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CASE NO.: Appeal (civil)  1971-1973 of 2000

PETITIONER: J.C. Budhraja

RESPONDENT: Chairman, Orissa Mining CorporationLtd. & Anr.   

DATE OF JUDGMENT: 18/01/2008

BENCH: H. K. Sema, G. P. Mathur & R. V. Raveendran

JUDGMENT: J U D G M E N T

RAVEENDRAN, J.

         These appeals are filed against the common judgment dated  15.10.1999 passed by the High Court of Orissa in Misc. Appeal   No.296/1998 filed by the respondents and Misc. Appeal No.198/1998 and  Civil Revision No.109/1998 filed by the appellant.

2.      The appellant is stated to be legal heir and successor in interest of  N.C. Budhraja (hereinafter referred to as the contractor). M/s. Orissa Mining  Corporation Ltd. (for short OMC or respondent) entered into an agreement  dated 16.9.1967 (Agreement No.30/F-2) for removal of over-burden at  Kaliapani (Cuttack District) by excavation in all kinds of soil (including  stoney earth and gravel mixed with boulders), and depositing/disposing of  the same, as directed. The maximum lift was 6m including initial lift of one  metre. The order to commence work was issued on 23.9.1967. Parties also  entered into three supplementary agreements in regard to the said contract  No.30/F-2, on 2.8.1969, 7.3.1970 and 10.2.1972. [Note : OMC had also  entered into other contracts with the contractor including contract dated  22.2.1968 (Contract No.2/F/2) for raising Chrome Ore by open excavation  from the said mining area. We are not concerned with those contracts in  these appeals].  

3.      The main agreement enumerated two items of work in its schedule.  The first, second, and third supplementary agreements enumerated  respectively eight items, one item and four items in their respective  schedules. The work was completed by the contractor on 15.6.1975. The  final bill in respect of the work was prepared by OMC on 21.10.1976. It was  revised in March-April 1977 by OMC. The final Bill It showed the total  value of the work done (under several items in the schedule to main and  three supplementary agreements) as Rs.1,49,190,76.74. The contractor  countersigned the said bill on 14.4.1977 under protest, but, however,  certified and confirmed that the measurements shown therein were correct.

4.      According to the contractor, having regard to the zig-zag route by  which the over burden had to be carried, the actual lead was much longer  and actual lift was much higher than what were stipulated in the agreement.  He contended that the amounts shown as due for the work done was as per  contract rates which was for removing overburden to the extent of lift and  lead provided in the contract schedules; and at several places, he had to cut  and remove the over-burden beyond the extent of lift and lead provided in  the contract, and he should be paid for such extra leads and lifts. He claimed  to have executed certain additional works not provided in the contract  schedules, on the directions of OMC. He therefore represented that the  matter may be examined and enquired into for determination of proper  amounts due. In view of the several representations made by the contractor  in respect of the contract no.30/F-2 as also other contracts, OMC sent the

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following letter dated 28.10.1978 to the contractor :-   \023Re : Settlement of pending claims.  

You had called on Chairman, OMC, recently and apprised him of the dues  receivable by you in respect of certain long pending matters such as mine  benches work and raising at Kaliapani Quarry-I. In the matter of Kaliapani  it has been decided to constitute a committee which will go separately into  your claims and other facts, in which connection you are requested to give  all possible help and assistance, so that your dues, if any, will be  ascertainable.

In regard to other pending matters, you had indicated yourself that you  will give the details of claims and payment received by you. This may be  given within a day or two so as to enable OMC to settle up the above at  the earliest.\024

5.      The contractor sent a reply dated 16.11.1978 enclosing therewith a  statement quantifying his claims relating to contract no. 30F-2 (subject  matter of these appeals) as also another contract (no. 2F-2). A Committee  was constituted by OMC to scrutinize and recommend on the admissibility  of the claims made by the contractor in regard to Agreement No.30/F-2 and  Agreement No.2/F-2. Several meetings were held by the said Committee and  the claims of the contractor aggregating to Rs.50,15,820 in regard to contract  no.30.F2 were considered. Ultimately the Committee submitted a final  report dated 7.12.1979 expressing the view that the contractor could be paid  only a sum of Rs.3,52,916/- in regard to his claims in respect of the two  contracts. The contractor, thereafter, wrote a letter dated 29.2.1980 stating  that he had come to know that the Committee had submitted its final report  and requested for a copy of the report and for payments of the amounts due.  OMC sent a reply dated 4.3.1980 stating that the claims were not accepted  yet but however agreed to release a sum of Rs.3.5 lakhs and released the said  sum on that day.  

