M/S MONSHER FIRE PROTECTION SYSTEM PVT. LTD. vs IAAI & ANR.

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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 20th December, 2023
+ CS(OS) 17/1991
M/S MONSHER FIRE PROTECTION SYSTEMS PVT. LTD.
….. Plaintiff
Through: Ms. Shantha Devi Raman, Mr. Arihant Jain and Mr. Mayank Ranjan Yadav, Advocates.

versus
IAAI & ANR. ….. Defendants
Through: Mr. S.K. Chandwani and Mr. Sameer Chandwani, Advocates.
CORAM:
HON’BLE MS. JUSTICE JYOTI SINGH
JUDGEMENT
JYOTI SINGH, J.
I.A. 21013/2015 (objection petition under Sections 30 and 33 of the Arbitration Act, 1940, by Petitioner/Plaintiff)

1. This application has been filed by the Petitioner under Sections 30 and 33 of the Arbitration Act, 1940 (hereinafter referred to as ‘1940 Act’), seeking setting aside of the arbitral award dated 22.03.2012 passed by the learned Arbitrator.
2. The relevant facts leading to the present application are that in response to Notice Inviting Tender by Respondent, now known as Airports Authority of India, Petitioner, earlier known as M/s Monsher Enterprises, submitted a tender for ‘Construction of New International Passenger Terminal Building at Delhi, SH: Fire Protection System’. It was an item rate contract indicating the description and estimated quantities of several items of the Work and Unit Rates for respective Items of the Work.
3. Petitioner’s tender was accepted by the Respondent vide letter dated 10.11.1983 at the negotiated tendered amount of Rs.33,99,921/-. Time for completion of work was 15 months reckoned from 15th day after issue of the said letter i.e. time for commencing the work was 25.11.1983 and due date of completion was 24.02.1985. A formal agreement was executed between the parties on 19.12.1983, in the meantime.
4. Work was completed on 30.04.1986 and following the completion, Respondent vide letter dated 27.08.1987 informed the Petitioner that the final bill was ready for payment and Petitioner was requested to attend the office to sign some documents to clear the bill. As per the Petitioner, after completion of work and multiple reminders, Respondent cleared the 15th and final bill somewhere in December, 1989, which was about three and a half years from the date of completion of the work and the net payable amount less recoveries was Rs.1,35,062.71/-. By a letter dated 09.12.1989, Petitioner protested against the wrongful recovery of Rs.33,600/- on account of the pipes. Respondent deliberately did not supply the certified copy of the final bill, which was sought for in the same letter and finally, Petitioner had no option but to invoke the arbitration Clause 25 by letter dated 05.01.1990. As per the Respondent, Petitioner has signed a final bill and received the payment of Rs.1,35,062.71/- unconditionally on 10.11.1989. Having received the payment, protest was lodged by letter dated 09.12.1989 albeit confining the objection to recovery of Rs.33,600/- only. Belatedly, vide letter dated 05.01.1990, Petitioner invoked the arbitration Clause 25 and the Appointing Authority by a letter dated 04.04.1990 appointed Shri A. Sankaran as the sole Arbitrator and referred the claims and counter claims for adjudication.

5. As the chronology goes, Petitioner filed the Statement of Claim dated 29.05.1990 raising Claims No. 1 to 19 and claiming a total amount of Rs.29,42,586.54/-. Respondent denied and disputed the claims and filed counter Statement of Facts but did not file any counter claim. The learned Arbitrator passed an award dated 28.11.1990 in favour of the Petitioner awarding a sum of Rs.10,59,182.15/- as well as future interest from the date of award till actual payment.
6. Petitioner filed an application before this Court under Section 14(2) of the 1940 Act which was registered as Suit No.17/1991, seeking directions to the learned Arbitrator to file record of proceedings together with the award for making the same Rule of the Court. Aggrieved by the award dated 28.11.1990, Respondent filed objections dated 14.08.1991, which were registered as IA No. 10341/1991. By an order dated 20.03.2007, this Court allowed the application on two-fold grounds: (a) enlargement of the scope of reference by increasing the amount of the claims by the Petitioner than what was originally referred and awarding additional amounts to the Petitioner beyond the scope of reference; and (b) Arbitrator considered documents filed with the synopsis after conclusion of hearing and no opportunity was given to the parties to meet the case. This was held by the Court to be misconduct in law and thus the application was allowed setting aside the award dated 28.11.1990. Having set aside the award, Court passed the following directions:-
“…………………..
CS(OS) No.17/1991
1. In view of the award of the sole arbitrator A.Sankaran having been set aside, no further directions are called for making the award rule of the Court. However, it must be noticed that the dispute is extremely old and now needs to be finally settled. Parties had led their evidence before the earlier arbitrator.

2. Parties seem to want to produce additional documents as filed at the stage of submission of synopsis on conclusion of final hearing before the arbitrator and thus liberty is given to the parties to lead evidence in that behalf. Records of the earlier arbitrator can be transmitted to the new arbitrator so that the matter is confined only to leading of such additional evidence and final hearing of the matter.
3. Learned counsels for the parties state that in view of the limited nature of proceedings to be held before the arbitrator, which are for leading the additional evidence of both the parties in respect of documents already filed on record along with written synopsis and the final hearing to be concluded, not more than five to six sittings may be required. Further disputes having arisen as per the statement of claim, the arbitrator would now decide the complete claims as made in the statement of claim. There is an agreement between the counsels in this behalf.
4. Justice R.C.Chopra (Retd) of this Court is appointed as the Sole Arbitrator to decide the disputes between the parties. The arbitrator will fix its own sitting fee subject to a maximum of total fee of Rs 1.5 lakh. The parties will equally bear the arbitrator’s fee.
5. The suit is disposed in the aforesaid terms leaving the parties to bear their own costs.”

