Tag Archives: Arbitration Act

Till Adjudication of Demand – Government Cannot Withhold Money of Contractor

In Gangotri Enterprises Ltd. v. Union of India, (2016) 11 SCC 720, it was held that the demand of the Government is crystallised or adjudicated upon, the Government cannot withhold the money of the contractor. This judgment is primarily based on the judgment of the Hon’ble Apex Court in Union of India v. Raman Iron Foundry, (1974) 2 SCC 231. In this case it was held that the Government had no right to appropriate the amount claimed without getting it first adjudicated. It was held as under:

            “But here the order of interim injunction does not expressly or by necessary implication, carry any direction to the appellant to pay the amounts due to the respondent under other contracts. It is not only in form but also in substance a negative injunction. It has no positive content. What is does is merely to injunct the  appellant from recovering, suo motu, the damages claimed by it from out of other amounts due to the respondent. It does not direct that the appellant shall pay such amounts to the respondent. The appellant can still refuse to pay such amounts if it thinks it has a valid defence and if the appellant does so, the only remedy open to the respondent would be to take measures in an appropriate forum for recovery of such amounts where it would be decided whether the appellant is liable to pay such amounts to the respondent or not. No breach of the order of interim injunction as such would be involved in non-payment of such amounts by the appellant to the respondent. The only thing which the appellant is interdicted from doing is to make recovery of its claim for damages by appropriating such amounts in satisfaction of the claim. That is clearly within the power of the court under Section 41(b) of the Arbitration Act, 1940 because the claim for damages forms the subject-matter of the arbitration proceedings and the court can always say that until such claim is adjudicated upon, the appellant shall be restrained from recovering it by appropriating other amounts due to the respondent.” State of Gujarat v. Amber Builders, (2020) 2 SCC 540.  

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Application Under Section 34 of the Arbitration and Conciliation Act – Condonation of Delay

In Assam Urban Water Supply and Sewerage Board v. Subash Projects and Marketing Ltd., (2012) 2 SCC 624, an argument was raised with reference to Section 43 of the Arbitration Act that provisions of Limitation Act, 1963 have been made applicable to Arbitrators and when application is made for setting aside award hence all provisions of Act, 1963 should be held applicable but it was negative. In aforesaid judgment an attempt was made to attract Section4 of the Limitation Act, but it was observed as under:

       “The above section enables a party to institute a suit, prefer an appeal or make an application on the day court reopens where the prescribed period for any suit, appeal or application expires on the day when the court is closed. The crucial words in Section 4 of the Limitation Act are ‘prescribed period’. Section 2 (j) of the Limitation Act defines ‘period of limitation’ which means the period of limitation prescribed for any suit, appeal or application by the Schedule, and ‘prescribed period’ means the period of limitation computed in accordance with the provisions of this Act. Section 2 (j) of the Limitation Act when read in the context of Section 34(3) of the Arbitration Act, becomes amply clear that the prescribed period for making an application for setting aside arbitral award is three months. The period of 30 days mentioned in the proviso that follows sub-section (3) of Section 34 of the Arbitration Act is not the period of limitation and therefore, not ‘prescribed period’ forf the purposes of making the application for setting aside the arbitral award. The period of 30 days beyond three months which the court may extend on sufficient cause being shown under the proviso appended to sub-section (3) of Section 34 of the Arbitration Act being not the period of limitation or, in other words, ‘prescribed period’, section 4 of the Limitation Act is not at all attracted.

In Commissioner, M.P. Housing Board v. Mohanlal and Company, AIR 2016 SC 3592, issue of condonation of delay in respect of an application under Section 34 of the Arbitration and Conciliation Act came up for consideration before the Court. After Arbitral Award was given on 11.11.2010, contractor being aggrieved therefrom, instead of filing application/objection under Section 34(1) of the 1996 Act, preferred to file an application under Section 11 of the Act, 1996, in High Court seeking appointment of Arbitrator to adjudicate the dispute. Application was rejected by the Court observing that there is already an arbitral award, hence no further action under Section 11 of Act, 1996 can be allowed. Thereafter contractor filed objection before the Court challenging award on 26.09.2011. He also filed an application under Section 14 requesting to exclude time consumed in the proceedings before High court when he filed application under Section 11 and the same was rejected. That application was allowed by the District Judge taking recourse to Section 141 of the Limitation Act. M.P. Housing Board challenged order of District Judge in Civil Revision Before High Court but failed and that is how matter came to Supreme Court. Relying on Union of India v. Popular Construction company, (2001) 8 SCC 470, Court held that period of limitation under Section 34(3) is mandatory and would bar application of Section 5 of the Limitation Act. Suman Devi v. Addl. Commissioner, 2019 (132) ALR 471.

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Filed under Application under Section 34 - Delay Condonation, Arbitration