6.      The contractor sent a notice dated 4.6.1980 invoking the Arbitration  Agreement (Clause 23) in respect of pending claims relating to Contract No.  30F-2 and two other contracts. He suggested a panel of names and requested  OMC to appoint one of them as Arbitrator. Immediately, thereafter, the  contractor filed Misc. Case No.306/80 in regard to the contract in the Court  of the Sub-Judge, Bhubaneswar, under section 8(2) of Arbitration Act, 1940  (\021Act\022 for short) for appointment of an Arbitrator. The court allowed the said  petition by order dated 6.10.1980 appointing Mr. Justice Balakrishna Patro,  a retired Judge of the Orissa High Court as Arbitrator by consent. On  16.12.1982, an application was made by the present appellant under Order  22 Rule 3 CPC claiming to be the son of legatee of the contractor and for  substituting him in place of the deceased N.C. Budhraja, as his legal heir.  The said application was allowed by the court on 15.11.1985. In the  meanwhile, Arbitration Act, 1940 (’Act’ for short) was amended by the  Arbitration (Orissa Amendment) Act, 1984, inserting section 41A providing  for constitution of and reference to the Arbitration Tribunal. By Notification  dated 3.5.1986, (amended by Memo dated 23.6.1986) the State Government  constituted a one Member Special Arbitral Tribunal with Justice N. K. Das  as Arbitral Tribunal to settle the disputes between the contractor and OMC  in regard to contract no. 30/F-2.  

7.      The contractor filed a claim statement dated 27.6.1986 before the  arbitrator praying for an award of Rs.3,41,42,040 with interest from  1.6.1986, as detailed below :

     Value of work done by the contractor                              : Rs.2,45,85,183.89

     Less:     Amounts paid by OMC to the                          Contractor                                                      : Rs .1,49,88,566.90      

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Balance due :   (Rs.95,96,616.99) rounded off as                 : Rs.  95,96,616.00

     Add:      Interest on the said amounts                         from the respective dates       : Rs.2,40,09,948.00

     Add:      Interest on belated        Payments                          : Rs.      5,35,476.00    Rs. 2,45,45,424.00                                                                         _________________                                                            Total                                                   :       Rs.3,41,42,0 40.00                                                                            _________________

In the claim statement filed before the arbitrator, the nature and quantum of  claim made was different from what was claimed in the letter dated  16.11.1978 which was considered by the Committee. In the claim statement  the contractor abandoned claims to an extent of Rs.21,83,692 out of the  claim of Rs.50,15,820/- made on 16.11.1978 and claimed only Rs.26,32,128  from the original claim. The balance of the claim was fresh claims, not made  earlier. The claim of Rs.95,96,616 made before the arbitrator was made up  of two parts, first being a part of the original claim made in the letter dated  16.11.1978 and the second being completely fresh claims made for the first  time in the claim statement, as detailed below : (i) Out of the original claim of Rs.50,15,820 made                         Rs. 28,32,128     

    in the letter dated 16.11.1978 (The claim for balance        of Rs.21,83,692 not pursued in arbitration)

(ii) Fresh claims not made earlier                                      Rs. 67,64,488

                                                                (Note : As per actual calculations, the total of the claims made by the appellant was  Rs.96,66,107 and the new claims were Rs.68,33,979].

8.      The Arbitrator made a reasoned award dated 28.11.1986 holding that  the appellant was entitled to a sum of Rs.1,02,66,901.36 (which was more  than the claim of Rs.95,96,616) with interest at 12% per annum from  1.8.1977 till date of award, and future interest at the rate of 6% P.A. from  the expiry of one month from the date of the award till date of decree. The  award is in respect of 35 claims. Out of 35 claims, Items 1 to 16 related to  the schedule items of work under the contract (main agreement and the  supplementary agreement 1 to 3). Items 17 to 34 were in respect of work  which did not form part of the contract schedule. Claim 35 related to  escalation in cost of labour and material on account of delay in execution.  

8.1)    The details of the items 1 to 16, (that is description of work, total  amount claimed, amount admitted, difference in dispute and amount  awarded) are as under  :  

Sl. No.

Description of item Claim of  Contractor Amount  admitted by  OMC Amount in  dispute Award by  Arbitrator

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1 Removal of overburden in all  kinds of soil etc. within a lead of  100 m. (Maximum lift 6M)  

50802.98 45040.32 5762.66 5762.66 2 Removal of overburden etc.  within a lead of one km beyond  initial lead of 30 m (maximum  lift \026 6m)

406881.20 406581.20 300.00 300.00 3 Transportation of excavated  overburdened etc., within a lead  of 1 km beyond initial lead of  6m

676228.94 616245.60 59983.34 59983.34 4 Transportation of excavated over  burdened etc., within a lead of  2km beyond one km.

5361.09 5361.09 0 0 5 Clearing heavy jungle etc.,

6201.72 3303.72 2898.00 0 6 Cutting and uprooting trees etc.,  5\022 grith

29800.80 14205.60 15595.20 0 7 Cutting and uprooting trees etc.,  5\022 to 10\022 grith

11352.00 3360.00 7992.00 0 8 Excavation of overburden in all  kinds of rocks etc., upto 60m  lead

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3689850.00 3390979.12 298870.88 298870.88 9 Excavation of overburden in all  kinds of rock etc., upto 2km  distance and within lifts of 35m

