REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.   4747           OF 2008 (Arising out of SLP (C) No.4765 of 2005)

Gulbarga University        … Appellant

Versus

Mallikarjun S. Kodagali & Anr.        … Respondents

J U D G M E N T

S.B. Sinha, J.

1. Leave granted.

2. Application  of  Section  14  of  the  Limitation  Act,  1963  in  a

proceeding  under  Section  34  of  the  Arbitration  and  Conciliation  Act,

1996 (for short, ‘the Act’) is in question in this appeal which arises out of

a  judgment  and  order  dated  31.1.2005  passed  by  the  High  Court  of

Karnataka at Bangalore in Miscellaneous First Appeal No.717 of 2004

whereby  and  whereunder  the  objection  filed  by  the  appellant  herein

under Section 34 of the Act was held to be barred by limitation.

3. Bereft of all unnecessary details, the fact of the matter is as under :

The  parties  hereto  entered  into  a  contract  of  construction  of  an

indoor stadium on or about 21.5.1993.  The said contract  contained a

clause  pertaining  to  resolution  of  dispute  between  the  parties  by  the

Superintending Engineer, PWD, Gulbarga contained in clause 30 of the

contract, which reads as under :

“The decision  of the Superintending Engineer of the Gulbarga Circle for the time being shall be final, conclusive, and binding on all parties to the contract upon all questions relating to the meaning  of  the  specifications,  designs, drawings  and  instructions  herein  before mentioned  and  as  to  the  quality  of workmanship or material used on the work, or as to any other question, claim, right, matter, or thing whatsoever, in any way arising out of, or relating  to  the  contract,  esigns,  drawings, specifications, estimates, instructions, orders or those  conditions  or  otherwise  concerning  the works  or  the execution,  or,  failure  to  execute the same, whether  arising during  the  progress of  the  work,  or  after  the  completion  or abandonment thereof in case of dispute arising between  the  contractor  and  Gulbarga University.”

The parties filed their  claims and counter claims before the said

authority.  A purported award was passed in terms thereof on or about

30.7.1999.  However, a copy thereof was not supplied to the respondent.

Respondent filed a writ petition before the High Court of Karnataka for

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issuance of  a writ  of or  in  the nature of mandamus directing the said

authority to supply it  a copy of the said award.  The writ petition was

filed on 17.2.2000.  It was allowed by an order dated 13.6.2000 whereby

and whereunder the Superintending Engineer was directed to furnish a

copy of his decision to the respondent.  Pursuant thereto, the same was

furnished on 19.8.2000.   

Treating the said award to be one made under the Act as also on

the premise that no objection thereto was filed by the appellants in the

court  of  Principal  Civil  Judge  within  the  period  prescribed  for

questioning the validity thereof and, thus, became an executable decree,

an execution application was filed on or about 18.9.2000.  An objection

thereto was filed by the appellant herein purported to be under Section 47

of the Code of Civil Procedure.  The said objection was dismissed.  A

Revision Application was filed thereagainst and by a judgment and order

dated 30.11.2001, it was held by the High Court that the said clause does

not constitute an arbitration agreement.

A special leave petition was filed thereagainst by the respondent

and in a decision of Three Judge Bench of this Court, since reported in

Mallikarjun v. Gulbarga University [(2004) 1 SCC 372], the decision of

the  High  Court  was  reversed  holding  that  ‘clause  30’  constituted  an

arbitration  agreement.   This  Court,  in  support  of  the  said  decision,

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noticed an earlier  decision of this  Court  in  Bharat  Bhushan Bansal v.

U.P. Small Industries Corporation Limited [(1999) 2 SCC 166], stating :

“15. A  bare  comparison  of  clause  30  of  the contract  agreement  involved  in  the  present matter  and  clauses  23  and  24  involved  in Bharat Bhushan Bansal case  would show that they are not identical. Whereas clause 30 of the agreement  in  question  provides  for  resolution of  the  dispute  arising  out  of  the  contract  by persons named therein;  in terms of clause 24, there was no question of decision by a named person in the dispute raised by the parties to the agreement.  The  matters  which  are  specified under  clauses  23  and  24  in  Bharat  Bhushan Bansal  case were  necessarily  not  required  to arise  out  of  the  contract,  but  merely  claims arising  during  performance  of  the  contract. Clause 30 of the agreement in the present case did provide for resolution of the dispute arising out  of  the  contract  by  the  Superintending Engineer,  Gulbarga Circle,  Gulbarga.  For that reason,  the  case  relied  upon  by  the  learned counsel for the respondent is distinguishable.

