Allowed

Tecpro Systems Limited v. Madhucon Projects Limited

Telangana HC5 Feb 2024ARBAPPL/87/2023

Case brief

AI extract

What is this about?

This is an application to appoint an arbitrator under the Arbitration and Conciliation Act. The respondent raised a bar by limitation claim. The High Court decided to allow the appointment but directed the arbitrator to first decide the limitation issue as a preliminary matter before adjudication on the merits. Justice N.R.L. Nageswara Rao was appointed as the sole arbitrator.

What did the court decide?

Appointment of Sri N.R.L. Nageswara Rao as Arbitrator and direction to treat limitation as a preliminary issue.

Tecpro Systems Limited Vs Madhucon Projects Limited — Arbitration | Telangana HC (2024)

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{³¹⁸³ I

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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD

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MONDAY THE FIFTH DAY OF FEBRUARY TWO THOUSAND AND TWENW FOUR

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PRESENT

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THE HONOURABLE SRI JUSTICE B.VIJAYSEN REDDY

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ARBITRATION APPLICATION NO: 87 oF 2023

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Between:

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TECPRO Systems Limited, (Under Liquidation) Tecpro Tower, 11A-17, Sth Cross !9_aQ,^{SIPCOT lT PARK, Siruseri, Chennai,Tamil Nadu, Representedby its} Official Liquidator, Ramachandran Subramanian.

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..,APPLICANT

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AND

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MADHUCON PROJECTS LIMITED, Madhucon House, 1129/A, Road NO.36, Jubilee Hills, Hyderabad - 500033 Through its Authorised Representative.

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...RESPONDENT

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Arbitration Applicatim Under Section 11 (5) & (6) of the Arbitration and Conciliation Act, 1996 Rt/w. Scheme for Appointment of Arbitrator, 1996 R/W Scheme for Appointment of Arbitrator i) to appoint an artlitrator to adjudicate the claims and disputes between the Applicant and Respondent, ii)To award the costs of application.

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Counsel for the Petitioner : SRl. MUPPIRI SARAN

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Counsel for the Respondent : SRI SAINI KESHAVA RAO

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The Court made the following:

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HONOURABLE SRI JUSTICE B. VIJAYSEN REDDY ARBITRATION APP LICATION No.87 OF 2023

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ORDER:

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I This application is filed seeking to adjudicate claims and disputes between the applicant - TECPRO SYSTEMS LIMITED and respondent - MADHUCON PROJECTS LIMITED in terms of the agreement dated I 9.09.2009.

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2.1. The case of the applicant is that it is currently undergoing liquidation under the provisions of the Insolvency and Bankruptcy Code 2016 (for short 'IBC 2016') initiated by the order dated 16.01.2020. The present application is filed through the Official Liquidator appointed under the said order. The respondent is a registered company under the provisions of the Companies Act 1956 (for short 'Companies Act') established in 2002. The respondent company is engaged in infrastructure business involved in EpC & Tumkey Projects, Power, Mining, Irrigation, National Highway, Bridges and Flyover etc.

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2.2. It is submitted that the respondent approached the applicant for supply and service of coal and lime handling systems and for that

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pulpose, val.ious agreements were entercd between them. It is stated that pursuant to the enquiry letter submitted by the respondent and the technical offer issued by the applicant dated 19'02'2009 and 30.03'2009, the respondenr issued Le*er of Intent (LOI) dared 10.04.2009 for supply of all equipment, rnaterial, spare parts, special tools, consumables and other supplies as may be required for coal and lime handling systems. Accordingly, a supply agreem€nt d.ated 19.09.2009 was entered into between the applicant and the respondent.

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2.3. The value of the contract for supply was Rs.45,85, O0,OO0/_ as provided under Clause 6 of the supply agreement. As per the terms and conditions of the supply agreemenL the appricant was required to suppry goods at the site situated near Tamminapatnam and Momrnidi Villages, Chillakur Mandal, SpS Nellore Disrrict, Andhra pradesh. It was agreed that apart from the contract value, the respondent shall bear all additional taxes, duties and service tax for the supply to be done and the same was valued at Rs.3,23,1g,g32l_. Thus, the gross was valued at Rs'49,08'18,832/- after adding the basic contract value

and taxes.

(r 2.4. The applicant supplied goods and for the^{said supplies,} raised invoices to a tune of Rs.48,54,95,7681-.^However,the

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respondent paid only a sum of Rs.36,57,31,2191-.^{Apart from the said} amount, the respondent also released an arnount of^{Rs.4,58,50,000/-} towards mobilization advance on 18.06.2009.^{Further, an amountof} Rs. 1,16,70,4521- was paid towards design and^drawing on^14.10.2009 and Rs. 1,45,05,5141- has been debited by the Corporate Debtor.^Thus, the respondent has paid a total amount of Rs.44,05,05,9221- to^the applicant as against the outstanding payment of Rs.48,54,95,768/-.