10379041.20 10379041.20 0 0 10 Lift beyond 15m upto 16m depth

5066.85 5054.84 12.01 12.01 11 Lift beyond 16m upto 17m  

9858.70 9785.55 73.15 73.15 12 Lift beyond 17m upto 18m  

12647.79 12373.84 273.95 273.95 13 Lift beyond 18m upto 19m  

13358.54 13037.07 321.47 321.47 14 Lift beyond 19m upto 20m  

9812.25 9447.79 364.46 364.46 15 Lift beyond 20 upto 21m  

5070.33 4882.89 187.44 187.44 16 Lift beyond 21m upto 22m                                                                                 89.71 76.89 12.82 12.82

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1,53,16,507.00 149,19,076/72 397,430/28 365,862/18

Though in the claim statement, the appellant had clearly stated that he had in  all received Rs.149,88,566/90, and given credit for the said sum, during the  hearing, the appellant contended that instead of Rs.149,88,566/90, he had  appropriated only Rs.120,01,695/90 towards this contract and that the  balance of Rs.29,86,871/- had been adjusted towards some other contacts.  Even though the claim statement was not amended, the Arbitrator proceeded  on that basis and awarded Rs.32,83,243 in respect of items 1 to 16 as under :  

A.  Total amount claimed for Items 1 to 16                      Rs. 153,16,507.00

B.  Total of Items 1 to 16 admitted by OMC              Rs. 149,19,076/72

C.  Total of claims admitted by Arbitrator                      Rs.     3,65,862/18                                                                 _______________                                 (B+C)           Total           Rs. 152,84,938/90

Amount shown as received by contractor towards          Rs.1,20,01,695/90 Items 1 to 16 (as against Rs.149,88,566/90 shown as  received from OMC in the claim statement)                                                                 ________________         BALANCE arrived at Arbitrator                   Rs.32,83,243.00         as due to contractor in respect of items 1 to 16        ________________

8.2)    Claims of contractor at Sl. No. 17 to 34 related to items of work not  covered in the schedule to the contract, for which claim was made on the  basis of damages/quantum meruit. As against the total of Rs.70,56,573/55  claimed in regard to these 18 items (Items 17 to 34), the Arbitrator awarded  in all Rs.52,56,847/36. The details of the claims made by the appellant and  the amount awarded in respect of each of them are as under : S.No. Description  of item Amount Claimed Amount Awarded

17 Extra Head Lead for 90 m

2810144.10 2450042.88 18 Removal of excavated materials from the  edge of the quarry

54888.60 50858.60 19 Unmeasured quantity of excavation  

848372.64 664720.00 20 Catch Water Drain

278842.50 27842.50 21 Removal of slipped earth from side slopes

143646.00 Nil

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22 Restoration of benches to proper shape

186761.16 140070.87 23 Bullah Pilling to prevent slipping of  benches

15722.70 Nil 24 Dry rubble packing

202499.00 122856.40 25 Extra lift during construction of Haul Road

262837.73 262837.73 26 Extra lift for excavated materials dumped at  quarry edge.

360690.49 270517.88 27 Extra lift measured by Surveyor but not  paid  

1396128.63 1047096.50 28 Idle labour due to non-supply of working  plan

145577.00 Nil 29 Idle labour due to want of working site

76850.00 Nil  30 Idle labour due to stoppage of work by the  respondent and restriction of working area

389288.00 194644.00 31 Reparing of Haul road damaged by cyclone

10640.00 Nil 32 Reconstruction of Damsala Embankment

25370.00 25370.00 33 Barbed wire fencing

27315.00 Nil

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34 Supply of electricity to work site and  respondent\022s colony

72000.00 Nil

Rs. 70,56,573/55 Rs. 52,56,847/36

8.3)    The last item of claim of the appellant, namely item No.35 was for  Rs.22,17,188/34 as escalation in cost between 1972 and 1975 on account of  increase in cost of labour and material, based on the General Price Index.  The Arbitrator determined the value of work executed after 1.4.1973 as  Rs.52,96,967/-. He awarded an escalation of 32.6% on the said value of  work and awarded Rs.17,26,811.00 as escalation in cost of labour and  material.  

8.4)    Thus the Arbitrator awarded Rs.102,66,901.66 to the appellant as  detailed below (exclusive of interest), as against the claim of Rs.95,96,616/-  (exclusive of interest) made by the appellant :  

(i)     Amounts award in respect of claims 1 to 16                      Rs.32,83,243.00 (ii)    Amounts awarded in respect of claims 17 to 34           Rs.52,56,847.36         (as against claim of Rs.70,56,573/55)

(iii)   Amount awarded in respect of claim 35 as escalation     Rs. 17,26,811.00         (as against claim of Rs.22,17,188/34)                           _______________                                 Total award                             Rs.102,66,901.36                                                                         _____________

9.      The contractor filed OS No.224/1986 for making the award rule of the  court, on the file of the Civil Judge, Sr. Division, Bhubaneswar. The    objections to the said award filed by OMC were registered as Misc. Case  No.5/1987. The said court, by common judgment dated 21.3.1998, overruled  the objections and directed that the award of the arbitrator be made the rule  of the court and a decree be drawn in terms of the award.  

