S. RAVINDRA BHAT
1. The Delhi Jal Board (hereafter “DJBâ€), in this appeal under Section 37 of the Arbitration and Conciliation Act, 2015 (hereafter “Actâ€),
questions the decision of a learned Single Judge, refusing to interdict an arbitral award (under Section 34) which had directed it to pay amounts to
Rajora Builders (hereafter “Rajoraâ€), for the services it rendered.
2. DJB had entered into a contract with Rajora for domestic sewage disposal. Owing to delays in the completion of work, an extension of time had
been provided to Rajora up till 31st July, 2002. The work of the underlying contract was completed on 24th December, 2002. Thereafter, the final bill
for gross value of `2,89,81,244.36, including 3 extra items was alleged to have been submitted by Rajora to DJB. Rajora vide letter dated 17th July,
2003 informed DJB that final bill had not been paid. Rajora’s enquiry revealed that payment of the final bill was pending because of lack of
approval of the competent authority for the extension of time, hence, the request for extension was made. On 17th July, 2003, Rajora had contacted
DJB requesting extension of time for the work to be completed till the date of completion (i.e. 24th December, 2002). A copy of the final bill was also
attached to the letter. Thereafter, on 23rd May, 2006, DJB granted Rajora’s request for extension of time for work to be performed till 24th
December, 2002 without any levy of compensation. However, escalation benefits were restricted only up to 11th March, 2002. However, in spite of
the grant of extension, the final bill was not settled. On 5th October, 2006, DJB sent a final bill to Rajora for acceptance and counter signature.
However, it was not accepted by Rajora as amounts payable to it under various heads, were not included in that final bill. This was also noted by the
Tribunal. Further, on 1st January, 2009, Rajora instituted arbitration proceedings for recovery of the amount owed to it.
3. In arbitration, DJB’s written submissions urged a preliminary objection that Rajora’s work was completed on or before 24th December,
2002. Accordingly, DJB argued that pursuant to the shorter limitation periods under Section 478 of the Delhi Municipal Corporation Act, 1957
(hereafter “Delhi Municipal Corporation Actâ€) and Section 96 of the Delhi Water Board Act, 1998 (hereafter “Delhi Water Board Actâ€) (six
month time bar), Rajora’s arbitral claim was time-barred. The DJB also contended that the claim was time-barred under the longer limitation
period under Article 18 of the Limitation Act (three years). In response, Rajora’s counsel argued that Section 478 of the Delhi Municipal
Corporation Act and Section 96 of the Delhi Water Board Act were inapplicable. Rajora submitted that DJB granted the extension of time only on
23rd May, 2006, and required it to accept and counter-sign a final bill prepared by DJB on 5th October, 2006. Accordingly, under the longer limitation
period under Article 18 of the Limitation Act (three years), the claims are not time-barred Arbitral award.
4. In the award, the Tribunal found that the claims were not time-barred, since DJB prepared the final bill only in October, 2006. The Arbitrator also
found that DJB’s reliance on Section 478 of the Delhi Municipal Corporation Act and Section 96 of Delhi Water Board Act were incorrect and
the claims were not time-barred. The Tribunal found for Rajora in the matter, and issued an award of `1,09,75,419.74, along with interest.
The impugned order
5. DJB challenged the award under Section 34 of the Act, arguing inter alia, that the Award was invalid because the Rajora’s claims were time-
barred and therefore, rendered un-arbitrable. It was contended that claims raised by it in arbitration were no different from those raised in the final bill
submitted by Rajora in its letter dated 17th July, 2003. Accordingly, the claim in question arose more than five years prior to the commencement of
arbitration and was accordingly time-barred.
6. Rajora urged that the plea of limitation raised in the argument before the learned Single Judge, was not raised by DJB in arbitration. Nevertheless,
Rajora urged that the preparation of the final bill was to be made by DJB after the work was completed and the completion certificate was issued. Till
such time, Rajora could not even seek to invoke the arbitration clause. Since the final bill was prepared on 5th October, 2006, the claims in question
arose only thereafter, and were accordingly not time-barred.
7. The learned Single Judge found that although the plea of limitation had been raised in arbitration, it had not been raised in the current form.
Although, the learned Single Judge notes that this itself should be a sufficient ground not to permit DJB to raise it for the first time in argument, he,
nonetheless, conducted a merits inquiry on the plea.
