Sher-E-Kashmir Institue of Medical Sciences through Its Director Vs M/S Siemens Pvt. Ltd.

The afore-titled three petitions under Section 34 of the Jammu and Kashmir Arbitration and Conciliation Act, 1997 (hereinafter referred to as 8the Act of 19979) have been filed by petitioner Sher-i-Kashmir Institute of Medical Sciences, Soura, Srinagar, for assailing three different awards dated 23.11.2022, passed by the learned Arbitral Tribunal presided over by Hon9ble Mr. Justice Hasain

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Masoodi, former Judge of this High Court. Since the factual and legal issues involved in these three petitions are similar in nature, as such, the same are taken up together for their disposal.

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On 11.05.2006, the petitioner invited offers for supply/installation/testing of Digital High Frequency X- ray with image intensifier. On 10^th March, 2006, another tender was floated by the petitioner inviting offers for supply/ installation/testing of lates State of Art Hi-Tech 64 Slice CT Scanner and on 8^th May, 2006, the petitioner floated a tender inviting offers for supply/installation/ testing of a latest State of Art Sensation Open CT Stimulator. The respondent, in response to aforesaid three tender notices, submitted its bids/offers in respect of all afore-named three equipments and the same were accepted. Accordingly, supply order No.SIMS-324-182006(Eq)-1690-94 dated 20.07.2006 was placed by the petitioner with the respondent in respect of supply/installation/testing of Digital High Frequency X- ray. Supply order No.SIMS-324-18-2006(Eq)-1685-89 dated 20.07.2006 was issued by the petitioner in favour of the respondent for supply/installation/testing of Hi-Tech 64 Slice CT Scanner whereas supply order No.324-18- Arb P No.18/2023 c/w Arb P No.19/2023 Arb P No.20/2023 Page 2 of 45

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2006(Eq)-2091-96 dated 15.09.2006 was placed by the petitioner with the respondent for supply/installation/ testing of latest State of Art Sensation Open CT Stimulator. Pursuant to these supply orders, the respondent supplied the aforesaid three types of equipments to the petitioner and the same were installed and tested.

¶20

While the petitioner released the payment of the respondent for supply of aforesaid three equipments, a dispute arose with regard to release of payments in respect of installation charges of these three equipments. A series of correspondence followed between the parties with regard to release of installation expenses in respect of the aforesaid three equipments and when the amount was not released by the petitioner in favour of the respondentsupplier, three applications came to be filed by the respondent before this Court under Section 11 of the Act of 1997. These applications were registered as AA No.04/2016, 06/2016 and 07/2016. These applications were decided by this Court in terms of common order dated 4^th June, 2018, whereby Hon9ble Shri Justice Hasnain Masoodi, a former Judge of this Court, was appointed as sole Arbitrator, to decide the disputes between the parties.

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The learned Arbitrator entered upon the reference and passed three different awards. Award dated 23.11.2022, which is subject matter of Arb P No.18/2023, pertains to claim regarding installation expenses of High Frequency Digital X-ray. Vide the said award, the respondent has been held entitled to an amount of Rs.4,77,460/ on account of civil, electrical, mechanical and other works executed by it in connection with site preparation, installation and commissioning of High Frequency Digital X-ray. Besides this, the petitioner has been directed to pay simple interest @6% on the aforesaid amount with effect from 21.10.2009 till the date of award with a further interest @9% per annum from the date of award till the amount is paid to the respondent.

¶24

Arbitration award dated 23.11.2022 with respect to claim regarding installation expenses in respect of 64 CT Scanner is subject matter of challenge in Arb. P No.19/2023. Vide the said award, the respondent has been held entitled to an amount of Rs.49,60,449/ on account of civil, electrical, mechanical and other works executed by the respondent in connection with site preparation, installation and commissioning of 64 CT Scanner. Besides this, the respondent has been held Arb P No.18/2023 c/w Arb P No.19/2023 Arb P No.20/2023 Page 4 of 45

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entitled to 6% interest per annum on the aforesaid amount with effect from 21.10.2009 till the date of award with a further interest of 9% per annum from the date of award till the amount is paid by the petitioner to the respondent.

¶27

Award dated 23.11.2022 with respect to installation expenses pertaining to Sensation Open CT Stimulator is subject matter of challenge in Arb. P No.20/2023. Vide the said award, the respondent has been held entitled to an amount of Rs.18,99,790/ on account of civil, electrical, mechanical and other works executed by it in connection with site preparation, installation and commissioning of CT Stimulator. Besides this, the respondent has also been held entitled to simple interest @6% per annum on the aforesaid amount with effect from 21.10.2009 till the date of award with a further interest of 9% per annum from the date of award till the amount is paid to the respondent.

¶28

The petitioner has challenged the impugned awards on identical grounds. It has been contended that that no formal agreement was entered into between the parties and there was no arbitration agreement between the parties, therefore, the impugned awards passed by the learned Arbitrator are without jurisdiction. It has been

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further contended that the supply orders were issued on turnkey basis and there was no specific provision for civil, mechanical or electrical works. It has been contended that the Arbitral Tribunal has, of its own, awarded the amount in complete disregard to the terms of the supply orders. It has also been contended that no certificate regarding completion of work was issued at any time by the Engineers and that M-Book/works registers were not maintained by the contractor. Thus, the claims and bills put forth by the respondent had no evidentiary value. It has been contended that the work was required to be completed under the supervision of Engineers of the petitioner-Institute which was not done by the respondent. It has also been contended that the learned Arbitrator could not have placed reliance upon the certificate issued by the HOD Radiology as the same was only with respect to functioning of the machines. It has been further contended that the learned Arbitrator has not considered the detailed statement of defence submitted by the petitioner and on this ground also, the impugned awards deserve to be set aside. It has been contended that the impugned awards are in conflict with public policy as the same violate the fundamental cannons of law, inasmuch

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as the learned Arbitrator has transgressed beyond the terms of the agreement. It has been further contended that the conclusions drawn by the learned Arbitral Tribunal are inconsistent with the material available on record.

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I have heard the learned counsel appearing for the parties and perused the impugned awards, record of the Arbitration and the grounds of challenge projected by the petitioners.

