High Court · 2010

arose between the parties with regard to execution of the work covered by the said L.S.Agreement, the contractor filed O.P.No.35 of 1984 seeking appointment of an Arbitrator, which ended in dismissal, and against the said dismissal order, C.R.P.No.868 of 1991 was filed before this Court and this Court appointed Sri Justice K.Punnayya, retired judge of this Court, as sole Arbitrator. 5 . On passing the award by the Arbitrator on 29.07.1994, the contactor filed O.S.No.167 of 1994 under Section 17 of the Arbitration Act, 1940 (for short ‘the Act’) to make the award as rule of the Court. Whereas, the employer filed O.P.No. 40 of 1999 under Sections 30 and 33 of the Act to set aside the said award.

6. In O.P.No.40 of 1999, the learned Principal Senior Civil Judge, Tirupati, after going into the merits of the claim, on point No.1 - whether there are grounds to set aside the award dated 29.07.1994 held that the Arbitrator at length discussed from pages 6 to 24 of the award including the aspect that the time is not the essence of contract and that breach of contract was on behalf of the employer and awarded amount under various heads, and that it is not the case of the contractor that there is an error on the face of the award, and therefore, there is no necessity to set aside the award.

7. On point No.2-whether the petition is barred by limitation, it was held as under: “The docket proceedings dated 21.09.1999 are as follows: Issuance of notice u/s 14(2) is a mandatory requirement and mode of service of such a notice is immaterial……. (since the docket portion was torned, could not reproduced) contd.. (Secretary Government Karnataka another vs.V.Haribabu). In this case after the award is filed by the Arbitrator into the court, notice to the parties was not issued by this court. Unless the stage U/s.14 has been gone through the award can’t be made a rule of court as per Section 17 of the Act. Hence, issued notice regarding the filing of the award by the arbitrator, to both parties. Call on

24.9.99. The docket note by the staff dated 24.9.99 is that “notice issued to both parties in Dis.No.1513 dated 23.9.99””.

8. While perusing the said docket proceedings, the learned Judge further held that in the petition at paragraph 16 of page 5, the cause of action was shown to be arisen on 24.09.1999 i.e., when the Principal Senior Civil Judge, Tirupati ordered notice, but this fact is not correct in view of the aforesaid docket order dated 21.09.1999 and that the present O.P was filed on 26.10.1999 and the cause of action shows that the notice to the parties was served on 28.09.1999. The learned Judge presumed that after hearing both sides, the Court O.S.No.167/94 in the docket proceedings dated 21.09.199 ordered notice in the open court with the aforesaid order, and therefore, the O.P is barred by limitation, and accordingly dismissed the O.P.

9. Consequent to the dismissal of the above O.P, O.S. No.167 of 1994 was allowed making the award dated 29.07.1994 as rule of Court.

10. Questioning the said orders, the employer filed the present Civil Miscellaneous Appeal and Civil Revision Petition.

11. We have heard Sri M.Adinarayana Raju, learned counsel for the appellant-employer, and Sri P.Krishna Reddy, learned counsel appearing for the respondent-contractor. 1 2 . The learned counsel for the appellant taken us through the claims and clauses in the L.S.Agreement.

13. Clause 4 of the Articles of L.S.Agreement clearly discloses that time shall be considered as essence of the agreement; that the work has to be completed within 18 months from the date of handing over of the site; that the contractor has to show the progress as defined in the tabular statement and that “Rate of progress” below, subject nevertheless to the provisions for extension of time contained in clause 59 of the Standard Preliminary Specification. Clause 5 of the Articles of L.S.Agreement discloses that the said conditions shall be read and construed as forming part of this agreement and the parties will respectively abide by and submit themselves to the conditions and stipulations and perform the agreements on their parts, respectively. 1 4 . Clause 17 of the special conditions for outside works stipulates that the contractor shall make his own arrangement for the water required for the work. Similarly, clause 21 of the special conditions for outside works prescribes that the rates entered in contract schedule shall be for finished work. Constructions expenses involved in the building or other expenses incurred for seignorages, quarry fees, tools etc., and such contingent expenses shall not entitle the contractor to claim any extra in respect thereof. 1 5 . For claim No.6, where the contractor claimed an amount of Rs.14,865/- towards the digging of the bore well, only an amount of Rs.8,085/- was awarded, since as per clause 17 of the special conditions for outside works, it is the responsibility of the contractor to make his own arrangement for securing water for execution of the work. 1 6 . Preliminary Specification No.59 of the Andhra Pradesh Detailed Standard Specifications provides that the Contractor is entitled to extension of time for the delays caused, but he is not entitled to any compensation on account of delays or hindrances to the work from any cause whatsoever shall lie, except, as defined thereunder.

