Madrasdated High Court · 2025

O.P.No.1007 of 2015Prayer: Original Petition filed under Section 34(2)(A)(IV) & (V) and (B)(2) r/w. Section 16(6) of the Arbitration and Conciliation Act, 1996, to set aside the arbitration award dated 27.08.2015 passed by the second respondent which had arisen out of the dispute between the petitioner and the first respondent in Contract dated 11.08.2000 and direct the first respondent to pay the costs of the petition. For Petitioner : Mr.A.Abdul HameedSenior CounselFor Respondents : No appearancefor R1 and R2Mr.S.Gopalakrishnan for R3O R D E RThis Original Petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996, against the award dated 27.08.2015 passed by the Sole Arbitrator arising out of a dispute between the petitioner and the first respondent in a contract dated 11.08.2000.2. Heard Mr.A.Abdul Hameed, learned Senior Counsel appearing for the petitioner and Mr.S.Gopalakrishnan, learned counsel appearing for the third respondent. 3. On 11.08.2000, a contract was entered into between the petitioner and the first respondent for Charter Hire of 1 No.200 Ton 2/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 2015Work Over Rig, together with all equipments/accessories for Work Over Operation in the KG Basin of the petitioner in the State of Andhra Pradesh. This contract was awarded in favour of the first respondent pursuant to the tender floated by the petitioner. It is stated that the first respondent failed to perform the obligations under the contract and as a result, the liquidated damages were levied and ultimately, the contract was terminated vide notice dated 04.09.2001 with effect from 30.09.2001.4. The first respondent was permitted to continue the work over operation, subject to certain conditions contained therein and ultimately, the contract came to an end on 11.10.2002.5. The first respondent issued the trigger notice dated 28.01.2006 under Section 21 of the Arbitration and Conciliation Act, 1996 [for brevity 'the Act'] for referring the disputes to the Arbitrator. Thereafter, the Sole Arbitrator was appointed and the arbitration proceedings commenced on 09.11.2010. 3/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 20156. The first respondent filed the claim statement on 10.12.2010 and the petitioner filed reply and counter claim on 10.03.2011, and a rejoinder was also filed by the first respondent on 29.04.2011. The chief and cross-examination was over on both sides on 10.04.2013 and the first respondent commenced their arguments on 15.06.2013 and completed on 25.08.2013. 7. The first respondent filed a memo dated 06.09.2013 for receipt of three additional documents. Objections were filed by the petitioner on 26.09.2013. However, the Arbitrator passed an order on 29.09.2013 taking those documents on file and marked them as Ex.C37 to Ex.C39. Thereafter, arguments were addressed on both sides and the impugned award dated 27.08.2015 came to be passed by the Sole Arbitrator. The same has been put to challenge in the present petition.8. The main ground that was urged by the learned Senior Counsel appearing on behalf of the petitioner is that the claim made by the first respondent was hopelessly barred by limitation. The learned Senior Counsel further submitted that the Arbitrator, without there being any 4/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 2015evidence, and after giving a finding to that effect, proceeded to award a sum of Rs.15,00,000/- in favour of the first respondent towards Claim No.5, which pertained to reimbursement towards costs for drill strings and other accessories which remained in the well.9. Per contra, the learned counsel appearing on behalf of the third respondent submitted that the first respondent is presently under the administration of the Official Liquidator, who is the third respondent. The learned counsel submitted that there is no patent illegality in the reasoning given by the learned Arbitrator warranting interference of this Court. Hence, he sought for dismissal of this petition.10. It is not in dispute that the notice of termination of contract was given on 04.09.2001, with effect from 30.09.2001. It is also not in dispute that the contract came to an end on 11.10.2002. The trigger notice before initiation of arbitration proceedings was issued by the first respondent only on 28.01.2006. After the appointment of the Arbitrator, the claim statement was filed by the first respondent. One of the main objections that was raised in the reply filed by the petitioner is that the 5/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 2015claim made by the first respondent is barred by limitation and hence, the entire claim is liable to be rejected. For this reply, the first respondent has filed a rejoinder and has merely stated that the claim made by the first respondent is within the period of limitation.11. At this juncture, it will be relevant to take note of the written arguments filed on the side of the first respondent and the portion which dealt with the issue of limitation. For appreciation, the same is extracted hereunder:-“XV. Whether the claim made by the claimant is within the period of limitation?A.As per Ex.P22 issued by the respondent, the contract came to an end on 11.10.2002. The claimant raised the claims by various letters between 11.10.2002 and 10.10.2005 i.e. within a period of 3 years. The letters are dated 05.09.2000, 05.10.2000, 27.06.2001, 22.01.2002, 28.01.2002, 06.03.2001, 27.02.2002, 27.05.2002, 30.03.2002, 01.04.2003, 26.08.2004, 12.01.2005, 21.02.2005, 28.04.2005 and 01.07.2005 which are marked as Ex.P.10, Ex.P.11, Ex.P.12, Ex.P.13, Ex.P.19, Ex.P.21, Ex.P.23, Ex.P.24, Ex.P.26, Ex.P.28, Ex.P.29, Ex.P.30, Ex.P.31, Ex.P.32 