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Before proceeding to determine merits of the contentions urged by the petitioner for assailing the impugned awards, it is necessary to understand the scope and power of this Court under Section 34 of the Act of 1997 in interfering with an award of an Arbitrator. The power of a Court to set aside an award under Section 34 of the Act of 1997 is provided for in the said provision in the following manner:

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"34. Application for setting aside arbitral award .

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(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub- section (2) and subsection (3).

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(2). An arbitral award may be set aside by the Court only if-

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(a) the party making the application furnishes proof that-

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(i) a party was under some incapacity ;or

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(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

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(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

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(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration or it contains decisions on matters beyond the scope of the submission to arbitration:

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Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

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(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or

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(b) the Court finds that-

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(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

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(ii) the arbitral award is in conflict with the public policy of State:

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Explanation. Without prejudice to the generality of sub-clause (ii) of clause (b), it is hereby declared for the avoidance of any doubt, that an award is in conflict with the public policy of the State if the making of the award was induced or affected by fraud or corruption or was in violation of section 58 or section 64.

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(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

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request had bow disposed of by the arbitral tribunal:

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Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

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(4) On receipt of an application under sub-section (1), the Court may, where it is 16 appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.

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Clause (a) of sub section (2) quoted above, is not attracted to the present case as the grounds of challenge raised by the petitioner, which have been referred to hereinbefore, do not fall in any of the sub-clauses of clause (a). Even sub-clause (i) of clause (b) of sub-section (2) is not relevant for the purpose of determination of the present case. We are concerned only with sub-clause (ii) of clause (b) of sub-section (2) quoted above, which provides that an arbitral award is liable to be set aside if the same is in conflict with the public policy of the State.

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The petitioner, in the instant case, has challenged the impugned awards, primarily, on the ground that the same is against the public policy of the State being patently illegal and contrary to the terms of agreement between the parties. It is, therefore, necessary to

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understand as to what is meant by the expressions <public policy of the State= or <public policy of India9 as they appear in the corresponding provisions of the Arbitration and conciliation Act, 1996 (for short <the Act of 1996=). Explanation to clause (b) of sub-section (2) of Section 34 of the Act of 1997, as quoted above, provides that an award would be in conflict with the public policy of the State if the making of the award was induced or affected by fraud or corruption or if it was in violation of Section 58 or Section 64. As to what is meant by the expressions 8public policy of the State9 or 8the public policy of India9 has been a subject matter of deliberation and discussion before the Supreme Court in a large number of cases. It would be apt to refer to some of these cases with a view to understand the scope and power of this Court to interfere with the award of an Arbitrator.

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The Supreme Court has, in the case of Oil and Natural Gas Corporation Ltd vs. Saw Pipes Ltd., (2003) 5 SCC 705 , while construing the expression <the public policy of India= as contained in Section 34 (2)(b)(ii) of the Act of 1996, held as under:

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<31.Therefore, in our view, 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

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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 the term 'public policy' in Renusagar's case (supra), it is required to be held that the award could be set aside if it is patently illegal. Result would be - award could be set aside if it is contrary to: -

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(a) fundamental policy of Indian law; or

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(b) the interest of India; or

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(c) justice or morality, or

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(d) in addition, if it is patently illegal.

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Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court. Such award is opposed to public policy and is required to be adjudged void.

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74 In the result, it is held that:-

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A. (1) The Court can set aside the arbitral award under Section 34(2) of the Act if the party making the application furnishes proof that:-

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(i) a party was under some incapacity, or

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(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

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(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

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(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it

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contains decisions on matters beyond the scope of the submission to arbitration;

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(2) The Court may set aside the award:-

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(i) (a) if the composition of the arbitral tribunal was not in accordance with the agreement of the parties,

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(b) failing such agreement, the composition of the arbitral tribunal was not in accordance with Part-I of the Act.

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(ii) if the arbitral procedure was not in accordance with:-

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(a) the agreement of the parties, or

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(b) failing such agreement, the arbitral procedure was not in accordance with Part-I of the Act.

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However, exception for setting aside the award on the ground of composition of arbitral tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part-I of the Act from which parties cannot derogate.

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(c) If the award passed by the arbitral tribunal is in contravention of provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.

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(3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:-

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(a) fundamental policy of Indian law;

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(b) the interest of India; or

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(c) justice or morality, or

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(d) if it is patently illegal.

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(4) It could be challenged:-

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(a) as provided under Section 13(5); and

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(b) Section 16(6) of the Act.

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B. (1) The impugned award requires to be set aside mainly on the grounds:-

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(i) there is specific stipulation in the agreement that the time and date of delivery of the goods was the essence of the contract;

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(ii) in case of failure to deliver the goods within the period fixed for such delivery in the schedule, ONGC was entitled to recover from the contractor liquidated damages as agreed;

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(iii) it was also explicitly understood that the agreed liquidated damages were genuine preestimate of damages;

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(iv) on the request of the respondent to extend the time limit for supply of goods, ONGC informed specifically that time was extended but stipulated liquidated damages as agreed would be recovered;

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(v) liquidated damages for delay in supply of goods were to be recovered by paying authorities from the bills for payment of cost of material supplied by the contractor;

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(vi) there is nothing on record to suggest that stipulation for recovering liquidated damages was by way of penalty or that the said sum was in any way unreasonable.

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(vii) In certain contracts, it is impossible to assess the damages or prove the same. Such situation is taken care by Sections 73 and 74 of the Contract Act and in the present case by specific terms of the contract=.

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Before proceeding to analyse the ratio laid down in

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the afore-quoted observations of the Supreme Court it would be pertinent to mention here that vide Amendment Act No. 3 of 2016, certain amendments were carried out in Section 34 of the Act of 1996 w.e.f. 23.10.2015. By virtue of this amendment Explanation 1 to clause (b)(ii) of sub section (2) of Section 34 was modified and Explanation 2 along with subsection (2A) was incorporated in Section 34 of the Act of 1996. Prior to that, the provisions contained in Section 34 of the Act of 1996 were identical to the

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provisions contained in Section 34 of the Act of 1997 as they existed at the relevant time. Vide Explanation 1, it was provided that the public policy of India would mean 8fundamental policy of Indian law9 or 8the most basic notions of justice or morality9 and vide Section (2A), the ground of patent illegality for setting aside an award was incorporated.