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2.5. It is submitted that the respondent has also availed services of the applicant for erection, testing and commissioning^{(for site).} For the said services, the respondent first issued a LOI^dated 10.04.2009 and value of the contract for service was ftxed^at Rs.2,15,00,000/-; after including alt taxes on the^{grossvalue of the} contract amounting toPis27,02,1421-,the total value of the^contract came to be Rs.2,42,02,1421-. Aceordingly, the applicant^company provided services to a tune of Rs.2,60,61,7551- i.e., Rs.I8,59,613/over and above the contract value. The applicant raised bill^{to a tune} of Rs.2,60,61,755l-, however, only an amount of^{Rs.1,89,86,968/-was} paid by the respondent and thus a sum of Rs.70,74,7871-^{is dueand}

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payable by the respondent to the applicant. Thus, according to the applicant, a sum of Rs.4,49,g9,g46l_ is payable towards supply of equipment, material etc., and a sum of Rs.7 0,74,7g7/_towards services by the respondent.

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2.6. It is submitted that a letter datedO2.03.ZOI5 was exchanged between the parties for closure of the contract in terms of the contract for supply and contract of services. In addition to the above, a meeting was held between the parties on 12.03-20r5 for accounts and technicar issues reconciriation' The case of the appricant is that despite severar repeated requests, no payments were made by the respondent. In the meanwhile, insolvency resolution process of the applicant was initiated by the order dated O7.Og.ZOl7 passed by the National Company Law Tribunal, principal Berrch, New Delhi (NCLT, New Delhi). The Resolution professional of the applicant under Section 9 of the IBC 2016, filed Application No.l37l9flD8/2018 before the NCLT, Hyderabad Bench. The said application was withdrawn by the Liquidator on 29.07.2022 in order to initiate arbitration proceedings against the respondent. Subsequently, the applicant issued notice dated 07'11'2022 invoking arbitration clause as provided under Clause 17.2

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)

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(1 of the agreement between the^{parties.Respondentgave reply by way}

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of notice dated 15.12.2022.

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Heard Mr. Muppiri Saran, learned counsel^{for the applicant,}

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and Mr. Saini Keshava Rao, Iearned counsel for the^{respondent,and} perused the material on record.

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The leamed counsel for the respondent submitted that the instant application filed under Section I l(6) of the Arbitration^and Conciliation Act 1996 (for short 'Arbitration Act') is^banedby timitation as per Section 137 of the Limitation Act. The^period of limitation commences from 12.03.2015 on which date, a meeting^was held between the parties for reconciliation of issues.^{The company} petition filed by the applicant was admitted on 07.08.2017 by which date 2 years 4 months 25 days elapsed i.e., from the alleged^date of reconciliation of account / acknowledgement of debt.^{The company} petition was withdrawn on29.07.2022. Even if time is calculated^from 29.07.2022 including earlier period of 2^years 4 months^{25 days as} stated above, the 3 years period would expire by 04.03.2023. The present arbitration application was filed on 10.04.2023, as such,

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l,*t

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the same is barred by limitation with a delay of one (l) month six (6) days.

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r^)

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S. The leamed counsel for the applicant submitted that arbitration application is not barred by limitation; the time consumed during the process of company petition has to be excluded under Section 14 of the Lirnitation Act, and further time during which arbitration notice was ir;sued and 30 days period from the date of service of arbitration notice has to be excluded.

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On enquiring with the leamed counsel for the respondent that it would be appropriate for the parties to argue the issue of limitation before the rearned Arbitrato. as mixed questions of law and facts are involved, the leamed counsel fairly corrceded that the mafter may be referred to the Arbitrator. Howevet learned counsel for the respondent submitted that reference to arbitration may be subject to the condition that the point of rimitation sha, be decided as a preliminary issue before the Arbitrator enters upon adjudication of the main dispute between the parties. In response, the leamed counsel for the applicant has submitted that he does not have objection for such condition and that the appricant wourd not insist for submission of: written / defence

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statement until preliminary issue of limitation^{is decided by the} Arbitrator.

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Accordingly, the arbitration application is allowed.

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Sri N.R.L. Nageswara Rao, Former Judge, erstwhile High Court of Andhra Pradesh, is appointed as Arbitrator to arbitrate on the disputes between the applicant and the respondent. The Arbitrator shall enter on reference and proceed with, as enjoined by the Arbitration Act.^The parties are at liberty to raise all factual and legal grounds in support of their respective claims. The Arbitrator is entitled to fees as^per the rates specified in Schedule - IV of the Arbitration Act, inserted by Act 3 of 2016 with effect from 23.10.2015, which shall be borne by^both parties in equal shares.

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As a sequel thereto, miscellaneous applications, if any,^pending

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in the arbitration ap lication stand closed.

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Sd/. C. V. MALLIKARJUNAVARMA JOINT REGISTRAR

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//TRUE^COPY//

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SECTION^OFFICER

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to'.,. ,n Justice N.R.L. Nageswara -il.r'ro'r Rao, Former Judge, erstwhile High court of Andhra Pradesh, z-r s-z+,^{Prakashnaoar' Near SapthaPadi} 1' Ph : 9959377667

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