Supreme Court of India
Opg Power Generation Private Limited vs Enexio Power Cooling Solutions India … on 20 September, 2024
Author: Dhananjaya Y. Chandrachud
Bench: Dhananjaya Y. Chandrachud
2024 INSC 711 REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 3981-3982 OF 2024
(Arising out of SLP (Civil) Nos.21017-21018 of 2021)
OPG POWER GENERATION
PRIVATE LIMITED … APPELLANT(S)
Versus
ENEXIO POWER COOLING
SOLUTIONS INDIA PRIVATE
LIMITED & ANR. … RESPONDENT(S)
With
CIVIL APPEAL NOS. 3983-3984 OF 2024
(Arising out of SLP (Civil) Nos.21009-21010 of 2021)
JUDGMENT
MANOJ MISRA, J.
1. These two appeals are directed against a common
judgment and order of the High Court1 dated 1 September
2021 passed in OSA (CAD) Nos. 174-175 of 2021,
whereby, exercising powers under Section 37 of the
Arbitration and Conciliation Act, 19962 read with Section
13(1) of the Commercial Courts Act, 20153 and Clause 15
of Amended Letters Patent, 1865 read with Order XXXVI
Signature Not Verified
Digitally signed by
Sanjay Kumar
Date: 2024.09.20
1
15:11:55 IST
Reason: High Court of Judicature at Madras
2
1996 Act
3
2015 Act
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 1 of 150
Rule 9 of O.S. Rules, the Division Bench of the High Court
allowed the appeals, set aside the judgment and order of
the Single Judge dated 23 December 2020 and restored
the arbitral award dated 13 July 2020.
THE CONTRACT
2. OPG Power Generation Private Ltd (in short OPG –
the appellant in the leading appeal), a subsidiary of Gita
Power and Infrastructure Private Limited (in short Gita
Power – Respondent No.2 (R-2) in the leading appeal, and
appellant in the connected appeal), floated a composite
tender for design, manufacture, supply, erection and
commissioning of air-cooled condenser unit (ACC Unit)
with auxiliaries for 160 MW Coal Based Thermal Power
Plant (Project) at Gummidipoondi in the State of Tamil
Nadu. Enexio Power Cooling Solutions (in short Enexio –
Respondent No.1 (R-1) in the leading appeal) bid for the
project. After a series of correspondences /negotiations,
on 4 March 2013, R-2 issued two separate orders: (i) for
design, engineering and supply of one ACC Unit with
auxiliaries for 160 MW Coal Based Power Project at
Gummidipoondi (in short, Supply Purchase Order); and (ii)
for erection and commissioning of one unit of ACC with
auxiliaries for 160 MW Coal Based Power Project at
Gummidipoondi (in short, Erection Purchase Order).
Interestingly, the tender was floated by OPG but the
supply and erection orders were issued by its holding
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 2 of 150
company (Gita Power – R-2) on 4 March 2013. However,
later, in the month of July 2013, OPG confirmed those
orders by issuing two separate orders with same terms
and bearing the same date i.e. 4 March 2013.
3. The supply / erection purchase orders with its
enclosures contained an arbitration clause in the following
terms:
“Clause 21. ARBITRATION
21.1. In the event of any dispute or difference
arising under the Order or in connection
therewith including any question relating to
existence, meaning and interpretation of the
Order or any alleged breach thereof that cannot
be amicably settled between the Parties, the
same shall be referred to the arbitration.
21.2. Arbitration shall be conducted under the
Rules of Conciliation and Arbitration of the
International Chamber of Commerce by three
arbitrators appointed in accordance with said
rules. The place of arbitration will be at Chennai.
The arbitration proceedings shall be conducted
in the English language.
21.3. The arbitrators shall take into
consideration the will of the Parties as expressed
in the Order, the evidence presented, the
principles of equity and good faith. The
decision(s) of the arbitrators shall be final and
both Parties undertake to fulfil and execute the
said decision(s).
21.4. Notwithstanding any dispute between the
parties, Parties shall not be entitled to withhold/
delay/defer their obligations under the Order
and same shall be carried out strictly in
accordance with the terms and conditions of the
Order.”
4. Clause 6 of the supply purchase order provided:
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“6-Tax and duties:
6.1. Taxes, duties and levies payable and
charged by the competent authority such as
Excise Duty, Sales Tax, Cess will be borne and
paid by the Purchaser.
6.2. The Purchaser shall issue Central Sales
Tax Form C or any other Form as applicable for
interstate sale.”
5. Likewise, clause 6 of the erection purchase order
provided:
“6-Tax and duties:
6.1. All taxes duties and local levies payable and
charged by the Competent Authority for the Services,
such as Service Tax, cess, work order tax and other
charges which could be levied in connection with and
during the Order, whether deducted at source or not,
will be borne and paid by the Purchaser.
6.2. Any statutory variation due to implication of new
taxes and duties shall be paid by Purchaser.”
THE DISPUTE BETWEEN PARTIES
6. The intended completion/ commissioning date, as
originally contemplated, was 31 March 2014. However,
commissioning took place in May 2015. The total amount
billed by Enexio (R-1) for the aforesaid two orders was Rs.
46,71,04,493 but the amount paid to it was Rs.
39,59,19,629 only. This gave rise to a dispute. According
to Enexio (R-1), Rs.6,75,15,631 remained payable to it.
Whereas, according to the appellant, nothing was due as
from the remaining amount, following sums were
deductible:
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 4 of 150
“(i) Rs.3,30,00,000, vide debit note dated
24.08.2015, towards liquidated damages for
delay in supply and erection.
(ii) Rs.5,94,06,693, vide debit note dated
16.01.2016, towards customs duty.
(iii) Rs. 1,72,854 towards dismantling
modification – TG building.
(iv) Rs. 27,40,161 towards ACC duct fabrication.
Totaling Rs. 9,53,19,708.”
7. On 19 April 2018 a meeting took place between
the representatives of the parties. Minutes of that meeting
were drawn in the following terms:
“Minutes of meeting with M/s. OPG Power
Generation Pvt. Ltd. and M/s. ENEXIO Power
Cooling Solutions (I) Pvt. Ltd. dated 19.04.2018.
Members Present:
OPGS ENEXIO
1. Mr. S. Swaminathan 1. Mr. Parasuram
2. Mrs. C. Kiruthiga 2. Mr. Ravi Rengasamy
Sub.: Supply of Air-cooled condenser with
auxiliaries for 160 MW Coal based Power
Project of OPG Power Generation Pvt. Ltd.
(OPGPG) – Debit Notes.
Ref.: 1. Order No. OPGPG/ED/P-III/SUPPLY/008,
dated 04.03.2013.
2. Order No. OPGPG/ED/P-III/ ERECTION
/009, dated 04.03.2013
Description Amount in Rs.
Total Billed Amount 467,104,493
Amount Paid 395,919,629
Balance Payable incl Retention 67,515,618
OPGPG Debit
LD- Delay in Supply 30,900,000
LD- Delay in Erection 2,100,000
Customs Duty 59,406,693
Dismantling Modification – TG 172,854
Building
ACC duct Fabrication (Debit raised
for Rs.63,40,161/- against which
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GEA have accepted for
Rs.36,00,000/- that is reduced
from payable) 2,740,161
Total OPGPS Debit 95,319,708
Final Payable by Enexio 27,804,090
The above figures are validated by respective
Projects and Finance departments.
However, we request that the CD, CVD and LD’s
be looked at leniently and mutually settled. The
Contract calls for all taxes such as ED, ST to be
reimbursed and CVD is equivalent to Excise
duty.
LD is not only due to our ENEXIO’s fault. In any
case, this did not cause for any delay in Plant
commissioning. We have had huge losses due to
US dollar increase during Project stage to the
tune of Rs.1.82 crores.
ENEXIO requested that the above amount of
Rs.2,78,04,090/- payable by them to M/s. OPG
Power Generation Pvt. Ltd. be adjusted against
the amount to be received by M/s. ENEXIO
Power Cooling Solutions (I) Pvt. Ltd. from M/s.
OPGS Power Gujarat Pvt. Ltd.”
8. According to Enexio (R-1), in that meeting, the
parties were ad idem regarding the outstanding principal
amount payable to Enexio (R-1) and there was no
consensus on any other item mentioned in the minutes of
the meeting.
9. On 26 May 2018 OPG extended an offer of Rs. 300
lacs to Enexio (R-1) as full and final settlement of the
account. This was not accepted by Enexio. Hence, the
claim.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 6 of 150
ENEXIO’S (R-1’s) CLAIM
10. On 2 May 2019 Enexio (R-1) invoked the
arbitration clause, under the extant ICC Rules, raising the
following claims:
S.No. Claim Amount (in INR)
A Outstanding principal amount as 6,75,15,631
due under the Purchase Orders
B Declaration that the Debit Note
Nos.076/2015-16 and 077/2015- -
16, both dated 24.08.2015, issued
by the Employer, claiming
deduction of aggregate amount of
INR 3,30,00,000/- towards
Liquidated Damages for the delay,
are unlawful and unsustainable.
C Declaration that the Debit Note
No.032/2015-16 dated -
12.01.2016, issued by the
Employer, claiming deduction of
Rs.5,94,06,693/- towards
Customs Duty, including CVD and
SAD, is unlawful and
unsustainable.
D Interest on outstanding principal 3,51,43,446
amount calculated @ 18% p.a.
from respective due date(s) of
payments till 31.03.2019.
E Interest on outstanding principal
amount calculated @ 18% p.a. for -
further period starting from
01.04.2019 till the date of
payment.
F Damages under the Purchase 8,00,00,000
Orders
G Costs of arbitration
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THE COUNTERCLAIM
11. On 15 July 2019 OPG submitted its defense, and
raised counterclaims in respect of: (a) liquidated damages
for delay; (b) customs duties; (c) cost of erection of
horizontal and vertical exhaust through external agency;
(d) cost of repair/ replacement of gear boxes; and (e) cost
of repair/ replacement of fan modules.
THE AWARD
12. On 13 July 2020 ICC Arbitral Tribunal, comprising
of three members, delivered a unanimous award,
whereunder OPG and Gita Power, who have separately
filed these two appeals, were required to pay, jointly and
severally, to the claimant (R-1 – Enexio):
(i) Rs. 6,11,75,470/- towards outstanding
principal amount due under the purchase
orders;
(ii) Rs. 95,27,533/- towards ICC
Administrative Costs and the Tribunal
fees and expenses incurred in the
arbitration; and
(iii) Rs. 40,65,515/- towards claimant’s
legal fees and expenses.
In addition to the above, OPG and Gita
Power were directed to pay simple interest
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 8 of 150
at a rate of 10% per annum on: (a) Rs.
6,11,75,470/- from 30 October 2015
until the date of payment; (b)
Rs.95,27,533/- from the date of the
award till the date of payment; and (c) Rs.
40,65,515/- from the date of the award
till the date of payment.
However, all other claims including
counterclaims were rejected.
KEY FINDINGS IN THE AWARD
13. The key findings of the Arbitral Tribunal were:
(a) Gita Power and OPG are jointly and severally
liable – Gita Power, being the holding company of OPG,
had actively participated in the negotiations and had
placed the purchase orders, which were later confirmed
by OPG. In fact, they both acted as a single economic
enterprise. Therefore, mere issuance of another set of
purchase orders by OPG with same terms and
conditions would not relieve Gita Power of its
obligations, rather both would be jointly and severally
liable to the claimant (Enexio).
(b) Claimant is entitled to the unpaid principal
amount with interest – Principal amount of Rs.
6,75,15,631/- is due and payable to the claimant
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 9 of 150
(Enexio) under the terms of the purchase orders, subject
to reconciliation of Rs.63,40,161 spent on vertical duct
erection. Thus, net amount payable to the claimant is
Rs. 6,11,75,470 plus interest.
(c) No Damages are payable by Enexio to OPG/ Gita
Power for the delay – The claimant was entitled to
extension up to the date of completion i.e., 21
September 2015. Therefore, Enexio has no liability
towards liquidated damages for the delay. Moreover, all
the completion requirements were achieved by that
date.
(d) No liability of Enexio to pay customs duty –
Clause 6 of the Supply / Erection Purchase orders
stipulated that all taxes, duties and local levies payable
would be borne and paid by the purchaser. Therefore,
liability to pay customs duty would fall upon the
purchaser/ employer.
(e) Limitation –
(i) Declaratory relief sought by Enexio qua the
debit notes (i.e., towards liquidated damages and
customs duty) is beyond the period of limitation
prescribed by Article 58 of the Limitation Act, 19634;
4
1963 Act
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 10 of 150
(ii) However, Enexio’s claim for unpaid dues
payable under the contract is within the period of
limitation; and
(iii) OPG’s counterclaim for cost of
repair/replacement of gearboxes and fan modules is
barred by limitation.
Reasoning of the Arbitral Tribunal on limitation:
14. Regarding the finding on limitation, the Arbitral
Tribunal (in short the “Tribunal”) observed that the
declaratory relief qua the debit notes (i.e., towards: (a)
Liquidated damages for the delay; and (b) Customs duty)
was sought beyond three years from the date when the
right to sue first accrued, therefore it was beyond the
limitation period prescribed by Article 58 of the Schedule
to the 1963 Act. The Tribunal noticed that the debit note
for liquidated damages was issued on 24 August 2015; the
claimant acknowledged its receipt vide letter dated 28
August 2015; whereas the request for arbitration was
received by ICC Secretariat on 2 May 2019. Likewise, the
debit note for customs duty was issued on 12 January
2016 that is, beyond three years from the date of request
for arbitration.
15. Insofar as the relief for recovery of the unpaid
amount under the purchase orders was concerned, the
Tribunal opined that it was not barred by limitation
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 11 of 150
because meaningful negotiations were ongoing between
the parties as evidenced by the minutes of meeting dated
19 April 2018, which was followed by a written offer of the
purchaser/ employer, dated 26 May 2018, to pay Rupees
three crores to the claimant as full and final settlement of
the account. The relevant observations in that regard are
found in paragraph 16.03 (d) of the award, which is
extracted below:
“16.03 (d) Based on the arguments of the Parties’
respective Counsel and with reference to the case
law and statutes cited during the oral hearing in
this arbitration, the Tribunal finds that as long
as meaningful negotiations were ongoing
between the parties the period of limitation of
three years had not begun to run. Following the
meeting held between the parties on 19th April
2018 the respondents made a written offer to
settle the matter on 26th May 2018. Thus, the
Tribunal finds that the period of limitation had
not commenced until 26th May 2018 and
consequently had not expired when the Request
for Arbitration was received by the ICC
Secretariat on 2nd May 2019. Accordingly, the
Tribunal finds that items A, D, E and F claiming
payment of money are not time barred.”
16. Regarding the counterclaim for cost of repair/
replacement of gearboxes and fan modules as barred by
limitation, the Tribunal reasoned thus:
“16.04 Time Bar in relation to the Respondents’
counterclaims for the cost of repair/replacement
of gearboxes and fan modules.
There is no evidence that these counterclaims
were included in the ongoing negotiations. The
Tribunal has found that the Taking Over
Certificate is deemed to have been issued on 21st
September 2015. (See Section 13.13 above). On
that date the Claimant is deemed to haveCivil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 12 of 150
completed its obligations and thus, that is the
latest date from which the limitation period of
three years must run. The Claimant’s liabilities
are barred by limitation on or earlier than 21st
September 2018. The Counterclaim was
delivered on 15th July 2019 and is, thus, barred
by limitation……….”CHALLENGE TO THE AWARD U/S 34 OF THE 1996
ACT
17. Two applications, namely, O.P. Nos. 533 and 562
of 2020, were filed by OPG (the appellant in the leading
Civil Appeal) and Gita Power (appellant in the connected
appeal and R-2 in the leading appeal) respectively, under
Section 34 of the 1996 Act, for setting aside the award
dated 13 July 2020.
Grounds of Challenge
18. OPG and Gita Power laid challenge to the arbitral
award, inter alia, on the following grounds:
(i) Enexio’s (R-1’s) claim was made beyond the
period of limitation prescribed by Articles 14 and
18 of the Schedule to the 1963 Act. The
arbitration clause was invoked on 2 May 2019,
well beyond three years from the date (i.e., 31
March 2014) when the work ought to have been
completed as per the contract. It was also beyond
three years from the deemed date of completion
(i.e., 21 September 2015).
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 13 of 150
(ii) Different yardstick was adopted in computing the
limitation period of the claim than what was
adopted for the counterclaim, which was not at all
justified as both arose out of same contractual
relationship.
(iii) One part of the minutes of meeting dated 19 April
2018 that supported the counterclaim was
discarded, while the other part, which favored the
claimant, was accepted. This is nothing but
perverse.
(iv) The time for completion of the work under the
contract was extended without any basis.
(v) Findings in the award are self-contradictory in as
much as, if challenge to the debit note for
damages on account of the delay was beyond
limitation, there was no logic in denying
adjustment of those damages against the unpaid
dues payable to Enexio under the purchase
orders.
(vi) Material evidence qua liability for customs duty
was ignored.
SINGLE JUDGE’S ORDER U/S 34 OF THE 1996 ACT
19. The learned Single Judge in its judgment and
order on the application, under Section 34 of the 1996 Act,
charted the undisputed dates as follows:
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 14 of 150
Date Events
31.03.2014 Said work ought to have been
completed by Enexio.
24.08.2015 Debit note pertaining to liquidated
damages was raised by Gita and
OPG
21.09.2015 Deemed date of completion of said
work
12.01.2016 Debit note regarding customs duty
was raised by Gita and OPG
19.04.2018 Talks between adversaries namely
Enexio on one side and Gita/OPG
on the other side culminated in
minutes of meeting (Ex.C.78)
26.05.2018 Gita/OPG offered to settle at Rs.
300 lacs as full and final settlement
(Ex. C. 79)
22.08.2018 Gita/OPG sent communication
enclosing cheque for Rs. 25 lakhs as
part of Rs. 3 Crores in full quit (Ex.
C. 80)
29.10.2018 Enexio returned Rs. 25 lakhs
cheque (Ex. C. 82)
02.05.2019 Arbitral institution, namely, ICC
request for arbitration (to be noted,
both parties agreed that this is the
date of commencement of
arbitration within the meaning of
section 21 of A and C Act)
15.07.2019 Gita/OPG made counter claim vide
its pleadings before AT
20. After charting the relevant dates, and perusing the
arbitral award, in paragraph 25 of the judgment, the
learned Single Judge observed:
“25. There is a clear dichotomy in impugned
award regarding the legal drill of testing
limitation. AT has taken 26.05.2018 as the
reckoning date, that being the date on which
written offer to settle the matter was made by
Gita/OPG vide Ex. C. 79, but for testing the
counter claim of Gita/OPG, AT has takenCivil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 15 of 150
21.09.2015 as the reckoning date or starting
point of limitation, that being the date of deemed
completion of said work. This Court is
constrained to observe that this dichotomy is
akin to classical division between science and
mysticism. Therefore, this Court unhesitatingly
holds that this is patently illegal and an
implausible view. To be noted, this dichotomy is
not a mere erroneous application of law, and it
needs no reappreciation of evidence. It is also an
infract of section 18 of A and C Act which
provides for equal treatment of parties. More
importantly, the law of limitation being based on
public policy, as already delineated supra,
infract of the same would clearly vitiate the
impugned award as one being in conflict with
public policy of India.”
21. The learned Single Judge thereafter proceeded to
observe that the counterclaim and heads of claim were so
intertwined with each other that a decision on one, with
no decision on the other, would vitiate the entire award.
Further, it was observed, if the arbitral tribunal had taken
the date of joint meeting (i.e., 19 April 2018), and the
follow up offer dated 26 May 2018, as the starting point of
limitation for the claim, the same would be the starting
point of limitation for the counterclaim as well. And if the
starting point of limitation is taken as 21 September 2015
(i.e., the date of completion of the work), the claim, which
was filed on 2 May 2019, was well beyond three years and
as such barred by limitation. Thus, according to the
learned Single Judge there was inherent contradiction in
the arbitral award which made it vulnerable to a challenge
under Section 34 of the 1996 Act. Consequently, the
learned Single Judge set aside the arbitral award.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 16 of 150
22. Aggrieved by the judgment and order of the learned
Single Judge, dated 23 December 2020, Enexio (R-1
herein) filed two appeals, namely, O.S.A. (CAD) Nos. 174
and 175 of 2021, before the Division Bench of the High
Court, which came to be allowed by the impugned
judgment.
IMPUGNED JUDGMENT
23. The Division Bench of the High Court, inter alia,
took the view that the minutes of meeting dated 19 April
2018, read with e-mail dated 26 May 2018, amounted to
an acknowledgment of the dues payable to Enexio, thereby
satisfying the ingredients of Section 18 of the 1963 Act for
a fresh period of limitation to run from that date. It
observed that when the last part of the minutes’ dated 19
April 2018 is read with subsequent communication dated
26 May 2018, it belies the stand of the counterclaimant
that the counterclaims were admitted to the claimant.
Thus, the Division Bench, inter alia, held that the view
taken by the arbitral tribunal was a possible view and
there was no patent illegality in the award meriting
interference under Section 34 of the 1996 Act.
Consequently, the order of the learned Single Judge was
set aside, and the arbitral award was restored.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 17 of 150
24. We have heard Mr. Abhimanyu Bhandari for the
appellants; Mr. Gaurab Banerjee for the claimant-
respondent and have perused the record.
SUBMISSIONS ON BEHALF OF APPELLANT(S)
25. The learned counsel for the appellants, inter alia,
submitted:
(i) The Arbitral Tribunal, in paragraph 16.03(d) of
the award qua claims (i), (iv), (v) and (vi)
(corresponding claim numbers A, D, E and F) of
the claimant-respondent, observed:
“As long as meaningful negotiations were ongoing
between the parties, the period of limitation of three
years had not begun to run. Following the meeting
held between the parties on 19th April, 2018 the
respondents made a written offer to settle the matter
on 26 May 2018. Thus, the Tribunal finds that the
period of limitation had not commenced until 26 May
2018 and consequently had not expired when the
request for arbitration was received by the ICC
Secretariat on 2 May 2019.”The afore-quoted observations are in teeth of
decisions of this Court in (i) Bharat Sanchar
Nigam Limited v. Nortel Networks Pvt. Ltd.5
and (ii) B & T AG v. Ministry of Defence6 where
it has been held that mere negotiations will not
postpone the cause of action for the purpose of
limitation.
5
(2021) 5 SCC 738, paragraphs 20 and 21
6
(2024) 5 SCC 358, paragraph 73Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 18 of 150
(ii) The period of limitation for the claim would have
to be counted as three years from the date of
completion i.e., 21 September 2015, which got
over before 2 May 2019 i.e., the date when request
was received for arbitration. Once the claim is
barred by limitation, the award allowing the claim
would be deemed to be violative of fundamental
policy of Indian law and, therefore, vulnerable in
the light of the law declared in (i) Ssangyong
Engg. & Construction Co. Ltd. v. NHAI7 and (ii)
Associate Builders v. Delhi Development
Authority.8
(iii) The Arbitral Tribunal applied different yardstick
for computing limitation of the claim than what
was adopted for the counterclaim. For example,
the start point of limitation for the claim was
taken as 26 May 2018 whereas for the
counterclaim it was taken as 21 September 2015.
This amounted to unequal treatment of the
parties more so when claim as well as
counterclaim arose from the same contractual
relationship.