8. On the merits, the learned Single Judge found that the claims were not barred by limitation. It was held that DJB had placed significant weight on
para 11 of the award, which said:
“11. The work was completed on 24th December, 2002. Thereafter, the final bill for gross value of Rs. 2,89,81,244.36 including 3 extra items
submitted by the Claimant. . .â€
DJB urged that the above plea indicated that the final bill has been prepared and submitted by Rajora to DJB prior to 17th July, 2003, and accordingly,
the claim was time-barred. However, the learned Single Judge found that there was no bill that had been submitted by Rajora to DJB for the payment
of `2,89,81,244.36, that had been referred by the DJB to the tribunal â€" despite giving substantial time for its production before the Court. The learned
Single Judge accordingly found that there was no factual basis to support the contention that there was a bill that had been prepared prior to July,
2003, which would be reckoned as the starting point for the limitation. The learned Single Judge also noted again that this flavor of the limitation plea
was urged for the first time, by the DJB. Accordingly, the learned Single Judge held that the final bill was prepared by DJB only in October, 2006,
which would be the starting point for limitation. Therefore, it was ruled that Rajora’s claims were not time-barred.
9. Learned senior counsel for the DJB, Ms. Geeta Luthra, reiterated its objections to the award and urged this Court to set aside the learned Single
Judge’s ruling. It was argued that the question of limitation went into the root of the controversy and the DJB as objector, could urge it in any
form. Relying on Rajora’s letter dated 17th July, 2003, it was submitted by the counsel that Rajora could not contend that no final bill had been
prepared. Accordingly, its plea that the bar of limitation could not be urged, was of no avail and had to be rejected. It was emphasized that
Rajora’s objections had to be seen in the light of its express statements in the letter. Given these facts, the plea of limitation was substantial; the
award of the tribunal was patently illegal and therefore, deserved to be set aside.
Analysis & Conclusions
10. There are three questions which have to be answered by this Court. Firstly, as a matter of contractual interpretation, the responsibility for the
preparation of the final bill was on which party; secondly, as a legal matter, when does the clock of limitation begin ticking; and thirdly, as a factual
matter, whether the correct starting point was adopted by the learned Single Judge and Arbitrator.Â
11. As to the first question, DJB contends that the onus of preparing the final bill lies on Rajora as per Clause 7 of the Conditions of Contract, which
notes:
“[. . .] the final bill shall be submitted by the contractor within one month from the date fixed for completion of the work otherwise the Engineer-in-
charge's certificate of the measurement and of the total amount payable for the work shall be final and binding on all parties.â€
Rajora submitted before the learned Single Judge that the final bill was to be prepared by DJB. However, based on the material on record, this
position is not expressly set out in Rajora’s submissions. This position was acknowledged by learned Single Judge which noted:
“If the petitioner [Appellant in this matter] delayed the preparation and passing of final bill then they cannot take shelter of this clause when the
work was completed on 24.12.2002â€
(emphasis added)
12. The impugned judgment found that the obligation to prepare the final bill was with DJB, and not Rajora, and that this interpretation was
“consistent with the clause of the Contact Agreement which requires the Petitioner to prepare the final bill and not Respondent.†The language of
Clause 7 of the Conditions of Contract expressly notes that the obligation to submit the final bill falls upon the Contractor (Rajora in the current
matter).
No contrary contractual provisions have been provided by Rajora to disprove the same. As a pure question of contractual interpretation, it would,
therefore, appear that the obligation lay entirely upon Rajora. However, the above condition is to be seen in light of the DJB’s submissions that
indicate that it had prepared a final bill on 5th October, 2006. Accordingly, it appears that DJB’s submissions â€" which rely heavily on Clause 7
of the Conditions of Contract â€" are undermined by its own behavior. It is important to note that in its pleas before this Court, DJB submitted that on
5th October, 2006, the “[f]inal bill was prepared by DJB and Rajora was requested to counter sign the same so that the accounts could be finalized
and the case could be settled.â€
13. Accordingly, it is held that DJB’s submission that obligation to prepare the final bill lay solely upon Rajora is to be rejected. Since definitive
resolution of the question of who had the obligation to prepare the final bill is not essential to dispose of the objections, this Court is of the opinion that it
is unnecessary to delve further into it except noting that the obligation did not lie exclusively upon DJB.
