A.K. Construction Company Vs State of Madhya Pradesh and Others

Chhatisgarh High Court (Single Judge)

ACQA->ACQUITTAL APPEAL [ APPEAL U/S 378 ], 1533 of 2000 ,1530 of 2000 of 2015, Judgment Date: Mar 09, 2015

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AFR
HIGH COURT OF CHHATTISGARH, BILASPUR
Civil Revision No. 1533 of 2000
M/s A.K. Construction Company
---- Petitioner
Versus
State of Madhya Pradesh and Others
---- Respondents
Civil Revision No. 1530 of 2000
M/s A.K. Construction Company
---- Petitioner
Versus
State of Madhya Pradesh and Others
---- Respondents
For Petitioners : Shri B. P. Sharma, Advocate
For Respondents : Shri S. P. Kale, Dy. A.G. for the State.
Hon'ble Shri Justice P. Sam Koshy
C A V Order
Passed On : 09.03.2015
Since the two Civil Revisions arise out of the identical set of facts
decided by Madhya Pradesh Arbitration Tribunal, Bhopal on 31.03.2000 in
Reference Case No. 28 of 1990 and Reference Case No. 29 of 1990, this
Court to avoid repetition decides both the Civil Revisions by this common
order.
2. In Revision Petition No. 1533 of 2000 the applicant was awarded a
contract for remodeling of cement concrete lining of Mahanadi Main Canal
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from RD 2000 M to RD 2500 M vide agreement No.16DL of 10/82. Similarly,
in Revision Petition No. 1530 of 2000 the applicant was awarded a contract for
remodeling of cement concrete lining of Mahanadi Main Canal from RD 2500
M to RD 3000 M vide agreement No.17DL of 10/82. The period of completion
of both the contracts was 10 months excluding rainy season i.e. 16th June to
31st December. Both the contracts were awarded to the same Construction
Company i.e. the applicant in both the civil revisions. The work order to
commence the work was issued on 22.10.1982. Thus, the completion date
was to be 15.04.1984. Since the work could not be completed for some
reason or the other within the stipulated period, the contract awarded to the
applicant got terminated. Thereafter, a dispute was raised by the applicant
challenging the illegal termination of the contract and for awarding cost and
damages for the loss sustained to the applicant under the provisions of
Arbitration Act. The dispute was raised before Madhya Pradesh Arbitration
Tribunal, Bhopal wherein the two reference cases were registered as
Reference Case No. 28 of 1990 and Reference Case No. 29 of 1990
respectively.
3. After completion of pleadings and proceedings before the Arbitration
Tribunal, the Tribunal vide impugned award dated 31.03.2000 held that the
applicant is entitled only for the claim raised in claim No.1 which in Reference
Case No. 28 of 1990 was Rs. 25,607.15 and in Reference Case No.29 of
1990 was Rs.16,194.63. Rest of the claims of the applicant in both the
reference cases were specifically rejected by the Tribunal. At the same time,
so far as the counter claim raised by the respondents was concerned, the
Tribunal allowed the same and in Reference Case No. 28 of 1990 the
respondents were awarded an amount of Rs.6,79,590.00 and in Reference
Case No.29 of 1990 the respondents were awarded an amount
Rs.5,60,404.37.
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4. It is pertinent to mention that the amount of counterclaim awarded by
the Tribunal in favour of the respondents was to the extent of the advance
money received by the applicant for the purchase of plant and machinery for
the execution of the work order. This advance amount was to be
subsequently adjusted from the running bills of the applicant, but which could
not be recovered as the work itself was not completed by the applicant so as
to adjust from the running bills.
5. It is these two awards passed by the Tribunal which are under
challenge through the instant Civil Revisions under Section 19 of Madhya
Pradesh Madhyastham Adhikaran Adhiniyam, 1983 (for short 'Section 19 of
the Act of 1983').
6. A perusal of Section 19 of the Act of 1983 would show that the power of
revision conferred upon the High Court while scrutinizing the award passed by
the Tribunal is very limited terms. For ready reference Sub-section 2 of
Section 19 of the Act of 1983 is reproduced herein under:
If it appears to the High Court that the Tribunal-
(a) has exercised a jurisdiction not vested in it by law; or
(b) has failed to exercise a jurisdiction so vested; or
(c) has acted in exercise of its jurisdiction illegally, or with material
irregularity; or
(d) has misconducted itself or the proceedings; or
(e) has made an award which is invalid or has been improperly
procured by any party to the proceedings.
the High Court may make such order in the case as it thinks fit.