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As we have already seen from the afore-quoted observations of the Supreme Court in Saw Pipes Ltd’s case (supra), even prior to the incorporation of amendments in terms of the Act of 3 of 2016 in Section 34 of the Act of 1996, it was held by the Supreme Court that an award could be set aside if it is contrary to the fundamental policy of Indian law, the interest of India, or justice or morality, or if it is patently illegal. So, the expressions 8public policy of State/India9 would embrace within their purview the expressions 8fundamental policy of India law9, 8interest of India9, 8justice or morality9 and 8patent illegality9. Thus, non-incorporation of the amendments made vide Act No. 03 of 2016 to the Act of 1996 in the Act of 1997, which governs the present case, would not make any difference to the scope and power of this Court to interfere in the impugned award passed by

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the learned Arbitrator. The same can be set aside, if it is found against the public policy of the State/India, that is to say, if it is contrary to the interest of India or contrary to justice or morality or if it is patently illegal.

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The question that arises for consideration is as to what is meant by the expressions <fundamental policy of Indian law/State law=, <the interest of India/State=, <justice or morality=, or <patent illegality=. These expressions came up for discussion and deliberation before the Supreme Court in the case of Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 . Paras (27) to (42) of the judgment are relevant to the context and the same are reproduced as under:

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< Fundamental Policy of India Law :

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27.Coming to each of the heads contained in the Saw Pipes judgment, we will first deal with the head "fundamental policy of Indian Law". It has already been seen from the Renusagar judgment that violation of the Foreign Exchange Act and disregarding orders of superior courts in India would be regarded as being contrary to the fundamental policy of Indian law. To this it could be added that the binding effect of the judgment of a superior court being disregarded would be equally violative of the fundamental policy of Indian law.

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28.In a recent judgment, ONGC Ltd. v. Western Geco International Ltd. , 2014 (9) SCC 263, this Court added three other distinct and fundamental juristic principles which must be understood as a part and parcel of the

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fundamental policy of Indian law. The Court held:

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"35. What then would constitute the "fundamental policy of Indian law" is the question. The decision in ONGC [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705] does not elaborate that aspect. Even so, the expression must, in our opinion, include all such fundamental principles as providing a basis for administration of justice and enforcement of law in this country. Without meaning to exhaustively enumerate the purport of the expression "fundamental policy of Indian law", we may refer to three distinct and fundamental juristic principles that must necessarily be understood as a part and parcel of the fundamental policy of Indian law. The first and foremost is the principle that in every determination whether by a court or other authority that affects the rights of a citizen or leads to any civil consequences, the court or authority concerned is bound to adopt what is in legal parlance called a "judicial approach" in the matter. The duty to adopt a judicial approach arises from the very nature of the power exercised by the court or the authority does not have to be separately or additionally enjoined upon the fora concerned. What must be remembered is that the importance of a judicial approach in judicial and quasi-judicial determination lies in the fact that so long as the court, tribunal or the authority exercising powers that affect the rights or obligations of the parties before them shows fidelity to judicial approach, they cannot act in an arbitrary, capricious or whimsical manner. Judicial approach ensures that the authority acts bona fide and deals with the subject in a fair, reasonable and objective manner and that its decision is not actuated by any extraneous consideration. Judicial approach in that sense acts as a check against flaws and faults that can render the decision of a court, tribunal or authority vulnerable to challenge.

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38. Equally important and indeed fundamental to the policy of Indian law is the

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principle that a court and so also a quasijudicial authority must, while determining the rights and obligations of parties before it, do so in accordance with the principles of natural justice. Besides the celebrated audi alteram partem rule one of the facets of the principles of natural justice is that the court/authority deciding the matter must apply its mind to the attendant facts and circumstances while taking a view one way or the other. Non-application of mind is a defect that is fatal to any adjudication. Application of mind is best demonstrated by disclosure of the mind and disclosure of mind is best done by recording reasons in support of the decision which the court or authority is taking. The requirement that an adjudicatory authority must apply its mind is, in that view, so deeply embedded in our jurisprudence that it can be described as a fundamental policy of Indian law.

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39. No less important is the principle now recognised as a salutary juristic fundamental in administrative law that a decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a court of law. Perversity or irrationality of decisions is tested on the touchstone of Wednesbury principle [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223: (1947) 2 All ER 680 (CA)] of reasonableness. Decisions that fall short of the standards of reasonableness are open to challenge in a court of law often in writ jurisdiction of the superior courts but no less in statutory processes wherever the same are available.

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40. It is neither necessary nor proper for us to attempt an exhaustive enumeration of what would constitute the fundamental policy of Indian law nor is it possible to place the expression in the straitjacket of a definition. What is important in the context of the case at hand is that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have

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drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an Arbitral Tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest."

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29. It is clear that the juristic principle of a "judicial approach <demands that a decision be fair, reasonable and objective. On the obverse side, anything arbitrary and whimsical would obviously not be a determination which would either be fair, reasonable or objective.

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30.The Audi Alteram Partem principle which undoubtedly is a fundamental juristic principle in Indian law is also contained in Sections 18 and 34(2)(a)(iii) of the Arbitration and Conciliation Act. These Sections read as follows:

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"18. Equal treatment of parties.- The parties shall be treated with equality and each party shall be given a full opportunity to present his case.

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34. Application for setting aside arbitral award.-

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(1) xxx xxx xxx

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(2) An arbitral award may be set aside by the Court only if-

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(a) the party making the application furnishes proof that-

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(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;

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31 The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where::

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(i)a finding is based on no evidence, or

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(ii) an arbitral tribunal takes into account something irrelevant to the decision which it arrives at; or

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(iii) ignores vital evidence in arriving at its decision, such decision would necessarily be perverse.

