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Uttam Singh Duggal and Co. (P) Ltd. Vs. Indian Oil Corporation Ltd. and anr. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberSuit No. 697-A of 1983
Judge
Reported in1987(1)ARBLR281(Delhi); ILR1985Delhi131
ActsIndian Arbitration Act - Sections 20 and 37(4)
AppellantUttam Singh Duggal and Co. (P) Ltd.
RespondentIndian Oil Corporation Ltd. and anr.
Advocates: S.L. Watel,; R.K. Watel and; V.K. Koura, Advs
Cases ReferredVulcan Insurance Co. v. Maharj Singh
Excerpt:
(i) section 20--agreement to refer disputes to arbitration only in respect of notified claims--claims not notified as prescribed to be deemed to have been waived--notified claims--what are--whether merely a step in proceeding to commence arbitration--letters written in ordinary course--whether 'disputes' to be referred to arbitration.;(ii) section 20 & 37(4)--existence or otherwise of dispute referable to arbitration only has to be considered at the stage of application for reference to arbitration, rest of the controversies are within the domain of the arbitrator--whether or not the application has been made within the time as specified in the agreement, cannot be gone into at this stage.;(iii) section 37(4)--the question of extension of time under--does not arise if it is asserted.....d.p. wadhawa, j.(1) this is a petition under s. 20 of the arbitration act (for short 'the act').(2) the petitioner, a contractor, centered into a contract with the indian oil corporation limited (for short 'the corporation), respondent no. 1, for construction of certain works at faridabad for the r & d centre of the corporation. respondent no. 2 is the head of the r&d; centre, faridabad. the contract combined an arbitration clause. before. proceed further it is better to set out the relevant clauses of the contract, between (he. parties touching on the arbitration. these are :-- (i)'1.0.23.0.'notified clai.m' shall mean a claim of the contractor notified in accordance with the provisions of clause 6.6.1.0. hereof.' (ii)'6.6.1.0. should the contractor consider that he is entitled to any.....
Judgment:

D.P. Wadhawa, J.

(1) This is a petition under S. 20 of the Arbitration Act (for short 'the Act').

(2) The petitioner, a contractor, centered into a contract with the Indian Oil Corporation Limited (for short 'the Corporation), respondent No. 1, for construction of certain works at Faridabad for the R & D Centre of the Corporation. Respondent No. 2 is the head of the R&D; Centre, Faridabad. The contract combined an arbitration clause. Before. proceed further it is better to set out the relevant clauses of the contract, between (he. parties touching on the arbitration. These are :--

(I)'1.0.23.0.'Notified Clai.m' shall mean a claim of the Contractor notified in accordance with the provisions of Clause 6.6.1.0. hereof.'

(II)'6.6.1.0. Should the contractor consider that he is entitled to any extra payment o,- compensation in respect of the works over and above the amount due in terms of the contrac as specified in. Clause6.3.1.0. hereof or should.the Contractor dispute the validity of any deductions made or threatened by the Corporation from any Running Account Bills or any payments due to him in terms of the Contract, the Contractor shall forthwith give notice in writing of his claim in this behalf to the Engineer-in-Charge and the Site Engineer within 10 (ten) days from the date of the issue of orders or instructions relative to any works for which the Contractor claims such additional payment or compensation, or on the happening of other event upon which the Contractor bases such claim, and such notice shall give full particulars of the nature of such claim, grounds on which it is based, and the amount cLamed. The Contractor shall not be entited to raise any dain.nor shall the Corporation anywise; be liable in respect of any claim by the Contractor unless notice of such claim shall have been given by the Contractor to the Engineer-in-Charge and the Site Engineer in the manner and within the time aforcsaid, and the Contractor shall be deemed to have waived any or all claims and all his rights in respect of any claim not. notified to the Engineer-in-Charge and the Site Engineer in writing in the manner and within the time aforesaid.'

(III)'6.6.3.0. Any or all claims of the Contractor notified in accordance with the provision of clause6.6.1.0. hereof as shall remain persist at the time of preparation of Final Bill by the Contractor shall be separately included in the Final Bill prepared by the Contractor in the form of a Statement of claims attached thereto, giving particulars of the nature of such claim, grounds on which it is based, and the amount claimed, and shall be supported by a copies of the notice(s) sent in respect thereof to the Engineer-in-Charge and Site Engineer under Clause6.6.1.0 hereof. In so far as such claim shall in any material particular be at variance with the claim notified by the Contractor within the provision Of 6.6.1.0 hereof, it shall be deemed to be a claim different from the notified claim with consequence in respect thereof indicated in Clause 6.6.1.0 hereof,and with consequences in respect of the notified claim as indicated in Clause 6.6.3.1 hereof.'

