Supreme Court of India
VISAKHAPATNAM PORT TRUSTversusM/S CONTINENTAL CONSTRUCTION COMPANY
- Citation
- 2009 INSC 230
- Decided
- 20 February 2009
- Disposal
- Disposed off
- Bench
- MARKANDEY KATJU
Holding
The amendment to Section 17 is inapplicable to the 1985 award, courts cannot assess the reasonableness of arbitrators’ reasons, the Rs 74,810.38 claim is time‑barred and dismissed, and the Rs 6,44,500 claim is within limitation and upheld.
Summary
The Supreme Court examined two appeals arising from a High Court judgment involving Visakhapatnam Port Trust (VPT) and M/s Continental Construction Company. The first appeal concerned a claim of Rs 74,810.38 for recovered jack‑rods, which the Court held was time‑barred under Section 37 of the Arbitration Act, 1940 and Article 137 of the Limitation Act, 1963, and therefore dismissed. The second appeal dealt with a claim of Rs 6,44,500 for a survey boat, where the Court found the arbitration had commenced within the limitation period, so the claim was upheld. The Court also ruled that the 1990 amendment to Section 17 of the Arbitration Act (requiring reasons for awards) did not apply to an award dated 20 Nov 1985, and that courts cannot scrutinise the reasonableness of the arbitrators’ reasons. Consequently, the first High Court judgment was set aside and the second affirmed.
Issues considered
- Whether the 1990 amendment to Section 17 of the Arbitration Act, 1940 requiring reasons for awards applies to an award dated 20 November 1985.
- Whether a court may examine the reasonableness of the reasons given by arbitrators.
- Whether the claim of Rs 74,810.38 is barred by limitation under Section 37 of the Arbitration Act, 1940 and Article 137 of the Limitation Act, 1963.
- Whether the claim of Rs 6,44,500 is time‑barred.
- When an arbitration is deemed to have commenced for the purpose of limitation under Section 37(3) of the Arbitration Act, 1940.
Legislation cited
- Arbitration Act, 1940s. 17, s. 37
- Limitation Act, 1963s. 137
Subjects
ArbitrationArbitration awardSection 17Section 37LimitationTime-barred claimNon‑reasoned awardSupreme Court of IndiaVisakhapatnam Port TrustContinental Construction
Judgment
[2009) 2 S.C.R. 840
A VISAKHAPATNAM PORT TRUST .......
v
MIS CONTINENTAL CONSTRUCTION COMPANY
Civil Appeal No 5849-5850 of 2002··-
FEBRUARY 20, 2009
B
(MARKANDEY KATJU AND R.M. LODHA,. JJ.)
Arbitration Act, 1940 :
~
Sections 17, 37 :-Arbitration Award- Reasons given by
c the 'Arbitrators subsequently - Held: Reasonableness of the
reasons given i:JY arbitrators·cannot be gone into by the Court
- Also, the amendment in s. 17 vide Andhra Pradesh Act not
attracted since award was passed prior to the amendment -
Limita_(ion Act, 1963, Section 137.
;k
D The two appeals arising from the common judgment
of the High Court, ~elate to s.37 of the Arbitration Act, 1940
and Article 137 of the Limitation Act, 1963 as also the
./
amendment in s.17 of the Arbitration Act vide Andhra
Pradesh Act 1 of 1990.
E.
Disposing of the appeals, the Court
HELD: 1. Th.e amendment in Section 17 of the
---
.............
~
Arbitration Act, 1940 vide A.ndhra Pradesh Act (1 of 1990)
is not attracted in the present fact situation as the award
F was passed by the arbitrators o_n 20th November, 1985
i.e. much before the amendment. As per Section 17 then
obtaining, it \Xas not imperative for the arb.itrators to give
reasons in support of the award. Secondly, upon the.