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32 A good working test of perversity is contained in two judgments. In H.B. Gandhi, Excise and Taxation Officer-cum-Assessing Authority v. Gopi Nath & Sons, 1992 Supp (2) SCC 312 at p. 317, it was held:

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"7. ...................It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law."

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In Kuldeep Singh v. Commr. of Police , (1999) 2 SCC 10 at para 10, it was held:

¶152

"10. A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with."

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33 It must clearly be understood that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal

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mind would not be held to be invalid on this score.. Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd. , (2012) 1 SCC 594, this Court held:

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"21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye-law 248, in a claim against a nonmember, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at."

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34 It is with this very important caveat that the two fundamental principles which form part of the fundamental policy of Indian law (that the arbitrator must have a judicial approach and that he must not act perversely) are to be understood.

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Interest of India

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35 The next ground on which an award may be set aside is that it is contrary to the interest of India. Obviously, this concerns itself with India as a member of the world community in its relations with foreign powers. As at present advised, we need not dilate on this aspect as this ground may need to evolve on a case by case basis.

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Justice

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36 The third ground of public policy is, if an award is against justice or morality. These are two different concepts in law. An award can be said to be against justice only when it shocks the conscience of the court. An illustration of this can be given. A claimant is content with restricting his claim, let us say to Rs. 30 lakhs in a statement of claim before the arbitrator and at no point does he seek to claim anything more. The arbitral award ultimately awards him 45 lakhs without any acceptable reason or justification. Obviously, this would shock the conscience of the court and the arbitral award would be liable to be set aside on the ground that it is contrary to "justice".

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Morality

¶166

37 The other ground is of "morality". Just as the expression "public policy" also occurs in Section 23 of the Indian Contract Act, so does the expression "morality". Two illustrations to the said section are interesting for they explain to us the scope of the expression "morality". "(j) A, who is B's Mukhtar, promises to exercise his influence, as such, with B in favour of C, and C promises to pay 1,000 rupees to A. The agreement is void, because it is immoral.

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(k) A agrees to let her daughter to hire to B for concubinage. The agreement is void, because it is immoral, though the letting may not be punishable under the Indian Penal Code (XLV of 1860)."

¶168

38 In Gherulal Parekh v. Mahadeo Dass Maiya, 1959 Supp (2) SCR 406, this Court explained the concept of "morality" thus-

¶169

"Re. Point 3 - Immorality: The argument under this head is rather broadly stated by the learned Counsel for the appellant. The learned counsel attempts to draw an analogy from the Hindu Law relating to the doctrine of pious obligation of sons to discharge their father's debts and contends that what the Hindu Law considers to be immoral in that context may appropriately be applied to a case under s. 23 of the Contract Act. Neither

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any authority is cited nor any legal basis is suggested for importing the doctrine of Hindu Law into the domain of contracts. Section 23 of the Contract Act is inspired by the common law of England and it would be more useful to refer to the English Law than to the Hindu Law texts dealing with a different matter. Anson in his Law of Contracts states at p. 222 thus:

¶173

"The only aspect of immorality with which Courts of Law have dealt is sexual immorality........... ."

¶174

Halsbury in his Laws of England, 3rd Edn., Vol. 8, makes a similar statement, at p. 138 :

¶175

"A contract which is made upon an immoral consideration or for an immoral purpose is unenforceable, and there is no distinction in this respect between immoral and illegal contracts. The immorality here alluded to is sexual immorality."

¶176

In the Law of Contract by Cheshire and Fifoot, 3rd Edn., it is stated at p. 279:

¶177

"Although Lord Mansfield laid it down that a contract contra bonos mores is illegal, the law in this connection gives no extended meaning to morality, but concerns itself only with what is sexually reprehensible."

¶178

In the book on the Indian Contract Act by Pollock and Mulla it is stated at p. 157:

¶179

"The epithet "immoral" points, in legal usage, to conduct or purposes which the State, though disapproving them, is unable, or not advised, to visit with direct punishment."

¶180

The learned authors confined its operation to acts which are considered to be immoral according to the standards of immorality approved by Courts. The case law both in England and India confines the operation of the doctrine to sexual immorality. To cite only some instances: settlements in consideration of concubinage, contracts of sale or hire of things to be used in a brothel or by a prostitute for purposes incidental to her profession,

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agreements to pay money for future illicit cohabitation, promises in regard to marriage for consideration, or contracts facilitating divorce are all held to be void on the ground that the object is immoral.

¶184

The word "immoral" is a very comprehensive word. Ordinarily it takes in every aspect of personal conduct deviating from the standard norms of life. It may also be said that what is repugnant to good conscience is immoral. Its varying content depends upon time, place and the stage of civilization of a particular society. In short, no universal standard can be laid down and any law based on such fluid concept defeats its own purpose. The provisions of S. 23 of the Contract Act indicate the legislative intention to give it a restricted meaning. Its juxtaposition with an equally illusive concept, public policy, indicates that it is used in a restricted sense; otherwise there would be overlapping of the two concepts. In its wide sense what is immoral may be against public policy, for public policy covers political, social and economic ground of objection. Decided cases and authoritative text-book writers, therefore, confined it, with every justification, only to sexual immorality. The other limitation imposed on the word by the statute, namely, "the court regards it as immoral", brings out the idea that it is also a branch of the common law like the doctrine of public policy, and, therefore, should be confined to the principles recognized and settled by Courts. Precedents confine the said concept only to sexual immorality and no case has been brought to our notice where it has been applied to any head other than sexual immorality. In the circumstances, we cannot evolve a new head so as to bring in wagers within its fold."

¶185

39 This Court has confined morality to sexual morality so far as section 23 of the Contract Act is concerned, which in the context of an arbitral award would mean the enforcement of an award say for specific performance of a contract involving prostitution. "Morality" would, if it is to go beyond sexual morality

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necessarily cover such agreements as are not illegal but would not be enforced given the prevailing mores of the day. However, interference on this ground would also be only if something shocks the court's conscience.