7. A perusal of the above referred provision itself would very clearly reflect
that the scope of interference by the High Court under Section 19 of the Act of
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1983 is very limited. In other words the applicant would have to show that the
Tribunal has acted in excess of its jurisdiction or has committed a jurisdictional
illegality or has misconducted itself in the process of finally deciding the
matter. Though by way of this civil revisions, the applicant has challenged the
entire award passed by the Tribunal in as much as rejection of the claims of
the applicant except for claim No.1 in both the reference cases, during the
course of argument counsel for the applicant, conscious of the fact that the
scope of interference under Section 19 of the Act of 1983 being very limited,
restricted his argument only on one count that is as to whether the Tribunal
has committed an error of law in entertaining the counterclaim of the
respondents.
8. According to the counsel for the applicant, the Tribunal has committed
an error of law to the extent of entertaining the counterclaim of the
respondents in as much as the Tribunal failed to appreciate the fact that the
counterclaim raised by the respondents ought to have been rejected as the
claims raised in the counterclaim were never raised by the respondents at the
time of finalization of the final bill nor was it raised by the respondents at any
point of time against the applicant and that such a claim has for the first time
been raised by the respondents before the Tribunal much after the claim of the
applicant was instituted.
9. To buttress his submissions counsel for the applicant relied upon a
decision of the Supreme Court in the case of State of Goa v. Praveen
Enterprises reported in (2012) 12 SCC 581 wherein in paras-20 the Apex
Court held as under:
“20. As far as counterclaims are
concerned, there is no room for ambiguity in regard
to the relevant date for determining the limitation.
Section 3(2)(b) of the Limitation Act, 1963 provides
that in regard to a counterclaim in suits, the date on
which the counterclaim is made in court shall be
deemed to be the date of institution of the
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counterclaim. As the Limitation Act, 1963 is made
applicable to arbitrations, in the case of a
counterclaim by a respondent in an arbitral
proceeding, the date on which the counterclaim is
made before the arbitrator will be the date of
“institution” insofar as counterclaim is concerned.
There is, therefore, no need to provide a date of
“commencement” as in the case of claims of a
claimant. Section 21 of the Act is therefore not
relevant for counterclaims. There is however one
exception. Where the respondent against whom a
claim is made, had also made a claim against the
claimant and sought arbitration by serving a notice
to the claimant but subsequently raises that claim
as a counterclaim in the arbitration proceedings
initiated by the claimant, instead of filing a separate
application under Section 11 of the Act, the
limitation for such counterclaim should be
computed, as on the date of service of notice of
such claim on the claimant and not on the date of
filing of the counterclaim.”
10. The ratio laid down in the said case has been reiterated by the
Supreme Court in the case of Voltas Limited v. Rolta India Limited reported in
(2014) 4 SCC 516. Approving the said ratio the Supreme Court has
reiterated its position by again holding that if the counterclaim filed after the
prescribed period of limitation before the Arbitrator is saved in entirety solely
on the ground that a party had vaguely stated that it would be claiming
liquidated damages, it would not attract the conceptual exception carved out in
the case of Praveen Enterprises (supra).
11. According to the counsel for the applicant, the case in hand is squarely
covered by the judgment of the Supreme Court in the cases cited above.
According to the counsel for the applicant, by now, it is well settled that, for
tenability of a counterclaim, such counterclaim should be computed as on the
date of service of notice of such claim on the claimant. According to the
counsel for the applicant, the respondents ought to have first raised a claim
against the applicant pertaining to the claim raised in the counterclaim and
further also ought to have sought for arbitration by serving a notice to the
claimants and in the absence of the said two ingredients the counterclaim put
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forth by the respondents cannot be entertainable. In the instant case,
according to the counsel for the applicant, the State Govt. i.e. the respondents
had never raised any claim against the applicant with regard to the claim
made in the counterclaim. They neither had at any point of time asked the
applicant for settlement of dispute by way of an arbitration proceedings nor
had at any point of time served a notice to the applicant in this regard. Thus,
the counter claim raised by the respondents for the first time before the
Tribunal suffers from delay in latches and the Tribunal ought to have rejected
the counterclaim of the respondents in its entirety on the ground of limitation
itself. For these reasons, counsel for the applicant submits that the award
deserves to be set aside and modified to the extent of allowing the
counterclaim raised by the respondents and the same should be rejected.