award dated 20th November, 1985 being challenged by
G Visakhapatnam Port Trust (VPT) before Principal Sub-
ordinate Judge, Visakhapatnam, he has· directed the
,,. 1"
· arbitrators to· give reasons for the award in the light of the
amendment. [Para 25] [850-D]
H 840
'
-1 VISAKHAPATNAM PORT TRUST V. M/S 841
CONTINENTAL CONSTRUCTION COMPANY
k-._'>\
2. Subsequently the arbitrators did give their reasons. A
Reasonableness of the reasons given by arbitrators cannot
be gone into by the Court. [Para 27] [851-B]
3.1 The judgment of the High Court of Judicature of
Andhra Pradesh in CMA No. 1559/1994 is set aside. The
claim of Mis Continental Construction Company for Rs. B
74,810.38 stands dismissed. The amount of Rs. 74,810.38
deposited with the executing Court by Visakhapatnam ·
"- Port Trust pursuant to the order dated 27th September,
2004 of this Court shall be refunded to them ~tongwith
interest accrued thereon. [Para 28] [851-D] c
3.2 The judgment of the High Court in CMA No.77/
1995 is affirmed. The amount of Rs. 6,44,500/- deposited
by Visakhapatnam Port Trust with the executing Court .
' -..I, pursuant to the order of this Court dated 27th September,
20~4 shall be paid to Mis Continental Construction D
Company alongwith interest accrued thereon. [Para 28]
[851-E]
· CIVILAPPELLATE JURISDICTION: Civil Appeal No 5849-
5850 of 2002
,. E
From the Judgement and Order dated 26.04.2002 of the
Hon'ble High Court of JudicatureAndhra Pradesh at Hyderabad
~ in CMA Nos. 1559 of 1994 & 77of1995.
•
(
Kailash Vasdev, Gopal Singh, for the Appellants .
I
S.S. Upadhyay, Santosh Mishra, Kumud Das, Rajesh R. F
Dubey, Sharmila Upadhyay, for the Respondent.
The Judgement of the Court was delivered by
R.M. LODHA, J.
Both these appeals by ~ecial leave, arise out of one and G
~
the same judgment dated 26 April, 2002 rendered by the High
Court of JudicatureAndhra Pradesh whereby it allowed the two
appeals
.
being CMA No. 1559/1994- and CMA No. 77/1995.
2. For the sake of convenience, we shall refer the appellant
H
842 SUPREME COURT REPORTS [2009) 2 S.C.R. ,,.
A - Visakhapatnam Port Trust, "VPT" and the respondent - M/s
Continental Construction Company, "the Contractor".
3. In CMA No. 1559/1994 before the High Court, the dispute
between the parties was in respect of refund of an amount of
Rs. 74,810.38 which was recovered by VPT from the contractor's
B running-bill no. 21. VPT entered into an agreement with the
th
contractor on 7 January, 1973 where under the contractor was
to construct the ore berth 263 meters long 29. 73 meters wide
comprising of eight numbers of 18 meters x 27.73 meters long
concrete cribs spaced at 35M centres on prepared foundations
c and connected by pre-cast pre-stressed deck and R.C.C. slab
and construction of two Mooring Dolphins comprising concrete
deck supported on 900mm internal diameter Racker bored
piles. For the execution of the said contract, VPT was to supply
various equipments comprising of hydraulic jacks, hydraulic
/Ir
D pumps, steel yoke assembly, jack rods etc. and it appears to
be fairly admitted position that 950 nos. of jack rods were
supplied btY VPT to the contractor. Towards cost of 500 jack
rods, on 8t August, 1974, from the contractor's running bill no.
21, an amount of Rs.74,810.38 was recovered by VPT.
E 4. As there was a dispute between VPT and the contractor
with regard to return of 950 jack rods valuing Rs. 9,65, 155/-,
VPT referred to the dispute to arbitration in the year 1975. The
}-
statement of claim was filed by VPT before the arbitrators on
4th June, 1976. On 23rd March, 1980, the arbitrators rejected
F the claim of VPT. The award dated 23rd March, 1980 was
challenged by VPT before the Civil Judge, Visakhapatanam by
filing a petition under Sections 30 & 33 of the Arbitration Act,
. 1940 (for short, 'Act, 1940' ). The Civil Judge, Visakhapatanam
1
dismissed the said petition on 10 h September, 1984.
