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TMI Blog2013 (5) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... te may choose to decide whether the claim is a dead claim, it is implied that he will do so only when the claim is evidently and patently a long time barred claim and there is no need for any detailed consideration of evidence. The question whether a claim is barred by res judicata, does not arise for consideration in a proceedings under section 11 of the Act. Such an issue will have to be examined by the arbitral tribunal. A decision on res judicata requires consideration of the pleadings as also the claims/issues/points and the award in the first round of arbitration, in juxtaposition with the pleadings and the issues/points/claims in the second arbitration. The limited scope of section 11 of the Act does not permit such examination of the maintainability or tenability of a claim either on facts or in law. Thus the Designate has clearly exceeded his limited jurisdiction under section 11 by deciding that the claim for extra cost, though covered by the arbitration agreement was barred by limitation and by the principle of res judiata. He was also not justified in terming the application under section 11 of the Act as ‘misconceived and malafide’. Nor could he attribute ‘mala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed a statement of claims raising eight claims. However in its written submission before the Arbitrator, the contractor confined its claims to only three, aggregating to Rs.1,31,81,288/-. 5. The appellant made several counter-claims aggregating to Rs.92,72,529/-. Subsequently the statement of counter-claims was amended and the following para was added in regard to the extra cost in getting the work completed through an alternative contractor:- Since the aforementioned contract is still pending and IOCL is in the process of inducting agency (ies) to complete the said work, the Engineerin- charge of the said contract, EIL estimated a minimum expenditure of Rs.18,36,20,000/- for completion of the works under the said contract which EIL intimated to IOCL by its letter dated 23.5.2002, a copy whereof is annexed hereto and marked Annexure RY. The said estimated expenditure has been revised by IOCL who has arrived at the reduced figure of Rs.2,10,41,626/- (Rupees Two Crores Ten Lacs Forty One Thousand Six Hundred Twenty Six Only) in its proposal dated 09.09.2006, a copy whereof is annexed hereto and marked Annexure RY- 1. Accordingly, IOCL is entitled to recover from SPSEL any add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tually incurred have been more than the costs which were required to be incurred under the contract, then the difference between the two costs could have been awarded as damages to the respondent. There is no proper evidence on the record to show that what could have been the costs of the balance work if it had been executed within reasonable period after the termination of the contract. Such damage cannot be awarded on mere opinion of any particular person or on hypothetical basis. Under clause 7.0.9.0 of General Conditions of the Contract, the respondent was entitled at the risk and expenses of the contractor to get completed the balance work and recover the costs from the claimant. This clause further contemplates that on the amount actually expended by the owner for the completion of the work 15% to be added as supervision charges, the same would have become recoverable from the claimant. In the present case, no such cost has been incurred till date. Thus, for these reasons, I reject this counter claim. (emphasis supplied). The arbitrator adjusted Rs.11,10,662 awarded to the appellant, towards the sum of Rs.91,33,844 awarded in favour of the respondent and consequently dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omply, contending that the counter claim in regard to the risk-execution cost had already been rejected by the arbitrator, by his award dated 27.10.2008 and that award having attained finality, there could be no further arbitration. In view of the said stand of the respondent, the appellant filed a petition under section 11 of the Act praying for appointment of an arbitrator to decide its claim for the extra cost in getting the work completed through the alternative agency. 8. The learned Designate of the Chief Justice of the Delhi High Court (for short the Designate ) by the impugned order dated 8.12.2009 dismissed the application with costs of Rs.50,000/-. He held that the application under section 11 of the Act by the appellant was misconceived, barred by res judicata, and mala fide. The Designate held (i) that the claim by the appellant in regard to extra cost had already been considered and rejected by the Arbitrator; (ii) that the claim regarding extra cost was barred by limitation (by drawing an inference from the observation of the Arbitrator that the risk execution tender was not awarded to Deepak Construction Co. within a reasonable period of termination of respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... la fide , it will be necessary to examine the facts and relevant documents. What is to be decided in an application under section 11 of the Act is whether there is an arbitration agreement between parties. The Chief Justice or his designate is not expected to go into the merits of the claim or examine the tenability of the claim, in an application under section 11 of the Act. The Chief Justice or his Designate may however choose to decide whether the claim is a dead (long-barred) claim or whether the parties have, by recording satisfaction, exhausted all rights, obligations and remedies