16. Once clause 30 is constituted to be a valid arbitration  agreement,  it  would  necessarily follow that the decision of the arbitrator named therein would be rendered only upon allowing the  parties  to  adduce  evidence  in  support  of their  respective  claims  and  counter-claims  as also upon hearing the parties to the dispute. For the purpose of constituting the valid arbitration agreement,  it  is  not  necessary  that  the conditions as regards adduction of evidence by the parties or giving an opportunity of hearing to them must specifically be mentioned therein. Such conditions,  it  is  trite,  are implicit  in the decision-making  process  in  the  arbitration proceedings. Compliance with the principles of natural justice inheres in an arbitration process.

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They,  irrespective  of  the  fact  as  to  whether recorded  specifically  in  the  arbitration agreement or not are required to be followed. Once  the  principles  of  natural  justice  are  not complied with, the award made by the arbitrator would be rendered invalid. We, therefore, are of the opinion that the arbitration clause does not necessitate spelling out of a duty on the part of the  arbitrator  to  hear  both  parties  before deciding  the  question  before  him.  The expression “decision” subsumes adjudication of the dispute. Here in the instant case, it will bear repetition to state, that the disputes between the parties arose out of a contract and in relation to matters  specified  therein  and,  thus,  were required to be decided and such decisions are not  only final  and binding on the parties,  but they are conclusive which clearly spells out the finality of such decisions as also their binding nature.

17. A  clause  which  is  inserted  in  a  contract agreement  for  the  purpose  of  prevention  of dispute  will  not  be  an  arbitration  agreement. Such  a  provision  has  been  made  in  the agreement itself by conferring power upon the Engineer-in-Charge  to  take  a  decision thereupon in relation to the matters envisaged under clauses 31 and 32 of the said agreement. Clauses  31  and  32  of  the  said  agreement provide  for  a  decision  of  the  Engineer-in- Charge  in  relation  to  the  matters  specified therein.  The  jurisdiction  of  the  Engineer-in- Charge in  relation to  such matters  are limited and they cannot be equated with an arbitration agreement.  Despite  such  clauses  meant  for prevention of dispute arising out of a contract, significantly, clause 30 has been inserted in the contract agreement by the parties.

18. The  very  fact  that  clause  30  has  been inserted  by the  parties  despite  the  clauses  for prevention of dispute is  itself  a pointer to the

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fact  that  the  parties  to  the  contract  were  ad idem that the dispute and differences arising out of or under the contract should be determined by a domestic tribunal chosen by them.”

Appellant thereafter filed an application in terms of Section 34 of

the Act before the Principal Civil  Court on 8.12.2003.  The same was

held to be barred by limitation.  An appeal preferred thereagainst by the

appellant  before  the  High Court  has  been  dismissed  by reason of  the

impugned judgment, stating :

“The  learned  counsel  for  the  respondent  has drawn our attention to the decision reported in AIR 2001 SC 4010 in the case of UNION OF INDIA  v.  M/S  POPULKAR CONSTRUCTIONS COMPANY.  In  the said decision, the Apex Court has clearly laid down that  the  provisions of Section 5 of  Limitation Act  are  not  applicable  to  an  application  filed challenging the award under Section 34 and as such  there  was  no  scope  for  assessing sufficiency of  the  cause for  the  delay beyond and period prescribed in the proviso to Section 34.

In the light of this judgment and in the facts and circumstances of the case as adverted to above, we are of the clear view that the petition filed before the Court  below under Section 34 was clearly barred by time and the findings arrived at and conclusions reached by the Court below while  dismissing  the  petition  on  the  ground, does not call for any interference as it does not suffer from any infirmity in law.”

