respondent. The appellant will have to pay  

the award amount due to the respondent and if necessary modify its claim  

for extra cost against the respondent.

21. In view of the foregoing, this appeal is allowed and the order of the  

Designate is set aside. The application under section 11 of the Act filed by  

appellant before the Chief Justice of the Delhi High Court is allowed and  

Justice P.K.Bahri (Retd.) who was the earlier Arbitrator is appointed as the  

sole arbitrator to decide the appellant’s claim in regard to the additional cost  

for completing the work. It is open to the respondent to raise all contentions  

against  the  claim of  the  appellant  including  the  contention  of  limitation,  

19

maintainability and res judicata, before the arbitrator. Nothing in this order  

shall be construed as expression of any opinion on the merits or tenability of  

the claim of the appellant regarding extra cost.

…………………………….J. (R V Raveendran)

New Delhi; …………………………..J. February 3, 2011. (A K Patnaik)          

20