@JUDGMENTTAG-ORDER
Janaki Amma, J.@mdashThe revision petition is filed by the State of Kerala challenging the order of the Subordinate Judge, Trivandrum setting aside the award of the arbitrator in O.S. (Arbitration) No. 114 of 1977 of the Sub Court, Trivandrum. The suit related to a contract of work undertaken by the Respondent for the construction of a bridge across the Vamanapuram river at Kollampuzha crossing. A formal agreement was executed on 31st March 1959. The terms of the agreement provided for arbitration of dispute or difference between the parties to the contract either during the progress or after the completion of the works or after the determination, abandonment or breach of the contract, as to the interpretation of the contract or as to any matter or thing arising thereunder (except as to the matters left to the sole discretion of the division officer or Superintending Engineer under the Clauses of this contract) or as to the withholding by the division officer of any bill to which the contractor may claim to be entitled. The contract was terminated in 1962 before the work was completed. Steps were taken against the Respondent under the Revenue Recovery Act in the year 1972 and amounts were realised from him by sale of his properties. On 10th June 1977, the Respondent initiated proceedings before the Subordinate Judge, Trivandrum for directing the Defendants, the State of Kerala and the Executive Engineer, Buildings and Roads Division, Trivandrum to file the agreement dated 31st March 1959 before court and praying for an order of reference to the Chief Engineer (Arbitration), Trivandrum to resolve the disputes between the parties to the agreement or in the alternative to appoint an arbitrator to resolve such disputes. The Chief Engineer (Arbitration) was accordingly directed to make an award. Before the arbitrator, the contractor claimed the price of work done, the cost of materials taken possession of by the Respondents and also compensation for the losses sustained by him. The arbitrator held that the claims put forward by the Respondent were barred by limitation as the Respondent had not taken steps to agitate his claims within the period of three years fixed under the Limitation Act of 1963. The contention put forward that certain letters evidenced by Exts. P-44, 48 and 53 amounted to acknowledgment of liability was not accepted by the arbitrator. On the award being filed in court, the Respondent filed I.A. No. 4931 of 1978 to set aside the award. The learned Subordinate Judge held that the award being a speaking one, it was open to the Court to go into the correctness of the finding regarding limitation. The court held that the termination of the work in 1962 was not tantamount to a denial of right. According to the learned Judge, the letters of the Superintending Engineer and those of the Chief Engineer disclosed that the final accounts had not been settled and as such it could not be said that the claim was made more than three years after the accrual of the cause of action. The award was accordingly set aside and the matter was remitted to the arbitrator to submit a fresh award after going into the merits of the claim. This order is challenged in the revision petition.
2. The point that arises for decision is whether the arbitrator''s finding that the claim was barred by limitation required interference by the learned Subordinate Judge. It would appear that the arbitrator proceeded on the footing that the claimant should have moved for arbitration within a period of three years from the date of termination of the contract. The arbitrator also took it for granted that there was a settlement of accounts subsequent to the termination of the contract and it was on the basis of the settlement of accounts that the State initiated proceedings under the Revenue Recovery Act in 1972. The arbitrator did not accept the contention that the letters, Exts. 44, 48 and 53 saved the limitation because those letters were written after the claim became barred. The learned Subordinate Judge, on the other hand, held that it was Article 113 of the Limitation Act that applied and there would be accrual of cause of action only when there is a denial of right so far as the contract is concerned. The learned Subordinate Judge also held that the direction terminating the work in 1962 did not amount to a denial of any right. According to the learned Subordinate Judge, the letters of the Superintending Engineer and the Chief Engineer disclosed that there had not been a final settlement of accounts and as such it could not be said that the claim was made more than three years after the accrual of the cause of action. It was on the above footing that the learned Judge set aside the award and remitted the matter to the arbitrator for a fresh award after going into the merits of the claim.
3. u/s 16(1)(c) of the Arbitration Act, the Court may remit the award where the objection to the legality of the award is apparent on the face of it.
4. What is an error of law on the face of the award is dealt with by Russell on the Law of Arbitration, 19th Edition, Page 448, thus:
An error of law on the face of the award means...that you can find in the award or a document actually incorporated thereto, as, for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous.
Unless upon the face of the award we can distinctly collect what the arbitrator intended to decide, and that we can see that he has decided wrongly, the court will not interfere.
5. The Supreme Court had also occasion to interpret the words "legality of the award which is apparent on the face of it". The earliest case on the point is
An award being a decision of an arbitrator whether a lawyer or a layman chosen by the parties, and entrusted with power to decide dispute submitted to him is ordinarily not liable to be challenged on the ground that it is erroneous.... The award is the decision of a domestic tribunal chosen by the parties, and the Civil Courts which are entrusted with the power to facilitate arbitration and to effectuate the awards, cannot exercise appellate powers over the decision. Wrong or right the decision is binding if it be reached fairly after giving adequate opportunity to the parties to place their grievances in the manner provided by the arbitration agreement. But it is now firmly established that an award is bad on the ground of error of law on the face of it, when in the award itself or in a document actually incorporated in it, there is found some legal proposition which is the basis of the award and which is erroneous. An error in law on the face of the award means: "you can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative a ''reference is made to a contention of one party, that opens the door to setting first what that contention is, and then going to the contract on which the parties rights depend to see if that contention is sound." Champsey Bhara and Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd. 50 Ind. App. 324 : AIR 1923 P.C. 66. But this rule does not apply where questions of law are specifically referred to the arbitrator for his decision; the award of the arbitrator on these questions is binding upon the parties, for by referring the specific questions the parties desire to have a decision from the arbitrator on those questions rather than from the Court, and the Court will not, unless it is satisfied that the arbitrator had proceeded illegally, interfere with the decision.