14. With respect to the second question, it is seen that the period of time or the cause for instituting legal proceeding for initiation of arbitration, begins
from the date of the final bill. Article 18 of the Limitation Act prescribes a limitation of three years commencing from the date when the work is done,
for the price of work done, where no time has been fixed for payment. However, the authorities have now refined how to understand this three-year
period of tolling of limitation. The Supreme Court in Inder Singh Rekhi v. Delhi Development Authority, (1988) 2 SCC 338, observed that:
“on completion of the work a right to get payment would normally arise but where the final bills . . . have not been prepared as appears from the
record and when the assertion of the claim was made . . . and there was non-payment, the cause of action arose from that date [the date of non-
payment].â€
15. Accordingly, Inder Singh Rekhi (supra) is an authority for the proposition that date of preparation of final bill â€" which represents the assertion of
the claim â€" is the date from which the period of limitation begins. This period of limitation can, however, be enlarged based on the factual situation of
a case, the tolling of the three-year period may renew. In Satender Kumar vs. Municipal Corporation of Delhi and Anr., MANU/DE/0385/2010, it was
noted that:
“if the issue is a live issue, because there is correspondence keeping the same alive, the issue is not a dead issue meaning thereby, by entering into
correspondence, and by acknowledging the claims, though the same are disputed, there is in fact acknowledgment within the meaning of Section 18 of
the Limitation Act to extend the period of limitation.â€
Furthermore, in J.C. Budhraja vs. Chairman, Orissa Mining Corporation Limited and Another 2008(2) SCC 444 it was observed that:
“an acknowledgement of liability in respect of such right has been made in writing signed by the party against whom such right is claimed, a fresh
period of limitation shall be computed from the time when the acknowledgement was so signed.â€
16. As regards the third question, it is noticeable that in its written submissions before this Court, DJB places on reliance on Clause 7 of the contract,
which notes that:
“the final bill shall be submitted by the contractor within one month from the date fixed for completion of the work otherwise the Engineer-in-
charge's certificate of the measurement and of the total amount payable for the work shall be final and binding on all parties.â€
DJB argues that it is an “undisputed position†that once the work was completed in December, 2002, Rajora raised its final bill in the same month,
and that the letter of 17th July, 2003 restated this demand for payment of the final bill that had been made at a prior date. The learned Single Judge
found no documentary evidence to establish that Rajora had submitted a final bill for payment to DJB on or before 17th July, 2003. In response, DJB
re-emphasizes that Rajora’s own rejoinder filed before the Arbitral Tribunal noted that it had submitted a final bill for a gross value of
`2,89,81,244.36, including three extra items in December 2002. In light of Rajora’s submissions that affirm the preparation of a final bill in
December 2002, the learned Single Judge’s finding that there was no documentary evidence of Rajora’s preparation of a final bill is to be seen
in the context of the circumstance that it is also not disputed that DJB prepared a final bill on 5th October 2006, which was submitted to Rajora. It is
further a matter of record that till then, the DJB had not formally granted the extension of time, which would have been (and was, in this case) the
basis for preparing or finalizing a Final bill.
17. This Court is of opinion that the final bill for the purposes of the computation of the period of limitation is the October, 2006 final bill. The
arbitration was, therefore, not time-barred, since it was commenced within the three-year window. The 2002 final bill in this context has to be viewed
as subject to the extension of time granted; the extension was finally determinative of what amounts were due. Therefore, the finality attached to the
said earlier bill is not conclusive, because at that stage, Rajora had no means of knowing whether the request for extension would have been granted,
or not; the period for the claim, and the amounts that it was entitled to seek were, therefore, unknown to it and inchoate. On reading of letter dated
17th July, 2003, it can be understood that the final bill had not been paid and on enquiring it was found that the bill was pending because of lack of
approval of competent authority for extension of time. It was only in May, 2006 that such extension was given, which permitted the accrual of the
claim. Accordingly, the claim only fully accrued in 2006. The live status of the claim was further recognized by DJB’s submission of a final bill in
October, 2006. Accordingly, the period of limitation began in 2006, and the commencement of the arbitration is not time-barred.
18. Further, this Court is of the opinion that having regard to all these circumstances, unless the approach of the tribunal or the learned Single Judge
were disclosed to be based on a palpable and manifest error of law, appellate interference is not called for, merely because this Court can take a
different view. That standard, required for interference, has not been met with in this case. The appeal must necessarily fail; it is consequently
dismissed without order on costs.