¶189

Patent Illegality

¶190

40 We now come to the fourth head of public policy namely, patent illegality. It must be remembered that under the explanation to section 34 (2) (b), an award is said to be in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. This ground is perhaps the earliest ground on which courts in England set aside awards under English law. Added to this ground (in 1802) is the ground that an arbitral award would be set aside if there were an error of law by the arbitrator. This is explained by Lord Justice Denning in R v. Northumberland Compensation Appeal Tribunal. Ex Parte Shaw., 1952 1 All ER 122 at page 130:

¶191

"Leaving now the statutory tribunals, I turn to the awards of the arbitrators. The Court of King's Bench never interfered by certiorari with the award of an arbitrator, because it was a private tribunal and not subject to the prerogative writs. If the award was not made a rule of court, the only course available to an aggrieved party was to resist an action on the award or to file a bill in equity. If the award was made a rule of court, a motion could be made to the court to set it aside for misconduct of the arbitrator on the ground that it was procured by corruption or other undue means: see the statute 9 and 10 Will. III, c. 15. At one time an award could not be upset on the ground of error of law by the arbitrator because that could not be said to be misconduct or undue means, but ultimately it was held in Kent v. Elstob, (1802) 3 East 18, that an award could be set aside for error of law on the face of it. This was regretted by Williams, J., in Hodgkinson v. Fernie, (1857) 3 C.B.N.S. 189, but is now well established."

¶192

41 This, in turn, led to the famous principle laid down in Champsey Bhara Company v. The Jivraj

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Balloo Spinning and Weaving Company Ltd., AIR 1923 PC 66, where the Privy Council referred to Hodgkinson and then laid down:

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"The law on the subject has never been more clearly stated than by Williams, J. in the case of Hodgkinson v. Fernie:

¶197

"The law has for many years been settled, and remains so at this day, that, where a cause or matters in difference are referred to an arbitrator a lawyer or a layman, he is constituted the sole and final judge of all questions both of law and of fact ...... The only exceptions to that rule are cases where the award is the result of corruption or fraud, and one other, which though it is to be regretted, is now, I think firmly established viz., where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award. Though the propriety of this latter may very well be doubted, I think it may be considered as established."

¶198

"Now the regret expressed by Williams, J. in Hodgkinson v. Fernie has been repeated by more than one learned Judge, and it is certainly not to be desired that the exception should be in any way extended. An error in law on the face of the award means, in their Lordships' view, 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. It does not mean that if in a narrative a reference is made to a contention of one party that opens the door to seeing first what that contention is, and then going to the contract on which the parties' rights depend to see if that contention is sound. Here it is impossible to say, from what is shown on the face of the award, what mistake the arbitrators made. The only way that the learned judges have arrived at finding what the mistake was is by saying: "Inasmuch as the Arbitrators awarded

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so and so, and inasmuch as the letter shows that then buyer rejected the cotton, the arbitrators can only have arrived at that result by totally misinterpreting Cl.52." But they were entitled to give their own interpretation to Cl. 52 or any other article, and the award will stand unless, on the face of it they have tied themselves down to some special legal proposition which then, when examined, appears to be unsound. Upon this point, therefore, their Lordships think that the judgment of Pratt, J was right and the conclusion of the learned Judges of the Court of Appeal erroneous."

¶202

This judgment has been consistently followed in India to test awards under Section 30 of the Arbitration Act, 1940.

¶203

42 In the 1996 Act, this principle is substituted by the 'patent illegality' principle which, in turn, contains three subheads -

¶204

42.1(a) a contravention of the substantive law of India would result in the death knell of an arbitral award. This must be understood in the sense that such illegality must go to the root of the matter and cannot be of a trivial nature. This again is a really a contravention of Section 28(1)(a) of the Act, which reads as under:

¶205

"28. Rules applicable to substance of dispute.-(1) Where the place of arbitration is situated in India,-

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(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;"

¶207

42.2(b) a contravention of the Arbitration Act itself would be regarded as a patent illegalityfor example if an arbitrator gives no reasons for an award in contravention of section 31(3) of the Act, such award will be liable to be set aside.

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42.3(c) Equally, the third sub-head of patent illegality is really a contravention of Section 28 (3) of the Arbitration Act, which reads as under:

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"28. Rules applicable to substance of dispute.-

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(1) Xxx xxx (2) Xxx xxx

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(3) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction."

¶214

This last contravention must be understood with a caveat. An arbitral tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable person could do=.

¶215

In the recent case of OPG Power Generation Private

¶216

Ltd vs. Enexio Power Cooling Solutions India Private

¶217

Limited and another, 2024 SCC Online SC 2600, the Supreme Court, after surveying its earlier decisions with regard to the legal principles governing challenge to an arbitral award, observed that, for an award to be to be against the policy of India, a mere infraction of the municipal laws of India is not enough. It was held that there must be, inter alia, infraction of fundamental policy of Indian law, including a law meant to serve public interest or public good. As to what is meant by the expression 8fundamental policy of Indian law9, the Supreme Court observed that the said expression has to

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be accorded a restricted meaning in terms of Explanation-1 which was incorporated vide amendment made in the year 2015. Para 52 of the said judgment is relevant to the

¶221

context and the same is reproduced as under:

¶222

<52. The legal position which emerges from the aforesaid discussion is that after the 82015 amendments9 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

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1. The expression <in contravention with the fundamental policy of Indian law= by use of the word 8fundamental9 before the phrase 8policy of Indian law9 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 vulnerable. To bring the contravention within the fold of fundamental policy of Indian law, the award must contravene all or any of such fundamental principles that provide a basis for administration of justice and enforcement of law in this country. Without intending to exhaustively enumerate instances of such contravention, by way of illustration, it could be said that (a) violation of the principles of natural justice; (b) disregarding orders of superior courts in India or the binding effect of the judgment of a superior court; and (c) violating law of India linked to public good or public interest, are considered contravention of the fundamental policy of Indian law. However, while assessing whether there has been a contravention of the fundamental policy of Indian law, the extent of judicial scrutiny must not exceed the limit as set out in Explanation 2 to Section 34(2)(b)(ii). Most basic notions of morality and justice=

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In the aforesaid judgment, the Supreme Court, while explaining the connotation of the expression 8most basic notions of morality and justice9 observed as under:

