IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 4TH DAY OF JANUARY, 2019 BEFORE THE HON’BLE MRS.JUSTICE S.SUJATHA M.F.A. No.6031/2010 [AA] BETWEEN :
UNION OF INDIA REP. BY GARRISON ENGINEER (MAINT) (AIR FORCE), JALAHALLI, BANGALORE-560013 ...APPELLANT (BY SRI B.P.PUTTASIDDAIAH, ADV.) AND :
1. M/s RAGHAVENDRA 1597, POST BOX No.2117, NAGAPPA BLOCK, BANGALORE-560013.
2. SHRI JITANDRA SINGH SOLE ARBITRATOR, C/O CHIEF ENGINEER (AIR FORCE) NO.2, DC AREA MES ROAD, YESHANTHPUR POST, BANGALORE-560022 …RESPONDENTS (BY SRI K.SHIVAJI RAO, ADV. FOR R-1;
VIDE COURT ORDER DATED 11.12.2014 NOTICE TO R-2 IS DISPENSED WITH.) THIS M.F.A. IS FILED UNDER SECTION 37(1)(a) OF ARBITRATION ACT, AGAINST THE ORDER DATED 21.12.2009 PASSED IN AC 17/1998 ON THE FILE OF VI ADDITIONAL CITY CIVIL JUDGE, BANGALORE, DISMISSING THE SUIT FILED UNDER SECTIONS 14 & 17 OF ARBITRATION ACT, PRAYING TO PASS JUDGEMENT AND DECREE IN TERMS OF THE AWARD DATED 23.04.1998 AND TO MAKE THE AWARD THE RULE OF THE COURT.
THIS M.F.A. COMING ON FOR FURTHER HEARING, THIS DAY, THE COURT DELIVERED THE FOLLOWING:
J U D G M E N T This appeal is filed by the Union of India challenging the judgment dated 21.12.2009 in A.C.No.17/1998 on the file of the VI Additional City Civil Judge, Bengaluru City ['Trial Court' for short].
2. The appellant issued a tender on 22.12.1986 for providing external services to married accommodation for 48 Airmen at Air Force Station at Jalahalli. The tender of the respondent No.1 was received on 23.01.1987 and the same was accepted on 12.02.1987. As per the terms and conditions of the agreement, the contractor-respondent No.1 was required to commence work on 05.03.1987 and complete the same on or before 04.09.1987. Since the contractor did not complete the work, time was extended upto 30.11.1988 at his request. However, the said work having not been completed, the appellant cancelled the contract on 15.05.1989 entrusting the balance work to the other agency on 17.03.1990. It is the contention of the appellant that the parties to the contract mutually agreed for amending the said agreement for incorporating certain modifications in the Arbitration Clause at para 6(b) on page No.27 of the Contract Agreement on 20.12.1993.
3. It transpires that the Chief Engineer (AF), Bengaluru appointed respondent No.2 as Arbitrator on 02.03.1996. Claims and counter claims were filed. Arbitrator entered appearance on 13.03.1996. The contractor remained absent despite providing sufficient opportunity. Hence, the Arbitrator rejected the claims of the contractor and partially allowed the claim No.1 of the appellant by its award dated 23.04.1998.
4. The said award was challenged by the contractor by filing Arbitration Suit in A.S.No.1/2000 whereas A.C.No.17/98 was filed by the appellant for making the award as a rule of the court and for passing the decree as per the award. Both the matters were clubbed together and a common order dated 30.06.2004 was passed by the Trial Court dismissing the A.S.No.1/2000 filed by the contractor and allowing the Arbitration Case No.17/1998 filed by the appellant herein and award was passed with future interest at the rate of 18% per annum.
5. Being aggrieved by the order dated 30.06.2004 passed in A.C.No.17/1998 and A.S.No.1/2000, the respondent preferred appeals before this Court by filing MFA No.733/2005 and MFA No.734/2005. The appeal in MFA No.734/2005 was dismissed on 07.11.2006. This Court by order dated 12.09.2008 was pleased to set aside the impugned order by allowing MFA No.733/2005 in part and remanding the matter to the Trial Court only for the purpose of determining question of limitation.
6. Subsequent to passing of the order dated 12.09.2008 passed in MFA No.733/2005, the Trial Court was pleased to issue notice to the parties and considering the arguments advanced on behalf of both the parties, dismissed the Arbitration Case No.17/1998 filed by the appellant on the ground that the disputes referred to by the appellant is barred by time. Being aggrieved by the same, the present appeal is filed.
7. The fulcrum of dispute revolves around the question of limitation inasmuch as the dispute referred to by the appellant to the arbitrator.
8. Learned counsel appearing for the appellant placing reliance on the amended contract agreement dated 20.12.1993 would submit that the appointment of arbitrator on 02.03.1996 was on the request made by the respondent No.1 who has not raised any objections before the Arbitrator. Among the eight claims made by the appellant, only claim No.1 was allowed partially, rejecting the claims of the contractor. As such, respondent No.1 is not entitled to raise objections regarding the aspect of limitation at this length of time. The common order of the trial Court dated 30.06.2004 was the subject matter of M.F.A.No.734/2005 which was dismissed rejecting the claim of the contractor even on the issue of the time barred claim raised. Inadvertently, the said order of this Court was not brought to the notice of this Court in the subsequent appeal proceedings [in M.F.A.No.733/2005], disposed of on 12.09.2008, which culminated in the order impugned herein on the remand made by this Court to the Trial Court for the purpose of determining the question of limitation.