(IV)'6.6.3.1. Any and all notified claims not specifically reflected and included in the Final Bill in accordance with the provisions of Clause 6.6.3.0 hereof shall be deemed to have been waived by the contractor.and the Corporation shall have no liability in respect thereof and the Contractor shall not bo entitled to raise or include in the Final Bill any claim(s)other than a notified claim conforming in all respects in accordance with the provisions of Clause6.6.3.0 hereof.

'9.0.0.0.......any dispute or difference betweenthe parties hereto arising out of any notified claim of the. Contractor included in his final Bill in accordance with the provisions of Clause 6.6.3.0 hereof and/or arising out of any amount claimed by the Corporation (whether or not the amount claimed by the Corporation or any part thereof shall have been deducted from the Final Bill of the Contractor or any amount paid by the Corporation to the ..Contractor in respect of the work) shall be referred to arbitration by a Sole Arbitrator selected by the Contractor from a panel of three persons nominated by the Head, R&D; Centre.'

The arbitration clause was modified by Work OrderNo. 1 dated 3-12-1976 (item 13) as follows:-

'The Sole Arbitrator shall be selected by the Contractor out of a penal of seven persons, nominated by the Head, R and D Centre. All the seven persons so nominated shall be Engineers of standing.'

(3) The contract is dated 17-12-1976. The stipulated date for completion of the contract was 12-12-1978. However, the contract was completed on 1-7-1981. It is alleged that the delay in completion of the work under the contract was entirely due to the default on the part of the Corporation. By a letter dated 27-7-1981 (Ex. P-138), the contractor submitted its claims amounting to Rs. 31.55 lacs. These claim were specified under9 different items, and pertained to (1) cost difference on materials purchased after 12-12-1978 (Rs. 2.70 lacs); (2) escalation on electrical goods (Rs. 1.50 lacs); (3) escalation on sanitary goods etc. (Rs. O.75 lac); (4) extra cost on trade items executed beyond 25 percent variation (Rs. 1.85 lacs): (5) under utilisation of labour etc. due to delay in supply of drawing (Rs. 7.50lacs); (6) additional expenditure incurred on office establishmentetc. after 12-12-1978 (Rs. 11.00 lacs): (7) loss suffered on account of interest recovered by the Corporation on Mobilization Advance after 12-12-1978 (Rs. 3.00 lacs); (8) loss suffered on account of natural calamity being collapse of centering and shuttering of overhead tank due to squall on 16-6-1979 (Rs. 1.75lacs); and (9) other miscellaneous losses (Rs. 1.50 lacs).

(4) The contractor submitted the final bill for the work executed under the contract with letters dated 22-12-19,SI (in respect of civil and mechanical works); dated 7-1-1982 (in respect of extra items); and dated 16-3-1982 (in respect of electricalworlds).

(5) With letter dated 22-12-1981 with which the contractors final bill in respect of civil and mechanical works was sent, theA contractor also sent its claims amounting to Rs. 33.25 lacs. Thesis is stated, was as per requirement of clause 6.6.3.0. the excess in the claims now submitted with those submitted with letter dated 27-7-1981 was on account of items pertaining to extra cost on trade items executed beyond 25 per cent variation which in the earlier claim amounted to Rs. 1.85 lacs while in the final claim it was Rs. 3.55 lacs.

(6) By letter dated 28-12-1981 of the Corporation, the contractor was informed that

'None of the claims now raised by you have been notified within the provisions of Clause 6.6.1.0 of the General Conditions of Contract, and that, thereforee, the Corporation cannot be liable 'in respect of any such claims'.

This letter was in reply to letter dated 27-7-1981 of the contractor.

(7) Thereafter, it appears, there was further correspondence between the parties on the question of appointment of the arbitrator. The final bill of the contractor with which it had appended its claims for settlement was decided on 1-3-1983. the final bill was, however, signed by the contractor under protest.Another notice dated 26-4-1983 was sent to the Corporation by the contractor again seeking the panel of names from amongst whom the contractor was to select an arbitrator. Since there was no response from the Corporation, the present petition wasinstituted.