10.     Feeling aggrieved, OMC filed Misc. Appeal No.296/1998,  challenging the decision of the Civil Judge refusing to set aside the award,  directing a decree in terms of the award. The contractor filed Misc. Appeal  No.198/1998 and Civil Revision No.109/1998 claiming future interest from  the date of decree as the judgment of the Civil Judge was silent on that  aspect.         The High Court heard and disposed of the said appeals and  revision petition by common judgment 15.10.1999. It allowed Misc. Appeal  No.296/1998 filed by OMC and dismissed M.A. No.198/1998 and C.R.  No.109/1998 filed by the contractor. The High Court held :

(i)     The claim of the contractor was barred by limitation and therefore the  award was liable to be set aside.

(ii)    The arbitrator acted beyond his jurisdiction in awarding huge   amounts towards alleged extra work, even though there was nothing  to indicate that conditions contemplated in proviso to Clause 11  (relating to additional work) were satisfied.

(iii)   Though the award purported to be a reasoned award, the award in  regard to Items 17, 18, 19 and 25 to 27 was not supported by any  reason and therefore, the award was liable to be set aside.  

(iv)    The award in respect of escalation in cost (item 35) at the rate of

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32.6% of the value of work was without basis, (when the claim itself  was for a lesser rate), in the absence of any provision in the contract  for escalation, amounted to legal misconduct.  

(v)     The award being in excess of the claim made by the contractor  shocked the judicial conscience of the court.  

(vi)    Interest could have been awarded by the arbitrator only from the date  of reference (6.10.1980) and could not be awarded in regard to any  pre-reference period.  

(vii)   Though in the normal course, some of the issues would have  necessitated remitting the matter to the arbitrator for fresh  consideration, it was not necessary to remit the matter as the entire  award was being set aside on the ground of limitation.  

The said decision of the High Court is challenged by the appellant in this  appeal by special leave.  11.     On the contentions urged, the following questions arise for  consideration :

(i)     Whether the claim made before the arbitrator or any part thereof  was  barred by limitation?

(ii)    Whether the award is liable to be set aside on the ground of legal  misconduct and the error apparent on the face of the award?

(iii)   Whether the award is liable to be set aside on the ground that the  arbitrator exceeded his jurisdiction ?

(iv)    To what relief the parties are entitled?

Questions (i) and (ii) :

12.     The Arbitrator held that the claims were not barred. He held :

"In the case of a suit, the date on which the cause of action arises is the  date from which the limitation period starts. Under section 20, it is the  date on which the right to apply accrues that determines the starting point.  That starting point does not coincide with the date on which the cause of  action for filing a suit arises. The same principle would apply to an  application under section 8 of the Act. \005 The claimant signed the final  bill on 14.4.1977 under protest. It is not correct to say that the claimant  accepted the final bill. \005 All these factors show that negotiation was  going on and the matter was in a nebulous and fluid stage. The committee  gave its report in December, 1979. In March, 1980 some portion out of the  money said to have been found due by the committee was paid on ad hoc  basis. Notice was given by the contractor on 14.6.80. So, the dispute as to  final bill still continues. Till the final bill is prepared and accepted by the  contractor, limitation would not accrue. When the matter went to court in  1980, it was not barred by limitation\005"        

13.     The High Court found that the work was completed on 15.6.1975,  final measurement was taken on 16.6.1975 and the final bill was signed by  the contractor under protest on 14.4.1977 and therefore held that the cause of  action for the contractor to make a claim arose on 14.4.1977. According to  the High Court, as the notice invoking arbitration was issued on 4.6.1980  and the petition under section 8(2) of the Act was filed thereafter, beyond  three years from 14.4.1977, the entire claim was barred by limitation. The  High Court further held that as the final bill was signed under protest by the  contractor, it could be said that the cause of action arose on a date  subsequent to the date of signing of the final bill. It further held that the fact  that the Departmental Committee considered the claims in 1979, subsequent

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to the signing of the final bill under protest, did not have the effect of  saving/extending limitation in the absence of any acknowledgement in  writing as required under section 18 of the Act.

14.     Section 18 of the Limitation Act, 1963 deals with effect of  acknowledgement in writing. Sub-section (1) thereof provides that where,  before the expiration of the prescribed period for a suit or application in  respect of any right, an acknowledgement of liability in respect of such right  has been made in writing  signed by the party against whom such right is  claimed, a fresh period of limitation shall be computed from the time when  the acknowledgement was so signed. The explanation  to the section  provides that an acknowledgement may be sufficient though it omits to  specify the exact nature of the right or avers that the time for payment has  not yet come or is accompanied by a refusal to pay, or is coupled with a  claim to set off, or is addressed to a person other than a person entitled to the  right. Interpreting section 19 of the Limitation Act, 1908 (corresponding to  section 18 of the Limitation Act, 1963) this Court in Shapur Fredoom  Mazda v. Durga Prosad Chamaria (AIR 1961 SC 1236), held :   

\023\005 acknowledgement as prescribed by section 19 merely renews debt; it  does not create a new right of action. It is a mere acknowledgement of the  liability in respect of the right in question; it need not be accompanied by a  promise to pay either expressly or even by implication.  

