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TMI Blog2008 (1) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... uding stoney earth and gravel mixed with boulders), and depositing/disposing of the same, as directed. The maximum lift was 6m including initial lift of one metre. The order to commence work was issued on 23.9.1967. Parties also entered into three supplementary agreements in regard to the said contract No.30/F-2, on 2.8.1969, 7.3.1970 and 10.2.1972. [Note : OMC had also entered into other contracts with the contractor including contract dated 22.2.1968 (Contract No.2/F/2) for raising Chrome Ore by open excavation from the said mining area. We are not concerned with those contracts in these appeals]. 3. The main agreement enumerated two items of work in its schedule. The first, second, and third supplementary agreements enumerated respectively eight items, one item and four items in their respective schedules. The work was completed by the contractor on 15.6.1975. The final bill in respect of the work was prepared by OMC on 21.10.1976. It was revised in March-April 1977 by OMC. The final Bill It showed the total value of the work done (under several items in the schedule to main and three supplementary agreements) as Rs. 1,49,190,76.74. The contractor countersigned the said bill on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered. Ultimately the Committee submitted a final report dated 7.12.1979 expressing the view that the contractor could be paid only a sum of Rs. 3,52,916/- in regard to his claims in respect of the two contracts. The contractor, thereafter, wrote a letter dated 29.2.1980 stating that he had come to know that the Committee had submitted its final report and requested for a copy of the report and for payments of the amounts due. OMC sent a reply dated 4.3.1980 stating that the claims were not accepted yet but however agreed to release a sum of Rs. 3.5 lakhs and released the said sum on that day. 6. The contractor sent a notice dated 4.6.1980 invoking the Arbitration Agreement (Clause 23) in respect of pending claims relating to Contract No. 30F-2 and two other contracts. He suggested a panel of names and requested OMC to appoint one of them as Arbitrator. Immediately, thereafter, the contractor filed Misc. Case No.306/80 in regard to the contract in the Court of the Sub-Judge, Bhubaneswar, under section 8(2) of Arbitration Act, 1940 ( Act for short) for appointment of an Arbitrator. The court allowed the said petition by order dated 6.10.1980 appointing Mr. Justice Balakrishna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claims made by the appellant was Rs. 96,66,107 and the new claims were Rs. 68,33,979]. 8. The Arbitrator made a reasoned award dated 28.11.1986 holding that the appellant was entitled to a sum of Rs. 1,02,66,901.36 (which was more than the claim of Rs. 95,96,616) with interest at 12% per annum from 1.8.1977 till date of award, and future interest at the rate of 6% P.A. from the expiry of one month from the date of the award till date of decree. The award is in respect of 35 claims. Out of 35 claims, Items 1 to 16 related to the schedule items of work under the contract (main agreement and the supplementary agreement 1 to 3). Items 17 to 34 were in respect of work which did not form part of the contract schedule. Claim 35 related to escalation in cost of labour and material on account of delay in execution. 8.1) The details of the items 1 to 16, (that is description of work, total amount claimed, amount admitted, difference in dispute and amount awarded) are as under : Sl. No. Description of item Claim of Contractor Amount admitted by OMC Amount in dispute Award by Arbitrator 1. Removal of overburden in all kinds of soil etc. within a lead of 100 m. (Maximum lift 6M) 5080 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived from OMC in the claim statement) Rs.1,20,01,695/90 BALANCE arrived at Arbitrator as due to contractor in respect of items 1 to 16 Rs.32,83,243.00 8.2) Claims of contractor at Sl. No. 17 to 34 related to items of work not covered in the schedule to the contract, for which claim was made on the basis of damages/quantum meruit. As against the total of Rs. 70,56,573/55 claimed in regard to these 18 items (Items 17 to 34), the Arbitrator awarded in all Rs. 52,56,847/36. The details of the claims made by the appellant and the amount awarded in respect of each of them are as under : S.No. Description of item Amount Claimed Amount Awarded 17. Extra Head Lead for 90 m 2810144.10 2450042.88 18. Removal of excavated materials from the edge of the quarry 54888.60 50858.60 19. Unmeasured quantity of excavation 848372. 