(8) Along with the petition, the contractor also filed an application under S. 37(4) of the Act, it being is No. 2210183. This sub-section is us follows :-

'(4)Where the terms of an agreement to refer future differences to arbitration provide that any claims to which the agreement applies shall be barred unless notice to appoint an arbitrator is given or an arbitrator is appointed or some other step to convene arbitration proceedings is taken within a time fixed by the agreement, and a difference arises to which the agreement applies, the Court, if it is of opinion that in the circumstances of the case undue hard ship would otherwise be caused, and notwithstanding that the time so fixed has expired, may on suchterms, if any, as the justice of the case may require,extend the time for such period as it thinks proper.'

It is prayed in this application that in case the court comes to the conclusion that 10 days period of notice ax envisaged by clause 6.6.1.0 was applicable in respect of any of the claimsof the contractor or that there has been delay in lodging any of its claims, time be extended for such period on such terms as the court deems just and proper to enable the reference of the subject disputes to arbitration in terms of arbitration agreement between the parties. .

(9) The case of the Corporation is quite simple. In fact, its case is what it said in its reply dated 28-12-1981 (Ex. P-139)to, the letter dated 27-7-1981 of the contractor. The Corpora corporation denied that the contractor submitted any claims to it inaccordance with the provisions of clause 6.6.1.0 or that the contractor submitted any notified claim(s) with its final billing accordance with the provisions of clause 6.6.3.0. The Corporation also referred to the difference of amounts in the two claims of the contractor : one submitted along with letter dated27-7-1981 and the other with the final bill. The contractor in its petition had also referred to its letter dated 12-2-1982which, according to the contractor, was a notice to the Corporation as contemplated by S. 37(3) of- the Act This the Corporation denied. In this letter the contractor had stated that in case it did not receive any positive response from the Corporation, it would seek redress through arbitration. To theA application under S. 37(4) of the Act of the contractor, The Corporation raised the following preliminary objections :-

'The application is misconceived and is not maintainable since Section 37(4) of the Arbitration Act is not applicable to the present case, in as much as the arbitration agreement does not apply to the claims referred to in the Petition filed under Section 20 of the Indian Arbitration Act or to any of them, nor does there exist any term in the arbitration agreement that any claim to which the agreement applies shall be barred unless notice to appoint an arbitrator is given or an arbitrator is appointed or some other step to commence arbitration proceedings is taken within a time fixed.'

It was said that the court had no jurisdiction to refer to arbitration any claims which are not notified claims included in the final bill.

(10) On the pleas thus raised the following issues were framed :-

1.Is the claim within the scope of the arbitration agreement ?2. If so, if such a claim is covered .by the arbitration agreement ?3. If issues 1 and 2 are decided against the petitioners, then are the petitioners entitled to extension of time under Section 37(4) of the Arbitration Act?4. Relief.

Parties have led evidence by means of affidavits. -

(11) Mr. Watel had various submissions to make. strongly relying on a decision of the English Court of Appeal in Jedranska Slobodna v. Oleagine Sa [(1983)3 Ah Er 602] (1).Mr. Watel submitted that notice contemplated in the aforesaid clause 6.6.1.0 was merely a step to commence arbitration proceedings. If so, he submitted that the case fell within the provisions of S. 37(4) of the Act if it is held that no notice as required under this clause was given. According to the contractor, the claims were basically because of delay in completion of the contract which delay was caused by the Corporations the relevant drawings were not given to the contractor. It was submitted that when it is said that the claim of the contractor is not a notified claim as defined in clause 1.0.23.0, it merely means that notice of the claim was not given. To sumup, Mr. Watel submitted, in order to bring his case within the purview of S. 37(4) of the Act, that the claims were of recurring type and could not be quantified till the contract was completed; these arose out of the default committed by the Corporation and thereforee the Corporation would know the consequences; the work was completed and accepted by the Corporation without demur; and if the claims are held to have extinguished the contractor could not go to the court and taking into account the amounts involved there will be undue hardship caused to the contractor. It was asserted that notice of breach which was given by the contractor to the Corporation though without specifying the amount would itself make theclaim a notified claim. Reliance was placed on a decision of the Supreme Court in Sterling General Insurance Co. Ltd. v.Planters Airways Pvt. Ltd. : [1975]3SCR136 , wherein it was held that in interpreting S. 37(4) of the Act the court has to take liberal view of the meaning of the words 'underhardship'. It was said 'undue' must mean something which is not merited by the conduct of the claimant, or is very much disproportionate to it. It was then held that the court mistake all the relevant circumstances of the case into consideration. Reliance was also placed on a decision of the Calcutta 'High Court in the Cotton Corporation of India Ltd. The Oriental Fire & General Insurance.Co. Ltd. : AIR1984Cal355 , where the court took into account the amount involved in the dispute as one of the grounds while extending time under S. 37 of the Act.