17. In view of the above, certain claims, which were awarded by the Arbitrator are prohibited as per Articles of L.S.Agreement, or Special conditions for outside work or Preliminary Specification No.59 of the Andhra Pradesh Detailed Standard Specifications, have to be considered by the Court below in detail while interpreting the clauses in the agreement. Since the Court below itself recorded that docket proceedings were made by the staff and recorded that notice to the parties was not issued by the Court after award is filed, the presumption drawn by the Court on the docket proceedings dated

21.09.1999 that his predecessor might have ordered notice after hearing both sides in O.S.No.167 of 1992 is contrary to the record maintained by the Court, as referred to above.

18. The Supreme Court in Oil and Natural Gas Corporation Ltd. V. M/s.Nippon Steel Corporation Ltd.,[1] on Point No.1 whether the High Court was justified in extending the principle of constructive notice to the facts of the present case ignoring the express stipulations of Section 14(2) of the Arbitration Act, 1940, while considering Article 119 of the Limitation Act in filing the application for setting aside the award, referred to the earlier judgments in Indian Rayon Corporation Ltd. Vs.Raunaq and Company Pvt. Ltd.[2] and Secretary to Govt. of Karnataka and Another v. Harishbabu[3] and held that though on

18.02.2002 the Registry notified the submission of the award in court by way of an office report, but the same cannot be treated to be in the nature of a notice. The noting made by the Registry in the office report merely brought to the notice of the Court, a copy was served upon the parties concerned. It is only thereafter it can be said that the Court directed issue of notice to the parties regarding filing of the award which has been sent by the Registry. The Registry on its own could not have issued a notice without a direction from the court in this regard. Therefore, there was no notice of filing of the award in the Court to the parties as contemplated in Article 119(b) of the Limitation Act, and accordingly held that the objections to the award were filed within the time and not barred by time, and therefore, allowed the appeal setting aside the order passed by the High Court affirming the judgment passed by the learned single Judge dismissing the arbitration petition.

19. Therefore, we are of the view that the lower Court is not justified in drawing presumption from the docket proceedings noted by the office that after the award is filed by the Arbitrator, notice to the parties was issued by the Court. Unless the stage U/s.14(2) has been gone through, the award cannot be made as a rule of Court as per Section 17 of the Act. Even assuming that 21.09.1999 is to be taken for the purpose of limitation for issuance of notice regarding filing of the award, the presence of the parties if any was through their counsel when the said order was passed after issuing notice. Therefore, no knowledge can be imputed to the parties about the filing of the award and the order passed by the Court about the issuance of the notice for filing of the award. In view of the same, the impugned orders passed by the Court below in dismissing the O.P. and making the award as rule of Court are set aside. The matters are remitted to the Court below to consider the same afresh with regard to the validity of the claims, if any prohibited by the clauses in the agreement and the Arbitrator committed any misconduct in ignoring those clauses in entertaining the claims and awarding the amounts, within a period of six months from the date of receipt of a copy of this order, after giving opportunity to both sides.

20. In the result, the Civil Miscellaneous Appeal and the Civil Revision Petition are allowed. There shall be no order as to costs. ________________________ JUSTICE A.GOPAL REDDY ______________________ JUSTICE G.V.SEETHAPATHY Date: 19.04.2010 [1] AIR 2007 SUPREME COURT 327 [2] (1988)4 SCC 31 [3] (1996) 5 SCC 400