7
(2019) 15 SCC 131
8
(2015) 3 SCC 49
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 19 of 150
(iv) Once the declaratory relief qua Debit Notes dated
24 August 2015 (i.e. in respect of Rs. 3,30,00,000
towards liquidated damages for the delay in
supply and erection under the purchase orders)
and 12 January 2016 (i.e. in respect of Rs.
5,94,06,693/- towards Customs Duties) was held
barred by limitation, the amount reflected in the
Debit Notes ought to have been deemed payable
by the claimant and that amount ought to have
been adjusted against any amount payable to the
claimant.
(v) The Division Bench erroneously relied on the
minutes dated 19 April 2018 to apply Section 18
of the 1963 Act for extending the period of
limitation of the claim when it was nobody’s case
that limitation stood extended thereby. Further, if
the minutes dated 19 April 2018 were to be relied,
it ought to have been relied in toto and not in part.
That is, it should have been taken as an
admission of liability of the claimant towards
liquidated damages for the delay as well as
customs duty.
(vi) In paragraph 13 of the impugned judgment, the
Division Bench sought to appreciate the evidence
i.e. the minutes of meeting dated 19 April 2018,
which was beyond the scope of powers exercisable
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 20 of 150
under Section 37 read with Section 34 of the 1996
Act. In this regard, reliance was placed on: (i) UHL
Power Company limited v. State of Himachal
Pradesh9; (ii) Dyna Technologies Pvt. Ltd. v.
Crompton Greaves Lt.,10; (iii) Heidelbergh
Cement India Ltd. v. The Indure Pvt. Ltd.11; (iv)
MMTC Ltd. v. Vedanta Ltd.12; (v) Ssangyong
Engg (supra); and (vi) Haryana Tourism Ltd. v.
Kandhari Beverages Ltd.13
(vii) The learned Single Judge justifiably set aside the
award that was self-contradictory and perverse.
(viii) Counterclaims for cost of repair/ replacement of
gear boxes, which were defective, ought to have
been adjudicated. In absence thereof, the arbitral
award is rendered bad in law.
(ix) The Division Bench of the High Court
misconstrued the ratio of the decision of this
Court in Geo Miller & Co. (P) Ltd. v. Rajasthan
Vidyut Utpadan Nigam Ltd14 for treating the
claim within, and the counterclaim beyond, the
period of limitation.
9
(2022) 4 SCC 116, paragraphs 16 to 21
10
(2019) 20 SCC 1, paragraphs 27-43
11
2022/DHC/003952
12
(2019) 4 SCC 163, paragraphs 11 to 13
13
(2022) 3 SCC 237, paragraphs 7 & 8
14
(2020) 14 SCC 643 (para 28)
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 21 of 150
(x) The subsequent purchase orders issued by OPG
replaced the earlier purchase orders issued by
Gita Power, and the supply/ work was in respect
of an OPG project, therefore Gita Power could not
have been dragged into arbitration and made
jointly and severally liable with OPG.
SUBMISSIONS ON BEHALF OF FIRST RESPONDENT
/ENEXIO
26. The learned counsel for the first respondent, inter
alia, submitted:
(i) The findings in the award are factually
correct. There is no patent illegality, as
alleged, or otherwise, which may warrant
interference under Section 34 of the 1996
Act. Therefore, the Division Bench of the
High Court was justified in setting aside
the order of the Single Judge and restoring
the award.
(ii) The appellant’s case that all counterclaims
were treated as barred by limitation and,
therefore, not considered on merits, is
factually incorrect. In all five counterclaims
were there. Out of those five, counterclaims
towards: (i) liquidated damages for the
delay in supply and erection; (ii) customsCivil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 22 of 150
duty; and (iii) cost of erection of horizontal
and vertical exhaust duct through an
external agency, were considered and
decided on merits. The counterclaims for
liquidated damages and customs duty were
rejected whereas counterclaim for cost of
erection of vertical duct was allowed. Only
two counterclaims towards (i) cost of
repair/ replacement of Gear Boxes, due to
alleged defective supply, amounting to
Rs.9,76,000, and (ii) cost of repair/
replacement of Fan Modules, due to alleged
defective supply, amounting to
Rs.14,80,802, were dismissed as barred by
limitation. The finding that these two
counterclaims were barred by limitation is
premised on there being no material to
indicate that they were included in the
ongoing negotiation.
(iii) The arbitral tribunal considered the three
counterclaims on merit by adopting the
same yardstick qua limitation as applied to
the claims. These three counterclaims were
not treated as barred by limitation as they
were cited in the minutes of the meeting
dated 19 April 2018 wherein the principal
amount due to OPG was alsoCivil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 23 of 150
acknowledged. It is thus incorrect to state
that the arbitral tribunal adopted different
yardstick on the point of limitation while
deciding counterclaims than what was
adopted to decide the claims.
(iv) Enexio’s claim of the balance amount was
not barred by limitation even if the
limitation period is counted from the date
of completion of the project i.e., 21
September 2015, because before expiry of
the period of limitation of three years, that
is before 20 September 2018, vide minutes
of the meeting dated 19 April 2018, OPG
had acknowledged in writing its liability
towards the balance of the principal
amount (i.e., Rs. 6,75,15,631) albeit
subject to deductions. Thus, by virtue of
Section 18 of the 1963 Act, from the date
of written acknowledgment, which was
followed by written communication dated
26 May 2018, fresh period of limitation of
three years began to run.
(v) Inference drawn from the minutes of the
meeting as well as subsequent conduct of
the parties to conclude lack of consent on
Enexio’s part for deductions in the
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 24 of 150
outstanding amount, is a decision within
the remit of the arbitral tribunal. Therefore,
any error, if at all, would be an error within
its jurisdiction, which is not amenable to
interference under Section 34 of the 1996
Act. Because, while examining the validity
of an award under Section 34, the Court
exercises supervisory and not appellate
jurisdiction (vide: (i) Steel Authority of
India Ltd. versus Gupta Brothers Steel
Tubes Ltd.15; (ii) Associated Builders
(supra); (iii) Ssangyong Engg (supra); and
(iv) Delhi Airport Metro Express Pvt. Ltd.
v. DMRC Ltd.16).
(vi) The learned Single Judge had erred in
observing:
(a) ‘That any infract qua limitation
would violate public policy and attract
Section 34 (2) (b) (ii) read with
Explanation 1 of the 1996 Act.’
Because limitation is a mixed
question of fact and law and if its
determination depends on
interpretation / appreciation of
evidence / materials on record, any15
(2009) 10 SCC 63
16
(2022) 1 SCC 131Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 25 of 150
error, ipso facto, would not render the
award amenable to interference as is
clear from the Proviso to sub-section
(2-A) of Section 34 of the 1996 Act.
(b) ‘That different dates could not have
been taken for determining limitation
of the claim and the counterclaim,
when both were intertwined and had
arisen from a common supply/works
contract.’ Because three out of five
counterclaims were decided on merits
and not on limitation. The remaining
two were rejected on limitation as
they were not reflected in the minutes
of meeting dated 19 April 2018.
Therefore, benefit of Section 18 of the
1963 Act was not available qua those
counterclaims. Moreover, there
cannot be a general rule that
limitation for claims and
counterclaims must have a common
run because counterclaim is a
separate action which must stand on
its own legs, as has been held by this
Court in Oil and Natural Gas
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 26 of 150
Corporation Ltd. v. Afcons
Gunanusa JV17.
(vii) The counterclaim for the cost of repair/
replacement of gearboxes and fan modules
was rightly rejected by the arbitral tribunal
as barred by limitation as regarding it there
was no recital in the minutes of meeting
dated 19 April 2018. Moreover, it was not
intertwined with the claim for the balance
amount as the cause of action for the two
were different. One arose from supply and
erection, and the other arose subsequently,
post commissioning/ completion of the
project, on account of alleged defect in the
material supplied.
(viii) Gita Power being the holding company of
OPG and having actively participated in the
formation of the contract as also in
issuance of purchase orders for the
supply/ works, which carried the
arbitration clause, was bound by the
arbitration agreement and also liable
jointly and severally along with OPG for the
dues.
17
(2024) 4 SCC 481
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 27 of 150
ISSUES
27. Upon consideration of the rival submissions, the
core issue which falls for our determination is:
“Whether the arbitral award is in conflict with
the public policy of India, or/ and is vitiated
by patent illegality appearing on the face of
the award?”
28. The answer to the above issue would depend, inter
alia, on our determination of the following sub-issues:
(a) Whether Gita Power (R-2) could have
been subjected to arbitration and made
jointly and severally liable along with
OPG for the award, when the project
beneficiary was OPG?
(b) Whether Enexio’s claim for the
outstanding principal amount barred
by limitation?
(c) Whether the counter claim, in respect
of cost of repair / replacement of gear
boxes and fan modules, could be
treated as barred by time when the
other side’s claim, arising out of sameCivil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 28 of 150
contractual relationship, was found
within limitation?
(d) Whether arbitral award for payment of
the outstanding principal amount with
interest is perverse because it makes
no adjustment for debit note(s) entries
even though the prayer to declare them
as invalid was rejected as barred by
time?
(e) Whether the reasoning of the arbitral
tribunal is flawed and vitiated by
adopting different yardstick for
adjudging the counterclaim than what
was adopted for adjudging the claim? If
so, whether it vitiated the award and
rendered it vulnerable to a challenge
under Section 34 of the 1996 Act?
RELEVANT LEGAL PRINCIPLES GOVERNING A
CHALLENGE TO AN ARBITRAL AWARD
29. Before we delve into the issue/ sub-issues culled
out above, it would be useful to have a look at the relevant
legal principles governing a challenge to an arbitral award.
Recourse to a Court against an arbitral award may be
made through an application for setting aside such award
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 29 of 150
in accordance with sub-sections (2), (2-A) and (3) of
Section 34 of the 1996 Act18. Sub-section (2) of Section 34
has two clauses, (a) and (b). Clause (a) has five sub-
clauses which are not relevant to the issues raised before
18
Section 34. Application for setting aside arbitral award. — (1) ………..
(2) An arbitral award may be set aside by the Court only if—
(a) the party making the application establishes on the basis of the record of the arbitral
tribunal that—
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it
or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with the dispute not contemplated by or not falling within the
terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the
submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so
submitted, only that part of the arbitral award which contains decisions on matters not submitted to
arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance
with the agreement of the parties, unless such agreement was in conflict with the provision of this
Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with
this Part; or
(b) the Court finds that –
(i) the subject matter of the dispute is not capable of settlement by arbitration
under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1. — For the avoidance of any doubt, it is clarified that an award is in conflict
with the public policy of India, only if, –
(i) the making of the award was induced or affected by fraud or corruption or was in
violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2— For the avoidance of doubt, the test as to whether there is a contravention
with the fundamental policy of Indian law, shall not entail a review on the merits of the
dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations,
may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on
the face of the award:
Provided that an award shall not be set aside, merely on the ground of an erroneous application of
the law or by reappreciation of evidence.
(3) An application for setting aside may not be made after three months have elapsed from the date
on which the party making that application had received the arbitral award or, if a request had been made
under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the court is satisfied that the applicant was prevented by sufficient cause from making
the application within the set period of three months it may entertain the application within a period of 30
days, but not thereafter.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 30 of 150
us. Insofar as clause (b) is concerned, it has two sub-
clauses, namely, (i) and (ii). Sub-clause (i) of clause (b) is
not relevant to the controversy in hand. Sub-clause (ii) of
clause (b) provides that if the Court finds that the arbitral
award is in conflict with the public policy of India, it may
set aside the award.
Public Policy
30. “Public policy” is a concept not statutorily defined,
though it has been used in statutes, rules, notification etc.
since long, and is also a part of common law. Section 2319
of the Contract Act, 1872 uses the expression by stating
that the consideration or object of an agreement is lawful,
unless, inter alia, opposed to public policy. That is, a
contract which is opposed to public policy is void.
31. In Chitty on Contracts20, scope of public policy,
largely accepted across jurisdictions for invalidation of
contracts, has been summarized in the following terms:
“Objects which on grounds of public policy
invalidate contracts may, for convenience, be
generally classified into five groups: first, objects19
Section 23.– What consideration and objects are lawful, and what not. — The consideration or object of an
agreement is lawful, unless –
it is forbidden by law; or
is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or
involves or implies, injury to the person or property of another; or
the court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of
which the object or consideration is unlawful is wide.
20
Volume 1, 35th Edition, paragraph 19-112
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 31 of 150
which are illegal by common law or by
legislation; secondly, objects injurious to good
government either in the field of domestic or
foreign affairs; thirdly, objects which interfere
with the proper working of the machinery of
justice; fourthly, objects injurious to marriage
and morality; and, fifthly, objects economically
against the public interest, viz contracts in
restraint of trade…..”
32. In Gherulal Parakh v. Mahadeodas Maiya and
others21, a three-Judge Bench of this Court, in the context
of Section 23 of the Contract Act, summarized the doctrine
of public policy as follows:
“Public policy or the policy of the law is an elusive
concept; it has been described as untrustworthy
guide, variable quality, uncertain one, unruly
horse, etc; the primary duty of a court of law is
to enforce a promise which the parties have
made and to uphold the sanctity of contracts
which formed the basis of society, but in certain
cases, the court may relieve them of their duty
on a rule founded on what is called the public
policy; for want of better words Lord Atkin
describes that something done contrary to public
policy is a harmful thing, but the doctrine is
extended not only to harmful cases but also to
harmful tendencies; this doctrine of public policy
is only a branch of common law, and, just like
any other branch of common law, it is governed
by precedents; the principles have been
crystallized under different heads and though it
is permissible for courts to expound and apply
them to different situations, it should only be
invoked in clear and incontestable cases of harm
to the public; Though the heads are not closed
and though theoretically it may be permissible to
evolve a new head under exceptional
circumstances of a changing world, it is
advisable in the interest of stability of society not21
AIR 1959 SC 781Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 32 of 150
to make any attempt to discover new heads in
these days.
(Emphasis supplied)
33. In Central Inland Water Transport Corporation
v. Brojo Nath Ganguly22, this Court observed that the
expressions ‘public policy’, ‘opposed to public policy’, or
‘contrary to public policy’ are incapable of precise
definition. It was observed that public policy is not the
policy of a particular government. Rather it connotes some
matter which concerns the public good and the public
interest. It was observed:
“92.……what is for the public good or in the
public interest or what would be injurious or
harmful to the public good or the public interest
has varied from time to time. As new concepts
take the place of old, transactions which were
once considered against public policy are now
being upheld by the courts and, similarly, where
there has been a well- recognized head of public
policy, the courts have not shirked from
extending it to new transactions and changed
circumstances and have at times not even
flinched from inventing a new head of public
policy.”
(Emphasis supplied)
34. In Renusagar Power Co. Ltd. v. General Electric
Co.23, a three-Judge Bench of this Court observed that the
doctrine of public policy is somewhat open- textured and
flexible. By citing earlier decisions, it was observed that
there are two conflicting positions which are referred to as
the “narrow view” and the “broad view”. According to the
22
(1986) 3 SCC 156, paragraph 92
23
1994 Supp (1) SCC 644
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 33 of 150
narrow view, courts cannot create new heads of public
policy whereas the broad view countenances judicial law
making in these areas. In the field of private international
law, it was pointed out, courts refuse to apply a rule of
foreign law or recognize a foreign judgment or a foreign
arbitral award if it is found that the same is contrary to
the public policy of the country in which it is sought to be
invoked or enforced. However, it was clarified, a
distinction is to be drawn while applying the rule of public
policy between a matter governed by domestic law and a
matter involving conflict of laws. It was observed that the
application of the doctrine of public policy in the field of
conflict of laws is more limited than that in the domestic
law and the courts are slower to invoke public policy in
cases involving a foreign element than when a purely
municipal legal issue is involved. It was held that
contravention of law alone will not attract the bar of public
policy, and something more than contravention of law is
required.
35. In fact, in Renusagar (supra), this Court was
dealing with the enforceability of a foreign award. For that
end, it had to interpret the expression “contrary to public
policy” in the context of Section 7(1)(b)(ii) of Foreign
Awards (Recognition and Enforcement) Act, 196124. While
24
Section 7. Conditions for enforcement of foreign awards. – (1) A foreign award may be enforced under this
Act—
*******
(b) if the court dealing with the case is satisfied that –
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 34 of 150
doing so, this Court held that — (a) contravention of law
alone will not attract the bar of public policy, and
something more than contravention of law is required25;
and (b) the expression ‘public policy’ must be construed in
the sense the doctrine of public policy is applied in the
field of private international law. Applying the said criteria,
it was held that enforcement of a foreign award could be
refused on the ground of being contrary to public policy if
such enforcement would be contrary to (a) fundamental
policy of Indian law or (b) the interests of India or (c) justice
or morality26. The Court thereafter proceeded to hold that
a contravention of the provisions of the Foreign Exchange
Regulation Act would be contrary to the public policy of
India as that statute is enacted for the national economic
interest to ensure that the nation does not lose foreign
exchange which is essential for the economic survival of
the nation27.
36. What is clear from above is that for an award to be
against public policy of India a mere infraction of the
municipal laws of India is not enough. There must be, inter
alia, infraction of fundamental policy of Indian law
including a law meant to serve public interest or public
good.
*******
(ii) the enforcement of the award will be contrary to the public policy.
25
paragraph 65 of Renusagar (supra)
26
paragraph 66 of Renusagar (supra)
27
paragraph 75 of Renusagar (supra)
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 35 of 150
37. In Oil and Natural Gas Corporation (ONGC) v.
Saw Pipes Ltd.28 a two-Judge Bench of this Court, in the
context of a challenge to a domestic arbitral award under
Section 34(2)(b)(ii) of the 1996 Act as it stood prior to 2015
amendment, ascribed wider meaning to the expression
‘public policy of India’ in the following terms:
“31. ……. the phrase public policy of India used
in section 34 in context is required to be given a
wider meaning. It can be stated that the concept
of public policy connotes some matter which
concerns public good and the public interest.
What is for public good or in public interest or
what would be injurious or harmful to the public
good or public interest has varied from time to
time. However, the award which is, on the face of
it, patently in violation of statutory provisions
cannot be said to be in public interest. Such
award/ judgment/ decision is likely to adversely
affect the administration of justice. Hence, in our
view, in addition to narrower meaning given to
the term “public policy” in Renusagar case, it is
required to be held that the award could be set
aside if it is patently illegal. The result would be
– award could be set aside if it is contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality, or
(d) in addition, if it is patently illegal.
Illegality must go to the root of the matter and if
the illegality is of trivial nature, it cannot be held
that award is against the public policy. Award
could also be set aside if it is so unfair and
unreasonable that it shocks the conscience of
the court. Such award is opposed to public policy
and is required to be adjudged void.
(Emphasis supplied)
28
(2003) 5 SCC 705
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 36 of 150
38. Following the expansive view of the concept
“contrary to public policy”, in D.D.A v. M/s. R.S. Sharma
& Co.29, which related to a matter arising from a
proceeding under Section 34, as it stood prior to 2015
amendment, a two-Judge Bench of this Court, on the
scope of the power to set aside an arbitral award,
summarized the general principles as follows:
“21. …
(a) An award, which is
(i) contrary to substantive provisions of
law; or
(ii) the provisions of the arbitration and
Conciliation Act, 1996; or
(iii) against the terms of the respective
contract; or
(iv) patently illegal; or
(v) prejudicial to the rights of the parties;
Is open to interference by the court
under Section 34(2) of the Act.
(b) The award could be set aside if it is contrary
to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality.
(c) The award could also be set aside if it is so
unfair and unreasonable that it shocks the
conscience of the court.
(d) It is open to the court to consider whether
the award is against the specific terms of
contract and if so, interfere with it on the
ground that it is patently illegal and opposed
to public policy of India.”
39. In Oil and Natural Gas Corporation Limited v.
Western Geco International Limited30, which also
29
(2008) 13 SCC 80
30
(2014) 9 SCC 263 paragraphs 35, 38 and 39
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 37 of 150
related to the period prior to 2015 amendment of Section
34 (2)(b)(ii)31, a three-Judge Bench of this Court, after
considering the decision in Saw Pipes (supra), without
exhaustively enumerating the purport of the expression
‘fundamental policy of Indian law’, observed that it would
include all such fundamental principles as providing a
basis for administration of justice and enforcement of law
in this country. The Court thereafter illustratively referred
to three fundamental juristic principles, namely, (a) that
in every determination that affects the rights of a citizen
or leads to any civil consequences, the court or authority
or quasi-judicial body must adopt a judicial approach,
that is, it must act bona fide and deal with the subject in
a fair, reasonable and objective manner and not actuated
by any extraneous consideration; (b) that while
determining the rights and obligations of parties the court
or tribunal or authority must act in accordance with the
principles of natural justice and must apply its mind to
the attendant facts and circumstances while taking a view
one way or the other; and (c) that its decision must not be
perverse or so irrational that no reasonable person would
have arrived at the same.
40. In Associate Builders (supra), a two-Judge Bench
of this Court, held32 that audi alteram partem principle is
31
See Footnote 18
32
See paragraph 30 of the judgment in Associate Builders (supra)
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 38 of 150
undoubtedly a fundamental juristic principle in Indian law
and is enshrined in Sections 1833 and 34 (2)(a)(iii)34 of the
1996 Act. In addition to the earlier recognized principles
forming fundamental policy of Indian law, it was held that
disregarding: (a) orders of superior courts in India; and (b)
the binding effect of the judgment of a superior court
would also be regarded as being contrary to the
fundamental policy of Indian law35. Further, elaborating
upon the third juristic principle (i.e., qua perversity), as
laid down in Western Geco (supra), it was observed that
where: (i) a finding is based on no evidence; or (ii) an
arbitral tribunal takes into account something irrelevant
to the decision which it arrives at; or (iii) ignores vital
evidence in arriving at its decision, such decision would
necessarily be perverse36. To this a caveat was added by
observing that when a court applies the ‘public policy test’
to an arbitration award, it does not act as a court of appeal
and, consequently, errors of fact cannot be corrected; and
a possible view by the arbitrator on facts has necessarily
to pass muster as the arbitrator is the ultimate master of
the quantity and quality of evidence to be relied upon
when he delivers his arbitral award. It was also observed
that an award based on little evidence or on evidence
which does not measure up in quality to a trained legal
33
Section 18. Equal treatment of parties. — The parties shall be treated with equality and each party shall be
given a full opportunity to present his case.
34
See Footnote 18
35
See paragraph 27 of the judgment in Associate Builders (supra)
36
Paragraph 31 of the judgment in Associate Builders (supra)
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 39 of 150
mind would not be held to be invalid on that score. Thus,
once it is found that the arbitrator’s approach is not
arbitrary or capricious, it is to be taken as the last word
on facts37.
2015 Amendment in Sections 34 and 48
41. The afore-mentioned judicial pronouncements
were all prior to 2015 Amendment. Notably, prior to the
Amendment, 2015 the expression “in contravention with
the fundamental policy of Indian law” was not used by the
legislature in either Section 34(2)(b)(ii) or Section 48(2)(b).
The pre-amended Section 34(2)(b)(ii) and its Explanation
read:
“S.34. Application for setting aside arbitral
award—
(1) *******
(2) An arbitral award may be set aside by the court
only if—
******
(b) the court finds that –
******
(ii) the arbitral award is in conflict with the public
policy of India.