7. The newly appointed Arbitrator vide order dated 25.04.2007 permitted the Respondent to file amended Statement of Defence, which was filed and rejoinder thereto was filed by the Petitioner. Affidavits of admission/denial were filed by the parties in regard to the additional documents on record which were filed in the earlier round of arbitration with the synopsis. Since some of the documents i.e. C-34 to C-40 were denied by the Respondent, Petitioner sought liberty to lead evidence and since Petitioner denied documents R-29 to R-53, Respondent also took permission to lead evidence and both parties filed their affidavits of witnesses. On 08.01.2009, counsels for the parties stated that they did not want to lead oral evidence and would restrict arguments to documents only. On 02.03.2012, parties gave consent for extending the time for making of the award. The Arbitrator thereafter rendered an award dated 22.03.2012 rejecting all claims of the Petitioner, save and except, Claim No. 6 and also deciding the preliminary objection raised by the Respondent that the claims were time barred, in favour of the Respondent.
8. Assailing the award, learned counsel for the Petitioner contends that the award suffers from a jurisdictional error as the Arbitrator has travelled beyond the terms of reference and the order dated 20.03.2007 passed by this Court. As the order indicates, Court had permitted both parties an opportunity to lead evidence restricted to the additional documents filed by the parties at the stage of submission of synopsis on conclusion of final hearing before the earlier Arbitrator and the disputes were to be adjudicated on the basis of record forming part of the earlier arbitration proceedings. Contrary to these directions, the Arbitrator, by order dated 25.04.2007 permitted the Respondent to file an amended Statement of Defence, wherein new pleas were taken by the Respondent, which was wholly illegal and impermissible and the award deserves to be set aside on this ground alone.
9. The entire record prior to the passing of the order by this Court on 20.03.2007 including the objections raised in IA No. 10341/1991 by the Respondent would reflect that it is for the first time in the amended Statement of Defence, the Respondent had raised the objection that Petitioner had accepted full and final payment without any objection and/or the claims were barred under the arbitration Clause 25. The contention of the Respondent was that under Clause 25 it was clearly provided, as a term of the contract that in case the contractor did not make a demand for arbitration in respect of any claim(s) in writing within 90 days of receiving intimation that bill was ready for payment, claim of the contractor will be deemed to have been waived and absolutely barred and the Authority shall be discharged and released of all liabilities under the contract in respect of these claims. Without prejudice to the contention that this plea could not be taken after a whole round of arbitration and particularly, when it was never taken in the earlier arbitration proceedings or in the objections filed by the Respondent under Sections 30 and 33 of the 1940 Act in IA No. 10341/1991, even otherwise this plea cannot be accepted on merits. The Arbitrator failed to consider that Respondent did not supply the certified copy of the 15th and final bill until 19.01.1990, when the same was forwarded to the Petitioner along with a letter dated 19.01.1990. By a letter dated 19.12.1989, Petitioner made a specific request to supply the certified copy of the bill and reference to this also finds mention in the letter dated 05.01.1990 by which the request to supply the copy of the bill was reiterated and the arbitration clause was invoked. Therefore, the claims were erroneously held to be barred by the learned Arbitrator.
10. It was further contended that the learned Arbitrator erred in coming to the conclusion that Petitioner accepted the rates given under the final bill and the objections were an afterthought, overlooking the fact that payment under the final bill was accepted by the Petitioner under pressure as Petitioner was facing hardship having incurred heavy expenses in execution of the work. Petitioner was compelled to accept the payment by signing on dotted lines else even the amount that was being released would not have been released. Mere acceptance of payment and that too under pressure cannot amount to waiver to seek due and legitimate payments due to the Petitioner under the award.
11. Before proceeding to refer to the contentions of the respective parties, it needs to be noted that Petitioner had initially raised certain claims and referred to certain figures against those claims to the Respondent vide letter dated 05.01.1990. On this basis, Respondent, vide letter dated 04.04.1990 forwarded the claims to the Arbitrator. Subsequently, Respondent contends that the claims were revised and were a departure from the earlier claims and/or figures mentioned therein and this was one of the bone of contention raised by the Respondent when the initial objection was filed before this Court. However, when the matter was remanded back, Court had recorded the consent of the parties that the Arbitrator would decide on the Statement of Claim filed by the Petitioner.
CLAIM NO. 1
12. Counsel for the Petitioner contends that Petitioner claimed an amount of Rs.15,165/- (amended claim Rs.86,794/-) towards illegal deduction made by the Respondent in 15th and final bill w.r.t. 7 item Nos. 8, 11C, 19A, 21, 28, 2E and 5. Petitioner filed a chart indicating the quantities of the items, rates as per agreement, reduced rates and the amounts deducted. Respondent had no right to reduce the rates below the quoted rates for the excess quantities under the contract items since Clause 12A of the Agreement read with Item Rate Tender Conditions provided that contractor had to pay at the rate quoted by him, if any additional quantities are executed. Contention of the Respondent that reduction in rate was on account of the fact that quantities or items exceeded more than 50% of the schedule of quantities and Clause 12A provided that in such situation Respondent could pay as per Clause 12(ii), was misplaced inasmuch as Respondent was unable to establish that there was a deviation in the quantities beyond 50% and therefore Clause 12A was inapplicable.
13. Respondent contends that the quantities of items exceeded more than 50% of the schedule of quantities and Clause 12A provided that wherever quantities exceeded 50%, Respondent would pay at the prevailing market rates in accordance with Clause 12(ii). Moreover, after having accepted the full and final payment of the bill, without any protest, Petitioner has no justification to claim the amounts. The same procedure was adopted by the Respondent for deriving rates for various other items, which was never assailed by the Petitioner and it cannot be permitted to pick and choose items at its whims and fancies.
CLAIM NO. 2
14. This claim was raised for construction of 13 additional Brick Masonry Chambers of bigger size, which was an extra item entitling the Petitioner to payment of Rs.10,000/- per chamber. Letter dated 29.04.1987 written by the Petitioner to the Respondent was brought to the notice of the Arbitrator as Document C-24, wherein Petitioner had categorically stated that the previous Executive Engineer and Superintending Engineer had agreed to pay market rates as they were aware that the labour cost itself would work out from Rs.8,000/- to Rs.9,000/- for these chambers, which were non-standard as also the fact that the project was delayed for more than three years and there was substantial increase for both material and labour in the said period. Request was made to review the decision at the reduced price and yet the Arbitrator rejected the claim ignoring the material on record.
15. Respondent contends that contract between the parties stipulated construction of Brick Masonry Chambers of a particular size with specific material and dimension, however, during the execution of the work, sizes of the chamber were altered and quantity was increased from 7 to 21. Initial rate for the chambers was Rs.2,800/- per chamber, which was revised to Rs.3,803.73/- and Petitioner accepted the final payment of Rs.1,35,062.71/- without any protest. Even in the protest letter dated 09.12.1989, objection was confined to a claim of Rs.33,600/- and there was no demand of the rate of Rs.10,000/- per chamber. Petitioner is selectively making claims inasmuch it accepted the rate of Rs.3,808.75/- for 8 chambers but objected for the remaining 13 chambers.
CLAIM NOS. 3, 4 AND 5
16. Petitioner claimed a total sum of Rs.5,80,000/- towards expenses alleged to have been incurred for replacing special heavy duty fitted SSCI pipes with special heavy duty CI fittings. Petitioner contended that it developed special moulds for heavy duty fittings, tested them as per fire safety regulations and thus incurred additional expenditure because Respondent insisted on lead joints, spigots and socketed fittings. However, the pipes started leaking for no fault of the Petitioner and therefore, the additional expenditure ought to be reimbursed to the Petitioner.
17. Learned Arbitrator wrongly rejected the claims on the ground that no supporting material had been filed, overlooking several documents such as Ex. C-5, C-6, C-8, C-10, C-12, C-13, C-15, C-25, C-30, C-35, C-36 and C-37, which substantiated every expense incurred in the execution of the work in addition to 11 other documents and erroneously rejected the claim, by referring only to C-4 and C-14. Ex. C-5 was totally ignored, which was a letter dated 11.02.1985 of the Tariff Advisory Committee (‘TAC’) wherein the TAC had clearly opined that C.I. Socket and spigot joint mains were not acceptable for fire fighting system and this was repeatedly suggested to the Respondent by the Petitioner, however, no heed was paid, ultimately leading to heavy leakage in the CI fitting. Learned Arbitrator also ignored Ex.C-8, a letter dated 15.03.1985 sent by the Petitioner to the Respondent stating that pipes and pipe fittings should meet the requirement of TAC.