12. Per contra, counsel for the State/respondents submitted that the
contention of the applicant is totally misconceived and is not sustainable. He
submitted that the claim of the respondents raised through the counterclaim
and also the award passed by the Tribunal do not deserve any interference as
it is a well reasoned award passed by the Tribunal and that there is no
illegality or infirmity in the award passed by the Tribunal. State counsel also
submitted that even if the award passed by the Tribunal under challenge is
tested on the test stone of the judgment referred to by the counsel for the
applicant, it would not call for any interference as the requirement of law as
laid down by the Hon'ble Supreme Court in the case of Praveen Enterprises
(Supra) has been complied with.
13. According to the State counsel, if the entire facts and circumstances of
the case and the documents relating to the case are taken into consideration,
it would clearly indicate that immediately after the contract was terminated, the
respondents had issued a notice to the applicant calling for surrendering the
plant and machinery which the applicant firm purchased upon obtaining
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advance from the respondents. On account of the fact that the contract itself
stood terminated on the ground of nonperformance of the contract the amount
which had been released as advance payment to the applicant having not
been recovered or adjusted, the applicant was called upon by the respondents
by way of notice and when the applicant failed to refund the amount and also
failed to produce back the plant and machinery purchased on the advance
payment received from the respondents, the respondents had taken steps for
recovering the said amount from the petitioners by way of a revenue recovery
proceeding. It was further contended that pending the revenue recovery
proceedings before the competent authority the applicant moved for redressal
of his grievance by way of arbitration and the matter was referred to the
Arbitration Tribunal. The applicant having raised the statement of claim before
the Arbitrator, the respondents also as an abandon caution raised a
counterclaim in spite of the revenue recovery proceedings having been
initiated and thus it cannot be said that the respondents has for the first time
raised the counterclaim before the Arbitrator and they have never raised any
claim against the applicant prior to the arbitration proceedings. For these
facts and reasons counsel for the respondents submitted that the instant Civil
Revisions being devoid of substance deserve to be rejected.
14. Having considered the rival contentions put forth by the counsel for
either side and also keeping in view the fact that the counsel for the applicant
has confined his submission to the counterclaim being awarded in favour of
the respondents by the arbitration Tribunal, this Court upholding the award of
the Tribunal on the other issues decided by the Tribunal ventures into deciding
the issue of allowing the counterclaim raised by the respondents.
15. Before going into the facts of the case it would be appropriate if we take
note of the decision rendered by the Supreme Court in the case of Praveen
Enterprises (supra). In the said case the Supreme Court has elaborately dealt
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with the issue as to whether the respondent in an arbitration proceeding is
precluded from making a counterclaim. In paragraphs 20, 32 and 41 it was
observed:
“20. …....There is however one exception.
Where the respondent against whom a claim is
made, had also made a claim against the claimant
and sought arbitration by serving a notice to the
claimant but subsequently raises that claim as a
counterclaim in the arbitration proceedings initiated
by the claimant, instead of filing a separate
application under Section 11 of the Act, the
limitation for such counterclaim should be
computed, as on the date of service of notice of
such claim on the claimant and not on the date of
filing of the counterclaim.”
“32. A counterclaim by a respondent
presupposes the pendency of proceedings relating
to the disputes raised by the claimant. The
respondent could no doubt raise a dispute (in
respect of the subject-matter of the counterclaim)
by issuing a notice seeking reference to arbitration
and follow it by an application under Section 11 of
the Act for appointment of arbitrator, instead of
raising a counterclaim in the pending arbitration
proceedings. The object of providing for
counterclaims is to avoid multiplicity of proceedings
and to avoid divergent findings. The position of a
respondent in an arbitration proceeding being
similar to that of a defendant in a suit, he has the
choice of raising the dispute by issuing a notice to
the claimant calling upon him to agree for reference
of his dispute to arbitration and then resort to an
independent arbitration proceeding or raise the
dispute by way of a counterclaim, in the pending
arbitration proceedings.”
“41. …..(b)Where the arbitration agreement
provides for referring all disputes between the
parties (whether without any exceptions or subject
to exceptions), the arbitrator will have jurisdiction to
entertain any counterclaim, even though it was not
raised at a stage earlier to the state of pleadings
before the arbitrator.”
16. The view taken in the case of Praveen Enterprises (supra) has been
further reiterated in a recent judgment of the Supreme Court in the case of
Voltas Limited v. Rolta India Limited reported in (2014) 4 SCC 516 wherein
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also the Supreme Court has dealt with the issue of raising of a counterclaim.
In paragraph-28 the Supreme Court holds as under:
“28. ...We are inclined to think so on two counts.