G
5. It is pertinent to notice here that until the rejection of ;.
claim made by VPT for Rs. 9,65d 155/- towards the cost of 950
jack rods vide award dated 23r March, 1980, the contractor "
did not raise any dispute with regard to recovery of Rs.
th
74,810.38 made by VPT on 8 ,A,ugust, 1974 from the
H
VISAKHAPATNAM PORT TRUST V. M/S 843
CONTINENTAL CONSTRUCTION COMPANY [R.M. LODHA, J.]
contractor's running bill no. 21. It was only thereafter, to be A
specific on 2ih March, 1980 that the contractor called upon VPT
nd
to release the sum of Rs. 74,810.38. Then on 22 of September,
1984, the contractor initiated proceedings under the Act, 1940
in respect of claim of Rs.74,810.38 by appointing its arbitrator
and also called upon VPT to appoint its arbitrator. The arbitrators B
st
entered upon the reference on 1 February, 1985 and they also
appointed an Umpire. The contractor filed its statement of claim
before the arbitrators on 16th March, 1985. The arbitrators by
their award dated 2ih October, 1985 accepted the claim of the
contractor and passed an award for Rs.74,810.38 in favour of c
the contractor.
6. VPT challenged the award by filing petition (O.P.No. 10/
1986) under Sections 30 and 33 of the Act, 1940, inter alia
raising the objection that the claim of the contractor was time
barred. The Court of the Principal Subordinate Judge, D
1
Visakhapatnam vide his judgment dated 16 h February, 1994
allowed OP No. 10/1986; set aside the award of the arbitrators
and held that the claim of the contractor was barred by limitation.
7. The contractor challenged the judgment of the Principal
Subordinate Judge, Visakhapatanam dated 16th February, 1994 E
by filing an appeal before the High Court which was registered
as CMA No. 1559/1994. The High Court upturned the judgment
of the Principal Subordinate Judge, Visakhapatnam and held
that the claim of the contractor for Rs. 74,810.38 was within
limitation. F
8. The other appeal being CMA No. 77/1995 before the
High Court arose out of C-3 contract for execution of marine
works and break waters at the outer harbour at Lova Garden,
Visakhapatnam. The dispute seems to have arisen between G
rd
-t, VPT and the contractor on 3 February, 1975 in respect of the
charges for power driven survey boat used by the contractor.
The dispute was referred to the consulting engineers who opined
viae their report dated 3rd May, 1975 that it was the responsibility
of the contractor to provide the survey vessel and consequently,
H
844 SUPREME COURT REPORTS [2009] 2 S.C.R.
'
A the contractor's claim in this regard"'was untenable. Jhe
1
contractor then on 15 h May, 1975 appointed Shri G.N. Bajpai
as its arbit~ator and called upon VPT to appoint its arbitrator.
VPT appointed one Mr. T.V. Rajaram as its arbitrator and the
arbitrators in turn appointed Mr. AW. De'Lima as Umpire. The
B arbitrators, however, could not enter upon the reference. The
contractor, accordingly, approached the Principal Subordinate
Judge, Visakhapatnam for the appointment of arbitrators by
invoking Sections 8, 9 and 20 of the Act, 1940. The Principal
Subordinate Judge, Visakhapatnam treated that suit under
C Section 8 of the Act, 1940 and vide its order dated 10th
September 1984 allowed the suit filed by the contractor and
directed each party to appoint its arbitrators within 15 days
therefrom. Each party, accordingly, appointed its arbitrator and
the appointed arbitrators entered upon reference. On 14th fy1arch,
D 1985, the contractor filed claim in the sum of Rs. 8,49,000/-
with interest and 9ost pertaining to the charges for power driven
survey boat.
9. The arbitrators passed the award on 20th November,
E 1985 allowing the claim of the contractor for Rs. 6,44,500/- b~!
no interest or cost were allowed.
th
. 10. VPT challenged the award dated 20 November, 1985
in the Court of Subordinate Judge, Visakhapatnam by filing ·
petition numbered as OP No. 164/1986. The award was mainly
F opposed by VPT on the ground of limitation and that the award
was non-reasoned.
11. The sub~ordinate Jud~e, Visakhapatnam allowed the
petition vide its order dated 16 February, 1994 and set aside
~he award holding that the claim was barred by !Imitation.
G
12. The contractor, then carried the matter to _the High Court >-
by filing CMA No. 77/1995. The said appeal has been allowed
by the High Court vide its judgment dated 26th April, 2002.