64 664720.00 20. Catch Water Drain 278842.50 27842.50 21. Removal of slipped earth from side slopes 143646.00 Nil 22. Restoration of benches to proper shape 186761.16 140070.87 23. Bullah Pilling to prevent slipping of benches 15722.70 Nil 24. Dry rubble packing 202499.00 122856.40 25. Extra lift during construction of H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /1998 claiming future interest from the date of decree as the judgment of the Civil Judge was silent on that aspect. The High Court heard and disposed of the said appeals and revision petition by common judgment 15.10.1999. It allowed Misc. Appeal No.296/1998 filed by OMC and dismissed M.A. No.198/1998 and C.R. No.109/1998 filed by the contractor. The High Court held : (i) The claim of the contractor was barred by limitation and therefore the award was liable to be set aside. (ii) The arbitrator acted beyond his jurisdiction in awarding huge amounts towards alleged extra work, even though there was nothing to indicate that conditions contemplated in proviso to Clause 11 (relating to additional work) were satisfied. (iii) Though the award purported to be a reasoned award, the award in regard to Items 17, 18, 19 and 25 to 27 was not supported by any reason and therefore, the award was liable to be set aside. (iv) The award in respect of escalation in cost (item 35) at the rate of 32.6% of the value of work was without basis, (when the claim itself was for a lesser rate), in the absence of any provision in the contract for escalation, amounted to legal misconduct. (v) The award b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bill was signed by the contractor under protest on 14.4.1977 and therefore held that the cause of action for the contractor to make a claim arose on 14.4.1977. According to the High Court, as the notice invoking arbitration was issued on 4.6.1980 and the petition under section 8(2) of the Act was filed thereafter, beyond three years from 14.4.1977, the entire claim was barred by limitation. The High Court further held that as the final bill was signed under protest by the contractor, it could be said that the cause of action arose on a date subsequent to the date of signing of the final bill. It further held that the fact that the Departmental Committee considered the claims in 1979, subsequent to the signing of the final bill under protest, did not have the effect of saving/extending limitation in the absence of any acknowledgement in writing as required under section 18 of the Act. 14. Section 18 of the Limitation Act, 1963 deals with 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 right, an acknowledgement of liability in respect of such right has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ledgement rests oral evidence has been expressly excluded but surrounding circumstances can always be considered. 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 .. 15. 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 affirmation 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 acknowledgement. But if the defendant merely says, without admitting liability, it would like to examine the claim or the accounts, it may not amount to acknowledgement. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the cause of action accrued on 14.4.1977 when the final bill was signed by the contractor. It is not in dispute that the final bill showed that a sum of Rs. 17,69,608.73 was payable to the contractor (after giving credit to the payments made and after withholding a sum of Rs. 7,45,953.83 as 5% security deposit). Towards the said sum of Rs. 17,69,608.73. Rs. 17 lacs was paid on 25.2.1976 and Rs. 70,000/- was paid on 6.8.1977. The contractor had made some claims and OMC wrote a letter dated 28.10.1978 in regard to the pending claims of the contractor. In regard to Kaliapani matters, OMC informed the contractor that it has been decided to constitute a Committee which will go into the claims of the contractor so that the dues, if any, could be ascertained. It further stated that on the details of the claims and payments received being given to the contractor, OMC will settle up the pending matters at the earliest. This clearly showed an intention on the part of OMC to admit the jural relationship of contractor and employer and an intention to settle the pending claims after being satisfied about them. Therefore, the letter dated 28.10.1978 was clearly an acknowledgement in writing i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Act, 1940 with the limitation for the claim itself. The limitation for a suit is calculated as on the date of filing of the suit. In the case of arbitration, limitation for the claim is to be calculated on the date on which the arbitration is deemed to have commenced. Section 