(12) Anticipating the argument of the Corporation that arbitration agreement would apply only to that dispute which fell within the definition of a 'notified claim', Mr. Watcl submitted that the arbitration agreement would include within its compass any difference or dispute between the parties provided that(a) such dispute has been notified within ten days of the date of occurrence, and (b) the same is included separately in the final bill. That such an interpretation should be given to the arbitration agreement in the present case, Mr. Watel relied upon a decision of the Supreme Court in Union of India v.D. R. Revri & Co. : [1977]1SCR483 , wherein the Supreme Court observed as under :-

'It must be remembered that a contract is a commercial document between the parties and it must be interpreted in such a manner as to give efficacy to the contract rather than to invalidate it. It.would not be right while interpreting a contract,entered into between two lay parties, to apply strict rules of construction which are ordinarily applicable to a conveyance and other formal documents. The meaning of such a contract must be gathered by adopting a commonsense approach and it must not be allowed to be thwarted by a narrow pedantic and legalistic interpretation.'

(13) Mr. V. N. Koura, learned counsel for the Corporation,submitted that the arbitration agreement in the present case did not cover all disputes between the parties. According to him,the dispute for the purpose of the, arbitration agreement wouldnot merely be the notified claims but only those notified claims which are included in the final bill. Even a variation in the notified claim would be a different claim. According to Mr.Koura, the present petition under S. 20 of the Act was not maintainable inasmuch as no difference between the parties had arisen to which the arbitration agreement applied and further question as to whether time should be extended under S. 37 of the Act would not be relevant Mr. Koura further submitted that in any case the court would not have jurisdiction to extend time for giving notice in writing of the claim of the contractor under clause 6.6.1.0 and further that this clause does not merely stipulate a period of ten days but other conditions as well like giving of full particulars of the nature of theclaim, grounds on which it is based and the amount claimed and is to be given to a particular authority. With reference to various letters written by the contractor prior to the letter of 27-7-1981, Mr. Koura submitted that none of these lettersmet the requirements of clause 6.6.1.0. He said that these letters could at best be taken as mere hints by the contractor of some possible claim, but these would certainly not be taken as substitute for a notified claim as required under the aforesaid clause. Referring to the letter of 27-7-1981 Mr. Kour asubmitted that even this did not meet the requirement of theclause. It was not addressed to the Engineer-in-charge/Site Engineer within ten days and also did not give any particular of the alleged claims and at best it contained heads of various claims and again this was no compliance with the provisions of the clause. It was stated by the Corporation that this cause was agreed to so as to prevent the contractor from raising any general claims at the end of the works when the claims could neither be properly verified nor properly assessed and that the object was to confine the contractor

'Only to those claims of which there could be a contemporaneous verification of the factors involved and the facts and figures given and to exclude general claims and assessments subsequently made'

It way argued that if a particular drawing had not been furnished by the Corporation in time and as a result thereof the contractor incurred any wasteful or additional expenditure or damage he could have notified the Engineer-in-charge and the Site Engineer of the delay in furnishing of the drawing by the Corporation, with the details of personnel and equipment etc. renderedidle, and the costs, charges and /or, damages etc. incurred as a result thereof at least within ten days of the receipt of thedrawing. It was also submitted that before all these clausesin the agreement were agreed to, the contractor had desired that the arbitration clause should apply to all the disputes and differences arising under the contract, but this was not agreedto. Only change agreed to was that instead of three there should be seven names from which the contractor was to select an arbitrator and clause 9.0.0.0 was amended accordingly. Mr.Koura referred to a decision of the English Court of Appeal in Babanaft International v. Avant Petroleum (1982) 3 AllER 244 as being fully applicable to the present case. I may note here that this judgment was distinguished in the decision of the Court of Appeal cited by Mr. Watel. Thus,according to Mr. Koura, neither S. 20 nor S. 37 of the Actapplied.

(14) Under S. 20 of the Act, I have to see if any difference has arisen to which the arbitration agreement, as contained in clause 9.0.0.0 applied and if so whether I should extend the time under S. 37(4) of the Act, in case I wave the time-bar limit.