13. As noticed above, it is from the common judgment
H
VISAKHAPATNAM PORT TRUST V. M/S 845
CONTINENTAL CONSTRUCTION COMPANY [R.M. LODHA, ·J.]
,_. --s dated 26th April, 2002 disposing of CMA No. 1559/1994 and A
CMA No. 77/1995 that these two appeals arise.
14. We shall first deal with the contractor's claim of
Rs. 74,810.38. The only issue thatfalls for our consideration with
regard to this claim is whether it is barred by limitation.
B
15. Section 37 of the Arbitration Act, 1940 and Article 137
of the Limitation Act, 1963 are relevant for the purpose.
The Arbitration Act, 1940;
"37. Limitations. - (1) All the provisions of the Indian c
Limitation Act, 1908 (9of1908), shall apply to arbitrations
as they apply to proceedings in Court.
(2) Notwithstanding any term in an arbitration agreement
to the effect that no cause of action accrue in respect of
any matter required by the agreement to be referred until D
an award is made under the agreement, a cause of action
shall, for the purpose of limitation, be deemed to have
accrued in respect of any such matter at the time when it
\'.VOUld have accrued but for that term in the agreement.
(3) For the purposes of this section and of the Indian E
Limitation Act, 1908 (9 of 1908), an arbitration shall be
deemed to be commenced when one party to the
arbitration agreement serves on the other parties thereto
a notice requiring the appointment of an arbitrator, or where
the arbitration agreement provides that the reference shall F
be to a person named or designated in the agreement,
requiring that the difference be submitted to the person so
named or designated.
(4) Where the terms of an agreement to refer further G
differences to arbitration provide that any claims to which
the agre_ement applies shall be barred unless notice to
appoint an arbitrator is given or an arbitrator is appointed
or some other step to commence arbitration proceedings
is taken within a time fixed by. the agreement, and a H
846 SUPREME COURT REPORTS [2009] 2 S.C.R.
A difference 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,
B extend the time for such period as it thinks proper.
(5) Where the Court orders that an award be set aside or
orders, after the commencement of an arbitration, that the
arbitration agreement shall cease to have effect with
respect to the difference referred, the period between the
c commencement of the arbitration and the date of the order
of the Court shall be excluded in computing the time
prescribed by the Indian' Limitation Act, 1908 (9 of 1908)
for the commencement of the proceedings (including
arbitration) with respect to the difference referred."
D
The Limitation Act, 1963 ;
"137. Any other application three years When the
for which no period of right to
limitation is provided apply
E ·accrues."
elsewhere in this division.
16. It is apparent from the bare reading of Section 37 that
the law of limitation is applicable to the proceedings before the
arbitrators as it applies to proceedings before the Courts. Under
F Sub-section (3), arbitration proceedings are to be deemed to
have commenced when notice is served by one party upon the
other - (i) requiring him to appoint an arbitrator, or (ii) if the
arbitrator was named or designated in the arbitration agreement,
requiring him to submit the difference to arbitrator named or
G designated.
)-
17. In the backdrop of aforesaid legal position, let us now
th
turn to the facts. On 8 August, 1974, VPT recovered an amount
of Rs.74,810.38 being the cost of 500 jack rods from running
bill no. 21 tendered by the contractor. The dispute with regard
H
VISAKHAPATNAM PORT TRUST V. MIS 847
CONTINENTAL CONSTRUCTION COMPANY [R.M. LODHA, J.]