The statement on which a plea of acknowledgement is based must relate to  a present subsisting liability though the exact nature or the specific  character of the said liability may not be indicated in words. Words used  in the acknowledgement must, however, indicate the existence of jural  relationship between the parties such as that of debtor and creditor, and it  must appear that the statement is made with the intention to admit such  jural relationship. Such intention can be inferred by implication from the  nature of the admission, and need not be expressed in words. If the  statement is fairly clear, then the intention to admit jural relationship may  be implied from it. The admission in question need not be express but  must be made in circumstances and in words from which the court can  reasonably infer that the person making the admission intended to refer to  a subsisting liability as at the date of the statement. Stated generally,  courts lean in favour of a liberal construction of such statements though it  does not mean that where no admission is made one should be inferred, or  where a statement was made clearly without intending to admit the  existence of jural relationship such intention could be fastened on the  maker of the statement by an involved or far-fetched process of  reasoning.\024  

In construing words used in the statements made in writing on which a  plea of acknowledgement rests oral evidence has been expressly excluded  but surrounding circumstances can always be considered. \005 The effect of  the words used in a particular document must inevitably depend upon the  context in which the words are used and would always be conditioned by  the tenor of the said document\005..   

15.     It is now well settled that a writing to be an acknowledgement of  liability must involve an admission of a subsisting jural relationship between  the parties and a conscious affirmation of an intention of continuing such  relationship in regard to an existing liability. The admission need not be in  regard to any precise amount nor by expressed words.  If a defendant writes  to the plaintiff requesting him to send his claim for verification and payment,  it amounts to an acknowledgement. But if the defendant merely says,   without admitting liability, it would like to examine the claim or the  accounts, it may not amount to acknowledgement. In other words, a writing,  to be treated as an acknowledgement of liability should consciously admit  his liability to pay or admit his intention to pay the debt. Let us illustrate. If   a creditor sends a demand notice demanding payment of Rs.1 lakh due under  a promissory note executed by the debtor and the debtor sends a reply stating  that he would pay the amount due, without mentioning the amount, it will

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still be an acknowledgement of liability. If a writing is relied on as an  acknowledgement for extending the period of limitation in respect of the  amount or right claimed in the suit, the acknowledgement should necessarily  be in respect of the subject matter of the suit. If a person executes a work  and issues a demand letter making a claim for the amount due as per the  final bill and the defendant agrees to verify the bill and pay the amount, the  acknowledgement will save limitation for a suit for recovery of only such  bill amount, but will not extend the limitation in regard to any fresh or  additional claim for damages made in the suit, which was not a part of the  bill or the demand letter. Again we may illustrate. If a house is constructed  under the item rate contract and the amount due in regard to work executed  is Rs. two lakhs and certain part payments say aggregating to Rs.1,25,0000/-  have been made and the contractor demands payment of the balance of  Rs.75,000/- due towards the bill and the employer acknowledges liability,  that acknowledgement will be only in regard to the sum of Rs.75,000/-  which is due. If the contractor files a suit for recovery of the said Rs.75,000/-  due in regard to work done and also for recovery of Rs.50,000/- as damages  for breach by the employer and the said suit is filed beyond three years from  completion of work and submission of the bill but within three years from  the date of acknowledgement, the suit will be saved from bar of limitation  only in regard to the liability that was acknowledged namely Rs.75,000/- and  not in regard to the fresh or additional claim of Rs.50,000/- which was not  the subject matter of acknowledgement. What can be acknowledged is a  present subsisting liability. An acknowledgment made with reference to a  liability, cannot extend limitation for a time barred liability or a claim that  was not made at the time of acknowledgment or some other liability relating  to other transactions. Any admission of jural relationship in regard to the  ascertained sum due or a pending claim, cannot be an acknowledgement for  a new additional claim for damages.  

16.     We   will   now   examine   this   case    with   reference   to   the   said  principles. In this case,  the cause of action accrued on 14.4.1977 when the  final bill was signed by the contractor. It is not in dispute that the final bill  showed that a sum of Rs.17,69,608.73 was payable to the contractor (after  giving credit to the payments made and after withholding a sum of  Rs.7,45,953.83 as 5% security deposit). Towards the said sum of  Rs.17,69,608.73. Rs.17 lacs was paid on 25.2.1976 and Rs.70,000/- was paid  on 6.8.1977. The contractor had made some claims and OMC wrote a letter  dated 28.10.1978 in regard to the pending claims of the contractor. In regard  to Kaliapani matters, OMC informed the contractor that it has been decided  to constitute a Committee which will go into the claims of the contractor so  that the dues, if any, could be ascertained. It further stated that on the details  of the claims and payments received being given to the contractor, OMC  will settle up the pending matters at the earliest. This clearly showed an  intention on the part of OMC to admit the jural relationship of contractor and  employer and an intention to settle the pending claims after being satisfied  about them. Therefore, the letter dated 28.10.1978 was clearly an  acknowledgement in writing in so far as the \023pending claims\024 of the  contractor. What were the pending claims is made clear in the letter dated  16.11.1978 written by the contractor enclosing a statement showing that in  all, a sum of Rs.50,15,820/- was due. The Committee constituted by the  OMC examined these claims and admitted the claims only to an extent of  Rs.3,52,916/- as per its final report dated 7.12.1979. OMC paid   Rs.3,50,000/- on 4.3.1980. In view of the acknowledgement in writing on  28.10.1978 and payment of the Rs.3,50,000/- on 4.3.1980, it can be said that  in regard to the pending claims of the contractor, the limitation stood  extended by three years from 4.3.1980 and at all events by three years from  28.10.1978. It is not in dispute that the contractor issued the notice invoking  arbitration on 4.6.1980 and immediately filed a petition under section 8(2) of  the Act for appointment of Arbitrator which was allowed on 6.10.1980.  Therefore, whatever claims were made before the Arbitrator which was part  of the claim of Rs.50,15,820, was within time, having been made within  three years from 28.10.1978 and 4.6.1980.

