Haryana Urban Development Authority, Karnal vs M/S. Mehta Construction Company & Anr.

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2693 OF 2022 (SPECIAL LEAVE PETITION (CIVIL) NO. 6137 OF 2022) (DIARY NO. 23287 OF 2020)

HARYANA URBAN DEVELOPMENT AUTHORITY, KARNAL ..... APPELLANT(S)

VERSUS

M/S. MEHTA CONSTRUCTION COMPANY AND ANOTHER ..... RESPONDENT(S)

ORDER

Delay condoned. Leave granted.

2. The appellant before us – Haryana Urban Development Authority,

Karnal, Haryana, and the respondent – M/s. Mehta Construction

Company, on 6th July 1998, had entered into an agreement

whereby the respondent was to construct water body, water body

fall, pedestrian bridge, backwall of deck, pump chamber (partly

above and partly below the GI pipe), lay CI and RCC pipes and all

Signature Not Verified other works contingent thereto for development of town park in Digitally signed by DEEPAK SINGH Date: 2022.04.02 14:09:26 IST Reason: Sector 8 and 9 (Phase – II), Karnal, for an amount not exceeding

Civil Appeal @ Diary No. 23287 of 2020 Page 1 of 8 Rs.32.50 lakhs. The scope of the work was enhanced to

Rs.40,23,962/- and then to Rs.45,87,326/-.

3. The contractual work was completed on 24 th August 1999. It is the

case of the appellant that the respondent had failed to comply with

the terms and conditions of the contract and complete the work

within the contractual period, whereas it is the case of the

respondent that the appellant was responsible for the delay in

completion of the work.

4. In April 2012, the respondent filed an application before the

Punjab and Haryana High Court under Section 11(6) of the

Arbitration and Conciliation Act, 1996 (for short, the ‘Act’) for

appointment of an arbitrator for adjudication of disputes in the

subject contract.

5. The application was disposed of vide order dated 19 th October

2012 with a direction to the parties to approach the Arbitrator-cum-

Superintending Engineer, HUDA Circle, Karnal in terms of Clause

25-A of the agreement for settlement of disputes.

6. The sole arbitrator passed an award dated 20 th December 2013

awarding an amount of Rs.1,19,69,945/- along with interest @

18% per annum on the delayed payments.

Civil Appeal @ Diary No. 23287 of 2020 Page 2 of 8

7. On 28th March 2014, the appellant filed objections to the award

before the Additional District Judge, Karnal, under Section 34 of

the Act along with an application for condonation of delay. Upon

notice, the respondent filed reply to both the objections under

Section 34 and the application seeking condonation of delay.

8. By order dated 8th January 2018, the Additional District Judge,

Karnal, held that the objections were barred by limitation and no

plausible explanation was given to explain the delay. On the other

hand, the respondents had duly proved the issues by “leading

cogent and convincing evidence”. He also held that the award

dated 20th December 2013 is perfect and a legal one and the fact

that the respondent had completed the work after thirteen and a

half months proved that the respondent was not able to comply

with the terms and conditions of the contract. The appellant had

granted extension for completion of work time and again without

imposing penalty. Further, it was an admitted case that time was

essence of the contract as there was a default clause.

9. The appellant preferred an appeal under Section 37 of the Act,

which has been dismissed by the impugned judgment dated 11 th

December 2019 passed by the Single Judge of the Punjab and

Civil Appeal @ Diary No. 23287 of 2020 Page 3 of 8 Haryana High Court. The reasoning given by the High Court reads

as under:

“5. The Addl. District Judge, Karnal, while dismissing the objections filed by the appellant under Section 34 of the Act has observed that the arbitration award dated 20.12.2013 passed by the arbitrator is perfect and legal one and there is no ground proved on the file at the instance of the objector that the award suffers from any infirmities at all. It was further observed that the objections filed by the objector are barred by limitation as the same were not filed within the prescribed period. No plausible explanation could be given by the objector, for filing the objections at a belated stage. The Addl. District Judge, Karnal came to hold that the objections filed by the objector are not maintainable and the objections are also barred by limitation. Counsel for the appellant fails to point out any perversity in the findings returned by the court below. Counsel for the appellant miserably failed to point out as to how the objections filed by the appellant were within limitation.”

