DURGA CHARAN RAUTRAYversusSTATE OF ORISSA & ANR.

                    [2011] 13 (ADDL.) S.C.R. 16


A                   DURGA CHARAN RAUTRAY
                                   v.
                     STATE OF ORISSA & ANR.
                   (Civil Appeal No. 1735 of 2006)

                         NOVEMBER 1, 2011
B
      [R. M. LODHA AND JAGDISH SINGH KHEHAR, JJ.]

          Arbitration Act, 1940 - Contractual agreement -
    Disputes/claims raised by contractor-appellant - After receipt
C   of payment on preparation of the final bill, without raising
    objection - Redressal by way of arbitration - High Court
    holding that the appellant having received payment after
    preparation of final bill without raising objections, could not
    have initiated arbitral proceedings - On appeal, held:
o   Appellant despite having received payment after preparation
    of final bill without raising objections, could seek redressal of
    his disputes by way of arbitration in terms of the contractual
    agreement - He could still raise his unsatisfied claims before
    an arbitrator - Order referring the dispute raised by the
E   appellant to the arbitral tribunal, having attained finality, the
    respondents were precluded from asserting that the claims
    raised by the appellant could not be adjudicated upon by way
    of arbitration - Order passed by the High Court was
    contradictory in terms - Once the High Court concluded that
F   the Miscellaneous Case filed by the respondents raising
    objections was barred by limitation, it was not open to the High
    Court to consider one of the objections raised by the
    respondents and to uphold the same, so as to disentitle the
    appellant from reaping the fruits of the arbitral award - Thus,
    order passed by the High Court is set aside and that of the
G   civil judge making arbitral award rule of the court, is upheld.

      Appellant was entrusted with a construction work by
  respondent-State. Dispute arose between the parties and
  were referred to an arbitral tribunal. The arbitral tribunal
H                             16
DURGA CHARAN RAUTRAY v. STATE OF ORISSA & 17
                 ANR.
passed an award in favour of the appellant. The appellant A
filed an application to make the arbitral award, rule of the
court. The respondents filed objections under Sections
30 and 33 of the Arbitration Act, 1940 by filing
Miscellaneous Case. The Civil Judge dismissed the
Miscellaneous Case on the ground of limitation. The B
award was made rule of the court. Aggrieved, the
respondents filed an appeal before the High Court under
Section 39 of the Arbitration Act, 1940. The High Court
upheld the order of the Civil Judge on the issue of
limitation, however, held that the appellant could not c
obtain the benefits of the award rendered by the Arbitral
Tribunal in his favour since the appellant had received
payments on the preparation of final bill without raising
objections. Therefore, the appellant filed the instant
appeal.                                                      D
    Allowing the appeal, the Court

     HELD: 1.1 A perusal of clause 23 of the contractual
agreement leaves no room for any doubt that the
appellant could claim arbitration on account of disputes E
arising from the contract "except where otherwise
provided". Clause 23 includes within the purview of
arbitration, disputes whether arising during the progress
of the work or after the completion or abandonment
thereof. There is no restraint whatsoever expressed in F
clause 23, which would deprive the appellant from
seeking redressal by way of arbitration, merely because
he had received payments after the preparation of the
final bill, without raising any objections. Accordingly,
even after the receipt of payment on the preparation of G
the final bill, it was open to the appellant to seek redressal
of his disputes.by way of arbitration, even though he had
not raised any objections. [Para 8] [23-G-H; 24-A-C]

    Bharat Coking Goa Ltd. v. Annapurna Construction
                                                            H
    18     SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A (2003) 8 sec 154: 2003 (3) Suppl. SCR 122 - relied on.

         1.2 Despite receipt of payment on the preparation of
    the final bill, it was still open to the appellant to raise his
    unsatisfied claims before an arbitrator, under the contract
B   agreement. It was no longer open to the respondents to
    contest the claim of the appellant on the instant issue
    after the appellant had obtained the court order dated
    15.05.1981 which referred the disputes raised by the
    appellant to an arbitral tribunal. The court order dated
c   15.05.1981 referring the disputes raised by the appellant
    to arbitration, attained finality inasmuch as the same
    remained uncontested at the hands of the respondents.
    The respondents were, thereafter precluded from
    asserting that the claims raised by the appellant could not
0   be adjudicated upon by way of arbitration. Once the
    disputes raised by the appellant were referred for
    arbitration and the rival parties submitted to the arbitration
    proceedings without any objection, it is no longer open
    to either of them to contend that arbitral proceedings
E   were not maintainable. Further, the order passed by the
    High Court is contradictory in terms. Once the High Court
    had concluded, that the Miscellaneous Case filed by the
    respondents raising objections was barred by limitation,
    it was not open to the High Court to consider one of the
    objections raised by the respondents and to uphold the
F   same, so as to disentitle the appellant from reaping the
    fruits of the arbitral award. Once the plea of limitation had
    been upheld, the objection(s) filed by the respondents,
    irrespective of the merit{s) thereof were liable to be
    rejected. [Para 8] [24-E-H; 25-A-D]
G
         1.3 The High Court erred in concluding that the
    appellant having received payment after preparation of
    the final bill, without having raised any objection, could
    not have initiated arbitral proceedings. The judgment
H
DURGA CHARAN RAUTRAY v. STATE OF ORISSA &                    19
                 ANR.
rendered by the High Court is set aside. The order passed         A
by the Civil Judge, Senior Division is upheld. [Para 9] [25-
E-F]