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<58. In the light of the discussion above, in our view, when we talk about justice being done, it is about rendering, in accord with law, what is right and equitable to one who has suffered a wrong. Justice is the virtue by which the society/ court / tribunal gives a man his due, opposed to injury or wrong. Dispensation of justice in its quality may vary, dependent on person who dispenses it. A trained judicial mind may dispense justice in a manner different from what a person of ordinary prudence would do. This is so, because a trained judicial mind is likely to figure out even minor infractions of law/ 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 See paragraph 76 of the judgment in Ssyanyong (supra) 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 8justice9 with 8most basic notions9 of it. In such circumstances, giving a broad dimension to this category 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 justice=. Suffice it to observe, they ought to be such elementary principles of justice that their violation could be figured out by a prudent member of the public who may, or may not, be judicially trained,

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which means, that their violation would shock the conscience of a legally trained mind. In other words, this ground would be available to set aside an arbitral award, if the award conflicts with such elementary/ fundamental principles of justice that it shocks the conscience of the Court in conflict with most basic notions of morality or justice most basic notions of justice Morality.

¶231

59. The other ground is of morality. On the question of morality, in Associate Builders (supra), this Court, after referring to the provisions of Section 23 of the Contract Act, 1872; earlier decision of this Court in Gherulal (supra); and Indian Contract Act by Pollock and Mulla, held that judicial precedents have confined morality to sexual morality. And if 8morality9 were to go beyond sexual morality, it would cover such agreements as are not illegal but would not be enforced given the prevailing mores of the day. The court also clarified that interference on this ground would be only if something shocks the court9s conscience=

¶232

While explaining as to what is meant by the expression 8patent illegality9 the Supreme Court, in the aforesaid judgment, clarified that it refers to such an illegality as goes to the root of the matter and does not amount to mere erroneous application of law.

¶233

From the foregoing analysis of law on the subject, it is clear that the power of this Court to interfere with an award of an Arbitrator is extremely limited and it is only on the grounds as mentioned in Section 34 of the Act of 1997 that this Court would be justified in interfering with the award of an arbitrator. In the present case, as already stated, we are only concerned with the question, as to

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whether the impugned award is against the public policy of the State which, as already stated, would include, 8fundamental policy of State law9, 8interest of the State, the basic notions of justice and morality and 8patent illegality9. All these expressions have been explained by the Supreme Court in the judgments referred to hereinbefore.

¶237

It has to be borne in mind that when a Court is considering a challenge to an arbitral award, it has not to act as a Court of appeal. An award based on limited evidence or an interpretation given by an arbitrator to the terms of the agreement which is plausible cannot be interfered with by a Court while considering a challenge to the award. The Court cannot re-appreciate the evidence with a view to hold that the award suffers from patent illegality, nor can it interpret the terms of the agreement so as to undo the interpretation given by the arbitrator, provided the interpretation given by an Arbitrator to the terms of the agreement is plausible and reasonable. It is also clear that every error of law committed by the Arbitral Tribunal would not constitute a patent illegality.

¶238

With the aforesaid legal position in mind, let us now proceed to consider the contentions raised by the petitioner. The first contention that has been raised by the

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petitioner for assailing the impugned awards is that no formal agreement was entered into between the parties and, as such, there was no arbitration agreement between the parties. It has been contended that NIT was erroneously treated as an agreement between the parties.

¶242

In the above context, a perusal of the record produced before the learned Arbitrator, would reveal that after issuance of supply order in respect of supply of 64 Slice CT Scanner and CT Stimulator, two separate agreements dated 18^th October, 2006 came to be executed between the parties, both of which contain Arbitration Clauses. So far as supply of High Frequency Digital X-ray is concerned, the terms and conditions attached to the supply order clearly indicate that there is an arbitration clause which forms part of these terms and conditions. The arbitration clauses contained in the supply order and the agreements, which are identical in nature, provide for resolution of disputes or differences arising between the parties in relation to or in connection with the contract. Therefore, the dispute arising between the parties with regard to payment of installation expenses in respect of aforesaid three equipments was fully covered by the

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arbitration agreement.

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Apart from the above, at the time of making of reference of disputes to the Arbitrator, it was open to the petitioner to raise such a plea but no such plea was raised by it. This Court, while referring the disputes to the arbitration in terms of order dated 4^th June, 2019, has clearly held that the disputes between the parties arose out of the terms of the contract. The said order has attained finality. Even before the Arbitrator, the petitioner has not raised any issue with regard to jurisdiction of the Tribunal to decide the claims put forward by the respondent. Thus, it is not open to the petitioner to raise this issue in these proceedings, particularly when even on merits, the disputes arising between the parties are covered by the arbitration clause.

¶247

Next it has been contended by the petitioner that the supply orders were issued on turnkey basis and there was no specific provision for civil, mechanical or electrical works. In this regard, the learned Arbitral Tribunal has, on the basis of the material on record, clearly held that key documents pertaining to the supply of aforesaid three equipments lead to the conclusion that the allotment orders were made by the petitioner in favour of the respondent not merely for supply of these three

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equipments but also for site preparation, installation and allied matters. In this regard, the learned Arbitral Tribunal has referred to the relevant clauses of supply orders which provide for installation of equipments. The learned Arbitrator has also referred to the terms and conditions attached to the supply orders to reinforce his conclusion that the contract relating to supply of aforesaid three types of equipments was not only with respect to supply of these equipments but it was also with respect to the site preparation, installation and testing etc. The conclusion drawn by the learned Arbitral Tribunal in this regard is based upon the admitted documents placed on record by the parties and, as such, it cannot be stated that the same is either perverse or there is any patent illegality committed by the learned Arbitral Tribunal in arriving at such a conclusion.

¶251

So far as the contention of the petitioner that no completion certificate was issued by its Engineers and that respondent has not maintained M-Book/Works Registers and, as such, the respondent is not entitled to any claim with regard to installation expenses, is concerned, in this regard it is to be noted that the learned Arbitral Tribunal has observed that the petitioner cannot escape the liability

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to pay for the works executed only because it is not in a position to get the works verified and lay hands on the work books prepared or expected to be prepared by its Engineers. It is to be noted that the Measurement Books and other record relating to the works executed by a contractor are to be maintained by the employer and not by the contractor. The petitioner cannot take advantage of its own failure to maintain the record to deny the rightful claim of the respondent with regard to the expenses incurred on site preparation and installation of the equipments. The conclusion of the learned Arbitrator in this regard is absolutely in accordance with law and cannot be subjected to any interference.