First, in Praveen Enterprises the Court has carved out
an exception and, while carving out an exception, has
clearly stated that the limitation for “such counterclaim”
should be computed as on the “date of service of notice”
of “such claim on the claimant” and not on the date of
final counterclaim. We are absolutely conscious tht a
judgment is not to be read as a statute but to understand
the correct ratio stated in the case it is necessary to
appreciate the repetitive use of the words. That apart, if
the counterclaim filed after the prescribed period of
limitation before the arbitrator is saved in entirety solely
on the ground that a party had vaguely stated that it
would be claiming liquidated damages, it would not
attract the conceptual exception carved out in Praveen
Enterprises. In fact, it would be contrary to the law laid
down not only in the said case, but also to the basic
principle that a time-barred claim cannot be asserted
after the prescribed period of limitation.”
17. If we take into consideration the ratio laid down by the Supreme Court
in the above referred two decisions with the facts of the present case, it would
reveal that the respondents in the instant case on account of the non
performance by the applicant had terminated the contract on 7/8-6-1984
which is Exhibit P-17 with the records. A perusal of Exhibit P-17 itself would
show that the respondents had in very categorical terms vide the same letter
had instructed the applicant firm that the plant and machinery purchased by
the applicant on receipt of advance should be brought back to the site
immediately as it was learnt by the respondents that the applicant had already
removed the same from the site. The said notice has also demanded the
refund of advance money of Rs.4.80 lakhs with interest which the applicant
had received for purchase of plant and machinery. Immediately after raising
the demand the applicant responded for settlement of the dispute by invoking
the arbitration clause as is evident from Exhibit P-18 and Exhibit P-19
submitted by the applicant to the Executive Engineer on 20.12.1984 and
22.01.1985 respectively. The respondents again vide letter dated 02.08.1984
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Exhibit D-12 and 31.01.1988 Exhibit D-20 before the Tribunal had asked the
applicant contractor for returning of the plant and machinery purchased from
the advance received from the respondents and also for refunding advance
payment of Rs.4.80 lakhs with interest. In response the applicant vide Exhibit
P-21 sought for resolving the dispute by way of arbitration proceedings.
Further Exhibit D-13 dated 29.06.1988 would also reflect that the office of the
respondents had already initiated revenue recovery proceedings for the
recoveries which were to be made from the applicant vide office memo dated
29.05.1988. It is then that the matter was referred for being adjudicated upon
before the Tribunal and the applicant submitted his claim before the Tribunal
on 31.12.1989 to which the respondents also submitted their response and in
the said response itself the respondents had sought for a direction from the
Tribunal for refund/adjust of advance amount paid to the applicant by the
respondents by way of a counterclaim.
18. Now, if we see the ratio laid down by the Supreme Court in the case of
State of Goa(supra), it would clearly reveal that in paragraph-32 the Supreme
Court clearly meant that the object of providing counterclaim is to avoid the
multiplicity of proceedings and divergent finding. In the same judgment, the
Supreme Court in paragraph-41(b) held that where the Arbitration agreement
provides for referring of disputes between the parties, the Arbitrator will have
the jurisdiction to entertain any counterclaim even though it was not raised
earlier before the Arbitrator. In the instant case what is evident from the
records is that, in fact, it was the respondents who had first raised demand for
refund of the advance money paid to the applicant and also for returning of the
plant and machinery purchased from the advance money obtained by the
applicant from the respondents to which the applicant had also responded
seeking for resolving the dispute by arbitration proceedings and down the line
when the arbitration proceedings started, the respondents also raised their
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demand payable to the respondents by the applicant and in order to avoid
multiplicity of litigation the respondents had filed the counterclaim along with
their response to the statement of the claims raised by the applicant. Under
the said given facts and circumstances of the case, it cannot be said that the
respondents are precluded from raising a counter claim nor for that matter can
it be held that the demand raised by the respondents was for the first time
being raised before the arbitration Tribunal alone. Rather it was raised as
early as on 1984 itself and since then there is a continuous correspondence
being made on either side. The respondents also had initiated revenue
recovery proceedings to which also the applicant responded in the office of
Tahsildar. Since the applicant had also raised certain demands, the revenue
recovery proceedings could not be given effect to and thereafter the matter
came up before the Arbitrator where either parties have raised their respective
claim and counterclaim.
19. For the foregoing reasons, this Court is of the opinion that the
counterclaim raised by the respondents cannot be said to be barred by
limitation nor can it be held that the respondents are precluded from raising
such dispute.
20. Thus, the issue raised by the applicant is decided in the negative and
both the Civil Revisions in its entirety being devoid of substance deserve to be
and are accordingly rejected.
Judge
Bhola