to claim of Rs. 74,810.38, thus. arose on that date. The A
contractor ought to have given notice calling upon VPT to
appoint arbitrator within three years therefrom or apply to the
Court within this time. However, it was after ten years on 22nd
September. 1984 that the contractor appointed its arbitrator and
called upon VPT to appoint its arbitrator. Significantly, VPT had s
already made a claim of Rs. 9,65, 155/- against the contractor
for withdrawal and return of jack rods and the dispute was referred
to arbitration at the instance of VPT in the year 1976. Although
the contractor contested the said claim of VPT before the
arbitrators but curiously no counter claim for Rs. 74,810.38 was c
made in those proceedings. It is true that arbitrators rejected
the claim of VPT on 23rd March, 1980 and the petition before
thefu Civil Judge, Visakhapatnam also came to be . dismissed on
10 September, 1984 but that does not improve the case of the
contractor in so far as limitation is concerned as the limitation
fu ~ 0
began to run from 8 August, 1974. It was too late on 22
September, 1984 for the contractor to agitate the claim of
1
Rs.74,810.38 for which the cause of action accrued on 8 h
August, 1874. The contractor ought to have made counter claim
before the arbitrators in the year 1976 itself when VPT made a
claim of 9,65, 155/- for withdrawal of jack rods. In any view of the E
matter, the claim of Rs. 74,810.38 raised for the first time after
10 years of accrual of cause of action is apparently barred by
time and rightly rejected by Principal Subordinate Judge,
Visakhapatnam vide judgment dated 16fu February, 1994.
F
18. As a matter offact, Mr. S.B. Upadhyay, Senior Counsel
for the respondent could not show that claim for Rs. 74,810.38
was within time.
19. As noticed above, CMA No. 77/1995 before the High
Court related to non-payment of the charges of the power driven G
survey boat used by the contractor. Admittedly, the dispute in
this regard arose between the parties on 3rd February, 1975
and the matter was referred to the consulting engineers. The
consulting engineers rejected the claim of the contractor on 3rd
May, 1975 holding that it was the responsibility of the contractor H
848 SUPREME COURT REPORTS [2009] 2 S.C.R.
A to provide survey vessel. The contractor on 15th May, 1975
appointed its arbitrator and gave notice to VPT requiring them
to appoint their arbitrator. VPT also appointed its arbitrator but
th·e arbitrators could not enter upon the reference. It was in the
year 1979, then that the contractor approached the Principal
B Subordinate Judge, Visakhapatnam by filing suit under the
Arbitration Act, 1940 which was allowed vide order dated 10th
September, 1984 directing each party to appoint its arbitrator
within 15 days. In compliance thereof, the parties appointed their
arbitrators and on 16th March, 1985 the contractor filed its
C statement of claim for payment of hire charges for power driven
survey boat.
20. Sub-Section (3) of Section 37 of the Act, 1940, inter
a/ia, · provides that an arbitration· shall be deemed to be
commenced when one party to the arbitration agreement serves
)r
D on the other party thereto a notice requiring the appointment of
an arbitrator. The core controversy is: in the facts and
circumstances of the case, when the arbitration can be said to
have commenced.
E 21. In what we have already noticed above, the dispute
with regard to charges for the power driven survey boat arose
on 3rd February, 1975 and after the claim was rejected by the
consulting engineers on 3rd May, 1975, the contractor appointed
the arbitrator on 15th May, 1975 and asked VPT to appoint its
F arbitrator. In other words on 15th May, 1975, the contractor served .
on VPT a notice requiring them to appoint their arbitrator under
the agreement. Thus under Section 37(3~ the arbitrati~n shall
be deemed to have commenced on 15 May, 1975 1.e. well
within time and the High .Court rightly rejected the objection of
G VPT that the claim with regard to charges for the survey vessel
was time barred. Merely because, the arbitrators could not enter ;.
upon reference and the contractor had to approach the Court in
th
the year, 1979 by filing suit wll~ch was allowed on 10
September, 1984 and new arbitrators were appointed by the
H parties and statement of claim was filed by the contractor on
VISAKHAPATNAM PORT TRUST V. M/S 849
CONTINENTAL CONSTRUCTION COMPANY [R.M. LODHA, J.]
1
14 h March, 1985, that would not render the contractor's claim A
,-- l time barred.
22. Mr. Kailash Vasudev, Senior Counsel contended that
the non-reasoned award is bad in law. In this connection, learned
Senior Counsel referred to Section 17 of the Act, 1940 which
came to be amended by insertion of proviso vide Andhra B
Pradesh Act(1 of 1990).
23. Section 17 of the Act, 1940 reads thus ;
"17. Judgment in terms of award. - Where the Court
sees - no cause to remit the award or any of the matters C ·
referred to arbitration for reconsideration or to set aside
the award, the Court shall, after the time for making an
application to set aside the award has expired, or such
application having been made, after refusing it, proceed
to pronounce judgment according to the award, and upon D
the judgment so pronounced a decree shall follow and no
appeal shall lie from such decree except on the ground
that it is in excess of, or not otherwise in accordance with,
the award."