Explanation.– Without prejudice to the generality of
sub-clause (ii) it is hereby declared, for the avoidance
of any doubt, that an award is in conflict with the
public policy of India if the making of the award was
induced or affected by fraud or corruption or was in
violation of section 75 or section 81.
Whereas pre-amended Section 48(2)(b) and its
Explanation read:
37
Paragraph 33 of the judgment in Associate Builders (supra)
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 40 of 150
S. 48. Conditions for enforcement of foreign
awards. –
(1) ********
(2) Enforcement of an arbitral award may also be
refused if the court finds that—
(a). ******
(b) the enforcement of the award would be contrary
to the public policy of India.
Explanation. – Without prejudice to the generality of
sub-clause (b) of this section, it is hereby declared,
for the avoidance of any doubt, that an award is in
conflict with the public policy of India if the making
of the award was induced or affected by fraud or
corruption.
42. By the Amendment, 2015, in place of the old
Explanation to Section 34(2)(b)(ii), Explanations 1 and 2
were added to remove any doubt as to when an arbitral
award is in conflict with the public policy of India.
43. At this stage, it would be pertinent to note that we
are dealing with a case where the application under
Section 34 of the 1996 Act was filed after the Amendment,
2015, therefore the newly substituted/ added
Explanations would apply38.
44. The Amendment, 2015 adds two explanations to
each of the two sections, namely, Section 34(2)(b)(ii)39 and
Section 48(2)(b)40, in place of the earlier Explanation. The
38
Ssangyong Engineering & Construction Co. Ltd (supra)
39
See footnote 18
40
Section 48(2)(b).–
Explanation 1. — For the avoidance of any doubt, it is clarified that an award is in conflict with the
public policy of India, only if ,–
(i) the making of the award was induced or affected by fraud or corruption or was in violation of
section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 41 of 150
significance of the newly inserted Explanation 1 in both
the sections is two-fold. First, it does away with the use of
words: (a) “without prejudice to the generality of sub-clause
(ii)” in the opening part of the pre-amended Explanation to
Section 34(2)(b)(ii); and (b) “without prejudice to the
generality of clause (b) of this section” in the opening part
of the pre-amended Explanation to Section 48(2)(b);
secondly, it limits the expanse of public policy of India to
the three specified categories by using the words “only if”.
Whereas, Explanation 2 lays down the standard for
adjudging whether there is a contravention with the
fundamental policy of Indian law by providing that a
review on merits of the dispute shall not be done. This
limits the scope of the enquiry on an application under
either Section 34(2)(b)(ii) or Section 48(2)(b) of the 1996
Act.
45. The Amendment, 2015 by inserting sub-section (2-
A)41 in Section 34, carves out an additional ground for
annulment of an arbitral award arising out of arbitrations
other than international commercial arbitrations. Sub-
section (2-A) provides that the Court may also set aside an
award if that is vitiated by patent illegality appearing on
the face of the award. This power of the Court is, however,
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.– For the avoidance of doubt, the test as to whether there is a contravention with the
fundamental policy of Indian law shall not entail a review on the merits of the dispute.
41
See Footnote 18
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 42 of 150
circumscribed by the Proviso, which states that an award
shall not be set aside merely on the ground of an
erroneous application of the law or by re-appreciation of
evidence.
46. Explanation 1 to Section 34(2)(b)(ii), specifies that
an arbitral award is in conflict with the public policy of
India, only if,- (i) the making of the award was induced or
affected by fraud or corruption or was in violation of
Section 75 or Section 81; or (ii) it is in contravention with
the fundamental policy of Indian law; or (iii) it is in conflict
with the most basic notions of morality or justice.
47. In the instant case, there is no allegation that the
making of the award was induced or affected by fraud or
corruption, or was in violation of Section 75 or Section 81.
Therefore, we shall confine our exercise in assessing as to
whether the arbitral award is in contravention with the
fundamental policy of Indian law, and/ or whether it
conflicts with the most basic notions of morality or justice.
Additionally, in the light of the provisions of sub-section
(2-A) of Section 34, we shall examine whether there is any
patent illegality on the face of the award.
48. Before undertaking the aforesaid exercise, it would
be apposite to consider as to how the expressions (a) “in
contravention with the fundamental policy of Indian law”;
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 43 of 150
(b) “in conflict with the most basic notions of morality or
justice”; and (c) “patent illegality” have been construed.
In contravention with the fundamental policy of
Indian law
49. As discussed above, till the Amendment, 2015 the
expression “in contravention with the fundamental policy
of Indian law” was not found in the 1996 Act. Yet, in
Renusagar (supra), in the context of enforcement of a
foreign award, while construing the phrase “contrary to
the public policy”, this Court held that for a foreign award
to be contrary to public policy mere contravention of law
would not be enough rather it should be contrary to: (a)
the fundamental policy of Indian law; and /or (b) the
interest of India; and/ or (c) justice or morality.
50. In the judicial pronouncements that followed
Renusagar (supra), already discussed above, the domain
of what could be considered contrary to the ‘public policy
of India’/ ‘fundamental policy of Indian law’ expanded,
resulting in much greater interference with arbitral
awards than what the lawmakers intended. This led to the
Amendment, 2015 in the 1996 Act.
51. In Ssangyong Engineering (supra), this Court
dealt with the effect of the Amendment, 2015. While doing
so, it took note of a supplementary report of February
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 44 of 150
2015 of the Law Commission of India made in the context
of the proposed 2015 amendments. The said
supplementary report has been extracted in paragraph 30
of that judgment. The key features of it are summarized
below:
(a) Mere violation of law of India would not be a
violation of public policy in cases of
international commercial arbitrations held in
India.
(b) The proposed 2015 amendments in 1996 Act
(i.e., in Sections 34(2)(b)(ii) and 48(2)(b)
including insertion of sub-section (2-A) in
Section 34) were on the assumption that the
terms, such as, “fundamental policy of Indian
law” or conflict with “most basic notions of
morality or justice” would not be widely
construed.
(c) The power to review an award on merits is
contrary to the object of the Act and
international practice.
(d) The judgment in Western Geco (supra)
would expand the court’s power, contrary to
international practice. Hence, a clarification
needs to be incorporated to ensure that the term
‘fundamental policy of Indian law’ is narrowly
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 45 of 150
construed. The applicability of Wednesbury
principles to public policy will open the
floodgates. Hence, Explanation 2 to Section
34(2)(b)(ii) has been proposed.
After taking note of the supplementary report, the
statement of objects and reasons of the Amendment Act,
2015, and the amended provisions of Sections 28, 34 and
48, this Court held:
“34. What is clear, therefore, is that the
expression public policy of India, whether
contained in section 34 or in section 48, would
now mean the fundamental policy of Indian law
as explained in paras 18 and 27 of Associate
Builders i.e. the fundamental policy of Indian law
would be relegated to Renusagar’s
understanding of this expression. This would
necessarily mean that Western Geco expansion
has been done away with. In short, Western
Geco, as explained in Paras 28 and 29 of
Associate Builders, would no longer obtain, as
under the guise of interfering with an award on
the ground that the arbitrator has not adopted a
judicial approach the court’s intervention would
be on the merits of the award, which cannot be
permitted post amendment. However, in so far as
principles of natural justice are concerned, as
contained in sections 18 and 34(2)(a) (iii) of the
1996 Act, these continue to be the grounds of
challenge of an award, as is contained in para 30
of Associate Builders.
35.*****
36******
37. In so far as domestic awards made in India
are concerned, an additional ground is now
available under sub-section (2-A), added by the
Amendment Act, 2015 to section 34. Here, thereCivil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 46 of 150
must be patent illegality appearing on the face of
the award, which refers to such illegality as goes
to the root of the matter, but which does not
amount to mere erroneous application of the law.
In short, what is not subsumed within the
fundamental policy of Indian law, namely, the
contravention of a statute not linked to public
policy or public interest, cannot be brought in by
the back door when it comes to setting aside an
award on the ground of patent illegality.
38. Secondly, it is also made clear that
reappreciation of evidence, which is what an
appellate court is permitted to do, cannot be
permitted under the ground of patent illegality
appearing on the face of the award.
39. To elucidate, para 42.1 of Associate Builders,
namely, a mere contravention of the substantive
law of India, by itself, is no longer a ground
available to set aside an arbitral award. Para
42.2 of Associate Builders, however, would
remain, for if an arbitrator gives no reasons for
an award and contravenes section 31(3) of the
1996 Act, that would certainly amount to a
patent illegality on the face of the award.
40. The change made in Section 28(3) by the
Amendment Act really follows what is stated in
paras 42.3 to 45 in Associate Builders, namely,
that the construction of the terms of a contract
is primarily for an arbitrator to decide, unless the
arbitrator construes the contract in a manner
that no fair minded or reasonable person would;
in short, that the arbitrator’s view is not even a
possible view to take. Also, if the arbitrator
wanders outside the contract and deals with the
matters not allotted to him, he commits an error
of jurisdiction. This ground of challenge will now
fall within the new ground added under Section
34 (2-A).
41. What is important to note is that a decision
which is perverse, as understood in paras 31 and
32 of Associate Builders, while no longer being a
ground for challenge under “public policy of
India”, would certainly amount to a patent
illegality appearing on the face of the award.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 47 of 150
Thus, a finding based on no evidence at all or an
award which ignores vital evidence in arriving at
its decision would be perverse and liable to be set
aside on the ground of patent illegality.
Additionally, a finding based on documents
taken behind the back of the parties by the
arbitrator would also qualify as a decision based
on no evidence inasmuch as such decision is not
based on evidence led by the parties, and
therefore, would also have to be characterized as
perverse.
********* ******* *******
69. We therefore hold, following the aforesaid
authorities, that in the guise of misinterpretation
of the contract, and consequent errors of
jurisdiction, it is not possible to state that the
arbitral award would be beyond the scope of
submission to arbitration if otherwise the
aforesaid misinterpretation [which would
include going beyond the terms of the contract],
could be said to have been fairly comprehended
as disputes within the arbitration agreement or
which were referred to the decision of the
arbitrators as understood by the authorities
above. If an arbitrator is alleged to have
wandered outside the contract and dealt with
matters not allotted to him, this would be a
jurisdictional error which could be corrected on
the ground of patent illegality, which, as we have
seen, would not apply to international
commercial arbitrations that are decided under
Part II of the 1996 Act. To bring in by the back
door grounds relatable to Section 28 (3) of the
1996 Act to be matters beyond the scope of
submission to arbitration under section
34(2)(a)(iv) would not be permissible as this
ground must be construed narrowly and so
construed, must refer only to matters which are
beyond the arbitration agreement or beyond the
reference to the arbitral tribunal.”
52. The legal position which emerges from the
aforesaid discussion is that after the ‘2015 amendments’
in Section 34 (2)(b)(ii) and Section 48(2)(b) of the 1996 Act,
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 48 of 150
the phrase “in conflict with the public policy of India” must
be accorded a restricted meaning in terms of Explanation
1. The expression “in contravention with the fundamental
policy of Indian law” by use of the word ‘fundamental’
before the phrase ‘policy of Indian law’ makes the
expression narrower in its application than the phrase “in
contravention with the policy of Indian law”, which means
mere contravention of law is not enough to make an award
vulnerable. To bring the contravention within the fold of
fundamental policy of Indian law, the award must
contravene all or any of such fundamental principles that
provide a basis for administration of justice and
enforcement of law in this country. Without intending to
exhaustively enumerate instances of such contravention,
by way of illustration, it could be said that (a) violation of
the principles of natural justice; (b) disregarding orders of
superior courts in India or the binding effect of the
judgment of a superior court; and (c) violating law of India
linked to public good or public interest, are considered
contravention of the fundamental policy of Indian law.
However, while assessing whether there has been a
contravention of the fundamental policy of Indian law, the
extent of judicial scrutiny must not exceed the limit as set
out in Explanation 2 to Section 34(2)(b)(ii).
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 49 of 150
Most basic notions of morality and justice
53. In Renusagar (supra) this Court held that an
arbitral award is in conflict with the public policy of India
if it is, inter alia, contrary to “justice and morality”.
Explanation 1, inserted by 2015 Amendment, makes it
clear that an award is in conflict with the public policy of
India, inter alia, if it conflicts with the ‘most basic notions
of morality or justice’.
Justice
54. Justice is the virtue by which the society/ court /
tribunal gives a man his due, opposed to injury or wrong.
Justice is an act of rendering what is right and equitable
towards one who has suffered a wrong. Therefore, while
tempering justice with mercy, the court must be very
conscious, that it has to do justice in exact conformity
with some obligatory law, for the reason that human
actions are found to be just or unjust on the basis of
whether the same are in conformity with, or in opposition
to, the law42. Therefore, in ‘judicial sense’, justice is
nothing more nor less than exact conformity to some
obligatory law; and all human actions are either just or
unjust as they are in conformity with, or in opposition to,
the law43.
42
Union of India v. Ajeet Singh, (2013) 4 SCC 186, paragraph 26.
43
P. Ramanatha Aiyar’s Advanced Law Lexicon, 6th Edition, Volume III, page 2621.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 50 of 150
55. But, importantly, the term ‘legal justice’ is not
used in Explanation 1, therefore simple conformity or non-
conformity with the law is not the test to determine
whether an award is in conflict with the public policy of
India in terms of Explanation 1. The test is that it must
conflict with the most basic notions of justice. For lack of
any objective criteria, it is difficult to enumerate the ‘most
basic notions of justice’. More so, justice to one may be
injustice to another. This difficulty has been
acknowledged by many renowned jurists, as is reflected in
the observations of this Court in Delhi Administration v.
Gurdip Singh Uban44 , extracted below:
“23. The words ‘justice’ and ‘injustice’, in our
view, are sometimes loosely used and have
different meanings to different persons
particularly to those arrayed on opposite sides.
One man’s justice is another’s injustice [Raplph
Waldo Emerson: Essays (1803-82), First Series,
1841, “Circles]. Justice Cardozo said: “The web
is entangled and obscure, shot through with a
multitude of shades and colors, the skeins
irregular and broken. Many hues that seem to be
simple, are found, when analyzed, to be a
complex and uncertain blend. Justice itself,
which we are wont to appeal to what as a test as
well as an ideal, may mean different things to
different minds and at different times. Attempts
to objectify its standards or even to describe
them have never wholly succeeded (Selected
Writings of Cardozo, pp 223-224, Falcon
Publications, 1947).”44
(2000) 7 SCC 296Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 51 of 150
56. In Associate Builders (supra), while this Court
was dealing with the concept “public policy of India”, in
the context of a Section 34 challenge prior to 2015
amendment, it was held that an award can be said to be
against justice only when it shocks the conscience of the
court45. The Court illustrated by stating that where an
arbitral award, without recording reasons, awards an
amount much more than what the claim is restricted to, it
would certainly shock the conscience of the court and
render the award vulnerable and liable to be set aside on
the ground that it is contrary to justice.
57. In Ssyangyong (supra), which dealt with post
2015 amendment scenario, it was observed that an
argument to set aside an award on the ground of being in
conflict with ‘most basic notions of justice’, can be raised
only in very exceptional circumstances, that is, when the
conscience of the court is shocked by infraction of some
fundamental principle of justice. Notably, in that case the
majority award created a new contract for the parties by
applying a unilateral circular, and by substituting a
workable formula under the agreement by another, dehors
the agreement. This, in the view of the Court, breached the
fundamental principles of justice, namely, that a
unilateral addition or alteration of a contract can never be
foisted upon an unwilling party, nor can a party to the
45
See paragraph 36 of the judgment in Associate Builders (supra)
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 52 of 150
agreement be liable to perform a bargain not entered with
the other party46. However, a note of caution was
expressed in the judgment by observing that this ground
is available only in very exceptional circumstances and
under no circumstance can any court interfere with an
arbitral award on the ground that justice has not been
done in the opinion of the court because that would be an
entry into the merits of the dispute.
58. In the light of the discussion above, in our view,
when we talk about justice being done, it is about
rendering, in accord with law, what is right and equitable
to one who has suffered a wrong. Justice is the virtue by
which the society/ court / tribunal gives a man his due,
opposed to injury or wrong. Dispensation of justice in its
quality may vary, dependent on person who dispenses it.
A trained judicial mind may dispense justice in a manner
different from what a person of ordinary prudence would
do. This is so, because a trained judicial mind is likely to
figure out even minor infractions of law/ norms which may
escape the attention of a person with ordinary prudence.
Therefore, the placement of words “most basic notions”
before “of justice” in Explanation 1 has its significance.
Notably, at the time when the 2015 Amendment was
brought, the existing law with regard to grounds for
setting aside an arbitral award, as interpreted by this
46
See paragraph 76 of the judgment in Ssyanyong (supra)
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 53 of 150
Court, was that an arbitral award would be in conflict with
public policy of India, if it is contrary to: (a) the
fundamental policy of Indian law; (b) the interest of India;
(c) justice or morality; and /or is (d) patently illegal. As we
have already noticed, the object of inserting Explanations
1 and 2 in place of earlier explanation to Section 34(2)(b)(ii)
was to limit the scope of interference with an arbitral
award, therefore the amendment consciously qualified the
term ‘justice’ with ‘most basic notions’ of it. In such
circumstances, giving a broad dimension to this category47
would be deviating from the legislative intent. In our view,
therefore, considering that the concept of justice is open-
textured, and notions of justice could evolve with changing
needs of the society, it would not be prudent to cull out
“the most basic notions of justice”. Suffice it to observe,
they48 ought to be such elementary principles of justice
that their violation could be figured out by a prudent
member of the public who may, or may not, be judicially
trained, which means, that their violation would shock the
conscience of a legally trained mind. In other words, this
ground would be available to set aside an arbitral award,
if the award conflicts with such elementary/ fundamental
principles of justice that it shocks the conscience of the
Court.
47
in conflict with most basic notions of morality or justice
48
most basic notions of justice
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 54 of 150
Morality
59. The other ground is of morality. On the question of
morality, in Associate Builders (supra), this Court, after
referring to the provisions of Section 23 of the Contract
Act, 1872; earlier decision of this Court in Gherulal
(supra); and Indian Contract Act by Pollock and Mulla, held
that judicial precedents have confined morality to sexual
morality. And if ‘morality’ were to go beyond sexual
morality, it would cover such agreements as are not illegal
but would not be enforced given the prevailing mores of
the day. The court also clarified that interference on this
ground would be only if something shocks the court’s
conscience49.
Patent Illegality
60. Sub-section (2-A) of Section 34 of the 1996 Act,
which was inserted by 2015 Amendment, provides that an
arbitral award not arising out of international commercial
arbitrations, may also be set aside by the Court, if the
Court finds that the award is visited by patent illegality
appearing on the face of the award. The proviso to sub-
section (2-A) states that an award shall not be set aside
merely on the ground of an erroneous application of the
law or by reappreciation of evidence. In Saw Pipes (supra),
while dealing with the phrase ‘public policy of India’ as
49
See paragraph 39 of Associate Builders (supra)
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 55 of 150
used in Section 34, this court took the view that the
concept of public policy connotes some matter which
concerns public good and public interest. If the award, on
the face of it, patently violates statutory provisions, it
cannot be said to be in public interest. Thus, an award
could also be set aside if it is patently illegal. It was,
however, clarified that illegality must go to the root of the
matter and if the illegality is of trivial nature, it cannot be
held that award is against public policy.
61. In Associate Builders (supra), this Court held that
an award would be patently illegal, if it is contrary to:
(a) substantive provisions of law of India;
(b) provisions of the 1996 Act; and
(c) terms of the contract50.
The Court clarified that if an award is contrary to the
substantive provisions of law of India, in effect, it is in
contravention of Section 28(1)(a)51 of the 1996 Act.
Similarly, violating terms of the contract, in effect, is in
contravention of Section 28(3) of the 1996 Act.
50
See also three-Judge Bench decision of this Court in State of Chhattisgarh v. SAL Udyog (P) Ltd. (2022) 2 SCC
275
51
Section 28. — Rules applicable to substance of dispute. — (1) Where the place of arbitration is situated in
India,–
(a) In an arbitration other than an international commercial arbitration, the arbitral tribunal shall
decide the dispute submitted to arbitration in accordance with the substantive law for the time
being in force in India
*******
(2) *****
(3) while deciding and making an award, the arbitral tribunal shall, in all cases, take into account the
terms of the contract and trade usages applicable to the transaction. (As substituted by Act 3 of 2016 w.e.f
23.10.2015)
Prior to substitution by Act 3 of 2016, sub-section (3) of Section 28 read as under:
“(3) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and
shall take into account the usages of the trade applicable to the transaction.
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62. In Ssangyong (supra) this Court specifically dealt
with the 2015 Amendment which inserted sub-section (2-
A) in Section 34 of the 1996 Act. It was held that “patent
illegality appearing on the face of the award” refers to such
illegality as goes to the root of matter, but which does not
amount to mere erroneous application of law. It was also
clarified that what is not subsumed within “the
fundamental policy of Indian law”, namely, the
contravention of a statute not linked to ‘public policy’ or
‘public interest’, cannot be brought in by the backdoor
when it comes to setting aside an award on the ground of
patent illegality52. Further, it was observed, reappreciation
of evidence is not permissible under this category of
challenge to an arbitral award53.
Perversity as a ground of challenge
63. Perversity as a ground for setting aside an arbitral
award was recognized in Western Geco (supra). Therein
it was observed that an arbitral decision must not be
perverse or so irrational that no reasonable person would
have arrived at the same. It was observed that if an award
is perverse, it would be against the public policy of India.
52
See paragraph 37 of Ssyangyong (supra)
53
See paragraph 38 of Ssyangyong (supra)
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 57 of 150
64. In Associate Builders (supra) certain tests were
laid down to determine whether a decision of an arbitral
tribunal could be considered perverse. In this context, it
was observed that where: (i) a finding is based on no
evidence; or (ii) an arbitral tribunal takes into account
something irrelevant to the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, such
decision would necessarily be perverse. However, by way
of a note of caution, it was observed that when a court
applies these tests it does not act as a court of appeal and,
consequently, errors of fact cannot be corrected. Though,
a possible view by the arbitrator on facts has necessarily
to pass muster as the arbitrator is the ultimate master of
the quantity and quality of evidence to be relied upon. It
was also observed that an award based on little evidence
or on evidence which does not measure up in quality to a
trained legal mind would not be held to be invalid on that
score.
65. In Ssangyong (supra), which dealt with the legal
position post 2015 amendment in Section 34 of the 1996
Act, it was observed that a decision which is perverse,
while no longer being a ground for challenge under “public
policy of India”, would certainly amount to a patent
illegality appearing on the face of the award. It was
pointed out that an award based on no evidence, or which
ignores vital evidence, would be perverse and thus
patently illegal. It was also observed that a finding based
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 58 of 150
on documents taken behind the back of the parties by the
arbitrator would also qualify as a decision based on no
evidence in as much as such decision is not based on
evidence led by the parties, and therefore, would also have
to be characterized as perverse54.
66. The tests laid down in Associate Builders (supra)
to determine perversity were followed in Ssyanyong
(supra) and later approved by a three-Judge Bench of this
Court in Patel Engineering Limited v. North Eastern
Electric Power Corporation Limited55.