17.     In regard to the claims aggregating to Rs.95,96,616/- made in the

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claim statement filed before the Arbitrator, only claims aggregating to  Rs.28,32,138 related to and formed part of the said pending claim of  Rs.50,15,820. The appellant did not make a claim in regard to the remaining  Rs.21,83,692. Therefore, out of the claim of Rs.95,96,616 made by the  appellant before the Arbitrator, the claim for only Rs.28,32,138/- was not  barred by limitation. The remaining claims of the appellant aggregating to  Rs.67,64,488/- out of the total of Rs.95,96,616/- being fresh claims, were not  \023pending claims\024 in respect of which the acknowledgement was made.  Therefore the said fresh claims aggregating to Rs.67,64,488 made for the  first time in the claims statement filed on 27.6.1986 were clearly barred by  limitation.

18.     The learned counsel for the appellant submitted that the limitation  would begun to run from the date on which a difference arose between the  parties, and in this case the difference arose only when OMC refused to  comply with the notice dated 4.6.1980 seeking reference to arbitration. We  are afraid, the contention is without merit. The appellant is obviously  confusing the limitation for a petition under section 8(2) of the Arbitration  Act, 1940 with the limitation for the claim itself. The limitation for a suit is  calculated as on the date of filing of the suit. In the case of arbitration,  limitation for the claim is to be calculated on the date on which the  arbitration is deemed to have commenced. Section 37(3) of the Act provides  that for the purpose of Limitation Act, an arbitration is deemed to have been  commenced when one party to the arbitration agreement serves on the other  party thereto, a notice requiring the appointment of an arbitrator. Such a  notice having been served on 4.6.1980, it has to be seen whether the claims  were in time as on that date. If the claims were barred on 4.6.1980, it follows  that the claims had to be rejected by the arbitrator on the ground that the  claims were barred by limitation. The said period has nothing to do with the  period of limitation for filing a petition under section 8(2) of the Act. Insofar  as a petition under section 8(2), the cause of action would arise when the  other party fails to comply with the notice invoking arbitration. Therefore,  the period of limitation for filing a petition under section 8(2) seeking  appointment of an arbitrator cannot be confused with the period of limitation  for making a claim. The decisions of this Court in Inder Singh Rekhi vs.  Delhi Development Authority - (1988) 2 SCC 338, Panchu Gopal Bose vs.  Board of Trustees for Port of Calcutta - (1993) 4 SCC 338 and Utkal  Commercial Corporation vs. Central Coal Fields - (1999) 2 SCC 571 also  make this position clear.        19.     The appellant next contended, relying on section 18 of Limitation Act,  that as there was acknowledgement of liability in regard to Contract  No.30/F-2 in the letter dated 28.10.1978, and the notice invoking arbitration  was issued on 4.6.1980 within 3 years from 28.10.1978, he was at liberty to  make any claim in regard to the contract before the arbitrator, (even though  such claims had not been earlier made) and all such claims shall have to be  treated as being within the period of limitation. Such a contention cannot be  countenanced. As noticed above, the cause of action arose on 14.4.1977. But  for the acknowledgement on 28.10.1978, on the date of invoking arbitration  (4.6.1980), the claims would have been barred by time as being beyond the  period of limitation. The limitation is extended only in regard to the liability  which was acknowledged in the letter dated 28.10.1978. It is not in dispute  that either on 28.10.1978 or on 4.3.1980, the contractor had not made the  fresh claims aggregating to Rs.67,64,488  and the question of such claims  made in future for the first time on 27.6.1986, being acknowledged by OMC  on 28.10.1998 did not arise.  