(15) The first limb of argument of Mr. Watel is that he complied with the requirements of clause 6.6.1.0 and, if so, in that case, as to whether the claim was barred by limitation or not was to be decided by the arbitrator, and he refers to a decision of a Full Bench of this Court in Ved Prakash v Union of India : AIR1984Delhi325 which approved a decision of the Division Bench in Jai Chand Bhasin v. Union of India : AIR1983Delhi508 . In Ved Parkash's case the petitioner by his letter dated 29-6-1981 asked the respondent to appoint an arbitrator. The Chief Engineer refused to males theappointment. The reason he gave was that the petitioner had made the request for appointment of an arbitrator after the expiry of 90 days and it was a term of the clause that such a request should be made within 90 days, otherwise the,Government shall be discharged and released of all liabilities and all claims would be deemed to have waived. Raying on a Division Bench decision in Jai Chand Bhasin (supra), the court held that this question falls within the province of the arbitrator to whom the disputes shall be referred. Whether the demand or arbitration has been made within the stated time and whether the claims should be deemed to have been waived in terms of the clause is essentially a question for the arbitrator to decide. The court is not concerned with it at this stage. The court has only to see that there are disputes and all those disputes ace to be referred to arbitration as per agreement between the parties and the arbitrator can decide those questions.

(16) In Jai Chand Bhasin (supra), the court held that in the aforesaid circumstances, S. 37 of the Act had no applicability. When there is no admission by the applicant/contractor in his application under S. 20 of the Act that the demand for arbitration in respect of his claim is beyond the period stated in the arbitration agreement, the question of invoking S. 37 is premature and does not arise. At the stage of the application under S. 20 the court is only to see that there are disputes and'those disputes are to be referred to arbitration as per agreement between the parties and the arbitrator can decide those questions. The court is not concerned with the question whether the claim of the party to the arbitration agreement is barred bytime. That question falls within the province of the arbitrator to whom the dispute is referred. The court was further of the view that S. 37 bears close resemblance to S: 28 of the Act.Just as the court has power under S. 28 to enlarge the time for making the award, similarly S. 37(4) empowers the court to extend the time for giving notice for appointing can arbitrator145in respect of any claim beyond the period of 90 days in stated circumstances of undue hardship. It was asserted that. at the stage of an application under S. 20 when the applicant maintains that his claim is within time invocation of S. 37(4) is notattracted.

(17) The second limb of the argument of Mr. Watel is that if the court finds that the claim of the contractor is barred as no notice to appoint an arbitrator was given within time prescribed or that an arbitrator was not so appointed or some other steps to commence arbitration proceeding were not taken, then the court should extend time on the facts and circumstances of the case. This argument, I am afraid, could only be advanced if the contractor admitted specifically that its claim was so barred. Otherwise, in view of the aforesaid two decisions of thiscourt, I cannot possibly go into this question as to whether theclaim of the contractor is barred by time or not. There has to be a clear admission of the contractor to that effect.

