M/S Chabbras Associates Vs the Superintending Engineer

M/S CHABBRAS ASSOCIATES A PARTNERSHIP FIRM REGISTERED UNDER THE PROVISIONS OF INDIAN PARTNERSHIP ACT 1932, HAVING ITS REGISTERED OFFICE AT No. H NO.11-1-776/14, CHILKALGUDA, SECUNDERABAD-560061 TELANGANA STATE, REP BY ITS MANAGING PARTNER, RAMESH KUMAR CHABBRAS, S/O SATHISH, AGED ABOUT 53 YEARS,

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(BY SRI. SAMPATH A, ADVOCATE)

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AND:

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…APPELLANT

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THE SUPERINTENDING ENGINEER JNNURM, MYSURU CITY CORPORATION, MYSURU-570024

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…RESPONDENT

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HC-KAR

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THIS COMAP IS FILED UNDER SECTION 13 (1A) OF THE COMMERCIAL COURTS ACT, 2015 PRAYING TO SET ASIDE THE IMPUGNED JUDGMENT AND ORDER DATED 17.03.2025 PASSED BY THE LEARNED LXXXIII ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, COMMERCIAL COURT, BENGALURU (CCH 84) AND CONSEQUENTLY SET ASIDE THE AWARD DATED 04.03.2024 IN A.C. NO. 391/2022 WAS PASSED BY THE LEARNED SOLE ARBITRATOR.

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THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

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CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE and HON'BLE MR. JUSTICE C.M. POONACHA

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ORAL JUDGMENT

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(PER: HON'BLE MR. JUSTICE C.M. POONACHA)

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The present appeal is filed by the claimant under section 37(1)(c) of the Arbitration and Conciliation Act, 1996 [ A&C Act ] read with Section 13 (1A) of the Commercial Courts Act, 2015 impugning the judgment dated 17.03.2025 passed in Com.A.P. No.111/2024 by the LXXXIII Addl. City Civil & Sessions Judge, Commercial Court, Bengaluru (CCH-84) [Commercial Court] and the award dated 04.03.2024 passed in A.C. No.391/2022 [impugned award] by the Sole Arbitrator [Arbitral Tribunal]. The Arbitral Tribunal has dismissed the claim petition filed by the appellant [the claimant before the Arbitral Tribunal] as barred by

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limitation. The learned commercial court has not interfered with the impugned award.

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The relevant facts in a nutshell leading to the present appeal are that the respondent invited tenders for "improvement of the road around Mysure Palace" (for three stretches i.e., 1, 2 and 4) in Mysuru city. The appellant/claimant was the successful tenderer and the parties entered into an agreement dated 29.04.2011 [ the Agreement ]. The agreed contract price was `15,89,86,060/- and the period for completion of project was twelve months from 24.09.2011.

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It is the case of the appellant that it mobilised men, material and machinery for the purpose of execution of the work. However, the appellant/claimant could not complete the work due to various defaults committed by the respondent. It is alleged that at every stage, there were hurdles created by the respondent, as a result of which, the claimant incurred huge loss of labour and machinery. That the work could not be completed even after two years ten months after the agreement period had expired. The respondent

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kept the work in abeyance from 28.02.2015, as a result of which, the claimant finally terminated the contract.

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It is further alleged that there were regular meetings to review the progress of the work. However, the same was not fruitful in removing the obstacles. It is alleged that the rates were not approved and despite various meetings between the parties, the same was not agreed upon. Hence, the claimant invoked the arbitration clause 4 of the agreement and initiated the arbitration proceedings. The claimant made various claims inter alia towards non payment for work done; compensation towards labour being kept idle; idleness of material; withholding of bank guarantee; retaining the AMD beyond the agreed period; cutting of trees; escalation of price and miscellaneous works. A total sum of `75,43,14,814/- was claimed together with interest.

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The respondent entered appearance in the arbitration proceedings and filed statement of objections admitting that the work that was entrusted to the claimant. However, it was alleged that the claim for non payment of dues was barred by time. It is also alleged that all the amounts due and payable to the claimant have been paid.

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6. The Arbitral Tribunal while considering the aspect of limitation

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noticed the following admitted facts:

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i) The contract between the parties was executed on 29.04.2011;

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ii) The contract period was extended till 31.03.2014;

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iii) The supplementary agreement dated 27.08.2013 was executed between the parties for revising the rates for tiles and barricades stones trailings;

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iv) The claimant vide letter dated 14.09.2015, sought for appointment of an Arbitrator;

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v) No action was taken by the claimant pursuant to the arbitration notice dated 14.09.2015;

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vi) There is no correspondence between the parties from 12.10.2015 to 28.08.2020;

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vii) The 18^th part bill is dated 25.11.2015;

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viii) The 19^th part bill is dated 29.06.2016 which is not paid;

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ix) The claimant vide letter dated 28.08.2020 terminates the contract.