67. In a recent three-Judge Bench decision of this
Court in Delhi Metro Rail Corporation Ltd. v. Delhi
Airport Metro Express Pvt. Ltd.56, the ground of patent
illegality /perversity was delineated in the following terms:
“40. In essence, 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; or the
construction of the contract is such that no fair
or reasonable person would take; Or, that the
view of the arbitrator is not even a possible view.
A finding based on no evidence at all or an award
which ignores vital evidence in arriving at its
decision would be perverse and liable to be set
aside under the head of patent illegality. An
award without reasons would suffer from patent
illegality. The arbitrator commits a patent54
See Paragraph 41 of Ssyangyong (supra).
55
(2020) 7 SCC 167
56
2024 INSC 292Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 59 of 150
illegality by deciding a matter not within its
jurisdiction or violating a fundamental principle
of natural justice.”Scope of interference with an arbitral award
68. The aforesaid judicial precedents make it clear
that while exercising power under Section 34 of the 1996
Act the Court does not sit in appeal over the arbitral
award. Interference with an arbitral award is only on
limited grounds as set out in Section 34 of the 1996 Act.
A possible view by the arbitrator on facts is to be respected
as the arbitrator is the ultimate master of the quantity and
quality of evidence to be relied upon. It is only when an
arbitral award could be categorized as perverse, that on
an error of fact an arbitral award may be set aside.
Further, a mere erroneous application of the law or wrong
appreciation of evidence by itself is not a ground to set
aside an award as is clear from the provisions of sub-
section (2-A) of Section 34 of the 1996 Act.
69. In Dyna Technologies (supra), a three-Judge
Bench of this Court held that Courts need to be cognizant
of the fact that arbitral awards are not to be interfered with
in a casual and cavalier manner, unless the court
concludes that the perversity of the award goes to the root
of the matter and there is no possibility of an alternative
interpretation that may sustain the arbitral award. It was
observed that jurisdiction under Section 34 cannot be
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 60 of 150
equated with the normal appellate jurisdiction. Rather,
the approach ought to be to respect the finality of the
arbitral award as well as party’s autonomy to get their
dispute adjudicated by an alternative forum as provided
under the law.
70. Now, we shall examine the scope of interference
with an arbitral award on ground of insufficient, or
improper/erroneous, or lack of, reasons.
Reasons for the Award – When reasons, or lack of it,
could vitiate an arbitral award.
71. Section 31 (3)57 of the 1996 Act provides that an
arbitral award shall state reasons upon which it is based,
unless (a) the parties have agreed that no reasons are to
be given, or (b) the award is an arbitral award on agreed
terms under Section 30.
71.1 As to the form of a reasoned award, in Russell on
Arbitration (24th Edition, page 304) it is stated thus:
“6.032. No particular form is required for a reasoned
award although ‘the giving of clearly expressed reasons
responsive to the issues as they were debated before the
arbitrators reduces the scope for the making of
unmeritorious challenges’. When giving a reasoned award
the tribunal need only set out what, on its view of the
evidence, did or did not happen and explain succinctly57
Section 31. Form and contents of arbitral award. – (1) ….. (2)….
(3) The arbitral award shall state the reasons upon which it is based, unless –
(a) the parties have agreed that no reasons are to be given, or
(b) the award is an arbitral award on agreed terms under section 30.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 61 of 150
why, in the light of what happened, the tribunal has
reached its decision, and state what that decision is. In
order to avoid being vulnerable to challenge, the tribunal’s
reasons must deal with all the issues that were put to it. It
should set out its findings of fact and its reasoning so as to
enable the parties to understand them and state why
particular points were decisive. It should also indicate the
tribunal’s findings and reasoning on issues argued before
it but not considered decisive, so as to enable the parties
and the court to consider the position with respect to
appeal on all the issues before the tribunal. When dealing
with controversial matters, it is helpful for the tribunal to
set out not only its view of what occurred, but also to make
it clear that it has considered any alternative version and
has rejected it. Even if several reasons lead to the same
result, the tribunal should still set them out. That said, so
long as the relevant issues are addressed there is no need
to deal with every possible argument or to explain why the
tribunal attached more weight to some evidence than to
other evidence. The tribunal is not expected to recite at
great length communications exchanged or submissions
made by the parties. Nor is it required to set out each step
by which it reached its conclusion or to deal with each and
every point made by the parties. It is sufficient that the
tribunal should explain what its findings are and the
evidential route by which it reached its conclusions.
71.2 On the requirement of recording reasons in an
arbitral award and consequences of lack of, or inadequate,
reasons in an arbitral award, this Court in Dyna
Technologies (supra) held:
“34. The mandate under section 31 (3) of the
Arbitration Act is to have reasoning which is
intelligible and adequate and, which can in
appropriate cases be even implied by the courts
from a fair reading of the award and documents
referred to thereunder, if need be. The aforesaid
provision does not require an elaborate judgment
to be passed by the arbitrators having regard to
the speedy resolution of dispute.
35. When we consider the requirement of a
reasoned order, three characteristics of a
reasoned order can be fathomed. They are:
proper, intelligible and adequate. If the
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reasonings in the order are improper, they reveal
a flaw in the decision-making process. If the
challenge to an award is based on impropriety or
perversity in the reasoning, then it can be
challenged strictly on the grounds provided in
section 34 of the Arbitration Act. If the challenge
to an award is based on the ground that the
same is unintelligible, the same would be
equivalent of providing no reasons at all. Coming
to the last aspect concerning the challenge on
adequacy of reasons, the court while exercising
jurisdiction under section 34 has to adjudicate
the validity of such an award based on the degree
of particularity of reasoning required having
regard to the nature of issues falling for
consideration. The degree of particularity cannot
be stated in a precise manner as the same would
depend on the complexity of the issue even if the
court comes to a conclusion that there were gaps
in the reasoning for the conclusions reached by
the tribunal, the court needs to have regard to
the document submitted by the parties and the
contentions raised before the tribunal so that
awards with inadequate reasons are not set
aside in casual and cavalier manner. On the
other hand, ordinarily unintelligible awards are
to be set aside, subject to party autonomy to do
away with the reasoned award. Therefore, the
courts are required to be careful while
distinguishing between inadequacy of reasons in
an award and unintelligible awards.”71.3. We find ourselves in agreement with the view
taken in Dyna Technologies (supra), as extracted
above. Therefore, in our view, for the purposes of
addressing an application to set aside an arbitral award
on the ground of improper or inadequate reasons, or
lack of reasons, awards can broadly be placed in three
categories:
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(1) where no reasons are recorded, or the
reasons recorded are unintelligible;
(2) where reasons are improper, that is, they
reveal a flaw in the decision- making process;
and
(3) where reasons appear inadequate.
71.4. Awards falling in category (1) are vulnerable as
they would be in conflict with the provisions of Section
31(3) of the 1996 Act. Therefore, such awards are liable
to be set aside under Section 34, unless (a) the parties
have agreed that no reasons are to be given, or (b) the
award is an arbitral award on agreed terms under
Section 30.
71.5. Awards falling in category (2) are amenable to a
challenge on ground of impropriety or perversity, strictly
in accordance with the grounds set out in Section 34 of
the 1996 Act.
71.6. Awards falling in category (3) require to be dealt
with care. In a challenge to such award, before taking a
decision the Court must take into consideration the
nature of the issues arising between the parties in the
arbitral proceedings and the degree of reasoning
required to address them. The Court must thereafter
carefully peruse the award, and the documents referred
to therein. If reasons are intelligible and adequate on a
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fair-reading of the award and, in appropriate cases,
implicit in the documents referred to therein, the award
is not to be set aside for inadequacy of reasons.
However, if gaps are such that they render the reasoning
in support of the award unintelligible, or lacking, the
Court exercising power under Section 34 may set aside
the award.
Scope of interference with the interpretation /
construction of a contract accorded in an arbitral
award.
72. An arbitral tribunal must decide in accordance
with the terms of the contract. In a case where an arbitral
tribunal passes an award against the terms of the
contract, the award would be patently illegal. However, an
arbitral tribunal has jurisdiction to interpret a contract
having regard to terms and conditions of the contract,
conduct of the parties including correspondences
exchanged, circumstances of the case and pleadings of the
parties. If the conclusion of the arbitrator is based on a
possible view of the matter, the Court should not
intefere58. But where, on a full reading of the contract,
the view of the arbitral tribunal on the terms of a contract
is not a possible view, the award would be considered
perverse and as such amenable to interference59.
58
See: Steel Authority of India Ltd. v. Gupta Brother Steel Tubes Limited, (2009) 10 SCC 63; Pure Helium India
(P) Ltd v. ONGC, (2003) 8 SCC 593; McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181;
MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163
59
South East Asia Marine Engg. & Construction Ltd. (SEAMEC Ltd.) v. Oil India Ltd., (2020) 5 SCC 164
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 65 of 150
Whether unexpressed term can be read into a contract
as an implied condition.
73. Ordinarily, terms of the contract are to be
understood in the way the parties wanted and intended
them to be. In agreements of arbitration, where party
autonomy is the grund norm, how the parties worked out
the agreement, is one of the indicators to decipher the
intention, apart from the plain or grammatical meaning of
the expressions used60.
74. However, reading an unexpressed term in an
agreement would be justified on the basis that such a term
was always and obviously intended by the parties thereto.
An unexpressed term can be implied if, and only if, the
court finds that the parties must have intended that term
to form part of their contract. It is not enough for the court
to find that such a term would have been adopted by the
parties as reasonable men if it had been suggested to
them. Rather, it must have been a term that went without
saying, a term necessary to give business efficacy to the
contract, a term which, although tacit, forms part of the
contract61.
60
Bharat Aluminium Co. V. Kaiser Aluminium Technical Services Inc., (2016) 4 SCC 126.
61
Adani Power (Mundra) Ltd. v. Gujarat ERC, (2019) 19 SCC 9
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 66 of 150
75. But before an implied condition, not expressly
found in the contract, is read into a contract, by invoking
the business efficacy doctrine, it must satisfy following five
conditions:
a. it must be reasonable and equitable;
b. it must be necessary to give business efficacy to
the contract, that is, a term will not be implied if
the contract is effective without it;
c. it must be obvious that “it goes without saying”;
d. it must be capable of clear expression;
e. it must not contradict any terms of the contract62.
ANALYSIS/ DISCUSSION
76. Having noticed the legal principles governing a
challenge to an arbitral award, we shall now proceed to
address the issues culled out above, which arise for our
consideration in these appeals.
GITA POWER (R-2) BOUND BY THE ARBITRATION
AGREEMENT AND THEREFORE JOINTLY AND
SEVERALLY LIABLE
77. To have a clear understanding of the issue as to
whether Gita Power (R-2), the appellant in the connected
appeal, could be subjected to arbitral proceedings and
62
Nabha Power Limited (NPL) v. Punjab State Power Corporation Limited (PSPCL) and Another, (2018) 11 SCC
508, followed in Adani Power (supra)
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made jointly and severally liable along with OPG for the
dues of Enexio, a look at the facts relating to formation of
the contract including the conduct of the parties would be
apposite.
78. The relevant facts in this regard, which find mention
in the award, are as follows:
(a) There were two companies, namely, Gita Power
(R-2) and OPG (appellant). Gita Power is the
holding company of OPG. Two Tenders were
floated. One by a Gujarat Company in the same
group, which related to design, manufacture,
delivery to site, erection testing and
commissioning of two ACC units with auxiliaries
for a thermal power plant in Gujarat (for short
Gujarat Unit). The other was issued by OPG in
respect of design, manufacture, delivery to site,
erection testing and commissioning of an ACC unit
with auxiliaries for a thermal power plant at
Gummidipoondi in Tamil Nadu (for short T.N.
Unit).
(b) Enexio (R-1 – the claimant) submitted a single
unpriced techno-commercial offer covering both
projects. Following negotiations, a revised techno
commercial offer covering both projects was
submitted in August 2012. Thereafter, following
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further negotiations, another technical offer
covering both projects was submitted by Enexio on
6 October 2012.
(c) On 5 November 2012, with reference to the
techno offers, OPG addressed a letter to Enexio, in
respect of T.N. Unit, stating thus:
“Design, Engineering, Supply, Installation,
Testing and Commissioning of Air Cooled
Condenser with auxiliaries for 1 X 160 MW
(Phase III) Coal Based Power Project at
Gummudipoondi.
We refer to your offer GCTQD/ OPG – Gujarat –
Gummidipoondi /4239/12 / Rev 2 dated
October 6, 2012 and technical and commercial
discussions we had with you of date. We have
pleasure in informing you of our intent to award
a contract for Air Cooled Condenser with
auxiliaries in conformance to the discussions
you had with us.
Price: The price for the total scope is Rs.
44,00,00,000/- (Forty four crores only).
Price basis: F.O.R. destination (Power Project site
at Gummidipoondi)Taxes and Duties: Extra at actuals, but inclusive
of port handling charges.
Delivery schedule: The overall agreed time for
takeover of equipment will be March 2014.”
(d) On 4 March 2013, Gita Power (R-2), holding
company of OPG, issued two separate Purchase
Orders for:
(i) Design, Engineering and Supply of 1
Unit of ACC with Auxiliaries for 160 MW CoalCivil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 69 of 150
Based project at Gummidipoondi (Supply
Purchase Order); and
(ii) Erection and Commissioning of 1
Unit of ACC with Auxiliaries for 160 MW Coal
Based Power project at Gummidipoondi
(Erection Purchase Order).
(e) Pursuant to these purchase orders, on 1 April
2013 Enexio (R-1) submitted a Work Schedule. As
per which, commissioning of the ACC Unit was
planned on 31 March 2014.
(f) On 13 June 2013, the foundations for the ACC
Unit were handed over to Enexio (R-1) by OPG.
(g) On 4 July 2013 Enexio received 10% of the
Order price and on 23 July 2013 second payment
of 10% of the Order price was received by Enexio.
Both payments were made by Gita Power (R-2).
(h) While the work was in progress, OPG issued
two separate Purchase Orders, namely, supply
purchase order and erection purchase order, on
similar terms and with similar references as were
there in the Purchase Orders issued by R-2 (Gita
Power).
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 70 of 150
(i) In the statement of defense, it was stated that
when the purchase orders were ready for issue,
since Gita Power (R-2) was the holding company of
OPG, it was felt that in the commercial interest of
the project, the order for supply and erection of
ACC Unit should be placed on the claimant by R-
2. The statement of defense further states that
soon after issuance of the purchase orders in the
beginning of April 2013, OPG and R-2 were advised
that as the project was being set up by OPG, and
it had all the required registrations, etc. it would
be advisable that the Purchase Orders placed on
the claimant by R-2 for supply and erection of ACC
Unit be substituted/ replaced by Purchase Orders
in the name of OPG. In addition to above, OPG
pleaded that the substitution/ replacement of
purchase orders maintained the continuity of the
rights and obligations undertaken from 4 March
2013.
79. Based on the above-noted facts, and the evidence
brought on record during the arbitral proceedings, the
Tribunal concluded that the ‘Group of Companies’
doctrine is applicable, as OPG and R-2 have represented
themselves as a single economic entity which could switch
duties and obligations from one to the other. The Tribunal
held that – (a) R-2 is a proper party; (b) both OPG and R-
2 were bound by the arbitration agreements, which gave
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rise to the arbitral proceedings; and (c) OPG and R-2 were
jointly and severally liable to the claimant for complying
with the award.
80. In Cox & Kings Ltd. v. SAP India (P) Ltd.63, a
Constitution Bench of this Court held that by interpreting
the express language employed by the parties in the record
of agreement, coupled with surrounding circumstances of
its formation, performance, and discharge of the contract,
a Court or Arbitral Tribunal is empowered to determine
whether a non-signatory is a party to an arbitration
agreement. It was held that ‘Group of Companies’ doctrine
is premised on ascertaining the intention of the non-
signatory to be party to an arbitration agreement. The
doctrine requires the intention to be gathered from
additional factors such as direct relationship with the
signatory parties, commonality of subject matter,
composite nature of the transaction, and performance of
the contract.
81. In the instant case, the Arbitral Tribunal has found
that: (a) Gita Power is the holding company of OPG; (b)
Gita Power had issued the Purchase Orders and had
actively participated in the formation of the contract even
though the ACC unit of Gummudipoondi was of OPG; (c)
initial 10% of the purchase price was provided by Gita
63
(2024) 4 SCC 1
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Power (R-2); (d) the subsequent Purchase Orders issued
by OPG were on similar terms and were issued by way of
affirmation to obviate technical issues. In our view, the
above circumstances had a material bearing for invocation
of “Group of Companies doctrine” to bind Gita Power (R-2)
with the arbitration agreement and fasten it with liability,
jointly and severally with OPG, in respect of the Purchase
Orders relating to ACC Unit of Gummudipoondi project.
Thus, bearing in mind that an arbitral tribunal has
jurisdiction to interpret a contract having regard to the
terms and conditions of the contract and conduct of the
parties including correspondences exchanged, and,
further, taking into account the provisions of sub-section
(2-A) of Section 34 of the 1996 Act limiting the scope of
interference with a finding returned in an arbitral award,
we do not find a good reason to interfere with the above
findings of the Arbitral Tribunal more so when it is based
on a possible view of the matter. We, therefore, reject the
argument on behalf of R-2 that it was not bound by the
arbitration agreement and that it ought not to have been
made jointly and severally liable along with OPG for the
dues payable to Enexio. Sub-issue (a) is decided in the
aforesaid terms.
ENEXIO’S CLAIM NOT BARRED BY LIMITATION.
82. On the issue as to whether Enexio’s claim was barred
by time, the submissions of the appellants, inter alia, are:
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 73 of 150
(a) The date fixed by the contract for
completion of the obligations of supply of
goods and erection of ACC unit is 31 March
2014. Hence, the date of reckoning for the
purposes of limitation ought to be 31 March
2014.
(b) The contract was a mixture of supply of
goods and services (i.e., works). Therefore,
Article 14 of the Schedule to the 1963 Act
applied for the price of goods supplied, and
Article 18 applied for the price of works
provided, for computing the limitation period
of the claim. In either case, the limitation
period of three years would commence to run,
not later than, from 31 March 2014.
(c) Even if it is assumed that the deemed date
of completion was 21 September 2015 (as
held by the arbitral tribunal), the claim being
filed on 2 May 2019, was well beyond 3 years
from that date.
(d) Once the period of limitation started to
run, in terms of Articles 14 and 18, mere
negotiations could not have extended the
period of limitation. Therefore, the award,
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 74 of 150
which takes a contrary view, is patently
illegal.
83. Before proceeding further, we must remind
ourselves that sub-section (1) of Section 4364 of the 1996
Act makes the Limitation Act, 1963 (in short, 1963 Act)
applicable to arbitrations as it applies to proceedings in
Court. Sub-section (2) of Section 43 provides that unless
otherwise agreed by the parties, an arbitral proceeding
shall be deemed to have commenced on the date specified
in Section 2165. On a conjoint reading of sub-sections (1)
and (2) of Section 43 of the 1996 Act along with Sections
64
Section 43. Limitations. – (1) The Limitation Act, 1963 (36 of 1963) shall apply to arbitrations as it applies to
proceedings in Court.
(2) For the purposes of this section and the Limitation Act, 1963 (36 of 1963), an arbitration shall be
deemed to have commenced on the date referred in section 21.
(3) Where an arbitration agreement to submit future disputes to arbitration provides that any claim to
which the agreement applies shall be barred unless some step to commence arbitral proceedings is taken
within the time specified by the agreement, and a dispute arises to which the agreement applies, the court, if it
is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and
notwithstanding that the time so fixed has expired, may on such terms, if any, as the justice of the case may
require, extend the time for such period as it thinks proper.
(4) Where the Court orders that an arbitral award be set aside, the period between the
commencement of the declaration and the date of the order of the court shall be excluded in computing the
time prescribed by the Limitation Act, 1963 (36 of 1963), for the commencement of the proceedings (including
arbitration) with respect to the dispute so submitted.
65
Section 21. Commencement of arbitral proceedings. — Unless otherwise agreed by the parties, the arbitral
proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be
referred to arbitration is received by the respondent.
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366 and 2 (j)67 of the 1963 Act it is clear that if on the date
of commencement of the arbitral proceeding, as referred
to in Section 21 of the 1996 Act, the claim(s) is/are barred
by limitation, as per the provisions of the 1963 Act, the
Arbitral Tribunal will have to reject such claim(s) as barred
by limitation68.
84. In the case in hand there is no dispute between the
parties that the arbitral proceedings, in terms of Section
21 of the 1996 Act, commenced on 2 May 2019. Therefore,
our exercise would be to determine whether the period of
limitation got over prior to that date or not. For that
purpose, it would be necessary to ascertain as to which
Article of the Schedule was applicable to the claim. And if
more than one applied, which one applied to which part of
the claim.
66
Section 3. — Bar of limitation. – (1) Subject to the provisions contained in sections 4 to 24 inclusive, every
suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed, although
limitation has not been set up as a defense.
(2) For the purposes of this Act –
(a) a suit is instituted –
(i) in an ordinary case, when the plaint is presented to the proper officer;
(ii) in the case of a pauper, when his application for leave to sue as a pauper is made; and
(iii) in the case of a claim against the company which is being wound up by the court, when
the claimant first sends in his claim to the official liquidator;
(b) any claim by way of a set-off or a counter claim, shall be treated as a separate suit and shall be
deemed to have been instituted –
(i) in the case of a set off, on the same date as the suit in which the set off is pleaded;
(ii) in the case of a counter claim, on the date on which the counter claim is made in court;
(c) an application by notice of motion in a High Court is made when the application is presented to
the proper officer of that court.
67
Section 2. Definitions. – In this Act, unless the context otherwise requires, —
(j) ‘period of limitation’ means the period of limitation prescribed for any suit, appeal
or application by the Schedule, and ‘prescribed period’ means the period of limitation computed in accordance
with the provisions of this Act.
68
State of Goa v. Praveen Enterprises, (2012) 12 SCC 581, paragraph 16.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 76 of 150
85. According to the appellant(s) (i.e., OPG and Gita
Power – appellant in the connected appeal), Articles 14
and 18 of the Schedule to the 1963 Act applied to the
claim. Importantly, the award does not specify the
Article(s) which were applied except Article 58 which was
applied to the declaratory relief sought in the claim and
which was found barred by time. However, as the claim is
based on a contract, we will also consider the applicability
of Article 55 and the residuary Article 113 of the
Schedule69, if none other Article(s) were applicable to the
claim.
69
The Schedule (PERIODS OF LIMITATION) See sections 2(j) and 3:
PART II – SUITS RELATING TO CONTRACTS
Article No. Description of Suit Period of Limitation Time from which period begins to run
14. For the price of goods Three years The date of the delivery of the goods
sold and delivered
where no fixed period
is agreed upon
18. For the price of work done Three years When the work is done.
by the plaintiff for the
defendant at his request,
where no time has been
fixed for payment.
55. For compensation for the Three years When the contract is broken or
breach of any contract, (where there are successive breaches)
express or implied not herein when the breach in respect of which
specially provided for. the suit is instituted occurs or
(where the breach is continuing)
when it ceases.
PART III – SUITS RELATING TO DECLARATIONS
58. To obtain any other Three years When the right to sue first accrues.
Declaration
PART X – SUITS FOR WHICH THERE IS NO PRESCRIBED PERIOD
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Facts having material bearing on limitation
86. For a proper determination of the aforesaid issue,
we need to have a close look at the material facts relevant
to the issue of limitation. In our view, the material facts70,
inter alia, are:
(a) There was a composite Tender inviting offer
for design, manufacture, delivery to site,
erection, testing and commissioning of an ACC
unit with auxiliaries for a thermal power plant.