20.     Another aspect requires to be noticed. The contractor was  N.C.Budhraja. The original claim (which was the subject matter of letter  dated 28.10.1978, subjected to examination by the Committee as per report  dated 7.12.1979, and towards which Rs.3,50,000/- was paid) made by the  contractor N.C. Budhraja aggregated to Rs.50,15,820. The Appellant who is  his LR cannot for the first time make a fresh claim before the Arbitrator,  which was never made by N.C. Budhraja. The Appellant could only pursue  the claim made by N.C. Budhraja, which were pending or subsisting when

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N.C. Budhraja issued the notice dated 4.6.1980

21.     The arbitrator committed an error apparent on the face of the record  and a legal misconduct in holding that the entire claim was within time. His  assumption that if the application filed by the contractor in 1980 under  section 8(2) of Arbitration Act for appointment of an Arbitrator was in time,  all claims made in the claim statement filed before the Arbitrator appointed  in such proceeding under section 8(2) are also in time, is patently erroneous  and is an error apparent on the face of the record. The reasoning of the  arbitrator that on account of the formation of the Committee by OMC to  scrutinize the pending claims in pursuance of the OMC’s letter dated  28.10.1978, and the payment of Rs.3,50,000/- on 4.3.1980 in pursuance of  the Committee giving its final report on 7.12.1979, every claim of the  contract including new claims which were made for the first time in the  claim statement filed in 1986 (as contrasted with ’pending claims’ considered  by OMC), are not barred by limitation, is also an error apparent in the face  of the award. Under section 18 an acknowledgement in writing extends the  limitation. Under section 19 a payment made on account of a debt, enables a  fresh  period of limitation being computed. Therefore, the letter of OMC  dated 28.10.1978 and the payment of Rs.3,50,000/- by OMC, would result in  a fresh period of limitation being computed only in regard to the ’existing  debt’ in respect of which acknowledgment and payment was made.  Admittedly, as at that time, the claim of the contractor was only for a sum of  Rs.50,15,820. Therefore, the letter dated 28.10.1978 and payment on  4.3.1980 extended the limitation only in respect of the claims which were  part of the said claim of Rs.50,15,820. Therefore, the fresh claims of  Rs.67,64,488/- (out of the total claim of Rs.95,96,616) is barred by  limitation and the award made in that behalf is liable to be set aside.  Consequently, we hold that only that part of the claim before the Arbitrator  which was part of the claim of Rs.5015,820/- made by the contractor, that  was existing or pending as on 28.10.1978 and 4.3.1980, namely  Rs.28,32,128 (out of Rs.95,96,616) could have been considered by the  Arbitrator.        Question (iii) & (iv) :

22.     In the claim statement filed before the arbitrator the appellant showed  the value of work done as Rs.2,45,85,183.89 and the total payments made by  OMC as Rs.149,88,566.90. Thus he claimed the balance due as  Rs.95,96,616. Even while calculating the interest on the amount outstanding,  the claimant proceeded on the basis that he has received in all,  Rs.1,49,88,566.90 from OMC. The prayer before the arbitrator in the claim  statement was for the award of Rs.95,96,616 in regard to the work done after  giving credit of Rs.1,49,88,566.90. The categorical stand of the contractor  and the appellant all along has been that OMC had paid in all a sum of  Rs.149,88,566.90. But during the course of the arbitration proceedings, the  appellant contended that out of Rs.149,88,566.90 received from OMC and  taken into credit towards this contract, a sum of Rs.29,86,871/- was being  appropriated towards other contracts and therefore the payments made by  OMC towards this contract should be taken as Rs.120,01,695.90. The  arbitrator has mechanically accepted the said altered stand contrary to the  claim statement and proceeded to determine the amount payable by OMC,  by taking the amount paid by OMC as Rs.120,01,659.90 towards this  contract, even though the claim statement showing that OMC had paid   Rs.149,88,566.90 remained unaltered. The claim statement was not amended  to show that only Rs.120,01,659.90 had been received from OMC in regard  to the contract. When the claim made in the claim statement is after  adjusting Rs.149,88,566.90 paid by OMC towards the work, the arbitrator  cannot proceed on the basis that only Rs.120,01,659.90 was paid towards the  work. As a result though the Arbitrator found that the amount payable  towards claims at Items 1 to 16 was only Rs.365,862.18, he awarded  Rs.32,83,243/- to the appellant, thereby increasing the liability of OMC by  Rs.29,86,871/-. By awarding more than what was claimed in the claim  statement (by showing a lesser amount as having been paid by OMC though  claim statement showed a higher amount), the Arbitrator clearly exceeded

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his jurisdiction. The Arbitrator thus committed a legal misconduct and the  award to that extent is  liable to be set aside. Therefore the amount awarded  in respect of claims at items 1 to 16 by the Arbitrator is to be reduced by  Rs.29,86,871/-.  

23.     The Arbitrator has exceeded his jurisdiction in another respect. The  total claim made by the contractor before the Arbitration was Rs.95,96,616/-  (excluding interest). But the amount awarded by the arbitrator towards the  said claim was Rs.1,02,66,901/36 (excluding interest). Making an award in  excess of the claim itself by Rs.6,70,285 is a clear act of exceeding the  jurisdiction and amounts to a legal misconduct and to that extent of  Rs.6,70,285/- the award is invalid.  

23.     In regard to item 35, that is escalation in cost, the claim in the claim  statement was at the rate of 15% for the value of work done in 1972-73,  28.5% in respect of value of work done in 1973-74 and 32% in respect of  work done in 1974-75. But the Arbitrator has awarded escalation at a flat  rate of 32.6% on the entire cost of work done from 1.4.1973 and thereby  awarded an escalation in excess of what was claimed. This also amounts to  exceeding the jurisdiction and therefore legal misconduct. The award in  excess of what was claimed was invalid.  