(18) Analysing the clause in the case it has first to be seen if there, is a dispute to which the arbitration clause applies. So,the question of existence of dispute is to be seen first. that dispute has to be raised inaccordance with the provision of the agreement to attract the applicability of the arbitration clause.If no such dispute exists, the arbitration clause is not applicable and in fact there would be no arbitration agreement.In fact, if reference is made to the arbitration clause the present case, no time limit as such is prescribed for the appointment of the arbitratior. As I see clause 6.6.1.0exists independently of clause 9.0.0.0. Under clause 6.6.1.0,the contractor shall forthwith give notice in writing of his claim to the Engineer-in-charge and the Site Engineer within ten days from the date of issue of order of instructions relative to any works for which the contractor claims such additional payment or compensation, or on the happening of other event upon which the contractor bases such claim; (ii) such notice shall give full particulars of the nature of such claims; (iii) grounds on which it is based; and (iv) the amount claimed. The contractor is debarred from raising any claim unless notice of such claim has been given in the manner and within the time prescribed, otherwise the contractor 'shall be deemed to have waived any or all claims and all his rights in respect of any claim not notified to the Engineer-in-charge and the Site Engineer in writing in the manner and within the time aforesaid'. under clause 6.6.3.0 if any of the claims which has been notified inaccordance with clause 6.6.1.0 still remains/persists at the time of preparation of final bill, the contractor is to specify the same in the form of a statement of claim attached to the final bill,again giving the particulars of the nature of the claims, grounds on which the claims are based and the amount claimed and this again is to be supported by copy of the notice sent in respect.thereof to the Engineer-in-charge and Site Engineer. It is specifically mentioned in clause 6.6.3.0 that if the claim attached with the final bill be at variance with the claim notified under the provisions of clause 6.6.1.0, it shall be deemed to be a claim different from the notified claim with consequence that it shall stand waived as given in clause 6.6.1.0. However,under clause 6.6.3.1. any claim notified under clause 6.6.1.0which is not calculated in the final bill stands waived., Thus.the parties agreed that before any claim/dispute could be subject matter of arbitration, certain formalities had to be goneinto. Clause 9.0.0.0 which deals with arbitration applies only to disputes and differences arising out of a notified claim included in the final bill of the contractor. As noted above, there is no time limit prescribed in clause 9.0.0.0. In these circumstances.it is thereforee difficult to see as to how the provisions of S. 37(4) would apply to the requirements of clause 6.6.1.0, assuming that the disputes in the present case are (1) covered under clause9.0.0:0, and (2) that the contractor did take steps to commence arbitration proceedings within the time fixed by 'the arbitration agreement. Mr. Watel's argument is that notified claim is nothing but a claim in writing to the Corporation within ten days of the date of occurrence and this claim is to be included separately in the final bill. According to him clauses 6.6.1.0, 6.6.3.0 and9.0.0.0 are inextricably interlinked and, thereforee, the notified claim is merely 'some other steps to commence arbitration proceedings' as envisaged in S. 37(4) of the Act.

(19) Before referring to the decisions referred to by counsel for the parties it would be appropriate to discuss the basics involved in a case like the present one. Normally, in commercial contracts one comes across a provision requiring certain formalities to be performed within a stipulated time. ln default the arbitration is barred. In shipping contracts there is a clause known as the 'centurion' arbitration clause which would be an ideal example. This clause reads as follows :-

'............any claim must be made in writing andclaimants' arbitrator appointed within three months of final discharge, and where this provision is not complied with the claim shall be deemed to be waived and absolutely barred.... ....'.

Lord Denning Mr in Agro Company of Canada v. Richmond Shipping Ltd. (1973 .1 LlRep. 392 expressed the view that the courts now appears to regard a contractual time limit as a positively beneficial feature of a commercial contrAct the objects of such a clause are, it has been stated-(i) to provide some limit to the uncertainties and expense of arbitration and litigation; (ii) to facilitate the obtaining of material evidences and (iii) to facilitate the settling of accounts for each transaction as and when they fall due. The English courts have repeatedly upheld the three months' time limit fixed by the centurion clause and have even enforced shorter periods than this,though clauses of this type are held to be construed strictly anda claim will not be barred by lapse of time unless the provision dearly applies to the claim in question. A distinction has to be made where a clause in the contract extinguishes the claim but that would not bar the right to refer the claim to arbitration. The result would simply be that when the arbitrator makes his award it would be to the effect that claim fails Then there is a clause which bars the right to arbitration but does not defeat the claim. The only effect of failure to comply with the time limit is that the enforcement cannot be effected by means of an arbitration. If the claimant wishes to assert insights he must file a civil suit.

(20) In the Law and Practice of Commercial Arbitration in England by Sir Mustill and Boyd, the learned authors, commen ting upon the above two types of lime barring provisions, observed as under :-

These two different types of time-barring provision may sometimes be combined in a single clause failure to comply with the limits fixed by the clause destroys both the claim itself, and the arbitrator's right to adjudicate upon it.ln many instances, the distinction between these two species of, clause gives rise. to no difficulty, since it is common for the clause itself to state explicitly that failure to perform the required formality within the time limit will have the effect of barring theclaim. Thus, the clause may provide that in default of compliance 'the claim shall be deemed to be waived and absolutely barred' or that 'all claims shall be deemed to be waived'. Rather less specific, bat none the less sufficiently clear, ale those clauses which stipulate that the formality to be performed within the time limit is the giving of a notice of claim,not (as in the case of some clauses) the commencement of an an arbitration Here. there is no need to read the clause as having any effect on the party'sright to arbitrate; if the clause stipulates that notice of claim must be given within a certain number ofdays, then the obvious interpretation is that if the notice is rot so given, the claim is lost.'

(Pages 168-169, 1982 Edn.)