37(3) of the Act provides that for the purpose of Limitation Act, an arbitration is deemed to have been commenced when one party to the arbitration agreement serves on the other party thereto, a notice requiring the appointment of an arbitrator. Such a notice having been served on 4.6.1980, it has to be seen whether the claims were in time as on that date. If the claims were barred on 4.6.1980, it follows that the claims had to be rejected by the arbitrator on the ground that the claims were barred by limitation. The said period has nothing to do with the period of limitation for filing a petition under section 8(2) of the Act. Insofar as a petition under section 8(2), the cause of action would arise when the other party fails to comply with the notice invoking arbitration. Therefore, the period of limitation for filing a petition under section 8(2) seeking appointment of an arbitrator cannot be confused wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itrator was in time, all claims made in the claim statement filed before the Arbitrator appointed in such proceeding under section 8(2) are also in time, is patently erroneous and is an error apparent on the face of the record. The reasoning of the arbitrator that on account of the formation of the Committee by OMC to scrutinize the pending claims in pursuance of the OMC's letter dated 28.10.1978, and the payment of Rs. 3,50,000/- on 4.3.1980 in pursuance of the Committee giving its final report on 7.12.1979, every claim of the contract including new claims which were made for the first time in the claim statement filed in 1986 (as contrasted with 'pending claims' considered by OMC), are not barred by limitation, is also an error apparent in the face of the award. Under section 18 an acknowledgement in writing extends the limitation. Under section 19 a payment made on account of a debt, enables a fresh period of limitation being computed. Therefore, the letter of OMC dated 28.10.1978 and the payment of Rs. 3,50,000/- by OMC, would result in a fresh period of limitation being computed only in regard to the 'existing debt' in respect of which acknowledgment and pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only Rs. 120,01,659.90 was paid towards the work. As a result though the Arbitrator found that the amount payable towards claims at Items 1 to 16 was only Rs. 365,862.18, he awarded Rs. 32,83,243/- to the appellant, thereby increasing the liability of OMC by Rs. 29,86,871/-. By awarding more than what was claimed in the claim statement (by showing a lesser amount as having been paid by OMC though claim statement showed a higher amount), the Arbitrator clearly exceeded his jurisdiction. The Arbitrator thus committed a legal misconduct and the award to that extent is liable to be set aside. Therefore the amount awarded in respect of claims at items 1 to 16 by the Arbitrator is to be reduced by Rs. 29,86,871/-. 23. The Arbitrator has exceeded his jurisdiction in another respect. The total claim made by the contractor before the Arbitration was Rs. 95,96,616/- (excluding interest). But the amount awarded by the arbitrator towards the said claim was Rs. 1,02,66,901/36 (excluding interest). Making an award in excess of the claim itself by Rs. 6,70,285 is a clear act of exceeding the jurisdiction and amounts to a legal misconduct and to that extent of Rs. 6,70,285/- the award is invalid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of excavation 8,44,360.00 8,48,372.64 6,64,720.00 20. Catch water drain 1,55,400.00 27,842.50 27,842.50 21. Removal of slipped earth from side slopes 3,42,960.00 1,43,646.00 Nil 26. Extra lift for excavated material dumped at quarry edge 7(e) 42,370.00 3,60,690.49 270,517.88 (42,370.00)* 27. Extra lift measured by surveyor 7(b) 1,25,642.00 13,96,128.67 10,47,096.50 (125,642.00)* 28. Idle labour (non supply of plans) 9(a) 1,45,575.00 1,45,575.00 Nil 29. Idle labour (for want of site) 9(c) 75,450.00 76,850.00 Nil 30. Idle labour (due to stoppage of work and restriction of working area) 9(b) & (d) 2,61,205.00 3,89,288.00 194,644.00 31. Repairing road damaged by cyclone 10(iii) 10,640.00 10,640.00 Nil 32. Reconstruction of Embasskent 10(vii) 25,370.00 25,370.00 25,370.00 33. Wire fencing 1,05,000.00 27,315.00 Nil 34. Electricity supply to work site and colony 6(b) 72,000.00 72,000.00 Nil 28,32,128.30 13,93,373.50 [Note : The figures shown by (*) in the column 'Award by Arbitrator', refer to the maximum that could have been awarded by the Arbitrator having regard to claim that was not barred by limitation]. Thus the total amount awarded by the Arbitrator against c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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