18. Respondent contended that the work was executed in accordance with tender conditions. Petitioner was fully aware that it had to carry out the work according to the specifications contained in the agreement and as per the stipulated specifications, lead joints, spigots and socketed fittings (heavy duty) were required to be used in the work. No special fittings over and above those agreed under the contract were used by the Petitioner which explains why no objection was raised to the final bill except under a limited head. No material was placed on record to substantiate that any additional work was carried out at the instance of the Respondent or that additional expenditure had been incurred by using a particular pipe on the directions of the Respondent.
CLAIM NOS. 7, 8 AND 9
19. Under Claim No.7, Petitioner claimed that the deductions made by the Respondent for non-returning of SSCI pipes of various diameters, received by the Petitioner from the Respondent for execution of work was illegal.
20. Claim No. 8 was for refund of an amount of Rs.28,263/- recovered by the Respondent from the final bill towards cost of rectification of the defects through other agencies while Claim No. 9 was for refund of an amount of Rs.78,800/- deducted from the final bill. The Arbitrator rejected the claims without appreciating that Respondent had not placed any material on record or led evidence to show that it had engaged any outside agency to rectify the alleged defects such as leakage in pipes etc. Respondent had vide letter dated 07.08.2017 informed the Petitioner that it would get the defect rectified from an outside agency but the Arbitrator ignored the contents of the letter dated 23.09.1987, which were self-explanatory and go to show that Respondent had not resorted to any outside agency even until 23.09.1987, which is the last correspondence referred to by the Respondent in this context. Joint testing was done on 17.12.1987 and work was found to be without any defect and completion certificate was also furnished by the Respondent. Rectification, if any, after the expiry of maintenance period on 30.04.1987 was illegal. Record shows that work was stopped on 30.04.1986 and defect liability fell for one year. Thus, the unilateral deductions were illegal and the amount should have been reimbursed to the Petitioner.
CLAIM NO. 12
21. Claim 12 pertained to expenses incurred on establishment and administration totalling to a sum of Rs.2,70,000/- i.e. Rs.7,500/- per month. Petitioner contends that the learned Arbitrator has illegally rejected the claim holding that it is not supported by proper evidence and that the Petitioner was responsible for prolongation of the work as well as failure to execute the same in a proper manner. This observation and conclusion is contrary to the plethora of documents placed on record by the Petitioner in support of the claim, being Ex. C-7 to C-11, C-17, C-19 and C-25, which reflected a huge delay on the part of the Respondent to handover the site for work. In fact, Respondent’s own document being Ex. R-3, R-7, R-9 to R-11, R-14, R-15, R-17 and R-19 substantiated that the delay was on the part of the Respondent and Petitioner could not be blamed for prolongation of the contract and it was for this reason that the period for completion of the work was extended.
22. Respondent contended that delay in completion of the work was entirely due to the lapses of the Petitioner and the period of contract was extended on Petitioner’s request on the terms and conditions of the original agreement.
CLAIM NO. 13
23. Under Claim No. 13, Petitioner sought interest at the rate of 24% p.a. on delayed final payment of Rs.2,50,000/- w.e.f. 30.04.1986, the date of completion of the work to 10.11.1989 i.e. the date of making the final payment. Nothing substantial was argued on behalf of the Petitioner under this claim, save and except, that there was no justifiable reason for the Respondent in taking time to finalise the accounts and therefore, Petitioner is entitled for compensation in the form of interest. Respondent contended that the Arbitrator has rightly found that there were good and sufficient reasons for the Respondent in taking time in finalising the accounts and making deduction and being a finding of fact based on material on record, this Court ought not to interfere within the scope of Sections 30 and 33 of the 1940 Act.
CLAIM NO. 16
24. This claim was on account of escalation in material costs and labour charges due to delay in completion of the project, for a total amount of Rs.5,75,330/-. Petitioner contended that this claim was based on Clause 10-C of the agreement between the parties. Record shows that right from 06.03.1985, Petitioner had been writing to the Respondent complaining that execution of the work was delayed on account of acts of omission and commission on the part of the Respondent, but most of the letters were not replied to. These letters were placed on record as Ex. C-7, C-9, C-11, C-17 and C-25. The major failure was considerable delay in handing over the site on time. Arbitrator has ignored Ex.C-2, escalation statement filed by the Petitioner in coming to the conclusion that no records were placed to calculate the escalation. The finding is also in ignorance of Ex.C-2, which was a detailed chart showing the escalation in the cost of material and labour, running into 5 pages. Ignorance of vital documents is a legal misconduct and on this ground the award deserves to be set aside.
25. Respondent contended that no infirmity can be found with the finding and conclusion of the Arbitrator. The claim was neither maintainable nor arbitrable and was contrary to the provisions in the contract. The delay in completion of the work and payment of final bill was entirely due to Petitioner’s lapses and as per the provisions of the contract i.e. Clause 10-C the escalation was paid in entirety. The formula adopted by the Petitioner to claim escalation is unwarranted and beyond the contractual provisions.
26. Both sides relied on judgments to support their arguments. Learned counsel for the Petitioner placed reliance on the judgment of the Supreme Court in K.P. Poulose v. State of Kerala and Another, AIR 1975 SC 1259, to contend that one of the grounds available for setting aside the arbitral award under Section 30 of the 1940 Act, is where the Arbitrator has misconducted himself or the proceedings. The Supreme Court has held that misconduct under Section 30(a) is not a connotation of moral lapse but comprises legal misconduct which is complete if the Arbitrator on the face of the award arrives at an inconsistent conclusion even on his own findings or arrives at a decision by ignoring very material documents which throw abundant light on the controversy to help a just and fair decision. Reliance is also placed on the judgment of the Supreme Court in Cochin Shipyard Limited v. Apeejay Shipping Limited, (2015) 15 SCC 522, where the Supreme Court reiterated and reaffirmed that under Section 30 the ambit and sweep of legal misconduct includes non-consideration of relevant documents, ascription of reasons of passing of the award which do not flow from the material on record. The judgments are cited to support the argument that material documents placed on record have been totally ignored by the Arbitrator leading to a wrong finding that the claims were unsubstantiated and there was no evidence and ex-consequentia a wrong conclusion, leading finally to rejection of the claims.