(21) Commenting on the proviSions of S. 27 of the EngliSh.Arbitration Act, which is almost similar to S. 37(4) of the Indian Arbitration Act, the learned authors said:-

'It will be observed that the section only applies in terms to those agreements which provide that in default of timely compliance with the specified formalities any claims to which the agreement applies shall bebarred'. But relief under the section can he granted whether the: effect of the clause is to bar the claim,or merely to bar the right to have the claim decided in an arbitration. Nor is the word 'claims' limited to causes of action it applies to any claim to have an issue decided by arbitration, The application of the .section, is also limited to those agreements where the formalities to be. completed within the time limit consist either of the giving of notice to appoint-an-.arbitrator, or the appointment of art arbitrator, or some other step to commence arbitration proceedings. The section has no application to limitation provisions under which the step to be taken is the giving of a notice of claim.'

(pages 176-177).

(22) In the case reported as Jedranska Slobodna v. OleagineSA (1983) 3 All Er 602 the chartered vessel arrived at the port on 1-5-1980 and waited for discharge until 7-9-1980. Dw charge was finally completed on 15-11-1980. The time for the commence merit of arbitration expired on 15-2-1981., Which was.under the arbitration clause which read as under:--

All disputes from time to time arising ou t of this contract shall,.............. be referred-to the final arbitrament. ............... Any claim must be made in writing and claimants' Arbitrator inputted within three months of final discharge and where this vision n6t complied with the claim shafl6q deemed to be waived and absolutely baired.........,..'.

No clam in writing was made nor the ship owners' arbitrator appointed within that period and thd question that arose was that whether the court has jurisdiction under S. 27 of the English Arbitration Act to extend the time, and if it has jurisdiction whether it should extend the time. This section reads as follows :-

'Power of court to extend time for commencing arbitration proceedings. where the tenafly of an agreement to refer future disputes to arbitration provide that any claims to which the agreement applies shall be barred unless notice to appoint an imitator is given or an arbitrator is appointed Or some other step to commence arbitration proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the High Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired.may, on such terms, if any, as the justice of the case may require, but without prejudice to the pro-visions of any enactment limiting the time fof the commencement of arbitration proceedings, extend the time for such period as it thinks proper.'

The court held that whole of the clause related to arbitration The first sentence required claims to be referred to arbitrati of the second sentence dealt with the requirement that the clai)is to be in writing and the arbitrator appointed in the l''mheperiod and the consequences if this does not occur. The Cotiih held 'the) use of the singular 'where this provision is not combed with' is a clear indication that the notice requirement is step to commence arbitration proceedings'.' The court observe

'We agree with Lloyd J that the appointment of the arbitrate and the making of the claim in writing in the arbitration clause go hand in hand, and that both provisions are so inextricably bound together that they should be regarded as part of the same process of commencing arbitration procedeings'.

This judgment distinguished the three Judges decision of the Court of Appeal(Babanaft International v. Avant Petroleum (1982) 3 All ER244 referred to by Mr. Koura. In this latter case there were two clauses in the agreement. The arbitration clause provided that any or all differences and disputes of whatsoever nature arising out of the Charterparty be pui to arbitration in the City ofLondon. It contained no time limit for commencing arbitrationproceedings. There was another clause being clause M2 which was separate from the arbitration clause and which read as follows:-

'Charterers shall be discharged and released from all liability in respect of any claims. owners may have under this Charter Party * * * * * unless a claim has been presented to Charterers in writing with all available supporting documents, within 90 (ninety)days from completion of discharge of the cargo concerned under this Charter Party.'

It was held in this case that making of a claim does not by itself commence the arbitration proceedings or necessarily lead to their being commenced. The claim may be conceded or settled amicably. Donaldson, Lj observed,

'In essence S. 27 empowers the court to extend the time fixed for giving notice to appoint an arbitrator, appointing an arbitrator or taking some other step to commence arbitration proceedings if doing so wilt prevent a claim becoming time-barred. It does not empower the court to extend any other time limits'

This judgment of the Court of Appeal was distinguished in the decision cited by Mr. Watel on the ground that the arbitration clause and'clause M2 were separate distinct and unrelated.

(23) I am of the view that of the judgment of the Court of Appeal in.Babanaft .International v. Avant Petroleum(:supra)refeerred to by Mr. Koura is more apt in the present case. The court cannot extend the time for making a claim under clause6.6.1.0 under S. 37(4) of the Act. Until a claim is made in accordance with this clause, there could not be any dispute which could be referred to arbitration under clause 9.0.0.0.