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Dr.  M.P.  Raju,  learned  counsel  appearing  on  behalf  of  the

appellant, would contend that the earlier decision of this Court in Union

of India v.  M/s. Popular Constructions Company [AIR 2001 SC 4010],

whereupon reliance has been placed by the High Court has since been

revisited by this  Court  in  State of  Goa v.  Western Builders [(2006) 6

SCC 239], holding :

“14. The question is whether Section 14 of the Limitation  Act  has  been  excluded  by  this special  enactment  i.e.  the  Arbitration  and Conciliation  Act,  1996.  Section  43  of  the Arbitration and Conciliation Act, 1996 clearly says that the Limitation Act, 1963 shall apply to arbitration  as  it  applies  to  the  proceedings  in the court.

15. Therefore, general proposition is by virtue of Section 43 of the Act of 1996 the Limitation Act,  1963  applies  to  the  Act  of  1996  but  by virtue of  sub-section (2)  of  Section 29 of  the Limitation  Act,  if  any  other  period  has  been prescribed  under  the  special  enactment  for moving  the application  or  otherwise  then  that period of limitation will govern the proceedings under  that  Act,  and  not  the  provisions  of  the Limitation  Act.  In  the  present  case  under  the Act of 1996 for setting aside the award on any of the grounds mentioned in sub-section (2) of Section  34  the  period  of  limitation  has  been prescribed and that will  govern. Likewise, the period of condonation of delay i.e. 30 days in the proviso.

16. But  there  is  no  provision  made  in  the Arbitration  and Conciliation Act,  1996 that  if any party has bona fidely prosecuted its remedy before  the  other  forum  which  had  no

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jurisdiction then in that case whether the period spent in prosecuting the remedy bona fidely in that  court  can be excluded or  not.  As per  the provision, sub-section (3) of Section 34 which prescribes  the period of  limitation  (3 months) for moving the application for setting aside the award  before  the  court  then  that  period  of limitation will be applicable and not the period of limitation prescribed in the Schedule under Section 3 of the Limitation Act, 1963. Thus, the provision of moving the application prescribed in the Limitation Act, shall stand excluded by virtue of sub-section (2) of Section 29 as under this special enactment the period of limitation has  already  been  prescribed.  Likewise  the period of condonation of delay i.e. 30 days by virtue of the proviso.

17. Therefore,  by virtue  of  sub-section  (2)  of Section  29  of  the  Limitation  Act  what  is excluded is the applicability of Section 5 of the Limitation Act and under Section 3 read with the  Schedule  which  prescribes  the  period  for moving application.

18. Whenever two enactments are overlapping each  other  on  the  same  area  then  the  courts should  be  cautious  in  interpreting  those provisions.  It  should  not  exceed  the  limit provided by the statute. The extent of exclusion is, however, really a question of construction of each  particular  statute  and  general  principles applicable are subordinate to the actual words used by legislature.”

Referring  to  Popular  Construction (supra)  and  National

Aluminimum Co.  Ltd. v.  Pressteel  & Fabrications  (P)  Ltd. [(2004 (1)

SCC 540], it was held :

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“25. Therefore, in the present context also it is very clear to us that there are no two opinions in  the  matter  that  the  Arbitration  and Conciliation  Act,  1996  does  not  expressly exclude  the  applicability  of Section 14 of  the Limitation  Act.  The prohibitory provision  has to  be  construed  strictly.  It  is  true  that  the Arbitration  and  Conciliation  Act,  1996 intended  to  expedite  commercial  issues expeditiously. It is also clear in the Statement of  Objects  and  Reasons  that  in  order  to recognise  economic  reforms the  settlement  of both  domestic  and  international  commercial disputes should be disposed of quickly so that the country’s economic progress be expedited. The  Statement  of  Objects  and  Reasons  also nowhere  indicates  that  Section  14  of  the Limitation  Act  shall  be  excluded.  But  on  the contrary,  intendment  of  the  legislature  is apparent in the present case as Section 43 of the Arbitration and Conciliation Act, 1996 applies the Limitation Act, 1963 as a whole. It is only by virtue of sub-section (2) of Section 29 of the Limitation Act that its operation is excluded to that extent of the area which is covered under the Arbitration and Conciliation Act, 1996. Our attention  was  also  invited  to  the  various decisions of this Court interpreting sub-section (2)  of  Section  29  of  the  Limitation  Act  with reference to other Acts like the Representation of  the  People  Act  or  the  provisions  of  the Criminal Procedure Code where separate period of limitation has been prescribed. We need not overburden  the  judgment  with  reference  to those  cases  because  it  is  very  clear  to  us  by virtue of  sub-section (2)  of  Section 29 of  the Limitation  Act  that  the  provisions  of  the Limitation Act shall stand excluded in the Act of 1996 to the extent of area which is covered by the Act of 1996. In the present case under Section 34 by virtue of sub-section (3) only the application  for  filing  and  setting  aside  the award a period has been prescribed as 3 months