27. Learned counsel for the Respondent, on the other hand, relied on the judgment of the Supreme Court in M/s. Sudarshan Trading Co. v. Government of Kerala and Another, (1989) 2 SCC 38, where it was held that appraisement of evidence by the Arbitrator is never a matter which the Court questions and considers. If the parties have selected their own forum, the chosen forum must be conceded the power of appraisement of the evidence. Reliance was placed on the judgment of the Supreme Court in State of Rajasthan v. Puri Construction Co. Ltd. and Another, (1994) 6 SCC 485, wherein the Supreme Court held that the Arbitrator is the final arbiter of the disputes between the parties and the award is not open to challenge on the ground that Arbitrator has drawn his own conclusions or has failed to appreciate the facts. In Ravindra and Associates v. Union of India, (2010) 1 SCC 80, the Supreme Court observed that the High Court wrongly interfered with the arbitration award and practically acted as a Court of appeal, which it could not do. In McDermott International Inc. v. Burn Standard Co. Ltd. and Others, (2006) 11 SCC 181, the Supreme Court held that the 1996 Act makes provision for the supervisory role of Court and review of the arbitral award only to ensure fairness. Intervention of the Court is envisaged in few circumstances only such as case of fraud or bias, violation of natural justice etc. and Court cannot correct errors of the Arbitrators.
28. I have heard the learned counsels for the parties and examined their rival contentions.
29. There is no dispute on the facts to the extent that Petitioner was awarded the contract dated 19.12.1983 for construction of New International Passenger Terminal Building at Delhi with respect to fire protection system. The original time for completion of the work was 15 months, commencing from 25.11.1983 and ending on 24.02.1985. As the work was not completed on time, on which both parties have their respective contra submissions, the period for completion was extended without levy of compensation on the Petitioner. According to the Respondent, the Authority had, vide its letter dated 27.08.1987 (Ex.C-26), intimated the Petitioner that final bill for the work was ready for payment and it should attend the office to sign certain documents for receiving the payment. Petitioner, on the other hand, contended that certified copy of the final bill was not made available to it and vide letter dated 09.12.1989, Petitioner requested the Executive Engineer to send the same. This request was repeated by letter dated 05.01.1990, which was also a letter invoking arbitration. The rival stands of the parties on this issue are important in the context of the first and foremost issue that needs consideration in light of the objection raised by the Respondent before the Arbitrator and reiterated before this Court that the claims of the Petitioner were barred under Clause 25.
30. Before examining the issue of the claims being barred, it is important to deal with another contention of the Petitioner that the Arbitrator had travelled beyond the terms of reference and order dated 20.03.2007 passed by this Court whereby Court had permitted both parties an opportunity to lead additional evidence only to the extent of additional documents filed by the parties at the stage of submission of synopsis on conclusion of final hearing before the earlier Arbitrator. Perusal of the order dated 20.03.2007 shows that against the first award, Respondent herein had filed objections on two grounds viz. (a) Petitioner/Claimant had increased the amount of claims, enlarging the scope of reference; and (b) Arbitrator considered documents after conclusion of hearing. Insofar as the first ground was concerned, the Court had observed that the Arbitrator being creature of the agreement derives its authority to adjudicate as a consequence of reference made to him and therefore, the subsequently furnished claims of the Petitioner were a departure from what was confined in the letter dated 05.01.1990. Insofar as the second objection was concerned, the Court held that consideration of documents after conclusion of hearing was a misconduct in law. Having so held and keeping in view that the disputes were extremely old and needed to be finally settled, the Court directed that records of the earlier Arbitrator would be transmitted to the new Arbitrator so that the matter is confined only for leading additional evidence with respect to additional documents filed earlier at the stage of synopsis. However, the Court further held that further disputes having arisen as per the statement of claim, the Arbitrator would now decide the complete claims as made in the statement of claim and this was recorded by way of an agreement between the parties.
31. After the parties appeared before the second Arbitrator, Respondent sought permission to file amended Statement of Defence, which was not opposed by the Petitioner. Thereafter, admission/denial of documents was conducted in regard to additional documents and the affidavits of the witnesses were filed. In the amended Statement of Defence, Respondent took a preliminary objection that the purported claims of the Claimant were time barred. This objection was predicated on Clause 25 of the Contract Agreement between the parties which provided that if the contractor did not make any demand for arbitration in respect of any claim(s) in writing within 90 days of receiving intimation that the bill was ready for payment, the contractor will be deemed to have waived his right and the Authority shall be discharged of its liability in respect of these claims. Clause 25 is extracted hereunder for ready reference:-
“25. Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications designs, drawings and instructions herein before mentioned and as to the quality of workmanship or materials used on the work or as to any other question claim, right of matter or thing whatsoever, if any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or failure to execute the same whether arising during the progress or the work or after the completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the Chief Engineer, International Airports Authority of India, in charge of the work at the time of dispute or if there be no Chief Engineer the administrative head of the Department of Engineering of said authority at the time of such appointment. It will be no objection to any such appointment that the arbitrator so appointed is International Airports Authority of India’s Employee that he had to deal with the matters to which the contract relates and that in the course of his duties as International Airports Authority of India’s Employee he had expressed views on all or any of the matters in dispute or difference. The arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, such Chief Engineer or administrative head of the Department of Engineering as aforesaid at the time of such transfer, vacation of office or inability to act shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of contract that no person other than person appointed by such Chief Engineer or administrative head of the Department of Engineering of the Authority as aforesaid should act as arbitrator and if for any reason, that is not possible, the matter is not to be referred to arbitration at all. In all cases where the amount of the claim in dispute is Rs.50,000/- (Rupees fifty thousand) and above, the arbitrator shall give reasons for the award.
Subject to, as aforesaid the provisions of the Arbitration Act 1940 or any statutory modification or re-enactment thereof and the rules made there under and for time being in force shall apply to the arbitration proceeding under this clause.
It is a term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such disputes.
It is also a term of contract that if the contractor(s) does/do not make any demand for arbitration in respect of any claims(s) in writing within 90 days of receiving the intimation from the Authority that the Bill is ready for payment the claim of the contractor(s) will be deemed to have been waived and absolutely barred and the Authority shall be discharged and released of all liabilities under the contract in respect of these claims.
The arbitrator(s) may from time to time with consent of the parties extend the time for making and publishing the award.”
(emphasis supplied)