(b) Enexio submitted a composite unpriced
techno-commercial offer for the project.
(c) On 5 November 2012, with reference to the
techno offer, OPG addressed a letter71
expressing intent to award contract for the
project at a composite cost of 44 crores. This
letter also sets out a tentative date for
completion / takeover of the project i.e., March
2014.
113. Any suit for which Three years When the right to sue accrues.
no period of limitation
is provided elsewhere
in this Schedule
70
As gathered from paragraph 7 (including sub paragraphs 7.01 to 7.76) of the Arbitral Award under the title
‘Background to the Dispute’
71
Quoted in paragraph 79 (c) above
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(d) In that backdrop, on 4 March 2013, Gita
Power (R-2) issued two separate orders, one, for
Design, Engineering and Supply of 1 Unit of
ACC with Auxiliaries (Supply Purchase Order)
and, second, for Erection and Commissioning of
it (Erection Purchase Order).
(e) Pursuant to these purchase orders, on 1
April 2013, Enexio (R-1) submitted a Work
Schedule. As per which, commissioning of the
ACC Unit was planned on 31 March 2014. In
furtherance thereof, Enexio received 10% of the
order price in advance on 4 July 2013, and
another 10% on 23 July 2013. Both the
advance payments were received from Gita
Power (R-2).
(f) While the work was in progress, in July 2013
OPG issued two orders replicating those that
were issued by Gita Power (R-2) with
insignificant variation.
(g) As per the Supply Purchase Order, payments
were to be made in the following order:
Payments:
(i) 10% of Order Price as advance money
on submission of request for advance
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 79 of 150
and advance payment bank guarantee
for 10% of the Order Price, valid until
completion of supply;
(ii) 10% against approval of Engineering
Documentation;
(iii) 65% of the Order Price on Pro Rata
basis along with 100% taxes after
receipt of material at site;
(iv) 5% of the Order Price upon
submission of (a) invoice, and (b)
certificate on completion of punch
points duly signed by Parties;
(v) 5% of the Contract Price upon
submission of (a) invoice, (b) take over
certificate of Equipment issued by
Purchaser; and (iii) warranty bond for
10% of the contract valid up to the end
of warranty period;
(vi) 5% of the Contract Price upon
submission of (a) invoice, (b) certificate
of completion of performance test of
equipment by purchaser;
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 80 of 150
(vii) Payments to be made within 25
days of submission of invoice/ request
for payment and other documents
(h) Annexure A of the Supply Purchase Order
carried commercial conditions, inter alia,
providing for Performance Guarantee Test in
the following terms:
(1) The Performance Guarantee Test of
the equipment shall be carried out
immediately after takeover of the
equipment but in no case later than two
months from the date of takeover.
(2) Performance guarantee test will be
carried out by the representatives and
manpower of the purchaser under the
supervision of the supplier’s engineer.
(3) In case the performance guarantee
test is not carried out due to reasons
outside supplier’s control within 180
days from the date of takeover, the
guaranteed performance shall be
deemed to have been achieved and all
liabilities of supplier with respect to the
performance guarantee test shall be
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 81 of 150
over. Within these said 180 days, the
supplier remains liable for the
guaranteed performance of the
equipment.
(4) The Erection Purchase Order
repeated most of the clauses of the
supply purchase order and provided for
payment in the following manner:
Payment
(i) 80% against progress of work on
pro rata basis and against
certification by site officials.
(ii) 10% after mechanical
completion / Punch list.
(iii) 10% of the contract price after
Commissioning against bank
guarantee in favor of the owner for
equivalent value and valid for the
entire warranty period.
(j) Enexio (R-1) asserted that it finished its work
under the contract on or about February 2015.
However, on 12 March 2015, OPG complained
to Enexio in writing that certain work remained
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 82 of 150
and, therefore, Enexio must instruct its team to
complete the pending work.
(k) Enexio claimed that successful operation of
the vacuum pump was carried out on 21 May
2015, which implies commissioning of the ACC
unit. In response OPG asserted that three
components of the ACC unit were defective.
(l) On 2 July 2015, OPG issued a debit note
towards modifications to the turbine generator
building. Thereafter, on 24 August 2015, OPG
issued two debit notes: (i) towards work related
to lifting of the vertical duct; and (ii) towards
liquidated damages permissible under the
Supply Purchase Order and Erection Purchase
Order for the delay in execution.
(m) On 28 August 2015 Enexio wrote to OPG
questioning the debit notes.
(n) On 21 September 2015 Enexio informed
OPG that the turbine generator was running at
full load and, thereby, requested OPG to
arrange for Performance Guarantee Test (PG
Test). This request was repeated by e-mails
dated 3 October 2015 and 8 October 2015.
Later, on 9 October 2015, Enexio sent a letter
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to OPG attaching six protocols confirming
commissioning of all relevant segments of the
project. Not only that, on 20 October 2015,
Enexio sent a procedure for the PG Test. But
the PG Test was not undertaken.
(o) On 12 January 2016, OPG issued debit note
against OPG’s account for customs duty.
(p) On 22 August 2016 OPG informed Enexio
that fan assembly had detached. On 20
January 2017 Enexio sent an e-mail to OPG,
saying:
“Sir,
This is further to our visit to your site on
7/1/2016.
Considering the time availability and on
the interest of closing the issue, we suggest the
following:
1. Using in-situ machining agency,
the shaft dia variation can be machined
out after dismantling the hub and blade
assembly alone. Gearbox will not be
disturbed at all. We already obtained
offer for this.
2. To match the machined out shaft
dia and key way, existing fan hub bore
and key way can be rebuild and
machined after machining out existing
bore by 5mm.
3. To start the work, the spare
gearbox supplied by us at free of cost
can be used and remaining seven gear
boxes can be attended one or two at a
time.
4. You being a valuable customer to
us, we wish to execute the correction
work even though this failure happenedCivil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 84 of 150
after our guarantee. We will depute our
engineer to site for entire work.
5. But we could not bear the
commercial implications since we
already suffered loss and our money is
also locked up in this project due to
various reasons cited in our various
earlier letters.
6. Hence, we request you to pay the
correction cost and not to deduct the
same from us.
We request you for above proposal.”
(q) On 2 March 2017 Enexio requested OPG to
provide certificates for completion of
Gummudipoondi as well as Gujarat project. The
format of the desired certificate was sent by
Enexio to OPG. Therein it was mentioned that
ACC Unit was commissioned during May 2015
and was performing satisfactorily since then.
(r) On 6 March 2017 OPG confirmed that it
would issue the required certificate for
marketing purpose and that certificate would
not absolve the claimant from its contractual
obligations under the purchase orders which,
according to OPG, were yet to be fulfilled.
(s) Following further exchanges between the
parties, a meeting was held on 19 April 2018.
The minutes72 of that meeting, inter alia,
72
See Paragraph 7 of this judgment.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 85 of 150
reflected that the principal amount outstanding
towards Enexio under the contract was the one
that was claimed by Enexio in the claim.
However, the minutes indicated that it was not
payable because of certain deductions claimed
by OPG. According to Enexio, those deductions
(i.e. towards customs duty and liquidated
damages) were incorrectly recorded in the
minutes even though there was no agreement
in respect thereof.
(t) On 26 May 2018, on reiteration of demand
by Enexio, OPG responded, vide
communication dated 26 May 2018, and offered
Rs.3 crores to Enexio as full and final
settlement of the account. This offer was
rejected by Enexio. Whereafter, arbitration
proceeding commenced.
Material Observations in the Award.
87. We shall now extract few observations/ findings in
the award which, in our view, would be useful in
determining the limitation issue. These observations/
findings, with their corresponding paragraph number in
the award, are extracted below:
“1). On 1st April 2013 the Claimant prepared its
L1 Network Schedule which indicated the final
activities leading to commissioning ..:
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 86 of 150
Hook up with TG: 8-Mar-14 to 14-Mar-14
Commissioning 22-Mar-14 to 31-Mar-14.
……(para 13.02 of the award)
2). The Purchase Orders are silent on the mode
of payment of the Claimant’s invoices except to
note that:
7.3. 65% of the Order Price shall be paid on Pro
rata basis along with 100% Taxes and Duties
after receipt of material at site.
7.7 Payments will be made within twenty-five
days of submission of Invoice/ request for
payment and other documents.
….. (para 13.08 (b) of the award)
3). No indication is given in the Purchase
Orders as to what ‘other documents are required.
…..(para 13.08 (c) of the award)
4). The claimant asserts that until November
2013 payments were made to the claimant
initially by Respondent no.2 and subsequently
by Respondent no.1 by cheque/ RTGS but from
12th November 2013 all subsequent payments
were made by letter of credit. In order to receive
payment by this method the claimant asserts
that additional documentation was required
which created delays in payment.
……(para 13.08 (d) of the award)
5). Respondent no.1 denies that there was delay
in clearing payments to the claimant and asserts
that all payments validly due to the claimant
were made in time. Respondent no.1 asserts
that:
(i) Invoices were submitted by the claimant
later than the date on the face of the invoice;
(ii) To compute the period in which payment
of an invoice is to be made the start date is
the date on which the invoice, complete with
all supporting documents, is received by
Respondent no.1 which must be after
receipt of the relevant material at site; and
(iii) In many cases, invoices were not
accompanied by the required backup
documents and the payment of the invoiceCivil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 87 of 150
could not be released until these backup
documents were submitted by the claimant.
……(para 13.08 (e) of the award)
6). The tribunal accepts that delays by the
Claimant in submitting its invoices, in providing
the backup materials and in crediting payment
to its account would be included in the times
computed by the claimant between the date of
the invoice and the date of payment as included
in its tabulation of its invoices. However,
examination of Exhibit C-21 indicates that for
invoices paid before 12 November 2013, over
90%, were paid in less than 50 days from the
invoice date. Whereas, for invoices paid after 12
November only about 30% were paid within 50
days. Indeed, about 25% of the invoices dated
after 12 November 2013 were not paid for 100
days or longer. These percentages satisfy the
tribunal that the introduction of payment by
letter of credit, as it was arranged by Respondent
no.1, was more onerous than could reasonably
have been anticipated by the claimant when it
entered into the contracts.
…..(para 13.08 (g) of the award)
7). Respondent no.1 decided that the original
design of the Hot well drain pump was
unnecessarily large and changed the specified
pump to a smaller pump on 21st November
2013. As a result, both the pump and the electric
motor, which was required to drive the pump,
had to be re-ordered. The claimant asserts, and
respondent no.1 does not deny, that the original
pump and motor would have been delivered to
site on or about 17th February 2014.
……..(para 13.10 (a) of the award)
8). It was agreed at the hearing in this
arbitration that the actual delivery date of the
motors (which arrived a few days after the pump)
could be taken as on or about 7th May 2014.
Thus, there was a delay of approximately 79 days
in delivery.
……(para 13.10 (b) of the award).
9). On balance, the Tribunal is satisfied that
the drain pump together with its motor, although
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 88 of 150
a low value component, was a necessary part of
the ACC unit and the decision by Respondent no.
1 to replace it at a late stage risked delaying the
project. The time elapsed between the original
estimated delivery date, and the assumed actual
delivery date was 79 days.
…….(para 13.10 (e) of the award)
10). The tribunal finds the following facts to be
significant:
(i) The ACC unit could not be connected to
the turbine generator flange until the
turbine generator was in place to have the
connection made. Thus, welding of the ACC
unit to the turbine flange was dependent on
both completion of the horizontal duct and
pressure balancing bellows by the claimant
and the installation of the turbine on behalf
of Respondent no.1.
(ii) The ACC unit could not be
commissioned, nor could the PG test be
conducted without a flow of turbine exhaust
steam. The turbine must be operational to
provide the necessary flow of exhaust
steam. Thus, both commissioning and the
PG test were dependent on both the ACC
unit and the turbine being operational.
(iii) Up until the claimant was ready to
erect the first part of the horizontal duct
there is no evidence that the claimant was
delayed by any other construction activity
on site. The claimant states that the vertical
duct erection was completed on 15th July
2014. The vertical duct should have been
completed on 7th February 2014. Thus, the
tribunal finds that at 15th July 2014 the
claimant was 158 days behind its program
which is not attributable to non-readiness
of Respondent no.1.
(iv) The tribunal is satisfied that steam
flowing (steam blowing) was being
conducted by the turbine generator
contractor in early February 2015 which
would have been likely to have prevented
the welding of the duct to the turbine flange.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 89 of 150
This process also indicates that the turbine
was not operational.
(v) On the basis of Mr. Parasuram’s
evidence, the tribunal finds that the
claimant had completed the connection
between the horizontal duct and the turbine
generator flange around February 2015 but
that commissioning of the ACC unit did not
start until April 2015. Mr. Parasuram
attributes the delay between February and
April 2015 to Respondent no.1’s other
contractors having outstanding work. Thus,
completion of the Hook-up as described in
the L1 network Schedule which should have
taken place on 14th March 2014 did not
take place until mid- February 2015 by
which time the ACC unit construction was
about 343 days behind schedule. On the
evidence presented to the tribunal it is not
possible to apportion the further delay of
about 158 days which occurred between
15th July 2014 and mid- February 2015
between slow progress by the claimant and
hindrance to the claimant’s work by the
ongoing turbine generator installation.
However, the tribunal is satisfied that at
least part of this delay was not attributable
to the claimant.
……..(para 13.13 (c) of the award)
11). The tribunal now considers when, if at all,
the ACC system was completed. There are three
certificates which are referred to in the erection
purchase order. These are:
A certificate on competition of punch points;
A Take Over Certificate of Equipment; and
A certificate of competition of performance test.
None of these certificates have been issued.
………(para 13.13 (d) of the award)
12). The only certificate issued by the
respondents was dated 2nd March 2017. In
separate correspondence, Respondent no.1
stated that this certificate was issued for
marketing purposes and did not absolve the
claimant from its contractual obligation under
the Purchase Orders.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 90 of 150
……..(para 13.13 (e) of the award)
13). Notwithstanding the respondents’ caveat,
the issuance by the respondents of the 2nd
March 2017 certificate is considered significant
by the tribunal. The respondents knew the
purpose for which the certificate was required by
the claimant and, if it did not believe in the
veracity of what it was certifying, even for
marketing purposes, then it behaved
dishonestly. The tribunal has no basis for
assuming that the respondents would have acted
in such a dishonest manner and thus, concludes
that the respondents must have believed that the
ACC unit was operating satisfactorily when it
issued that certificate. The certificate states that
the ACC unit was operating satisfactorily from
May 2015. However, the tribunal does not rely
on this date as it was not material to the purpose
for which the certificate was required and was
the date included in the draft certificate provided
by the claimant.
……….(para 13.13 (f) of the award)
14). The tribunal concludes that all the criteria
for issuing all three of the certificates listed
above would have to be met before the ACC unit
could be certified to be operating satisfactorily.
The last alleged defects notified by Respondent
no.1 in 2015, which has been exhibited, is dated
4th July 2015. (The fan assembly detached more
than a year later, and that event could not have
been the basis for withholding the relevant
certificates through 2015). In its e-mail of 4th
July 2015, Respondent no.1 notes gearbox
defects but gave no details nor is the tribunal
provided with any information about what
action, if any, was taken in relation to the alleged
gearbox defect. However, the tribunal is satisfied
that on 4th July 2015 the ACC units were not yet
in fit condition to merit the issue of the three
relevant certificates.
……….(para 13.13 (g) of the award)
15). The first indication that the claimant
thought it was ready for a performance
guarantee test was in its e-mail dated 21st
September 2015. There is no evidence to suggest
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 91 of 150
that both the certificate on completion of punch
points and takeover certificate of equipment
should not have been issued on or before 21st
September 2015. In the absence of any evidence
from Respondent no.1 that there were any
remaining punch points or that the ACC system
was not capable of being taken over, the tribunal
finds that these certificates are deemed to have
been issued on 21st September 2015 a delay
from the planned date of 539 days.
……(para 13.13 (h) of the award)
16). Equally, there is no further indication that
the ACC unit was not capable of passing the PG
test on 21st September 2015. However, a PG test
can only be deemed satisfactory if it is not
carried out within 180 days of the issue of the
taking over certificate. Accordingly, the PG test
would be deemed to have been carried out
satisfactorily only after a further 180 days had
elapsed. Thus, the tribunal finds that the
deemed achievement of Supplier’s liability in
respect to Performance Guarantee Test pursuant
to Clause 10.5 of Annexure A of the Erection
Purchase Order only became effective on 19th
March 2016. As the claimant was still requesting
a PG test as late as 20th May 2016 the tribunal
is satisfied that the deeming provisions apply
and the ACC unit is deemed to have passed the
PG test. The Erection Purchase Order states
that, where the PG test is deemed to have been
carried out, the respondents remained liable for
the guaranteed performance during the 180
days. However, it is silent on whether the deemed
achievement of supplier’s liability in respect to
Performance Guarantee test is retrospective to
the date when the performance can be said to
have been achieved. The tribunal finds that for
the purposes of determining the delay caused by
the failure to arrange a PG test it would be just
to consider that the required performance was
achieved on 21st September 2015 – the date on
which the tribunal has found that the ACC unit
was deemed to have been taken over.
………(para 13.13 (i) of the award)
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 92 of 150
17). Respondent no.1 did not issue the takeover
certificate of equipment or a certificate of
completion nor did it arrange a PG test. However,
it has offered no evidence of any defects in the
ACC unit that it has shown existed on 21st
September 2015. Accordingly, the tribunal is
satisfied, on the balance of probabilities, that
respondent no.1 delayed issuing the said
certificates and the PG test because it was not in
a position, due to other factors beyond the
Claimant’s control, to properly commission the
ACC unit. Therefore, the tribunal is satisfied that
at 21st September 2015, Respondent no.1 had
delayed completion by 539 days and the
claimant is entitled to 539 days’ extension of
time.
…………(para 13.13 (j) of the award)
18). Summary of Delays
Delay in payment Nil
Delay in handing over site Nil
Due to change of specification
of the Drain Pump 79 days
Delay in BBU approval Nil
Staircase and pipe rack
Hindrance Nil
Non-readiness of
Respondent no.1 539 days
The tribunal finds that these delays are not
cumulative but parallel. The effect of the drain
pump being changed would have occurred before
mid-February 2014 when the tribunal found that
the project was delayed by 158 days. Thus, the
delay at that point for which the claimant was
responsible was 158 days less 79 days allowed
for the change of drain pump. Thus, the claimant
was in culpable delay of 79 days in mid-
February. The delay in commissioning occurred
after mid-February 2014. Thus, the total
extension of time granted by the tribunal is 539
days.
…….(para 13.14 of the award)
19). Liquidated Damages
As the tribunal has granted an extension of time
for completion of the ACC unit to 21st September
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 93 of 150
2015 and has also found that the requirements
for completion of the ACC units were achieved on
that date, the tribunal finds that the claimant
has no liability for liquidated damages….
……(para 13.15 of the award)”
Relevant Article(s) of the Schedule to the Limitation
Act, 1963 applicable to the claim
88. Having taken note of the relevant facts as well as
material observations in the arbitral award, we shall now
consider as to which Article, or Articles(s), if more than
one is applicable, of the Schedule to the 1963 Act would
apply to the claim(s) of Enexio. Notably, the claim was in
respect of: (a) declaration qua invalidity of Debit note(s);
(b) outstanding principal amount; and (c) interest. Insofar
as relief qua declaration was concerned, it was found
barred by time prescribed by Article 58, and there is no
serious challenge to that finding. As regards claim for the
outstanding principal amount, it was a composite claim
for the balance amount payable for supplies made and
work done under the Supply Purchase Order and the
Erection Purchase Order respectively, which was found
within limitation.
89. According to the appellant(s), Article 14 is
applicable to the claim in respect of balance amount for
the price of the goods supplied under the Supply Purchase
Order; and Article 18 would apply to the claim for the work
done under the Erection Purchase Order. It is their case
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 94 of 150
that if the project was to be completed by 31 March 2014,
three years period should be counted from that date and,
therefore, claim would be barred by limitation as on 2 May
2019 i.e., the date of commencement of the arbitral
proceeding.
90. Per contra, Enexio’s case is that it is a composite
contract for design, manufacture, supply, erection and
commissioning of air-cooled condenser unit (ACC Unit)
with auxiliaries for 160 MW Coal Based Thermal Power
Plant (Project) at Gummidipoondi in the State of Tamil
Nadu whereunder payments were to be made on pro rata
basis, and final payment was to be made only on
completion of the work, subject to issuance of relevant
certificates. The completion of work got delayed due to
reasons beyond the control of Enexio, as held by the
Tribunal, therefore, 539 days of extension, up to the
deemed date of completion of the project i.e., 21
September 2015, was granted. In between, the contract
was not repudiated by either party. Hence, the limitation
period of three years would have to be counted from the
date of completion of the work, that is, from 21 September
2015. It is also their case that before expiry of the
prescribed period of three years, a written
acknowledgment of the outstanding amount was made
vide minutes of the meeting dated 19 April 2018.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 95 of 150
Therefore, by virtue of Section 1873 of the 1963 Act, a fresh
period of three years would start from the date of
acknowledgement, which got further extended, by virtue
of the provisions of Section 1974 of the 1963 Act, on
account of the offer made on 26 May 2018 to pay Rs. 3
crores as full and final settlement of all dues. Hence, as
on 2 May 2019, the claim was not barred by limitation.
91. A plain reading of Article 14 of the Schedule to the
1963 Act, which is pari materia Article 5275 of the First
Schedule to the Limitation Act, 1908 (in short 1908 Act),
would indicate that it applies where: (a) the suit/ claim is
73
Section 18. Effect of acknowledgment in writing.— (1) Where, before the expiration of the prescribed
period for a suit or application in respect of any property or right, an acknowledgement of liability in respect of
such property or right has been made in writing signed by the party against whom such property or right is
claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be
computed from the time when the acknowledgment was so signed.
(2) Where the writing containing the acknowledgement is undated, oral evidence may be given of the time
when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of
its content shall not be received.
Explanation.– for the purposes of this section, —
(a) an acknowledgement may be sufficient though it omits to specify the exact nature of the
property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet
come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a
claim to set off, or is addressed to a person other than a person entitled to the property or right;
(b) the word ‘signed’ means signed either personally or by an agent duly authorized in this
behalf; and
(c) an application for the execution of a decree or order shall not be deemed to be an
application in respect of any property or right.
74
Section 19. Effect of payment on account of debt or of interest on legacy.— Where payment on account of a
debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to
pay the debt or legacy or by his agent duly authorized in this behalf, a fresh period of limitation shall be
computed from the time when the payment was made:
Provided that, save in the case of payment of interest made before the 1st day of January, 1928, an
acknowledgement of the payment appears in the handwriting of, or in writing signed by, the person making the
payment.
Explanation. — For the purposes of this section, —
(a) where mortgage land is in the possession of the mortgagee, the receipt of the rent or
produce of such land shall be deemed to be a payment;
(b) ‘debt’ does not include money payable under a decree or order of a court.
