CAUSE TITLE:
B.k. consortium engineers private limited vs indian institute of management
DATE OF ORDER:
19th January 2023
JUDGE(S):
The Hon’ble Justice Shekhar B. Saraf
PARTIES:
Petitioner: Mr. Jayanta Kumar Mitra, Sr. Adv.
Mr. Dhruba Ghosh, Sr. Adv.
Mr. Sakya Sen, Adv.
Ms. Dola Adhikari, Adv.
Mr. Rohit Banerjee, Adv.
Mr. Sunil Gupta, Adv.
Mr. Altamash Alim, Adv.
Ms. Ajeyaa Choudhury, Adv
Respondent: Mr. Sabyasachi Chowdhury, Adv.
Mr. Bhaskar Mukherjee, Adv.
Ms. Nafisa Yasmin, Adv
SUBJECT:
The Hon’ble High Court Calcutta (hereinafter referred to as ‘High Court’ or ‘the Court’), stated that it is quite evident that the argument that is the basis of the current conflict is ex-facie time-barred and qualifies as deadwood. As a result, the arbitration reference is thus rejected.
IMPORTANT PROVISIONS:
Arbitration & Conciliation Act, 1996
- Section 11 - states the procedure of appointment of the arbitrator by the parties
- Section 21 - states the commencement of the arbitral proceedings.
Limitation Act 1963
- Section 9 - states the continuation of the time. No future impairment or incapacity to file a lawsuit or submit an application prevents the passage of time once it has started: The term of limitation for a lawsuit to collect the debt shall be extended while the administration is on-going if letter of administration to the property of a creditor have already been awarded to his debtor.
- Section 11 - states about the lawsuits arising from agreements made outside of the regions covered by the Act
BRIEF FACTS:
- On July 9th 2008 a tender was issued for residential civil work by the respondent. That tender was taken by one of the petitioner and the work order was circulated to the respective parties on 28th August 2008. Based on the contract the project needed to be finished by 31st August 2009 with the consideration amount of Rupees Thirty-Nine Page 3 of 54 Crores Three Lakhs Twenty Thousand One Hundred Eighty Five Only
- With time the respondent increased the value of the contract by adding more work which went up to Rupees Eighty Crores Twenty-Three Lakhs Seventy-Three Thousand Two Hundred Sixty Only and due to this some extension was requested by the petitioner on various grounds which was till 31st August 2014 and thus the work was completed. At last the wholesome bill was issued and was accepted by the petitioner and signed. However along with the acceptance the request for raise on price was issued and this was not the first time.
- After the final payment another notice for price escalation was issued by the respondent. Petitioner stated that according to contract clause escalation claim has not yet been settled therefore a request by the respondent for getting petitioner consent for the arbitration proceedings was initiated.
- Respondent denied the claims made by the petitioner regarding the price escalation and stated that basing on the terms of the contract there was acceptance from both the sides regarding the consideration amount and the final settlement. Therefore he is nowhere liable for any further payment.
- On 8th March 2021 petitioner invoked the arbitration under section 21 of the Act for the initiation of the arbitration proceedings.
- Therefore an application under Section 11 of the Arbitration & Conciliation Act, 1996 has been filed by the petitioner requesting for the appointment of a sole arbitrator to resolve the matter between the parties.
- The appointment process of the arbitrator was challenged which was provided in the contract, that also authorised the respondent to assign a sole arbitrator for dispute resolution between the parties.
QUESTIONS ROSE:
Whether the power to appointment the sole arbitrator is in accordance with the Act of 1996?
ARGUMENTS ADVANCED BY THE PETITIONER
- It was argued the work resumed was subjected to the right to price escalation and which was not denied by the respondent himself. Therefore the work continued assuming that there is assurity regarding price escalation. The petitioner suffered huge loss because of under pay based on 2008 rate therefore invoking the clause for price escalation was contended.
- A meeting was held by the respondent where the petitioner was asked to finish the work with the assurity of being given the price escalation. However about 14 months later the final bill was produced which did not include any such price raise which gave no other option than to accept the receiving.
- The Court may appoint the arbitrator since the appointment process outlined in the agreement is not legitimate under the law. The arbitration agreement's presence is undisputable; hence the condition of Section 11 that merely concerns the agreement's existence is met.
- Since Section 11(6A) forbids such an exercise, the Court is unable to consider the restriction of the core claims when exercising its Section 11 of the Act authority. Furthermore, because it involves both a legal and factual issue, restriction should only be resolved by the arbitrator.
- The respondent rejected its duty to pay in a letter dated 12.09.2017, and only then did the three-year statute of limitations begin to run. The parties had been in negotiations or mutual conversations before and this letter will constitute the "breaking point" as defined by the Geo Miller Case.
ARGUMENTS ADVANCED BY THE RESPONDENT
- It is argued that the said petition is not maintainable and should be dismissed. The purported claim is outside the bounds of the contract even if it is not apparent from the evidence that it is barred by limitation.
- The counsel pointed out that the respondent had not raised any objections to the petitioner's insertion of an arbitration provision, and that without such an opposition, this Court must send the case to arbitration, with the arbitrator being required to rule on any jurisdictional or other issues. Furthermore, in a letter dated April 10, 2021, the respondent accepted that the case might be submitted for arbitration and independently recommended an arbitrator.
- The petitioner acknowledged the final payment made on March 15, 2016, the date on which all statements under the contract were resolved as the "final settlement" of all claims made under the contract. Furthermore, the petitioner promised "not to submit any claim hereafter in this respect.
- Additionally, they reiterated their agreement in a letter dated March 17, 2016, and all they asked for was to be given consideration for "any relief in the manner of escalation against the contract.” Later, the disagreement was brought up as an addition to avoid this settlement on the pretext of "duress." The advocate strongly rejected claims that the respondent "compelled" the petitioner to approve the final bill in a certain manner or under any "compelling conditions."
- The attorney argued that making a simple claim of fraud, coercion, duress, or undue influence is insufficient and that the party making the allegation must first demonstrate that it is true by presenting the court with pertinent evidence.
ANALYSIS BY THE COURT:
- Regarding the limitation period the cause of action originated on March 11, 2016, the day the respondent released the final bill, and as a result, the statute of limitations began to run as of that day.
- The response sent out two letters acknowledging the final account, and as a result, they secured payments for both of them as well as a reimbursement of the remaining balance. In reality, the petitioner's letter of approval just states a "request" for more improvement.
- The petitioners' following demand letters include no reference of coercion or pressure, and no proof was ever shown to support the claim that they accepted the entire bill dated March 11, 2016, under duress or coercion.
- The respondent's letter from 2017 denying the petitioner's demands was only a restatement of its prior position and cannot be regarded as the impasse that ended discussion to provide a new limitation period. This reasoning made are misguided since in that instance, the final bill was never paid, and as a result, the rejection was used as the moment at which the statute of limitations began to run. The facts of the current instance make it easily distinct.
CONCLUSION
In the present case the breaking point occurred on the same day when the petitioner attempted to use arbitration and submitted their escalation arguments for the first time after receiving payment, retention funds, and the final contract certificate, the current application is time-barred.
Even though the respondent nominated an arbitrator in a letter dated April 10, 2021, that letter cannot be interpreted as acknowledging the petitioner's claim because it both denied the claim and was beyond the time period of appointing one.
Click here to download the original copy of the judgement