32. According to the Respondent, as per Clause 25, Petitioner was required to invoke arbitration in respect of the purported claims within 90 days of receiving intimation from the Authority that the bill was ready for payment, failing which Petitioner would be deemed to have waived its right to demand arbitration and Authority was absolved of its liabilities in respect of the claims under the contract. Respondent states that intimation was sent to the Petitioner vide letter dated 27.08.1987 that the bill was ready and Petitioner was called upon to sign documents to release the payments. Petitioner, however, waited for over three years to invoke arbitration and therefore the claims were clearly time barred.
33. The question that begs an answer is whether the claims of the Petitioner stood extinguished or waived by not invoking arbitration within 90 days of receiving intimation that the bill was ready for payment and for this the point that needs to be addressed is if the said letter was received by the Petitioner.
34. Before proceeding further, judicial notice needs to be taken as to whether Clause 25 can be considered as a restraint to legal proceedings in view of Section 28 of the Indian Contract Act, 1872, especially keeping in view sub-Section (b) of Section 28 which was inserted by way of an amendment w.e.f. 08.01.1997. The original Section 28 of the Contract Act reads as follows:-
“28. Agreements in restraint of legal proceedings, void.— Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights.”

35. By way of amendment, sub-Section (b) was inserted and amended Section 28 reads as follows:-
“28. Agreements in restraint of legal proceedings, void.— Every agreement,— Every agreement –
(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights,
is void to that extent.”

36. The Supreme Court in National Insurance Co. Ltd. v. Sujir Ganesh Nayak & Co. and Another, (1997) 4 SCC 366, held that an agreement which curtails the period of limitation and prescribes a shorter period than prescribed by law, would be void as offending Section 28 of the Contract Act because it restricts the party from enforcing its rights in Court after the period prescribed under the agreement expires even though the period prescribed by law for the enforcement of the rights has yet not expired. But there could be agreements which do not seek to curtail the time for enforcement of the right but which provide for the forfeiture or waiver of the right itself if no action is commenced within the period stipulated by the agreement. Such a clause in the agreement would not fall within the mischief of Section 28 of the Contract Act. Relevant passage from the judgment is as under:-
“16.  From the case-law referred to above the legal position that emerges is that an agreement which in effect seeks to curtail the period of limitation and prescribes a shorter period than that prescribed by law would be void as offending Section 28 of the Contract Act. That is because such an agreement would seek to restrict the party from enforcing his right in Court after the period prescribed under the agreement expires even though the period prescribed by law for the enforcement of his right has yet not expired. But there could be agreements which do not seek to curtail the time for enforcement of the right but which provide for the forfeiture or waiver of the right itself if no action is commenced within the period stipulated by the agreement. Such a clause in the agreement would not fall within the mischief of Section 28 of the Contract Act. To put it differently, curtailment of the period of limitation is not permissible in view of Section 28 but extinction of the right itself unless exercised within a specified time is permissible and can be enforced. If the policy of insurance provides that if a claim is made and rejected and no action is commenced within the time stated in the policy, the benefits flowing from the policy shall stand extinguished and any subsequent action would be time-barred. Such a clause would fall outside the scope of Section 28 of the Contract Act. This, in brief, seems to be the settled legal position. We may now apply it to the facts of this case.”