                     Case Law Reference:
  2003 (3) Suppl. SCR 122        relied on          Para 8        B
    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
1735 of 2006.

    From the Judgment & Order dated 22.12.2003 of the High
Court of Orissa at Cuttack in ARBA No. 14 of 2003.                C

    Ginny J. Rautray, Praveena Gautam for the Appellant.

    Shibashish Misra for the Respondents.

    The Judgment of the Court was delivered by                    D

     JAGDISH SINGH KHEHAR, J. 1. The appellant was
entrusted with the construction of balance work of earth dam
in connection with the Kharkhai Irrigation Project upto RL
316.50 on 31.12.1975. The estimated cost of the said balance      E
work was Rs.13,78,810/-. As per the contract agreement, the
work was to commence on 1.1.1976 and was to be completed
on or before 31.7.1976. For some reasons including change
in design, the work could not be completed within the
prescribed time. The appellant eventually completed the           F
assigned work in July, 1978. This deiay in completion of work,
according to the appellant, resulted in financial loss to the
appellant. In addition to the aforesaid, the appellant had some
other grievances as well. Illustratively, the appellant sought
payment towards some additional work e~ecuted by him, and         G
also, refund of royalty deducted on account of the supply of
"morum". All these disputes were raised by the appellant, with
the concerned respondent(s). The respondent(s) chose not to
entertain the claims raised by the appellant. In fact, all
communications addressed by the appellant to the respondents
                                                                  H
    20    SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A remained unanswered. The appellant then sought reference of
  his claims for adjudication before an arbitrator. This request of
  the appellant was also not heeded to. The appellant thereafter
  obtained a Court order dated 15.5.1981, whereby the disputes
  raised by the appellant were referred to an arbitral tribunal. The
B arbitral tribunal examined nine items of claim raised by the
  appellant.

       2. The award rendered by the arbitral tribunal dated
  15.9.1998, adjudicated claim item nos. 4, 5, 6 and 9, in favour
C of the appellant. In so far as claim item no.4 is concerned, the
  appellant had demanded an additional amount of Rs.2 lakhs
  on account of price escalation. This claim was based on the
  fact, that after the work was assigned to him, the State
  Government had revised minimum wages of labour, and
  increased the same by 16%. The appellant, accordingly,
D claimed extra payment of 16% over the gross amount paid in
  the final bill. The arbitral tribunal neld the appellant entitled to
  Rs.24,380/- towards price escalation. In claim item no.5, the
  appellant claimed Rs.5,51, 173/- towards cost of "morum"
  supplied, but for which no payment had been released. In this
E behalf, the appellant claimed carriage of 47,106 cubic meters
  with 15 kilometers lead, at the rate of Rs.21.35 per cubic meter.
  While adjudicating the instant claim, the arbitral tribunal found
  the appellant entitled to the difference between the cost of
  supply of "morum", as against the cost of supply of "earth". In
F respect of claim item no.5, the appellant was held entitled to a
  sum of Rs.78,667/-. In claim item no.6, the appellant demanded
  a refund of Rs.20,727/- deducted towards royalty from his bills.
  The aforesaid royalty was allegedly charged on the "morum"
  supplied by the appellant. The appellant was held entitled to
G refund of the entire sum of Rs.20,727/- deducted from his bills
  towards royalty. In so far as claim item no.9 is concerned, the
  appellant claimed interest at the rate of 18% per annum on the
  principal claim amount, from the due date till the date of final
  payment. The arbitral tribunal held the appellant entitled to
H interest at the rate of 10% per annum on the principal awarded
DURGA CHARAN RAUTRAY v. STATE OF ORISSA & 21
      ANR. [JAGDISH SINGH KHEHAR, J.]
amount of Rs.1,23,724/-, with effect from 19.8.1981 (i.e., the        A
date with effect from which the Interest Act, 1978 came into
force) till 5.4.1992. Calculated in the aforesaid terms, the
arbitral tribunal awarded interest of Rs.1,31,544/- to the
appellant.
                                                                      8
       3. Notice to make the arbitral award dated 15.9.1998 "rule
of the court" was issued on 22.2.1999. In March, 1999, the
respondents were served with the said notice. On 21.12.1999,
the Government Pleader entered appearance on behalf of the
respondents, and sought time to file objections. Objections on        C
behalf of the respondents were filed before the Civil Judge,
Senior Division, Bhubaneswar on 6.3.2000. To contest the
arbitral award dated 15.9.1998, the respondents filed
objections under sections 30 and 33 of the Arbitration Act, 1940
by filing a "Miscellaneous Case". It would be relevant to mention
that section 30 aforesaid, postulates the grounds for setting         D
aside an award, whereas, section 33 lays down the course to
be adopted for challenging, inter alia, the validity of an arbitral
award.