¶255

Next it has been contended by the petitioner that the works were not executed by the respondent under the supervision of its Engineers as per the terms of the contract. In this regard, it is to be noted that the work of installation of equipments was to be undertaken by the respondent within the hospital premises itself and not at a faraway location. The Head of the relevant Department of the petitioner institute has, admittedly, certified the successful installation and functioning of all the three equipments that were supplied by the respondent. In fact,

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there is material on record to show that the equipments were being operated successfully even at the time when the disputes were referred to the Arbitration. In the face of this material on record the contention of the petitioner that the installation work was not executed by the respondent under the supervision of its Engineers is misconceived. In fact, when the petitioner convened a meeting on 04.03.2014 to consider the claim of the respondent, it was recorded in the said meeting that the works had been executed by the respondent but the concerned Engineer showed his inability to verify the works as the same had been executed long back in the year 2007. In the minutes of the meeting, it has been recorded that the equipments are functioning efficiently as on the date of the meeting. Besides this, there is material on record to show that annual maintenance contracts of these equipments are being awarded to the respondent company from time to time.

¶259

From the above, it is clear that the respondent has executed the work of installation of three equipments successfully and efficiently. Merely because the officers of the petitioner are reluctant in issuing a verification certificate in this regard in writing, the respondent cannot Arb P No.18/2023 c/w Arb P No.19/2023 Arb P No.20/2023 Page 36 of 45

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be denied the expenses incurred by it in installation of the aforesaid three equipments. The reasoning adopted by the learned Arbitral Tribunal in this regard is absolutely in accordance with law and cannot be faulted in any circumstances.

¶262

It has been next contended that the learned Arbitrator could not have placed reliance upon the certificate issued by the HOD, Radiology, to the effect that the equipments are functioning efficiently to conclude that the installation of these equipments was undertaken by the respondent in accordance with the terms of the supply orders.

¶263

In the above context, it is to be noted that the learned Arbitrator has only drawn an inference from the certificate issued by the HOD, Radiology, to conclude that there has been successful installation of the equipments. Once the HOD, Radiology, has certified that the equipments are functioning and operating successfully and efficiently, it leads to an irresistible conclusion that the installation of these equipments has been made perfectly in accordance with the terms of the supply orders.

¶264

Learned counsel for the petitioner has, during the course of arguments, raised the contention that the claims

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of the respondent are stale, inasmuch as the supply of equipments had taken place in the year 2007 and until the year 2015, the respondent did not invoke the arbitration clause. It has been contended that the issue of limitation can be raised at any stage of the proceedings and even if the petitioner has not raised the plea of limitation either before the Arbitrator or in the petition under Section 34 of the Act, still then, once it is found that the claims of the respondent are time barred, the same cannot be awarded in his favour.

¶268

It is an admitted case of the parties that the issue with regard to limitation has not been raised by the petitioner either before the Arbitrator or in these petitions under Section 34 of the Act. The question that arises for determination is whether it is open to the petitioner to raise this issue at the stage of final arguments. The legal position in this regard is very clear that such an issue cannot be raised for the first time during the proceedings under Section 34 of the Act and that too, at the time of final arguments. In my aforesaid view, I am supported by a number of judgments delivered by this Court and other High Courts of the Country. It would be apt to make a reference to some of these precedents.

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The High Court of Bombay has, in the case of Vimal G. Jain vs. Vertex Financial Services Pvt. Ltd. (2007) 3 Mh.L.J. 866, while considering the aforesaid aspect of the matter, observed as under:

¶272

<Further, the Section 16(2) of the said Act clearly provides that a plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because he has appointed, or participated in the appointment of, an arbitrator. Conjoint reading of the above provisions of law would disclose that a party to the arbitration proceedings seeking to raise the point of bar of limitation for initiating the arbitration proceedings should raise the issue at the earliest opportunity and in any case not later than the submission of the statement of defence, otherwise it would be deemed to have been waived. The law in that regard is well-settled by the decision of the Apex Court in Narayan Prasad Lohia v. Nikunj Kumar Lohia and Ors. wherein it has been clearly held that unless the objection in terms of Section 16(2) is raised within the time prescribed under the said Section, it would be deemed to have been waived in terms of Section 4 of the said Act. In the case in hand, undisputedly, the point regarding the bar of limitation was never raised before the learned arbitrator. Being so, it should be deemed to have been waived.

¶273

9. Even otherwise, the point of limitation is a mixed question of law and fact. In fact, the law in this regard also is well-settled and the same was reiterated by the Apex Court in the decision sought to be relied upon on behalf of the appellant himself. In Ramesh Desai's case (supra), it was clearly observed by the Apex Court that "A plea of limitation cannot be decided as an abstract principle of law divorced from facts as in every case the starting point of limitation has to be ascertained which is entirely a question of fact. A plea of limitation is a mixed question of law and fact.". Once it is clear that the point of limitation was not

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raised before the learned Arbitrator, apart from the fact that it is deemed to have been waived, the question of entertaining such point in proceedings under Section 34 of the said Act or in an appeal arising from the order passed therein, cannot arise. Hence no fault can be found with the impugned order in that regard.=

¶277

Again, the High Corut of Delhi has, in the case of

¶278

International Breweries Pvt. Ltd. vs. Kalpana International Breweries Ltd. 2024 SCC OnLine Del. 9466, while dealing with the issue with regard to staleness of claims raised at a belated stage, observed as under:

¶279

31. The Appellant has vociferously argued that the claims are beyond (2020) 14 SCC 643 limitation. However, the Appellant has not referred to the series of communications between the period from October 2006 and March 2009, exchanged between the parties and which form part of the Arbitral record.