and Ex.P.33 respectively.”6/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 201512. The above stand taken by the first respondent makes it clear that the contract came to an end on 11.10.2002 and thereafter, the first respondent was continuously sending communications to the petitioner upto the year 2005, and there was nothing to show that the petitioner responded to any of those communications. Thereby, the first respondent has virtually attempted to extend the period of limitation by means of sending repeated representations/communications to the petitioner.13. Even in the written arguments filed on the side of the petitioner, a specific stand was taken to the effect that the contract came to an end in the year 2002 and the claim has not been made within the period of limitation of 3 years thereafter, and therefore, the claim made by the first respondent is barred by limitation.14. After the written submissions were filed, arguments on the side of the first respondent was also completed, which is evident from the proceedings recorded by the learned Arbitrator which is found at Page Nos.241 to 243 in the paper book. At this point of time, a memo dated 7/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 201506.09.2013 came to be filed on the side of the first respondent. For proper appreciation, the memo is scanned and extracted hereunder:-15. The three documents that were relied upon by the first respondent is available at Page Nos.251 to 256 in the paper book. For this memo, the petitioner filed objections. The petitioner took a stand that 8/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 2015the documents relied upon are attempted to be brought in belatedly, without assigning any reasons, and that there is no proof regarding the issuance of receipt of documents mentioned at Serial Nos.2 and 3 of the memo and that the document in Serial No.1 is inadmissible in evidence.16. The learned Arbitrator, through proceedings dated 29.09.2013, considered the memo and objections and decided to take those documents on file and marked those documents as Ex.C37 to Ex.C39, subject to the objections raised by the petitioner. Thus, even though the Arbitrator did not deal with the objections in the proceedings dated 29.09.2013, the Arbitrator was expected to deal with the objections atleast while passing the award.17. It is relevant to take note of one vital fact which missed the attention of the learned Arbitrator. The learned Arbitrator failed to see that these three documents were not supported by any pleadings. The appropriate manner in which these three documents ought to have been brought on file is by permitting the claimant to file additional statement and explain the purport of those documents and the stand that is sought 9/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 2015to be taken by relying upon those documents. Instead, the Arbitrator thought it fit to straight away admit those documents without pleadings. Apart from that, these documents ought to have been marked through the witness who should have explained the above three documents and the scope of the bank entries that were relied upon by the first respondent. If this procedure had been followed, the petitioner would have had an opportunity to file a reply for the additional statement, and also would have cross-examined the witness pertaining to the three additional documents that were sought to be brought in by the first respondent towards the fag end of the proceedings. The denial of this opportunity to the petitioner would clearly tantamount to violation of the principles of natural justice. The reason for rendering such a finding will get more clearer in the later portion of this order. 18. The learned Arbitrator while dealing with the issue of limitation has rendered the following finding:- “81. I am of the view that though the contract came to an end on 11.10.2002, the last payment against the said work was made by the respondent to the claimant Company on 28.03.2003 and the claimant has issued a notice dated 10/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 201528.01.2006 in Ex.C38 for appointment of Arbitrator and the Chennai office has forwarded the same to the Rajahmundry office the letter of the claimant requesting for appointment of Arbitrator on 31.01.2006 (Ex.C39). But the Learned Counsel for the respondent has denied the same and stated that the payment made on 28.03.2003 (Ex.C37) cannot be relied upon. However, there is no evidence from the respondent to establish that no payment was made on 28.03.2003 nor there is any evidence from the respondent to show when the respondent has made the last payment and in absence of final bill, the last date of payment made by the respondent can be considered as the starting point of limitation. The respondent also had not produced any evidence to show that they have denied the claims made by the claimant prior to 28.3.03 to the several letters sent by the claimant for commencement of period of limitation. I am therefore of the view that mere denial by the Learned Counsel for the respondent that no payment was made by respondent on 28.3.03 is not acceptable in the absence of any proof of the non-payment on 28.3.2003. The respondent could have produced the copies of account books showing when the last payment was made to the claimant under the agreement or when the respondent had denied the claims of the claimant made in several letters referred to prior to 11.10.2002, when the contract came to an end.”19. The learned Arbitrator has given a finding as if the petitioner 