37. This issue came up for consideration before this Court in Manohar Singh and Sons v. Raksha Karamchari Coop. Gr. H. Soc, 2010 (114) DRJ 665, wherein Clause 6, which was the bone of contention, provided that if the contractor or employer was dissatisfied with the decision of the architect on any matter, either party may, within 28 days after receiving notice of such decision give a written notice to the other party requiring that such matter in dispute be arbitrated upon. Court interpreted the clause to limiting the time within which the contractor had to approach for arbitration. However, relying on the judgment in National Insurance (supra), the Court drew a distinction between a clause which limits the time within which an aggrieved party can invoke arbitration and enforce its rights and another clause which extinguishes the right of any party or discharges the other party from liability, if arbitration is not invoked within the time stipulated therein. Relying on the unamended Section 28 of the Contract Act, the Court held that clause 6 of the agreement fell in the former category and was thus invalid.
38. In the present case, admittedly, the disputes relate to a period prior to amendment to Section 28 w.e.f. 08.01.1997 and therefore, the next issue that arises is the applicability of amended Section 28. This question becomes important because if the amendment is retrospective, then by virtue of Section 28(b), any agreement which extinguishes the rights of any party or discharges any party thereto, from any liability, under or in respect of any contract, on the expiry of a specified period so as to restrict any party from enforcing his right, is void to that extent and in this light, Clause 25 will be rendered void and the claims of the Petitioner cannot be held to be time barred. This legal conundrum need not detain this Court as the issue is no longer res integra.
39. The Supreme Court in Union of India and Another v. IndusInd Bank Limited and Another, (2016) 9 SCC 720, was considering this very question and for the sake of ready reference, paragraph 1 of the judgment is extracted hereunder:-
“1. Leave granted. The present appeals by the Union of India raise an interesting question as to the applicability of the 1997 Amendment to Section 28 of the Contract Act, 1872. The facts of the three appeals are similar inasmuch as they concern four exporters who belong to what is known as the GPB Group of Companies.”

