Plea Of Limitation Shall Be Deemed To Be Waived If Not Raised Before Arbitrator U/S 16 Of Arbitration Act: Madhya Pradesh High Court

Brief Facts

This arbitration appeal under Section 37(1) (b) of the Arbitration and Conciliation Act 1996 (hereinafter to be referred to as Act of 1996) has been filed assailing the order dated 16.3.2021, passed in MJC.A.V.No.1/2018 by the learned second Additional District Judge, Dr. Ambedkar Nagar, District Indore.

A work order was issued to the appellant on 28.11.2008, for the construction of provision of 50 Foreign Officers Accommodation at Army War College, Mhow. According to the appellant, the work was completed, and thereafter the bills were also raised, however, the payment of which was not made in time which led to a dispute between the parties, and the matter was referred to the arbitrator, before whom, various claims were submitted. The Arbitrator, vide its award dated 5.9.2018 , decided the claims directing the respondent to pay the interest on the delayed payments wherein as many as five claims were decided.

The aforesaid award was challenged by the Union of India before the second Additional District Judge, Dr. Ambedkar Nagar, District Indore under Section 34 of the Act of 1996 in which the final order was passed on 16.3.2021, allowing the appeal partially, and it was held that the learned Arbitrator has erred in awarding the interest despite the fact that the claimants did not even claim the same.

Contentions

The appellant submitted that interest was claimed in the claim petition before the arbitrator and has drawn attention of this Court to the averments made in respect of the claims and that so far as claim no.4 is concerned, it is true that no interest was sought, and thus, it is submitted that the impugned order can be sustained only in respect of claim no.4 (cost of reference). However, the other claims in respect of interest have erroneously been rejected by the District Court.

Reliance was placed on the Bombay High Court judgment in Vimal G. Jain Vs. Vertex Financial Services Pvt. Ltd (2007) in which it was held that bar of limitation cannot be raised in proceeding under Section 34 of the Act of 1996, or in an appeal arising therefrom, and if the point regarding bar of limitation is not raised before the arbitrator the same cannot be raised under Section 34 of the Act of 1996.

Per contra, the respondent submitted that the respondent has also preferred the A.A No.3/2022 and A.A.No.25/2022 on the ground that the claims were barred by limitation which ground, though was not raised before the arbitrator was specifically raised in the proceedings under Section 34 of the Act of 1996 by way of amendment.

That since the ground of limitation in filing the claim has not been considered by the District Court, the matter may be remanded back.

That otherwise also the interest has been awarded by the arbitrator not from the date of submission of bills but from the date of completion of work which is also erroneous.

Court's Analysis

The court, at the outset, rejected the contention of the respondent with respect to the claim barred by limitation and observed that the respondent has not taken any ground of delay before the arbitrator, and in such circumstances, the respondent would be precluded from raising this issues for the first time in the application filed under Section 34 of the Act of 1996, and although the respondent did amend the application filed under Section 34 of 1996 and also added ground of delay in filing the claim by the claimants, it was inconsequential.

The court referred to the Bombay High Court judgment in Vimal G. Jain Vs. Vertex Financial Services Pvt. Ltd (2007) wherein it was held that Conjoint reading of sections 4 and 16 of the Arbitration Act would disclose that a party to the arbitration proceedings seeking to raise the point of bar of limitation for initiating the arbitration proceedings should raise the issue at the earliest opportunity and in any case not later than the submission of the statement of defence, otherwise it would be deemed to have been waived.

After perusing the pleadings of the respective parties, the court further observed that the interest was certainly claimed by the claimants, which has also been awarded by the Arbitrator as claimed. Thus, the finding of the learned judge of the District Court that the interest was not claimed by the appellant is apparently perverse and cannot be sustained in the eyes of law.

Accordingly, the appeals filed by the appellant M/S Uma Shankar, were allowed. Whereas the appeals preferred by the Union of India were dismissed.

Case Title: M/S. UMA SHANKAR MISHRA Versus UNION OF INDIA

Case Reference: ARBITRATION APPEAL NO.24/2021

Judgment Date: 05/11/2024

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