The Court quoted with approval the following passage from
Therefore, when a question of law is the point in issue, unless both sides specifically agree to refer it and agree to be bound by the Arbitrator''s decision, the jurisdiction of the Courts to set an arbitration right when the error is apparent on the face of the award is not ousted. The mere fact that both parties submit incidental arguments about a point of law in the course of the proceedings is not enough.
6. In the instant case, the reference to an arbitrator did not in itself contain any question of law. The Plaintiff only claimed that the disputes between the Plaintiff and the Defendant should be resolved by a reference to the Chief Engineer (Arbitration), Trivandrum. It was preliminary to the decision of the disputes that the arbitrator found that the claims put forward by the Plaintiff were barred by limitation. This finding by the Arbitrator was challenged before the Subordinate Judge on the ground that the finding constituted an error of law apparent on the face of the award. The contention put forward by the Plaintiff was that there was no bar of limitation and the correct provision of law has not been referred to in the award. Prima facie, since a question of law has been dealt with by the arbitrator in the award and the decision thereon was the ground on which the award was passed, the learned Subordinate Judge was justified in examining the matter to find out if there is an error of law apparent.
7. The further question is whether the decision of the Arbitrator that the claim is barred by limitation is sustainable and whether the learned Subordinate Judge was right in holding that there was no bar of limitation. The arbitrator proceeded on the footing that since there was a termination of the contract in the year 1962 and the Plaintiff was aware of this, the claim put forward by the Plaintiff is barred by limitation. According to the Arbitrator, the period of limitation prescribed is 3 years under the Limitation Act, 1963. It is also mentioned that the Respondents had initiated Revenue Recovery proceedings in 1972 and the amount due to the State has been realised by sale of immovable property. There has been a final settlement of accounts and the Plaintiff was not entitled to take up the matter again in 1977, long after a period of three years. It is also stated that the letters relied upon by the Plaintiff viz., Exts. 44, 48 and 53 were long after the claims became barred and as such, they are not available by way of acknowledgment of liability. The learned Subordinate Judge took a different view. According to the learned Judge, there was no settlement of accounts and Article 113 of the Limitation Act governed the matter. Under that provision, the starting point of limitation is when the right accrues. The learned Subordinate Judge also held that there was no denial of right when the work was terminated and, therefore, no cause of action arose in 1962. According to the learned Judge, since accounts have not been settled yet, there was no bar of limitation.
8. The question to be decided is whether the above reasoning is sustainable. It is noted from the award that the Plaintiff claimed before the Arbitrator amounts by way of price of work done, cost of materials taken possession of by the Respondents and also compensation for the losses sustained by him. The Limitation Act of 1963 provides a period of three years under Article 14 for the price of goods sold and delivered where no fixed period of credit is agreed upon. The period of limitation is to begin from the date of delivery of goods. For the price of work done by the Plaintiff for the Defendant at his request where no time has been fixed for payment, a period of three years is fixed under Article 18 and the period of limitation is to commence from the date when the work is done. Article 55 provides a period of three years for compensation for the breach of any contract, express or implied which has not been provided for. The cause of action is to commence when the contract is broken or where there are successive breaches when the breach in respect of which the suit is instituted occurs or where the breach is continuing when it ceases. The above provisions are applicable in the case of building and engineering contracts. In Ramlal v. Commissioners of Tekari Municipality AIR (1961) Patna 485, a professional contractor who entered into a contract of work with a Municipality sued for amounts for supply of materials, and for work done. It was held that in respect of supply of materials, Articles 52 of the Limitation Act (1908) which corresponds to Article 14 of the Act of 1963 applied. The starting point of limitation in such cases is the date of delivery of goods and that the provision applicable to price of work done is Article 56 of Act 1908 which corresponds to Article 18 of the Act of 1963. The time when the period begins to run is when the work is done. In Mohomed Ghasita v. Sirajuddin AIR 1922 Lahore 198, the claim was for balance of amount due under a contract which included both materials supplied and price of work done. The claim being for a consolidated amount and indivisible, it was held that Article 115 of the Limitation Act (1908) which corresponds to Article 55 of the Act, 1963, viz., the provision dealing with compensation for the breach of any contract, express or implied, not specially provided for, applied. In Sita Ram v. Mt. Mahmudi Begam AIR 1934 Lahore 475, a contractor who undertook the construction of a building, showing no satisfactory progress was asked to stop work and the work was entrusted to another. A suit by the former contractor for value of work done by him and price of materials left by him on the spot when he was asked to stop the work was held to be governed by Article 115 of the Limitation Act (1908) corresponding to Article 55 of the Act now in force. The learned Subordinate Judge is, therefore, not correct in holding that Article 113 applied to the case.
9. It is, however, seen that even though the Arbitrator held that the period of limitation is 3 years under the Limitation Act of 1963, he has not mentioned under which provision the claims of the contractor fell and what is the starting point of limitation. The Arbitrator was also not correct in holding that the Plaintiff''s claim is based on settlement of accounts. There is thus an error of law apparent on the face of the award. There are, therefore, no sufficient reasons for interference with the order setting aside the award and remitting the dispute to the Arbitrator. The Arbitrator may dispose of the objection regarding bar of limitation in the light of what is mentioned in the foregoing paragraphs and pass a fresh award. The time granted by the Subordinate Judge will stand extended till 2nd June 1980. The order of the Subordinate Judge will stand modified as above. The revision petition will stand allowed. The parties will bear their costs.