75
See Footnote 83
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 96 of 150
for the price of goods sold and delivered; and (b) no fixed
period of credit is agreed upon. Whereas Article 18 of the
Schedule, which is pari materia Article 5676 of the First
Schedule of the 1908 Act, applies where: (a) the suit/claim
is for the price of work done by the plaintiff/ claimant for
the defendant at his request; and (b) no time has been
fixed for payment. Thus, where a suit is for goods supplied
and work done by the plaintiff (a contractor) and the price
of materials and the price of work is separately mentioned,
and the time for payment is not fixed by the contract,
Article 14 will apply to the former claim, and Article 18 to
the latter. But where a claim is made for a specific sum of
money as one indivisible claim on the contract, without
mentioning any specific sum as being the price of goods or
price of the work done, neither Article 14 nor Article 18
will apply, but only Article 55, which provides for all
actions ex contractu (i.e., based on a contract) not
otherwise provided for, would apply77.
92. Article 55, which is a combination of erstwhile
Articles 11578 and 11679 of the First Schedule to the 1908
Act, is a residuary Article in respect of all actions based
on a contract not otherwise specially provided for. For the
applicability of Article 55, four requirements should be
76
See Footnote 84
77
See U. N. Mitra’s Law of Limitation and Prescription, Sixteenth Edition, Volume 1, at page 1063, published by
LexisNexis.
78
See Footnote 86
79
See Footnote 87
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 97 of 150
satisfied, namely, (1) the suit should be based on a
contract; (2) there must be breach of the contract; (3) the
suit should be for compensation; and (4) the suit should
not be covered by any other Article specially providing for
it.
93. A breach of a contract may be by non-performance,
or by repudiation or by both80. In Anson’s Law of Contract
(29th Oxford Edition), under the heading ‘Forms of Breach
Which Justify Discharge’, it is stated thus:
“The right of a party to be treated as discharged
from further performance may arise in any one
of three ways: the other party to the contract (a)
may renounce its liabilities under it; (b) may by
its own act make it impossible to fulfil them, (c)
may fail to perform what it has promised. Of
these forms of breach, the first two may take
place not only in the course of performance but
also while the contract is still wholly executory
i.e., before either party is entitled to demand a
performance by the other of the other’s promise.
In such a case the breach is usually termed an
anticipatory breach. The last can only take place
at or during the time for performance of the
contract.”
94. Thus, failure of a party to a contract in performing
its obligation(s) thereunder could be considered a breach
of contract for the purpose of bringing an action against it
by the other party. In such an event, the other party can
claim compensation or damages, or/ and, in certain cases,
obtain specific performance.
80
P. Ramanatha Aiyar’s Advanced Law Lexicon, 4th Edition at page 596
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 98 of 150
95. The phrase ‘compensation for breach of contract’,
as occurring in Article 55 of the Schedule to the 1963 Act,
would comprehend also a claim for money due under a
contract. ‘Compensation’ is a general term comprising any
payment which a party would be entitled to claim on
account of any loss or damage arising from a breach of a
contract, and the expression has not been limited only to
a claim for unliquidated damages. The expression is wide
enough to include a claim for payment of a certain sum81.
96. In Mahomed Ghasita v. Siraj-ud-Din and
others82, the plaintiff was to supply Italian marble and
other stone required for flooring and was also to do all the
work necessary for constructing the floor. The plaintiff
sued for the balance of the money due to him based on
this contract and the plaint made no mention of the price
of the materials as distinct from the price of the work. The
matter came before a Full Bench of the then Lahore High
Court. Before the Full Bench the question was, what
Article of the Limitation Act, 1908 is applicable to the suit.
Sir Shadi Lal C.J., as His Lordship then was, speaking for
the Bench held:
“The action brought by the plaintiff was for the
recovery of the balance of the money due to him
on the strength of the contract described above;
81
See U. N. Mitra’s Law of Limitation and Prescription, Sixteenth Edition, Volume 2, at pages 1342 & 1343,
published by LexisNexis.
82
AIR 1922 Lah 198 (FB) : ILR (1921) 2 Lah 376 (FB) : 1921 SCC OnLine Lah 303
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 99 of 150
and the question for consideration is what article
of the Limitation Act governs the claim. Our
attention has been invited, in the first instance,
to article 5283, which prescribes a period of three
years (enlarged to six years by the Punjab Loans
Limitation Act of 1904) for the recovery of the
price of goods sold and delivered to the
defendant; and also to article 5684, which lays
down a period of three years for a suit to recover
the price of work done by the plaintiff for the
defendant. Now, as stated above, the plaintiff
supplied not only the materials, but also the
labour, and it is clear that neither of the
aforesaid articles governs the suit in its entirety.
It is, however, urged that the action comprises
two claims, one for the price of the material
supplied by the plaintiff, and the other relating
to the price of the work done by him, and that
these two claims should be dealt with separately,
and that they are governed by article 52 and
article 56, respectively. The rule of law is no
doubt firmly established that a combination of
several claims in one action does not deprive
each claim of its specific character and
description. The Code of Civil Procedure allows a
plaintiff, in certain circumstances, to combine in
one action two or more distinct and independent
claims, and it is quite possible that one of the
claims may be barred by limitation, and the
other may be within time; though both of them
arise out of one and the same cause of action. In
a case of that description there is no reason why83
First Schedule of Limitation Act, 1908
Article Description of Suit Period of Limitation Time from which
Period begins to run52 For the price of goods Three years The date of the delivery
sold and delivered, where of the goods.
no fixed period of credit is
agreed upon.
84
First Schedule of Limitation Act, 1908
Article Description of Suit Period of Limitation Time from which
Period begins to run
56 For the price of work done Three years When the work is done.
by the plaintiff for the
defendant at his request
where no time has been
fixed for payment.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 100 of 150
the court should not apply to each claim the rule
of limitation specially applicable thereto. It is
nowhere laid down that only one article should
govern the whole of the suit, though it may
consist of several independent claims, and that
the suit should not be split up into its component
parts for the purpose of the law of limitation.
The question, however, is whether the action as
brought by the plaintiff can be treated as a
combination of two distinct claims. Now, the
plaint makes no mention of the price of the
materials as distinct from the price of the work
and contains no reference whatsoever to two
claims. There is only one indivisible claim, and
that is for the balance of the money due to the
plaintiff on the basis of a contract, by which he
was to be paid for everything supplied and done
by him in connection with the flooring of the
building at a comprehensive rate. The claim, as
laid in the plaint is an indivisible one; it cannot
be split up into two portions. We must, therefore,
hold that it falls neither under article 52, nor
under article 56.
The learned advocate for the plaintiff contends
that as neither of the above articles governs the
claim, it should come within article 12085. The
judgment in Radha Kishen v. Basant Lal, which
is relied upon in support of this contention, no
doubt, related to a suit for the recovery of a sum
of money alleged to be due for the work
performed and material supplied by the plaintiff
to the defendant under a contract, and the
learned judges held that neither article 52 nor
article 56 was applicable to the entire claim.
They then made the following observation –
“There is no other articles specially
applicable, and hence the only article
which can be applied is article 120.”
85
First Schedule of Limitation Act, 1908
Article Description of Suit Period of Limitation Time from which
Period begins to run
120 Suit for which no period Six years When the right to sue accrues.
of limitation is provided
elsewhere in this Schedule.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 101 of 150
Now with all deference to the learned judges we
are unable to hold that there is no other article
governing a claim of that character. It seems that
their attention was not drawn to article 11586,
which governs every suit for compensation for
the breach of a contract not in writing registered
and not specially provided for in the Limitation
Act. It is beyond doubt that this article is a
general provision applying to all actions ex
contractu not specially provided for otherwise;
and the present claim certainly arises out of a
contract entered into between the parties. The
word ‘compensation’ in article 115 as well as in
article 11687 has the same meaning as it has in
section 7388 of the Indian Contract Act and
86
First Schedule of Limitation Act, 1908
Article Description of Suit Period of Limitation Time from which
Period begins to run
115 For compensation for the Three years When the contract is broken,
breach of any contract, or (where there are successive
express or implied, not in breaches) when the breach in
writing registered and not in respect of which the suit is
herein specially provided for. Instituted occurs, or (where
the breach is continuing) when
it ceases.
87
First Schedule of Limitation Act, 1908
Article Description of Suit Period of Limitation Time from which
Period begins to run
116 For compensation for the Six years When the period of limitation
breach of a contract in would begin to run against a
writing registered. suit brought on a similar
contract not registered.
88
The Indian Contract Act, 1872.
Section 73. Compensation for loss or damage caused by breach of contract.– When a contract has
been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the
contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual
course of things from such breach, or which the parties knew, when they made the contract, would be likely to
result from the breach of it.
Such compensation is not to be given for any remote and indirect loss or damage sustained by reason
of the breach.
Compensation for failure to discharge obligation resembling those created by contract.—
When an obligation resembling those created by contract has been incurred and has not been
discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from
the party in default, as if such person had contracted to discharge it and had broken his contract.
Explanation.– In estimating the loss or damage arising from a breach of contract, the means which
existed of remedying the inconvenience caused by the non-performance of the contract must be taken into
account
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 102 of 150
denotes a sum of money payable to a person on
account of the loss or damage caused to him by
the breach of a contract. It has been held, and
we consider rightly, that a suit to recover a
specified sum of money on a contract is a suit for
compensation within articles 115 and 116 —
vide Nobocoomar Mookhopadhaya v. Siru
Mullick89 and Husain Ali Khan v. Hajiz Ali
Khan90.
We are accordingly of opinion that the present
claim must be regarded as one for compensation
for the breach of a contract, and that there is no
special provision in the Act which governs the
claim. It must, therefore, come under the general
provision contained in article 115, which governs
every action arising out of contract, not
otherwise specially provided for.”
(Emphasis supplied)
97. In Dhapia v. Dalla91 before a Full Bench of the
Allahabad High Court the question was, what Article of the
First Schedule to the 1908 Act would apply to a suit for
recovery of a specified sum under a contract. In that suit,
the plaintiff had made defendant(s) partner to one half of
the fishery rights in the tank arising from a Theka, on the
condition that they would pay him half the Theka money.
The allegations made in the plaint showed that the
defendant(s) had already worked out the Theka in respect
of their share in it. As that suit was not filed within three
years from the date of breach, it was dismissed by the trial
court as barred by limitation by applying Article 11592 of
the First Schedule to the 1908 Act. The plaintiff preferred
89
(1890) ILR 6 Cal 94
90
(1881) ILR 3 All 600 (FB)
91
1969 All LJ 718 : AIR 1970 All 206 : 1969 SCC OnLine All 79
92
See Footnote 86
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 103 of 150
appeal, which was allowed on the finding that Article 12093
of the First Schedule to the 1908 Act applied, whereunder
the limitation was six years. When the matter travelled to
the High Court, an argument was raised that neither
Article 115 nor Article 120 could apply, rather Article
11394 would apply. It was contended before the High
Court that Article 113 should apply as the claim is nothing
but for specific performance. Rejecting this submission
and holding that Article 115 of the First Schedule to 1908
Act would apply, the Full Bench held:
“8. In our opinion there is no force in this
argument. It is true that there was a contract
between the parties inasmuch as the plaintiff
gave to the defendants one half of the fishery
rights in the tank, on the condition that they
would pay him half the theka money. The
allegations made in the plaint show that the
defendants had already worked out the theka in
respect of their share in it. All that remained to
be done was to pay the proportionate theka
money to the plaintiff. In such circumstances no
suit for specific performance of contract could be
filed: only a suit to enforce the agreement so far
as it related to the payment of the proportionate
theka money could be, and has been filed.
9. The relevant portion of section 12 of the
Specific Relief Act (Act 1 of 1877) reads as
follows:
“… The specific performance of any
contract may in the discretion of the
court be enforced—93
See Footnote 85
94
First Schedule of Limitation Act, 1908
Article Description of Suit Period of Limitation Time from which
Period begins to run113 For specific performance Three years The date fixed for the
of contract performance, or, if no
. such date is fixed, when
the plaintiff has notice that
performance is refused.
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(a) When the act agreed to be done is in
the performance, wholly or partly, of a
trust;
(b) When there exists no standard for
ascertaining the actual damages caused
by the non-performance of the act agreed
to be done;
(c) When the act agreed to be done is
such that pecuniary compensation for its
non- performance would not afford
adequate relief, or
(d) When it is probable that pecuniary
compensation cannot be got for the non-
performance of the act agreed to be
done……”
10. A suit for the recovery of a specified sum
under a contract cannot be said to be a suit of
the nature where pecuniary compensation would
not afford adequate relief. We are, therefore, of
the opinion that the suit out of which this civil
revision arises cannot be said to be a suit for the
specific performance of a contract and will not be
governed by Article 113 of the First Schedule to
the Indian Limitation Act, 1908
xxxxx xxxxx
13. We now proceed to consider why Article 115
of the First Schedule to the Limitation Act should
apply to the facts of the present case. Article 115
applies when there is a breach of contract, and
suit is for compensation for the loss suffered by
the innocent party. A breach of contract ‘occurs
where a party repudiates or fails to perform one
or more of the obligations imposed upon him by
the contract’: (vide Cheshire and Fifoot, p 484).
‘If one of two parties to a contract breaks the
obligation which the contract imposes, a new
obligation will in every case arise – a right of
action conferred upon the party injured by the
breach’ (vide Anson’s Law of Contract, p 412).
Admittedly, in the present case, there was a
contract and according to the plaintiff and the
findings of the court a breach of contract had
occurred inasmuch as the defendants failed to
pay the stipulated amount upon the date fixed
under the contract.
14. Difficulty can, however, be caused by the
word ‘compensation’ used in Article 115. It can
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 105 of 150
be argued that the words compensation for
breach of contract point rather to a claim for
unliquidated damages than to the payment of a
certain sum, and, therefore, where the suit is for
the recovery of a specified sum, and not for the
determination of unliquidated damages, this
article should not apply. In our opinion this
contention would be wholly untenable because it
was not accepted by this court in the Full Bench
case of Hussain Ali Khan versus Hafiz Ali Khan95
and by the Privy Council in the case of Tricomdas
Coovarji Bhoja versus Sri Gopinath Jiu Thakur96.
In the case of Husain Ali Khan Article 116 of
Schedule II of the Limitation Act (Act XV of 1877)
was the subject of interpretation. Articles 115
and 116 of Schedule II of Act XV of 1877 have
been reproduced verbatim in the Indian
Limitation Act, 1908. Article 115 deals with the
breach of contracts not in writing and registered
while Article 116 provided for breach of contracts
in writing and registered. It is, therefore,
obvious, that the meaning which has to be given
to the words ‘compensation for breach of
contract’ occurring in both the Articles will have
to be the same.
xxx xxx xxx
16. In the case of Tricomdas Cooverji Bhoja the
argument that the words ‘compensation for
breach of a contract’ point rather to a claim of
unliquidated damages than to the claim of
payment of certain sum was not accepted
because the word compensation has been used
in the Indian Contract Act in a very wide sense.
17. The relevant portion of section 73 of the
Indian Contract Act reads as follows:
‘73. When a contract has been broken,
the party who suffers by such breach is
entitled to receive, from the party who
has broken the contract, compensation
for any loss or damage caused to him
thereby, which naturally arose in the
usual course of things from such breach,
or which the parties knew, when they
made the contract, to be likely to result
from the breach of it.
95
I.L.R. 3 All 600
96
AIR 1916 PC 182Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 106 of 150
Such compensation is not to be given for
any remote and indirect loss or damage
sustained by reason of the breach……Illustrations
………………..
(n) A contracts to pay a sum of money
to B on a day specified. A does not pay
the money on that day; B, in consequence
of not receiving the money on that day is
unable to pay his debts, and is totally
ruined. A is not liable to make good to B
anything except the principal sum he
contracted to pay, together with interest
up to the day of payment.’
18. It is, therefore, clear that the word compensation has
been used, in section 73 of the Indian Contract Act in a
very wide sense and the present case would be covered by
it.
19. We see no reason why the words ‘compensation for
breach of contract’ as used in Article 115 should be given
a meaning different from the same words as used in Article
116. Article 115 being a residuary Article for suits based
on breach of contract, it is obvious that the suit out of
which this revision arises would be governed by the said
Article.”
(Emphasis supplied)
98. On a consideration of the aforesaid decisions as
well as the provisions of Section 73 of the Contract Act and
Article 55 of the Schedule to the 1963 Act, we are of the
view that even a suit for recovery of a specified amount,
based on a contract, is a suit for compensation, and if the
suit is a consequence of defendant breaching the contract
or not fulfilling its obligation(s) thereunder, the limitation
for institution of such a suit would be covered by Article
55 of the Schedule to the 1963 Act, provided the suit is
not covered by any other Article specially providing for it.
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99. In the instant case, there is no dispute that the
claim is based on a contract. The finding of the Arbitral
Tribunal in paragraph 13.13 (i)97 of the award is that the
appellant(s) herein had failed to undertake the
performance guarantee test, despite request of the
claimant, within the period specified therefor. The final
payment of the bill(s) / invoice(s) was dependent on
issuance of certificate(s) including one relating to
successful completion of the performance guarantee test
(PG Test). Further, the contract provided that if the
performance guarantee is not undertaken by the
purchaser (appellant(s) herein), it could be deemed that
the supplier (claimant -R-1) had fulfilled its obligation of
providing a guaranteed performance of the project under
the contract. In these circumstances, when, despite
request of the contractor /supplier, the employer/
purchaser failed to undertake the PG Test, the Arbitral
Tribunal justifiably concluded that even though the
supplier (claimant) had fulfilled its obligations under the
contract, the purchaser (appellant(s) herein) had failed in
fulfilling its obligation of making payment of the
outstanding principal amount to the claimant, which had
become due and payable under the contract. In our view,
therefore, the claim being one for ‘compensation’ (which
term includes a specified outstanding amount), based on
97
Extracted in paragraph 88 (16) of this judgment.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 108 of 150
breach of a contract, the limitation for the claim would fall
within the ambit of Article 55 of the Schedule to the 1963
Act unless demonstrated that the claim is specially
covered by any other Article of the Schedule.
100. In Geo Miller (supra)98 a three-Judge Bench of
this Court held that in a commercial dispute, though mere
failure to pay may not give rise to a cause of action, once
the applicant has asserted their claim and the respondent
fails to respond to such claim, such failure will be treated
as a denial of the applicant’s claim giving rise to a dispute
and, therefore, a cause of action for reference to
arbitration would come into existence. It was also
observed that it would not lie in the mouth of the claimant
to plead that it waited to refer the dispute to arbitration
because it was making representations and sending
reminders to the respondent to settle the matter.
101. In Major (Retd.) Inder Singh Rekhi v. Delhi
Development Authority99, in the context of
commencement of the period of limitation for making a
reference application under Section 20 of the erstwhile
Arbitration Act, 1940, it was held by this Court that to be
entitled to have an order of reference under Section 20, it
is necessary that there should be an arbitration agreement
and secondly, differences must arise to which the
98
See paragraph 29 of the judgment in Geo Miller (supra)
99
(1988) 2 SCC 338
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 109 of 150
agreement applied. Once there is an assertion of claim by
the appellant and silence as well as refusal in respect of
the same by the respondent, a dispute would arise
regarding non-payment of the alleged dues. The Court
thereafter went on to observe:
“4. ……. The High Court proceeded on the basis
that the work was completed in 1980 and
therefore, the appellant became entitled to the
payment from that date, and the cause of action
under article 137 arose from that date. But in
order to be entitled to ask for the reference under
section 20 of the Act there must not only be an
entitlement to money but there must be a
difference, or dispute must arise. It is true that
on completion of the work a right to get payment
would normally arise but where the final bills as
in this case have not been prepared as appears
from the record and when the assertion of the
claim was made on 28.2.1983 and there was
non- payment, the cause of action arose from
that date, that is to say, 28.2.1983. It is also true
that a party cannot postpone the approval of
cause of action by writing reminders or sending
reminders but where the bill had not been finally
prepared, the claim made by a claimant is the
accrual of the cause of action. A dispute arises
where there is a claim and a denial and
repudiation of the claim. The existence of dispute
is essential for appointment of an arbitrator
under Section 8 or reference under section 20 of
the Act. There should be dispute and there can
only be a dispute when a claim is asserted by one
party and denied by the other on whatever
grounds. Mere failure or inaction to pay does not
lead to the inference of the existence of dispute.
Dispute entails a positive element and assertion
of denying, not merely inaction to accede to a
claim or a request. Whether in a particular case
a dispute has arisen or not has to be found out
from the facts and circumstances of the case.”
102. Interpreting the decision of this Court in Inder
Singh Rekhi (supra), in B & TG AG (supra) it was, inter
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 110 of 150
alia, held that three principles of law are discernible from
the aforesaid decision: (1) ordinarily, on the completion of
the work, the right to receive the payment begins; (2) a
dispute arises when there is a claim on one side and its
denial/ repudiation by the other; and (3) a person cannot
postpone the accrual of cause of action by repeatedly
writing letters, or sending reminders. In other words,
bilateral discussions for an indefinite period would not
save the situation so far as the accrual of cause of action
and the right to apply for appointment of arbitrator is
concerned.
103. In the case in hand, the award reveals that in
respect of payment of Claimant’s invoices, the Purchase
Orders provided that 65% of the Order Price was to be paid
on pro rata basis along with 100% taxes and duties after
receipt of material at site, within 25 days of submission of
Invoice/ request for payment, and other documents100.
The award recites that there is no indication in the
Purchase Orders as to what ‘other documents’ were
required101. Not only that, payment, including balance
payment, was dependent on issuance of: (i) certificate on
completion of punch points signed by parties; (ii) take over
certificate of equipment (to be issued by the Purchaser);
and (iii) certificate of completion of performance test of
100
Paragraph 13.08 (b) of the Award
101
Paragraph 13.08 (c) of the Award
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 111 of 150
equipment (to be issued by the Purchaser)102. But none of
these certificates was issued103. In these circumstances,
the Arbitral Tribunal had to consider various facts and
circumstances to come to a definite conclusion that the
work was completed on 21 September 2015. In holding
so, Tribunal relied on: (a) an e-mail sent by the claimant
on 21 September 2015 showing its readiness to a
performance guarantee test; and (b) the fact that there was
no evidence to suggest that the certificates on completion,
as ought to have been issued, should not have been issued
on or before 21 September 2015104. The Tribunal also took
note of the terms and conditions of the contract which
were to the effect that the performance guarantee test can
be deemed satisfactory if, despite request, it is not carried
out within 180 days of the issue of the taking over
certificate. The Tribunal noticed that vide certificate dated
2 March 2017 the appellant(s) admitted that unit was
commissioned in May 2015 and there was a request of the
claimant dated 21 September 2015 to undertake
performance guarantee test105. Taking all of this into
account, the Tribunal held that the “deemed achievement
of supplier’s liability in respect to performance guarantee”,
pursuant to clause 10.5 of Annexure A of the Erection
Purchase Order, became effective on 19 March 2016106.
102
Paragraph 7.32 of the Award
103
Paragraph 13.13 (d) of the Award
104
Paragraph 13.13 (h) of the Award.
105
See Paragraph 88 (16) above including paragraph 13.13 (f) of the Award.
106
Paragraph 13.13 (i) of the Award.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 112 of 150
104. From the discussion thus far, following dates
emerge which, in our view, would be relevant for
determining the start point of limitation for the claim:
(a) 21 September 2015 i.e., the deemed
date of completion of the supply/ work
undertaken by the claimant under the
Purchase Orders/ contract; and
(b) 19 March 2016 i.e., the deemed date
by which the supplier (Claimant) had fulfilled
its liability under the contract relating to
guaranteed performance of the Unit
concerned.