11/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 2015has made the last payment against the work done by the first respondent on 28.03.2003, by relying upon the entry that was made in the statement of account which was marked as Ex.C37. If such a finding has to be rendered, the learned Arbitrator ought to have explained as to whether such a payment actually was received from the petitioner, and even if it is assumed that it is received from the petitioner, whether it pertained to the contract that is under dispute. The bank entry is completely silent about these facts. However, the Arbitrator thereafter proceeds to put the burden of proof on the petitioner and has held that the petitioner has failed to show that no such payment was made by them on 28.03.2003 and the petitioner has failed to show that such last payment was made in the absence of the final bill. On this premise, the Arbitrator has calculated the limitation from 28.03.2003 and has concluded that the trigger notice was issued on 28.01.2006 and hence, the claim made by the first respondent is within the time. 20. This is further elaborated by the Arbitrator at paragraph No.82 of the award.21. In the considered view of this Court, the above finding of the 12/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 2015learned Arbitrator suffers from patent illegality. It is not necessary for this Court to burden this order with all the citations and it will suffice to take note of the latest judgment of the Hon'ble Apex Court in the case of OPG Power Generation Private Limited vs. Enexio Power Cooling Solutions India Private Limited and another reported in 2025 (2) SCC 417. The Hon'ble Apex Court has held that the ground of patent illegality is available for setting aside a domestic award, if the decision of the Arbitrator is found to be perverse or so irrational that no reasonable person would have arrived at it. Such patent illegality can also arise in a case where a finding is based on no evidence at all or where an award ignores a vital evidence while arriving at a decision. Even an award without reasons would suffer from patent illegality. Such patent illegality will also arise in a case where the Arbitrator decides a matter not within his jurisdiction or there is a violation of the principles of natural justice.22. In the case in hand, the impugned award suffers from patent illegality since it is vitiated due to violation of principles of natural justice and also due to the fact that the findings were rendered on the 13/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 2015issue of limitation based on no evidence.23. As was observed supra, the basis for admitting three documents as Ex.C37 to Ex.C39 was not supported by pleadings and it was not marked through a witness. As a result, the petitioner lost an opportunity to file a reply for additional statement, which should have been filed by the first respondent, and the petitioner also lost an opportunity to cross-examine the witness, if those documents had been marked through a witness.24. The learned Arbitrator expected the petitioner to prove that the petitioner did not make any payment to the first respondent on 28.03.2003 and no final bill was raised for such payment. Even though the Indian Evidence Act does not apply to the arbitration proceedings, certainly the principles of evidence will apply during such proceedings. If the first respondent was relying upon certain documents in order to save the claim from being knocked out on the ground of limitation, it is the first respondent who should have discharged the burden and the burden never shifts to the petitioner till the first respondent discharges 14/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 2015the burden. Therefore, the learned Arbitrator went wrong in strongly relying upon the bank entry dated 28.03.2003 and thereby, gave a finding that the claim is within the limitation. In other words, a claim which otherwise was hopelessly barred by limitation, all of a sudden, sees the light at the end of the tunnel because of a one bank entry dated 28.03.2003. In such an event, the entire burden was on the first respondent to explain those bank entries to sustain the claim. By no stretch, the burden could have been shifted on the petitioner. 25. The last issue pertains to the counter claim made by the petitioner. If the very claim made by the first respondent is barred by limitation, it goes without saying that the counter claim also cannot be considered on the very same ground. In any case, the learned Arbitrator has given sufficient reasons for rejecting the counter claim made by the petitioner.26. The upshot of the above discussion leads to the only 15/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 2015conclusion that the award dated 27.08.2015 passed by the learned Arbitrator suffers from patent illegality and it can be brought within the scope of Section 34(2)(a)(iv) of the Act. 27. Accordingly, the award dated 27.08.2015 passed by the Sole Arbitrator is hereby set aside and this Original Petition stands allowed. There shall be no order as to costs. 10-09-2025ssbIndex:YesSpeaking orderNCC:Yes16/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 2015To1.M/s.Shiv-Vani Oil and Gas Exploration Service Limited, (Amalgamated with SVUL Projects Limited) Having its Registered Office, at Tower-1, 5th Floor, NBCC Plaza, Sector-5, Pushp Vihar, Saket, New Delhi-110 017.2. The Sole Arbitrator, No.40, Sankarapuram, Alemelumangapuram, Mylapore, Chennai-600 004.3.The Official Liquidator, High Court, Delhi. 17/18 https://www.mhc.tn.gov.in/judis O.P.No.1007 of 2015N.ANAND VENKATESH, JssbO.P.No.1007 of 201510.09.202518/18