25.     The award of the arbitrator in respect of time barred claim of  Rs.67,64,488 is an error apparent on the face of the award. Award of  amounts in excess of claim (referred to in paras 22, 23 and 24) clearly  amount to exceeding the jurisdiction. All these, that is awarding amount  towards time barred part of the claim of Rs.67,64,488, and awarding  amounts of Rs.29,86,871, Rs.670,285 and escalation in cost at a rate more  than what is claimed, are all legal misconducts and the award in regard to  those amounts are null and void. There is however some overlapping of the  aforesaid amounts.

26.     Does it mean that the entire award should be set aside? The answer is  no. That part of the award which is valid and separable can be upheld. That  part relates to the claims which  were validly before the Arbitrator, which  were part of the existing or pending claims of Rs.50,15,820 and which were  not barred by limitation. As stated above they were the claims which were  existing or pending in 1978, 1979 and 1980 (considered by the committee  and payment made by OMC) which were carried before the Arbitrator to an  extent of Rs.28,32,128. Only the amounts awarded by the Arbitrator against  those claims can be considered as award validly made in Arbitration, falling  within jurisdiction. They are clearly severable from the other portions of the  award. The particulars of the claims and corresponding awards are as  follows:   

Item  No. Description Item No.  in letter  dated  16.11.78 Contractor’s  claim  originally  made 16.11.78 Contractor’s  claim before  Arbitrator

Award by  Arbitrator 7. Cutting and uprooting  trees

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5 20,869.32 11,352.00 Nil 17. Extra head lead for 90 M 7(a) 2,61,926.40 28,10,144.00 24,50,042.88  

(261,926.40)*

18. Removal of excavated  material from edge of  quarry 3 3,43,360.58 54,888.60 50,858.60 19. Unmeasured quantity of  excavation 4 8,44,360.00 8,48,372.64 6,64,720.00 20. Catch water drain 12 1,55,400.00 27,842.50 27,842.50

21. Removal of slipped earth  from side slopes 15 3,42,960.00 1,43,646.00 Nil 26. Extra lift for excavated  material dumped at  quarry edge 7(e) 42,370.00 3,60,690.49 270,517.88 (42,370.00)* 27. Extra lift measured by  surveyor  7(b)

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1,25,642.00 13,96,128.67 10,47,096.50 (125,642.00)*

28. Idle labour (non supply  of plans) 9(a) 1,45,575.00 1,45,575.00 Nil 29. Idle labour (for want of  site) 9(c) 75,450.00 76,850.00 Nil 30. Idle labour (due to  stoppage of work and  restriction of working  area) 9(b) & (d) 2,61,205.00 3,89,288.00 194,644.00 31. Repairing road damaged  by cyclone  10(iii) 10,640.00 10,640.00 Nil 32. Reconstruction of  Embasskent  10(vii) 25,370.00 25,370.00 25,370.00 33. Wire fencing 13 1,05,000.00 27,315.00 Nil 34. Electricity supply to  work site and colony 6(b) 72,000.00 72,000.00 Nil

  28,32,128.30

13,93,373.50

[Note : The figures shown by (*) in the column ’Award by Arbitrator’, refer  to the maximum that could have been awarded by the Arbitrator having  regard to claim that was not barred by limitation].

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Thus the total amount awarded by the Arbitrator against claims which were  not barred by limitation was only Rs.13,93,373.50. The award to this extent  is not open to challenge. This part of the award does not suffer from any  legal misconduct. There is also no error apparent on the face of the award in  respect of the amount. It is not open to challenge.  

27.     The scope of interference is limited. In Hindustan Construction Co.  Ltd. vs. Governor of Orissa - (1995) 3 SCC 8, this Court held :  "It is well known that the court while considering the question whether the  award should be set aside, does not examine that question as an appellant  court. While exercising the said power, the court cannot reappreciate all  the materials on the record for the purpose of recording a finding whether  in the facts and circumstances of a particular case the award in question  could have been made. Such award can be set aside on any of the grounds  specified in section 30 of the Act."  

In Hindustan Tea Co. vs. M/s K. Sashikant & Co. - 1986 (Supp.) SCC 506,  this Court observed thus :  "The Award is reasoned one. The objections which have been raised  against the Award are such that they cannot indeed be taken into  consideration within the limited ambit of challenge admissible under the  scheme of the Arbitration Act. Under the law, the Arbitrator is made the  final arbiter of the dispute between the parties. The award is not open to  challenge on the ground that the Arbitrator has reached a wrong  conclusion or has failed to appreciate facts."  

Therefore, the Award of the Arbitrator has to be upheld to an extent of    Rs.13,93,373.50.  

28.     In view of the foregoing, we allow these appeals in part, set aside the  judgment of the High Court and direct a decree in terms of the award for a  sum of Rs.13,93,373.50 with interest at the rate of 12% P.A. from 1.8.1977  to date of award (28.11.1986) and at the rate of 6% P.A. thereafter, that is  from 29.11.1986 till date of payment. Parties to bear their respective costs.