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and delay can be condoned to the extent of 30 days. To this extent the applicability of Section 5 of the Limitation Act will stand excluded but there is no provision in the Act of 1996 which excludes  operation  of  Section  14  of  the Limitation  Act.  If  two  Acts  can  be  read harmoniously  without  doing  violation  to  the words used therein, then there is no prohibition in doing so.”

The ratio laid down in the said decision has since been reiterated in

Union of India & Anr. v.  Bhavna Engineering Co. [2007 (5) RAJ 458],

stating :

“This  Court in  a recent judgment  rendered in State of  Goa  Vs.  Western Builders,   (2006) 6   SCC   239,   held   that   Section   14   of the   Limitation   Act,   1963   is applicable  in the  Arbitration  and  Conciliation  proceedings. Having  gone through the various facts, we are of the view that the mistake committed by the appellant  in  approaching    the    Madhya Pradesh   High   Court   and   the   Bombay High   Court   is bona fide.     We,   therefore, condone   the   delay.     In   the   facts   of   this case   and   in   the interest   of   justice,   we, however,   think   it   proper   that   the   Section 34   Application pending before the Additional District  Judge,  Gwalior  be  transferred  to  the Bombay High Court.   The application will  be decided on merits expeditiously. Parties are at liberty  to  urge  all  the  contentions  before  that Court.”

There cannot be any doubt whatsoever that in terms of sub-section

(2) of Section 34 of the Act, an arbitral award may be set aside only if

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one of the conditions specified therein is satisfied.   Sub-section (3) of

Section  34  provides  for  the  period  of  limitation  within  which  an

application  under  Section  34  of  the  Act  is  to  be  filed.   The  proviso

appended thereto empowers the court to entertain an application despite

expiry of the period of limitation specified therein, namely, three months.

No provision, however, exists as regards application of Section 14 of the

Limitation Act.  This Court, as noticed hereinbefore in Western Builders

opined  that  sub-section  (2)  of  Section  29  thereof  would  apply  to  an

arbitration  proceedings  and consequently  Section 14 of the  Limitation

Act would also be applicable.  We are bound by the said decision.  Once

it is held that the provisions of Section 14 of the Limitation Act, 1963

would apply, it must be held that the learned Trial Judge as also the High

Court has committed an error in not applying the said provisions.

The  question,  however,  as  to  whether  the  period  spent  by  the

appellant  in  prosecuting  the  aforementioned  proceedings  should  be

excluded  or  not  is  a  matter  which  must  fall  for  decision  before  the

Principal  Civil  Court.   The necessary corollary of  the  aforementioned

finding is that as to whether the appellant had been prosecuting, with due

diligence another proceeding or not would fall for consideration before

the Principal Civil Court.   

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The impugned judgment of the High Court, therefore, cannot be

sustained.   It  is  set  aside  accordingly.   The  matter  is  remitted  to  the

Principal Civil Court for consideration of the matter afresh in the light of

observations  made  hereinbefore.   The  appeal  is  allowed  accordingly.

However, in the facts and circumstances of this case, there shall be no

order as to costs.

………………………….J.        [S.B. Sinha]

………………………….J.              [Cyriac Joseph]

New Delhi; August 1, 2008

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