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The Arbitral Tribunal held that from the first notice for arbitration dated 14.09.2015, the period of limitation expired on 13.09.2018. It is further held that the termination notice dated 28.08.2020, the second notice for arbitration dated 09.11.2021, as well as the submission of the final bill loses relevance as they are events which transpired after the expiry of the limitation period. That the claim was made in the year 2022 after lapse of more than seven years. The relevant findings of the Arbitral Tribunal regarding limitation are as under:

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67 . Applying the aforesaid law laid down by the Hon'ble Supreme Court, in the case on hand, the cause of action arose on 30.1.2015; 14.2.2015; 25.2.2015; 5.3.2015 and finally on 14.9.2015. The claimant ought to have approached this Tribunal within 3 years from 14.9.2015. After 3 year's period expired on 13.9.2018, the claimant's right got extinguished after the limitation period was over. The subsequent issuance of termination notice dated 28.8.2020 or the legal notice to appoint arbitrator dated 2.9.2022 or the submission of the final bill before this Tribunal along with the claim petition, are all irrelevant and will not render any assistance to the claimant in order to get over the period of limitation which was over by 30.9.2018.

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The claimant also did not issue any arbitration notice at every time there was breach of the contract terms by the respondent. This is a case of consecutive breaches or multiple breaches of the contract terms and not a case of

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continuous breach. Every time, the Respondent rejected the rates for the barricading stone, the cause of action arose and likewise, every time the claimant attributed the delay on the part of the Respondent breach of the contractual terms occurred and claimant ought to have issued notice of arbitration claiming compensation from the Respondent. Though several correspondences took place between the parties as could be seen from Ex. P6 to Ex. P183 and Ex. R5 to Rx. R67, the Claimant slept over its right to seek arbitration and the last straw on the camel's back was on 14.9.2015. Between 14.9.2015 to 28.8.2020 the claimant slept over the matter for more than 5 years and woke up too late in the day on 28.8.2020 when the contract was terminated and the second notice of arbitration sent on 9.11.2021.

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Thus, having lost the race on 30.9.2018 itself the subsequent events of notice of termination and second notice of arbitration and filing the final bill before this Tribunal in the year 2022, the claim therefore is hopelessly barred by limitation and as has been observed by the Hon'ble Supreme Court in B and T AG's case, the case on hand is also clearly and undoubtedly one of a hopelessly barred claim as the claimant by its conduct slept over its right for more than 5 years.

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8. Being aggrieved by the dismissal of the claim petition, the

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claimant filed a petition under Section 34 of the A&C Act in Com. A.P. No.111/2024. The Commercial Court has noticed the relevant fact situation and affirmed the findings recorded by the Arbitral Tribunal. It is relevant to notice the following findings of the Commercial Court:

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The preparation of the final bill and the notice of termination of contract were unwarranted since the last

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work done by the contractor was in respect of the 19th and Part Bill, which was cleared on 25/7/2016, and thereafter neither the bank guarantee was renewed nor any work done. Therefore, the termination of the contract and preparation of the final bill in the year 2020 was itself beyond the period of limitation and inconsequential. Ultimately, it is to be noted that when the contractor has not done any work after 25/7/2016, initiating the arbitration by issuing the arbitration notice on 9/11/2021 is clearly barred by limitation.

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When the contractor has admittedly not renewed the bank guarantee and has not done any work after 25/7/2016, the necessity for termination never arose and therefore the termination in the year 2020 by the claimant is only a belated act to try to create a cause of action for initiating arbitration, which is unacceptable.

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Even if this principle is accepted, as already noted supra, the contractor has not renewed the bank quarantee after 2016, and the last work was done under the 19th and Part Bill, which was cleared on 25/7/2016. Therefore, even if the said date is taken as the starting period of limitation, the initiation of arbitration by issuing the second notice of arbitration dated 9/11/2021 would be hopelessly barred by limitation.

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9. It is the vehement contention of the learned counsel for the

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appellant that the rates have not been agreed between the parties and that the respondent continued to carry out the work. It is also

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contended that no final measurement had taken place, no final bill

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was prepared and the respondent has not terminated the contract.

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Admittedly, the appellant/claimant has issued a letter dated

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14.09.215 whereunder, it has inter alia stated as follows:

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We are carrying out the balance work as per the instructions and assurances given to us during the meeting held during month of August without prejudice to our claims of compensation submitted by us. Therefore, it is humbly requested to instruct the concern to take joint measurements of all the pending items which are not measured and release the payments along with the payments which are now being made after recommenced of the work and kindly initiate action to appoint an Arbitrator for settlement of our compensation claims as per Clause 38 of agreement and settlement made through Arbitration at Clause (4) of Special Conditions of Contract.

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It is further not disputed that although the appellant has submitted various bills for payment, including the 18^th and 19^th bills, the same were not paid by the respondent. As is forthcoming from the letter dated 14.09.2015 ( the relevant portion of which has been extracted above), the appellant had invoked the Arbitration Clause in the contract. The Arbitral Tribunal has rightly noticed that the claimant ought to have taken steps for adjudication of its claims within three years from 14.09.2015 and that the subsequent termination notice dated 28.08.2020 or the legal notice dated

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