40. The primary contention before the Supreme Court, as evident from reading of paragraph 12 was, whether Section 28 applies in its original form or after amendment in 1997. In order to answer this, the Supreme Court observed that the first question that would require an answer would be whether the change made in Section 28 is clarificatory or declaratory of the law and hence retrospective. Examining the Law Commission’s report and the Statement of Objects and Reasons for the amendment, the Supreme Court held that the amendment would be prospective as it seeks to bring about a substantive change in law by stating, for the first time, that even where an agreement extinguishes the right or discharges the liability of any party to an agreement, so as to restrict such party from enforcing his right on the expiry of a specified period, such agreement would become void to that extent. The amendment, therefore, seeks to set aside the distinction made in the case law up to date, between agreements which limit the time within which the remedies can be availed and agreements which do away with the right altogether in so limiting the time. It was observed that these are obviously substantive changes in law, which are remedial in nature and cannot have retrospective effect. Relevant paragraphs of the judgment are as under:-
“12.  The primary contention with which we are faced is whether Section 28 applies in its original form or whether it applies after amendment in 1997. In order to answer this question, it is first necessary to set out Section 28 in its original form and Section 28 after amendment. The section reads as under:
12.1. Original section
“28. Agreements in restraint of legal proceedings, void.—Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent.”
12.2. Amendment w.e.f. 8-1-1997
“28. Agreements in restraint of legal proceedings, void.—Every agreement—
(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights,
is void to that extent.”
(emphasis supplied)
13.  In order to answer this primary question, we have first to see whether the change made in Section 28 could be said to be clarificatory or declaratory of the law, and hence retrospective. It is common ground that the statute has not made the aforesaid amendment retrospective as it is to come into force only with effect from 8-1-1997.
14.  The original section is of 1872 vintage. It remained in this incarnation for over 100 years and was the subject-matter of two Law Commission Reports. The 13th Report of the Law Commission of India, September 1958 examined the section and ultimately decided that it was not necessary to amend it, given the fact that there is a well-known distinction between agreements providing for relinquishment of rights as well as remedies as against agreements for relinquishing remedies only. This was reflected in Para 55 of the Report as follows:
“55. Section 28.—Decided cases reveal [Hirabhai v. Manufacturer’s Life Insurance Co., (1912) 14 Bom LR 741 : 16 IC 1001. Cf. Baroda Spg. and Wvg. Co. Ltd. v. Satyanarayana Marine and Fire Insurance Co. Ltd., 1913 SCC OnLine Bom 17 : ILR (1914) 38 Bom 344 at pp. 348-49.] a divergence of opinion in relation to certain clauses of insurance policies with reference to the applicability of this section. On examination, it would appear that these cases do not really turn on the interpretation of the section, but hinge on the construction of the insurance policies in question. The principle itself is well recognised that an agreement providing for the relinquishment of rights and remedies is valid, but an agreement for relinquishment of remedies only falls within the mischief of Section 28. Thus, in our opinion, no change is called for by reason of the aforesaid conflict of judicial authority.”
15.  Several decades passed, until the Law Commission in its 97th Report of March 1984 suo motu decided that the section required amendment. An introduction to the Report stated the point for consideration thus:
“1.2. Point for consideration.—Under Section 28 of the Indian Contract Act, 1872—to state the point in brief—an agreement which limits the time within which a party to an agreement may enforce his rights under any contract by proceedings in a court of law is void to that extent. But the section does not invalidate an agreement in the nature of prescription, that is to say, an agreement which provides that, at the end of a specified period. If the rights thereunder are not enforced, the rights shall cease to exist. As will be explained in greater detail in later Chapters of this Report, this position creates serious anomalies and hardship, apart from leading to unnecessary litigation. Prima facie, it appeared to the Commission that the section stood in need of reform on this point. The arguments for and against amendment of the section will be set out later. For the present, it is sufficient to state that the problem is one of considerable practical importance as such stipulations are frequently found in agreements entered into in the course of business.”
16.  After going through the existing case law and finding that the existing case law resulted in economic injustice because of unequal bargaining power, the Law Commission decided to recommend a change in the section. This was done as follows:
“5.1. Need for reform of the law.—We now come to the changes that are needed in the present law. In our opinion, the present legal position as to prescriptive clauses in contracts cannot be defended as a matter of justice, logic, commonsense or convenience. When accepting such clauses, consumers either do not realise the possible adverse impact of such clauses, or are forced to agree because big corporations are not prepared to enter into contracts except on these onerous terms. “Take it or leave it all”, is their general attitude, and because of their superior bargaining power, they naturally have the upper hand. We are not, at present, dealing with the much wider field of “standard form contracts” or “standard” terms. But confining ourselves to the narrow issue under discussion, it would appear that the present legal position is open to serious objection from the common man’s point of view. Further, such clauses introduce an element of uncertainty in transactions which are entered into daily by hundreds of persons.
5.2. Demerits of the present law.—It is hardly necessary to repeat all that we have said in the preceding Chapters about the demerits of the present law. Briefly, one can say that the present law, which regards prescriptive clauses as valid while invalidating time-limit clauses which merely bar the remedy, suffers from the following principal defects:
(a) It causes serious hardship to those who are economically disadvantaged and is violative of economic justice.
(b) In particular, it harms the interests of the consumer, dealing with big corporations.
(c) It is illogical, being based on a distinction which treats the more severe flaw as valid, while invalidating a lesser one.
(d) It rests on a distinction too subtle and refined to admit of easy application in practice. It thus, throws a cloud on the rights of parties, who do not know with certainty where they stand, ultimately leading to avoidable litigation.
5.3. Recommendation to amend Section 28, Contract Act.—On a consideration of all aspects of the matter, we recommend that Section 28 of the Indian Contract Act, 1872 should be suitably amended so as to amend to render invalid contractual clauses which purport to extinguish, on the expiry of a specified term, right accruing from the contract. Here is a suggestion for re-drafting the main paragraph of Section 28.
Revised Section 28, main paragraph, Contract Act as recommended
28. Every agreement—
(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract by the usual legal proceedings in the ordinary tribunals, or
(b) which limits the time within which he may thus enforce his rights, or
(c) which extinguishes the rights of any party thereto under or in respect of any contract on the expiry of a specified period or on failure to make a claim or to institute a suit or other legal proceeding within a specified period, or
(d) which discharges any party thereto from any liability under or in respect of any contract in the circumstances specified in clause (c), is void to that extent.”
(emphasis in original)
17.  A period of 13 years passed after which this Report was implemented. The Statement of Objects and Reasons of the Amendment reads as follows:
“1. The Law Commission of India has recommended in its 97th Report that Section 28 of the Indian Contract Act, 1872 may be amended so that the anomalous situation created by the existing section may be rectified. It has been held by the courts that the said Section 28 shall invalidate only a clause in any agreement which restricts any party thereto from enforcing his rights absolutely or which limits the time within which he may enforce his rights. The courts have, however, held that this section shall not come into operation when the contractual term spells out an extinction of the right of a party to sue or spells out the discharge of a party from all liability in respect of the claim. What is thus hit by Section 28 is an agreement relinquishing the remedy only i.e. where the time-limit specified in the agreement is shorter than the period of limitation provided by law. A distinction is assumed to exist between remedy and right and this distinction is the basis of the present position under which a clause barring a remedy is void, but a clause extinguishing the rights is valid. This approach may be sound in theory but, in practice, it causes serious hardship and might even be abused.
2. It is felt that Section 28 of the Indian Contract Act, 1872 should be amended as it harms the interests of the consumer dealing with big corporations and causes serious hardship to those who are economically disadvantaged.
3. The Bill seeks to achieve the above objects.”
18.  What emerges on a reading of the Law Commission Report together with the Statement of Objects and Reasons for the Amendment is that the Amendment does not purport to be either declaratory or clarificatory. It seeks to bring about a substantive change in the law by stating, for the first time, that even where an agreement extinguishes the rights or discharges the liability of any party to an agreement, so as to restrict such party from enforcing his rights on the expiry of a specified period, such agreement would become void to that extent. The amendment therefore seeks to set aside the distinction made in the case law up to date between agreements which limit the time within which remedies can be availed and agreements which do away with the right altogether in so limiting the time. These are obviously substantive changes in the law which are remedial in nature and cannot have retrospective effect.
19.  In Sukhram Singh v. Harbheji [Sukhram Singh v. Harbheji, (1969) 1 SCC 609 : (1969) 3 SCR 752] this Court held : (SCC pp. 614-15, para 12 : SCR pp. 758-59)
“12. Now a law is undoubtedly retrospective if the law says so expressly but it is not always necessary to say so expressly to make the law retrospective. There are occasions when a law may be held to be retrospective in operation. Retrospection is not to be presumed for the presumption is the other way but many statutes have been regarded as retrospective without a declaration. Thus it is that remedial statutes are always regarded as prospective but declaratory statutes are considered retrospective. Similarly sometimes statutes have a retrospective effect when the declared intention is clearly and unequivocally manifest from the language employed in the particular law or in the context of connected provisions. It is always a question whether the legislature has sufficiently expressed itself. To find this one must look at the general scope and purview of the Act and the remedy the legislature intends to apply in the former state of the law and then determine what the legislature intended to do. This line of investigation is, of course, only open if it is necessary. In the words of Lord Selborne in Main v. Stark [Main v. Stark, (1890) LR 15 AC 384 at p. 388 (PC)], there might be something in the context of an Act or be collected from its language, which might give to words prima facie prospective a large operation. More retrospectivity is not to be given than what can be gathered from expressed or clearly implied intention of the legislature.”
20.  Considering that the subject-matter of Section 28 is “agreements”, the unamended Section 28 would be the law applicable as on 31-1-1996, which is the date of the agreement of bank guarantee. It now remains for us to deal with the case law cited by both sides.
xxx xxx xxx
24. On a conspectus of the aforesaid decisions, it becomes clear that Section 28, being substantive law, operates prospectively, as retrospectivity is not clearly made out by its language. Being remedial in nature, and not clarificatory or declaratory of the law, by making certain agreements covered by Section 28(b) void for the first time, it is clear that rights and liabilities that have already accrued as a result of agreements entered into between parties are sought to be taken away. This being the case, we are of the view that both the Single Judge [Union of India v. Bhagwati Cottons Ltd., 2008 SCC OnLine Bom 217 : (2008) 5 Bom CR 909] and the Division Bench [Indusind Bank Ltd. v. Union of India, 2011 SCC OnLine Bom 1972] were in error in holding that the amended Section 28 would apply.”