     4. The "Miscellaneous Case", filed by the respondents was        E
contested by the appellant inter alia by raising a preliminary
objection. It was sought to be asserted, that the "Miscellaneous
Case" was barred by limitation. The "Miscellaneous Case" filed
by the respondents was rejected by the Civil Judge, Senior
Division, Bhubaneshwar by accepting the plea of limitation            F
raised by the appellant. The suit filed by the appellant was
decreed on 30.4.2002. The award of the arbitral tribunal dated
15.9.1998 was made "rule of the court". The respondents were
directed to pay the awarded amount to the appellant, failing
which, the appellant was granted liberty to recover the same
through Court.                                                        G

     5. Dissatisfied with the order passed by the Civil Judge
Senior Division, Bhubaneshwar, the respondents preferred a~
app:al ?efore the High Court of Orissa under section 39 of the
Arb1trat1on Act, 1940. In the said appeal, the respondents            H
    22     SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A raised two contentions. Firstly ii was sought to be asserted, that
  the objections filed by the respondents through the
  "Miscellaneous Case" filed under sections 30 and 33 of the
  Arbitration Act, 1940, were wrongly rejected by the Civil Judge,
  Senior Division, Bhubaneshwar, on the ground of limitation.
s Secondly it was asserted, that the controversy raised by the
  appellant could not have been referred for adjudication by way
  of arbitration, after the appellant had received the final bill
  without raising any objection.

        6. The determination by the Civil Judge, Senior Division,
C Bhubaneshwar, on the issue of limitation was upheld by the High
  Court. Yet the contention advanced at the hands of the
  respondents, that ii was not open to the appellant to have sought
  adjudication of his claims, by way of arbitration, after the
  appellant had received payments on the preparation of the final
D bill without raising any objections, was accepted. In sum and
  substance, therefore, by its order dated 22.12.2003 it was
  concluded by the High Court, that the appellant could not reap
  the benefits of the award rendered by the arbitral tribunal in his
  favour on 15.9.1998.
E
        7. Dissatisfied with the judgment rendered by the High
  Court dated 22.12.2003, the appellant filed a petition for special
  leave to appeal bearing no.12183 of 2004. Leave was granted
  on 20.3.2006. Consequently, the matter came to be
F renumbered as civil appeal no.1735 of 2006.

        8. Since the plea of limitation had been decided in favour
  of the appellant and against the respondents, the only question
  to be adjudicated upon, in the present appeal filed by the
  appellant, is, whether the disputes/claims raised by the
G appellant could have been referred for arbitration, after the
  appellant had received payment after the preparation of the final
  bill, without raising any objections. The answer to the instant
  query must necessarily flow from the relevant clause of the
  agreement which entitled the appellant to seek redressal of
H disputes through arbitration, as it is the arbitration clause alone
DURGA CHARAN RAUTRAY v. STATE OF ORISSA &                        23
      ANR. [JAGDISH SINGH KHEHAR, J.)
which defines the parameters of the disputes which rival parties       A
can raise for adjudication before an arbitrator (or arbitral
tribunal). In so far as the instant aspect of the matter is
concerned, clause 23 of the agreement dated 31.12.1975 is
relevant. The same is being extracted hereinbelow:
                                                                       B
    "Clause 23 - Except where otherwise provided in the
    contract all questions and disputes relating to the meaning
    of the specifications, designs, drawings and instructions
    hereinbefore mentioned and as to the quality of
    workmanship of materials used on the work, or as to any
    other questions, claim, right matter, or thing whatsoever,         C
    if any way arising out of, or relating to the contract, designs,
    drawings, specifications, estimates instructions, orders or
    these conditions, or otherwise concerning the work or the
    execution, or failure to execute the same, whether arising
    during the progress of the work, or after the completion or        D
    abandonment thereof shall be referred to the sole
    arbitration of a Superintending Engineer of the State Public
    Works Department unconnected with the work at any stage
    nominated by the concerned Chief Engineer. If there be
    no such Superintending Engineer, it should be referred to          E
    the sole arbitration of the Chief Engineer concerned. It will
    be no objection to any such appointment that the arbitrator
    so appointed is a Government Servant. The award of the
    Arbitrator so appointed shall be final, conclusive and
    binding on all parties to these contract."                         F