24. Vide Andhra Pradesh' Act ( 1 of 1990), the following E
proviso have been inserted to Section 17;
"Provided that where as award pending in the Court at
the commencement of the Arbitration (Andhra Pradesh
Amendment) Act, 1990 or an award filed in the Court, F
thereafter does not contain reasons therefore as required
by the proviso to sub-section ( 1) of Section 14 the Court
shall not proceed to pronounce the judgment according to
the award, but shall remit the award to the arbitrators or
the umpire for giving reasons therefore as required by the G
said proviso and thereupon the arbitrators or umpire shall,
within thirty days from the date of remittance of the award
to them by the Court give reasons for the award and file
the same in the Court:
Provided Further that on the application of the arbitrators H
850 SUPREME COURT REPORTS [2009] 2 S.C.R.
A or the umpire and for reasons to be recorded in writing, it
shall be competent for the Court, to extend the period of
thirty days aforesaid for a further period not exceeding
fifteen days:
Provided also that where an award pending in the court
B as aforesaid does not contain any reasons and there is
no possibility to remit the award to the arbitrator or panel
of arbitrators or umpire due to their incapacity, negligence,
refusal to act or death, the Court shall set aside the award
and direct the parties to initiate fresh arbitration in
c accordance with the terms of the agreement."
25. Firstly, amendment in Section 17 vide Andhra Pradesh
Act (1 of 1990) is not attracted in the present fact situation as
the award was passed by the arbitrators on 20th November, 1985
i.e. much before the amendment. As per Section 17 then
0
obtaining, it was not imperative for the arbitrators
.
to give reasonsth
in support of the award. Secondly, upon the award dated 20
November, 1985 being challenged by VPT before Principal Sub-
ordinate Judge, Visakhapatnam, the Principal Sub-ordinate
Judge, Visakhapatnam, directed the arbitrators to give reasons
E for the award in the light of the amendment aforenoticed.
26. Consequently, the arbitrators gave the following
reasons:
"Having gone through the various provisions in the contract
F docum-ents which have a bearing on the dispute between
the parties and after applying correct and proper
interpretation for adjudication of the said dispute, we find
that the Visakhapatnam Port trust, the Respondents in
this case, were under a Contractual obligation to make
G available a Survey Boat for use on these works and that,
although the survey boat was available with them, they ,,_
failed totally to fulfil that contractual obligation necessitating
the claimants to obtain a boat from their own resources
and deploy the same on the works throughout the
H construction period. We find that after allowing some
VISAKHAPATNAM PORT TRUST V. M/S 851
CONTINENTAL CONSTRUCTION COMPANY [R.M. LODHA, J.]
adjustments found necessary on perusal of the contract A
and after having considered the written as also the oral
submissions made to us by the parties, the claimants are
entitled to be paid by the Respondent the sum as
determined by us in our award."
27. Although this exercise was unnecessary but the fact of 8
the matter is, that subsequently the arbitrators did give their
reasons. Reasonableness of the reasons given by arbitrators
~ cannot be gone into by the Court. This objection of the Senior
Counsel is, accordingly, overruled.
c
28. For the foregoing reasons, we dispose of these
appeals as follows:-
(1) The judgment of the High Court of Judicature of Andhra
Pradesh in CMA No. 1559/1994 is set aside. The claim of M/s
~ Continental Construction Company for Rs. 74,810.38 stands D
dismissed. The amount of Rs. 74,810.38 deposited with the
executing Court by Visakhapatnam Port Trust pursuant to the
order dated 27th September, 2004 of this Court shall be refunded·
to them alongwith interest accrued thereon.
(2) The judgment of the High Court irtCMA No,--77/1995 is E
affirmed. The amount of Rs. 6,44,500/- deposiled by
Visakhapatnam Port Trust with the executing Court pursuant to
-" the order of this Court dated 27th September, 2004 shall be
paid to M/s Continental Construction Company alongwith
interest accrued thereon. F
(3) The parties shall bear their own costs.
G.N. Appeals disposed of.
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