(24) Mr. Watel made a distinction that in any ease notices as regards claim Nos.4, 8 and 9 were sent. He referred to various letters addressed by the contractor to the Corporation in this regard. I do not think any of these letters fulfills the requirements of clause 6.6.1.0. These letters were written asa matter of course without making any claim. In the letters it is complained that : drawings have not been given and 'Incase of any further delay all damages and idle labour charges shall be borne by the Indian Oil Corporation' (Ex. P-3 dated9-3-1977); 'The labour force i? not idle at present but will become idle if further drawings are not received' (Ex. P-4 dated12-3-1977); 'Therefore, till the full set of drawings are available to us the interest charge may kindly be waived' (Ex. P-5dated 19-3-1977); 'In absence of drawings we are incurring unnecessary expenditure of Rs. 2,0001- per day on account of idle labour, hire charges for machinery, staff and other miscellaneous expenses etc., which is a great loss to the company. It is requested that the drawings may be arrange and issued within 24 hours on. receipt of this letter, failing which Rs. 2,000.00per day.will be claimed on account of suspension of work and hampering of progress clue to failure of the department to supply the requisite details drawings' (Ex. P-6 dated 22-3-1977): -'We,therefore, request you. to kindly send us complete drawings along with necessary, working details to enable us to proceed with the work. It is needless to point out than we have already suffered heavy financial loss due to non-availability of drawings'(Exi.P-8 dated 1-4-1977): 'Our skilled labourers are sitting idle and incurring heavy expenses. It is also noted that monsoon is approaching soon' (Ex. P-IO dated 15-4-1977) 'We would like to bring to your notice hat until such drawings us required by us are not given to us in full 'sets it is becoming difficult to expedite the work and all loss borne by us on this account shall be at the cost of the department which shall be fully liable for such charges. We do not want any piecemeal delivery of the drawings as it is not possible to plan the procurement of materials or schedule the work to be executed in a planned and phased banner' (Ex. P-1.1dated 3-5-1977); and 'Any delay in getting the necessary details shall cause unnecessary loss to us which shall be to your account' (Ex. P-13 dated 8-6-1977). The above are some of the examples of the 'notices' claimed by the contractor to have been sent. Mr. Watel wants me to rule that these fulfill the requirements of a 'notified claim' under clause 6.6.1.0. . I am afraid I cannot agree. The clause is quite simple and unambiguous and I need not refer to any rule of interpretation to construe the clause.

(25) As regards the contention that it was not possible to comply with the requirements of clause 6.6.1.0 in terms in case of continuing breach, I have not been able to appreciate this argument as no particular instance of a continuing breach was brought to my notice. If the argument is relating to non-supply of drawings in time, the least the contractor could do was to give his claim within ten days of the receipt of the drawing and not wait till the whole contract was complete. No correlation has been shown as to why a notified claim could not be preferred within the period when the drawings were received and the whole contract was completed, if the argument of continuingbreach, is to be accepted.

(26) I think it is too late in the day to contend that clause6.6.1.0 is void merely because it not only bars the claims but the remedy as well : see Vulcan Insurance Co. v. Maharj Singh : [1976]2SCR62 where the Supreme Court held the following clause in an insurance policy to be valid :

'In no case whatever shall the Company be liable for any loss or damage after the expiration of twelvemonths from the happening of the loss or damage unless the claim is the subject of pending action orarbitration.'

(27) In any case, in the instant case the issue pertained to the habitability of the notified claim under clause 9.0.0.0. What Matters are agreed to be referred to arbitration depend upon the agreement between the parties. It, thereforee, appears to me that clause 9.0.0.0 would apply only to a notified claim. After taking this view, I have to hold that the present petition under S. 20 of the Act is not maintainable. Perhaps, it was not necessary for me to analyze the provisions of S. 37(4) of the Act but the arguments were intermixed and it was difficult to extricate oneself from both examining the provisions of S. 20 vis-a-vis S. 37(4) of the Act particularly when the submission was that a notified claim was merely a step in proceeding to commence arbitration.

(28) In view of the above discussion, it has to be held that the claim in the present case is not covered by the arbitration agreement or that it is not within the scope of the arbitration agreement. It has also to be held that the petitioner is not entitled to any extension of time under S. 37(4) of the Act.All these issues are thus held m favor or the respondent Corporation and against the petitioner contractor.

(29) The suit is accordingly dismissed but with no roster asto costs.


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