under the contract, so that neither the contract nor the arbitration agreement survived. When it is said that the Chief Justice or his Designate may choose to decide whether the claim is a dead claim, it is implied that he will do so only when the claim is evidently and patently a long time barred claim and there is no need for any detailed consideration of evidence. We may elucidate by an illustration : If the contractor makes a claim a decade or so after completion of the work without referring to any acknowledgement of a liability or other factors that kept the claim alive in law, and the claim i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... econd arbitration. The limited scope of section 11 of the Act does not permit such examination of the maintainability or tenability of a claim either on facts or in law. It is for the arbitral tribunal to examine and decide whether the claim was barred by res judicata. There can be no threshold consideration and rejection of a claim on the ground of res judicata, while considering an application under section 11 of the Act. Re : Question (ii) 14. We extract below the reasoning adopted by the Designate to dismiss the appellant s application under section 11 of the Act :- 5. In my opinion, not only the aforesaid para 102 in the Award dated 27.10.2008 operates as res judicata against the present petitioner, I find that the present petition is misconceived and and mala fide because, if the present petitioner is correct in saying and which I doubt it is, that its limitation/right would only begin after the work is completed by M/s Deepak Construction Company when the amount of the higher cost is known, even then, the work was completed by the M/s Deepak Construction Company admittedly on 29.12.2007, and thus the present petitioner, could well have proved its counter claim in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person in breach of obligations under the earlier contract. It cannot be that limitation and a right continues indefinitely to be extended till the performance is completed under a subsequent risk purchase contract. This would give complete uncertainty to the period of limitation striking at the very root of one of the principles of the Limitation Act and which is that evidence is lost by passage of time and which will cause grave prejudice to the person against whom a stale claim is filed. 15. The appellant submitted that having regard to clause 7.0.9.0 of the contract, damages can be claimed by it (as employer), in regard to the additional amount incurred for getting the work completed through an alternative agency at the risk and cost of the contractor along with the supervision charges, only when the amount was actually expended for completion of the entire work; and therefore, unless the work was completed by the alternative agency and the final bill was settled or finalized, the actual extra cost could not be determined. It was pointed out that in the first round of arbitration, the hearing was concluded by the Arbitrator on 13.3.2008 and matter was reserved for orders and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o extra cost was not being considered in that award and that appellant should make the claims separately after the amount was actually expended. 17. Clause 7.0.9.0 of the contract relied upon by the appellant reads thus : clause 7.0.9.0 Upon termination of the contract, the owner shall be entitled at the risk and expenses of the contractor by itself or through any independent contractor(s) or partly by itself and/or partly through independent contractor(s) to complete to its entirety the work as contemplated in the scope of work and to recover from the contractor in addition to any other amounts, compensations or damages that the owner may in terms hereof or otherwise be entitled to (including compensation within the provisions of clause 4.4.0.0 and clause 7.0.7.0 hereof) the difference between the amounts as would have been payable to the contractor in respect of the work (calculated as provided for in clause 6.2.1.0 hereof read with the associated provisions thereunder and clause 6.3.1.0 hereof) and the amount actually expended by the owner for completion of the entire work as aforesaid together with 15% (fifteen per cent) thereof to cover owner s supervision charges, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sk and cost of a person, then, the amount which is to be claimed from the person who is guilty of breach . becomes crystallized when the risk purchase tender at a higher cost is awarded.. This may be true as a general proposition. But it may not apply if there is a specific provision in the contract (like clause 7.0.9.0) which requires that the employer should claim as extra cost, only the difference between the amounts as would have been payable to the contractor in respect of the work and the amount actually expended by the owner for completion of the entire work . 19. The Designate should have avoided the risks and dangers involved in deciding an issue relating to the tenability of the claim without necessary pleadings and documents, in a proceeding relating to the limited issue of appointing an Arbitrator. It is clear that the Designate committed a jurisdictional error in dismissing the application filed by the appellant under section 11 of the Act, on the ground that the claim for extra cost was barred by res judicata and by limitation. Consideration of an application under section 11 of the Act, does not extend to consideration of the merits of the claim or the chances ..... X X X X Extracts X X X X X X X X Extracts X X X X
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