105. Now, we shall consider whether Articles 14 and 18
of the Schedule to the 1963 Act were applicable or not.
Article 14 applies where the suit is for the price of the
goods sold and delivered, and there is no fixed period of
credit agreed upon. Here, there is an indivisible claim in
respect of the outstanding principal amount for the goods
supplied and the work done. Moreover, the payment(s)
under the supply purchase order were to be on pro rata
basis, and full payment for the supplies was dependent on
supporting documents, including certificates, to be
provided by the purchaser, which were not provided.
Thus, when full payment(s) under the supply/erection
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 113 of 150
purchase order(s) were dependent on certificates relating
to completion/ commissioning /guaranteed performance
etc., the claimant waited till successful completion /
commissioning / guaranteed performance of the project to
file a composite claim for the balance amount payable
under both the purchase orders. In our view, therefore,
Article 14 is not applicable to the claim as framed.
106. Insofar as Article 18 is concerned, it is to apply
where the suit is for the price of the work done by the
plaintiff for the defendant at his request, and where no
time has been fixed for payment. In the instant case, there
is an indivisible claim for the outstanding amount in
respect of goods supplied and the work done. As already
noticed above, the payment(s) under the contract were to
be made on pro rata basis, dependent on work done and
certificates issued, which, as per the finding in the award,
were not issued. Hence, the claimant was entitled to make
a composite claim for the goods supplied and the work
done after the project was successfully complete i.e., when
the Unit was commissioned followed by guaranteed
performance. Because it is only then, when the
outstanding amount, as per the Bills / Invoices raised,
became due and payable to the claimant in terms of the
contract. Thus, in our view, Article 18 would also not
apply.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 114 of 150
107. As it is not demonstrated that any other Article of
the Schedule specially providing for the claim, as was
made by R-1, was applicable, in our view, Article 55 of the
Schedule was applicable to the claim, inter alia, for the
following reasons:
(a) The claim was for compensation
(in as much as the term ‘compensation’
includes a specified amount payable
under a contract107) in respect of the
goods supplied and the work done under
a contract; and
(b) The claim was based on a breach
of the contractual obligation as, according
to the findings returned by the Arbitral
Tribunal, the respondents to the claim
(appellant(s) herein) had failed to fulfil
their obligation(s) of making payment of
the outstanding principal amount
payable under the contract despite
raising of bills / invoices by the claimant.
Starting Point of Limitation for the Claim
108. Having determined that limitation for the claim
would be governed by Article 55 of the Schedule to the
107
See our discussion in paragraphs 96 to 98 of this judgment
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 115 of 150
1963 Act, we shall now ascertain the date from which the
limitation period is to be counted.
109. Under Article 55, the limitation period begins to
run when the contract is broken or where there are
successive breaches, when the breach in respect of which
the suit is instituted occurs, or where the breach is
continuing, when it ceases.
110. In the case in hand, it is nobody’s case that either
party repudiated the contract. Further, the claim is not in
respect of non-payment of any specific bill or invoice
during execution of the contract. Rather, it is for the
outstanding principal amount due to the claimant on
discharge of his obligations under the contract. No doubt,
list of unpaid bills / invoices was placed on record of the
arbitral proceedings to demonstrate that bills / invoices
were raised / issued, but the same was by way of evidence
to support the claim, which was for the entire outstanding
principal amount payable to the claimant on discharge of
its obligations under the contract. Thus, simply put, the
cause of action for the claim in question is appellant(s)’
failure to make payment of the outstanding principal
amount to the claimant despite discharge of contractual
obligations by it.
111. At this stage, we would like to put on record that
nothing was brought to our notice that there was any fixed
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 116 of 150
date, or period of credit, for payment of the balance
amount. In the above circumstances, in our view, the
starting point of limitation should be the date when the
claimant had fulfilled all its obligations under the contract
and was entitled for release of the outstanding amount
payable under the contract.
112. As per the contract, if, after takeover, the
purchaser (appellant(s) herein) fails to undertake the
performance guarantee test, within 180 days from the date
of request for it by the supplier (i.e., claimant), it is to be
deemed that the supplier has fulfilled its liability in respect
of the guaranteed performance. Apparently, passing the
performance guarantee test was last of the supplier’s
(claimant’s) obligations, whereafter the supplier was
entitled for release of the balance amount. The Tribunal
has found: (a) that as per certificate dated 2 March 2017,
the commissioning took place in May 2015; (b) at that time
there were certain technical issues, which were resolved
later; (c) on 21 September 2015, claimant sent request to
the appellant(s) to undertake performance guarantee test,
but there was no response to the request; and (d) the
period of 180 days, counted from 21 September 2015,
expired on 19 March 2016. In the light of the above
findings, the Tribunal concluded that commissioning took
place in the month of May 2015; technical issues were
resolved by 21 September 2015; and performance
guarantee period expired on 19 March 2016.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 117 of 150
113. Based on the above, while bearing in mind that
final payment of the principal outstanding amount was
dependent on meeting the requirement of performance
guarantee, in our view, the cause of action for the claim,
as made, matured on expiry of that stipulated period of
180 days within which, despite request, the appellant(s)
(i.e., purchaser) failed to undertake the performance
guarantee test. Thus, even though there might be several
bills/ invoices raised/issued by the claimant during
execution of the contract, the claim of the claimant for the
outstanding principal amount matured on expiry of 180
days from the date of the notice given by the claimant to
the appellant(s) (i.e., respondents to the claim) to
undertake the performance guarantee test. We, therefore,
conclude that limitation for the claim started to run from
19 March 2016.
114. At this stage, we may notice, only to reject, an
alternative submission made on behalf of the appellant,
which is, that if Article 55 was applicable, the breach of
the contract occurred when the claimant failed to
complete the project by 31 March 2014, as promised,
therefore, the period of limitation should be counted from
that date. This argument, in our view, is not sustainable,
because time was not the essence of the contract in as
much as there was a clause for liquidated damages for
delay in completion (See Clause 13 of Annexure A of the
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 118 of 150
Supply Purchase Order as extracted in paragraph 7.32 of
the award). Moreover, there is no material on record to
indicate that the contract was repudiated by the appellant
on any date for non-completion of the project by the date
stipulated. Rather, the materials on record, as recited in
the award, indicate that parties continued to engage with
each other and accepted performance of contractual
obligations even beyond the stipulated date. Further,
there is a clear finding in the award that the claimant was
entitled to extension of 539 days. For the above reasons,
we reject the alternative submission made on behalf of the
appellant(s).
Limitation Extended by Acknowledgement dated
19.04.2018 under Section 18 of the 1963 Act
115. As the limitation period of three years prescribed
by Article 55, if counted from 19 March 2016, expired
before the date of commencement of the arbitral
proceeding (i.e., 2 May 2019), we will have to consider
whether, by virtue of acknowledgment, if any, the claimant
was entitled to extension of the period of limitation.
116. Section 18108 of the 1963 Act deals with the effect of
acknowledgement in writing. Sub-section (1) thereof
provides that where, before the expiration of the
prescribed period for a suit or application in respect of any
108
See Footnote 73
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 119 of 150
right, an acknowledgement of liability in respect of such
right has been made in writing signed by the party against
whom such right is claimed, a fresh period of limitation
shall be computed from the time when the
acknowledgment was so signed. The Explanation to this
section provides that an acknowledgment may be
sufficient though it omits to specify the exact nature of the
right or avers that the time for payment has not yet come
or is accompanied by a refusal to pay, or is coupled with
a claim to set off, or is addressed to a person other than a
person entitled to the right.
117. In Khan Bahadur Shapoor Fredom Mazda v.
Durga Prasad Chamaria and others109 while dealing with
Section 19 of the 1908 Act, which is pari materia Section
18 of the 1963 Act, this Court held that for a valid
acknowledgement, under the provision, the essential
requirements are: (a) it must be made before the relevant
period of limitation has expired; (b) it must be in regard to
the liability in respect of the right in question; and (c) it
must be made in writing and must be signed by the party
against whom such right is claimed. In paragraph 6 of the
judgment, it was observed:
“6. ….. The statement on which a plea of
acknowledgement is based must relate to a
present subsisting liability though the exact
nature or the specific character of the said
liability may not be indicated in words. Words
used in the acknowledgment must, however,109
AIR 1961 SC 1236: (1962) 1 SCR 140Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 120 of 150
indicate the existence of jural relationship
between the parties such as that of debtor and
creditor, and it must appear that the statement
is made with the intention to admit such jural
relationship. Such intention can be inferred by
implication from the nature of the admission,
and need not be expressed in words. If the
statement is fairly clear then the intention to
admit jural relationship may be implied from it.
The admission in question need not be express
but must be made in circumstances and in
words from which the court can reasonably infer
that the person making the admission intended
to refer to a subsisting liability as at the date of
the statement. In construing words used in the
statements made in writing on which a plea of
acknowledgment rests oral evidence has been
expressly excluded but surrounding
circumstances can always be considered. Stated
generally courts lean in favor of a liberal
construction of such statements though it does
not mean that where no admission is made one
should be inferred, or where a statement was
made clearly without intending to admit the
existence of jural relationship such intention
could be fastened on the maker of the statement
by an involved or far-fetched process of
reasoning……
7. …… The effect of the words used in a
particular document must inevitably depend
upon the context in which the words are used
and would always be conditioned by the tenor of
the said document…….”
(Emphasis supplied)
118. In J.C. Budhraja v. Chairman Orissa Mining
Corporation Ltd. and Others110 , following the decision in
Khan Bahadur Shapoor (supra), a three-Judge Bench of
this Court held:
“21. It is now well settled that a writing to be an
acknowledgement of liability must involve an
admission of a subsisting jural relationship
between the parties and a conscious affirmation110
(2008) 2 SCC 444Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 121 of 150
of an intention of continuing such relationship
in regard to an existing liability. The admission
need not be in regard to any precise amount nor
by expressed words. If a defendant writes to the
plaintiff requesting him to send his claim for
verification and payment, it amounts to an
acknowledgment. But if the defendant merely
says, without admitting liability, it would like to
examine the claim or the accounts, it may not
amount to acknowledgment. In other words, a
writing, to be treated as an acknowledgement of
liability should consciously admit his liability to
pay or admit his intention to pay the debt. Let us
illustrate. If a creditor sends a demand notice
demanding payment of Rs.1,00,000 due under a
promissory note executed by the debtor and the
debtor sends a reply stating that he would pay
the amount due, without mentioning the
amount, it will still be an acknowledgment of
liability. If a writing is relied on as an
acknowledgement for extending the period of
limitation in respect of the amount or right
claimed in the suit, the acknowledgement should
necessarily be in respect of the subject matter of
the suit. If a person executes a work and issues
a demand letter making a claim for the amount
due as per the final bill and the defendant agrees
to verify the bill and pay the amount, the
acknowledgement will save limitation for a suit
for recovery of only such bill amount, but will not
extend the limitation in regard to any fresh or
additional claim for damages made in the suit,
which was not a part of the bill or the demand
letter. ……….. What can be acknowledged is a
present subsisting liability. An
acknowledgement made with reference to a
liability, cannot extend limitation for a time-
barred liability or a claim that was not made at
the time of acknowledgement or some other
liability relating to other transactions. Any
admission of jural relationship in regard to the
ascertained sum due or a pending claim, cannot
be an acknowledgment for a new additional
claim for damages.
(Emphasis supplied)
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 122 of 150
119. In the instant case, as found above, the limitation
period started to run from 19 March 2016. Within three
years therefrom, in the minutes of meeting dated 19 April
2018111 there was a clear acknowledgement that the
amount claimed by Enexio (as is there in the claim) is the
balance amount payable, though subject to debit, by way
of set off, against various claims made by the appellant(s)
herein upon the claimant. In our view, such an
acknowledgment is sufficient to extend the limitation
period as it admits the existing liability of the appellant(s)
qua the balance amount payable to the claimant under the
contract. Benefit of such an acknowledgement would not
be lost merely because a set off is claimed, inasmuch as
clause (a) of the Explanation to Section 18, inter alia,
provides that an acknowledgement for the purposes of this
Section may be sufficient though it is accompanied by a
refusal to pay, or is coupled with a claim to set off. This
would imply that, subject to fulfilment of other conditions
of Section 18, once the defendant acknowledges that he
owes a certain sum to the plaintiff there would be
sufficient acknowledgment within the meaning of Section
18, even though he states that he is entitled to set off
against this sum another sum which the plaintiff owes
him. Thus, in our view, the minutes of meeting dated 19
April 2018, though claims a set off, is a valid
acknowledgement of the existing liability within the ambit
111
Minutes are quoted in paragraph 7 of this judgment
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 123 of 150
of Section 18 of the 1963 Act and it extends the period of
limitation for a period of 3 years from the date it was made.
In consequence, the claim of Enexio, made on 2 May 2019,
was well within the period of limitation. Sub-issue (b) is
decided in the aforesaid terms.
APPELLANT(S) COUNTERCLAIM IN RESPECT OF COST
OF REPAIR/ REPLACEMENT OF GEAR BOX AND FAN
MODULES BARRED BY TIME
120. Now, we shall consider whether the counterclaim
was barred by limitation. Before that, we must understand
the true nature of a counterclaim. A counterclaim is a
claim made by a defendant in a suit against the plaintiff.
It is a claim, independent of and separable from the
plaintiff’s claim, which can be enforced by a cross action.
Counterclaim preferred by the defendant in a suit is a
cross suit and even if the suit is dismissed, counterclaim
shall remain alive for adjudication. The purpose of the
scheme relating to counterclaim is to avoid multiplicity of
proceedings112.
121. In Afcons Gunanusa JV (supra), after considering
a plethora of precedents and authoritative texts, this
Court summarized the legal principles relating to
counterclaims, in the context of arbitral proceedings, as
under:
112
Rajni Rani v. Khairati Lal, (2015) 2 SCC 682, paragraph 9.6.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 124 of 150
“168. On our analysis of the statutory framework
of the Arbitration Act and the CPC, related
academic discourse and judicial
pronouncements, the following conclusions
emerge:
(i) Claims and counter-claims are
independent and distinct proceedings;
(ii) A counter-claim is not a defense to
a claim and its outcome is not contingent
on the outcome of the claim;
(iii) Counter-claims are independent
claims which could have been raised in
separate proceedings but are permitted
to be raised in the same proceeding as a
claim to avoid a multiplicity of
proceedings; and
(iv) the dismissal of proceedings in
relation to the original claim does not
affect the proceedings in relation to the
counter-claim.”
122. Section 23 (2A)113 of the 1996 Act gives respondent
to a claim a right to submit a counterclaim or plead a set
off, which shall be adjudicated upon by the arbitral
tribunal, if such counterclaim or set off falls within the
scope of the arbitration agreement. Section 43 (1)114 of the
1996 Act provides that the 1963 Act shall apply to
arbitrations as it applies to proceedings in court. Section
3(2)(b)115 of the 1963 Act provides that any claim by way
of set off or a counterclaim, shall be treated as a separate
113
Section 23. Statement of claim and defence.—
(1) …..
(2) …..
(2-A) The respondent, in support of his case, may also submit a counter-claim or plead set-off,
which shall be adjudicated by the arbitral tribunal, if such counter-claim or set-off falls within the
scope of the arbitration agreement.
114
See Footnote 64
115
See Footnote 66
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 125 of 150
suit and shall be deemed to have been instituted – (i) in
the case of a set off, on the same date as the suit in which
the set off is pleaded; (ii) in the case of a counterclaim, on
the date on which the counterclaim is made in court. It is
thus clear that a counterclaim is to be treated as a
separate suit for the purposes of limitation and, to
ascertain whether it is within limitation, the date of
reckoning is the date when the counterclaim is filed and
not when the claim/ suit is filed. At this stage, it be noted
that Section 21 of the 1996 Act is not relevant for
determining the date of institution of a counterclaim as it
is for a claim. There is however one exception. Where the
respondent against whom a claim is made, had also made
a claim against the claimant and sought arbitration by
serving a notice to the claimant but subsequently raises
that claim as a counterclaim in the arbitration
proceedings initiated by the claimant, instead of filing a
separate application under Section 11 of the 1996 Act, the
limitation for such counterclaim should be computed, as
on the date of service of notice of such claim on the
claimant and not on the date of filing of the
counterclaim116.
123. In Thomas Mathew v. KLDC Ltd.117 this Court, in
the context of a claim referable to Article 55 of the
Schedule to the 1963 Act, by relying on Section 3 (2)(b) of
116
See State of Goa v. Praveen Enterprises, (2012) 12 SCC 581, paragraph 20; and Voltas Ltd. v. Rolta India Ltd.,
(2014) 4 SCC 516.
117
(2018) 12 SCC 560, paragraph 9
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 126 of 150
the 1963 Act, held that a counterclaim is required to be
treated as a separate suit and the period of limitation
would be three years from the date of accrual of the cause
of action.
124. It is therefore well settled that a counterclaim is
like a cross suit, or a separate suit, and the limitation of a
counterclaim is to be counted from the date of accrual of
the cause of action which it seeks to espouse. As a logical
corollary thereof, it is quite possible that even though a
suit or a claim is within the period of limitation, the
counterclaim may well be barred by limitation, if the cause
of action espoused therein accrued beyond the prescribed
period of limitation.
125. In the instant case, the counterclaims were for: (a)
liquidated damages for the delay in supply and erection;
(b) reimbursement of customs duties; (c) cost of erection
of horizontal and vertical exhaust duct through an
external agency; (d) cost of repair/ replacement of Gear
Box, due to alleged defective supply; and (e) cost of repair/
replacement of Fan Modules, due to alleged defective
supply. Out of the above five counterclaims, three
counterclaims, namely, (a), (b) and (c), were dealt by the
Arbitral Tribunal on merits, as they stood recited in the
minutes of meeting dated 19 April 2018. Whereas the
remaining two, namely, (d) and (e), were treated as barred
by limitation because in respect thereof there was no
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 127 of 150
recital / material to show that they were subject matter of
negotiation between the parties. The counterclaim (a) (i.e.,
relating to liquidated damages for the delay) was rejected
because the Tribunal found the claimant entitled to
extension of time as the ACC Unit project envisaged Hook-
up / connection to the turbine generator flange which
could took place only in February 2015 as turbine
generator installation, which was being done by another
contractor employed by OPG, got delayed118. The
counterclaim (b) (i.e., reimbursement of customs duties)
was rejected because, according to the Tribunal, as per the
Supply Purchase Order, all Taxes, duties and levies were
to be borne by the purchaser (appellant(s) herein)119.
Insofar as counterclaim (c) was concerned, it was allowed
and the counterclaimant was allowed set off in respect
thereof. The summary of how each of the counterclaims
were dealt with, is found in paragraph 17 of the Award.
126. We have, therefore, to consider whether the two
counterclaims (d) and (e) were justifiably held time-barred
or not. More particularly, because claimant’s claim which
arose out of same contract was found within limitation.
127. Since counterclaim is to be treated as a separate
suit or a cross-suit, its limitation would have to be
determined independent of the claim, based on the cause
118
See paragraphs 13.13 (c) and 13.15 of the Award, extracted in 88 (10) and 88 (19) above.
119
Paragraph 14 of the Award.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 128 of 150
of action espoused therein. Therefore, we would have to
determine as to when the right to seek for the
counterclaims (d) and (e) accrued. In this context, while
dealing with the previous issue i.e., regarding the claim
being within limitation, we noticed a few dates which, in
our view, would be helpful in determining the present
issue. These dates are:
(a) May 2015 – when ACC Unit got
commissioned and was operating satisfactorily,
as per certificate dated 2 March 2017 issued by
OPG.
(b) 21 September 2015 – deemed date of takeover
of the project i.e., when all alleged defects were
removed by the claimant, and a request was
made by the claimant to the purchaser
(appellant(s) herein) to undertake performance
guarantee test.
(c) 19 March 2016 – when the period of 180 days
of guaranteed performance expired. This date is
important because, as per the contract, if, within
the aforesaid period, the performance guarantee
test is not undertaken, despite request of the
supplier, it is to be deemed that the supplier has
discharged its liability of a guaranteed
performance of 180 days.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 129 of 150
128. The Tribunal takes 21 September 2015 as the start
point of limitation for the counterclaim on the premise that
it would be the date when the Takeover Certificate is
deemed to have been issued. That is, the supplier had
fulfilled its obligations. On basis thereof, the Tribunal
found counterclaims (d) and (e) barred by time as the
counterclaim was filed on 15 July 2019 i.e., more than
three years later, and there existed no acknowledgement
in respect thereof.
129. However, while dealing with the previous issue, we
found 19 March 2016 as the start point of limitation for
the claim because that is the date when 180 days period
of guaranteed performance, which was part of supplier’s
liability, expired. Be that as it may, whether we count the
limitation period from 21 September 2015 or 19 March
2016, the counterclaim which was filed on 15 July 2019
was beyond the prescribed period of three years inasmuch
as its cause of action could not have arisen after 19 March
2016 because by 19 March 2016, the supplier / contractor
had fulfilled its obligation of guaranteed performance for
180 days.
Minutes of meeting dated 19 April 2018 did not extend
limitation of counterclaims (d) and (e)
130. In these circumstances, the question that falls for
our consideration is whether the minutes of meeting dated
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 130 of 150
19 April 2018 extended the period of limitation for
counterclaim(s)120 (d) and (e) as it did for the claim as well
as counterclaims (a) (b) and (c). The contention on behalf
of the appellant(s) is that the claim and the counterclaim
arose out of same contractual relationship, therefore, if
the acknowledgment dated 19 April 2018 extends
limitation of one part of the claim/ counterclaim, it would
automatically extend limitation of the remaining part of
the claim / counterclaim. Per contra, learned counsel for
Enexio (R-1) contended that there could be multiple claims
arising out of the same contract, if the acknowledgment
extending limitation under Section 18 of 1963 Act relates
to only few, limitation for the rest would not get extended.
Thus, the Tribunal committed no such error which may
warrant interference under Section 34 of the 1996 Act.
131. We have given our thoughtful consideration to the
rival submissions. The minutes of meeting dated 19 April
2018 was drawn within three years of accrual of the cause
of action for the claim, whether we count limitation from
19 March 2016 (as determined by us) or 21 September
2015 (as determined by the Tribunal). Therefore, the
crucial question, which we must consider and decide, is
whether those minutes could be considered as an
acknowledgment of subsisting liability qua counterclaims
(d) and (e).
120
For description of counterclaims (a) to (e), see paragraph 126 of this judgment.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 131 of 150
132. The minutes121 of meeting dated 19 April 2018
incorporates a table giving specific description of the items
and their corresponding value on which parties,
purportedly, admitted their respective liabilities.
Interestingly, the balance amount payable to the
contractor (Enexio – R-1) finds mention there and so does
contractor’s liability towards liquidated damages, customs
duty, dismantling – TG Building and ACC Duct
fabrication, which have all been addressed on merits in
the Award. But, there is no mention of items referable to
counterclaims (d) and (e), which have been held time
barred. Further, the minutes do not state that parties
acknowledge, or are willing to settle, any other, or all their
rights/ obligations, arising from, or under, the contract.
Thus, the acknowledgment is specific and in respect of
certain items only.