41. Following this judgment, a Co-ordinate Bench of this Court in Delhi Development Authority v. Sanyukt Nirmata and Another, 2019 SCC OnLine Del 6468, held that the claims of the contractor were barred. This case is close to the facts of the present case and becomes significant to refer as the clause involved therein was similar to the clause in the present case. Clause 25 incorporated in the agreement between the parties in the said case is extracted hereunder for ready reference:-

“6.  The said objection is based on clause 25 of the contract, the relevant extract of which is as under:
“It is also a term of the contract that if the contractor does not make any demand for arbitration in respect of any claim in writing within 90 days of receiving the intimation from the Engineer-in-charge that he is ready for payment, the claim of the contractor’s will be deemed to have been waived and absolutely and that Authority shall be discharged and release all liabilities under the contract in respect of those claims.””

42. Relying on the judgment of the Supreme Court in Union of India v. IndusInd Bank (supra), the Court first concluded that Clause 25 therein was not void under Section 28 since the disputes were prior to the amendment. On the facts, the Court found that DDA had informed the contractor that final bill was ready, which was evident from contractor’s own letter dated 17.09.1992 and yet despite not having received payments, the contractor raised no claims within 3 months as required under Clause 25. The Court thereafter held that Clause 25 was applicable and the claims were barred. It may be noted that counsel for the Petitioner had pointed out that the judgment has been challenged in appeal in FAO(OS)(COMM) 314/2019 but there is no stay. Even otherwise, the case of the Respondent is squarely covered by the judgment of this Court in Manohar Singh (supra), where it was held that a clause in the agreement extinguishing the rights of a party to enforce the claim cannot be void under unamended Section 28.
43. Coming to the facts of this case, from the arbitral record it is evident that Respondent had vide letter dated 27.08.1987 intimated the Petitioner that the bill was ready for payment and certain documents were required to be signed at the end of the Petitioner to process the release of money. It was not the case of the Petitioner during the arbitral proceedings that this letter was not received and the consistent stand was that vide letter dated 09.12.1989, Petitioner had requested for ‘certified copy’ of the bill. This position is clear from a reading of the said letter. Subsequently, Petitioner invoked arbitration vide letter dated 05.01.1990, where it was reiterated that certified copy of the bill was not furnished. Interestingly, even this issue was raised after a stark silence of over two years, with no explanation as to what the Petitioner did from 1987 to 1989, assuming that the letter dated 09.12.1989 was sent, a fact which is seriously disputed by the Respondent. Even today, it is not the stand of the Petitioner that letter dated 27.08.1987 was not received. Non-receipt of a certified copy of the bill is thus of no consequence in so far as Clause 25 is concerned, for which the focal point is the intimation that the bill is ready for payment. Petitioner also received payments in the meantime and objected only to a shortfall of Rs. 33,600/-, with respect to claims pertaining to extra chambers. Assuming the certified copy of the bill was not received, there was no stopping the Petitioner from approaching the Respondents in this regard and asking for the same, instead of waking from slumber after 2 years, being aware of Clause 25 and the restriction therein. In this view of the matter, once the Petitioner failed to invoke arbitration in writing within 90 days of receiving the intimation, its rights were extinguished by virtue of Clause 25 of the Agreement and therefore the finding of the Arbitrator warrants no interference on this aspect. An argument was taken by learned counsel for the Petitioner that the objection of the claims being time barred was not taken by the Respondent in the first round of arbitration and therefore, it was not open to the Arbitrator to entertain this objection. This contention, merits rejection for two-fold reasons. Firstly, the objection of the claims being barred under Clause 25 goes to the root of the jurisdiction of the Arbitrator and as per the settled law being a legal plea it can be taken at any stage of litigation between the parties. Secondly and more importantly, before the Statement of Defence was filed by the Respondent, the order sheet reflects that Petitioner had given no objection, subject to the Respondent not altering the pleas taken. Subsequently, the Arbitrator heard both sides on the issue of time barred claims and opportunity was given to the Petitioner to canvass arguments on this, which the Petitioner availed without any protest or objection. Only because the result is not in favour of the Petitioner, it cannot be permitted to turn around and urge that the plea of time barred claims could not be entertained by the Arbitrator. This Court therefore agrees with the finding of the learned Arbitrator that the claims of the Petitioner were barred under Clause 25 of the Contract between the parties and no reason to interfere in the award is made out by the Petitioner. For this reason, Court has not delved into the merits of the claims.
44. Objections filed by the Petitioner are accordingly rejected and the application is dismissed.

JYOTI SINGH, J
DECEMBER 20 , 2023/kks/Shivam/KA

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