¶280

32. Admittedly, since this issue was not raised before the Sole Arbitrator by the Appellant in its Statement of Defence, no evidence was led by either party in this regard. The issue of limitation, therefore, cannot be examined without evidence given the disputed contentions of the parties in the present case. The fact that this was not raised by the Appellant in its Statement of Defence, whether or not there was any other evidence to show that the claim was within limitation, could only have been examined by the Sole Arbitrator. There is no such finding in the Arbitral Award, since this aspect was concededly not adjudicated upon by the Sole Arbitrator.

¶281

33. There is another aspect as well. Limitation being a mixed question of fact and law, cannot be decided by this Court in these proceedings. Since the issue of limitation was not raised by the Appellant, the same would be deemed to have been waived and could not be permitted

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to have been raised for the first time either in the Petition under Section 34 of the Arbitration Act or Section 37 of the Arbitration Act.

¶285

34. It is the consistent view of this Court that the plea of limitation has to be raised at the first opportunity by the party resisting the claim. If there is no objection in the first instance, then the same would lead to a deemed waiver by such party. [See: Municipal Corporation of Delhi v. M/s Harcharan Dass Gupta.

¶286

A Division Bench of this Court has, in the case of

¶287

Sukhvinder Kour vs. Union of India, 2024 SCC OnLine J&K 652, while dealing with the issue as to whether time barred claims were referred to the Arbitrator for arbitration, noticed the legal position on the issue and observed as under:

¶288

In the present case, it will be seen that the application for appointment of an arbitrator was filed on 24th of September 2005 by the claimant with respect to the cause of action, which is purported to have accrued to the claimant in the year 1997. In the light of the ratio of the judgments cited hereinabove, the issue whether the claims being stale or dead could have been gone into by the arbitrator if the same were properly raised and agitated before the said forum.

¶289

A finding has been returned by the learned Single Judge that no such pleas were taken by the petitioner before the arbitrator nor has anything been brought on record or urged at the time of hearing that such pleas were raised before the arbitrator. Being a disputed question of fact and law, the Union of India was under an obligation to raise such a plea at the appropriate stage before the arbitral forum. If such a plea was taken, it would have been open to the claimant, in those circumstances, to

¶290

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show by leading cogent evidence that there had been an acknowledgement of the liabilities by the Union of India towards the claimant. Having not done so, it would not be at this stage for the Union of India to assert that the claims of the claimant were dead or were stale claims. Thus, this issue cannot be raised and consequently gone into by this Court at this stage and hence decided against the respondent.

¶293

From the foregoing analysis of the legal position on the subject, it is clear that the plea of limitation has to be raised at the first opportunity by the party resisting the claim. If such a plea is not raised at the initial stage during the arbitration proceedings, it would amount to waiver.

¶294

In the instant case, admittedly, the petitioner has not raised the plea of limitation before the Arbitrator and has not raised the said plea even in these petitions under Section 34 of the Act. It is not open to the petitioner to raise such a plea at the time final arguments. There is a sound logic and reason for declining to raise the plea of limitation at this stage of the proceedings. The plea of limitation is a mixed question of fact and law. If the petitioner would have raised this plea before the learned Arbitrator, the respondent would have been put to notice and would have been in a position to avail the opportunity to lead evidence with a view to show that either there was an admission of its claims by the petitioner or that its Arb P No.18/2023 c/w Arb P No.19/2023 Arb P No.20/2023 Page 42 of 45

¶295

Page 42 of 45

¶296

claims were still under consideration of the petitioner, as a result of which the period of limitation had not started to run against it. Coming up with plea of limitation all of a sudden at the time of final arguments in Section 34 petition is not permissible in law.

¶297

Apart from the above, even on merits, it cannot be stated that the claims of the respondent are stale. If we have a look at the record of the arbitration, it is clear that after the installation of the equipments, the respondent has been in correspondence with the petitioner and at no stage, the petitioner has denied its claims. The record shows that the equipments were installed in the premises of the petitioner hospital in the year 2007. A number of communications were addressed by the respondent to the petitioner and its officials including communications dated 21.10.2009, 08.03.2010, 13.05.2010 and 02.06.2010 for inspection of the site so that the payments could be released. A meeting was called upon by the Chief Engineer of the petitioner Institute on 18^th June, 2013 to examine the claims of the respondent. Vide communication dated 21.06.2013, the respondent insisted that the site inspection of the civil, electrical and mechanical works was carried out on 20.11.2012 and it

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¶300

also appended duplicate copies of the bills. Thereafter the petitioner-Institute constituted a committed headed by the Chief Engineer of the Institute to physically check/verify the work done in respect of civil, mechanical and electrical component of job. A meeting was also held on 04.03.2014, in which, while it was agreed that the works had been executed by the respondent company, but the concerned Engineer showed his inability to verify the works as the installation had taken place in the year 2007.

¶301

Thus, the record clearly shows that the petitionerInstitute never denied the claims of the respondent and these were under consideration of the petitioner upto the year 2014, whereafter, when the respondent failed to get any positive result, it issued letter dated 7^th August, 2015, invoking the arbitration clause. Prior to that, the respondent also addressed communication dated 10^th April, 2015, requesting the petitioner to furnish information with regard to decision of the authorities. In the face of this material on record, it can safely be stated that the claims raised by the respondent were not time barred and stale, but the same were under active consideration of the petitioner-institute. The contention of

¶302

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¶304

the petitioner in this regard is, therefore, without any substance.

¶305

For what has been discussed hereinbefore, I do not find any ground to interfere in the well-reasoned impugned awards passed by the learned Arbitrator. The instant petitions challenging the impugned awards filed by the petitioner are meritless and are, accordingly, dismissed.

¶306

40. The record be sent back.

¶307

(Sanjay Dhar)
Judge
Srinagar
14 .11.2025
<Bhat Altaf=
Whether the Judgment is speaking: Yes
Whether the judgment is reportable: Yes

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Sher-E-Kashmir Institue of Medical Sciences through Its Director v. M/S Siemens Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

Sher-E-Kashmir Institue of Medical Sciences through Its Director v. M/S Siemens Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

Why is it important?

What the court decided

Issues for consideration

Cases cited

Statutes considered

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