133. In J.C. Budhraja (supra) this Court held that a
writing to be an acknowledgement of liability must involve
an admission of a subsisting jural relationship between
the parties and conscious affirmation of an intention of
continuing such relationship regarding existing liability.
The Court added that the admission need not be in respect
of any precise amount nor by expressed words. However,
it was clarified that any admission of jural relationship in
regard to a certain sum due, or a pending claim, cannot
121
Extracted in paragraph 7 of this judgment
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 132 of 150
be an acknowledgement for a new additional claim for
damages122. That apart, in J.C. Budhraja (supra), this
Court rejected an argument that if there was
acknowledgment of any liability in regard to a contract,
then one was at liberty to make any claim in regard to the
contract. Relevant portion of the judgment is extracted
below:
“27. The appellant next contended, relying on
Section 18 of the Limitation Act, that as there
was acknowledgement of liability in regard to
Contract no. 30/F-2 in the letter dated 28-10-
1978, and the notice invoking arbitration was
issued on 4-6-1980 within three years from 28-
10-1978, he was at liberty to make any claim in
regard to the contract before the arbitrator even
though such claims had not been made earlier
and all such claims have to be treated as being
within the period of limitation. Such a contention
cannot be countenanced. As noticed above, the
cause of action arose on 14-4-1977. But for the
acknowledgement on 28-10-1978, on the date of
invoking arbitration 4-6-1980, the claims could
have been barred by time as being beyond the
period of limitation. The limitation is extended
only in regard to the liability which was
acknowledged in the letter dated 28-10-1978. It
is not in dispute that either on 28-10-1978 or on
4-3-1980, the contractor had not made the fresh
claims aggregating to Rs.67,64,488 and the
question of such claims made in future for the
first time on 27-6-1986, being acknowledged by
OMC on 28-10-1998 did not arise.”
(Emphasis supplied)
134. On the question of extension of limitation, where
only a part of the liability, or a specific amount, is
acknowledged during the period of limitation, there are
long-standing decisions of various High Courts upholding
122
See paragraph 21 of J.C. Budhraja (supra) extracted in paragraph 119 of this judgment.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 133 of 150
the same principle as is discernible from the decision in
J.C. Budhraja (supra). Some of these decisions are being
noticed below.
135. In Bans Gopal v. Mewa Ram123 in the context of
applicability of Section 19 of the 1908 Act, which is pari
materia Section 18 of the 1963 Act, the question before the
Allahabad High Court was, whether a creditor could
recover Rs.585 when acknowledgment was in respect of
Rs.200 only. One of the arguments was that
acknowledgment of a sum of Rs.200 cannot be taken as
an acknowledgment of a sum of Rs.585. Accepting the
argument, the Court held:
“4. ….. It is true that if no definite sum had been
mentioned and there had been an
acknowledgement in general terms the amount
of the debt would have been discovered from the
evidence as mentioned in Explanation 1, Section
19 of the Limitation Act. In the present case,
however, there is a definite acknowledgement of
Rs.200 and if this is to be used to save limitation,
it could be done only with respect to the sum
acknowledged, and not with respect to any sum
that may be proved to be due on that date.”(Emphasis supplied)
136. In Kali Das Chaudhuri v. Drapaudi Sundari
Dassi124 for the purpose of seeking the benefit of extension
of limitation, the letter sought to be relied by the plaintiff
as an acknowledgement made by solicitor of the defendant
stated thus:
123
AIR 1930 All 461 : 1929 SCC OnLine All 152
124
AIR 1918 Cal 294: 1917 SCC OnLIne Cal 23Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 134 of 150
“Your client Babu Hari Prasad Saha was the
gomoshta at Calcutta in the employ of the firm of
Dwarka Nath Makhan Lal Saha, remunerated by
a share of the profits, and being liable for a
proportionate share of the losses. He was struck
by paralysis in the Bengali year 1307, from
which time he could not do active work. He,
however, continued to be in Calcutta till 1311
when he left Calcutta and went away to his home
at Urapara. Our clients have all along been ready
and willing to have the accounts duly taken up
to this time that your client retired from
Calcutta. Your client as the managing gomostha
has to make up and explain the accounts up to
that time. Our clients will offer every facility in
the matter of the adjustment of accounts. …… It
is not the fact that your client retired on 27th
June 1910. He ceased to do active work in 1307
and retired in 1311. Our clients have no
recollection of any notice from Messrs Dutta and
Guha. Our clients are ready to pay to your client
whatever may be found due on an adjustment of
the accounts up to 1311.”Interpreting the aforesaid letter, in the context of
plaintiff’s argument that it be treated as an
acknowledgment of subsistence of relationship up to 27
June 1910, the Calcutta High Court held:
“Now, as I read that letter, that contains three
material statements: it contains a statement that
plaintiff was gomostha of the defendants; the
second statement is that he was employed up to
1311 (BS) (corresponding with 1904 – 1905], and
no longer; and the third statement is that the
defendants were willing and ready to pay to the
plaintiff whatever might be found due to him on
an adjustment of the accounts up to 1311. Now,
what is the claim of the plaintiff in this case? He
brought his suit in order to establish his right to
have the accounts taken upon the basis that he
was a partner, and that he was entitled to have
the accounts taken down to June 1910. TheCivil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 135 of 150
defendants’ solicitors wrote that he was not a
partner and that he was not entitled to have the
accounts taken up to 1910, but that he was only
entitled to have the accounts up to 1311 (BS)
(corresponding with 1904 – 1905). I cannot
understand how that can be taken to be an
acknowledgement of the right which the plaintiff
was endeavoring to substantiate in his plaint. I
can understand it being said and argued with
considerable force that it was an
acknowledgement of some part of the plaintiffs
claim, inasmuch as his claim was to have the
accounts taken up to June 1910, and inasmuch
as the defendants admitted that he was entitled
to have the accounts taken up to 1904 – 1905: to
that extent it is an acknowledgment, but in my
judgment it is not an acknowledgement of the
right alleged by the plaintiff, namely, that he was
entitled to have the accounts taking up to June
1910.”
(Emphasis supplied)
137. Having considered the judicial precedents on the
subject, in our view, to extend the period of limitation with
the aid of Section 18, the acknowledgment must involve
an admission of a subsisting jural relationship between
the parties and a conscious affirmation of an intention of
continuing such relationship regarding an existing
liability. Such intention can be gathered from the nature
of the admission. In other words, the admission in
question need not be express, or regarding a precise
amount, but must be made in circumstances and in words
from which the court can reasonably infer that the person
making the admission intended to refer to a subsisting
liability as on the date of the statement. However, where
an acknowledgement is in respect of a specified sum of
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 136 of 150
money or a specific right only, and not in general terms, it
would extend the period of limitation only in respect
thereof, and not of other claims which, though may have
arisen out of same jural relationship, are not specified
therein. In other words, where an acknowledgement of
liability is made only with reference to a portion of the
claim put forward by the plaintiff/ claimant, it would
extend limitation only in respect of such portion, and not
of the entire claim of the plaintiff.
138. Reverting to the case in hand, the minutes of
meeting dated 19 April 2018 made no reference to the
items referable to counterclaims (d) and (e). There is also
no acknowledgment in general terms in regard to liabilities
subsisting under the contract. Therefore, in our view, the
said minutes could not be treated as an acknowledgment
for the purpose of extending limitation of counterclaims
(d) and (e), which were not specified therein. In
consequence, when counterclaims (d) and (e) were
otherwise barred by limitation on the date of filing of
counterclaim, the Tribunal was legally justified in
rejecting them as barred by limitation. Sub-issue (c) is
decided in the aforesaid terms.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 137 of 150
REJECTION OF PRAYER TO DECLARE DEBIT NOTES
INVALID DID NOT AFFECT ENEXIO’S CLAIM FOR THE
OUTSTANDING PRINCIPAL AMOUNT.
139. We shall now consider whether rejection of
Enexio’s prayer to declare debit notes invalid, had
adversely affected the claim for the outstanding principal
amount in respect of the goods supplied/ work done under
the contract. In this regard, at the outset, we must bear in
mind that it is trite that limitation bars the remedy but
does not extinguish the right, save in a case which is
covered by Section 27 of the 1963 Act125. It is equally
settled that in a suit or a claim, multiple reliefs may be
claimed by virtue of Order II Rule 3 of the Code of Civil
Procedure, 1908126 , that is, the plaintiff may unite in the
same suit several causes of action against the same
defendant(s). The period of limitation is prescribed by the
Schedule to the 1963 Act127. The Schedule to the 1963
Act is divided into three Divisions. The First Division,
which deals with suits, is relevant for the purposes of this
case inasmuch as by virtue of Section 43 (1) of the 1996
Act the provisions of the 1963 Act apply to arbitrations as
they apply to proceedings in Court. The First Division of
the Schedule comprises of ten (X) Parts. Each Part deals
125
Prem Singh & Ors v. Birbal & Ors., (2006) 5 SCC 353, paragraphs 11 and 12.
126
Order II Rule 3, CPC.— Joinder of causes of action.— (1) Save as otherwise provided, a plaintiff may unite in
the same suit several causes of action against the same defendant, or the same defendants jointly; and any
plaintiffs having causes of action in which they are jointly interested against the same defendant or the same
defendants jointly may unite such causes of action in the same suit.
(2) Where causes of action are united, the jurisdiction of the Court as regards the suit shall depend on
the amount or value of the aggregate subject-matter at the date of instituting the suit.
127
See Section 2(j) of the Limitation Act, 1963.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 138 of 150
with suit(s) of a different nature. The period of limitation,
including its start point, is dependent on its nature as well
as event, if any, as specified in the Article(s) of the
Schedule. Therefore, when CPC, in certain circumstances,
permits combining in one action two or more distinct and
independent claims, it is quite possible that one of the
claims may be barred by limitation and the other may be
within time128.
140. In the instant case, as already held, the claim for
compensation i.e., recovery of outstanding principal
amount was covered by Article 55 of the Schedule and the
start point of limitation was 19 March 2016; whereas for
the relief of declaration, Article 58 was applicable. For
which, the start point of limitation was the date when the
debit note was communicated to Enexio i.e., the claimant.
According to the arbitral tribunal, one debit note was
issued on 24 August 2015, which was acknowledged by
the claimant vide letter dated 28 August 2015, and the
other was issued on 12 January 2016. Therefore, the
period of limitation i.e., three years expired before 2 May
2019, that is, when request for arbitration was received by
ICC Secretariat. In these circumstances, the relief for
declaratory relief was held barred by limitation, and
rightly so, by the arbitral tribunal.
128
See Mohamed Ghasita v. Siraj-ud-Din and Ors. (supra), extracted in paragraph 97 of this judgment.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 139 of 150
141. Now, the question is whether rejection of
declaratory relief impacted the relief for compensation.
Answer to it, in our view, is obviously no. The reason is
that the relief for compensation was not a consequential
relief i.e., dependent on debit note(s) being declared invalid
because issuance of debit note(s) was a unilateral act of
the employer which on its own did not extinguish the right
of the contractor. No doubt, where the relief sought is
consequential to the declaration, and declaratory relief is
found barred by time, the prayer for consequential relief
will also fail129. But where declaration is just an optional
relief i.e., on which the main relief is not dependent,
rejection of it as barred by limitation would not extinguish
the claim in respect of which substantive relief is sought.
In the instant case, debit note was unilaterally issued by
the employer of the contractor. It, therefore, did not bind
the contractor. In such circumstances, it was open for the
contractor to sue for its dues without seeking a declaration
qua the debit notes. Consequently, rejection of the
declaratory relief as barred by limitation, in our
considered view, did not have a material bearing on
Enexio’s claim against the appellant(s) herein for the
outstanding principal amount payable under the contract.
And, further, that amount, as shown debited in the debit
note(s), was not to be automatically adjusted against the
principal outstanding amount payable to Enexio. In our
129
See Padhiyar Prahladji Chenaji v. Maniben Jagmalbhai & Ors., (2022) 12 SCC 128, paragraph 17
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 140 of 150
view, while deciding the claim of Enexio, the arbitral
tribunal was well within its remit to adjudicate upon the
issue whether such amount should be adjusted or not
against the outstanding principal amount payable to
Enexio. For the reasons aforesaid, there is no perversity
in the award on this count. Sub-issue (d) is decided
accordingly.
THE ARBITRAL TRIBUNAL DID NOT ADOPT
DIFFERENT YARDSTICK / REASONING OF THE
ARBITRAL TRIBUNAL IS NOT FLAWED OR PERVERSE
142. The next argument on behalf of the appellant(s) is
that the arbitral tribunal adopted different yardstick for
adjudicating the claim than what was adopted for the
counterclaim; and the reasoning is completely flawed and
perverse. By referring to paragraphs 16.03 (d)130 and
16.04131 of the award it was submitted:
(a) If negotiations could extend limitation for
the claim, it would extend limitation for the
counterclaim as well, because both arise from
same contractual relationship. Moreover, it is
well settled that negotiations by themselves
do not extend limitation as held by this Court
in Geo Miller (supra) and B & T AG (supra).
130
See paragraph 15 of this judgment wherein paragraph 16.03(d) of the award has been extracted.
131
See paragraph 16 of this judgment wherein paragraph 16.04 of the award has been extracted.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 141 of 150
(b) If the minutes of meeting dated 19 April
2018 could be relied on to hold that
appellant(s) had admitted their liability qua
the claim for the outstanding principal
amount, it ought to have been relied also for
upholding Enexio’s liability qua liquidated
damages for delay and customs duty.
143. At first blush, the above arguments appear
attractive, but, when we test them by reading the award
in its entirety, we find that the tribunal did not reject the
counterclaims qua liquidated damages and custom duties
as barred by limitation. Rather, rejected them on merit.
Liquidated damages were denied because Enexio was
entitled to 539 days extension for completion; and
customs duties were found payable by the purchaser. The
findings thereon are based on construction of the terms of
the contract with reference to the conduct of the parties,
therefore, it does not call for interference under Section 34
of the 1996 Act.
144. As far as extension of limitation by negotiation is
concerned, a careful look at paragraph 16.03(d) of the
arbitral award would indicate that there is a reference to
two more aspects, ‘apart from meaningful negotiations’, to
conclude that limitation for the claim was saved. These
are: (a) the minutes of meeting dated 19 April 2018; and
(b) the written offer of OPG (respondent(s) to the claim)
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 142 of 150
dated 26 May 2018 to settle the matter. We have already
found, while deciding sub-issues (b) and (c), that the
minutes of meeting dated 19 April 2018 tantamounted to
an acknowledgment under Section 18 of the 1963 Act qua
the items mentioned therein. We also noticed that it
carried no mention regarding those items on which
counterclaims were based, and therefore, they were
rejected as barred by limitation. In these circumstances,
though paragraph 16.03(d) of the award gives the
impression that limitation was extended because
negotiations were ongoing in respect of items related to the
claim, the limitation was extended by applying the
principle of acknowledgment as enshrined in Section 18 of
the 1963 Act on basis of two documents i.e., the minutes
of meeting dated 19 April 2018; and the offer letter dated
26 May 2018. Importantly, the principle of extension of
limitation by acknowledgement was applied in respect of
only those claims regarding which a mention was there in
the minutes of meeting dated 19 April 2018. In respect of
claims regarding which there was no recital in the
minutes, the tribunal observed that they were not part of
the negotiations. Thus, though the term used in
paragraph 16.03(d) of the award is ‘negotiation(s)’, the
tribunal, by referring to minutes dated 19 April 2018 and
settlement offer dated 26 May 2018, indicated the
underlying legal principle / rationale behind its
conclusion. We, therefore, conclude that though reasons
recorded in the award at first blush appear insufficient, or
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 143 of 150
a bit confusing, but, when those reasons are examined in
the context of the documents placed and the arguments
advanced, the underlying reasons, which form basis of the
conclusion, are not only intelligible but sound. For the
aforesaid reasons and in the light of the law expounded in
paragraph 71.6 above, we reject the submission of the
appellant(s)’ counsel that the reasoning of the arbitral
tribunal is flawed/perverse or that the award is vitiated by
adopting different yardstick for adjudging the claim than
what was adopted for the counterclaim. Even otherwise,
the mistake, if any, committed by the arbitral tribunal in
using the words ‘ongoing negotiations’ in place of
acknowledgement is trivial does not go to the root of the
matter as to have a material bearing on the conclusion.
Therefore, for this mistake alone, the award is not liable
to be set aside.
145. The other submission on behalf of the appellant
that the arbitral tribunal was obliged to accept the
admission contained in the minutes of meeting dated 19
April 2018 qua liquidated damages and customs duties,
because it relied on it for extending the limitation, is
equally unacceptable. Reason being that acknowledgment
is just a piece of evidence, like an admission. An admission
can always be explained. Therefore, even if it is used for
extending the limitation, it cannot be regarded as
conclusive proof of either the claim or the counterclaim
regarding which there is an acknowledgement. Because
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 144 of 150
the Court or the Tribunal would have to decide the claim
or the counterclaim, if within limitation, upon
consideration of the entire evidence led before it. No doubt,
in that process, the acknowledgement would also have to
be considered as a piece of evidence. Thus, in our view,
the tribunal was well within its jurisdiction in drawing a
conclusion, based on consideration of the entire evidence,
at variance with the recitals in the acknowledgement.
146. Otherwise also, as is clear from the award, the
claimant had challenged the recital in the minutes i.e.,
regarding its liability for liquidated damages and customs
duties, by claiming that it was economically coerced into
making such admission. Circumstances, proven on
record, indicated that (a) soon after the meeting dated 19
April 2018, the claimant had sent a denial of its liability;
and (b) later, on 26 May 2018, the appellant(s) herein had
made an offer of Rs.3 crores to Enexio towards full and
final settlement of all its claim. In these circumstances,
based on the evidence led by the parties, the tribunal was
well within its remit to conclude that the claimant was not
liable in respect of those items which formed part of the
counterclaim. Such conclusion, which is based on proven
circumstances, is a plausible view and cannot be termed
perverse. Hence, it is not amenable to interference in a
challenge under Section 34 of the 1996 Act. In our view,
therefore, the learned Single Judge of the High Court erred
in law while interfering with the arbitral award.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 145 of 150
147. Before closing discussion on the issue, it would be
necessary to address an alternative submission raised on
behalf of the appellants. It was argued that the learned
Single Judge and the Division Bench of the High Court,
admittedly, were exercising jurisdiction under Sections 34
and 37, respectively, of the 1996 Act. As, while exercising
jurisdiction under Section 34, the Court does not sit in
appeal over the award, it cannot substitute the reasoning
in the award with its own. Likewise, the appellate court
exercising power under Section 37 cannot have greater
power than what a Court possesses under Section 34.
Consequently, it was argued, the appellate court (i.e., the
Division Bench of the High Court) exceeded its jurisdiction
while providing its own reasons to support the conclusion
in the award. It was also urged that in absence of proper
reasons in the award, the only course available was to set
aside the award with liberty to the parties to undertake
fresh arbitration.
148. We have given due consideration to the above
submission. In our view, a distinction would have to be
drawn between an arbitral award where reasons are either
lacking/unintelligible or perverse and an arbitral award
where reasons are there but appear inadequate or
insufficient132. In a case where reasons appear insufficient
132
See paragraphs 71.2 to 71.6 of this judgment.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 146 of 150
or inadequate, if, on a careful reading of the entire award,
coupled with documents recited/ relied therein, the
underlying reason, factual or legal, that forms the basis of
the award, is discernible/ intelligible, and the same
exhibits no perversity, the Court need not set aside the
award while exercising powers under Section 34 or Section
37 of the 1996 Act, rather it may explain the existence of
that underlying reason while dealing with a challenge laid
to the award. In doing so, the Court does not supplant the
reasons of the arbitral tribunal but only explains it for a
better and clearer understanding of the award.
149. In the instant case, the appellate court took pains,
and rightly so, to understand and explain the underlying
reason on which the claim of Enexio was found within
limitation. As noticed above, paragraph 16.03 (d) of the
award contains the reason based on which the arbitral
tribunal concluded that Enexio’s claim was within
limitation. However, in paragraph 16.03 (d), the arbitral
tribunal failed to state, in so many words, that it was
treating the minutes of meeting dated 19 April 2018 as an
acknowledgment within the meaning of Section 18 of the
1963 Act. This omission on the part of the arbitral tribunal
was trivial and did not travel to the root of the award,
therefore, in our view, the appellate court was well within
its jurisdiction to explain the underlying legal principle
which the arbitral tribunal had applied; and in doing so,
it did not supplant the reasons provided in the award. In
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 147 of 150
this view of the matter, the impugned order of the Division
Bench does not suffer from any legal infirmity. Sub-issue
(e) is decided in the aforesaid terms.
SUMMARY OF OUR CONCLUSIONS
150. In the light of the analysis above, we summarize
our conclusions as follows:
(i) Though the ACC Unit /project was of OPG,
Gita Power, as the holding company of OPG,
had actively participated in the formation of the
contract for the project. Not only did it place
purchase order(s) on Enexio but made advance
payment(s) thereunder to Enexio, which were
subsequently affirmed by OPG. The two,
therefore, not only acted as a single economic
entity but as agents of each other. Hence, the
arbitral tribunal was justified in holding that
Gita Power was bound by the arbitration
agreement and jointly and severally liable
along with OPG to pay the awarded amount.
(ii) The claim of Enexio was an indivisible claim
for compensation in lieu of goods supplied, and
work done, based on breach of the contract,
therefore limitation for the claim was governedCivil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 148 of 150
by Article 55, and not by Articles 14, 18 and
113, of the Schedule to the 1963 Act.
(iii) The claimant’s claim for the outstanding
principal amount matured on 19 March 2016.
Therefore, limitation started to run from that
date. However, even if we count limitation from
21 September 2015 (as found by the Tribunal)
it will have no material bearing on the award
for the reason indicated below.
(iv) The limitation for the claim as well as
counterclaim(s), other than those relating to
cost of repair/replacement of gear boxes and
fan modules, stood extended, under Section 18
of the 1963 Act, on the basis of
acknowledgement made in the minutes of
meeting dated 19 April 2018, and, therefore,
those were within limitation as on the date of :
(a) commencement of arbitration (i.e. 2 May
2019); and (b) the date of filing counterclaim
(i.e. 15 July 2019) and were rightly considered
on merit.
(v) The counterclaims qua cost of repair
/replacement of gear boxes and fan modules
were rightly held barred by time as in respect
thereof there was no recital in the minutes of
meeting dated 19 April 2018.
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 149 of 150
(vi) Rejection of prayer to declare debit notes
invalid, on ground of limitation, had no adverse
impact on the claimant’s claim for
compensation, which was well within the
extended period of limitation.
151. Based on our conclusions above, we are of the view
that there is no palpable error in the arbitral award as to
be termed ‘patently illegal’ / ‘perverse’, or in conflict with
public policy of India. Therefore, the Division Bench of the
High Court was justified in setting aside the judgment and
order of the Single Judge and restoring the arbitral award.
Accordingly, the appeal(s) fail and are hereby dismissed.
Parties to bear their own costs.
152. Pending application(s), if any, stand disposed of.
………………………………………CJI.
(Dr. Dhananjaya Y. Chandrachud)
………………………………………..J.
(J B Pardiwala)
.………………………………………..J.
(Manoj Misra)
New Delhi;
September 20, 2024
Civil Appeal @ SLP (C) Nos.21017-21018 of 2021 Page 150 of 150