A perusal of clause 23 of the contractual agreement extracted
above, leaves no room for any doubt that the appellant could
claim arbitration on account of disputes arising from the contract
"except where otherwise provided". It is not the case of the           G
respondents, that the appellant was precluded by any clause
in the contractual agreement from seeking settlement of claims
raised by the appellant (which have been allowed in favour of
the appellant by the arbitral tribunal). Clause 23 includes within
the purview of arbitration, disputes whether arising during the
                                                                       H
    24     SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A progress of the work or after the completion or abandonment
  thereof. There is no restraint whatsoever expressed in clause
  23, which would deprive the appellant from seeking redressal
  by way of arbitration, merely because he had received
  payments after the preparation of the final bill, without raising
8 any objections. Accordingly, we are of the view, that even after
  the receipt of payment on the preparation of the final bill, it was
  open to the appellant to seek redressal of his disputes by way
  of arbitration, even though he had not raised any objections.
  Secondly, in so far as the instant aspect of the matter is
c concerned, the issue in hand stands concluded by this Court
  in Bharat Coking Coal Ltd. v. Annapurna Construction (2003)
  8 sec 154 wherein it has been held as under:

         "Only because the respondent has accepted the final bill,
         the same would not mean that it was not entitled to raise
D        any claim. It is not the case of the appellant that while
         accepting the final bill, the respondent had unequivocally
         stated that he would not raise any further claim. In absence
         of such a declaration, the respondent cannot be held to be
         estopped or precluded from raising any claim ... ".
E
  In the instant case also the appellant, while accepting payment
  on the preparation of the final bill, did not undertake that he
  would not raise any further claims. As such, we are satisfied
  that the judgment rendered in Bharat Coking Coal Ltd., case
F (supra) leads to the irresistible conclusion, that despite receipt
  of payment on the preparation of the final bill, it was still open
  to the appellant to raise his unsatisfied claims before an
  arbitrator, under the contract agreement. Thirdly, it was no
  longer open to the respondents to contest the claim of the
G appellant on the instant issue after the appellant had obtained
  the court order dated 15.5.1981 which referred the disputes
  raised by the appellant to an arbitral tribunal. The Court order
  dated 15.5.1981 referring the disputes raised by the appellant
  to arbitration, attained finality inasmuch as the same remained
H uncontested at the hands of the respondents. The respondents
DURGA CHARAN RAUTRAY v. STATE OF ORISSA & 25
      ANR. [JAGDISH SINGH KHEHAR, J.]

were, thereafter precluded from asserting that the claims raised A
by the appellant could not be adjudicated upon by way of
arbitration. Once the disputes raised by the appellant were
referred for arbitrat:on and the rival part:es submitted to the
arbitration proceedings without any objection, it is no longer
open to either of them to contend that arbitral proceedings were B
not maintainable. And fourthly, the order passed by the High
Court is contradictory in terms. Once the High Court had
concluded, that the Miscellaneous Case filed by the
respondents raising objections was barred by limitation, it was
not open to the High Court to consider one of the objections c
raised by the respondents and to uphold the same, so as to
disentitle the appellant from reaping the fruits of the arbitral
award. In other words, once the plea of limitation had been
upheld, the objection(s) filed by the respondents, irrespective
of the merit(s) thereof were liable to be rejected.              0
      9. For the reasons recorded hereinabove, we are of the
view that the High Court erred in concluding that the appellant
having received payment after preparation of the final bill,
without having raised any objection, could not have initiated
arbitral proceedings. The judgment rendered by the High Court         E
dated 22.12.2003 is, accordingly, set aside. The order passed
by the Civil Judge, Senior Division, Bhubaneshwar dated
30.4.2002 is upheld. The instant appeal is accordingly allowed.
The respondents are directed to pay the appellant the awarded
amount, failing which, the appellant shall be at liberty to recover   F
the same through Court.
       10. There will be no order as to costs.

N.J.                                             Appeal allowed.