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TMI Blog2024 (9) TMI 1300X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 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 Powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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: "(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: " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A Outstanding principal amount as due under the Purchase Orders 6,75,15,631 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 amount calculated @ 18% p.a. from respective due date(s) of payments till 31.03.2019. 3,51,43,446 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 Orders 8,00,00,000 G Costs of arbitration 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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; (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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). (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived 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. (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 trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roject, 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) customs 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, any 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TRAL 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 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 subclauses which are not relevant to the issues raised before us. Insofar as clause (b) is concerned, it has two subclauses, 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 pol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ign 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 significance of the newly inserted Explanation 1 in both the sections is two-fold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e apposite to consider as to how the expressions (a) "in contravention with the fundamental policy of Indian law"; (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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, there 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 availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 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 vulner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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)." 56. In Associate Bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 opentextured, 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 j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 patent 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ached 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inguishing 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: (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) requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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. 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 Pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Orders for: (i) Design, Engineering and Supply of 1 Unit of ACC with Auxiliaries for 160 MW Coal 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). (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 comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gita 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 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. 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 Febru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, reflected that the principal amount outstanding towards Enexio under the contract was the one that was claimed by Enexio in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 invoice 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 arran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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. 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 appo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; 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 art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls 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." 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 provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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- (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 proba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 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. Such compensation is not to be given for any remote and indirect loss or damage s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 exi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enying, 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 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 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. Apparent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant 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 right, an acknowledgement of liability in respect of such right has been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 acknowledgment. But if the defendant merely says, without admitting liability, it would like to examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 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 under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d independent of the claim, based on the cause 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. 128. The Tribunal takes 21 September 2015 as the start p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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). 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 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: "Your client Babu Hari Prasad Saha was the gomoshta at Calcutta in the employ of the firm of Dwarka Nath Makhan L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smuch 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 money or a specific right only, and not in general terms, it would extend the period of limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imitation, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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). (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 extens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (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. Footnotes 1High Court of Judicature at Madras 21996 Act 32015 Act 41963 Act 5(2021) 5 SCC 738, paragraphs 20 and 21 6(2024) 5 SCC 358, paragra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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. 19Section 23.-- What consideration and objects are lawful, and what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, Volume III, page 2621. 44 (2000) 7 SCC 296 45 See paragraph 36 of the judgment in Associate Builders (supra) 46 See paragraph 76 of the judgment in Ssyanyong (supra) 47 in conflict with most basic notions of morality or justice 48 most basic notions of justice 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on) 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. 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssive breaches) when the breach in in respect of which the suit is 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 breach of a contract in writing registered. Six years When the period of limitation would begin to run against a 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 crea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ph 126 of this judgment. 121 Extracted in paragraph 7 of this judgment 122 See paragraph 21 of J.C. Budhraja (supra) extracted in paragraph 119 of this judgment. 123 AIR 1930 All 461 : 1929 SCC OnLine All 152 124 AIR 1918 Cal 294: 1917 SCC OnLIne Cal 23 125 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. 128 See Mohamed Ghasita v. Siraj-ud-Din and Ors. (supra), extracted in paragraph 97 of this judgment. 129 See Padhiyar Prahladji Chenaji v. Maniben Jagmalbhai & Ors., (2022) 12 SCC 128, paragraph 17 130 See para ..... X X X X Extracts X X X X X X X X Extracts X X X X
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