10. As per sub-section (3) to Section 34 of the Act, an application for

setting aside an award is to be made within three months from the

date on which a party filing objections under sub-section (1) to

Section 34 has received the arbitral award; or, if a request has

been made under Section 33, from the date on which that request

has been disposed of by the arbitral tribunal. However, the proviso

states that the court may condone delay of a period up to thirty

days in filing of the objections if it is satisfied that the applicant is

prevented by sufficient cause from making an application under

Section 34(1) of the Act.

Civil Appeal @ Diary No. 23287 of 2020 Page 4 of 8

11. In the present case, it is an accepted position that the application

for setting aside of the award dated 20 th December 2013 was

made on 28th March 2014 accompanied by an application for

condonation of delay. The court, therefore, had the power to

condone the eight days’ delay, which was less than thirty days, in

terms of the proviso to sub-section (3) to Section 34 of the Act. In

the application seeking condonation of delay, it was inter alia

stated that after receiving a copy of the award at about 6:50 p.m.

on 20th March 2014, the appellant had engaged an empanelled

advocate and the records pertaining to the arbitration case were

constructed and examined. The short delay had also occurred as

sanctions and approvals were required from the higher/competent

authority.

12. Given the aforesaid background and the short condonable delay

which had occurred, we do not think that the High Court and the

Additional District Judge, Karnal were justified in refusing to

condone the delay. The application for condonation of delay in

filing of the objections should have been allowed.

13. Learned counsel for the respondent, however, contends that the

Additional District Judge, Karnal had also dismissed the objections

on merits. We have considered this contention but observe that

Civil Appeal @ Diary No. 23287 of 2020 Page 5 of 8 the observation and findings recorded by the Additional District

Judge are cryptic and perfunctory. The same is equally true of the

reasoning given by the High Court in the impugned order, which is

full of generalisation and does not deal with specific issues and

contentions raised by the appellant in the objections. In particular,

the objection that the claims of the respondent were barred by

limitation.

14. Sub-section (1) to Section 43 of the Act states that the Limitation

Act, 1963 shall apply to arbitrations as it applies to the

proceedings in court. Sub-section (2) to Section 43 states that for

the purpose of Section 43 and Limitation Act, an arbitration shall

be deemed to have commenced on the date referred to in Section

21 of the Act.1 In the context of the present case, several issues

would arise for consideration, including the date on which the

respondent had invoked the arbitration clause, and whether there

was delay thereafter in filing the application under Section 11(6) of

the Act, the legal effect and consequences of the delay, the effect

of the order dated 19th October 2012, etc.

15. Sub-section (2)(a) to Section 34 of the Act inserted with effect

from 23rd October 2015 states that the arbitral award may be set

1 For the purpose of this decision, we need not refer to sub-section (3) to Section 43 of the Act, which provision, if relied, can be examined.

Civil Appeal @ Diary No. 23287 of 2020 Page 6 of 8 aside by the court if the court finds the award is vitiated by patent

illegality appearing on the face of the award. The proviso

stipulates that the award shall not be set aside merely on the

ground of erroneous application of law or by misappreciation of

evidence. An award can also be set aside under sub-clause (ii) to

clause (b) of Section 34(2) on the ground that it is in conflict with

the public policy of India, which expression has been explained in

the Explanation(s) to the said Section.

16. We have briefly noted the provisions of the Act only to highlight

that the objections under Section 34 of the Act did require

consideration and in-depth examination and should not have been

dismissed without proper and full application of mind with

reference to the provisions of the Limitation Act and the Act.

17. In these circumstances, and for the reasons stated, we have no

option but to allow the present appeal and set aside the impugned

order dated 11th December 2019 passed by the High Court as well

as the order dated 8th January 2018 passed by the Additional

District Judge, Karnal.

18. We would remit the matter to the file of the Additional District

Judge, Karnal, who would hear the objections afresh and on

merits without being influenced by the earlier orders and also the

Civil Appeal @ Diary No. 23287 of 2020 Page 7 of 8 present order. We clarify that the observations made in this order

are for the disposal of the present appeal and would not be

treated as observations that are binding on the Additional District

Judge, Karnal, when he examines and decides the objections

under Section 34 of the Act on merits.

19. The appeal is allowed in the above terms with no order as to

costs.

......................................J. (AJAY RASTOGI)

......................................J. (SANJIV KHANNA) NEW DELHI;

MARCH 30, 2022.

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