9. Per contra, learned counsel appearing for respondent would submit that the arbitrator was appointed by the appellant on 02.03.1996 i.e., more than seven years after the termination of the contract on 15.05.1989. Three years period being prescribed under Article 137 of the Limitation Act, 1963 appointment of the arbitrator beyond the period of limitation is wholly unsustainable and the arbitral award passed thereon is not maintainable in law.
10. I have given my thoughtful consideration to the arguments advanced by the learned counsel for the parties and perused the material placed on record.
11. Before adverting to the question of limitation as contemplated under the provisions of the Limitation Act, 1963, it is beneficial to refer to the order of this Court dated 07.11.2006 passed in M.F.A.No.734/2005 and the same is extracted hereunder for ready reference:
“2. The award passed by the arbitrator dated 23.4.1998 in Arbitration Clause No.17/1998 for making the award as a rule of court and passed the decree as per the award is questioned in this appeal and the application filed by the appellant herein in AS No.1/2000 to set aside the award came to be dismissed.
3. The appellant’s grievance is that there was a delay in the commencement of arbitration proceedings and this fact was lost sight of by the trial court while considering the award passed by the arbitrator.
4. In the light of the submission made as above, I have carefully perused the order of the trial court and in particular page No.11 the trial court has observed thus:
“In the present case the respondent had not appeared before the Arbitrator to contest the claim and the Arbitrator has not specifically discussed this question in the Award. On the face of the Award if can not be said that, there is an error apparent on the face of the award to this effect. Even if a time barred claim is allowed by the Arbitrator, it cannot always be said that, the Arbitrator allowed claim contrary to the provisions of law. If the claim is time barred or could not have been awarded by the Arbitrator, the respondent should have appeared and taken an objection before him. And as no such objection was raised, the objection cannot be raised in this Court. As such, it cannot be said that, the Arbitrator has committed any misconduct or there is an error of law apparent on the face of the Award.”
5. Further, the trial court has observed at paragraphs 11 and 12 thus:
“11. Their Lordships further held “Exparte award is not liable to be set aside specially when the respondent has not shown any cause what to speak of sufficient cause for his not appearing before the Arbitrator.”
12. On perusal of the above provision it becomes clear that, when the contractor did not appear before the Arbitrator and did not take objections, now he cannot challenge the award and the said award is liable to be made as a rule of the court.”
The above observation goes to indicate that the appellant did not appear before the arbitrator nor took any objections whatsoever and therefore, the trial court was justified in dismissing the application filed to set aside the award of the arbitrator.”
12. It is not in dispute that the common order dated 30.06.2004 was the subject matter of both the M.F.A. Nos.733/2005 and 734/2005 which were disposed of on different dates. It is unfortunate that the order passed in M.F.A.No.734/2005 on 07.11.2006 was not brought to the notice of this Court while disposing of M.F.A.No.733/2005. The very contention raised by the contractor in as much as the delay in commencement of the Arbitration proceedings and the alleged time barred claim allowed by the Arbitrator was very well considered and held that the contractor did not appear before the Arbitrator nor took any objections whatsoever and therefore, the trial court was justified in dismissing the application filed to set aside the award of the Arbitrator. Accordingly, the appeal filed by the contractor came to be dismissed. In such circumstances, while determining the question of limitation, the observations made by this Court as aforesaid has to be kept in mind. The Trial Court had no opportunity to consider the order of this Court in M.F.A.No.734/2005 as none of the learned counsel appearing for the parties have brought to the notice of the trial court regarding the same. It is well settled law that any objection regarding the appointment of an Arbitrator has to be raised at the preliminary stage and not at the appellate stage. The contractor has neither appeared before the Arbitrator nor raised an objection in as much as appointment of the Arbitrator/barred claim.
13. No specific finding was given in M.F.A.No.733/2005 on the limitation aspect. The matter was remanded to the trial court only for the purpose of determining the question of limitation. In the circumstances, earlier order passed in M.F.A.No.734/2005 which has reached finality has a binding effect on the parties where the award passed by the Arbitrator is made as a rule of the court. On this ground alone, the order of the trial court requires to be set aside.
14. The other material documents placed on record by the appellant to emphasize that the Arbitrator was appointed at the instance of the contractor on 02.03.1996 would not be necessary to address the issue on hand for the reasons discussed in the preceding paragraphs. It is ex-facie apparent that the order impugned is contrary to the order of this Court in M.F.A.No.734/2005. Accordingly, the same cannot be sustained.
15. Hence, the following:
ORDER 1. The appeal is allowed.
2. The order dated 21.12.2009 passed in A.C.No.17/1998 on the file of the VI Additional City Civil Judge, Bangalore is set aside.
3. The award passed by the Arbitrator dated 23.04.1998 is confirmed and made as a rule of the Court.
Sd/- JUDGE PMR/NC